Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
May 31, 2016 | Jul. 07, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | SemiLEDs Corp | |
Entity Central Index Key | 1,333,822 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 2,940,290 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | May 31, 2016 | Aug. 31, 2015 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 3,530 | $ 4,808 |
Accounts receivable (including related parties), net of allowance for doubtful accounts of $569 and $586 as of May 31, 2016 and August 31, 2015 respectively | 1,099 | 2,049 |
Inventories | 4,398 | 5,924 |
Prepaid expenses and other current assets | 840 | 891 |
Total current assets | 9,867 | 13,672 |
Property, plant and equipment, net | 17,007 | 20,779 |
Intangible assets, net | 1,246 | 1,353 |
Goodwill | 54 | 54 |
Investments in unconsolidated entities | 1,930 | 2,014 |
Other assets | 601 | 648 |
TOTAL ASSETS | 30,705 | 38,520 |
CURRENT LIABILITIES: | ||
Current installments of long-term debt | 342 | 1,068 |
Accounts payable | 1,701 | 1,650 |
Accrued expenses and other current liabilities | 2,618 | 3,597 |
Total current liabilities | 4,661 | 6,315 |
Long-term debt, excluding current installments | 2,602 | 2,839 |
Other liability | 3,011 | |
Total liabilities | 10,274 | 9,154 |
Commitments and contingencies (Note 5) | ||
SemiLEDs stockholders' equity | ||
Common stock, $0.0000056 par value—75,000 shares authorized; 2,940 shares and 2,905 shares issued and outstanding as of May 31, 2016 and August 31, 2015 respectively | ||
Additional paid-in capital | 172,416 | 172,117 |
Accumulated other comprehensive income | 2,972 | 3,083 |
Accumulated deficit | (155,008) | (145,904) |
Total SemiLEDs stockholders' equity | 20,380 | 29,296 |
Noncontrolling interests | 51 | 70 |
Total equity | 20,431 | 29,366 |
TOTAL LIABILITIES AND EQUITY | $ 30,705 | $ 38,520 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | May 31, 2016 | Aug. 31, 2015 |
Condensed Consolidated Balance Sheets | ||
Allowance for doubtful accounts | $ 569 | $ 586 |
Common stock, par value (in dollars per share) | $ 0.0000056 | $ 0.0000056 |
Common stock, shares authorized | 75,000 | 75,000 |
Common stock, shares issued | 2,940 | 2,905 |
Common stock, shares outstanding | 2,940 | 2,905 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Condensed Consolidated Statements of Operations | ||||
Revenues, net | $ 2,378 | $ 3,508 | $ 8,257 | $ 11,002 |
Cost of revenues | 3,828 | 4,367 | 11,946 | 14,055 |
Gross loss | (1,450) | (859) | (3,689) | (3,053) |
Operating expenses: | ||||
Research and development | 394 | 594 | 1,617 | 1,954 |
Selling, general and administrative | 1,267 | 1,621 | 3,557 | 5,648 |
Employee termination benefits | 59 | 207 | ||
Gain on disposals of long-lived assets, net | (29) | (27) | (287) | |
Total operating expenses | 1,691 | 2,215 | 5,354 | 7,315 |
Loss from operations | (3,141) | (3,074) | (9,043) | (10,368) |
Other income (expenses): | ||||
Equity in gain (loss) from unconsolidated entities | (79) | 40 | (79) | (16) |
Interest expenses, net | (13) | (26) | (42) | (74) |
Other income, net | 48 | 29 | 101 | 88 |
Foreign currency transaction gain (loss), net | (78) | (15) | (60) | 49 |
Total other income (expenses), net | (122) | 28 | (80) | 47 |
Loss before income taxes | (3,263) | (3,046) | (9,123) | (10,321) |
Income tax expense | 1 | |||
Net loss | (3,263) | (3,046) | (9,123) | (10,322) |
Less: Net loss attributable to noncontrolling interests | (10) | (5) | (19) | (48) |
Net loss attributable to SemiLEDs stockholders | $ (3,253) | $ (3,041) | $ (9,104) | $ (10,274) |
Net loss per share attributable to SemiLEDs stockholders: | ||||
Basic and diluted (in dollars per share) | $ (1.11) | $ (1.10) | $ (3.12) | $ (3.60) |
Shares used in computing net loss per share attributable to SemiLEDs stockholders: | ||||
Basic and diluted (in shares) | 2,932 | 2,856 | 2,916 | 2,859 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Condensed Consolidated Statements of Comprehensive Loss | ||||
Net loss | $ (3,263) | $ (3,046) | $ (9,123) | $ (10,322) |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments, net of tax of $0 for all periods presented | 374 | 642 | (111) | (1,003) |
Comprehensive loss | (2,889) | (2,404) | (9,234) | (11,325) |
Comprehensive loss attributable to noncontrolling interests | (12) | (7) | (19) | (48) |
Comprehensive loss attributable to SemiLEDs stockholders | $ (2,877) | $ (2,397) | $ (9,215) | $ (11,277) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Condensed Consolidated Statements of Comprehensive Loss | ||||
Foreign currency translation adjustments tax | $ 0 | $ 0 | $ 0 | $ 0 |
Condensed Consolidated Stateme7
Condensed Consolidated Statement of Changes in Equity - 9 months ended May 31, 2016 - USD ($) shares in Thousands, $ in Thousands | Total SemiLEDs Stockholders' Equity | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Accumulated Deficit | Non-Controlling Interests | Total |
BALANCE at Aug. 31, 2015 | $ 29,296 | $ 172,117 | $ 3,083 | $ (145,904) | $ 70 | $ 29,366 | |
BALANCE (in shares) at Aug. 31, 2015 | 2,905 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Issuance of common stock under equity incentive plans (in shares) | 35 | ||||||
Stock-based compensation | 299 | 299 | 299 | ||||
Comprehensive loss: | |||||||
Other comprehensive loss | (111) | (111) | (111) | ||||
Net loss | (9,104) | (9,104) | (19) | (9,123) | |||
BALANCE at May. 31, 2016 | $ 20,380 | $ 172,416 | $ 2,972 | $ (155,008) | $ 51 | $ 20,431 | |
BALANCE (in shares) at May. 31, 2016 | 2,940 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
May 31, 2016 | May 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (9,123) | $ (10,322) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 4,049 | 3,839 |
Stock-based compensation expense | 299 | 1,092 |
Provisions for inventory write-downs | 1,206 | 1,161 |
Equity in loss from unconsolidated entities | 79 | 16 |
Gain on disposals of long-lived assets, net | (27) | (287) |
Changes in: | ||
Accounts receivable, net | 935 | (88) |
Inventories | 281 | 1,273 |
Prepaid expenses and other | 83 | 429 |
Accounts payable | 224 | (889) |
Accrued expenses and other current liabilities | (915) | (152) |
Net cash used in operating activities | (2,909) | (3,928) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property, plant and equipment | (667) | (1,299) |
Proceeds from sales of property, plant and equipment | 355 | |
Payments for development of intangible assets | (47) | (37) |
Decrease (increase) in restricted cash | 351 | |
Other investing activities | (16) | 28 |
Net cash used in investing activities | (375) | (957) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments of long-term debt | (945) | (1,453) |
Other financing activities | 3,000 | |
Net cash provided by (used in) financing activities | 2,055 | (1,453) |
Effect of exchange rate changes on cash and cash equivalents | (49) | (295) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,278) | (6,633) |
CASH AND CASH EQUIVALENTS—Beginning of period | 4,808 | 12,649 |
CASH AND CASH EQUIVALENTS—End of period | 3,530 | 6,016 |
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Accrual related to property, plant and equipment | $ 351 | 842 |
Proceeds from sale of property, plant and equipment included in other current liabilities | $ 884 |
Business
Business | 9 Months Ended |
May 31, 2016 | |
Business | |
