10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2019

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File Number: 001-34992

SemiLEDs Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	20‑2735523 (I.R.S. Employer Identification Number)
3F, No.11 Ke Jung Rd., Chu‑Nan Site, Hsinchu Science Park, Chu‑Nan 350, Miao‑Li County, Taiwan, R.O.C. (Address of principal executive offices)	350 (Zip Code)

Registrant’s telephone number including area code: +886‑37‑586788

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	TradingSymbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0000056	LEDs	The Nasdaq Stock Market

Securities registered pursuant to Section12(g) of the Act:

None

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☒

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. Yes ☒ No ☐

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).Yes ☒  No ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of voting stock held by non‑affiliates of the registrant as of February 28, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter), based upon the closing price of the common stock reported by the NASDAQ Capital Market on such date, was approximately $6.8 million. Shares of common stock held by each executive officer and director of the registrant and by each person who owns 10% or more of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares outstanding of the registrant’s Common Stock, par value $0.0000056 per share, as of November 13, 2019: 3,594,015.

SemiLEDs Corporation

Table of Contents

		Page No.
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Mine Safety Disclosures	24
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	65
Item 9A.	Controls and Procedures	65
Item 9B.	Other Information	65
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	66
Item 11.	Executive Compensation	70
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	72
Item 13.	Certain Relationships and Related Transactions, and Director Independence	73
Item 14.	Principal Accountant Fees and Services	75
PART IV
Item 15.	Exhibits and Financial Statement Schedules	76
Item 16.	Form 10-K Summary	77
Signatures		78

Smaller Reporting Company— Scaled Disclosure

Pursuant to Item 10(f) of Regulation S‑K promulgated under the Securities Act of 1933, as amended, as indicated herein, we have elected to comply with the scaled disclosure requirements applicable to “smaller reporting companies.”

PART I.

Forward‑looking Statements

This Annual Report on Form 10‑K 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 Form 10‑K, 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, 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, including those described in Item 1A, Risk Factors. In light of these risks, uncertainties and assumptions, the forward‑looking events and circumstances discussed in this Form 10‑K may not occur, 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.

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.

Item 1. Business

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, 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 Taiwan, the United States, the Netherlands, Germany and India. 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:

• reusing sapphire substrate in subsequent production runs;

• optimizing our epitaxial growth processes to create layers that efficiently convert electrical current into light;

• employing a copper alloy base manufacturing technology to improve our chip’s thermal and electrical performance;

• utilizing nanoscale surface engineering to improve usable light extraction;

• manufacturing extremely small footprint LEDs with optimized yield, ideal for Mini LED applications;

• developing a LED structure that generally consists of multiple epitaxial layers which are vertically‑stacked on top of a copper alloy base;

• developing low cost Chip Scaled Packaging (CSP) technology; and

• developing multi-pixel Mini LED packages for commercial displays.

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.

1

We were incorporated in the State of Delaware on January 4, 2005. We are a holding company for various wholly owned subsidiaries. SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, is our wholly owned operating subsidiary, where a substantial portion of our assets are held and located, where a portion of our research, development, manufacturing and sales activities take place. Taiwan SemiLEDs owns a 97% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacture, and substantial portion of marketing and sale of LED products, including lighting fixtures and systems, and where most of our employees are based.

Our Technology

Our proprietary technology integrates copper alloy in a vertical LED structure. We first grow epitaxial layers on a sapphire wafer. The epitaxial layers are multiple doped GaN layers. At this point in the process, our structure has the following order: (i)sapphire; (ii)n‑doped GaN (N‑GaN); (iii)multi‑quantum well layers (MQWs); and (iv)p‑doped GaN (P‑GaN). Next, we deposit and define (by patterning and etching) multiple metal layers on the P‑GaN layer. These metal layers consist of several different mirror layers and copper alloy layers, which are deposited on top of the mirror layers by electroplating. The copper alloy metal layers, which are collectively called the P‑Contact Metal Layer, create low resistance contact with the P‑GaN layer.

We then remove the sapphire wafer from the N‑GaN layer through laser radiation, and the sapphire wafer is removed from the production line and recycled. The remaining device structure—consisting of the P‑Contact Metal Layer on top of the epitaxial layers— is then ready for further processing. To complete our LED device structure, we then deposit and define additional metal layers on top of the N‑GaN layers to achieve low resistance contact with the N‑GaN layers. These additional metal layers are collectively called the N‑Contact Metal Layer. After this process, our final LED chip structure is: (i)copper alloy metal layer; (ii)P‑GaN; (iii)MQWs; (iv)N‑GaN; and (v)N‑contact Metal layer. Our final LED chip structure is diced into individual LED chips and then separated, tested and binned according to customer specifications, such as wavelength (color) and brightness. When a constant electrical current flows from our P‑Contact Metal Layer to our N‑contact Metal layer, light is generated in the MQWs and emitted through the surface of the N‑GaN.

We believe that most conventional GaN LEDs grown on sapphire wafers are based on a lateral design. However, we believe a superior combination of both light output efficiency and het removal is realized in a vertical LED chip design with a copper alloy metal structure.  Among pure metals at room temperature, copper has the second highest electrical and thermal conductivity, after silver. Heat is generated by passing electrical current through resistive materials. In our vertical LED chips, electrical current flows from the low resistance copper alloy base to the epitaxial layers also with low electrical resistance, thereby resulting in lower heat generation. Furthermore, due to the high thermal conductivity of the copper alloy layer, the heat generated in our device is effectively conducted to the packaging materials, where it can be dissipated through a heat sink. The resulting lower operating temperature helps to maintain LED device performance and reliability.

Once light is generated in the MQWs of our LED chips, the light is emitted out of the N‑GaN surface. Our chip uses a high reflectivity metal between the copper alloy layer and the P‑GaN surface that acts as a mirror to reflect light more effectively out of the internal structure of the device. In contrast, in conventional sapphire‑based LED devices, leakage can occur when light escapes through the sides of the substrate or is converted to heat due to the higher internal resistance of the device. Furthermore, by optimizing the internal structure and surface of our epitaxial layers through our proprietary nanosurface engineering, a greater portion of light is extracted after generation within the device, whereas conventional sapphire‑based LED devices have a semi‑transparent contact layer (STCL) which absorbs and reduces the amount of light that can be emitted vertically from the chip. We are also developing various packaging technologies, such as component cost reducing Advanced Packaging Technology called CSP, Multi‑Channel Emitters (MCE) and Chip‑On‑Board (COB).

Our Products

LED Chips

We produce and purchase a wide variety of blue, white, green and UV LED chips, including our EV LED product series, currently ranging from chip sizes of 380 microns, or µm, by 380µm to 1520µm by 1520µm. We sell our LED chips to packaging customers or to distributors, who in turn sell to packagers. Our LED chips are used primarily for applications in the specialty lighting market, including commercial, and industrial sectors. Our LED chips may be used in specialty industrial applications, such as UV curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, and architectural lighting. Currently, we focus mostly on UVLED applications.

LED Components

We currently package a portion of our LED chips into LED components for sale to distributors and end-customers in selected markets. The majority of our LED components use chips that are greater than 860μm by 860μm, focusing on high wattage (>3W) applications. Our packaged products can be categorized into three different groups: UV, Multi-Channel Emitter (MCE), and Specialty lighting. Besides the standard products, we provide customization service for all market segments. Our UV LED product portfolio ranges from two to 260 electrical watts, and are designed for industrial applications such as printing, coating, curing, and medical/cosmetic uses. The MCE packages target entertainment, architectural, aquarium and horticultural lighting sectors. Variations of four, seven, 12, 16 channel LEDs allow users to control each LEDs separately to produce all colors in the visible light spectrum. We use specialized chip bonding technology to ensure minimal chip-to-chip distance in order to deliver optimized color mixing capability in compact packages. Specialty lighting is mainly in the infrared spectrum with options of 30, 60, 90 and 120 degree view angles. These are used in surveillance, IP cameras and night vision applications.

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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 set to target at the system end include different types of UV LED industrial printers, aquarium lighting, medical applications,niche imaging light engines, horticultural lighting and high standard commercial lighting.Recently, we introduced multi-pixel Mini-LED package (16 RGB pixels in one package) for fine pitch Mini-LED display market.

Our packaging process includes chip bonding, wire bonding, phosphor coating, encapsulation, scribing, dicing and testing. We may, from time to time, establish packaging operations in selected markets for sale to distributors and end-customers in such markets. We also contract with other manufacturers to produce for our LED components based on our design and technology requirements and under our quality control specifications and final inspection process.

Lighting Products

We design, assemble and sell lighting fixtures and systems for general lighting applications, including commercial, residential and industrial lighting. Our lighting products consist primarily of LED luminaries and LED retrofits. Our lighting product customers are primarily ODMs of lighting products and the end-users of lighting devices. Revenues from sales of our lighting products represented 11% and 13% of our revenues for the years ended August 31, 2019 and 2018, respectively.

OEM/ODM Services

We provide design and manufacturing services at the modular and system level. Currently, most of the design projects involve high power UVLED lamps to be incorporated/retrofitted into large scale press equipment. Besides hardware, we also provide software development to lamp control and equipment-to-lamp signal communication.

Manufacturing

Our manufacturing operations are located in Taiwan. Since late fiscal 2011, we have suffered from the underutilization of our manufacturing capacity, primarily for our LED chips. Consequently, a portion of our manufacturing equipment was idled, resulting in significant excess capacity charges. We also use contract manufacturers to produce certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process. We are moving toward a fabless business model in which we would utilize foundry fabs to ODM our chips using our developed technology. As part of the restructuring, we continue to explore opportunities to sell our chip manufacturing equipment, which will help us to reduce the idle capacity costs. As part of our cost reduction efforts, we moved and consolidated our LED packaging facility to our headquarters in Chunan, Taiwan in February 2018. While we intend to focus on managing our costs and expenses, over the long term we expect to be required to invest substantially in LED component products development and production equipment if we are to grow.

Raw Materials and Components

We use the following raw materials in our LED chip manufacturing: metal organics, sapphire, copper alloy, gold slugs, sodium gold sulfite, aluminum granules and electrolytic nickel, among others. We use the following assembly materials in the production of our LED component products: gold bond wire, lead frame, ceramic substrate, phosphor, silicon zener-diode, silicone rubber, eutectic (AuSn) bonding material and silver paste, among others. We also purchase industrial and general chemicals and gases for the manufacture of both our LED chips and LED components. We do not manufacture our lighting products from the raw materials, but we assemble our lighting products from individual components, such as LED emitters, electronic components, printed circuit boards, heat-sink, lenses and other metal and plastic components.

We purchase raw materials and components from a wide range of suppliers around the world. The raw materials and components we use are readily available. We have two or more suppliers for a majority of the raw materials we use. Historically, we have never experienced any significant delay or shortage in the supply of our raw materials and components.

Quality Management

We have implemented quality control measures at each stage of our operations, including obtaining supplier qualifications, inspecting incoming raw materials and random testing during our production process, to ensure consistent product yield and reliability. We test all new processes and new products prior to commercial production. We also inspect all final products prior to delivery to our customers to ensure that production standards are met. If we encounter defects, we conduct an analysis in an effort to identify the cause of the defect and take appropriate corrective and preventative measures. We provide standard product warranties on our products, which generally range from three months to two years. Our manufacturing facility located in Hsinchu Science Park, Taiwan, are certified in compliance with ISO9001:2015. The facility is subject to periodic inspection by the relevant governmental authorities for safety, environmental and other regulatory compliance.

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We require all of our employees involved in the manufacturing and engineering process to receive quality control training, according to a certification system depending on the level of skills and knowledge required. The training program is designed to ensure consistent and effective application of our quality control procedures.

Sales and Marketing

We market and sell our products through both our direct sales force and distributors. We primarily sell our LED components to distributors and end-customers in selected markets. Our packaging customers package our LED chips and sell the packaged product to distributors or end-customers. Our distributors resell our LED chips either to packagers or to end-customers. We sell our LED chips to packagers and distributors. Our lighting product customers consist primarily of ODMs of lighting products and the end-users of lighting devices with the sales made by our direct sales force. For modules and systems, we mainly deal with end-customers directly.

Our direct sales force is primarily based in Taiwan. We assign our sales personnel to different geographic regions so that they can keep abreast of trends in specific markets. We plan to continue expanding our sales coverage in Asia as we grow our business. In addition, we may enter into strategic relationships with companies in Taiwan or other countries that we believe may provide strategic value to us.

We focus our marketing efforts on brand awareness, product advantages and qualified lead generation. We rely on a variety of marketing strategies, including participation in industry conferences and trade shows, to share our technical message with customers, as well as public relations, industry research and online advertising.

Customers

We package our LED chips into LED components, which we sell to distributors and end-customers in selected markets. In addition, we sell a portion of our LED chips products to packaging customers and LED chip distributors. Sales to distributors represented 1% and 3% of our revenues for the years ended August 31, 2019 and 2018, respectively.

We have historically derived a significant portion of our revenues from a limited number of customers. For the years ended August 31, 2019 and 2018, our top ten customers collectively accounted for 73% and 66%, respectively, of our revenues. Some of our largest customers and what we produce, or have produced, for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project-based purchases and broadening customer base, among other things. For the years ended August 31, 2019 and 2018, sales to our three largest customers, in the aggregate, accounted for 45% and 34% of our revenues, respectively. For the year ended August 31, 2019, sales to Revlon, Inc. and Oreon Holding B.V. accounted for 18% and 16% of our total revenues, respectively. For the year ended August 31, 2018, sales to UFlex Limited and Oreon Holding B.V. accounted for 14% and 13% of our total revenues, respectively.

Our revenues are concentrated in a few select markets, including Netherlands, Taiwan, the United States and India. We expect that our revenues will continue to be substantially derived from these countries for the foreseeable future. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in these markets.

Intellectual Property

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

As of August 31, 2019, we had 127 patents issued and four patents pending with the United States Patent and Trademark Office covering various aspects of our core technologies. As of August 31, 2019, we also had 137 patents issued and one patent pending before patent and trademark offices outside the United States. Of these 264 issued patents, 86 expire between 2020 and 2024, 110 expire between 2025 and 2029, 66 expire between 2030 and 2036, and two expire after 2036. Sixty-two of our issued patents are design patents and one of our pending patents is a design patent. We believe that factors such as the technological and innovative abilities of our personnel, the success of our ongoing product development efforts and our efforts to maintain trade secret protection are more important than patents in maintaining our competitive position. We pursue the registration of certain of our trademarks in the United States, Taiwan and China and have been granted trademarks with respect to “SemiLEDs” in the United States and China, and “MvpLED” in China.

Our industry is characterized by frequent intellectual property litigation involving patents, trade secrets, copyrights, mask designs, among others. From time to time, third parties may 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. Furthermore, 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. See “Risk Factors— Risks Related to Our Business— Intellectual property claims against us or our customers could subject us to significant costs and materially damage our business and reputation.”

4

Research and Development

We focus our research and development efforts on our design methodology and process technology for our LED products. We also focus on improving our production yields and increasing wafer sizes to lower our production costs. Our research and development team work closely with our manufacturing team. We conduct our research and development activities at our manufacturing facilities in Taiwan. Our future research and development strategy will primarily focus on developing new products in collaboration with our ODM partners utilizing our vertical technology and our expertise in the manufacturing of LED components. We expect to be continually engineering new products and systems, as well as enhancements to existing products, to meet the needs of our customers. By leveraging the fabless business model, we expect to be able to minimize our own research and development costs associated with chip products, increase the scale of our business without increasing overhead and diversify our business risk among many sales channels.

Competition

We believe that our advanced technology helps us to compete in the innovative, intensely competitive and rapidly changing market of LED design and manufacturing. To succeed, however, we must continue to manufacture products that meet the demanding requirements of high performance at low costs. We do not account for a significant percentage of the total market volume today, and we face significant competition from other more established providers of similar products as well as from new entrants into our markets.

We compete with many LED chip manufacturers and LED packaging manufacturers. With respect to our LED chips and LED components, we primarily compete with Cree, Seoul Viosys Co., Ltd. or SVC, Everlight, LiteOn, LED Engin, Nichia Corporation, or Nichia, Philips (Lumileds), Osram-OS GmbH and Edison Opto Corporation, or Edison. We have a number of competitors that compete directly with us and are much larger than us, including, among others, Cree, Nichia, Philips (Lumileds) and Osram-OS GmbH. Several substantially larger companies, such as Philips (Lumileds) and Osram-OS GmbH, compete against us with a relatively small segment of their overall business. In addition, several large and well-capitalized semiconductor companies, such as Samsung Electronics Co., Ltd., or Samsung, LG Innotek Co., Ltd., or LG Innotek, have entered into the LED chip and UV market. These potential competitors have extensive experience in developing semiconductor chips, which is similar to the manufacturing process for LED chips and LED packaging. We are also aware of a number of well-funded private companies that are developing competing products. We will also compete with numerous smaller companies entering the market, some of whom may receive significant government incentives and subsidies pursuant to government programs designed to encourage the use of LED lighting and to establish LED-sector companies.

Some of our existing and potential competitors possess significant advantages, including longer operating histories, greater financial, technical, managerial, marketing, distribution and other resources, more long-standing and established relationships with our existing and potential customers, greater name recognition, larger customer bases and greater government incentives and support.

We believe that the key competitive factors in our markets are:

• consistently producing high-quality LED chips with high efficacy;

• providing a low total cost of ownership (i.e., cost, efficacy and lifespan) for end-customers;

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

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

• our sales channels.

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

Environmental Regulation

In our research and development and manufacturing processes, we use a variety of hazardous materials and industrial chemicals. In each of the jurisdictions in which we operate, we are subject to a variety of laws and regulations governing the exposure to and storage, handling, emission, discharge and disposal of these materials or otherwise relating to the protection of the environment. Environmental laws and regulations are complex and subject to constant change, with a tendency to become more stringent over time. Failure to comply with any new or existing laws, whether intentional or inadvertent, could subject us to fines, penalties and other material liabilities to the government or third parties, injunctions requiring the suspension of operations, redemption costs or other remedies, and the need for additional capital, equipment or other process requirements, any of which could have a material adverse effect on our business and reputation.

5

Working Capital

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

Employees

As of August 31, 2019, we had approximately 136 employees. Most of these employees were based in Taiwan, with a small number of employees in China. None of our employees is represented by a labor union. We consider relations with our employees to be good.

Financial Information about Geographic Areas

We derive a substantial portion of our revenue from product sales to international customers. For information concerning geographic areas of our customers and geographic information concerning our long‑lived assets, see Note 12, “Product and Geographic Information,” of the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report. International operations expose us to risks that are different from operating in the United States, including foreign currency translation and transaction risk, risk of changes in tax laws, application of import/export laws and regulations and other risks described further in Item 1A, Risk Factors, of this Annual Report.

Available Information

Our website is www.semileds.com. We make available free‑of‑charge through our website our Annual Report on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and any amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. Our SEC reports can be accessed through the “Investors” section of our website. The information found on our website is not part of this or any other report we file with or furnish to the SEC. A copy of our Annual Report on Form 10‑K is available without charge to stockholders upon written request to: Investor Relations, SemiLEDs Corporation, 3F, No.11 Ke Jung Rd., Chu‑Nan Site, Hsinchu Science Park, Chu‑Nan 350, Miao‑Li County, Taiwan, R.O.C.

Item 1A. Risk Factors

A wide range of factors could materially affect our performance. The following factors and other information included in this Annual Report should be carefully considered. Although the risk factors described below are the ones management deems significant, additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the following risks actually occur, our business, operating results, and financial condition could be adversely affected. In that event, the trading price of our common stock could decline and you could lose part or all of your investment.

Risks Related to Our Business

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

On June 21, 2017, Well Thrive Ltd. (“Well Thrive”) filed a complaint against SemiLEDs Corporation in the United States District Court for the District of Delaware. The complaint alleges that Well Thrive is entitled to a return of $500 thousand paid toward a note purchase pursuant to a purchase agreement (the “Purchase Agreement”) effective July 6, 2016 with Dr. Peter Chiou, which was assigned to Well Thrive on August 4, 2016. Pursuant to the terms of the Purchase Agreement, we have retained the $500 thousand payment as liquidated damages. Well Thrive alleges that the liquidated damages provision is unenforceable as an illegal penalty and does not reflect the amount of purported damages. On March 13, 2018, we filed a motion to enforce a settlement agreement between the parties to dismiss the lawsuit with prejudice.  On March 27, 2018, Well Thrive filed an answering brief in opposition to our motion on the basis that Well Thrive never consented to dismiss the case. On January 2, 2019, the judge denied without prejudice the motion filed by us, because there remains some question as to whether Well Thrive’s former lawyers and Dr. Chiou had authority from Well Thrive to settle this case.  The judge’s order allows us to conduct depositions of Well Thrive’s former lawyer, Dr. Chiou, and Mr. Chang Sheng-Chun, Well Thrive’s director, and to request documents relating to the issues surrounding the settlement. Based on this order, we arranged the depositions to obtain more evidence in support of a motion to enforce the settlement agreement. On October 25, 2019, Well Thrive filed a motion to modify the Court’s scheduling order and to allow it to file a motion for summary judgment, and we filed an opposition to the motion. On November 13, 2019, the Court denied Well Thrive’s motion. The Court set a trial date of March 2, 2020, if needed. If we are ordered to return the $500 thousand payment, we may not have sufficient cash to do so and may not be able to continue as a going concern.

We may not be able to realize adequate interest or prices for selling certain non-core patent.

We have sold certain patents, generally for technology that we are not actively developing. While we plan to continue to monetize our patent portfolio through sales of non-core patents, we may not be able to realize adequate interest or prices for those patents. Accordingly, we cannot provide assurance that we will be able to generate revenue from these sales.

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We have incurred net losses in recent periods and may require additional financing. If financing is not available, we may be required to further downsize or discontinue operations.

We incurred net losses attributable to SemiLEDs stockholders of $3.6 million and $3.0 million for the years ended August 31, 2019 and 2018, respectively. We can give no assurance that we will not continue to incur net losses in future periods. Our revenue and operating results may continue to decline for a variety of reasons, some of which are described elsewhere in this “Risk Factors” section and are beyond our control. As of August 31, 2019, we had an accumulated deficit of $177.8 million. Further, at August 31, 2019, our cash and cash equivalents were down to $1.4 million. These facts and conditions raise substantial doubt about our ability to continue as a going concern, and our independent registered public accounting firm has included an explanatory paragraph regarding going concern qualification in its audit report. However, our management believes it has liquidity plan, as further described in elsewhere in this annual report that if executed successfully should provide sufficient liquidity to meet our obligations as they become due for a reasonable period of time. While we believe that these liquidity plan measures will be adequate to satisfy our liquidity requirements for the twelve months ending August 31, 2020, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan, including issuing convertible notes to certain of our directors, may have a material adverse effect on our business, results of operations and financial position, and may adversely affect our ability to continue as a going concern. If we do not become consistently profitable, our accumulated deficit will grow larger and our cash balances will decline further, and we will require additional financing to continue operations. Any such financing may not be accessible on acceptable terms, if at all. If we cannot generate sufficient cash or obtain additional financing, we may be required to downsize our business further or discontinue our operations altogether.

We depend on contract manufacturing for portions of our supply chain. The inability of our contract manufacturers to produce products that satisfy our requirements may have a material adverse effect on our business.

From time to time, we may use contract manufacturers to produce products or some parts of our products. Our reliance on such contract manufacturers exposes us to a number of significant risks, including:

• reduced control over delivery schedules, quality assurance, manufacturing yields and production costs;

• lack of guaranteed production capacity or product supply; and

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

If these contract manufacturers fail to deliver products on time and at a satisfactory level of quality, we could have difficulties fulfilling our customer orders and our net revenues could decline. If our contract manufacturers were to become unable or unwilling to continue to manufacture our products at requested quality, quantity, yields and costs, or in a timely manner, our business and reputation could be seriously harmed. As a result, we would have to attempt to identify and qualify substitute manufacturers, which could be time consuming and difficult, and 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.

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

Rapid change and technical innovation characterize the LED chips and components market. Our success depends on the successful development, introduction, commercialization and acceptance of new generations of products and enhancements to existing product lines. We have made and continue to make significant investments in growth initiatives. For example, in the second quarter of fiscal 2017, we moved down the supply chain, supplying customer with a full UVLED lamp system. Our UVLED lamp started from stand alone to a full system that includes lamp-to-printer signal communication to various safety interlocks. Two UVLED systems were delivered in the third and fourth fiscal quarter of fiscal 2017. We expect to continue our efforts at further research and development of innovative products. We may need to spend more time and money than we expect or have to develop and introduce new products or enhancements and, even if we succeed, they may not be sufficiently profitable for us to recover all or a meaningful part of our investment. In addition, our new products or enhancements may need certifications or require qualifications by our customers or potential customers. However, both of the certification and qualification processes are lengthy and uncertain and may negatively impact our sales and marketing efforts to sell or transition our customers to such new products or enhancements. Furthermore, once introduced, new products may adversely impact sales of our older generation products, or make them less desirable or even obsolete, and could adversely impact our revenues and operating results.

Our ability to successfully develop and introduce new products and product enhancements, and the revenues and costs associated with these efforts, are affected by our ability to (i)properly identify customer needs, (ii)prove the feasibility of new products, (iii)price our products competitively and profitably, (iv)accurately predict and control costs and yields associated with manufacturing the products, (v)manufacture and deliver new products timely and in sufficient volume, (vi)assist the customers in qualifying or adopting the new products in a timely manner and (vii)anticipate and compete successfully with competitors. Even if we are successful, if a customer requires certain certifications for or new qualification process of our new products, the time when that customer will actually purchase our products and we will be able to receive revenue from that customer will be significantly delayed.

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We may not be able to effectively develop, maintain and expand our sales and distribution channels, which could negatively affect our ability to expand our sales and business and damage our brand reputation.

As part of our strategy, we market and sell our products through third-party distributors in certain markets. We rely on these distributors to service end-customers, and our failure to maintain strong working relationships with such distributors could have a material adverse impact on our operating results and revenues from such jurisdictions and damage our brand reputation. If we are unable to effectively develop and expand our distribution channels, or do so in a timely manner, to ensure our products are reaching the appropriate customer base, our sales and results of operations may be adversely impacted. In addition, if we successfully develop these channels, we cannot guarantee that customers will accept our products or that we will be able to manufacture and deliver products in the timeline established by our customers. We have attempted to direct our efforts to areas of business where we see the best opportunity for the most profitable sales of our LED products, which includes primarily a focus on the UV LED market segment and placing a greater emphasis on the sale of LED components in selected markets where pricing pressure is significant, and pursuing new market opportunities that leverage our core competencies. We are now focused on developing 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. Continual introductions of new products and solutions, services, and enhancement of existing products and services, and effective servicing of customers are key to our competitive strategy. We also work to develop relationships with a select number of our customers to develop relationships which would continue to enhance our component product growth and profitability to complement our strategic focus. Our primary business objective is to provide our customers with a convenient, full-service, one-stop shopping solution for their needs by offering customized design services and high-quality products at good value. These strategies may negatively impact our revenues as we may not be able to develop and expand our customer base and distribution channels in a timely manner, among other reasons.

We do not control the activities of our distributors with respect to the marketing and sales of and customer service support for our products. Therefore, the reputation and performance of our distributors and the ability and willingness of our distributors to sell our products, uphold our brand reputation for quality, by providing, for example, high quality service and pre- and post-sales support, and their ability to expand their businesses and their sales channels are essential to the future growth of our business and has a direct and material impact on our sales and profitability in such jurisdictions. Also, as with our individual customers, we do not have long-term purchase commitments from our distributor customers, and they can therefore generally cancel, modify or reduce orders with little or no advance notice to us. As a result, any reductions or delays in, or cancellations of, orders from any of our distributors may have a negative impact on our sales and budgeting process.

In addition, we have entered and may from time to time enter into exclusivity or other restrictions or arrangements of a similar nature as part of our agreements with our distributors. Such restrictions or arrangements may significantly hinder our ability to sell additional products, or enter into agreements with new or existing customers or distributors that plan to sell our products, in certain markets, which may have a material adverse effect on our business, financial condition and results of operations.

Moreover, we may not be able to compete successfully against those of our competitors who have greater financial resources and are able to provide better incentives to distributors, which may result in reduced sales of our products or the loss of our distributors. The loss of any key distributor may force us to seek replacement distributors, and any resulting delay may be disruptive and costly.

We operate in highly competitive markets that are characterized by rapid technological changes and declining average selling prices. Competitive pressures from existing and new companies and/or damage to our brand may harm our business and operating results.

Competition in the markets for LED products is intense, and we expect that competition will continue to increase. Increased competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results and financial condition. 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 for our products. However, such cost savings currently have a limited impact on our gross profit, as we have suffered from the underutilization of manufacturing capacity and must absorb a high level of fixed costs, such as depreciation.

We compete with many LED chip manufacturers and LED packaging manufacturers. With respect to our LED chips and LED components, we primarily compete with Cree, SVC, Everlight, LiteOn, LED Engin, Nichia, Philips (Lumileds), Osram-OS GmbH and Edison. We have a number of competitors that compete directly with us and are much larger than us, including, among others, Cree, Nichia, Philips (Lumileds) and Osram-OS GmbH. Several substantially larger companies, such as Philips (Lumileds) and Osram-OS GmbH, compete against us with a relatively small segment of their overall business. In addition, several large and well-capitalized semiconductor companies, such as Samsung and LG Innotek, have entered into the LED chip and UV market. These potential competitors have extensive experience in developing semiconductor chips, which is similar to the manufacturing process for LED chips and LED packaging. We are also aware of a number of well-funded private companies that are developing competing products. We will also compete with numerous smaller companies entering the market, some of whom may receive significant government incentives and subsidies pursuant to government programs designed to encourage the use of LED lighting and to establish LED-sector companies. For example, the Chinese government subsidizes equipment costs, which enables manufacturers in China to remain price competitive and make it very difficult for foreign companies to compete.

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Our existing and potential competitors may have a number of significant advantages over us, including greater financial, technical, managerial, marketing, distribution and other resources, more long-standing and established relationships with our existing and potential customers, greater name recognition, larger customer bases and greater government incentives and support. In addition, some of our competitors have been in operation much longer than we have and therefore may have more long-standing and established relationships with our current and potential customers.

We compete primarily on the basis of our products’ performance, price, quality, and reliability and on our ability to customize products to meet customer needs. However, our competitors may be able to develop more competitive products, respond more quickly to new or emerging technologies, offer comparable products at more competitive prices or bring new products to the market earlier. Any failure to respond to increased competition in a timely or cost-effective manner could have a material adverse effect on our business, financial condition, results of operations and prospects. Furthermore, intellectual property claims against us, including pending claims and litigation, regardless of the outcome, could be used by our competitors to damage our brand reputation and our relationships with existing and potential customers.

We derive our revenues mainly from the sales of our LED components. Our inability to grow our revenues generated from the sales of LED components would have a negative impact on our financial condition and results of operation.

LED components are the core products from which we derive our revenues. Revenues attributable to the sales of our LED components represented 75% and 69% of our revenues for the years ended August 31, 2019 and 2018, respectively. Although revenues attributable to the sale of LED lighting products accounted for 11% and 13% of our revenues for the years ended August 31, 2019 and 2018, we expect to continue to generate our revenues mainly from the sales of LED components for the foreseeable future. As such, the continued market acceptance of our LED components is critical to our continued success. Our inability to grow our revenues generated from the sales of LED components would have a negative impact on our business, financial condition and results of operations.

The market for LEDs has historically been, and we expect will continue to be, highly volatile, which could harm our business and result in significant fluctuations in the market price of our common stock.

Fluctuations in supply and demand for LEDs pose serious risks to our prospects, business, financial condition and results of operations. Our industry, akin to the semiconductor industry, is highly cyclical and characterized by rapid technological change, rapid product obsolescence, declining average selling prices and wide fluctuations in supply and demand. Our industry’s cyclicality results from a complex set of factors, including, but not limited to:

• fluctuations in demand for end-products that incorporate LED chips and LED components;

• ongoing reductions in the number of LED chips and LED components required per application due to performance improvements; and

• fluctuations in the unutilized manufacturing capacity available to produce LED chips and LED components.

If market demand increases and we are not able to increase our capacity or if we experience delays or unforeseen costs in increasing our capacity levels, we may not be able to achieve our financial targets. Alternatively, as market demand decreases or as market supply surpasses demand, we may not be able to reduce manufacturing expenses or overhead costs proportionately. If an increase in supply outpaces the increase in market demand, or if demand decreases, the resulting oversupply could adversely impact our sales and result in the underutilization of manufacturing capacity, high inventory levels, changes in revenue mix and rapid price erosion, which would lower our margins and adversely impact our financial results. For example, over the past few years, we recorded significant excess capacity charges as we suffered from underutilization of our manufacturing capacity as a result of a decrease in customer demand, and significant write-downs of inventories as a result of a decline in their average selling prices. We may experience similar problems in the future, and we cannot predict when they may occur or the severity of such difficulties and the impact on our margins and operating results.

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

We have implemented certain actions to accelerate operating cost reductions and improve operational efficiencies in response to changes in the economic environment, our industry and demand. In connection with the implementation of our cost and capital expenditure reduction programs, we developed a strategic plan to address areas of business where we see the best opportunity for the most profitable sales of our LED products, which includes primarily a focus on the UV LED market segment and placing a greater emphasis on the sale of LED components in selected markets where pricing pressure is less significant, and pursuing new market opportunities that leverage our core competencies. We continue to monitor prices and, consistent with our existing contractual commitments, may decrease our activity level and capital expenditures further. This plan reflects our strategy of controlling capital costs and maintaining financial flexibility. We also disposed of a certain level of our idle equipment to reduce the excess capacity charges that we have suffered for a few years. In addition, to provide sufficient liquidity to meet our obligations as they become due for a reasonable period of time, we reduced our capital expenditures as appropriate. The cost reduction plan is further enhanced through the fabless business model in which we implemented certain workforce reductions and have sold certain patents that we were no longer actively developing and are exploring the opportunities to consign or sell certain equipment related to the manufacturing of vertical LED chips, in order to reduce the idle capacity charges, minimize our research and development activities associated with chips manufacturing operation.

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Despite our planning, some cost-cutting and capital expenditure reduction measures could have unexpected negative consequences. As part of our ongoing cost reduction efforts, we may reduce our work force further and experience additional attrition, which may expose us to legal claims against us and loss of necessary human resources. If we face costly employee or contract termination claims, our operations and prospects could be harmed. Furthermore, capital expenditure reduction could adversely impact our future sales. While our cost and capital expenditure reduction efforts reduced, or are expected to reduce, our operating costs as well as capital expenditure, we cannot be certain that all efforts will be successful or that we will not be required to implement additional actions to structure our business to operate in a cost-effective manner in the future.

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

Our quarterly operating results are difficult to predict and may fluctuate significantly in the future. We have experienced seasonal and quarterly fluctuations in the past. As such, our past quarterly operating results may not be good indicators of future performance.

The following factors could cause our operating results to fluctuate:

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

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

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

• seasonal fluctuations in our customers’ purchasing patterns.

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

If we are unable to implement our product innovation strategy effectively, our business and financial results could be materially and adversely affected.

As part of our growth strategy, we plan to continue to be innovative in product design, to deliver new products and improve our manufacturing efficiencies. In particular, as the LED industry develops and technical specifications and market standards change, we must continue to innovate and develop competitive products that are accepted by the marketplace. Our existing or potential customers could develop, or acquire companies that develop, products or technologies that may render our products or technologies obsolete or noncompetitive. Our future success depends on our ability to develop and introduce new, technologically advanced and lower cost products, such as high quality, flexible and more complete LED system solution. If we are unable to achieve technological breakthroughs, introduce new products that are commercially viable and meet rapidly evolving customer requirements, and keep pace with evolving technological standards and market development, we may experience reduced market share and our ability to compete may be adversely impacted. If we are 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 respond to competition.

We may be exposed to intellectual property infringement or misappropriation claims by third parties, which could adversely affect our financial condition and results of operations.

Trademark, patent, copyright and other intellectual property rights are critical to our business and the business of our competitors. Our industry is characterized by frequent intellectual property litigation involving patents, trade secrets, copyrights, and mask designs among others. 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.

Litigation to determine the validity and scope of any claim against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights can be highly uncertain because of the complex scientific, legal and factual questions and analyses involved. Defending against any intellectual property infringement claims would likely result in costly litigation, diversion of the attention and efforts of our technical and management personnel and ultimately may lead to our not being able to manufacture, use or sell products found to be infringing. As a result of any such dispute, we may be required to develop non-infringing technology, pay substantial damages, enter into royalty or licensing agreements to use third-party technology, cease selling certain products, adjust our marketing and advertising activities or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. If we are unable to obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices on a timely basis, our business and competitive position may be adversely affected. For example, although we and Cree executed a settlement agreement providing for dismissal of our amended complaints against each other without prejudice, we agreed to the entry of a permanent injunction that was effective October 1, 2012 that precludes us from (and/or from assisting others in) making, using, importing, selling and/or offering to sell in the United States certain accused products and/or any device that includes such an accused product after that date and to payment of a settlement fee for past damages.

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The intellectual property rights related to packaging LEDs with phosphors to make white light LED components are particularly complex and characterized by aggressive enforcement of those rights. Many of our competitors and other third parties hold patents or licenses or cross-licenses that relate to phosphors and the use of phosphors in LED packages to make white light LED components. We have sought to minimize the risk that one of our competitors or another third party will assert a claim related to our packaged LED components by marketing these products only in certain countries in which we believe enforcement of intellectual property rights has historically been more limited. We cannot assure you that our belief with respect to the enforcement of rights within those markets is accurate. In addition, if the products we sell in a particular country are subsequently shipped or resold to another country, the intellectual property laws of the country of final destination may also apply to our products. Further, we may be subject to claims if our packaging customers for our LED chips lack sufficient intellectual property rights with respect to their packaging process and related packaging materials. We cannot assure you that our competitors or others will not claim that our LED chips or our LED components infringe their intellectual property rights or that, if such claims are made, we will be able to successfully dispute such claims.

Intellectual property claims against us, or our customers, including our distributor customers, could subject us to significant costs and materially damage our business and reputation.

From time to time, third parties may assert infringement claims against us, or our customers with respect to our products, or our customers’ products that incorporate our technologies or products, and any such legal action or the threat of legal action against us, or our customers, could impair such customers’ continued demand for our products.

Furthermore, we agree to defend and indemnify our customers in the event that they are sued by third parties for intellectual property infringement claims involving the sale or use of our products. There can be no assurance that we will be successful in defending these claims. Our indemnification obligations could increase the cost to us of an adverse ruling in any such action.

If LEDs fail to achieve widespread adoption in the general lighting market, or if alternative technologies gain market acceptance, our prospects will be materially and adversely impacted and we may be unable to achieve and maintain our profitability.

SemiLEDs had moved away from general lighting markets due to extreme price erosion led by companies in China. We have moved on to focus on industrial UV applications. If LED lighting does not achieve widespread acceptance and adoption, or if demand for LED products does not grow as we anticipate, our revenues may decline and our prospects for growth and profitability will be limited. Moreover, if existing sources of light other than LED devices, such as organic light emitting diodes (OLEDs), achieve adoption, or if new sources of light are developed, our current products and technologies could become less competitive or obsolete.

Potential customers for LED general lighting systems may not adopt LED lighting as an alternative to traditional lighting technology because of LEDs’ higher upfront cost. In addition, manufacturers of general lighting systems may have substantial investments and know-how related to their existing lighting technologies, such as traditional incandescent, fluorescent, halogen and high intensity discharge, or HID, lighting devices, and may perceive risks relating to the complexity, reliability, quality, usefulness and cost-effectiveness of LED products. Even if LED lighting continues to achieve performance improvements and cost reductions, limited customer awareness of the benefits of LEDs, lack of widely accepted standards governing LED lighting and customer unwillingness to adopt LEDs in favor of entrenched solutions could significantly limit the demand for LED products. Additional factors that may limit the adoption of LEDs for general lighting include, among others:

• a significant reduction in or discontinuation of government regulations and economic incentives to promote the development of the LED industry or government regulations that discourage the use of some traditional lighting technologies;

• changes in economic and market conditions that affect the viability of some traditional lighting technologies, for example declining energy prices that favor existing lighting technologies; and

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

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

Our gross margins have fluctuated and may continue to fluctuate from period to period as a result of the mix of products that we sell and the utilization of our manufacturing capacity in any given period, among other things. For example, as a strategic plan, we placed greater emphasis on the sales of LED components rather than the sales of LED chips where we have been forced to cut prices on older inventory. The sales of our UV LED embedded components product successfully improved our gross margin, operating results and cash flows in fiscal 2017, but slightly dropped in fiscal 2018. In fiscal 2019, sales continued to decrease but sales contributed by LED components increased, compared to fiscal 2018, which resulted in an increase in gross margin. We intend to continue to pursue opportunities for profitable growth in areas of business where we see the best opportunity for our UV market, focus on product enhancement and developing our UV LED into many other applications or devices. As we expand and diversify our product offerings and with varying average selling prices, or execute new business initiatives, a change in the mix of products that we sell in any given period may increase volatility in our revenues and gross margin from period to period.

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Increased competition and the adoption of alternatives to our products, more complex engineering requirements, lower demand, over-capacity in the market and other factors has led to price erosion and, as a result, lower product margins and lower revenues. 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 the gross margin of our products. We anticipate our competitors will continue to implement such competitive strategies from time to time in the future. Our introduction of new LED component products, such as the LED components that incorporate EV or UV LED chips may further reduce the selling prices of our older generation products or render them obsolete.

We rely on a limited number of key suppliers for certain key raw materials and equipment. The loss of key suppliers may have a material adverse effect on our business.

There are a limited number of companies which supply certain of the specialized raw materials that are important to the manufacture of our products as well as a very limited number of manufacturers of equipment that are critical to our operations. We generally enter into spot purchase orders with our suppliers and do not have long-term or guaranteed supply arrangements with any of them. For example, we purchase Red or IR LED chips, the key material used in the manufacture of our LED components, from a limited number of suppliers. A major shortage of these key raw materials would impair our ability to meet our production needs resulting in increased costs.

We also purchase gases, photo chemicals and other materials from various suppliers on the spot market. Although supply constraints do not currently have an impact on our ability to procure supply, supply constraints have occurred in the past and may occur again from time to time in the future. Additionally, we use metals such as copper alloy and other commodities in our manufacturing process. The price volatility of such materials may make our procurement planning challenging. If the prices of materials increase it may adversely affect our operating margins. Although these materials are generally available and are not considered to be specialty chemicals, our inability to procure such materials in volumes and at commercially reasonable prices could result in a material adverse effect on our business, financial condition and results of operations.

If any of our key raw material suppliers fails to meet our needs on time or at all, we may not be able to procure replacement supplies from other sources on a timely basis or on commercially reasonable terms and our production may be delayed or interrupted, which could impair our ability to meet our customers’ needs and damage our customer relationships.

Disclosure requirements under the Dodd-Frank Act relating to “conflict minerals” could increase our costs and limit the supply of certain metals used in our products and affect our reputation with customers and shareholders.

As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, or the Dodd-Frank Act, in August 2012 the SEC promulgated final rules regarding annual disclosures by public companies of their use of certain minerals and metals, known as “conflict minerals,” which are mined from the Democratic Republic of the Congo, or the DRC, and adjoining countries, and their efforts in to prevent the sourcing of such conflict minerals from these countries. These conflict minerals are commonly referred to as “3TG” and include tin, tantalum, tungsten, and gold. These rules require us to ascertain and disclose the origin of some of the raw materials that we use, including gold, annually no later than May 31 of each year. We expect to incur costs associated with complying with these disclosure requirements, including due diligence to determine the sources of conflict minerals used in our products and other potential changes to our products, processes, or sources of supply as a consequence of such due diligence activities. The implementation of these rules and our compliance procedures could adversely affect the sourcing, supply, and pricing of materials used in our products. As there may be only a limited number of suppliers offering “conflict free” conflict minerals, we cannot be sure that we will be able to obtain sufficient quantities of conflict minerals from such suppliers or at competitive prices. Also, our reputation with our customers, shareholders and other stakeholders could be damaged if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the procedures we may implement. If we cannot guarantee that all of our products exclude conflict minerals sourced from the DRC or adjoining countries, certain of our customers may discontinue, or materially reduce, purchases of our products, which could result in a material adverse effect on our results of operations and financial condition may be adversely affected.

We may not be able to effectively expand our production capacity or upgrade our production facilities or do so in a timely or cost-effective manner, which could prevent us from growing our sales, margins and market share.

While we intend to focus on managing our costs and expenses in the short term, over the long term we expect to be required to invest substantially if we are to grow. This will mean having to continually expand our production capacity or upgrade our production facilities as we deem appropriate under future market conditions and future customer demand. Such investment could take time to become fully operational, and could otherwise increase our costs, and we may not be able to execute quickly to take advantage of market opportunities as they arise.

Upgrading or expanding existing facilities could result in manufacturing problems that may reduce our yields and utilization rates below our target levels. For example, we have experienced difficulties in the past in achieving acceptable yields when we moved our manufacturing facilities to a new location and when we introduced new products or new manufacturing processes, which has adversely affected our operating results.

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Upgrading or expanding production facilities or capacity requires a significant amount of fixed cost since it requires us to add and purchase manufacturing lines, equipment and additional raw materials and other supplies. If we are not able to recoup these costs through increased sales and profits, our business, financial condition and results of operations could be materially and adversely affected.

Sales of our products are concentrated in a few select markets. Adverse developments in these markets could have a material and disproportionate impact on us.

Our revenues are highly concentrated in a few select markets, including the Netherlands, Taiwan, the United States, Germany, Japan and India. Net revenues generated from sales to customers in the Netherlands, Taiwan, the United States, Germany, Japan and India, in the aggregate, accounted for 85% and 84% of the Company’s net revenues for the years ended August 31, 2019 and 2018, respectively. As a result of the concentration of our revenues in these markets, economic downturns, changes in governmental policies and increased competition in these markets could have a material and disproportionate impact on our revenues, operating results, business and prospects. Any unfavorable economic or market conditions in such jurisdictions could have a negative impact on our sales and profitability.

Variations in our production yields and limitations in the amount of process improvements we can implement could impact our ability to reduce costs and could cause our margins to decline and our operating results could suffer.

Our products are manufactured using technologies that are highly complex. The number of saleable products, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following:

• variability in our process repeatability and control;

• contamination of the manufacturing environment;

• equipment failure, variations in the manufacturing process, or power outages;

• lack of consistency and adequate quality and quantity of components and raw materials;

• losses from broken wafers, inventory damage or human errors;

• defects in packaging either within our facilities or at our subcontractors; and

• any transitions or changes in our production process, planned or unplanned.

Introduction of new products and manufacturing processes are often characterized by lower yields in the initial commercialization stage. LED chip and component manufacturing is complicated and consists of many layers of complex materials that must interact with each other. In addition, when we introduce new products and processes we often use new chemical solutions and chemical compounds with which we have less experience. We must analyze how the various solutions, compounds and layers of materials interact with each other and perform as parts of the LED chip structure. It takes time for us to analyze the data from our initial manufacturing runs and optimize our processes, and over time we generally achieve higher yield rates as we gain more experience with the product or processes. We have continuously improved and increased our production yields to reduce the per-unit cost of production for our new LED components that incorporate EV or UV LED chips; 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. In the past, we have experienced difficulties in achieving acceptable yields when introducing new products or new manufacturing processes, which has adversely affected our operating results. We may experience similar problems in the future, and we cannot predict when they may occur or the severity of such difficulties and the impact on our business.

In some instances, we may offer products for future delivery at prices based on planned yield improvements or increased cost efficiencies from other production advances. Failure to achieve these planned improvements or advances could significantly affect our margins and operating results.

We may face challenges further expanding our LED components business. In addition, our strategy of marketing our LED components in jurisdictions with limited intellectual property enforcement regimes may limit the markets where we can sell our LED components and may subject our intellectual property rights to infringement.

We face challenges in further expanding our LED components business, which has been our core product now and onward, because it involves processes and technologies that are significantly different from our manufacturing processes for LED chips. For example, we are developing advanced-level LED component manufacturing techniques, such as processes that allow us to manufacture wafer-level packaging. If we are not able to further develop our LED components business or if competitors create or adopt more advanced packaging technologies than ours, then our business, financial condition and results of operations could be materially and adversely affected.

