SEMILEDS CORP S-1 Filing

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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                               As filed with the Securities and Exchange Commission on August 6, 2010

                                                                                                                                                     Registration No. 333-




                                                     UNITED STATES
                                         SECURITIES AND EXCHANGE COMMISSION
                                                                      WASHINGTON, D.C. 20549




                                                                          FORM S-1
                                              REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933




                                                        SEMILEDS CORPORATION
                                                           (Exact Name of Registrant as Specified in its Charter)




                 Delaware                                                          3674                                                       20-2735523
       (State or Other Jurisdiction of                                (Primary Standard Industrial                                         (I.R.S. Employer
      Incorporation or Organization)                                  Classification Code Number)                                       Identi fication Number)

                                                                  3F, No.11 Ke Jung Rd., Chu-Nan Site,
                                                                   Hsinchu Science Park, Chu-Nan 350,
                                                                    Miao-Li County, Taiwan, R.O.C.
                                                                             +886-37-586788
                                                   (Address, Including Zip Code, and Telephone Number, Including Area
                                                             Code, of Registrant's Principal Executive Offi ces)




                                                                  National Corporate Research Ltd.
                                                                             Process Agent
                                                                      615 South DuPont Highway
                                                                           Dover, DE 19901
                                                                           1-(800)-483-1140
                                   (Name, Address Including Zip Code, and Telephone Number Including Area Code, of Agent for Service)




                                                                              COPIES TO:

                            Mark J. Lee                                                                                    Jeffrey D. Saper
                         Thomas H. Tobiason                                                                               Steven V. Bernard
                                       Harold M. Yu                                                                                               Eva H. Wang

                   ORRICK, HERRINGTON & SUTCLIFFE LLP                                                                           WILSON SONSINI GOODRICH & ROSATI
                     43/F., Gloucester Tower, The Landmark                                                                             Professional Corporation
                             15 Q ueen's Road Central,                                                                                   650 Page Mill Road
                                    Hong Kong                                                                                         Palo Alto, California 94304




                                                             Approximate date of commencement of proposed sale to the public:
                                                         As soon as practicable after the effective date of this Registration Statement.




            If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following
box.    

            If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.        _______________

             If this form is a post-effective amendm ent filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.     _______________

             If this form is a post-effective amendm ent filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.     _______________

            Indicate by check mark whether the registrant is a large accelerated filer, an accel erat ed filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b2 of the Exchange Act.

         Large accelerated filer                           Accelerated filer                          Non-accel erat ed filer                            Smaller reporting company 
                                                                                                        (Do not check i f a smaller
                                                                                                          reporting company)



                                                                   CALCULATION OF REGIS TRATION FEE



              Title Of Each Class Of Securities To Be Registered                                 Proposed maximum aggregate offering price (1)(2)                      Amount of registration fee

Common Stock, par value $0.0000004 per share                                                                         $172,500,000                                               $12,299.25



(1)
          Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.


(2)
          Includes shares which the underwriters have the option to purchase to cover overallotments, if any.

            The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents

The informat ion in this prospectus is not complete and may be changed. We may not sell these securities until the registratio n statement filed
with the Securities and Exchange Co mmis sion is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer
to buy these securities in any jurisdiction where the offer or sale is not permitted.

                                                              Subject to Co mplet ion
                                                Preliminary Prospectus dated                   , 2010.

PROSPECTUS


                                                                           Shares



                                                                Common Stock




          This is SemiLEDs Corporation's init ial public offering. We are selling    shares of our common stock and the selling stockholders
are selling        shares of our common stock. We will not receive any proceeds fro m the sale of shares to be offered by the selling
stockholders.

         We expect the public offering price to be between $           and $    per share. Currently, no public ma rket exists for the shares.
After pricing of the offering, we expect that the shares will trade on the NASDAQ Global Market under the symbol "LEDS."

       Investing in the common stock involves risks that are described in the "Risk Factors" section beginning
on page 9 of this prospectus.




                                                                                          Per Share            Total
                              Public o ffering price                                      $                    $
                              Underwrit ing discount                                      $                    $
                              Proceeds, before expenses, to us                            $                    $
                              Proceeds, before expenses, to the selling
                              stockholders                                                $                    $

          The underwriters may also purchase up to an additional              shares fro m us, and up to an additional          shares from the
selling stockholders, at the public offering price, less the underwriting d iscount, within 30 days fro m the date of this prospectus to cover
overallot ments, if any.

         Neither the Securities and Exchange Co mmission nor any state securities commission has approved or disapproved of these securities
or determined if this prospectus is truthful or comp lete. Any representation to the contrary is a criminal o ffense.

         The shares will be ready for delivery on or about                 , 2010.




               BofA Merrill LynchBarclays CapitalJefferies & Company
Canaccord Genuity                                         Caris & Company, Inc.




                    The date of this prospectus is   , 2010.
Table of Contents


                                                             TAB LE OF CONTENTS

                                                                                                                                 Page
               PROSPECTUS SUMMA RY                                                                                                   1
               THE OFFERING                                                                                                          5
               SUMMARY CONSOLIDATED FINANCIAL DATA                                                                                   7
               RISK FA CTORS                                                                                                         9
               SPECIA L NOTE REGA RDING FORWARD-LOOKING STATEM ENTS                                                                 40
               USE OF PROCEEDS                                                                                                      42
               DIVIDEND POLICY                                                                                                      42
               CAPITALIZATION                                                                                                       43
               DILUTION                                                                                                             45
               SELECTED CONSOLIDATED FINANCIA L DATA                                                                                47
               MANAGEM ENT'S DISCUSSION A ND ANA LYSIS OF FINANCIA L CONDITION AND RESULTS
                 OF OPERATIONS                                                                                                      50
               INDUSTRY                                                                                                             80
               BUSINESS                                                                                                             84
               MANAGEM ENT                                                                                                          99
               EXECUTIVE COMPENSATION                                                                                              104
               CERTAIN RELATIONSHIPS A ND RELATED TRANSACTIONS                                                                     118
               PRINCIPA L A ND SELLING STOCKHOLDERS                                                                                121
               DESCRIPTION OF CAPITA L STOCK                                                                                       124
               SHA RES ELIGIBLE FOR FUTURE SA LE                                                                                   129
               MATERIA L U.S. FEDERAL INCOM E TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR
                 COMMON STOCK                                                                                                      131
               UNDERWRITING                                                                                                        135
               LEGA L MATTERS                                                                                                      141
               EXPERTS                                                                                                             141
               WHERE YOU CAN FIND MORE INFORMATION                                                                                 141
               INDEX TO CONSOLIDATED FINANCIA L STATEM ENTS                                                                        F-1

           You should rely only on the information contained in this prospectus and any free writing prospectus we may specifically auth orize to
be delivered or made availab le to you. We have not, and the selling stockholders and the underwriters have not, authorized an y one to provide
you with additional or different in formation. The information contained in this prospectus or any free writing pro spectus is accurate only as of
its date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations
and prospects may have changed since that date.

          This prospectus is an offer to sell only the shares offered hereby but only under circu mstances and in jurisdictions where it is lawfu l to
do so. No action has been or will be taken in any jurisdiction by us or any underwriter that would permit a public offering o f our co mmon stock
or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other tha n the United States.
Persons outside the United States who come into possession of this prospectus must inform themselv es about and observe any restrictions
relating to this offering and sale of our co mmon stock and the distribution of this prospectus outside the United States.

                                                                          i
Table of Contents


                                                          PROSPECTUS S UMMARY

         This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you sh ould
consider before investing in our common stock. You should read this entire prospectus carefully, including our consolidated financial
statements and the related notes and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," in each case included elsewhe re in this prospectus.

Company Overview

         We develop, manufacture and sell LED chips and LED components that we believe are among the industry leading LED products on
both a lumens per watt and cost per lumen basis. Our products are used primar ily for general lighting applicat ions, including street lights and
commercial, industrial and residential lighting. We sell blue, green and ultrav iolet (UV) LED chips under our MvpLED brand, primarily to
customers in China, Taiwan and other parts of Asia. We sell our LED ch ips to packaging customers or to distributors, who in turn sell to
packagers. In addition, we package a portion of our LED chips into LED co mponents which we sell to distributors and end -customers in
selected markets.

         Our operations include both LED chip and LED co mponent manufacturing. We grow our epitaxy materials on sapphire by applying
our patented and proprietary process technology based on galliu m n itride, or GaN, and related compounds. We then process thes e materials to
create individual chips. We also package a portion of these chips to create LED co mponents.

         We have developed advanced capabilit ies and proprietary know-how in sapphire reclamation, GaN epitaxial gro wth, copper alloy
technology, nanoscale surface engineering and vertical LED structure technology, which enable us to produce LED chips that when packaged
are capable of provid ing greater than 100 lu mens per watt. We believe these capabilities and know-how also allow us to reduce our
manufacturing costs and our dependence on sapphire, a costly raw material used in the production of sapphire -based LEDs. In addition, we
believe these technologies will help facilitate our migration to larger wafer sizes.

        Our manufacturing operations are located in Taiwan. We intend to expand our manufacturing capabilit ies in Taiwan to meet the
expected demand for our products. In addition, we have established Xurui Guangdian Co., Ltd., or China SemiLEDs, a joint vent ure in Foshan,
China to manufacture and sell LED chips in China. We hold a 49% o wnership interest in Ch ina SemiLEDs. China SemiLEDs h as begun
constructing manufacturing facilities wh ich we expect to be operational after January 2011.

Industry B ackground

         Light emitting diodes, or LEDs, are solid-state electronic co mponents that emit light in a variety of brightness levels and colors. LEDs
are increasingly used in a growing number of applications ranging fro m consumer electronics, such as backlighting for handsets, laptops and
televisions, to general lighting, such as outdoor and indoor lighting.

          LEDs have recently begun penetrating the general lighting market, which includes applications for architectural, replacement lamp,
retail display, co mmercial, industrial, outdoor area and residential uses. According to the Freedonia Group, an independent market research
firm, the general lighting market, including sales of the light fixtures and bulbs, is estimated to be approximately $100 b illion.

          Currently LED lighting accounts for a small portion of the general lighting market. Ho wever, we believe that increased LED
performance, reduced LED cost, growing awareness of the advantages of LEDs and government policies that discourage the use of some
traditional lighting technologies and support LED adoption will continue to drive the adoption of LEDs in the general lighting market. LED
lighting consists of the LED co mponents, optics, heat sinks, power supplies and fixtures. An LED

                                                                        1
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component is an LED chip that has been packaged. According to Strategies Unlimited, an independent market research firm, reve nues
attributable to LED co mponents for general lighting applications were $665 million in 2009 and are estimated to grow to $4.3 b illion by 2014,
which represents a compound annual growth rate of 45%.

         Ho wever, to increase penetration of the general lighting market, LED chip and package manufacturers must continue to reduce the
total cost of ownership of LED lighting. Total cost of ownership primarily includes: (i) the upfront cost of the LED device, which includes the
LED ch ip costs and the cost of packaging the LED chips; (ii) the lifet ime energy cost; and (iii) the frequency of replacement, which is in part a
function of the product lifespan. Although energy cost and lifespan tend to favor LED lighting over some trad itional lighting technologies,
currently the upfront cost of an LED device is significantly higher than that of traditional lighting technologies.

Our Strengths

         We believe that the following strengths will enable us to compete effectively and t o capitalize on the expected growth of the LED
general lighting market:

     •
            Patented Vertical Copper Alloy Chip Structure. Our patented copper alloy device structure combined with our proprietary
            process technologies generate less heat and allow for increased heat removal co mpared to sapphire -based LED devices thereby
            increasing the lu mens per watt, or efficacy, and lifespan of our LED chips. In addition, we manufacture our LED chips using a
            vertical structure which reduces light output losses through the substrate and allows us to perform nanoscale surface enginee ring
            that we believe results in higher efficacy.

     •
            Competitive Manufacturing Cost Structure. Our proprietary manufacturing technologies and know-how enable us to maintain a
            competitive manufacturing cost structure. We have developed advanced capabilities and proprietary know-how in sapphire
            reclamat ion, wh ich is a key part of our manufacturing cost savings as we recycle and re-use sapphire wafers mult iple t imes. In
            addition, we believe our manufacturing technologies, including sapphire reclamation and the use of copper alloy, will facilit ate our
            transition to larger wafer sizes.

     •
            Efficient Operating and Business Model. Our operating and business model is focused on price competit iveness through our
            low-cost operating structure. We believe locating our facilities in Taiwan provides us with operating cost advantag es including
            reduced labor, rental, material, construction, and borrowing costs as well as favorable tax treat ment. When operational, we
            anticipate that China SemiLEDs' manufacturing facilities in Foshan, China will provide it with similar benefits.

     •
            LED Research a nd Development Expertise. Our research and development team, including members of our senior management,
            has significant experience in the LED and semiconductor industries. The application of this expertise has allowed us to incre ase the
            performance of our h ighest performing LED chips when packaged, fro m appro ximately 60 lu mens per watt in 2006 to over
            140 lu mens per watt in 2010, using vertical LED technology.

Our Strategy

       Our goal is to be the leading developer and manufacturer of LED chips and LED co mponents that meet the performance requirements
demanded by LED lighting customers, wh ile providing the

                                                                         2
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best value proposition on both a lumens per watt and cost per lumen basis. Key elements of our strategy include the following:

     •
             Remain on the Forefro nt of Innovation of LED Chip and LED Component Technologies. We intend to continue to innovate in
             product design and process technologies through our research and development efforts. Our continued innovation is intended to
             ensure that our products continue to perform at industry-leading efficacies for a variety of end-customer applications, in part icular
             for general lighting applications.

     •
             Reduce Cost Through Technology and Manufacturing Improvements. We plan to increase our investment in research and
             development to improve our manufacturing processes and increase our production yields to reduce the per-unit cost of our
             products. In particular, we are developing new technologies to enable us to produce LED chips using larger size wafers.

     •
             Drive Our Growth in China and Grow Our Net Income Through Chi na SemiLE Ds. The Ch ina market represented 46.1% o f
             the LED lighting revenues in 2009 according to Strategies Un limited. We intend to continue our growth in China through Chin a
             SemiLEDs, which we expect will have operational manufacturing capabilit ies after January 2011.

     •
             Expand Our Manufacturing Capacity in Taiwan. As a result of imp roving economic conditions resulting in increased demand
             for our products, while we have continued to expand capacity and optimize our manufacturing processes to improve utilizat io n of
             our equipment, beginning in March 2010 we have been operating our manufacturing facilities at or near full capacity. To addre ss
             continuing imp rovement in market conditions, we intend to expand our production in Taiwan by further improving utilizat ion of
             our equipment and by adding additional MOCVD reactors, equipment and tools.

     •
             Target Markets and Customers Where Our Technologies Create a Competitive Advantage. We will continue to focus our
             development and sales efforts in markets where customers place a premiu m on innovation, product performance and cost. In
             particular, in the near-term we will focus on outdoor street lighting in China and applicat ions where we believe the environ mental
             benefits and lower total cost of ownership will p lay a larger role in the purchasing decision.

     •
             Leverage Government Incentive Funding for LE D Development, Facility Expansion and Market Expansion. We have been
             awarded a mix of grants fro m local and national government agencies in Taiwan to support our research and d evelopment efforts.
             China SemiLEDs has also been awarded a mix o f grants fro m local govern ment agencies in Ch ina to support manufacturing. W e
             intend to apply for additional government grants and incentives in Taiwan and Ch ina.

     •
             Pursue Strategic Relationships and Acquisitions. We plan to pursue strategic relationships, such as joint ventures, and
             acquisitions that expand our business. We plan to identify, execute and integrate acquisitions and enter into joint ventures to build
             scale, acquire intellectual property and enter into new geographic and product markets to enhance our reach and diversify our
             sales.

Risks Associated With Our Business

         We believe the following are some of the majo r challenges, risks and uncertainties that may materia lly affect us:

     •
             if LEDs fail to achieve widespread adoption in the general lighting market, o r if alternative technologies gain market accept ance,
             our prospects will be materially adversely impacted and we may be unable to maintain our pro fitability;

                                                                         3
Table of Contents

     •
            we operate in h ighly co mpetitive markets that are characterized by rapid technological changes and declining average selling
            prices, and competitive p ressures from existing and new companies may harm our business and operating results;

     •
            the market fo r LEDs has historically been, and we expect will continue to be, highly volatile, wh ich could harm our business and
            result in significant fluctuations in the market price of our co mmon stock;

     •
            intellectual property claims against us or our customers could subject us to significant costs and materially damage our business
            and reputation;

     •
            our operating results may fluctuate fro m quarter to quarter, wh ich could make our future performance difficult to predict and co uld
            cause our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our
            common stock;

     •
            we may not be able to effectively expand production capacity or do so in a timely or cost -effective manner, wh ich could prevent us
            fro m achiev ing increased sales, marg ins and market share;

     •
            we may have difficulty managing our future growth and the associated increased scale of our operations, which could materially
            and adversely affect our business and operating results;

     •
            growth of our business in China is substantially dependent on the success of our China jo int venture, China SemiLEDs, wh ich was
            formed in January 2010, wh ich is not yet operational and of which we do not hold a majo rity of the shares; and

     •
            as China SemiLEDs commences and expands its business, it may co mpete with us for sa les in China.

Corporate Informati on and Structure

         We were incorporated in Delaware on January 4, 2005. Ou r principal executive offices are located at 3F, No.11 Ke Jun g Rd., Chu-Nan
Site, Hsinchu Science Park, Chu-Nan 350, M iao-Li County, Taiwan, R.O.C. Our telephone number is +886-37-586788. Our website address is
www.semileds.com . The info rmation on or accessible through our website is not part of this prospectus.

        We are a hold ing company for various wholly owned subsidiaries and holdings in jo int ventures. Our most significant subsidiary is our
wholly o wned operating subsidiary, SemiLEDs Optoelectronics Co., Ltd., or Taiwan SemiLEDs, where substantially all of our assets are held
and our operations are located. Taiwan SemiLEDs owns a 100% equity interest in Silicon Base Develop ment, Inc., or SBDI. SBDI packages
LED ch ips into LED co mponents. We also sell a majority of our LED co mponents through the Taiwan branch office of Helios Crew
Corporation, or Helios Crew, our wholly owned Delaware subsidiary.

        We have a 49% interest in Ch ina SemiLEDs, a joint venture entity that was established in China in January 2010 to manufacture and
sell LED chips. We also own a 50% interest and a 49% interest in jo int ventures in Malaysia and Taiwan, respectively. Each of our joint
ventures, including Ch ina SemiLEDs, is an unconsolidated entity that is still in early development stage and has not had any material
operations to date. Such entities are accounted for using the equity method of accounting, and as such, we recognize our portion of the net
income or loss from such entities under income (loss) from unconsolidated entities.

                                                                        4
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                                                               THE OFFERING

Co mmon stock offered by us.                                           shares
Co mmon stock offered by the selling stockholders                      shares
Co mmon stock to be outstanding after this offering                    shares
Overallot ment option                                     The underwriters have an option to purchase a maximu m of                   addit ional
                                                          shares of common stock fro m us and the selling stockholders to cover
                                                          overallot ments. Of the shares subject to the option,             shares would be sold
                                                          by us, and              shares would be sold by the selling stockholders. The
                                                          underwriters may exercise this option at any time within 30 days fro m the date of the
                                                          prospectus.
Use of proceeds                                           We intend to use the net proceeds received by us fro m this offering to expand
                                                          production capacity, to build a test line for research and development related to LED
                                                          chip production based on 6" wafers and for general corporate purposes, including
                                                          working capital and capital expenditures. We may also use a portion of the net
                                                          proceeds to acquire or invest in comp lementary technologies, solutions or businesses
                                                          or to obtain rights to such complementary technologies, solutions or businesses.
                                                          There are no agreements, understandings or commit ments with respect to any such
                                                          acquisition or investment at this time.
                                                          We will not receive any proceeds from the sale of shares by the selling stockholders.
                                                          See "Use of Proceeds."
Directed share program                                    At our request, the underwriters have reserved for sale, at the init ial public o ffering
                                                          price, up to             shares offered by this prospectus for sale to some of our
                                                          directors, officers, employees, distributors, dealers, business associates and related
                                                          persons. If these persons purchase reserved shares, this will reduce the number of
                                                          shares available for sale to the public. Any reserved shares that are not so purchased
                                                          will be offered by the underwriters to the public on the same terms as the oth er shares
                                                          offered by this prospectus.
Risk factors                                              Investing in our common stock involves a high degree of risk. See "Risk Factors"
                                                          beginning on page 9 of this prospectus for a discussion of factors you should
                                                          carefully consider before deciding to invest in our co mmon stock.
Proposed NASDAQ Global Market sy mbol                     "LEDS"

        The number of shares of our common stock to be outstanding after this offering is based on 293,588,236 shares outstanding as of
May 31, 2010, and excludes:

     •
               9,668,775 shares of common stock issuable upon the exercise of options outstanding as of May 31, 2010 under our 2005 Equity
               Incentive Plan, as amended, at a weighted average exercise price of $0.05 per share;

                                                                       5
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     •
            354,610 shares of common stock as of May 31, 2010 reserved for issuance under our 2005 Equity Incentive Plan; and

     •
            shares of common stock, subject to automatic increases on September 1 of each year fro m September 2011 to September 2017 of
            the smallest of     shares,         % of the shares of common stock outstanding at the time or the nu mber of shares to be
            determined by our board, reserved for issuance under our 2010 Equity Incentive Plan, which we plan to adopt in connection wit h
            this offering.

         Except as otherwise indicated, informat ion in this prospectus reflects or assumes the follo wing:

     •
            that our amended and restated certificate of incorporation and our amended and restated bylaws, which will be in effect upon the
            complet ion of this offering, are in effect;

     •
            the automatic conversion of 5,859,950 shares of Class B co mmon stock into 5,859,950 shares of Class A common stock effective
            upon the completion of th is offering;

     •
            the automatic conversion of 192,064,223 shares of convertible preferred stock into 192,064,223 shares of Class A common stock
            effective upon the completion of th is offering;

     •
            no exercise of the underwriters' overallot ment option to purchase up to             addit ional shares of our common stock;

     •
            a        : 1 reverse stock split effect ive of our outstanding Class A common stock effected in                , 2010; and

     •
            the amend ment of our certificate of incorporation such that we will no longer have Class A and Class B co mmon stock but only
            one class of undesignated common stock issued and outstanding effective upon the closing of this offering.

          Un less the context otherwise requires in this prospectus, "we," "us," "our company," "our," and "SemiLEDs" refe r co llectively to
SemiLEDs Corporation and its consolidated subsidiaries; "China" or "PRC" refers to the People's Republic of China, excluding Taiwan, Hong
Kong and Macau; "Korea" refers to the Republic of Korea; "$" or "U.S. dollars" refers to the legal c urrency of the Un ited States; "NT dollars"
refers to New Taiwan dollars, the legal currency of Taiwan; "RM B" or "Ren minbi" refers to the legal currency of Ch ina; and co nvertible
preferred stock refers collect ively to our Series A, B, C, D and E convertible preferred stock.

          This prospectus contains translations of certain RMB and NT dollar amounts into U.S. dollar amounts at specified rates. All
translations from RM B and NT dollars to U.S. dollars were made at the noon buying rate as set forth in the H.10 statistical release of the
Federal Reserve Board. Unless otherwise stated, the translations of RMB and NT dollars into U.S. dollars have been made at th e noon buying
rate in effect on May 28, 2010, wh ich was RM B6.83 to US$1.00 and NT$32.00 to US$1.00. We make no representation that the RM B, NT
dollar o r U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars, RM B or NT dollars, as the
case may be, at any particular rate or at all. On Ju ly 30, 2010, the noon buying rates were RM B6.77 to US$1.00 and NT$31.95 to US$1.00.

                                                                         6
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                                                SUMMARY CONSOLIDATED FINANCIAL DATA

         The fo llo wing tables summarize the consolidated financial data for our business. You should read this summary consolidated financial
data in conjunction with "Management's Discussion and Analysis of Financial Condit ion and Results of Operations" and our cons olidated
financial statements, related notes thereto and other financial information included elsewhere in this prospectus.

         We have derived the summary consolidated statement of operations data for the years ended August 31, 2007, 2008 and 2009 fro m our
audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary unaudited consolidated
statement of operations data for the nine months ended May 31, 2009 and 2010 and the consolidated balance sheet data as of May 31, 2010
fro m our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financ ial statements
have been prepared on a basis consistent with the audited consolidated financial statements appearing elsewhere in this prospectus and, in the
opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for fair presentat ion of such data.
Our historical results are not necessarily indicative of results to be expected for any future periods.

                                                                                                                 Nine Months Ended
                                                        Years Ended August 31,                                         May 31,
                                             2007                2008                     2009                2009               2010
                                                                                                                     (unaudited)
                                                                  (in thousands, except share and per share amounts)
              Consolidated
                Statement of
                Operations:
              Revenues, net              $          6,860     $          14,749     $       11,551      $        7,010      $           24,275
              Cost of revenues   (1)
                                                    4,484                11,681             11,019               6,536                  14,230

                Gross profit                        2,376                 3,068                532                 474                  10,045

              Operating expens es:
                Research and
                   development (1)                   902                  1,935              2,452               1,591                   1,490
                Selling, general and
                   administrative (1)               1,704                 2,320              2,568               1,600                   2,244

                    Total operating
                      expenses                      2,606                 4,255              5,020               3,191                   3,734

              Income (loss) from
                 operations                          (230 )              (1,187 )            (4,488 )            (2,717 )                6,311
              Other income (expens e):
                 Loss from
                    unconsolidated
                    entities (2)                       —                     —                   —                   —                    (169 )
                 Interest income
                    (expens e), net                    97                    41                215                 209                     (21 )
                 Other income, net                     —                     37                 —                   —                       —
                 Foreign currency
                    transaction gain
                    (loss)                           234                    295                580                 424                    (325 )

                    Total other
                      income
                      (expens e), net                331                    373                795                 633                    (515 )

              Income (loss) before
                 provision for income
                 taxes                               101                   (814 )            (3,693 )            (2,084 )                5,796
              Provision for income
                 taxes                                 —                     —                   —                   —                    271

              Net income (loss)          $           101      $            (814 )   $        (3,693 )   $        (2,084 )   $            5,525


              Net income (loss)
                attributable to
                common stock:
                Basic                    $             —      $            (814 )   $        (3,693 )   $        (2,084 )   $             460


                Diluted                  $             —      $            (814 )   $        (3,693 )   $        (2,084 )   $             487


              Net income (loss) per
                share attributable to
  common stock:
  Basic                   $        0.00    $        (0.01 )   $            (0.04 )   $        (0.02 )   $         0.00


  Diluted                 $        0.00    $        (0.01 )   $            (0.04 )   $        (0.02 )   $         0.00


Shares used in
  computing net
  income (loss) per
  share attributable to
  common stock:
  Basic                       57,342,749       75,530,727             92,404,576         91,146,507          98,029,563
  Diluted                     57,892,748       75,530,727             92,404,576         91,146,507         107,899,182


                                                                  7
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                                                                                                                                 As of May 31, 2010    (3)


                                                                                                                                                                 Pro Forma
                                                                                                                   Actual              Pro Forma                 as Adjusted
                                                                                                                                        (unaudited)
                                                                                                                                      (in thousands)
                 Consolidated Balance Sheet Data:

                 Cash and cash equivalents                                                                     $       14,157     $           14,157         $

                 Working capital   (4)
                                                                                                                       23,725                 23,725

                 Total assets                                                                                          76,307                 76,307

                 Long-term debt, net of current portion   (5)
                                                                                                                        3,964                  3,964

                 Total stockholders' equity                                                                    $       65,867     $           65,867         $



(1)
       Stock-based compensation expens es are included in our cost of revenues, research and development expenses and selling, general and administrative expenses as follows:

                                                                                                                                           Nine Months Ended
                                                                                        Years Ended August 31,                                  May 31,
                                                                                    2007         2008          2009                              2010
                                                                                                                                              (unaudited)


                                                                                                                    (in thousands)
                    Stock-based compensation expens es included in:

                       Cost of revenues                                            $     —        $       —        $        —          $                                29

                       Research and development                                          —                —                 —                                           18

                       Selling, general and administrative                                3                8                16                                          53

                                     Total stock-based compensation
                                       expenses                                    $      3       $        8       $        16         $                               100



(2)
       Includes our proportionate share of loss from our unconsolidated joint venture entities, including China SemiLEDs. Our invest ments in these entities are initially stated at cost on our
       consolidated balance sheets and adjusted for our portion of equity in these investees' income or loss.


(3)
       Our consolidated balance sheet data as of May 31, 2010 is presented:



             •
                        on an actual basis;


             •
                        on a pro forma basis to give effect to the conversion of 5,859,950 Class B common stock into Class A common stock and the conversion of 192,064,223 shares of
                        convertible preferred stock, which repres ents all of the issued and outstanding shares of convertible preferred stock, into s hares of Class A common stock on a
                        one-for-one basis; and


             •
                        on a pro forma as adjusted basis to reflect the pro form a adjustments stated above and the sale by us of           shares of common stock offered by this prospectus at
                        the initial public offering price of $       per share (the mid-point of the price range set forth on the cover page of this prospectus) after deducting underwriting
                        discounts and commissions and estimated offering expens es payable by us.



(4)
       Working capital represents short-term assets less short-term liabilities.


(5)
       Long-term debt includes long-term notes with a maturity of greater than 12 months.
8
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                                                                RIS K FACTORS

          An investment in our common stock involves a high degree of risk. You should carefully consi der the risks described below, together
with all of the other information contained in this prospectus before making an investment decision. Our business, prospects, financial
condition or operating results could be materially and adversely affected by any of the risks set forth herein as well as other risks not currently
known to us. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of y our investment. In
assessing the risks described below, you should also refer to the other information contained in this prospectus, including our consolidated
financial statements and the related notes thereto, before deciding to purchase any shares of our common stock.

Risks Related to Our Business

We have a limited operating history which makes it difficult for you to evaluate our business, financial condition, operating results and
prospects and which impairs our ability to accurately forecast our future performance.

         We were incorporated in January 2005 and our first sales of LED chips occurred in November 2005. Ou r revenue to date has not been
significant and we have only recently generated net income. Our limited operating history, comb ined with the rapidly evolving nature of the
LED industry in which we co mpete, may not provide an adequate basis for you to evaluate our operating and financial results and business
prospects. In addition, we only have limited insight into emerging trends that may adversely affect our business, prospects a nd our operating
results. As such, our limited operating history may impair our ability to accurately fo recast our future performance.

We have incurred net losses and although we have recorded moderate net income in recent periods, we may again incur net losse s in the
future a nd no assurance can be given that we will be able to maintain our recent revenue a nd net income growth.

          We incurred net losses of $0.8 million and $3.7 million for the fiscal years ended August 31, 2008 and 2009, respectively, and we
recorded only moderate net inco me of $0.1 million for the fiscal year ended August 31, 2007. As a result, our financial statements for the year
ended August 31, 2009 include a note that there is substantial doubt about our ability to continue as a going con cern, which note does not give
effect to the receipt by us of the net proceeds of this offering. As of May 31, 2010, we had an accu mulated deficit of $4.2 millio n. Although we
recorded net income of $5.5 million for the nine months ended May 31, 2010, no assurance can be given that we can maintain such profitability
and we may incur substantial net losses in the future. Our revenue and net income may decline for a variety of reasons, some of which are
beyond our control and include:

     •
            general economic downturns, including an onset of a major financial or economic crisis similar to the one which occurred
            beginning in late calendar year 2008;

     •
            adverse economic develop ments in Taiwan or China;

     •
            slower or less than expected, or negative, growth of the LED general lighting market;

     •
            oversupply in the LED industry;

     •
            our inability to innovate products at the pace of the market and our inability to execute our business strategies; or

     •
            our inability to produce our products due to production interruptions or delays.

         You should not rely on the revenue or net income growth of any prior quarterly or annual periods as an indication of our futu re
performance. In the past, we have experienced revenue declines and incurred increased net losses. If our future growth fails to meet investor or
analyst expectations, it

                                                                         9
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could have a severe adverse impact on the trading price of our co mmon stock and could have a material adverse effect on our b usiness,
financial condition and results of operations.

We derive a substantial portion of our revenues fro m the sale of our LE D chips. Our inability to grow or maintain our revenues generated
from the sales of LE D chips would have a negative impact on our financial condition and results of operation.

         A substantial portion of our revenues to date have been derived fro m the sale of LED chips, our core product. Revenues attributable to
the sale of our LED chips represented 94.6%, 88.0%, 77.6% and 78.8% of our revenues in the years ended August 31, 2007, 2008 and 2009
and the nine months ended May 31, 2010, respectively. Revenues attributable to the sale of our LED co mponents represented substantially all
of the remain ing portion of our revenues for those periods. We expect to continue to derive a substantial portion of our revenues from the sale
of LED chips for the foreseeable future. As such, the continued market acceptance of our LED chips is critical to our continu ed success, and
our inability to grow or maintain our revenues generated from the sales of LED chips would have a negative impact on our business, financial
condition and results of operations.

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

         Our products are primarily sold for use in LED general lighting applicat ions. Our financial condition, results of operations and
prospects substantially depend on increased market acceptance of LEDs in general lighting globally, and in particular in Asia. Although LED
lighting has grown rapidly in recent years, adoption of LEDs for general lighting has only recently begun, is still limited a nd faces significant
challenges.

         If LED lighting does not achieve widespread acceptance and adoption, or if demand for LED products does not grow as we anticipate,
our revenues may decline and our prospects for growth and profitability will be limited. Moreover, if existin g sources of light other than LED
devices, such as organic light emitting diodes (OLEDs), ach ieve adoption, or if new sources of light are developed, our curre nt products and
technologies could become less competitive or obsolete.

         Potential customers for LED general lighting systems may not adopt LED lighting as an alternative to traditional lighting technology
because of LEDs' higher upfront cost. In addition, manufacturers of general lighting systems may have substantial investments and know-how
related to their existing lighting technologies, such as traditional incandescent, fluorescent, halogen and high intensity discharge, or HID,
lighting devices, and may perceive risks relating to the complexity, reliab ility, quality, usefulness and cos t-effectiveness of LED products.
Incumbents in the light fixture industry may view LEDs as a threat and disfavor them. Even if LED lighting continues to achie ve performance
improvements and cost reductions, limited customer awareness of the benefits of LEDs, lack of widely accepted standards governing LED
lighting and customer unwillingness to adopt LEDs in favor o f entrenched solutions could significantly limit the demand fo r L ED products.
Additional factors that may limit the adoption of LEDs for general lighting include, among others:

     •
            availability of government regulat ions that discourage the use of some traditional lighting technologies and government incen tives
            and regulations to promote the development of the LED industry;

     •
            changes in economic and market conditions that affect the viability of some t raditional lighting technologies, for examp le declining
            energy prices that favor existing lighting technologies; and

                                                                        10
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     •
            capital expenditures for new and replacement lighting systems by end users of LED products, which may decline during economic
            downturns.

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

          Co mpetition in the markets for LED products is intense, and we expect that competition will continue to increase. Increased
competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and f ailure to increase,
or the loss of, market share, any of which would likely seriously harm our business, operating results and financial condition.

         We co mpete with many LED ch ip manufacturers and, to a lesser extent, LED packaging manufacturers. With respect to our LED ch ips
and LED co mponents, we primarily co mpete with Citizen Electronics Co., Ltd., Cree, Inc., Epistar Corporation, Everlight Electronics Co., Ltd.,
Nich ia Corporation, Ph ilips (Lu mileds), Siemens (Osram) and Showa Denko. We have a nu mber of co mpetitors that compete directly with us
and are much larger than us, including, among others, Cree, Inc., Ep istar Corporat ion, Nichia Corporat ion, Philips (Lu mileds), and Siemens
(Osram). Several substantially larger co mpanies compete against us with a relat ively small segment of their overall bu siness. In addition,
several large and well-capitalized semiconductor companies, such as Micron Technology, Inc., Samsung Electronics Co., Ltd., Sharp Ltd. and
Taiwan Semiconductor Manufacturing Co., have recently announced their plans to enter into the LED chip and lighting market. These potential
competitors have extensive experience in developing semiconductor chips, which is similar to the manufacturing process for LE D chips. We
are also aware of a nu mber o f well-funded private companies that are developing competing products. We will also compete with numerous
smaller co mpanies entering the market, so me of who m may receive significant government incentives and subsidies pursuant to g overnment
programs designed to encourage the use of LED lighting and to establish LED-sector companies. For example, Korea has programs to
encourage the use of LED lighting and to establish LED-sector companies, which could result in new co mpetitors.

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

         The larger co mpanies with wh ich we co mpete, or may co mpete in the future with, may have greater capital resources which may p ut
them in a better position to substantially increase their manufacturing capacity and expend resources on research and development efforts or to
withstand any significant market downturns. Such larger co mpanies typically have broader product lines and market focus and thus are not as
susceptible to downturns in a particular market. These competitors have in the past reduced their average selling prices, and the resulting
competitive pricing pressures have caused us to similarly reduce our prices, accelerat ing the decline in the gross margin of our products. We
expect our competitors will imp lement such competitive strategies again in the future.

         We co mpete primarily on the basis of our products' performance, price, quality, and reliability and on our ability to customi ze products
to meet customer needs. However, our co mpetitors may be able to develop more co mpetitive products, respond more quickly to new or
emerging technologies, or bring new products to the market earlier. Moreover, our existing or potential customers could develop, or acquire
companies that develop, products or technologies that may render our products or technologies obsolete or noncompetitive. Our continued
success depends on our ability to develop and introduce new, technologically advanced and lower cost products, such as more e fficient, h igher

                                                                        11
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brightness LED ch ips. If we are unable to achieve technological breakthroughs, introduce new products that are commercially v iable and meet
rapidly evolving customer requirements, and keep pace with evolving technological standards and market development, we may experien ce
reduced market share. Any failure to respond to increased competition in a timely or cost -effective manner could have a material adverse effect
on our business, financial condition and results of operations and prospects.

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

          Fluctuations in supply and demand for LEDs pose serious risks to our prospects, business and results of operations. Our indus try, akin
to the semiconductor industry, is highly cyclical and characterized by rap id technological change, rapid product obsolescence, declin ing
average selling prices and wide fluctuations in supply and demand. Our industry's cyclicality results fro m a co mp lex set of factors, including,
but not limited to:

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

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

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

         As market demand increases, if we are not able to increase our capacity or if we experience delays or unforeseen costs associated with
increasing our capacity levels, we may not be able to achieve our financial targets. Alternatively, as market demand decreases or as market
supply surpasses demand, we may not be able to reduce manufacturing expenses or overhead costs proportionately. We believe th at many of
our competitors are, like us, adding MOCVD reactors and related equip ment to increase manufacturing capacity. We expect a significant
number of MOCVD reactors and related equipment will co me on line in the next 12 months and increase LED chip supply. If t he expected
increase in supply outpaces any increases in future market demand, or if demand decreases, the resulting oversupply could adversely impact
our sales and cause us to reduce our prices, which would lower our margins and adversely impact our financial results.

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

         Trademark, patent, copyright and other intellectual property rights are crit ical to our business and the business of our comp etitors. Our
industry is characterized by frequent intellectual property litigation involv ing patents, trade secrets, copyrights, a nd mask designs among
others. Competitors of ours and other third parties have in the past and will likely fro m t ime to t ime in the future allege t hat our products
infringe on their intellectual property rights. Other co mpanies, including our primary co mpe titors, have been for several years, and continue to
be, devoting substantially greater resources than us in filing for and obtaining patents that potentially affect many aspects of our LED chips and
LED co mponents and our business. Any intellectual property claim against us, regardless of the validity or outcome, could hav e a material
adverse effect on our business, financial condition, reputation and competitive position. The risk that an infringement claim, wit h or without
merit, will be asserted against us will increase as our visibility within the LED market increases as a result of this offering.

         Litigation to determine the validity and scope of any claim against us for infringement, mis -appropriation, mis-use or other violation of
third-party intellectual property rights can be highly uncertain because of the complex scientific, legal and factual questions and analyses
involved. Defending against intellectual property infringement claims, whether they are with or without merit or are dete rmined in our favor,
would likely result in costly litigation, diversion of the attention and

                                                                        12
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efforts of our technical and management personnel or the inability to manufacture, use or sell products found to be infringing. As a result of any
such dispute, we may be required to develop non-infringing technology, pay substantial damages, enter into royalty or licens ing agreements to
use third-party technology, cease selling certain products, adjust our marketing and advertising activities or take other actions to re solve the
claims. These actions, if required, may be costly or unavailable on terms acceptable to us. If we are unable to obtain sufficient rights or develop
non-infringing intellectual property or otherwise alter our business practices on a timely basis, our business and competitive po sition may be
adversely affected. Moreover, some of our d istribution agreements require us to indemnify our distributors for third-party intellectual property
infringement claims, wh ich could increase the cost to us of an adverse ruling in such an action.

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

          In addit ion, our customers may be subject to infringement claims involving our customers' products that incorporate our techn ologies
or products, and any unfavorable result could impair such customers' continued demand for our products. For example, Nichia Corporation, or
Nich ia, filed a lawsuit in Japan against a Japanese subsidiary of Seoul Semiconductor Co., Ltd., or Seoul Se miconductor, which is one of our
customers, and another lawsuit in Korea against Seoul Semiconductor. In those two lawsuits, Nich ia asserted that our LED chip s infringed two
patents in Japan and one in Korea. While we were not named as a defendant in eithe r of those lawsuits, we intervened as independent or
supplementary parties. Although the Japanese lawsuit was settled, it is still possible for Nich ia to file a new lawsuit on the two patents
originally at issue in the action in Japan. In addition, althoug h the Korean district court found the patent at issue to be invalid, Nichia's
subsequent appeal and Seoul Semiconductor's related invalidation action were both withdrawn after the parties entered into a cross-licensing
agreement. As such, the invalidity finding by the district court was vacated.

         In May 2010, Bluestone Innovations Texas LLC filed a co mplaint in the United States District Court fo r the Eastern District of Texas
against Osram GmbH, a major German lighting systems manufacturer, as well as other major players in the LED industry. The complaint also
names SemiLEDs as a defendant. Bluestone alleges infringement of a U.S. patent and seeks injunctive relief and damages. Although we have
not yet been served, we believe that we have meritorious defenses to the infringement allegations and intend to defend this lawsuit vigorously.
However, there can be no assurance that we will be successful in our defense and, even if we are successful, we may incur sub stantial legal fees
and other costs in defending the lawsuit. See " Business —Legal Proceedings."

                                                                        13
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Our operating results may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause
our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our c ommon stock.

         Our quarterly operating results are difficult to predict and may fluctuate significantly in the future. We have experienced seasonal and
quarterly fluctuations in the past. However, given that we are an early -stage company operating in a rapidly g rowing industry, those
fluctuations may be masked by our recent growth rates and as a result may not be readily apparent fro m our historical operatin g results. As
such, our past quarterly operating results may not be good indicators of future performance.

         In addit ion to the other risks described in this "Risk Factors" section, the following factors could cause our operating results to
fluctuate:

     •
             general global economic and financial conditions;

     •
             our production capacity, average selling prices and manufacturing yields;

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

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

     •
             timing of orders fro m and shipments to major customers and end -customers, including as part of LED pro ject-based orders, and
             our ability to forecast demand and manage lead t imes for the manufacturing of our products;

     •
             seasonal fluctuations in our customers' purchasing patterns;

     •
             the cyclical nature of the LED industry;

     •
             fluctuations in the currency exchange rates of the U.S. dollar, NT dollar and RM B; and

     •
             natural disasters, such as floods, typhoons and earthquakes, that result in interruptions in power supply resulting fro m such e vents
             or due to other causes.

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

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

         We plan to continue to expand production capacity at Taiwan SemiLEDs' manufacturing facilit ies. In addition, our strategy to
capitalize on the potential growth of the LED market in Ch ina includes China SemiLEDs. China SemiLEDs is currently constructing
manufacturing facilities in Foshan, China and is not yet operational. There are many events that could delay, prevent or impact our ability to
increase our capacity in accordance with our plans, or otherwise increase our costs, including shortages or late delivery of building materials
and facility equip ment, delays in governmental approval, consents, licenses, permits and certifications, labor d isputes, availability of sp ace for
further build-out or earthquakes or other natural disasters, among others.

          Any unanticipated delays in comp letion of planned expanded facilities at Taiwan SemiLEDs or China SemiLEDs or cost overruns may
result in a loss of customers and will have a negative impact on our and China SemiLEDs' reputation.
14
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         Upgrading or expanding existing facilit ies could also result in manufacturing problems that reduce our yields. For examp le, in the third
fiscal quarter of 2009, we suffered a temporary decrease in our yields after we moved our manufacturing facilities in Taiwan to a new location
to increase manufacturing capacity. Yields and utilization rates below our target levels could negatively impact our g ross profit.

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

We may have difficulty managing our future growth and the associated increased scale of our operations, which could materially and
adversely affect our business and operating results.

          We have experienced a period of significant growth over the past few years and expect to continue to expand our b usiness and
operations. Since our inception in 2005, our revenues grew fro m $0.7 million fo r the year ended August 31, 2006 to $11.6 million for the year
ended August 31, 2009 and $24.3 million for the nine months ended May 31, 2010. In addit ion, Ch ina SemiLEDs will have to complete the
build-out of the manufacturing facilities, purchase equipment and hire technical and managerial personnel, install LED ch ip manufac turing
lines, install financial and administrative equip ment and software and commence operat ions and begin to market and sell products.

         Our future expansion plans, in particu lar those in Ch ina, may p lace a significant strain on our managerial, ad min istrative, o perational,
technological and financial resources. In order to manage our growth, we must continue to hire, recru it and manage our workfo rce effect ively
as well as imp lement adequate controls and reporting systems and procedures in a timely manner. If we fail to manage our grow th, we may
encounter, among other things, delays in production and operational difficult ies. Moreover, additional capital investments will increase our cost
base, which will make it mo re difficult for us to offset any future revenue shortfalls by offsetting expense reductions in th e short term.

         In order to effectively support our growth and meet customer demand, we must also continue to:

     •
             maintain adequate manufacturing facilit ies and equipment;

     •
             secure and maintain sufficient and stable supplies of raw material;

     •
             continue to expand our research and development, sales and marketing, technological and distribution capabilit ies;

     •
             enhance the skills and capabilities of our key personnel and hire additional experienced senior level managers and technical
             personnel; and

     •
             attract and retain qualified employees.

        If we are unable to effectively manage our growth and the associated increased scale of our operations, our financial results , financial
condition, business or prospects could be harmed significantly.

Sales of our products are concentrated in Asia, particularly in China and in Taiwan. Adverse developments in these markets cou ld have a
material and disproportionate impact on us.

        Our revenues are highly concentrated in markets in Asia, part icularly in China and Taiwan. Revenues generated from sales of our LED
chips and LED co mponents to China (including Hong Kong) accounted for 23.2%, 47.2% and 41.6% of our revenues for the years en ded
August 31, 2008 and 2009 and the nine months ended May 31, 2010, respectively, and revenues generated fro m sales of our LED chips and
LED co mponents to Taiwan accounted for 42.2%, 31.8% and 41.3% of our revenues for the years ended August 31, 2008 and 2009 and the
nine months ended May 31, 2010, respectively. As a result of our revenue concentration in these two markets, economic downturns, changes in
governmental policies and increased competition in Ch ina or Taiwan could have a material and disproportionate impact on our r evenues,
operating results, business and prospects.

                                                                          15
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We may not succeed in cost-effectively producing LED chips using larger wafer sizes.

          To lower our per unit production costs and to compete effectively, we expect to have to continually develop new technologies that
allo w us to produce LED ch ips using larger wafer sizes. We are currently producing chips based on 2.5" wafer sizes. Although we have plans
to migrate to commercial production based on 4" wafers and to commence research and development or testing for the manufactur e of 6"
wafers in the next 12 months, we do not have any experience in the co mmercial production of LED chips using 4" and 6" wafers.

          Larger wafers are significantly mo re expensive to manufacture than smaller wafers and generally have physical attribu tes and
properties that make it materially mo re d ifficult to process efficiently for the manufacture of LED chips with yield and consistency that may not
justify the high cost of the wafer. While we have invested and will continue to invest in process technologies and know-how to manufacture
LED ch ips using 4" wafers and we expect to co mmence research and development to manufacture chips using 6" wafers, no assurance can be
given that we will be successful in doing so. Several of our co mpetitors have begun manufacturing LED ch ips based on 4" wafer s. If we are
unable to cost-effectively migrate to larger wafer sizes, or if these and other manufacturers succeed in developing cost-effective 4" and 6"
wafer technology before we do, our financial condition, results of operations, competitiveness and prospects will be material ly and adversely
affected.

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

        Our products are manufactured using technologies that are highly co mplex. The nu mber o f usable chips, or yield, fro m our production
processes may fluctuate as a result of many factors, including but not limited to the follo wing:

     •
            variability in our process repeatability and control;

     •
            contamination of the manufacturing environ ment;

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

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

     •
            losses from b roken wafers, inventory damage or hu man errors;

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

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

         Introduction of new products and manufacturing processes are often characterized by lower yields in the init ial co mmercializat ion
stage. In the past, we have experienced difficu lties in ach ieving acceptable yields when introducing new products or new manu facturing
processes, which has adversely affected our operating results. We may experience similar problems in the future, and we cannot predic t when
they may occur or the severity of such difficu lties and the impact on our business.

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

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

       As part of our growth strategy, we plan to continue to be innovative in product design, to deliver new products and improve our
manufacturing efficiencies. In particular, as the LED industry

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develops and technical specificat ions and market standards change, we must continue to innovate and develop competitive produ cts that are
accepted by the marketplace. We have also made significant investments in technologies intended to enhance our LED co mponent capabilities.
If we are unable to execute our product innovation strategy effectively, we may not be able to take advantage of market oppor tunities as they
arise, execute our business plan or respond to competition.

We may not be successful in expanding our sales of LED components in certain markets, and some o f our packaging customers may reduce
orders if they perceive us as competing with them.

         We have recently expanded our sales of LED co mponents and plan to continue to focus on increasing such sales in the future. As we
continue to expand our LED co mponents business, some of our packaging customers may perceive us as a competitor and may reduc e or cease
purchasing our LED ch ips. If such reduction in orders occurs faster than our g rowth in our LED co mponents business or if future demand for
these products does not grow, our business, financial condition and results of operations could be materially and adversely a ffected.

         In addit ion, we face challenges in further expanding our LED co mponents business because it involves processes and technologies that
are significantly different fro m our manufacturing processes for LED chips, wh ich has been our core product to date. For exam ple, we are
developing advanced level LED co mponent techniques, such as wafer level packaging, wh ich is in early stages of development. We have not
yet produced wafer level packaging co mmercially or in any significant volu mes, and may not be able to do so. If we are not ab le to further
develop our LED co mponents business or if co mpetitors create or adopt mo re advanced packaging technologies than ours, then our business,
financial condition and results of operations could be materially and adversely affected.

          In addit ion, the intellectual property rights related to LED co mponents are particularly co mplex and characterized by aggressive
enforcement of those rights. To min imize the likelihood that one of our competitors or another third party will assert a clai m, regardless of the
merit, related to our LED co mponents, we have sought to market these products only in certain countries in which we believe enforcement of
intellectual property rights has historically been more limited. As a result, sales of our LED co mponents have been limited t o a small nu mber of
countries, and, given our strategy to minimize litigation risk, we may not be able to identify addit ional countries that we f ind to be suitable
markets for these products. In addition, if the countries in wh ich we currently sell our LED c o mponents increase their enforcement of
intellectual property rights, our ability to continue to sell our LED co mponents in our current markets may be materially adv ersely affected.
Sales of our LED co mponents and our other products may also be limited in the event that they are subsequently shipped or otherwise resold in
a country, and a claim is brought against us or our customer pursuant to the intellectual property laws of the country of fin al destination.

We derive a substantial portion of our revenues fro m a limited number of customers and generally do not enter into long -term customer
contracts. The loss of, or a significant reduction in purchases by, o ne or more o f these customers could adversely affect our operating
results and financial condition.

        We derive a significant portion of our revenues from a limited nu mber of customers. For the years ended August 31, 2007, 2008 and
2009, our top ten customers represented 77.7%, 73.0% and 57.3% of our revenues, respectively, and 63.8% for the nine months ended May 31,
2010. So me of our largest customers have changed from year to year primarily as a result of our limited operating history, ra pid growth,
broadening customer base, and the timing of discrete, large project-based purchases. In addition, for the year ended August 31, 2009 and the
nine months ended May 31, 2010, one distributor customer, Shenzhen Noah OPT-ELE Co., Ltd., or Shenzhen Noah, accounted for 32.2% and
25.6%, respectively, of our revenues. Shenzhen Noah purchases products from us through one-time purchase orders and does not have any
long-term purchase commit ments.

