LEDS 10-K & 10-Q changes, risk factors and insider trading

We incurred net losses attributable to SemiLEDs stockholders of $2.0$1.1 million and $2.7$2.0 million for the years ended August 31, 20242025 and 2023,2024, 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, 2024,2025, we had an accumulated deficit of $189$190 million.million And ourand cash and cash equivalents decreasedof to$2.6 $1.7million. million at August 31, 2024, theseThese 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 a 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, 2025,2026, 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 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 derive asubstantially significant portionall 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, 20242025 and 2023,2024, our top ten customers collectively accounted for approximately 99% and 91% of our revenues.revenues, respectively. Some of our largest customers and what we produce/have produced for them change 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, 20242025 and 2023,2024, sales to our three largest customers, in the aggregate, accounted for approximately 61%94% and 53%61% of our revenues, respectively.

WeHistorically, derivewe have derived 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.

Until recently, LED components arewere the core products from which we derivederived our revenues. Revenues attributable to the sales of our LED components represented approximately 51%5% and 56%51% of our revenues for the years ended August 31, 20242025 and 2023,2024, respectively. WeExcluding revenues from buy-sell orders of equipment, 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.

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. In 2023, sales and gross margin both decreased due to a decline in other revenues rather than LED components compared to 2022. In 2024, sales decreased but gross margin increased due to higher other revenues rather than LED chips, LED components and lighting products sales compared to 2023. In 2025, sales increased but gross margin decreased due to higher other revenues, which generally have lower margins than LED chips, LED components and lighting products sales. We intend to continue to pursue opportunities for profitable growth in areas of business where we see the best opportunity for our UV market, focusing 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, like buy-sell orders of equipment, 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.

While we intend to focus on managing our costs and expenses in the short term,expenses, over the long term we expect to be required to invest substantially in LED components product development and production equipment if we are to grow. 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.

Our revenues are highly concentrated in a few select markets, including India, Japan, the Netherlands,Netherlands Taiwan,and the United States and Japan.States. Net revenues generated from sales to customers in India, Japan, the Netherlands,Netherlands Taiwan,and the United States, and Japan, in the aggregate, accounted for approximately 91%97% and 89%78% of our net revenues for the years ended August 31, 20242025 and 2023,2024, 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.

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

Our ability to receive dividends and other payments from Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. 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.Bandaoti Zhaoming Co., Ltd.

Our ability to operate our holding company in the U.S. is dependent on Taiwan SemiLEDs’Bandaoti Zhaoming Co., Ltd.’s ability to repay its obligations to SemiLEDs Corporation.

SemiLEDs Corporation has substantial intercompany receivables from Taiwan SemiLEDs.Bandaoti Zhaoming Co., Ltd. However, we are dependent on Taiwan SemiLEDs’Bandaoti Zhaoming Co., Ltd.’s 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 SemiLEDsBandaoti Zhaoming Co., Ltd. entered into two new loan agreements to refinance existing real estate loans of Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. and provide for operating capital.

Our ability to make further investments in Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. may be dependent on regulatory approvals in Taiwan.

Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. depends on us to meet its equity financing requirements. Any capital contribution by us to Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. 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 SemiLEDsBandaoti Zhaoming Co., Ltd. may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

Although we are incorporated in Delaware, a substantial portion of our operations are conducted in Taiwan through Taiwan SemiLEDsBandaoti andZhaoming itsCo., subsidiaries.Ltd. 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.

Our common stock is listed on the Nasdaq Capital Market. To maintain that listing, we must satisfy the continued listing requirements of Nasdaq for inclusioncontinued inlisting on the Nasdaq Capital Market, including among other things, a minimum stockholders’ equity of $2.5 million and a minimum bid price for our common stock of $1.00 per share, 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.share.

Additionally,On onDecember July4, 11, 2023,2024, we received a notice from NASDAQNasdaq indicating that we did not meet the minimum of $2,500,000$2.5 million in stockholders’ equity required by Nasdaq Listing Rule 5550(b)(1) for continued listing or the alternatives of market value of listed securities or net income from continuing operations. Pursuant to the Nasdaq listing rule, we submitted a plan to regain compliance.Nasdaq. Nasdaq accepted our planplan, and we were granted us an extension of up to January180 8,calendar 2024.days from December 4, 2024 to evidence compliance.

However, our stockholders equity has again declined below the $2,500,000 minimum as of August 31, 2024, so we may receive another deficiency notice. There can be no assurance that we will be able to regain or maintain compliance with Nasdaq’s continued listing requirements or that our common stock will not be delisted from Nasdaq in the future.Nasdaq.

We have significant foreign currency exposure,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 announcementrecently ofimposed Brexitand proposed tariffs by the United States on goods imported from many countries 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.

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,India, Taiwan,Japan, the Netherlands and the United States, and Japan.States. We also sell our “Enhanced Vertical,” or EV, LED product series in blue, white, green and UV in selected markets. Our lighting products customers are primarily original design manufacturers, or ODMs, of lighting products and the end users of lighting devices. We also contract other manufacturers to produce for our sale certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process. In addition, in fiscal year 2025, we entered into a number buy-sell orders for equipment that we purchased and then sold to our customer.