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 and majority 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 chips and LED components, as well as lighting products. LED components have become the most important part of the Company’s 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 Taiwan, the United States and China. As of May 31, 2016 , SemiLEDs had s ix wholly owned subsidiaries and a 93 % equity interest in Ning Xiang Technology Co., Ltd. (“Ning Xiang”), a company engaged in the design, manufacture and sale of lighting fixtures and systems . The most significant of these consolidated subsidiaries is SemiLEDs Optoelectronics Co., Ltd. (“Taiwan SemiLEDs”) located in Hsinchu, Taiwan where a substantial portion of research, development, manufacturing, marketing and sales activities currently takes place and where a substantial portion of the assets is held and located. Taiwan SemiLEDs owns a 100% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd., formerly known as Silicon Base Development, Inc., which is engaged in the research, development, manufacture, marketing and sale of LED components. 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
May 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation —The Company’s unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable provisions of the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the rules and regulations of the SEC. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on December 15, 2015. The unaudited condensed consolidated balance sheet as of August 31, 2015 included herein was derived from the audited consolidated financial statements as of that date. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated balance sheet as of May 31, 2016, the statements of operations and comprehensive loss for the three and nine months ended May 31, 2016 and 2015, the statement of changes in equity for the nine months ended May 31, 2016, and the statements of cash flows for the nine months ended May 31, 2016 and 2015. The results for the three or nine months ended May 31, 2016 are not necessarily indicative of the results to be expected for the year ending August 31, 2016. The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements. The Company has suffered losses from operations of $13.3 million and $24.8 million, gross losses on product sales of $4.1 million and $11.3 million, and net cash used in operating activities of $4.5 million and $15.7 million for the years ended August 31, 2015 and 2014, respectively. Loss from operations for the three and nine months ended May 31, 2016 were $ 3.1 million and $ 9 .0 million, respectively. Gross loss on product sales for the three and nine months ended May 31, 2016 were $ 1.5 million and $ 3.7 million, respectively. Further, at May 31, 2016, the Company’s cash and cash equivalents was down to $3.5 million. These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern. However, management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business. · Rais ing approximately $ 4.5 million of cash through the private placement of additional common shares and debt of the Company to an investor (See Note 1 1 ). · Enter ing into an agreement in December 2015 with a strategic partner for the potential sale of the headquarters building located at Miao-Li, Taiwan. The total cash consideration for the potential sale is $5.2 million to be paid in three installments, of which the initial installment of $3 million was received on December 14, 2015. The sale is expected to close on December 31, 2017. This agreement has been accounted for as a secured financing arrangement as the Company retains the title, rights and benefits of ownership of the building. Consequently, the building has not been de-recognized as an asset from the Company’s consolidated balance sheet and a repayment obligation was recorded in other liability (long-term) when the cash was received. · Suppressing gross loss from chip sales by moving toward a fabless business model through an agreement with an ODM partner entered into on December 31, 2015. The Company is restructuring the chips manufacturing operation. The Company is exploring the opportunities to consign or sell certain equipment to the ODM partner. Part of its employees related to the Company’s chips manufacturing has transferred to the ODM partner. The Company also implemented certain workforce reductions with respect to its chips manufacturing operation. Following the restructuring, the Company expects to reduce payroll, minimize research and development activities associated with chips manufacturing operation and reduce idle capacity charges. This partnership should help the Company obtain a steady source of LED chips with competitive and favorable price for its packaging business, expand the production capacity for LED components, and strengthen its product portfolio and technology. · Increasing sales of Automotive Projects in both China and India by cultivating relationships with automotive lighting developers that are outside the Company’s historical distribution channels. Maintaining the number of display models at automotive lighting facilities in order to provide dealers, communities and consumers with examples of newly designed product. · Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of new higher margin products. In the second quarter of fiscal 2016, the Company’s module product has moved from sampling stage to mass production and begun shipment to customers. S teadily grow th of the module product and the continued commercial sales of its UV LED product are expected to improve the Company’s future gross margin, operating results and cash flows. The Company is targeting niche markets and focused on product enhancement and developing its LED product into many other applications or devices. · C ontinu ing 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. · Rais ing additional cash through 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 should be adequate to satisfy its liquidity requirements for the twelve months ending May 31 , 2017, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern. These unaudited interim condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern. Principles of Consolidation —The unaudited interim condensed consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation. Use of Estimates —The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the collectibility 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, goodwill 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. On December 10, 2015, the Company entered into a Building Purchase Agreement to sell its headquarter building at a sales price o f $5.2 mill ion. The sale is scheduled to close on December 31, 2017. As a result, the Company changed its estimates of the useful live and the salvage value of the building to better reflect the estimated periods during which the building will remain in service and the sales price. The effect of this change in estimate was to increase depreciation expense and to net loss by $77 thousand, and increase negative basic and diluted earnings per share by $0.03 for the period ended May 31, 2016. 