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Our distribution strategy limits the sales of our LED components as we are selling only in countries that may not necessarily have the highest demand or market potential. The intellectual property rights related to LED components are particularly complex and characterized by aggressive enforcement of those rights. To minimize the likelihood that one of our competitors or another third party will assert a claim related to our LED components, we have sought to market these products only in countries in which we believe enforcement of intellectual property rights has historically been more limited as identified below and to ensure the new line of LED products are not subject to any effective injunction in the United States, because we believe that it is important for us to consciously manage our exposure to litigation. Any such litigation, whether with or without merit, could divert our management, financial and other resources away from our business and thereby have a negative impact on our continued development and growth. We do not currently sell our LED components in all countries that meet, what we believe to be, an acceptable litigation risk profile. We review profiles of different countries and may determine from time to time that we should sell our products in one or more additional countries that meet our litigation risk profile for sale of our LED components. However, we may not be able to identify additional countries that we find to be suitable markets for these products. We have considered the potential loss of revenues and income that we may suffer as a result of our strategy to sell only in certain select countries and have concluded that, on balance, the potential loss of such revenues and income is not outweighed by the potential litigation risks. Also, there can be no guarantee that, by selling our LED components in these countries, we have not exposed our intellectual property rights, including our patents, to infringement by others. With respect to any potential infringement of our patents and other intellectual property rights by others in countries where we currently sell our LED components, we have considered the potential loss of revenues and income that we may suffer associated with such sales and have made a business judgment that the benefits outweigh any potential loss. In addition, if the countries in which we currently sell our LED components increase their enforcement of intellectual property rights, the risk of litigation would materially increase and our ability to continue to sell our LED components in these markets may be materially and adversely affected. Sales of our LED components and our other products may also be limited in the event that they are subsequently shipped or otherwise resold in a country and a claim is brought against us or our customer pursuant to the intellectual property laws of the country of final destination.

As we continue to operate in the lighting fixtures market, we may face additional competition and our existing customers may reduce orders.

As we continue to operate in the lighting fixtures market and seek to increase our sales of lighting products in the future, we may face competition from fixtures and bulbs manufactured and marketed by other LED lighting fixture companies and from lighting products incorporating incandescent, fluorescent, halogen, ceramic metal halide or other lighting technology. In addition, many of our existing customers who purchase our LED chips and LED components develop and manufacture lighting fixtures using those chips and components. As we continue to operate in that market, our customers may respond by reducing or discontinuing their orders for our products. This could prevent us from growing or even maintaining our revenues from the sale of LED chips and LED components, which would negatively impact our business, financial condition and results of operations.

As with our LED components, to minimize the likelihood that one of our lighting fixture competitors or another third party will assert an intellectual property right related to our lighting fixtures, we have sought to market these products only in countries in which we believe enforcement of intellectual property rights has been more limited. Our sales of lighting products to customers in the United States decreased significantly in recent years. This distribution strategy may limit our sales to countries that do not have the highest demand or market potential, and raise similar issues and risks to those raised with respect to our use of this strategy in connection with marketing our LED components.

We derive a significant portion of our revenues from a limited number of customers, including distributor customers, and generally do not enter into long-term customer contracts. The loss of, or a significant reduction in purchases by, one or more of these customers, or the failure by one of these customers to pay, could adversely affect our operating results and financial condition.

We have historically derived a significant portion of our revenues from a limited number of customers, including distributor customers. For the years ended August 31, 2019 and 2018, our top ten customers collectively accounted for 73% and 66%, respectively, of our revenues. Some of our largest customers and what we produce/have produced for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project-based purchases and broadening customer base, among other things. For the years ended August 31, 2019 and 2018, sales to our three largest customers, in the aggregate, accounted for 45% and 34% of our revenues, respectively.

The sales cycle from initial contact to confirmed orders with our customers is typically long and unpredictable. We typically enter into individual purchase orders with large customers, which can be altered, reduced or cancelled with little or no notice to us. We do not generally enter into long-term commitment contracts with our customers. As such, these customers may alter their purchasing behavior and reduce or cancel orders with little or no notice to us. Consequently, any one of the following events may cause material fluctuations or declines in our revenues:

• reduction, delay or cancellation of orders from one or more of our major customers;

• loss of one or more of our major customers and our failure to identify additional or replacement customers; and

• failure of any of our major customers to make timely payment for our products.

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

Our future success depends on the continued service and performance of our key personnel, including in particular Trung T. Doan, our chief executive officer, and members of our executive team. We do not maintain key man insurance on any of our officers or key employees.

If Mr. Doan or other key personnel were unable or unwilling to continue in their present positions, we may not be able to replace them readily or on terms that are reasonable, if at all. As such, the loss of Mr. Doan or other key personnel, including other key members of our management team and certain of our key marketing, sales, product development or technology personnel, could significantly disrupt our operations and prevent the timely achievement of our development strategies and growth, which would likely have an adverse effect on our financial condition, operating results and prospects. Moreover, we may lose some of our customers if any of our officers or key employees were to join a competitor or forma competing company. The loss of the services of our senior management for any reason could adversely affect our business, operating results and financial condition.

In addition, competition for experienced employees in our industry can be intense, and we may not be successful in recruiting, motivating or retaining sufficiently qualified personnel on terms that are reasonable, or at all. Cyclical volatility in our industry and in our business may aggravate this problem. For example, the challenges we faced in recent years relating to loss of market share and a sustained decrease in the market price of our common stock, among others, could impact our ability to attract and retain employees. When consumer demand for our products is reduced or delayed, we expect lower net revenue and reduced profitability. When our stock price declines, our equity incentive awards may lose retention value. In response to such downturns, we may further implement cost reduction actions, including spending controls, forced holidays and company shutdowns, employee layoffs, shortened work-weeks and involuntary salary reductions. Layoffs during an industry downturn could make it more difficult for us to retain key talent and staff members, or to rehire employees should business improve.

We are highly dependent on our customers’ ability to produce and sell products incorporating our LED products. If our customers are not successful, our operating results could be materially and adversely affected.

Our customers incorporate our LED products into their products. As such, demand for our products is dependent on demand for our customers’ end-products that incorporate our LED products and our customers’ ability to sell these products. The general lighting market has only recently begun to develop and adopt standards for fixtures that incorporate LED devices. If the end-customers for our products are unable to manufacture fixtures that meet these standards, our customers’ sales, and consequently our sales, will suffer.

With respect to the sale of our LED components, a substantial portion of which is used in specialty industrial applications, such as UV curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, and architectural lighting. A majority of our sales are to such end-customers in selected markets. Sales by end-customers of our products are generally dependent on their ability to develop high quality and highly efficient lighting products and require complex designs and processes, including thermal design, optical design and power conversion. We are making a transition 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. Our customer’s timely and successful product development, the success of our customers’ new product introductions and market acceptance could be materially and adversely affected our operating results.

If our intellectual property, including our proprietary technologies and trade secrets, are not adequately protected to prevent misuse or misappropriation by our competitors, the value of our brand and other intangible assets may be diminished, and our business may be materially and adversely affected. In addition, the sale of certain patents increases our business risk.

Our future success and competitive position depends in part on our ability to protect our intellectual property, including proprietary technologies and trade secrets. In particular, we have developed advanced capabilities and proprietary know-how in sapphire reclamation, gallium nitride, or GaN, epitaxial growth, copper alloy technology, nanoscale surface engineering and vertical LED structure technology that are critical to our business. We rely, and expect to continue to rely, on a combination of confidentiality and license agreements with our employees, licensees, partner and third parties with whom we have relationships, and trademark, copyright, patent and trade secret protection laws, to protect our intellectual property, including our proprietary technologies and trade secrets.

There can be no assurance that the steps we have taken or plan to take in the future are adequate to protect our intellectual property, including our proprietary technologies and trade secrets. We expect to continue to seek patent and trademark protection for our technologies and know-how. However, we will only be able to protect such technologies and know-how from unauthorized use by third parties to the extent that valid, protectable and enforceable rights cover them. We cannot be certain that our patent and trademark applications will lead to patents being issued and registered trademarks being granted in a timely manner, or at all. Even if we are successful in obtaining such rights, the intellectual property laws of other countries in which our products are sold or may in the future be sold may not protect our products and intellectual property rights to the same extent as the laws of the United States. For example, China currently is thought to afford less protection to intellectual property rights generally than some other jurisdictions. As such, the lack of strong patent and other intellectual property protection in China may significantly increase our vulnerability as regards unauthorized disclosure or use of our intellectual property and undermine our competitive position. The legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in LED-related industries are uncertain and still evolving, both in the United States and in other countries. Moreover, the contractual agreements that we enter into with employees, licensees and third parties to protect our intellectual property and proprietary rights afford only limited protection and may not been enforceable.

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We also expect that the more successful we are, the more likely it will be that competitors will try to develop or patent similar or superior technologies, products and services. In the event that our competitors or others are able to obtain knowledge of our know-how, trade secrets and technologies through independent development, our failure to protect such know-how, trade secrets and technologies and/or our other intellectual property and proprietary rights may undermine our competitive position. In addition, third parties may knowingly or unknowingly infringe our trademarks and other intellectual property rights, and litigation may be necessary to protect and enforce our intellectual property rights or determine the validity and scope of our proprietary rights. Any such litigation could be very costly and could divert management attention and resources away from our business, and the outcome of such litigation may not be in our favor. If the protection of our intellectual property, including our proprietary technologies and trade secrets, is inadequate to prevent use or appropriation by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our products and methods of operation. Any of these events may have a material adverse effect on our business, financial condition, reputation and competitive position.

We have also sold certain patents, generally for technology that we are no longer actively developing. While we plan to continue to monetize our patent portfolio through sales of non-core patents, we may not be able to realize adequate interest or prices for those patents. Accordingly, we cannot provide assurance that we will be able to generate revenue from these sales. In addition, although we seek to be strategic in our decisions to sell patents, we might incur reputational harm if a purchaser of our patents sues one of our customers for infringement of the purchased patent, and we might later decide to enter a space that requires the use of one or more of the patents we sold.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

To protect a substantial amount of our technologies, we have chosen to rely primarily on trade secrets law rather than seeking protection through patents. Trade secrets are inherently difficult to protect. In order to protect our intellectual property rights, including our proprietary technologies and trade secrets, we rely in part on security measures, as well as confidentiality agreements with our employees, licensees and other third parties. These measures and agreements may not effectively prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. While we believe we use reasonable efforts to protect our trade secrets, we could potentially lose future trade secret protection if any unintentional or willful disclosure by our directors, employees, consultants or contractors of such information occurs, including disclosure by employees during or after the termination of their employment with us, in particular if they were to join one of our competitors. Laws regarding trade secret rights in certain markets in which we operate may afford little or no protection. The loss of trade secret protection could make it easier for third parties to compete with our products by copying functionality. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our business, revenue, reputation and competitive position.

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 could cause demand for our products to decline, which could materially and adversely affect our revenues, profits and margins.

We believe the near-term growth of the LED market will be driven in part by government policies in certain countries that either directly promote the use of LEDs or discourage the use of some traditional lighting technologies. Today, the upfront cost of LED lighting exceeds the upfront cost for some traditional lighting technologies that provide similar lumen output in many applications. However, for environmental reasons, among others, some governments around the world have used policy initiatives to accelerate the development and adoption of LED lighting and other non-traditional lighting technologies that are seen as more environmentally-friendly compared to some traditional lighting technologies. Reductions in, or eliminations of, government investment and favorable energy policies could result in decreased demand for our products and decrease our revenues, profits, margins and prospects.

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

In the ordinary course of our business, we may be exposed to general commercial claims related to the conduct of our business, class action lawsuits, employment claims and other litigation claims. Any such litigation, whether with or without merit, could result in significant costs. In addition, members of our senior management may be required to divert significant attention and resources to these matters, reducing the time, attention and resources they have available to devote to managing our business. These additional expenses and diversion of attention and resources, along with any reputational issues raised by these lawsuits, may have a material negative impact on our business, financial condition and results of operations.

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We are required to assess our internal control over financial reporting on an annual basis and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports, significant expenses to remediate any internal control deficiencies and ultimately have an adverse effect on our share price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a management report that assesses the effectiveness of our internal control over financial reporting in our annual report on Form 10-K. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, which we will be required to disclose. Our compliance with Section 404 requires that we incur substantial accounting expenses and expend significant management resources and time on compliance related issues. If we are unable to comply with the requirements of Section 404 in a timely manner, or if we identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, we may be subject to sanctions or investigations by regulatory agencies such as the SEC. In addition, failure to meet the requirements of Section 404 or to disclose any material weakness may cause investors to lose confidence in our financial statements and the trading price of our common stock may decline. Moreover, if we fail to remedy any material weakness, our financial statements may be inaccurate, our ability to report our financial results on a timely and accurate basis may be adversely affected, our access to the capital markets may be restricted, we may be subject to sanctions or investigation by regulatory authorities, including the SEC and The NASDAQ Stock Market, or NASDAQ, and our stated results of operations and reputation may be materially and adversely affected.

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

As part of our business strategy, we have and may continue to pursue acquisitions of businesses and assets, strategic alliances and joint ventures. Long-lived assets, including property, plant and equipment and intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable.

In addition, some of our investments are accounted for under the equity method of accounting, which we record our proportionate share of their net income or loss, or using the cost method. However, they must also be tested for impairment. For the investments we account for under the equity method or the cost method, the impairment test considers whether the fair value of the equity investment as a whole, not the underlying net assets, has declined and whether that decline is other than temporary. If we determine that impairment is indicated, we would be required to take an immediate non-cash charge to earnings, which could adversely impact our operating results.

We may undertake joint ventures, investments, acquisitions, joint projects, and other strategic alliances and such undertakings, as well as our existing joint ventures, may be unsuccessful and may have an adverse effect on our business.

We have grown our business in part through strategic alliances and acquisitions. We continually evaluate and explore strategic opportunities as they arise, including product, technology, business or asset transactions, such as acquisitions or divestitures. Such undertakings may not be successful or may take a substantially longer period than initially expected to become successful, and we may never recover our investments or achieve desired synergies or economies from these undertakings.

This notwithstanding, we may in the future continue to seek to grow our operations in part by entering into joint ventures, undertaking acquisitions or establishing other strategic alliances with third parties in the LED and LED-related industries. These activities involve challenges and risks in negotiation, execution, valuation and integration, and closing of the transactions could be delayed or prevented by regulatory approval requirements, including antitrust review, or other conditions.

Any future agreements that we may enter into also could expose us to new operational, regulatory, market, litigation and geographical risks as well as risks associated with significant capital requirements, the diversion of management and financial resources, unforeseen operating difficulties and expenditures, sharing of proprietary information, loss of control over day-to-day operations, non-performance by a counterparty and potential competition and conflicts of interest. In addition, we may not be successful in finding suitable targets on terms that are favorable to us, or at all. Even if successfully negotiated and closed, expected synergies from a joint venture, acquisition or other strategic alliance may not materialize or may not advance our business strategy, may fall short of expected return-on-investment targets or may not prove successful or effective for our business. We may also encounter difficulty integrating the operations, personnel and financial and operating systems of an acquired business into our current business.

We may need to raise additional debt funding or sell additional equity securities to enter into such joint ventures or make such acquisitions. 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.

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

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Any undetected defects in our products may harm our sales and reputation and adversely affect our manufacturing yields.

The manufacture of LED chips and components is highly complex, requiring precise processes in a highly controlled and sterile environment using specialized equipment. We manufacture our LED products to meet customer requirements with respect to quality, performance and reliability. Although we utilize quality control procedures at each stage of our manufacturing process, our products may still contain defects that are undetected until after they are shipped or inspected by our customers, or on operation of the device. For example, there could be sub-micron defects that would not be detected by our quality control procedures; such sub-micron defects may increase the current leakage in the device and could negatively affect the product performance over time. Unsatisfactory performance of or defects in our products may cause us to incur additional expenses, including costs in relation to product warranties, cancellation and rescheduling of orders and shipments, and product returns or recalls. Failure to detect and rectify defects in our products before delivery could subject us to product liability claims and harm our credibility and market reputation, which could materially adversely affect our business and results of operations.

In addition, we do not currently have fully automated manufacturing processes, which could potentially introduce contaminants to the production processes through human error. Defects or other difficulties in the manufacturing process can prevent us from achieving maximum capacity utilization, which is the actual number of wafers that we are able to produce in relation to our capacity, and also can prevent acceptable yields of quality LED chips from those wafers.

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

We consume significant amounts of electricity and water in our manufacturing process. We may experience future disruptions or shortages in our electricity or water supply, which could result in a drop in or loss of throughput and product yield or even the loss of an entire production run, depending on the duration of disruption or shortage. Although we maintain generators and other backup sources of electricity, these replacement sources are only capable of providing effective backup supplies for limited periods of time. We do not currently have any alternative sources of water nor do we maintain backup tanks. We cannot assure you that we will not experience disruptions or shortages in our electricity or water supply or that there will be sufficient electricity and water available to us to meet our future requirements. Any material disruption could significantly impact our normal business operations, cause us to incur additional costs and adversely affect our financial condition and results of operations.

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

Our research and development and manufacturing activities involve the use of hazardous materials, including acids, adhesives and other industrial chemicals. As a result, we are subject to a variety of environmental, health and safety laws and regulations governing the use, storage, handling, transportation, emission, discharge, exposure to, and disposal of such hazardous materials. Compliance with applicable environmental laws and regulations in each of the jurisdictions in which we operate can be costly, and there can be no assurance that violations of these laws will not occur in the future as a result of human error, accident, equipment failure, or other causes. Liability under environmental and health and safety laws can be joint and several, and without regard to fault or negligence. The failure to comply with past, present, or future laws could subject us to increased costs and significant fines and penalties, damages, legal liabilities, suspension of production or operations, alteration of our manufacturing facilities or processes, curtailment of our sales and adverse publicity. Any of these events could harm our business and financial condition.

Furthermore, environmental protection and workplace safety regulations may become more stringent in the future, and although we cannot predict the ultimate impact of any such new laws, they may impose greater compliance costs or result in increased risks or penalties, which could harm our business. Existing and future environmental laws and regulations could also require us to acquire pollution abatement or remediation equipment, modify our product designs or incur other expenses associated with such laws and regulations. As our industry continues to evolve, we may be required to evaluate and use new materials in our manufacturing process that may be subject to regulation under existing or future environmental laws and regulations, and our use of such new materials may be restricted. Any such restriction could require us to alter our manufacturing processes or increase our expenses. If we fail to comply with current and future environmental laws and regulations, whether intentional or inadvertent, we may be required to pay fines and other liabilities to the government or third parties, suspend production or even cease operation.

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

As a multinational organization with operations and sales in various jurisdictions, we may be subject to taxation in such jurisdictions. The various tax laws and regulations are becoming increasingly complex, with the interpretation and application of such laws and regulations becoming more challenging and uncertain. We may be subject to additional taxes, fines and penalties to the extent we are not correct in our interpretation and the amount of taxes we declare and pay. In addition, given the continuing global economic slowdown, as well as high government debt levels of many countries, there is an increasing likelihood that the amount of taxes we pay in these jurisdictions could increase substantially. Any such events would have a material impact on our reputation, financial condition and results of our operations.

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

We conduct operations through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between our subsidiaries. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to support the transfer prices. While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which would result in a higher tax liability to us. In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.

The non-U.S. activities of our non-U.S. subsidiaries may be subject to U.S. taxation.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years, makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. Our provisional estimate is that no tax will be due under this provision. However, there can be no assurance as to accuracy of the estimation. If the ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s financial condition, operating results and cash flows could be materially adversely affected.

Risks Relating to Our Holding Company Structure

Our ability to receive dividends and other payments from Taiwan SemiLEDs may be restricted by commercial and legal restrictions, which may materially and adversely affect our ability to grow, fund investments, make acquisitions, pay dividends and otherwise fund and conduct our business.

We are a holding company with one material asset, which is our ownership interest in Taiwan SemiLEDs.

Dividends and interest on intercompany loans we receive from our subsidiaries in Taiwan, if any, will be subject to withholding tax under Taiwan law. The ability of our subsidiaries in Taiwan to pay dividends, repay intercompany loans from us or make other distributions to us is restricted by, among other things, the availability of funds, the terms of various credit arrangements entered into by our subsidiaries, as well as statutory and other legal restrictions. In addition, although there are currently no foreign exchange control regulations that restrict the ability of our subsidiaries located in Taiwan to distribute dividends to us, we cannot assure you that the relevant regulations will not be changed and that the ability of our subsidiaries to distribute dividends to us will not be restricted in the future. A Taiwan company is generally not permitted to distribute dividends or to make any other distributions to stockholders for any year in which it did not have either earnings or retained earnings (excluding reserves). In addition, before distributing a dividend to stockholders following the end of a fiscal year, the company must recover any past losses, pay all outstanding taxes and set aside 5% of its annual net income (less prior years’ losses and outstanding taxes) as a legal reserve until the accumulated legal reserve equals its paid-in capital, and may set aside a special reserve.

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

Our cash position in SemiLEDs Corporation’s bank account has declined significantly. SemiLEDs Corporation has substantial intercompany receivables from Taiwan SemiLEDs. However, we are dependent on Taiwan SemiLEDs’ ability to raise money through the sale of a portion of its subsidiary and the restructuring of its chip operation to pay back SemiLEDs Corporation. On July 5, 2019, Taiwan SemiLEDs entered into two new loan agreements to refinance existing real estate loans of Taiwan SemiLEDs and provide for operating capital.

Our ability to make further investments in Taiwan SemiLEDs may be dependent on regulatory approvals in Taiwan.

Taiwan SemiLEDs depends on us to meet its equity financing requirements. Any capital contribution by us to Taiwan SemiLEDs requires the approval of the relevant Taiwan authorities, such as the Hsinchu Science Park Administration. We may not be able to obtain any such approval in the future in a timely manner, or at all. We cannot assure you that we will be able to complete these government registrations or obtain the government approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our subsidiaries or any of their respective subsidiaries. If we fail to complete these registrations or obtain the approvals, our ability to capitalize Taiwan SemiLEDs may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

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The rights of stockholders may be limited as we conduct a substantial portion of our operations in Taiwan and a substantial portion of our assets and substantially all of our directors and officers reside outside the United States.

Although we are incorporated in Delaware, a substantial portion of our operations are conducted in Taiwan through Taiwan SemiLEDs and its subsidiaries. As such, a substantial portion of our assets are located in Taiwan. In addition, substantially all of our directors and officers reside outside the United States, and a substantial portion of the assets of those persons are located outside of the United States. Therefore, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under applicable securities laws or otherwise. Even if you are successful in bringing an action, the laws of Taiwan may render you unable to enforce a United States judgment against our assets or the assets of our directors and officers.

For judgments obtained in courts outside of Taiwan to be recognized and enforceable in Taiwan without review of the merits, the Taiwan court in which the enforcement is sought must be satisfied that: the foreign court rendering such judgment has jurisdiction over the subject matter in accordance with the Taiwan law; the judgment and the court procedure resulting in the judgment are not contrary to the public order or good morals of Taiwan; the judgment is a final judgment for which the period for appeal has expired or from which no appeal can be taken; if the judgment was rendered by default by the foreign court, the defendant was duly served in the jurisdiction of such court within a reasonable period of time in accordance with the laws and regulations of such jurisdiction, or process was served on the defendant with the Taiwan judicial assistance; and judgment of Taiwan courts is recognized and enforceable in the foreign court rendering the judgment on a reciprocal basis.

Political, Geographical and Economic Risks

Due to the location of our operations, we are vulnerable to natural disasters and other events, which may seriously disrupt our operations.

Most of our operations are located in Taiwan, and the operations of many of our LED manufacturing service providers, suppliers and customers are located in Taiwan and the PRC. For the years ended August 31, 2019 and 2018, 10% and 28%, respectively, of our revenues were derived from customers located in Taiwan and China (including Hong Kong). Our operations and the operations of our customers and suppliers are vulnerable to earthquakes, tsunamis, floods, droughts, typhoons, fires, power losses and other major catastrophic events, including the outbreak, or threatened outbreak, of any widespread communicable diseases. Disruption of operations due to any of these events may require us to evacuate personnel or suspend operations, which could reduce our productivity. Such disasters may also damage our facilities and equipment and cause us to incur additional costs to repair our facilities or procure new equipment, or result in personal injuries or fatalities or result in the termination of our leases and land use agreements. Any resulting delays in shipments of our products could also cause our customers to obtain products from other sources. Although we maintain property insurance for such risks, there is no guarantee that future damages or business losses from earthquakes and catastrophic other events will be covered by such insurance, that we will be able to collect from our insurance carriers, should we choose to claim under our insurance policies, or that such coverage will be sufficient. In addition, natural disasters, such as earthquakes, tsunamis, floods and typhoons, may also disrupt or seriously affect the operations of our customers and suppliers, resulting in reduced orders or shipments or the inability to perform contractual obligations. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Our operations in China expose us to certain inherent legal and other risks that could adversely affect our business.

As a Delaware corporation, we are subject to laws and regulations applicable to foreign companies operating in China in general and specifically to the laws and regulations applicable to foreign invested joint stock companies. The PRC legal system is a civil law system based on written statutes. Unlike common law systems, prior court decisions may be cited for reference but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation since then has been to significantly enhance the protections afforded to various forms of foreign investments in China. The PRC legal system continues to rapidly evolve and the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. For example, our current and future operating subsidiaries in China must obtain relevant permits (including land use permits), licenses and approvals necessary for to commence operations and sales and, no assurance can be given that they will be able to do so or that if obtained that such permits, licenses or approvals will be adequate or that they will not be revoked or cancelled in the future. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances, impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we have either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we have. These uncertainties may impede our ability to enforce the contracts we have entered into with our business partners, customers and suppliers.

Because the legal and regulatory environment in China is subject to inherent uncertainties, the enforcement of our rights as a foreign company investing in China may be difficult. For example, our intellectual property may be afforded less protection in China than in some other countries. By entering the market in China in general and by licensing our intellectual property to China SemiLEDs for example, our vulnerability towards unauthorized disclosure or use of our intellectual property may be significantly increased.

Future litigation could result in substantial costs and diversion of our management’s attention and resources, and could disrupt our business, as well as have a material adverse effect on our financial condition and results of operations. Given the relative unpredictability of China’s legal system and potential difficulties enforcing a court judgment in China, we may be unable to halt the unauthorized use of our intellectual property through litigation, which could adversely affect our competitive position, our ability to attract customers, and our results of operations.

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Strained relations between the PRC and Taiwan could negatively affect our business and the market price of our common stock.

Taiwan has a unique international political status. Since 1949, Taiwan and the PRC have been separately governed. The PRC government claims that it is the sole government in China and that Taiwan is part of China. Although significant economic and cultural relations have been established during recent years between Taiwan and the PRC, the PRC government has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. Furthermore, the PRC government adopted an anti-secession law relating to Taiwan. Relations between Taiwan and the PRC governments have been strained in recent years for a variety of reasons, including the PRC government’s position on the “One China” policy and tensions concerning arms sales to Taiwan by the United States government. Any tension between the Taiwan government and the PRC government, or between the United States and China, could materially and adversely affect the market prices of our common stock.

If the U.S. dollar or other currencies in which our sales, raw materials, component purchases and capital expenditures are denominated fluctuate significantly against the New Taiwan, or NT, dollar and other currencies, our profitability may be seriously affected.

We have significant foreign currency exposure, and are primarily affected by fluctuations in exchange rates among the U.S. dollar, the NT dollar and other currencies. A portion of our revenues and expenses are denominated in currencies other than NT dollars, primarily U.S. dollars. We do not hedge our net foreign exchange positions through the use of forward exchange contracts or otherwise and as a result we are affected by fluctuations in exchange rates among the U.S. dollar, the NT dollar and other currencies. For example, the announcement of Brexit caused severe volatility in global currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. Any significant fluctuation in exchange rates may be harmful to our financial condition and results of operations.

The PRC government’s control of currency conversion and changes in the exchange rate between the Renminbi and other currencies could negatively affect our financial condition and our ability to pay dividends.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade related transactions, can be made in foreign currencies without prior approval from State Administration of Foreign Exchange in China, or SAFE, provided that we satisfy certain procedural requirements. However, approval from SAFE or its local counterpart is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. Our revenue from sales in China (including Hong Kong) accounted for 3% and 9% of our revenues for the years ended August 31, 2019 and 2018, respectively.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, which generally prohibits U.S. companies from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, may not be subject to these prohibitions, and therefore may have a competitive advantage. In the past, there have been instances of corruption, extortion, bribery, pay-offs, theft and other fraudulent practices in Taiwan and China, as well as other Asian countries and Russia. We cannot assure that our employees or other agents will not engage in such conduct and render us responsible under the FCPA. If our employees or other agents are found to have engaged in corrupt or fraudulent business practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Owning Our Common Stock

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

In December 2010, our common stock was initially approved for listing on the NASDAQ Global Select Market but was transferred to the NASDAQ Capital Market effective November 5, 2015. To maintain that listing, we must satisfy the continued listing requirements of NASDAQ for inclusion in the NASDAQ Capital Market, including among other things, a minimum stockholders’ equity of $2.5 million and a minimum bid price for our common stock of $1.00 per share, that a majority of the members of our board of directors are independent under the NASDAQ Listing Rules and that our audit committee consist of three independent directors who satisfy additional requirements under the Exchange Act. Although we are currently in compliance with these requirements, there is no assurance that our common stock will continue to qualify for continued listing on NASDAQ which would materially and adversely impact the market value of our common stock.

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We may seek additional capital that may result in stockholder dilution.

We may require additional capital due to continuing losses, deteriorating business conditions or other future developments. If our current sources of capital are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain bank loans and credit facilities. The sale of convertible debt securities or additional equity securities could result in dilution to our stockholders. The incurrence of further indebtedness, whether in the form of public debt or bonds or bank financing, would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

Our ability to obtain external financing is subject to a number of uncertainties, including:

• our future financial condition, results of operations and cash flows and the trading price of our common stock;

• the state of global credit markets and our creditworthiness;

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

• economic, political and other conditions in Taiwan, China and elsewhere.

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

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

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

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

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

• actual or anticipated changes in our growth rate;

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

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

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

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

• sales or expected sales of additional common stock;

• announcements from, or operating results of, our competitors; and

• general economic and market conditions.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may cause the market price of shares of our common stock to decline. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We had ever been a defendant in two filed actions and may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

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

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

As of November 13, 2019, 3.5 million shares of common stock were issued and outstanding, including approximately 0.6 million shares of common stock issued in the initial public offering, which are freely tradable without restriction by non-affiliates. Certain stockholders, including stockholders owning a majority of our outstanding shares as well as current and former employees, are eligible to resell shares of common stock in the public market under Rule 144, which, in the case of our affiliate and persons who have been affiliates in the last three months, would be subject to volume limitations and certain other restrictions under Rule 144, including that we are current in our SEC filings. In general, Rule 144 provides that any of our non-affiliates, who have held restricted common stock for at least six-months, are entitled to sell their restricted stock freely, provided that we are current in our SEC filings. After one year, a non-affiliate may sell without any restrictions.

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We have also filed registration statements on Form S-8 under the Securities Act to register approximately 565 thousand shares for issuance pursuant to options or other rights to purchase common stock under our equity incentive plans.These shares can be freely sold in the public market upon issuance and once vested, subject to the applicable plan and/or the agreements entered into with holders of options or other rights to purchase common stock in connection with the issuance of such options or other rights to purchase common stock.

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

As of November 13, 2019, our directors and executive officers, together with their affiliates, beneficially owned, in the aggregate, approximately 40% of our outstanding common stock. As a result, certain of these stockholders acting alone or these stockholders, acting together, would have the ability to practically control the outcome of matters submitted to our stockholders for approval, including the election of our directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:

• limiting stockholders’ ability to influence corporate matters;

• delaying, deferring or preventing a change in corporate control;

• impeding a merger, consolidation, takeover or other business combination involving us; or

• discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

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

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

We have never declared or paid any cash dividends on our common stock or convertible preferred stock and do not intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or maintain the price at which our stockholders purchased their shares.

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

Certain provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. As long as our major stockholder, Simplot Taiwan, Inc., which is beneficially owned by Scott R. Simplot, one of our directors, continues to hold 25% or more of the total voting power of all outstanding shares of our stock entitled to vote generally in the election of directors, shareholders holding at least 25% of the total voting power of all outstanding shares of our stock entitled to vote generally in the election of directors are able to call a special meeting in accordance with our bylaws; provided, however, at such time when the ownership interest of Simplot Taiwan, Inc. first falls below 25% of our total voting power, our amended and restated certificate of incorporation requires that a special meeting may be called only by a majority of our board of directors. Our amended and restated certificate of incorporation precludes stockholder action by written consent. In addition, our amended and restated bylaws require that any stockholder proposals or nominations for election to our board of directors must meet specific advance notice requirements and procedures, which may make it more difficult for our stockholders to make proposals or director nominations. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law. These provisions may prohibit or restrict large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us. These provisions in our certificate of incorporation and bylaws and under Delaware law could discourage potential takeover attempts and could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in our market price being lower than it would be without these provisions.

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Item1B.Unresolved Staff Comments

Not applicable.

Item 2.Properties

The following are significant manufacturing and office facilities that we own or lease as of August 31, 2019:

• We own a four-story building located in Hsinchu Science Park, Taiwan. We occupy approximately 183 thousand square feet of the building, and we lease approximately 55 thousand square feet of space to a third party tenant. Approximately 32% of our occupied space in the building is devoted to our manufacturing operations. We lease the land on which the building is situated from the Science Park Administration in Hsinchu.

Item 3. 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.

On June 21, 2017, Well Thrive Ltd. (“Well Thrive”) filed a complaint against SemiLEDs Corporation in the United States District Court for the District of Delaware. The complaint alleges that Well Thrive is entitled to return of $500 thousand paid toward a note purchase pursuant to a purchase agreement (the “Purchase Agreement”) effective July 6, 2016 with Dr. Peter Chiou, which was assigned to Well Thrive on August 4, 2016. Pursuant to the terms of the Purchase Agreement, we have retained the $500 thousand payment as liquidated damages. Well Thrive alleges that the liquidated damages provision is unenforceable as an illegal penalty and does not reflect the amount of purported damages. On March 13, 2018, we filed a motion to enforce a settlement agreement between the parties to dismiss the lawsuit with prejudice.  On March 27, 2018, Well Thrive filed an answering brief in opposition to our motion on the basis that Well Thrive never consented to dismiss the case. On January 2, 2019, the judge denied without prejudice the motion filed by us, because there remains some question as to whether Well Thrive’s former lawyers and Dr. Chiou had authority from Well Thrive to settle this case. The judge’s order allows us to conduct depositions of Well Thrive’s former lawyer, Dr. Chiou, and Mr. Chang Sheng-Chun, Well Thrive’s director, and to request documents relating to the issues surrounding the settlement. Based on this order, we arranged the depositions to obtain more evidence in support of a motion to enforce the settlement agreement. On October 25, 2019, Well Thrive filed a motion to modify the Court’s scheduling order and to allow it to file a motion for summary judgment, and we filed an opposition to the motion. On November 13, 2019, the Court denied Well Thrive’s motion. The Court set a trial date of March 2, 2020, if needed.

On March 11, 2019, a former employee (the “Plaintiff”) of Taiwan Bandaoti Zhaoming Co., Ltd. (“Taiwan Bandaoti”) filed a civil complaint against Taiwan Bandaoti in the Taiwan Miao-Li District Court. The Plaintiff alleged the following causes of action under the Labor Standards Act of Taiwan: (1) failure to pay the annual bonus; and (2) failure to pay transportation allowance. The Plaintiff is seeking compensation in the aggregate of approximately $9 thousand (NT$293 thousand). On May 24, 2019, Taiwan Miao-Li District Court determined on its own initiative to transfer the case to the Taiwan Hsin-Chu District Court due to a lack of jurisdiction over the action in whole or in part. On August 16, 2019, the Taiwan Hsin-Chu District Court held the first mediation proceeding, and on September 27, 2019, the Plaintiff and Taiwan Bandaoti had the first oral argument. The next oral argument will be held on December 6, 2019.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price Information for our Common Stock

Our common stock began trading on the NASDAQ Global Select Market under the symbol “LEDS” on December 8, 2010 and was transferred to the NASDAQ Capital Market effective November 5, 2015 where it continues to trade under the same symbol.

There were 64 holders of record of our common stock as of November 13, 2019.

Recent Sales of Unregistered Securities

Not applicable.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not make any repurchases of our common stock and no purchases of common stock were made on our behalf during the fourth quarter of our fiscal 2019.

Item 6.Selected Financial Data

Not applicable.

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Item7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations

The following discussion and analysis of our financial condition and results of operations is based upon and should be read in conjunction with the audited consolidated financial statements and the notes included elsewhere in this Annual Report on Form 10‑K, as well as the Risk Factors contained in Part I, Item 1A of this Annual Report on Form 10‑K, and other information provided from time to time in our other filings with the SEC.

Overview

We develop, manufacture and sell light emitting diode (LED) chips, LED components, LED modules and systems. Our products are used for general specialty industrial applications, including ultraviolet, or UV, curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, architectural lighting and entertainment lighting.

We package our LED chips into LED components, which we sell to distributors and a customer base that is heavily concentrated in a few select markets, including Netherlands, Taiwan, the United States, Germany and India. We also sell our “Enhanced Vertical,” or EV, LED product series in blue, white, green and UV in selected markets. Our lighting products customers are primarily original design manufacturers, or ODMs, of lighting products and the end users of lighting devices. We also contract other manufacturers to produce for our sale certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process.

We are a holding company for various wholly owned subsidiaries. SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, is our wholly owned operating subsidiary, where a substantial portion of our assets are held and located and where a portion of our research, development, manufacturing and sales activities take place. Taiwan SemiLEDs owns a 97% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacture, and substantial portion of marketing and sale of LED products, and where most of our employees are based.

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 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 credit 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.

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• 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 component products development and production equipment if we are to grow.

• Our ability to continue to innovate. As part of our growth strategy, we plan to continue to be innovative in product design, to deliver new products and to improve our manufacturing efficiencies. Our continued success depends on our ability to develop and introduce new, technologically advanced and lower cost products, such as more efficient, better performance LED component products. If we are unable to introduce new products that are commercially viable and meet rapidly evolving customer requirements or keep pace with evolving technological standards and market developments or are otherwise unable to execute our product innovation strategy effectively, we may not be able to take advantage of market opportunities as they arise, execute our business plan or be able to compete effectively. In December 2018, we announced sampling of ultraviolet C (UVC) product lines and launched our first product in the tri-color multi pixel series, a 16-pixel RGB array component, to reduce total production costs through increased SMT throughput. 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 the Netherlands, Taiwan, the United States, Germany, Japan and India. 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/have produced for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project‑based purchases and broadening customer base, among other things. For the years ended August 31, 2019 and 2018, sales to our three largest customers, in the aggregate, accounted for 45% and 34% of our revenues, respectively.

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• 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. In June 2012, we settled an intellectual property dispute involving Cree. We agreed to dismiss amended complaints filed against each other without prejudice. We agreed to the entry of a permanent injunction that was effective October 1, 2012 that precludes us from (and/or from assisting others in) making, using, importing, selling and/or offering to sell in the United States certain accused products and/or any device that includes such an accused product after that date and to payment of a settlement fee for past damages. All accused products sold before the date of settlement are released under this agreement and our customers and distributors are specifically released. All remaining claims between Cree and us were withdrawn without prejudice, with each retaining the right to assert them in the future. 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.

• Declining cash position. Our cash and cash equivalents decreased to $1.4 million as of August 31, 2019 primarily due to the combination of our net cash used in operating activities offset by proceeds from long-term debt. 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. In July 2019, we entered into two new loan agreements to refinance an existing real estate loan and provide for operating capital. Based on our current financial projections, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months.

Components of Consolidated Statements of Operations

Revenues, net

Our core products are LED components, LED modules and systems, which are the most important part of our business, as well as LED chips and lighting products.

Our revenues are affected by sales volumes of our LED chips, LED components and lighting products and our average selling prices for such products. In addition, as we expand and diversify our product offerings and with varying average selling prices, any change in the mix of products that we sell in any given period may affect our total revenues. For example, average selling prices for our LED components are generally higher than for LED chips and the average selling prices for our lighting products are higher than for our LED chips and LED components.

We recognize revenue on sales of our products when persuasive evidence of an arrangement exists, the price is fixed or determinable, ownership and risk of loss has transferred and collection of the sales proceeds is probable. We obtain written purchase authorizations from our customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. We typically consider delivery to have occurred at the time of shipment, unless otherwise agreed in the applicable sales terms, as this is generally when title and risk of loss for the product passes to the customer.

Our larger customers typically provide us with non‑binding rolling forecasts of their requirements for the coming one to three months; however, recent global economic uncertainty and weakness has led to reduced spending in our target markets and made it difficult for our customers and us to accurately forecast and plan future business activities. Our customers may increase, decrease, cancel or delay purchase orders already in place, with no material consequences to the customer. As a result, we may face increased inventories and our backlog may decline as a result of any economic downturn or material change in market conditions or economic outlook. We price our products in accordance with prevailing market conditions, taking into account the technical specifications of the product being sold, the order volume, the strength and history of our relationship with the customer, our inventory levels and our capacity utilization. When average selling prices drop, as they did in recent years, inventory write‑downs to net realizable values may also result.

Our customers consist primarily of packagers, ODMs and end‑customers. Our revenues attributable to our ten largest customers accounted for 73% and 66% of our revenues for the years ended August 31, 2019 and 2018, respectively.

Our revenues have been concentrated in a few select markets, including the Netherlands, Taiwan, the United States, Germany, Japan and India. Net revenues generated from these countries, in the aggregate, accounted for 85% and 84% of our net revenues for the years ended August 31, 2019 and 2018, respectively. We expect that our revenues will continue to be substantially derived from these countries for the foreseeable future. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets.

Our revenues are presented net of estimated sales returns and discounts. We estimate sales returns and discounts based on our historical discounts and return rates and our assessment of future conditions.

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Cost of Revenues

Our cost of revenues consists primarily of cost of materials, depreciation expenses, manufacturing overhead costs, direct labor costs and utilities cost, all related to the manufacture of our LED products. Materials include raw materials, other materials such as gases and chemicals, consumables, and assembly materials. Because our products are manufactured based on customers’ orders and specifications and we purchase materials and supplies to support such orders, we generally purchase our materials at spot prices in the marketplace and do not maintain long‑term supply contracts. We purchase materials from several suppliers. Our procurement policy is to select only a small number of qualified vendors who demonstrate quality of materials and reliability on delivery time. We are subject to variations in the cost of our materials and consumables from period to period. Moreover, because we consume a significant amount of electricity in our manufacturing process, any fluctuations in electricity costs will have an impact on our cost of revenues. We also use contract manufacturers to produce for our certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process.

Direct labor costs consist of salary (including stock‑based compensation expenses), bonus, training, retirement and other costs related to our employees engaged in the manufacture of our products. Manufacturing overhead costs consist primarily of salaries, bonuses and other benefits (including stock‑based compensation expenses) for our administrative personnel allocated to manufacturing functions, repairs and maintenance costs for equipment and machinery maintenance costs and lease expenses.

Our cost of revenues also includes excess capacity charges as a result of the underutilization of our manufacturing capacity and inventory valuation adjustments to write down our inventories to their estimated net realizable values as a result of declines in their average selling prices.

Operating Expenses

Research and development. Our research and development expenses, which are expensed as incurred, consist primarily of expenses related to employee salaries, bonuses and other benefits (including stock‑based compensation expenses) for our research and development personnel, engineering charges related to product design, purchases of materials and supplies, repairs and maintenance and depreciation related expenses.

Selling, general and administrative. Selling, general and administrative expenses consist primarily of salaries, bonuses and other benefits (including stock‑based compensation expenses) for our administrative, sales and marketing personnel, expenses for professional services, which include fees and expenses for accounting, legal, tax and valuation services, amortization and depreciation related expenses, marketing related travel, lease expenses, entertainment expenses, allowance for doubtful accounts and general office related expenses, as well as compensation to our directors. We expect our selling, general and administrative expenses to decrease as we continue to implement cost reduction initiatives, such as spending controls, and as we continue to streamline our operations.

Gain on disposal of long‑lived assets, net. We recognized a gain of $288 thousand and $902 thousand on the disposal of long-lived assets for the years ended August 31, 2019 and 2018, respectively. Due to the excess capacity charges that we have suffered for a few years, considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of a certain level of our idle equipment.

Other Income (Expense)

Equity in loss from unconsolidated entities. We recognized net loss of $8 thousand from our equity investments without readily determinable fair value in Intematix for the year ended August 31, 2018, based on the excess of the carry amount over the receivables. No gain nor loss was recognized from our equity investments without readily determinable far value for the year ended August 31, 2019. We report our investment in the entity as investments in unconsolidated entities on our consolidated balance sheets and such investment amounts are initially stated at cost, and subsequently adjusted for our portion of equity in undistributed earnings or losses.

Interest expenses, net. Interest expenses, net consists of interest income and interest expense. Interest income represents interest earned from our cash and cash equivalents deposited with commercial banks in the United States and Taiwan. As of August 31, 2019 and 2018, we had cash and cash equivalents of $1.4 million and $3.4 million, respectively, which consisted of time deposits with initial maturity of greater than three months but less than one year. Interest expense consists primarily of interest on our long‑term borrowings and/or short‑term lines of credit with certain banks in Taiwan as well as with our Chairman and largest stockholder. We had long‑term debt totaling $6.4 million and $2.3 million as of August 31, 2019 and 2018, respectively.

Other income, net. Other income for the year ended August 31, 2018 primarily consists of sales of patents and rental income from the lease of the second floor of our Hsinchu building, offset by the commission expense and related depreciation charge. Other income for the year ended August 31, 2019 consists primarily of rental income from the lease of spare space in our Hsinchu building, offset by the settlement of a lawsuit with Epistar.

Foreign currency transaction gain (loss), net. We recognized a net foreign currency transaction gain of $40 thousand and a net loss of $52 thousand for the years ended August 31, 2019 and 2018, respectively, primarily due to the depreciation of the U.S. dollar against the NT dollar from bank deposits and accounts receivables held by Taiwan SemiLEDs and Taiwan Bandaoti Zhaoming Co., Ltd. in currency other than the functional currency of such subsidiaries.

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Provision for Income Taxes

United States tax treatment. We and one of our subsidiaries, Helios Crew, are United States corporations and are therefore required to file federal income tax returns with the Internal Revenue Service as well as with certain applicable state tax authorities. As our operations in the United States have been minimal, we have not to date recorded nor paid any significant federal or state corporate income tax.

We have investments in controlled foreign corporations and affiliates, which under Subpart F of the United States Internal Revenue Code, or Subpart F, may under certain circumstances subject our investments in controlled foreign corporations and affiliates to taxation in the United States. Subpart F provides that United States corporations may be required to include in their income certain undistributed earnings of the foreign corporations and affiliates as though such earnings had been distributed currently. Subpart F applies only to United States shareholders (such as us) who hold an interest in a foreign corporation and affiliates that meet the definition of a “controlled foreign corporation.” Under Section 957(a) of the United States Internal Revenue Code, a “controlled foreign corporation” means any foreign corporation if more than 50% of either (i) the total combined voting power of all classes of stock of such corporation entitled to vote, or (ii) the total value of the stock of such corporation, is owned by “United States Shareholders” on any day during the foreign corporation’s taxable year.

Subpart F does not apply, however, to the income of a controlled foreign corporation generated from the sale of goods that are manufactured in its country of incorporation. Also, any income attributable to a controlled foreign corporation and its affiliates that is not engaged in a United States trade or business is generally not subject to United States taxation until its earnings are distributed, or the stock of the foreign corporation is disposed. All of our products are manufactured in Taiwan by Taiwan SemiLEDs, our wholly owned foreign subsidiary. Because Taiwan SemiLEDs conducts its manufacturing activities in Taiwan, the income or loss of Taiwan SemiLEDs is included in our consolidated financial statements, but is not considered taxable income for United States taxation purposes pursuant to Section 954(d)(1)(A) of the United States Internal Revenue Code. This generally enables a United States taxpayer, such as us, to indefinitely defer United States taxation on the profits earned by its controlled foreign corporations and affiliates by retaining the earnings in such entities. We do not currently have any plans to repatriate any of our retained earnings from any of our controlled foreign subsidiaries or affiliates and we do not currently have any plans to declare or pay any dividends from such entities.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years, makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. Our provisional estimate is that no tax will be due under this provision.