General economic conditions and geographic concentration. Many countries including the United States and the European Union (the “E.U.”) members have instituted, or have announced plans to institute, government regulations and programs designed to encourage or mandate increased energy efficiency in lighting. These actions include in certain cases banning the sale after specified dates of certain forms of incandescent lighting, which are advancing the adoption of more energy efficient lighting solutions such as LEDs. When the global economy slows or a financial crisis occurs, consumer and government confidence declines, with levels of government grants and subsidies for LED adoption and consumer spending likely to be adversely impacted. Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands,Netherlands Taiwan,and the United States, and Japan.States. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets. For example, the aggressive support by the Chinese government for the LED industry through significant government incentives and subsidies to encourage the use of LED lighting and to establish the LED‑sector companies has resulted in production overcapacity in the market and intense competition. Furthermore, due to Chinese package manufacturers increasing usage of domestic LED chips, prices are increasingly competitive, leading to Chinese manufacturers growing market share in the global LED industry. In addition, we have historically derived a significant portion of our revenues from a limited number of customers. Some of our largest customers and what we produce/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, 20242025 and 2023,2024, sales to our three largest customers, in the aggregate, accounted for 61%94% and 53%61% of our revenues, respectively.

Our customers consist primarily of packagers, ODMs and end‑customers. Our revenues attributable to our ten largest customers accounted for 99% and 91% of our revenues for the years ended August 31, 20242025 and 2023.2024, respectively.

Our revenues have been concentrated in a few select markets, including India, Japan, the Netherlands,Netherlands Taiwan,and the United States and Japan.States. Net revenues generated from these countries, in the aggregate, accounted for 91%97% and 89%78% of our net revenues for the years ended August 31, 20242025 and 2023,2024, respectively. We expect that our revenues will continue to be substantially derived from these countries for the foreseeable future. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets.

Gain on disposal of long‑lived assets, net. We recognized azero gain ofand $49 thousand andof zerogain on the disposal of long-lived assets for the years ended August 31, 20242025 and 2023,2024, respectively. Due to the excess capacity charges that we have suffered for many years, considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of a certain level of our idle equipment.

Foreign currency transaction gain (loss), net. We recognized a foreign currency transaction gain of $464 thousand and a foreign currency transaction loss of $13 thousand and $52 thousand for the years ended August 31, 20242025 and 2023,2024, respectively, primarily due to the appreciationimpact of fluctuations in the exchange rate of the U.S. dollar against the NT dollar from bank deposits and accounts payable held by Taiwan SemiLEDs and Taiwan Bandaoti Zhaoming Co., Ltd. in currency other than the functional currency of such subsidiaries.

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,Bandaoti Zhaoming Co., Ltd., our wholly owned foreign subsidiary. Because Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. conducts its manufacturing activities in Taiwan, the income or loss of Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. is included in our consolidated financial statements, but is not considered taxable income for United States taxation purposes pursuant to Section 954(d)(1)(A) of the United States Internal Revenue Code. This generally enables a United States taxpayer, such as us, to indefinitely defer United States taxation on the profits earned by its controlled foreign corporations and affiliates by retaining the earnings in such entities. We do not currently have any plans to repatriate any of our retained earnings from any of our controlled foreign subsidiaries or affiliates and we do not currently have any plans to declare or pay any dividends from such entities.

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‑conformingnon-conforming shipments and product warranty claims. Based on historical return percentages, which have not been material to date, and other relevant factors, the Company estimates its potential future exposure on recorded product sales, which reduces product revenues in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets. The Company also provides standard product warranties on its products, which generally range from three months to two years. Management estimates the Company’s warranty obligations as a percentage of revenues, based on historical knowledge of warranty costs and other relevant factors. To date, the related estimated warranty provisions have been insignificant. Refer to Note 2 to the Consolidated Financial Statements for our revenue recognition policies.

The allowance for doubtful accounts is based on management’s assessment of the collectability of customer accounts. Management regularly reviews the allowance by considering certain factors such as historical experience, industry data, credit quality, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. No badBad debt expenses were recognized$115 duringthousand and zero for the years ended August 31, 20242025 and 2023.2024, respectively.

We are a Delaware corporation and, under SEC requirements, must report our financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. At the same time, our subsidiaries use the local currency as their functional currency. For example, the functional currency for Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. is the NT dollar. The assets and liabilities of the subsidiaries are, therefore, translated into U.S. dollars at exchange rates in effect at each balance sheet date, and income and expense accounts are translated at average exchange rates during the period. The resulting translation adjustments are recorded to a separate component of accumulated other comprehensive income (loss) within equity. Any gains and losses from transactions denominated in currencies other than their functional currencies are recognized in the consolidated statements of operations as a separate component of other income (expense). Due to exchange rate fluctuations, such translated amounts may vary from quarter to quarter even in circumstances where such amounts have not materially changed when denominated in their functional currencies.

Revenues attributable to the sales of our LED components were $2.7$2.0 million and $3.3$2.7 million, representing 51% and 56%million of our revenues for the years ended August 31, 20242025 and 2023,2024, respectively. The decrease in sales of LED components was primarily due to less volumes sold.sold for the LED components.

Revenues attributable to the sales of lighting products were $212$228 thousand and $321$212 thousand, representing 4% and 5%thousand of our revenues for the years ended August 31, 20242025 and 2023,2024, respectively. The decreaseincrease in sales of lighting products was mainlyprimarily due to lessvarying demandvolumes sold for LED lighting products.