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 customer orders. Any failure of such suppliers and contract manufacturers to perform could have an adverse effect upon the Company’s reputation and its ability to distribute its products or satisfy customers’ orders, which could adversely affect the Company’s business, financial position, results of operations and cash flows. Concentration of Credit Risk —Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company keeps its cash and cash equivalents in demand deposits with prominent banks of high credit quality and invests only in money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. As of May 31, 2016 and August 31, 2015, cash and cash equivalents of the Company consisted of the following (in thousands): May 31, August 31, Cash and Cash Equivalents by Location 2016 2015 United States; Denominated in U.S. dollars $ $ Taiwan; Denominated in U.S. dollars Denominated in New Taiwan dollars Denominated in other currencies China (including Hong Kong); Denominated in U.S. dollars Denominated in Renminbi Denominated in H.K. dollars Total cash and cash equivalents $ $ T he 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 collectibility 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. Net revenues generated from sales to the top ten customers represented 62% and 60 % of the Company’s total net revenues for the three and nine months ended May 31, 2016, respectively, and 60% and 61% of the Company’s net revenues for the three and nine months ended May 31, 2015, respectively. The Company’s revenues have been concentrated in a few select markets, including Taiwan, the United States, and China (including Hong Kong). Net revenues generated from sales to customers in these markets, in the aggregate, accounted for 81 % and 80% of the Company’s net revenues for the three and nine months ended May 31, 2016, respectively, and 53% and 70% of the Company’s net revenues for the three and nine months ended May 31, 2015, respectively. Noncontrolling Interests —Noncontrolling interests are classified in the consolidated statements of operations as part of consolidated net income (loss) and the accumulated amount of noncontrolling interests in the consolidated balance sheets as part of equity. 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. Recent Accounting Pronouncements In March 2016, FASB issued ASU No. 2016-09 (“ASU 2016-09”), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting which modifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This standard will be effective for the Company on September 1, 201 7 . The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases, which is intended to improve financial reporting on leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for the Company on September 1, 2019. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15 “Presentation of Financial Statements— Going Concern (Subtopic 205-40) (Topic 718): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The Update provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. This Update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The Update is effective for the Company on September 1, 2017 and management has elected not to early adopt it. When the Update is effective, it could have a material effect on management’s assessment of the Company’s ability to continue as a going concern. In June 2014, the FASB issued ASU No. 2014-12 “Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The new standard is effective for the Company on September 1, 2016. Management expects the adoption of the ASU w ill not have a material effect on the accompanying financial statements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 deferring the effective date of ASU 2014-09 to periods beginning on or after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016, and interim periods within that year. With the deferral, the Company expects t he new standard will be effective for the Company on September 1, 201 8 . The standard permits the use of either the retrospective or cumulative effect transition method. Management is evaluating the effect that ASU 2014-09 will have on the Company’s consolidated financial statements and related disclosures. Management has not yet selected a transition method nor has it determined the effect of the standard on the Company’s ongoing financial reporting. |
Balance Sheet Components
Balance Sheet Components | 9 Months Ended |
May 31, 2016 | |
Balance Sheet Components | |
Balance Sheet Components | 3. Balance Sheet Components Inventories Inventories as of May 31, 2016 and August 31, 2015 consisted of the following (in thousands): May 31, August 31, 2016 2015 Raw materials $ $ Work in process Finished goods Total $ $ Inventory write-downs to estimated net realizable values were $ 1,206 thousand and $1,161 thousand for the nine months ended May 31, 201 6 and 2015 , respectively. Property, Plant and Equipment Property, plant and equipment as of May 31, 2016 and August 31, 20 15 consisted of the following (in thousands): May 31, August 31, 2016 2015 Buildings and improvements $ $ Machinery and equipment Leasehold improvements Other equipment Construction in progress Total property, plant and equipment Less: Accumulated depreciation, amortization and impairment Property, plant and equipment, net $ $ Intangible Assets Intangible assets as of May 31, 2016 and August 31, 2015 consisted of the following (in thousands): May 31, 2016 Weighted Accumulated Average Gross Amortization Net Amortization Carrying and Carrying Period (Years) Amount Impairment Amount Patents and trademarks 15 $ $ $ Acquired technology 5 Total $ $ $ August 31, 2015 Weighted Accumulated Average Gross Amortization Net Amortization Carrying and Carrying Period (Years) Amount Impairment Amount Patents and trademarks 14 $ $ $ Acquired technology 5 Total $ $ $ |
Investments in Unconsolidated E
Investments in Unconsolidated Entities | 9 Months Ended |
May 31, 2016 | |
Investments in Unconsolidated Entities | |
Investments in Unconsolidated Entities | 4. Investments in Unconsolidated Entities The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of May 31, 2016 and August 31, 2015 consisted of the following (in thousands, except percentages): May 31, 2016 August 31, 2015 Percentage Percentage Ownership Amount Ownership Amount Equity method investments: SILQ (Malaysia) Sdn. Bhd. (“SILQ”) % $ % $ Xurui Guangdian Co., Ltd. (“China SemiLEDs”) % — % — Cost method investments Various Various Total investments in unconsolidated entities $ $ There were no dividends received from unconsolidated entities through May 31, 2016 . Equity Method Investments The Company and the other investor in SILQ, a joint venture in Malaysia which wa s engaged in the design, manufacture and sale of lighting fixtures and systems, each owned a 50% equity interest in SILQ in 2009. In January 2014, the Company participated in SILQ’s capital increase and contributed $76 thousand. Following the capital increase, the Company’s equity interest in SILQ was diluted from 50% to 49% , and consequently, the Company recognized a gain on dilution of its investment of $26 thousand. The dilution gain was recognized as additional paid in capital in the consolidated statement of changes in equity. In April 2014, the Company sold part of its equity interest in SILQ to the other investor for a cash consideration of $ 114 thousand and recognized a gain on sale of investment of $37 thousand. The gain was reported in the consolidated statements of operations in equity in losses from unconsolidated entities . Upon consummation of the sale, the Company’s equity interest in SILQ was reduced from 49% to 33% . The Company subsequently invested $130 thousand in SILQ’s capital increase in April 2014 and its equity interest remains unchanged . SILQ applied for dissolution in May 2016 and wa s in the process of being dissolved as of May 31, 2016 . The carrying amount of the Company's investment in SILQ was reduced to its proportionate share of the net realizable value reported by SILQ . The Company still owns a 49 % equity interest in China SemiLEDs. However, this investment has a carrying amount of zero as a result of a previously recognized impairment. Cost Method Investments The fair values of the Company’s cost method investments are not readily available. All cost method investments are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