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         The sales cycle fro m in itial contact to confirmed orders with our customers is typically long and unpredictable. We typically ent er into
individual purchase orders with large customers, wh ich can be altered, reduced or cancelled with litt le or no notice to us. We do not generally
enter into long-term co mmit ment contracts with our customers. As such, these customers may alter their purchasing behavior and reduce or
cancel orders with little or no notice to us. Consequently, any one of the following events may ca use material fluctuations or declines in our
revenues:

     •
             reduction, delay or cancellat ion of orders fro m one or more of our major customers;

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

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

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

         Our future success depends on the continued service and performance of our key personnel, including in part icular Tru ng T. Do an, our
chief executive officer, and Dr. Anh Chuong Tran, our chief operating officer. We do no t maintain key man insurance on any of our officers or
key employees.

         If any of Mr. Doan, Dr. Tran or others of our key personnel were unable or unwilling to continue in their present positions, we may not
be able to replace them read ily o r on terms that are reasonable, if at all. As such, the loss of Mr. Doan, Dr. Tran or other key personnel,
including other key members of our management team and certain of our key market ing, sales, product development or technology personnel,
could significantly disrupt our operations and prevent the timely ach ievement of our development strategies and growth, which would likely
have an adverse effect on our financial condition, operating results and prospects. Moreover, we may lose some of our custome rs if any of our
officers or key emp loyees were to jo in a co mpetitor or form a co mpeting co mpany. The loss of the services of our senior management for any
reason could adversely affect our business, operating results and financial condition.

           In addit ion, competit ion for experienced employees in our industry can be intense, and we may not be successful in recruiting,
motivating or retain ing sufficiently qualified personnel on terms that are reasonable, or at all. In particular, Ch ina SemiLE Ds may face
difficult ies recruit ing and retaining suitable employees in sufficient numbers and it may need to invest significant time and resources to train
personnel to perform the necessary manufacturing, senior management and admin istrative functions.

The marketing and distribution efforts of our third-party distributors may not be effective, which could negatively affect our ability to
expand our business outside of Taiwan and China a nd damage our brand reputation.

         We market and sell our p roducts through third-party distributors in certain markets such as China, Japan and South Korea. For the
years ended August 31, 2008 and 2009 and the nine months ended May 31, 2010, 40.0%, 54.8% and 45.5% of our revenues were fro m sales to
distributors. We rely on these distributors to service end-customers, and our failure to maintain strong working relat ionships wit h such
distributors could have a material adverse impact on our operating results and revenues fro m such countries and damage our br and reputation.

        We do not control the activities of our distributors with respect to the market ing and sales of and customer service support for our
products. Therefore, the reputation and performance of our distributors and the ability and willingness of our d istributors to sell our products,
uphold our brand reputation for quality, by providing, for examp le, h igh quality service and pre - and post-sales support, and their ab ility to
expand their businesses and their sales channels are essential to the future growth

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of our business and has a direct and material impact on our sales and profitability in such jurisdictio ns. Also, as with our individual customers,
we do not have long-term purchase commit ments fro m our d istributor customers, and they can therefore generally cancel, modify or reduce
orders with little or no notice to us. As a result, any reductions or delays in, or cancellations of, orders fro m any of our d istributors may have a
negative impact on our sales and budgeting process.

         In addit ion, we have entered and may fro m time to time enter into exclusivity or other restrictions or arrangements o f a similar nature
as part of our agreements with our d istributors. Such restrictions or arrangements may significantly h inder our ability to se ll additional
products, or enter into agreements with new or existing customers or distributors that plan to sell our products, in certain markets, which may
have a material adverse effect on our business, financial condition and results of operations.

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

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

         Our customers incorporate our LED products into their products. As such, demand for our products is dependent on demand fo r o ur
customers' end-products that incorporate our LED products and our customers' ability to sell these products. The ge neral lighting market has
only recently begun to develop and adopt standards for fixtures that incorporate LED devices. If the end -customers for our prod ucts are unable
to manufacture fixtures that meet these standards, our customers' sales, and consequent ly our sales, will suffer.

          With respect to our LED chips, substantially all of our sales are to packagers or distributors, who in turn sell to packagers , a substantial
portion of which is used in LED general lighting applicat ions. Our packaging customers package our LED chips and sell the packaged product
to distributors or end-customers such as lighting fixture manufacturers. Our d istributors resell our LED chips either to packagers or to
end-customers. General lighting applications typically require wh ite lighting whereas we typically sell b lue chips or chips with other non -white
color characteristics. Therefore, our customers coat our LED ch ips with an appropriately co lored phosphor that converts the LED light
emission into the desired color. Sales of our LED chips are highly dependent upon our customers' ability to procure high qualit y phosphors,
develop high quality and highly efficient wh ite LED co mponents and obtain the necessary intellectual property rights, such as the rights to use
various phosphors. Even if our customers are able to develop competit ive wh ite LED co mponents using our LED ch ips, there can be no
assurance that our customers will be successful in the marketplace.

         With respect to the sale of our LED co mponents , substantially all of our sales are to distributors, who sell to end-customers, or directly
to end-customers. Sales by end-customers of our products are generally dependent on their ability to develop high quality and highly efficient
lighting products and require co mplex designs and processes, including thermal design, optical design and power conversion.

If our intellectual property, including our proprietary technologies and trade secrets, are not adequately protected to preve nt mis-use or
misappropriation by our competitors, the value of our brand and other intangible assets may be diminished, and our business may be
materially and adversely affected.

          Our future success and competitive position depends in part on our ability to protect our intellectual property, includin g proprietary
technologies and trade secrets. In particular, we have developed advanced capabilities and proprietary know-how in sapphire reclamation, GaN
epitaxial

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growth, copper alloy technology, nanoscale surface engineering and vertical LED structure technology that are critical to our b usiness. We rely,
and expect to continue to rely, on a co mbination of confidentiality and license agreements with our employees, licensees and third part ies with
whom we have relationships, and trademark, copyright, patent and trade secret protection laws, to protect our intellectual pr operty, includ ing
our proprietary technologies and trade secrets.

          There can be no assurance that the steps we have taken or plan to take in the future are adequate to protect our intellectual property,
including our proprietary technologies and trade secrets. We currently have 31 patents issued and 43 patents pending with the United States
Patent and Trademark Office covering various aspects of our core technologies. We also have 43 patents issued and 86 patents pending before
patent and trademark offices outside the United States. Of these 74 issued patents and 129 pending patents, 57 are issued design patents and 10
are pending design patents. We expect to continue to seek patent and trademark protection for our technologies and know -how. However, we
will only be able to protect such technologies and know-how fro m unauthorized use by third parties to the extent that valid, protectable and
enforceable rights cover them. We cannot be certain that our patent and trademark applications will lead to issued patents being issued and
registered trademarks being granted in a timely manner, or at all. Even if we are successful in obtaining such rights, the in tellectual property
laws of other countries in which our products are sold or may in the future be sold ma y not protect our products and intellectual property rights
to the same extent as the laws of the United States. For example, China currently affords less protection to a company's inte llectual property
than some other jurisdictions. As such, the lack of s trong patent and other intellectual property protection in Ch ina may significantly increase
our vulnerability as regards unauthorized disclosure or use of our intellectual property and undermine our co mpetit ive position. The legal
standards relating to the valid ity, enforceability and scope of protection of intellectual property rights in LED -related industries are uncertain
and still evolving, both in the Un ited States and in other countries. Moreover, the contractual agreements that we enter into with employees,
licensees and third parties to protect our intellectual property and proprietary rights afford only limited protection and ma y not be enforceable.

          We also expect that the more successful we are, the more likely it will be that competitors will try to develop or patent similar or
superior technologies, products and services. In the event that our competitors are able to obtain knowledge of our know -how, t rade secrets and
technologies through independent development, our failure to protect such know-how, trade secrets and technologies and/or our other
intellectual property and proprietary rights may undermine our co mpetitive position. In addit ion, third part ies may knowingly or unknowing ly
infringe our trademarks and other intellectual property rights, and litigation may be necessary to protect and enforce our intellectual property
rights or determine the valid ity and scope of our proprietary rights. Any such litigation could be very costly and could dive rt management
attention and resources away fro m our business, and the outcome of such lit igation may not be in our favor. If the protection of our intellectual
property, including our proprietary technologies and trade secrets, is inadequate to prevent use or appropriation by third pa rties, the value of our
brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our products and me thods of
operation. Any of these events may have a material adverse effect on our business, financial condit ion, reputation and competitive position.

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

         To protect a substantial amount of our technologies, we have chosen to rely primarily on trade secrets law rather than seeking
protection through patents. Trade secrets are inherently difficult to protect. In order to protect our intellectual property rights, including our
proprietary technologies and trade secrets, we rely in part on security measures, as well as confidentiality agreements with our emp loyees,
licensees and other third parties. These measures and agreements may not effectively

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prevent disclosure of confidential informat ion, including trade secrets, and may not provide an adequate remedy in the event of unauthorized
disclosure of confidential informat ion. While we believe we use reasonable efforts to protect our trade secrets, we could potent ially lose future
trade secret protection if any unintentional or willfu l disclosure by our directors, employees, consultants or co ntractors of such information
occurs, including disclosure by employees during or after the termination of their employ ment with us, in part icular if they were to join one of
our competitors. In addit ion, in the event that others independently discover or gain access to our trade secrets and proprietary information, we
would not be able to assert any trade secret rights against such parties. Laws regarding trade secret rights in certain marke ts in which we
operate may afford little or no protection. The los s of trade secret protection could make it easier for third parties to compete with our products
by copying functionality. Costly and time -consuming litigation could be necessary to enforce and determine the scope of our proprietary rights,
and failure to obtain or maintain trade secret protection could adversely affect our business, revenue, reputation and competitive position.

The reduction or elimination of government invest ment in LED lighting or the elimination of, or changes in, policies that enc ourage the
use of LE Ds over some traditional lighting technologies could cause demand for our products to decline, which could materiall y and
adversely affect our revenues, profits and margins.

         We believe the near-term gro wth of the LED market will be driven in part by government policies that either directly p romote the use
of LEDs or d iscourage the use of some traditional lighting technologies. Today, the upfront cost of LED lighting exceeds the upfront cost for
some traditional lighting technologies that provide similar lu men output in many applications. However, for environ mental reasons, among
others, various governments around the world have used policy in itiatives to accelerate the development and adoption of LED l ighting and
other non-traditional lighting technologies that are seen as more environmentally -friendly co mpared to some tradit ional lighting technologies.
Reductions in, or eliminations of, government investment and favorable energy policies could result in decreased demand for o ur products and
decrease our revenues, profits, margins and prospects.

If we fail to implement proper and effective internal controls over financial reporting, our ability to produce accurate and timely financial
reports could be impaired and our stock price could decline.

         Prior to this offering, we have been a private company and have not filed reports with the SEC. We will become subject to the public
reporting requirements of the Securit ies Exchange Act of 1934, or the Exchange Act, upon the co mpletion of this offering. As a public
reporting company listed on the NASDAQ Global Market, we will be required, among other things, to maintain a system of effect ive internal
control over financial reporting. We produce our consolidated financial statements in accordance with the requirements of generally accepted
accounting principles in the United States, or US GAAP, but it is necessary for us to enhance our internal control environ ment to align our
procedures with those expected of a public company.

           Effective internal controls are necessary for us to produce reliable financial reports. As a public company, we will be required to
evaluate periodically the effect iveness of the design and operation of our internal controls over financial repo rt ing. These evaluations may
result in the conclusion that enhancements, modifications or changes to our internal controls are necessary or desirable. Alt hough we have
begun recruiting additional finance and accounting personnel, we will need to hire addit ional personnel or outsource this function to meet these
requirements. Our ab ility to hire and retain personnel with US GAAP expertise in Taiwan may affect our ability to meet these requirements.
We have not yet begun the process of evaluating or documenting our internal control over financial reporting processes and systems. Ou r
initiat ives ultimately may not result in an effect ive internal control environ ment.

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         If we fail to imp lement and maintain an effect ive system of internal control over financial reporting we may be unable to pro duce
timely, reliable financial reports. Similarly, if management or our independent registered public accounting firm were to discover material
weaknesses in our internal controls it could result in loss of investor confidence and a decline in our stock price.

Our gross margins could fluctuate as a result of changes in o ur product mix and other factors, which may adversely impact our operating
results.

         We anticipate that our gross marg ins will fluctuate fro m period to period as a result of the mix of products that we sell in any given
period. If our sales mix shifts to a greater percentage of LED co mponents, our average selling prices could be higher. Ho wever, LED
components generally have lower margins than our LED chips, and therefore our overall gross margin levels would be adversely impacted.
Increased competition and the adoption of alternatives to our products, more co mp lex engineering requirements, lower demand, over -capacity
in the market and other factors may also lead to price erosion and as a result a lower product margins and lower revenues.

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

          We have grown our business in part through strategic alliances and acquisitions. For example, we formed China SemiLEDs in Jan uary
2010 to focus on the growing market in China and we acquired SBDI in April 2010 to process LED ch ips into LED co mponents. We intend to
continue growing our operations by entering into joint ventures, undertaking acquisitions or establishing other strategic alliances with third
parties in the LED and LED-related industries. These activities involve challenges and risks in negotiat ion, execution, valuation and
integration, and closing of the transactions could be delayed or prevented by regulatory approval requirements, including ant itrust review, or
other conditions. Our existing jo int ventures and acquisitions and future ones that we may enter also could expose us to new operational,
regulatory, market and geographical risks as well as risks associated with significant capital requirements, the diversion of man agement and
financial resources, sharing proprietary informat ion, loss of control over operations and non-performance by a counterparty. In addition, we
may not be successful in finding suitable targets on terms that are favorable to us, or at all.

         Even if successfully negotiated and closed, expected synergies from a jo int venture, acquisition or other strategic alliance may not
materialize or may not advance our business strategy, may fall short of expected return -on-investment targets or may not prove successful or
effective fo r our business. Any future joint venture or acquisition could involve numerous risks including:

     •
            difficulty integrating the operations, internal control systems, technologies and products of the acquired business;

     •
            potential disruption of our ongoing business and distraction of management;

     •
            inadequate cash to fund the acquisition or to pay for unanticipated expenses;

     •
            creating an entity which subsequently becomes a competitor to us;

     •
            exposure to unknown liabilit ies, including litigation against the companies we may acquire;

     •
            potential loss of key emp loyees or customers of the acquired co mpany; and

     •
            additional costs due to differences in culture, geographic locations and duplication of key talent.

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          We may need to raise additional debt funding or sell additional equity securities to enter into such joint ventures or make such
acquisitions. However, we may not be able to obtain such debt funding or sell equity securities on terms that are favorable t o us, or at all. The
raising of additional debt funding by us, if required and available, would result in increased debt service obligations and could result in
additional operating and financing covenants, or liens on our assets, that would restrict our operations. The sale of additio nal eq uity securities,
if required and available, could result in d ilution to our stockholders.

Any undetected defects in our products may harm o ur sales and reputation and adversely affect our manufacturi ng yields.

          The manufacture of LED ch ips is highly co mplex, requiring precise processes in a highly controlled and sterile environment us ing
specialized equip ment. We manufacture our LED products to meet customer requirements with respect to quality, performance and reliab ility.
Although we utilize quality control procedures at each stage of our manufacturing process, our products may still contain def ects that are
undetected until after they are shipped or inspected by our customers. Unsatisfactory performance of o r d efects in our products may cause us to
incur additional expenses, including costs in relation to product warranties, cancellation and rescheduling of orders and shipments, and product
returns or recalls. Failure to detect and rectify defects in our products before delivery could subject us to product liab ility claims and harm our
credibility and market reputation, which could materially adversely affect our business and results of operations.

         In addit ion, we do not currently have fully automated manufacturing processes, which could potentially introduce contaminants to the
production processes through human error. Defects or other difficult ies in the manufacturing process can prevent us from ach ieving maximu m
capacity utilizat ion, wh ich is the actual number of wafers that we are able to produce in relation to our capacity, and acceptable yields of
quality LED chips fro m those wafers.

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

         There are a limited nu mber of co mpanies which supply certain of the specialized raw materials that are impo rtant to the manuf acture
of our products as well as a very limited number of manufacturers of equip ment that are critical to our operations. We generally enter into spot
purchase orders with our suppliers and do not have long-term or guaranteed supply arrangements with any of them. We purchase sapphire
products, the key wafer material used in the manufacture of our LEDs fro m a limited number o f suppliers. A major shortage of sapphire wafers
would impair our ability to meet our p roduction needs resulting in increased costs.

         We also purchase gases, photo chemicals and other materials fro m various suppliers on the spot market. For examp le, t here are
currently supply constraints in the market for Trimethylgalliu m and other Organo -metallic material, which is used for MOCVD growth of GaN,
Aluminiu m Galliu m Nitride, or AlGaN, and Indiu m Galliu m Nitride, or In GaN, layers on sapphire. Although those constraints have not yet had
a impact on our ability to procure supply, continued supply constraints could have a negative impact on us if supply does not increase over the
next year. Additionally, we use metals such as copper alloy and other commod ities in our manufacturing process. The price volatility of su ch
materials may make our procurement planning challenging. If the prices of materials increase it may adversely affect our oper ating margins.
Although these materials are generally availab le and are not considered to be specialty chemicals, our inability to procure s uch materials in
volumes and at commercially reasonable prices could result in a material adverse effect on our business, financial condition and results of
operations.

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         Furthermore, the global LED chip manufacturing industry currently relies on only a few manufacturers of M OCVD reactors. Because
the MOCVD reactor is the key equipment used to produce LED chips, a significant increase in demand for production capacity co uld place
significant pressure on these equipment manufacturers. These equipment manufacturers may not be able to timely meet such demand. In
addition, there are varying lead times of up to six months or more for M OCVD reactors. In the event that we are unable to pro cure sufficient
equipment for our planned capacity expansions, planned migration to larger wafer sizes and, in part icular, for China SemiLEDs' new 4"
manufacturing facility, our business, financial condition and results of operations would be materially adversely affected.

         If any of our key raw material and equip ment suppliers fails to meet our needs on time or at all, we may not be able to procure
replacement supplies fro m other sources on a timely basis or on commercially reasonable terms and our production may be delay ed or
interrupted, which could impair our ab ility to meet our customers' needs and damage our customer relat ionships.

Unfavorable economic or global market conditions are likely to continue to have a negative impact on our business, financi al condition and
results of operations.

          The recent economic downturn in the Un ited States and international markets has led to slower economic activ ity, concerns about
inflation and energy costs, decreased business and consumer confidence, reduced corporate profits and capital spending, adverse business
conditions and diminished liquidity and credit availability in many financial markets. In addit ion, the global economic reces sion has led to
reduced spending in our target markets and made it difficult fo r our customers and us to accurately forecast and plan future business activities.
Continued weak econo mic conditions and further adverse trends in general economic conditions, consumer confidence, emp loyment levels,
business conditions, interest rates, availability of cred it, inflation and taxation have in the past and may again in the future cause consumer
spending to decline further, reduce demand for and prices of our products and our customers' products, affect the prices and availab ility of raw
materials, and limit our ability to obtain financing for our operations. Furthermore, our customers may be unable to access capital efficiently, o r
at all, which could adversely affect our financial condition by resulting in product delays, increased defaults in accounts r eceivables and
increased inventory exposures. Any unfavorable economic or market conditions could have a material adverse effect on our business, financial
condition and results of operations.

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

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

Our operations involve the use of hazardous materials and we must comply with environmental laws, which can result in signifi cant costs,
and may affect our b usiness a nd operating results.

         Our research and development and manufacturing activ ities involve the use of hazardous materials, including acids, adhesives and
other industrial chemicals. As a result, we are subject to a

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variety of environ mental, health and safety laws and regulations governing the use, storage, handling, transportation, emis sion, discharge,
exposure to, and disposal of such hazardous materials. Co mp liance with applicable environ mental laws and regulations in each of the
jurisdictions in which we operate can be costly, and there can be no assurance that violations of these laws will not occur in the future as a
result of human error, accident, equip ment failure, or other causes. Liab ility under environ mental and health and safety laws can be joint and
several, and without regard to fault or negligence. The failure to co mply wit h past, present, or future laws could subject us to increased costs
and significant fines and penalties, damages, legal liabilities, suspension of production or operations, alteration of our ma nufacturing facilities
or processes, curtailment of our sales and adverse publicity. Any of these events could harm our business and financial conditio n. In addition,
China SemiLEDs is required to obtain the relevant approvals fro m PRC environ mental protection authorities prior to co mmencing commercial
operations at its manufacturing facility, and there can be no assurance that it will be able to obtain such approvals in a timely manner, or at all.

         Furthermore, environ mental p rotection and workplace safety regulations may beco me mo re stringent in the futu re, and although we
cannot predict the ultimate impact of any such new laws, they may impose greater co mpliance costs or result in increased risks or penalties,
which could harm our business. Existing and future environmental laws and regulations could als o require us to acquire pollution abatement or
remediation equip ment, modify our product designs or incur other expenses associated with such laws and regulations. As our industry
continues to evolve, we may be required to evaluate and use new materials in our manufacturing process that may be subject to regulation
under existing or future environ mental laws and regulations, and our use of such new materials may be restricted. Any such re striction could
require us to alter our manufacturing processes or increase our expenses. If we fail to co mply with current and future environmental laws and
regulations, whether intentional or inadvertent, we may be required to pay fines and other liabilities to the government or t hird parties, suspend
production or even cease operation.

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligat ed to pay
additional taxes in various jurisdictions.

         As a mu ltinational organization, we are subject to taxation in many jurisdictions around the world with increasingly comp lex tax laws,
the application of wh ich can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes
in the applicable tax princip les, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which
could have a material adverse effect on our liquidity and results of operations. In addition, the taxing authorities in these jurisdictions could
review our tax returns and impose additional tax, interest and penalties, and the taxing authorities could claim that various withholding
requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could
have a material impact on us and the results of our operations.

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

         We conduct operations world-wide through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between
our subsidiaries. If two or more affiliated co mpanies are located in different countries, the tax laws or regulat ions of each country generally will
require that transfer prices be the same as those between unrelated companies dealing at arms' length and that contemporaneous documentation
is maintained to support the transfer prices. While we believe that we operate in co mp lianc e with applicable transfer p ricing laws and intend to
continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any o f these countries were
to successfully challenge our transfer prices as not reflecting arms' length transactions, they could require us to adjust our transfer prices and
thereby reallocate our inco me to

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reflect these revised transfer prices, wh ich would result in a h igher tax liability to us. In addition, if the country from wh ich the income is
reallocated does not agree with the reallocation, both countries could tax the same income, re sulting in double taxat ion. If tax authorities were
to allocate inco me to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would in crease our
consolidated tax liability, wh ich could adversely affect our financial condition, results of operations and cash flows.

Proposed future U.S. federal income tax legislation could negatively impact our effective tax rate.

         President Obama's administration and key members of Congress have announced propose d tax legislation that could substantially
modify the rules governing the U.S. taxat ion of certain non-U.S. subsidiaries. These potential changes include limitations on the ability to claim
and utilize foreign tax credits and deferral of interest expense d eductions until non-U.S. earnings are repatriated to the United States. Details of
the proposal remain unknown, although if any of these proposals are enacted into law, they could negatively impact the amount of taxes
payable in the United States and our effective tax rate and adversely affect our results of operations.

Risks Related to Our Investment in China Semi LEDs

If we fail to execute our China strategy through China SemiLEDs, our financial condition, results of operations, business a nd prospects
may be materially and adversely affected.

         Given the significance of the China market as part of our business strategy, our net income growth and overall growth prospec ts are
significantly dependent on the success of Ch ina SemiLEDs. We established China SemiLEDs in January 2010 and its manufacturing facilities
will not be operational until after January 2011. Ch ina SemiLEDs is the first operating entity we have established in Ch ina a nd we have not had
prior experience in establishing, constructing and managing design, manufacture and sales operations of the scale that is contemp lated at Ch ina
SemiLEDs. China SemiLEDs may not be able to comp lete construction of its manufacturing facilities in a t imely basis, or at al l, or with in
projected budgets. China SemiLEDs must hire significant numbers of additional technical, engineering and operational staff, install new
equipment and begin operations in accordance with current budget and plans and must establish a new sales force and distribut ion network for
its products.

         Our management and other key personnel will also have to devote significant managerial time and resources to help grow China
SemiLEDs' business, which could result in the diversion of our management resources away fro m our curre nt business operations and
customers. A majority of the members of the board of directors of Ch ina SemiLEDs are our emp loyees, including our chief execu tive officer
Trung T. Doan and our chief operating officer Dr. Anh Chuong Tran. Mr. Doan and Dr. Tran serve as chairman and vice-chairman,
respectively, of the board of Ch ina SemiLEDs.

         Furthermore, certain local and provincial governments of the PRC have offered China SemiLEDs support in the form of incentive s,
including subsidies with respect to the construction of manufacturing facilities, interest rates on loans and equipment purchases and research
and development grants. However, there is no assurance that such local and provincial govern ments will not significantly redu ce or even
eliminate some o r all of these government incentives. In addition, such incentives and subsidies, which were approved and provided by local
and provincial government authorities, may be in contravention of PRC national written rules and regulations and therefore, s uch incentives
and subsidies may be challenged by the PRC national govern ment. Although we are not legally obligated to further fund China S emiLEDs, we
may need to provide it addit ional funding to meet our and its goals, in particu lar if the government subs idies and incentives that it currently
receives were to be eliminated or reduced. China SemiLEDs must be profitable for us to recoup the cost of our investment and realize financial
benefits from this jo int venture. We cannot assure you that our

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investment will be profitable or that China SemiLEDs will be successful as it could fail for a number of reasons , some of wh ich are beyond our
control.

We do not own a majority of the shares of China SemiLEDs and if t here are significant disagreements with the other shareholde rs of China
SemiLEDs or if C hina SemiLE Ds' ma nagement takes actions that are detrimental to us, our financial condition, results of o perations,
business and prospects may be materially and adversely affected.

         Pursuant to the articles of association of Ch ina SemiLEDs, we have the right to nominate a majority of its board of director s. However,
we only own 49% of the shares of the joint venture, and the other shareholders, acting collectively as a group, control Ch ina SemiLEDs with
respect to any matters that require stockholder approval by a simp le majority. Although special resolutions, which require the approval of
stockholders representing at least two-thirds of the shares of China SemiLEDs, are necessary for certain corporate actions, inclu ding any
increase or reduction in the registered capital, any merger, separation, dissolutio n or change of the form of Ch ina SemiLEDs or any
amend ments to its articles of association, we cannot assure you that disputes will not arise with respect to the interpretation and application of
the provision requiring special resolutions or that the other shareholders of China SemiLEDs will not exercise their voting rights to the
detriment of our interests in other matters.

         Our right to nominate a majority of the board terminates if China SemiLEDs is listed on a stock exchange. In addition, the number of
directors we can nominate declines as the percentage of the outstanding shares of China SemiLEDs that we hold declines below 41%. If our
percentage ownership is diluted because China SemiLEDs issues additional common stock for any reason, inc luding to raise capital or effect
acquisitions, or if Ch ina SemiLEDs conducts a public offering and lists its common stock on a stock exchange, our ability to control or
influence board decisions or the operation of the business could be substantially dimin ished or eliminated. Furthermo re, under its articles of
association, if a director has a connected relationship with any enterprise that is the subject of a resolution at a board me eting, s uch director
may not vote on the matter, either directly or by pro xy. As such, in the event that any matters involving us or our relat ionship with Ch ina
SemiLEDs are b rought before the board of directors of China SemiLEDs, our directors would be required to recuse themselves an d such board
decisions would be made by the remain ing directors that are not affiliated with us.

         Although we and the other non-selling stockholders have a right of first refusal with respect to the sale by any of the other
shareholders of their interests in Ch ina SemiLEDs, if we do not exercise such rights, or are unable to do so, new stockholders will beco me our
partners in the joint venture. These new partners may have different interests, objectives and strategic plans that conflict with o urs or those of
the other shareholders in China SemiLEDs. In addition, no assurance can be given that such new stockholders may not be one of our
competitors in China or elsewhere, wh ich could lead to significant conflicts, including the disclosure of proprietary informa t ion and lead to
contested stockholder votes and attempts by such stockholder to influence China SemiLEDs to take actions that are not favorable to us.

         Any disputes between us and the other shareholders of China SemiLEDs may lead to adverse consequences for the growth pro spects
of Ch ina SemiLEDs and its and our ability to further access and penetrate the China market and also may result in litigation.

         In addit ion, the day-to-day management of China SemiLEDs will be conducted by its general manager, deputy gen eral manager and
other senior personnel. Although the board of directors appoints and may dismiss the general manager and the general manager must
implement board resolutions and report to the board, the general manager of China SemiLEDs and other members of its manag ement will have
significant operational control over China SemiLEDs. While we intend to actively monitor and, to the extent possible, direct th e operations of
China SemiLEDs through our five board members,

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we cannot assure you that the management of China SemiLEDs will not take actions that are detrimental to our interests.

China SemiLE Ds may compete with us for sales in China.

         For the year ended August 31, 2009 and the nine months ended May 31, 2010, 47.2% and 41.6%, respectively, of our revenues were
generated from sales to customers in Ch ina (including Hong Kong). Un der various intellectual property agreements between us and China
SemiLEDs, we have transferred patents and granted licenses with respect to certain of our patents to China SemiLEDs so that it can
manufacture and sell LED chips in China. As such, both Chin a SemiLEDs and Taiwan SemiLEDs will sell substantially the same LED chips in
China. We cannot assure you that China SemiLEDs and Taiwan SemiLEDs will not ultimately co mpete for the same pool of existing or new
customers, in particular if demand fo r LED products decreases or does not increase. We do not consolidate the financial results of Ch ina
SemiLEDs in our consolidated financial statements but instead record 49% of the net inco me or loss fro m China SemiLEDs in our income
statement under inco me (loss) fro m unconsolidated entities. If Ch ina SemiLEDs makes significant sales to customers in China t hat would have
otherwise been made by Taiwan SemiLEDs our revenues could be materially and adversely affected, and if the amount we reco rd u nder
income (loss) fro m unconsolidated entities for those sales does not compensate for the impact of the loss of the sale by Taiwan SemiLEDs, then
our results of operations would be materially and adversely affected.

         Mr. Doan and Dr. Tran may have potential conflicts of interest because they serve as our officers and directors and also the chairman
and vice-chairman, respectively, of China SemiLEDs. They may face circu mstances where a business opportunity is available t o both Chin a
SemiLEDs and us. In such a scenario, they may need to decide the extent, if any, either co mpany retains such opportunity. Because China
SemiLEDs is not yet operational, we do not yet know the nature or extent of any such conflicts nor have we determined how suc h conflicts will
be resolved. If the conflicts are frequent or severe, we may be unable to resolve them in a timely o r satisfactory manner. For examp le, if there
are conflicts regarding business opportunities, we could be harmed in many ways, including if the conflict results in:

     •
            neither Ch ina SemiLEDs nor us obtaining the business opportunity;

     •
            China SemiLEDs obtaining the opportunity instead of us;

     •
            confusion in the market because we are unable to manage the conflict and distinguish each entity;

     •
            damage to our relationship with the officers, directors and other shareholders of China SemiLEDs or us;

     •
            our officers no longer serving as directors of China SemiLEDs or as our officers or d irectors; or

     •
            legal act ion or the threat of the same against us, China SemiLEDs or o ur respective officers, directors or stockholders.

We cannot assure you that we will not have significant disputes concerning the scope of our intellectual property agreements with China
SemiLEDs, and the non-compete provisions between us and C hina SemiLEDs may constrain our ability to grow in China, both of which
could have a material and adverse effect on our business, prospects, financial condition and results of operations.

         We have entered into various patent assignment and cross -license agreements with Ch ina SemiLEDs, pursuant to which we agreed to
assign certain patents to China SemiLEDs and grant royalty -free, exclusive and non-transferable licenses with respect to certain other patents to
China

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SemiLEDs for use in manufacturing and selling LED ch ips in China. In return, China SemiLEDs agreed to grant us a royalty -free, transferable
and exclusive license to use the assigned patents globally except in manufacturing LED wafers and chips in Ch ina. Pu rsuant to the cross-license
agreements all future patents acquired by China SemiLEDs will be licensed to us for use in manufacturing or selling LED p rodu cts globally.
Under a trademark cross-license agreement, we agreed to grant China SemiLEDs a royalty -free, exclusive license to use our "SemiLEDs"
trademark within China, subject to certain conditions.

         We have also agreed to certain non-compete provisions in favor of China SemiLEDs. In particular, we cannot invest in any other
company that is engaged in the production of LED wafers or chips in Ch ina. We also cannot engage in the production of LED wafers or ch ips
directly or indirectly, in the form of orig inal equip ment manufacturing or outsourcing, in China. Finally, we cannot allow an y third party to
which we transfer or license our technologies to apply such technologies in the production of LED wafers or ch ips in Ch ina.

          We cannot assure you that we will not have disputes with the other shareholders of China SemiLEDs regarding th e scope of the
intellectual property rights licensed, our rights under the cross -licensing agreements or the scope of the non-compete provisions. In addition, if
China SemiLEDs is not successful, these non-compete provisions and the limitations in the intellectual p roperty cross-licensing agreements
could prohibit us fro m entering into other strategic joint ventures and relationships in Ch ina and fro m entering certain markets in China, wh ich
could have a material and adverse effect on our business, prospects, financial condition and results of operations.

Risks Relating to Our Hol di ng Company Structure

Our ability to receive dividends and other payments from Taiwan SemiLEDs and China SemiLEDs may be restricted by commercial,
statutory 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 hold ing company. Our two material assets are our ownership interest in Ta iwan SemiLEDs and our joint venture interest in
China SemiLEDs. We also have other joint ventures in the early stages of business development.

          Dividends and interest on intercompany loans we receive fro m our subsidiaries in Taiwan, if any, wi ll be subject to wit hholding tax
under Taiwan law. The ability of our subsidiaries in Taiwan to pay dividends, repay interco mpany loans from us or make other distributions to
us is restricted by, among other things, the availability of funds, the terms of various credit arrangements entered into by our subsidiaries, as
well as statutory and other legal restrictions, including the Taiwan government's right to revoke repatriat ion of profits wit hin a specified period
subject to certain violat ions. In addition, although there are currently no foreign exchange control regulations that restrict the ability of our
subsidiaries located in Taiwan to distribute dividends to us, we cannot assure you that the relevant regulations will not be changed and that the
ability of our subsidiaries to distribute dividends to us will not be restricted in the future. A Taiwan co mpany is generally not per mitted to
distribute dividends or to make any other distributions to stockholders for any year in wh ich it d id not have either earnings or retained earnings
(excluding reserves). In addition, before d istributing a dividend to stockholders following the end of a fiscal year, the co mpany must recover
any past losses, pay all outstanding taxes and set aside 10% of its annual net income (less prior years' losses and outstanding taxes) as a legal
reserve until the accumulated legal reserve equals its paid-in capital, and may set aside a special reserve.

        Upon co mmencement of co mmercial production at Ch ina SemiLEDs, a substantial portion of our business in China will be conducted
through China SemiLEDs. The pay ment of div idends by entities established in China is subject to limitations. Regulations in C hina currently
permit pay ment of div idends only out of accumulated profits as determined in accordance with accounting standards and

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regulations in Ch ina. PRC subsidiaries are generally required to set aside at least 10% of their after-tax profit based on PRC accounting
standards each year to their general reserves or statutory capital reserve fund until the aggregate amount of such reserves reaches 50% of their
respective registered capital, wh ich is appro ximately RM B102.4 million fo r China SemiLEDs. Statutory reserves are not distributable as loans,
advances or cash dividends. As China SemiLEDs is in early stages of development we expect that it will have accu mulated defic its for the near
term.

         In addit ion, any dividends paid by China SemiLEDs requires the approval of the affirmative vote of the stockholders of China
SemiLEDs, which may not be given. Moreover, any income that we source fro m China is subject to PRC withholding tax under the new
Enterprise Income Tax Law of the PRC, or the EIT Law. Under the EIT Law and its implementation regulations, both of which bec ame
effective on January 1, 2008, we will be subject to a withholding tax rate of 10% for any dividends paid b y China SemiLEDs to us if we are
deemed a non-PRC tax resident.

Our ability to make further invest ments in Taiwan SemiLE Ds may be dependent on regulatory approvals in Taiwan and, with respe ct to
China SemiLE Ds, regulatory approvals in China.

         Taiwan SemiLEDs depends on us and China SemiLEDs depends on us and its other stockholders to meet their equity financing
requirements. Any capital contribution by us to Taiwan SemiLEDs requires the approval of the relevant Taiwan authorities such as the Hsinchu
Science Park Administration. We may not be able to obtain any such approval in the future in a t imely manner, o r at all. Any lo ans or capital
contributions to PRC subsidiaries including China SemiLEDs, are subject to PRC regulations in connection wit h foreign investment and
foreign exchange ad min istration. For example, loans by us to China SemiLEDs to fund its activities cannot exceed statutory li mits and must be
registered with the State Administration of Foreign Exchange in China, or SAFE, or its lo cal branch, and additional capital contributions would
be subject to government approvals.

          We cannot assure you that we will be able to co mplete 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 use the proceeds we receive fro m this offering and to capitalize Taiwan
SemiLEDs and Ch ina SemiLEDs may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund
and expand our business.

Your rights may be limited as we conduct a substantial portion of our operations in Taiwan and in China, and a substantial po rtion of our
assets and a majority of our directors and officers reside outside the United States.

         Although we are incorporated in Delaware, substantially all of our operations are conducted in Taiwan through Taiwan SemiLEDs and
in China through China SemiLEDs. As such, substantially all of our assets are located in Taiwan o r the PRC. In addition, subs tantially all of
our directors and officers reside outside the United States, and a substantial portion of the assets of those persons are loc ated outside of the
United States. Therefore, it may be d ifficu lt 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 and Ch ina may render you unable to enforce a United States judgment against our assets or the assets of
our directors and officers.

         For judg ments obtained in courts outside of Taiwan to be recognized and enforceable in Taiwan without review o f the merits th e
Taiwan court in wh ich the enforcement is sought must be satisfied that: the foreign court rendering such judgment has jurisdiction over the
subject matter in accordance with the Taiwan law; the judg ment and the court procedure resulting in the judgment are no t contrary to the public
order or good morals of Taiwan; the judg ment is a final judg ment for which the period

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for appeal has expired or fro m which no appeal can be taken; if the judg ment was rendered by default by the foreign court, th e defendant was
duly served in the jurisdiction of such court within a reasonable period of time in accordance with the laws and regulations of such jurisdiction,
or process was served on the defendant with the Taiwan judicial assistance; and judgment of Taiwan courts is recognized and e nforceable in the
foreign court rendering the judg ment on a reciprocal basis.

         The recognition and enforcement of foreign judg ments are provided for under the PRC Civ il Procedures Law. PRC co urts may
recognize and enforce foreign judgments, which do not otherwise violate basic legal princip les, state sovereignty, safety or social public
interest of the PRC, in accordance with the requirements of the PRC Civ il Procedures Law based either on treaties between the PRC and the
country where the judgment is made or on reciprocity between jurisdictions. As there currently exists no treaty or oth er form of reciprocity
between the PRC and the United States governing the recognition of judg ments, including those predicated upon the liability p rovisions of the
U.S. federal securit ies laws, there is uncertainty whether and on what basis a PRC court wo uld recognize and enforce judgments rendered by
U.S. courts.

Political, Geographical and Economic Risks

Due to the location of our operations in Taiwan and the location of the operations of China SemiLEDs, we are vul nerable to na tural
disasters and other events, which may seriously disrupt our operations.

          Most of our operations, and the operations of many of our LED manufacturing service providers, suppliers and customers are lo cated
in Taiwan and the PRC. For the year ended August 31, 2009 and for the nine months ended May 31, 2010, 31.8% and 41.3%, respectively, of
our revenues were derived fro m customers located in Taiwan and 47.2% and 41.6%, respectively, of our revenues were derived fr o m customers
located in Ch ina (including Hong Kong). Our operations and the operations of our customers and suppliers are vulnerable to earthquakes,
floods, droughts, typhoons, fires, power losses and other major catastrophic events. Disruption of operations due to any of t hese events may
require us to evacuate personnel or suspend operations, which could reduce our productivity. Such disasters may also damage o ur facilities and
equipment and cause us to incur additional costs to repair our facilit ies or procure new equip ment, or result in personal in juries or fatalities or
result in the termination of our leases and land use agreements. Any resulting delays in shipments of our products could also cause our
customers to obtain products from other sources. Although we maintain p roperty and business interruption insurance for such risks, there is no
guarantee that future damages or business losses from earthquakes and other events will be covered by such insurance, that we will be able to
collect fro m our insurance carriers, should we choose to claim under our insu rance policies, or that such coverage will be sufficient. In addition,
natural disasters, such as earthquakes, floods and typhoons, may also disrupt or seriously affect the operations of our custo mers and suppliers,
resulting in reduced orders or shipments or the inability to perform contractual obligations. The occurrence of any of these events could have a
material adverse effect on our business, financial condit ion and results of operations.

Any outbreak of widespread contagious diseases may have a material adverse effect on our business operations, financial condition and
results of operations.

         The outbreak, or threatened outbreak, of any severe commun icable disease (such as severe acute respiratory syndrome, avian in fluenza
or H1N1 influenza) in Taiwan or Ch ina could materially and adversely affect the overall business sentiments and environment in these markets ,
particularly if such outbreak is inadequately controlled. This, in turn, could materially and adversely affect their domestic consumption, labor
supply and, possibly, the overall gross domestic product growth. As our revenue is substantially derived fro m our operations in Taiwan and
China, any labor shortages or contraction or slowdown in the growth of do mestic consumption in Taiwan or China could damage our business.
In addition, if any of our emp loyees are affected by any severe communicable d isease, our

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operations in the affected areas may be disrupted and we may be required to close our facilities to prevent the spread of the disease. The spread
of any severe communicable d isease in Taiwan or China may also impact the operations of our customers and suppliers, wh ich could in turn
materially and adversely affect our business, financial condition and results of operations.

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

          As a Delaware corporation, we are subject to laws and regulations applicable to foreign co mpanies operating in Ch ina in gener al and
specifically to the laws and regulations applicable to fo reign -invested joint stock companies. The PRC legal system is a civ il law system based
on written statutes. Unlike co mmon law systems, prio r court decisions may be cited for reference but have limited precedentia l value. In 1979,
the PRC govern ment began to promulgate a comp rehensive system of laws and regulations governing economic matters in gen eral. The overall
effect of legislation since then has been to significantly enhance the protections afforded to various forms of foreign inves tments in Ch ina. The
PRC legal system continues to rapidly evolve and the interpretatio ns of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. F or example, China
SemiLEDs must obtain relevant permits (including land use permits), licenses and approvals necessary for the comp letion of its factory, to
purchase equipment and to commence operations and sales. Although we believe that China SemiLEDs has obtained or will obtain such
permits, licenses and approvals, no assurance can be given that it will be able to do so or that if obtained that such permits, licenses or
approvals will be adequate or that they will not be revoked or cancelled in the future. In addit ion, some regulatory requirements issued by
certain PRC govern ment authorities may not be consistently applied by other government authorities (including local government authorit ies),
thus making strict co mpliance with all regulatory requirements impractical, or in so me circu mstances, impossible. For examp le , we may have
to resort to administrative and court proceedings to enforce the legal protection that we have either by law or contract. How ever, since PRC
administrative and court authorities have significant discretion in interpreting and imp lementing sta tutory and contractual terms, it may be more
difficult to evaluate the outcome of ad ministrative and court proceedings and the level of legal protection we have. These un certainties may
impede our ability to enforce the contracts we have entered into with our business partners, customers and suppliers.

        Because the legal and regulatory environment in Ch ina is subject to inherent uncertainties, the enforcement of our rights as a foreign
company investing in China may be difficult. For example, o ur intellectual property may be afforded less protection in Ch ina than in some
other countries. By entering the market in China in general and in particu lar by establishing manufacturing operations in China through China
SemiLEDs, our vulnerab ility towards unauthorized d isclosure or use of our intellectual property may be significantly increased.

          Future lit igation could result in substantial costs and diversion of our management's attention and resources, and could disr upt our
business, as well as have a material adverse effect on our financial condition and results of operations. Given the relat ive unpredictability of
China's legal system and potential difficult ies enforcing a court judg ment in China, we may be unable to halt the unauthorize d u se of our
intellectual property through litigation, wh ich could adversely affect our co mpetitive position, our ability to attract custo mers, and our results of
operations.

New labor laws in China may adversely affect China SemiLEDs' results of operations or that of our customers.

        On June 29, 2007, the PRC government pro mulgated the Labor Contract Law of the PRC, or the New Labor Contract Law, which
became effective on January 1, 2008. The New Labor Contract Law imposes greater liabilities on employers and significantly affects the cost
of an employer's decision

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to reduce its workforce. The New Labor Contract Law imposes new requirements concerning, among other things, the types of contracts to be
entered into between an employer and its employees and establishes time limits for p robationary period and for how long an em ployee can be
placed in a fixed-term employ ment contract. If an employer intends to terminate an employee or not to renew an emp loyment contract upon its
expirat ion, the employer is obligated to pay severance calculated based on the seniority and monthly salary of such employee (except for
certain special circu mstances expressly provided for under Chinese laws). Furthermo re, only under certain circu mstances expre ssly provided
for under the New Labor Contract Law, can the emp loyer terminate the emp loyment contract. In the event that Chin a SemiLEDs decides to
significantly change or decrease its workforce, the New Labor Contract Law could adversely affect its ability to enact such c hanges in a
manner that is most advantageous to its business or in a timely and cost -effective manner, thus materially and adversely affecting our financial
condition and results of operations.

          In recent years, certain regions of Ch ina have been experiencing a labor shortage as migrant wo rkers and middle level management
seek better wages and working conditions elsewhere. This trend of labor shortages is expected to continue, fueled by the effects of the
"One-Child" policy imposed by the PRC government and will likely result in increasing wages as companies seek to keep their existing work
forces. Recently, certain fo reign owned enterprises in southern China, in part icular in Foshan and Zhongshan in Guangdong Province have
witnessed significant labor d isturbances, including prolonged strikes and work stoppages. No assurance can be given that Chin a SemiLEDs or
any of our customers in Ch ina will not experience similar labor d isturbances related to working conditions, wages or other re asons. Labor
shortages, strikes and other disturbances may adversely affect China SemiLEDs' future operating results by, for examp le, preventing it fro m
manufacturing at peak capacity and forcing it to increase wages and benefits to attract the diminishing pool of available wor kers, and may
result in negative publicity and reputational harm. In addit ion, substantial co mpetition in China for qualified and capable personnel, particu larly
experienced engineers and technical personnel may make it difficult for China SemiLEDs to recruit and retain qualified emp loy ees. If China
SemiLEDs is unable to staff sufficient and adequate personnel at its China facilit ies, it may experience lower revenues or increased
manufacturing costs, which would adversely affect its profitability and as a result adversely affect our reported net income.

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

          Taiwan has a unique international political status. Since 1949, Taiwan and the PRC have been separately governed. The PRC
government claims that it is the sole government in China and that Taiwan is part of China. A lthough significant economic and cultural
relations have been established during recent years between Taiwan and China, the PRC government has refused to renounce the possibility
that it may at so me point use force to gain control over Taiwan. Furthermore, the PRC government adopted an anti-secession law relating to
Taiwan. Relat ions between Taiwan and the PRC govern ments have been strained in recent years for a variety of reasons, including the PRC
government's position on the "One China" policy and tensions concerning arms sales to Taiwan by the United States government. Any tension
between the Taiwan government and the PRC government, or between the Un ited States and China, could materially and adversely affect the
market prices of our co mmon stock.

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

        We have significant foreign currency exposure, and are primarily affected by fluctuations in exchange rates among the U.S. dollar, the
NT dollar, the Japanese Yen and other currencies. A portion

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of our revenues and expenses are denominated in currencies other than NT dollars, primarily U.S. dollars and to a lesser extent the Japanese
Yen. We do not hedge our net foreign exchange positions through the use of forward exchange contracts or otherwise and as a r esult are
affected by fluctuations in exchange rates among the U.S. dollar, the NT dollar, the Japanese Yen and other currencies. Any significant
fluctuation in exchange rates may be harmfu l to our financial condition and results of operations.

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

          The PRC govern ment imposes controls on the convertibility of the Ren minbi into foreign currencies and, in certain cases, the
remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and expenditures from trade related transactions, can be made in foreign currencies without prior approval fro m
the State Administration of Foreign Exchange of the PRC, or SAFE, provided that we satisfy certain procedural requirements. H owever,
approval fro m SAFE or its local counterpart is required where Ren minbi is to be converted into foreign currency and remitted out of China to
pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC govern ment may also at its dis cretion restrict
access in the future to foreign currencies for current account transactions. Ou r revenue fro m sales in China (including Hong Kong) accounted
for 47.2% and 41.6% of our revenue for the year ended August 31, 2009 and the nine months ended May 31, 2010. We also expect China
SemiLEDs to begin making sales in China after it co mmences commercial production at its Foshan manufacturing facilities. Since substantially
all of China SemiLEDs' future cash flow fro m operations is expected to be denominated and settled in Ren minbi, any existing a nd future
restrictions on currency exchange may limit China SemiLEDs' ab ility to purchase goods and services outside of China or otherwise fund its
business activities that are conducted in foreign currencies.

If the PRC government determines that China SemiLEDs failed to obtain requisite PRC governmental ap provals for, or register with the
PRC government, Chi na SemiLE Ds' current and past import and export of technologies, China SemiLEDs could be subject to sancti ons.

         The PRC govern ment imposes controls on technology import and export. The term "technology import and export" is broadly defined
to include, without limitation, the transfer or license of patents, software and know-how, and the provision of services in relatio n to technology.
Depending on the nature of the relevant technology, the import and export of technology require either approval by, or reg istration with, the
relevant PRC governmental authorities. We have transferred and licensed certain of our technologies to China SemiLEDs, wh ich transfers and
licenses may constitute technology import under PRC laws. In addit ion, China SemiLEDs has licensed and will continue to license certain
technologies to us, which licenses constitute technology export under PRC laws. In addition, China SemiLEDs may enter into li censes with
other third parties outside of Ch ina for certain technologies, which licenses would also constitute the import or export of technology under PRC
laws. China SemiLEDs has not obtained the approval of, or co mpleted the applicable registration with, the relevant PRC govern mental
authorities for all of its import and export of these technologies.

        If China SemiLEDs is found to be, or has been, in vio lation of PRC laws or regulat ions concerning the import or export of
technologies, the relevant regulatory authorities have broad discretion in dealing with such violation, including, but not limited to, issuing a
warning, levying fines, restricting China SemiLEDs fro m remitting royalties or any other fees, if any, relating to these technologies outside of
China, confiscating China SemiLEDs' earnings generated from the import or export of such technology or even restricting its future export and
import of any technology. If the PRC govern ment determines that China SemiLEDs' past import and export of technology were inc onsistent

                                                                        34
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with, or insufficient for, the proper operation of its business, it could be subject to similar sanc tions. Any of these or similar sanctions could
cause significant disruption to China SemiLEDs' business operations or render it unable to conduct a substantial portion of its business
operations and may adversely affect its business and result of operation s.

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

         We are subject to the U.S. Foreign Co rrupt Practices Act, or FCPA, which generally prohib its U.S. co mpanies fro m engaging in
bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addit ion, we are required
to maintain records that accurately and fairly represent our transactions and have an adequate syste m of internal accounting controls. Foreign
companies, including some that may co mpete with us, may not be subject to these prohibitions, and therefore may have a co mp et itive
advantage. In the past, there have been instances of corruption, extortion, bribery, pay-offs, theft and other fraudulent practices in Taiwan and
China as well as other Asian countries. We cannot assure that our emp loyees or other agents will not engage in such conduct a nd render us
responsible under the FCPA. If our employees or other agents are found to have engaged in corrupt or fraudulent business practices, we could
suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condit ion a nd results of
operations.

Risks Related to this Offering and our Common Stock

An active, liquid and orderly trading market for our common stock may not develop, our stock price may be volatile and you ma y be unable
to sell your shares at or above the offering price you paid.