Revenues attributable to the sales of our LED chips were $93$149 thousand and $111$93 thousand, representing 2%thousand of our revenues for both the years ended August 31, 20242025 and 2023.2024, respectively. The slightincrease decreasein sales of LED chips was primarily due to a lowervarying volumes ofsold for LED chips sold in the fiscal year ended August 31, 2024.chips.

Revenues attributable to other revenues representedwere 43%$41 million and 37%$2 million of our revenues for the years ended August 31, 20242025 and 2023,2024, respectively. The increase in other revenues was primarily due to thebuy-sell provisionpurchase orders of services and the sale of raw materials.equipment.

Research and development. Our research and development expenses were $1.2 million andfor $1.4 million forboth the year ended August 31, 20242025 and 2023, respectively.2024. The slight decrease was primarily due to a $124 thousand decrease in payroll expense and a $64 thousand decrease in materials and supplies.supplies, partially offset by a $10 thousand increase in payroll expense.

Selling, general and administrative. Our selling, general and administrative expenses were $2.9 million andfor $3.1 million forboth the years ended August 31, 20242025 and 2023, respectively.2024. The slight decrease was mainly attributable to a $116$134 thousand decrease in payroll expense, offset by a $15$115 thousand decreaseincrease in insurancebad expenses,debt a $10 thousand decrease in repair and maintenance expense and a $8 thousand decrease in employee benefit.expense.

Gain on disposal of long‑lived assets, net. We recognized azero gain ofand $49 thousand andof zerogain on the disposal of long-lived assets for the years ended August 31, 20242025 and 2023,2024, respectively. Due to the excess capacity charges that we have suffered for many years, and considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of certain of our idle equipment.equipment in the year ended August 31, 2024.

Interest expenses, net. Interest expenses, netnet, which primarily consisted of accrued interest payments on convertible notes, NT dollar denominated long-term notes and $2.4 million of loans with our Chairman and Chief Executive Officer and our largest shareholder.shareholder, decreased from $247 thousand for the year ended August 31, 2024 to $140 thousand for the year ended August 31, 2025. The decrease in interest expense, net was primarily due to lowerthe outstandingrepayment debt.$1.6 million of loan principal in fiscal year 2025.

Foreign currency transaction loss,gain (loss), net. We recognized a net foreign currency transaction gain of $464 thousand and a net foreign currency transaction loss of $13 thousand and a net foreign currency transaction loss of $52 thousand for the years ended August 31, 20242025 and 2023,2024, respectively, primarily due to the appreciationimpact of fluctuations in the exchange rate of the U.S. dollar against the NT dollar from bank deposits and accounts payables held by Taiwan SemiLEDs and Taiwan Bandaoti Zhaoming Co., Ltd. in currency other than the functional currency of such subsidiaries.receivable.

Our effective tax rate is expected to be approximately zero for both fiscal year 20242025 and 2023,2024, since Taiwan SemiLEDsBandaoti Zhaoming Co., Ltd. incurred losses, and because we provided a full valuation allowance on all deferred tax assets, which consisted primarily of net operating loss carryforwards and foreign investment loss.

We recognized zero and $5 thousand net income attributable to non-controlling interests and zero net loss attributable to non-controlling interests for the year ended August 31, 20242025 and 2023,2024, respectively, which was attributable to the share of the net income of Taiwan Bandaoti Zhaoming Co., Ltd. held by the non-controlling holders. Non-controlling interests represented zero and 2.63% equity interest in Taiwan Bandaoti Zhaoming Co., Ltd.Ltd., foras both the years endedof August 31, 20242025 and 2023.2024, respectively.

We have several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancellable and noncancelable leases that expire at various dates between DecemberAugust 20242026 and December 2040. See Note 6, "Commitments and Contingencies" in the notes to our audited consolidated financial statements in this Form 10-K.

Our NT dollar denominated long-term notes, totaled $1.3$908 millionthousand and $1.8$1.3 million as of August 31, 20242025 and 2023,2024, respectively. These long-term notes consistedconsist of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million). The first loan originally for $2.0 million (NT$62 million) has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 2.415% currently), and was exclusively used to repay the existing loans. The second loan originally for $1.2 million (NT$38 million) has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 2.795% currently) and is available for operating capital. These loans are secured by an $78$82 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.

On January 8, 2019, we entered into secured loan agreements with eachTrung ofDoan, theour Chairman and Chief Executive Officer and theJ.R. Simplot Company, our largest shareholder of the Company,shareholder, with aggregate amounts of $1.7 million and $1.5 million, respectively, and an annual interest rate of 8%.8% All(the proceeds“Loan Agreements”). The Loan Agreements are secured by a second priority security interest on our headquarters building. The maturity date of the loansLoan Agreements 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 were initially required to repay the loans of $1.5 million on January 14, 2021 and $1.7 million on January 22, 2021, respectively. On January 16, 2021, the maturity date of thesethe loansLoan Agreements was extended with same terms and interest rate for one year to January 15, 2022, and on January 14, 2022, the maturity date of thesethe loansLoan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023. On January 13, 2023, the maturity date of thesethe loansLoan Agreements was further extended with same terms and interest rate for one year to January 15, 2024.