May 31, 2016 | |
Commitments and Contingencies | |
Commitments and Contingencies | 5 . Commitments and Contingencies Operating Lease Agreements —The Company has several operating leases with unrelated parties, primarily for land, plant and office spaces in Taiwan, which are including cancellable and noncancellable and which expire at various dates between June 201 7 and December 2020. Lease expense related to these noncancellable operating leases was $ 109 thousand and $ 346 thousand for the three and nine months ended May 31, 2016, respectively, and $130 thousand and $438 thousand for the three and nine months ended May 31, 2015, respectively. Lease expense is recognized on a straight-line basis over the term of the lease. The aggregate future noncancellable minimum rental payments for the Company’s operating leases as of May 31, 2016 consisted of the following (in thousands): Operating Years Ending August 31, Leases Remainder of 2016 $ 2017 2018 2019 2020 Thereafter Total $ Purchase Obligations —The Company had purchase commitments for inventory, property, plant and equipment in the amount of $ 1.6 million and $2.6 million as of May 31, 2016 and August 31, 2015, 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. Common stock purchase agreement —The Company entered into a definitive common stock purchase agreement effective December 18, 2014 (the “Agreement”) with Mr. Xiaoqing Han, the Chairman and CEO of Beijing Xiaoqing Environmental Protection Group. The transaction has not closed due to Mr. Han’s difficulty in transferring funds from China. To date, the Company has only received approximately $261 thousand of the $5 million purchase price. Pursuant to the terms of the Agreement, if Mr. Han did not purchase the shares before February 25, 2015, then he is required, upon written request by the Company, to pay the Company $3 million in liquidated damages plus the legal fees incurred by the Company relating to the sale. On June 29, 2015, the Company provided written notice to Mr. Han informing him that he is in breach of the Agreement for failure to provide full payment before February 25, 2015 and demanding that he remit the balance of the purchase price by July 16, 2015 or, alternatively, the $3 million in liquidated damages. On July 6, 2015, Mr. Han replied in a letter that he acknowledged recei pt of the payment demand notice and the balance he owed under the Agreement. He also expressed his intent to continue with the terms and conditions in the Agreement. However, he was unable to transfer personal investment funds out of China. He requested an extension of time to complete the purchase. The Company’s Board rejected his request of granting him more time to execute the Agreement and filed a complaint for breach of contract in the Delaware Court of Chancery in April 2016 . Mr. Han filed an answer and counterclaim seeking rescission of the Agreement and a return of his $261 thousand payment. If the Company receives a judgment, t here can be no assurance when the Company can collect any judgment for liquidated damages. This gain contingency has not be en recognized in these consolidated financial statements , and the amount liquidation damages collected, if any, will be recognized when received. |
Common Stock
Common Stock | 9 Months Ended |
May 31, 2016 | |
Common Stock. | |
Common Stock | 6 . Common Stock R everse S tock S plit — On April 15, 2016, the Company amended its certificate of incorporation to effect a one-for-ten ( 1:10 ) r everse s tock s plit. This reverse stock split became effective as of the close of business on April 15, 2016. The r everse s tock s plit had no effect on the par value of its common stock and did not reduce the number of authorized shares of common stock but reduc ed the number of outstanding shares of common stock by the ratio. Accordingly, the outstanding shares , stock options disclosures, net loss per share, and other per share disclosures for all periods presented have been retrospectively adjusted to reflect the impact of this reverse stock split. |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
May 31, 2016 | |
Stock-based Compensation | |
Stock-based Compensation | 7 . 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 increased the number of shares authorized for issuance under the plan by an additional 2,500 thousand shares. Prior to SemiLEDs’ initial public offering, the Company had another stock-based compensation plan (the “ 2005 Plan”) , but awards are made from the 2010 Plan after the initial public offering. Options outstanding under the 2005 Plan continue to be governed by its existing terms. A total of 6,349 thousand shares was reserved for issuance under the 2005 Plan and 2010 Plan as of both May 31, 2016 and 2015. As of May 31, 2016 and 2015, there were 3,836 thousand and 3,886 thous and shares of common stock available for future issuance under the equity incentive plans. In April 201 6 , SemiLEDs granted 8 thousand restricted stock units to its directors that vest 100% on the earlier of April 12 , 201 7 and the date of the next annual meeting. The grant-date fair value of the restricted stock units was $ 3.4 per unit. During fiscal 2015, SemiLEDs granted 10 thousand restricted stock units to the Company’s executives and employees. These stock units vest over four years at a rate of 25% on each anniversary of the vesting start date. The grant-date fair value of stock units was equal to the closing price of the common stock on the date of grant. In addition, in May 2015 , SemiLEDs granted 5 thousand restricted stock units to its directors that vest ed 100% on April 12, 2016 . The grant-date fair value of the restricted stock units was $ 8 . 20 per unit. Each restricted stock unit represents the contingent right to one share of SemiLEDs’ common stock. The grant date fair value of stock options is determined using the Black-Scholes option - pricing model. The Black-Scholes option-pricing model requires inputs including the market price of SemiLEDs’ common stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several of the Company’s publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of stock units is based upon the market price of SemiLEDs’ common stock on the date of the grant. This fair value is amortized to compensation expense over the vesting term. Stock-based compensation expense is recorded net of estimated forfeitures such that expense is recorded only for those stock-based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. A forfeiture rate of zero is estimated for stock-based awards with vesting term that is less than or equal to one year from the date of grant. A summary of the stock-based compensation expense for the three and nine months ended May 31, 2016 and 2015 was as follows (in thousands): Three Months E nded May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Cost of revenues $ $ $ $ Research and development Selling, general and administrative $ $ $ $ |