          Prior to this offering, there has not been a public market fo r our co mmon stock. We cannot predict the extent to which a trading market
will develop or how liquid that market might become. The init ial public o ffering price for our co mmon stock will be determine d by
negotiations between us and representatives of the underwriters and may not be indicative o f prices that will p revail in the trading market after
the closing of the offering. The market price of shares of our common stock could be subject to wide fluctuations in response to many risk
factors listed in this section and others beyond our control, including:

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

     •
             changes in our customer co mposition and their orders;

     •
             actual or anticipated changes in our growth rate;

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

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

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

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

     •
             sales or expected sales of additional co mmon stock;

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

                                                                          35
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     •
             general economic and market conditions.

         Furthermore, the stock markets have experienced extreme price and volu me fluctuations that have affected and continue to affe ct the
market prices of equity securities of many co mpanies. These fluctuations often hav e been unrelated or disproportionate to the operating
performance of those companies. These broad market and industry fluctuations, as well as general economic, political and mark et conditions
such as recessions, interest rate changes or international currency fluctuations, may cause the market price of shares of our co mmon stock to
decline.

         If the market price of shares of our co mmon stock after this offering does not exceed the initial public offering price, you may not
realize any return on your investment and may lose some or all of your investment. In the past, companies that have experienced volatility in
the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future.
Securities lit igation against us could result in substantial costs and divert our management's attention from other business concerns, which
could seriously harm our business.

If securities or industry analysts issue an adverse opinion regarding our stock or do not publish research reports about our business, our
stock price and trading volume could decline.

         The trading market for our co mmon stock will be in fluenced by research reports that industry or securities analysts publish about us or
our business and prospects. We do not currently have any and there may never be research coverage by industry or financial an alysts of us. If
no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if analysts commence coverage, if one
or more of the analysts who cover us downgrade our stock, our stock price would likely decline, perhaps substantially. If one or more of these
analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn
could cause our stock price or trading volu me to decline.

We will incur increased costs as a result of being a public company.

        As a public co mpany, we will incur a significantly h igher level of legal, accounting and other expenses than we do as a private
company. In addition, the Sarbanes -Oxley Act of 2002, as well as rules subsequently imp lemented by the SEC and the Nasdaq Global Market,
have required changes in the corporate governance practices of public companies.

         As a result of becoming a public co mpany, we are in the process of establishing additional board committees and will adopt and
implement additional policies regard ing internal controls over financial reporting and disclosure controls and procedures. In particular,
compliance with Sect ion 404 of the Sarbanes-Oxley Act, which requires public co mpanies to include a report of management o n the
effectiveness of their internal control over financial reporting, will increase our administration costs. In addition, we will incur costs associated
with public co mpany reporting requirements, such as the requirements to file annual and quarterly reports, other event -related reports and
proxy statements with the SEC.

       We expect these rules and regulations will increase our legal and financial co mpliance costs, but we cannot predict or estima te the
amount or the timing of additional costs we may incur.

Future sales of our common stock could cause our stock price to fall.

        Sales of substantial amounts our common stock in the public market after the co mplet ion of this offering, or the percep tion t hat these
sales could occur, could cause the market price o f our co mmon stock to decline.

        Based on the number of shares outstanding as of             , upon complet ion of this offering, there will be        shares of co mmon stock
outstanding. Of these shares, only the shares sold in this

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offering, plus any shares sold upon exercise of the underwriters' over-allot ment option, will be freely t radable without restriction or additional
registration under the Securities Act of 1933, or the Securities Act, unless held by our "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remain ing         shares outstanding as of         are "restricted securities" as defined in Rule 144 and may not be sold in
the absence of registration other than in accordance with Rule 144 under the Securit ies Act or another exemption fro m registration. In addition,
as of May 31, 2010, there were outstanding options to purchase 9,668,775 shares of common stock, 2,967,425 of wh ich were v ested and
exercisable.

         In connection with this offering, the selling stockholders, all of our d irectors and officers, and holders of substantially all of our
outstanding equity securities, have entered into lock-up agreements with the underwriters or us under which the holders of such shares hav e
agreed not to sell or otherwise dispose of any of their shares for a period of 180 days after the date of this prospectus, subject to certain
exceptions, without the prior written consent of Merrill Lynch and Barclays Cap ital. At any time and without pub lic notice, any or all o f the
shares subject to the lock-up may be released prior to expiration of the 180-day lock-up period at the discretion of Merrill Lynch and Barclays
Capital. We cannot predict what effect, if any, market sales of securities held by our stockholders or the availability of these securities for
future sale will have on the market price of our co mmon stock.

        As resale restrictions end, the market price of our co mmon stock could decline if the holders of those shares sell th em or are perceived
by the market as intending to sell them. In addit ion, after this offering, based on shares outstanding as of May 31, 2010, the holders of
287,728,285 shares of common stock will be entitled to rights to cause us to register the sale of those shares under the Securities Act. All of
these shares are subject to the 180-day lock-up period. Reg istration of these shares under the Securities Act would result in these shares
becoming freely t radable without restriction under the Securities Act i mmed iately upon the effectiveness of such registration.

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

         After this offering, our directors, executive officers and holders of mo re than 5% of our co mmon stock, together with their affiliates,
will beneficially o wn, in the aggregate, approximately          % o f our outstanding common stock, assuming no exercise of the underwriters'
option to purchase additional shares of our common stock in this offering. As a result, certain of these stockholders acting alo ne or these
stockholders, acting together, would have the ability to control the outcome of matters submitted to our stockholders f or approval, including the
election of our directors and any merger, consolidation or sale of all or substantially all o f our assets. In addition, these stockholders, acting
together, would have the ability to control the management and affairs of our co mp any. Accordingly, this concentration of ownership might
harm the market price of our co mmon stock by:

     •
            limit ing stockholders' ability to influence corporate matters;

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

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

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

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

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Purchasers in this o ffering will experience immediate and substantial dilution in tangible book value of their investment.

         Purchasers in this offering will immediately experience substantial dilution in net tangible book value. Because our common stock has
in the past been sold at prices substantially lower than the initial public offering price that you will pay, you will suffer immed iate dilution of
$        per share in net tangible book value, based on an assumed init ial offering price of $          per share of common stock, which is the
mid-point of the range of the proposed initial public o ffering price set forth on the cover of this prospectus. The exercise of o utstanding options,
2,967,425 of which are outstanding and exercisable as of May 31, 2010, will result in fu rther dilution. See "Dilution."

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

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

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

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

     •
             the state of global credit markets and our credit worthiness;

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

     •
             economic, polit ical and other conditions in Taiwan, China and elsewhere.

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

We have broad discretion in the use of the net proceeds from t his offeri ng and may not use them effectively.

         We intend to use an as yet undetermined amount of the net proceeds from this offering for general corporate purposes, including
working capital, sales and market ing activities, general and administrative matters and capital expenditures. We may also use a portion of the
net proceeds to acquire or invest in complementary technologies, solutions or businesses or to obtain rights to such compleme ntary
technologies, solutions or businesses. Our management and board of directors will have considerable discretion in apply ing our net proceeds
and you will not have the opportunity, as part of your investment decision, to assess whether we are using our net proceeds a ppropriately. Until
the net proceeds we receive are used, they may be placed in investments that do not produce income or that lose value. We may use our net
proceeds for purposes that do not result in any increase in our net inco me, which could cause the price of our co mmon stock t o decline.

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

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

                                                                         38
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our common stock will appreciate in value or maintain the price at wh ich our stockholders have purchased their shares in this offering or in the
future.

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

          Provisions in our certificate of incorporation and bylaws, that we intend to adopt before the completion of this offering , ma y have the
effect of delay ing or preventing a change of control or changes in our management. Our amended and restated certificate of in corporation will
require that any action to be taken by stockholders must be taken at a duly called meet ing of stockholders, which may only be called by our
board of directors, the chairperson of our board of directors or the chief executive officer with the concurrence of a majority of our board of
directors, and may not be taken by written consent. Our amended and restated bylaws will require that any stockholder proposals or
nominations for election to our board of directors must meet specific advance notice requirements and procedures, which make it more d ifficu lt
for our stockholders to make proposals or director nominations.

          In addit ion, our amended and restated certificate of incorporation to be in effect upon the completion of this offering will p rovide for
our board of directors to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual
meet ing of our stockholders, with the other classes continuing for the remainder of their respective three -year terms. Our amended and restated
certificate of incorporation and amended and restated bylaws to be effective upon the completion of this offering will provide t hat all
stockholder actions must be effected at a duly called meeting of stockholders and not by a consent in writing, and that only a majority of the
authorized directors of our board of d irectors may call a special meet ing of stockholders. Our stockholders will not have cumulative voting
rights. The combination of the classification of our board of directors and the lack o f cu mulat ive voting will make it more d ifficult for our
existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. I n
addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred s tock with voting or
other rights or preferences that could impede the success of any attempt to change our control.

          Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General
Corporation Law. These provisions may prohibit or restrict large stockholders, in particu lar those owning 15% or mo re of our ou tstanding
voting stock, fro m merg ing or co mbining with us. These provisions in our certificate of incorporation and bylaws and unde r Delaware law
could discourage potential takeover attempts and could reduce the price that investors might be willing to pay for shares of our common stock
in the future and result in our market price being lower than it would be without these provisions.

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                                 SPECIAL NOTE REGARDING FORWARD-LOOKING S TATEMENTS

          This prospectus includes forward-looking statements. All statements other than statements of historical facts contained in this
prospectus, including statements regarding our future results of operations and financial position, strategy and plans, and o ur expectations for
future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "design," "intend,"
"expect" and similar exp ressions are intended to identify forward -looking statements. We have based these forward-looking statements largely
on our current expectations and projections about future events and trends that we believe may affect our financial condition, results o f
operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward -looking statements are
subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors." Moreover, we operat e in a very
competitive and rap idly changing environment. New risks emerge fro m t ime to time. It is not possible for ou r management to predict all risks,
nor can we assess the impact of all factors on our business or the extent to which any factor, or co mbination of factors, may cau se actual results
to differ materially fro m those contained in any forward-looking statements we may make. In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur, and actual results could differ
materially and adversely fro m those anticipated or implied in th e fo rward -looking statements. Forward-looking statements include, but are not
limited to, statements about:

     •
            our expectations regarding the market demand for LED products, in particular in the general lighting market;

     •
            our expectations regarding performance improvements and cost reductions of LEDs;

     •
            our beliefs regard ing the importance of environ mentally-friendly lighting technologies;

     •
            our expectations regarding governmental support for the deployment of LEDs;

     •
            our beliefs regard ing the effects of environ mental regulat ion on some traditional lighting technologies;

     •
            our beliefs regard ing the changing competitive landscape in the LED industry;

     •
            our expectations regarding China SemiLEDs and our growth in the China market;

     •
            our beliefs and expectations regarding the future shortage or availability of certain raw materials, such as sapphire;

     •
            our future financial performance, including our revenues, cost of revenues, operating expenses and our ability to s ustain gross
            profit margins and net income levels;

     •
            our ability to keep pace with changes in technology and our competitors;

     •
            our ability to comp lete our Ch ina SemiLEDs facility in Ch ina and expand our production facility in Taiwan within the project ed
            time periods and budgeted amounts, and our ability to operate such production facilit ies in an uninterrupted manner;

     •
            our success with respect to any future acquisitions of businesses, solutions or technologies;

     •
            our ability to adequately protect our intellectual p roperty; and
     •
            our liquidity and working capital requirements.

          Forward-looking statements speak only as of the date of this prospectus. You should not place undue reliance on any forward -looking
statements. Although we believe that the expectations reflected in the forward -looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. We disclaim any duty to update any of these forward-looking statements after the date
of this prospectus to confirm these statements or revised expectations.

                                                                      40
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         This prospectus also contains statistical data and estimates, including those relating to market size and growth rates of the markets in
which we participate. These market data, including market data fro m Strategies Unlimited, the Freedonia Group and the U.S. Department of
Energy, include project ions that are based on a number of assumptions. These publications typically indicate that they have o btained their
informat ion fro m sources they believe to be reliab le, but do not guarantee the accurac y and completeness of their information. The LED market
may not grow at the rates projected by the market data, or at all. The failure of the market to grow at the projected rates may materially and
adversely affect our business and the market p rice o f our co mmon stock. In addit ion, the rapidly changing nature of the LED market subjects
any projections or estimates relating to the growth prospects or future condition of our market to significant uncertainties.

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                                                               US E OF PROCEEDS

         We expect the net proceeds to us fro m this offering, after expenses to be approximately $               million based on an assumed init ial
public offering price of $         per share (the mid -point of the price range set forth on the cover page of this prospectus) and after deducting
underwrit ing discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assu med initial
public offering price of $         per share would increase (decrease) the net proceeds to us by $                million, after deducting
underwrit ing discounts and commissions and estimated offering expenses, assuming that the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An in crease of
1.0 million shares in the number of shares offered by us would increase the net proceeds to us by $               million. Similarly, a decrease of
1.0 million shares in the number of shares offered by us would decrease the net proceeds to us by $                million. If the underwriters'
overallot ment option to purchase additional shares fro m us is exercised in fu ll, we estimate that we will receive net proceeds of
$           million.

         The principal purposes of this offering are to obtain additional cap ital, to create a public market for our co mmon stock and to facilitate
our future access to the public equity markets. We intend to use the net proceeds received by us from this offering to expand production
capacity, to build a test line and for research and development related to LED chip production based on 6" wafers and for general corporate
purposes, including wo rking capital and capital expenditures. We may also use a portion of the net proceeds to acquire or invest in
complementary technologies, solutions or businesses or to obtain rights to such complementary technologies, solutions or businesses. There are
no agreements, understandings or commit ments with respect to any such acquisition or investment at this time.

         We have not yet determined all of our anticipated expenditures and therefore cannot estimate the amounts to be used for each of the
purposes discussed above. The amounts and timing of any expenditure will vary depending on the amount of cash generated by ou r operations,
competitive and technological develop ments and the rate of growth, if any, o f our business. Accordingly, our management will have significant
discretion in the allocation of the net proceeds we will receive for this offering. Depending on future events and other chan ges in the business
climate, we may determine at a later time to use the net proceeds for different purposes. Pending their use, we intend to place our net proceeds
in short-term bank deposits.

        We will not receive any proceeds from the sale of shares by the selling stockholders.


                                                               DIVIDEND POLICY

          We have never declared or paid, and do not have any present plan to declare or pay any cash dividends on our commo n stock in the
foreseeable future. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our
business. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our b oard of directors and
will depend on then existing conditions, including our financial condition, operating results, g eneral business conditions, contractual
restrictions, capital requirements, business prospects, restrictions on the payment of dividends under Delaware law and any o ther factors our
board of directors may deem relevant.

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                                                              CAPITALIZATION

        The fo llo wing table sets forth our cash and cash equivalents and capitalizat ion as of May 31, 2010:

    •
            on an actual basis;

    •
            on a pro forma basis, giving effect to the automatic conversion of all outstanding convertible preferred stock and Class B co mmon
            stock into an aggregate of 197,924,173 shares of Class A common stock as if such conversions had occurred on May 31, 2010; and

    •
            on a pro forma as adjusted basis, giving effect to (i) the automatic conversion of all outstanding convertible preferred stock and
            Class B common stock into an aggregate of 197,924,173 shares of Class A common stock as if such conversions had occurred on
            May 31, 2010 and (ii) the sale by us of           shares of common stock in th is offering, at an in itial public offering price of
            $          per share (the mid-point of the price range set forth on the cover page of this prospectus), after deducting underwrit ing
            discounts and commissions and estimated offering expenses payable by us.

        You should read this table in conjunction with the sections titled "Use of Proceeds," "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements
and notes thereto included elsewhere in this prospectus.

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                                                                                                                 As of May 31, 2010
                                                                                                                                             Pro Forma
                                                                                                                                                 As
                                                                                           Actual                Pro Forma                   Adjusted (1)
                                                                                                                    (unaudited)
                                                                                                            (in thousands, except share
                                                                                                              and per share amounts)
             Cash and cash equivalents                                                $       14,157         $         14,157            $

             Long-term debt (including current portion)                               $         4,953        $           4,953           $

             Stockholders' equity:
               Co mmon stock
                  Class A and Class B, $0.0000004 par
                     value—206,483,335 shares authorized;
                     101,524,013 shares issued and outstanding
                     actual (unaudited); 407,000,000 shares
                     authorized, 293,588,236 shares issued and
                     outstanding pro forma
                     (unaudited);        shares issued and
                     outstanding pro forma as adjusted
                     (unaudited)                                                                    —                        —
               Convertible preferred stock
                  Issuable in series A to E, $0.0000004 par
                     value—192,064,239 shares authorized;
                     192,064,223 shares issued and outstanding
                     actual (unaudited); no shares authorized,
                     issued and outstanding pro forma and pro
                     forma as adjusted (unaudited)                                                —                        —
               Additional paid-in capital                                                     70,278                   70,278
               Accumulated other comprehensive loss                                             (238 )                   (238 )
               Accumulated deficit                                                            (4,173 )                 (4,173 )

                                 Total stockholders' equity                                   65,867                   65,867

                                 Total capitalization                                 $       70,820         $         70,820            $



             (1)
                    A $1.00 increase (decreas e) in the assumed initial public offering price of $          per share (the mid-point of the price range set forth on the cover page of this
                    prospectus) would increase (decrease) the amount of additional paid-in capital, total stockholders' equity and total capitalization by approximately
                    $           million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting
                    underwriting discounts and commissions and estimated offering expenses payable by us.


        The number of shares of our common stock set forth in the table above:

    •
           excludes 9,668,775 shares of common stock issuable upon the exercise of options outstanding as of May 31, 2010 to purchase our
           common stock granted pursuant to the 2005 Equ ity Incentive Plan, as amended, at a weighted average exercise price of $0.05 p er
           share;

    •
           excludes an aggregate of 354,610 shares of common stock as of May 31, 2010 reserved for issuance under the 2005 Equity
           Incentive Plan;

    •
           excludes        shares of common stock, subject to automatic increases on September 1 of each year fro m September 2011 to
           September 2017 o f the smallest of       shares,        % of the shares of common stock outstanding at the time or the nu mber of
           shares to be determined by our board, reserved for issuance under our 2010 Equity Incentive Plan, wh ich we p lan to adopt in
           connection with this offering; and
•
    includes shares of 101,250 co mmon stock that were legally issued but are subject to repurchase by us.

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                                                                      DILUTION

          If you invest in our common stock, you will experience immediate and substantial dilution to the extent of the differen ce bet ween the
initial public offering price per share of our co mmon stock and the pro forma as adjusted net tangible book value per share of our common
stock immediately after the offering.

         The historical net tangible book value of our co mmon stock as of May 31, 2010 was $65.5 million, or $0.65 per share. Historical net
tangible book value per share represents our total tangible assets less our total liabilit ies, divided by the number of shares of outstanding
common stock.

         The pro forma net tangible book value of our co mmon stock as of May 31, 2010 was $               million, or $        per share. The pro
forma net tangible book value per share gives effect to the automatic conversion of our outstanding convertible preferred sto ck into common
stock in connection with this offering. The pro forma as adjusted net tangible book value of our co mmon stock as of May 31, 2010 was
$        , or $       per share. The pro forma as adjusted net tangible book value gives effect to the (i) automat ic conversion of our
outstanding convertible preferred stock into co mmon stock in connection with this offering and (ii) receipt of the net proceeds from our sale
of           shares of co mmon stock in this offering at the assumed in itial public offering price of $         per share (the mid -point of the
price range set forth on the cover page of this prospectus), after deducting underwrit ing discounts and commissions and estimat ed offering
expenses payable by us. The difference between the init ial public offering price and the pro forma as adjusted net tang ible book value
represents an immediate dilution of $            per share to new investors purchasing common stock in this offering.

        The fo llo wing table illustrates this dilution on a per share basis:

              Initial public offering price per share                                                                $

                 Pro forma net tangible book value per share as of May 31, 2010                     $
                 Increase in pro forma net tangible book value per share attributable to new
                   investors                                                                        $


              Pro forma as adjusted net tangible book value per share after this offering                            $


              Dilution per share to new investors in this offering                                                   $


         A $1.00 increase (decrease) in the assumed in itial public offering price of $          per share (the mid-point of the price range set
forth on the cover page of this prospectus) would increase (decrease) our pro fo rma as adjusted net tangible book value as of May 31, 2010 by
approximately $             million, the pro forma as adjusted net tangible book value after this offering by $           per share and the dilution
in pro forma as adjusted net tangible book value per share to new investors in this offering by $            per share, assuming the number of
shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.

         If the underwriters' overallotment option to purchase additional shares from us is exercised in full, the pro forma as adjusted net
tangible book value per share after this offering would be $        per share, the increase in pro fo rma as adjusted net tangible bo ok value per
share to existing stockholders would be $         per share and the dilution to new investors purchasing shares in this offering would be
$        per share.

                                                                           45
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         The table belo w summarizes as of May 31, 2010, on a pro forma as adjusted basis, the number of shares of our commo n stock we
issued and sold, the total consideration we received and the average price per share (i) paid to us by existing stockholders, (ii) t o be paid by new
investors purchasing our common stock in this offering at the init ial public offering price of $            per share (the mid-point of the price
range set forth on the cover page of this prospectus) before deducting estimated underwriting discounts and commissions payable by us of
$           million and estimated offering expenses of approximately $               million, and (iii) the average price per share paid by existing
stockholders and by new investors who purchase shares of common stock in th is offering.

                                                 Shares Purchased                        Total Consideration
                                                                                                                                Average
                                                                                                                                Price Per
                                                                                                                                 Share

                                             Number                 Percent            Amount                  Percent
              Existing
                stockholders                  293,588,236                          $    70,278,000                          $          0.24
              New investors

              Total                                                    100.0 % $                                  100.0 %


        The number of shares of our common stock to be outstanding after this offering is based on 293,588,236 shares issued and outs tanding
as of May 31, 2010, on a pro forma basis and:

     •
             excludes 9,668,775 shares of common stock issuable upon the exercise of options outstanding as of May 31, 2010 under our 2005
             Equity Incentive Plan, as amended, at a weighted average exercise price of $0.05 per share;

     •
             excludes 354,610 shares of common stock as of May 31, 2010 reserved for issuance under our 2005 Equity Incentive Plan; and

     •
             excludes        shares of common stock, subject to automatic increases on September 1 of each year fro m September 2011 to
             September 2017 o f the smallest of       shares,        % of the shares of common stock outstanding at the time or the nu mber of
             shares to be determined by our board, reserved for issuance under our 2010 Equity Incentive Plan, wh ich we p lan to adopt in
             connection with this offering.

     •
             includes 101,250 shares of co mmon stock that were legally issued but are subject to repurchase by us.

         Sales by the selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduce d
to          shares or           % of the total number of shares of our common stock outstanding after this offering. If the underwriters'
overallot ment option is exercised in full, the number o f shares held by the existing stockholders after this offering would be red uced
to          % of the total number o f shares of our common stock outstanding after this offering, and the number o f shares held by new
investors would increase to             or          % of the total number o f shares of our common stock outstanding after this offering.

         To the extent that any outstanding options are exercised, new investors will experience further dilution.

                                                                              46
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                                             S ELECTED CONSOLIDATED FINANCIAL DATA

        You should read the follo wing selected consolidated financial data below in conjunction with "Management's Discussion and Ana lysis
of Financial Condition and Results of Operations" and our consolidated financial statements, related notes and other financial information
included elsewhere in this prospectus. The selected consolidated financial data and related notes thereto in this section is not intended to replace
the consolidated financial statements and is qualified in its entirety by the consolidated financial statements and related notes thereto included
elsewhere in this prospectus.

         The fo llo wing selected consolidated statement of operations data for the years ended August 31, 2007, 2008 and 2009 and the selected
consolidated balance sheet data as of August 31, 2008 and 2009 have been derived fro m our audited consolidated financial statements included
elsewhere in this prospectus. The follo wing selected consolidated statement of operations data for the period fro m January 4, 2005 (inception)
through August 31, 2005 and for the year ended August 31, 2006 and the selected consolidated balance sheet data as of August 31, 2005, 2006
and 2007 have been derived fro m our audited consolidated financial statements, which are not included in this prospectus. The unaudited
consolidated financial statements as of and for the nine months ended May 31, 2009 and 2010 have been derived fro m our unaudited
consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on
a basis consistent with the audited consolidated financial statements and, in the opinion of management, include all adjustments, consisting
only of normal recurring adjustments, necessary for fair presentation of such data. The results of operations for the nine mo nths ended May 31,
2010 are not necessarily indicat ive of results to be expected for any subsequent period.

                                                                        47
Table of Contents

                                                  January 4,
                                                    2005 (1)
                                                   through                                                                                      Nine Months Ended
                                                  August 31,                           Years Ended August 31,                                         May 31,
                                                     2005            2006                2007          2008                 2009               2009             2010
                                                                                                                                                    (unaudited)
                                                                              (in thousands, except share and per share amounts)
                    Consolidated
                      Statement of
                      Operations:
                    Revenues, net             $             — $             745 $            6,860 $       14,749 $            11,551 $            7,010 $         24,275
                    Cost of revenues   (2)
                                                            —             1,680              4,484         11,681              11,019              6,536           14,230

                    Gross profit (loss)                     —               (935 )           2,376          3,068                   532              474           10,045

                    Operating expens es:
                     Research and
                        development (2)                   633             1,584                902          1,935                  2,452           1,591               1,490
                     Selling, general and
                        administrative (2)                530             1,788              1,704          2,320                  2,568           1,600               2,244

                         Total operating
                           expenses                      1,163            3,372              2,606          4,255                  5,020           3,191               3,734

                    Income (loss) from
                       operations                       (1,163 )          (4,307 )            (230)         (1,187 )            (4,488 )           (2,717)             6,311
                    Other income
                       (expens e):
                      Loss of
                         unconsolidated
                         entities (3)                       —                 —                 —                 —                  —                —                 (169 )
                      Interest income
                         (expens e), net                    78              101                 97                41                215              209                 (21 )
                      Other income, net                     —                —                  —                 37                 —                —                   —
                      Foreign currency
                         transaction gain
                         (loss)                             63               (65 )             234               295                580              424                (325 )

                         Total other
                           income
                           (expens e), net                141                 36               331               373                795              633                (515 )

                    Income (loss) before
                       provision for income
                       taxes                            (1,022 )          (4,271 )             101              (814 )          (3,693 )           (2,084)             5,796
                    Provision for income
                       taxes                                —                 —                 —                 —                  —                —                 271

                    Net income (loss)         $         (1,022 ) $        (4,271 ) $           101 $            (814 ) $        (3,693 ) $         (2,084) $           5,525


                    Net income (loss)
                      attributable to
                      common stock:
                     Basic                    $             — $               — $               — $             (814 ) $        (3,693 ) $         (2,084) $            460


                     Diluted                  $             — $               — $               — $             (814 ) $        (3,693 ) $         (2,084) $            487


                    Net income (loss) per
                      share attributable to
                      common stock:
                     Basic                    $           0.00 $            0.00 $            0.00 $            (0.01 ) $          (0.04 ) $        (0.02) $            0.00


                     Diluted                  $           0.00 $            0.00 $            0.00 $            (0.01 ) $          (0.04 ) $        (0.02) $            0.00


                    Shares used in
                      computing net
                      income (loss) per
                      share attributable to
                      common stock:
                     Basic                          24,911,987       39,142,776          57,342,749     75,530,727          92,404,576         91,146,507       98,029,563
                     Diluted                        24,911,987       39,142,776          57,892,748     75,530,727          92,404,576         91,146,507      107,899,182


                                                                     48
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                                                                           As of August 31,                                       As of May 31, 2010    (4)


                                                                                                                                                         Pro
                                                                                                                                                        Forma
                                                                                                                                             Pro          as
                                                          2005          2006        2007         2008            2009          Actual      Forma       Adjusted
                                                                                                                                         (unaudited)
                                                                                                (in thousands)
                          Consolidated
                            Balance Sheet
                            Data:
                          Cash and cash
                            equivalents               $    3,768 $        1,972 $       1,960 $ 11,120          $ 13,715 $ 14,157 $ 14,157                    $

                          Working capital     (5)
                                                           5,374          2,785         6,761     16,944          20,836        23,725       23,725

                          Total assets                    14,954         14,025     31,882        43,740          50,801        76,307       76,307
                          Long-term debt, net
                            of current portion
                            (6)
                                                                 —             —           —            —          2,995         3,964        3,964
                          Total stockholders'
                            equity                    $ 13,738 $ 13,075 $ 29,159 $ 39,492                       $ 43,997 $ 65,867 $ 65,867                    $



(1)
       We were incorporated on January 4, 2005.


(2)
       Stock-based compensation expens es are included in our cost of revenues, research and development expenses and selling, general and administrative expenses as follows:

                                                                                                                                             Nine Months Ended
                                                                                Years Ended August 31,                                            May 31,
                                                                 2005          2006       2007         2008                2009                    2010
                                                                                                                                                (unaudited)
                                                                                                        (in thousands)
                  Stock-based compensation
                    expenses included in:

                     Cost of revenues                            $   —         $    —       $     —         $     —        $     —            $                    29

                     Research and development                        —              —             —               —              —                                 18
                     Selling, general and
                       administrative                                —              —              3               8             16                                53

                                  Total stock-based
                                    compensation
                                    expenses                     $   —         $    —       $      3        $      8       $     16           $                   100



(3)
       Includes our proportionate share of loss from our unconsolidated joint venture entities, including China SemiLEDs. Our invest ments in these entities are initially stated at cost on our
       consolidated balance sheets and adjusted for our portion of equity in these investees' income or loss.


(4)
       Our consolidated balance sheet as of May 31, 2010 is presented:



             •
                        on an actual basis;


             •
                        on a pro forma basis to give effect to the conversion of 5,859,950 Class B common stock into Class A common stock and the conversion of 192,064,223 shares of
                        convertible preferred stock, which repres ents all of the issued and outstanding shares of converti ble preferred stock, into shares of Class A common stock on a
                        one-for-one basis; and


             •
                        on a pro forma as adjusted basis to reflect the pro form a adjustments stated above and the sale by us of        shares of common stock offered by this prospectus at
                        the initial public offering price of $    per share (the mid-point of the price range set forth on the cover page of this prospectus) after deducting underwriting
                        discounts and commissions and estimated offering expens es payable by us.
(5)
      Working capital represents current assets less current liabilities.


(6)
      Long-term debt includes long-term notes with a maturity of greater than 12 months.


                                                                                           49
Table of Contents


                        MANAGEMENT'S DISCUSSION AND ANALYS IS OF FINANCIAL CONDITION AND
                                            RES ULTS OF OPERATIONS

          This prospectus contains certain statements that are forward -looking in nature relating to our business, future events or our future
financial performance. Prospective investors are cautioned that such statements involve risks and uncertainties, and that actual events or
results may differ materially from the statements made in such forward -looking statements. In evaluating such statements, prospective investors
should specifically consider the various factors identified in this prospectus, including the matters set forth under the caption "Risk Factors,"
which could cause actual results to differ materially from those indicated by such forward-looking statements.

Company Overview

         We develop, manufacture and sell LED chips and LED components that we believe are among the industry leading LED products on
both a lumens per watt and cost per lumen basis. Our products are used primarily for general lighting applicat ions, including street lights and
commercial, industrial and residential lighting.

         We sell b lue, green and ultravio let (UV) LED ch ips under our MvpLED brand to a customer base that is heavily co ncentrated in Asia,
in particular China, Taiwan and Korea. Our operations include both LED chip and LED co mponent manufacturing. We grow our epit axy
materials on sapphire by applying our patented and proprietary process technology based on GaN and related co mpounds. We then process
these materials to create individual ch ips. We also package a portion of these chips to create LED co mponents.

         We produce a wide variety of LED ch ips, currently ranging fro m chip sizes of 1520  m by 1520  m to 380  m by 380  m. The
majority of our chips are capable of providing over 100 lu mens per watt when packaged. We sell our LED ch ips to packaging customers or to
distributors, who in turn sell to packagers. In addit ion, we package a portion of our LED chips into LED co mponents, which we sell to
distributors and end-customers in selected markets.

         We are a hold ing company for various wholly owned subsidiaries and jo int ventures. Our most significant subsidiary is our who lly
owned operating subsidiary, Taiwan SemiLEDs, where substantially all of our assets are held and located, substantially all of our employees
are employed and located, and where all of our research and development and sales activities take place. Taiwan SemiLEDs owns a 100%
equity interest in SBDI, a consolidated entity effective April 1, 2010. We also sell a substantial portion of our LED co mponents through the
Taiwan branch office o f Helios Crew, our wholly owned Delaware subsidiary. We have a 49% interest in China SemiLEDs, a joint venture in
China, wh ich has not had any material operations to date. We also own a 50% interest and a 49% interest in two jo int ventures in Malaysia and
Taiwan, respectively, each of which is still in early develop ment stage and has not had any material operations to date.

         Our 49% ownership interest in China SemiLEDs is accounted for as an equity method investment and as such is not consolidated for
financial report ing purposes. We report our investment in China SemiLEDs on our consolidated balance sheet at cost, after adding or deducting
our portion of equity in undistributed earnings or losses. If the value of our investment in Ch ina SemiLEDs declines, and the decline is
determined to be other-than-temporary, the investment will be written down to fair value. We recognize our proportionate share (based on our
percentage ownership) of the net inco me or loss, as the case may be, fro m China SemiLEDs under inco me (loss) fro m unconsolida ted entities
in our consolidated statements of operations, which include, in addit ion to the income o r loss attributable to China SemiLEDs, our
proportionate share of the income or loss from our other two joint venture entities.

                                                                       50
Table of Contents

China SemiLEDs

         We expect that a substantial portion of our business in Ch ina will be conducted through China SemiLEDs and we expect that our
results of operations will be significantly impacted by the performance of Ch ina SemiLEDs as it begins to manufacture and sell products, and
begins to aggressively pursue customers. We expect that China SemiLEDs will manufacture LED ch ips for sale to packagers and d istributors,
which we expect will include shareholders of China SemiLEDs. We expect that the end users of China SemiLEDs ' LED products will include
government entities, such as cities and provinces who will use its LED p roducts for installat ion in street lighting and signage applications and
to a lesser extent include businesses for use in commercial applications, such as lighting for warehouses and commercial build ings and
backlighting applications for LCD notebooks, television sets and computer mon itors.

        Our chief executive officer, Trung T. Doan, and our chief operating officer, Dr. Anh Chuong Tran, serve as chairman and
vice-chairman, respectively, of the board of directors of China SemiLEDs. Neither of these officers, however, will receive separat e
compensation in the form of salary or other benefits fro m China SemiLEDs. China SemiLEDs' board of directors, together with its
management, will be responsible for supervising the operations of China SemiLEDs. A general manager has been appointed at China
SemiLEDs to carry out its day-to-day operations, including its manufacturing, sales and market ing, and employe e relations.

         We expect that China SemiLEDs will begin to incur expenses, including research and development and selling, general and
administrative expenses, as it ramps up manufacturing and commercial production and as it continues to develo p new products and
applications. During this initial gro wth and commercialization stage of China SemiLEDs, we expect both our our sales and marketing and
research and development staff will be actively involved in the development and build -up of the business. After this initial period, we expect
China SemiLEDs will h ire and train professionals in these functions who will be dedicated to Ch ina SemiLEDs' business, produc ts and
customers, and we expect to maintain close collaboration across teams. As with our two senior officers, none of our emp loyees or staff
involved in assisting China SemiLEDs will receive any co mpensation in the form of salary, bonus or other compensation from Ch ina
SemiLEDs. China SemiLEDs is expected to grant stock options, subject to its board of directors' approval and shareholders approval, to its
emp loyees, which are independent of our employee stock compensation plans.

          As China SemiLEDs' business grows, depending on the materiality of China SemiLEDs' business as compared to our business, we
expect that we will have to report the financial performance of China SemiLEDs, to varying degrees, in the periodic and annua l reports that we
file with the SEC under the Exchange Act. In certain circu mstances, we may be required to in clude the financial statements of China
SemiLEDs in their entirety in our reports.

         We have invested approximately $14.7 million in China SemiLEDs to date. China SemiLEDs' total cap ital contributio n received to
date is approximately $45.0 million, and all of its capital expenditures have been funded from p roceeds of its equity financings. Neither we nor
the other shareholders of China SemiLEDs have any contractual obligation to make further cap ital contributions to China SemiL EDs.

Key Factors Affecti ng Our Financial Condi tion, Results of Operations and B usiness

         The fo llo wing are key factors that we believe affect our financial condition, results of operations and business:

     •
             General economic conditions and geographic concentration. A global econo mic slowdown or financial crisis, similar to the one
             that occurred beginning in late calendar year 2008, will likely have a significant impact on the LED industry and our financial
             results. As the

                                                                         51
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         economy slows, consumer and govern ment confidence declines and government spending programs decrease, with levels of
         government grants and subsidies for LED adoption and consumer spending likely to be adversely impacted. Moreover, because our
         sales have been concentrated in a few select markets, including Ch ina, Taiwan and Ko rea, our financial results will be impact ed by
         general economic and polit ical conditions in such markets.

    •
           Industry growth and demand for products and applications using LED chips. The overall adoption of LED lighting devices to
           replace tradit ional lighting sources are expected to influence the growth and demand for LED ch ips and impact our financial
           performance. As a substantial portion of our LED chips and LED co mponents are used by end -users in general lighting
           applications, the adoption of LEDs into these applications will have a strong impact on the demand of LED chips generally and, as
           a result, for our LED chips and LED co mponents.

    •
           Average selling price of our products. Ou r financial performance is affected by the average selling price of our LED chips and,
           to a lesser extent, the average selling price of our LED co mponents. The price that we charge to our customers is subject to a
           variety of factors, including prices charged by our competitors, the efficacy of our products, our cost basis, the size of th e order and
           our relat ionship with the relevant customer as well as general market and economic conditions. Our ability to continue to innovate
           by introducing higher efficacy, LED chips at lower costs will have a material influence on our ability to maintain or increas e the
           average selling price of our LED chips and LED co mponents.

    •
           Our ability to achieve consistently high manufacturing yields. We measure our manufacturing yield per wafer by the number of
           saleable LED chips produced, compared to the theoretical maximu m number of LED ch ips that can be produced on such wa fer. It
           is crit ical for us to achieve high manufacturing yields in order to maintain our margins. We expect to have to continually at tain
           higher yields fro m our existing wafer sizes and develop new technologies that allow us to efficiently mig rate to large r wafer sizes.

    •
           Planned expansion of production capacity. As a result of improving economic conditions resulting in increased demand, wh ile
           we have continued to optimize our manufacturing process and expand capacity in Taiwan and have also begun to ra mp up
           utilizat ion of our equip ment, beginning in March 2010 we have been operating our manufacturing facilities at or near full cap acity.
           We plan to add additional capacity for the production of LED ch ips in Taiwan in late 2010 and the first three months o f 2011. In
           addition, Ch ina SemiLEDs will add capacity when it becomes operational. Our financial performance will depend on our and
           China SemiLEDs' ability to expand production capacities in a timely manner and in accordance with projected budgets, product
           yield and quality specifications. Our financial performance also will be impacted by additional capacity added by industry
           participants in the future. Several co mpanies have announced plans to begin construction of new LED facilities or increase th eir
           existing LED manufacturing capacity. There has been increased investment in manufacturing facilities for LED chips and LED
           components and this trend is likely to generate significant new capacity over the next few years, resulting in increased comp etit ion,
           lower average selling prices and lower margins for many part icipants.

    •
           Our ability to realize our strategic initiatives, including through China SemiLEDs. Our success in Ch ina will depend on our
           ability to execute our strategies through China SemiLEDs, including the build -out of its manufacturing facilities and the
           commencement of co mmercial production lines on a timely and cost efficient basis. In addition, our ability to execute our
           strategies in Ch ina will depend on our continued good working relat ionship with the other shareholders of China SemiLEDs, who
           are all PRC entities, and who collectively o wn 51% of China SemiLEDs.

                                                                       52
Table of Contents

Components of Consoli dated Statements of Operati ons

     Revenues, net

      Our revenues are derived substantially fro m the sale of our LED ch ips and to a lesser extent fro m the sale of our LED components.
Revenues for our LED ch ips represented 94.6%, 88.0%, 77.6% and 78.8% for the years ended August 31, 2007, 2008 and 2009 and the nine
months ended May 31, 2010, respectively, with the substantial portion of our remaining revenues attributable to our LED co mp onents.

        Our revenues and the percentage of total revenues by products for the years ended August 31, 2007, 2008 and 2009 an d the nine
months ended May 31, 2009 and 2010 are as follows:

                                                               Years Ended August 31,                                   Nine Months Ended May 31,
                                                    2007                2008                        2009                  2009             2010
                                                                                                                               (unaudited)
                                                                                            (in thousands)
                          Revenues, net:
                          LED chips          $ 6,490         94.6 %$ 12,981          88.0 %$     8,960        77.6 %$ 5,379        76.7 %$ 19,120          78.8 %
                          LED
                            components            182         2.7       1,228         8.3        2,328        20.1     1,405       20.1        4,748       19.5
                          Other (1)               188         2.7         540         3.7          263         2.3       226        3.2          407        1.7

                          Total              $ 6,860        100.0 %$ 14,749         100.0 %$ 11,551          100.0 %$ 7,010       100.0 %$ 24,275         100.0 %




              (1)
                      Other includes revenues attributable to the sale of general lighting products for use in residential homes and offi ce buildin gs, the sale of specialized LED
                      applications, the sale of epitaxial wafers and the sale of scraps and raw materi als.


        Our revenues are affected by sales volumes of our LED chips and LED co mponents and our blended average selling prices for suc h
products. Blended average selling prices for LED co mponents are higher than for LED chips and therefore our total revenues are also affected
by our product mix.

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

         Our larger customers typically provide us with non-binding rolling forecasts of their requirements for the co ming three to six months.
Typically, our customers place purchase orders one to two months before the expected shipment date; however, during periods w hen market
demand significantly exceeds supply, customers generally place their orders more than two months in advance in order to ensure an adequate
supply to meet their growing business needs. Our customers may increase, decrease, cancel or delay purchase orders already in place, with no
material consequences to the customer. As a result, we may face increased inventories and our backlog may decline as a result of any e conomic
downturn or material change in market conditions or economic outlook. We price our products in accordance with prevailing m arket
conditions, taking into account the technical specificat ions of the product being sold, the order volume, the strength and history of our
relationship with the customer, our inventory levels and our capacity utilizat ion.

        The number of customers that we sold our products to increased from 116 customers during the year ended August 31, 2007 to 305
customers during the nine month period ended May 31, 2010. Our customers for LED ch ips consist of both packagers and distributors who sell
our LED ch ips to their packaging customers. Packagers in turn sell their packaged LED co mponents to end -users of lighting devices. Our
customers for LED co mponents consist primarily of d istributors. Distributors

                                                                                         53
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accounted for 39.2%, 40.0%, 54.8% and 45.5% of our revenues for the years ended August 31, 2007, 2008, 2009 and for the nine months
ended May 31, 2010, respectively. Our revenues attributable to our ten largest customers accounted for 77.7%, 73.0%, 57.3% and 63.8% o f our
revenues for the years ended August 31, 2007, 2008, 2009 and the nine months ended May 31, 2010, respectively.

         Our revenues are concentrated to sales to customers in certain countries in Asia, in particu lar, Ch ina and Taiwan. Our revenues
attributable to customers in China (including Hong Kong) and Taiwan represented 69.3%, 65.4%, 79.0% and 82.9%, respectively, of our
revenues for the years ended August 31, 2007, 2008 and 2009 and for the nine months ended May 31, 2010, respectively. We expect that our
revenues will continue to be concentrated to sales in these jurisdictions for the foreseeable future.

       Our revenues by geographic region are based on the billing addresses of our customers. The fo llo wing table sets forth our revenue s by
geographic region and the percentage of total revenues represented by each geographic region for the periods indicated:

                                                       Years Ended August 31,                           Nine Months Ended May 31,
                                              2007              2008                   2009               2009             2010
                                                                                                               (unaudited)
                                                                             (in thousands)
                         Revenues,
                           net:
                         Taiwan          $ 2,871      41.9 %$   6,225    42.2 %$     3,671     31.8 %$ 2,332    33.3 %$ 10,013       41.3 %
                         China (1)         1,881      27.4      3,416    23.2        5,457     47.2    3,014    43.0    10,104       41.6
                         United States       397       5.8        240     1.6          771      6.7      575     8.2       946        3.9
                         Korea               322       4.7      3,746    25.4          539      4.7      243     3.4     1,023        4.2
                         Others            1,389      20.2      1,122     7.6        1,113      9.6      846    12.1     2,189        9.0

                         Total           $ 6,860     100.0 %$ 14,749    100.0 %$ 11,551       100.0 %$ 7,010   100.0 %$ 24,275      100.0 %




              (1)
                      Includes Hong Kong.


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

     Cost of Revenues

          Our cost of revenues consists primarily of cost of materials, depreciat ion expenses, manufacturing overhead costs, direct lab or costs and
utilit ies cost, all related to the manufacture of our LED chips and LED co mponents. Materials include raw materials th at are used in the
manufacturing of our products, other materials such as gases and chemicals and consumables. Because our products are manufact ured based on
customers' orders and specifications and we purchase materials and supplies to support such orders , we generally purchase our materials at spot
prices in the marketplace and do not maintain long-term supply contracts. We purchase materials fro m several suppliers. Our p rocurement
policy is to select only a small nu mber of qualified vendors who demonstrate quality of materials and reliability on delivery t ime. We are
subject to variations in the cost of our materials and consumables fro m period to period. Moreover, because we consume a sign ificant amount
of electricity in our manufacturing process, any fluctuations in electricity costs will have an impact on our cost of revenues.

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

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     Operating Expenses

        Our operating expenses include research and development expenses and selling, general and ad ministrative expenses. The compon ents
of our operating expenses and percentage of such expenses as a percentage of total operating expenses for the years ended August 31, 2007,
2008 and 2009 and the nine months ended May 31, 2009 and 2010 co mprised the follo wing:

                                                           Years Ended August 31,                         Nine Months Ended May 31,
                                                   2007              2008               2009                2009             2010
                                                                                                                 (unaudited)
                                                                                (in thousands)
                          Operating Expenses:
                          Research and
                            development        $ 902       34.6 %$ 1,935    45.5 %$ 2,452         48.8 %$ 1,591    49.9 %$ 1,490       39.9 %
                          Selling, general and
                            administrative      1,704      65.4    2,320    54.5    2,568         51.2    1,600    50.1    2,244       60.1

                          Total               $ 2,606     100.0 %$ 4,255   100.0 %$ 5,020        100.0 %$ 3,191   100.0 %$ 3,734      100.0 %



         Research and development. Our research and development expenses, which are expensed as incurred, consist primarily of expenses
related to employee salaries, bonuses and other benefits (including stock-based compensation expenses) for our research and development
personnel, engineering charges related to product design, purchases of materials and supplies, repairs and maintenance and depreciation related
expenses. We expect our research and development expenses to increase as we hire addit ional personnel and devote more resources to research
and development to improve our technologies and manufacturing processes and to reduce manufacturing costs.

         Selling, general and administrative. Selling, general and ad ministrative expenses consist primarily of salaries, bonuses and other
benefits (including stock-based compensation expenses) for our administrative, sales and marketing personnel and also consist of lease
expenses, market ing-related travel, entertain ment expenses and general office-related expenses. We also incur expenses for professional
services, which include fees and expenses for accounting, legal, tax and valuation services.

          We expect our selling, general and administrative expenses to increase in the near future as we increase our sales and market ing efforts
in line with the expansion of our business, manufacturing capacity and product offerings and as we hire additional staff and engage professional
service providers to meet our corporate disclosure and governance requirements after we beco me a public, reporting company subsequent to
this offering.

     Other Income (Expense)

          Loss from unconsolidated entities. Loss from unconsolidated entities consists of our portion of the loss of our three partially
owned, unconsolidated entities, which include China SemiLEDs. These entities are accounted for using the equity method of acc ounting, and
as such, we recognize our portion of the net inco me or loss from such entities in our consolidated statements of operations. We report our
investment in such entities as investments in unconsolidated entities on our consolidated balance sheets and such investment amounts are
initially stated at cost, and subsequently adjusted for our portion of equity in undistributed earnings or losses. If the value of our investment in
such entities declines, and the decline is determined to be other-than-temporary, the investment will be written down to fair value.

         Interest income (expense), net. Interest inco me (expense), net consists of interest income and interest expense. Interest income
represents interest earned from our cash and cash equivalents which are on deposit with co mmercial banks in Taiwan and the Un ited States,
and fro m cert ificates of deposit purchased from co mmercial banks in Taiwan. We had $13.7 million and $14.2 million in cash and cash
equivalents as of August 31, 2009 and May 31, 2010, respectively.

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        Interest expense consists primarily of interest on our long-term borrowings and short-term lines of credit with certain banks in Taiwan.
We had $3.4 million and $5.0 million of long-term debt, including the current portion of such long-term debt as of August 31, 2009 and
May 31, 2010, respectively. We also had drawn down $0.3 million fro m our short-term cred it facilit ies as of May 31, 2010.

         Other income, net. Other inco me, net primarily consists of a gain on sale of an investment accounted for under the cost method for
the year ended August 31, 2008. We d id not record other income or loss, net for the years ended August 31, 2007 and 2009 or for the nine
months ended May 31, 2009 and 2010.

         Foreign currency transaction gain (loss). The functional currency of Taiwan SemiLEDs, SBDI, and the Taiwan branch office of
Helios Crew is NT dollar. Gains or losses on foreign currency transactions are recognized in our consolidated statement of operations as
foreign currency transaction gains (losses). Certain purchase contracts for materials, supplies and equipment entered into by our subsidiaries are
denominated in currencies other than NT dollars, main ly in U.S. dollars and to a lesser extent Japanese Yen. For our customers outside of
Taiwan, our subsidiaries quote prices for our products and bill our customers in U.S. dollars, and record revenues and accounts receivable in
NT dollars for such orders at the time of such sale based on our revenue recognition policies. Most of our sales to customers and purchases are
on credit. Any changes in the exchange rates between NT dollar, U.S. dollar, Japanese Yen and other currencies will result in o ur recognizing
foreign currency transaction gains or losses, as the case may be, depending on the movement of the fo reign exchange rates fro m the time when
we record revenues and purchases, to the time we receive and make payment. W e also have foreign currency transaction gains or losses fro m
time deposits held in currencies other than the functional currency of the subsidiary that holds such deposits.

     Provision for Income Taxes

         United States tax treatment. We and our subsidiary, Helios Crew, are United States corporations and are therefore required to file
federal inco me tax returns with the Internal Revenue Serv ice as well as with certain applicab le state tax authorities. As our operations in the
United States have been minimal, we have not to date recorded nor paid any federal o r state corporate income tax.

          We have investments in controlled foreign corporations and affiliates, which under Subpart F of the United States Internal Revenue
Code, or Subpart F, may under certain circu mstances subject our investments in controlled foreign corporations and affiliates to taxation in t he
United States. Subpart F provides that United States corporations may be required to include in their income certain undistrib uted earnings of
the foreign corporations and affiliates as though such earnings had been distributed currently. Subpart F applies only to United States
shareholders (such as us) who hold an interest in a foreign corporation and affiliates that meets the d efinition of a "controlled foreign
corporation." Under Section 957(a) of Subpart F, a "controlled foreign corporation" means any foreign corporation if more than 50% of either
(i) the total co mbined voting power of all classes of stock of such corporation entitled to vote, or (ii) the total value of the stock of such
corporation, is owned by "United States Shareholders" on any day during the foreign corporation's taxable year.

         Subpart F does not apply, however, to the income of a controlled fo reign 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 affil iates that is not
engaged in a Un ited States trade or business is generally not subject to United States taxation until its earnings are distributed, or the stock of
the foreign corporation is disposed. All of our products are manufactured in Taiwan by Taiwan SemiLEDs, our wholly owned fore ign
subsidiary. Because Taiwan SemiLEDs conducts its manufacturing activities in Taiwan, the income o r loss of Taiwan SemiLEDs is included in
our consolidated financial statements, but is not considered taxab le income for United States taxat ion

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purposes pursuant to §954(d)(1)(A) o f the United States Internal Revenue Code. This generally enables a Un ited States taxpayer, such as us, to
indefinitely defer Un ited States taxation on the profits earned by its controlled foreign corporations and affiliates by retaining the ear nings in
such entities. We do not currently have any plans to repatriate any of our retained earnings fro m 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.

          It has been reported, however, that the current presidential ad ministration in the United States may seek to modify t he rules governing
taxat ion of controlled foreign corporations and affiliates and any such changes may result in our having to pay applicable ta xes in the United
States on income earned by such entities in the future.