On January 7, 2024, J.R. Simplot Company entered into an assignment agreement (the “Assignment”) pursuant to which J.R. Simplot assigned and transferred all of its right, title and interest in and to the loanLoan agreementAgreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the loanLoan agreement.Agreement.

On January 7, 2024, we entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc. and Trung Doan. The Fourth Amendment to the Loan Agreement with Simplot Taiwan Inc. (i) extended the maturity date of its loan agreement to January 15, 2025, and (ii) upon mutual agreement of weus and Simplot Taiwan Inc., permitted us to repay any principal amount or accrued interest, in an amount not to exceed $400,000, by issuing shares of our common stock in the name of Simplot Taiwan Inc. as partial repayment of the loanLoan agreementAgreement at a price per share equal to the closing price of our common stock immediately preceding the business day of the payment notice date. All other terms and conditions of the loanLoan agreementAgreement with Simplot Taiwan Inc. remained the same. The Fourth Amendment to the Loan Agreement with Trung Doan amended the loan's maturity date with same terms and interest rate to January 15, 2025. All other terms and conditions of the Loan Agreement with Trung Doan remained the same.

On January 7, 2024, we issued 305,343 shares of our common stock at a price of $1.31 per share to repay $400,000 of accrued interest on the Loanloan Agreementagreement with Simplot Taiwan Inc. The shares of common stock were issued in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.

On JulyFebruary 3,9, 2024, we and Trung Doan entered into the SixthFifth Amendment to the loanLoan agreementAgreement (thewith “SixthTrung Amendment”).Doan. The SixthFifth Amendment to the Loan Agreement with Trung Doan (i) amended the loanLoan agreementAgreement to permit, upon the mutual agreement of we and Trung Doan,permit us to repay aup portionto $800,000 of the principal amount or accrued interest under the loanLoan agreement,Agreement by issuing shares of the our common stock and (ii) elected to prepay $800,000 of loan principal by delivering 629,921 shares of the our common stock to Trung DoanDoan, asbased partial repayment of the loan agreement at a price per share equal toon the closing price of our$1.27 commonper stockshare immediatelyon precedingFebruary the8, business day of the payment notice date.2024. All other terms and conditions of the loanLoan agreement, as amended by the Sixth Amendment,Agreement remained the same.

On JanuaryFebruary 5,9, 2024, thewe Holdersrepaid converted$800,000 theof totalloan principal andby accrueddelivering interest of the Notes, in an aggregate amount of $1,608,848, to 1,228,128629,921 shares of our common stock atto aMr. conversionDoan, based on the closing price of $1.31$1.27 per share.share on February 8, 2024.

As of August 31, 20242025 and 2023, the outstanding principal of2024, these notesloans totaled zero$800 thousand and $1.4$2.4 million, respectively.

We have incurred significant losses since inception, including net losses attributable to SemiLEDs stockholders of $2.0$1.1 million and $2.7$2.0 million during the years ended August 31, 20242025 and 2023.2024. Net cash usedprovided inby operating activities for the year ended August 31, 20242025 was $365$2.2 thousand.million. As of August 31, 2024,2025, we had cash and cash equivalents of $1.7$2.6 million. We have undertaken actions to decrease losses incurred and implemented cost reduction programs in an effort to transform the Company into a profitable operation. In addition, we are planning to issue additional equity to our stockholders.

We estimate that our cash requirements to service debt and contractual obligations in fiscal 20252026 is approximately $3.4$1.9 million, which we expect to fund through the issuance of additional equity to repay principal and accrued interest and through loan extensions. Based on our current financial projections and assuming the successful implementation of our liquidity plans, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months and beyond. The remaining loans with each of our Chairman and Chief Executive Officer and our largest shareholder are expected to be extended upon maturity.maturity or repaid with equity. However, there can be no assurances that our planned activities will be successful in raising additional capital, reducing losses and preserving cash. If we are not able to generate positive cash flows from operations, we may need to consider alternative financing sources and seek additional funds through public or private equity financings or from other sources, or refinance our indebtedness, to support our working capital requirements or for other purposes. There can be no assurance that additional debt or equity financing will be available to us or that, if available, such financing will be available on terms favorable to us.

Cash Flows Provided by (Used inIn) Operating Activities

Net cash provided by operating activities for the years ended August 31, 2025 was $2.2 million, and net cash used in operating activities for the years ended August 31, 2024 and 2023 was $365 thousand and $984 thousand, respectively.thousand. The decreaseincrease in cash flows used in operating activities was primary attributable to aan $900 thousand decrease inof net lossloss, an $5.3 million increase of $659accounts payable, an $955 thousand and a decrease in inventoryincrease of $1.0investment million,loss from unconsolidated entities and an $840 thousand increase of accrued expenses and other current liabilities, partially offset by ana $3.6 million increase inof depreciationaccounts receivable, a $1.5 million increase of inventory and amortizationa $234 thousand increase of $396prepaid thousand, stock-based compensation expense of $236 thousandexpenses and accountsother payablecurrent of $447 thousand.assets.

Net cash used in investing activities for the years ended August 31, 20242025 and 20232024 was $101$595 thousand and $321$101 thousand, respectively.respectively, Theprimarily decrease in cash flows used in investing activities was primary attributable to a decrease in cash used infor the purchase of machinery and equipment of $78 thousand and a decrease in cash used in proceeds from salespurchases of property, plant and equipment ofduring $51each thousand.period.