The current presidential administration in the United States modified the rules governing taxation of controlled foreign corporations and affiliates and any such changes were not expected to result in our having to pay applicable taxes in the United States on income earned by such entities.

Taiwan tax treatment. The corporate income tax rate in Taiwan is 20% and 17% for the year ended August 31, 2019 and 2018, respectively. Corporate income taxes payable, however, are subject to an alternative minimum tax. The Taiwan government enacted the Taiwan Alternative Minimum Tax Act, or the AMT Act, on January 1, 2006. Under the AMT Act, a taxpayer must pay the higher of its taxable income multiplied by the corporate income tax rate or the alternative minimum tax, or AMT. In calculating the AMT amount, the taxpayer must include income that would otherwise be exempt from taxation pursuant to various tax holidays or investment tax credits, other than certain exemptions or tax credits that have been grandfathered for the purposes of calculating AMT. The AMT rate for business entities is 12%. In addition to the statutory corporate taxes payable, or the AMT, corporate taxpayers in Taiwan are subject to an additional tax on distributable retained earnings (after statutory legal reserves) to the extent that such earnings are not distributed prior to the end of the subsequent year. This undistributed earnings surtax is determined in the subsequent year when the distribution plan relating to earnings attributable to the prior year is approved by a company’s stockholders and is payable in the subsequent year. The surtax rate has been reduced from 10% to 5%, starting applicable to the undistributed retained earnings of the year ended August 31, 2019. Because most of our subsidiaries in Taiwan incurred losses before income tax for both our fiscal year 2019 and 2018, we do not expect to pay such taxes on undistributed earnings.

As of August 31, 2019, we had total foreign net operating loss carryforwards of $120.3 million, arising primarily from certain of our consolidated and majority owned subsidiaries in Taiwan, which will expire in various amounts in future years. Pursuant to the Taiwan Income Tax Act, as amended in January 2009, net operating loss carryforwards can be carried forward for a period of ten years.

As a result of amendments to the “Taiwan Income Tax Act” enacted by the Office of the President of Taiwan on February 7, 2018, the statutory income tax rate increased from 17% to 20% and the unappropriated earning tax decreased from 10% to 5% effective from January 1, 2018. The effect of the change in tax rate on deferred tax income had been recognized in profit which had been offset by the reverse of deferred tax allowance. The new tax rates are applicable to the Company starting from September 1, 2018.

In addition, in accordance with the Taiwan Income Tax Act, dividends distributed by companies incorporated in accordance with the Taiwan Company Act shall be deemed as income derived from sources in Taiwan and income taxes shall be levied on the shareholders receiving such dividends. In the event that a Taiwan incorporated company distributes dividends to its foreign shareholders, it will be required to withhold tax payable by the foreign shareholders at the time of payment at a rate of 20% or a lower tax treaty rate if applicable. Therefore, dividends received from our subsidiaries in Taiwan, if any, will be subjected to withholding tax under Taiwan law.

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Income Taxes

We are subject to income taxes in both the United States and foreign jurisdictions. Significant management judgment is required in determining our income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Our deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in our consolidated statements of operations become deductible expenses under applicable income tax laws or when loss or credit carryforwards are utilized. Realization of these deferred tax assets is dependent on our ability to earn future taxable income against which these deductions, losses and credits can be utilized. Therefore, we assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not more likely than not, a valuation allowance is established. These estimates and judgments about our future taxable income are based on assumptions that are consistent with our future plans. A net cumulative loss in recent years is a significant piece of negative evidence in determining the realization of the benefits of deferred tax assets. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We have provided a full valuation allowance on our deferred tax assets because our cumulative losses in recent years causes us to believe that realization of our deferred tax assets is not more likely than not.

Inventory Valuation

Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value. We determine cost using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of our production overhead. At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence and we write down our inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. Our estimation of future demand is primarily based on the backlog of customer orders as of the balance sheet date and projections based on our actual historical sales trends and customers’ demand forecast. We evaluated our inventories on an individual item basis. For our finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Market for raw materials is based on replacement cost. We also write down items that are considered obsolete based upon changes in customer demand, manufacturing process changes or new product introductions that may eliminate demand for the product. Once written down, inventories are carried at this lower amount until sold or scrapped. Provisions for inventory write‑downs are included in our costs of revenues in the consolidated statements of operations. There is significant judgment involved with the estimates of excess and obsolescence and if our estimates regarding customer demand or other factors are inaccurate or actual market conditions or technological changes are less favorable than those estimated by management, additional future inventory write‑downs may be required that could adversely affect our operating results. Inventory write‑downs totaled $743 thousand and $695 thousand for the years ended August 31, 2019 and 2018, respectively. A majority of our inventory write‑downs during the years ended August 31, 2019 and 2018 was related to finished goods and work in process, primarily as a result of obsolescence.

Useful Life of Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation on property, plant and equipment is calculated using the straight‑line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight‑line method over the shorter of the lease term or the estimated useful life of the asset. We make estimates of the useful life of our property, plant and equipment in order to determine depreciation expense to be recorded each reporting period based on similar assets purchased in the past and our historical experience with such similar assets, as well anticipated technological or market changes. The estimated useful life of our property, plant and equipment directly impacts the timing of when our depreciation expense is recognized. There is significant judgment involved with estimating the useful lives of our property, plant and equipment, and a change in the estimates of such useful lives could cause our depreciation expense in future periods to increase significantly.

Impairment of Long‑lived Assets

In assessing the recoverability of our long‑lived assets, we first, determine whether indicators of impairment are present. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, a history of negative operating cash flow, or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review. Second, if we determine that indicators of impairment are present, we determine whether the estimated undiscounted cash flows expected to be generated from the use and eventual disposal of the potentially impaired assets (or asset group) are less than the carrying amount. Third, if such estimated undiscounted cash flows do not exceed the carrying amount, we estimate the fair value of the asset (or asset group) and recognize an impairment charge if the carrying amount is greater than the fair value of the asset (or asset group). Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third‑party independent appraisers, as considered necessary. We group our long‑lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are generated, or an asset group. We determined that we have two asset groups for impairment testing purposes, one of which is associated with the manufacture and sale of LED chips and LED components, and the other is associated with our Ning Xiang subsidiary, which is engaged in the manufacture and sale of lighting fixtures and systems.

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The estimates of future cash flows involve subjective judgments and represent our best estimate at each date of assessment about future developments, determined based on reasonable and supportable assumptions and projections taking into account past experience, as well as market data obtained from independent external sources. The use of different assumptions could increase or decrease the estimates of expected future cash flows and consequently, increase or decrease the related impairment charges. For example, if the average selling prices continue to decline beyond the assumptions used in our forecast of future cash flows expected to be generated by the asset groups, or if demand for our LED products does not grow as we anticipate, or if utilization rates are lower than anticipated, it is reasonably possible that the estimate of expected future cash flows may change in the near term resulting in the need to adjust our determination of fair value.

For the year ended August 31, 2019, lower than projected sales of our LED products and lower market capitalization compared to our consolidated net book values again indicated potential impairment of our long‑lived assets. We projected undiscounted future cash flows to analyze potential impairment, based upon a variety of factors, including primarily our continuous efforts to suppress gross loss from chip sales and the cooperation model discussed with other parties, considering all known trends and uncertainties. The significant assumptions used in determining the estimated undiscounted cash flows for the LED chips and components asset group were revised to reflect the new operation status. Based on the assessment, the expected undiscounted cash flows to be generated by this asset group exceeded its carrying value. Consequently, no asset impairment was recognized during the year ended August 31, 2019.

Critical Accounting Policies and Estimates

Effective September 1, 2018, we adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, using the retrospective transition approach. The standard requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The reclassified restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows were not material for all periods presented.

Effective September 1, 2018, we adopted ACS 606 using the modified retrospective transition method. Under this approach, we apply the new standards to all new contracts initiated on and after September 1 2018, and, for contracts which have remaining obligations as of September 1 2018, we recognized no adjustment to the opening balance of our retained earnings account.

On September 1, 2018, we 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. There was no material impact on our consolidated financial position, results of operations or cash flows due to the adoption.

Effective September 1, 2018, we adopted ASU No. 2017-09, “Compensation- Stock Compensation: Scope of Modification Accounting”. The guidance provides clarity and reduces diversity in practice and cost and complexity when accounting for a change to the terms or conditions of a share-based payment award. Adoption of this standard did not have a material impact on our consolidated financial position, results of operations or cash flows.

Except as described above, there have been no material changes in the matters for which we make critical accounting policies and estimates in the preparation of our condensed consolidated financial statements for the year ended August 31, 2019 as compared to those disclosed in our 2018 Annual Report.

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 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, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive income (loss) within equity. Income and expense accounts are translated at average exchange rates during the period. Any gains and losses from transactions denominated in currencies other than their functional currencies are recognized in the consolidated statements of operations as a separate component of other income (expense). Due to exchange rate fluctuations, such translated amounts may vary from quarter to quarter even in circumstances where such amounts have not materially changed when denominated in their functional currencies.

The translations from NT dollars to U.S. dollars were made at the exchange rates set forth in the statistical release of the Bank of Taiwan. On August 31, 2019 the exchange rate was 31.39 NT dollars to one U.S. dollar. On November 13, 2019, the exchange rate was 30.50 NT dollars to one U.S. dollar.

No representation is made that the NT dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or NT dollars, as the case may be, at any particular rate or at all.

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Results of Operations

The following table sets forth, for the periods presented, our consolidated statements of operations information. In the table below and throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following consolidated statement of operations data for the years ended August 31, 2019 and 2018 has been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10‑K. The information contained in the table below should be read in conjunction with our consolidated financial statements and notes thereto included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10‑K. The historical results presented below are not necessarily indicative of the results that may be expected for any future period:

	Years Ended August 31,
	2019							2018
				% of							% of
	$			Revenues				$			Revenues
	(in thousands)
Consolidated Statement of Operations Data:
Revenues, net	$	5,902			100		%	$	7,495			100		%
Cost of revenues		5,450			92		%		7,930			106		%
Gross profit (loss)		452			8		%		(435	)		(6	)	%
Operating expenses:
Research and development		1,613			27		%		957			13		%
Selling, general and administrative		2,792			47		%		3,184			42		%
Gain on disposals of long-lived assets, net		(288	)		(5	)	%		(902	)		(12	)	%
Total operating expenses		4,117			69		%		3,239			43		%
Loss from operations		(3,665	)		(61	)	%		(3,674	)		(49	)	%
Other income (expenses):
Equity in loss from unconsolidated entities		—			—		%		(8	)		—		%
Interest expenses, net		(190	)		(3	)	%		(27	)		—		%
Other income, net		250			4		%		780			10		%
Foreign currency transaction gain (loss), net		40			1		%		(52	)		(1	)	%
Total other income (expenses), net		100			2		%		693			9		%
Loss before income taxes		(3,565	)		(59	)	%		(2,981	)		(40	)	%
Income tax expense		—			—			—			—
Net loss		(3,565	)		(59	)	%		(2,981	)		(40	)	%
Less: Net loss attributable to noncontrolling interests		—			—		%		—			—		%
Net loss attributable to SemiLEDs stockholders	$	(3,565	)		(59	)	%	$	(2,981	)		(40	)	%

Year Ended August 31, 2019 Compared to Year Ended August 31, 2018

	Years Ended August 31,
	2019					2018
			% of						% of				Change			Change
	$		Revenues			$			Revenues				$			%
	(in thousands)
LED chips	$	93		2	%	$	244			3		%	$	(151	)		(62	)	%
LED components		4,430		75	%		5,181			69		%		(751	)		(14	)	%
Lighting products		632		11	%		968			13		%		(336	)		(35	)	%
Other revenues(1)		747		12	%		1,102			15		%		(355	)		(32	)	%
Total revenues, net		5,902		100	%		7,495			100		%		(1,593	)		(21	)	%
Cost of revenues		5,450		92	%		7,930			106		%		(2,480	)		(31	)	%
Gross profit (loss)	$	452		8	%	$	(435	)		(6	)	%	$	887			204		%

(1) Other includes primarily revenues attributable to the sale of epitaxial wafers, scraps and raw materials, the provision of services and the lease of manufacturing as well as research and development facilities.

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Revenues, net

Our revenues decreased by 21% from $7.5 million for the year ended August 31, 2018 to $5.9 million for the year ended August 31, 2019. The $1.6 million decrease in revenues reflects a $151 thousand decrease in revenues attributable to sales of LED chips, a $751 thousand decrease in revenues attributable to sales of LED components, a $336 thousand decrease in revenues attributable to the sales of lighting products, and a $355 thousand decrease in other revenues.

Revenues attributable to the sales of our LED chips represented 2% and 3% of our revenues for the years ended August 31, 2019 and 2018, respectively. The decrease in revenues attributable to sales of LED chips was as a result of a 62% decrease in the volume of LED chips sold, primarily due to our strategic decision to place greater emphasis on the sales of LED components rather than the sales of LED chips.

Revenues attributable to the sales of our LED components represented 75% and 69% of our revenues for the years ended August 31, 2019 and 2018, respectively. The decrease in revenues attributable to sales of LED components was primarily due to the lower average selling price for our UV LED product. The decrease was also a result of lower volume sold for another LED components products, which has a higher average selling price. 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 and to focus on the profitable products.

Revenues attributable to the sales of lighting products represented 11% and 13% of our revenues for the years ended August 31, 2019 and 2018, respectively. The decrease in revenues attributable to the sales of lighting products was mainly due to a slowdown in demand on LED luminaries and retrofits and fewer non-recurring project-based orders for LED lighting products.

The decrease in other revenues was primarily due to a decrease in service revenues for the year ended August 31, 2019.

Cost of Revenues

Our cost of revenues decreased by 31% from $7.9 million for the year ended August 31, 2018 to $5.5 million for the year ended August 31, 2019. The decrease in cost of revenues was primarily due to our ongoing cost reduction efforts, a decrease in volume sold and a decrease in depreciation expense and idle capacity charges associated with property, plant and equipment. Inventory write‑downs totaled $743 thousand and $695 thousand for the years ended August 31, 2019 and 2018, respectively. A majority of our inventory write‑downs during the years ended August 31, 2019 and 2018 was related to finished goods and work in process, primarily as a result of obsolescence.

Gross Profit (Loss)

Our gross profit increased from a loss of $435 thousand for the year ended August 31, 2018 to a profit of $452 thousand for the year ended August 31, 2019. Our gross margin percentage was 8% for the year ended August 31, 2019, as compared to negative 6% for the year ended August 31, 2018 as a consequence of the increase in the sales of products with higher margin.

Operating Expenses

	Years Ended August 31,
	2019							2018
				% of							% of				Change			Change
	$			Revenues				$			Revenues				$			%
	(in thousands)
Research and development	$	1,613			27		%	$	957			9		%	$	656			69		%
Selling, general and administrative		2,792			47		%		3,184			40		%		(392	)		(12	)	%
Gain on disposals of long-lived assets, net		(288	)		(5	)	%		(902	)		(2	)	%		614			(68	)	%
Total operating expenses	$	4,117			69		%	$	3,239			47		%	$	878			27		%

Research and development. Our research and development expenses increased from $957 thousand for the year ended August 31, 2018 to $1.6 million for the year ended August 31, 2019. The increase was primarily due to a $150 thousand increase in payroll expense and other operating expenses as a result of headcount reallocation and a $508 thousand increase in materials and supplies used in research and development, offset by a $4 thousand decrease in depreciation and amortization expense.

Selling, general and administrative. Our selling, general and administrative expenses decreased from $3.2 million for the year ended August 31, 2018 to $2.8 million for the year ended August 31, 2019. The decrease was mainly attributable to a $57 thousand decrease in payroll and stock-based compensation expenses, a $306 thousand decrease in professional service fees and insurance fees due to a reversal of an accrual, and decrease in various expenses.

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Gain on disposal of long‑lived assets, net. We recognized a gain of $288 thousand and $902 thousand, net on the disposal of long-lived assets for the years ended August 31, 2019 and 2018, respectively. Primarily due to the excess capacity charges that we have suffered for a few years, considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of a certain level of our idle equipment.

Other Income (Expenses)

	Years Ended August 31,
	2019							2018
				% of							% of
	$			Revenues				$			Revenues
	(in thousands)
Equity in loss from unconsolidated entities	$	—			—		%	$	(8	)		—		%
Interest expenses, net		(190	)		(3	)	%		(27	)		—		%
Other income, net		250			4		%		780			10		%
Foreign currency transaction gain (loss), net		40			1		%		(52	)		(1	)	%
Total other income (expenses), net	$	100			2		%	$	693			9		%

Equity in loss from unconsolidated entities. We recognized net loss of $8 thousand from our cost method investment in InteMatix for the year ended August 31, 2018, based on the excess of the carry amount over the receivables.

Interest expenses, net. The increase in interest expenses, net was primarily due to the increase in debt balance, resulting from our entry into loan agreements on January 8, 2019 with each of our Chairman and our largest stockholder, with aggregate amounts of $3.2 million, and an annual interest rate of 8%. The proceeds of the loans were used to return the deposit received in 2015 in connection with the proposed sale of our headquarters building, which sale agreement was terminated.

Other income, net. Other income for the year ended August 31, 2018 primarily consisted of sales of patents and rental income from the lease of the second floor of our Hsinchu building, offset by the commission expense and related depreciation charge. Other income for the year ended August 31, 2019 consisted primarily of rental income from the lease of spare space in our Hsinchu building, offset by the settlement of a lawsuit with Epistar.

Foreign currency transaction gain (loss), net. We recognized a net foreign currency transaction gain of $40 thousand and a net loss of $52 thousand for the years ended August 31, 2019 and 2018, respectively, primarily due to the depreciation of the U.S. dollar against the NT dollar from bank deposits and accounts receivables held by Taiwan SemiLEDs and Taiwan Bandaoti Zhaoming Co., Ltd. in currency other than the functional currency of such subsidiaries.

Income Tax Expense (Benefit)

We did not recognize any income tax expense for both the years ended August 31, 2019 and 2018. Although we incurred losses before income tax for most of our subsidiaries for the fiscal year, we provided a full valuation allowance on all deferred tax assets.

As of August 31, 2019 and 2018, we recognized full valuation allowances of $31.0 million and $35.4 million, respectively, on our net deferred tax assets to reflect uncertainties related to our ability to utilize these deferred tax assets, which consist primarily of certain net operating loss carryforwards and foreign investment loss. We considered both positive and negative evidence, including forecasts of future taxable income and our cumulative loss position, and continued to report a full valuation allowance against our deferred tax assets as of both August 31, 2019 and 2018. We continue to review all available positive and negative evidence in each jurisdiction and our valuation allowance may need to be adjusted in the future as a result of this ongoing review. Given the magnitude of our valuation allowance, future adjustments to this allowance based on actual results could result in a significant adjustment to our results of operations.

As of August 31, 2019, we had U.S. federal net operating loss (“NOLs”) carryforwards of $29.6 million, which will expire in various amounts beginning in our fiscal 2026. NOLs generated in tax years prior to August 31, 2018 can be carried forward for twenty years, whereas NOLs generated after August 31, 2018 can be carried forward indefinitely. Utilization of these net operating losses carryforwards may be subject to an annual limitation due to applicable provisions of the Internal Revenue Code of 1986, as amended, and local tax laws if we have experienced an “ownership change” in the past, or if an ownership change occurs in the future.

35

As of August 31, 2019, we had total foreign net operating loss carryforwards of $120.1million, arising primarily from certain of our consolidated and majority owned subsidiaries in Taiwan. Pursuant to the Taiwan Income TaxAct, as amended in January2009, net operating losses carryforwards can be carried forward for a period of tenyears.

Net Loss Attributable to Noncontrolling Interests

	Years Ended August 31,
	2019					2018
			% of						% of
	$		Revenues			$			Revenues
	(in thousands)
Net loss attributable to noncontrolling interests	$	—		—	%		$	—		—	%

We recognized net loss attributable to non-controlling interests of approximately $0 for the year ended August 31, 2019, which was attributable to the share of the net losses of Taiwan Bandaoti Zhaoming Co., Ltd held by the remaining non-controlling holders. As of August 31, 2019, non-controlling interests represented 3.29% equity interest in Taiwan Bandaoti Zhaoming CO., Ltd.

Liquidity and Capital Resources

As of August 31, 2019 and 2018, we had cash and cash equivalents of $1.4 million and $3.4 million, respectively, which were predominately held in U.S. dollar denominated demand deposits and/or money market funds.

As of November 13, 2019, we had no available credit facility.

Our long-term debt, which consisted of NT dollar denominated long-term notes and loans from our Chairman and our largest shareholder, totaled $6.4 million and $2.3 million as of August 31, 2019 and 2018, respectively.

Our NT dollar denominated long-term notes, totaled $3.2 million and $2.3 million as of August 31, 2019 and 2018, respectively. As of August 31, 2018, these long-term notes carried an interest rate of 1.62%, based on the annual time deposit rate plus a specific spread, were payable in monthly installments, and were secured by our property, plant and equipment. These long-term notes did not have prepayment penalties or balloon payments upon maturity. On July 5, 2019, we entered into two New Taiwan dollar (“NTD”) denominated loan agreements with aggregate amounts of $3.2 million (NT$100 million).  The first loan for $2.0 million (NT$62 million) has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 1.62% currently), and was exclusively used to repay the existing loans.  The second loan 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% currently) and is available for operating capital. The new loans are secured by a $79 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.

• The first note payable requires monthly payments of principal in the amount of $21 thousand plus interest over the 8-year term of the note with final payment to occur in July 2027 and, as of August 31, 2019, our outstanding balance on this note payable was approximately $2.0 million.

• The second note payable requires monthly payments of principal in the amount of $13 thousand plus interest over the 8-year term of the note with final payment to occur in July 2027 and, as of August 31, 2019, our outstanding balance on this note payable was approximately $1.2 million.

Property, plant and equipment pledged as collateral for our notes payable were $3.7 million and $4.2 million as of August 31, 2019 and 2018, respectively.

On January 8, 2019, we entered into loan agreements with each of our Chairman and Chief Executive Officer and our largest shareholder, with aggregate amounts of $3.2 million, and an annual interest rate of 8%. All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the proposed sale of our headquarters building pursuant to the agreement dated December 15, 2015. We are required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively, unless the loans are sooner accelerated pursuant to the loan agreements. As of August 31, 2019, these loans totaled $3.2 million. The loans are secured by a second priority security interest on our headquarters building.

We have incurred significant losses since inception, including net losses attributable to SemiLEDs stockholders of $3.6 million and $3.0 million during the years ended August 31, 2019 and 2018, respectively. Net cash used in operating activities for the year ended August 31, 2019 was $3.5 million. As of August 31, 2019, we had cash and cash equivalents of $1.4 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. In addition, we are planning to issue convertible notes to our major stockholders and may issue additional equity.

36

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 12months. However, there can be no assurances that our planned activities will be successful in 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.

Cash Flows

The following summary of our cash flows for the periods indicated has been derived from our consolidated financial statements, which are included elsewhere in this Annual Report on Form 10‑K (in thousands):

	Years Ended August 31,
	2019			2018
Net cash used in operating activities	$	(3,546	)	$	(1,177	)
Net cash provided by (used in) investing activities	$	(2,628	)	$	1,213
Net cash provided by (used in) financing activities	$	4,054		$	(331	)

Cash Flows Used in Operating Activities

Net cash used in operating activities was $3.5 million and $1.2 million for the years ended August 31, 2019 and 2018, respectively. Cash used in operating activities for the year ended August 31, 2019 was $2.4 million higher, primary attributable to a decrease of $1.2 million in cash collected from customers, and an increase of $1.4 million in cash paid out for inventory during the year ended August 31, 2019 compared to the year ended August 31, 2018.

Cash Flows Provided By (Used in) Investing Activities

Net cash used in investing activities was $2.6 million for the year ended August 31, 2019, consisting primarily of the return of $3 million to Epistar and $127 thousand of purchases of machinery and equipment, partially offset by $502 thousand of proceeds from sales of machinery and equipment.

Net cash provided by investing activities was $1.2 million for the year ended August 31, 2018, consisting primarily of the proceeds from the sales of property, plant and equipment of $1 million as a result of the disposal of idle machinery, proceeds from sales of investment and from patents assignment contributed $54 thousand and $500 thousand, respectively, partially offset by a $341 thousand in cash used in the purchase of machinery and equipment.

Cash Flows Provided by (Used in) Financing Activities

Net cash provided by financing activities was $4.1 million for the year ended August 31, 2019,consisting primarily of $3.2 million of proceeds from Chairman and shareholder loans, and $3.2 million of proceeds from the new bank loans, partially offset by $2.3 million of repayments on long-term notes.

Net cash used in financing activities was $331 thousand for the year ended August 31, 2018, primarily attributable to the repayments on long-term debt.

Capital Expenditures

We had capital expenditures of $127 thousand and $341 thousand for the years ended August 31, 2019 and 2018, 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.

37

Off‑Balance Sheet Arrangements

As of August 31, 2019, we did not engage in any off‑balance sheet arrangements. We do not have any interests in variable interest entities.

Accounting Pronouncements Not Yet Adopted

Please refer to ‘Summary of Significant Accounting Policies_ Recent Accounting Pronouncements’ for more details.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8.Financial Statements and Supplementary Data

38

Audit • Tax • Consulting •  Financial Advisory

Registered with Public Company Accounting Oversight Board (PCAOB)

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the board of directors of SemiLEDs Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SemiLEDs Corporation and its subsidiaries (“the Company”) as of August 31, 2019, the related consolidated statement of operations, comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with the U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Consideration of the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 2 to the financial statements, the Company incurred recurring losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans with regard to these matters are described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ KCCW Accountancy Corp.

We have served as the Company’s auditor since 2019.

Diamond Bar, California

November 20, 2019 

KCCW Accountancy Corp.

3333 South Brea Canyon Rd. #206, Diamond Bar, CA 91765, USA

Tel: +1 909 348 7228 ● Fax: +1 909 895 4155 ● info@kccwcpa.com

39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the board of directors of SemiLEDs Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SemiLEDs Corporation and its subsidiaries (the "Company") as of August 31, 2018, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

Going concern uncertainty

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred recurring losses from operations, has net current liabilities and an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

/s/ B F Borgers CPA PC

We have served as the Company’s auditor since 2016.

Lakewood, Colorado

November 26, 2018

40

SEMILEDS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars and shares, except par value)

	August 31,
	2019			2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,363		$	3,421
Restricted cash and cash equivalents		19			—
Accounts receivable (including related parties), net of allowance for doubtful accounts    of $195 and $477 as of August 31, 2019 and August 31, 2018, respectively		703			282
Inventories		2,083			1,818
Prepaid expenses and other current assets		460			340
Total current assets		4,628			5,861
Property, plant and equipment, net		5,878			7,213
Intangible assets, net		93			98
Investments in unconsolidated entities		894			914
Other assets		169			164
TOTAL ASSETS	$	11,662		$	14,250
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt	$	398		$	335
Accounts payable		680			894
Advance receipt toward the convertible note		500			500
Accrued expenses and other current liabilities		2,342			5,505
Total current liabilities		3,920			7,234
Long-term debt, excluding current installments		5,954			2,013
Total liabilities		9,874			9,247
Commitments and contingencies (Note 6)
EQUITY:
SemiLEDs stockholders’ equity
Common stock, $0.0000056 par value—7,500 shares authorized; 3,594 shares    and 3,559 shares issued and outstanding as of August 31, 2019 and August 31, 2018,    respectively		—			—
Additional paid-in capital		175,804			175,527
Accumulated other comprehensive income		3,753			3,727
Accumulated deficit		(177,816	)		(174,251	)
Total SemiLEDs stockholders’ equity		1,741			5,003
Noncontrolling interests		47			—
Total equity		1,788			5,003
TOTAL LIABILITIES AND EQUITY	$	11,662		$	14,250

See notes to consolidated financial statements.

41

SEMILEDS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars and shares, except per share data)

	Years Ended August 31,
	2019			2018
Revenues, net	$	5,902		$	7,495
Cost of revenues		5,450			7,930
Gross profit (loss)		452			(435	)
Operating expenses:
Research and development		1,613			957
Selling, general and administrative		2,792			3,184
Gain on disposals of long-lived assets, net		(288	)		(902	)
Total operating expenses		4,117			3,239
Loss from operations		(3,665	)		(3,674	)
Other income (expenses):
Equity in loss from unconsolidated entities		—			(8	)
Interest expenses, net		(190	)		(27	)
Other income, net		250			780
Foreign currency transaction gain (loss), net		40			(52	)
Total other income (expenses), net		100			693
Loss before income taxes		(3,565	)		(2,981	)
Income tax expense		—			—
Net loss		(3,565	)		(2,981	)
Less: Net loss attributable to noncontrolling interests		—			—
Net loss attributable to SemiLEDs stockholders	$	(3,565	)	$	(2,981	)
Net loss per share attributable to SemiLEDs stockholders:
Basic and diluted	$	(1.00	)	$	(0.84	)
Shares used in computing net loss per share attributable to SemiLEDs stockholders:
Basic and diluted		3,580			3,550

See notes to consolidated financial statements.

42

SEMILEDS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. dollars)

	Years Ended August 31,
	2019			2018
Net loss	$	(3,565	)	$	(2,981	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $0 for both periods		25			26
Comprehensive loss	$	(3,540	)	$	(2,955	)
Comprehensive loss attributable to noncontrolling interests	$	(1	)	$	—
Comprehensive loss attributable to SemiLEDs stockholders	$	(3,539	)	$	(2,955	)

See notes to consolidated financial statements.

43

SEMILEDS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands of U.S. dollars and shares)

							Accumulated					Total
					Additional		Other					SemiLEDs			Non-
	Common Stock				Paid-in		Comprehensive		Accumulated			Stockholders’			Controlling			Total
	Shares		Amount		Capital		Income		Deficit			Equity			Interests			Equity
BALANCE—September 1, 2017		3,544	$	—	$	175,386	$	3,701	$	(171,270	)	$	7,817		$	—		$	7,817
Issuance of common stock under equity    incentive plans		15		—		—		—		—			—			—			—
Stock-based compensation		—		—		141		—		—			141			—			141
Comprehensive income (loss)
Other comprehensive income (loss)		—		—		—		26		—			26			—			26
Net loss		—		—		—		—		(2,981	)		(2,981	)		—			(2,981	)
BALANCE—August 31, 2018		3,559	$	—	$	175,527	$	3,727	$	(174,251	)	$	5,003		$	—		$	5,003
Issuance of common stock under equity    incentive plans		35		—		—		—		—			—			—			—
Stock-based compensation		—		—		149		—		—			149			—			149
Common stock issued by SBDI*		—		—		128		—		—			128			48			176
Comprehensive income (loss)
Other comprehensive income (loss)		—		—		—		26		—			26			(1	)		25
Net loss		—		—		—		—		(3,565	)		(3,565	)		—			(3,565	)
BALANCE—August 31, 2019		3,594	$	—	$	175,804	$	3,753	$	(177,816	)	$	1,741		$	47		$	1,788

See notes to consolidated financial statements.

* SBDI (Taiwan Bandaoti Zhaoming Co., Ltd.) is one of the Company’s subsidiaries.

44

SEMILEDS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

	Years Ended August 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,565	)	$	(2,981	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,093			998
Stock-based compensation expense		149			141
Bad debt expense		—			10
Provisions for inventory write-downs		743			695
Equity in loss from unconsolidated entities		—			8
Gain on disposals of long-lived assets, net		(288	)		(902	)
Income recognized on patents assignment		—			(499	)
Changes in :
Accounts receivable		(427	)		801
Inventories		(987	)		393
Prepaid expenses and other assets		(145	)		129
Accounts payable		(185	)		(84	)
Accrued expenses and other current liabilities		66			114
Net cash used in operating activities		(3,546	)		(1,177	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(127	)		(341	)
Proceeds from sales of property, plant and equipment		502			1,004
Payments for development of intangible assets		(3	)		(4	)
Proceeds from sale of investment		—			54
Proceeds from patents assignment		—			500
Refund of cash receipt-in-advance		(3,000	)		—
Net cash provided by (used in) investing activities		(2,628	)		1,213
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		6,385			—
Repayments of long-term debt		(2,330	)		(331	)
Acquisition of noncontrolling interests		(1	)		—
Net cash provided by (used in) financing activities		4,054			(331	)
Effect of exchange rate changes on cash and cash equivalents		79			132
NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,041	)		(163	)
CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of year		3,512			3,675
CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—End of year	$	1,471		$	3,512
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	39		$	43
Cash paid for income taxes	$	—		$	—
NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrual related to property, plant and equipment	$	56		$	67

See notes to consolidated financial statements.

45

SEMILEDS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended August 31, 2019 and 2018

1. BUSINESS

SemiLEDs Corporation (“SemiLEDs” or the “parent company”) was incorporated in Delaware on January 4, 2005 and is a holding company for various wholly owned subsidiaries. SemiLEDs and its subsidiaries (collectively, the “Company”) develop, manufacture and sell high performance light emitting diodes (“LEDs”). The Company’s core products are LED components, LED modules and systems, as well as LED chips and lighting products. LED components, modules and systems have become the most important part of its business. A portion of the Company’s business consists of the sale of contract manufactured LED products. The Company’s customers are concentrated in a few select markets, including Netherlands, Taiwan, the United States, Germany and India.

As of August 31, 2019, SemiLEDs had four wholly owned subsidiaries. SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, is the Company’s wholly owned operating subsidiary, where a substantial portion of the assets is held and located, and where a portion of research, development, manufacturing and sales activities take place. Taiwan SemiLEDs owns a 97% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacturing and a substantial portion of marketing and sale of LED components, and where most of the Company’s employees are based.

SemiLEDs’ common stock began trading on the NASDAQ Global Select Market under the symbol “LEDS” on December 8, 2010 and was transferred to the NASDAQ Capital Market effective November 5, 2015 where it continues to trade under the same symbol.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation —The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Going Concern —The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.

The Company has suffered losses from operations of $3.7 million and $3.7 million,and used net cash in operating activities of $3.5 million and $1.2 millionfor the years ended August 31, 2019 and 2018, respectively.Further, at August 31, 2019, the Company’s cash and cash equivalents was down to $1.4 million. These facts and conditions have raised substantial doubt about the Company’s ability to continue as a going concern. However, gross profit on product sales was $452 thousand for the year ended August 31, 2019 compared to a gross loss of $435 thousand for the year ended August 31, 2018. In addition, the Company entered into two new loan agreements to refinance its existing real estate loan and to provide for operating capital during the year ended August 31, 2019. Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business.

• Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of new higher margin products. The growth of the Company’s module products and the continued commercial sales of its UV LED products are expected to improve the Company’s future gross margin, operating results and cash flows. The Company is targeting niche markets and focused on product enhancement and developing its LED product into many other applications or devices.

• Continuing to monitor prices, work with current and potential vendors to decrease costs and, consistent with its existing contractual commitments, may possibly decrease its activity level and capital expenditures further. This plan reflects its strategy of controlling capital costs and maintaining financial flexibility.

• Raising additional cash through the issuance of convertible notes to our major stockholders, further equity offerings, sales of assets and/or issuance of debt as considered necessary and looking at other potential business opportunities.

While the Company's management believes that the measures described in the above liquidity plan will be adequate to satisfy its liquidity requirements for the twelve months after the date that the financial statements are issued, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern. These consolidated financial statements and financial statement schedule 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.

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Revenue Recognition —Effective September 1 2018, the Company adopted ASC 606 using the modified retrospective transition method. The Company applied the following five steps to achieve the core principles of ASC 606: 1) identified the contract with a customer; 2) identified the performance obligations (promises) in the contract; 3) determined the transaction price; 4) allocated the transaction price to the performance obligations in the contract; and 5) recognized revenue when (or as) the Company satisfies a performance obligation. The Company recognizes the amount of revenue when the Company satisfies a performance obligation to which it expects to be entitled for the transfer of promised goods or services to customers. The Company obtains written purchase authorizations from its customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. Generally, the Company considers delivery to have occurred at the time of shipment as this is generally when title and risk of loss for the products will pass to the customer. The Company provides its customers with limited rights of return for non‑conforming shipments and product warranty claims. Based on historical return percentages, which have not been material to date, and other relevant factors, the Company estimates its potential future exposure on recorded product sales, which reduces product revenues in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets. The Company also provides standard product warranties on its products, which generally range from three months to two years. Management estimates the Company’s warranty obligations as a percentage of revenues, based on historical knowledge of warranty costs and other relevant factors. To date, the related estimated warranty provisions have been insignificant.

Principles of Consolidation —The consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation.

On September 1, 2018, the Company adopted ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). This standard allows equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investees) 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 a qualitative assessment to identify impairment at each reporting period. When a qualitative assessment indicates that impairment exists, the Company is required to measure the investments at fair value.

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 consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the preparation of the Company’s consolidated financial statements on the basis that the Company will continue as a going concern, the collectability of accounts receivable, inventory net realizable values, realization of deferred tax assets, valuation of stock‑based compensation expense, the useful lives of property, plant and equipment and intangible assets, the recoverability of the carrying amount of property, plant and equipment, intangible assets and investments in unconsolidated entities, the fair value of acquired tangible and intangible assets, income tax uncertainties, provision for potential litigation costs and other contingencies. Management bases its estimates on historical experience and also on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however, actual results could differ materially from those estimates.

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

Concentration of Supply Risk— Some of the components and technologies used in the Company’s products are purchased and licensed from a limited number of sources and some of the Company’s products are produced by a limited number of contract manufacturers. The loss of any of these suppliers and contract manufacturers may cause the Company to incur transition costs to another supplier or contract manufacturer, result in delays in the manufacturing and delivery of the Company’s products, or cause it to carry excess or obsolete inventory. The Company relies on a limited number of such suppliers and contract manufacturers for the fulfillment of its customers’ 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. Deposits held with banks may exceed the amount of insurance provided on such deposits. As of August 31, 2019 and 2018, cash and cash equivalents of the Company consisted of the following (in thousands):

	August 31,
Cash and Cash Equivalents by Location	2019		2018
United States;
Denominated in U.S. dollars	$	52	$	194
Taiwan;
Denominated in U.S. dollars		447		2,220
Denominated in New Taiwan dollars		730		55
Denominated in other currencies		77		910
China (including Hong Kong);
Denominated in U.S. dollars		—		7
Denominated in Renminbi		49		29
Denominated in H.K. dollars		8		6
Total cash and cash equivalents	$	1,363	$	3,421

The Company’s revenues are substantially derived from the sales of LED products. 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, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

Customers that accounted for 10% or more of the Company’s total net accounts receivable as of August 31, 2019 and 2018 consist of the following:

	August 31,
Customers	2019			2018
Customer A		61	%		2	%
Customer B		10	%		—	%
Customer C		—	%		18	%
Customer D		9	%		18	%
Customer E		4	%		17	%
Customer F		2	%		10	%
Customer G		10	%		—	%

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The customers accounted for 10% or more of the Company’s total net revenues for the years ended August 31, 2019 and 2018, as follows (in thousands, except percentages):

	Years Ended August 31,
	2019					2018
			% of					% of
Customers	Amount		Revenues			Amount		Revenues
Customer A	$	1,093		18	%	$	542		7	%
Customer B		922		16	%		571		7	%
Customer C		625		11	%		991		13	%
Customer E		267		5	%		1,014		14	%

Cash and Cash Equivalents—The Company considers all highly liquid investment instruments purchased with initial maturities of three months or less to be cash equivalents.

As of August 31, 2019 and 2018, cash and cash equivalents of the Company consist of the following (in thousands):

	August 31,
Cash and Cash Equivalents	2019		2018
Cash;
Cash and demand deposits	$	1,363	$	3,403
Cash equivalents;
Money market funds		—		18
Total cash and cash equivalents	$	1,363	$	3,421

Restricted Cash Equivalents— Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan. As of August 31, 2019 and 2018, the Company’s restricted cash equivalents at current portion amounted $19 thousand and $0, respectively. As of August 31, 2019 and 2018, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $89 thousand and $91 thousand, respectively.

Foreign Currency— The Company’s subsidiaries use the local currency as their functional currency. The assets and liabilities of the subsidiaries are, therefore, translated into the U.S. dollars at exchange rates in effect at each balance sheet date, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive income (loss) within equity. Income and expense accounts are translated at average exchange rates during the period. Any gains and losses from transactions denominated in foreign currencies are recognized in the consolidated statements of operations as a separate component of other income (expense).

Accounts Receivable — Accounts receivable (including related parties with zero net book value as of August 31, 2019 and 2018, respectively) are recorded at invoiced amounts, net of allowances for doubtful accounts, and do not bear interest. The allowance for doubtful accounts is based on management’s assessment of the collectability of customer 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. Charges to bad debt expense were $10 thousand during the year ended August 31, 2018. No bad debt expenses were recognized during the year ended August 31, 2019.

Inventories— Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value. Cost is determined using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Company’s production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write‑downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped.

Property, Plant and Equipment— Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment. Depreciation on property, plant and equipment is calculated using the straight‑line method over the estimated useful lives, less estimated salvage values of the assets. Leasehold improvements are amortized using the straight‑line method over the shorter of the lease term or estimated useful life of the asset.

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The estimated useful lives of property, plant and equipment are as follows:

Buildings and improvements	5 to 20	years
Machinery and equipment	1 to 10	years
Leasehold improvements	2 to 10	years
Other equipment	2 to 6	years

Major Maintenance Activities— The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

Intangible Assets— Intangible assets consist of patents, trademarks and acquired technology. Intangible assets are initially recognized at their respective acquisition costs. All of the Company’s intangible assets have been determined to have finite useful lives and are, therefore, amortized using the straight‑line method over their estimated useful lives:

Patents and trademarks	5 to 25	years
Acquired technology	5	years

Impairment of Long‑Lived Assets— Management evaluates the Company’s long‑lived assets, excluding goodwill, that consist of property, plant and equipment and intangible assets, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying amount of the asset over the estimated fair value of the asset. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third‑party independent appraisers, as considered necessary.

No impairment charge was recognized in the years ended August 31, 2019 and 2018.

Recovery of Investments in Unconsolidated Entities —Management evaluates the recoverability of the carrying amount of the Company’s equity investments accounted for using the equity method and cost method when there is an indication of potential impairment. If the estimated realizable value of an equity investment falls below its carrying amount and management determines that this shortfall is other‑than‑temporary, the carrying amount of such investment is written down to its estimated realizable value. In determining whether a decline in value is other‑than‑temporary, management considers the length of time and the extent to which such value has been less than the carrying amount, the financial condition and prospects of the investee, and the Company’s ability and intent to retain the equity investment for a period of time sufficient to allow for any anticipated recovery in value.

No impairment charge was recognized in the year ended August 31, 2019 and 2018.

Income Taxes —The Company accounts for income taxes under the asset and liability method. As part of the process of preparing the consolidated financial statements, the Company estimates its income taxes in each of the jurisdictions in which it operates. The Company estimates actual current tax expense together with assessing temporary differences resulting from differing accounting treatment for items such as accruals and allowances that are not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities which are included in the Company’s consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s consolidated statements of operations become deductible expenses under applicable income tax laws or when operating loss or tax credit carryforwards are utilized. Accordingly, realization of the deferred tax assets is dependent on the Company’s ability to earn future taxable income against which these deductions, losses and credits can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applicable to the taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the Company’s deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period the change in the tax law was enacted.

Management assesses the likelihood that the Company’s deferred tax assets will be recovered from future taxable income and, to the extent management believes that recovery is not more likely than not, a valuation allowance is established. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Stock‑based Compensation —Compensation costs related to employee stock options and restricted stock units are based on the fair value of the options and stock units on the date of grant, net of estimated forfeitures. The Company determines the grant date fair value of the options using the Black‑Scholes option‑pricing model. The related stock‑based compensation expense is generally recognized on a straight‑line basis over the period in which an employee is required to provide service in exchange for the options and stock units, or the vesting period of the respective options and stock units.

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Research and Development Costs —Research and development costs are expensed as incurred. Research and development costs are presented as a separate line item in the consolidated statements of operations.

Advertising Costs —Advertising costs are expensed as incurred. Advertising costs totaled $2 thousand and $1 thousand for the years ended August 31, 2019 and 2018, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Segment Reporting —The Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Company’s reportable segments. During the years ended August 31, 2019 and 2018, the Chief Executive Officer has been identified as the chief operating decision maker. The Company’s chief operating decision maker regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the Company does not have any operating segments as defined in the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 280‑10‑50‑1, “Segment Reporting.”

Shipping and Handling Costs — The Company includes costs from shipping and handling within cost of revenues in the period in which they are incurred.

Net Income (Loss) Per Share of SemiLEDs Common Stock —Basic net income (loss) per share is computed by dividing net income (loss) attributable to SemiLEDs stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) attributable to SemiLEDs stockholders is determined by allocating undistributed earnings as if all of the earnings for the period had been distributed. Diluted net income (loss) per share is computed by using the weighted‑average shares of common stock outstanding, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options and unvested restricted stock units using the treasury stock method.

Noncontrolling Interests —Noncontrolling interests are classified in the consolidated statements of operations as part of consolidated net income (loss) and the accumulated amount of noncontrolling interests in the consolidated balance sheets as part of equity. Changes in ownership interest in a consolidated subsidiary that do not result in a loss of control are accounted for as an equity transaction. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.

On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd. (“SBDI”), the Company’s wholly owned operating subsidiary, issued 414,000 common shares and amended its certificate of incorporation to increase its issued common stock from 12,087,715 shares to 12,501,715 shares. As of the date of this report, the increased capital of $176 thousand (NT$5.4 million) has been completely received in cash by Taiwan Bandaoti Zhaoming Co., Ltd. The Company did not subscribe for the newly issued common shares, and, as a result, noncontrolling interest in SBDI was increased from zero to 3.31%. In December 2018, Taiwan SemiLEDs purchased 3,000 common shares of SBDI from non-controlling interests. As of August 31, 2019, noncontrolling interest in SBDI was down to 3.29%.

Commitments and Contingencies — Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Fair Value Measurements — The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

See Note 12 for further details.

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Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Change to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, “Fair Value Measurement.” ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020. The Company is currently evaluating the impact ASU 2018-13 will have on the disclosures included in its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in ASU 2018-07 specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments in ASU 2018-07 also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. This standard became effective for the Company on September 1, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted the new standard effective September 1, 2018, using the retrospective transition approach. The reclassified restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows were not material for all periods presented.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in ASU 2016-02 require lessees to recognize all leases on the balance sheet by recording a right-of-use asset and a lease liability, and lessor accounting has been updated to align with the new requirements for lessees. The new standard also provides changes to the existing sale-leaseback guidance. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning September 1, 2019. The FASB has also issued additional standards which provide additional clarification and implementation guidance on the previously issued ASU 2016-02 and have the same effective date as the original standard. The Company plans to apply this guidance on a modified retrospective basis at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings, with no restatement of prior periods. The Company plans to elect the package of practical expedients permitted under the transition guidance within the new standard. In addition, the Company plans to elect the practical expedient to combine lease and non-lease components for all asset classes. The Company also plans to elect the short-term lease exception to keep leases with an initial term of twelve months or less off of the balance sheet. The Company is continuing to evaluate the impact ASU 2016-02 will have on its consolidated financial statements and does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows

3. BALANCE SHEET COMPONENTS

Inventories

Inventories as of August 31, 2019 and 2018consist of the following (in thousands):

	August 31,
	2019		2018
Raw materials	$	479	$	577
Work in process		728		505
Finished goods		876		736
Total	$	2,083	$	1,818

Inventory write‑downs to estimated net realizable values for the years ended August 31, 2019 and 2018 were $743 thousand and $695 thousand, respectively.