         Taiwan tax treatment. Prior to January 1, 2010, the corporate income tax rate in Taiwan was 25%. On May 28, 2010, Taiwan's
legislature passed a bill reducing Taiwan's corporate income tax rate to 17%, which was promu lgated by the President of Taiwa n on June 15,
2010. Th is 17% tax rate applies to our income tax returns for the fiscal year starting September 1, 2010. Pursuant to the Taiwan Alternative
Minimu m Tax Act, or the AMT Act, wh ich became effect ive on January 1, 2006, an alternative min imu m tax, or AMT, is payable if the
income tax payable pursuant to the Taiwan Inco me Tax is below the min imu m amount prescribed under the AMT Act. The taxable in co me for
calculating the AMT includes most income that is exempted fro m inco me tax under various legislations, such as tax holiday s and investment
tax credits. The AMT rate for business entities is 10%. However, the Taiwan AMT Act grandfathered certain tax exempt ions and tax credits
granted prior to the enactment of the AMT.

          Co mpanies in Taiwan that conduct business in certain industries promoted by the Taiwan govern ment, including the semiconductor
and LED industries, may also be eligib le for preferential tax treat ment under the Statute for Upgrading Industries even though it was abolished
on May 12, 2010. Under the Statute for Upgrading Industries, Taiwan SemiLEDs is entitled to a five-year tax exempt ion for income
attributable fro m the use of equip ment that we previously purchased to manufacture blue and green LED wafers and LED chips fu nded in
whole or in part by proceeds fro m its initial capital investments and subsequent capital increases. Such tax exemption is availab le either to the
shareholder of Taiwan SemiLEDs or, if we so determine, to Taiwan SemiLEDs itself. The exempt ion period may begin at any t ime within four
to five years following the commencement of co mmercial production using such equipment. We have received approval fro m t he ta x
authorities to utilize the exempt ion, but have not designated the year fro m which we will begin using such exemption.

         In addit ion, Taiwan SemiLEDs enjoys certain tax credits under the Statute for Upgrading Industries ranging fro m 7% t o 11% for
investments in automation equipment and technology made prior to December 31, 2009 as well as tax credits of 30% for research and
development expenses incurred prior to December 31, 2009, both of which can be applied over a period of five years. Such tax credits cannot
exceed 50% of inco me tax payable for that year, and unused credits can be carried over for four years and be fully applied in the last year of
carry-over. As of August 31, 2009, Taiwan SemiLEDs had unused tax credits of $1.1 million, wh ich will begin exp iring in various amounts in
the year ending August 31, 2010. We expect Taiwan SemiLEDs to utilize a portion of s uch tax credits to offset income tax payable in the year
ending August 31, 2010. In addit ion, Taiwan SemiLEDs has received approval fro m the tax authorities to enjoy tax cred its of up to 20% under
the Statute for Upgrading Industries for our prior investments in township areas in Taiwan with limited resources or with slow development,
which can be applied over a period of four years. We are still in the process of applying for the final approval for the applicat ion of such tax
credit.

          According to the newly enacted Statute for Industrial Innovation, which came into effect on May 12, 2010, a Taiwan company is
entitled to apply for a tax credit of up to 15% of the aggregate amount invested in research and development if the amount of such credit does
not exceed 30% of its

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income tax payable fo r that year. Any unused credit cannot be carried over to later years. This law changed the tax regime th at was in effect
under the Statute for Upgrading Industries, which was abolished on May 12, 2010. Although the Statute for Industrial Innovation became
effective in May 2010, the applicable tax incentives under this new tax regime can be retroactively applied fro m January 1, 2010. Taiwan
SemiLEDs may be entit led to such tax credits under the Statute for Industrial Innovation to offset its income tax payable fro m t he year ending
August 31, 2010 through the year ending August 31, 2019.

        As of August 31, 2009, Taiwan SemiLEDs had unused net operating loss carryforwards of appro ximately $5.8 million, which will
begin expiring in various amounts in the year ending August 31, 2015. Pursuant to the Taiwan Inco me Tax Act, as amended on January 21,
2009, net operating loss carryforwards can be carried forward for a period of ten years. We expect that Taiwan SemiLEDs will fully utilize net
operating loss carryforwards to offset taxable inco me in the year ending August 31, 2010.

         In addit ion, in accordance with the Taiwan Inco me Tax Act, div idends distributed by companies incorporated in accordance with the
Taiwan Co mpany Act shall be deemed as income derived fro m sources in Taiwan and income taxes shall be levied on the shareholders
receiving such dividends. In the event that a Taiwan incorporated company distributes dividends to its foreign shareholders, it will be required
to withhold tax payable by the foreign shareholders at the time o f pay ment at a rate of 20% or a lo wer tax treaty rate if app licab le. Therefore,
dividends received fro m Taiwan SemiLEDs, if any, will be subjected to withholding tax under Taiwan law.

Critical Accounti ng Policies and Esti mates

         We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United St ates of
America, or US GAAP, which requires us to make judg ments, estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during each reporting period. We continually evaluate these estimates and assumptions based on historic al experience,
knowledge and assessment of current and other conditions, our expectations regarding our future based on available informat ion and reasonable
assumptions, which together form our basis for making judgments about matters that are not readily apparent fro m other source s. Since the use
of estimates is an integral co mponent of the financial reporting process, our actual results could differ fro m those estimates.

        We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our
consolidated financial statements.

     Revenue Recognition

         Our revenues are derived substantially fro m the sale of our LED ch ips and, to a lesser extent, fro m the sale of our LED compo nents. We
sell a large portion of our products to distributors, who in turn sell our products to their customers, which include both packaging customers
that package our LED chips and to end-user customers that manufacture general lighting devices.

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

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         We provide our customers with limited rights of return for non -conforming shipments and product warranty claims. Based on
historical return percentages and other relevant factors, we estimate our potential future exposure on recorded product sales and record a
provision against product revenues when deemed appropriate. If we enter into an arrangement that contains more specific right s of return or
acceptance provisions, revenues are deferred until the rights or provisions lapse. To date, our product returns and the related estimated sales
returns have been insignificant. Ou r revenue recognition policy is generally the same whether we sell to packagers, end -customers or
distributors as we do not provide any special rights to any class of customer.

        The evaluation of the above revenue recognition criteria requires significant management judgment. For instance, we use judgment to
assess collectibility based on factors such as credit-worthiness and past collection history. If we determine that collection of a payment is not
reasonably assured, revenue recognition is deferred until the time collection becomes reasonably assured, which is generally upon receipt of
payment. We also use judgment to assess whether a price is fixed or determinable by reviewing contractual terms and conditions related to
payment terms. In addition, we estimate sales returns and allowances on product sales which are based on historical sales ret urns, allowances,
market act ivity, and other known or anticipated trends and factors. These estimates are subject to management judgment and actual results
could be different fro m our estimates wh ich could result in future adjustments to our revenues and operating results.

     Stock-Based Compensation

        We account for our stock options granted to employees utilizing a fair value method of accounting which requires us to measure the
cost of employee services received in exchange for the stock options based on the estimated grant date fair value of those op tions. The fair
value of the stock options is estimated using the Black-Scholes option-pricing model. The resulting expense is recognized over the period
during which an emp loyee is required to provide service in exchange for the award, or the vesting period, which fo r our stock option grants has
generally been four years.

        We account for stock options issued to nonemployees based on their estimated fair value wh ich is also determined using the
Black-Scholes option-pricing model. However, the fair value of the stock options granted to nonemployees is remeasured each reporting period
through the vesting date, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.

         The Black-Scholes option-pricing model requires inputs for the expected term, expected volatility and risk-free interest rate for each
option grant. Further, the forfeiture rate also affects the amount of aggregate compensation that we are required to record a s an expense. These
inputs are subjective and generally require significant judgment.

          The expected term for options granted to our emp loyees is derived fro m h istorical data on employee exercises and post-vesting
emp loyment termination behavior after taking into accoun t the contractual life of the options. Our expected volatility is derived fro m the
historical volatilities of several unrelated public co mpanies within our industry over a period appro ximately equal to the expected term of each
option grant because we have no trading history and, therefore, very limited informat ion on the volatility of the fair value of our common stock.
When making the selections of our industry peer companies to be used in the volatility calcu lation, we also considered the st age of
development and size of potential co mparab le co mpanies, among other factors. The risk -free interest rate is based on the U.S. Treasury yield in
effect at the time of grant for zero coupon U.S. Treasury notes with maturit ies approximately equal to the expected term of each option grant.

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        The fair value of the options granted during the years ended August 31, 2007, 2008 and 2009 and the nine months ended May 31, 2009
and 2010 were estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:

                                                                                                                            Nine Months
                                                                                                                               Ended
                                                                         Years Ended August 31,                               May 31,
               Assumptions                                       2007                   2008           2009           2009                2010
               Risk-free interest rates (%)                         4.8                   3.4             2.3               2.3             2.7
               Expected term (in years)                             5.8                   5.8             5.9               5.9             6.2
               Div idend yield (%)                                    0                     0               0                 0               0
               Expected volatility (%)                             47.0                  61.6            61.6              61.6            69.8

         If, in the future, we determine that another method for calculat ing these input assumptions is more reasonable, or if another method is
prescribed by authoritative guidance, the fair value calcu lations for future grants of stock options could change significantly. In that regard ,
higher volatility and longer expected lives generally result in an increase in the fair value of a stock option which would r esult in an increase to
our stock-based compensation expense. We will continue to use judgment in evaluating the expected term and expected volatility on a
prospective basis and incorporating these factors into the Black-Scholes option-pricing model.

         We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriaten ess of the
forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly c hanges in the estimated
forfeiture rate can have a significant effect on reported stock-based compensation expense, as the cumulat ive effect of adjusting the rate for all
expense amortization is recognized in the period the forfeiture estimate is changed. If a rev ised forfeiture rate is higher than the previously
estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the
consolidated financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an ad justment is made that
will result in an increase to the stock-based compensation expense recognized in the consolidated financial statements. To date, we have not
recognized any significant adjustments to our stock-based compensation as a result of forfeiture revisions. We will also continue to use
judgment in evaluating the forfeiture rate related to our stock-based compensation.

       The fo llo wing table summarizes, by grant date, the number of shares of common stock subject to options granted to emp loyees since
September 1, 2008, the associated per share exercise price and estimated fair value of our co mmon stock for each grant:

                                                                                      Fair Value Per
                                         Number of                                        Share          Aggregate Grant
               Grant Date              Options Granted      Exercise Price          of Common Stock      Date Fair Value
               September 1, 2008              3,104,800     $           0.06        $           0.02    $        25,000
               November 1, 2008                 210,000                 0.07                    0.02              2,000
               February 15, 2009                 65,000                 0.07                    0.02              1,000
               March 1, 2009                  1,000,000                 0.07                    0.02              8,000
               February 10, 2010              1,692,700                 0.07                    0.55            822,000
               July 23, 2010                    200,000                 0.64                    0.64             67,000

         In addit ion to the options granted above, we granted options to purchase 40,000 shares on September 1, 2008, 25,000 shares on
February 10, 2010 and 25,000 shares on May 2, 2010 with exercise prices of $0.06, $0.07 and $0.07 per share, respectively, to our
nonemployees. We determined that the fair value of the underlying co mmon stock on these dates was $0 .02, $0.55 and $0.64 p er share,
respectively. The total amount of expenses associated with these grants was not determinable on the dates of the grants or th e date of this
prospectus as they are subject to periodic remeasurement.

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          Also required fo r the calculat ion of the fair value of our stock options is the fair value of the underlying common stock . Given the
absence of an active market for our co mmon stock, our board of directors determined the fair value of our co mmon stock for ou r grants of stock
options. Our board of d irectors determined the fair value of our co mmon stock based in part on an ana lysis of relevant metrics, including some
or all of the following for each grant date:

     •
            the nature of our business and our history;

     •
            the overall economic outlook, and the condition and outlook of our industry;

     •
            the financial condition of our business;

     •
            our future earning capacity of our co mpany;

     •
            the market value of public co mpanies engaged in the same or similar lines of business;

     •
            experience of our management team;

     •
            management projections of future cash flows;

     •
            working capital requirements; and

     •
            future capital expenditures.

         Our board determined the fair value of our co mmon stock in part by using contemporaneous and retrospective valuations based on the
market approach and the income approach to estimate our aggregate enterprise value at each valuation date. The market approach measures the
enterprise value of a co mpany through the analysis of different market variables of co mparable co mpanies. Consideration is giv en to the
financial condition and operating performance of the co mpany being valued relative to those of publicly traded co mparable co mpanies. When
choosing the comparable co mpanies to be used for the market approaches, we focused on companies in our industry or a similar line of
business that had similar characteristics. So me of the other criteria used to select our comparable co mpanies included the business description,
business size, projected growth, financial condition and historical earnings. The inco me approach measures the value of a comp any as the
present value of its future economic benefits by applying an appropriate risk -adjusted discount rate to expected cash flows, based on forecasted
revenues and costs. The discount rate used is the weighted average cost of interest -bearing debt and equity capital. We utilized a discounted
cash flow analysis for the inco me approach. In the discounted cash flow analysis, future cash flows are d iscounted to present value using an
appropriate discount rate. Cash flo ws are forecasted for a d iscrete period of years and then projected to grow at a constant rate in perpetuity.
We prepared a financial forecast for each valuation to be used in the computation of the enterprise value for the income appr oaches. The
financial fo recasts took into account our past experience and future expectations. The risks associated with achieving these forecasts were
assessed in selecting the appropriate discount rate. The enterprise values for the market approach and the income approach we re then weighted
based the valuation purpose, availability of data and possibility of future scenarios for our co mpany.

         In order to determine the fair value of our co mmon stock, the enterprise value determined fro m the market approach and income
approach at each valuation date were allocated to the shares of convertible preferred stock and shares of common stock using an option -pricing
methodology. The option-pricing method treats common stock and convertible preferred stock as call options on the total equity value of a
company. When a liquid ity event, such as a strategic sale, merger or init ial public offering occurs and the total equity value o f a company is
less than the amount of debt owed plus the total liquidation preference of a co mpany's convertible preferred stock, the value of t he common
stock is zero. However, if the total equity value is greater than the liquidation preference of the convertible preferred sto ck, the common and
convertible preferred stock share equally in the value of each dollar of total equity va lue greater than the total liqu idation preference.

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          The option-pricing methodology uses the Black-Scholes option-pricing model to price the call options. This model defines the
securities' fair values as functions of the current fair value of a co mpany and uses assumptions such as the anticipated hold ing period and the
estimated volatility of the equity securities. The anticipated holding period utilized in these valuations was based on then -current plans and
estimates of our board of directors and management. Estimates of the volatility of our stock were based on available informat ion on the
volatility of the capital stock of our comparable publicly traded co mpanies. This approach is consistent with the methods outlined in the
American Institute of Certified Public Accountants Practice Gu ide, Valuation of Privately-Held-Company Equity Securities Issued as
Compensation .

        The estimated fair value of our co mmon stock at each grant date also reflected a non -marketability discount in light of the fact that our
stockholders cannot freely trade our co mmon stock in the public markets.

        Our board of directors considered several factors in determin ing the fair value of our co mmon stock, including the review of
independent valuation reports and developments in our business. The valuations performed by our board of directors and the in tervening
changes between valuations are discussed below.

        August 31, 2008 contemporaneous valuation. The contemporaneous valuation as of August 31, 2008 determined a fair value of
our common stock of $0.02 per share. The valuation used a risk-adjusted discount rate of 21.6%, a non-marketability discount of 35.5% and an
estimated holding period of three years fro m the valuation date. In order to determine the aggregate enterprise value, the valuation was
weighted between the market approach and the income approach with 85% of the enterprise value determined utilizing the income approach
being combined with 15% of the enterprise value determined utilizing the market approach. Based on this valuation and other factors, our
board of directors used $0.07 per share as the exercise price for all options granted through the date of the subsequent cont emporaneous
valuation performed as of August 31, 2009.

         August 31, 2009 contemporaneous valuation. The contemporaneous valuation as of August 31, 2009 determined a fair value of
our common stock of $0.02 per share. The valuation used a risk-adjusted discount rate of 25.4%, a non-marketability discount of 42.4% and an
estimated holding period of three years fro m the valuation date. This contemporaneous valuation also relied solely on the inc ome approach and,
therefore, was not weighted among the market and inco me approaches. Based on this valuatio n and other factors, our board of directors used
$0.07 per share as the exercise price for all options granted through the date of the subsequent contemporaneous valuation pe rformed as of
May 31, 2010. As a result of the a retrospective valuation performed as of February 28, 2010 and a contemporaneous valuation performed as of
May 31, 2010 discussed further below, the fair value of the underlying co mmon stock for options granted in February and May 2010 were
subsequently increased for the calculations of our stock-based compensation for the nine months ended May 31, 2010.

         February 28, 2010 retrospective valuation. The retrospective valuation as of February 28, 2010 determined a fair v alue of our
common stock of $0.55 per share. The valuation used a risk-adjusted discount rate of 28.7%, a non-marketability discount of 22.3% and an
estimated holding period of n ine months from the valuation date. In order to de termine the aggregate enterprise value, the valuation was
weighted between the market approach and the income approach with 80% of the enterprise value determined utilizing the income approach
being combined with 20% of the enterprise value determined utilizing the market approach. Significant developments in our business that
contributed to the increase in the fair value of our co mmon stock during the period fro m the date of our August 31, 2009 contemporaneous
valuation included our entering into a number of joint ventures, including China SemiLEDs. Based on this retrospective valuation, the fair
value of the underlying common stock for options granted in February 2010 were subsequently increased for the calculations of our
stock-based compensation for the nine months ended May 31, 2010.

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          May 31, 2010 contemporaneous valuation. The contemporaneous valuation as of May 31, 2010 determined a fair v alue of our
common stock of $0.64 per share. The valuation used a risk-adjusted discount rate of 29.5%, a non-marketability discount of 13.4% and an
estimated holding period of five months from the valuation date. In order to determine the aggregate enterprise value, the valuation was
weighted between the market approach and the income approach with 80% of the enterprise value determined utilizing the income approach
being combined with 20% of the enterprise value determined utilizing the market approach. Significant developments in our business that
contributed to the increase in the fair value of our co mmon stock during the period fro m the date of our February 28, 2010 retro spective
valuation included (i) a Series E convertible preferred stock offering which resulted in the receipt of $15.0 million in proceeds, which provided
us with resources to support our growth plan, (ii) our move toward a potential init ial public o ffering, fo llowed by informal discussions with
potential underwriters in March 2010 and formal d iscussions with potential underwriters in April 2010, and (iii) the increase in our levels of
staff, including the addition of key management employees, during this period. Based on this valuation, th e fair value of the underlying
common stock for options granted in May 2010 were subsequently increased for the calculat ions of our stock-based compensation for the nine
months ended May 31, 2010.

        There is inherent uncertainty in these estimates and if we had made different assumptions than those described above, the amount of
our stock-based compensation expense, net income (loss) and net income (loss) per share amounts could have been significantly different .

          We recorded stock-based compensation expense of $0 for the year ended August 31, 2009 and $0.1 million for the nine months ended
May 31, 2010. As of May 31, 2010, we had $0.8 million of unrecognized stock-based compensation expense related to emp loyee stock options
granted under our 2005 Equity Incentive Plan, which is expected to be recognized over an average period of 2.4 years. As of M ay 31, 2010, we
had 142,500 options outstanding held by our nonemployee consultants, of which 78,750 had not yet vested. As of May 31, 2010, we also had
63,750 shares of common stock outstanding held by our nonemployee consultants that are still vesting and, therefore, are subject to repurchase
by us. The recognition of future compensation expense for these nonemployee options and shares are potentially subject to adjustment based on
future fluctuations in the fair value of our co mmon stock and various other assumptions and, with respect to the options, fut ure exercise
activity. In future periods, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based
compensation and as we issue additional stock-based awards to continue to attract and retain emp loyees and nonemployee directors.

     Inventory Valuation

        Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or market value. We
determine cost using a weighted average. At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence
and we write-down our inventory to its estimated market value based upon an aging analysis of the inventory on hand and assumptions about
future demand. Once written down, inventories are carried at this lower amount until sold or scrapped. We also establish a re serve for items
that are considered obsolete based upon changes in customer demand, manufacturing process changes or new product introduction s that may
eliminate demand for the product. There is significant judg ment involved with the estimates of excess and o bsolescence and the related
reserves and if our estimates regarding customer demand or other factors are inaccurate or actual market conditions or techno logical changes
are less favorable than those estimated by management, addit ional future inventory writ e-downs may be required that could adversely affect
our operating results. Inventory write-downs to market value during the years ended August 31, 2007, 2008 and 2009 and the nine months
ended May 31, 2009 and 2010 were $0.6 million, $0.1 million, $0.8 million, $0.8 million and $0, respectively.

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     Allowance for Doubtful Accounts

        Trade accounts receivable are recorded at invoiced amounts, net of our estimated allo wances for doubtful accounts. The allowance for
doubtful accounts is estimated based on an assessment of our ability to collect on customer accounts receivables. We regularly review the
allo wance by considering certain factors such as historical experience, industry data, credit quality, age of accounts receivable balan ces and
current economic conditions that may affect a customer's ability to pay. In cases where we are aware of circu mstances that may impair a
specific purchaser's ability to meet their financial obligations to us, we record a specific allo wance against amounts due fro m the customer and
thereby reduce the net recognized receivable to the amount we reasonably believe will be collecte d. There is judg ment involved with estimat ing
our allo wance for doubtful accounts and if the financial condition of our customers were to deteriorate, resulting in their inability to make the
required payments, we may be required to record additional allowances or charges against product revenues. Charges to bad debt expense
during the years ended August 31, 2007, 2008, 2009 and the nine months ended May 31, 2009 and 2010 were $0, $0.1 million, $0, $0 and
$0.2 million, respectively.

     Income Taxes

        We are subject to inco me taxes in both the United States and foreign jurisdictions. Significant management judgment is requir ed in
determining our provision for inco me taxes, our deferred tax assets and liabilities and any valuation allo wance recorded aga inst our net
deferred tax assets. These estimates and judgments about our future taxab le income are based on assumptions that are consistent with our future
plans. As of August 31, 2009 and May 31, 2010, we have recorded a fu ll valuation allowance on our n et deferred tax assets due to uncertainties
related to our ability to utilize them in the foreseeable future. These deferred tax assets primarily consist of certain net operating loss
carryforwards and research and development tax cred its. Should the actual amounts differ fro m our estimates, the amount of our valuation
allo wance could be materially impacted.

         Since inception, we have incurred operating losses and, accordingly, we have not recorded a significant provision for income taxes for
any of the periods presented. Accordingly, there have not been significant changes to our provision for inco me taxes during the years ended
August 31, 2007, 2008, 2009 or the nine months ended May 31, 2009 and 2010.

         As of August 31, 2009 and May 31, 2010, we had U.S. federal net operating loss carryforwards of $1.0 million and $1.3 million,
respectively, and state net operating loss carryforwards of $0.5 million and $0.5 million, respectively. Realization of deferred tax assets is
dependent upon future earnings, if any, the timing and amount of wh ich are uncertain. Accordingly, the net deferred tax assets have been fully
offset by a valuation allowance. If not utilized, the federal net operating loss and tax credit carryforwards will exp ire beg inning in year ending
August 31, 2025 and the state net operating loss will begin expiring in year ending August 31, 2017. Utilizat ion of these net operating losses
and credit carryforwards may be subject to an annual limitation due to applicable provisions of the Internal Revenue Code of 1986, as
amended, and state and local tax laws if we have experienced an "ownership change" in the past, or if an o wnership change occurs in the future,
including, for example, as a result of the shares issued in this offering aggregated with certain other sales of our stock before or after this
offering. We had total tax loss carryforwards in Taiwan as of August 31, 2009 of $5.8 million, which will begin exp iring in various amounts in
year ending August 31, 2015. In accordance with the Taiwan Inco me Tax Act amended in January 2009, net operating losses as determined by
the tax authorities would be carried forward to deduct fro m future taxable inco me for ten consecutive years. Such amend ment i s effective for us
beginning September 1, 2009, and extends the period of tax loss carryforwards.

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     Useful Life of Property, Plant and Equipment

        Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation on property, plant and equipment is
calculated using the straight-line method over the estimated useful lives of the assets. We make estimates of the u seful life of o ur property,
plant and equipment in order to determine depreciation expense to be recorded each reporting period based on similar assets p urchased in the
past and our historical experience with such similar assets, as well anticipated techno logical or market changes. The estimated useful life of our
property, plant and equipment directly impacts the timing of when our depreciation expense is recognized. There is significan t judgment
involved with estimating the useful lives of our property, p lant and equipment, and a change in the estimates of such useful lives could cause
our depreciation expense in future periods to increase significantly.

     Impairment of Long-Lived Assets

        We assess impairment of our property, plant and equip ment and intangible assets when events or changes in circu mstances indicate that
their carrying amount may not be recoverable. Circu mstances such as the discontinuation of a product or product line, a sudde n or consistent
decline in the forecast for a product, changes in technology or in the way an asset is being used, a history of negative operating cash flow, or an
adverse change in legal factors or in the business climate, among others, may trigger an impairment rev iew.

         Impairment exists if the carrying amounts of such assets exceed the estimates of undiscounted cash flows expected to be generated
fro m the use and the eventual disposal of the asset. Should impairment exist, impairment loss is recognized in the consolidat ed statements of
operations based on the excess of the carrying amount of the asset over the estimated fair value of the asset. Although our cash flow fo recasts
are based on assumptions that are consistent with our plans, there is significant judgment involved in determining the cas h flow attributable to a
long-lived asset over its estimated remain ing useful life. The use of different assumptions would increase or decrease estimated u ndiscounted
future operating cash flows and could impact the determination that an impairment exists. We have not recognized any impairment charges
during the years ended August 31, 2007, 2008, 2009 or the nine months ended May 31, 2010.

Results of Operations

        The fo llo wing table sets forth, for the periods presented, our consolidated statements of operations. In the table below and throughout
this "Management's Discussion and Analysis of Financial Condit ion and Results of Operations," the following consolidated statement of
operations data for the years ended August 31, 2007, 2008, and 2009 have been derived fro m our audited consolidated financial statements
included elsewhere in this prospectus. The unaudited consolidated statements of operations data for the nine months ended May 31, 2009 and
2010 have been derived fro m our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited
consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and, in the
opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such data.
The informat ion contained in the table below should be read in conjunction with our consolidated financial statements and not es thereto

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beginning on page F-1 of this prospectus. The historical results presented below are not necessarily indicat ive of the results that may be
expected for any future period:

                                                                              Years Ended August 31,                                     Nine Months Ended May 31,
                                                                  2007                 2008                       2009                    2009                 2010
                                                                         % of                 % of                         % of                  % of                 % of
                                                             $         revenue       $      revenue          $           revenue       $       revenue       $      revenue
                                                                                                                                                 (unaudited)
                                                                                                         (in thousands)
                               Consolidated
                                 Statement of
                                 Operations:
                               Revenues, net             $ 6,860          100.0 %$ 14,749      100.0 %$ 11,551              100.0 %$   7,010      100.0 %$ 24,275        100.0 %
                               Cost of revenues            4,484           65.4    11,681       79.2    11,019               95.4      6,536       93.2    14,230         58.6

                               Gross profit                  2,376         34.6     3,068       20.8             532          4.6        474        6.8       10,045      41.4

                               Operating expens es:
                                Research and
                                   development                   902       13.1     1,935       13.1         2,452           21.2      1,591       22.7        1,490       6.1
                                Selling, general and
                                   administrative            1,704         24.8     2,320       15.7         2,568           22.2      1,600       22.8        2,244       9.3

                                    Total operating
                                      expenses               2,606         37.9     4,255       28.8         5,020           43.4      3,191       45.5        3,734      15.4

                               Income (loss) from
                                  operations                  (230 )       (3.3 )   (1,187 )    (8.0 )      (4,488 )        (38.8 )    (2,717 )   (38.7 )      6,311      26.0
                               Other income
                                  (expens e):
                                 Loss from
                                    unconsolidated
                                    entities                      —         —           —        —                —            —           —         —          (169 )    (0.7 )
                                 Interest income
                                    (expens e), net               97        1.4         41       0.3             215          1.8        209        3.0          (21 )    (0.1 )
                                 Other income, net                —          —          37       0.2              —            —          —          —            —         —
                                 Foreign currency
                                    transaction gain
                                    (loss)                       234        3.4       295        2.0             580          5.0        424        6.0         (325 )    (1.3 )

                                    Total other
                                      income
                                      (expens e), net            331        4.8       373        2.5             795          6.8        633        9.0         (515 )    (2.1 )

                               Income (loss) before
                                  provision for income
                                  taxes                          101        1.5       (814 )    (5.5 )      (3,693 )        (32.0 )    (2,084 )   (29.7 )      5,796      23.9
                               Provision for income
                                  taxes                           —         —           —        —                —            —           —         —          271        1.1

                               Net income (loss)         $       101        1.5 $     (814 )    (5.5 ) $ (3,693 )           (32.0 ) $ (2,084 )    (29.7 ) $    5,525      22.8



Nine Months Ended May 31, 2010 Compared to Nine Months Ended May 31, 2009

     Revenues, net

       Our revenues increased by approximately 246.3% fro m $7.0 million for the nine months ended May 31, 2009 to $24.3 million for the
nine months ended May 31, 2010. The $17.3 million increase in revenues reflects a $13.7 million increase in revenues attributable to sales of
LED ch ips and a $3.3 million increase in revenues attributable to sales of LED co mponents. The increase in revenues attributable to sales of
LED ch ips was due to a 240.7% increase in the volume of LED ch ips sold and a slight increase in the blended average selling p rice of LED
chips as we introduced new, higher-priced models starting in December 2009. The increase in revenues attributable to sales of LED
components was due to a 279.7% increase in the volume of LED co mponents sold due to increased customer demand for our LED co mponents,
which was offset in part by a decrease in blended average selling price of LED co mpon ents due to continued market co mpetitio n and the
general trend of lo wer b lended average selling prices for products that have been available in the market for some time.
          The significant increase in volu me o f LED ch ips and LED co mponents sold was primarily due to increased end-user demand as a
result of increased economic act ivity in calendar year 2010, as the global economy began to recover fro m a significant financ ial and economic
downturn which began in late calendar year 2008 and which cont inued through most of calendar year 2009, and also due to our

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ability to ramp up our production capacity and produce LED chips and LED co mponents that met our customers' demand and techni cal
specifications.

         Recovery in government, consumer and corporate spending began to occur in certain countries begin ning in the summer of calendar
year 2009 and continued to gain pace in each of the quarters in calendar year 2010. We believe that we had benefited in particular, as the
improvement in economic conditions and increased business activity and growth was more pronounced in the northern Asian countries of
China, Taiwan and Korea, where a significant majority of our customers are based. We believe that the increase in government spending in
particular, was a result of significant government financial stimu lus programs in itiated by various governments worldwide. We believe that our
revenues increased in part fro m such government init iatives, particularly in China, as many of the end -users of our LED p roducts were
government led or govern ment sponsored. The number of customers that we sold our products to increased fro m 187 customers during the nine
month period ended May 31, 2009 to 305 customers during the nine month period ended May 31, 2010.

     Cost of Revenues

        Our cost of revenues increased by 117.7% fro m $6.5 million for the nine months ended May 31, 2009 to $14.2 million for the nine
months ended May 31, 2010. Cost of revenues as a percentage of revenues decreased from 93.2% in the nine months ended May 31, 2009 to
58.6% in the nine months ended May 31, 2010, p rimarily as a result of imp roved production yields and capacity utilization due to the
significant increase in the volu me of products sold.

          The $7.7 million increase in our cost of revenues was primarily due to a 180.3% increase in materials cost, a 180.6% increase in our
overhead expenses, a 37.1% increase in our depreciat ion expenses and a 119.1% increase in our direct labor costs. Such increa ses all were a
result of our continued ramp up of our business and operations and a result of the increase in our revenues from a significant in crease in the
volume of products manufactured and sold to meet increased customer demand. Depreciation expenses increased as we continued t o purchase
mach inery and equipment to expand our manufacturing capacity. Direct labor costs increased, as we had 351 employees engaged in
manufacturing activ ities as of May 31, 2010, co mpared with 159 emp loyees as of May 31, 2009.

     Gross Profit

      Our gross profit increased significantly fro m $0.5 million for the nine months ended May 31, 2009 to $10.0 million for t he nine months
ended May 31, 2010. Our g ross margin percentage increased fro m 6.8% for the nine months ended May 31, 2009 to 41.4% for t he nine months
ended May 31, 2010, primarily due to imp roved capacity utilizat ion as we operated at or near full capacity as a result of increased customer
demand for our LED chips and LED co mponents, a change in our product mix to higher margin products and improved production yi elds.

     Operating Expenses

         Research and development. Our research and development expenses decreased slightly by 6.3% fro m $1.6 million for the nine
months ended May 31, 2009 to $1.5 million for the nine months ended May 31, 2010. The decrease was mainly attributable to the complet ion
of a government sponsored research and development project, resulting in a decrease in salaries attributable to research and development
functions of $0.3 million as we reassigned certain of our research and development personnel to other functions , as well as due to decreases in
repairs and maintenance expenses of $0.1 million and engineering charges related to product design and testing of $0.1 million.

        The decrease was offset in part by an increase in materials and supplies related expenses of $0.1 million and an increase in
depreciation expenses of $0.1 million, as a result of our continued research and development efforts to improve yields and to develop improved
LED ch ips and LED

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components. Our research and development expenses as a percentage of our revenues decreased from 22.7% for the nine months en ded
May 31, 2009 to 6.1% for the nine months ended May 31, 2010. A lthough the aggregate amount spent on research and development was
moderately lower, the percentage of research and development expenses as a portion of revenues decreased significantly as rev enues increased
significantly. The number of emp loyees allocated to research and development functions decreased by seven employees.

          Selling, general and administrative. Our selling, general and ad ministrative expenses increased by 40.3% fro m $ 1.6 million for the
nine months ended May 31, 2009 to $2.2 million for the nine months ended May 31, 2010. The increase was main ly attributable to an increase
in salary related expenses of $0.2 million and an increase in professional services expenses for consultancy and market survey valuation and
legal services of $0.2 million for the nine months ended May 31, 2010, offset in part by a decrease in lease expenses of $0.1 million as a result
of the relocation of our manufacturing facilities and operations to a newly acquired building. The increase in salary related expenses was
primarily due to the hiring of additional emp loyees for sales, marketing and administrative functions to accommodate the grow th and increased
activity of our business.

     Other Income (Expense)

         Loss from unconsolidated entities. We did not record any loss from unconsolidated entities for the nine months ended May 31,
2009 as we d id not have any such entities during such time. We recorded a loss from unconsolidated entities of $0.2 million for the nine
months ended May 31, 2010, which was attributable primarily to the recognition of our portion of the net loss fro m China SemiLEDs. These
entities were in their early start-up stage and did not generate any revenues. The expense increase was main ly for ad min istrative and start-up
costs for such entities.

         Interest income (expense), net. We recorded net interest income of $0.2 million for the nine months ended May 31, 2009, as
compared to a net interest expense of $0 for the nine months ended May 31, 2010. Our interest income decreased primarily as a result of a
decline in interest rates earned on our time deposits from an annual percentage rate of 2.3% for the nine months ended May 31, 2009 to an
annual percentage rate of 0.3% for the nine months ended May 31, 2010 as a result of significant decreases in market interest rates. The
increase in interest expense was primarily due to additional long -term borrowings incurred in connection with our acquisition o f a bu ilding and
MOCVD reactors during the nine months ended May 31, 2010.

        Other income, net.      We did not record any other income or loss for the nine months ended May 31, 2009 and 2010.

        Foreign currency transaction gain (loss). We recorded a foreign currency transaction gain of $0.4 million for the nine months
ended May 31, 2009 and a foreign currency transaction loss of $0.3 million for the nine months ended May 31, 2010, p rimarily due to the
appreciation of the NT do llar against the U.S. dollar.

     Provision for Income Taxes

         Income tax expense. We did not record any inco me tax expense for the nine months ended May 31, 2009, as we recorded a loss
before inco me taxes during the period. We recognized an income tax expense of $0.3 million for the nine months ended May 31, 2010 in spite
of having available to us tax loss carryforwards and tax credits as we were subject to a 10% alternative minimu m tax under Ta iwan's AMT Act.

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Year Ended August 31, 2009 Compared to Year Ended August 31, 2008

     Revenues, net

        Our revenues decreased by 21.7% fro m $14.7 million for the year ended August 31, 2008 to $11.6 million for the year ended
August 31, 2009. The $3.2 million decrease in revenues reflects a $4.0 million decrease in revenues attributable to sales of LED chips, wh ich
was offset in part by a $1.1 million increase in revenues attributable to sales of LED co mponents. The decrease in revenues attributable to sales
of LED chips was due to a 31.7% decrease in the volume of LED ch ips sold, which was offset in part by a slight increase in blended average
selling price. The increase in revenues attributable to LED co mponents resulted from a 127.4% increase in the volu me of LED components
sold, which was offset in part by a decrease in b lended average selling price.

         The decrease in volu me of LED chips sold primarily resulted fro m a significant decline in end-user demand due to the global
economic recession which began in the fall of calendar year 2008. The decrease also resulted fro m our decision to limit sales of products to
certain customers as we were concerned with the credit risk during the financial crises. The slight increase in the blended average selling price
for our LED ch ips was a result of our introduction of new LED ch ips throughout this period which demonstrated significantly h igher efficacy
in terms of lu mens per watt.

         The volu me of LED co mponents increased as a result of the ramp up of our LED co mponent business during calendar year 2008 and
also as a result of a significant order in calendar year 2009 fro m one customer for a defined proje ct. The decrease in the blended average selling
price resulted fro m general decreases in the blended average selling price for LED co mponents as a result of increased market competition.

     Cost of Revenues

        Our cost of revenues decreased by 5.7% fro m $11.7 million for the year ended August 31, 2008 to $11.0 million for the year ended
August 31, 2009. Cost of revenues as a percentage of revenues increased from 79.2% fo r the year ended August 31, 2008 co mp ared to 95.4%
for the year ended August 31, 2009.

         The decrease in our cost of revenues was primarily due to a 15.1% decrease in materials cost and a 9.6% decrease in o verhead
expenses as a result of the decrease in the volume of LED chips sold, offset in part by the increase in the volu me of LED comp onents sold.
Direct labor costs increased slightly by 2.7%, as we continued to hire additional manufacturing staff. We had 180 employees e ngaged in
manufacturing activ ities as of August 31, 2009, co mpared with 172 emp loyees as of August 31, 2008.

     Gross Profit

       Our gross profit decreased by 82.7% fro m $3.1 million for the year ended August 31, 2008 to $0.5 million for the year ended
August 31, 2009. Our gross margin percentage decreased from 20.8% fo r the year ended August 31, 2008 to 4.6% for the year ended
August 31, 2009 due to the decline in sales volu mes of LED chips, as well as the decrease in the blended average selling prices for our LED
components. The decrease was also due to low capacity utilizat ion in 2009 primarily as a result of the relocation of our manufacturing facilities
and operations to a newly acquired build ing which relocation co mmenced in May 2009 and was completed in July 2009. In additio n, we also
experienced lo wer p roduction yields as a result of our efforts in implementing new manufacturing processes to increase the performance of our
LED ch ips.

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     Operating Expenses

         Research and development. Our research and development expenses increased by 26.7% fro m $1.9 million for the year ended
August 31, 2008 to $2.5 million for the year ended August 31, 2009. The increase was due to our participation in a government sponsored
research and development project, resulting in an increase in salaries attributable to research and development of $0.2 million, an increase in
materials and supplies used in res earch and development of $0.2 million, and an increase in the repairs and maintenance costs for research and
development related equip ment of $0.1 million. Ou r research and development expenses increased as a percentage of our total revenues from
13.1% to 21.2%, for the years ended August 31, 2008 and 2009, respectively, as a result of the continued increase in our research and
development efforts and the lower revenues generated during the year ended August 31, 2009.

         Selling, general and administrative. Our selling, general and ad ministrative expenses increased by 10.7% fro m $2.3 million for the
year ended August 31, 2008 to $2.6 million for the year ended August 31, 2009. The increase was mainly attributable to an increase in salary
related expenses of $0.3 million, an increase in our professional service expenses of $0.2 million for accounting and legal fees and expenses in
connection with a settlement of a patent infringement lawsuit, an increase in other expenses of $0.1 million, and an increase in t ravel related
expenses of $0.1 million, partly offset by a decrease in depreciation expenses of $0.3 million and a decrease in allowance for doubtful accounts
of $0.1 million.

         The increase in salary related expenses was due to our hiring of additional employees for sales, marketing and admin istrative functions
to accommodate the growth of our business. The travel related expenses increased as a result of increases in travel related e xpenses as we
continued to increase our market ing activities for our expanding business in various jurisdictions. The decrease in depreciation expenses was
primarily due to a decrease in the amount of depreciat ion expenses being allocated to selling, general and administrative exp enses because
certain production machinery and equip ment that had been temporarily id led in calendar year 2008 were put back into operation in cale ndar
year 2009, resulting in such depreciation expenses being allocated to cost of revenues.

     Other Income (Expense)

         Loss from unconsolidated entities. We did not have any unconsolidated entities in the years ended August 31, 2008 and 2009 and,
as such, did not record any income or loss from unconsolidated entities for such years.

          Interest income (expense), net. We recorded an increase in net interest income of $0.2 million fro m $0 for the year ended
August 31, 2008 to $0.2 million for the year ended August 31, 2009. Our interest income increased primarily as a result of an in crease in the
principal a mount of cash and cash equivalents in time deposits as a result of proceeds from our Series D equity financing. The increase in
interest income was offset in part by interest expense incurred with respect to our long -term borro wings.

        Other income, net. We had net other income of $0 for the year ended August 31, 2008, p rimarily related to a gain o n the sale of our
investment in a joint venture. We did not record other income or expense for the year ended August 31, 2009.

        Foreign currency transaction gain (loss). Ou r foreign currency transaction gain increased fro m $0.3 million for the year ended
August 31, 2008 to $0.6 million for the year ended August 31, 2009, p rimarily due to the appreciation of the U.S. dollar against the NT dollar.

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     Provision for Income Taxes

        Income tax expense. We did not record any inco me tax expense for the years ended August 31, 2008 and 2009 because we
recorded a net loss for both years, accompanied by a full deferred tax valuation allowance.

Year Ended August 31, 2008 Compared to Year Ended August 31, 2007

     Revenues, net

        Our revenues increased by 115.0% fro m $6.9 million for the year ended August 31, 2007 to $14.7 million for the year ended August 31,
2008. The $7.9 million increase in revenues reflects a $6.5 million increase in revenues attributable to sales of LED chips and a $1.0 million
increase in revenues attributable to sales of LED co mponents. The increase in product revenues was due to a 115.2% and 767.8% increase in
the volume of LED chips and LED co mponents sold, respectively, which was offset in part by a decrease in average selling price for both
products. The increase in the volumes of both our LED ch ips and LED co mponents being sold was a result of the increase in ou r manufacturing
capacity as we ramped up our facilities in Taiwan and as a result of an increase in the total number of our customers. The nu mber of customers
we sold to increased fro m 116 customers during the year ended August 31, 2007 to 167 customers during the year ended August 31, 2008 due
to the development and commercialization of LED ch ips and LED co mponents that met customer demand and technical specifications.

         The decreases in the average selling prices of both our LED ch ips and our LED co mponents resulted from the continued increase in
supply and competition over the period and continued improvements in technology, resulting in more cost effective and efficient products
being introduced by us and our competitors, wh ich generally results in industry players, including us, having to lower prices for existing
products and existing inventory. The pressure on blended average selling prices was also attributable to a slowing of the gro wth in various
economies that began in the fall of calendar year 2008.

     Cost of Revenues

        Our cost of revenues increased significantly, gro wing by 160.5% fro m $4.5 million for the year ended August 31, 2007 to $11.7 million
for the year ended August 31, 2008. Cost of revenues as a percentage of revenues increased from 65.4% fo r the year ended August 31, 2007
compared to 79.2% for the year ended August 31, 2008.

         The increase in our cost of revenues was primarily due to increases in all major categories of our cost of revenues, includin g a 97.4%
increase in materials cost, a 256.8% increase in depreciation e xpenses, a 158.5% increase in overhead expenses and a 223.6% increase in direct
labor costs, all as a result of the build-up of our business and purchase of mach inery and equipment and other materials to begin commercial
production of our LED chips and LED co mponents. Direct labor costs increased as we continued to hire additional manufacturing personnel.
We had 172 employees engaged in manufacturing activit ies as of August 31, 2008, co mpared with 151 employees as of August 31, 2007.

     Gross Profit

        Our gross profit increased by 29.1% fro m $2.4 million for the year ended August 31, 2007 to $3.1 million for the year ended August 31,
2008. Our g ross margin percentage decreased from 34.6% for the year ended August 31, 2007 to 20.8% for the year ended August 31, 2008 as
a result of a decrease in the blended average selling price of our LED chips and LED co mponents as well as lower equip ment ut ilization due to
significant equip ment purchases in the year ended August 31, 2008.

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     Operating Expenses

         Research and development. Our research and development expenses increased by 114.5% fro m $0.9 million fo r the year ended
August 31, 2007 to $1.9 million for the year ended August 31, 2008, main ly due to the increased number of ongoing research and development
projects for the year ended August 31, 2008 co mpared the year ended August 31, 2007, resulting in an increase in salaries attrib utable to
research and development of $0.6 million, an increase in consumption of materials and supplies of $0.2 million, engineering charges with
respect to product design and testing of $0.1 million, and an increase in the repairs and maintenance of research and development related
equipment of $0.1 million. The nu mber of employees allocated to research and development activities increased by 18 emp loyees. Our research
and development expenses as a percentage of our total revenues were 13.1% and 13.1% for the years ended August 31, 2007 an d 2008,
respectively.

         Selling, general and administrative. Our selling, general and ad ministrative expenses increased by 36.2% fro m $1.7 million for the
year ended August 31, 2007 to $2.3 million for the year ended August 31, 2008. The increase was primarily attributable to an increase in
depreciation expenses of $0.3 million primarily as a result of our idling certain manufacturing mach inery and equipment in the year ended
August 31, 2008. The increase was also due to an increase in the allowance for doubtful accounts of $0.1 million, increases in professional
services expenses of $0.1 million primarily as a result of increased legal expenses due to our having to defend aga inst certain lawsuits in the
year ended August 31, 2008 and an increase in lease expenses of $0.1 million to acco mmodate the larger staff and increased activity of our
business.

     Other Income (Expense)

         Loss from unconsolidated entities. We did not have any unconsolidated entities in the years ended August 31, 2007 and 2008 and,
as such, did not record any income or loss from unconsolidated entities for such years.

          Interest income (expense), net. We recorded a decrease in net interest inco me of $0.1 million fro m $0.1 million for the year ended
August 31, 2007 to $0 for the year ended August 31, 2008. The decrease in our net interest income for the year ended August 31, 2008 was
primarily due to lower balances of cash and cash equivalents during that period due to the expansion of our production capacity through the
purchase of machinery, equip ment and materials, and delayed customer payments, as a result of the global economic recession b eginning in the
fall of calendar year 2008, wh ich lo wered our cash balances.

        Other income, net.     We recorded other inco me, net of $0 for the years ended August 31, 2007 and 2008.

        Foreign currency transaction gain (loss). Ou r foreign currency transaction gain increased fro m $0.2 million for the year ended
August 31, 2007 to appro ximately $0.3 million for the year ended August 31, 2008, primarily due to the appreciation of the U.S. dollar against
the NT dollar.

     Provision for Income Taxes

        Income tax expense. We did not record any inco me tax expense for the year ended August 31, 2007 because we applied our loss
carryforwards to offset our tax liability. We d id not record any income tax expense or benefit for the year ended August 31, 2008 because we
recorded a net loss for that year, accompanied by a full deferred tax valuation allowance.

Unaudi ted Quarterly Results of Operations

        The fo llo wing table sets forth our consolidated statement of operations data for each of the seven quart ers ended May 31, 2010. This
unaudited quarterly information has been prepared on a basis

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consistent with our audited consolidated financial statements and, in the opinion of management, reflects all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of the informat ion for the periods presented. You should read the table in
conjunction with our consolidated financial statements and notes thereto included elsewhere in this prospectus. The results o f operations for
historical periods are not necessarily indicative of the results of operations for a fu ll year or any future period.

                                                                                                    Three months ended
                                                              November 30,     February 28,     May 31,       August 31,    November 30,      February 28,      Ma
                                                                  2008             2009          2009            2009           2009              2010           20
                                                                                                        (in thousands)
                                    Revenues, net               $    2,505      $     1,970 $      2,535     $   4,541       $     6,705       $     7,684 $ 9
                                    Cost of revenues                 2,034            1,492        3,010         4,483             4,869             4,515   4

                                    Gross profit (loss)                471              478         (475 )           58            1,836             3,169        5
                                    Operating expenses:
                                     Research and
                                       development                     522              433          636            861              571               337
                                     Selling, general and
                                       administrative                  476              537          587            968              659               666

                                         Total operating
                                           expenses                    998              970        1,223         1,829             1,230             1,003        1

                                    Income (loss) fro m
                                      operations                      (527 )           (492 )     (1,698 )       (1,771 )            606             2,166        3
                                    Other inco me
                                      (expense):
                                     Loss from
                                       unconsolidated
                                       entities                         —                —            —              —                —                (10 )
                                     Interest income
                                       (expense), net                  103               90           16              6                (5 )              (6 )
                                     Foreign currency
                                       transaction gain
                                       (loss)                          747              704       (1,027 )          156             (211 )            (141 )

                                         Total other
                                           income
                                           (expense), net              850              794       (1,011 )          162             (216 )            (157 )

                                    Income (loss) before
                                      provision for
                                      income taxes                     323              302       (2,709 )       (1,609 )            390             2,009        3
                                    Provision for inco me
                                      taxes                             —                —            —              —                27                93

                                    Net inco me (loss)          $      323      $       302 $ (2,709 ) $         (1,609 )    $       363       $     1,916 $ 3


Quarterly Results

         Co mparing our revenues on a quarterly basis, we experienced a moderate decrease in revenu es from $2.5 million in the three months
ended November 30, 2008 to $2.0 million in the three months ended February 28, 2009, primarily as a result of a 51.1% decrease in the volume
of LED chips sold, offset in part by an increase in the blended average selling price of our LED chips. The decrease in volu me of LED chips
sold was primarily due to a decline in end-user demand as a result of the global economic downturn, which began in late calendar year 2008
and continued through calendar year 2009; however, the impact was offset in part by an increase in the blended average selling price as we
offered higher-priced models of LED chips developed for specialized LED applications allowing us to maintain a gross profit of $0.5 million in
the three months ended February 28, 2009.

        Our revenues increased in each of the quarters from May 31, 2009 to May 31, 2010. Revenue increased fro m $2.5 million in the three
months ended May 31, 2009 to $9.9 million in the three months ended May 31, 2010, as the global economy continued to recover fro m the
economic recession. Despite the growth in our revenues, we suffered fro m lower capacity utilizat ion, primarily attributable t o the relocation of
our Taiwan manufacturing facilities and operations to a newly acquired build ing

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beginning in May 2009 which we co mpleted in July 2009, and as a result of declines in production yields as we imp lemented new
manufacturing processes to enhance the brightness of our LED chips. As a result, we recorded a gross loss of $0.5 million in the three months
ended May 31, 2009, and a gross profit of $0.1 million in the three months ended August 31, 2009.

         As a result of imp roving economic conditions resulting in increased demand, while we have continued to optimize our manufactu ring
process and expand capacity in Taiwan and have also begun to ramp up utilization of our equip ment, be ginning in March 2010 we have been
operating our manufacturing facilit ies at or near fu ll capacity. To address continuing improvement in market conditions, we int end to expand
our production in Taiwan by fu rther imp roving utilization of our equip ment and b y adding additional MOCVD reactors, equipment and tools.
In addition, through our introduction of new and higher-priced models of LED chips beginning in December 2009, the blended average selling
price of our LED chips increased over the three months ended February 28, 2010. Th rough a combination of continued efforts to expand our
production capacity, improve yields, and shift our product mix to h igher marg in products, our gross margin percentage increas ed fro m 27.4% in
the three months ended November 30, 2009 to 41.2% in the three months ended February 28, 2010. Our gross margin percentage for the three
months ended May 31, 2010, which was 51.0%, was higher due to increased sales during the quarter of a high performance LED chip with a
particularly high average selling price, which contributed to an overall shift in mix for the quarter toward higher margin products. Margin also
improved during the three months ended May 31, 2010 due to the sale during the quarter of approximately $0.3 million of scrap material which
had no associated cost of revenues.