ThereAlthough our stockholders’ equity exceeded the $2.5 million minimum as of May 31, 2026, there can be no assurance that we will be able to regain and maintain compliance with Nasdaq’s continued listing requirements or that our common stock will not be delisted from Nasdaq.

In the firstthird quarter of fiscal 2026, we entered intoreceived buy-sell purchase ordersorders, pursuant to which we purchased equipment and then resold the goods to our customer. The revenue relating to these purchase orders was $1.3$7.4 million,million in the third quarter of fiscal 2026, and the associated cost of revenue was $1.2$5.1 million. We did not have any buy-sell purchase orders during the second quarter of fiscal 2026.

We anticipate buy-sell purchase orders in the thirdfourth quarter of fiscal 2026. As a result of these purchase orders and associated uncertainty of the business, our revenue, cost of revenues, receivables, inventories and customer deposits over future quarters may vary significantly. In addition, if our shipments are delayed, revenue recognition may be delayed into future quarters. We cannot assure you when, or if, the revenue will be recognized, when payments will be received, or if we will receive further orders in the future.

Our ability to improve our gross margins, reduce ourgenerate net lossesincome and restore our operations to profitability.

Adverse macroeconomic developments in those selected markets, including India, Japan, the United StatesStates, India and the Netherlands, where our revenues are concentrated, including supply chain delays and the impact of inflation on customer demand.

We package our LED chips into LED components, which we sell to distributors and a customer base that is heavily concentrated in a few select markets, including India, Japan, the United StatesStates, India and the Netherlands. We also sell our “Enhanced Vertical,” or EV, LED product series in blue, white, green and UV in selected markets. We sell our LED chips to packagers or to distributors, who in turn sell to packagers. Our lighting products customers are primarily original design manufacturers, or ODMs, of lighting products and the end‑users of lighting devices. We also contract other manufacturers to produce for our sale certain LED products, and for certain aspects of our product fabrication, assembly and packaging processes, based on our design and technology requirements and under our quality control specifications and final inspection process. In addition, beginning in fiscal year 2025, we have entered into number buy-sell orders for equipment that we purchased and then sold to our customer.

In the firstthird quarter of fiscal 2026, we entered intoreceived buy-sell purchase ordersorders, pursuant to which we purchased equipment and then resold the goods to our customer. The revenue relating to these purchase orders was $1.3$7.4 million in the firstthird quarter of fiscal 2026, and the associated cost of revenue was $1.2$5.1 million. We did not have any buy-sell purchase orders during the second quarter of fiscal 2026.

We anticipate buy-sell purchase orders in the thirdfourth quarter of fiscal 2026. As a result of these purchase orders and associated uncertainty of the business, our revenue, cost of revenues, receivables, inventories and customer deposits over future quarters may vary significantly. In addition, if our shipments are delayed, revenue recognition may be delayed into future quarters. We cannot assure you when, or if, the revenue will be recognized, when payments will be received, or if we will receive further orders in the future.

General economic conditions and geographic concentration. Many countries including the United States and the European Union (the “E.U.”) members have instituted, or have announced plans to institute, government regulations and programs designed to encourage or mandate increased energy efficiency in lighting. These actions include in certain cases banning the sale after specified dates of certain forms of incandescent lighting, which are advancing the adoption of more energy efficient lighting solutions such as LEDs. When the global economy slows or a financial crisis occurs, consumer and government confidence declines, with levels of government grants and subsidies for LED adoption and consumer spending likely to be adversely impacted. Our revenues have been concentrated in a few select markets, including India, Japan, the United StatesStates, India and the Netherlands. Given that we are operating in a rapidly changing industry, our sales in specific markets may fluctuate from quarter to quarter. Therefore, our financial results will be impacted by general economic and political conditions in such markets. For example, the aggressive support by the Chinese government for the LED industry through significant government incentives and subsidies to encourage the use of LED lighting and to establish the LED‑sector companies has resulted in production overcapacity in the market and intense competition. Furthermore, due to Chinese package manufacturers increasing usage of domestic LED chips, prices are increasingly competitive, leading to Chinese manufacturers growing market share in the global LED industry. In addition, we have historically derived a significant portion of our revenues from a limited number of customers. Some of our largest customers and what we produce for them have changed from quarter to quarter primarily as a result of the timing of discrete, large project‑based purchases and broadening customer base, among other things. For the three and sixnine months ended FebruaryMay 28,31, 2026, sales to our three largest customers, in the aggregate, accounted for 59%95% and 81% of our revenues.revenues, respectively.

Cash position. Our cash and cash equivalents increased to $4.0$6.0 million as of FebruaryMay 28,31, 2026 from $2.4 million as of FebruaryMay 28,31, 2025. We have implemented actions to accelerate operating cost reductions and improve operational efficiencies. The plan is further enhanced through the fabless business model in which we implemented certain workforce reductions and are exploring the opportunities to sell certain equipment related to the manufacturing of vertical LED chips, in order to reduce the idle capacity charges and minimize our research and development activities associated with chips manufacturing operation. Based on our current financial projections and assuming our outstanding notes are converted or extended, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months.

The Company’s revenues for the sixnine months ended FebruaryMay 28,31, 2026 were significantlyprimarily derived from buy-sell purchase orders of equipment.