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Property, Plant and Equipment

Property, plant and equipment as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019			2018
Buildings and improvements	$	13,238		$	13,558
Machinery and equipment		37,988			39,391
Leasehold improvements		156			150
Other equipment		2,250			2,312
Construction in progress		61			289
Total property, plant and equipment		53,693			55,700
Less: Accumulated depreciation and amortization		(47,815	)		(48,487	)
Property, plant and equipment, net	$	5,878		$	7,213

Depreciation expense was $1,079 thousand and $976 thousand for the years ended August 31, 2019 and 2018, respectively.

Property, plant and equipment pledged as collateral for the Company’s notes payable were $3.7 million and $4.2 million as of August 31, 2019 and 2018, respectively.

Intangible Assets

Intangible assets as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31, 2019
	Weighted
	Average	Gross				Net
	Amortization	Carrying		Accumulated		Carrying
	Period (Years)	Amount		Amortization		Amount
Patents and trademarks	15	$	542	$	449	$	93
Acquired technology	5		484		484		—
Total		$	1,026	$	933	$	93

	August 31, 2018
	Weighted
	Average	Gross				Net
	Amortization	Carrying		Accumulated		Carrying
	Period (Years)	Amount		Amortization		Amount
Patents and trademarks	15	$	544	$	446	$	98
Acquired technology	5		494		494		—
Total		$	1,038	$	940	$	98

Amortization expense was $14 thousand and $22 thousand for the years ended August 31, 2019 and 2018, respectively.

No impairment charge was recognized in the year ended August 31, 2019 and 2018.

The estimated future amortization expense for the Company’s intangible assets as of August 31, 2019 is as follows (in thousands):

Years Ending August 31,	Total
2020	$	9
2021		9
2022		8
2023		8
2024		8
Thereafter		51
Total	$	93

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Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019		2018
Advance receipts from sale of our headquarters building	$	—	$	3,199
Accrued compensation and benefits		1,357		1,242
Other (individually less than 5% of total accrued expenses and    other current liabilities)		985		1,064
Total	$	2,342	$	5,505

4. INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of August 31, 2019 and 2018 consist of the following (in thousands, except percentages):

	August 31, 2019					August 31, 2018
	Percentage					Percentage
	Ownership			Amount		Ownership			Amount
Equity method investments:
Xurui Guangdian Co., Ltd. (“China SemiLEDs”)		—	%	$	—		49	%	$	—
Equity investment without readily determinable fair value	Various				894	Various				914
Total investments in unconsolidated entities				$	894				$	914

There were no dividends received from unconsolidated entities through August 31, 2019.

Equity Method Investments

The Company owns a 49% equity interest in China SemiLEDs. This investment has a carrying amount of zero as a result of a previously recognized impairment.In May 2019, the Foshan (China) Court declared China SemiLEDs was bankrupt after confirming that China SemiLEDs was incapable to pay outstanding debts.

Equity Investment without Readily Determinable Fair Value

Equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the Company) which do not have readily determinable fair values are recorded as equity investment without readily determinable fair value. All equity investments without readily determinable fair value are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable, and measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.The recoverable value of the investment was determined based on the Company’s best estimate of the amount that could be realized from the investment, which considered the latest financial information. During the year ended August 31, 2018, the Company recognized net loss of $8 thousand from equity investment without readily determinable fair value in Intematix based on the excess of the carry amount over the receivables that the investee notified after its liquidation being completed. During the year ended August 31, 2019, no impairment losses were recognized for the equity investments without readily determinable fair value.

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5. INDEBTEDNESS

Long‑term Debt

Long‑term debt as of August 31, 2019 and 2018 consist of the following loans (in thousands):

	August 31,
	2019			2018
First note payable-E Sun Bank	$	—		$	860
Second note payable- E Sun Bank		—			1,488
First note payable- Mega Bank		1,954			—
Second note payable- Mega Bank		1,198			—
Loans from Chairman and Shareholders		3,200
Total long-term debt		6,352			2,348
Less: Current installments		(398	)		(335	)
Total long-term debt, excluding current installments	$	5,954		$	2,013

Our long-term debt, which consisted of New Taiwan dollar (“NTD”) denominated long-term notes and loans from the Chairman and the largest shareholder of the Company, totaled $6.4 million and $2.3 million as of August 31, 2019 and 2018, respectively.

The long‑term notes payable to E Sun Commercial Bank (the “E Sun Bank”) bearing an interest rates of 1.62% as of August 31, 2018 were payable in monthly installments of principal and interest over the 15-year term of the notes with final payment to occur in May 2024 and in December 2025. The interest rates were based on the annual time deposit rate plus a certain spread. The notes were secured by the Company’s property, plant and equipment, and did not have prepayment penalties or balloon payments upon maturity of the notes. In July 2019, the notes were all repaid.

On July 5, 2019, the Company and Mega International Commercial Bank (“Mega Bank”) entered into two NTD denominated loan agreements in an aggregate amount of $3.2 million (NT$100 million). The first note of $2.0 million (NT$62 million) payable to Mega Bank has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 1.62% currently), and was exclusively used to repay the mentioned-above-notes with E Sun Bank. The second note of $1.2 million (NT$38 million) payable to Mega Bank has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 2% currently) and is available for operating capital. Both note payables are secured by a first priority security interest on the Company’s headquarters building. Income from renting the collateral must be deposited into a Reserved Account opened with Mega Bank, and only the balance of deposits exceeding $79 thousand (NT$2.5 million) after deducting the principal and interest payable for the current month (including the accumulated outstanding amount) may be transferred outwards. The balance of the Reserve Account is US$19 thousand as of August 31, 2019. The two notes payables to Mega Bank require monthly payments of principal in the amount of $21 thousand plus interest and $13 thousand plus interest, respectively, over the 8-year term of the notes with final payment to occur in July 2027.

On January 8, 2019, the Company entered into loan agreements with each of the Chairman and Chief Executive Officer and the largest shareholder of the Company, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of both 8%. All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the cancelled proposed sale of the Company’s headquarters building pursuant to the agreement dated December 15, 2015. The Company is required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively, unless the loans are sooner accelerated pursuant to the loan agreements. As of August 31, 2019, these loans totaled $3.2 million. The loans are secured by a second priority security interest on the headquarters building of the Company.

The scheduled principal payments for the Company’s long-term debt as of August 31, 2019 consist of the following (in thousands):

	Scheduled
	Principal
Years Ending August 31,	Payments
2020	$	398
2021		3,598
2022		398
2023		398
2024		398
Thereafter		1,162
Total	$	6,352

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6. COMMITMENTS AND CONTINGENCIES

Operating Lease Agreements —The Company has several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between December 2020 and December 2029. As of August 31, 2019 and 2018, the Company maintained outstanding deposits for these leases in the amount of $10 thousand and $85 thousand, respectively, which are included in other long‑term assets in the accompanying consolidated balance sheets. Lease expense related to these operating leases was $151 thousand and $472 thousand for the years ended August 31, 2019 and 2018, respectively. Lease expense is recognized on a straight‑line basis over the term of the lease.

The aggregate future noncancelable minimum rental payments for the Company’s operating leases as of August 31, 2019 consist of the following (in thousands):

	Operating
Years Ending August 31,	Leases
2020	$	148
2021		93
2022		29
2023		11
2024		10
Thereafter		56
Total	$	347

Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $158 thousand and $1.6 million as of August 31, 2019 and 2018, respectively.

Litigation — The Company is directly or indirectly involved from time to time in various claims or legal proceedings arising in the ordinary course of business. The Company recognizes a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in assessing both the likelihood of an unfavorable outcome and whether the amount of loss, if any, can be reasonably estimated.

On June 21, 2017, Well Thrive filed a complaint against SemiLEDs Corporation in the United States District Court for the District of Delaware. The complaint alleges that Well Thrive is entitled to return of $500 thousand paid toward a note purchase pursuant to the Purchase Agreement effective July 6, 2016 with Dr. Peter Chiou, which was assigned to Well Thrive on August 4, 2016. Pursuant to the terms of the Purchase Agreement, the Company has retained the $500 thousand payment as liquidated damages. Well Thrive alleges that the liquidated damages provision is unenforceable as an illegal penalty and does not reflect the amount of purported damages. On March 13, 2018, the Company filed a motion to enforce a settlement agreement between the parties to dismiss the lawsuit with prejudice. On March 27, 2018, Well Thrive filed an answering brief in opposition to the Company’s motion on the basis that Well Thrive never consented to dismiss the case. The judge’s order allows the Company to conduct depositions of Well Thrive’s former lawyer, Dr. Chiou, and Mr. Chang Sheng-Chun, Well Thrive’s director, and to request documents relating to the issues surrounding the settlement. Based on this order, the Company intends to arrange the depositions to obtain more evidence in support of a motion to enforce the settlement agreement. On October 25, 2019, Well Thrive filed a motion to modify the Court’s scheduling order and to allow it to file a motion for summary judgment, and the Company filed an opposition to the motion. On November 13, 2019, the Court denied Well Thrive’s motion. The Court set a trial date of March 2, 2020, if needed.

On December 28, 2018, the Company received a notification from the Court in Miao-Li County, Taiwan that Epistar Corporation (the successor to Formosa Epitaxy Incorporation, the “Plaintiff”) filed a motion requesting that the Company return the $3 million prepayment plus value-added-tax for the headquarters building sale and pay interest during this period and litigation fee. The Plaintiff also petitioned the Court to do a provisional execution upon the Company, which would permit the Plaintiff to sell the building and/or other assets belonging to the Company to recover the prepayment. On January 4, 2019, the Company filed a statement of defense arguing that the Plaintiff’s action and motion for provisional execution should be dismissed and the litigation fees should be borne by the Plaintiff. On January 25, 2019, the Company and the Plaintiff entered into a settlement, agreeing that the Company would return the $3 million plus value-added-tax of $150 thousand and penalty of $200 thousand, and on February 1, 2019, the Plaintiff withdrew the motion. As of August 31, 2019, the Company has paid the $3.35 million in full.

On March 11, 2019, a former employee (the “Plaintiff”) of Taiwan Bandaoti Zhaoming Co., Ltd. (“Taiwan Bandaoti”) filed a civil complaint against Taiwan Bandaoti in the Taiwan Miao-Li District Court. The Plaintiff alleged the following causes of action under the Labor Standards Act of Taiwan: (1) failure to pay the annual bonus; and (2) failure to pay transportation allowance. The Plaintiff is seeking compensation in the aggregate of approximately $9 thousand (NT$293 thousand). On May 24, 2019, Taiwan Miao-Li District Court determined on its own initiative to transfer the case to the Taiwan Hsin-Chu District Court due to a lack of jurisdiction over the action in whole or in part. On August 16, 2019, the Taiwan Hsin-Chu District Court held the first mediation proceeding, and on September 27, 2019, the Plaintiff and Taiwan Bandaoti Zhaoming had the first oral argument. The next oral argument will be held on December 6, 2019.

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Except as described above, as of August 31, 2019, there was no pending litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.

7. COMMON STOCK

At its Annual Meeting held on June 29, 2018 (Taiwan time), the Company’s stockholders approved an amendment to its Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), to reduce the number of authorized shares of common stock from 75,000,000 to 7,500,000. The amendment did not change any of the rights and privileges of the Company’s common stock or its par value, and did not affect the number of shares of the Company’s common stock currently outstanding. Accordingly, the authorized common shares disclosures for all periods presented have been retrospectively adjusted to reflect this amendment of its Restated Certificate of Incorporation.

8. STOCK‑BASED COMPENSATION

The Company currently has one equity incentive plan (the “2010 Plan”), which provides for awards in the form of restricted shares, stock units, stock options or stock appreciation rights to the Company’s employees, officers, directors and consultants. In April 2014, SemiLEDs’ stockholders approved an amendment to the 2010 Plan that increases the number of shares authorized for issuance under the plan by an additional 250 thousand shares. On July 31, 2019, the stockholders approved to increase in the authorized share reserve under the 2010 plan by an additional 500 thousand shares, to extend expiration of the 2010 Plan to November 3, 2023, to remove the IRS Code section 162(m) provisions, and to modify the maximum grant limit to 35 thousand shares to one person in a one year period. Prior to SemiLEDs’ initial public offering, the Company had another stock‑based compensation plan (the “2005 Plan”), but awards are made from the 2010 Plan after the initial public offering. Options outstanding under the 2005 Plan continue to be governed by its existing terms.

A total of 1,021 thousand and 521 thousand shares were reserved for issuance under the 2010 Plan as of August 31, 2019 and 2018, respectively. As of August 31, 2019 and 2018, there were 691 thousand and 189 thousand shares of common stock available for future issuance under the 2010 Plan.

In July 2018, SemiLEDs granted 7.5 thousand restricted stock units to its directors. Among which, 5 thousand restricted stock units vested 100% on June 29, 2019, and 2.5 thousand restricted stock units were cancelled because of resignation of a director. The grant-date fair value of the restricted stock units was $4.75 per unit.

In January 2018, SemiLEDs granted 56.7 thousand restricted stock units to its employees, of which 50% vested on January 1, 2019 and 50% will be vested on January 1, 2020 or will become fully vested upon a change in control. The grant-date fair value of the restricted stock units was $4.10 per unit.

In November 2017, SemiLEDs granted 2.5 thousand restricted stock units to its directors that vested 100% on June 29, 2018. The grant-date fair value of the restricted stock units was $4.15 per unit, respectively.

Stock‑based Compensation Expense

The total stock-based compensation expense consists of stock-based compensation expense for stock options and restricted stock units granted to employees, directors, nonemployees and also includes stock options to purchase SemiLEDs’ common stock as part of an employment agreement related to the Company’s acquisition of SBDI (later on renamed as TSLC Corporation). A summary of the stock-based compensation expense for the years ended August 31, 2019 and 2018 is as follows (in thousands):

	Years Ended August 31,
	2019		2018
Cost of revenues	$	44	$	44
Research and development		27		22
Selling, general and administrative		78		75
	$	149	$	141

Stock‑based compensation expense is recorded net of estimated forfeitures such that expense is recorded only for those stock‑based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. A forfeiture rate of zero is estimated for stock‑based awards with vesting term that is less than or equal to one year from the date of grant.

There was no recognized stock-based compensation tax benefit for the years ended August 31, 2019 and 2018, as the Company recorded a full valuation allowance on net deferred tax assets as of August 31, 2019 and 2018.

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Stock Options Awards

The grant date fair value of stock options is determined using the Black‑Scholes option‑pricing model. The Black‑Scholes option‑pricing model requires inputs including the market price of SemiLEDs’ common stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several of the Company’s publicly‑traded peers over the expected term of stock options, risk‑free interest rate and expected dividend. The expected term is derived from historical data on employee exercises and post‑vesting employment termination behavior after taking into account the contractual life of the award. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the related options. The expected dividend has been zero for the Company’s option grants as SemiLEDs has never paid dividends and does not expect to pay dividends for the foreseeable future. Each of these inputs is subjective and generally requires significant judgment to determine.

A summary of the option activity and changes for the years ended August 31, 2019 and 2018 is presented below:

						Weighted-
				Weighted-		Average
	Number of			Average		Remaining		Aggregate
	Stock Options			Exercise		Contractual		Intrinsic
	Outstanding			Price		Life (Years)		Value
	(In thousands)							(In thousands)
Outstanding—September 1, 2017		12		$	116.10		3.0	$	1
Granted		—			—
Forfeited		(2	)		23.40
Exercised		—			—
Outstanding—August 31, 2018		10		$	132.66		2.3	$	—
Granted		—			—
Forfeited		—			103.00
Exercised		—			—
Outstanding—August 31, 2019		10		$	133.82		1.4	$	—
Vested and expected to vest—August 31, 2019		10		$	133.82		1.4	$	—
Exercisable—August 31, 2019		10		$	133.82		1.4	$	—

As of August 31, 2019 and 2018, unrecognized compensation costs related to unvested stock options were nil.

Restricted Stock Units Awards

The grant date fair value of stock units is based upon the market price of SemiLEDs’ common stock on the date of the grant. This fair value is amortized to compensation expense over the vesting term.

A summary of the restricted stock unit awards outstanding and changes for the years ended August 31, 2019 and 2018 is presented below:

				Weighted-
	Number of			Average
	Stock Units			Grant Date
	Outstanding			Fair Value
	(In thousands)
Outstanding—September 1, 2017		16		$	7.33
Granted		66			4.23
Vested		(15	)		6.93
Forfeited		(1	)		10.70
Outstanding—August 31, 2018		66		$	4.25
Granted		—			—
Vested		(35	)		4.34
Forfeited		(2	)		4.75
Outstanding—August 31, 2019		29		$	4.10

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As of August 31, 2019 and 2018, unrecognized compensation cost related to unvested restricted stock unit awards of $41thousand and $202thousand, respectively, is expected to be recognized over a weighted average period of 0.34years and 1.24years, respectively, and will be adjusted for subsequent changes in estimated forfeitures.

9. NET LOSS PER SHARE OF COMMON STOCK

The following stock‑based compensation plan awards were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have an antidilutive effect on the net loss per share (in thousands of shares):

	Years Ended August 31,
	2019		2018
Stock units and stock options to purchase common stock		11		78

10. INCOME TAXES

Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.

United States

SemiLEDs Corporation is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to the U.S. corporate income tax system including, among other things, lowering the U.S. statutory federal tax rate to 21%. The reduction of the U.S. corporate tax rate caused the Company to adjust its U.S. deferred tax assets and liabilities to the lower federal rate of 21% in the fiscal year ended August 31, 2019. The Tax Act also added many new provisions, including a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries (“transition tax”), changes to bonus depreciation, limits on deductions for executive compensation and interest expense, a tax on global intangible low-taxed income (“GILTI”), the base erosion anti-abuse tax (“BEAT”) and a deduction for foreign-derived intangible income. The Company has elected to account for the tax on GILTI and BEAT as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax. However, the Company has considered the potential impact of GILTI and BEAT on its U.S. federal net operating loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions.

The changes included in the Tax Act are broad and complex. The SEC issued Staff Accounting Bulletin No. 118 (SAB 118), as amended by ASU 2018-05, which provides guidance for companies related to the Tax Act. ASU 2018-05 allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The Company’s accounting for the tax effects of the Tax Act were completed in fiscal 2019. Although the Company believes the effects of the Tax Act have been appropriately recorded, it will continue to monitor, among other things, changes in interpretations of the Tax Act, any legislative action arising because of the Tax Act and any changes in accounting standards for income taxes or related interpretations in response to the Tax Act. The Company intends to assess the impact of any such changes in legislative interpretations or standards and adjust its provision as new information becomes available.

In accordance with SAB 118, the Company has made reasonable estimates related to (1) the remeasurement of its U.S. deferred tax balances for the reduction in the statutory tax rate, (2) the liability for the transition tax and (3) the partial valuation allowance recorded against its federal NOL carryforward due to the impact of the GILTIand BEAT provisions. In fiscal 2019, the Company determined that there were no material changes to the provisional amounts recorded as of August 31, 2019.

Taiwan

The Company’s loss before income taxes is primarily derived from the operations in Taiwan and income tax expense is primarily incurred in Taiwan.

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As a result of amendments to the “Taiwan Income Tax Act” enacted by the Office of the President of Taiwan on February 7, 2018, the statutory income tax rate increased from 17% to 20% and the undistributed earning tax,or a surtax, decreased from 10% to 5% effective from January 1, 2018.As a result, the statutory income tax rate in Taiwan is 20% and 17% for the years ended August 31, 2019 and 2018, respectively. An additionalsurtax,of which rate was reduced from 10% to 5% being applied to the Company starting from September 1, 2018, is assessed on undistributed income for the entities in Taiwan, but only to the extent such income is not distributed or set aside as a legal reserve before the end of the following year. The 5% surtax is recorded in the period the income is earned, and the reduction in the surtax liability is recognized in the period the distribution to stockholders or the setting aside of legal reserve is finalized in the followingyear.

The Company’s loss before income taxes for the years ended August 31, 2019 and 2018 was attributable to the following jurisdictions (in thousands):

	Years Ended August 31,
	2019			2018
U.S. operations	$	(568	)	$	(369	)
Foreign operations		(2,997	)		(2,612	)
Loss before income taxes	$	(3,565	)	$	(2,981	)

Income tax expense differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% and 34% to loss before income taxes for the years ended August 31, 2019 and 2018, respectively, as a result of the following (in thousands):

	Years Ended August 31,
	2019			2018
Computed “expected” income tax benefit	$	(748	)	$	(1,013	)
Foreign tax rate differential		25			543
Valuation allowance		(3,908	)		(8,428	)
Other		4,631			8,898
Income tax expense	$	—		$	—

Net deferred tax assets (liabilities) as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019			2018
Deferred tax assets:
Inventories, primarily due to inventory obsolescence and    lower of cost or market provisions	$	1,599		$	1,549
Allowance for doubtful accounts		33			104
Accruals and other		79			89
Property, plant and equipment		1,035			1,447
Stock-based compensation		388			622
Investments in unconsolidated entities		—			5,554
Net operating loss carryforwards		27,849			26,049
Total gross deferred tax assets		30,983			35,414
Less: Valuation allowance		(30,983	)		(35,414	)
Deferred tax assets, net of valuation allowance	$	—		$	—

A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and operating loss carryforwards utilizable. Management considers the scheduled reversal of deferred tax liabilities, carryback availability, projected future income, and tax-planning strategies in making this assessment. The Company established full valuation allowances to offset all of its deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

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As of August 31, 2019, the Company had the U.S. net operating losses (the “U.S. NOLs”) ofapproximately $29,609 thousand, which begins to expire in 2025. The U.S. NOLs generated in tax years prior to August 31, 2018, can be carryforward for twenty years, whereas U.S. NOLs generated after August 31, 2018 can be carryforward indefinitely. The unused net operating loss carryforwards were as follows (inthousands):

	August 31,		Expiration
	2019		Year
U.S. federal net operating loss carryforwards    (prior to August 31, 2018)	$	12,893	2025-2037
U.S.  federal net operating loss carryforwards (after August 31, 2018)		16,716		—
Foreign net operating loss carryforwards    (expiring over the next 5 years)		80,503	2020-2024
Foreign net operating loss carryforwards    (expiring in more than 5 years)		30,616	2025-2029
Foreign net operating loss carryforwards (indefinite life)		9,225		—
Total unused net operating loss carryforwards and income tax    credits	$	149,953

Unrecognized Tax Benefits

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years, makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. Provisional estimate of the Company is that no tax will be due under this provision.

As of August 31, 2019 and 2018, the Company had no unrecognized tax benefits.

The Company is subject to taxation in the United States and various states and certain foreign jurisdictions. As of August 31, 2019, the 2015 through 2018 tax years remain subject to examination by the U.S. tax authorities. With few exceptions, as of August 31, 2019, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for tax years before 2014. Below is a summary of open tax years by major tax jurisdiction:

	Open
	Tax Year
U.S. federal	2015-2018
U.S. state	2015-2018
Foreign—Taiwan	2017-2018

The Company is not currently under examination by income tax authorities in any federal, state or foreign jurisdictions. The Company does not expect that the total amount of unrecognized tax benefits will change significantly within the next 12 months.

11. PRODUCT AND GEOGRAPHIC INFORMATION

Revenues by products for the years ended August 31, 2019 and 2018 are as follows (in thousands):

	Years Ended August 31,
	2019		2018
LED chips	$	93	$	244
LED components		4,430		5,181
Lighting products		632		968
Other(1)		747		1,102
Total	$	5,902	$	7,495

(1) Other includes primarily revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.

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Revenues by geography are based on the billing address of the customer. The following table sets forth revenues by geographic area for the years ended August 31, 2019 and 2018 (inthousands):

	Years Ended August 31,
	2019		2018
Netherlands	$	1,573	$	1,786
United States		1,948		1,729
Taiwan		426		1,383
Japan		389		3
India		260		1,005
China		166		573
Germany		400		399
Other (individually less than 5% of total net revenues)		740		617
Total	$	5,902	$	7,495

Tangible Long‑Lived Assets

Substantially all of the Company’s tangible long‑lived assets are located in Taiwan.

12. FAIR VALUE MEASUREMENTS

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of August 31, 2019 and 2018 (in thousands):

	August 31, 2019				August 31, 2018
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents and restricted cash	$	1,382	$	1,382	$	3,421	$	3,421
Receivables (including related parties)		703		703		282		282
Other assets (non-derivatives)		539		539		334		334
Financial liabilities:
Payables (including related parties)	$	3,522	$	3,522	$	3,700	$	3,700
Long-term debt (including current installments)		6,352		6,352		2,348		2,332

The fair values of the financial instruments shown in the above table as of August 31, 2019 and 2018 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects management’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by management based on the best information available in the circumstances, including expected cash flows and appropriately risk‑adjusted discount rates, available observable and unobservable inputs.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

• Cash, cash equivalents, restricted cash, receivables and payables (including related parties) and notes payable to banks: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

• Other assets (non‑derivatives) include primarily value‑added tax (“VAT”) refund receivables, refundable deposits, and restricted time deposits. The fair value of VAT refund receivables approximates the carrying amount because of the short maturity. The fair value of refundable deposits and restricted time deposits with no fixed maturity is based on the carrying amount.

• Long‑term debt: The fair value of the Company’s variable rate long‑term debt is estimated based on the prevailing market rate adjusted by the Company’s credit spread.

During the year ended August 31, 2018, the Company recognized net loss of $8 thousand from cost method investment in Intematix based on the excess of the carry amount over the receivables that the investee notified after its liquidation being completed.

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13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following tables set forth selected quarterly statement of operations data for each of the years ended August 31, 2019 and 2018 (in thousands, except per share data):

	Three Months Ended
	November 30,			February 28,			May 31,			August 31,			Fiscal
	2018			2019			2019			2019			2019
Revenues, net	$	972		$	1,630		$	1,745		$	1,555		$	5,902
Cost of revenues		1,191			1,628			1,405			1,226			5,450
Gross profit (loss)		(219	)		2			340			329			452
Operating expenses		803			917			1,041			1,356			4,117
Loss from operations		(1,022	)		(915	)		(701	)		(1,027	)		(3,665	)
Net loss attributable to SemiLEDs stockholders	$	(978	)	$	(847	)	$	(859	)	$	(881	)	$	(3,565	)
Net loss per share attributable to SemiLEDs stockholders,    basic and diluted	$	(0.27	)	$	(0.24	)	$	(0.24	)	$	(0.25	)	$	(1.00	)

	Three Months Ended
	November 30,			February 28,			May 31,			August 31,			Fiscal
	2017			2018			2018			2018			2018
Revenues, net	$	2,003		$	1,543		$	1,999		$	1,950		$	7,495
Cost of revenues		1,951			1,987			1,837			2,155			7,930
Gross loss		52			(444	)		162			(205	)		(435	)
Operating expenses		917			795			514			1,013			3,239
Loss from operations		(865	)		(1,239	)		(352	)		(1,218	)		(3,674	)
Net loss attributable to SemiLEDs stockholders	$	(392	)	$	(1,132	)	$	(326	)	$	(1,131	)	$	(2,981	)
Net loss per share attributable to SemiLEDs stockholders,    basic and diluted	$	(0.11	)	$	(0.32	)	$	(0.09	)	$	(0.32	)	$	(0.84	)

14. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

As a holding company, dividends received from SemiLEDs’ subsidiaries in Taiwan, if any, will be subject to withholding tax under Taiwan law, as well as statutory and other legal restrictions. The condensed parent company only financial information for SemiLEDs is presented below (in thousands):

	August 31,
Condensed Balance Sheets	2019			2018
ASSETS
Cash and cash equivalents	$	52		$	194
Prepaid expenses and other current assets		7,085			3,973
Total current assets		7,137			4,167
Intangible assets, net		1			1
Investments in subsidiaries		(1,169	)		1,674
TOTAL ASSETS	$	5,969		$	5,842
LIABILITIES AND EQUITY
Advance receipt toward the convertible note	$	500		$	500
Accrued expenses and other current liabilities		528			339
Total current liabilities		1,028			839
Total non-current liabilities		3,200			—
Total equity		1,741			5,003
TOTAL LIABILITIES AND EQUITY	$	5,969		$	5,842

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SemiLEDs had no contingencies, long‑term obligations and guarantees as of August 31, 2019 or August 31, 2018.

	Years Ended August 31,
Condensed Statements of Operations	2019			2018
Operating expenses:
Selling, general and administrative	$	398		$	754
Loss from operations		(398	)		(754	)
Other income (expenses):
Equity in losses from subsidiaries, net		(2,997	)		(2,619	)
Other income (expenses), net		(170	)		392
Total other expenses, net		(3,167	)		(2,227	)
Net loss	$	(3,565	)	$	(2,981	)

	Years Ended August 31,
Condensed Statements of Cash Flows	2019			2018
Net cash provided by (used in):
Operating activities	$	(3,342	)	$	(449	)
Investing activities		—			534
Financing activities		3,200			—
Net increase (decrease) in cash and cash equivalents		(142	)		85
Cash and cash equivalents at beginning of year		194			109
Cash and cash equivalents at end of year	$	52		$	194

15. RELATED PARTY TRANSACTIONS

On January 8, 2019, the Company entered into loan agreements with each of its Chairman and Chief Executive Officer and its largest shareholder, with aggregate amounts of $3.2 million, and an annual interest rate of 8%. All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the canceled sale of the Company’s headquarters building pursuant to the agreement dated December 15, 2015. The Company is required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively, unless the loans are accelerated pursuant to the loan agreements.  As of August 31, 2019, these loans totaled $3.2 million. The loans are secured by a second priority security interest on the Company’s headquarters building

16. SUBSEQUENT EVENT

In September 2019, SemiLEDs granted 5 thousand restricted stock units to its directors that will vest 100% on the earlier of July 31, 2020 and the date of the 2020 annual meeting. The grant-date fair value of the restricted stock units was $2.45 per unit.

In September 2019, SemiLEDs granted 2.5 thousand restricted stock units to a director that will vest 100% on the earlier of September 5, 2020 and the date of the 2020 annual meeting. The grant-date fair value of the restricted stock units was $2.45 per unit.

The Company has analyzed its operations subsequent to August 31, 2019 to the date these consolidated financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these consolidated financial statements.

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Item9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.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 August 31, 2019. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls 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 August 31, 2019, 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.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our CEO and CFO, we assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework in “Internal Control— Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our CEO and CFO concluded that our internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of the financial statements for external purposes in accordance with GAAP, as of August 31, 2019.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended August 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.Other Information

Not applicable.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance

Our Board of Directors

Trung T. Doan, 61, has served as a director, Chairman of our Board and as our CEO since January 2005, and as our President since August 2012. Prior to joining us, Mr. Doan served as Corporate Vice President of Applied Global Services (AGS) Product Group at Applied Materials, Inc. and also served as President and Chief Executive Officer of Jusung Engineering, Inc., a semiconductor/LCD equipment company in Korea. In addition, Mr. Doan served as Vice President of Process Development at Micron Technology Inc. Mr. Doan previously served as a director of Advanced Energy Industries, a publicly traded manufacturer of power conversion and control systems within the past five years. Mr. Doan also previously served as a director of Dolsoft Corporation, a privately held software company, as a director of Nu Tool Inc., a semiconductor technology company, and as a director of EMCO, a publicly traded manufacturer of advanced flow control devices and systems. Mr. Doan holds a bachelor of science degree in nuclear engineering from the University of California, Santa Barbara, where he graduated with honors, and a master of science degree in chemical engineering from the University of California, Santa Barbara. Our Board has determined that Mr. Doan should serve on our Board and as our Chairman based on his in‑depth knowledge of our business and industry and his experience serving on the boards of directors of several major technology companies, as well as in management roles in the technology industry.

Dr. Edward Kuan Hsiung Hsieh, 67, has served as a director since February 2012. Dr. Hsieh has been Chairman, Chief Executive Officer and a director of Eton Intelligent Technologies, a media and publications company, since April 2000 and Chairman, Chief Executive Officer and a director of VR Networks, a VoIP and Internet networks company, since January 2000. He has also served as an Adjunct Professor at National Taiwan University since February 2009. From February 2007 to February 2010, Dr. Hsieh was Chief Executive Officer of Asia Pacific Telecom, a 3G mobile and fixed line telecommunications company, as well as Executive Director of APOL, an Internet service provider. He also served as Chairman of International Christian Goodwill within the past five years. Dr. Hsieh holds a bachelor of science degree in electrical engineering from National Taiwan University, a master of science degree in electrical engineering from the University of California, Santa Barbara and a doctor of philosophy degree in electrical engineering from Cornell University. He also studied accounting at the University of California, Los Angeles. Our Board has determined that Dr. Hsieh should serve as a director based on his experience teaching master of business administration classes at National Taiwan University, his service as an International Financial Adviser with Merrill Lynch, Pierce, Fenner & Smith and his management roles at several start‑up companies.

Scott R. Simplot, 72, has served as a director since March 2005. Mr. Simplot has been Chairman of the board of directors and a director of J.R. Simplot Company since May 2001 and August 1970, respectively. Mr. Simplot holds a bachelor of science degree in business from the University of Idaho and a master of business administration degree from the University of Pennsylvania. Mr. Simplot became a director on our Board as part of his duties as the Chairman of the board of J.R. Simplot Company, the 100% owner of Simplot Taiwan, Inc., which was entitled to designate two members of our board of directors in connection with J.R. Simplot Company’s investment in our Series A convertible preferred stock. Our Board has determined that Mr. Simplot should serve as a director based on the extensive knowledge and insight he brings to our Board from his experience serving as Chairman and holding a variety of management positions at a large private company and serving on the boards of directors of companies in a variety of industries.

Walter Michael Gough, 65, has served as a director since April 2016. Mr. Gough has led Gough and Associates, a firm that specializes in financial consulting for domestic and international companies since 2005. He is also a tenured faculty member in Accounting and Business at DeAnza College in Cupertino, California where he has taught since 1985. From June 2000 to June 2004, he was Chief Financial Officer and Financial Consultant at Nu Tool Inc., a semiconductor equipment manufacturer. From 1995 through 1999, he was a founding member and Chief Financial Officer of Invest In Yourself, LLC; an organization that provided consulting for professional sports franchises. Prior to teaching and consulting, Mr. Gough was a financial analyst and contracts manager at Watkins-Johnson Company, a high technology electronics firm. Before Watkins-Johnson, Mr. Gough worked for Kidder Peabody, an investment banking firm. He holds MBA and BA degrees (cum laude) from Santa Clara University, and a Masters in English from Notre Dame de Namur University. Our Board has determined that Mr. Gough should serve on our Board based on his experience as a consultant to technology companies in both the United States and Taiwan, his prior experience as a chief financial officer of several companies, and his expertise in accounting and finance.

Roger Lee, 61, has served as a director since September 2019. Mr. Lee previously served as a director and an Audit Committee member of SemiLEDs from August 2017 to March 2019. Mr. Lee has more than 30 years of semiconductor experience and leadership. He has been the President and CEO of TF Semiconductor Solutions (TFSS) since August 2014. Prior to becoming the CEO of TFSS, Mr. Lee served as world-wide COO and Interim President & CEO of Telefunken Semiconductors located in Roseville, California and Heilbronn, Germany from May 2011 to July 2014. Mr. Lee began his career as an engineer for Texas Instruments. During his career, Mr. Lee has served on numerous boards and held a variety of executive and senior-level positions for several companies, including senior vice president of SMIC. Previously, he co-founded the SMIC-Toppan JV (TSES) where he served as its vice chairman of its Board of Directors, and had held several senior management positions, including senior fellow and head of flash memory at Micron Technology and was instrumental to the development of Micron’s flash memory program. More recently, he was COO and a board member of Founder Microelectronics, Inc. in Shenzhen, China where he was responsible for overall company operations, including fab manufacturing, sales and marketing, facilities, and R&D operations. Mr. Lee earned his Bachelor’s degree and Master’s degree in Electrical Engineering from Iowa State University. Our Board has determined that Mr. Lee should serve on our Board based on his experience with technology companies and other organizations in both the United States and China.

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Executive Officers

In addition to Mr. Doan, our CEO, who also serves as a director, our executive officers as of November 13, 2019 consisted of the following:

Christopher Lee, 48, has served as our Chief Financial Officer since September 2015. From November 21, 2014 until his appointment as Chief Financial Officer, Mr. Lee was the interim Chief Financial Officer of the Company. Mr. Lee joined SemiLEDs in September 2014. Mr. Lee has over 20 years of experience in accounting and finance, including US GAAP, PCAOB standards and SEC rules and regulations. Prior to joining us, Mr. Lee was a partner of KEDP CPA Group from August 2009 to June 2011 and a self‑employed accountant from July 2011 to August 2014. Mr. Lee holds a BS degree in accounting from Ohio State University and a MS degree in business taxation from Golden Gate University and is licensed as a Certified Public Accountant (CPA) in the United States.

CORPORATE GOVERNANCE

Board Composition

Our Nominating and Corporate Governance Committee is charged with identifying and evaluating individuals qualified to serve as members of the Board and recommending to the full Board nominees for election as directors. We seek directors with experience in areas relevant to the strategy and operations of the Company. We seek a Board that collectively has a range and diversity of skills, experience, age, industry knowledge and other factors in the context of the needs of the Board. The biographies of each of the directors above contains information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years and the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee to determine that the person should serve as a director of our Company. In addition to the information presented above regarding each director’s specific experience, qualifications, attributes and skills that led our Nominating and Corporate Governance Committee and Board to the conclusion that he should serve as a director, we also believe that each of our directors has a reputation for integrity, honesty and adherence to high ethical standards. Each of our directors has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our Company and our Board.

Board Responsibilities and Structure

The Board oversees, counsels, and directs management in the long‑term interests of the Company and our stockholders. The Board’s responsibilities include:

• selecting, evaluating the performance of, and determining the compensation of the CEO and other executive officers;

• overseeing the risks that the Company faces;

• reviewing and approving our major financial objectives and strategic and operating plans, and other significant actions;

• overseeing the conduct of our business and the assessment of our business and other enterprise risks to evaluate whether the business is being properly managed; and

• overseeing the processes for maintaining our integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics.

The Board and its committees met throughout the year on a set schedule, held special meetings, and acted by written consent from time to time as appropriate. During fiscal year 2019, the Board held executive sessions for the independent directors to meet without Mr. Doan present at the end of every Board meeting.

Our Bylaws do not dictate a particular Board structure and the Board is free to determine whether or not to have a Chairman and, if so, to select that Chairman and our CEO in the manner it considers our best interest. Currently, the Board has selected Mr. Doan to hold the position of both Chairman of the Board and CEO. Mr. Doan’s experience at the Company has afforded him intimate knowledge of the issues, challenges and opportunities facing each of the Company’s businesses. Accordingly, he is well positioned to focus the Board’s attention on the most pressing issues facing the Company. The Board has not appointed a lead independent director. The Board believes its administration of its risk oversight function has not affected the Board’s leadership structure.

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Board Committees and Charters

The Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities and actions to the full Board. The Board currently has, and appoints the members of, a standing Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. Each of the Board committees has a written charter approved by the Board, and we post each charter on our web site at http://investors.semileds.com/governance.cfm. Each committee can engage outside experts, advisors and counsel to assist the committee in its work. The following table identifies the current committee members.

			Nominating
			and Corporate
Name	Audit	Compensation	Governance
Dr. Edward Kuan Hsiung Hsieh	Chair	˅
Walter Michael Gough	˅
Roger Lee	˅
Scott R. Simplot		Chair	Chair
Number of Committee Meetings Held in Fiscal Year 2018	5	2	2

Audit Committee

Our Audit Committee is responsible for, among other things:

• reviewing and approving the selection of our independent auditors, and approving the audit and non‑audit services to be performed by our independent auditors;

• monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

• reviewing the adequacy and effectiveness of our internal control policies and procedures;

• discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors our interim and year‑end operating results; and

• preparing the Audit Committee Report that the SEC requires in our annual proxy statement.

The Board believes that each current member of our Audit Committee is an independent director under the NASDAQ rules and meets the additional SEC independence requirements for audit committee members. It has also determined that Dr. Hsieh and Mr. Gough meet the requirements of an “audit committee financial expert,” as defined in Regulation S‑K.

Compensation Committee

Our Compensation Committee is responsible for, among other things:

• overseeing our compensation policies, plans and benefit programs;

• reviewing and approving for our executive officers: the annual base salary, the annual incentive bonus, including the specific goals and amount, equity compensation, employment agreements, severance arrangements and change in control arrangements, and any other benefits, compensation or arrangements;

• reviewing and determining our equity‑based compensation plans; and

• administering our equity‑based compensation plans.

Although the Compensation Committee has the authority to determine the compensation paid to executive officers, other officers, employees, consultants and advisors, it can delegate its responsibility for setting compensation for individuals other than the CEO to a subcommittee, in the case of other officers, or to officers, in the case of employees and consultants. It may also delegate to officers the authority to grant options or other equity or equity‑based awards to employees who are not executive officers or members of the Board. It may also generally take into account the recommendations of the CEO, other than with respect to his own compensation.

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Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee is responsible for, among other things:

• identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to the Board;

• reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board;

• overseeing the evaluation of our Board and management; and

• recommending members for each Board committee to our Board.

Our Nominating and Corporate Governance Committee has not established any minimum qualifications for directors although in assessing the skills and characteristics of individual members, it must give due regard for independence and financial literacy considerations dictated by the NASDAQ rules. The Nominating and Corporate Governance Committee does not at this time have a policy regarding its consideration of director candidates recommended by stockholders, as it has not yet received any such recommendations. It may adopt a policy if such recommendations are received.

Attendance at Board, Committee and Annual Stockholders’ Meetings

The Board held seven meetings in fiscal year 2019. We expect each director to attend every meeting of the Board and the committees on which he serves, and encourage them to attend the annual stockholders’ meeting. All directors attended at least 75% of the aggregate meetings of the Board and the committees on which they served in fiscal year 2019 and all continuing directors attended the 2019 annual meeting of stockholders.

Risk Management

The Board is involved in the oversight of risks that could affect the Company. The Board also monitors cyber threat trends, regulatory developments, and major threats to the Company, including setting expectations and accountability for management, as well as assessing the adequacy of resources, funding, and focus on cyber risk management activities. This oversight is conducted primarily through the Audit Committee which, on behalf of the Board, is charged with overseeing the principal risk exposures we face and our mitigation efforts in respect of these risks. The Audit Committee is responsible for interfacing with management and discussing with management the Company’s principal risk exposures and the steps management has taken to monitor and control risk exposures, including risk assessment and risk management policies. The Compensation Committee also plays a role in that it is charged, in overseeing the Company’s overall compensation structure, with assessing whether that compensation structure creates risks that are reasonably likely to have a material adverse effect on us.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. These standards are designed to deter wrongdoing and to promote honest and ethical conduct. The Code of Business Conduct and Ethics is available at our website at http://investors.semileds.com/governance.cfm. Any amendments to the Code, or any waivers of its requirements required to be disclosed pursuant to SEC or NASDAQ requirements, will be disclosed on the website.

Communications from Stockholders and Other Interested Parties to Directors

The Board recommends that stockholders and other interested parties initiate communications with the Board, any committee of the Board or any individual director in writing to the attention of our Corporate Secretary at our principal executive office at 3F, No.11 Ke Jung Rd., Chu‑Nan Site, Hsinchu Science Park, Chu‑Nan 350, Miao‑Li County, Taiwan, R.O.C. This process will assist the Board in reviewing and responding to stockholder communications in an appropriate manner. The Board has instructed our Corporate Secretary to review such correspondence and, at his discretion, not to forward items if he deems them to be of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file with the SEC an initial report of ownership of our stock on Form 3 and reports of changes in ownership on Form 4 or Form 5. Persons subject to Section 16 are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they file. As a matter of practice, our administrative staff assists our executive officers and directors in preparing initial ownership reports and reporting ownership changes, and typically files those reports on their behalf. Based solely on a review of the copies of such forms in our possession and on written representations from reporting persons, we believe that during fiscal year 2019 all of our executive officers, directors and 10% beneficial owners filed the required reports on a timely basis under Section 16(a).

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Item11.Executive Compensation

COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AND DIRECTORS

Executive Compensation

This executive compensation section discloses the compensation awarded to or earned by our “named executive officers” during fiscal years 2019 and 2018.

We held our last non‑binding advisory vote regarding compensation of our named executive officers at 2018 Annual Meeting of Stockholders and expect to hold our next vote at our 2021 Annual Meeting of Stockholders.

Summary Compensation Table

The following table sets forth all of the compensation earned by named executive officers during the relevant fiscal years.

						Stock		Option		All Other
Name and Principal Position	Fiscal Year	Salary ($)		Bonus ($)		Awards ($)(1)		Awards ($)		Compensation ($)		Total ($)
Trung T. Doan	2019		303,750		—		—		—		—		303,750
Chief Executive Officer	2018		303,750		—		—		—		—		303,750
Christopher Lee
Chief Financial Officer	2018		102,893		—		6,821		—		—		109,714

(1) Mr. Christopher Lee’s compensation did not exceed $100 thousand for the fiscal year ended August 31, 2019.

Outstanding Equity Awards at Fiscal Year‑End

There was no outstanding equity award held by Mr. Doan as of the fiscal year ended August 31, 2019.

Pension Benefits

We do not maintain any defined benefit pension plans.

Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plans.

Severance and Change in Control Benefits

Mr. Doan entered into an employment agreement in 2005, which provides that if he is terminated by us without cause or resigns due to a constructive termination, he will receive as severance an amount equal to six months of his then‑current salary plus his current medical insurance for six months following his termination date. We offered such severance to motivate Mr. Doan to continue as our executive officer by providing severance protection in the event that he is terminated by us without having committed any egregious act constituting cause or if we adversely change his position such that he resigns. Cause is defined as (a) the conviction of a felony or of any criminal offense involving moral turpitude; (b) the repeated failure to satisfactorily perform duties reasonably required by us; (c) material breach of the proprietary information and invention agreement, our written policies established by our Board or any term of his employment agreement; or (d) misappropriation of our property or unlawful appropriation of our corporate opportunity or our business. If we determine cause exists, we will provide Mr. Doan with written notice alleging cause and his failure to remedy the alleged cause within 30 days may result in a termination for cause. Constructive termination is defined as one of the following events when we have not received Mr. Doan’s written consent for such event: (a) a significant reduction of his duties, position or responsibilities relative to his duties, position or responsibilities in effect immediately prior to such reduction or his removal from such position, duties and responsibilities, provided that a reduction in duties, position or responsibilities solely by virtue of us being acquired and made part of a larger entity will not constitute a constructive termination; (b) a substantial reduction, without good business reasons, of the facilities and perquisites available to him immediately prior to such reduction; (c) a reduction of his base salary unless such reduction is a part of a Company‑wide reduction for similarly situated persons; or (d)a material reduction in the kind or level of employee benefits to which he is entitled immediately prior to such reduction, with the result that his overall benefits package is significantly reduced, unless such reductions are part of a Company‑wide reduction for similarly situated persons.

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Employment Agreements

Mr. Doan entered into an employment agreement in 2005, which provides for the severance payments and benefits described under “Severance and Change in Control Benefits” above.

Director Compensation

Our Board has adopted a director compensation policy pursuant to which non‑employee members of the Board will receive the following compensation for their board and committee services:

• an annual cash retainer for general Board service of $25,000 paid in quarterly installments;

• no cash payments for attendance at general Board meetings;

• an annual cash retainer of $15,000 for serving as chairman of the Audit Committee, $9,000 for serving as the chairman of the Compensation Committee and $6,000 for serving as the chairman of the Nominating and Governance Committee, with each retainer paid in quarterly installments;

• an annual cash retainer of $8,000 per non‑chairman member serving on the Audit Committee, $5,000 per non‑chairman member serving on the Compensation Committee and $3,000 per non‑chairman member serving on the Nominating and Corporate Governance Committee; and

• each year shortly following the annual stockholder meeting an annual grant of 2,500 shares of RSUs, which fully vests on the earlier of the next annual meeting or the one‑year anniversary of the grant date, subject to continued service through the vesting date, provided that the RSUs will fully vest if we are subject to a change in control during their service.

The director compensation policy requires directors to attend at least 75% of the meetings each year in order to be renominated. The policy also includes an equity ownership guideline whereby our directors will be expected to own and hold shares of our common stock until retirement from their Board service. We also reimburse non‑employee directors for travel, lodging and other expenses incurred in connection with their attendance at Board or committee meetings.