          Our research and development expense was higher for the three months ended August 31, 2009 as we co mmenced pilot run production
for LED chips that we designed and developed for a research and development project sponsored by the Taiwan Min istry of Economic Affairs.
This phase of the project required high cost materials, such as sapphire and an increased amount of consumables and supplies, as well as cost
involved in imp roving product yield to meet the technical specificat ion in the project. Our research and development expenses then decreased
for the three months ended November 30, 2009, primarily because the final phase of this project involved the testing and packaging process,
which was not as complex and as costly as the earlier phase, resulting in a decrease in our research and development expenses. Following the
complet ion of the project in November 2009, our research and development expenses decreased further for the three months ende d
February 28, 2010, primarily because we reassigned certain of our research and development personnel to other functions, resulting in a
decrease in salaries attributable to research and development functions and a decrease in other research and development expe n ses. In addition,
in the three months ended February 28, 2010, we received the grant fro m the Taiwan M inistry of Economic Affairs for the project, which was
recorded as an offset against our research and development expenses. Beginning March 2010, we increas ed our research and development
efforts to support our expanded production capacity.

         Our selling, general and administrative expense was higher in the three months ended August 31, 2009 primarily as a result of legal
fees and expenses in connection with a settlement of a patent infringement lawsuit, record ing of an allowance for doubtful accounts, and higher
sales and market ing efforts. Ou r selling, general and administrative expense was higher in the three months ended May 31, 2010 primarily due
to professional services for market survey valuation and legal services and recording of an allowance for doubtful accounts.

         Based upon all of the foregoing, we believe that quarterly revenues and operating results are likely to vary sign ificantly in the future
and that period-to-period comparisons of our results of operations are not necessarily mean ingful and should not be relied upon as indications
of future performance. There can be no assurance that our revenues or gross margins will increase or be sustained in future periods or that we
will be profitable in any future period.

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Li qui di ty and Capital Resources

          Since our inception through May 31, 2010, we have substantially satisfied our capital and liquidity needs from $70.3 million of net
proceeds fro m private sales of our convertible preferred stock and, to a lesser extent, fro m cash flow fro m operat ions, bank borrowings and
credit lines. As of August 31, 2007, 2008 and 2009 and May 31, 2010, we had cash and cash equivalents of $2.0 million, $11.1 million,
$13.7 million and $14.2 million, respectively, wh ich were predominately denominated in U.S. dollars and consisted of bank deposits and time
deposits with a number o f co mmercial banks in Taiwan.

          During the years ended August 31, 2007, 2008 and 2009 and the nine months ended May 31, 2010, we utilized operating lines of
credit with certain banks to fulfill our short-term financing needs. The outstanding balances of these lines of credit were $0.6 million,
$0.8 million, $0 and $0.3 million as of August 31, 2007, 2008 and 2009 and May 31, 2010, respectively. These lines of credit h ad maturity
dates of six months fro m the date of draw down and interest rates ranged from 1.3% to 4.0% during these periods. Unused amoun ts on these
lines of cred it were $0.6 million, $2.0 million, $3.3 million and $5.5 million as of August 31, 2007, 2008, 2009 and May 31, 2010,
respectively.

         As of August 31, 2007, 2008 and 2009 and May 31, 2010, our long-term debt, wh ich include long-term notes, totaled $0, $0.8 million,
$3.4 million and $5.0 million, respectively. The long-term notes carry fixed interest rates ranging from 1.7% to 1.8%, are payable in monthly
installments, and are secured by our property, plant and equipment. The first note payable requires monthly payments of princ ipal and interest
in the amount of $12,000 over the 15-year term of the note with final payment to occur in May 2024. The second note payable requires
monthly payments of principal and interest in the amount of $27,000 over the five -year term o f the note with final payment to occur in August
2014. The th ird note payable requires monthly payments of principal and interest in the amount of $26,000 over the five -year term of the note
with final payment to occur in March 2015. The notes do not have prepayment penalties or balloon payments upon maturity.

          Fro m inception to May 31, 2010, our capital expenditures amounted to $35.3 million, p rimarily consisting of equipment for the
manufacture of LED chips and LED co mponents, including MOCVD reactors and ancillary manufacturing equipment, among others. As of
August 31, 2007, 2008 and 2009 and May 31, 2010, we had outstanding purchase commit ments for major property, plant and equipment of $0,
$3.4 million, $11.2 million and $3.6 million, respectively. Fro m time to time, we may also consider the acquisition of, or evaluate investments
in, certain products and businesses complementary to our business. Any such acquisition or investment may require additional capital.

         We have incurred significant losses since inception, including net losses of $0.8 million and $3.7 million during the years ended
August 31, 2008 and 2009. As a result, our consolidated financial statements for the year ended August 31, 2009 include a footnote disclosure
indicating that there is substantial doubt about our ability to continue as a going concern. For the nine months ended May 31, 2010, we
generated net income o f $5.5 million. We believe that the net proceeds fro m this offering, if successful, together with our existing liquid ity
sources and anticipated funds fro m operations, will satisfy our cash requirements for at least the next 12 months. However, if we are not able to
continue to generate positive cash flows fro m operations, we may need to consider alternative financing source s and seek additional funds
through public or private equity financings or fro m other sources to support our working capital requirements or for other pu rposes. There can
be no assurance that additional financing will be availab le to us or that, if availab le, such financing will be available on terms favorable to us.

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     Cash Flow

        The following summary of our cash flows for the periods indicated has been derived fro m our consolidated financial statements , which
are included elsewhere in this prospectus:

                                                                Years Ended August 31,                       Nine Months Ended May 31,
                                                         2007            2008                2009              2009             2010
                                                                                                                    (unaudited)
                                                                                       (in thousands)
               Net cash provided by (used in)
                 operating activities                $     (3,025 )   $        2,399     $      (454 )   $        (931 )   $       6,108
               Net cash used in investing
                 activities                                (7,703 )        (2,882 )           (8,896 )          (5,271 )         (22,643 )
               Net cash provided by financing
                 activities                               11,013               9,821          12,576            11,134           16,637

          Cash Flows Provided By (Used In) Operating Activities

         Net cash provided by operating activities for the nine months ended May 31, 2010 o f $6.1 million was primarily attrib utable to: (i) our
net income of $5.5 million and aggregate non-cash charges of $3.8 million, which primarily included depreciation and amort ization expenses of
$3.4 million; (ii) offset in part by net cash used in operating assets and liabilit ies during the period of $3.2 million, wh ich includ ed a large
increase in net accounts receivable and inventory of $3.4 million and $1.5 million, respectively, as a result of h igher sales and customer
demand over the period, offset in part by an increase in accounts payable of $1.2 million.

         Net cash used in operating activities for the year ended August 31, 2009 of $0.5 million was primarily attributable to: (i) a net loss of
$3.7 million and net cash used in operating assets and liabilit ies during the period of $1.4 million, wh ich primarily included an increase in
inventory of $1.6 million, offset in part by a slight increase in accounts payable of $0.2 million; (ii) offset in part by aggregate non-cash
charges of $4.6 million, which primarily consisted of depreciation and amortizat ion expenses of $4.6 million.

         Net cash provided by operating activities for the year ended August 31, 2008 of $2.4 million was primarily attributable to: (i) a net loss
of $0.8 million and net cash used in operating assets and liabilities during the period of $0.9 million, which primarily included an increase in
accounts receivable of $2.0 million as a result of increased sales and longer credit terms extended to our customers to increase our market
share, an increase in inventory of $0.6 million to support sales growth, offset in part by an increase in accrued liabilit ies and accounts payable
of $1.0 million and $0.7 million, respectively; (ii) offset in part by aggregate non-cash charges of $4.2 million, wh ich primarily consisted of
depreciation and amort ization expenses of $4.1 million.

          Net cash used in operating activities for the year ended August 31, 2007 of $3.0 million was primarily attributable to: (i) net income of
$0.1 million and aggregate non-cash charges of $2.0 million, which consisted of depreciation and amortizat ion expenses of $2.0 million;
(ii) offset in part by a significant increase in net cash used in operating assets and liabilit ies of $5.2 million, wh ich primarily included an
increase in inventory of $4.2 million as a result of a build-up in inventories to support our anticipated sales growth and an increase in accounts
receivable of $1.7 million as a result of increased sales, offset in part by an increase in accru ed liabilit ies and accounts payable of $0.4 million
and $0.4 million, respectively.

          Cash Flows Used in Investing Activities

        Net cash used in investing activities for the nine months ended May 31, 2010 was $22.6 million, consisting primarily o f our having
made investments in China SemiLEDs and two other joint venture entities in the aggregate amount of $15.5 million, purchases of property,
plant and equipment of $6.1 million to support the expansion of our manufacturing capacity in Taiwan and p ayment for the acquisition of
SBDI, net of cash acquired of $0.9 million.

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        Net cash used in investing activities for the year ended August 31, 2009 was $8.9 million, consisting primarily of the p urchase of
buildings and purchase of machinery and equip ment.

          Net cash used in investing activities for the year ended August 31, 2008 was $2.9 million, consisting primarily of the p urchase of
production machinery and equipment in an amount of $2.5 million, the pay ment for application costs and registration fees of patents that we
developed in the amount of $0.4 million and the purchase of investments in non-marketable equity in an unaffiliated company, which was
accounted for under the cost method in the amount of $0.4 million, offset in part by proceeds of $0.5 million fro m the sale of o ur investment in
a joint venture entity.

        Net cash used in investing activities for the year ended August 31, 2007 was $7.7 million, consisting primarily of the p urchase of
production machinery and equipment in the amount of $7.1 million, and the purchase of our investment in a joint venture entity of $0.4 million.

          Cash Flows Provided by Financing Activities

         Net cash provided by financing activit ies for the nine months ended May 31, 2010 was $16.6 million, consisting primarily of proceeds
fro m the issuance of Series E convertible preferred stock of $15.0 million, proceeds fro m the incurrence of long-term debt of $1.5 million and
proceeds fro m a draw down on a line of cred it of $1.4 million, offset in part by payments on a line of credit of $1.1 million and payments of
long-term debt of $0.3 million.

         Net cash provided by financing activit ies for the year ended August 31, 2009 was $12.6 million, consisting primarily o f proceeds from
the issuance of Series D convertible preferred stock of $10.0 million, proceeds from the incurrence of long-term debt of $3.4 million and
proceeds fro m a draw down on a line of cred it of $1.0 million, offset in part by payment on a line of credit of $1.7 million.

         Net cash provided by financing activit ies for the year ended August 31, 2008 was $9.8 million, consisting primarily of proceeds fro m
the issuance of Series C convertible preferred stock of $9.7 million and proceeds from a draw down on a line of credit of $1.4 million, offset in
part by payments on a line of cred it of $1.3 million.

         Net cash provided by financing activit ies for the year ended August 31, 2007 was $11.0 million, consisting primarily o f proceeds from
the issuance of Series C convertible preferred stock of $10.4 million and proceeds fro m a draw down on a line of cred it of $0.6 million.

     Contractual Obligations

       The following table sets forth our contractual obligations as of August 31, 2009:

                                                                                    Payment Due In
                                                    Less than          1-3                 3-5            More than
                                                     1 year           years               years            5 years            Total
                                                                                     (in thousands)
              Operating lease agreements        $           456   $      1,066       $      1,225     $         1,789     $      4,536
              Long-term debt, including
                current portion                             420               864             868               1,263            3,415
              Purchase obligations for
                property, plant and
                equipment                               11,200                 —               —                      —         11,200

              Total contractual obligations     $       12,076    $      1,930       $      2,093     $         3,052     $     19,151


        As of May 31, 2010, our total purchase obligations for property, plant and equipment were $3.6 million. In addition, d uring the nine
months ended May 31, 2010, we incurred additional long-term debt of $1.5 million and drew down another $1.4 million fro m a line of cred it,
and also made regular payments on our long-term debt and line of credit of $1.5 million. In addition, we entered into two

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noncancellable operating leases as a result of our acquisition of SBDI. Such operating leases require lease payments of less than $0.1 million
during the years ending August 31, 2010 and 2011. We also made payments of less than $0.1 million on our other operating leases during the
nine months ended May 31, 2010.

Capi tal Expenditures

         We had capital expenditures of $7.1 million, $2.5 million, $8.8 million and $6.1 million for the years ended August 31, 2007, 2008
and 2009 and the nine months ended May 31, 2010, respectively. Our cap ital expenditures consisted primarily of purchases of mach inery and
equipment, construction in progress, prepayments for our manufacturing facilities and prepayments for e quip ment purchases. We expect to
continue investing in capital expenditures in the future as we expand our business operations and prudently invest in the coo rdinated expansion
of our production capacity.

Off-Bal ance Sheet Arrangements

         During the years ended August 31, 2007, 2008, 2009 and the nine months ended May 31, 2010, we did not engage in any off-balance
sheet arrangements. We do not have any interest in entities referred to as variable interest entities.

Quantitati ve and Qualitati ve Disclosures about Market Risk

        We are exposed to market risks in the ordinary course of our business. These risks include primarily:

     Interest Rate Risk

        Our exposure to interest rate risk primarily relates to interest expense incurred by our short-term and long-term borrowings, as well as
interest income generated by excess cash invested in demand deposits and liquid investments with orig inal maturit ies of three months or less.
Such interest-earning instruments carry a degree of interest rate risk. We have not used any derivative financial instruments to manage our
interest rate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates.
However, our future interest expense may increase due to changes in market interest rates.

     Foreign Exchange Risk

        A portion of our revenues and expenses are currently transacted by our non -U.S. subsidiaries in currencies other than their functional
currencies, main ly in U.S. dollars and to a lesser extent in Japanese Yen. Ou r exposure to foreign exchange risk primarily relates to currency
gains and losses from the time we enter into and settle our sales and purchase transactions. Accordingly, we are subject to foreign currency
related risks and incur foreign currency transaction losses and gains from time to time, which are recognized in our consolida ted statements of
operations. If there are significant changes in the exchange rates between NT dollar, U.S. dollar, Japanese Yen a nd other curren cies, our
consolidated financial results could be harmed. To date, we have not used any derivative financial instruments to hedge again st the effect of
exchange rate fluctuations. As a result, our consolidated financial condition or results of operations may be adversely affected due to changes in
foreign exchange rates.

Recentl y Issued Accounting Pronouncements

          In June 2009, the Financial Accounting Standards Board, or FASB, issued a new accounting standard that requires a qualitative
approach to identifying a controlling financial interest in a variab le interest entity, or VIE, and requires ongoing assessme nt of whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. The new accounting standard is effe ctive for us as of

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September 1, 2010. The adoption of this standard is not expected to have a significant impact on our consolidated financial statements.

          In October 2009, the FASB issued a new accounting standard that changes the accounting for arrangements with multiple deliverables.
The new standard requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its de liverables based on
their relative selling prices. In October 2009, the FASB also issued a new accounting standard that changes revenue recognition for tangible
products containing software and hardware elements. The new standard requires revenue arrangements that contain tangible prod ucts with
software elements that are essential to the functionality of the products t o be scoped out of the existing software revenue recognition accounting
guidance and accounted for under these new accounting standards. Both standards will be effective for us in the first quarter of the year ending
August 31, 2011 and early adoption is permitted. The adoption of this standard is not expected to have a significant impact on o ur consolidated
financial statements.

         In January 2010, the FASB issued an amendment to an accounting standard which requires new disclosures for fair val ue
measurements and provides clarificat ion for existing fair value disclosure requirements. The amend ment will require an entity t o disclose
separately the amounts of significant transfers in and out of Levels I and II fair value measurements and to describe the reasons for the
transfers; and to disclose information about purchases, sales, issuances and settlements separately in the reconciliation for fair value
measurements using significant unobservable inputs, or Level III inputs. This amendment clarifies existing disclosure requirements for the
level of disaggregation used for classes of assets and liabilit ies measured at fair value and requires disclosures about the valuation techniques
and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level II and Level III inputs. The
adoption of this amendment will not impact our consolidated financial statements.

         In April 2010, the FASB issued an accounting standard update which provides guidance on the criteria to be fo llo wed in recognizing
revenue under the milestone method. The milestone method of recognition allo ws a vendor who is involved with the provision of deliverab les
to recognize the full amount of a milestone payment upon achievement, if, at the inception of the revenue arrangement, the milestone is
determined to be substantive as defined in the standard. The update is effective for us in the first quarter of the year ending August 31, 2011
and early adoption is permitted. The adoption of this standard is not expected to have a significant impact on our consolidated financial
statements.

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                                                                   INDUS TRY

         Light emitting diodes, or LEDs, are solid-state electronic co mponents that emit light in a variety of brightness levels and colors. LEDs
are increasingly used in a growing number of applications ranging fro m consumer electronics, such as backlighting for handsets, laptops and
televisions, to general lighting, such as outdoor and indoor lighting.

         Backlighting applications have been the largest end-market for LEDs to date. However, LEDs have recently begun penetrating the
general lighting market. The general lighting market includes applications for architectural, rep lacement lamp, retail d ispla y, commercial,
industrial, outdoor area and residential uses. According to the Freedonia Group, an independent market research firm, the gen eral lighting
market, including sales of the light fixtures and bulbs, is estimated to be approximately $100 billion.

         While LED lighting accounts for a small portion of the general lighting market, industry analysts anticipate that LED adoptio n will
increase. LED lighting consists of the LED co mponents, optics, heat sinks, power supplies and fixtures. An LED co mponent is an LED chip
that has been packaged. According to Strategies Unlimited, an independent market research firm, revenues attributable to LED components for
general lighting applications were $665 million in 2009 and are estimated to grow to $4.3 billion by 2014, wh ich represents a compound annual
growth rate of 45%.

Key Dri vers for LED Adopti on i n the General Lighti ng Market

         We believe the following factors have driven and will continue to drive the adoption of LEDs in the general lighting mar ket.

     Increased LED performance

        Fro m 2005 to 2009, the highest commercially availab le lu mens per watt for cool wh ite LED co mponents increased from 47 to 132,
according to Strategies Unlimited. Lighting performance is typically measured by lumen efficacy, or lu mens per watt. A lu men is a measure of
the amount of usable light generated by a light source, and lumen efficacy measures the lumens generated per unit of energy input. As a result
of the increases in lu men efficacy, LED lighting offers energy saving advantages compared to some traditional lighting techno logies such as
incandescent and halogen and is becoming increasingly co mpetitive with other tradit ional lighting technologies such as linear and compact
fluorescent and high-intensity discharge, or HID. In addition to lu men efficacy, another key benchmark for lighting performance is total
lifespan, measured by the total number of hours of light provided within a defined color spectrum. Longer lifespan reduces replacemen t and
maintenance costs.

     Reduced LED Cost

        Currently, LEDs typically have low operational costs, but higher upfront costs than traditional lighting technologies. However, LED
costs are decreasing due to:

     •
            advances in epitaxial, process and packaging technologies resulting in greater lu men efficacy per LED device;

     •
            improved LED manufacturing processes and equipment, such as processing larger wafer sizes, equip ment capable of larger batche s
            and cleaner deposition, process consistency, automation and use of cleaner chemicals, all of which result in higher ch ip yields per
            wafer; and

     •
            larger scale LED production, resulting in higher equip ment utilizat ion and lower material costs that lead to lower overall
            production costs.

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     Growing Awareness of the Advantages of LEDs

         LEDs have several advantages over traditional lighting technologies:

     •
             Environmental Advantages and Lower Energy Consumption. Global concerns about rising energy costs and the environment are
             driving demand for mo re environ mentally-friendly and energy efficient lighting. LEDs have high energy efficiency and are
             approximately 5 t imes as efficient as incandescent lamps. In addition , fluorescent lamps and some HID lamps contain toxic
             mercury wh ich can escape if the bulb is broken, posing environmental disposal problems.

     •
             Longer Lifetime Reducing Maintenance Costs. LEDs are designed to provide up to 50,000 hours of light output. According to a
             March 2010 report prepared for the U.S. Depart ment of Energy, tradit ional incandescent provides approximately 1,000 hours of
             light output, linear fluorescent provides approximately 25,000 hours of light output and HID provides approximately 20,000 ho urs
             of light output. LEDs' longer lifespan is expected to drive adoption by reducing the significant replacement cost for traditional
             incandescent bulbs and fluorescent lamps when the cost of changing a light includes expensive labor costs, such a s in the case of
             street lights and public arena lights.

     •
             Durability and Reliability. Since LEDs are solid-state components, they are more resistant to damage fro m external shock than
             more fragile tradit ional lighting technologies such as incandescent and fluorescent. LEDs also generally operate effect ively at a
             wide range of temperatures with consistent efficiency. In contrast, fluorescent lamps begin to lose efficiency when operating
             substantially above or below 70 degrees Fahrenheit (21 degrees Celsius), limit ing their use for outdoor lighting.

     •
             High Color Quality, Contrast and Image Quality. LEDs can emit light of an intended color without the use of expensive and
             energy inefficient color filters that some tradit ional lighting technologies require. LED lighting also offers saturated colors and can
             more easily focus light than incandescent and fluorescent which provide non -directional lighting. For examp le, LED lighting is
             often used for spotlighting purposes in architectural lighting, public aren as and entertainment lighting.

     •
             Form Factor and Design Flexibility. LED products can be deployed in many different sizes and configurations to meet specific
             customer needs. LEDs allow design flexib ility in color changing, dimming and providing s maller form factors.

     Government Policies Discouraging the Use o f Some Traditional Lighting Technologies

        Po licymaking by various countries is expected to play an increasingly important role in d riv ing LED adoption for general ligh ting.
Various governments are setting energy efficiency benchmarks or enacting restrictions on the sale and use of inefficient lightin g. For examp le,
the European Union adopted a regulation to gradually phase out inefficient lamps, such as incandescent bulbs and conventional halogen bulbs,
fro m the EU market starting in September 2009 and aims to co mplete implementing the measures by September 2012. The United St ates
adopted the Energy Independence and Security Act of 2007, which applies stringent constraints on the sale of inc andescent lights beginning in
2012. In addition to policies discouraging the use of incandescent lighting, some governments are also considering policies t hat discourage the
use of fluorescent bulbs due to their to xic mercury content.

     Government Investments and Support for LEDs

       In addit ion to government policies discouraging the use of certain traditional lighting technologies, various governments are directly
investing in or encouraging LED lighting projects. For

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example, China, which represented 46.1% of the world wide LED general lighting revenues in 2009, according to Strategie s Un limited, has
policies that encourage government entities and provinces to purchase and install LED lights. In March 2009, the PRC Min istry of Science and
Technology introduced an LED street lighting plan that calls for 1 million LED street lights to be installed in 21 cities nationwide before the
end of 2011. Korea has also instituted programs to promote the use of LED-based lighting products and to establish LED-sector companies.

Certain Challenges for Wi des pread LED Adoption in General Lighting

          Increased penetration of the general lighting market by LEDs faces certain key challenges. To increase penetration of the gen eral
lighting market, LED chip and package manufacturers must continue to reduce the total cost of ownership of LED lightin g. Tot al cost of
ownership primarily includes: (i) the upfront cost of the LED device, which includes the LED chip costs and the cost of packaging the LED
chips; (ii) the lifet ime energy cost; and (iii) the frequency of replacement, which is in part a function of the product lifespan. Although energy
cost and lifespan tend to favor LED lighting over some trad itional lighting technologies, currently the upfront cost of an LE D d evice is
significantly higher than that of traditional lighting technologies. To reduce total cost of ownership, LED manufacturers must improve several
product characteristics:

     Lower LED Chip Manufacturing Cost

        Similar to the semiconductor manufacturing process, LED manufacturers can increase the number of usable chips per wafer by
migrat ing to larger wafer sizes. The total area of a 4" wafer is 4 t imes that of a 2" wafer, therefore the number of chips av ailable for a 4" wafer
is substantially higher than that for a 2" wafer. The larger nu mber of available chips per wafer theoretically can result in lower costs per chip.
However, the price for sapphire wafers increases disproportionately to the increase in surface area, such that the sapphire cost per chip
increases. In addition, the necessary equipment to process larger wafers are limited in supply and are costly.

       Migrat ing to larger sapphire wafer sizes poses not only the above cost challenges, but also significant technology challenges. For
example, processing sapphire wafers typically results in "bowing", or wafer deformation caused by the different thermal prope rties of sapphire
and GaN. This bowing effect is even more pronounced on larger size wa fers resulting in lower chip y ields.

     Reduce Packaging Cost

       Packaging LED chips constitutes a significant portion of the total cost of the finished LED co mponent. Packag ing costs primar ily
include the lead frame, bonding processes, phosphor and optical lenses. To lower cost, LED chip manufacturers and packagers must work
together to develop imp roved package designs, thereby reducing the quantity of materials used and simplify ing packaging opera tions.

     Maximize Efficacy

        By improving efficacy, LED manufacturers reduce the energy required to produce an equivalent amount of light, thereby reducing
energy consumption and operating cost over the life of the product. Higher efficacy LED ch ips also allow for s maller devices thereby
increasing the variety of lighting applications suitable for LEDs. In order to increase efficacy, chip makers can optimize the design, ma terials
and manufacturing processes for LED ch ips. When chips are packaged to create components, there is an additional impact on e fficacy fro m the
phosphor mix used in the packaging process to alter the color of light emitted. For examp le, the phosphor mix necessary to ac hieve "warm
white" color characteristics usually results in an LED co mponent with lower efficacy when co mpared to a "cool white" LED co mponent, thus
requiring a higher efficacy chip to co mpensate for conversion losses.

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Therefore, improvements in phosphors used in packaging LED co mponents also has the potential to improve efficacy.

     Extend Lifespan

       When energized, an LED chip generates heat which, if not properly managed, reduces the chip's usable lifespan and degr ades the chip's
performance by changing its color characteristic over time. To manage heat build -up, costly heat sinks must be added, further increasing costs.

LED Industry Manufacturing—Chi p Manufacturing and Component Producti on

        The LED industry is frequently divided into "upstream" chip makers and "downstream" chip packagers.

     Chip Makers

        The "upstream" production process for LED chips begins with a substrate such as sapphire, silicon carbide, o r silicon. A majo rity of the
LED ch ips today are manufactured using sapphire as the base substrate material. The substrate is used for the growth of very t hin layers of
crystals across the substrate's surface, a process known as epitaxial growth. Following epitaxial growth, the wafers are processed to create
structures with electrodes which are polished and then finally cut to create fin ished individual chips. These chips are then tested to determine
their precise color, and are sorted into consistent groupings, or bins, for final packaging either by the chip manufacturer or by a third-party chip
packager.

     Chip Packagers

        Chip packagers are involved in the "downstream" manufacturing process where ind ividual chips are typically attached to a lead frame,
various substrates or a printed circu it board, wh ich strengthens the LED and acts as a heat sink for heat removal. The packag ing process also
involves wire bonding. Next, an optical lens is added, which may contain a phosphor to optimize and adjust the color of the lig ht emitted fro m
the packaged LED device. Fo r white LED production, the light emission leaving the surface of the chip can be converted by a c ombination of
red, green and blue phosphors to generate white light, or a blue LED can be coated with yello w phosphor that converts the blue light emission
into light that appears white to the human eye.

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                                                                      B USINESS

Company Overview

         We develop, manufacture and sell LED chips and LED components that we believe are among the ind ustry leaders when measured on
both a lumens per watt and cost per lumen basis. Our products are used primarily for general lighting applicat ions, including street lights and
commercial, industrial and residential lighting.

         We sell b lue, green and ultravio let (UV) LED ch ips under our MvpLED brand, primarily to customers in China, Taiwan and other
parts of Asia. We sell our LED chips to packaging customers or to distributors, who in turn sell to packagers. In addit ion, we package a portion
of our LED chips into LED co mponents, which we sell to d istributors and end -customers in selected markets.

        Our operations include both LED chip and LED co mponent manufacturing. We grow our epitaxy materials on sapphire by applying
our patented and proprietary process technology based on GaN and related co mpounds. We then process these materials to create individual
chips. We also package a portion of these chips to create LED co mponents.

         We have developed advanced capabilit ies and proprietary know-how in sapphire reclamation, GaN epitaxial gro wth, copper alloy
technology, nanoscale surface engineering and vertical LED structure technology, which enables us to produce LED chips that w hen packaged
are capable of provid ing greater than 100 lu mens per watt. We believe these capabilities and know-how also allow us to reduce our
manufacturing costs and our dependence on sapphire, a costly raw material used in the production of sapphire -based LEDs. In addition, we
believe these technologies will help facilitate our migration to larger wafer sizes.

         Our manufacturing operations are located in Taiwan. We intend to expand our manufacturing capabilit ies in Taiwan to meet the
expected demand for our products. In addition, we have estab lished China SemiLEDs, a jo int venture in Foshan, China, which will
manufacture and sell LED chips in China. Ch ina SemiLEDs has begun constructing manufacturing facilit ies which we expect t o be operational
after January 2011. We hold a 49% ownership interest in China SemiLEDs and currently have the right to nominate a majority of the seats on
its board of directors, which, together with its management, is responsible for its operations. See " —Our Joint Ventures—Chin a SemiLEDs."

Our Strengths

         We believe that the following strengths will enable us to compete effectively and to capitalize on the expected growth of the LED
general lighting market.

     Patented Vertical Copper Alloy Chip Structure

        We have developed advanced capabilit ies and proprietary know -how in sapphire reclamat ion, GaN ep itaxial growth, co pper alloy
technology, nanoscale surface engineering and vertical LED structure technology. In particular, our patented copper alloy dev ice structure has
no attached substrate, in contrast to other LED devices which retain sapphire or other attached substrates. We believe our st ructure produces
less heat and is more effect ive in removing heat than sapphire-based LED devices. A mong the common metals, copper has the second lowest
thermal and electrical resistivity after silver. These properties combined with our proprietary p rocess technologies generate less heat and allow
for increased heat removal co mpared to sapphire-based LED devices, thereby increasing the efficacy and lifespan of our LED chips.

          In addit ion, we manufacture our LED chips using a vertical structure with a h igh reflectiv ity metal mirror to reflect lig ht. Our structure
extracts light vertically through a thick N-GaN layer (g reater than 3  m), allowing us to perform nanoscale surface engineering that we believe
results in higher

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efficacy. In contrast, we believe a lateral sapphire-based structure loses light output through the retained sapphire substrate and limits the ability
to perform surface engineering due to the thinner top P-GaN layer (less than 0.5  m), resulting in lower overall light output. See " —Our
Technology."

     Competitive Manufacturing Cost Structure

       Our proprietary manufacturing technologies and know-how enable us to maintain a co mpetitive manufacturing cost structure. We have
developed advanced capabilities and proprietary know-how in sapphire reclamation, which is a key part o f our manufacturing cost savings as
we recycle and re-use sapphire wafers mult iple t imes. Recycling reduces our dependence on sapphire, one of the most expens ive raw materials
in sapphire-based LED manufacturing. There have been supply shortages and price fluctuations of sapphire in the past, and we believe thes e
shortages and fluctuations may occur in the future. In addit ion, we believe our technology will fac ilitate our transition to larger wafer sizes
because our ability to remove the sapphire reduces the effects of wafer bowing. We believe this will allo w us to improve our chip yield as we
move to larger wafer sizes, reducing our per unit production costs.

     Efficient Operating and Business Model

        Our operating and business model is focused on price competit iveness through our low-cost operating structure. We believe locating
our facilities in Taiwan p rovides us with operating cost advantages including reduced labor, rental, material, construction, and borrowing costs
as well as favorable tax treat ment. When operational, we anticipate that China SemiLEDs' manufacturing facilities in Foshan, China will
provide it with similar benefits.

     LED Research a nd Development Expertise

       Our research and development team, including members of our senior management, has significant experience in the LED and
semiconductor industries. Trung Doan, our chief executive officer, has over 25 years of experience in the semiconductor and LED industries
and has held various senior management positions at major international corporations. Dr. Anh Chuong Tran, our chief operating officer, has
over 15 years experience in the optoelectronics and LED industries. Prio r to working with us, Dr. Tran worked as a senior technical staff
member at Emco re and was one of the key members that developed the first commercial M OCVD reactor for In GaN LEDs. Our researc h and
development team has increased the performance of our h ighest performing LED chips when packaged, fro m appro ximately 60 lu mens
per watt in 2006 to over 140 lu mens per watt in 2010, using vertical LED technology.

Our Strategy

        Our goal is to be the leading developer and manufacturer of LED chips and LED co mponents that meet the performance requirements
demanded by LED lighting customers, wh ile providing the best value proposition on both a lumens per watt and cost per lu men basis. Key
elements of our strategy include the following:

     Remain on the Forefro nt of Innovation of LED Chip and Component Technologies

       We intend to continue to innovate in product design and process technologies through our research and development efforts. In an effort
to accelerate our innovation, we also evaluate opportunities to acquire new technologies. Our continued innovation is intended to ensure that
our products continue to perform at industry-leading efficacies for a variety of end-customer applicat ions, in particular fo r general lighting
applications. For example, we are developing LED ch ips that will be capable of delivering over 150 lu mens per watt when packaged. In
addition, we are developing

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technologies that we believe will enable us to perform wafer level packag ing to streamline the packaging process for our LED components and
reduce form factor and costs.

     Reduce Cost Through Technology and Manufacturing Improvements

        We plan to increase our investment in research and development to improve our manufacturing processes and increase our produc tion
yields to reduce the per-unit cost of our products. In particular, we seek to reduce defects by customizing our equip ment and by automating and
improving our processes.

        We are also developing new technologies to enable us to produce LED ch ips using larger size wafers. We are currently producin g
chips based on 2.5" wafers, have a test line for 4" wafers and plan to begin commercial manufacturing of LED ch ips using 4" wafers in 2011.
We also expect to commence research and development of 6" wafer technology in 2011. In addition, when the manufacturing lines become
operational at Ch ina SemiLEDs, we expect it will produce LED chips using 4" wafers.

     Drive Our Growth in China and Grow Our Net Income Through Chi na SemiLE Ds

       We intend to continue our growth in the China market, which represented 46.1% of the LED lighting revenues in 2009 according to
Strategies Unlimited. We plan to do this through China SemiLEDs, which we expect will have operational manufacturing capabilities after
January 2011. Because China SemiLEDs is located in China and 51% o wned by Chinese compa nies, including packaging co mpanies and
PRC-state owned enterprises, we believe it will be well-positioned to access demand for LED ch ips by government entities, such as cities and
provinces that use LEDs for street lighting and signage applications. Altho ugh we do not consolidate the financial results of China SemiLEDs,
we record 49% of the income or loss of China SemiLEDs in our inco me statement under inco me (loss) fro m unconsolidated entitie s.

         We also intend to continue to focus on our exis ting business in China through Taiwan SemiLEDs and acquire new customers and
increase market share. Given the size of the China general lighting market and the relat ively low penetration rate of that ma rket by LEDs to
date, we believe that Taiwan SemiLEDs' and China SemiLEDs' future operations can leverage each other's strengths to grow sales in China for
both entities. We believe that we will also benefit fro m our strategic relat ionships with the other shareholders of China Sem iLEDs.

     Expand our Manufacturing Capacity in Taiwan

       As a result of improving economic conditions resulting in increased demand, while we have continued to optimize our manufactu ring
process and expand capacity in Taiwan and have also begun to ramp up utilization of our equip ment, beginning in March 2010 we have been
operating our manufacturing facilit ies at or near fu ll capacity. To address continuing improvement in market conditions, we int end to expand
our production in Taiwan by fu rther imp roving utilization of our equip ment and by adding additional MOCVD reactors, equipment and tool.

     Target Markets and Customers Where Our Technologies Create a Competitive Advantage

       We will continue to focus our development and sales efforts in markets where customers place a p remiu m on innovation, product
performance and cost. In particular, in the near-term we will focus on outdoor street lighting and new installations in government projects in
China and other countries where we believe the environmental benefits and lower tot al cost of ownership will play a larger role in the
purchasing decision.

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         We also believe our LED chip and packaging technologies and expertise will enable us to further expand our presence in backlighting,
med ical and automotive applications. For examp le, our LED chips can be used in backlighting applications to reduce the numb er of LED ch ips
required for such applications.

     Government Incentive Funding for LE D Development, Facility Expansion and Market Expansion

       We have been awarded a mix of grants fro m the Taiwan M inistry of Econo mics Affairs as well as the Hsinchu Science Park to sup port
our research and development efforts in Taiwan. Ch ina SemiLEDs has also been awarded a mix of grants fro m the Nanhai, Foshan local
government in Guangdong province and from the China M inistry of Science and Technology to support manufacturing in Chin a. We intend to
apply for additional government grants and incentives in Taiwan and China, and, based on our discussions with govern ment officials in China,
we believe that additional grants may be available to China SemiLEDs for the purchase of additional LED manufacturing equip me nt.

     Pursue Strategic Relationships and Acquisitions

       We plan to pursue strategic relat ionships, such as joint ventures, and acquisitions that expand our business. We plan to identify, execute
and integrate acquisitions and enter into joint ventures to build scale, acquire intellectual property and enter into new geo graphic and product
markets to enhance our reach and diversify our sales. We plan to evaluate strategic acquisition opportunities that we believe will enable o ur
products to continue to perform at industry-leading efficacies, wh ile also providing an attractive return-on-investment. When evaluating
potential acquisition targets, we will consider factors such as market position, growth and earnings prospects and ease of in tegration.

Our Technol ogy

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

         We then remove the sapphire wafer fro m the N-GaN layer through laser radiation, and the sapphire wafer is removed from the
production line and recycled. The remain ing device structure—consisting of the P-Contact Metal Layer on top of the epitaxial layers —is then
ready for further p rocessing. To comp lete our LED device structure, we then deposit and define additional metal layers on top of the N-GaN
layers to achieve low resistance contact with the N-GaN layers. These additional metal layers are collectively called the N-Contact Metal
Layer.

         After this process, our final LED chip structure is: (i) copper alloy metal layer; (ii) P-GaN; (iii) M QWs; (iv) N-GaN; and (v) N-contact
Metal layer. Ou r final LED chip structure is diced into ind ividual LED ch ips and then separated, tested and binned according to customer
specifications, such as wavelength (color) and brightness. When a constant electrical current flo ws fro m our P -Contact Metal Layer to our
N-Contact Metal Layer, light is generated in the MQWs and emitted through the surface of the N-GaN.

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         Our LED chip production process is outlined in the following diagram:




         A significant difference in our production process from conventional sapphire -based LED chip p roduction is our ability to recycle and
re-use the sapphire wafer mu ltiple times. By reusing sapphire wafers, we reduce our dependence on sapphire and our wafer mat erials cost. In
addition, the difference in the thermal expansion properties of the sapphire wafer and the doped GaN layers results in a "bowed" wafer due to
the high temperatures used in the growth process. When the wafer "bows" significantly, the chip yield decreases substantially. Larger wafer
sizes exacerbate the "bowing" effect. Our ability to remove the sapphire allows us to reduce wafer bowing during the patterning process, which
we believe will enable us to more easily migrate to larger wafer sizes.

         We believe that most conventional GaN LEDs grown on sapphire wafers are based on a lateral design. However, we believe a supe rior
combination of both light output efficiency and heat removal is realized in a vert ical LED chip design with a copper alloy metal structure.
Among pure metals at roo m temperature, copper has the second highest electrical and thermal conductivity, after silver. Heat is generated by
passing electrical current through resistive materials. In our vert ical LED chips, electrical current flo ws fro m the low resistance copper alloy
base to the epitaxial layers also with lo w electrical resistance, thereby resulting in lo wer heat generation. Furthermo re, du e to the high thermal
conductivity of the copper alloy layer, the heat generated in our device is effect ively conducted to the packaging materials, where it can be
dissipated through a heat sink. The resulting lower operating temperature helps to maintain LED device performance and reliab ility.

          Once light is generated in the MQWs of our LED chips, the light is emitted out of the N-GaN surface. Our ch ip uses a high reflectivity
metal between the copper alloy layer and the P-GaN surface that acts as a mirror to reflect light more effect ively out of the internal structure of
the device. In contrast, in conventional sapphire-based LED devices, leakage can occur when light escapes through the sides of the substrate or
is converted to heat due to the higher internal resistance of the device. Furthermore, by optimizin g the internal structure and surface of our
epitaxial layers through our proprietary nanosurface engineering, a greater portion of light is extracted after generation within t he device,
whereas conventional sapphire-based LED devices have a semi-transparent contact layer (STCL) which absorbs and reduces the amount of
light that can be emitted vertically fro m the chip.

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        The diagrams belo w display our vertical design chip and a sapphire-based lateral design chip and the related electrical current paths
found on these two LED ch ip structures:




Our Products

          LED Chips

         We sell our LED chips under our MvpLED brand name. Ou r LED chips are used primarily fo r applications in the general lighting
market, including street lights and commercial, industrial and residential lighting. They are also used in other markets such as UV applicat ions,
backlighting, medical and automotive applications.

        We produce a wide variety of LED ch ips, currently ranging fro m chip sizes of 1520  m by 1520  m to 380  m by 380  m. The
majority of our chips are capable of providing greater than 100 lu mens per watt when packaged. We sell b lue, green and UV LED chips.

        The chart below lists our LED chip products by size, design, model number and color:

                       Size                                                       Design            Model Number            Color
               1520  m × 1520  m                                                              SL-V-B60A C              Blue
                                                                                                SL-V-U60A CD             UV

               1200  m × 1200  m                                                              SL-V-B45A K              Blue


               1200  m × 1200  m                                                              SL-V-B45A C              Blue
                                                                                                SL-V-B45A C2             Blue
                                                                                                SL-V-U45A CD             UV

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                       Size                                                      Design            Model Number            Color
              1070  m × 1070  m                                                              SL-V-B40A K              Blue


              1070  m × 1070  m                                                              SL-V-B40A C              Blue
                                                                                               SL-V-B40A C2             Blue
                                                                                               SL-V-U40A C              UV
                                                                                               SL-V-G40A C              Green
              860  m × 860  m                                                                SL-V-B35A D              Blue


              720  m × 720  m                                                                SL-V-B28A D              Blue

              610  m × 610  m                                                                SL-V-B24A D              Blue

              400  m × 400  m                                                                SL-V-B15AA               Blue
                                                                                               SL-V-G15AA               Green
              380  m × 380  m                                                                SL-V-U15AA               UV


     LED Components

      We package a portion of our LED chips for sale to distributors and end -customers in selected markets such as China, Taiwan, Russia
and Malaysia. We sell a majority of our LED co mponents through our wholly owned subsidiary, Helios Crew. The majority of our LED
components use our 1200  m by 1200  m and 1070  m by 1070  m chips, most of wh ich are co mbined with phosphors to produce
components with various color temperatures.

        Our LED co mponents include different form factors co mprised of lead frame and silicon packaged devices. We apply our proprietary
design for the packaging process, such as wafer level phosphor coating, to optimize the optical and thermal propert ies of the LED co mponent.
Our packag ing process includes chip bonding, wire bonding, phosphor coating, encapsulation, scribing, dicing and testing.

Raw Materials

          We use the following raw materials in our LED chip manufacturing: metal organics, sapphire, copper alloy, gold slugs, sodium gold
sulfite, alu minu m g ranules and electrolytic nickel, among others. We use the following assembly materials in the production of our LED
component products: gold bond wire, lead frame, phosphor, silicon zener-diode, silicon rubber and silver paste, among others. We also
purchase industrial and general chemicals and gases for the manufacture of both our LED chips and LED co mponents.

Quality Management

        We have imp lemented quality control measures at each stage of our operations, including obtaining s upplier qualificat ions, inspecting
incoming raw materials and random testing during our production process, to ensure consistent product yield and reliability. We test all new
processes and new products prior to commercial production. We also inspect all final products prior to delivery to our

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customers to ensure that production standards are met. If we encounter defects, we conduct an analysis in an effort to identify t he cause of the
defect and take appropriate corrective and preventative measures.

        Our manufacturing fabs are located in Hsinchu Science Park and Sinwu, Taiwan and are cert ified in co mp liance with ISO9001:2008.
Our fabs are subject to periodic inspection by the relevant governmental authorities for safety, environ mental and other regu latory compliance.
Upon complet ion of construction of China SemiLEDs' Foshan manufacturing facility, it will apply for ISO9001 certificat ion.

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

Sales and Marketing

        We market and sell our p roducts through our direct sales force and through distributors to cus tomers in Asia, North America and
Europe. We primarily sell our LED ch ips to packagers and distributors. Our packag ing customers package our LED ch ips and sell the packaged
product to distributors or end-customers such as lighting fixture manufacturers. Our d istributors resell our LED chips either to p ackagers or to
end-customers. We sell our LED co mponents to distributors and end -customers in selected markets.

        Our direct sales force is based in Taiwan. We assign our sales personnel to different geographical regions so that our sales personnel
can keep abreast of trends in specific markets. We are seeking to expand our sales coverage in Asia as we grow our business in China, Korea
and Japan. In addition, we may enter into strategic relat ionships with co mpanies in Taiwan, Ch ina, Korea and Japan who may h ave
complementary technologies or products to generate demand for our LED products. For examp le, we have entered into a jo int ven ture in
Malaysia for strategic reasons, including market intelligence and channel development.

         Our sales cycles vary depending on whether a sale is made directly to a packager or d istributor and whether the sale is for o ur LED
chips or LED co mponents. The sales cycle begins with the sales team leveraging existing relationships, industry contacts and customer or
distributor inquiries. Our sales team then assesses and priorit izes the sales opportunity. The sales team then provides appro priate product
samples and follo w-up support for qualification and testing. The sales team coordinates with our production department to determine
production capacity and a delivery schedule. Over the course of the sales process, the sales team provides ongoing customer s upport and seeks
to leverage the relationship for fo llow-on opportunities. For customers gained through distributors, the sales cycle begins with the initial
contact by the distributor and ends with subsequent product delivery through the distributor. We provide ongoing customer sup port to the
packagers or end-customers that purchase products fro m our distributors.

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

Customers

          We sell our products to direct customers and LED ch ip distributors, which represented 45.2% and 54.8%, respectively, of our revenues
for the fiscal year ended August 31, 2009 and 54.5% and 45.5%, respectively, of our net product revenues for the nine months ended May 31,
2010. During the

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fiscal year ended August 31, 2009 and the nine months ended May 31, 2010, we sold our LED chips and LED co mponents to 227 customers
and 305 customers, respectively.

         For the year ended August 31, 2009, sales to one of our distributors, Shenzhen Noah Opto -electronics Co., Ltd., or Shenzhen Noah,
accounted for 32.2% of our total revenues. For the year ended August 31, 2008, sales to Lu mens Semiconductor Lighting, Shen zhen Noah and
Intematix Corporat ion, or Intematix, accounted for 22.3%, 21.8% and 10.2%, respectively, of our total revenues. For the year ended August 31,
2007, sales to Shenzhen Noah, Do minant Semiconductors Sdn Bhd and Intematix accounted for 24.9%, 10.4% and 10.0%, respectively, of our
total revenues. For the years ended August 31, 2007, 2008 and 2009 and the nine months ended May 31, 2010, our top ten customers for each
of those periods accounted for 77.7%, 73.0%, 57.3% and 63.8%, respectively, of our total revenues for each of those periods.

         Our revenues were concentrated in certain countries in Asia, in part icular, China and Ta iwan. Our revenues from customers located in
China (including Hong Kong) and Taiwan represented 69.3%, 65.4%, 79.0%, 76.3% and 82.9%, respectively, of our revenues for th e years
ended August 31, 2007, 2008 and 2009 and for the nine months ended May 31, 2009 and 2010, respectively. We expect that our revenues will
continue to be substantially derived fro m these countries for the foreseeable future.

Intellectual Property

         Our ability to co mpete successfully depends upon our ability to protect our proprietary technologies and other confidential
informat ion. We rely, and expect to continue to rely, on a co mbination of confidentiality and license agreements with our emp loyees, licensees
and third parties with whom we have relat ionships, and trademark, copyright, patent and trade secret protection laws, to protect our intellectual
property, including our proprietary technologies and trade secrets.

          We have 31 patents issued and 43 patents pending with the United States Patent and Trademark Office, and also have 43 patents
issued and 86 patents pending before patent and trademark offices outside the U.S. covering various aspects of our core techn ologies. Of these
74 issued patents and 129 pending patents, 57 are issued design patents and 10 are pending design patents. However, we believe that factors
such as the technological and innovative abilities of our personnel, the success of our ongoing product development efforts a nd our efforts to
maintain trade secret protection are more important than patents in maintaining our co mpetitive position. We pursue the registration of certain
of our trademarks in the Un ited States, Taiwan and China and have been granted trademarks with respect to "SemiLEDs" in the U nited States
and "MvpLED" in Taiwan.

         Our industry is characterized by frequent intellectual property lit igation involving patents, trade secrets, copyrights, mask designs,
among others. Fro m t ime to time, third parties may allege that our products infringe on their intellectual property rights. See "Risk
Factors—Risks Related to Our Business —Intellectual property claims against us or our customers could subject us to significant costs and
materially damage our business and reputation."

Research and Development

         We focus our research and development efforts on our design methodology and process technology for our LED products. We also
focus on improving our production yields and increasing wafer sizes to lower our production costs. Our research and developme nt team works
closely with our manufacturing team.

        We conduct our research and development activities at our Hsinchu manufacturing facility. We expect that China SemiLEDs will also
conduct research and development in its Foshan manufacturing facilit ies, when operational, and will also focus on reducing manufacturing
costs and designing and developing new LED devices and processes.

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Competiti on

         We believe that our advanced technology helps us to compete in the innovative, intensely competitive and rap idly changing mar ket of
LED design and manufacturing. To succeed, however, we must continue to manufacture products that meet the demanding requirements of
high efficacies at low costs. We do not account for a significant percentage of the total market volu me today, and we face significant
competition fro m other mo re established providers of similar products as well as fro m potential new entrants into our markets.

         We co mpete with many LED ch ip manufacturers and, to a lesser extent, LED packaging manufacturers. With respect to our LED ch ips
and LED co mponents, we primarily co mpete with Citizen Electronics Co., Ltd., Cree, Inc., Epistar Corporation, Everlight Electronics Co., Ltd.,
Nich ia Corporation, Ph ilips (Lu mileds), Siemens (Osram) and Showa Denko. We have a nu mber of co mpetitors that compete directly with us
and are much larger than us, including, among others, Cree, Inc., Ep istar Corporat ion, Nichia Corporat ion, Philips (Lu mileds), and Siemens
(Osram). Several substantially larger co mpanies compete against us with a relat ively small segment of their overall business. In addition,
several large and well-capitalized semiconductor companies, such as Micron Technology, Inc., Samsung Electronics Co., Ltd., Sharp Ltd. and
Taiwan Semiconductor Manufacturing Co. have recently announced their plans to enter into the LED chip and lighting market. We are also
aware of a nu mber of well-funded private co mpanies that are developing competing products. We will also compete with nu merous smaller
companies entering the market, some of who m may receive significant government incentives and subsidies pursuant to governmen t programs
designed to encourage the use of LED lighting and to establish LED-sector companies. We believe that we generally co mpete favorably within
the marketplace. However, some of our existing and potential competitors possess significant advantages, including longer ope rating histories,
greater financial, technical, managerial, marketing, d istribution and other resources, more long -standing and established relationships with our
existing and potential customers, greater name recognition, larger customer bases and greater government ince ntives and support.

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

     •
            consistently producing high-quality LED ch ips with high efficacy;

     •
            balancing lu men output generation with provid ing low lu men cost;

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

     •
            possessing sufficient M OCVD reactor capacity to meet customer demands.

         Although we face significant competit ion, we believe that our proprietary technologie s and business practices allow us to compete
effectively on all of the above factors.

Environmental Regulation

          In our research and development and manufacturing processes, we use a variety of hazardous materials and industrial chemicals . In
each of the jurisdictions in wh ich we operate, we are subject to a variety of laws and regulations governing the storage, hand ling, emission,
exposure to, discharge and disposal of these materials or otherwise relating to the protection of the environment. Environ mental laws and
regulations are comp lex and subject to constant change, with a tendency to become more stringent over time. Failu re to comp ly with any new
or existing laws, whether intentional or inadvertent, could subject us to fines, penalties and other material liabilities to the government or third
parties, injunctions requiring the suspension of operations, redemption costs or other remed ies, and the need for additional capit al equip ment or
other process requirements, any of which could have a material adverse effect on our business and reputation.

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Empl oyees

         As of May 31, 2010, we had 413 emp loyees, including 351 in manufacturing and engineering, 20 in research and development, 14 in
sales and market ing and 28 in general ad ministration. All of our employees are based in Taiwan. None of our emp loyees is repr esented by a
labor union. We consider our employee relations to be good. We believe that our future success will depend on our continued ability to attract,
hire and retain qualified personnel.