The allowance for doubtful accounts is based on management’s assessment of the collectability of customer accounts. Management regularly reviews the allowance by considering certain factors such as historical experience, industry data, credit quality, age of accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. No bad debt expenses were recognized during the three and sixnine months ended FebruaryMay 28,31, 2026 and 2025.

The Company writes down excess and obsolete inventory to its estimated net realizable value. The net realized value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realized value is based on current market conditions and historical experience with product sales of similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value. For finished goods and work in process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write downs are included in cost of revenues in the consolidated statements of operations. Once written down, inventories are carried at this lower cost basis until sold or scrapped. Inventory write‑downs to estimated net realizable values were $126$129 thousand and $50$39 thousand for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. Inventory write‑downs to estimated net realizable values were $407 thousand and $185 thousand for the nine months ended May 31, 2026 and 2025, respectively.

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 FebruaryMay 28,31, 2026, the exchange rate was 31.2331.36 NT dollars to one U.S. dollar. On AprilJuly 6,7, 2026, the exchange rate was 31.5232.15 NT dollars to one U.S. dollar.

Three Months Ended FebruaryMay 28,31, 2026 Compared to the Three Months Ended FebruaryMay 28,31, 2025

____________________ (1) Other revenues for the three months ended FebruaryMay 28,31, 2026 primarily include revenues attributable to the sale of epitaxial wafers, scraps and raw materials and the provision of services and a joint development project with CrayoNano AS, and other revenues for the three months ended February 28, 2025 primarily represent revenues attributable to the buy-sell purchase orders of equipment.

Our revenues decreased by 90%49% from $10.9$17.7 million for the three months ended FebruaryMay 28,31, 2025 to $1.1$9.1 million for the three months ended FebruaryMay 28,31, 2026. The decrease in revenues was driven almost entirely by the $10.0$9.1 million decrease in sales of other revenues as a result of thea absencereduction of anyin buy-sell purchase orders of equipment in the three months ended February 28, 2026.equipment.

Revenues attributable to the sales of our LED chips were $26$18 thousand and $29$30 thousand of our revenues for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decrease in sales of LED chips was primarily due to varyinglower volumes sold for theof LED chips.

Revenues attributable to the sales of our LED components were $423$998 thousand and $682$360 thousand for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decreaseincrease in sales of LED components was primarily due to varyinghigher volumes sold for theof LED components.

Revenues attributable to the sales of our lighting products were $69$90 thousand and $58$47 thousand for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. The increase in sales of lighting products was primarily due to varyinghigher volumes sold forof lighting products.

Revenues attributable to our other revenues were $546$8.0 thousandmillion and $10.1$17.2 million of our revenues for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decrease in other revenues for the three months ended May 31 2025 was primarily due to absencea ofreduction in buy-sell purchase orders of equipment in the three months ended February 28, 2026.equipment.

Our cost of revenues decreased by 89%60% from $10$16.7 million for the three months ended FebruaryMay 28,31, 2025 to $1.1$6.6 million for the three months ended FebruaryMay 28,31, 2026. The decrease in cost of revenues was due to a reduction in the absence of cost of equipment relating to buy-sell purchase orders of equipment.

Our gross profit represented 1%27% and 9%5% of our revenues for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decreaseincrease in gross margin for the three months ended FebruaryMay 28,31, 2026 was primarily due to improved margins on the absence of buy-sell purchase orders of equipment.

Our research and development expenses decreasedincreased from $279$292 thousand for the three months ended FebruaryMay 28,31, 2025 to $276$363 thousand for the three months ended FebruaryMay 28,31, 2026. The decreaseincrease was primarily due to a $55$74 thousand increase in payroll and compensation expense and a $6 thousand increase in insurance expense, partially offset by a $60$10 thousand decrease in materials and supplies used in research and development.

Our selling, general and administrative expenses decreased from $614$709 thousand for the three months ended FebruaryMay 28,31, 2025 to $575$681 thousand for the three months ended FebruaryMay 28,31, 2026. The decrease was mainly attributable to a $37 thousand decrease in shipping expense, a $27$42 thousand decrease in payroll expense and a $23 thousand decrease in professional service expense, partially offset by a $31 thousand increase in utilities expense and a $31 thousand increase in travel expense.

Investment loss from unconsolidated entities Investment loss from unconsolidated entities decreased from $10$9 thousand for the three months ended FebruaryMay 28,31, 2025 to $6$2 thousand for the three months ended FebruaryMay 28,31, 2026, primarily due to the increase in the fair value of equity method investments.

Interest expenses, net Interest expenses, net, which primarily consisted of accrued interest payments on loans with our Chairman and Chief Executive Officer and our largest shareholder, decreased from $42$20 thousand for the three months ended FebruaryMay 28,31, 2025 to $22$10 thousand for the three months ended FebruaryMay 28,31, 2026. The decrease in interest expense, net was primarily due to the repayment of $1.6 million of loan principal in fiscal year 2025.

Other income, net Other income, net increased from $265$266 thousand for the three months ended FebruaryMay 28,31, 2025 to $275$270 thousand for the three months ended FebruaryMay 28,31, 2026, primarily due to increased rental income.