Director Compensation Table

The following table sets forth the total compensation for our non‑employee directors for the year ended August 31, 2019:

	Fees Earned or				All Other
Name	Paid in Cash ($)		Stock Awards ($)		Compensation ($)	Total ($)
Dr. Edward Kuan Hsiung Hsieh		45,000		—	—		45,000
Walter Michael Gough		33,000		—	—		33,000
Roger Lee(1)		—		—	—		—
Scott R. Simplot(2)	—		—		—	—

(1) Mr. Lee resigned from SemiLEDs on March 17, 2019. He held 2,500 restricted stock units and had unpaid compensation in cash of $74,250 at the date of his resignation, which were all waived in fiscal year 2019.

(2) Mr. Simplot waived any right to compensation.

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Item12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial ownership of our common stock as of November 13, 2019 with respect to:

• each person, or group of affiliated persons, who is known by us to own beneficially 5% or more of our common stock;

• each of our directors;

• each of our named executive officers; and

• all directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. All shares of our common stock subject to options currently exercisable or exercisable within 60 days of November 13, 2019 and RSUs that will vest within 60 days of November 13, 2019, are deemed to be outstanding for the purpose of computing the percentage ownership of the person or group holding options and RSUs, but are not deemed to be outstanding for computing the percentage of ownership of any other person.

Unless otherwise indicated by the footnotes below, we believe, based on the information furnished to us, that each stockholder named in the table has sole voting and investment power with respect to all shares beneficially owned, subject to applicable community property laws.

Percentage of ownership is based on 3,594,015 shares of common stock outstanding as of November 13, 2019.

Unless otherwise indicated in the footnotes to the table, the address of each individual listed in the table is c/o SemiLEDs Corporation, 3F, No.11Ke Jung Rd., Chu‑Nan Site, Hsinchu Science Park, Chu‑Nan 350, Miao‑Li County, Taiwan, R.O.C.

	Shares Beneficially Owned
Name and Address of Beneficial Owner	Number			Percent
5% Stockholders:
Simplot Taiwan, Inc.		989,934	(1)		27.5	%
J.R. Simplot Company
999 Main Street, Suite 1300 Boise, ID 83702
Trung Tri Doan		367,972	(2)		10.2	%
Executive Officers and Directors:
Trung Tri Doan		367,972	(2)		10.2	%
Walter Michael Gough		8,368		*
Roger Lee		—		*
Dr. Edward Kuan Hsiung Hsieh		21,071		*
Scott R. Simplot		1,020,970	(1)(3)		28.4	%
Christopher Lee		11,500	(4)	*
All executive officers and directors as a group (6 persons)		1,429,881	(4)		39.8	%

* Indicates beneficial ownership of less than 1%.

(1) Based on a Schedule 13G filed February 10, 2011, Simplot Taiwan, Inc., a wholly owned subsidiary of J.R. Simplot Company, and J.R. Simplot Company share voting and investment power over all such shares. Scott Simplot is the Chairman of J.R. Simplot Company. Mr. Simplot may be deemed to have shared voting and investment power over the shares held by Simplot Taiwan, Inc. Mr. Simplot disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.

(2) Includes 127,141 shares held by The Trung Tri Doan 2010 GRAT, of which Trung Tri Doan is the sole trustee.

(3) Includes 31,036 shares held by JRS Properties IIIL.P. JRS Management L.L.C. is the sole general partner of JRS Properties IIIL.P. Scott Simplot and Stephen A. Beebe are the managers of JRS Management L.L.C. As managers of JRS Management L.L.C., Mr. Simplot and Mr. Beebe share voting and investment power over the securities held by JRS Properties IIIL.P. Mr. Simplot may be deemed to have shared voting and investment power over the shares held by JRS Properties IIIL.P. Mr. Simplot disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.

(4) Includes 3,625 RSUs that will vest within 60 days.

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Equity Compensation Plan Information

The following table summarizes information about our equity compensation plans as of August 31, 2019. All outstanding awards relate to our common stock.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)			Weighted- average exercise price of outstanding options, warrants and rights(2) (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
	(in  thousands)					(in  thousands)
Equity compensation plans approved by security    holders		39	(1)	$	133.82		652
Equity compensation plans not approved by security    holders	—			—		—
Total		39					652

(1) Consists of stock options granted under the 2005 Equity Incentive Plan and the 2010 Equity Incentive Plan, and restricted stock units granted under the 2010 Equity Incentive Plan. No additional grants could be made under the 2005 Equity Incentive Plan after December 8, 2010. In April 2014 and July 2019, SemiLEDs’ stockholders approved amendments to the 2010 Plan that increased the number of shares authorized for issuance under the plan by an additional 250 thousand shares and 500 thousand shares, respectively.

(2) The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock unit awards, which have no exercise price. The information required by this Item with respect to the securities ownership of directors, officers and certain beneficial owners is set forth under the heading “Principal Stockholders” above.

Item 13.Certain Relationships and Related Transactions, and Director Independence

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

On January 8, 2019, the Company entered into loan agreements with each of its Chairman and Chief Executive Officer and its largest shareholder, with aggregate amounts of $1.7 million and 1.5 million, respectively, and an annual interest rate of both 8%. As of August 31, 2019, these loans totaled $3.2 million. For more detail information, see Note3 to Consolidated Financial Statements in “Part II Item 8. Financial Statements and Supplementary Data”.

Except to the above, since September 1, 2017, there has not been any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors or executive officers, any holder of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than the transactions described below, some of which represent continuing transactions from prior periods.

Employment Agreements

See “Compensation of the Named Executive Officers and Directors—Employment Agreements.”

Policies and Procedures for Related Party Transactions

Our Board has adopted a formal, written related party transactions policy pursuant to which, our executive officers, directors, beneficial owners of more than 5% of our common stock, and any member of the immediate family of and any firm, corporation or other entity at which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial interest, are not permitted to enter into a related party transaction with us without prior consent and approval of our Audit Committee. This policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we are a participant, the aggregate amount involved will or may be expected to exceed $120,000 in any year and a related person has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity), including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness or employment by us of a related person.

73

The Audit Committee has determined that a related person does not have a direct or indirect material interest in the following categories of transactions and that each will be deemed to be preapproved:

• any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer), director, or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenue.

Director Independence

The published listing requirements of NASDAQ dictate that a majority of the Board be comprised of independent directors whom our Board has determined have no material relationship with our Company and who are otherwise “independent” directors under those listing requirements. Our current Board consists of the five persons listed above. The Board has determined that each of our current directors, other than Mr. Doan, our CEO, qualifies as an independent director, such that more than a majority of our directors are independent directors under the NASDAQ rules.

The NASDAQ rules have objective tests and a subjective test for determining who is an “independent director.” Under the objective tests, a director cannot be considered independent if:

• the director is, or at any time during the past three years was, an employee of the company;

• the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

• a family member of the director is, or at any time during the past three years was, an executive officer of the company;

• the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceeded 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever was greater (subject to certain exclusions);

• the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or

• the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has not established categorical standards or guidelines to make these subjective determinations but considers all relevant facts and circumstances.

In addition to the Board‑level standards for director independence, the NASDAQ rules provide that directors, of whom there must be three, who serve on the Audit Committee must each satisfy standards established by the SEC that require that members of audit committees must not be affiliated persons of the issuer and may not accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer other than their director compensation.

Transactions Considered in Independence Determinations

In making its independence determinations, the Board considered transactions that occurred since the beginning of fiscal year 2016 between the Company and entities associated with the independent directors or members of their immediate family. All identified transactions that appeared to relate to the Company and a family member of, or entity with a known connection to, a director were presented to the Board for consideration.

None of the non‑employee directors was disqualified from “independent” status under the objective tests. In making its subjective determination that each of our Company’s non‑employee director is independent, the Board reviewed and discussed additional information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and the Company’s management. The Board considered the transactions in the context of the NASDAQ objective standards, the special standards established by the SEC for members of audit committees, and the SEC and U.S. Internal Revenue Service (“IRS”) standards for compensation committee members. Based on all of the foregoing, as required by the NASDAQ rules, the Board made a subjective determination that, because of the nature of the director’s relationship with the entity and/or the amount involved, no relationships exist that, in the opinion of the Board, would impair the director’s independence.

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Item14.Principal Accountant Fees and Services

Fees Billed by Independent Registered Public Accounting Firm

The following table shows the fees and related expenses for audit and other services provided by BF Borgers CPA PC billed for fiscal year 2018 and by KCCW Accountancy Corp for fiscal year 2019. The services described in the following fee table were approved in conformity with the Audit Committee’s pre‑approval process.

	2019 Fees		2018 Fees
	KCCW Accountancy Corp		BF Borgers CPA PC
Audit Services	$	104,000	$	186,000
Audit-Related Services	—		—
Tax Services		7,000		7,000
All Other Services	—		—
Total	$	111,000	$	193,000

Audit Services. This category includes the audit of our annual consolidated financial statements, review of our quarterly condensed consolidated financial statements and services that are normally provided by our independent auditors in connection with statutory and regulatory filings or engagements. This category also includes statutory audits required by the Tax Bureau of Taiwan for certain of our subsidiaries in Taiwan.

Tax Services. The services for the fees disclosed in this category include tax return preparation and technical tax advice.

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PART IV

Item 15.Exhibits and Financial Statement Schedules

(2) Exhibits:

Exhibit						Filed
No	Exhibit Title	Form	File No.	Exhibit	Filing Date	Herewith
3.1	Amended and Restated Certification of Incorporation of Registrant, and amendments thereto	S-1/A	333‑168624	3.1(c)	November 22, 2010
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation	8‑K	333‑168624	3.1	April 15, 2016
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation	8-K	333‑168624	3.1	July 3, 2018
3.4	Amended and Restated Bylaws of Registrant	S‑1/A	333‑168624	3.2(b)	November 22, 2010
4.1	Form of Common Stock Certificate	S‑1/A	333‑168624	4.1	November 22, 2010
4.2(d)	Description of the Registrant’s Securities Under Section 12 of the Securities Exchange Act of 1934					X
10.1†	2005 Equity Incentive Plan (amended March 1, 2010)	S‑1	333‑168624	10.1	August 6, 2010
10.2†	2010 Equity Incentive Plan, as amended July 31, 2019	DEF 14A	001‑34992	10.1	June 18, 2019
10.3†	Amended and Restated Employment Agreement with Trung T. Doan, dated March 15, 2005	S‑1	333‑168624	10.3	August 6, 2010
10.4†	SemiLEDs Corporation 2010 Equity Incentive Plan, Stock Unit Grant Agreement (Director Form)	8‑K	001‑34992	99.1	February 9, 2012
10.5†	SemiLEDs Corporation 2010 Equity Incentive Plan, Form of Stock Unit Agreement (Officer Form)	8‑K	001‑34992	99.1	February 24, 2012
10.6	Form of Proprietary Information and Inventions Agreement	S‑1/A	333‑168624	10.8	September 14, 2010
10.7	Form of Non‑competition Agreement	S‑1/A	333‑168624	10.9	September 14, 2010
10.8†	Form of Option Agreement for the 2010 Equity Incentive Plan	S‑1/A	333‑168624	10.10	November 16, 2010
10.9†	Form of Indemnification Agreement with directors and officers	S‑1/A	333‑168624	10.11	October 26, 2010
10.10	Loan Agreement dated January 8, 2019 between SemiLEDs Corporation and Trung Doan.	10-Q	001-34992	10.1	January 11, 2019
10.11	Loan Agreement dated January 8, 2019 between SemiLEDs Corporation and J. R. Simplot Company.	10-Q	001-34992	10.2	January 11, 2019
10.12	The First Loan Agreement between Mega International Commercial Bank and SemiLEDs Optoelectronics Co., Ltd. dated July 5, 2019 (translation)					X
10.13	The Second Loan Agreement between Mega International Commercial Bank and SemiLEDs Optoelectronics Co., Ltd. dated July 5, 2019 (translation)					X
10.16	Purchase Agreement, effective July 6 , 2016 , by and between SemiLEDs Corporation, a Delaware corporation, and Peter Chiou, an individual	8‑K	001‑34992	2.1	July 6, 2016
10.17	Assignment and Assumption of Purchase Agreement, effective August 23, 2016 , between Peter Chiou and Well Thrive Limited, a Samoa international company	8‑K/A	001‑34992	10.2	August 23, 2016

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Exhibit						Filed
No	Exhibit Title	Form	File No.	Exhibit	Filing Date	Herewith
10.18	Amendment No. 1 to Purchase Agreement, effective August 23, 2016, between SemiLEDs Corporation, Peter Chiou and Well Thrive Limited	8‑K/A	001‑34992	10.3	August 23, 2016
16.1	Letter from BF Borgers CPA PC to the SEC dated September 2, 2019	8-K	001-34992	16.1	September 3,2019
21.1	List of Subsidiaries					X
23.1	Consent of KCCW Accountancy Corp, Independent Registered Public Accounting Firm					X
23.2	Consent of BF Borgers CPA PC, Independent Registered Public Accounting Firm					X
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a‑14(a)/15d‑14(a)					X
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a‑14(a)/15d‑14(a)					X
32.1	Certification Pursuant to 18 U.S.C. Section 1350					X
32.2	Certification Pursuant to 18 U.S.C. Section 1350					X
101.INS*	XBRL Instance Document					X
101.SCH*	XBRL Taxonomy Extension Schema Document					X
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document					X

† Management contract or compensatory arrangement

Item 16. Form 10-K Summary

None.

77

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.

Date: November 20, 2019	SemiLEDs Corporation
	By:	/s/ TRUNG TRI DOAN
		Trung Tri Doan Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ TRUNG TRI DOAN	Chairman and Chief Executive Officer (Principal Executive Officer)	November 20, 2019
Trung Tri Doan
/s/ CHRISTOPHER LEE	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	November 20, 2019
Christopher Lee
/s/ SCOTT R. SIMPLOT	Director	November 20, 2019
Scott R. Simplot
/s/ DR. EDWARD KUAN HSIUNG HSIEH	Director	November 20, 2019
Dr. Edward Kuan Hsiung Hsieh
/s/ GOUGH WALTER MICHAEL	Director	November 20, 2019
Gough Walter Michael
/s/ ROGER LEE	Director	November 20, 2019
Roger Lee

78

SEMILEDS CORPORATION

SCHEDULE II— VALUATION AND QUALIFYING ACCOUNTS

	Years Ended
	August 31,
	2019			2018
	(In  thousands)
Allowance for Doubtful Accounts (Including Related Parties):
Beginning balance	$	477		$	815
Charged to bad debt expense		—			10
Write-downs charged against the allowance		(277	)		—
Effect of exchange rate changes		(5	)		(348	)
Ending balance	$	195		$	477

	Years Ended
	August 31,
	2019			2018
	(In  thousands)
Valuation Allowance for Deferred Tax Assets:
Beginning balance	$	35,414		$	44,429
Charged to income tax expense		(3,908	)		(8,428	)
Net operating loss carryforward expired		(194	)		(817	)
Effect of exchange rate changes		(329	)		230
Ending balance	$	30,983		$	35,414

79

EX-10.12

Exhibit 10.12

兆豐國際商業銀行

Mega International Commercial Bank

Medium- and Long-Term Credit Facility Agreement

Serial Number: 075110800041

Customer Name: SemiLEDs Optoelectronics Co.,Ltd.

Medium- and Long-Term Credit Facility Agreement

This Credit Facility Agreement (hereinafter referred to as the “Agreement”) is entered into by Mega International Commercial Bank Co., Ltd. (hereinafter referred to as Party A)

and

SemiLEDs Optoelectronics Co.,Ltd. (hereinafter referred to as Party B)

along with Party B’sjoint guarantors (hereinafter referred to as Party C) for the Credit Facility (hereinafter referred to as “Facility”) applied to Party A by Party B in view of the need for paying to E.SUN BANK loan used to purchase plant and equipmentby Party B. It is hereby agreed that all parties shall be governed by the following terms and conditions:

General Conditions

Chapter One  General Provisions

Article 1: Information and terms on types of credit

I. Purpose of loan : for paying to E.SUN BANK loan used to purchasing plant and equipment by Party B.

II. Loan facility: Total Sixty Two Million New Taiwan dollars only.

III. Requirement of drawdown:

Up until the prior mortgage for the collateral under this Agreement granted the second rank of the maximum mortgage to Party A, a drawdown can be made upon presenting the Application for Utilization of the Credit Facility.

Party A shall pay the loan for the prior ranks of the right of mortgage.

IV. Drawdown Period: from June 24, 2019 and end on December 23, 2019.

V. Deadline and method for repayment: Borrowing Period: from (July 8,2019) and end on (July 8,2027). The payment for the first installment should be made one month after the expiry of the first drawdown date. The principal of the loan should be repaid by equal on a monthly basis in a total of 96 installments.

VI. Calculation and payment of interests: Interest should be paid at Party A’s NTD base rate plus 0.64% on a monthly basis. Party A’s NTD base rate is (0.98% ) at the time of the signing of this Agreement. The interest rate will be adjusted subsequently as Party A’s NTD base rate changes, and interest will be calculated at the adjusted annual rate starting from the date of adjustment.

VII. Calculation and payment of default penalty and late payment interest: If Party B fails to repay the principal(s) or pay interest on the due date, it shall pay, staring from the due dates thereof, a penalty calculated at 10% of the applicable interest rate for the first six months of delay, or 20% of the applicable interest rate for the period starting from the seventh month of delay. If Party B fails to repay the principal(s) in accordance with this Agreement, it shall pay, in addition to the penalty prescribed in the preceding paragraph, a late payment interest on the unpaid principal(s) at the rate of the sum of 1% per annum the applicable interest rate.

VIII. Calculation and payment of default penalty for early payment: None

IX. Commitment fee: None

X. Other individually negotiated terms:

1. Upon the maximum mortgage of One Hundred and Twenty Million New Taiwan dollars for the collateral under this Agreement set to Party A, a full insurance with Party A as beneficiary should be purchased.

2. The prior ranks of the right of mortgage should be cancelled within five business days after disbursement to grant Party A, the first rank of the right of mortgage.

3. Income from renting the collateral under this Agreement should be only deposited into Party B’s Reserve Account opened with Party A. Only the balance of deposits exceeding Two Million and Five Hundred Thousand New Taiwan dollars after deducting the principal and interest payable for the current month (including the accumulated outstanding amount) may be transferred outwards.

4. A Letter of Commitment (or an Affidavit) should be given and undertaken by Party B that, during the loan period, it will not lease, sell or create any encumbrance on the real property as collateral under this Agreement to any third party without obtaining the prior consent of Party A.

5. Party B undertakes to provide Party A with the unregistered buildings on the land of Lot No. 11, Section Southern Taiwan Science Park, Zhunan Township (about 514.72 Ping), license obtained from the Hsinchu Science Park Bureau, Ministry Of Science and Technology on March 28, 2016 and Party B as the builder) as collateral under a maximum-amount mortgage once the registration is going to be done.

6. When a new leasing contract is added or renewed at the expiry of the current on the collateral under this Agreement, the latest leasing contract should be provided for Party A, and the rent brought from the new leasing contract should be only deposited into Party B’s Reserve Account opened at Party A.

7. The interest rate of drawing amount in NTD under this Agreement should not be lower than the prevailing NTD base rate of loan posted by Party A.

Article 2: Party B may pay off foreign currency debts in foreign currency or New Taiwan dollar due to the credit business of this Agreement. When the currency is New Taiwan dollars, Party B agrees that the amount paid will be calculated at the prevailing spot foreign exchange selling rate posted by Party A on the debt maturity date or payment date. However, Party B should have Party A’s consent before making any early pre-payments.

Article 3: In the event that Party A finds it difficult to obtain funds or disburse the loan that it is likely Party A will be at a risk of violating the laws and regulations, the disbursement date and amount may be changed. However, the commitment fee shall be returned to Party B according to the proportion of the undisbursed amount where Party A has received the commitment fee and has not disbursed the loan.

Article 4: Any demand or notice arising from this Agreement sent by Party A to Party B and Party C, if sent to the address which was last notified by the recipient or its agent shall be deemed to have been duly served. However, where the recipient or its agent has moved from the said last-notified address, or there are other causes attributable to the recipient or its agent thereby making it impossible to effect service at its last-notified address, and the recipient or its agent did not give any prior notice to Party A, then the aforesaid demand or notice shall be deemed to have been served on the recipient after Party A has posted it to the address which was last notified by the recipient or its agent and the passage of the normal postal delivery time.

Article 5: Principal repayments, interest and other payments under this Agreement shall be taken place by Party B within Party A’s business hours at Party A’s place of business.

Article 6: Party B agrees that in the event that the interest rate for the facility hereunder is adjusted as the base rate changes (where the base rate is 2.625% per annum at the time of the signing of this Agreement), the base rate shall be immediately adjusted according to that adjusted by Party A. Party B further agrees that in the event of any adjustments after the signing of this Agreement, such adjustments shall be binding on Party B provided that they have been publicly announced by Party A at its place of business.

Chapter Two Provisions of Debt Preservation

Article 7: Party B shall not do any of the following acts without the prior written consent of Party A: change the nature of its business or re-incorporate its company; enter into, amend, or terminate any contract for lease of the company’s business in whole, or for entrusted business, or for regular joint operations with others; transfer the whole or any essential part of its business or assets; accept the transfer of another’s whole business or assets, which has great bearing on the business operations of the company.

Article 8: Party B shall be subject to the supervision of the purpose of the credit, the inspection of the business and finance and the examination and control of the collateral by Party A, and shall provide Party A with direct access to any relevant account books, financial statements (including the consolidated financial statements), vouchers and documents.  Party A may also, if necessary, require Party B to provide such credit checking materials or the financial statements audited by an account firm acceptable to Party A on a regular basis, and require such account firm to provide the working paper and deliver a copy of such financial statements to the Joint Credit Information Center by giving notice to Party A. In the event that Party A believes that any financial statements or any other documents submitted by Party B to Party A contain false information, Party B shall be deemed in breach upon notice from Party A. However, Party A is not obliged to make such supervision, inspection, examination, control or review. In the event that Party A believes that the financial structure of Party B needs to be improved, it may require Party B to effect such improvement.

Party B and Party C agree that Party A may provide Party B’s and Party C’s creditworthiness report issued by Party A, credit facility documents (including records of delay in payment, reminder letter and bad loan), the Party B’s and Party C’s financial documents, paper credit materials, individual credit materials, credit card (including IC card and magnetic stripe card) materials and the credit materials of credit card’s appointed stores, as well as any other documents related to the credit facility, to the Small and Medium Enterprise Credit Guarantee Fund (SMEG) or any organization appointed by the SMEG, for collection, computer processing, use and international transmission, and to the Joint Credit Information Center for filing. Party B and Party C agree that the Joint Credit Information Center may provide such materials and documents to any of its member agencies.

Article 9: When Party A holds the notes signed, guaranteed or endorsed by Party B or Party C for conducting credit extension business, Party B or Party C agree to bear full responsibility for any losses to Party A resulting from Party B’s or Party C’s chop being stolen without Party A’s knowledge, or Party B’s or Party C’s chop being forged, provided that Party A has exercised the duty of care. When Party A holds the IOUs, notes, letters of guarantee or other instruments of Party B or Party C for conducting credit extension business, if Party A proves that the borrowing item has been delivered to Party B, or the Letter of Guarantee has been issued to the beneficiary in accordance with the credit agreement, Party B and Party C shall not deny the existence of the credit obligation by indicating that the chop affixed on the above-mentioned instruments was stolen or forged.

If there is any agreement, amendment, modification or addition to the name, organization, constituent documents, responsible person, or any other matters which has great bearing on the business operations of the company, Party B and Party C shall inform and obtain approval from the Party A for those changes or cancellations of any chop specimen that is no longer effective but was furnished to the Party A earlier. Before notifying Party A of the changes, Party B and Party C shall take full responsibility and be liable for any transactions undertaken by Party A. Prior to obtaining the approval from Party A for those changes and cancellation of the chop specimen, the chop specimens of Party B and Party C originally provided to Party A remains in full force and are effective. Party B and Party C are responsible for any and all transactions with Party A arising from the chop on the chop specimen card on file with Party A. However, in case the chop on the chop specimen card on file with Party A is stolen or forged, for any and all losses or damages, the measures shall be taken in accordance with the provisions of the preceding paragraph.

Article 10: If, for any reason that cannot be attributed to Party A, any loss or damage that occurs to any IOUs, notes, negotiable instruments or any other debt certificates that are signed, endorsed, accepted, or guaranteed by Party B, or if a change, revision or alteration is made to any such debt certificates for which Party A cannot be held responsible, then, other than those account ledgers, vouchers, computer-produced documents and photocopies of transmitted records that Party B has proved to be inaccurate and corrected by Party A, Party B consents to the content and description within all such records. Party B further agrees to repay the various fees, charges, costs, expenses, penalties, principal and interest of the indebtedness on the maturity date.

Article 11: 1.If any of the following occurs with respect to the indebtedness owed by Party B to Party A, requiring neither a prior notice nor a demand with a reasonable cure period given by Party A, Party A in its discretion may then immediately reduce the credit line, or shorten the credit extension term or declare all principal and interest amounts immediately due and payable:

(1) Any failure to repay the principal(s) in accordance with this Agreement;

(2) Any filing for composition, bankruptcy or reorganization by the applicable law, or rejection and notification by the Bills Clearing House, ceasing of business operations, settlement of all indebtedness;

(3) Any failure to provide collateral as previously agreed;

(4) In the event of the death of an individual Party B, the heir or successor of Party B declares a limited inheritance or waives the rights to inherit;

(5) Party B’s assets are confiscated as a result of a criminal case or investigation.

2. If any of the following occurs with respect to the indebtedness owed by Party B to Party A, upon a prior notice or a demand with a reasonable cure period given by Party A, Party A at its discretion may then reduce the credit line or shorten the credit extension term or declare all principal and interest amounts immediately due and payable:

(1) Any failure to make any interest payment for any indebtedness;

(2) The collateral is attached, lost or destroyed, loses its value, or becomes insufficient to secure the creditor’s rights;

(3) The Party B’s actual use of proceeds deviates from the use approved by Party A;

(4) Any compulsory execution, provisional seizure, provisional injunction or precautionary measure resulting in Party A unable to be secured or repaid;

Article 12: Regardless of the term of repayment for any indebtedness by Party B and Party C to Party A, if Party B and Party C breach any of the provisions contained herein or elsewhere, Party A may debit any and all deposits of Party B and Party C with Party A or accelerate the repayment term of any and all indebtedness of Party A to Party B and Party C prior to its maturity date (except for any checking deposits which are not terminated). Party A may further set off those amounts against any and all indebtedness incurred by Party B and Party C to Party A.

Party B and Party C understand and agree that, if there is a breach of any provisions contained in any agreement or documents by and between Party B and Party C and Party A, and Party A then reduces the credit line, or shortens the credit extension term or declares all principal and interest amounts immediately due and payable. In the event that the checking deposit (account) is so terminated, Party A shall immediately return any and all balance in such checking deposit account and set it off against any and all indebtedness incurred by Party B and Party C to Party A.

The Party A’s set off set forth in the preceding paragraphs will become effective upon the act of debiting from the applicable accounts. Concurrently, any and all savings vouchers, passbooks, checks, or other vouchers issued by Party A to Party B and Party C will also be annulled to the extent of that set-off.

Article 13: If the repayment for several debts borne by Party B to Party A is not sufficient to cover the total indebtedness, the methods and order shall be applied in accordance with the provisions of the Civil Code. However, the default penalty shall be discharged in the order next to the expenses and before the interest.

Article 14: In the event that Party B and Party C are subject to a litigation due to failure to perform their obligations, the credit investigation expenses, storage cost, transportation cost, legal fees (to the extent of the amount paid to the attorney engaged by Party A if it is unable to litigate on its own) and any other necessary costs incurred by Party A in exercising or preserving its claims against Party B or Party C shall be borne by Party B and Party C, unless the court decides that there is no creditor's right against Party B and Party C.

Chapter Three Provisions of Collateral

Article 15: The collaterals provided by Party B and (or) collateral provider according to this Agreement, except for securing total indebtedness under this Agreement, also agree to secure borrowings (including loans, advances, acceptance, overdraft, discount, authorized guarantee, authorized acceptance bill, authorized commercial paper guarantee, issuance of letters of credit, export negotiation and all indebtedness and related advances arising from loans and others), principals and interests incurred on bills and guarantee obligations, default interests, penalties, enforcement expenses, insurance expenses advanced by the mortgagee, litigation expenses and indemnity for damages in connection with the non-performance of obligations by Party B and (or) the collateral provider from Party A at present (including debts incurred in the past and currently not yet repaid) and in the future, to the extent of the maximum amount set forth in the Mortgage or Pledge Agreement.

Article 16: (I) If the collateral is insurable, Party A shall be designated as the mortgagee, requesting the insurance company to insert a special mortgage clause in the insurance policy, and procuring appropriate insurance cover against fire risks or other risks as requested by Party A, and the insurance amount and conditions shall be agreed by Party A, at the insurance expense and other relevant expenses of Party B or collateral provider. Insurance policies and receipts insurance expenses should be kept by Party A. If Party B or collateral provider fails to initiate or renew any insurance coverage. This Agreement may be used as the Letter of Authorization by Party A to procure an insurance cover on behalf of the other Party. Party B shall then immediately reimburse Party A for the funds advanced to pay the insurance premium, otherwise Party A may deem and include the amount as an integral part of the amount owed by Party B and calculate the interest at the interest rate set forth on this Agreement. For the avoidance of doubt, Party A has the right, but not the obligation, to initiate the aforementioned insurance or pay the insurance premium. If the collaterals have been extinguished, regardless of any reasons, the insurance company may use to refuse or defer indemnity payment, Party A may set an appropriate period to request Party B to provide additional collaterals equivalent to the reduction in the amount approved by Party A. In the event of a failure to provide such collaterals within the aforesaid period, Party A may request Party B to repay the indebtedness immediately.

(II) Party A shall have the joint security interest for the Facility in the collateral provided by Party B and Party C, regardless of when or the order in which it is provided, and this Agreement may be used to provide such security.

Article 17: If the collaterals are damaged, have been extinguished, or have depreciated in value for causes not attributable to both parties such as natural disaster, accident or third-party action, Party B shall immediately notify Party A. Party A may set an appropriate period to request Party B to provide additional collaterals equivalent to the reduction in the amount. In the event of a failure to provide such collaterals within the aforesaid period, Party A may request Party B to repay the indebtedness. If the thing pledged serves as collateral, Party A is released from the obligation to return the thing pledged or compensate for the damage.

Article 18: If goods serve as collateral, the taxes, warehouse rent, moving costs and other expenses payable shall be jointly borne by the provider and Party B. When Party A takes possession of the collaterals according to the law, Party A shall not be held liable for any mistakes in connection with the decision to move the collaterals, or any damages sustained from the non-movement of the collaterals, unless there is an event the liability for which is attributable to Party A.

Chapter Four Provisions of Joint Guarantor

Article 19: Party C agrees to be jointly and severally liable for all indebtedness borne by Party C according to this Agreement until all such obligations have been fully repaid. Party C agrees to the following:

(1) Party A may request for indemnity to Party C instead of receiving satisfaction of a claim from the collaterals.

(2) When Party C pays the debt in full for Party B and request Party A to transfer the real rights for security, Party C shall not object to any defects of the collaterals.

Article 20: Party C agrees that, if the indebtedness has not been repaid in full, if Party C pays the debt to Party A, within the required repayment period, the rights of Party C to claim and subrogate for reimbursement against Party B should be satisfied after the remainder of the creditor’s rights which Party A can claim against Party B, provided that the creditor’s rights have been guaranteed by Party C.

Article 21: Based on a tangible fact, if Party A may notify Party B of adding or replacing joint guarantors approved by Party A, Party B shall immediately take the aforesaid actions.

Chapter Five Other Provisions

Article 22: With respect to Party B’s and Party C’s obligations arising from this Agreement, the laws of the Republic of China shall govern the requisites, manner and effect in connection with the establishment of the legal acts of Party B and Party C.

Article 23: Party B and Party C agree that the Taiwan Miaoli District Court or the Taiwan Taipei District Court will be the court of first instance having jurisdiction over all actions arising from or in connection with the indebtedness owed by Party B and Party C to Party A, unless the law provides special provisions for exclusive jurisdiction.

Article 24: This Agreement terminates when, according to this Agreement and subsequent supplementary agreements, all principals, interests, default interests, penalties, processing fees, fees, insurance premiums and other obligations have been fully repaid by Party B to Party A, and when the conditions which should be fulfilled by both Party A and Party b have been fulfilled.

Article 25: Party B and Party C agree that in light of the business needs, Party A may entrust its business to any other organizations pursuant to the requirements of the competent authority, and may provide such entrusted organization with relevant materials, provided that such entrusted organization shall be bound by the relevant laws and regulations and the confidentiality obligation when processing through computer or use any materials of Party B and Party C.

Party B and Party C may consult with Party A with respect to the type of information to be disclosed to such entrusted organization as described in the previous paragraph and the name of such entrusted organization.

Article 26: If there is any modification, addition or deletion of the terms and conditions described in this Agreement, it shall be notified to the other party and agreed upon by both parties. If any matter is not provided herein, unless otherwise provided, it shall be agreed upon by both parties.

Article 27: This Agreement is executed in two original copies and one duplicate copy among which one original copy and one duplicate copy is to be held by Party A hereto and one original copy and no duplicate copy to be held by Party B and Party C.

Special Provisions:

Article 28: With respect to the debts guaranteed by Party C, if Party B does not perform its contractual obligations and Party A deems it necessary to allow Party B to defer or amortize the payment upon request by Party B, it shall notify Party C in writing, in which case, Party C agrees to continue to perform its guarantee obligations as to all the debts after the written notice of Party A is given or deemed given.

Article 29: In any of the following circumstances, Party A may reduce at any time the line of credit or shorten the term of the loan granted to Party B or deem such loan immediately due and payable without giving prior notice or reminder letter:

1. Party B provides any untrue financial report or materials to Party A, resulting in the mistaken assessment by Party A, thus causing Party A to make mistakes in its assessment, or intentionally hide or misrepresent any facts in dealing with Party A, thus causing Party A to make mistakes;

2. any permit or license used by Party A to authorize the purpose of any fund is suspended or revoked;

3. any capital authorized by Party A is used in Mainland China.

Article 30: In any of the following circumstances, Party A may reduce at any time the line of credit or shorten the term of the loan granted to Party B or deem such loan immediate due and payable by giving a reasonable prior notice or reminder letter:

1. any bills used by Party B or its person in charge is not honored and no registration is made;

2. any bill provided by Party B for repayment is not accepted;

3. Party B delays in payment of its debt owed to any financial institution;

4. When a personal property is provided as collateral for the Facility, and Party A can take possession of collateral according to the Personal Property Mortgage Agreement;

5. Party B puts any of its property under custody of a third party without the approval of Party A;

6. Party B neglects to take out or renew any proper fire insurance (including the earthquake insurance) for the collateral;

7. Party B is merged into or with any other company or is split or reduces its registered capital;

8. Party B is in breach of any provisions of this Agreement.

Article 31: In the event that Party B and Party C allow Party A to put under custody or transfer any claims (including the creditor's rights guarantee) against Party B to a third party pursuant to the applicable regulations on securitization of financial assets, Party A may adopt the public announcement as set forth in such regulation in lieu of giving a transfer notice.

Article 32: Party B and Party C agree that Party A may, for the purpose of such transfer, provide the relevant creditor's rights documents to such transferee and debt value inspector, provided that Party A shall procure such persons to comply with the Bank Law, Computer processing protection law and any other applicable laws, and shall not disclose such information to any third party.

Article 33: Party B and Party C ☐agree ☐do not agree that any of personal basic information other than the name and address of Party B or Party C, accounting, credit, investment, or insurance documents held by or filed with Party A may be disclosed or referred to Mega Financial Holding Co., Ltd. and the following subsidiaries by Party A for the purpose of advertisement, marketing or provision of service, or interactively used with each other, provided that such holding company or subsidiary shall take all the necessary confidentiality measures to protect such documents:

Mega Securities Co. Ltd.

Chung Kuo Insurance Company

Mega Bills Finance Co. Ltd.

Mega Life Insurance Agency Co. Ltd.

Mega International Investment Trust Co., Ltd.

Mega Asset Management Co., Ltd.

Mega Venture Capital Co., Ltd.

Yung Shing Industries Co., Ltd.

Mega Futures Co., Ltd.

Mega International Securities Investment Consulting Co., Ltd.

Mega Card Co., Ltd.

Even if Party B and Party C accept this article, it can disagree at any time in the future by telephone, in writing or dealing in person with Party A, thereupon, Party A will notify Mega Financial Holding Co., Ltd. and the selected subsidiaries not to send any materials and exchange of the above Party B’s and Party C’s documents. However, if Party B and Party C explicitly express that only Mega Financial Holding Co., Ltd. and any subsidiaries thereof do not interactively use such information with each other, the expression of intent of Party B and Party C may apply.

Party B and Party C (signature)

Note 1:You do not have to sign or seal if you do not accept this article.

Note 2: If “agree” is not selected or the signature filed is left blank, it is regarded as “do not agree.”

Note 3: When any increase or decrease in the subsidiaries listed under this article as a result of an organizational change to Party A’s Financial Holding Co., Ltd., such information should be published on the Financial Holding Co., Ltd. and its subsidiaries.

Article 34: This Agreement is signed and sealed by Party B and Party C in person. Any future credit facility agreement between Party B and Party C and Party A affixed with any of the signature or seal of Party B and Party C will be valid.

Article 35: Party B and Party C agree that the third party having interest by law for the performance of obligations applies for assessment within the purpose and scope of compensation for Party B’s debts to Party A, Party A may provide the third party with information about the total amount of Party B’s debts to Party A, or the outstanding balance of principal, interest, default penalty, or expenses in the loan case depending on the type of debt.

Party B (signature)

Party C (signature)

Other negotiated terms:

Article 36: If the loan of this Agreement is a participating loan, Party B hereby declares that each co-borrower takes the responsibility of full payment for all liabilities under this Agreement.

Article 37: If Party C under this Agreement held the position of Director or Supervisor of Party B and left the position afterwards due to resignation or other legal considerations, without notification or claim by Party A, Party A may lower the line of credit or stop the drawdown by Party B. Party B shall inform Party A of the aforementioned circumstance. If the damage on Party A is caused by such violation, Party B shall be bound to compensate for any damage arising therefrom.

Article 38: Party C hereby declares that Party C performs its guarantee obligations under this Agreement in its private capacity. If Party C under this Agreement held the position of Director or Supervisor of Party B and left the position afterwards, Party C agrees to continue to perform its guarantee obligations under this Agreement in its private capacity.

Article 39: If Party C under this Agreement held the position of Director or Supervisor of Party B and left the position afterwards due to resignation or other legal considerations, Party C agrees to inform Party A of the aforementioned circumstance. If the damage on Party A is caused by such violation, Party C shall be bound to compensate for any damage arising therefrom.

Article 40: When Party A or Party B becomes aware that any personnel has accepted commissions, rebates, or other improper benefits, the party shall immediately notify the other party of such personnel's identity, the manner in which the provision, promise, request, or acceptance was made, and the monetary amount or other improper benefit that was provided, promised, requested, or accepted. The party shall also provide the other party with pertinent evidence and cooperate fully with the investigation. If there has been resultant damage to either party, the party may claim from the other party such damages.

Where Party A or Party B is discovered to be engaged in unethical conduct in its commercial activities, the other party may terminate or rescind this contract unconditionally at any time.

Article 41: If Party B is in any of the following circumstances, the bank may stop disbursement or terminate this Agreement to comply with applicable anti-money laundering and counter terrorism financing statutes.:

1. Where Party B fails to comply with the bank’s regular reviews, refuses to provide information on the beneficial owner or the individual with controlling rights over Party B, refuses to explain the nature or purpose of the transaction or the source of funding;

2. Where Party B is subject to economic sanctions or announced, identified or investigated by a foreign government, international anti-money laundering organization, or the Ministry of Justice in accordance with the “Counter-Terrorism Financing Act;”

Article 42: Party B and Party C hereby declares that she/he has thoroughly read and understood the above all terms and conditions within the reasonable period before signing the Agreement accordingly.

The undersigned:

Party A: Mega International Commercial Bank Co., Ltd.

Responsible person: Chairman Chao-Shun, Chang

Acting Chairman: Zhunan Science Park Branch Manager SuJen, Chen

Party B: SemiLEDs Optoelectronics Co.,Ltd.

Responsible person: Trung Tri Doan

Address: 1,3,4 F., No. 11, Kezhong Rd., Zhunan Township, Miaoli County 350, Taiwan (R.O.C.)

Business Administration Number: 12800800

July 5, 2019

	Signature and seal for identity verification	Verifying date	Verifying place	Verifying personnel
Party B

EX-10.13

Exhibit 10.13

兆豐國際商業銀行

Mega International Commercial Bank

Medium- and Long-Term Credit Facility Agreement

Serial Number: 075110800042

Customer Name: SemiLEDs Optoelectronics Co.,Ltd.

Medium- and Long-Term Credit Facility Agreement

This Credit Facility Agreement (hereinafter referred to as the “Agreement”) is entered into by Mega International Commercial Bank Co., Ltd. (hereinafter referred to as Party A)

and

SemiLEDs Optoelectronics Co.,Ltd. (hereinafter referred to as Party B)

along with Party B’s joint guarantors (hereinafter referred to as Party C) for the Credit Facility (hereinafter referred to as “Facility”) applied to Party A by Party B in view of the need for long-term working capital by Party B. It is hereby agreed that all parties shall be governed by the following terms and conditions:

General Conditions

Chapter One  General Provisions

Article 1: Information and terms on types of credit

I. Purpose of loan : For the use as long-term working capital.

II. Loan facility: Total Thirty Eight Million New Taiwan dollars only.

III. Requirement of drawdown:

Upon the cancellation on prior ranks of the right of mortgage for the collateral under this Agreement to grant Party A the first rank of the maximum mortgage, a drawdown can be made upon presenting the Application for Utilization of Credit Facility.

IV. Drawdown Period: from June 24, 2019 and end on December 23, 2019.

V. Deadline and method for repayment: Borrowing Period: from (July 15,2019) and end on (July 8, 2027). The payment for the first installment should be made one month after the expiry of the first drawdown date under the Medium- and Long-Term Credit Facility Agreement with Serial Number: 075110800041 signed by Party A and Party B on (July 5, 2019). The principal of the loan should be re-paid by equal on a monthly basis in a total of 96 installments. If any following the drawdown in part is made, the remaining repayment dates and number of installments after the first drawdown together with principal of the loan should be repaid.

VI. Calculation and payment of interests: Interest should be paid at Party A’s NTD base rate plus 1.02% on a monthly basis. Party A’s NTD base rate is (0.98%) at the time of the signing of this Agreement. The interest rate will be adjusted subsequently as Party A’s NTD base rate changes, and interest will be calculated at the adjusted annual rate starting from the date of adjustment.

VII. Calculation and payment of default penalty and late payment interest: If Party B fails to repay the principal(s) or pay interest on the due date, it shall pay, staring from the due dates thereof, a penalty calculated at 10% of the applicable interest rate for the first six months of delay, or 20% of the applicable interest rate for the period starting from the seventh month of delay. If Party B fails to repay the principal(s) in accordance with this Agreement, it shall pay, in addition to the penalty prescribed in the preceding paragraph, a late payment interest on the unpaid principal(s) at the rate of the sum of 1% per annum the applicable interest rate.

VIII. Calculation and payment of default penalty for early payment: None

IX. Commitment fee: None

X. Other individually negotiated terms:

1. Upon the maximum mortgage of One Hundred and Twenty Million New Taiwan dollars for the collateral under this Agreement set to Party A, a full insurance with Party A as beneficiary should be purchased.

2. The prior ranks of the right of mortgage should be cancelled within five business days after disbursement to grant Party A, the first rank of the right of mortgage.

3. Income from renting the collateral under this Agreement should be only deposited into Party B’s Reserve Account opened with Party A. Only the balance of deposits exceeding Two Million and Five Hundred Thousand New Taiwan dollars after deducting the principal and interest payable for the current month (including the accumulated outstanding amount) may be transferred outwards.

4. A Letter of Commitment (or an Affidavit) should be given and undertaken by Party B that, during the loan period, it will not lease, sell or create any encumbrance on the real property as collateral under this Agreement to any third party without obtaining the prior consent of Party A.

5. Party B undertakes to provide Party A with the unregistered buildings on the land of Lot No. 11, Section Southern Taiwan Science Park, Zhunan Township (about 514.72 Ping ), license obtained from the Hsinchu Science Park Bureau, Ministry Of Science and Technology on March 28, 2016 and Party B as the builder) as collateral under a maximum-amount mortgage once the registration is going to be done.

6. When a new leasing contract is added or renewed at the expiry of the current on the collateral under this Agreement, the latest leasing contract should be provided for Party A, and the rent brought from the new leasing contract should be only deposited into Party B’s Reserve Account opened at Party A.

7. A Letter of Commitment should be given and undertaken by Party B that the borrowed amount should only be used for the purchase of real property. In the event of any breach of commitments, Party A will increase the interest rate by a 0.25% markup and shall have the right to reduce the credit line or request for loan repayments in installments.

8. The interest rate of drawing amount in NTD under this Agreement should not be lower than the prevailing NTD base rate of loan posted by Party A.

Article 2: Party B may pay off foreign currency debts in foreign currency or New Taiwan dollar due to the credit business of this Agreement. When the currency is New Taiwan dollars, Party B agrees that the amount paid will be calculated at the prevailing spot foreign exchange selling rate posted by Party A on the debt maturity date or payment date. However, Party B should have Party A’s consent before making any early pre-payments.

Article 3: In the event that Party A finds it difficult to obtain funds or disburse the loan that it is likely Party A will be at a risk of violating the laws and regulations, the disbursement date and amount may be changed. However, the commitment fee shall be returned to Party B according to the proportion of the undisbursed amount where Party A has received the commitment fee and has not disbursed the loan.

Article 4: Any demand or notice arising from this Agreement sent by Party A to Party B and Party C, if sent to the address which was last notified by the recipient or its agent shall be deemed to have been duly served. However, where the recipient or its agent has moved from the said last-notified address, or there are other causes attributable to the recipient or its agent thereby making it impossible to effect service at its last-notified address, and the recipient or its agent did not give any prior notice to Party A, then the aforesaid demand or notice shall be deemed to have been served on the recipient after Party A has posted it to the address which was last notified by the recipient or its agent and the passage of the normal postal delivery time.

Article 5: Principal repayments, interest and other payments under this Agreement shall be taken place by Party B within Party A’s business hours at Party A’s place of business.

Article 6: Party B agrees that in the event that the interest rate for the facility hereunder is adjusted as the base rate changes (where the base rate is 2.625% per annum at the time of the signing of this Agreement), the base rate shall be immediately adjusted according to that adjusted by Party A. Party B further agrees that in the event of any adjustments after the signing of this Agreement, such adjustments shall be binding on Party B provided that they have been publicly announced by Party A at its place of business.

Chapter Two Provisions of Debt Preservation

Article 7: Party B shall not do any of the following acts without the prior written consent of Party A: change the nature of its business or re-incorporate its company; enter into, amend, or terminate any contract for lease of the company’s business in whole, or for entrusted business, or for regular joint operations with others; transfer the whole or any essential part of its business or assets; accept the transfer of another’s whole business or assets, which has great bearing on the business operations of the company.

Article 8: Party B shall be subject to the supervision of the purpose of the credit, the inspection of the business and finance and the examination and control of the collateral by Party A, and shall provide Party A with direct access to any relevant account books, financial statements (including the consolidated financial statements), vouchers and documents.  Party A may also, if necessary, require Party B to provide such credit checking materials or the financial statements audited by an account firm acceptable to Party A on a regular basis, and require such account firm to provide the working paper and deliver a copy of such financial statements to the Joint Credit Information Center by giving notice to Party A. In the event that Party A believes that any financial statements or any other documents submitted by Party B to Party A contain false information, Party B shall be deemed in breach upon notice from Party A. However, Party A is not obliged to make such supervision, inspection, examination, control or review. In the event that Party A believes that the financial structure of Party B needs to be improved, it may require Party B to effect such improvement.