Net Loss Per Share of Common St
Net Loss Per Share of Common Stock | 9 Months Ended |
May 31, 2016 | |
Net Loss Per Share of Common Stock | |
Net Loss Per Share of Common Stock | 8 . 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 been anti-dilutive (in thousands of shares): Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Stock units and stock options to purchase common stock 12 23 31 53 |
Income Taxes
Income Taxes | 9 Months Ended |
May 31, 2016 | |
Income Taxes | |
Income Taxes | 9 . Income Taxes The Company’s loss before income taxes for the three and nine months ended May 31, 2016 and 2015 consisted of the following (in thousands): Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 U.S. operations $ $ $ $ Foreign operations Loss before income taxes $ $ $ $ Unrecognized Tax Benefits As of both May 31, 2016 and August 31, 2015, the Company had no unrecognized tax benefits related to tax positions taken in prior periods. The Company files income tax returns in the United States, various U.S. states and certain foreign jurisdictions. The tax years 2005 through 201 5 remain open in most jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or foreign jurisdictions. |
Employee Termination Benefits
Employee Termination Benefits | 9 Months Ended |
May 31, 2016 | |
Employee Termination Benefits | |
Employee Termination Benefits | 10 . Employee Termination Benefits In December 2015, the Company announced a restructuring plan with respect to its chips manufacturing operation in order to better align its fabless business model. Under the restructuring plan, the Company implemented certain workforce reductions with respect to its chips manufacturing operation. In the second quarter of 2016, part of its employees related to the Company’s chips manufacturing t ransferred to their ODM partner. The Company also reduced the workforce at chips manufacturing operation s that are no longer required to support production and operations. Accordingly, e mployee termination benefits of $ 59 thousand for 27 employees, or approximately 1 1 percent of the workforce , and $207 thousand for 66 employees, or approximately 23 percent of the workforce , were recognized for the three and nine months ended May 31 , 2016. |
Subsequent Events
Subsequent Events | 9 Months Ended |
May 31, 2016 | |
Subsequent Events. | |
Subsequent Events | 1 1 . Subsequent Events On July 6 , 2016, the Company entered into a purchase agreement with Dr. Peter Chiou ( the “Investor”) to purchase 577,000 newly issued shares of the Company’s common stock at $5.00 per share. This represents approximately 19.6% of the outstanding shares of the Company. The Investor has also agreed to purchase a $1,615,000 SemiLEDs Corporation’s 0% interest convertible note (the “Note”) with a September 29 , 2017 maturity date. Subject to shareholder approval at the Company’s next shareholders meeting, the Note will be convertible into a number of shares of the Company’s common stock equal to the quotient obtained by dividing (x) $1,615,000 by (y) the conversion price, which is equal to the lesser of $3.40 or the 5 -trading day volume weighted average price of the common st ock on the NASDAQ Stock Market ending on the m aturity d ate. The se investments are expected to be funded to SemiLEDs Corporation in three installments as follows: 1. 1st installment of $1, 0 00,000 has been wired to the Company’s bank account. 2. 2nd installment of $1, 8 85,000 will be wired to the Company o n or before August 15, 2016. Upon completion of the share purchase, Dr. Chiou will be appointed a member of SemiLEDs Corporations’ Board of Directors; Dr. Chiou has agreed to waive any compensation for his services on the Board. 3. 3rd installment of $1, 61 5,000 will be wired to the Company o n or before September 29 , 2016. |
Summary of Significant Accoun20
Summary of Significant Accounting Policy (Policies) | 9 Months Ended |
May 31, 2016 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation —The Company’s unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable provisions of the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the rules and regulations of the SEC. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on December 15, 2015. The unaudited condensed consolidated balance sheet as of August 31, 2015 included herein was derived from the audited consolidated financial statements as of that date. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated balance sheet as of May 31, 2016, the statements of operations and comprehensive loss for the three and nine months ended May 31, 2016 and 2015, the statement of changes in equity for the nine months ended May 31, 2016, and the statements of cash flows for the nine months ended May 31, 2016 and 2015. The results for the three or nine months ended May 31, 2016 are not necessarily indicative of the results to be expected for the year ending August 31, 2016. The accompanying unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements. The Company has suffered losses from operations of $13.3 million and $24.8 million, gross losses on product sales of $4.1 million and $11.3 million, and net cash used in operating activities of $4.5 million and $15.7 million for the years ended August 31, 2015 and 2014, respectively. Loss from operations for the three and nine months ended May 31, 2016 were $ 3.1 million and $ 9 .0 million, respectively. Gross loss on product sales for the three and nine months ended May 31, 2016 were $ 1.5 million and $ 3.7 million, respectively. Further, at May 31, 2016, the Company’s cash and cash equivalents was down to $3.5 million. These facts and conditions raise substantial doubt about the Company’s ability to continue as a going concern. However, management believes that it has developed a liquidity plan, as summarized below, that, if executed successfully, should provide sufficient liquidity to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business. · Rais ing approximately $ 4.5 million of cash through the private placement of additional common shares and debt of the Company to an investor (See Note 1 1 ). · Enter ing into an agreement in December 2015 with a strategic partner for the potential sale of the headquarters building located at Miao-Li, Taiwan. The total cash consideration for the potential sale is $5.2 million to be paid in three installments, of which the initial installment of $3 million was received on December 14, 2015. The sale is expected to close on December 31, 2017. This agreement has been accounted for as a secured financing arrangement as the Company retains the title, rights and benefits of ownership of the building. Consequently, the building has not been de-recognized as an asset from the Company’s consolidated balance sheet and a repayment obligation was recorded in other liability (long-term) when the cash was received. · Suppressing gross loss from chip sales by moving toward a fabless business model through an agreement with an ODM partner entered into on December 31, 2015. The Company is restructuring the chips manufacturing operation. The Company is exploring the opportunities