Facilities

          We have manufacturing facilities and offices in Hsinchu, Taiwan that occupy approximately 39,000 square feet. We o wn the portion
of the building that houses our manufacturing facilities and offices, but lease the land fro m the Science Park Administration in Hsinchu. We
also lease a total of appro ximately 54,000 square feet of manufacturing facilit ies in Sinwu, Taoyuan County, Taiwan. The leases in Hsinchu
and Taoyuan terminate in December 2020 and November 2016, respectively. We do not expect that the termination of these leases upon their
expirat ion will have a material impact on our business. We believe these facilit ies are adequate to meet our current and anticipate d
manufacturing needs for the foreseeable future. We also believe that additional space would be available on commercially reas onable terms to
facilitate any future expansion plans.

        Manufacturing facilities for Ch ina SemiLEDs are under construction. Upon completion, China SemiLEDs' manufacturing facility in
Foshan City, Guangdong Province, China, is expected to occupy approximately 225,000 square feet of leased space. The right to occupy and
use these facilit ies terminates in February 2060.

Legal Proceedings

         Due to the co mplex technology required to compete successfully in the LED industry, participants in our industry are often e ngaged in
significant intellectual property licensing arrangements, negotiations, disputes and litigation. For example, we are d irectly o r indirectly
involved in the following legal proceedings:

     Nichia

      In 2007, Nichia Corporation, or Nichia, brought patent infringement lawsuits against Seoul Semiconductor Co., Ltd., or Seoul
Semiconductor, in Korea and against Japan Seoul Semiconductor Co., Ltd., a subsidiary of Seoul Semiconductor, in Japan. Seoul
Semiconductor is one of our customers.

         In May 2007, Nichia filed a lawsuit with the Osaka District Court in Osaka, Japan against Japan Seoul Semiconductor Co., Ltd.,
claiming patent infringement. Nichia Corporat ion asserted that our LED ch ips infringed two of Nichia's patents in Japan. Wh ile we were not a
named party in this lawsuit, in August 2007 we intervened as an independent party and filed an action for declaratory judgmen t with the Osaka
District Court against Nichia. On March 3, 2009, we and Nichia entered into a settlement before the Osaka District Court and we subsequently
withdrew fro m the case. As a result of the disposition of the lawsuit, it is possible for Nichia to file a new lawsuit on the two Nichia patents
originally at issue.

         In October 2007, Nichia filed a patent infringement lawsuit with the Seoul Central District Court in Seoul, Korea, against Seoul
Semiconductor, asserting that our LED chips infringed one of Nichia's patents in Korea. While we were not a named party in th is lawsuit, in
January 2008, we intervened as a supplementary party and filed briefs with the Seoul Central District Court against Nichia's position. Seoul
Semiconductor filed an invalidation action with the Korean Intellectual Property Office, which concluded that Nichia's patent was invalid.
Nich ia appealed fro m the invalidation decision to the Patent Court. The Seoul Central District Court then ruled in favor of S eoul

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Semiconductor. Nichia appealed fro m the judgment of the District Court to the Seoul High Court. While the appeals were pendin g, Nich ia and
Seoul Semiconductor entered into a world-wide cross-license agreement. In January 2009, Nichia withdrew the appeal in the patent
infringement lawsuit and Seoul Semiconductor withdrew the invalidation action, and as a result the invalidty finding by the t rial court was
vacated.

     Rothschild

        In August 2009, Gertrude F. Neu mark Rothschild filed a co mplaint with the Intellectual Property Court in Taiwan against us an d seven
other companies, asserting that the production process of our products infringed her patent in Taiwan. M r. Trung T. Doan, our chief executive
officer, was named a co-defendant. In the complaint, Ms. Rothschild seeks monetary damages amounting to NT33.0 million ($1.0 million) and
an injunction against future infringement. The co mp laint alleges that we and Mr. Doan are jointly and severally liable for the amount of the
damages sought. On November 17, 2009, Ms. Rothschild withdrew her co mplaint against six of the other companies in th is case, leav ing us
and one other company as named defendants. On June 30, 2010, the Intellectual Property Court dis missed Ms. Rothschild's comp laint and her
motion for provisional enfo rcement against us. Ms. Rothschild has appealed the decision. We intend to continue to defend this suit vigorously.
However, because the ultimate outcome of the matter is uncertain, the amount of possible loss, if any, is not estimable.

     Bluestone

        In May 2010, Bluestone Innovations Texas LLC, or Bluestone, filed a co mp laint with the Un ited States District Court for the Eastern
District of Texas against us, Siemens (Osram) and other LED suppliers. Bluestone alleges infringement of one of its patents in the United
States and seeks injunctive relief and monetary damages. Although we have not yet been formally served, we believe that we h a ve meritorious
defenses to the infringement allegations and intend to defend this lawsuit vigorously. However, there can be no assurance that we will be
successful in our defense and, even if we are successful, we may incur substantial legal fees and other costs in defending th e lawsuit.

        In addit ion, fro m time to time we may be named in various claims arising in the ord inary course of our business.

Our Joi nt Ventures

         We have grown our business in part through strategic alliances and acquisitions, and intend to continue to grow our operations by
participating in jo int ventures, undertaking acquisitions or establishing other strategic alliances with third parties in the LED an d LED-related
industries. We have entered into three joint ventures, SILQ, SS Optoelectronics and China SemiLEDs. SILQ and SS Optoelectronics are still in
an early develop ment stage and none of SILQ, SS Optoelectronics or China SemiLEDs have had any material operations to date.

        In September 2009, we established SILQ, a joint venture enterprise in Malaysia to design, manufacture and sell lighting fixtures and
systems. We hold a 50% interest in SILQ. The other 50% is held by a Malaysian company. SILQ co mmenced co mmercial operations in June
2010.

        In June 2010, we formed SS Optoelectronics in Taiwan with one of our customers to facilitate the sale of our LED chips to this
customer. We hold a 49% interest in SS Optoelectronics.

     China SemiLE Ds

       Through equity investments, we formed China SemiLEDs, a foreign -invested joint stock company, in Foshan, Guangdong Province,
China, in January 2010. Ch ina SemiLEDs has five other shareholders, including Beijing Aieryidi Investment Co., Ltd., Foshan Nationstar

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Optoelectronics Co., Ltd., Zhejiang Shenghui Lighting Co., Ltd., Foshan Nanhai High-tech Industry Investment Co., Ltd. and a packaging
company which is a state-owned enterprise. Foshan Nationstar Optoelectronics Co., Ltd. and Zhejiang Shenghui Lighting Co., Ltd. are
packaging companies. Foshan Nanhai High-tech Industry Investment Co., Ltd. is a PRC state-owned enterprise. Beijing Aieryidi
Investment Co., Ltd., is a PRC investment co mpany owned by individuals. We paid $14.7 million in cash for our 49% o wnership interest in
China SemiLEDs.

         We established China SemiLEDs to continue our growth in China and grow our net inco me. We expect Ch ina SemiLEDs'
manufacturing facilities in Foshan, China to be operational after January 2011. Ch ina SemiLEDs will manufacture substantially the same LED
chips as those made and sold by Taiwan SemiLEDs. We do not consolidate China SemiLEDs in our consolidated financial statement s but
instead record 49% of the inco me or loss from the jo int venture in our consolidated statements of operations as income (loss) from
unconsolidated entities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations —China SemiLEDs."

         Early in the growth and commercialization stage of China SemiLEDs, our sales and marketing staff will be actively in volved in the
build-up of the business at China SemiLEDs. However, we expect China SemiLEDs will h ire and train sa les and marketing pro fessionals who
will be dedicated to China SemiLEDs' business, products and customers. Furthermore, as with the sales and marketing functions , although we
expect that our research and development emp loyees and staff may have an active role in China SemiLEDs' early stages, we expect China
SemiLEDs will hire and train research and development personnel independent of our staff, wh ile continuing to maintain close collaboration
across teams in an effort to realize synergies. Our sales and marketing and research and development teams will not receive compensation fro m
China SemiLEDs.

     Sales by China SemiLEDs and Taiwan SemiLEDs

       We will continue to sell LED chips and LED co mponents in China. We have granted licenses with respect to certain of our paten ts to
China SemiLEDs so that it can manufacture and sell LED chips in China. When China SemiLEDs is operational, both we and China
SemiLEDs will make sales to customers in Ch ina. Ho wever, since China SemiLEDs will produce substantially the same LED chips a s those
made by Taiwan SemiLEDs, we and China SemiLEDs may u ltimately co mpete for the same pool of existing or new customers, in pa rticu lar if
demand for LED products decreases or does not increase. However, China SemiLEDs may not use the patents we have licensed to t hem in
connection with any sales outside of China. See " —Intellectual Property Cross -Licensing Arrangements" and "Risk Factors—Risks Related to
Our Investment in Ch ina SemiLEDs —Ch ina SemiLEDs may potentially co mp lete with us for customers in China."

          Ho wever, we have agreed with the other shareholders of China SemiLEDs that we will not manufacture LED wafers o r chips in China
either directly or indirect ly, such as through original equip ment manufacturing or outsourcing. We have also agreed to not in vest in any other
company that manufactures LED wafers or ch ips in Ch ina or allow any third party to wh ich we tran sfer or license our technologies to apply
those technologies in the manufacturing of LED ep itaxial wafers or chips in Ch ina.

     Management of China SemiLEDs

        China SemiLEDs is required to have a general manager, who is appointed by the board of directors. The general manager, together with
the deputy general manager and other senior management personnel, has responsibility for the day -to-day operations of China SemiLEDs.
Decisions regarding sales and operations are addressed initially by the general manager. The general manager must also imp lement board
resolutions and report to the board. The board has the right to oversee the general manager's work and dismiss the general ma nager with or
without cause.

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     Board of Directors of China SemiLEDs

        China SemiLEDs' board of directors consists of nine directors. Although we only hold 49% of the shareholding in Chin a SemiLEDs, we
are entitled under China SemiLEDs' articles of association to nominate five of the nine d irectors on its board of directors, which nominations
are then subject to shareholder approval. Our nomination right will terminate automatically if Ch ina SemiLEDs is listed on any stock exchange.
Furthermore, if we hold less than 41% of the total number o f outstanding shares of China SemiLEDs the number of directors we have the right
to nominate will be proportionately adjusted downward. Our chief executive officer Trung T. Doan and our chief operating officer Dr. Anh
Chuong Tran will serve as chairman and vice chairman, respectively, of China SemiLEDs. Mr. Doan and Dr. Tran will not receive any
compensation from China SemiLEDs.

          Directors have fiduciary and diligence duties to China SemiLEDs, including, among others, to not use the advantages provided by
their positions to pursue business opportunities that belong to China SemiLEDs or to en gage in the same business as China SemiLEDs either
for their own account or for the account of any other person without the approval of the shareholders. In addition, a d irecto r that has a
connected relationship with any enterprise that is the subject of a resolution at a board meet ing may not vote on the matter, either directly or by
proxy. As such, in the event that any matters involving us or our relat ionship with China SemiLEDs are b rought before the boa rd of directors of
China SemiLEDs, our directors would be required to recuse themselves and such board decisions would be made by the remain ing directors
that are not affiliated with us. See "Risk Factors —Risks Related to Our Investment in China SemiLEDs —We do not own a majority of the
shares of China SemiLEDs and if there are significant disagreements with the other shareholders of China SemiLEDs or if Chin a SemiLEDs'
management takes actions that are detrimental to us, our financial condition, results of operations, business and prospects may be materially
and adversely affected."

        In addit ion, Ch ina SemiLEDs is also required to have a board of supervisors that examines the company's finances and monitors the
conduct of the directors or senior managers, among other things. The board of superv isors consists of six supervisors. Two of the supervisors
must be worker representatives and four must be shareholder representatives. Of the four shareholder representatives, we have the right to
nominate two.

     Preemptive Rights, Rights of First Refusal and Protective Rights

       If Ch ina SemiLEDs proposes to issue additional shares, each of its shareholders has a preemptive right to subscribe for all o r part of the
additional shares proposed to be issued in proportion to its then shareholding ratio in the co mpany. If any shareholder declines to exercise any
portion of its preemptive right, the other shareholders are entitled to purchase the shares declined by such shareholder. In addition, we and the
other shareholders have rights of first refusal if any other shareholder wishes to transfer or sell its shares.

          We also have a number of protective rights under China SemiLEDs' articles of association. For examp le, as long as we hold at least
25% of the outstanding shares of China SemiLEDs, our prior consent is required before China SemiLEDs may issue bonds or otherwise incur
debt (including guaranteeing any debt or other liability) in excess of RM B2,000,000 (appro ximately $239,000) in the aggregate over any
12-month period. In addit ion, special resolutions requiring the approval of shareholders holding two -thirds of the outstanding shares must be
adopted before China SemiLEDs can (i) increase or reduce its registered capital, (ii) merge, split, dissolve or change its form, (iii) amend its
articles of association, or (iv) take any other action that PRC laws and regulations require be decided by special resolutions.

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     Intellectual Property Cross-Licensing Arrangements

       We have entered into a patent assignment and license agreement, a patent cross -license agreement and a trademark cross -license
agreement with China SemiLEDs. The following summary is qualified by reference to the intellectual property agreements and ot her
agreements between us and China SemiLEDs that we will file with the SEC as exhibits t o the registration statement, of which t his prospectus
forms a part.

         Under the patent assignment and license agreement, as amended, we agreed to assign 13 patents to China SemiLEDs. In return China
SemiLEDs agreed to pay us a one-time pay ment of $600,000 by December 2010 and agreed to grant us a royalty -free, transferable and
exclusive (with respect to third parties other than China SemiLEDs) license to use the patents globally except in manufacturing LED ep itaxial
wafers and chips in China. China SemiLEDs agreed to not assign the patents to any third party without our written consent. We have agreed to
indemn ify China SemiLEDs fro m any damages arising out of any intellectual property infringement claims or proceedings with re spect to any
products manufactured by China SemiLEDs. The term of the agreement is 10 years.

         Under the patent cross-license agreement, we agreed to grant royalty-free, exclusive (with respect to third parties other than us) and
non-transferable licenses to China SemiLEDs to use 47 of our patents, and patents that we may acquire in the future, for the manufacture of
LED ep itaxial wafers or chips within China. Any patents acquired by China SemiLEDs will be licensed to us for use in manufact uring or
selling LED chips or packages globally. China SemiLEDs has agreed to not transfer or sublicense any of the licenses without our consent and
to indemnify us for any damages arising out of or in connection with any defective products manufactured by it. We may termin ate this
agreement if the directors nominated by us to the board of China SemiLEDs no longer constitute a majority of its board for re asons other than
because China SemiLEDS is listed on a stock exchange, we transfer our shares in Ch ina SemiLEDs, or we decline to exercise our preemptive
rights with respect to new issuances of shares of China SemiLEDs.

         Under the trademark cross-license agreement, we agreed to grant China SemiLEDs an exclusive (with respect to third parties other
than us) royalty-free license to use our "SemiLEDs" trademark within China, subject to certain conditions. In return, Ch ina SemiLEDs agreed
to grant a royalty-free and exclusive (with respect to third parties other than China SemiLEDs) license to us to use globally, except in Ch ina,
any trademark acquired by it. China SemiLEDs may not transfer or sublicense our SemiLEDs trademark, use our SemiLEDs trademar k as part
of the name for or trademark owned by any company owned or affiliated with Ch ina SemiLEDs, use any trademarks, na mes, lo gos or design
patents similar to or incorporating our "SemiLEDs" trademark, o r advertise or pro mote any services or products relating to an y LED ep itaxial
wafers or ch ips using the trademark of any other company.

         We may terminate the trademark cross-license agreement if China SemiLEDs' products fail to meet certain quality standards. We may
also terminate this agreement if the directors nominated by us to the board of China SemiLEDs no longer constitute a majority of its board for
reasons other than because China SemiLEDS is listed on a stock exchange, we transfer our shares in China SemiLEDs, or we d ecline t o
exercise our preempt ive rights with respect to new issuances of shares of China SemiLEDs.

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                                                                 MANAGEMENT

Executi ve Officers and Directors

        The fo llo wing table sets forth information about our executive officers and members of our board of d irectors as of August 6, 2010:

                        Name               Age                                     Position(s)
                        Trung T.
                          Doan                52    Chairman and Ch ief Executive Officer
                        Dr. Anh
                          Chuong
                          Tran                48    President, Ch ief Operating Officer and Director

                        David Young           46    Chief Financial Officer

                        Jack S. Yeh           51    Vice President, Sales and Marketing Div ision
                        Lanfang
                          (Lydia)
                          Chin                39    General Counsel
                        Scott R.
                          Simp lot            63    Director
                        William J.
                          Whitacre            57    Director
                        Richard P.
                          Beck                77    Director

         Our board of directors currently consists of five directors. Prio r to the effectiveness of the registration statement on Form S-1, of which
this prospectus is a part, we intend to appoint additional independent directors.

          Trung T. Doan has served as Chairman o f our board of d irectors and our Chief Executive Officer since January 2005. Prior to join ing
us, Mr. Doan served as Corporate Vice President of Applied Global Services (A GS) Product Group at Applied Materials, Inc. and also served
as President and Chief Executive Officer of Jusung Engineering, Inc., a semiconductor/LCD equip ment company in Korea. In addition,
Mr. Doan served as Vice President of Process Development at Micron Technology Inc. Mr. Doan currently serves on the board of directors of
Advanced Energy Industries, a publicly traded manufacturer of power conversion and control systems, and Dolsoft Co rporation, a privately
held software co mpany. Previously, Mr. Doan served as a director of Nu Tool Inc., a semiconductor technology company, and as a director of
EM CO, a publicly traded manufacturer of advanced flow control devices and systems. Mr. Doan holds a bachelor of science degree in nuclear
engineering fro m the University of California, Santa Barbara, where he graduated with hono rs, and a masters of science degree in chemical
engineering fro m the University of California, Santa Barbara. Our board of d irectors has determined that Mr. Doan should serve as chairman
and our Chief Executive Officer based on his in-depth knowledge of our business and industry and his experience serving on the boards of
directors of several major technology companies as well as in management roles in the technology industry.

          Dr. Anh Chuong Tran has served as our President, Ch ief Operating Officer and director since January 2005. Dr. Tran served as Vice
President at Highlink Technology Corporation fro m November 2000 to November 2004 and a senior staff scientist at Emcore Corpo ration fro m
1995 to February 2000. Dr. Tran holds a bachelor of science degree in physics from the Czech Technical University, Prague, and a doctor of
philosophy degree in physics fro m the University of Montreal. Our board of d irectors has determined that Dr. Tran should serve as our
President, Ch ief Operating Officer and director based on his in-depth knowledge of our business and industry and experience in operational
management roles in the technology industry.

          David Young has served as our Chief Financial Officer since March 2008. Prior to join ing us, Mr. Young served as Vice President,
Sourcing Administration, of Payless ShoeSource International Ltd. fro m October 2005 to February 2008, co-founder and executive vice
president of Tera Xtal Technology

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Corporation, chief financial officer of Sparkice.co m Inc. and chief financial officer of Young Brothers Develop ment Co., Ltd. from 1996 to
1999. M r. Young also served as audit manager at Arthur Anderson fro m 1993 to 1995 and as audit manager and audit senior at Ernst & Young
fro m 1987 to 1993. M r. Young holds a bachelor of arts degree in economics and business from the Un iversity of California, Los Angeles.

          Jack S. Yeh has served as our Vice President of Sales and Marketing since August 2005. Prior to jo ining us, Mr. Yeh served at
United Epitaxy Co mpany Ltd., a LED chip and wafer manufacturer, as Vice President fro m May 2000 to July 2 005, Senio r Sales Manager
fro m November 1998 to May 2000, and Market ing Manager fro m Ju ly 1996 to November 1998. Fro m July 1994 to August 1996, M r. Yeh
served as Sales Manager of the New Business Team at PRRINCO Inc., a manufacturer of optical disks. Mr. Yeh ho lds a bachelor of science
degree in electrical engineering fro m the University of Mary land.

          Lanfang (Lydia) Chi n has served as our General Counsel since November 2008. Prior to joining us, Ms. Chin was a partner at Hui
Fa Law Office fro m April 2007 to October 2008, and was Vice Senior Director of the Intellectual Property and Legal Depart ment at Quata
Display Inc., fro m March 2004 to Ju ly 2006. Ms. Chin holds a bachelor of law degree fro m National Taipei Un iversity and a masters of law
degree fro m Franklin Pierce Law Center.

          Scott R. Simplot has been our director since March 2005. Mr. Simp lot has been Chairman of the board of d irectors and a director of
J.R. Simp lot Co mpany since May 2001 and August 1970, respectively. Mr. Simplot has served as Manager of JRS Managemen t, LLC, since
September 2004, and General Partner to SRS Family Limited Partnership since January 1997. M r. Simp lot also serves as a director to various
companies such as Bar-U-, Inc., Block 65 and 66 Master As sociation, Inc., Cal Ida Chemical Co mpany, Censa of California, In c., Claremont
Realty Co., Glen Dale Farms, Inc., Potato Storage, Inc., Storage Partners I, Ltd., SMP, Inc., Three Creek Ranch Co., Camas, Inc., and Lattice
Energy, LLC. Mr. Simp lot holds a bachelor of science degree in business from the University of Idaho and a masters in business admin istration
fro m the University of Pennsylvania. Ou r board of directors has determined that Mr. Simp lot should serve as a director based on the extensive
knowledge and insight he brings to our board of directors fro m his experience serving as chairman and holding a variety of man ageme nt
positions at a large private company and serving on the boards of directors of co mpanies in a variety of industries. Mr. Simp lot became a
director on our board as part of his duties as the Chairman o f the board of J.R. Simp lot Co mpany, the 100% owner of Simp lot T aiwan, Inc.,
which was entitled to designate two members of our board of directors in connection with J.R. Simp lot Co mpan y's investment in our Series A
convertible preferred stock.

          William J. W hitacre has been our director since August 2009. Mr. Whitacre has been President, Chief Executive Officer and a
director of J.R. Simplot Co mpany since September 2009. He also serves as a director to various companies such as Agribusiness Capital Corp.,
Cal Ida Chemical Co., Censa of Californ ia, Inc., Morpheus, Inc., SDM, Inc., and SMP, Inc. Mr. Whitacre has been President of STM, Inc.,
since September 2009 and a Manager at Britz-Simp lot Gro wer Solutions, LLC since June 2008. Our board of d irectors has determined that
Mr. Whitacre should serve as a director based on his experience serving as president and Chief Executive Officer of a large priva te company
and serving on the boards of directors of companies in a variety of industries. Mr. Whitacre became a director of our board as part of his duties
as President and Chief Executive Officer of J.R. Simp lot Co mpany, the 100% o wner of Simplot Taiwan, Inc., wh ich was entitled to designate
two members of our board of d irectors in connection with J.R. Simp lot Co mpany's investment in our Series A convertible preferred stock.

          Richard P. Beck has been a director of our co mpany since July 2010. Mr. Beck prev iously served as a director of our company fro m
March 2005 to April 2008. He is currently a director o f TTM Technologies, Inc., a publicly traded manufacturer of printed circuit boards, and
serves as chairman of its audit committee, and also serves on the nominating and corporate governance committee. Fro m

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May 1998 to August 2006, Mr. Beck served as a director of Applied Films Corporation, a publicly traded manufacturer of flat panel display
equipment, served on its audit and nominating and governance committees, and fro m October 2001 to August 2006 served as chair man of the
board. Fro m September 2000 to October 2004, he served as a director and chairman of the audit committee of Photon Dynamics, Inc. a publicly
held manufacturer of semiconductor testing equipment. He served as Vice President and Chief Financial Officer fro m March 1992 to October
2001 and Senior Vice President fro m February 1998 to May 2002 of Advanced Energy Industries, Inc., and is currently a d irect or and chair of
its nominating and governance committee as well as a member of its audit and mergers and acquisitions committees. Our board o f directors has
determined that Mr. Beck should serve as a director based on his experience serving on the boards of directors of public and private companies,
and his strong background in finance.

Board Composition

         SemiLEDs currently has five authorized directors. Each d irector is elected for a period of one year at SemiLEDs' annual meet ing of
stockholders and serves until the next annual meeting or until h is successor is duly elected and qualified. The executive off icers serve at the
discretion of the board of directors. There are no family relat ionships among any of the directors or executive officers of S emiLEDs.

Director Compensation

          Directors are not currently co mpensated for their services as directors. However, we intend to review and consider future proposals
regarding board compensation, in particular as it relates to additional independent directors that we may add prior to the ef fectiveness of the
registration statement on Form S-1 of wh ich this prospectus is a part. Directors are eligible to participate in our 2010 Equity Incentive Plan,
which we intend to adopt prior to the effectiveness of this registration statement on Form S-1, o f which this prospectus is a part.

        Mr. Beck p reviously served as a director of our co mpany fro m March 2005 to April 2008. In August 2005 and March 2006, we issued
250,000 options and 50,000 options, respectively, to Mr. Beck at an exercise price per share of $0.015 and $0.030, respectively. In November
2006, M r. Beck exercised all o f his options and, as such, Mr. Beck does not have any options outstanding.

Commi ttees of the B oard of Directors

        Prior to the effectiveness of this registration statement on Form S-1, of which this prospectus is a part, we intend to appoint additional
independent directors to our board of directors. Once appointed, and prior to the effectiveness of this registration statement on Form S-1, these
independent directors will use their experience and expertise to assist us in establishing an audit committee, a co mpensation committee and a
nominating and governance committee, to adopt charters for each of those committees, to adopt our 2010 Equity Incentive Plan and to adopt an
amended and restated certificate of incorporation and an amended and restated bylaws to be in effect upon completion of this offering.

       Once constituted, we expect our audit co mmittee, compensation committee and nominating and governance committee to have the
composition and responsibilit ies described below.

     Audit Committee

        Our audit co mmittee is co mprised of          ,           and           each of who m is a non-emp loyee member of our board of
directors.          is the chairperson of our audit committee and is our audit co mmittee financial expert, as that term is defined under the SEC
rules imp lementing

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Section 407 of the Sarbanes-Oxley Act of 2002. Our audit co mmittee is responsible for, among other things:

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

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

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

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

    •
            preparing the audit committee report that the SEC requires in our ann ual pro xy statement.

    Compensation Committee

      Our co mpensation committee is comprised of             ,          and            .           is the chairperson of our compensation
committee. The co mpensation committee is respons ible for, among other things:

    •
            overseeing our compensation policies, plans and benefit programs;

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

    •
            preparing the compensation committee report that the SEC requires to be included in our annual pro xy st atement;

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

    •
            administering our stock option plans and employee stock purchase plan.

       We believe that the composition of our compensation committee meets the criteria for independence under, and the functioning of our
compensation committee co mplies with the applicable requirements of, the Sarbanes -Oxley Act of 2002 and the SEC rules and regulations.

    Nominating and Corporate Governance Committee

        Our no minating and corporate governance committee is comprised of        ,         and            . Is the chairperson of our
nominating and corporate governance committee. Our no minating and corporate governance committee will be responsible for, among other
things:

    •
            assisting our board of directors in identifying prospective director no minees and recommend ing nominees for each annual meeting
            of stockholders to the board of directors;

    •
    reviewing developments in corporate governance practices and developing and recommending governance principles applicable to
    our board of directors;

•
    reviewing the succession planning for our executive officers;

•
    overseeing the evaluation of our board of directors and management; and

•
    recommending members for each board co mmittee to our board of directors.

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Compensati on Committee Interlocks and Insi der Partici pation

       No interlocking relat ionship exists between our board of directors or co mpensation committe e and the board of directors or
compensation committee of any other entity, nor has any interlocking relationship existed in the past.

Code of B usiness Conduct and Ethics

         Prior to the effectiveness of this registration statement on Form S-1, we intend to adopt a code of business conduct and ethics that
applies to all o f our emp loyees, officers and directors, including those officers responsible for financial report ing. These standards are designed
to deter wrongdoing and to promote honest and ethical conduct. The code of business conduct and ethics will be availab le on our website. Any
amend ments to the code, or any waivers of its requirements, will be disclosed on the website. The information that appears on our website is
not part of, and is not incorporated into, this prospectus.

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                                                         EXECUTIV E COMPENSATION

         This executive co mpensation section provides informat ion about the material elements of the compensation awarded to or earned by
our "named executive officers" during fiscal year 2009. Our named executive officers consisted of our chief executive officer , chief financial
officer and our other three executive officers, who specifically were:

     •
             Trung T. Doan, our Ch ief Executive Officer;

     •
             Dr. Anh Chuong Tran, our President and Chief Operating Officer;

     •
             David Young, our Chief Financial Officer;

     •
             Jack S. Yeh, our Vice President of Marketing and Sales; and

     •
             Lanfang (Lydia) Chin, our General Counsel.

        This executive co mpensation discussion addresses and exp lains the compensation practices that were fo llo wed in fiscal year 2009 and
the numerical and related information in the summary co mpensation and other tables presented below.

Compensati on Discussion and Analysis

     Compensation Philosophy and Objectives

        We design our overall compensation program to attract and retain executive officers with the skills, experience and commit men t to help
us achieve our business objectives. Prior to this offering, we were a privately -held co mpany with a limited nu mber of equity holders. As such,
we have not been subject to stock exchange listing requirements or SEC rules requiring a majority of our board of d irectors to be independent
or relating to the formation and functioning of our board committees, including a co mpensation committee. Our chief executive officer, in
consultation with our board of directors, made the final decisions regarding the compensa tion of our executive officers, other than for himself
and our chief operating officer, and our board of directors determined the compensation of our chief executive officer and ch ief operating
officer, based on recommendations fro m our chief executive off icer.

           Following the offering, our co mpensation committee will have the responsibility for establishing, implement ing and monitoring
adherence to our compensation program. None of our executive officers will be a member of our co mpensation committee. Our compensation
committee will have the authority under its charter to engage the services of outside counsel, consultants, accountants and o ther advisors to
assist it in discharging its responsibilit ies relat ing to our executive co mpensation policies. In determin ing our co mpensation, we strive to reward
our executive officers with co mpensation that is affordable and is sufficient to retain such officers wh ile concurrently alig ning their interests
with the achievement of our financial and business goals as well as the goals of our stockholders. We do not use rigid guidelines or formulas,
nor have we used any benchmarking or other peer group survey, to determine the amount and mix of co mpensation elements for ea ch executive
officer. We have not adopted any formal or informal policies or guidelines for allocating co mpensation between cash and non -cash
compensation or among different forms of non-cash compensation and have not considered these allocations in our compensation decisions.
Instead, we have relied on the judg ment and experience of our chief executive officer and board members, who have assessed each officer's
experience, skills and role and responsibilit ies in determining a co mpensation level that is sufficient to retain and mot ivat e with out being too
costly for us.

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     Roles of Executives and Compensation Consultant

        Historically, our chief executive officer, in consultation with our board of directors, has determined the cash compensation of our other
executive officers, other than himself and our chief operating officer, based on his assessment of an officer's experience, skills and role and
responsibilit ies and our gross revenues. Our chief executive officer has made proposed recommendations regarding his own comp ensation and
that of our chief operating officer, wh ich are subject to the approval of our board of direc tors. To date, we have not hired a co mpensation
consultant to help evaluate the compensation for our named executive officers.

     Principal Elements of Executive Compensation

         The total co mpensation of our officers consists of the follo wing element s:

     •
              base salary;

     •
              bonuses;

     •
              long-term incentive compensation, consisting of options;

     •
              potential pay ments upon specified termination events and vesting acceleration for so me of our officers; and

     •
              benefits that are generally availab le to our employees.

          We offer cash compensation to our named executive o fficers in the form of base salaries at levels that we can afford an d are sufficient
to retain such officers. In addition to standard base salaries, we pay some of our officers certain bonuses that they have negotiated in their o ffer
letter or bonuses that we generally pay all of our employees in Taiwan; however, our ch ief executive officer, chief operating officer and chief
financial officer generally have not received any bonuses, except for the one-time retention bonuses for our chief executive o fficer and chief
operating officer described below. Historically, we have paid total cash compensation that is generally modest as determined in the collective
business judgment of our board of directors and our chief executive officer and have relied on our equity compensation to motivate our named
executive officers to achieve our long-term goals.

     Base Salaries

         Base salary is the guaranteed compensation received by our executive officers for performing their regularly assigned duties. The base
salary for each of our named executive officers was initially determined in a negotiation between us and each officer whe n such officer started
emp loyment. The base salary for our chief executive officer and president and chief operating officer was first set forth in an emp loyment
agreement in 2005 following our incorporation. Our board of directors most recently approved a n increase in the base salary and liv ing
allo wance for our ch ief executive officer and chief operating officer in March, 2007, after taking into account the recommend ation fro m our
chief executive officer, who made h is recommendation based on his own judgment and experience. However, because our net income in 2007
was min imal, our ch ief executive officer and chief operating officer waived and declined their eligib ility to receive this ba se salary increase and
liv ing allowance. In May, 2009, given our increased net income, our board of directors agreed that provided that our chief executive officer and
chief operating officer remain in service until each bonus payment date, they would earn in the aggregate an additional bonus that would in
total be equivalent to the base salary increase and liv ing allowance that they would have received had they accepted the base salary increase
and living allo wance that our board of officers offered in 2007 since April, 2007. This bonus was earned and paid in two inst allments in fiscal
year 2010 of appro ximately $51,667 each for our chief executive officer and $45,208 each fo r our chief operating officer. Sta rt ing in fiscal year
2010, our ch ief executive officer and chief operating officer accepted the combined base salary inc rease to $165,000 for our chief

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executive officer and $160,000 for our ch ief operating officer and $3,000 per month living allowance (for a total of $36,000) originally offered
in 2007 by our board of directors as a total base salary increase to $201,000 for our chief executive officer and $196,000 fo r our chief operating
officer, for ease of ad ministration.

         The base salary for Mr. Yeh was increased fro m the amount in h is offer letter in 2005 to its current level on August 1, 2008, by our
chief executive officer in connection with Mr. Yeh 's annual review in which our ch ief executive officer determined that Mr. Yeh was
performing reasonably well. For each of Mr. Young and Ms. Chin, the base salary has remained the same as set forth in their o ffer letter.
Because we have used our equity compensation as our primary means of motivating our officers to achieve our long-term business goals, we
have been able to conserve capital for our business by paying relatively modest base salaries, based on the experience of our chief executive
officer and our board of directors. The salary we paid in fiscal year 2009 to each named executive officer is reflected in the "Su mmary
Co mpensation Table" below.

     Annual Incentive Compensation

        Fo r fiscal year 2009, we did not have a formal bonus plan or program for any of our employees, including our named executive officers.
To conserve capital, we did not pay a bonus to our chief executive officer, our p resident and chief operating officer or our ch ief financial
officer in fiscal year 2009 or in any of our p revious fiscal years. We have an informal policy to pay ou r full-t ime emp loyees who are paid in NT
dollars a year-end bonus equal to two (2) months of the average base salary of each emp loyee based in Taiwan, as pro rated fo r their period of
service with us for the year. We adopted this informal policy of paying a year-end bonus in this amount because it is typical practice for a
Taiwanese company. In addit ion, to reward our emp loyees based in Taiwan for their diligence and efforts in light of our impro ved sales, we
paid each of our employees a special bonus in August, 2009 equal to NT$15,000. Ms. Ch in was treated in the same manner as our other
emp loyees based in Taiwan and paid both the year-end bonus (as pro rated for her months of employ ment with us in 2008) and the special
bonus in August, 2009 equal to NT$15,000. As a result of his negotiations with our chief executive officer, Mr. Yeh's 2005 offer letter
provided for a bonus that is guaranteed and payable three times each year in the amount of NT$150,000. These three bonus amou nts would
have been incorporated into Mr. Yeh's annual base salary, except that Mr. Yeh p referred to be paid in these three installments each year. In
addition, Mr. Yeh's offer letter provided for a guaranteed year-end bonus that was equal to two (2) months of his then average base salary,
which represents the year-end bonus for all of our emp loyees, as described above. In addition, according to Mr. Yeh 's offer letter, he is eligible
for an allocation of a p rofit -sharing pool equal to 10% of our net profits. He was not paid any profit -sharing allocation in fiscal year 2009
because we did not achieve net profits for this fiscal year. In fiscal year 2009, Mr. Yeh was paid his bonus of NT$150,000 three times, the same
year-end bonus as the other emp loyees based in Taiwan in an amount equal to two (2) months of his then average base salary and the special
bonus received by the other employees based in Taiwan in August, 2009 equal to NT$15,000. The actual bonus amounts for Ms. Chin and
Mr. Yeh for fiscal year 2009 are set forth in the "Summary Co mpensation Table" below.

     Long-Term Incentive Compensation

          Background. We established our equity incentive plan to align the interests of our employees, including our named executive
officers, with the interests of our stockholders and to provide them an incentive to support our long -term success and growth. We award our
equity incentive compensation in the form of options to acquire shares of our Class B co mmon stock, because we believe that stock options
encourage our executive officers to perform and are directly tied to any increase in the value of our business. To increase t he value of their
options, the officers needed to work d iligently to increase the value of our capital stock, wh ich would in turn benefit our stockholders.
Historically, our board of

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directors had the authority to make equity grants to executive officers and at times, has delegated this authority to our chief executive officer.
Following this offering, our co mpensation committee, when constituted, will make all decisions regarding equity grants to our executive
officers.

         Timing and Size of Grants. We typically grant the largest stock option in the year that an executive officer co mmences employ ment
pursuant to our negotiations with each such officer. Generally, each option grant vests annually according to a four-year schedule. Thereafter,
we consider making option grants on an annual basis at the discretion of our board of directors or our chief executive office r, when the board
has delegated to him this authority. We do not have any program or obligation that requires us to grant equity compensation to any executive
officer on specified dates. The size of each grant is generally set at a level that our board of directors deems appropriate to create a meaningful
opportunity for stock ownership while reflect ing the individual's position and longevity with us, the individual's existing e quity holdings and
the individual's potential for future responsibility.

          In fiscal year 2009, Mr. Young and Ms. Chin were each granted their init ial hire option. Mr. Young's option amount was negotiated
pursuant to his employment agreement and our chief executive officer determined the option amount for Ms. Chin, based on his assessment of
her experience, skills and responsibilit ies. Our board of directors granted to Mr. Young his options on an accelerated schedule as compared to
his emp loyment agreement to simplify the option grant schedule. That is, instead of granting two options for 500,000 shares e ach at his
emp loyment co mmencement (with the vesting starting at the employ ment co mmencement date for the first option and the vesting s tarting at the
first anniversary of the employ ment commencement date for the second option), a third option for 500,000 shares at his second anniversary
with us (with the vesting starting at the second anniversary of the employ ment commencement date) and a fourth option for 500,000 shares at
his third anniversary with us (with the vesting starting at the third anniversary of the employ ment commencement date), our board of directors
granted one option for 1,000,000 shares at his employ ment commencement and a second option for 1,000,000 shares at approximat ely his first
anniversary with us. Our ch ief executive officer also decided the option amount for Mr. Yeh's annual grant. Each of these options is subject to
our standard vesting schedule of four annual installments. The actual option amounts for Mr. Young, Ms. Ch in and Mr. Yeh for fiscal year
2009 are set forth in the "Grants of Plan-Based Awards Table" below.

         Stock Valuation. In the absence of a public trading market fo r our co mmon stock, our board of d irectors or chief executive officer
determined the fair market value o f our Class B common stock in good faith using factors it considered appropriate, including the price at
which shares of our Class B co mmon stock and convertible preferred stock had previously been issued, the rights associated with our
convertible preferred stock and our business prospects, and which beginning in 2007, included written reports periodically p repared by an
independent valuation firm retained by us. All fiscal year 2009 equity awards to our emp loyees, including named executive off icers, had an
exercise price that was at least equal to the fair market value of our Class B co mmon stock on the grant date, as determined by our board of
directors or chief executive officer, based on an appraisal prepared by an independent valuation firm. Following this offerin g, we expect the
exercise price of our options to be based on a consistent methodology that will either use the closing price of our co mmon stock on the da te of
the grant or the date immed iately prior to the date of grant. At this time, we have not yet made a decision regarding how to determine the
exercise price of our options.

        Restricted Shares, Stock Appreciation Rights and Stock Units. We generally have not granted restricted stock awards, stock
appreciation rights or stock units because we believe that options offer a more powerfu l incentive because the value of our s tock has to actually
appreciate in order for the officers to receive any gain fro m their options. In addition, our option plan did not offer stock appreciation rights or
stock units. However, in the future our co mpensation committee may consider

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the grant of restricted shares of our common stock, stock appreciation rights or restricted stock units in appropriate circu mstances.

     Stock Ownership Guidelines

       We currently do not require our directors or executive officers to own a specified amount of our co mmon stock. Our co mpensation
committee believes that the stock and option holdings of our directors and executive officers are sufficient at this time to provid e them
incentive to perform for us and to align this group's interests with those of our stockholders.

     Perquisites

         In fiscal year 2009, we d id not provide special benefits or other perquisites to our named executive officers. Our executive officers are
elig ible for the benefits generally availab le to our employees, including our labor insurance, national health insurance and certain group
insurance (including life insurance, accidental death & dis memberment insurance, hospitalization and surgical benefits), with the labor
insurance and national health insurance mandated by Taiwan law and all of this insurance available to all emp loyees, regardle ss of nationality;
and the min imu m pension contribution required by Taiwan law for emp loyees based in Taiwan who are Taiwanese citizens. Th ese general
benefits are either mandated by Taiwan law or offered to our employees because they are available at a typical emp loyer in Ta iwan.

     Severance and Change of Control Benefits

         Each of M r. Doan and Dr. Tran have an emp loyment agreement entered into in 2005, wh ich provides that if he is termin ated by us
without cause or resigns due to a constructive termination, he will receive as severance an amount equal to six (6) months of his then current
salary plus his current medical insurance for six (6) months following his termination date. We offered such severance to motivate Mr. Doan
and Dr. Tran to continue as our executive officers by giving them severance protection in the event that they are terminated by us without
having committed any egregious act constituting cause or we adversely change their positions such that they resign. Cause was defined as
(a) the conviction of a felony or of any criminal offense involving moral turp itude; (b) the repeated failure to satisfactorily perform duties
reasonably required by us; (c) material breach of the proprietary informat ion and invention agreement, our written policies established by our
board of directors or any term of h is employ ment agreement; or (d) misappropriation of our property or unlawfu l appropriat ion of our corporate
opportunity or our business. We will provide Mr. Doan and Dr. Tran with written notice alleging cause and that failure to remedy the alleged
cause within thirty (30) days may result in a termination fo r cause. Constructive termination was defined as one of the following events that has
not received his written consent: (a) a significant reduction of his duties, position or responsibilit ies relat ive to his duties, position or
responsibilit ies in effect immediately prior to such reduction or his removal fro m such position, duties and responsibilit ies, provided that a
reduction in duties, position or responsibilities solely by virtue of us being acquired and made part of a larger entity will not constitute a
constructive termination; (b) a substantial reduction, without good business reasons, of the facilit ies and perquisites available to him
immed iately prior to such reduction; (c) a reduction of his base salary unless such reduction is a part of a Co mpany-wide reduction for similarly
situated persons; or (d) a material reduction in the kind or level of employee benefits to which he is entitled immediately p rior to such
reduction, with the result that his overall benefits package is significantly reduced, unless such reductions are part of a Co mpany-wide
reduction for similarly situated persons.

         Mr. Young's emp loyment agreement entered into in 2007 provided fo r the following vesting acceleration and option benefits: (a) if he
is involuntarily terminated without cause before the second anniversary of his employ ment with us, all of the 1,000,000 shares subject to his
option granted on March 3, 2008, will beco me fully vested; and (b) if we are subject to a change of control within

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twenty-four (24) months from his first date of employ ment with us, all of the 1,000,000 shares subject to his option granted on March 3, 2008
will beco me fu lly vested and he will be granted an additional fully vested option for 1,000,000 shares. Mr. Young will not receive any of the
vesting acceleration rights or additional option described in this paragraph because the time restrictions for such accelerat ion and additional
option have passed.

        For additional informat ion, please see "—Potential Pay ments Upon Termination or Change in Control" below for more details.

     Financial Restatement Adjustment

        Our co mpensation committee has not adopted a policy on whether we will make retroactive adjustments to any cash or equity -based
incentive compensation paid to executive officers or other employees where the payment was predicated upon the achievement of financial
results that were subsequently the subject of a restatement. Our co mpensation committee believes that this issue is best addressed when the
need actually arises, when all of the facts regarding the restatement are known, so that we can make an informed decision that is in our best
interest.

     Tax and Accounting Treatment of Compensation

        Sect ion 162(m) of the Internal Revenue Code places a limit of $1.0 million per person on the amount of compensation that we may
deduct in any one year with respect to each of our named executive officers other than the chief financial officer. There is an exemption fro m
the $1.0 million limitation for performance-based compensation that meets certain requirements. All grants of options or stock appreciation
rights under our new Equity Incentive Plan, which we will adopt before this offering, are intended to qualify for the exemption. Please see
"Equity Incentive Plan" for more details. Grants of restricted shares or stock units under our Equity Incentive Plan may qualify for the
exemption if vesting is contingent on the attainment of object ives based on the performance criteria set forth in the plan an d if certain other
requirements are satisfied. Grants of restricted shares or stock units that vest solely on the basis of service cannot qualify for the exemption. To
maintain flexib ility in co mpensating officers in a manner designed to promote varying corporate g oals, our compensation committee, when
constituted, will not adopt a policy requiring all co mpensation to be deductible. To date, the compensation to our named exec utive officers has
not exceeded the $1.0 million limitation. Our co mpensation committee, when constituted, may approve co mpensation or changes to plans,
programs or awards that may cause the compensation or awards to exceed the limitation under section 162(m) if it determines that such action
is appropriate and in our best interests.

         We account for equity compensation paid to our employees under the rules of FASB Accounting Standards Codification ("ASC")
Topic 718, "Stock Co mpensation" (formerly FASB Statement No. 123(R)) ("ASC 718"), which requires us to estimate and reco rd an expen se
for each award of equity co mpensation over the service period of the award. Accounting rules also require us to record cash c ompensation as an
expense at the time the obligation is accrued. We have not tailored our executive co mpensation program to achieve particular accounting
results.

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Summary Compensati on Table

        The fo llo wing table sets forth all of the co mpensation earned by our named executive officers for the fiscal year ended Augus t 31,
2009.

                                                                                            Non-Equity
                    Name and                                                 Option        Incentive Plan        All Other
                    Principal Position        Salary           Bonus        Awards (1)     Compensation        Compensation            Total
                    Trung T. Doan         $ 161,000                    —             —                   —                   — $ 161,000
                      Chief
                      Executive
                      Officer
                    Dr. Anh
                      Chuong              $ 161,000                    —             —                   —                   — $ 161,000
                      Tran
                      President
                      and Chief
                      Operating
                      Officer
                    David Young
                      Chief               $ 112,000                    — $ 8,020                         —                   — $ 120,020
                      Financial
                      Officer
                    Jack S. Yeh (2)
                      Vice                $     57,202 $ 23,107                      —                   —                   — $         80,309
                      President of
                      Marketing
                      and Sales
                    Lanfang
                      (Lydia)             $     45,604 $          1,607 $          401                   —                   — $         47,612
                      Chin (3)
                      General
                      Counsel


              (1)
                         The amounts reported in this column represent the grant date fair value of the stock options granted to the named executive o fficers during fiscal year ended
                         August 31, 2009 calculated in accordance with the Financial Accounting Standards Board's Accounting Standards Codification Topic 718 (formerly known as
                         SFAS 123(R) and referred to herein as "ASC 718"). The assumptions used in calculating the grant date fair value of the stock optio ns reported in the Option
                         Awards column are set forth in our notes to the audited consolidated financial statements included elsewhere in the registration statement on Form S-1, of which
                         this prospectus forms a part. Note that the amounts reported in this column reflect the accounting cost for these stock options, and do not correspond to the actual
                         economic value that may be received by the named executive officers from the options.


              (2)
                         Mr. Yeh's monthly base salary is NT$157,800. His base salary and bonuses were converted into U.S. dollars, based on the daily noon buying rate in New York,
                         certi fied by the New York Federal Reserve Bank for customs purposes on each payment date.


              (3)
                         Ms. Chin's monthly base salary is NT$160,000. Her base salary and bonuses were converted into U.S. dollars, based on the daily noon buying rate in New York,
                         certi fied by the New York Federal Reserve Bank for customs purposes on each payment date.


Salary, Bonus and Non-Equi ty Incenti ve Plan Compensati on i n Proportion to Total Compensation

       The amount of salary, bonus and non-equity incentive plan compensation earned in fiscal year 2009 in proportion to the total
compensation reported for each of the named executive officers was:

                                  Mr. Doan:                                                                                                    100 %
                                  Dr. Tran :                                                                                                   100 %
                                  Mr. Young:                                                                                                    93 %
                                  Mr. Yeh:                                                                                                     100 %
                                  Ms. Chin:                                                                                                     99 %
        To date, we have not established any policy for allocating compensation between current and long -term co mpensation or between cash
and non-cash compensation.

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Grants of Plan-B ased Awards

         The fo llo wing table sets forth each non-equity incentive plan award and equity award granted to our named executive officers during
the year ended August 31, 2009.

                                                                                                                    All Other            Exercise       Grant
                                                                                                                     Option               or Base      Date Fair
                                                                                                                    Awards:              Price Per     Value of
                                                                                                                   Number of              Option         Stock
                                                                                                                   Securities            Share of         and
                                                                                                                   Underlying             Option        Option
                                                                                                                    Options               Awards        Awards
                                                                            Estimated Future Payouts
                                                                                     Under
                                                                           Non-Equity Incentive Plan
                                                                                     Awards
                                                                                                Maximu
                            Name                     Grant Date           Threshold    Target       m
                            Trung T.
                              Doan                                 —              —          —            —                     —               —              —
                            Dr. Anh
                              Chuong
                              Tran                             —                  —          —            —                     —               —              —
                            David                      February 5,
                              Young                          2009                 —          —            —           1,000,000 (1) $ 0.065 $ 8,020
                            Jack S. Yeh                        —                  —          —            —                  —           —       —
                            Lanfang
                              (Lydia)                  February 5,
                              Chin                           2009                 —          —            —               50,000 (2) $ 0.065 $               401


              (1)
                      The option will vest with respect to 250,000 shares on each March 1 of 2010, 2011, 2012 and 2013. This option has a term of approximately nine years from the
                      date of grant, subject to earlier expiration if the optionee's service terminates.


              (2)
                      The option will vest with respect to 12,500 shares on each February 15 of 2010, 2011, 2012 and 2013. This option has a term of nine years from the date of grant,
                      subject to earlier expiration if the optionee's service terminates.


Outstandi ng Equity Awards At Fiscal Year-End

         The fo llo wing table sets forth information regarding each unexercised option held by each of our named executive officers as of the
end of the year ended August 31, 2009.

                                                                          Option Awards
                                   Number of                Number of
                                    Securities               Securities
                                   Underlying               Underlying
                                   Unexercised              Unexercised
                                     Options                  Options
                                                                                  Option Exercise
                                                                                  Price Per Option                 Option
                                                                                        Share                   Expiration Date
              Name                 Exercisable             Unexercisable
              Trung T.
                Doan                             —                         —                      —                                  —
              Dr. Anh
                Chuong
                Tran                             —                         —                      —                                  —
              David
                Young                   250,000 (1)                 750,000      $            0.060                March 3, 2017
                                             —(2)                 1,000,000      $            0.065                March 1, 2018
              Jack S. Yeh               750,000 (3)                      —       $            0.015            September 1, 2015
                                         40,000 (4)                  40,000      $            0.060            September 1, 2016
                                         36,250 (5)                 108,750      $            0.060            September 1, 2017
Lanfang
  (Lydia)
  Chin                         —(6)                50,000       $           0.065             February 15, 2018


(1)
      The option will vest with respect to 250,000 shares on each March 3 of 2009, 2010, 2011 and 2012.


(2)
      The option will vest with respect to 250,000 shares on each March 1 of 2010, 2011, 2012 and 2013.


(3)
      The option vested with respect to 187,500 shares on each September 1 of 2006, 2007, 2008 and 2009.


(4)
      The option vested with respect to 20,000 shares on each September 1 of 2008, 2009, 2010 and 2011.


(5)
      The option will vest with respect to 36,250 shares on each September 1 of 2009, 2010, 2011 and 2012.


(6)
      The option will vest with respect to 12,500 shares on each February 15 of 2010, 2011, 2012 and 2013.


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Opti on Exercises in Fiscal Year 2009

         None of our named executive officers exercised options during the fiscal year ended August 31, 2009.