Party B and Party C agree that Party A may provide Party B’s and Party C’s creditworthiness report issued by Party A, credit facility documents (including records of delay in payment, reminder letter and bad loan), the Party B’s and Party C’s financial documents, paper credit materials, individual credit materials, credit card (including IC card and magnetic stripe card) materials and the credit materials of credit card’s appointed stores, as well as any other documents related to the credit facility, to the Small and Medium Enterprise Credit Guarantee Fund (SMEG) or any organization appointed by the SMEG, for collection, computer processing, use and international transmission, and to the Joint Credit Information Center for filing. Party B and Party C agree that the Joint Credit Information Center may provide such materials and documents to any of its member agencies.

Article 9: When Party A holds the notes signed, guaranteed or endorsed by Party B or Party C for conducting credit extension business, Party B or Party C agree to bear full responsibility for any losses to Party A resulting from Party B’s or Party C’s chop being stolen without

Party A’s knowledge, or Party B’s or Party C’s chop being forged, provided that Party A has exercised the duty of care. When Party A holds the IOUs, notes, letters of guarantee or other instruments of Party B or Party C for conducting credit extension business, if Party A proves that the borrowing item has been delivered to Party B, or the Letter of Guarantee has been issued to the beneficiary in accordance with the credit agreement, Party B and Party C shall not deny the existence of the credit obligation by indicating that the chop affixed on the above-mentioned instruments was stolen or forged.

If there is any agreement, amendment, modification or addition to the name, organization, constituent documents, responsible person, or any other matters which has great bearing on the business operations of the company, Party B and Party C shall inform and obtain approval from the Party A for those changes or cancellations of any chop specimen that is no longer effective but was furnished to the Party A earlier. Before notifying Party A of the changes, Party B and Party C shall take full responsibility and be liable for any transactions undertaken by Party A. Prior to obtaining the approval from Party A for those changes and cancellation of the chop specimen, the chop specimens of Party B and Party C originally provided to Party A remains in full force and are effective. Party B and Party C are responsible for any and all transactions with Party A arising from the chop on the chop specimen card on file with Party A. However, in case the chop on the chop specimen card on file with Party A is stolen or forged, for any and all losses or damages, the measures shall be taken in accordance with the provisions of the preceding paragraph.

Article 10: If, for any reason that cannot be attributed to Party A, any loss or damage that occurs to any IOUs, notes, negotiable instruments or any other debt certificates that are signed, endorsed, accepted, or guaranteed by Party B, or if a change, revision or alteration is made to any such debt certificates for which Party A cannot be held responsible, then, other than those account ledgers, vouchers, computer-produced documents and photocopies of transmitted records that Party B has proved to be inaccurate and corrected by Party A, Party B consents to the content and description within all such records. Party B further agrees to repay the various fees, charges, costs, expenses, penalties, principal and interest of the indebtedness on the maturity date.

Article 11: 1.If any of the following occurs with respect to the indebtedness owed by Party B to Party A, requiring neither a prior notice nor a demand with a reasonable cure period given by Party A, Party A in its discretion may then immediately reduce the credit line, or shorten the credit extension term or declare all principal and interest amounts immediately due and payable:

(1) Any failure to repay the principal(s) in accordance with this Agreement;

(2) Any filing for composition, bankruptcy or reorganization by the applicable law, or rejection and notification by the Bills Clearing House, ceasing of business operations, settlement of all indebtedness;

(3) Any failure to provide collateral as previously agreed;

(4) In the event of the death of an individual Party B, the heir or successor of Party B declares a limited inheritance or waives the rights to inherit;

(5) Party B’s assets are confiscated as a result of a criminal case or investigation.

2. If any of the following occurs with respect to the indebtedness owed by Party B to Party A, upon a prior notice or a demand with a reasonable cure period given by Party A, Party A at its discretion may then reduce the credit line or shorten the credit extension term or declare all principal and interest amounts immediately due and payable:

(1) Any failure to make any interest payment for any indebtedness;

(2) The collateral is attached, lost or destroyed, loses its value, or becomes insufficient to secure the creditor’s rights;

(3) The Party B’s actual use of proceeds deviates from the use approved by Party A;

(4) Any compulsory execution, provisional seizure, provisional injunction or precautionary measure resulting in Party A unable to be secured or repaid;

Article 12: Regardless of the term of repayment for any indebtedness by Party B and Party C to Party A, if Party B and Party C breach any of the provisions contained herein or elsewhere, Party A may debit any and all deposits of Party B and Party C with Party A or accelerate the repayment term of any and all indebtedness of Party A to Party B and Party C prior to its maturity date (except for any checking deposits which are not terminated). Party A may further set off those amounts against any and all indebtedness incurred by Party B and Party C to Party A.

Party B and Party C understand and agree that, if there is a breach of any provisions contained in any agreement or documents by and between Party B and Party C and Party A, and Party A then reduces the credit line, or shortens the credit extension term or declares all principal and interest amounts immediately due and payable. In the event that the checking deposit (account) is so terminated, Party A shall immediately return any and all balance in such checking deposit account and set it off against any and all indebtedness incurred by Party B and Party C to Party A.

The Party A’s set off set forth in the preceding paragraphs will become effective upon the act of debiting from the applicable accounts. Concurrently, any and all savings vouchers, passbooks, checks, or other vouchers issued by Party A to Party B and Party C will also be annulled to the extent of that set-off.

Article 13: If the repayment for several debts borne by Party B to Party A is not sufficient to cover the total indebtedness, the methods and order shall be applied in accordance with the provisions of the Civil Code. However, the default penalty shall be discharged in the order next to the expenses and before the interest.

Article 14: In the event that Party B and Party C are subject to a litigation due to failure to perform their obligations, the credit investigation expenses, storage cost, transportation cost, legal fees (to the extent of the amount paid to the attorney engaged by Party A if it is unable to litigate on its own) and any other necessary costs incurred by Party A in exercising or preserving its claims against Party B or Party C shall be borne by Party B and Party C, unless the court decides that there is no creditor's right against Party B and Party C.

Chapter Three Provisions of Collateral

Article 15: The collaterals provided by Party B and (or) collateral provider according to this Agreement, except for securing total indebtedness under this Agreement, also agree to secure borrowings (including loans, advances, acceptance, overdraft, discount, authorized guarantee, authorized acceptance bill, authorized commercial paper guarantee, issuance of letters of credit, export negotiation and all indebtedness and related advances arising from loans and others), principals and interests incurred on bills and guarantee obligations, default interests, penalties, enforcement expenses, insurance expenses advanced by the mortgagee, litigation expenses and indemnity for damages in connection with the non-performance of obligations by Party B and (or) the collateral provider from Party A at present (including debts incurred in the past and currently not yet repaid) and in the future, to the extent of the maximum amount set forth in the Mortgage or Pledge Agreement.

Article 16: (I)If the collateral is insurable, Party A shall be designated as the mortgagee, requesting the insurance company to insert a special mortgage clause in the insurance policy, and procuring appropriate insurance cover against fire risks or other risks as requested by Party A, and the insurance amount and conditions shall be agreed by Party A, at the insurance expense and other relevant expenses of Party B or collateral provider. Insurance policies and receipts insurance expenses should be kept by Party A. If Party B or collateral provider fails to initiate or renew any insurance coverage. This Agreement may be used as the Letter of Authorization by Party A to procure an insurance cover on behalf of the other Party. Party B shall then immediately reimburse Party A for the funds advanced to pay the insurance premium, otherwise Party A may deem and include the amount as an integral part of the amount owed by Party B and calculate the interest at the interest rate set forth on this Agreement. For the avoidance of doubt, Party A has the right, but not the obligation, to initiate the aforementioned insurance or pay the insurance premium.If the collaterals have been extinguished, regardless of any reasons, the insurance company may use to refuse or defer indemnity payment, Party A may set an appropriate period to request Party B to provide additional collaterals equivalent to the reduction in the amount approved by Party A. In the event of a failure to provide such collaterals within the aforesaid period, Party A may request Party B to repay the indebtedness immediately.

(II) Party A shall have the joint security interest for the Facility in the collateral provided by Party B and Party C, regardless of when or the order in which it is provided, and this Agreement may be used to provide such security.

Article 17: If the collaterals are damaged, have been extinguished, or have depreciated in value for causes not attributable to both parties such as natural disaster, accident or third-party action, Party B shall immediately notify Party A. Party A may set an appropriate period to request Party B to provide additional collaterals equivalent to the reduction in the amount. In the event of a failure to provide such collaterals within the aforesaid period, Party A may request Party B to repay the indebtedness. If the thing pledged serves as collateral, Party A is released from the obligation to return the thing pledged or compensate for the damage.

Article 18: If goods serve as collateral, the taxes, warehouse rent, moving costs and other expenses payable shall be jointly borne by the provider and Party B. When Party A takes possession of the collaterals according to the law, Party A shall not be held liable for any mistakes in connection with the decision to move the collaterals, or any damages sustained from the non-movement of the collaterals, unless there is an event the liability for which is attributable to Party A.

Chapter Four Provisions of Joint Guarantor

Article 19: Party C agrees to be jointly and severally liable for all indebtedness borne by Party C according to this Agreement until all such obligations have been fully repaid. Party C agrees to the following:

(1) Party A may request for indemnity to Party C instead of receiving satisfaction of a claim from the collaterals.

(2) When Party C pays the debt in full for Party B and request Party A to transfer the real rights for security, Party C shall not object to any defects of the collaterals.

Article 20: Party C agrees that, if the indebtedness has not been repaid in full, if Party C pays the debt to Party A, within the required repayment period, the rights of Party C to claim and subrogate for reimbursement against Party B should be satisfied after the remainder of the creditor’s rights which Party A can claim against Party B, provided that the creditor’s rights have been guaranteed by Party C.

Article 21: Based on a tangible fact, if Party A may notify Party B of adding or replacing joint guarantors approved by Party A, Party B shall immediately take the aforesaid actions.

Chapter Five Other Provisions

Article 22: With respect to Party B’s and Party C’s obligations arising from this Agreement, the laws of the Republic of China shall govern the requisites, manner and effect in connection with the establishment of the legal acts of Party B and Party C.

Article 23: Party B and Party C agree that the Taiwan Miaoli District Court or the Taiwan Taipei District Court will be the court of first instance having jurisdiction over all actions arising from or in connection with the indebtedness owed by Party B and Party C to Party A, unless the law provides special provisions for exclusive jurisdiction.

Article 24: This Agreement terminates when, according to this Agreement and subsequent supplementary agreements, all principals, interests, default interests, penalties, processing fees, fees, insurance premiums and other obligations have been fully repaid by Party B to Party A, and when the conditions which should be fulfilled by both Party A and Party b have been fulfilled.

Article 25: Party B and Party C agree that in light of the business needs, Party A may entrust its business to any other organizations pursuant to the requirements of the competent authority, and may provide such entrusted organization with relevant materials, provided that such entrusted organization shall be bound by the relevant laws and regulations and the confidentiality obligation when processing through computer or use any materials of Party B and Party C.

Party B and Party C may consult with Party A with respect to the type of information to be disclosed to such entrusted organization as described in the previous paragraph and the name of such entrusted organization.

Article 26: If there is any modification, addition or deletion of the terms and conditions described in this Agreement, it shall be notified to the other party and agreed upon by both parties. If any matter is not provided herein, unless otherwise provided, it shall be agreed upon by both parties.

Article 27: This Agreement is executed in two original copies and one duplicate copy among which one original copy and one duplicate copy is to be held by Party A hereto and one original copy and no duplicate copy to be held by Party B and Party C.

Special Provisions:

Article 28: With respect to the debts guaranteed by Party C, if Party B does not perform its contractual obligations and Party A deems it necessary to allow Party B to defer or amortize the payment upon request by Party B, it shall notify Party C in writing, in which case, Party C agrees to continue to perform its guarantee obligations as to all the debts after the written notice of Party A is given or deemed given.

Article 29: In any of the following circumstances, Party A may reduce at any time the line of credit or shorten the term of the loan granted to Party B or deem such loan immediately due and payable without giving prior notice or reminder letter:

1. Party B provides any untrue financial report or materials to Party A, resulting in the mistaken assessment by Party A, thus causing Party A to make mistakes in its assessment, or intentionally hide or misrepresent any facts in dealing with Party A, thus causing Party A to make mistakes;

2. any permit or license used by Party A to authorize the purpose of any fund is suspended or revoked;

3. any capital authorized by Party A is used in Mainland China.

Article 30: In any of the following circumstances, Party A may reduce at any time the line of credit or shorten the term of the loan granted to Party B or deem such loan immediate due and payable by giving a reasonable prior notice or reminder letter:

1. any bills used by Party B or its person in charge is not honored and no registration is made;

2. any bill provided by Party B for repayment is not accepted;

3. Party B delays in payment of its debt owed to any financial institution;

4. When a personal property is provided as collateral for the Facility, and Party A can take possession of collateral according to the Personal Property Mortgage Agreement;

5. Party B puts any of its property under custody of a third party without the approval of Party A;

6. Party B neglects to take out or renew any proper fire insurance (including the earthquake insurance) for the collateral;

7. Party B is merged into or with any other company or is split or reduces its registered capital;

8. Party B is in breach of any provisions of this Agreement.

Article 31: In the event that Party B and Party C allow Party A to put under custody or transfer any claims (including the creditor's rights guarantee) against Party B to a third party pursuant to the applicable regulations on securitization of financial assets, Party A may adopt the public announcement as set forth in such regulation in lieu of giving a transfer notice.

Article 32: Party B and Party C agree that Party A may, for the purpose of such transfer, provide the relevant creditor's rights documents to such transferee and debt value inspector, provided that Party A shall procure such persons to comply with the Bank Law, Computer processing protection law and any other applicable laws, and shall not disclose such information to any third party.

Article 33: Party B and Party C ☐agree ☐do not agree that any of personal basic information other than the name and address of Party B or Party C, accounting, credit, investment, or insurance documents held by or filed with Party A may be disclosed or referred to Mega Financial Holding Co., Ltd. and the following subsidiaries by Party A for the purpose of advertisement, marketing or provision of service, or interactively used with each other, provided that such holding company or subsidiary shall take all the necessary confidentiality measures to protect such documents:

Mega Securities Co. Ltd.

Chung Kuo Insurance Company

Mega Bills Finance Co. Ltd.

Mega Life Insurance Agency Co. Ltd.

Mega International Investment Trust Co., Ltd.

Mega Asset Management Co., Ltd.

Mega Venture Capital Co., Ltd.

Yung Shing Industries Co., Ltd.

Mega Futures Co., Ltd.

Mega International Securities Investment Consulting Co., Ltd.

Mega Card Co., Ltd.

Even if Party B and Party C accept this article, it can disagree at any time in the future by telephone, in writing or dealing in person with Party A, thereupon, Party A will notify Mega Financial Holding Co., Ltd. and the selected subsidiaries not to send any materials and exchange of the above Party B’s and Party C’s documents. However, if Party B and Party C explicitly express that only Mega Financial Holding Co., Ltd. and any subsidiaries thereof do not interactively use such information with each other, the expression of intent of Party B and Party C may apply.

Party B and Party C (signature)

Note 1: You do not have to sign or seal if you do not accept this article.

Note 2: If “agree” is not selected or the signature filed is left blank, it is regarded as “do not agree.”

Note 3: When any increase or decrease in the subsidiaries listed under this article as a result of an organizational change to Party A’s Financial Holding Co., Ltd., such information should be published on the Financial Holding Co., Ltd. and its subsidiaries.

Article 34: This Agreement is signed and sealed by Party B and Party C in person. Any future credit facility agreement between Party B and Party C and Party A affixed with any of the signature or seal of Party B and Party C will be valid.

Article 35: Party B and Party C agree that the third party having interest by law for the performance of obligations applies for assessment within the purpose and scope of compensation for Party B’s debts to Party A, Party A may provide the third party with information about the total amount of Party B’s debts to Party A, or the outstanding balance of principal, interest, default penalty, or expenses in the loan case depending on the type of debt.

Party B (signature)

Party C (signature)

Other negotiated terms:

Article 36: If the loan of this Agreement is a participating loan, Party B hereby declares that each co-borrower takes the responsibility of full payment for all liabilities under this Agreement.

Article 37: If Party C under this Agreement held the position of Director or Supervisor of Party B and left the position afterwards due to resignation or other legal considerations, without notification or claim by Party A, Party A may lower the line of credit or stop the drawdown by Party B. Party B shall inform Party A of the aforementioned circumstance. If the damage on Party A is caused by such violation, Party B shall be bound to compensate for any damage arising therefrom.

Article 38: Party C hereby declares that Party C performs its guarantee obligations under this Agreement in its private capacity. If Party C under this Agreement held the position of Director or Supervisor of Party B and left the position afterwards, Party C agrees to continue to perform its guarantee obligations under this Agreement in its private capacity.

Article 39: If Party C under this Agreement held the position of Director or Supervisor of Party B and left the position afterwards due to resignation or other legal considerations, Party C agrees to inform Party A of the aforementioned circumstance. If the damage on Party A is caused by such violation, Party C shall be bound to compensate for any damage arising therefrom.

Article 40: When Party A or Party B becomes aware that any personnel has accepted commissions, rebates, or other improper benefits, the party shall immediately notify the other party of such personnel's identity, the manner in which the provision, promise, request, or acceptance was made, and the monetary amount or other improper benefit that was provided, promised, requested, or accepted. The party shall also provide the other party with pertinent evidence and cooperate fully with the investigation. If there has been resultant damage to either party, the party may claim from the other party such damages.

Where Party A or Party B is discovered to be engaged in unethical conduct in its commercial activities, the other party may terminate or rescind this contract unconditionally at any time.

Article 41: If Party B is in any of the following circumstances, the bank may stop disbursement or terminate this Agreement to comply with applicable anti-money laundering and counter terrorism financing statutes.:

1. Where Party B fails to comply with the bank’s regular reviews, refuses to provide information on the beneficial owner or the individual with controlling rights over Party B, refuses to explain the nature or purpose of the transaction or the source of funding;

2. Where Party B is subject to economic sanctions or announced, identified or investigated by a foreign government, international anti-money laundering organization, or the Ministry of Justice in accordance with the “Counter-Terrorism Financing Act;”

Article 42: Party B and Party C hereby declares that she/he has thoroughly read and understood the above all terms and conditions within the reasonable period before signing the Agreement accordingly.

The undersigned:

Party A: Mega International Commercial Bank Co., Ltd.

Responsible person: Chairman Chao-Shun, Chang

Acting Chairman: Zhunan Science Park Branch Manager SuJen, Chen

Party B: SemiLEDs Optoelectronics Co.,Ltd.

Responsible person: Trung Tri Doan

Address: 1,3,4 F., No. 11, Kezhong Rd., Zhunan Township, Miaoli County 350, Taiwan (R.O.C.)

Business Administration Number: 12800800

July 5, 2019

	Signature and seal for identity verification	Verifying date	Verifying place	Verifying personnel
Party B

EX-21.1

Exhibit 21.1

List of Subsidiaries

		Percentage of
	Jurisdiction of	Our Ownership
Name	Incorporation	Interest
Majority Owned Subsidiaries:
SemiLEDs Optoelectronics Co., Ltd.	Taiwan		100	%
Helios Crew Corporation	Delaware		100	%
Taiwan Bandaoti Zhaoming Co., Ltd (Silicon Base Development, Inc.)	Taiwan		97	%
SemiLEDs International Corporation Ltd.	Hong Kong		100	%
Xuhe Guangdian Co., Ltd.	China		100	%

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders ofSemiLEDs Corporation:

We consent to the incorporation by reference in the registration statements (No.333-171107 and 333-197417) on Form S-8 of SemiLEDs Corporation of our report dated November 20, 2019, with respect to the consolidated balance sheet of SemiLEDs Corporation and its subsidiaries as of August 31, 2019, and the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows, and the related consolidated financial statement schedules for the years ended August 31, 2019, which report appears in the August 31, 2019 annual report on Form 10-K of SemiLEDs Corporation. Our report dated November 20, 2019 contains an explanatory paragraph that states that the Company has suffered recurring losses from operations, has not generated sufficient net cash flows from operating activities and has an accumulated deficit, which raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of that uncertainty.

/s/ KCCW Accountancy Corp.

Diamond Bar, California

November 20, 2019

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders ofSemiLEDs Corporation:

We consent to the incorporation by reference in the registration statements (No.333-171107 and 333-197417) on Form S-8 of SemiLEDs Corporation of our report dated November 26, 2018, with respect to the consolidated balance sheets of SemiLEDs Corporation and its subsidiaries as of August 31, 2018, and the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows, and the related consolidated financial statement schedules for the years ended August 31, 2018, which report appears in the August 31, 2019 annual report on Form 10-K of SemiLEDs Corporation. Our report dated November 26, 2018 contains an explanatory paragraph that states that the Company has suffered recurring losses from operations, has not generated sufficient net cash flows from operating activities and has an accumulated deficit, which raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of that uncertainty.

/s/ B F Borgers CPA PC

Lakewood, Colorado

November 20, 2019

EX-31.1

Exhibit 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

I, Trung Tri Doan, certify that:

1. I have reviewed this Annual Report on Form 10-K of SemiLEDs Corporation (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s)and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 20, 2019	/s/ Trung Tri Doan
	Name: Trung Tri Doan Title: Chairman and Chief Executive Officer

EX-31.2

Exhibit 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

I, Christopher Lee, certify that:

1. I have reviewed this Annual Report on Form 10-K of SemiLEDs Corporation (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 20, 2019	/s/ Christopher Lee
	Name: Christopher Lee Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of SemiLEDs Corporation (the “Registrant”) on Form 10-K for the year ended August 31, 2019, as filed with the Securities and Exchange Commission as of the date hereof (the “Report”), I, Trung Tri Doan, Chairman and Chief Executive Officer of the Registrant, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report fully complies with the requirements of section 13(a)or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: November 20, 2019	/s/ Trung Tri Doan
	Name: Trung Tri Doan
	Title: Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of SemiLEDs Corporation (the “Registrant”) on Form 10-K for the year ended August 31, 2019, as filed with the Securities and Exchange Commission as of the date hereof (the “Report”), I, Christopher Lee, Chief Financial Officer of the Registrant hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: November 20, 2019	/s/ Christopher Lee
	Name: Christopher Lee
	Title: Chief Financial Officer

EX-4.2(D)

Exhibit 4.2(d)

DESCRIPTION OF THE REGISTRANT'S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

The following summary of certain terms of our common stock describes material provisions of, but does not purport to be complete and is subject to, and qualified in its entirety by, our Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”), our Amended and Restated Bylaws (the “Bylaws”), the forms of which are included as exhibits to the Annual Report on Form 10-K of which this Exhibit 4(d) is also included, as well as the relevant portions of the Delaware General Corporation Law (“DGCL”).

Authorized Capital Stock

Under our Certificate of Incorporation, we are authorized to issue two classes of stock to be designated, respectively, “Common Stock” and Preferred Stock”. The total number of shares which the Corporation is authorized to issue is 7,500,000 shares, consisting of 7,500,000 shares of Common Stock, par value $0.0000056 per share, and no shares of Preferred Stock, par value $0.0000056 per share.

Preferred Stock

The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.

Voting Rights

Except as may be otherwise provided in the Certificate of Incorporation or Bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.　All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the rules of any stock exchange upon which the Corporation’s securities are listed, all other matters shall be determined by a majority of the votes cast affirmatively or negatively.

Dividend Rights

The directors of the Corporation, subject to any restrictions contained in (a) the DGCL or (b) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock.  Dividends may be paid in cash, in property, or in shares of the Corporation’s capital stock.

Transfer Agent and Registrar

Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, if one has been issued, duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

Antitakeover Provisions

The Certificate of Incorporation and Bylaws, as currently in effect, contain provisions that may have the effect of delaying, deferring or preventing a change in control of the Corporation’s ownership or management. They provide for:

• subject to the rights of the holders of any series of Preferred Stock, no action shall be taken by the stockholders of the Corporation other than at an annual or special meeting of the stockholders, and no action shall be taken by the stockholders by written consent;

• the provisions in the Certificate of Incorporation may not be amended or repealed in any respect unless such amendment or repeal is approved by the affirmative vote of the record holders of at least a majority of the total voting power of all issued and outstanding shares entitled to vote thereon;

• an advance notice of stockholder nominations for the election of directors or of business to be brought by the stockholders before any meeting of the stockholders shall be given in the manner provided in the Corporation’s Bylaws;

• each holder of shares of any class or series of capital stock of the Corporation shall be entitled to one vote for each share held, and no stockholder will be permitted to cumulate votes, at any election of directors;

• removal of directors only with cause, and by the holders of a majority of the shares then entitled to vote at an election of directors, voting together as a single class;

• no reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office;

• the calling of special meetings of shareholders only by the president, a majority of the board of directors or the holders of not less than 25% of all votes entitled to be cast on the matters to be considered at such meeting; and

• the issuance of preferred stock by the board without further action by the shareholders.

Antitakeover Effects of Provisions of Delaware Law

Delaware Takeover Statute.The Corporation is subject to the provisions of Section 203 of the DGCL and has adopted additional provisions in its Certificate of Incorporation for the approval, adoption, or authorization of business combinations. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner.

Section 203 defines a business combination to include:

• any merger or consolidation involving the corporation and the interested stockholder;

• any sale, transfer, lease, pledge, exchange, mortgage or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

• subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

• subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or

• the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through the corporation.

In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

No Cumulative Voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise.

Limitations of Liability and Indemnification Matters

The Corporation’s Bylaws states that to the fullest extent permitted by the DGCL, as the same exists or may be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.  If the DGCL is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of a corporation’s directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

XML

Stock-based Compensation (Tables)

12 Months Ended

Aug. 31, 2019

Stock-based Compensation

Summary of the option activity and changes

A summary of the option activity and changes for the years ended August 31, 2019 and 2018 is presented below:

						Weighted-
				Weighted-		Average
	Number of			Average		Remaining		Aggregate
	Stock Options			Exercise		Contractual		Intrinsic
	Outstanding			Price		Life (Years)		Value
	(In thousands)							(In thousands)
Outstanding—September 1, 2017		12		$	116.10		3.0	$	1
Granted		—			—
Forfeited		(2	)		23.40
Exercised		—			—
Outstanding—August 31, 2018		10		$	132.66		2.3	$	—
Granted		—			—
Forfeited		—			103.00
Exercised		—			—
Outstanding—August 31, 2019		10		$	133.82		1.4	$	—
Vested and expected to vest—August 31, 2019		10		$	133.82		1.4	$	—
Exercisable—August 31, 2019		10		$	133.82		1.4	$	—

Summary of the restricted stock unit awards outstanding and changes

A summary of the restricted stock unit awards outstanding and changes for the years ended August 31, 2019 and 2018 is presented below:

				Weighted-
	Number of			Average
	Stock Units			Grant Date
	Outstanding			Fair Value
	(In thousands)
Outstanding—September 1, 2017		16		$	7.33
Granted		66			4.23
Vested		(15	)		6.93
Forfeited		(1	)		10.70
Outstanding—August 31, 2018		66		$	4.25
Granted		—			—
Vested		(35	)		4.34
Forfeited		(2	)		4.75
Outstanding—August 31, 2019		29		$	4.10

Employees, directors and nonemployees

Stock-based Compensation

Summary of the stock-based compensation expense

A summary of the stock-based compensation expense for the years ended August 31, 2019 and 2018 is as follows (in thousands):

	Years Ended August 31,
	2019		2018
Cost of revenues	$	44	$	44
Research and development		27		22
Selling, general and administrative		78		75
	$	149	$	141

XML

Fair Value Measurements (Tables)

12 Months Ended

Aug. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of carrying amounts and estimated fair values of financial instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of August 31, 2019 and 2018 (in thousands):

	August 31, 2019				August 31, 2018
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents and restricted cash	$	1,382	$	1,382	$	3,421	$	3,421
Receivables (including related parties)		703		703		282		282
Other assets (non-derivatives)		539		539		334		334
Financial liabilities:
Payables (including related parties)	$	3,522	$	3,522	$	3,700	$	3,700
Long-term debt (including current installments)		6,352		6,352		2,348		2,332

XML

Product and Geographic Information

12 Months Ended

Aug. 31, 2019

Segment Reporting [Abstract]

Product and Geographic Information

11. PRODUCT AND GEOGRAPHIC INFORMATION

Revenues by products for the years ended August 31, 2019 and 2018 are as follows (in thousands):

	Years Ended August 31,
	2019		2018
LED chips	$	93	$	244
LED components		4,430		5,181
Lighting products		632		968
Other(1)		747		1,102
Total	$	5,902	$	7,495

(1) Other includes primarily revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.

Revenues by geography are based on the billing address of the customer. The following table sets forth revenues by geographic area for the years ended August 31, 2019 and 2018 (in thousands):

	Years Ended August 31,
	2019		2018
Netherlands	$	1,573	$	1,786
United States		1,948		1,729
Taiwan		426		1,383
Japan		389		3
India		260		1,005
China		166		573
Germany		400		399
Other (individually less than 5% of total net revenues)		740		617
Total	$	5,902	$	7,495

Tangible Long‑Lived Assets

Substantially all of the Company’s tangible long‑lived assets are located in Taiwan.

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Common Stock

12 Months Ended

Aug. 31, 2019

Common Stock [Abstract]

Common Stock

7. COMMON STOCK

At its Annual Meeting held on June 29, 2018 (Taiwan time), the Company’s stockholders approved an amendment to its Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), to reduce the number of authorized shares of common stock from 75,000,000 to 7,500,000. The amendment did not change any of the rights and privileges of the Company’s common stock or its par value, and did not affect the number of shares of the Company’s common stock currently outstanding. Accordingly, the authorized common shares disclosures for all periods presented have been retrospectively adjusted to reflect this amendment of its Restated Certificate of Incorporation.

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Balance Sheet Components

12 Months Ended

Aug. 31, 2019

Disclosure Text Block Supplement [Abstract]

Balance Sheet Components

3. BALANCE SHEET COMPONENTS

Inventories

Inventories as of August 31, 2019 and 2018consist of the following (in thousands):

	August 31,
	2019		2018
Raw materials	$	479	$	577
Work in process		728		505
Finished goods		876		736
Total	$	2,083	$	1,818

Inventory write‑downs to estimated net realizable values for the years ended August 31, 2019 and 2018 were $743 thousand and $695 thousand, respectively.

Property, Plant and Equipment

Property, plant and equipment as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019			2018
Buildings and improvements	$	13,238		$	13,558
Machinery and equipment		37,988			39,391
Leasehold improvements		156			150
Other equipment		2,250			2,312
Construction in progress		61			289
Total property, plant and equipment		53,693			55,700
Less: Accumulated depreciation and amortization		(47,815	)		(48,487	)
Property, plant and equipment, net	$	5,878		$	7,213

Depreciation expense was $1,079 thousand and $976 thousand for the years ended August 31, 2019 and 2018, respectively.

Property, plant and equipment pledged as collateral for the Company’s notes payable were $3.7 million and $4.2 million as of August 31, 2019 and 2018, respectively.

Intangible Assets

Intangible assets as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31, 2019
	Weighted
	Average	Gross				Net
	Amortization	Carrying		Accumulated		Carrying
	Period (Years)	Amount		Amortization		Amount
Patents and trademarks	15	$	542	$	449	$	93
Acquired technology	5		484		484		—
Total		$	1,026	$	933	$	93

	August 31, 2018
	Weighted
	Average	Gross				Net
	Amortization	Carrying		Accumulated		Carrying
	Period (Years)	Amount		Amortization		Amount
Patents and trademarks	15	$	544	$	446	$	98
Acquired technology	5		494		494		—
Total		$	1,038	$	940	$	98

Amortization expense was $14 thousand and $22 thousand for the years ended August 31, 2019 and 2018, respectively.

No impairment charge was recognized in the year ended August 31, 2019 and 2018.

The estimated future amortization expense for the Company’s intangible assets as of August 31, 2019 is as follows (in thousands):

Years Ending August 31,	Total
2020	$	9
2021		9
2022		8
2023		8
2024		8
Thereafter		51
Total	$	93

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019		2018
Advance receipts from sale of our headquarters building	$	—	$	3,199
Accrued compensation and benefits		1,357		1,242
Other (individually less than 5% of total accrued expenses and    other current liabilities)		985		1,064
Total	$	2,342	$	5,505

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Condensed Parent Company Only Financial Statements - Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Net cash provided by (used in):
Operating activities	$ (3,546)	$ (1,177)
Investing activities	(2,628)	1,213
Financing activities	4,054	(331)
Cash and cash equivalents at beginning of year	3,421
Cash and cash equivalents at end of year	1,363	3,421
SemiLEDs
Net cash provided by (used in):
Operating activities	(3,342)	(449)
Investing activities		534
Financing activities	3,200
Net increase (decrease) in cash and cash equivalents	(142)	85
Cash and cash equivalents at beginning of year	194	109
Cash and cash equivalents at end of year	$ 52	$ 194

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Stock-based Compensation - Stock Options Awards (Details) - Employee Stock Option - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018	Aug. 31, 2017
Number of Stock Options Outstanding
Outstanding at the beginning of the period (in shares)	10	12
Forfeited (in shares)		(2)
Outstanding at the end of the period (in shares)	10	10	12
Vested and expected to vest at the end of the period (in shares)	10
Exercisable at the end of the period (in shares)	10
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 132.66	$ 116.10
Forfeited (in dollars per share)	103.00	23.40
Outstanding at the end of the period (in dollars per share)	133.82	$ 132.66	$ 116.10
Vested and expected to vest at the end of the period (in dollars per share)	133.82
Exercisable at the end of the period (in dollars per share)	$ 133.82
Weighted-Average Remaining Contractual Life
Outstanding balance	1 year 4 months 24 days	2 years 3 months 18 days	3 years
Vested and expected to vest at the end of the period	1 year 4 months 24 days
Exercisable at the end of the period	1 year 4 months 24 days
Aggregate Intrinsic Value
Outstanding at the beginning of the period		$ 1
Outstanding at the end of the period			$ 1
Additional information on stock options
Unrecognized compensation cost related to unvested stock options	$ 0	$ 0

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Indebtedness (Details) $ in Thousands, $ in Millions				12 Months Ended
		Jul. 05, 2019 USD ($) Loan	Jan. 08, 2019 USD ($) Loan	Aug. 31, 2019 USD ($) Loan	Aug. 31, 2018 USD ($)	Jul. 05, 2019 TWD ($)	Dec. 31, 2018 USD ($)
Long-term Debt
Total long-term debt				$ 6,352	$ 2,348
Less: Current installments				(398)	(335)
Long-term debt, excluding current installments				5,954	2,013
Balance of reserve account				$ 19
Number of new loan agreement | Loan				2
Scheduled Principal Payments
2020				$ 398
2021				3,598
2022				398
2023				398
2024				398
Thereafter				1,162
Total long-term debt				6,352	$ 2,348
New Taiwan Dollars
Long-term Debt
Total long-term debt				6,400			$ 2,300
Scheduled Principal Payments
Total long-term debt				6,400			$ 2,300
Mega Bank
Long-term Debt
Maturity term		8 years
Aggregate amount of loan		$ 3,200				$ 100.0
Minimum balance of deposit required to be held for security		$ 79				2.5
Balance of reserve account				19
Note payable maturity month year		2027-07
Debt instrument, payment terms		monthly
Number of new loan agreement | Loan		2
Mega Bank | First note payable to Mega Bank
Long-term Debt
Aggregate amount of loan		$ 2,000				$ 62.0
Debt instrument, basis spread on variable rate	[1]	0.64%
Loan agreement, rate of interest		1.62%				1.62%
Loan periodic payment		$ 21
Mega Bank | First note payable to Mega Bank
Long-term Debt
Aggregate amount of loan		$ 1,200				$ 38.0
Debt instrument, basis spread on variable rate		1.02%
Loan agreement, rate of interest		2.00%				2.00%
Loan periodic payment		$ 13
Board Of Chairman and Shareholder
Long-term Debt
Total long-term debt			$ 3,200	3,200
Scheduled Principal Payments
Total long-term debt			$ 3,200	3,200
Chief Executive Officer
Long-term Debt
Aggregate amount of loan				1,700
Loan agreement, rate of interest			8.00%
Number of new loan agreement | Loan			1
Loan maturity date			Jan. 22, 2021
Largest Shareholder
Long-term Debt
Aggregate amount of loan				1,500
Loan agreement, rate of interest			8.00%
Number of new loan agreement | Loan			1
Loan maturity date			Jan. 14, 2021
First note payable
Long-term Debt
Maturity term					15 years
First note payable | E Sun Bank
Long-term Debt
Total long-term debt					$ 860
Scheduled Principal Payments
Total long-term debt					860
First note payable | Mega Bank
Long-term Debt
Total long-term debt				1,954
Scheduled Principal Payments
Total long-term debt				1,954
Second note payable | E Sun Bank
Long-term Debt
Total long-term debt					1,488
Scheduled Principal Payments
Total long-term debt					$ 1,488
Second note payable | Mega Bank
Long-term Debt
Total long-term debt				1,198
Scheduled Principal Payments
Total long-term debt				$ 1,198
Long-term notes
Long-term Debt
Interest rate (as a percent)					1.62%

[1] 0.64

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Condensed Parent Company Only Financial Statements - Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Aug. 31, 2019	May 31, 2019	Feb. 28, 2019	Nov. 30, 2018	Aug. 31, 2018	May 31, 2018	Feb. 28, 2018	Nov. 30, 2017	Aug. 31, 2019	Aug. 31, 2018
Operating expenses:
Selling, general and administrative									$ 2,792	$ 3,184
Loss from operations	$ (1,027)	$ (701)	$ (915)	$ (1,022)	$ (1,218)	$ (352)	$ (1,239)	$ (865)	(3,665)	(3,674)
Other income (expenses):
Other income (expenses), net									250	780
Total other income (expenses), net									100	693
Net loss attributable to SemiLEDs stockholders	$ (881)	$ (859)	$ (847)	$ (978)	$ (1,131)	$ (326)	$ (1,132)	$ (392)	(3,565)	(2,981)
SemiLEDs
Operating expenses:
Selling, general and administrative									398	754
Loss from operations									(398)	(754)
Other income (expenses):
Equity in losses from subsidiaries, net									(2,997)	(2,619)
Other income (expenses), net									(170)	392
Total other income (expenses), net									(3,167)	(2,227)
Net loss attributable to SemiLEDs stockholders									$ (3,565)	$ (2,981)

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Fair Value Measurements - Carrying Amounts and Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Aug. 31, 2019	Aug. 31, 2018
Carrying Amount
Financial assets:
Cash and cash equivalents and restricted cash	$ 1,382	$ 3,421
Receivables (including related parties)	703	282
Other assets (non-derivatives)	539	334
Financial liabilities:
Payables (including related parties)	3,522	3,700
Long-term debt (including current installments)	6,352	2,348
Fair Value
Financial assets:
Cash and cash equivalents and restricted cash	1,382	3,421
Receivables (including related parties)	703	282
Other assets (non-derivatives)	539	334
Financial liabilities:
Payables (including related parties)	3,522	3,700
Long-term debt (including current installments)	$ 6,352	$ 2,332

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Income Taxes - Net Operating Loss Carryforwards and Unrecognized Tax Benefits (Details) $ in Thousands	12 Months Ended
	Aug. 31, 2019 USD ($)
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 29,609
Total unused net operating loss carryforwards and income tax credits	$ 149,953
Operating loss carryforwards, Expiration Year	2025
U.S. Federal
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 12,893
U.S. Federal | Minimum
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, Expiration Year	2025
U.S. Federal | Maximum
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, Expiration Year	2037
U.S. Federal
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 16,716
Foreign
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	9,225
Net operating loss carryforwards (expiring over the next 5 years)	80,503
Net operating loss carryforwards (expiring in more than 5 years)	$ 30,616
Foreign | Minimum
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards (expiring over the next 5 years), Expiration Year	2020
Net operating loss carryforwards (expiring in more than 5 years), Expiration Year	2025
Foreign | Maximum
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards (expiring over the next 5 years), Expiration Year	2024
Net operating loss carryforwards (expiring in more than 5 years), Expiration Year	2029

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Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Foreign currency translation adjustments tax	$ 0	$ 0

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Consolidated Balance Sheets - USD ($) $ in Thousands	Aug. 31, 2019	Aug. 31, 2018
CURRENT ASSETS:
Cash and cash equivalents	$ 1,363	$ 3,421
Restricted cash and cash equivalents	19
Accounts receivable (including related parties), net of allowance for doubtful accounts of $195 and $477 as of August 31, 2019 and August 31, 2018, respectively	703	282
Inventories	2,083	1,818
Prepaid expenses and other current assets	460	340
Total current assets	4,628	5,861
Property, plant and equipment, net	5,878	7,213
Intangible assets, net	93	98
Investments in unconsolidated entities	894	914
Other assets	169	164
TOTAL ASSETS	11,662	14,250
CURRENT LIABILITIES:
Current installments of long-term debt	398	335
Accounts payable	680	894
Advance receipt toward the convertible note	500	500
Accrued expenses and other current liabilities	2,342	5,505
Total current liabilities	3,920	7,234
Long-term debt, excluding current installments	5,954	2,013
Total liabilities	9,874	9,247
Commitments and contingencies (Note 6)
SemiLEDs stockholders’ equity
Common stock, $0.0000056 par value—7,500 shares authorized; 3,594 shares and 3,559 shares issued and outstanding as of August 31, 2019 and August 31, 2018, respectively
Additional paid-in capital	175,804	175,527
Accumulated other comprehensive income	3,753	3,727
Accumulated deficit	(177,816)	(174,251)
Total SemiLEDs stockholders’ equity	1,741	5,003
Total equity	1,788	5,003
Noncontrolling interests	47
TOTAL LIABILITIES AND EQUITY	$ 11,662	$ 14,250

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Summary of Significant Accounting Policies - Concentration of Credit Risk (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Concentration Risk [Line Items]
Cash and cash equivalents	$ 1,363	$ 3,421
Revenues, net	$ 5,902	$ 7,495
Accounts receivable | Customer concentration | Customer A
Concentration Risk [Line Items]
Concentration risk (as a percent)	61.00%	2.00%
Accounts receivable | Customer concentration | Customer B
Concentration Risk [Line Items]
Concentration risk (as a percent)	10.00%
Accounts receivable | Customer concentration | Customer C
Concentration Risk [Line Items]
Concentration risk (as a percent)		18.00%
Accounts receivable | Customer concentration | Customer D
Concentration Risk [Line Items]
Concentration risk (as a percent)	9.00%	18.00%
Accounts receivable | Customer concentration | Customer E
Concentration Risk [Line Items]
Concentration risk (as a percent)	4.00%	17.00%
Accounts receivable | Customer concentration | Customer F
Concentration Risk [Line Items]
Concentration risk (as a percent)	2.00%	10.00%
Accounts receivable | Customer concentration | Customer G
Concentration Risk [Line Items]
Concentration risk (as a percent)	10.00%
Net revenues | Customer concentration | Customer A
Concentration Risk [Line Items]
Concentration risk (as a percent)	18.00%	7.00%
Revenues, net	$ 1,093	$ 542
Net revenues | Customer concentration | Customer B
Concentration Risk [Line Items]
Concentration risk (as a percent)	16.00%	7.00%
Revenues, net	$ 922	$ 571
Net revenues | Customer concentration | Customer C
Concentration Risk [Line Items]
Concentration risk (as a percent)	11.00%	13.00%
Revenues, net	$ 625	$ 991
Net revenues | Customer concentration | Customer E
Concentration Risk [Line Items]
Concentration risk (as a percent)	5.00%	14.00%
Revenues, net	$ 267	$ 1,014
United States | U.S. Dollars
Concentration Risk [Line Items]
Cash and cash equivalents	52	194
Taiwan | U.S. Dollars
Concentration Risk [Line Items]
Cash and cash equivalents	447	2,220
Taiwan | New Taiwan Dollars
Concentration Risk [Line Items]
Cash and cash equivalents	730	55
Taiwan | Other currencies
Concentration Risk [Line Items]
Cash and cash equivalents	77	910
China (including Hong Kong) | U.S. Dollars
Concentration Risk [Line Items]
Cash and cash equivalents		7
China (including Hong Kong) | Renminbi
Concentration Risk [Line Items]
Cash and cash equivalents	49	29
China (including Hong Kong) | H.K. dollars
Concentration Risk [Line Items]
Cash and cash equivalents	$ 8	$ 6

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Summary of Significant Accounting Policies - Impairment of Long-lived Assets (Details) - USD ($)	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Accounting Policies [Abstract]
Impairment of long-lived assets	$ 0	$ 0

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Aug. 31, 2019

Schedule of cash and cash equivalents by location

As of August 31, 2019 and 2018, cash and cash equivalents of the Company consisted of the following (in thousands):

	August 31,
Cash and Cash Equivalents by Location	2019		2018
United States;
Denominated in U.S. dollars	$	52	$	194
Taiwan;
Denominated in U.S. dollars		447		2,220
Denominated in New Taiwan dollars		730		55
Denominated in other currencies		77		910
China (including Hong Kong);
Denominated in U.S. dollars		—		7
Denominated in Renminbi		49		29
Denominated in H.K. dollars		8		6
Total cash and cash equivalents	$	1,363	$	3,421

Schedule of customers accounting for 10% or more

Customers that accounted for 10% or more of the Company’s total net accounts receivable as of August 31, 2019 and 2018 consist of the following:

	August 31,
Customers	2019			2018
Customer A		61	%		2	%
Customer B		10	%		—	%
Customer C		—	%		18	%
Customer D		9	%		18	%
Customer E		4	%		17	%
Customer F		2	%		10	%
Customer G		10	%		—	%

Schedule of cash and cash equivalents

As of August 31, 2019 and 2018, cash and cash equivalents of the Company consist of the following (in thousands):

	August 31,
Cash and Cash Equivalents	2019		2018
Cash;
Cash and demand deposits	$	1,363	$	3,403
Cash equivalents;
Money market funds		—		18
Total cash and cash equivalents	$	1,363	$	3,421

Schedule of estimated useful lives of property, plant and equipment

The estimated useful lives of property, plant and equipment are as follows:

Buildings and improvements	5 to 20	years
Machinery and equipment	1 to 10	years
Leasehold improvements	2 to 10	years
Other equipment	2 to 6	years

Schedule of estimated useful lives of finite-lived intangible assets

Patents and trademarks	5 to 25	years
Acquired technology	5	years

Customer concentration | Net revenues

Schedule of customers accounting for 10% or more

The customers accounted for 10% or more of the Company’s total net revenues for the years ended August 31, 2019 and 2018, as follows (in thousands, except percentages):

	Years Ended August 31,
	2019					2018
			% of					% of
Customers	Amount		Revenues			Amount		Revenues
Customer A	$	1,093		18	%	$	542		7	%
Customer B		922		16	%		571		7	%
Customer C		625		11	%		991		13	%
Customer E		267		5	%		1,014		14	%

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Related Party Transactions

12 Months Ended

Aug. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

15. RELATED PARTY TRANSACTIONS

On January 8, 2019, the Company entered into loan agreements with each of its Chairman and Chief Executive Officer and its largest shareholder, with aggregate amounts of $3.2 million, and an annual interest rate of 8%. All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the canceled sale of the Company’s headquarters building pursuant to the agreement dated December 15, 2015. The Company is required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively, unless the loans are accelerated pursuant to the loan agreements.  As of August 31, 2019, these loans totaled $3.2 million. The loans are secured by a second priority security interest on the Company’s headquarters building

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Product and Geographic Information - Revenues by Geography (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Aug. 31, 2019	May 31, 2019	Feb. 28, 2019	Nov. 30, 2018	Aug. 31, 2018	May 31, 2018	Feb. 28, 2018	Nov. 30, 2017	Aug. 31, 2019	Aug. 31, 2018
Revenues by geographic area
Revenues	$ 1,555	$ 1,745	$ 1,630	$ 972	$ 1,950	$ 1,999	$ 1,543	$ 2,003	$ 5,902	$ 7,495
Maximum percentage of total net revenues	5.00%				5.00%				5.00%	5.00%
Netherlands
Revenues by geographic area
Revenues									$ 1,573	$ 1,786
United States
Revenues by geographic area
Revenues									1,948	1,729
Taiwan
Revenues by geographic area
Revenues									426	1,383
Japan
Revenues by geographic area
Revenues									389	3
India
Revenues by geographic area
Revenues									260	1,005
China
Revenues by geographic area
Revenues									166	573
Germany
Revenues by geographic area
Revenues									400	399
Other (individually less than 5% of total net revenues)
Revenues by geographic area
Revenues									$ 740	$ 617

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Income Taxes (Details) - USD ($)	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Income Tax Disclosure [Abstract]
U.S. federal income tax rate (as a percent)	21.00%	34.00%
Statutory income tax rate in Taiwan (as a percent)	20.00%	17.00%
Additional Taiwan corporate income tax, or surtax rate (as a percent)	5.00%	10.00%
U.S. operations	$ (568,000)	$ (369,000)
Foreign operations	(2,997,000)	(2,612,000)
Loss before income taxes	$ (3,565,000)	$ (2,981,000)
Reconciliation of income tax expense
U.S. federal income tax rate (as a percent)	21.00%	34.00%
Computed “expected” income tax benefit	$ (748,000)	$ (1,013,000)
Foreign tax rate differential	25,000	543,000
Valuation allowance	(3,908,000)	(8,428,000)
Other	4,631,000	8,898,000
Deferred tax assets:
Inventories, primarily due to inventory obsolescence and lower of cost or market provisions	1,599,000	1,549,000
Allowance for doubtful accounts	33,000	104,000
Accruals and other	79,000	89,000
Property, plant and equipment	1,035,000	1,447,000
Stock-based compensation	388,000	622,000
Investments in unconsolidated entities		5,554,000
Net operating loss carryforwards	27,849,000	26,049,000
Total gross deferred tax assets	30,983,000	35,414,000
Less: Valuation allowance	(30,983,000)	(35,414,000)
Net operating loss carryforwards	$ 29,609,000
Net operating loss carryforwards expiration year	2025
Operating loss carryforwards expiration period	20 years
Unrecognized tax benefits	$ 0	$ 0
One-time transition tax payable period on certain unrepatriated earnings from non-U.S. subsidiaries	8 years

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Condensed Parent Company Only Financial Statements - Balance Sheets (Details) - USD ($)	Aug. 31, 2019	Aug. 31, 2018	Aug. 31, 2017
ASSETS
Cash and cash equivalents	$ 1,363,000	$ 3,421,000
Prepaid expenses and other current assets	460,000	340,000
Total current assets	4,628,000	5,861,000
Intangible assets, net	93,000	98,000
TOTAL ASSETS	11,662,000	14,250,000
LIABILITIES AND EQUITY
Advance receipt toward the convertible note	500,000	500,000
Accrued expenses and other current liabilities	2,342,000	5,505,000
Total current liabilities	3,920,000	7,234,000
Total equity	1,741,000	5,003,000
TOTAL LIABILITIES AND EQUITY	11,662,000	14,250,000
SemiLEDs
ASSETS
Cash and cash equivalents	52,000	194,000	$ 109,000
Prepaid expenses and other current assets	7,085,000	3,973,000
Total current assets	7,137,000	4,167,000
Intangible assets, net	1,000	1,000
Investments in subsidiaries	(1,169,000)	1,674,000
TOTAL ASSETS	5,969,000	5,842,000
LIABILITIES AND EQUITY
Advance receipt toward the convertible note	500,000	500,000
Accrued expenses and other current liabilities	528,000	339,000
Total current liabilities	1,028,000	839,000
Total non-current liabilities	3,200,000
Total equity	1,741,000	5,003,000
TOTAL LIABILITIES AND EQUITY	5,969,000	5,842,000
Contingencies, long-term obligations and guarantees	$ 0	$ 0

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Summary of Significant Accounting Policies - Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Aug. 31, 2019	Aug. 31, 2018
Cash And Cash Equivalents [Line Items]
Total cash and cash equivalents	$ 1,363	$ 3,421
Cash and demand deposits
Cash And Cash Equivalents [Line Items]
Total cash and cash equivalents	$ 1,363	3,403
Money market funds
Cash And Cash Equivalents [Line Items]
Total cash and cash equivalents		$ 18

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Summary of Significant Accounting Policies - Noncontrolling Interests (Details) $ in Thousands, $ in Millions			1 Months Ended	12 Months Ended
	Sep. 01, 2018 USD ($) shares	Sep. 01, 2018 TWD ($) shares	Dec. 31, 2018 shares	Aug. 31, 2019 USD ($) shares	Jan. 22, 2021 shares	Aug. 31, 2018 shares
Minority Interest [Line Items]
Common stock, shares issued				3,594,000		3,559,000
Taiwan Bandaoti Zhaoming Co., Ltd.
Minority Interest [Line Items]
Noncontrolling interest (as percentage)	3.31%	3.31%		3.29%	0.00%
Taiwan Bandaoti Zhaoming Co., Ltd.
Minority Interest [Line Items]
Common stock issued during period, shares	414,000	414,000
Common stock, shares issued	12,501,715	12,501,715			12,087,715
Common stock issued during period, value	$ 176	$ 5.4		$ 176
Taiwan SemiLEDs | Taiwan Bandaoti Zhaoming Co., Ltd.
Minority Interest [Line Items]
Common shares purchased form non-controlling interests			3,000

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Consolidated Statement of Changes in Equity - USD ($) shares in Thousands, $ in Thousands	Total	Taiwan Bandaoti Zhaoming Co., Ltd.	Common Stock	Additional Paid-in Capital	Additional Paid-in Capital Taiwan Bandaoti Zhaoming Co., Ltd.	Accumulated Other Comprehensive Income	Accumulated Deficit	Total SemiLEDs Stockholders' Equity	Total SemiLEDs Stockholders' Equity Taiwan Bandaoti Zhaoming Co., Ltd.	Non-Controlling Interests	Non-Controlling Interests Taiwan Bandaoti Zhaoming Co., Ltd.
BALANCE at Aug. 31, 2017	$ 7,817			$ 175,386		$ 3,701	$ (171,270)	$ 7,817
BALANCE (in shares) at Aug. 31, 2017			3,544
Issuance of common stock under equity incentive plans (in shares)			15
Stock-based compensation	141			141				141
Comprehensive income (loss)
Other comprehensive income (loss)	26					26		26
Net loss	(2,981)						(2,981)	(2,981)
BALANCE at Aug. 31, 2018	5,003			175,527		3,727	(174,251)	5,003
BALANCE (in shares) at Aug. 31, 2018			3,559
Issuance of common stock under equity incentive plans (in shares)			35
Stock-based compensation	149			149				149
Common stock issued by SBDI*		$ 176			$ 128				$ 128		$ 48
Comprehensive income (loss)
Other comprehensive income (loss)	25					26		26		$ (1)
Net loss	(3,565)						(3,565)	(3,565)
BALANCE at Aug. 31, 2019	$ 1,788			$ 175,804		$ 3,753	$ (177,816)	$ 1,741		$ 47
BALANCE (in shares) at Aug. 31, 2019			3,594

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Aug. 31, 2019	Aug. 31, 2018
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts	$ 195	$ 477
Common stock, par value (in dollars per share)	$ 0.0000056	$ 0.0000056
Common stock, shares authorized	7,500,000	7,500,000
Common stock, shares issued	3,594,000	3,559,000
Common stock, shares outstanding	3,594,000	3,559,000

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Aug. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation —The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Going Concern

Going Concern —The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.