to consign or sell certain equipment to the ODM partner. Part of its employees related to the Company’s chips manufacturing has transferred to the ODM partner. The Company also implemented certain workforce reductions with respect to its chips manufacturing operation. Following the restructuring, the Company expects to reduce payroll, minimize research and development activities associated with chips manufacturing operation and reduce idle capacity charges. This partnership should help the Company obtain a steady source of LED chips with competitive and favorable price for its packaging business, expand the production capacity for LED components, and strengthen its product portfolio and technology. · Increasing sales of Automotive Projects in both China and India by cultivating relationships with automotive lighting developers that are outside the Company’s historical distribution channels. Maintaining the number of display models at automotive lighting facilities in order to provide dealers, communities and consumers with examples of newly designed product. · Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of new higher margin products. In the second quarter of fiscal 2016, the Company’s module product has moved from sampling stage to mass production and begun shipment to customers. S teadily grow th of the module product and the continued commercial sales of its UV LED product are expected to improve the Company’s future gross margin, operating results and cash flows. The Company is targeting niche markets and focused on product enhancement and developing its LED product into many other applications or devices. · C ontinu ing 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. · Rais ing additional cash through 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 should be adequate to satisfy its liquidity requirements for the twelve months ending May 31 , 2017, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern. These unaudited interim condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern. |
Principles of Consolidation | Principles of Consolidation —The unaudited interim condensed consolidated financial statements include the accounts of SemiLEDs and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated during consolidation. |
Use of Estimates | Use of Estimates —The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the collectibility 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, goodwill 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. On December 10, 2015, the Company entered into a Building Purchase Agreement to sell its headquarter building at a sales price o f $5.2 mill ion. The sale is scheduled to close on December 31, 2017. As a result, the Company changed its estimates of the useful live and the salvage value of the building to better reflect the estimated periods during which the building will remain in service and the sales price. The effect of this change in estimate was to increase depreciation expense and to net loss by $77 thousand, and increase negative basic and diluted earnings per share by $0.03 for the period ended May 31, 2016. |
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 customer orders. Any failure of such suppliers and contract manufacturers to perform could have an adverse effect upon the Company’s reputation and its ability to distribute its products or satisfy customers’ orders, which could adversely affect the Company’s business, financial position, results of operations and cash flows. |
Concentration of Credit Risk | 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 May 31, 2016 and August 31, 2015, cash and cash equivalents of the Company consisted of the following (in thousands): May 31, August 31, Cash and Cash Equivalents by Location 2016 2015 United States; Denominated in U.S. dollars $ $ Taiwan; Denominated in U.S. dollars Denominated in New Taiwan dollars Denominated in other currencies China (including Hong Kong); Denominated in U.S. dollars Denominated in Renminbi Denominated in H.K. dollars Total cash and cash equivalents $ $ T he 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 collectibility 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. Net revenues generated from sales to the top ten customers represented 62% and 60 % of the Company’s total net revenues for the three and nine months ended May 31, 2016, respectively, and 60% and 61% of the Company’s net revenues for the three and nine months ended May 31, 2015, respectively. The Company’s revenues have been concentrated in a few select markets, including Taiwan, the United States, and China (including Hong Kong). Net revenues generated from sales to customers in these markets, in the aggregate, accounted for 81 % and 80% of the Company’s net revenues for the three and nine months ended May 31, 2016, respectively, and 53% and 70% of the Company’s net revenues for the three and nine months ended May 31, 2015, respectively. |
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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, FASB issued ASU No. 2016-09 (“ASU 2016-09”), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting which modifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This standard will be effective for the Company on September 1, 201 7 . The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases, which is intended to improve financial reporting on leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for the Company on September 1, 2019. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15 “Presentation of Financial Statements— Going Concern (Subtopic 205-40) (Topic 718): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The Update provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. This Update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The Update is effective for the Company on September 1, 2017 and management has elected not to early adopt it. When the Update is effective, it could have a material effect on management’s assessment of the Company’s ability to continue as a going concern. In June 2014, the FASB issued ASU No. 2014-12 “Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The new standard is effective for the Company on September 1, 2016. Management expects the adoption of the ASU w ill not have a material effect on the accompanying financial statements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 deferring the effective date of ASU 2014-09 to periods beginning on or after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016, and interim periods within that year. With the deferral, the Company expects t he new standard will be effective for the Company on September 1, 201 8 . The standard permits the use of either the retrospective or cumulative effect transition method. Management is evaluating the effect that ASU 2014-09 will have on the Company’s consolidated financial statements and related disclosures. Management has not yet selected a transition method nor has it determined the effect of the standard on the Company’s ongoing financial reporting. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
May 31, 2016 | |
Summary of Significant Accounting Policies | |