Potential Payments Upon Termination or Change in Control

         The table belo w reflects the potential payments and benefits to which certain of our named executive officers would be entitled under
the individual emp loyment agreements between these named executive officers and us, which are described in the section entitled,
"Compensation Discussion and Analysis". The amounts shown in the table below assume that each termination was effective as of August 31,
2009 and that all eligib ility requirements under the applicable agreement were met.

                              Name                                 Salary                  Medical Insurance                     Total
                              Trung T. Doan (1)                $       80,500         $                       1,163         $       81,663
                              Dr. Anh Chuong
                                Tran (1)                       $       80,500         $                       1,163         $       81,663
                              David Young                                  —                                     —                      —
                              Jack S. Yeh                                  —                                     —                      —
                              Lanfang (Lydia) Chin                         —                                     —                      —


                              (1)
                                      If either Mr. Doan or Dr. Tran is terminated by us without cause or resigns as a result of a constructive termination at any time, he is eligible to
                                      receive as severance an amount equal to six (6) months of his then current base salary and medical insurance for a six-month period following
                                      his employment termination date.


Pension Benefi ts

         We do not maintain any defined benefit pension plans.

Nonqualified Deferred Compensati on

         We do not maintain any nonqualified deferred co mpensation plans.

Empl oyment Agreements

        We have entered into employ ment agreements with each of our named executive officers, which set forth the terms of their
emp loyment, including base salary and to the extent applicable, a bonus opportunity, stock options and severance b enefits. Each named
executive officer's current cash and equity compensation, including base salary, bonus, options and severance, is discussed in greater detail in
"Compensation Discussion and Analysis" and set forth in the "Summary Co mpensation Table" ab ove.

         Each of Mr. Doan and Dr. Tran have an employ ment agreement entered into in 2005, which provides that if he is terminated by us
without cause or resigns due to a constructive termination, he will receive as severance an amount equal to si x (6) months of his then current
salary plus his current medical insurance for six (6) months following his termination date. Cause was defined as (a) the conviction of a felony
or of any criminal offense involving moral turpitude; (b) the repeated failure to satisfactorily perform duties reasonably required by us;
(c) material breach of the proprietary in formation and invention agreement, our written policies established by our board of dire ctors or any
term of h is emp loy ment agreement; or (d) misappropriation of our property or unlawfu l appropriation of our corporate opportunity or our
business. We will provide Mr. Doan and Dr. Tran with written notice alleg ing cause and that failure to remedy the alleged cause within thirty
(30) days may result in a termination for cause. Constructive termination was defined as one of the following events that has not received his
written consent: (a) a significant reduction of his duties, position or responsibilities relat ive to his duties, position or responsibilities in effect
immed iately prior to such reduction or his removal

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fro m such position, duties and responsibilities, provided that a reduction in duties, position or responsibilit ies solely by virtue of us being
acquired and made part of a larger entity will not constitute a constructive termination; (b) a substantial reduction, without good business
reasons, of the facilit ies and perquisites available to him immed iately prior to such reduction; (c) a reduction of his base salary unless such
reduction is a part of a Co mpany-wide reduction for similarly situated persons; or (d) a material reduction in the kind or level o f employee
benefits to which he is entitled immediately prior to such reduction, with the result that his overall benefits package is significantly reduced,
unless such reductions are part of a Co mpany-wide reduction for similarly situated persons.

           Mr. Young's emp loyment agreement entered into in 2007 provided fo r the following vesting acceleration and option benefits: (a) if he
is involuntarily terminated without cause before the second anniversary of his employ ment with us, all of the 1,000,000 shares subject to his
option granted on March 3, 2008, will beco me fully vested; and (b) if we are subject to a change of control within t wenty-four (24) months
fro m h is first date of emp loyment with us, all of the 1,000,000 shares subject to his option granted on March 3, 2008 will beco me fully vested
and he will be granted an additional fully vested option for 1,000,000 shares. Mr. Young will not receive any of the vesting acceleration or
additional option described in this paragraph because the time restrict ions for such acceleration and additional option have passed.

2010 Equity Incenti ve Plan

         We intend to adopt our 2010 Equity Incentive Plan before this offering becomes effective. The 2010 Equity Incentive Plan will
become effective on the effective date of the registration statement of wh ich this prospectus is a part. The 2010 Equity Ince ntive Plan will
replace our 2005 Equity Incentive Plan. No further g rants will be made under our 2005 Equity Incentive Plan after this offering . Ho wever, the
options outstanding after this offering under the 2005 Equity Incentive Plan will continue to be governed by its existing ter ms.

     Share Reserve

       We have reserved            shares of our common stock for issuance under the 2010 Equ ity Incentive Plan. The number of shares
reserved for issuance under the plan will be increased automatically on September 1 of each year, starting with September 1, 2011 and ending
with September 1, 2017, by a nu mber equal to the smallest of:

     •
            shares;

     •
            % of the shares of common stock outstanding at that time; or

     •
            the number of shares determined by our board of directors.

         In general, to the extent that awards under the 2010 Equity Incentive Plan are forfeited or lapse without the issuance of shares or shares
are reacquired by us, those shares will again become available for awards. All share numbers described in this summary o f the 2010 Equity
Incentive Plan (includ ing exercise prices for options and stock appreciation rights) are automat ically adjusted in the event of a stock split, a
stock dividend, or a reverse stock split.

     Administration

      The co mpensation committee of our board of directors, when constituted, will ad min ister the 2010 Equity Incentive Plan. The
compensation committee has the complete discretion to make all decisions relating to the plan and outstanding awards.

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     Eligibility

       Emp loyees, members of our board of directors who are not employees and consultants will be eligib le to participate in o ur 2010 Equ ity
Incentive Plan.

         Types o f Award. Our 2010 Equity Incentive Plan provides for the fo llo wing types of awards:

     •
             incentive and nonstatutory stock options to purchase shares of our common stock;

     •
             stock appreciation rights;

     •
             restricted shares of our common stock; and

     •
             restricted stock units.

         We generally have granted options to our service providers because we believe that options offer a more powerful long -term incentive
than restricted shares, stock appreciation rights or stock units. However, in the future our compensation committee may consider t he grant of
restricted shares, stock appreciation rights or restricted stock units in appropriate circu mstances and use such forms of equity-based
compensation in addition to options to align the interests of our service providers with that of our stockholders.

     Options and Stock Appreciation Rights

     The exercise price for options granted under the 2010 Equ ity Incentive Plan may not be less than 100% of the fair market value of our
common stock on the option grant date. Optionees may pay the exercise price by using:

     •
             cash;

     •
             shares of our common stock that the optionee already owns;

     •
             an immed iate sale of the option shares through a broker approved by us;

     •
             a promissory note, if permitted by applicable law; or

     •
             any other form of pay ment as the compensation committee determines.

         A participant who exercises a stock appreciation right receives the increase in value of our co mmon stock over the base price. The
base price for stock appreciation rights may not be less than 100% of the fair market value of our co mmon stock on the grant date. The
settlement value of a stock appreciation right may be paid in cash or shares of common stock, or a co mbination of both.

         Options and stock appreciation rights vest at the time or t imes determined by the compensation committee. In most cases, they will
vest over a four-year period following the date of grant. Options and stock appreciation rights also exp ire at the time determined by the
compensation committee, but in no event more than 10 years after they are granted. They generally exp ire earlier if the particip ant's service
terminates earlier. No part icipant may receive options or stock appreciation rights under the 2010 Equity Incentive Plan cove rin g more
than          shares in any fiscal year, except that a new employee may receive options or stock appreciation right s covering up to shares in the
fiscal year in which h is or her emp loyment starts.

     Restricted Shares and Stock Units

        Restricted shares and stock units may be awarded under the 2010 Equity Incentive Plan in return for any lawful consideration, and
participants who receive restricted shares or stock units generally are not required to pay for their awards in cash. In gene ral, these awards will
be subject to vesting. Vesting may be based on length of service, the attainment of performance -based milestones, or a co mbination of both, as
determined by the compensation committee. No participant may receive

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restricted shares or stock units with performance-based vesting covering more than           shares in any fiscal year, except that a new employee
may receive restricted shares or stock units covering up to       shares in the fiscal year in which h is or her emp loyment starts. Settlement of
vested stock units may be made in the fo rm of cash, shares of common stock, or a co mbination of both.

     Change in Control

        The co mpensation committee may determine that awards granted under the 2010 Equity Incentive Plan will vest or will become
exercisable (as applicable) on an accelerated basis if we experience a change in control. Awards will be subject to the agree ment evidencing a
change in control, as described below. Unvested awards (or portions thereof) may be treated in any manner permissible by applicable law,
including (without limitation) cancellation for no consideration. Vested options, stock appreciation rights and stock units may be continued by
us if we are the surviving corporation or assumed or substituted by the surviving corporation or its parent with new awards. In addition, vested
options and stock appreciation rights may be cancelled for consideration equal to the excess of the fair market value of our co mmon stock as of
the closing date of the change in control over the exercise price of the awards, and vested stock units may be canceled for a pay ment equal to
the fair market value of our co mmon stock as of the closing date of the change in control.

         A change in control includes:

     •
            a merger or consolidation or any other corporate reorganization or business combination transaction of our company with or in to
            another corporation, entity or person;

     •
            a sale, transfer or other disposition of all or substantially all of our as sets;

     •
            a pro xy contest that results in the replacement of more than 50% o f our directors over a 24-month period; or

     •
            an acquisition of 50% or more of our outstanding stock by any person or group, other than a person related to us (such as a h olding
            company owned by our stockholders or a trustee or other fiduciary holding securities under an employee benefit plan of ours or of
            our parent or of a subsidiary of ours).

     Amendments or Termination

        Our board of d irectors may amend or terminate the 2010 Equity Incentive Plan at any time. If our board of directors amends the plan, it
does not need to seek stockholder approval of the amend ment unless required by applicable law. The 2010 Equity Incentive Plan will continue
in effect for 10 years fro m its adoption date, unless our board of directors decides to terminate the plan earlier.

2005 Equity Incenti ve Plan

        Our 2005 Equity Incentive Plan was adopted by our board of directors on June 21, 2005 and approved by our stockholders on
February 2, 2006. The most recent amendment to the 2005 Equ ity Incentive Plan was adopted by our board of directors and stockholders o n
March 1, 2010. No further awards will be made under our 2005 Equity Incentive Plan after the co mpletion of this offering, but options
outstanding under the 2005 Equity Incentive Plan will continue to be governed by their existing terms.

     Share Reserve

       We have reserved an aggregate of 15,883,335 shares of our Class B common stock for issuance under our 2005 Equity Incentive Plan.
In general, if shares subject to awards of options and restricted stock granted under our 2005 Equity Incentive Plan cease to be subject to
issuance under such options

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(other than due to exercise of such options), are forfeited or are repurchased by us at the original issue price or the award s terminate without the
shares being issued, then these s hares will again become availab le fo r grant and issuance in connection with future awards under the 2005
Equity Incentive Plan.

     Administration

        Our board of d irectors and a committee consisting of our chief executive officer have ad min istered th e 2005 Equ ity Incentive Plan
before this offering and the compensation committee of our board of d irectors will ad minister this plan after this offering. Before this offering,
our board of directors and our chief executive o fficer and, after this offering, our co mpensation committee has complete discretion to make all
decisions relating to our 2005 Equity Incentive Plan.

     Eligibility

       Emp loyees, members of our board of directors who are not employees and consultants are eligible to participate in our 2005 Equ ity
Incentive Plan.

     Types of Awards

         Our 2005 Equity Incentive Plan provides for the fo llo wing types of awards:

     •
              incentive and nonstatutory stock options to purchase shares of our Class B co mmon stock; and

     •
              direct awards and sales of shares of our Class B co mmon stock (including restricted shares).

     Options

        The exercise price for incentive stock options may not be less than 100% of the fair market value of our Class B co mmo n stock on the
option grant date and the exercise price fo r nonstatutory stock options may not be less than 85% of the fair market value of our Class B
common stock on the option grant date, with any options granted to ten percent holders having an exercise price that may not be less than 110%
of the fair market value of our Class B co mmon stock on the option grant date. Optionees may pay the exercise price by using:

     •
              cash or check;

     •
              shares of common stock that the optionee already owns;

     •
              a full-recourse promissory note;

     •
              waiver of co mpensation due or accrued;

     •
              an immed iate sale of the option shares through a broker designated by us;

     •
              cancellation of indebtedness; or

     •
              any combination of the above payment methods.

        Our options generally vest annually over a four-year period following the vesting commencement date and generally exp ire
approximately n ine years after they are granted, unless the optionee ceases service with us.

     Share Awards
       The purchase price for shares awarded under the 2005 Equity Incentive Plan may not be less than 85% of the fair market value of our
Class B common stock on the award grant date, with shares awarded to ten percent holders having a purchase price that may not be le ss than
100% o f the fair

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market value of our Class B co mmon stock on the award grant date. Restricted shares vest at the times determined by our board of directors.

     Dissolution, Consolidation, Merger or Asset Sale

        If we experience a d issolution or liquidation, reorganization, consolidation, merger, or similar transaction or sale of all o r substantially
all of our assets, each outstanding award of options and restricted stock may be assumed, converted or replaced or an equivalent award may be
substituted or the award holder may be provided with s ubstantially similar consideration as was provided to our stockholders by the successor
or acquiring corporation. In the event that the successor or acquiring corporation refuses to assume, convert, replace or substitute awards, then
the awards will exp ire upon the consummation of the transaction.

     Amendments or Termination

       Our board of d irectors may amend or terminate the 2005 Equity Incentive Plan at any time. If our board of directors amends th e plan, it
does not need to ask for stockholder approval unless required by applicable law. No further awards will be made under our 2005 Equity
Incentive Plan after this offering, and the 2005 Equity Incentive Plan will auto matically terminate 10 years after its initial adoption by our
board of directors.

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                                    CERTAIN RELATIONS HIPS AND RELATED TRANSACTIONS

         Since September 1, 2006, there has not been any transaction or series of similar transactions to which we were or are a party in which
the amount involved exceeded or exceeds $120,000 and in wh ich any of our directors or executive officers, any holder of more than 5% of any
class of our voting securities or any member of the immediate family of any of the fo regoing persons had or will have a d irect o r ind irect
material interest, other than the transactions described below.

Equi ty Financings

     Issuance of Series C Convertible Preferred Stock

       The following table summarizes the shares of Series C convertible preferred stock purchased by directors, executive officers and 5%
stockholders of SemiLEDs and persons and entities associated with them in private placement transactions. In December 2006, J anuary 2007,
May 2007, January 2008, May 2008 and July 2008, we sold 44,584,455 shares of Series C convertible preferred stock at a price of $0.59 per
share for gross proceeds of approximately $26.4 million. Each share of Series C convertible p referred stock will auto matically convert into one
share of Class A common stock upon the completion of this offering.

                                                                                 Number of Shares
                                                                                    of Series C
                                                                                    Convertible                 Aggregate
                                                                                  Preferred Stock             Purchase Price
              Entities Affiliated with Directors
              Simp lot Taiwan, Inc. (Scott R. Simp lot and William J.
                Whitacre)                                                                 17,296,324     $       10,204,831.16
              WI Harper Inc. Fund VI Ltd. (Peter Liu, a p rior director
                of ours)                                                                  10,169,491     $         5,999,999.69
              Other 5% Stockhol ders
              Powerchip Technology Corporation (f/k/a Powerchip
                Semiconductor Corporation) and its affiliate Lu xxon
                Technology Corporation                                                    16,271,185     $         9,599,999.15

     Issuance of Series D Convertible Preferred Stock

       In September 2008, we issued and sold a total of 15,351,550 shares of Series D convertible p referred stock to Lite-On Technology
USA, Inc. at a purchase price of $0.6514 per share. Each share of Series D convertible p referred stock will auto matically convert into one share
of Class A common stock upon the completion of this offering.

     Issuance of Series E Convertible Preferred Stock

       The following table summarizes the shares of Series E preferred stock purchased by directors, executive officers and our 5%
stockholders and persons and entities associated with them in private placement transactions. In April 2010, we sold 23,794,8 87 shares of
Series E p referred stock at a price of $0.6514 per share for gross proceeds of approximately $15.5 million. Each share of Series E

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convertible preferred stock will automat ically convert into one share of Class A common stock upon the completion of this offering.

                                                                                  Number of Shares
                                                                                     of Series E
                                                                                     Convertible               Aggregate
                                                                                   Preferred Stock           Purchase Price
              Executi ve Officers
              Trung T. Doan                                                                    57,111    $           37,202.11
              Dr. Anh Chuong Tran                                                              28,555    $           18,600.73
              Entities Affiliated with Directors
              Simp lot Taiwan, Inc. (Scott R. Simp lot and William J.
                 Whitacre)                                                                15,044,519     $       9,799,999.68
              JRS Properties III L.P. (Scott R. Simp lot)                                  4,345,169     $       2,830,443.09
              WI Harper Inc. Fund VI Ltd. (Peter Liu, a p rior director of
                 ours)                                                                        871,179    $         567,486.01
              Other 5% Stockhol ders
              Lite-On Technology USA, Inc.                                                  1,315,104    $         856,658.75

Investors' Rights Agreement

          We have entered into an investors' rights agreement with certain holders of our co mmon stock and convertible preferred stock,
including Trung T. Doan, The Trung Doan 2010 GRA T, Dr. Anh Chuong Tran, The Anh Chuong Tran 2010 GRA T, Simp lot Taiwan, Inc., JRS
Properties III L.P., WI Harper Inc. Fund VI Ltd. and Lite-On Technology USA, Inc. Th is agreement provides for certain rights relating to the
registration of their shares of common stock, including those issued upon conversion of their convertible preferred stock. See " Description of
Capital Stock—Reg istration Rights" below for additional informat ion.

Lite-On Agreements

     Warranty Agreement

       In March 2009, Taiwan SemiLEDs, entered into a warranty agreement with Lite-On Technology Corporation, which held
approximately 5.68% of our shares as of May 31, 2010, pursuant to which Taiwan SemiLEDs set forth the terms and conditions of certain
warranty obligations of Taiwan SemiLEDs relating to the sale and purchase by Lite-On Technology Corporation of certain LED devices of
Taiwan SemiLEDs.

Luxxon Agreements

     Asset Purchase Agreement

       In December 2006, Taiwan SemiLEDs, entered into an asset purchase agreement with Lu xxon Technology Co rporation, an affiliate of
Powerchip Technology Corporation, pursuant to which Lu xxon Technology Corporat ion sold substantially all of its assets to Taiwan
SemiLEDs in exchange for $3.6 million cash, 10,169,491 shares of our Series C convertible preferred stock, and warrants to purchase an
additional 4,067,796 shares of our Series C convertible preferred stock. Such warrants expired in July 2008.

     Lease Agreement

       In December 2006, Taiwan SemiLEDs, in connection with the Asset Purchase Agreement d escribed above, entered into a lease
agreement with Lu xxon Technology Corporation to lease certain premises and facilities located at Sin wu Taoyuan County, Taiwan fro m
Lu xxon Technology Corporation

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for a term of ten (10) years. During the lease term, the total rental and charges (excluding certain operating expenses) for the leased premises
and leased facilities ("Rental") are as follows:

          (i)
                  December 2006—November 2008: NT$1,000,000 per month;

          (ii)
                  December 2008—November 2010: NT$1,200,000 per month;

          (iii)
                  December 2010—November 2012: NT$1,440,000 per month; and

          (iv)
                  Thereafter, the rental rate shall periodically increase by 15 percent every two years until the exp iration of the lease term.

Indemni ficati on Agreements

          We also intend to enter into indemn ification agreements with each of our directors and officers. The indemnification agreements and
the certificate of incorporation and bylaws that we intend to adopt upon completion of this offering will require us to indemn ify our directors
and officers to the fullest extent permitted by Delaware law.

Empl oyment Agreements

        See " Executive Co mpensation—Emp loyment Agreements."

Equi ty Incenti ve Plan

        See " Executive Co mpensation—2005 Equity Incentive Plan" and "Executive Co mpensation —2010 Equ ity Incentive Plan."

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                                              PRINCIPAL AND S ELLING STOCKHOLDERS

          The fo llo wing table sets forth information regarding the beneficial ownership of our co mmon stock as of May 31, 2010 and as adjusted
to reflect the sale of the co mmon stock offered by us under this prospectus by:

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

     •
            each of our directors;

     •
            each of our named executive officers;

     •
            all directors and executive officers as a group; and

     •
            each selling stockholder.

         Beneficial ownership is determined in accordance with the rules of the SEC. All shares of our common stock subject to options
currently exercisable or exercisable within 60 days of May 31, 2010, are deemed to be outstanding for the purpose of computin g the percentage
ownership of the person holding options, but are not deemed to be outstanding for computing the percentag e of ownership of any other person.

         Un less otherwise indicated by the footnotes below, we believe, based on the information furn ished to us, that each stockholde r named
in the table has sole or shared voting and investment power with respect to all shares beneficially o wned, subject to applicable community
property laws.

        Percentage of ownership is based on 293,588,236 shares of common stock outstanding as of May 31, 2010, after givin g effect to the
conversion of our outstanding convertible preferred stock into shares of common stock in connection with this offering, and       shares
outstanding after this offering, assuming no exercise of the underwriters' overallot ment option.

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

                                              Shares Beneficially                               Shares Beneficially
                                              Owned Prior to the                                 Owned After the
                                                  Offering                                          Offering
                                                                              Number
                                                                              of Shares
                                                                               Offered
              Name and Address of
              Beneficial Owner              Number              Percent                       Number            Percent
              5% Stockholders
                and other selling
                stockholders:
              Simp lot
                Taiwan, Inc. (1)            138,590,843             47.21 %
                  999 Main Street,
                  Suite 1300
                  Boise, ID 83702
              Trung Tri Doan (2)
                                              45,723,777            15.57 %
              Dr. Anh Chuong
                 Tran (3)                     45,361,888            15.45 %
              Lite-On Technology
                 USA, Inc.                    16,666,654             5.68 %
                  90 Chien 1
                  Road, Chung Ho
                  Taipei Hsien
                  235, Taiwan
              Powerchip
                 Technology
                 Corporation (4)              16,271,185             5.54 %
                  15FL., No.68,
                  Sec.3, Nanking
                  E. Rd., Jungshan
                  Chiu, Taipei,
                  Taiwan 104,
                  R.O.C.
              Executive Officers
                 and Directors :
              Trung Tri Doan (2)
                                              45,723,777            15.57 %
              Dr. Anh Chuong
                Tran (3)                      45,361,888            15.45 %
              Richard Beck (5)
                                                 300,000                  *
              William J. Whitacre
                 (1)
                                            138,590,843             47.21 %
              Scott Simp lot (1)(6)
                                            142,936,012             48.69 %
              David Young
                                                 750,000                  *
              Jack S. Yeh
                                                 866,250                  *
              Lanfang (Lydia)
                Chin                               12,500                 *
              All executive
                officers and
                directors as a
                group (8 persons)           235,950,427             80.35 %
*
      Indicates beneficial ownership of less than 1%.


(1)
      Represents 138,590,843 shares held by Simplot Taiwan, Inc. Simplot Taiwan, Inc. is a wholly owned subsidiary of J.R. Simplot Company. Scott Simplot is the
      Chairman of J.R. Simplot Company. William J. Whitacre is a Director and President of Simplot Taiwan, Inc. and is the President and CEO of J.R. Simplot
      Company.



      Messrs. Simplot and Whitacre may be deemed to have shared voting and investment power over the shares held by Simplot Taiwan, Inc. Each of Messrs. Simplot
      and Whitacre disclaim beneficial ownership of such shares, except to the extent of such director's pecuniary interest therein .

(2)
      Includes 22,000,000 shares held by The Trung Doan 2010 GRAT.


(3)
      Includes 22,000,000 shares held by The Anh Chuong Tran 2010 GRAT.


(4)
      Represents (i) 6,101,694 shares held by Powerchip Technology Corporation ("PTC"), (ii) 3,998,680 shares held by PTC's affiliate Quantum Vision Corp.,
      (iii) 1,000,000 shares held by PTC's affiliate Zei Li Investment Corp.,


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                       (iv) 979,662 shares held by PTC's affiliate Powerworld Capital Mag and (v) 4,191,149 shares held by PTC's affiliat e Li Hsin Investment.

             (5)
                    Mr. Beck became our director in July 2010.


             (6)
                    Represents 4,345,169 shares held by JRS Properties III L.P. JRS Management L.L.C. is the sole general partner of JRS Properties III L.P. Scott Simplot is a
                    manager of JRS Management L.L.C.



                    Mr. Simplot may be deemed to have shared voting and investment power over the shares held by JRS Properties III L.P. Mr. Simplot disclaims beneficial
                    ownership of such shares, except to the extent of his pecuniary interest therein.


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                                                     DES CRIPTION OF CAPITAL STOCK

General

         Upon the closing of this offering, our authorized capital stock, after giv ing effect to the amendment and restatement of our certificate
of incorporation, will consist of           shares of common stock, $0.0000004 par value.

        The fo llo wing is a summary o f the rights of our common stock and preferred stock and certain provisions of our restated certificate of
incorporation and amended and restated bylaws, which we intend to adopt effective upon the completion of th e offering. The follo wing
summary is qualified by reference to the restated certificate of incorporation and the amended and restated bylaws that we wi ll file with the
SEC as exhib its to our registration statement, of which this prospectus is a part.

Common Stock

         As of May 31, 2010, after g iving effect to the conversion of our convertible preferred stock into common stock, there were
293,588,236 shares of common stock held of record by 132 stockholders. After giving effect to the sale of the s hares of commo n stock offered
by this prospectus there will be           shares of common stock outstanding, assuming no exercise of the underwriters' overallot ment option
and no exercise of outstanding options.

         Each holder of co mmon stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, in cluding the
election of directors, and each holder does not have cumulative voting rights.

         Subject to preferences that may be applicable to any then outstanding preferred stock, holders of co mmon stock are entitled to receive
ratably those dividends, if any, as may be declared fro m t ime to time by the board of directors out of legally available fund s. In the event of our
liquidation, d issolution or winding up, holders of co mmon stock will be entitled to share ratably in the net assets legally a vailab le fo r
distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to
the holders of any outstanding shares of preferred stock.

       Ho lders of our co mmon stock have no preemptive, subscription, redemption or conversion rights. All issued and outstanding sha res of
our common stock are valid ly issued, fully paid and nonassessable.

        The rights, preferences and privileges of holders of our co mmon stock are subject to, and may be adversely affected by, the r ights of
holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

        Prior to this offering, we have issued an aggregate of 192,064,223 shares of convertible preferred stock in designations of S eries A
through E. The convertible preferred stock is entitled to certain liquidation preferences, conversion rights and dividend rights. However,
pursuant to the automatic conversion provision of our certificate of incorporation, all outstanding shares of convertible pre ferred stock will be
converted to common stock on a one-for-one basis upon the completion of any public offering with aggregate gross proceeds to us of not less
than $50 million (prior to underwrit ing discounts and commissions).

        We currently have no plans to issue any other shares of convertible preferred stock, however, upon the closing of this offering, the
board of directors will be authorized, subject to any limitations prescribed by law, without stockholder approval, to issue u p to an aggregate
of           shares of preferred stock in one or more series and to fix the rights, preferences, priv ileges and restrictions

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granted to or imposed upon the preferred stock, including voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rig hts of holders of
any preferred stock that may be issued in the future. We have no present plans to issue any shares of preferred stock.

         Issuances of preferred stock, wh ile providing flexib ility in connection with possible acquisitions and for oth er corporate purposes, may
have the effect of delaying, deferring or preventing a change in control of SemiLEDs without further action by our stockholde rs. The issuance
of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of co mmon stock. In certain
circu mstances, an issuance of preferred stock could have an effect of decreasing the market price of our co mmon stock.

Registration Rights

     Demand Registration Rights

         After the co mplet ion of this offering, the holders of 192,064,223 shares of our common stock will be entitled to certain demand
registration rights. The holders of at least 40% of these shares can, on not more than three occasions, request that we regis ter all or a portion of
their shares if the aggregate price to the public of the shares offered would exceed $7,500,000. Under these demand registration rights, we are
required to cause the shares requested to be included in the registration statement as soon as practicable, subject t o customary conditions and
limitat ions. We will not be required to effect a demand reg istration during the period beginning 90 days prior to the filing and 180 days
following the effectiveness of the registration statement in this offering.

     Piggyback Registration Rights

         After the co mplet ion of this offering, in the event that we propose to register any of our securities under the Securities Ac t, either fo r
our own account or for the account of other security holders, the holders of 287,728,285 s hares of our co mmon stock will be en titled to certain
"piggyback" registration rights allowing the holder to include their shares in such registration, subject to certain market in g and other
limitat ions. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to a registration
related to employee benefit plans, debt securities or corporate reorganizat ions, the holders of these shares are entitled to notice of the
registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to
include their shares in the registration.

     Form S-3 Registration Rights

         After the co mplet ion of this offering, the holders of 192,064,223 shares of our common stock will be entitled to certain Form S-3
registration rights. Holders of at least 30% of these shares can make a written request that we register their shares on Form S-3 if we are
elig ible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $3,000,000. These
stockholders may make an unlimited number of requests for registration on Form S-3. However, we will not be required to effect a registration
on Form S-3 if we have effected two such registrations in a given 12-month period.

     Registration Expenses

        We will pay the registration expenses of the holders of the shares registered pursuant to th e demand, piggyback and Form S-3
registrations described above. In an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to
limit the number of shares such holders may include.

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     Expiration of Registration Rights

        The demand, piggyback and Form S-3 registration rights described above will exp ire, with respect to any particular stockholder, after
the completion of th is offering, when that stockholder can sell all of the shares that the stockholder proposes to sell under Ru le 144 of the
Securities Act or a similar exempt ion during any three-month period. In any event, all such registration rights shall exp ire five years after the
consummation of this offering.

Effect of Certai n Provisions of our Amended and Restated Certificate of Incorporation and B ylaws and the Delaware Anti -Takeover
Statute

     Certificate of Incorporation and Bylaws to be in Effect Upon the Completion of this Offering

         Our amended and restated certificate of incorporation to be in effect upon the complet ion of this offering will provide fo r o ur board of
directors to be divided into three classes with staggered three-year terms. On ly one class of directors will be elected at each annual meeting of
our stockholders, with the other classes continuing for the remainder of their respective three -year terms. Because our stockholders do not have
cumulat ive voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our
directors. Our amended and restated certificate of incorporation and amended and restated bylaws to be effective upon the completion of this
offering will prov ide that all stockholder actions must be effected at a duly called meet ing of stockholders and not by a consent in writ ing, and
that only a majority of the authorized directors of our board of directors may call a special meet ing of stockholders. The combination of the
classification of our board of d irectors and the lack of cu mulative voting will make it more d ifficu lt for our existing stockholders to replace our
board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the
power to retain and discharge our officers, these provisions could also make it mo re difficult for existing stockholders or o ther parties to effect
a change in management. In addit ion, the authorization of undesignated preferred stock makes it possible for our board of d irect ors to issue
preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.

         These provisions may have the effect of deterring hostile takeovers or delaying changes in our control or management. These
provisions are intended to enhance the likelihood of continued stability in the co mposition of our board of directors and its policies and to
discourage certain types of transactions that may involve an actual or threatened acquisition. These provisions are designed to reduce our
vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of discouraging others fro m making tender offers for our shares and, a s a consequence,
they also may inhib it fluctuations in the market price of our stock that could result fro m actual o r ru mored takeover attempts. Such provisions
may also have the effect of preventing changes in our management.

     Section 203 of the Delaware General Corporation Law

       We are subject to Section 203 of the Delaware General Corporation Law, which prohib its a Delaware corporation fro m engaging in any
business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested
stockholder, with the following exceptions:

     •
             before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted
             in the stockholder becoming an interested stockholder;

     •
             upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockh older
             owned at least 85% o f the voting stock of the

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          corporation outstanding at the time the transaction began, excluding fo r purposes of determining the voting stock outstanding (but not
          the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also
          officers and (ii) emp loyee stock plans in which emp loyee participants do not have the right to determine confidentially whether
          shares held subject to the plan will be tendered in a tender or exchange offer; or

     •
            on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting
            of the stockholders, and not by written consent, by the affirmative vote of at least 66 2 / 3 % of the outstanding voting stock that is
            not owned by the interested stockholder.

         In general, Sect ion 203 defines business combination to include the following:

     •
            any merger or consolidation involving the corporation and the interested stockholder;

     •
            any sale, transfer, pledge or other disposition of 10% or mo re of the assets of the corporation involving the interested stoc kholder;

     •
            subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of th e
            corporation to the interested stockholder;

     •
            any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series
            of the corporation beneficially o wned by the interested stockholder; or

     •
            the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or
            through the corporation.

         In general, Sect ion 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and
associates, beneficially o wns, or within three years prior to the time of deter mination of interested stockholder status did own, 15% or more of
the outstanding voting stock of the corporation.

     Acceleration of Options Upon C hange of Control

       We intend to adopt our 2010 Equ ity Incentive Plan before the registration statemen t on Form S-1, of which this prospectus is a part,
becomes effective. The 2010 Equ ity Incentive Plan will beco me effective on the effect ive date of the registration statement o f which this
prospectus is a part. The compensation committee may determine that awards granted under the 2010 Equity Incentive Plan will vest or will
become exercisable (as applicable) on an accelerated basis if we experience a change in control. Awards will be subject to th e agreement
evidencing a change in control, as described below. Unvested awards (or portions thereof) may be treated in any manner permis sible by
applicable law, including (without limitation) cancellation for no consideration. Vested options, stock appreciation rights a nd stock units may
be continued by us if we are the surviving corporation or assumed or substituted by the surviving corporation or its parent with new awards. In
addition, vested options and stock appreciation rights may be cancelled for consideration equal to the excess of the fair mar ket value of our
common stock as of the closing date of the change in control over the exercise price of the awards, and vested stock units ma y be canceled for a
payment equal to the fair market value of our co mmon stock as of the closing date of the change in control.

         A change in control includes:

     •
            a merger or consolidation or any other corporate reorganization or business combination transaction of our company with or in to
            another corporation, entity or person;

     •
            a sale, transfer or other disposition of all or substantially all of our assets;

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     •
            a pro xy contest that results in the replacement of more than 50% o f our directors over a 24-month period; or

     •
            an acquisition of 50% or more of our outstanding stock by any person or group, other than a person related to us (such as a h olding
            company owned by our stockholders or a trustee or other fiduciary holding securities under an employee benefit plan of ours or of
            a parent or a subsidiary of ours).

         Generally, under our 2010 Equity Incentive Plan, if we experience a merger, consolidatio n or asset sale, each outstanding option or
stock purchase right will be assumed or an equivalent option or right will be substituted by such successor corporation or a parent or subsidiary
of such successor corporation, unless such successor corporation o r a parent or subsidiary of such successor corporation does not agree to
assume the award or to substitute an equivalent option or right, in which case such option or stock purchase right will terminate upon the
consummation of the transaction.

Transfer Agent and Registrar

        The transfer agent and registrar for our co mmon stock will be A merican Stock Transfer & Trust Co mpany, and its address is 1218
Third Avenue, Suite 1700, Seattle, Washington 98101.

NASDAQ Global Market Listing

         We will apply to have our common stock quoted on the NASDAQ Global Market under the symbol "LEDS."

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                                                    SHARES ELIGIBLE FOR FUTUR E SALE

          Before this offering, there has not been a public market for shares of our common stock. Future sales of substantial amounts of shares
of our co mmon stock, including shares issued upon the exercise of outstanding options, in the public market after this offering, or the
possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity
capital in the future.

          Upon the comp letion of this offering a total of                shares of co mmon stock will be outstanding, assuming that there are no
exercises of options after May 31, 2010. Of these shares, all                   shares of common stock sold in this offering by us and the selling
stockholders, plus any shares sold upon exercise of the underwriters' overallot ment option, will be freely t radable in the pu blic market without
restriction or further registration under the Securities Act, unless thes e shares are held by "affiliates," as that term is defined in Rule 144 under
the Securities Act.

         The remain ing                 shares of common stock will be "restricted securities," as that term is defined in Ru le 144 under the
Securities Act. These restricted securities are eligible for public sale only if they are reg istered under the Securities Act or if they qualify for an
exemption fro m reg istration under Rules 144 or 701 under the Securities Act, wh ich are su mmarized below.

         Subject to the lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, these restricted
securities will be available for sale in the public market as follows:

                                                                                                                        Number of
               Date                                                                                                      Shares
               On the date of this prospectus                                                                                       —
               Between 90 and 180 days after the date of this prospectus                                                            —
               At various times beginning more than 180 days after the date of this prospectus

        In addit ion, of the 9,668,775 shares of our co mmon stock that were subject to stock options outstanding as of May 31, 2010, options to
purchase 2,967,425 shares of co mmon stock were vested as of May 31, 2010 and will be elig ible for sale at various times beginning mo re than
180 days after the date of this prospectus.

Rule 144

          In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who is not our affiliate and has not been our
affiliate at any time during the preceding three months will be entitled to sell any shares of our common stock that such person has beneficially
owned for at least six months, including the holding period of any prior owner other than one of our affiliates, without rega rd to volume
limitat ions. Sales of our co mmon stock by any such person would be subject to the availability of current public informat ion about us if the
shares to be sold were beneficially o wned by such person for less than one year.

         In addit ion, under Ru le 144, a person may sell shares of our common stock acquired fro m us immediately upon the closing of this
offering, without regard to volume limitations or the availability of public informat ion about us, if:

     •
             the person is not our affiliate and has not been our affiliate at any time during the preceding three months; and

     •
             the person has beneficially owned the shares to be sold for at least one year, including the holding period of any prior o wne r other
             than one of our affiliates.

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         Beginning 90 days after the date of this prospectus, our affiliates who have beneficially owned shares of our common stock for at least
six months, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:

     •
             1% of the number of shares of our common stock then-outstanding, which will equal appro ximately                         shares
             immed iately after this offering; and

     •
             the average weekly trad ing volu me in our co mmon stock during the four calendar weeks preceding the date of filing of a notice of
             proposed sale of securities pursuant to Rule 144 with respect to the sale.

         Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirement s and to the availability of
current public in formation about us.

Rule 701

        In general, under Rule 701 as currently in effect, any of our emp loyees, consultants or advisors who purchase shares from us in
connection with a co mpensatory stock or option plan or other written agreement in a transaction before the effective date of this offering that
was completed in reliance on Rule 701 and comp lied with the requirements of Ru le 701 will, subject to the lock-up restrictions described
below, be eligible to resell such shares 90 days after the effective date of the registration statement of which this prospectus is a part in reliance
on Rule 144, but without compliance with certain restrict ions, including the holding period, contained in Rule 144.

Lock-Up Agreements

         In connection with this offering, our o fficers, directors, and existing holders of all of our securities have agreed with the underwriters,
subject to certain exceptions, not to dispose of or hedge any of our common stock or securities convertible into or exchangea ble for shares of
common stock, file or cause to be filed a reg istration statement covering shares of common stock or any securities that are convertible into,
exchangeable for, or represent the right to receive, co mmon stock or any substantially similar securities, or publicly disclo se the intention to do
any of the foregoing restrictions, during the period fro m the date of this prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Barclays Capital Inc. This
agreement is subject to certain exceptions, and is also subject to extension for up to an additional 34 days, as set forth in "Underwriting."

Registration Rights

         Upon co mpletion of th is offering, the holders of 287,728,285 shares of co mmon stock, assuming the conversion of our convertible
preferred stock into co mmon stock effective immediately prior to the closing of this offering, o r their transferees will be e ntitled to various
rights with respect to the registration of these shares under the Securities Act. Reg istration of these shares under the Securities Act would result
in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of th e registration
statement, except for shares purchased by affiliates. See "Description of Capital Stock —Reg istration Rights" for additional info rmation.

Registration Statements

         We intend to file a registration statement on Form S-8 under the Securities Act covering all of the shares of common stock subject to
options outstanding or reserved for issuance under our stock plans. We expect to file this registration statement as soon as practicable after this
offering. Ho wever, none of the shares registered on Form S-8 will be elig ible for resale until the exp irat ion of the lock-up agreements to which
they are subject.

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         MATERIAL U.S. FED ERAL INCOME TAX CONS EQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK

        The fo llo wing discussion is a summary of material U.S. federal inco me tax considerations generally applicable to non -U.S. holders of
our common stock that acquire shares of our common stock pursuant to th is offering and that hold such shares as capital assets (generally, for
investment). This summary does not purport to be a complete analysis of all the potential tax considerations relative thereto .

         For purposes of this discussion, a non-U.S. holder is any beneficial owner that for U.S. federal income tax purposes is not a
U.S. person or a partnership. The term U.S. person means:

     •
            an individual who is a citizen or resident of the United States;

     •
            a corporation or other entity taxab le as a corporation created in or organized under the laws of the United States, any state thereof
            or the District o f Colu mb ia;

     •
            an estate the income of which is subject to U.S. federal inco me taxation regardless of its source; or

     •
            a trust (x) if a court within the Un ited States is able to exercise primary supervision over the administration of such trust and one or
            more U.S. persons have the authority to control all substantial decisions of such trust or (y) that has a valid elect ion in effect under
            applicable U.S. Treasury regulations to be treated as a U.S. person.

          If a partnership or other pass-through entity holds shares of our common stock, the U.S. federal income tax treat ment o f a partner in
the partnership generally will depend upon the status of the partner or member and the activities of the partnership or other entity. Accordingly,
we urge partnerships or other pass -through entities that hold shares of our common stock and partn ers or members in these partnerships or other
entities to consult their tax advisors.

          This summary does not consider specific facts and circumstances that may be relevant to a particular non -U.S. holder's tax position
and does not consider the state, local or non-U.S. tax consequences of an investment in our co mmon stock or the U.S. federal gift and estate tax
consequences of an investment in our co mmon stock, except to the limited extent discussed below. It also does not apply to no n-U.S. ho lders
subject to special tax treat ment under the U.S. federal inco me tax laws (including partnerships or other pass -through entities, banks, insurance
companies, persons subject to the alternative minimu m tax, traders in securit ies that elect to use a mark -to-market method of accounting for
their securities holdings, persons deemed to sell our co mmon stock under the constructive sale provisions of the Internal Rev enue Code,
tax-exempt organizat ions, dealers in securities or currency, persons who hold common stock as part of a "straddle," "hedge," "conversion
transaction" or other risk-reduction or integrated transaction, controlled foreign corporations, passive foreign investment companies, companies
that accumulate earnings to avoid U.S. federal income tax, tax-exempt organizations, certain former U.S. cit izens or long-term residents and
persons who hold or receive co mmon stock as compensation). This summary is based upon the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury regulations, U.S. Internal Revenue Service (the "IRS") rulings and pronouncements and
judicial decisions in effect, all of which are subject to change, possibly on a retroactive basis, or differing interpretatio ns.

          This summary is included herein as general informati on only. Accordingly, each pros pecti ve stockhol der is urged to consult
its tax advisor with respect to the U.S. federal, state, local and non-U.S. i ncome and other tax consequences of hol di ng and dis posing of
our common stock.

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     Distributions

         Distributions of cash or property that we may pay in respect of our common stock will constitute dividends for U.S. fed eral inco me tax
purposes to the extent paid fro m our current or accu mulated earn ings and profits (as determined under U.S. federal inco me tax principles).
Div idends that we pay on our common stock to a non-U.S. holder generally will be subject to U.S. federal withholding tax at a 30% rate, o r at a
reduced rate prescribed by an applicable inco me tax treaty. If the amount of a distribution exceeds our current and accumulat ed earnings and
profits, such excess first will be treated as a tax-free return of capital to the extent of the non-U.S. holder's tax basis in our co mmon stock, and
thereafter will be treated as gain fro m the sale of stock. In order to obtain a reduced rate of U.S. federal withholding tax under an applicable
income tax treaty, a non-U.S. holder will be required to provide our paying agent a properly executed IRS Form W-8BEN or other appropriate
version of IRS Form W-8 certifying its entitlement to benefits under the treaty. A non -U.S. holder o f our co mmon stock that is elig ible for a
reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing
an appropriate claim fo r a refund with the IRS. A non-U.S. holder should consult its own tax advisor regarding its possible entitlement to
benefits under an inco me tax t reaty.

         The U.S. federal withholding tax described in the preceding paragraph does not apply to dividends that represent U.S. trade or business
income of a non-U.S. holder who provides a properly executed IRS Form W-8ECI, properly cert ify ing that the dividends are effectively
connected with the non-U.S. holder's conduct of a trade or business within the United States. In such circumstances, dividends will also be
subject to tax on a net income basis as described below under the caption entitled " —U.S. Trade or Business Income."

     Dispositions

        A non-U.S. ho lder generally will not be subject to U.S. federal inco me or withholding tax in respect of any gain on a sale, exchange or
other taxable disposition of common stock unless:

     •
             the gain is U.S. trade or business income (as described below);

     •
             the non-U.S. holder is an indiv idual who is present in the United States for 183 or mo re days in the taxable year o f the disposition
             and meets other conditions; or

     •
             our common stock constitutes a U.S. real property interest by reason of our status as a "U.S. real p roperty holding corporation"
             (which we refer to as USRPHC) under Section 897 of the Code at any time during the shorter of the five-year period ending on the
             date of disposition and the non-U.S. Ho lder's holding period for our co mmon stock.

         If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax on the gain
derived fro m the sale, wh ich tax may be offset by U.S. source capital losses (even though you are not considered a resident of the United
States). You should consult any applicable income tax or other treat ies that may provide for different ru les.

          In general, a corporation is a USRPHC if the fair market value o f its "U.S. real property interests" equals or exceeds 50% of the sum of
the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or busine ss. If we are determined
to be a USRPHC, the U.S. federal inco me and withholding taxes relat ing to interests in USRPHCs nevertheless will not apply to gains derived
fro m the sale or other d isposition of our co mmon stock by a non -U.S. holder whose shareholdings, actual and constructive, at all times during
the applicable period, amount to 5% or less of our common sto ck, provided that our common stock is regularly traded on an established
securities market. We do not believe that we currently are a USRPHC, and we do not anticipate becoming a USRPHC in the fut ure . Ho wever,
no assurance can be given that we

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will not be a USRPHC, or that our common stock will be considered regularly traded, when a non -U.S. holder sells its shares of our common
stock.

     U.S. Trade or B usiness Income

        Fo r purposes of this discussion, dividend income and gain on the sale, exchange or other taxab le disposition of our common st ock will
be considered to be "U.S. trade or business income" if such income or gain is (i) effectively connected with the conduct by a non-U.S. holder of
a trade or business within the United States and (ii) in the case of a non-U.S. holder that is eligible for the benefits of an income tax treaty with
the United States, attributable to a permanent establishment (or, for an individual, a fixed base) maintained by the non -U.S. holder in the Un ited
States. Generally, U.S. trade or business income is not subject to U.S. federal withholding tax (provided the non-U.S. holder co mp lies with
applicable cert ification and disclosure requirements); instead, a non -U.S. holder is subject to U.S. federal inco me tax on a net income basis at
regular U.S. federal inco me tax rates (in the same manner as a U.S. person) on its U.S. trade or business income. Any U.S. trad e or business
income received by a non-U.S. holder that is a corporation also may be subject to a "branch profits tax" at a 30% rate, or at a lo wer rate
prescribed by an applicable inco me tax treaty, under specific circu mstances. You should consult any applicable inco me tax or o ther treaties that
may provide for d ifferent rules.

     U.S. Federal Estate Taxes

        Shares of our co mmon stock owned or treated as owned by an individual who is not a cit izen o r resident of the Un ited States ( as defined
for United States federal estate tax purposes) at the time of death will generally be included in the indiv idual's gross estate for U.S. federal
estate tax purposes, and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise. Ho wever, it is
currently uncertain how the U.S. federal estate tax will be imp lemented and admin istered in 2010.

Information Reporting and B ackup Wi thhol ding Requirements

          We must annually report to the IRS and to each non-U.S. holder any dividend inco me that is subject to U.S. federal wit hholding tax, or
that is exempt fro m such withholding tax pursuant to an income tax treaty. This report includes the amount of dividends paid to each
individual, the indiv idual's name and address, and the amount of tax withheld, if any. Copies o f these informat ion returns also may be made
available under the provisions of a specific treaty or agreement to the tax authorities of the country in wh ich the non -U.S. holder resides. Under
certain circu mstances, the Code imposes a backup withholding obligation (currently at a rate of 28%) on certain reportable payments.
Div idends paid to a non-U.S. holder of our co mmon stock generally will be exempt fro m backup withholding if the non -U.S. holder provides a
properly executed IRS Form W-8BEN or otherwise establishes an exemption.

          The payment of the proceeds fro m the disposition of our common stock to or through the U.S. o ffice of any broker, Un ited States or
foreign, will be subject to informat ion reporting and possible backup withholding unle ss the owner certifies as to its non-U.S. status under
penalties of perjury or otherwise establishes an exempt ion, for examp le, on IRS Form W -8BEN, provided that the broker does not have actual
knowledge or reason to know that the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied. The
payment of the proceeds from the disposition of our common stock to or through a non -U.S. office of a non-U.S. bro ker will not be subject to
informat ion reporting or backup withholding unless the non-U.S. b roker has certain types of relationships with the Un ited States (which we
refer to as a U.S. related person). In the case of the payment of the proceeds fro m the disposition of our common stock to or through a
non-U.S. office of a broker that is either a U.S. person or a U.S. related person, the Treasury regulations require

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informat ion reporting (but not the backup withholding) on the payment unless the broker has documentary evidence in its files that t he owner is
a non-U.S. holder and the broker has no knowledge to the contrary. Non -U.S. holders should consult their own tax advisors on the application
of information reporting and backup withholding to them in their particular circu mstances (including upon their disposition o f our common
stock).

         Backup withholding is not an additional tax. Any amounts withheld under th e backup withholding rules fro m a pay ment to a
non-U.S. holder will be refunded or credited against the non-U.S. holder's U.S. federal income tax liability, if any, provided that the required
informat ion is furnished to the IRS.

Recentl y Enacted Legislation Affecting Taxation of Our Common Stock Hel d B y or Through Foreign Entities

         Recently enacted legislation generally will impose a U.S. federal withholding tax o f 30% on dividends and the gross proceeds of a
disposition of our common stock paid after December 31, 2012 to a foreign financial institution (as specifically defined under these rules)
unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the
U.S. tax authorities substantial in formation regard ing U.S. account holders of such institution (which includes certain equity and debt holders
of such institution, as well as certain account holders that are foreign entities with U.S. owners). The leg islation also will generally impose a
U.S. federal withholding tax of 30% on div idends and the gross proceeds of a disposition of our co mmon stock paid after December 31, 2012
to a non-financial foreign entity unless such entity provides the withholding agent with a cert ificat ion identifying the direct and indirect
U.S. owners of the entity. Under certain circu mstances, a non-U.S. holder might be elig ible for refunds or credits of such taxes. Prospective
investors are encouraged to consult with their o wn tax advisors regarding the possible imp licat ions of this legislation on their investment in our
common stock.

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                                                                 UNDERWRITING

        Merrill Lynch, Pierce, Fenner & Smith Incorporated and Barclays Capital Inc. are acting as representatives of each of the underwriters
named below. Subject to the terms and conditions set forth in a purchase agreement among us, the selling stockholders and the underwriters,
we and the selling stockholders have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to
purchase fro m us and the selling stockholders, the number of shares of common stock set forth opposite its name below.

                                                                                                         Number of
                                             Underwriter                                                  Shares
                              Merrill Lynch, Pierce, Fenner & Smith
                                           Incorporated
                              Barclays Capital Inc.
                              Jefferies & Co mpany, Inc.
                              Canaccord Genuity Inc.
                              Caris & Co mpany, Inc.

                                            Total


        Subject to the terms and conditions set forth in the purchase agreement, the underwriters have agreed, severally and not join tly, to
purchase all o f the shares sold under the purchase agreement if any of these shares are purchased. If an unde rwriter defaults, the purchase
agreement provides that the purchase commit ments of the nondefaulting underwriters may be increased or the purchase agreement may be
terminated.

         We and the selling stockholders have agreed to indemnify the underwriters against certain liab ilities, including liab ilities under the
Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

         The underwriters are offering the s hares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of
legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreemen t, such as the receipt
by the underwriters of officer's cert ificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify o ffers to the
public and to reject orders in whole or in part.

Commissions and Discounts

         The representatives have advised us that the underwriters propose initially to offer the shares to the public at the public offering price
set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $        per share. After the in itial
offering, the public offering price, concession or any other term of the offering may be changed.

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        The fo llo wing table shows the public offering price, underwriting discount and proceeds before expenses to us. The informat io n
assumes either no exercise or full exercise by the underwriters of their overallot ment option.