Foreign currency transaction (loss) gain, net We recognized a net foreign currency transaction loss of $5$150 thousand and a net foreign currency transaction gain of $65$48 thousand for the three months ended FebruaryMay 28,31, 2026 and 2025, respectively, primarily due to the impact of fluctuations in the exchange rate of the U.S. dollar against the NT dollar from bank deposits and accounts receivable.payable.

SixNine Months Ended FebruaryMay 28,31, 2026 Compared to the SixNine Months Ended FebruaryMay 28,31, 2025

____________________ (1) Other revenues for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 primarily represent revenues attributable to buy-sell purchase orders of equipment.

Our revenues decreased by 70%57% from $12.1$29.8 million for the sixnine months ended FebruaryMay 28,31, 2025 to $3.6$12.7 million for the sixnine months ended FebruaryMay 28,31, 2026. The decrease in revenues was driven almost entirely by the $8.7$17.3 million decrease in sales of other revenues as a result of a reduction in buy-sell purchase orders of equipment.

Revenues attributable to the sales of our LED chips were $31$50 thousand and $94$124 thousand of our revenues for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decrease in sales of LED chips was primarily due to varyinglower volumes sold for theof LED chips.

Revenues attributable to the sales of our LED components were $1.1$2.1 million and $1.2$1.6 million for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decreaseincrease in sales of LED components was primarily due to varyinghigher volumes sold for theof LED components.

Revenues attributable to the sales of our lighting products were $116$206 thousand and $117$163 thousand for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decreaseincrease in sales of lighting products was primarily due to varyinghigher volumes sold forof lighting products.

Revenues attributable to our other revenues were $2.4$10.3 million and $10.7$27.9 million of our revenues for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decrease in other revenues was primarily due to a reduction in buy-sell purchase orders of equipment.

Our cost of revenues decreased by 67%63% from $10.9$27.6 million for the sixnine months ended FebruaryMay 28,31, 2025 to $3.6$10.2 million for the sixnine months ended FebruaryMay 28,31, 2026. The decrease in cost of revenues was due to a reduction in the cost of equipment relating to buy-sell purchase orders of equipment.

Our gross profit represented 1%20% and 11%7% of our revenues for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, respectively. The decreaseincrease in gross margin for the sixnine months ended FebruaryMay 28,31, 2026 was primarily due to aimproved reductionmargins in revenue relating toon buy-sell purchase orders of equipment.

Our research and development expenses increased from $500$792 thousand for the three months ended FebruaryMay 28,31, 2025 to $632$995 thousand for the sixnine months ended FebruaryMay 28,31, 2026. The increase was primarily due to a $131$182 thousand increase in payroll expense.

Our selling, general and administrative expenses decreased from $1.3$2.0 million for the sixnine months ended FebruaryMay 28,31, 2025 to $1.3$1.9 million for the threenine months ended FebruaryMay 28,31, 2026. The decrease was mainly attributable to a $75$146 thousand decrease in payroll and compensation expense and a $37$53 thousand decrease in professional service expense,fees, partially offset by a $40$50 thousand increase in utilities expense,expense and a $12$42 thousand increase in travelbank expense and a $8 thousand increase in depreciationcharges expense.

We recognized a net gain of $30$29 thousand and zero on the disposal of long-lived assets for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, respectively. Due to the excess capacity charges that we have suffered for the last few years, and considering the risk of technological obsolescence and according to the production plan built based on our sales forecast, we disposed of certain of our idle equipment.

Investment loss from unconsolidated entities Investment loss from unconsolidated entities increaseddecreased from $13$22 thousand for the threenine months ended FebruaryMay 28,31, 2025 to $15$17 thousand for the sixnine months ended FebruaryMay 28,31, 2026, primarily due to the decreaseincrease in the fair value of equity method investments.

Interest expenses, net Interest expenses, net, which primarily consisted of accrued interest payments on loans with our Chairman and Chief Executive Officer and our largest shareholder, decreased from $109$130 thousand for sixnine months ended FebruaryMay 28,31, 2025 to $34$44 thousand for sixnine months ended FebruaryMay 28,31, 2026. The decrease in interest expense, net was primarily due to the repayment of $1.6 million of loan principal in fiscal year 2025.

Other income, net Other income, netnet, decreasedwhich fromprimarily $547consisted of rental income, were $814 thousand for threenine months ended FebruaryMay 28,31, 20252026 toand $5442025, thousand for six months ended February 28, 2026, primarily due to reduced rental income.respectively.

Foreign currency transaction gain (loss), net We recognized a net foreign currency transaction gainloss of $16$134 thousand and a net foreign currency transaction lossgain of $37$11 thousand for threenine months ended FebruaryMay 28,31, 2026 and 2025, respectively, primarily due to the impact of fluctuations in the exchange rate of the U.S. dollar against the NT dollar from bank deposits and accounts receivable.payable.

As of FebruaryMay 28,31, 2026 and August 31, 2025, we had cash and cash equivalents of $4.0$6.0 million and $2.6 million, respectively, which were predominately held in U.S. dollar denominated demand deposits and/or money market funds.deposits. We require cash to fund our operating expenses, working capital requirements and service our debts, including principal and interest.

As of AprilJuly 6,7, 2026, 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 $1.5$1.3 million and $1.7 million as of FebruaryMay 28,31, 2026 and August 31, 2025, respectively.