Schedule of cash and cash equivalents by location | May 31, August 31, Cash and Cash Equivalents by Location 2016 2015 United States; Denominated in U.S. dollars $ $ Taiwan; Denominated in U.S. dollars Denominated in New Taiwan dollars Denominated in other currencies China (including Hong Kong); Denominated in U.S. dollars Denominated in Renminbi Denominated in H.K. dollars Total cash and cash equivalents $ $ |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
May 31, 2016 | |
Balance Sheet Components | |
Schedule of inventories | May 31, August 31, 2016 2015 Raw materials $ $ Work in process Finished goods Total $ $ |
Schedule of property, plant and equipment | May 31, August 31, 2016 2015 Buildings and improvements $ $ Machinery and equipment Leasehold improvements Other equipment Construction in progress Total property, plant and equipment Less: Accumulated depreciation, amortization and impairment Property, plant and equipment, net $ $ |
Schedule of intangible assets | May 31, 2016 Weighted Accumulated Average Gross Amortization Net Amortization Carrying and Carrying Period (Years) Amount Impairment Amount Patents and trademarks 15 $ $ $ Acquired technology 5 Total $ $ $ August 31, 2015 Weighted Accumulated Average Gross Amortization Net Amortization Carrying and Carrying Period (Years) Amount Impairment Amount Patents and trademarks 14 $ $ $ Acquired technology 5 Total $ $ $ |
Investments in Unconsolidated23
Investments in Unconsolidated Entities (Tables) | 9 Months Ended |
May 31, 2016 | |
Investments in Unconsolidated Entities | |
Schedule of ownership interest and carrying amounts of investments in unconsolidated entities | May 31, 2016 August 31, 2015 Percentage Percentage Ownership Amount Ownership Amount Equity method investments: SILQ (Malaysia) Sdn. Bhd. (“SILQ”) % $ % $ Xurui Guangdian Co., Ltd. (“China SemiLEDs”) % — % — Cost method investments Various Various Total investments in unconsolidated entities $ $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
May 31, 2016 | |
Commitments and Contingencies | |
Schedule of aggregate future noncancellable minimum rental payments for the operating leases | Operating Years Ending August 31, Leases Remainder of 2016 $ 2017 2018 2019 2020 Thereafter Total $ |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 9 Months Ended |
May 31, 2016 | |
Stock-based Compensation | |
Summary of the stock-based compensation expense | Three Months E nded May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Cost of revenues $ $ $ $ Research and development Selling, general and administrative $ $ $ $ |
Net Loss Per Share of Common 26
Net Loss Per Share of Common Stock (Tables) | 9 Months Ended |
May 31, 2016 | |
Net Loss Per Share of Common Stock | |
Schedule of stock-based compensation plan awards were excluded from the computation of diluted net loss per share of common stock | Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Stock units and stock options to purchase common stock 12 23 31 53 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
May 31, 2016 | |
Income Taxes | |
Schedule of loss before income taxes | Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 U.S. operations $ $ $ $ Foreign operations Loss before income taxes $ $ $ $ |
Business (Details)
Business (Details) | May 31, 2016subsidiary |
Business | |
Number of wholly owned subsidiaries | 6 |
Ning Xiang | |
Business | |
Ownership interest (as a percent) | 93.00% |
Taiwan SemiLEDs | Taiwan Bandaoti Zhaoming Co., Ltd. | |
Business | |
Ownership interest (as a percent) | 100.00% |
Summary of Significant Accoun29
Summary of Significant Accounting Policies - Basis of Presentation and Use of Estimates (Details) $ / shares in Units, $ in Thousands | Dec. 14, 2015USD ($) | Dec. 10, 2015USD ($)item | Aug. 31, 2016USD ($) | May 31, 2016USD ($)$ / shares | May 31, 2015USD ($)$ / shares | May 31, 2016USD ($)$ / shares | May 31, 2015USD ($)$ / shares | Aug. 31, 2015USD ($) | Aug. 31, 2014USD ($) |
Losses from operations | $ 3,141 | $ 3,074 | $ 9,043 | $ 10,368 | $ 13,300 | $ 24,800 | |||
Gross losses on product sales | 1,450 | 859 | 3,689 | 3,053 | 4,100 | 11,300 | |||
Net cash used in operating activities | 2,909 | 3,928 | 4,500 | 15,700 | |||||
Cash and cash equivalents | 3,530 | 6,016 | 3,530 | 6,016 | $ 4,808 | $ 12,649 | |||
Total consideration of sale price of Taiwan headquarters building | $ 5,200 | ||||||||
Number of installments | item | 3 | ||||||||
Receipt from initial installment of cash consideration for the sale of its headquarters building | $ 3,000 | ||||||||
Net loss | $ (3,263) | $ (3,046) | $ (9,123) | $ (10,322) | |||||
Basic and diluted earnings per share | $ / shares | $ (1.11) | $ (1.10) | $ (3.12) | $ (3.60) | |||||
Useful life and salvage value | |||||||||
Depreciation expense | $ 77 | ||||||||
Net loss | $ (77) | ||||||||
Basic and diluted earnings per share | $ / shares | $ (0.03) | ||||||||
Subsequent Events | |||||||||
Cash expected to raise | $ 4,500 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies - Concentration of Credit Risk (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
May 31, 2016USD ($)customer | May 31, 2015USD ($) | May 31, 2016USD ($) | May 31, 2015USD ($) | Aug. 31, 2015USD ($) | Aug. 31, 2014USD ($) | |
Concentration of Credit Risk | ||||||
Cash and cash equivalents | $ 3,530 | $ 6,016 | $ 3,530 | $ 6,016 | $ 4,808 | $ 12,649 |
Number of Customers | customer | 10 | |||||
Net revenues | Customer concentration | ||||||
Concentration of Credit Risk | ||||||
Concentration risk (as a percent) | 62.00% | 60.00% | 60.00% | 61.00% | ||
Net revenues | Geographic concentration | ||||||
Concentration of Credit Risk | ||||||
Concentration risk (as a percent) | 81.00% | 53.00% | 80.00% | 70.00% | ||
United States | U.S. Dollars | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | $ 257 | $ 257 | 887 | |||
Taiwan | U.S. Dollars | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | 1,377 | 1,377 | 1,716 | |||
Taiwan | New Taiwan Dollars | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | 1,078 | 1,078 | 1,067 | |||
Taiwan | Other currencies | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | 474 | 474 | 344 | |||
China (including Hong Kong) | U.S. Dollars | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | 7 | 7 | 262 | |||
China (including Hong Kong) | Renminbi | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | 336 | 336 | 531 | |||
China (including Hong Kong) | H.K. dollars | ||||||
Concentration of Credit Risk | ||||||
Cash and cash equivalents | $ 1 | $ 1 | $ 1 |
Balance Sheet Components - Inve
Balance Sheet Components - Inventories (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | Aug. 31, 2015 | |
Balance Sheet Components | |||
Raw materials | $ 1,621 | $ 1,857 | |
Work in process | 628 | 793 | |
Finished goods | 2,149 | 3,274 | |
Total | 4,398 | $ 5,924 | |
Inventory write-downs | $ 1,206 | $ 1,161 |
Balance Sheet Components - Prop
Balance Sheet Components - Property, Plant and Equipment (Details) - USD ($) $ in Thousands | May 31, 2016 | Aug. 31, 2015 |
Property, Plant and Equipment | ||
Total property, plant and equipment | $ 76,336 | $ 77,582 |
Less: Accumulated depreciation, amortization and impairment | (59,329) | (56,803) |
Property, plant and equipment, net | 17,007 | 20,779 |
Buildings and improvements | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 14,534 | 13,883 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 56,624 | 58,075 |
Leasehold improvements | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 482 | 474 |
Other equipment | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | 3,722 | 3,732 |