The Company has suffered losses from operations of $3.7 million and $3.7 million,and used net cash in operating activities of $3.5 million and $1.2 millionfor the years ended August 31, 2019 and 2018, respectively.Further, at August 31, 2019, the Company’s cash and cash equivalents was down to $1.4 million. These facts and conditions have raised substantial doubt about the Company’s ability to continue as a going concern. However, gross profit on product sales was $452 thousand for the year ended August 31, 2019 compared to a gross loss of $435 thousand for the year ended August 31, 2018. In addition, the Company entered into two new loan agreements to refinance its existing real estate loan and to provide for operating capital during the year ended August 31, 2019. Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business.

• Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of new higher margin products. The growth of the Company’s module products and the continued commercial sales of its UV LED products are expected to improve the Company’s future gross margin, operating results and cash flows. The Company is targeting niche markets and focused on product enhancement and developing its LED product into many other applications or devices.

• Continuing to monitor prices, work with current and potential vendors to decrease costs and, consistent with its existing contractual commitments, may possibly decrease its activity level and capital expenditures further. This plan reflects its strategy of controlling capital costs and maintaining financial flexibility.

• Raising additional cash through the issuance of convertible notes to our major stockholders, further equity offerings, sales of assets and/or issuance of debt as considered necessary and looking at other potential business opportunities.

While the Company's management believes that the measures described in the above liquidity plan will be adequate to satisfy its liquidity requirements for the twelve months after the date that the financial statements are issued, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern. These consolidated financial statements and financial statement schedule 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.

Revenue Recognition

Revenue Recognition —Effective September 1 2018, the Company adopted ASC 606 using the modified retrospective transition method. The Company applied the following five steps to achieve the core principles of ASC 606: 1) identified the contract with a customer; 2) identified the performance obligations (promises) in the contract; 3) determined the transaction price; 4) allocated the transaction price to the performance obligations in the contract; and 5) recognized revenue when (or as) the Company satisfies a performance obligation. The Company recognizes the amount of revenue when the Company satisfies a performance obligation to which it expects to be entitled for the transfer of promised goods or services to customers. The Company obtains written purchase authorizations from its customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. Generally, the Company considers delivery to have occurred at the time of shipment as this is generally when title and risk of loss for the products will pass to the customer. The Company provides its customers with limited rights of return for non‑conforming shipments and product warranty claims. Based on historical return percentages, which have not been material to date, and other relevant factors, the Company estimates its potential future exposure on recorded product sales, which reduces product revenues in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets. The Company also provides standard product warranties on its products, which generally range from three months to two years. Management estimates the Company’s warranty obligations as a percentage of revenues, based on historical knowledge of warranty costs and other relevant factors. To date, the related estimated warranty provisions have been insignificant.

Principles of Consolidation

Principles of Consolidation —The consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation.

On September 1, 2018, the Company adopted ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). This standard allows equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investees) 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 a qualitative assessment to identify impairment at each reporting period. When a qualitative assessment indicates that impairment exists, the Company is required to measure the investments at fair value.

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

Use of Estimates— The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the preparation of the Company’s consolidated financial statements on the basis that the Company will continue as a going concern, the collectability of accounts receivable, inventory net realizable values, realization of deferred tax assets, valuation of stock‑based compensation expense, the useful lives of property, plant and equipment and intangible assets, the recoverability of the carrying amount of property, plant and equipment, intangible assets and investments in unconsolidated entities, the fair value of acquired tangible and intangible assets, income tax uncertainties, provision for potential litigation costs and other contingencies. Management bases its estimates on historical experience and also on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however, actual results could differ materially from those estimates.

Certain Significant Risks and Uncertainties

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

Concentration of Supply Risk

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 customers’ 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

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. Deposits held with banks may exceed the amount of insurance provided on such deposits. As of August 31, 2019 and 2018, cash and cash equivalents of the Company consisted of the following (in thousands):

	August 31,
Cash and Cash Equivalents by Location	2019		2018
United States;
Denominated in U.S. dollars	$	52	$	194
Taiwan;
Denominated in U.S. dollars		447		2,220
Denominated in New Taiwan dollars		730		55
Denominated in other currencies		77		910
China (including Hong Kong);
Denominated in U.S. dollars		—		7
Denominated in Renminbi		49		29
Denominated in H.K. dollars		8		6
Total cash and cash equivalents	$	1,363	$	3,421

The Company’s revenues are substantially derived from the sales of LED products. 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, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

Customers that accounted for 10% or more of the Company’s total net accounts receivable as of August 31, 2019 and 2018 consist of the following:

	August 31,
Customers	2019			2018
Customer A		61	%		2	%
Customer B		10	%		—	%
Customer C		—	%		18	%
Customer D		9	%		18	%
Customer E		4	%		17	%
Customer F		2	%		10	%
Customer G		10	%		—	%

The customers accounted for 10% or more of the Company’s total net revenues for the years ended August 31, 2019 and 2018, as follows (in thousands, except percentages):

	Years Ended August 31,
	2019					2018
			% of					% of
Customers	Amount		Revenues			Amount		Revenues
Customer A	$	1,093		18	%	$	542		7	%
Customer B		922		16	%		571		7	%
Customer C		625		11	%		991		13	%
Customer E		267		5	%		1,014		14	%

Cash and Cash Equivalents

Cash and Cash Equivalents—The Company considers all highly liquid investment instruments purchased with initial maturities of three months or less to be cash equivalents.

As of August 31, 2019 and 2018, cash and cash equivalents of the Company consist of the following (in thousands):

	August 31,
Cash and Cash Equivalents	2019		2018
Cash;
Cash and demand deposits	$	1,363	$	3,403
Cash equivalents;
Money market funds		—		18
Total cash and cash equivalents	$	1,363	$	3,421

Restricted Cash Equivalents

Restricted Cash Equivalents— Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan. As of August 31, 2019 and 2018, the Company’s restricted cash equivalents at current portion amounted $19 thousand and $0, respectively. As of August 31, 2019 and 2018, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $89 thousand and $91 thousand, respectively.

Foreign Currency

Foreign Currency— The Company’s subsidiaries use the local currency as their functional currency. The assets and liabilities of the subsidiaries are, therefore, translated into the U.S. dollars at exchange rates in effect at each balance sheet date, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive income (loss) within equity. Income and expense accounts are translated at average exchange rates during the period. Any gains and losses from transactions denominated in foreign currencies are recognized in the consolidated statements of operations as a separate component of other income (expense).

Accounts Receivable

Accounts Receivable — Accounts receivable (including related parties with zero net book value as of August 31, 2019 and 2018, respectively) are recorded at invoiced amounts, net of allowances for doubtful accounts, and do not bear interest. The allowance for doubtful accounts is based on management’s assessment of the collectability of customer 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. Charges to bad debt expense were $10 thousand during the year ended August 31, 2018. No bad debt expenses were recognized during the year ended August 31, 2019.

Inventories

Inventories— Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value. Cost is determined using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Company’s production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write‑downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped.

Property, Plant and Equipment

Property, Plant and Equipment— Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment. Depreciation on property, plant and equipment is calculated using the straight‑line method over the estimated useful lives, less estimated salvage values of the assets. Leasehold improvements are amortized using the straight‑line method over the shorter of the lease term or estimated useful life of the asset.

The estimated useful lives of property, plant and equipment are as follows:

Buildings and improvements	5 to 20	years
Machinery and equipment	1 to 10	years
Leasehold improvements	2 to 10	years
Other equipment	2 to 6	years

Major Maintenance Activities

Major Maintenance Activities— The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

Intangible Assets

Intangible Assets— Intangible assets consist of patents, trademarks and acquired technology. Intangible assets are initially recognized at their respective acquisition costs. All of the Company’s intangible assets have been determined to have finite useful lives and are, therefore, amortized using the straight‑line method over their estimated useful lives:

Patents and trademarks	5 to 25	years
Acquired technology	5	years

Impairment of Long-Lived Assets

Impairment of Long‑Lived Assets— Management evaluates the Company’s long‑lived assets, excluding goodwill, that consist of property, plant and equipment and intangible assets, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying amount of the asset over the estimated fair value of the asset. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third‑party independent appraisers, as considered necessary.

No impairment charge was recognized in the years ended August 31, 2019 and 2018.

Recovery of Investments in Unconsolidated Entities

Recovery of Investments in Unconsolidated Entities —Management evaluates the recoverability of the carrying amount of the Company’s equity investments accounted for using the equity method and cost method when there is an indication of potential impairment. If the estimated realizable value of an equity investment falls below its carrying amount and management determines that this shortfall is other‑than‑temporary, the carrying amount of such investment is written down to its estimated realizable value. In determining whether a decline in value is other‑than‑temporary, management considers the length of time and the extent to which such value has been less than the carrying amount, the financial condition and prospects of the investee, and the Company’s ability and intent to retain the equity investment for a period of time sufficient to allow for any anticipated recovery in value.

No impairment charge was recognized in the year ended August 31, 2019 and 2018.

Income Taxes

Income Taxes —The Company accounts for income taxes under the asset and liability method. As part of the process of preparing the consolidated financial statements, the Company estimates its income taxes in each of the jurisdictions in which it operates. The Company estimates actual current tax expense together with assessing temporary differences resulting from differing accounting treatment for items such as accruals and allowances that are not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities which are included in the Company’s consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s consolidated statements of operations become deductible expenses under applicable income tax laws or when operating loss or tax credit carryforwards are utilized. Accordingly, realization of the deferred tax assets is dependent on the Company’s ability to earn future taxable income against which these deductions, losses and credits can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applicable to the taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the Company’s deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period the change in the tax law was enacted.

Management assesses the likelihood that the Company’s deferred tax assets will be recovered from future taxable income and, to the extent management believes that recovery is not more likely than not, a valuation allowance is established. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Stock-based Compensation

Stock‑based Compensation —Compensation costs related to employee stock options and restricted stock units are based on the fair value of the options and stock units on the date of grant, net of estimated forfeitures. The Company determines the grant date fair value of the options using the Black‑Scholes option‑pricing model. The related stock‑based compensation expense is generally recognized on a straight‑line basis over the period in which an employee is required to provide service in exchange for the options and stock units, or the vesting period of the respective options and stock units.

Research and Development Costs

Research and Development Costs —Research and development costs are expensed as incurred. Research and development costs are presented as a separate line item in the consolidated statements of operations.

Advertising Costs

Advertising Costs —Advertising costs are expensed as incurred. Advertising costs totaled $2 thousand and $1 thousand for the years ended August 31, 2019 and 2018, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Segment Reporting

Segment Reporting —The Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Company’s reportable segments. During the years ended August 31, 2019 and 2018, the Chief Executive Officer has been identified as the chief operating decision maker. The Company’s chief operating decision maker regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the Company does not have any operating segments as defined in the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 280‑10‑50‑1, “Segment Reporting.”

Shipping And Handling Cost Policy

Shipping and Handling Costs — The Company includes costs from shipping and handling within cost of revenues in the period in which they are incurred.

Net Income (Loss) Per Share of SemiLEDs Common Stock

Net Income (Loss) Per Share of SemiLEDs Common Stock —Basic net income (loss) per share is computed by dividing net income (loss) attributable to SemiLEDs stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) attributable to SemiLEDs stockholders is determined by allocating undistributed earnings as if all of the earnings for the period had been distributed. Diluted net income (loss) per share is computed by using the weighted‑average shares of common stock outstanding, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options and unvested restricted stock units using the treasury stock method.

Noncontrolling Interests

Noncontrolling Interests —Noncontrolling interests are classified in the consolidated statements of operations as part of consolidated net income (loss) and the accumulated amount of noncontrolling interests in the consolidated balance sheets as part of equity. Changes in ownership interest in a consolidated subsidiary that do not result in a loss of control are accounted for as an equity transaction. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.

On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd. (“SBDI”), the Company’s wholly owned operating subsidiary, issued 414,000 common shares and amended its certificate of incorporation to increase its issued common stock from 12,087,715 shares to 12,501,715 shares. As of the date of this report, the increased capital of $176 thousand (NT$5.4 million) has been completely received in cash by Taiwan Bandaoti Zhaoming Co., Ltd. The Company did not subscribe for the newly issued common shares, and, as a result, noncontrolling interest in SBDI was increased from zero to 3.31%. In December 2018, Taiwan SemiLEDs purchased 3,000 common shares of SBDI from non-controlling interests. As of August 31, 2019, noncontrolling interest in SBDI was down to 3.29%.

Commitments and Contingencies

Commitments and Contingencies — Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Fair Value Measurements

Fair Value Measurements — The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

See Note 12 for further details.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Change to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, “Fair Value Measurement.” ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020. The Company is currently evaluating the impact ASU 2018-13 will have on the disclosures included in its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in ASU 2018-07 specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments in ASU 2018-07 also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. This standard became effective for the Company on September 1, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted the new standard effective September 1, 2018, using the retrospective transition approach. The reclassified restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows were not material for all periods presented.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in ASU 2016-02 require lessees to recognize all leases on the balance sheet by recording a right-of-use asset and a lease liability, and lessor accounting has been updated to align with the new requirements for lessees. The new standard also provides changes to the existing sale-leaseback guidance. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning September 1, 2019. The FASB has also issued additional standards which provide additional clarification and implementation guidance on the previously issued ASU 2016-02 and have the same effective date as the original standard. The Company plans to apply this guidance on a modified retrospective basis at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings, with no restatement of prior periods. The Company plans to elect the package of practical expedients permitted under the transition guidance within the new standard. In addition, the Company plans to elect the practical expedient to combine lease and non-lease components for all asset classes. The Company also plans to elect the short-term lease exception to keep leases with an initial term of twelve months or less off of the balance sheet. The Company is continuing to evaluate the impact ASU 2016-02 will have on its consolidated financial statements and does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows

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Condensed Parent Company Only Financial Statements

12 Months Ended

Aug. 31, 2019

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Condensed Parent Company Only Financial Statements

14. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

As a holding company, dividends received from SemiLEDs’ subsidiaries in Taiwan, if any, will be subject to withholding tax under Taiwan law, as well as statutory and other legal restrictions. The condensed parent company only financial information for SemiLEDs is presented below (in thousands):

	August 31,
Condensed Balance Sheets	2019			2018
ASSETS
Cash and cash equivalents	$	52		$	194
Prepaid expenses and other current assets		7,085			3,973
Total current assets		7,137			4,167
Intangible assets, net		1			1
Investments in subsidiaries		(1,169	)		1,674
TOTAL ASSETS	$	5,969		$	5,842
LIABILITIES AND EQUITY
Advance receipt toward the convertible note	$	500		$	500
Accrued expenses and other current liabilities		528			339
Total current liabilities		1,028			839
Total non-current liabilities		3,200			—
Total equity		1,741			5,003
TOTAL LIABILITIES AND EQUITY	$	5,969		$	5,842

SemiLEDs had no contingencies, long‑term obligations and guarantees as of August 31, 2019 or August 31, 2018.

	Years Ended August 31,
Condensed Statements of Operations	2019			2018
Operating expenses:
Selling, general and administrative	$	398		$	754
Loss from operations		(398	)		(754	)
Other income (expenses):
Equity in losses from subsidiaries, net		(2,997	)		(2,619	)
Other income (expenses), net		(170	)		392
Total other expenses, net		(3,167	)		(2,227	)
Net loss	$	(3,565	)	$	(2,981	)

	Years Ended August 31,
Condensed Statements of Cash Flows	2019			2018
Net cash provided by (used in):
Operating activities	$	(3,342	)	$	(449	)
Investing activities		—			534
Financing activities		3,200			—
Net increase (decrease) in cash and cash equivalents		(142	)		85
Cash and cash equivalents at beginning of year		194			109
Cash and cash equivalents at end of year	$	52		$	194

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Net Loss Per Share of Common Stock (Tables)

12 Months Ended

Aug. 31, 2019

Earnings Per Share [Abstract]

Schedule of stock-based compensation plan awards were excluded from the computation of diluted net loss per share of common stock

The following stock‑based compensation plan awards were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have an antidilutive effect on the net loss per share (in thousands of shares):

	Years Ended August 31,
	2019		2018
Stock units and stock options to purchase common stock		11		78

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Quarterly Results of Operations (Unaudited) (Tables)

12 Months Ended

Aug. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly statement of operations

The following tables set forth selected quarterly statement of operations data for each of the years ended August 31, 2019 and 2018 (in thousands, except per share data):

	Three Months Ended
	November 30,			February 28,			May 31,			August 31,			Fiscal
	2018			2019			2019			2019			2019
Revenues, net	$	972		$	1,630		$	1,745		$	1,555		$	5,902
Cost of revenues		1,191			1,628			1,405			1,226			5,450
Gross profit (loss)		(219	)		2			340			329			452
Operating expenses		803			917			1,041			1,356			4,117
Loss from operations		(1,022	)		(915	)		(701	)		(1,027	)		(3,665	)
Net loss attributable to SemiLEDs stockholders	$	(978	)	$	(847	)	$	(859	)	$	(881	)	$	(3,565	)
Net loss per share attributable to SemiLEDs stockholders,    basic and diluted	$	(0.27	)	$	(0.24	)	$	(0.24	)	$	(0.25	)	$	(1.00	)

	Three Months Ended
	November 30,			February 28,			May 31,			August 31,			Fiscal
	2017			2018			2018			2018			2018
Revenues, net	$	2,003		$	1,543		$	1,999		$	1,950		$	7,495
Cost of revenues		1,951			1,987			1,837			2,155			7,930
Gross loss		52			(444	)		162			(205	)		(435	)
Operating expenses		917			795			514			1,013			3,239
Loss from operations		(865	)		(1,239	)		(352	)		(1,218	)		(3,674	)
Net loss attributable to SemiLEDs stockholders	$	(392	)	$	(1,132	)	$	(326	)	$	(1,131	)	$	(2,981	)
Net loss per share attributable to SemiLEDs stockholders,    basic and diluted	$	(0.11	)	$	(0.32	)	$	(0.09	)	$	(0.32	)	$	(0.84	)

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Commitments and Contingencies

12 Months Ended

Aug. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. COMMITMENTS AND CONTINGENCIES

Operating Lease Agreements —The Company has several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between December 2020 and December 2029. As of August 31, 2019 and 2018, the Company maintained outstanding deposits for these leases in the amount of $10 thousand and $85 thousand, respectively, which are included in other long‑term assets in the accompanying consolidated balance sheets. Lease expense related to these operating leases was $151 thousand and $472 thousand for the years ended August 31, 2019 and 2018, respectively. Lease expense is recognized on a straight‑line basis over the term of the lease.

The aggregate future noncancelable minimum rental payments for the Company’s operating leases as of August 31, 2019 consist of the following (in thousands):

	Operating
Years Ending August 31,	Leases
2020	$	148
2021		93
2022		29
2023		11
2024		10
Thereafter		56
Total	$	347

Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $158 thousand and $1.6 million as of August 31, 2019 and 2018, respectively.

Litigation — The Company is directly or indirectly involved from time to time in various claims or legal proceedings arising in the ordinary course of business. The Company recognizes a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in assessing both the likelihood of an unfavorable outcome and whether the amount of loss, if any, can be reasonably estimated.

On June 21, 2017, Well Thrive filed a complaint against SemiLEDs Corporation in the United States District Court for the District of Delaware. The complaint alleges that Well Thrive is entitled to return of $500 thousand paid toward a note purchase pursuant to the Purchase Agreement effective July 6, 2016 with Dr. Peter Chiou, which was assigned to Well Thrive on August 4, 2016. Pursuant to the terms of the Purchase Agreement, the Company has retained the $500 thousand payment as liquidated damages. Well Thrive alleges that the liquidated damages provision is unenforceable as an illegal penalty and does not reflect the amount of purported damages. On March 13, 2018, the Company filed a motion to enforce a settlement agreement between the parties to dismiss the lawsuit with prejudice. On March 27, 2018, Well Thrive filed an answering brief in opposition to the Company’s motion on the basis that Well Thrive never consented to dismiss the case. The judge’s order allows the Company to conduct depositions of Well Thrive’s former lawyer, Dr. Chiou, and Mr. Chang Sheng-Chun, Well Thrive’s director, and to request documents relating to the issues surrounding the settlement. Based on this order, the Company intends to arrange the depositions to obtain more evidence in support of a motion to enforce the settlement agreement. On October 25, 2019, Well Thrive filed a motion to modify the Court’s scheduling order and to allow it to file a motion for summary judgment, and the Company filed an opposition to the motion. On November 13, 2019, the Court denied Well Thrive’s motion. The Court set a trial date of March 2, 2020, if needed.

On December 28, 2018, the Company received a notification from the Court in Miao-Li County, Taiwan that Epistar Corporation (the successor to Formosa Epitaxy Incorporation, the “Plaintiff”) filed a motion requesting that the Company return the $3 million prepayment plus value-added-tax for the headquarters building sale and pay interest during this period and litigation fee. The Plaintiff also petitioned the Court to do a provisional execution upon the Company, which would permit the Plaintiff to sell the building and/or other assets belonging to the Company to recover the prepayment. On January 4, 2019, the Company filed a statement of defense arguing that the Plaintiff’s action and motion for provisional execution should be dismissed and the litigation fees should be borne by the Plaintiff. On January 25, 2019, the Company and the Plaintiff entered into a settlement, agreeing that the Company would return the $3 million plus value-added-tax of $150 thousand and penalty of $200 thousand, and on February 1, 2019, the Plaintiff withdrew the motion. As of August 31, 2019, the Company has paid the $3.35 million in full.

On March 11, 2019, a former employee (the “Plaintiff”) of Taiwan Bandaoti Zhaoming Co., Ltd. (“Taiwan Bandaoti”) filed a civil complaint against Taiwan Bandaoti in the Taiwan Miao-Li District Court. The Plaintiff alleged the following causes of action under the Labor Standards Act of Taiwan: (1) failure to pay the annual bonus; and (2) failure to pay transportation allowance. The Plaintiff is seeking compensation in the aggregate of approximately $9 thousand (NT$293 thousand). On May 24, 2019, Taiwan Miao-Li District Court determined on its own initiative to transfer the case to the Taiwan Hsin-Chu District Court due to a lack of jurisdiction over the action in whole or in part. On August 16, 2019, the Taiwan Hsin-Chu District Court held the first mediation proceeding, and on September 27, 2019, the Plaintiff and Taiwan Bandaoti Zhaoming had the first oral argument. The next oral argument will be held on December 6, 2019.

Except as described above, as of August 31, 2019, there was no pending litigation that could have a material impact on the Company’s financial position, results of operations or cash flows.

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Summary of Significant Accounting Policies

12 Months Ended

Aug. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation —The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Going Concern —The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.

The Company has suffered losses from operations of $3.7 million and $3.7 million,and used net cash in operating activities of $3.5 million and $1.2 millionfor the years ended August 31, 2019 and 2018, respectively.Further, at August 31, 2019, the Company’s cash and cash equivalents was down to $1.4 million. These facts and conditions have raised substantial doubt about the Company’s ability to continue as a going concern. However, gross profit on product sales was $452 thousand for the year ended August 31, 2019 compared to a gross loss of $435 thousand for the year ended August 31, 2018. In addition, the Company entered into two new loan agreements to refinance its existing real estate loan and to provide for operating capital during the year ended August 31, 2019. Management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business.

• Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of new higher margin products. The growth of the Company’s module products and the continued commercial sales of its UV LED products are expected to improve the Company’s future gross margin, operating results and cash flows. The Company is targeting niche markets and focused on product enhancement and developing its LED product into many other applications or devices.

• Continuing to monitor prices, work with current and potential vendors to decrease costs and, consistent with its existing contractual commitments, may possibly decrease its activity level and capital expenditures further. This plan reflects its strategy of controlling capital costs and maintaining financial flexibility.

• Raising additional cash through the issuance of convertible notes to our major stockholders, further equity offerings, sales of assets and/or issuance of debt as considered necessary and looking at other potential business opportunities.

While the Company's management believes that the measures described in the above liquidity plan will be adequate to satisfy its liquidity requirements for the twelve months after the date that the financial statements are issued, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern. These consolidated financial statements and financial statement schedule 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.

Revenue Recognition —Effective September 1 2018, the Company adopted ASC 606 using the modified retrospective transition method. The Company applied the following five steps to achieve the core principles of ASC 606: 1) identified the contract with a customer; 2) identified the performance obligations (promises) in the contract; 3) determined the transaction price; 4) allocated the transaction price to the performance obligations in the contract; and 5) recognized revenue when (or as) the Company satisfies a performance obligation. The Company recognizes the amount of revenue when the Company satisfies a performance obligation to which it expects to be entitled for the transfer of promised goods or services to customers. The Company obtains written purchase authorizations from its customers as evidence of an arrangement and these authorizations generally provide for a specified amount of product at a fixed price. Generally, the Company considers delivery to have occurred at the time of shipment as this is generally when title and risk of loss for the products will pass to the customer. The Company provides its customers with limited rights of return for non‑conforming shipments and product warranty claims. Based on historical return percentages, which have not been material to date, and other relevant factors, the Company estimates its potential future exposure on recorded product sales, which reduces product revenues in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets. The Company also provides standard product warranties on its products, which generally range from three months to two years. Management estimates the Company’s warranty obligations as a percentage of revenues, based on historical knowledge of warranty costs and other relevant factors. To date, the related estimated warranty provisions have been insignificant.

Principles of Consolidation —The consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation.

On September 1, 2018, the Company adopted ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). This standard allows equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investees) 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 a qualitative assessment to identify impairment at each reporting period. When a qualitative assessment indicates that impairment exists, the Company is required to measure the investments at fair value.

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 consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the preparation of the Company’s consolidated financial statements on the basis that the Company will continue as a going concern, the collectability of accounts receivable, inventory net realizable values, realization of deferred tax assets, valuation of stock‑based compensation expense, the useful lives of property, plant and equipment and intangible assets, the recoverability of the carrying amount of property, plant and equipment, intangible assets and investments in unconsolidated entities, the fair value of acquired tangible and intangible assets, income tax uncertainties, provision for potential litigation costs and other contingencies. Management bases its estimates on historical experience and also on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however, actual results could differ materially from those estimates.

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

Concentration of Supply Risk— Some of the components and technologies used in the Company’s products are purchased and licensed from a limited number of sources and some of the Company’s products are produced by a limited number of contract manufacturers. The loss of any of these suppliers and contract manufacturers may cause the Company to incur transition costs to another supplier or contract manufacturer, result in delays in the manufacturing and delivery of the Company’s products, or cause it to carry excess or obsolete inventory. The Company relies on a limited number of such suppliers and contract manufacturers for the fulfillment of its customers’ 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. Deposits held with banks may exceed the amount of insurance provided on such deposits. As of August 31, 2019 and 2018, cash and cash equivalents of the Company consisted of the following (in thousands):

	August 31,
Cash and Cash Equivalents by Location	2019		2018
United States;
Denominated in U.S. dollars	$	52	$	194
Taiwan;
Denominated in U.S. dollars		447		2,220
Denominated in New Taiwan dollars		730		55
Denominated in other currencies		77		910
China (including Hong Kong);
Denominated in U.S. dollars		—		7
Denominated in Renminbi		49		29
Denominated in H.K. dollars		8		6
Total cash and cash equivalents	$	1,363	$	3,421

The Company’s revenues are substantially derived from the sales of LED products. 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, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.

Customers that accounted for 10% or more of the Company’s total net accounts receivable as of August 31, 2019 and 2018 consist of the following:

	August 31,
Customers	2019			2018
Customer A		61	%		2	%
Customer B		10	%		—	%
Customer C		—	%		18	%
Customer D		9	%		18	%
Customer E		4	%		17	%
Customer F		2	%		10	%
Customer G		10	%		—	%

The customers accounted for 10% or more of the Company’s total net revenues for the years ended August 31, 2019 and 2018, as follows (in thousands, except percentages):

	Years Ended August 31,
	2019					2018
			% of					% of
Customers	Amount		Revenues			Amount		Revenues
Customer A	$	1,093		18	%	$	542		7	%
Customer B		922		16	%		571		7	%
Customer C		625		11	%		991		13	%
Customer E		267		5	%		1,014		14	%

Cash and Cash Equivalents—The Company considers all highly liquid investment instruments purchased with initial maturities of three months or less to be cash equivalents.

As of August 31, 2019 and 2018, cash and cash equivalents of the Company consist of the following (in thousands):

	August 31,
Cash and Cash Equivalents	2019		2018
Cash;
Cash and demand deposits	$	1,363	$	3,403
Cash equivalents;
Money market funds		—		18
Total cash and cash equivalents	$	1,363	$	3,421

Restricted Cash Equivalents— Restricted cash primarily consists of cash held in reserved bank accounts in Taiwan. As of August 31, 2019 and 2018, the Company’s restricted cash equivalents at current portion amounted $19 thousand and $0, respectively. As of August 31, 2019 and 2018, the Company’s restricted cash at noncurrent portion, which was recorded as other assets, amounted to $89 thousand and $91 thousand, respectively.

Foreign Currency— The Company’s subsidiaries use the local currency as their functional currency. The assets and liabilities of the subsidiaries are, therefore, translated into the U.S. dollars at exchange rates in effect at each balance sheet date, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive income (loss) within equity. Income and expense accounts are translated at average exchange rates during the period. Any gains and losses from transactions denominated in foreign currencies are recognized in the consolidated statements of operations as a separate component of other income (expense).

Accounts Receivable — Accounts receivable (including related parties with zero net book value as of August 31, 2019 and 2018, respectively) are recorded at invoiced amounts, net of allowances for doubtful accounts, and do not bear interest. The allowance for doubtful accounts is based on management’s assessment of the collectability of customer 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. Charges to bad debt expense were $10 thousand during the year ended August 31, 2018. No bad debt expenses were recognized during the year ended August 31, 2019.

Inventories— Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value. Cost is determined using a weighted average. For work in process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Company’s production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write‑downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped.

Property, Plant and Equipment— Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment. Depreciation on property, plant and equipment is calculated using the straight‑line method over the estimated useful lives, less estimated salvage values of the assets. Leasehold improvements are amortized using the straight‑line method over the shorter of the lease term or estimated useful life of the asset.

The estimated useful lives of property, plant and equipment are as follows:

Buildings and improvements	5 to 20	years
Machinery and equipment	1 to 10	years
Leasehold improvements	2 to 10	years
Other equipment	2 to 6	years

Major Maintenance Activities— The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

Intangible Assets— Intangible assets consist of patents, trademarks and acquired technology. Intangible assets are initially recognized at their respective acquisition costs. All of the Company’s intangible assets have been determined to have finite useful lives and are, therefore, amortized using the straight‑line method over their estimated useful lives:

Patents and trademarks	5 to 25	years
Acquired technology	5	years

Impairment of Long‑Lived Assets— Management evaluates the Company’s long‑lived assets, excluding goodwill, that consist of property, plant and equipment and intangible assets, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying amount of the asset over the estimated fair value of the asset. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third‑party independent appraisers, as considered necessary.

No impairment charge was recognized in the years ended August 31, 2019 and 2018.

Recovery of Investments in Unconsolidated Entities —Management evaluates the recoverability of the carrying amount of the Company’s equity investments accounted for using the equity method and cost method when there is an indication of potential impairment. If the estimated realizable value of an equity investment falls below its carrying amount and management determines that this shortfall is other‑than‑temporary, the carrying amount of such investment is written down to its estimated realizable value. In determining whether a decline in value is other‑than‑temporary, management considers the length of time and the extent to which such value has been less than the carrying amount, the financial condition and prospects of the investee, and the Company’s ability and intent to retain the equity investment for a period of time sufficient to allow for any anticipated recovery in value.

No impairment charge was recognized in the year ended August 31, 2019 and 2018.

Income Taxes —The Company accounts for income taxes under the asset and liability method. As part of the process of preparing the consolidated financial statements, the Company estimates its income taxes in each of the jurisdictions in which it operates. The Company estimates actual current tax expense together with assessing temporary differences resulting from differing accounting treatment for items such as accruals and allowances that are not currently deductible for tax purposes. These differences result in deferred tax assets and liabilities which are included in the Company’s consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s consolidated statements of operations become deductible expenses under applicable income tax laws or when operating loss or tax credit carryforwards are utilized. Accordingly, realization of the deferred tax assets is dependent on the Company’s ability to earn future taxable income against which these deductions, losses and credits can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applicable to the taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the Company’s deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period the change in the tax law was enacted.

Management assesses the likelihood that the Company’s deferred tax assets will be recovered from future taxable income and, to the extent management believes that recovery is not more likely than not, a valuation allowance is established. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Stock‑based Compensation —Compensation costs related to employee stock options and restricted stock units are based on the fair value of the options and stock units on the date of grant, net of estimated forfeitures. The Company determines the grant date fair value of the options using the Black‑Scholes option‑pricing model. The related stock‑based compensation expense is generally recognized on a straight‑line basis over the period in which an employee is required to provide service in exchange for the options and stock units, or the vesting period of the respective options and stock units.

Research and Development Costs —Research and development costs are expensed as incurred. Research and development costs are presented as a separate line item in the consolidated statements of operations.

Advertising Costs —Advertising costs are expensed as incurred. Advertising costs totaled $2 thousand and $1 thousand for the years ended August 31, 2019 and 2018, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Segment Reporting —The Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Company’s reportable segments. During the years ended August 31, 2019 and 2018, the Chief Executive Officer has been identified as the chief operating decision maker. The Company’s chief operating decision maker regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the Company does not have any operating segments as defined in the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 280‑10‑50‑1, “Segment Reporting.”

Shipping and Handling Costs — The Company includes costs from shipping and handling within cost of revenues in the period in which they are incurred.

Net Income (Loss) Per Share of SemiLEDs Common Stock —Basic net income (loss) per share is computed by dividing net income (loss) attributable to SemiLEDs stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) attributable to SemiLEDs stockholders is determined by allocating undistributed earnings as if all of the earnings for the period had been distributed. Diluted net income (loss) per share is computed by using the weighted‑average shares of common stock outstanding, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options and unvested restricted stock units using the treasury stock method.

Noncontrolling Interests —Noncontrolling interests are classified in the consolidated statements of operations as part of consolidated net income (loss) and the accumulated amount of noncontrolling interests in the consolidated balance sheets as part of equity. Changes in ownership interest in a consolidated subsidiary that do not result in a loss of control are accounted for as an equity transaction. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.

On September 1, 2018, Taiwan Bandaoti Zhaoming Co., Ltd. (“SBDI”), the Company’s wholly owned operating subsidiary, issued 414,000 common shares and amended its certificate of incorporation to increase its issued common stock from 12,087,715 shares to 12,501,715 shares. As of the date of this report, the increased capital of $176 thousand (NT$5.4 million) has been completely received in cash by Taiwan Bandaoti Zhaoming Co., Ltd. The Company did not subscribe for the newly issued common shares, and, as a result, noncontrolling interest in SBDI was increased from zero to 3.31%. In December 2018, Taiwan SemiLEDs purchased 3,000 common shares of SBDI from non-controlling interests. As of August 31, 2019, noncontrolling interest in SBDI was down to 3.29%.

Commitments and Contingencies — Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Fair Value Measurements — The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

See Note 12 for further details.

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Change to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, “Fair Value Measurement.” ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020. The Company is currently evaluating the impact ASU 2018-13 will have on the disclosures included in its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in ASU 2018-07 specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments in ASU 2018-07 also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. This standard became effective for the Company on September 1, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted the new standard effective September 1, 2018, using the retrospective transition approach. The reclassified restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows were not material for all periods presented.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning September 1, 2020. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in ASU 2016-02 require lessees to recognize all leases on the balance sheet by recording a right-of-use asset and a lease liability, and lessor accounting has been updated to align with the new requirements for lessees. The new standard also provides changes to the existing sale-leaseback guidance. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning September 1, 2019. The FASB has also issued additional standards which provide additional clarification and implementation guidance on the previously issued ASU 2016-02 and have the same effective date as the original standard. The Company plans to apply this guidance on a modified retrospective basis at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings, with no restatement of prior periods. The Company plans to elect the package of practical expedients permitted under the transition guidance within the new standard. In addition, the Company plans to elect the practical expedient to combine lease and non-lease components for all asset classes. The Company also plans to elect the short-term lease exception to keep leases with an initial term of twelve months or less off of the balance sheet. The Company is continuing to evaluate the impact ASU 2016-02 will have on its consolidated financial statements and does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows

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Income Taxes

12 Months Ended

Aug. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

10. INCOME TAXES

Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.

United States

SemiLEDs Corporation is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to the U.S. corporate income tax system including, among other things, lowering the U.S. statutory federal tax rate to 21%. The reduction of the U.S. corporate tax rate caused the Company to adjust its U.S. deferred tax assets and liabilities to the lower federal rate of 21% in the fiscal year ended August 31, 2019. The Tax Act also added many new provisions, including a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries (“transition tax”), changes to bonus depreciation, limits on deductions for executive compensation and interest expense, a tax on global intangible low-taxed income (“GILTI”), the base erosion anti-abuse tax (“BEAT”) and a deduction for foreign-derived intangible income. The Company has elected to account for the tax on GILTI and BEAT as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax. However, the Company has considered the potential impact of GILTI and BEAT on its U.S. federal net operating loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions.

The changes included in the Tax Act are broad and complex. The SEC issued Staff Accounting Bulletin No. 118 (SAB 118), as amended by ASU 2018-05, which provides guidance for companies related to the Tax Act. ASU 2018-05 allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The Company’s accounting for the tax effects of the Tax Act were completed in fiscal 2019. Although the Company believes the effects of the Tax Act have been appropriately recorded, it will continue to monitor, among other things, changes in interpretations of the Tax Act, any legislative action arising because of the Tax Act and any changes in accounting standards for income taxes or related interpretations in response to the Tax Act. The Company intends to assess the impact of any such changes in legislative interpretations or standards and adjust its provision as new information becomes available.

In accordance with SAB 118, the Company has made reasonable estimates related to (1) the remeasurement of its U.S. deferred tax balances for the reduction in the statutory tax rate, (2) the liability for the transition tax and (3) the partial valuation allowance recorded against its federal NOL carryforward due to the impact of the GILTIand BEAT provisions. In fiscal 2019, the Company determined that there were no material changes to the provisional amounts recorded as of August 31, 2019.

Taiwan

The Company’s loss before income taxes is primarily derived from the operations in Taiwan and income tax expense is primarily incurred in Taiwan.

As a result of amendments to the “Taiwan Income Tax Act” enacted by the Office of the President of Taiwan on February 7, 2018, the statutory income tax rate increased from 17% to 20% and the undistributed earning tax, or a surtax, decreased from 10% to 5% effective from January 1, 2018. As a result, the statutory income tax rate in Taiwan is 20% and 17% for the years ended August 31, 2019 and 2018, respectively. An additional surtax, of which rate was reduced from 10% to 5% being applied to the Company starting from September 1, 2018, is assessed on undistributed income for the entities in Taiwan, but only to the extent such income is not distributed or set aside as a legal reserve before the end of the following year. The 5% surtax is recorded in the period the income is earned, and the reduction in the surtax liability is recognized in the period the distribution to stockholders or the setting aside of legal reserve is finalized in the following year.

The Company’s loss before income taxes for the years ended August 31, 2019 and 2018 was attributable to the following jurisdictions (in thousands):

	Years Ended August 31,
	2019			2018
U.S. operations	$	(568	)	$	(369	)
Foreign operations		(2,997	)		(2,612	)
Loss before income taxes	$	(3,565	)	$	(2,981	)

Income tax expense differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% and 34% to loss before income taxes for the years ended August 31, 2019 and 2018, respectively, as a result of the following (in thousands):

	Years Ended August 31,
	2019			2018
Computed “expected” income tax benefit	$	(748	)	$	(1,013	)
Foreign tax rate differential		25			543
Valuation allowance		(3,908	)		(8,428	)
Other		4,631			8,898
Income tax expense	$	—		$	—

Net deferred tax assets (liabilities) as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019			2018
Deferred tax assets:
Inventories, primarily due to inventory obsolescence and    lower of cost or market provisions	$	1,599		$	1,549
Allowance for doubtful accounts		33			104
Accruals and other		79			89
Property, plant and equipment		1,035			1,447
Stock-based compensation		388			622
Investments in unconsolidated entities		—			5,554
Net operating loss carryforwards		27,849			26,049
Total gross deferred tax assets		30,983			35,414
Less: Valuation allowance		(30,983	)		(35,414	)
Deferred tax assets, net of valuation allowance	$	—		$	—

A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and operating loss carryforwards utilizable. Management considers the scheduled reversal of deferred tax liabilities, carryback availability, projected future income, and tax-planning strategies in making this assessment. The Company established full valuation allowances to offset all of its deferred tax assets due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

As of August 31, 2019, the Company had the U.S. net operating losses (the “U.S. NOLs”) of approximately $29,609 thousand, which begins to expire in 2025. The U.S. NOLs generated in tax years prior to August 31, 2018, can be carryforward for twenty years, whereas U.S. NOLs generated after August 31, 2018 can be carryforward indefinitely. The unused net operating loss carryforwards were as follows (in thousands):

	August 31,		Expiration
	2019		Year
U.S. federal net operating loss carryforwards    (prior to August 31, 2018)	$	12,893	2025-2037
U.S.  federal net operating loss carryforwards (after August 31, 2018)		16,716		—
Foreign net operating loss carryforwards    (expiring over the next 5 years)		80,503	2020-2024
Foreign net operating loss carryforwards    (expiring in more than 5 years)		30,616	2025-2029
Foreign net operating loss carryforwards (indefinite life)		9,225		—
Total unused net operating loss carryforwards and income tax    credits	$	149,953

Unrecognized Tax Benefits

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years, makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. Provisional estimate of the Company is that no tax will be due under this provision.