Our NT dollar denominated long-term notes totaled $658$539 thousand and $908 thousand as of FebruaryMay 28,31, 2026 and August 31, 2025, respectively. These long-term notes consist of two loans which we entered into on July 5, 2019, with aggregate amounts of $3.2 million (NT$100 million). The first loan originally for $2.0 million (NT$62 million) has an annual floating interest rate equal to the NTD base lending rate plus 0.64% (or 2.415% currently), and was exclusively used to repay the existing loans. The second loan originally for $1.2 million (NT$38 million) has an annual floating interest rate equal to the NTD base lending rate plus 1.02% (or 2.795% currently) and is available for operating capital. These loans are secured by an $80 thousand (NT$2.5 million) security deposit and a first priority security interest on the Company’s headquarters building.

Starting from May 2021, the first note payable requires monthly payments of principal in the amount of $25 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of FebruaryMay 28,31, 2026, our outstanding balance on this note payable was approximately $408$334 thousand.

Starting from May 2021, the second note payable requires monthly payments of principal in the amount of $15 thousand plus interest over the 74-month term of the note with final payment to occur in July 2027 and, as of FebruaryMay 28,31, 2026, our outstanding balance on this note payable was approximately $250$205 thousand.

Property, plant and equipment pledged as collateral for our notes payable were $1.5$1.4 million and $1.7 million as of FebruaryMay 28,31, 2026 and August 31, 2025, respectively.

On January 15, 2026, we entered into the Seventh Amendment to the Loan Agreements with Simplot Taiwan Inc. and the Eighth Amendment to the Loan Agreements with Trung Doan. The Seventh Amendment to the Loan Agreement with Simplot Taiwan Inc. (i) capitalizecapitalized all outstanding and unpaid interest due under the Note (the “Unpaid Interest”) into the principal balance of the Loan.Loan and (ii) extended the maturity date to January 15, 2027. As of the Effective Date, the Unpaid Interest was equal to $364,924.63.$364,925. The parties agreed that the new principal balance of the Loan was $664,924.63, and (ii) extended the maturity date to January 15, 2027.$664,925. All other terms and conditions of the Loan Agreement with Simplot Taiwan Inc. remained the same. The Eighth Amendment to the Loan Agreement with Trung Doan extended the maturity date to January 15, 2027. All other terms and conditions of the Loan Agreement with Trung Doan remained the same.

As of FebruaryMay 28,31, 2026 and August 31, 2025, these loans totaled $1.2 million and $800 thousand, respectively.

WeAlthough we have incurred significant losses since inception, includingwe net loss attributable to SemiLEDs stockholders of $603 thousand andgenerated net income attributable to SemiLEDs stockholders of $388$1.5 million and $223 thousand during the three months ended FebruaryMay 28,31, 2026 and 2025, respectively. Net cash provided by operating activities for the sixnine months ended FebruaryMay 28,31, 2026 was $1.6$3.8 million. As of FebruaryMay 28,31, 2026, we had cash and cash equivalents of $4.0$6.0 million. We have undertaken actions to decrease losses incurred and implemented cost reduction programs in an effort to transform the Company into a profitable operation. In addition, we are planning to issue additional equity to our stockholders.

We estimate that our cash requirements to service debt and contractual obligations in fiscal 2026 is approximately $2.0$2.4 million, which we expect to fund through the issuance of additional equity to repay principal and accrued interest and through loan extensions. Based on our current financial projections and assuming the successful implementation of our liquidity plans, we believe that we will have sufficient sources of liquidity to fund our operations and capital expenditure plans for the next 12 months and beyond. The remaining loans with each of our Chairman and Chief Executive Officer and our largest shareholder are expected to be extended upon maturity or repaid with equity. However, there can be no assurances that our planned activities will be successful in raising additional capital, reducing losses and preserving cash. If we are not able to generate positive cash flows from operations, we may need to consider alternative financing sources and seek additional funds through public or private equity financings or from other sources, or refinance our indebtedness, to support our working capital requirements or for other purposes. There can be no assurance that additional debt or equity financing will be available to us or that, if available, such financing will be available on terms favorable to us.

Net cash provided by operating activities for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 was $1.6$3.8 million and $1.2$1.9 million, respectively. The increase in cash flows provided by operating activities was primary attributable to a $9.7$7.6 million decrease of inventory, a $2.3 million decrease of prepaid expenses and other current assets, a $1.7 million decrease of accounts receivables, a $192 thousand decrease of prepaid expenses and other current assets and a $132$222 thousand increase of inventory write downs, partially offset by a $7.2 million decrease of accruedaccounts expenses,payable and a $3.1 million decrease of accountsaccrued payable and a $1.2 million increase in net loss.expenses.

Net cash used in investing activities for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 was $16$103 thousand and $258$571 thousand, respectively, primarily for the purchases of property, plant and equipment during each period.

Net cash used in financing activities for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 was $230 thousand and $351$502 thousand, respectively. The decrease in cash flows used in financing activities was primarily due to a $417 thousand decrease in purchase of property, plant and equipment during the nine month ended May 31, 2026 and the acquisition of noncontrolling interest of $130 thousand during the sixnine months ended FebruaryMay 28,31, 2025.

We had capital expenditures of $44$131 thousand and $238$548 thousand for the sixnine months ended FebruaryMay 28,31, 2026 and 2025, 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.