Construction in progress | ||
Property, Plant and Equipment | ||
Total property, plant and equipment | $ 974 | $ 1,418 |
Balance Sheet Components - Inta
Balance Sheet Components - Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
May 31, 2016 | Aug. 31, 2015 | |
Intangible Assets | ||
Gross Carrying Amount | $ 2,091 | $ 2,052 |
Accumulated Amortization and Impairment | 845 | 699 |
Total | $ 1,246 | $ 1,353 |
Patents and trademarks | ||
Intangible Assets | ||
Weighted Average Amortization Period | 15 years | 14 years |
Gross Carrying Amount | $ 1,432 | $ 1,390 |
Accumulated Amortization and Impairment | 405 | 333 |
Total | $ 1,027 | $ 1,057 |
Acquired technology | ||
Intangible Assets | ||
Weighted Average Amortization Period | 5 years | 5 years |
Gross Carrying Amount | $ 659 | $ 662 |
Accumulated Amortization and Impairment | 440 | 366 |
Total | $ 219 | $ 296 |
Investments in Unconsolidated34
Investments in Unconsolidated Entities (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |||
Apr. 30, 2014 | Jan. 31, 2014 | May 31, 2016 | Aug. 31, 2015 | Aug. 31, 2009 | |
Investments in unconsolidated entities | |||||
Cost method investments | $ 1,881 | $ 1,885 | |||
Total investments in unconsolidated entities | 1,930 | $ 2,014 | |||
Dividend received from unconsolidated entities | $ 0 | ||||
SILQ (Malaysia) Sdn. Bhd. (“SILQ”) | |||||
Investments in unconsolidated entities | |||||
Percentage ownership | 33.00% | 49.00% | 33.00% | 33.00% | 50.00% |
Equity method investments | $ 49 | $ 129 | |||
Payment for investments | $ 130 | $ 76 | |||
Dilution gain on equity method investment | $ 26 | ||||
Cash consideration from sale of the investment | 114 | ||||
Gain on sale of investment | $ 37 | ||||
Xurui Guangdian Co., Ltd. (“China SemiLEDs”) | |||||
Investments in unconsolidated entities | |||||
Percentage ownership | 49.00% | 49.00% | |||
Equity method investments | $ 0 | $ 0 |
Commitments and Contingencies35
Commitments and Contingencies (Details) - USD ($) $ in Thousands | Dec. 18, 2014 | May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | May 31, 2016 | Apr. 30, 2016 | Aug. 31, 2015 | Feb. 25, 2015 |
Operating lease agreements | |||||||||
Lease expense related to operating leases | $ 109 | $ 130 | $ 346 | $ 438 | |||||
Future noncancellable minimum rental payments | |||||||||
Remainder of 2016 | 115 | 115 | $ 115 | ||||||
2,017 | 476 | 476 | 476 | ||||||
2,018 | 317 | 317 | 317 | ||||||
2,019 | 117 | 117 | 117 | ||||||
2,020 | 99 | 99 | 99 | ||||||
Thereafter | 33 | 33 | 33 | ||||||
Total | 1,157 | 1,157 | 1,157 | ||||||
Purchase Obligations | |||||||||
Purchase commitments for inventory, property, plant and equipment | $ 1,600 | $ 1,600 | 1,600 | $ 2,600 | |||||
Loss Contingency | |||||||||
Unrecognized contingent gain | $ 261 | ||||||||
Xiaoqing Han. | |||||||||
Loss Contingency | |||||||||
Amount received from sale of common stock | $ 261 | ||||||||
Purchase price as per agreement | $ 5,000 | ||||||||
Liquidating damages owed to entity if buyer does not purchase common stock | $ 3,000 |
Common Stock (Details)
Common Stock (Details) | Apr. 15, 2016 |
Common Stock. | |
Reverse stock split ratio | 0.10 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) $ / shares in Units, $ in Thousands | Apr. 12, 2016 | Apr. 30, 2016$ / sharesshares | May 31, 2015$ / sharesshares | Apr. 30, 2014shares | May 31, 2016USD ($)itemshares | May 31, 2015USD ($)shares | May 31, 2016USD ($)itemshares | May 31, 2015USD ($)shares | Aug. 31, 2015shares |
Stock-based Compensation | |||||||||
Number of share-based compensation plans | item | 1 | 1 | |||||||
Additional number of shares authorized for issuance | 2,500,000 | ||||||||
Shares of common stock reserved for issuance | 6,349,000 | 6,349,000 | 6,349,000 | 6,349,000 | 6,349,000 | ||||
Stock-based compensation expense | $ | $ 99 | $ 267 | $ 299 | $ 1,092 | |||||
Cost of revenues | |||||||||
Stock-based Compensation | |||||||||
Stock-based compensation expense | $ | 20 | 49 | 74 | 264 | |||||
Research and development | |||||||||
Stock-based Compensation | |||||||||
Stock-based compensation expense | $ | 7 | 22 | 37 | 133 | |||||
Selling, general and administrative | |||||||||
Stock-based Compensation | |||||||||
Stock-based compensation expense | $ | $ 72 | $ 196 | $ 188 | $ 695 | |||||
Common Stock | |||||||||
Stock-based Compensation | |||||||||
Common stock available for future issuance (in shares) | 3,886,000 | 3,836,000 | 3,886,000 | 3,836,000 | 3,886,000 | ||||
Employee Stock Option | |||||||||
Stock-based Compensation | |||||||||
Estimated forfeiture rate (as a percent) | 0.00% | 0.00% | |||||||
Employee Stock Option | Maximum | |||||||||
Stock-based Compensation | |||||||||
Vesting period | 1 year | ||||||||
Executives and employees | Restricted stock unit | |||||||||
Stock-based Compensation | |||||||||
Stock units granted (in shares) | 10,000 | ||||||||
Vesting period | 4 years | ||||||||
Vesting percentage on each anniversary of the vesting start date of awards granted | 25.00% | ||||||||
Directors | Restricted stock unit | |||||||||
Stock-based Compensation | |||||||||
Stock units granted (in shares) | 8,000 | ||||||||
Vesting percentage on the earlier of the first anniversary of the vesting start date and the date of the next annual meeting | 100.00% | ||||||||
Grant-date fair value (in dollars per share) | $ / shares | $ 3.4 | $ 8.20 | |||||||
Options granted of common stock (in shares) | 5,000 | ||||||||
Vesting percentage | 100.00% | ||||||||
Number of shares of common stock for which contingent right is established by restricted stock unit (in shares) | 1 |
Net Loss Per Share of Common 38
Net Loss Per Share of Common Stock (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Stock units and stock options to purchase common stock | ||||
Securities excluded from computation of diluted net income (loss) per share of common stock | ||||
Antidilutive securities (in shares) | 12 | 23 | 31 | 53 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | Aug. 31, 2015 | |
Loss before income taxes | |||||
U.S. operations | $ (271) | $ (203) | $ (518) | $ (706) | |
Foreign operations | (2,992) | (2,843) | (8,605) | (9,615) | |
Loss before income taxes | (3,263) | $ (3,046) | (9,123) | $ (10,321) | |
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 |
Employee Termination Benefits (
Employee Termination Benefits (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
May 31, 2016USD ($)employee | May 31, 2016USD ($)employee | |
Employee Termination Benefits | ||
Employee termination benefits | $ | $ 59 | $ 207 |
Number of employees | employee | 27 | 66 |
Percentage of workforce as compared to number of employees | 11.00% | 23.00% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Events - Dr. Peter Chiou (the "Investor") | Jul. 06, 2016USD ($)$ / sharesshares |
Subsequent Events | |
Amount of first installment | $ 1,000,000 |
Amount of second installment | 1,885,000 |
Amount of third installment | 1,615,000 |
Convertible note | |
Subsequent Events | |
Amount of convertible note | $ 1,615,000 |
Interest rate of convertible note | 0.00% |
Number of trading days | 5 days |
Minimum | Convertible note | |
Subsequent Events | |
Conversion price of convertible note | $ / shares | $ 3.40 |
Private placement | |
Subsequent Events | |
Number of shares sold | shares | 577,000 |
Offering price (in dollars per share) | $ / shares | $ 5 |
Percentage of outstanding shares sold | 19.60% |