As of August 31, 2019 and 2018, the Company had no unrecognized tax benefits.

The Company is subject to taxation in the United States and various states and certain foreign jurisdictions. As of August 31, 2019, the 2015 through 2018 tax years remain subject to examination by the U.S. tax authorities. With few exceptions, as of August 31, 2019, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for tax years before 2014. Below is a summary of open tax years by major tax jurisdiction:

	Open
	Tax Year
U.S. federal	2015-2018
U.S. state	2015-2018
Foreign—Taiwan	2017-2018

The Company is not currently under examination by income tax authorities in any federal, state or foreign jurisdictions. The Company does not expect that the total amount of unrecognized tax benefits will change significantly within the next 12 months.

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Related Party Transactions (Details) - Chairman and Chief Executive Officer and Largest Shareholder - USD ($)	Jan. 22, 2021	Jan. 14, 2021	Aug. 31, 2019	Jan. 08, 2019
Related Party Transaction [Line Items]
Aggregate amount of loan				$ 3,200,000
Loan agreement, rate of interest				8.00%
Related party loan amount			$ 3,200,000
Scenario Forecast
Related Party Transaction [Line Items]
Related party loan repayment amount	$ 1,700,000	$ 1,500,000

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Stock-based Compensation (Details) $ / shares in Units, $ in Thousands						1 Months Ended				12 Months Ended
	Jan. 01, 2020	Jul. 31, 2019 shares	Jun. 29, 2019 shares	Jan. 01, 2019	Jun. 29, 2018	Jul. 31, 2018 $ / shares shares	Jan. 31, 2018 $ / shares shares	Nov. 30, 2017 $ / shares shares	Apr. 30, 2014 shares	Aug. 31, 2019 USD ($) item shares	Aug. 31, 2018 USD ($) $ / shares shares
Stock-based Compensation
Number of share-based compensation plans | item										1
Additional number of shares authorized for issuance		500,000							250,000
Plan expiration date		Nov. 03, 2023
Maximum grant limit per employee per one year period		35,000
Shares of common stock reserved for issuance										1,021,000	521,000
Common stock available for future issuance (in shares)										691,000	189,000
Stock-based compensation expense (reverse) | $										$ 149	$ 141
Share-based Compensation, Forfeiture Method [Fixed List]										Estimating expected forfeitures
Estimated forfeiture rate (as a percent)										0.00%
Stock-based compensation tax benefit recognized | $										$ 0	$ 0
Taiwan SemiLEDs
Stock-based Compensation
Expected dividend of option grants										0.00%
Maximum
Stock-based Compensation
Vesting period										1 year
Restricted stock unit
Stock-based Compensation
Stock units granted (in shares)											66,000
Grant-date fair value (in dollars per share) | $ / shares											$ 4.23
Directors | Restricted stock unit
Stock-based Compensation
Stock units granted (in shares)						7,500		2,500
Vesting percentage per anniversary of the vesting start date			100.00%
Restricted stock units vested			5,000
Restricted stock units cancelled			2,500
Grant-date fair value (in dollars per share) | $ / shares						$ 4.75		$ 4.15
Vesting percentage					100.00%
Officer and Employees | Restricted stock unit
Stock-based Compensation
Stock units granted (in shares)							56,700
Vesting percentage per anniversary of the vesting start date				50.00%
Grant-date fair value (in dollars per share) | $ / shares							$ 4.10
Officer and Employees | Subsequent Event | Restricted stock unit
Stock-based Compensation
Vesting percentage per anniversary of the vesting start date	50.00%
Employees, directors and nonemployees | Cost of revenues
Stock-based Compensation
Stock-based compensation expense (reverse) | $										$ 44	$ 44
Employees, directors and nonemployees | Research and development
Stock-based Compensation
Stock-based compensation expense (reverse) | $										27	22
Employees, directors and nonemployees | Selling, general and administrative
Stock-based Compensation
Stock-based compensation expense (reverse) | $										$ 78	$ 75

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Investments in Unconsolidated Entities (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Investments in unconsolidated entities
Total investments in unconsolidated entities	$ 894	$ 914
Equity investment without readily determinable fair value	894	$ 914
Xurui Guangdian Co., Ltd. ("China SemiLEDs")
Investments in unconsolidated entities
Percentage Ownership		49.00%
Equity method investments	0	$ 0
Unconsolidated Entities
Investments in unconsolidated entities
Dividend received from unconsolidated entities	0
Intematix
Investments in unconsolidated entities
Impairment loss on investment	$ 0
Net loss recognized from investment		$ (8)

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Summary of Significant Accounting Policies - Others (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Revenues Recognition
Minimum warranty period	3 months
Maximum warranty period	2 years
Restricted Cash and Cash Equivalents
Restricted Cash Equivalents, Current	$ 19	$ 0
Restricted Cash, Noncurrent	89	91
Accounts Receivable
Due from related parties	0	0
Bad debt expense	0	10
Impairment loss on investment	0	0
Advertising Costs
Advertising costs incurred	$ 2	$ 1

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Business

12 Months Ended

Aug. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Business

1. BUSINESS

SemiLEDs Corporation (“SemiLEDs” or the “parent company”) was incorporated in Delaware on January 4, 2005 and is a holding company for various wholly owned subsidiaries. SemiLEDs and its subsidiaries (collectively, the “Company”) develop, manufacture and sell high performance light emitting diodes (“LEDs”). The Company’s core products are LED components, LED modules and systems, as well as LED chips and lighting products. LED components, modules and systems have become the most important part of its business. A portion of the Company’s business consists of the sale of contract manufactured LED products. The Company’s customers are concentrated in a few select markets, including Netherlands, Taiwan, the United States, Germany and India.

As of August 31, 2019, SemiLEDs had four wholly owned subsidiaries. SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, is the Company’s wholly owned operating subsidiary, where a substantial portion of the assets is held and located, and where a portion of research, development, manufacturing and sales activities take place. Taiwan SemiLEDs owns a 97% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacturing and a substantial portion of marketing and sale of LED components, and where most of the Company’s employees are based.

SemiLEDs’ common stock began trading on the NASDAQ Global Select Market under the symbol “LEDS” on December 8, 2010 and was transferred to the NASDAQ Capital Market effective November 5, 2015 where it continues to trade under the same symbol.

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Summary of Significant Accounting Policies - Intangible Assets (Details)	12 Months Ended
	Aug. 31, 2019
Patents and trademarks | Minimum
Finite Lived Intangible Assets [Line Items]
Estimated useful lives	5 years
Patents and trademarks | Maximum
Finite Lived Intangible Assets [Line Items]
Estimated useful lives	25 years
Acquired technology
Finite Lived Intangible Assets [Line Items]
Estimated useful lives	5 years

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Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (3,565)	$ (2,981)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $0 for both periods	25	26
Comprehensive loss	(3,540)	(2,955)
Comprehensive loss attributable to noncontrolling interests	(1)
Comprehensive loss attributable to SemiLEDs stockholders	$ (3,539)	$ (2,955)

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Balance Sheet Components - Property, Plant and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018	Jan. 22, 2021
Property Plant And Equipment [Line Items]
Total property, plant and equipment	$ 53,693		$ 55,700
Less: Accumulated depreciation and amortization	(47,815)		(48,487)
Property, plant and equipment, net	5,878	$ 7,213	7,213
Depreciation expense	1,079	976
Long-term notes
Property Plant And Equipment [Line Items]
Property, plant and equipment pledged as collateral for notes payable and lines of credit	3,700	$ 4,200
Buildings and improvements
Property Plant And Equipment [Line Items]
Total property, plant and equipment	13,238		13,558
Machinery and equipment
Property Plant And Equipment [Line Items]
Total property, plant and equipment	37,988		39,391
Leasehold improvements
Property Plant And Equipment [Line Items]
Total property, plant and equipment	156		150
Other equipment
Property Plant And Equipment [Line Items]
Total property, plant and equipment	2,250		2,312
Construction in progress
Property Plant And Equipment [Line Items]
Total property, plant and equipment	$ 61		$ 289

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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Aug. 31, 2019	Nov. 13, 2019	Feb. 28, 2019
Cover [Abstract]
Entity Registrant Name	SemiLEDs Corp
Entity Central Index Key	0001333822
Trading Symbol	LEDs
Document Type	10-K
Document Period End Date	Aug. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--08-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 6.8
Entity Common Stock, Shares Outstanding		3,594,015
Title of 12(b) Security	Common Stock, par value $0.0000056
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Security Exchange Name	NASDAQ
Entity File Number	001-34992
Entity Tax Identification Number	20-2735523
Entity Address, Address Line One	3F, No.11 Ke Jung Rd.
Entity Address, Address Line Two	Chu‑Nan Site
Entity Address, Address Line Three	Hsinchu Science Park, Chu‑Nan 350
Entity Address, City or Town	Miao‑Li County
Entity Address, Country	TW
Entity Address, Postal Zip Code	350
City Area Code	+886
Local Phone Number	37‑586788
Document Transition Report	false
Document Annual Report	true
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE

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Fair Value Measurements - Others (Details) $ in Thousands	12 Months Ended
	Aug. 31, 2018 USD ($)
Intematix
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Recognized net loss from cost method investment	$ 8

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Income Taxes - Summary of Open Tax Years by Major Tax Jurisdiction (Details)	12 Months Ended
	Aug. 31, 2018
U.S. Federal | Earliest Tax Year
Income Tax Contingency [Line Items]
Open Tax Year	2015
U.S. Federal | Latest Tax Year
Income Tax Contingency [Line Items]
Open Tax Year	2018
U.S. State | Earliest Tax Year
Income Tax Contingency [Line Items]
Open Tax Year	2015
U.S. State | Latest Tax Year
Income Tax Contingency [Line Items]
Open Tax Year	2018
Foreign-Taiwan | Earliest Tax Year
Income Tax Contingency [Line Items]
Open Tax Year	2017
Foreign-Taiwan | Latest Tax Year
Income Tax Contingency [Line Items]
Open Tax Year	2018

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Balance Sheet Components (Tables)

12 Months Ended

Aug. 31, 2019

Disclosure Text Block Supplement [Abstract]

Schedule of inventories

Inventories as of August 31, 2019 and 2018consist of the following (in thousands):

	August 31,
	2019		2018
Raw materials	$	479	$	577
Work in process		728		505
Finished goods		876		736
Total	$	2,083	$	1,818

Schedule of property, plant and equipment

Property, plant and equipment as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019			2018
Buildings and improvements	$	13,238		$	13,558
Machinery and equipment		37,988			39,391
Leasehold improvements		156			150
Other equipment		2,250			2,312
Construction in progress		61			289
Total property, plant and equipment		53,693			55,700
Less: Accumulated depreciation and amortization		(47,815	)		(48,487	)
Property, plant and equipment, net	$	5,878		$	7,213

Schedule of intangible assets

Intangible assets as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31, 2019
	Weighted
	Average	Gross				Net
	Amortization	Carrying		Accumulated		Carrying
	Period (Years)	Amount		Amortization		Amount
Patents and trademarks	15	$	542	$	449	$	93
Acquired technology	5		484		484		—
Total		$	1,026	$	933	$	93

	August 31, 2018
	Weighted
	Average	Gross				Net
	Amortization	Carrying		Accumulated		Carrying
	Period (Years)	Amount		Amortization		Amount
Patents and trademarks	15	$	544	$	446	$	98
Acquired technology	5		494		494		—
Total		$	1,038	$	940	$	98

Schedule of estimated amortization expense of intangible assets

The estimated future amortization expense for the Company’s intangible assets as of August 31, 2019 is as follows (in thousands):

Years Ending August 31,	Total
2020	$	9
2021		9
2022		8
2023		8
2024		8
Thereafter		51
Total	$	93

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019		2018
Advance receipts from sale of our headquarters building	$	—	$	3,199
Accrued compensation and benefits		1,357		1,242
Other (individually less than 5% of total accrued expenses and    other current liabilities)		985		1,064
Total	$	2,342	$	5,505

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Subsequent Event

12 Months Ended

Aug. 31, 2019

Subsequent Events [Abstract]

Subsequent Event

16. SUBSEQUENT EVENT

In September 2019, SemiLEDs granted 5 thousand restricted stock units to its directors that will vest 100% on the earlier of July 31, 2020 and the date of the 2020 annual meeting. The grant-date fair value of the restricted stock units was $2.45 per unit.

In September 2019, SemiLEDs granted 2.5 thousand restricted stock units to a director that will vest 100% on the earlier of September 5, 2020 and the date of the 2020 annual meeting. The grant-date fair value of the restricted stock units was $2.45 per unit.

The Company has analyzed its operations subsequent to August 31, 2019 to the date these consolidated financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these consolidated financial statements.

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Fair Value Measurements

12 Months Ended

Aug. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

12. FAIR VALUE MEASUREMENTS

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of August 31, 2019 and 2018 (in thousands):

	August 31, 2019				August 31, 2018
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents and restricted cash	$	1,382	$	1,382	$	3,421	$	3,421
Receivables (including related parties)		703		703		282		282
Other assets (non-derivatives)		539		539		334		334
Financial liabilities:
Payables (including related parties)	$	3,522	$	3,522	$	3,700	$	3,700
Long-term debt (including current installments)		6,352		6,352		2,348		2,332

The fair values of the financial instruments shown in the above table as of August 31, 2019 and 2018 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects management’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by management based on the best information available in the circumstances, including expected cash flows and appropriately risk‑adjusted discount rates, available observable and unobservable inputs.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

• Cash, cash equivalents, restricted cash, receivables and payables (including related parties) and notes payable to banks: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

• Other assets (non‑derivatives) include primarily value‑added tax (“VAT”) refund receivables, refundable deposits, and restricted time deposits. The fair value of VAT refund receivables approximates the carrying amount because of the short maturity. The fair value of refundable deposits and restricted time deposits with no fixed maturity is based on the carrying amount.

• Long‑term debt: The fair value of the Company’s variable rate long‑term debt is estimated based on the prevailing market rate adjusted by the Company’s credit spread.

During the year ended August 31, 2018, the Company recognized net loss of $8 thousand from cost method investment in Intematix based on the excess of the carry amount over the receivables that the investee notified after its liquidation being completed.

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Stock-based Compensation

12 Months Ended

Aug. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

8. STOCK‑BASED COMPENSATION

The Company currently has one equity incentive plan (the “2010 Plan”), which provides for awards in the form of restricted shares, stock units, stock options or stock appreciation rights to the Company’s employees, officers, directors and consultants. In April 2014, SemiLEDs’ stockholders approved an amendment to the 2010 Plan that increases the number of shares authorized for issuance under the plan by an additional 250 thousand shares. On July 31, 2019, the stockholders approved to increase in the authorized share reserve under the 2010 plan by an additional 500 thousand shares, to extend expiration of the 2010 Plan to November 3, 2023, to remove the IRS Code section 162(m) provisions, and to modify the maximum grant limit to 35 thousand shares to one person in a one year period. Prior to SemiLEDs’ initial public offering, the Company had another stock‑based compensation plan (the “2005 Plan”), but awards are made from the 2010 Plan after the initial public offering. Options outstanding under the 2005 Plan continue to be governed by its existing terms.

A total of 1,021 thousand and 521 thousand shares were reserved for issuance under the 2010 Plan as of August 31, 2019 and 2018, respectively. As of August 31, 2019 and 2018, there were 691 thousand and 189 thousand shares of common stock available for future issuance under the 2010 Plan.

In July 2018, SemiLEDs granted 7.5 thousand restricted stock units to its directors. Among which, 5 thousand restricted stock units vested 100% on June 29, 2019, and 2.5 thousand restricted stock units were cancelled because of resignation of a director. The grant-date fair value of the restricted stock units was $4.75 per unit.

In January 2018, SemiLEDs granted 56.7 thousand restricted stock units to its employees, of which 50% vested on January 1, 2019 and 50% will be vested on January 1, 2020 or will become fully vested upon a change in control. The grant-date fair value of the restricted stock units was $4.10 per unit.

In November 2017, SemiLEDs granted 2.5 thousand restricted stock units to its directors that vested 100% on June 29, 2018. The grant-date fair value of the restricted stock units was $4.15 per unit, respectively.

Stock‑based Compensation Expense

The total stock-based compensation expense consists of stock-based compensation expense for stock options and restricted stock units granted to employees, directors, nonemployees and also includes stock options to purchase SemiLEDs’ common stock as part of an employment agreement related to the Company’s acquisition of SBDI (later on renamed as TSLC Corporation). A summary of the stock-based compensation expense for the years ended August 31, 2019 and 2018 is as follows (in thousands):

	Years Ended August 31,
	2019		2018
Cost of revenues	$	44	$	44
Research and development		27		22
Selling, general and administrative		78		75
	$	149	$	141

Stock‑based compensation expense is recorded net of estimated forfeitures such that expense is recorded only for those stock‑based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. A forfeiture rate of zero is estimated for stock‑based awards with vesting term that is less than or equal to one year from the date of grant.

There was no recognized stock-based compensation tax benefit for the years ended August 31, 2019 and 2018, as the Company recorded a full valuation allowance on net deferred tax assets as of August 31, 2019 and 2018.

Stock Options Awards

The grant date fair value of stock options is determined using the Black‑Scholes option‑pricing model. The Black‑Scholes option‑pricing model requires inputs including the market price of SemiLEDs’ common stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several of the Company’s publicly‑traded peers over the expected term of stock options, risk‑free interest rate and expected dividend. The expected term is derived from historical data on employee exercises and post‑vesting employment termination behavior after taking into account the contractual life of the award. The risk‑free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the related options. The expected dividend has been zero for the Company’s option grants as SemiLEDs has never paid dividends and does not expect to pay dividends for the foreseeable future. Each of these inputs is subjective and generally requires significant judgment to determine.

A summary of the option activity and changes for the years ended August 31, 2019 and 2018 is presented below:

						Weighted-
				Weighted-		Average
	Number of			Average		Remaining		Aggregate
	Stock Options			Exercise		Contractual		Intrinsic
	Outstanding			Price		Life (Years)		Value
	(In thousands)							(In thousands)
Outstanding—September 1, 2017		12		$	116.10		3.0	$	1
Granted		—			—
Forfeited		(2	)		23.40
Exercised		—			—
Outstanding—August 31, 2018		10		$	132.66		2.3	$	—
Granted		—			—
Forfeited		—			103.00
Exercised		—			—
Outstanding—August 31, 2019		10		$	133.82		1.4	$	—
Vested and expected to vest—August 31, 2019		10		$	133.82		1.4	$	—
Exercisable—August 31, 2019		10		$	133.82		1.4	$	—

As of August 31, 2019 and 2018, unrecognized compensation costs related to unvested stock options were nil.

Restricted Stock Units Awards

The grant date fair value of stock units is based upon the market price of SemiLEDs’ common stock on the date of the grant. This fair value is amortized to compensation expense over the vesting term.

A summary of the restricted stock unit awards outstanding and changes for the years ended August 31, 2019 and 2018 is presented below:

				Weighted-
	Number of			Average
	Stock Units			Grant Date
	Outstanding			Fair Value
	(In thousands)
Outstanding—September 1, 2017		16		$	7.33
Granted		66			4.23
Vested		(15	)		6.93
Forfeited		(1	)		10.70
Outstanding—August 31, 2018		66		$	4.25
Granted		—			—
Vested		(35	)		4.34
Forfeited		(2	)		4.75
Outstanding—August 31, 2019		29		$	4.10

As of August 31, 2019 and 2018, unrecognized compensation cost related to unvested restricted stock unit awards of $41 thousand and $202 thousand, respectively, is expected to be recognized over a weighted average period of 0.34 years and 1.24 years, respectively, and will be adjusted for subsequent changes in estimated forfeitures.

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Investments in Unconsolidated Entities

12 Months Ended

Aug. 31, 2019

Investments In Unconsolidated Entities Disclosure [Abstract]

Investments in Unconsolidated Entities

4. INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of August 31, 2019 and 2018 consist of the following (in thousands, except percentages):

	August 31, 2019					August 31, 2018
	Percentage					Percentage
	Ownership			Amount		Ownership			Amount
Equity method investments:
Xurui Guangdian Co., Ltd. (“China SemiLEDs”)		—	%	$	—		49	%	$	—
Equity investment without readily determinable fair value	Various				894	Various				914
Total investments in unconsolidated entities				$	894				$	914

There were no dividends received from unconsolidated entities through August 31, 2019.

Equity Method Investments

The Company owns a 49% equity interest in China SemiLEDs. This investment has a carrying amount of zero as a result of a previously recognized impairment.In May 2019, the Foshan (China) Court declared China SemiLEDs was bankrupt after confirming that China SemiLEDs was incapable to pay outstanding debts.

Equity Investment without Readily Determinable Fair Value

Equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the Company) which do not have readily determinable fair values are recorded as equity investment without readily determinable fair value. All equity investments without readily determinable fair value are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable, and measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.The recoverable value of the investment was determined based on the Company’s best estimate of the amount that could be realized from the investment, which considered the latest financial information. During the year ended August 31, 2018, the Company recognized net loss of $8 thousand from equity investment without readily determinable fair value in Intematix based on the excess of the carry amount over the receivables that the investee notified after its liquidation being completed. During the year ended August 31, 2019, no impairment losses were recognized for the equity investments without readily determinable fair value.

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Commitments and Contingencies (Tables)

12 Months Ended

Aug. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Schedule of aggregate future noncancelable minimum rental payments for the operating leases

The aggregate future noncancelable minimum rental payments for the Company’s operating leases as of August 31, 2019 consist of the following (in thousands):

	Operating
Years Ending August 31,	Leases
2020	$	148
2021		93
2022		29
2023		11
2024		10
Thereafter		56
Total	$	347

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Product and Geographic Information (Tables)

12 Months Ended

Aug. 31, 2019

Segment Reporting [Abstract]

Schedule of revenues by products

Revenues by products for the years ended August 31, 2019 and 2018 are as follows (in thousands):

	Years Ended August 31,
	2019		2018
LED chips	$	93	$	244
LED components		4,430		5,181
Lighting products		632		968
Other(1)		747		1,102
Total	$	5,902	$	7,495

(1) Other includes primarily revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services.

Schedule of revenues by geographic area

Revenues by geography are based on the billing address of the customer. The following table sets forth revenues by geographic area for the years ended August 31, 2019 and 2018 (in thousands):

	Years Ended August 31,
	2019		2018
Netherlands	$	1,573	$	1,786
United States		1,948		1,729
Taiwan		426		1,383
Japan		389		3
India		260		1,005
China		166		573
Germany		400		399
Other (individually less than 5% of total net revenues)		740		617
Total	$	5,902	$	7,495

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Business (Details)	12 Months Ended
	Aug. 31, 2019 subsidiary
Business
Date of entity incorporation	Jan. 04, 2005
Number of wholly owned subsidiaries	4
Taiwan SemiLEDs | Taiwan Bandaoti Zhaoming Co., Ltd.
Business
Ownership interest (as a percent)	97.00%

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Stock-based Compensation - Restricted Stock Units Awards (Details) - Restricted stock unit - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Number of Stock Units Outstanding
Outstanding at the beginning of the period (in shares)	66	16
Granted (in shares)		66
Vested (in shares)	(35)	(15)
Forfeited (in shares)	(2)	(1)
Outstanding at the end of the period (in shares)	29	66
Weighted-Average Grant Date Fair Value
Outstanding at the beginning of the period (in dollars per share)	$ 4.25	$ 7.33
Granted (in dollars per share)		4.23
Vested (in dollars per share)	4.34	6.93
Forfeited (in dollars per share)	4.75	10.70
Outstanding at the end of the period (in dollars per share)	$ 4.10	$ 4.25
Additional information on stock units awards
Unrecognized compensation cost related to unvested restricted stock unit awards	$ 41	$ 202
Weighted-average remaining period over which expense will be recognized	4 months 2 days	1 year 2 months 26 days

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Commitments and Contingencies (Details) $ in Thousands, $ in Thousands			12 Months Ended
	Jan. 25, 2019 USD ($)	Dec. 28, 2018 USD ($)	Aug. 31, 2019 USD ($)	Aug. 31, 2019 TWD ($)	Aug. 31, 2018 USD ($)
Commitments and Contingencies
Lease expense related to operating leases			$ 151		$ 472
Operating lease agreements, description			The Company has 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 December 2020 and December 2029.	The Company has 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 December 2020 and December 2029.
Outstanding deposits for operating leases			$ 10		85
Future noncancellable minimum rental payments
2020			148
2021			93
2022			29
2023			11
2024			10
Thereafter			56
Total			347
Purchase Obligations
Purchase commitments for inventory, property, plant and equipment			158		1,600
Litigation
Advance receipt toward the convertible note			500		$ 500
Settlement agreement, date	January 25, 2019
Value-added-tax	$ 150
Penalty amount	$ 200
Loss contingency paid			3,350
Claims From Well Thrive Ltd.
Litigation
Advance receipt toward the convertible note			500
Epistar Corporation
Litigation
Loss contingency, return of prepayment value		$ 3,000
Former Employee
Litigation
Loss contingency, return of prepayment value			$ 9	$ 293
First mediation proceeding			August 16, 2019	August 16, 2019
Minimum
Commitments and Contingencies
Cancellable and noncancellable operating lease expiration			2020-12	2020-12
Maximum
Commitments and Contingencies
Cancellable and noncancellable operating lease expiration			2029-12	2029-12

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Balance Sheet Components - Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,026	$ 1,038
Accumulated Amortization	933	940
Total	93	98
Amortization expense recognized	14	22
Impairment of intangibles	0	$ 0
Estimated amortization expense for intangible assets
2020	9
2021	9
2022	8
2023	8
2024	8
Thereafter	$ 51
Patents and trademarks
Finite Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (Years)	15 years	15 years
Gross Carrying Amount	$ 542	$ 544
Accumulated Amortization	449	446
Total	$ 93	$ 98
Acquired technology
Finite Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (Years)	5 years	5 years
Gross Carrying Amount	$ 484	$ 494
Accumulated Amortization	$ 484	$ 494

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SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Allowance for Doubtful Accounts
Changes in Valuation and Qualifying Accounts
Beginning balance	$ 477	$ 815
Charged to expense		10
Write-downs charged against the allowance	(277)
Effect of exchange rate changes	(5)	(348)
Ending balance	195	477
Valuation Allowance for Deferred Tax Assets
Changes in Valuation and Qualifying Accounts
Beginning balance	35,414	44,429
Charged to expense	(3,908)	(8,428)
Net operating loss carryforward expired	(194)	(817)
Effect of exchange rate changes	(329)	230
Ending balance	$ 30,983	$ 35,414

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Net Loss Per Share of Common Stock

12 Months Ended

Aug. 31, 2019

Earnings Per Share [Abstract]

Net Loss Per Share of Common Stock

9. NET LOSS PER SHARE OF COMMON STOCK

The following stock‑based compensation plan awards were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have an antidilutive effect on the net loss per share (in thousands of shares):

	Years Ended August 31,
	2019		2018
Stock units and stock options to purchase common stock		11		78

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Indebtedness

12 Months Ended

Aug. 31, 2019

Debt Disclosure [Abstract]

Indebtedness

5. INDEBTEDNESS

Long‑term Debt

Long‑term debt as of August 31, 2019 and 2018 consist of the following loans (in thousands):

	August 31,
	2019			2018
First note payable-E Sun Bank	$	—		$	860
Second note payable- E Sun Bank		—			1,488
First note payable- Mega Bank		1,954			—
Second note payable- Mega Bank		1,198			—
Loans from Chairman and Shareholders		3,200
Total long-term debt		6,352			2,348
Less: Current installments		(398	)		(335	)
Total long-term debt, excluding current installments	$	5,954		$	2,013

Our long-term debt, which consisted of New Taiwan dollar (“NTD”) denominated long-term notes and loans from the Chairman and the largest shareholder of the Company, totaled $6.4 million and $2.3 million as of August 31, 2019 and 2018, respectively.

The long‑term notes payable to E Sun Commercial Bank (the “E Sun Bank”) bearing an interest rates of 1.62% as of August 31, 2018 were payable in monthly installments of principal and interest over the 15-year term of the notes with final payment to occur in May 2024 and in December 2025. The interest rates were based on the annual time deposit rate plus a certain spread. The notes were secured by the Company’s property, plant and equipment, and did not have prepayment penalties or balloon payments upon maturity of the notes. In July 2019, the notes were all repaid.

On July 5, 2019, the Company and Mega International Commercial Bank (“Mega Bank”) entered into two NTD denominated loan agreements in an aggregate amount of $3.2 million (NT$100 million). The first note of $2.0 million (NT$62 million) payable to Mega Bank has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 1.62% currently), and was exclusively used to repay the mentioned-above-notes with E Sun Bank. The second note of $1.2 million (NT$38 million) payable to Mega Bank has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 2% currently) and is available for operating capital. Both note payables are secured by a first priority security interest on the Company’s headquarters building. Income from renting the collateral must be deposited into a Reserved Account opened with Mega Bank, and only the balance of deposits exceeding $79 thousand (NT$2.5 million) after deducting the principal and interest payable for the current month (including the accumulated outstanding amount) may be transferred outwards. The balance of the Reserve Account is US$19 thousand as of August 31, 2019. The two notes payables to Mega Bank require monthly payments of principal in the amount of $21 thousand plus interest and $13 thousand plus interest, respectively, over the 8-year term of the notes with final payment to occur in July 2027.

On January 8, 2019, the Company entered into loan agreements with each of the Chairman and Chief Executive Officer and the largest shareholder of the Company, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of both 8%. All proceeds of the loans were exclusively used to return the deposit to Formosa Epitaxy Incorporation in connection with the cancelled proposed sale of the Company’s headquarters building pursuant to the agreement dated December 15, 2015. The Company is required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively, unless the loans are sooner accelerated pursuant to the loan agreements. As of August 31, 2019, these loans totaled $3.2 million. The loans are secured by a second priority security interest on the headquarters building of the Company.

The scheduled principal payments for the Company’s long-term debt as of August 31, 2019 consist of the following (in thousands):

	Scheduled
	Principal
Years Ending August 31,	Payments
2020	$	398
2021		3,598
2022		398
2023		398
2024		398
Thereafter		1,162
Total	$	6,352

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Condensed Parent Company Only Financial Statements (Tables)

12 Months Ended

Aug. 31, 2019

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Schedule of condensed parent company only balance sheets

The condensed parent company only financial information for SemiLEDs is presented below (in thousands):

	August 31,
Condensed Balance Sheets	2019			2018
ASSETS
Cash and cash equivalents	$	52		$	194
Prepaid expenses and other current assets		7,085			3,973
Total current assets		7,137			4,167
Intangible assets, net		1			1
Investments in subsidiaries		(1,169	)		1,674
TOTAL ASSETS	$	5,969		$	5,842
LIABILITIES AND EQUITY
Advance receipt toward the convertible note	$	500		$	500
Accrued expenses and other current liabilities		528			339
Total current liabilities		1,028			839
Total non-current liabilities		3,200			—
Total equity		1,741			5,003
TOTAL LIABILITIES AND EQUITY	$	5,969		$	5,842

Schedule of condensed parent company only statement of operations

	Years Ended August 31,
Condensed Statements of Operations	2019			2018
Operating expenses:
Selling, general and administrative	$	398		$	754
Loss from operations		(398	)		(754	)
Other income (expenses):
Equity in losses from subsidiaries, net		(2,997	)		(2,619	)
Other income (expenses), net		(170	)		392
Total other expenses, net		(3,167	)		(2,227	)
Net loss	$	(3,565	)	$	(2,981	)

Schedule of condensed parent company only statements of cash flows

	Years Ended August 31,
Condensed Statements of Cash Flows	2019			2018
Net cash provided by (used in):
Operating activities	$	(3,342	)	$	(449	)
Investing activities		—			534
Financing activities		3,200			—
Net increase (decrease) in cash and cash equivalents		(142	)		85
Cash and cash equivalents at beginning of year		194			109
Cash and cash equivalents at end of year	$	52		$	194

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Indebtedness (Tables)

12 Months Ended

Aug. 31, 2019

Debt Disclosure [Abstract]

Schedule of long-term debt

Long‑term debt as of August 31, 2019 and 2018 consist of the following loans (in thousands):

	August 31,
	2019			2018
First note payable-E Sun Bank	$	—		$	860
Second note payable- E Sun Bank		—			1,488
First note payable- Mega Bank		1,954			—
Second note payable- Mega Bank		1,198			—
Loans from Chairman and Shareholders		3,200
Total long-term debt		6,352			2,348
Less: Current installments		(398	)		(335	)
Total long-term debt, excluding current installments	$	5,954		$	2,013

Schedule of principal payments for the long-term debt

The scheduled principal payments for the Company’s long-term debt as of August 31, 2019 consist of the following (in thousands):

	Scheduled
	Principal
Years Ending August 31,	Payments
2020	$	398
2021		3,598
2022		398
2023		398
2024		398
Thereafter		1,162
Total	$	6,352

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Income Taxes (Tables)

12 Months Ended

Aug. 31, 2019

Income Tax Disclosure [Abstract]

Schedule of loss before income taxes

The Company’s loss before income taxes for the years ended August 31, 2019 and 2018 was attributable to the following jurisdictions (in thousands):

	Years Ended August 31,
	2019			2018
U.S. operations	$	(568	)	$	(369	)
Foreign operations		(2,997	)		(2,612	)
Loss before income taxes	$	(3,565	)	$	(2,981	)

Schedule of income tax expense differed from the amounts computed by applying the statutory U.S. federal income tax rate to loss before income taxes

Income tax expense differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% and 34% to loss before income taxes for the years ended August 31, 2019 and 2018, respectively, as a result of the following (in thousands):

	Years Ended August 31,
	2019			2018
Computed “expected” income tax benefit	$	(748	)	$	(1,013	)
Foreign tax rate differential		25			543
Valuation allowance		(3,908	)		(8,428	)
Other		4,631			8,898
Income tax expense	$	—		$	—

Schedule of net deferred tax assets (liabilities)

Net deferred tax assets (liabilities) as of August 31, 2019 and 2018 consist of the following (in thousands):

	August 31,
	2019			2018
Deferred tax assets:
Inventories, primarily due to inventory obsolescence and    lower of cost or market provisions	$	1,599		$	1,549
Allowance for doubtful accounts		33			104
Accruals and other		79			89
Property, plant and equipment		1,035			1,447
Stock-based compensation		388			622
Investments in unconsolidated entities		—			5,554
Net operating loss carryforwards		27,849			26,049
Total gross deferred tax assets		30,983			35,414
Less: Valuation allowance		(30,983	)		(35,414	)
Deferred tax assets, net of valuation allowance	$	—		$	—

Schedule of unused net operating loss carryforwards and income tax credits

As of August 31, 2019, the Company had the U.S. net operating losses (the “U.S. NOLs”) of approximately $29,609 thousand, which begins to expire in 2025. The U.S. NOLs generated in tax years prior to August 31, 2018, can be carryforward for twenty years, whereas U.S. NOLs generated after August 31, 2018 can be carryforward indefinitely. The unused net operating loss carryforwards were as follows (in thousands):

	August 31,		Expiration
	2019		Year
U.S. federal net operating loss carryforwards    (prior to August 31, 2018)	$	12,893	2025-2037
U.S.  federal net operating loss carryforwards (after August 31, 2018)		16,716		—
Foreign net operating loss carryforwards    (expiring over the next 5 years)		80,503	2020-2024
Foreign net operating loss carryforwards    (expiring in more than 5 years)		30,616	2025-2029
Foreign net operating loss carryforwards (indefinite life)		9,225		—
Total unused net operating loss carryforwards and income tax    credits	$	149,953

Summary of open tax years by major tax jurisdiction

Below is a summary of open tax years by major tax jurisdiction:

	Open
	Tax Year
U.S. federal	2015-2018
U.S. state	2015-2018
Foreign—Taiwan	2017-2018

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Common Stock (Details) - shares	Aug. 31, 2019	Aug. 31, 2018	Jun. 29, 2018
Class Of Stock [Line Items]
Common stock, shares authorized	7,500,000	7,500,000	7,500,000
Previously Reported
Class Of Stock [Line Items]
Common stock, shares authorized			75,000,000

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Balance Sheet Components - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Aug. 31, 2019	Aug. 31, 2018
Accrued Liabilities And Other Liabilities [Abstract]
Advance receipts from sale of our headquarters building		$ 3,199
Accrued compensation and benefits	$ 1,357	1,242
Other (individually less than 5% of total accrued expenses and other current liabilities)	985	1,064
Total	$ 2,342	$ 5,505
Maximum percentage of total accrued expenses and other current liabilities	5.00%	5.00%

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Net Loss Per Share of Common Stock (Details) - shares shares in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Stock units and stock options to purchase common stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	11	78

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Subsequent Event (Details) - $ / shares			1 Months Ended			12 Months Ended
	Jul. 31, 2019	Jun. 29, 2018	Sep. 30, 2019	Jul. 31, 2018	Nov. 30, 2017	Aug. 31, 2018
Subsequent Event [Line Items]
Plan expiration date	Nov. 03, 2023
Restricted stock unit
Subsequent Event [Line Items]
Stock units granted (in shares)						66,000
Grant-date fair value (in dollars per share)						$ 4.23
Restricted stock unit | Directors
Subsequent Event [Line Items]
Stock units granted (in shares)				7,500	2,500
Vesting percentage		100.00%
Grant-date fair value (in dollars per share)				$ 4.75	$ 4.15
Restricted stock unit | July 31, 2020 | Directors | Subsequent Event
Subsequent Event [Line Items]
Stock units granted (in shares)			5,000
Vesting percentage			100.00%
Grant-date fair value (in dollars per share)			$ 2.45
Plan expiration date			Jul. 31, 2020
Restricted stock unit | September 5, 2020 | Directors | Subsequent Event
Subsequent Event [Line Items]
Stock units granted (in shares)			2,500
Vesting percentage			100.00%
Grant-date fair value (in dollars per share)			$ 2.45
Plan expiration date			Sep. 05, 2020

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Income Statement [Abstract]
Revenues, net	$ 5,902	$ 7,495
Cost of revenues	5,450	7,930
Gross profit (loss)	452	(435)
Operating expenses:
Research and development	1,613	957
Selling, general and administrative	2,792	3,184
Gain on disposals of long-lived assets, net	(288)	(902)
Total operating expenses	4,117	3,239
Loss from operations	(3,665)	(3,674)
Other income (expenses):
Equity in loss from unconsolidated entities		(8)
Interest expenses, net	(190)	(27)
Other income, net	250	780
Foreign currency transaction gain (loss), net	40	(52)
Total other income (expenses), net	100	693
Loss before income taxes	(3,565)	(2,981)
Net loss	(3,565)	(2,981)
Net loss attributable to SemiLEDs stockholders	$ (3,565)	$ (2,981)
Net loss per share attributable to SemiLEDs stockholders:
Basic and diluted	$ (1.00)	$ (0.84)
Shares used in computing net loss per share attributable to SemiLEDs stockholders:
Basic and diluted	3,580	3,550

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Balance Sheet Components - Inventories (Details) - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Disclosure Text Block Supplement [Abstract]
Raw materials	$ 479	$ 577
Work in process	728	505
Finished goods	876	736
Total	2,083	1,818
Inventory write-downs	$ 743	$ 695

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Summary of Significant Accounting Policies - Basis of Presentation and Use of Estimates (Details) $ in Thousands	3 Months Ended								12 Months Ended
	Aug. 31, 2019 USD ($)	May 31, 2019 USD ($)	Feb. 28, 2019 USD ($)	Nov. 30, 2018 USD ($)	Aug. 31, 2018 USD ($)	May 31, 2018 USD ($)	Feb. 28, 2018 USD ($)	Nov. 30, 2017 USD ($)	Aug. 31, 2019 USD ($) Loan	Aug. 31, 2018 USD ($)
Accounting Policies [Abstract]
Losses from operations	$ 1,027	$ 701	$ 915	$ 1,022	$ 1,218	$ 352	$ 1,239	$ 865	$ 3,665	$ 3,674
Net cash used in operating activities									3,546	1,177
Gross profits (losses) on product sales	329	$ 340	$ 2	$ (219)	(205)	$ 162	$ (444)	$ 52	452	(435)
Cash and cash equivalents	$ 1,363				$ 3,421				$ 1,363	$ 3,421
Number of new loan agreement | Loan									2

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (3,565)	$ (2,981)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,093	998
Stock-based compensation expense	149	141
Bad debt expense	0	10
Provisions for inventory write-downs	743	695
Equity in loss from unconsolidated entities		8
Gain on disposals of long-lived assets, net	(288)	(902)
Income recognized on patents assignment		(499)
Changes in :
Accounts receivable	(427)	801
Inventories	(987)	393
Prepaid expenses and other assets	(145)	129
Accounts payable	(185)	(84)
Accrued expenses and other current liabilities	66	114
Net cash used in operating activities	(3,546)	(1,177)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(127)	(341)
Proceeds from sales of property, plant and equipment	502	1,004
Payments for development of intangible assets	(3)	(4)
Proceeds from sale of investment		54
Proceeds from patents assignment		500
Refund of cash receipt-in-advance	(3,000)
Net cash provided by (used in) investing activities	(2,628)	1,213
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt	6,385
Repayments of long-term debt	(2,330)	(331)
Acquisition of noncontrolling interests	(1)
Net cash provided by (used in) financing activities	4,054	(331)
Effect of exchange rate changes on cash and cash equivalents	79	132
NET DECREASE IN CASH AND CASH EQUIVALENTS	(2,041)	(163)
CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of year	3,512	3,675
CASH, AND CASH EQUIVALENTS, AND RESTRICTED CASH—End of year	1,471	3,512
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	39	43
NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrual related to property, plant and equipment	$ 56	$ 67

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Summary of Significant Accounting Policies - Property, Plant and Equipment (Details)	12 Months Ended
	Aug. 31, 2019
Buildings and improvements | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	5 years
Buildings and improvements | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	20 years
Machinery and equipment | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	1 year
Machinery and equipment | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	10 years
Leasehold improvements | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	2 years
Leasehold improvements | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	10 years
Other equipment | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	2 years
Other equipment | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	6 years

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Quarterly Results of Operations (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Aug. 31, 2019	May 31, 2019	Feb. 28, 2019	Nov. 30, 2018	Aug. 31, 2018	May 31, 2018	Feb. 28, 2018	Nov. 30, 2017	Aug. 31, 2019	Aug. 31, 2018
Quarterly Financial Information Disclosure [Abstract]
Revenues, net	$ 1,555	$ 1,745	$ 1,630	$ 972	$ 1,950	$ 1,999	$ 1,543	$ 2,003	$ 5,902	$ 7,495
Cost of revenues	1,226	1,405	1,628	1,191	2,155	1,837	1,987	1,951	5,450	7,930
Gross profit (loss)	329	340	2	(219)	(205)	162	(444)	52	452	(435)
Operating expenses	1,356	1,041	917	803	1,013	514	795	917	4,117	3,239
Loss from operations	(1,027)	(701)	(915)	(1,022)	(1,218)	(352)	(1,239)	(865)	(3,665)	(3,674)
Net loss attributable to SemiLEDs stockholders	$ (881)	$ (859)	$ (847)	$ (978)	$ (1,131)	$ (326)	$ (1,132)	$ (392)	$ (3,565)	$ (2,981)
Net loss per share attributable to SemiLEDs stockholders, basic and diluted	$ (0.25)	$ (0.24)	$ (0.24)	$ (0.27)	$ (0.32)	$ (0.09)	$ (0.32)	$ (0.11)	$ (1.00)	$ (0.84)

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Product and Geographic Information - Revenues by Products (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Aug. 31, 2019	May 31, 2019	Feb. 28, 2019	Nov. 30, 2018	Aug. 31, 2018	May 31, 2018	Feb. 28, 2018	Nov. 30, 2017	Aug. 31, 2019	Aug. 31, 2018
Revenues by products
Revenues	$ 1,555	$ 1,745	$ 1,630	$ 972	$ 1,950	$ 1,999	$ 1,543	$ 2,003	$ 5,902	$ 7,495
LED chips
Revenues by products
Revenues									93	244
LED components
Revenues by products
Revenues									4,430	5,181
Lighting products
Revenues by products
Revenues									632	968
Other
Revenues by products
Revenues									$ 747	$ 1,102

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SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Aug. 31, 2019

Valuation And Qualifying Accounts [Abstract]

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

SEMILEDS CORPORATION

SCHEDULE II— VALUATION AND QUALIFYING ACCOUNTS

	Years Ended
	August 31,
	2019			2018
	(In  thousands)
Allowance for Doubtful Accounts (Including Related Parties):
Beginning balance	$	477		$	815
Charged to bad debt expense		—			10
Write-downs charged against the allowance		(277	)		—
Effect of exchange rate changes		(5	)		(348	)
Ending balance	$	195		$	477

	Years Ended
	August 31,
	2019			2018
	(In  thousands)
Valuation Allowance for Deferred Tax Assets:
Beginning balance	$	35,414		$	44,429
Charged to income tax expense		(3,908	)		(8,428	)
Net operating loss carryforward expired		(194	)		(817	)
Effect of exchange rate changes		(329	)		230
Ending balance	$	30,983		$	35,414

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Quarterly Results of Operations (Unaudited)

12 Months Ended

Aug. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operations (Unaudited)

13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following tables set forth selected quarterly statement of operations data for each of the years ended August 31, 2019 and 2018 (in thousands, except per share data):

	Three Months Ended
	November 30,			February 28,			May 31,			August 31,			Fiscal
	2018			2019			2019			2019			2019
Revenues, net	$	972		$	1,630		$	1,745		$	1,555		$	5,902
Cost of revenues		1,191			1,628			1,405			1,226			5,450
Gross profit (loss)		(219	)		2			340			329			452
Operating expenses		803			917			1,041			1,356			4,117
Loss from operations		(1,022	)		(915	)		(701	)		(1,027	)		(3,665	)
Net loss attributable to SemiLEDs stockholders	$	(978	)	$	(847	)	$	(859	)	$	(881	)	$	(3,565	)
Net loss per share attributable to SemiLEDs stockholders,    basic and diluted	$	(0.27	)	$	(0.24	)	$	(0.24	)	$	(0.25	)	$	(1.00	)

	Three Months Ended
	November 30,			February 28,			May 31,			August 31,			Fiscal
	2017			2018			2018			2018			2018
Revenues, net	$	2,003		$	1,543		$	1,999		$	1,950		$	7,495
Cost of revenues		1,951			1,987			1,837			2,155			7,930
Gross loss		52			(444	)		162			(205	)		(435	)
Operating expenses		917			795			514			1,013			3,239
Loss from operations		(865	)		(1,239	)		(352	)		(1,218	)		(3,674	)
Net loss attributable to SemiLEDs stockholders	$	(392	)	$	(1,132	)	$	(326	)	$	(1,131	)	$	(2,981	)
Net loss per share attributable to SemiLEDs stockholders,    basic and diluted	$	(0.11	)	$	(0.32	)	$	(0.09	)	$	(0.32	)	$	(0.84	)

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Investments in Unconsolidated Entities (Tables)

12 Months Ended

Aug. 31, 2019

Investments In Unconsolidated Entities Disclosure [Abstract]

Schedule of ownership interest and carrying amounts of investments in unconsolidated entities

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of August 31, 2019 and 2018 consist of the following (in thousands, except percentages):

	August 31, 2019					August 31, 2018
	Percentage					Percentage
	Ownership			Amount		Ownership			Amount
Equity method investments:
Xurui Guangdian Co., Ltd. (“China SemiLEDs”)		—	%	$	—		49	%	$	—
Equity investment without readily determinable fair value	Various				894	Various				914
Total investments in unconsolidated entities				$	894				$	914