Financial Analysis

5. Commitments and Contingencies Operating Lease Agreements The Company has several operating leases with third parties, primarily for land, plant and office spaces in Taiwan, including cancelable and noncancelable leases that expire at various dates between August 2026 and December 2040 . Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company did not combine lease and non-lease components. Most leases do not include options to renew. The exercise of lease renewal options has to be agreed by the lessors. The depreciable life of assets and leasehold improvements are limited by the term of leases, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease expense is recognized on a straight-line basis over the term of the lease. Lease expense related to these noncancelable operating leases was $ 40 thousand and $ 120 thousand for three months and nine months ended May 31 , 2026, respectively. Lease expense related to these noncancelable operating leases was $ 24 thousand and $ 96 thousand for the three months and nine months ended May 31, 2025, respectively. Balance sheet information related to the Companys leases is presented below: May 31, 2026 August 31, 2025 Assets Operating lease right of use assets $ 1,007 $ 1,141 Li …

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6. 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 Companys employees, officers, directors and consultants. In April 2014, SemiLEDs stockholders approved an amendment to the 2010 Plan that increases the number of shares authorized for issuance under the plan by an additional 250 thousand shares. On July 31, 2019, the stockholders approved an increase in the authorized share reserve under the 2010 plan by an additional 500 thousand shares, to extend expiration of the 2010 Plan to November 3, 2023 , to remove the IRS Code section 162(m) provisions, and to modify the maximum grant limit to 35 thousand shares to one person in a one year period. On September 25, 2020, the stockholders approved an amendment to the 2010 Equity Incentive Plan to increase the authorized shares reserve by an additional 400 thousand shares. On March 17, 2023, the Board approved the amendment of the 2010 Plan to extend the term to March 17, 2033 , which was approved by the Company's stockholders at the annual meeting held on May 18, 2023. A total of 1,421 thousand and 1,421 thousand shares was reserved for issuance under the 2010 Plan as of May 31, 2026 and 2025, respectively. As of May 31, 2026 and 2025, there we re 429 thousand and 530 thousand shares of common stock available for future issuance under the equity incentive plans, respec …

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8. Income Taxes The Companys income before income taxes for the three and nine months ended May 31, 2026 and 2025 consisted of the following (in thousands): Three Months Ended Nine Months Ended May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 U.S. operations $ ( 96 ) $ ( 82 ) $ ( 292 ) $ ( 365 ) Foreign operations 1,619 305 470 429 Income before income taxes $ 1,523 $ 223 $ 178 $ 64 Unrecognized Tax Benefits On December 22, 2017, the U.S. Tax Cuts and Jobs Act was adopted, which among other effects, reduced the U.S. federal corporate income tax rate to 21 % from 34 % (or 35% in certain cases) beginning in 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years , makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parents deductions for payments to the subsidiaries. Our provisional estimate is that no tax will be due under this provision. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisio …

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Recent Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). The amendments in ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (CODM). In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. ASU 2023-07 became effective for annual reporting periods beginning after December 15, 2023, and interim periods within annual reporting periods beginning after December 15, 2024. The Company adopted the ASU on a retrospective basis for all prior periods presented, and the adoption had no material effect on the unaudited condensed consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The new standard requires entities to disclose additional information about certain expenses, such as purchases of inventory, employee compensation, depreciation, intangible asset amortization, as well as selling expenses included in commonly presented expense captions on the income statement. The FASB further clarif …

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9. Related Party Transactions On January 8, 2019, the Company entered into secured loan agreements with Trung Doan, its Chairman and Chief Executive Officer and J.R. Simplot Company, its largest shareholder, with aggregate amounts of $ 1.7 million and $ 1.5 million, respectively, and an annual interest rate of 8 % (the Loan Agreements). The Loan Agreements are secured by a second priority security interest on the Companys headquarters building. The maturity date of the Loan Agreements were January 14, 2021 and January 22, 2021 , respectively. On January 16, 2021, the maturity date of the Loan Agreements was extended with same terms and interest rate for one year to January 15, 2022 , and on January 14, 2022, the maturity date of the Loan Agreements was extended again with same terms and interest rate for one more year to January 15, 2023 . On January 13, 2023, the maturity date of the Loan Agreements was further extended with same terms and interest rate for one year to January 15, 2024 . On January 7, 2024, J.R. Simplot Company entered into an assignment agreement (the Assignment) pursuant to which J.R. Simplot assigned and transferred all of its right, title and interest in and to the Loan Agreement to Simplot Taiwan Inc., in accordance with and subject to the terms and conditions of the Loan Agreement. On January 7, 2024, the Company entered into the Fourth Amendment to the Loan Agreements with each of Simplot Taiwan Inc. and Trung Doan. The Fourth Amendment to the Loan Ag …

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10. Subsequent Events The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company has analyzed its operations subsequent to May 31, 2026 to the date these unaudited condensed consolidated financial statements were issued, finding that no material subsequent events need to be disclosed.

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