                                                                               Without                   With
                                                           Per Share           Option                   Option
                              Public o ffering
                                price                  $                  $                         $
                              Underwrit ing
                                discount               $                  $                         $
                              Proceeds, before
                                expenses, to
                                SemiLEDs
                                Corporation            $                  $                         $
                              Proceeds, before
                                expenses, to the
                                selling
                                stockholders           $                  $                         $

        The expenses of the offering, not including the underwriting discount, are estimated at $                   and are payable by us. The
underwriters have agreed to reimburse us for certain expenses related to this offering.

Overallotment Option

         We and the selling stockholders have granted an option to the underwriters to purchase up to                    additional shares at the
public offering price, less the underwrit ing discount. The underwriters may exercise this option for 30 days fro m the date of this prospectus
solely to cover any overallotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the
purchase agreement, to purchase a number of addit ional shares proportionate to that underwriter's initial amount reflected in the above table.

Reserved Shares

        At our request, the underwriters have reserved for sale, at the initial public offering price, up to                shares offered by this
prospectus for sale to some of our directors, officers, emp loyees, distributors, dealers, business associates and related persons. If these persons
purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not so
purchased will be o ffered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.

No Sales of Si milar Securities

         We, the selling stockholders, our executive officers and directors and our other existing security holders have agreed not to sell or
transfer any common stock or securities convertible into, exchangeable for, exercisable for, or repayable with common stock, for 180 days after
the date of this prospectus without first obtaining the written consent of each of Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Barclays Capital Inc. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly

     •
             offer, pledge, sell or contract to sell any co mmon stock,

     •
             sell any option or contract to purchase any common stock,

     •
             purchase any option or contract to sell any co mmon stock,

     •
             grant any option, right or warrant for the sale of any co mmon stock,

     •
             lend or otherwise dispose of or transfer any common stock,

     •
             request or demand that we file a registration statement related to the common stock, or
136
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     •
             enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common
             stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

         This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for o r repayable with
common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for wh ich the person
executing the agreement later acquires the power of d isposition. In the event that either (x) during the last 17 days of the lock-u p period
referred to above, we issue an earnings release or material news or a material event relating to us occurs or (y) prior to the exp iration of the
lock-up period, we announce that we will release earnings results or become aware that material news or a material event will o ccu r during the
16-day period beginning on the last day of the lock-up period, the restrict ions described above shall continue to apply until the expirat ion of the
18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

NASDAQ Global Market Listing

       We expect the shares to be approved for listing on the NASDAQ Global Market, subject to notice of issuance, under the symbol
"LEDS."

        Before this offering, there has been no public market for our co mmon stock. The initial public offering price will be determined
through negotiations between us and the representatives. In addition to prevailing market conditions, the factors to be considered in
determining the in itial public offering price are

     •
             the valuation mult iples of publicly traded co mpanies that the representatives believe to be co mparable to us;

     •
             our financial informat ion;

     •
             the history of, and the prospects for, our co mpany and the industry in which we co mpete;

     •
             an assessment of our management, its past and present operations, and the prospects for, and timing of, our futu re revenues;

     •
             the present state of our development; and

     •
             the above factors in relat ion to market values and various valuation measures of other companies engaged in activities simila r t o
             ours.

        An active trading market fo r the shares may not develop. It is also possible that after the offering the shares will not trad e in the public
market at or above the initial public offering price.

         The underwriters do not expect to sell mo re than 5% o f the shares in the aggregate to accounts over which they exercise discretionary
authority.

Price Stabilization, Short Positions and Penalty Bi ds

         Until the distribution of the shares is completed, SEC ru les may limit underwriters and selling group members fro m b idding fo r and
purchasing our common stock. Ho wever, the representatives may engage in transactions that stabilize the price of the common s tock, such as
bids or purchases to peg, fix or maintain that price.

         In connection with the offering, the underwriters may purchase and sell our co mmon stock in the open market. These transactio ns may
include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the
sale by the underwriters of a greater nu mber of shares than they are required to purchase in the offering.

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"Covered" short sales are sales made in an amount not greater than the underwriters' overallotment option described above. Th e underwriters
may close out any covered short position by either exercising their overallot ment option or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as co mpared to the price at wh ich they may purchase shares through the overallot men t option.
"Naked" short sales are sales in excess of the overallot ment option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may b e downward
pressure on the price of our co mmon stock in the open market after pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the o pen market prior
to the completion of the offering.

          The underwriters may also impose a penalty bid. Th is occurs when a particular underwriter repays to the underwriters a portion of t he
underwrit ing discount received by it because the representatives have repurchased shares sold by or for the account of such u nderwriter in
stabilizing or short covering transactions.

         Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or
maintaining the market price of our co mmon stock or preventing or retarding a decline in the market price of our co mmon stock. As a result,
the price of our co mmon stock may be higher than the price that might otherwise exist in the open market. The underwriters ma y conduct these
transactions on the NASDAQ Global Market, in the over-the-counter market or otherwise.

         Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect t hat the
transactions described above may have on the price of our co mmon stock. In addition, neither we nor any of the underwriters make any
representation that the representatives will engage in these transactions or that these transactions, once commenced, will no t be discontinued
without notice.

Electronic Offer, Sale and Distri buti on of Shares

         In connection with the offering, certain of the underwriters or securities dealers may d istribute prospectuses by electronic means, such
as e-mail. In addition, certain of the underwriters may facilitate Internet distribution for this offering to certain of its Internet subscription
customers. These underwriters may allocate a limited nu mber of shares for sale to their online brokerage customers. An electro nic prospectus is
available on the Internet web s ite maintained by certain of the underwriters. Other than the prospectus in electronic format, the information on
an underwriter's Internet web site is not part of this prospectus.

Other Relationships

        So me o f the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other
commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future re ceive, customary
fees and commissions for these transactions.

Notice to Prospecti ve Investors in the EEA

         In relat ion to each Member State of the Eu ropean Economic Area which has imp lemented the Prospectus Directive (each, a "Relev ant
Member State") an offer to the public of any shares which are the subject of the offering contemp lated by this prospectus may not be made in
that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares may be made at

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any time under the following exemptions under the Prospectus Direct ive, if they have been implemented in that Re levant Member State:

          (a)
                 to legal entities wh ich are authorized or regulated to operate in the financial markets or, if not so authorized or regulated ,
                 whose corporate purpose is solely to invest in securities;

          (b)
                 to any legal entity which has two or mo re of (1) an average of at least 250 emp loyees during the last financial year; (2) a total
                 balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual
                 or consolidated accounts;

          (c)
                 by the underwriters to fewer than 100 natural o r legal persons (other than "qualified investors" as defined in the Prospectus
                 Directive) subject to obtaining the prior consent of the representatives for any such offer; or

          (d)
                 in any other circu mstances falling with in Article 3(2) o f the Prospectus Direct ive;

provided that no such offer of shares shall result in a requirement for the publication by us or any representative of a pros pectus pursuant to
Article 3 of the Prospectus Direct ive.

         Any person making or intending to make any offer of shares within the EEA should only do so in circu mstances in which no
obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the selling stockholders nor the
underwriters have authorized, nor do they authorize, the making of any offer of shares through any financial intermed iary, ot her than offers
made by the underwriters which constitute the final offering of shares contemplated in this prospectus.

         For the purposes of this provision, and your representation below, the expression an "offer to the public" in relation to any shares in
any Relevant Member State means the communicat ion in any form and by any means of sufficient informat ion on the terms of t he offer and
any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in that Rele vant Member State
by any measure imp lementing the Prospectus Directive in that Relevant Member State and the expression "Prospectus Directive" means
Directive 2003/71/ EC and includes any relevant imp lementing measure in each Relevant Member State.

         Each person in a Relevant Member State who receives any communication in resp ect of, or who acquires any shares under, the offer of
shares contemplated by this prospectus will be deemed to have represented, warranted and agreed to and with us and each under writer that:

          (a)
                 it is a "qualified investor" within the meaning of the law in that Relevant Member State imp lementing Article 2(1)(e) of the
                 Prospectus Directive; and

          (b)
                 in the case of any shares acquired by it as a financial intermed iary, as that term is used in Article 3(2) of the Prospectus
                 Directive, (i) the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a
                 view to their offer or resale to, persons in any Relevant Member State other than "qualified investors" (as defined in the
                 Prospectus Directive), or in circu mstances in which the prior consent of the representatives has been given to the offer or
                 resale; or (ii) where shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified
                 investors, the offer of those shares to it is not treated under the Prospectus Direct ive as having been made to such persons.

        In addit ion, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subseq uently
made may only be directed at persons who are "qualified investors" (as defined in the Prospectus Direct ive) (i) who have professional
experience in matters relat ing to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial

                                                                         139
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Pro motion) Order 2005, as amended (the "Order") and/or (ii) who are high net worth co mpanies (or persons to whom it may otherwise be
lawfully co mmunicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons").
This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any
investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.

Notice to Prospecti ve Investors in S witzerland

          This document, as well as any other material relating to the shares which are the subject of the offering contemplated by this
prospectus, do not constitute an issue prospectus pursuant to Article 652a and/or 1156 of the Swiss Code of Ob ligations. The shares will not be
listed on the SIX Swiss Exchange and, therefore, the documents relating to the shares, including, but not limited to, this do cument, do not claim
to comply with the disclosure standards of the listing rules of SIX Swiss Exchange and corresponding prospectus schemes annexed to the
listing ru les of the SIX Swiss Exchange. The shares are being offered in Swit zerland by way of a p rivate placement, i.e. , to a small nu mber of
selected investors only, without any public offer and only to investors who do not purchase the shares with the intention to distribute them to
the public. The investors will be individually approached by the issuer fro m time to time. Th is document, as well as any ot her material relating
to the shares, is personal and confidential and do not constitute an offer to any other person. This document may only be use d by those
investors to whom it has been handed out in connection with the offering described herein and may neither d irect ly nor indirectly be distributed
or made available to other persons without express consent of the issuer. It may not be used in connection with any other off er and shall in
particular not be copied and/or distributed to the public in (or fro m) Switzerland.

Notice to Prospecti ve Investors in the Dubai Internati onal Financi al Centre

          This document relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Serv ices Auth ority.
This document is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, an y
other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with
exempt offers. The Dubai Financial Serv ices Authority has not approved this document nor taken steps to verify the informat io n set out in it,
and has no responsibility for it. The shares which are the subject of the offering contemplated by this pros pectus may be illiquid and/or subject
to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the s hares. If you do not
understand the contents of this document you should consult an authorised financial adviser.

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                                                                LEGAL MATTERS

        The validity of the co mmon stock being offered by this prospectus will be passed upon for us by Orrick, Herrington & Sutcliffe LLP,
Hong Kong, which has acted as our counsel in connection with this offering. Certain legal matters as to Taiwan law will be passed upon for us
by Lee and Li Attorneys-at-Law, and as to PRC law by Haiwen & Partners. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, Californ ia is representing the underwriters in this offering.


                                                                     EXPERTS

         The consolidated financial statements and financial statement schedule of SemiLEDs Co rporation as of August 31, 2009 and 2008, and
for each of the years in the three-year period ended August 31, 2009 have been included herein in reliance upon the report of KPM G LLP,
independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and
auditing.


                                              WHERE YOU CAN FIND MORE INFORMATION

          We have filed with the SEC a registration statement on Form S-1 under the Securit ies Act with respect to this offering of our co mmon
stock. This prospectus, which constitutes a part of the registration statement, does not contain all of the in formation set forth in the registration
statement, some items of which are contained in exhib its to the registration statement as permitted by the rules and regulations of the SEC. For
further info rmation with respect to us and our common stock, we refer you to the registration statement, including the exh ibits and the financial
statements and notes filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any
contract or any other document are not necessarily co mplete. If a contract or document has been filed as an exhibit to the re g istration statement,
please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as
an exhibit is qualified in all respects by the filed exh ibit. The exh ibits to the registration state ment should be referenced for the complete
contents of these contracts and documents. You may obtain copies of this information by mail fro m the Public Reference Sect io n of the SEC,
100 F Street, N.E., Roo m 1580, Washington, D.C. 20549, at prescribed rates . You may obtain informat ion on the operation of the public
reference roo ms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements
and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

        Upon co mpletion of th is offering, we will become subject to the informat ion and reporting requirements of the Exchange Act an d, in
accordance with this law, will file periodic reports, proxy statements and other information with the SEC. These periodic report s, proxy
statements and other informat ion will be availab le for inspection and copying at the SEC's public reference facilities and th e website of the
SEC referred to above.

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                                     INDEX TO CONSOLIDATED FINANCIAL S TATEMENTS

                                                                                                Page
             Report of Independent Registered Public Accounting Firm                              F-2
             Consolidated Balance Sheets                                                          F-3
             Consolidated Statements of Operations                                                F-4
             Consolidated Statements of Stockholders' Equity and Co mprehensive Income (Loss)     F-5
             Consolidated Statements of Cash Flows                                                F-6
             Notes to Consolidated Financial Statements                                           F-7
             Financial Statement Schedule:
                Schedule II—Valuation and Qualifying Accounts                                    F-36

                                                                 F-1
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                              REPORT OF INDEPENDENT REGIS TERED PUB LIC ACCOUNTING FIRM

The Board of Directors and Stockholders
SemiLEDs Corporation:

          We have audited the accompanying consolidated balance sheets of SemiLEDs Corporat ion and subsidiaries as of August 31, 2009 and
2008, and the related consolidated statements of operations, stockho lders' equity and comprehensive income (loss), and cash flows for each of
the years in the three-year period ended August 31, 2009. In connection with our audits of the consolidated financial statements, we also have
audited the consolidated financial statement schedule included herein. These consolidated financial statements and financial statement schedule
are the responsibility of the Co mpany's management. Our responsibility is to exp ress an opinion on these consolidated financial statements and
financia l statement schedule based on our audits.

         We conducted our audits in accordance with the standards of the Public Co mpany Accounting Oversight Board (United States). Th ose
standards require that we plan and perfo rm the audit to obtain reasonable assurance about whether the financial statements ar e free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by mana gement, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

          In our opin ion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SemiLEDs Corporation and subsidiaries as of August 31, 2009 and 2008, and the results of their operations and their cash flows for each of the
years in the three-year period ended August 31, 2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relat ion to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

          The acco mpanying consolidated financial statements and financial statement schedule have been prepared assuming that the Co mp any
will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Co mpany has suffered recurring losses
fro m operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard t o these matters are
also described in note 1. The consolidated financial statements and financial statement schedule do not include any adjustments that might
result fro m the outcome of this uncertainty.

                                                                (signed) KPM G LLP

Boise, Idaho
August 6, 2010

                                                                         F-2
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                                                       S EMILEDS CORPORATION
                                                       Consolidated B alance Sheets

                                            (In thousands, except for share and per share amounts)

                                                                            August 31,           August 31,             May 31,
                                                                              2008                 2009                  2010
                                                                                                                      (Unaudited)
             ASSETS
             CURRENT ASSETS:
               Cash and cash equivalents                                $        11,120      $        13,715      $          14,157
               Accounts receivable, net of allowance for doubtful
                 accounts and sales returns of $92, $112 and $268
                 as of August 31, 2008, 2009 and May 31, 2010
                 (unaudited)                                                      3,496                2,959                  6,235
               Accounts receivable fro m related parties                            132                   —                      40
               Inventory                                                          6,253                7,561                  9,466
               Prepaid expenses and other current assets                            191                  410                    303

                         Total current assets                                    21,192               24,645                 30,201
             Property, plant and equipment, net                                  21,151               24,678                 28,983
             Intangible assets, net                                                 105                  144                    342
             Investments in unconsolidated entities                                 714                  714                 16,076
             Other assets                                                           578                  620                    705

             TOTA L ASSETS                                              $        43,740      $        50,801      $          76,307

             LIAB ILITIES AND STOCKHOLDERS' EQUITY
             CURRENT LIA BILITIES:
               Accounts payable                                         $         1,007      $         1,135      $           2,425
               Accrued liabilities                                                2,449                2,254                  3,062
               Long-term debt, current portion                                      792                  420                    989

                       Total current liabilities                                  4,248                3,809                  6,476
             Long-term debt, net of current portion                                  —                 2,995                  3,964

                        Total liabilities                                         4,248                6,804                 10,440

             Co mmit ments and contingencies (Note 7)
             STOCKHOLDERS' EQUITY:
               Class A and Class B co mmon stock, $0.0000004
                 par value—206,483,335 shares authorized;
                 96,701,875, 96,202,188 and 101,524,013 shares
                 issued and outstanding as of August 31, 2008,
                 2009 and May 31, 2010 (unaudited)                                       —                    —                     —
               Convertible preferred stock issuable in series A
                 to E, $0.0000004 par value—167,740,108,
                 206,118,984 and 192,064,239 shares authorized;
                 153,026,807, 168,269,336 and
                 192,064,223 shares issued and outstanding as of
                 August 31, 2008, 2009 and May 31, 2010
                 (unaudited); liquidation preference of $70,430 as
                 of May 31, 2010 (unaudited)                                         —                    —                      —
               Additional paid-in capital                                        45,014               54,970                 70,278
               Accumulated other comprehensive inco me (loss)                       483               (1,275 )                 (238 )
               Accumulated deficit                                               (6,005 )             (9,698 )               (4,173 )

                        Total stockholders' equity                               39,492               43,997                 65,867

             TOTA L LIABILITIES AND STOCKHOLDERS'
               EQUITY                                                   $        43,740      $        50,801      $          76,307
See notes to consolidated financial statements.

                     F-3
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                                               S EMILEDS CORPORATION
                                           Consolidated Statements of Operations

                                (In thousands, except for share and per share amounts)

                                                                 Years Ended August 31,                       Nine Months Ended May 31,
                                                     2007                 2008             2009               2009               2010
                                                                                                                     (Unaudited)
                    Revenues, net               $           6,860 $          14,749 $         11,551 $             7,010 $            24,275
                    Cost of revenues                        4,484            11,681           11,019               6,536              14,230

                           Gross profit                     2,376              3,068               532               474              10,045

                    Operating expenses:
                     Research and
                       development                           902               1,935              2,452            1,591                  1,490
                     Selling, general and
                       administrative                       1,704              2,320              2,568            1,600                  2,244

                           Total operating
                             expenses                       2,606              4,255              5,020            3,191                  3,734

                    Income (loss) fro m
                      operations                             (230 )           (1,187 )        (4,488 )            (2,717 )                6,311
                    Other inco me
                      (expense):
                     Loss from
                        unconsolidated
                        entities                               —                   —                —                 —                    (169 )
                     Interest income
                        (expense), net                         97                  41              215               209                    (21 )
                     Other inco me, net                        —                   37               —                 —                      —
                     Foreign currency
                        transaction gain
                        (loss)                               234                 295               580               424                   (325 )

                        Total other inco me
                          (expense), net                     331                 373               795               633                   (515 )

                    Income (loss) before
                      provision for
                      income taxes                           101                (814 )        (3,693 )            (2,084 )                5,796
                    Provision for inco me
                      taxes                                    —                   —                —                 —                    271

                    Net inco me (loss)          $            101 $              (814 ) $      (3,693 ) $          (2,084 ) $              5,525

                    Net inco me (loss)
                      attributable to
                      common stock:
                     Basic                      $              — $              (814 ) $      (3,693 ) $          (2,084 ) $               460

                     Diluted                    $              — $              (814 ) $      (3,693 ) $          (2,084 ) $               487

                    Net inco me (loss) per
                      share attributable to
                      common stock:
                     Basic                      $            0.00 $            (0.01 ) $          (0.04 ) $        (0.02 ) $               0.00

                     Diluted                    $            0.00 $            (0.01 ) $          (0.04 ) $        (0.02 ) $               0.00
Shares used in
  computing net
  income (loss) per
  share attributable to
  common stock:
 Basic                        57,342,749        75,530,727          92,404,576   91,146,507    98,029,563
 Diluted                      57,892,748        75,530,727          92,404,576   91,146,507   107,899,182

                  See notes to consolidated financial statements.

                                       F-4
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                                              S EMILEDS CORPORATION
                    Consolidated Statements of Stockhol ders' Equity and Comprehensi ve Income (Loss)

                                              (In thousands, except for share amounts)

                                                                                                                                        Accumulated
                                                                                                                                           Other
                                                               Class A and B Common       Convertible Preferred                        Comprehensive
                                                                        Stock                    Stock                                 Income (Loss)
                                                                                                                      Additional
                                                                                                                       Paid-In                             Accumulated
                                                                                                                       Capital                                Deficit
                                                                                  Amoun                      Amoun
                                                                  Shares            t       Shares             t
                              BALANCE—September 1,
                                 2006                              96,250,000      $ —      108,333,330       $ —     $    18,629        $        (262 )    $    (5,292
                              Issuance of Series C
                                 convertible preferred stock               —         —        27,744,326          —        16,369                   —                —
                              Issuance of Class B common
                                 stock upon exercise of
                                 stock options                       426,875         —                —           —                1                —                —
                              Stock-based compensation                    —          —                —           —                3                —                —
                              Comprehensive income (loss):
                                      Foreign currency
                                        translation
                                        adjustment                         —         —                —           —            —                  (390 )             —
                                      Net income                           —         —                —           —            —                    —               101

                              Total comprehensive loss

                              BALANCE—August 31,
                                 2007                              96,676,875        —      136,077,656           —        35,002                 (652 )         (5,191
                              Issuance of Series C
                                 convertible preferred stock               —         —        16,949,151          —        10,000                   —                —
                              Issuance of Class B common
                                 stock upon exercise of
                                 stock options                        25,000         —                —           —                4                —                —
                              Stock-based compensation                    —          —                —           —                8                —                —
                              Comprehensive income (loss):
                                      Foreign currency
                                        translation
                                        adjustment                         —         —                —           —            —                1,135                —
                                      Net loss                             —         —                —           —            —                   —               (814

                              Total comprehensive income

                              BALANCE—August 31,
                                 2008                              96,701,875        —      153,026,807           —        45,014                 483            (6,005
                              Issuance of Series D
                                 convertible preferred stock               —         —        15,351,550          —        10,000                   —                —
                              Repurchas e of Series C
                                 convertible preferred stock               —         —          (109,021 )        —           (64)                  —                —
                              Repurchas es of common
                                 stock                               (585,937 )      —                —           —            (1)                  —                —
                              Issuance of Class B common
                                 stock upon exercise of
                                 stock options                        86,250         —                —           —             5                   —                —
                              Stock-based compensation                    —          —                —           —            16                   —                —
                              Comprehensive income (loss):
                                      Foreign currency
                                        translation
                                        adjustment                         —         —                —           —            —                (1,758 )             —
                                      Net loss                             —         —                —           —            —                    —            (3,693

                              Total comprehensive loss

                              BALANCE—August 31,
                                 2009                              96,202,188        —      168,269,336           —        54,970               (1,275 )         (9,698
                              Issuance of Series E
                                 convertible preferred stock
                                 (unaudited)                               —         —        23,093,935          —        15,043                   —                —
                              Issuance of Series E
                                 convertible preferred stock
                                 for employee compens ation                —         —          700,952           —            25                   —                —
   (unaudited)
Issuance of Class B common
   stock upon exercise of
   stock options (unaudited)     5,321,825    —              —     —          165           —             —
Stock-based compensation
   (unaudited)                          —     —              —     —           75           —             —
Comprehensive income (loss):
        Foreign currency
          translation
          adjustment
          (unaudited)                   —     —              —     —           —         1,037            —
        Net income
          (unaudited)                   —     —              —     —           —            —          5,525

Total comprehensive income
 (unaudited)

BALANCE—May 31, 2010
 (unaudited)                   101,524,013   $ —    192,064,223   $ —   $   70,278   $    (238 )   $   (4,173



           See notes to consolidated financial statements.

                                  F-5
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                                                                  S EMILEDS CORPORATION
                                                              Consolidated Statements of Cash Fl ows

                                                                            (In thousands)

                                                                                    Years Ended August 31,                 Nine Months Ended May 31,
                                                                           2007              2008             2009            2009             2010
                                                                                                                                   (Unaudited)
             CASH FLOWS FROM OPERATING ACTIVITIES:
               Net income (loss)                                       $          101      $     (814 )   $     (3,693 )   $    (2,084 )   $     5,525
               Adjustments to reconcile net income (loss) to net
                 cash provided by (used in) operating activities:
                  Depreciation and amortization                               2,026             4,093            4,552           3,400           3,367
                  Stock-based compensation expens e                               3                 8               16              12             100
                  Gain on sale of investment                                     —                (37 )             —               —               —
                  Bad debt expense                                               —                 92               24              —              185
                  Loss of unconsolidated entities                                —                 —                —               —              169
                  Changes in operating assets and liabilities:
                      Accounts receivable, net                               (1,686 )          (1,967 )            (27 )         1,088          (3,413 )
                      Inventory                                              (4,239 )            (566 )         (1,554 )        (2,614 )        (1,530 )
                      Prepaid expenses and other current assets                  (2 )            (111 )             60            (344 )           167
                      Accounts payable                                          368               706              221            (331 )         1,165
                      Accrued liabilities                                       404               995              (53 )           (58 )           373

                           Net cash provided by (used in) operating
                             activities                                      (3,025 )           2,399             (454 )          (931 )         6,108

             CASH FLOWS FROM INVESTING ACTIVITIES:
               Purchase of property, plant and equipment                     (7,111 )          (2,525 )         (8,795 )        (5,121 )        (6,130 )
               Sale of property, plant and equipment                             —                  5               58              —               25
               Purchase of investments                                         (407 )            (414 )             —               —          (15,532 )
               Sale of investments                                               —                450               —               —               —
               Placement of refundable deposits                                 (92 )              —                —               —               47
               Refund from refundabl e deposits                                  —                 43                4               2              —
               Development of intangible assets                                 (93 )            (441 )           (163 )          (152 )          (134 )
               Acquisition, net of cash acqui red                                —                 —                —               —             (919 )

                           Net cash used in investing activities             (7,703 )          (2,882 )         (8,896 )        (5,271 )       (22,643 )

             CASH FLOWS FROM FINANCING ACTIVITIES:
               Proceeds from issuance of Series C convertible
                 preferred stock                                             10,369             9,700                —              —               —
               Proceeds from issuance of Series D convertible
                 preferred stock                                                    —              —            10,000          10,000              —
               Proceeds from issuance of Series E convertible
                 preferred stock                                                   —               —                —               —          15,043
               Repurchas e of Series C convertible preferred stock                 —               —               (64 )           (64 )           —
               Proceeds from exercise of stock options                              1               1                4               4            165
               Proceeds from line of credit                                       643           1,416              956             963          1,413
               Payments on line of credit                                          —           (1,296 )         (1,712 )        (1,688 )       (1,126 )
               Proceeds from long-term debt                                        —               —             3,420           1,919          1,481
               Payments of long-term debt                                          —               —               (28 )            —            (339 )

                           Net cash provided by financing activities         11,013             9,821           12,576          11,134         16,637

               Effect of exchange rate changes on cash and cash
                  equivalents                                                     (297 )         (178 )           (631 )          (514 )           340

             NET INCREASE (DECREASE) IN CASH AND
               CASH EQUIVALENTS                                                    (12 )        9,160            2,595           4,418             442
             CASH AND CASH EQUIVALENTS—Beginning of
               period                                                         1,972             1,960           11,120          11,120         13,715

             CASH AND CASH EQUIVALENTS—End of period                   $      1,960        $   11,120     $     13,715     $    15,538     $   14,157


             SUPPLEMENTAL DISCLOSURES OF CASH
               FLOW INFORMATION:
               Cash paid for interest                                  $             3     $        7     $          11    $        —      $        47


               Cash paid for income taxes                              $            —      $       —      $          —     $        —      $        —


             NONCASH INVESTING AND FINANCING
               ACTIVITIES:
Series C convertible preferred stock issued for
  property, plant and equipment                        $    6,000     $     —     $          —   $   —   $   —


Series C convertible preferred stock issued for
  investment                                           $       —      $    300    $          —   $   —   $   —



                                           See notes to consolidated financial statements.

                                                                F-6
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                                                        SEMIL EDS CORPORATION

                                                 Notes to Consoli dated Financi al Statements

                                               Years Ended Aug ust 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

1. B usiness

          Business —SemiLEDs Co rporation ("SemiLEDs") was established on January 4, 2005 as a Delaware corporation. As of May 31,
2010, SemiLEDs had wholly o wned subsidiaries, the most significant of wh ich being SemiLEDs Optoelectronics Co., Ltd., formerly
Semi-Photonics, ("Taiwan SemiLEDs") located in Hsinchu, Taiwan where substantially all research, development, manufacturing and
market ing takes place and where substantially all of the assets are held. SemiLEDs also has partially owned subsidiaries inco rporated in
Malaysia, Japan, China and Taiwan.

       SemiLEDs and its subsidiaries (collectively, the "Co mpany") develop, manufacture and sell h igh performance light emitting diodes
("LEDs"). The Co mpany's customers are located in Europe, Asia and North A merica.

           Going Concern —The acco mpanying consolidated financial statements have been prepared assuming that the Co mp any will
continue as a going concern. The Co mpany has incurred significant losses since inception, including net losses of $0.8 million and $3.7 million
during the years ended August 31, 2008 and 2009, that raise substantial doubt about the Company's ability to continue as a going concern. As
of August 31, 2009 and May 31, 2010, the Co mpany had an accumulated deficit of $9.7 million and $4.2 million. The Co mpany's management
believes it will be able to identify sufficient cash flows to fund operations through the year ending August 31, 2010. Sources of this anticipated
cash flow include the issuance of convertible preferred stock to existing or new investors and improved cash flows fro m opera tions as the
Co mpany is able to produce its products more efficiently and those products gain market acceptance. There can be no assurance that the
Co mpany will be ab le to generate sufficient revenue and improvements in the cost of production. If the Co mpany is not able to generate
positive cash flows fro m operations, the Co mpany will need to consider alternative financing sources. Alternative financing s ources may not be
available when and if needed by the Company or on favorable terms.

2. Summary of Significant Accounting Policies

          B asis of Presentation —The Co mpany's consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of A merica ("US GAAP") and include the accounts of Se miLEDs and its consolidated
subsidiaries. All intercompany transactions and balances have been eliminated during consolidation.

         Investments in which the Co mpany has significant in fluence over the investee, which amounts to ownership interest from
approximately 20% to 50% for the Co mpany's investments, are accounted for using the equity method of accounting and are not c onsolidated.
These investments are in jo int ventures that the Company does not control but has the ability to exercise significant influence over operating
and financial policies. Under the equity method, investments are stated at cost after adding or removing the Co mpany's portio n of equity in
undistributed earnings or losses, respectively. The Co mpany's investment in these equity method entities is reported in the consolidated balance
sheets in investments in unconsolidated entities and the Co mpany's share of the income or loss, after the elimination of unre alized
intercompany profits, is reported in the consolidated statements of operations in loss from unconsolidated entities.

        Investments in entities that are not consolidated or accounted for under the equity method are accounted for using the cost method. The
Co mpany does not have any cost method investments in which it owns greater than a 20% o wnership interest in the entity. Under the cost
method, investments

                                                                       F-7
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                                                        SEMIL EDS CORPORATION

                                          Notes to Consoli dated Financi al Statements (Conti nued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




are reported at cost on the consolidated balance sheets in Investments in unconsolidate d entities, and dividend income received is reported in
the consolidated statements of operations in loss from unconsolidated entities.

          If the values of any of the equity method or cost method investments decline and the decline is determined to be other-than-temporary,
the related investment will be written down to its fair value.

          Use of Esti mates —The preparation of consolidated financial statements in conformity with US GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. Such management estimates include the allowance fo r doubtful
accounts, inventory valuation, valuation of deferred tax assets, fair value of co mmon stock, stock-based compensation expense, and the
carrying amount of property, plant and equipment and intangible assets. The Co mpany bases its estimates on historical expe rien ce and also on
assumptions that it believes are reasonable. The Co mpany assesses these estimates on a regular basis; however, actual results could differ
materially fro m those estimates.

          Unaudi ted Interi m Fi nancial Information —The accompanying interim consolidated balance sheet as of May 31, 2010, the interim
consolidated statements of operations and cash flows for the nine months ended May 31, 2009 and 2010 and the interim consolidated statement
of stockholders' equity and comprehensive income (loss) for the nine months ended May 31, 2010 are unaudited. The unaudited interim
consolidated financial statements have been prepared on a basis consistent with as the annual consolidated financial statemen ts and, in the
opinion of management, reflect all ad justments, which include only normal recurring adjustments, necessary to present fairly th e Co mpany's
financial position as of May 31, 2010 and its results of operations and cash flows for the nine months ended May 31, 2009 and 2010. The
financial data and the other financial information disclosed in these notes to the consolidated financial statements related to the nine month
periods are also unaudited. The results of operations for the nine months ended May 31, 2010 are not necessarily indicative of t he results to be
expected for the year ending August 31, 2010 or for any other future annual or interim period.

           Certain Significant Risks and Uncertainties —The Co mpany is subject to certain risks and uncertainties that could have a material
and adverse effect on the Co mpany's future financial position or results of operations, which risks and uncertainties include , among others: it
has a limited operating history, it may experience fluctuations in its revenues and operating results, any inability of the Co mpany to compete in
a rapidly evolv ing market and to respond quickly and effect ively to changing market requirements, any inability of the Co mpan y to increase
market awareness of its brand and products and develop and expand its sales channels, any inability of the Co mpany to forecast customer
demand accurately in making purchase decisions, any inability of the Co mpany to protect its intellectual property rights, cla ims by others that
the Co mpany infringes their proprietary technology, and any inability of the Co mpany to raise additional funds in the future.

           Concentrati on of Suppl y Risk —So me of the co mponents and technologies used in the Co mpany's products are purchased and
licensed fro m a limited number of sources. The loss of any of these suppliers may cause the Co mpany to incur additional transition costs, result
in delays in the manufacturing and delivery of its products, or cause it to carry excess or obsolete inventory. The Co mpany r elies on a third
party for the fulfillment of its customer orders, and the failure of this third

                                                                       F-8
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                                                         SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




party to perform could have an adverse effect upon the Co mpany's reputation and its ability to distribute its products, which could adversely
affect the Co mpany's business.

          Concentrati on of Credit Risk —Financial instruments that subject the Co mpany to concentrations of credit risk con sist primarily of
cash, cash equivalents and accounts receivable. The Co mpany keeps its cash and cash equivalents with prominent banks and inve sts only in
high-quality fixed-inco me securities. Deposits held with banks may exceed the amount of insurance provided on such deposits.

          All of the Co mpany's revenues are concentrated in sales of LED p roducts. Cred it risk with respect to accounts receivable in g eneral is
diversified due to the number o f different entit ies compr ising the Co mpany's customer base and their locations throughout the world. The
Co mpany performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable . The Co mpany
maintains reserves for estimated potential credit losses.

        As of August 31, 2008, two customers accounted for 12% and 36% of the Co mpany's gross accounts receivable. As of August 31,
2009, one of these same customers accounted for 34% of the Co mpany's gross accounts receivable. A s of May 31, 2010, the same customer
accounted for 23% and another customer accounted for 15% of the Co mpany's gross accounts receivable.

         Customers representing 10% or more of the Co mpany's revenues for the periods presented consist of the fo llowing (in percentages):

                                                                                                                         Nine Months
                                                                                                Years Ended                 Ended
                                                                                                 August 31,                May 31,
              Customers                                                             2007             2008        2009   2009        2010
                                                                                                                          (Unaudited)
              Customer A                                                                   25               22     32     31           26
              Customer B                                                                   10                *      *      *            *
              Customer C                                                                   10               10      *      *            *
              Customer D                                                                    *               22      *      *            *
              Customer E                                                                    *                *      *      *           10


              * Less than 10%


          Cash and Cash Equi valents —The Co mpany considers all h ighly liquid investment instruments purchased with initial maturities of
three months or less to be cash equivalents. As of August 31, 2008, 2009 and May 31, 2010, the Co mpany had $9.0 million, $11.5 million and
$8.2 million of cash equivalents consisting of certificates of deposit with maturities of three months or less.

          Foreign Currency —The Co mpany's subsidiaries use the local currency as their functional currency. The assets and liabilit ies of the
subsidiaries are, therefore, translated into U.S. dollars at exchange rates in effect at each balance sheet date, with the re sulting translation
adjustments recorded to a separate component of accumulated other co mprehensive income (loss) within stockholders' equity. Income and
expense accounts are translated at average exchange rates during the period. Any gains and losses from transactions denominat ed in foreign
currencies are recognized in the consolidated statements of operations.

                                                                        F-9
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                                                         SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

          Inventory —Inventories primarily consist of raw materials, work in process and finished goods and are stated at the lower of cost or
market value. Cost is determined using a weighted average. For work in p rocess and manufactured inventories, cost consists of raw materials,
fabricated wafer, direct labor and an allocated portion of the Co mpany's production overhead. The Co mpany also regularly writ es down excess
and obsolete inventory to its estimated market value based upon estimat ions about future demand and market conditions as cond itions warrant.
Once written down, inventories are carried at this lower cost basis until sold or scrapped.

         Property, Plant and Equi pment —Property, plant and equipment are stated at cost less accumulated depreciation and amort ization.
Depreciat ion on property, plant and equipment is calculated usin g the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

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

                                     Buildings and improvements                             5 to 20 years
                                     Machinery and equipment                                5 to 10 years
                                     Leasehold improvements                                 5 years
                                     Other equip ment                                       5 years

          Intangi ble Assets —Intangible assets consist of patents and acquired technology. The carrying amounts of the patents represent
application cost and registration fees for patents developed by the Company. Acquired technology arose from the acquisition of Silicon Base
Develop ment, Inc. ("SBDI") during the nine months ended May 31, 2010. Intangible assets are carried at cost. All of the Co mp any's intangible
assets have finite useful lives and are, therefore, amo rtized using the straight -line method over their estimated useful lives, which range fro m
four to 20 years.

           Impairment of Long-Li ved Assets —The Co mpany evaluates its long-lived assets, which consist of property, plant and equipment
and intangible assets, for indicators of possible impairment when events or changes in circu mstances indicate the carrying amo unt of an asset
may not be recoverable. Impairment exists if the carrying amounts of such assets exceed the estimates of future net undiscoun ted cash flows
expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value
of the asset over the estimated fair value of the asset. As of August 31, 2008, 2009 and May 31, 2010, the Co mpany has not written down any
of its long-lived assets as a result of impairment.

              Income Taxes —The Co mpany accounts for income taxes under the asset and liability method. As part of the process of preparing
the consolidated financial statements, the Co mpany is required to estimate its inco me taxes in each of the jurisdictions in wh ich it operates. The
Co mpany estimates actual current tax exposure together with assessing temporary differences resulting fro m differing accounting treatment for
items such as accruals and allowances that are not currently deductible for tax purposes. These differences result in deferred tax assets and
liab ilit ies which are included in the Co mpany's consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be
received when certain expenses previously recognized in the Co mpany's consolidated statements of operations become deductible expenses
under applicable income tax laws or when loss or credit carryforwards are utilized. Accordingly, realizat ion of the de ferred tax assets is
dependent on the Company's ability to earn future taxable inco me against which these deductions, losses and credits can

                                                                        F-10
Table of Contents


                                                         SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




be utilized. Deferred tax assets and liabilit ies are measured using enacted tax rates expected to be applicable to the taxable income in the years
in wh ich those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the Compan y's deferred tax
assets and liabilit ies is recognized in the consolidated statements of operations in the period the tax change was enacted.

       The Co mpany assesses the likelihood that its deferred tax assets will be recovered fro m future taxable inco me and, to the extent the
Co mpany believes that recovery is not more likely than not, a valuation allo wance is established.

          Stock-based Compensation —Co mpensation costs related to emp loyee stock options granted during the years ended August 31,
2007, 2008, 2009 and the nine months ended May 31, 2010 are based on the fair value of the options on the date of grant, net of estimated
forfeitures. The Co mpany determines the grant date fair value of the options using the Bla ck-Scholes option-pricing model and the related
stock-based compensation expense is generally recognized on a straight -line basis over the period in wh ich an employee is requ ired to provide
services in exchange for the options, or the vesting period of the respective options.

          The Co mpany accounts for stock options issued to nonemployees also based on the fair value of the options determined using th e
Black-Scholes option-pricing model. The fair value of stock options granted to nonemployees is remeasured each reporting period as the stock
options vest, and the resulting change in value, if any, is recognized in the Co mpany's consolidated statements of operations during the period
the related services are rendered.

          Research and De velopment Costs —Research and development costs are expensed as incurred.

          Segments —The Co mpany considers operating segments to be components of the Company in which separate financial informat ion
is available that is evaluated regularly by the Co mpany's chief operating decision making group in deciding how to allocate resources to and in
assessing performance of the co mponents. The chief operating decision making group for the Co mpany consists of the Chief Exec utive Officer
and the Chief Operating Officer. The chief operating decision making group reviews financial informat ion presented on a consolidated basis,
accompanied by information about revenue by geographic region, for purposes of allocating resources throughout the Company an d evaluating
financial perfo rmance. The Co mpany has one business activity and there are no segment managers who are held accountable for o perations,
operating results or plans for levels or co mponents below the consolidated unit level. Accordingly, the Co mpany has determined that it has a
single reporting segment and operating unit structure which is manufacturing, developing and selling LEDs.

           Deferred Rent —Certain of the Co mpany's operating leases contain predetermined fixed escalations of the mini mu m rental
payments to be made during the original terms of the leases. For these leases, the Company recognizes the related rental expe nse on a
straight-line basis over the life of the lease and, therefore, the rent expense will not equal the related cash payments. The difference between the
actual cash payments and the straight-line expense is recorded as a deferred credit included in accrued liabilit ies on the consolidated balance
sheets. The deferred credit will be reduced over the respective lease terms, ult imately to zero, as the Co mpany's rent escalates and the
straight-line rent expense is less than the actual cash payments.

         Shi ppi ng and Handling Costs —The Co mpany includes costs from shipping and handling within cost of revenues in th e period in
which they are incurred.

                                                                       F-11
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                                                         SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

           Revenue Recog nition —The Co mpany recognizes revenue on sales of its products when persuasive evidence of an arrangement
exists, the price is fixed or determinable, o wnership and risk of loss has transferred and collection of the sales proceeds is probable. Th e
Co mpany obtains written purchase authorizations fro m its customers as evidence of an arrangement and these authorizations gen erally prov ide
for a specified amount of product at a fixed p rice. The Co mpany considers delivery to have occurred at the time of ship ment, unless otherwise
agreed in the applicable sales terms, as this is generally when title and risk o f loss for the products will pass to the customer. Th e Co mpany
provides its customers with limited rights of return for non-conforming ship ments and product warranty claims. Based on historical return
percentages and other relevant factors, the Company estimates its potential fu ture exposure on recorded product sales which reduces product
revenue in the consolidated statements of operations and reduces accounts receivable in the consolidated balance sheets.

           Accounts Recei vable —Accounts receivable are recorded at invoiced amounts, net of allowances for doubtful accounts and
estimated sales returns, and do not bear interest. The allowance for doubtful accounts is based on the Company's assessment o f the collectibility
of its customer accounts. The Co mpany regularly reviews the allowance by considering certain factors such as historical experience, indus try
data, credit quality, age of accounts receivable balances and current economic conditions that may affect a customer's abilit y to pay. Charges to
bad debt expense were approximately $0, $92,000, $24,000, $0 and $185,000 during the years ended August 31, 2007, 2008, 2009 and the nine
months ended May 31, 2009 and 2010.

          Comprehensi ve Income (Loss) —Co mprehensive inco me (loss) is comprised of net inco me (loss) and other comprehensive income
(loss). For the Co mpany, other comprehensive inco me (loss) consists primarily of foreign currency translation adjustments. To tal
comprehensive income (loss) for all periods presented has been disclosed in the consolidated statements of stockholders' equity and
comprehensive income (loss).

           Multi ple Classes of Common Stock —The Co mpany has two classes of common stock, consisting of Class A common stock
("Class A") and Class B co mmon stock ("Class B"), which are identical except with respect to voting rights. The Class A are allowed one vote
on all matters subject to a vote of the stockholders and, except as required by law, the Class B do not have the right to vote. Further, there are a
number of safeguards built into the Co mpany's Articles of Incorporation, as well as Delaware law, which precludes the Board o f Directors fro m
declaring or paying unequal per share dividends on the Class A and Class B stock. Specifically, Delaware law p rovides that amendments to the
Co mpany's Articles of Incorporation wh ich would have the effect of adversely altering the rights, powers or preferences of a given class of
stock (in this case the right of the Class A to receive an equal dividend to any declared dividend on the Class B) must be approved by the class
of stock adversely affected by the proposed amendment. In addition, the Co mpany's Articles of Incorporation provide that befo re any such
amend ment may be put to a stockholder vote, it must be approved by the unanimous consent of the Board of Directors. As a result, the
undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B stock as if the
earnings for the year had been distributed.

         Net Income (Loss) Per Share of Common Stock —Basic and diluted net income (loss) per share attributable to common
stockholders are presented in conformity with the two-class method required for participating securities. Holders of Series A, B, C, D and E
convertible preferred stock are each entitled to receive noncumu lative div idends at the rate of 8% per annum, payable prior a nd in preference to
any dividends on any other shares of the Co mpany's capital stock. In the event a

                                                                       F-12
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                                                          SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




dividend is paid on common stock, the convertible preferred stockholders are entitled to a share of any such dividend on a pr o rata basis as if
they were holders of co mmon shares (on an as-if converted basis).

         Under the two-class method, basic net income (loss) per share attributable to common stockholders is computed by dividing the net
income (loss) attributable to common stockholders by the weighted average number of sha res of common stock outstanding during the period.
Net inco me (loss) attributable to common stockholders is determined by allocating undistributed earnings as if all of the ear n ings for the period
had been distributed. Diluted net income (loss) per share attributable to common stockholders is computed by using the weighted -average
shares of common stock outstanding, including potential dilutive shares of common stock assuming the dilut ive effect of outstanding stock
options using the treasury stock method. The weighted-average number of shares of common stock used to calculate the Company's basic net
income (loss) per share of common stock excludes those shares subject to repurchase related to stock options that were exercised prior to
vesting as these shares are not deemed to be issued for accounting purposes until they vest.

         The Co mpany has multip le classes of common stock; however, because the liquidation and dividend rights are identical, the
undistributed earnings are allocated on a proportionate basis and the resulting net income (loss) per share of common stock will, therefore, be
the same for both Class A and Class B on an individual or co mbined basis. Therefore for the calcu lation of the net inco me (loss) per share of
common stock, the Co mpany co mbined the weighted-average Class A and Class B because the assumed conversion of the Class B into shares
of Class A would have no impact on the net income (loss) per share of common stock.

Recentl y Issued Accounting Pronouncements

          In June 2009, the Financial Accounting Standards Board ("FASB") issued a new accounting standard that requires a qualitative
approach to identifying a controlling financial interest in a variab le interest entity (" VIE"), and requires ongoing assessme nt of whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. The new accounting standard is effective for the Co mpa ny as of
September 1, 2010. The Co mpany does not expect the adoption of this standard to have a significant impact on its consolidated financial
statements.

          In October 2009, the FASB issued a new accounting standard that changes the accounting for arrangements with multiple deliverables.
The new standard requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on
their relative selling prices. In October 2009, the FASB also issued a new accounting standard that changes revenue recognition for tangible
products containing software and hardware elements. The new standard requires revenue arrangements that contain tangible products with
software elements that are essential to the functionality of the products to be scoped out of the existing software revenue recognition accounting
guidance and accounted for under these new accounting standards. Both standards will be effective for the Co mpany in the first quarter of the
year ending August 31, 2011 and early adoption is permitted. The Co mpany does not expect the adoption of these standards to have a
significant impact on its consolidated financial statements.

        In January 2010, the FASB issued an amendment to an accounting standard which requires new disclosures for fair value
measurements and provides clarificat ion for existing fair value disclosure requirements. The amend ment will require an entity t o disclose
separately the amounts of significant

                                                                        F-13
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                                                          SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




transfers in and out of Levels I and II fair value measurements and to describe the reasons for the transfers; and to disclose informat ion about
purchases, sales, issuances and settlements separately in the reconciliation fo r fair value measurements using significant un observable inputs, or
Level III inputs. This amend ment clarifies existing disclosure requirements for the level of disaggregation used for classes of ass ets and
liab ilit ies measured at fair value and require d isclosures about the valuation techniques and inputs used to measure fair value fo r both recurring
and nonrecurring fair value measurements using Level II and Level III inputs. The adoption of this amendment will not impact the Co mpany's
consolidated financial statements.

         In April 2010, the FASB issued an accounting standard update which provides guidance on recognizing revenue under the milestone
method. The milestone method of recognition allows a vendor who is involved with the provision of deliverables to recognize t he full amount
of a milestone payment upon achievement, if, at the inception of the revenue arrangement, the milestone is determined to be substantive as
defined in the standard. The update is effective for the Co mpany in the first quarter of the year ending August 31, 2011 and early adoption is
permitted. The Co mpany does not expect the adoption of the update to have a significant impact on its consolidated financial s tatements.

3. B alance Sheet Components

Inventory

        Inventory as of August 31, 2008, 2009 and May 31, 2010 consist of the follo wing (in thousands):

                                                                              August 31,          August 31,            May 31,
                                                                                2008                2009                 2010
                                                                                                                      (Unaudited)
               Raw materials                                              $            873    $            800    $            1,737
               Work in p rocess                                                      2,667               2,417                 3,867
               Fin ished goods                                                       2,713               4,344                 3,862

               Inventory                                                  $          6,253    $          7,561    $            9,466


       Inventory write-downs to market value for the years ended August 31, 2007, 2008, 2009 and the nine months ended May 31, 2009 and
2010 were $609,000, $100,000, $815,000, $759,000 and $2,000.

                                                                        F-14
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                                                       SEMIL EDS CORPORATION

                                          Notes to Consoli dated Financi al Statements (Conti nued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

Property, Plant and Equi pment

        Property, plant and equipment as of August 31, 2008, 2009 and May 31, 2010 consist of the following (in thousands):

                                                                                August 31,                 August 31,             May 31,
                                                                                  2008                       2009                  2010
                                                                                                                                (Unaudited)
              Buildings and improvements                                    $              —           $         6,271     $            7,083
              Machinery and equipment                                                  21,991                   25,100                 31,385
              Leasehold improvements                                                    3,319                    1,833                  2,390
              Other equip ment                                                            785                      937                    614
              Construction in progress                                                  1,984                    1,644                  2,918

              Total property, plant and equipment                                      28,079                   35,785                  44,390
              Less accumulated depreciation and amortization                           (6,928 )                (11,107 )               (15,407 )

              Property, plant and equipment, net                            $          21,151          $        24,678     $           28,983


        Property, plant and equipment pledged as collateral for the Co mpany's note payables and lines of credit were $3.0 million, $7.2 million
and $4.9 million as of August 31, 2008, 2009 and May 31, 2010.

        Depreciation and amortizat ion expense recognized for the years ended August 31, 2007, 2008, 2009 and the nine months ended
May 31, 2009 and 2010 was $2.0 million, $4.1 million, $4.5 million, $3.4 million and $3.4 million.

Intangi ble Assets

        Intangible assets as of August 31, 2008, 2009 and May 31, 2010 consist of the following (in thousands):

                                                                         August 31,                   August 31,                 May 31,
                                                                           2008                         2009                      2010
                                                                                                                               (Unaudited)
              Patents                                                $                127         $                218     $                 284
              Acquired technology                                                      —                            —                        156

              Total intangible assets                                                 127                          218                       440
              Less accumulated amortizat ion                                          (22 )                        (74 )                     (98 )

              Intangibles assets, net                                $                105         $                144     $                 342


        A mortization expense recognized for the years ended August 31, 2007, 2008, 2009 and the nine months ended May 31, 2009 and 2010
was $0, $22,000, $52,000, $32,000 and $24,000.

                                                                     F-15
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                                                          SEMIL EDS CORPORATION

                                          Notes to Consoli dated Financi al Statements (Conti nued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

         The estimated amortization expense for the Co mpany's intangible assets as of May 31, 2010 for the next five years is as follows
(in thousands):

                                    Years Ending August 31,                                   Total
                                                                                           (Unaudited)
                                    Remainder of 2010                                      $                     7
                                    2011                                                                        51
                                    2012                                                                        51
                                    2013                                                                        51
                                    2014                                                                        34

Accrued Li abilities

        Accrued liabilit ies as of August 31, 2008, 2009 and May 31, 2010 consist of the following (in thousands):

                                                                            August 31,             August 31,              May 31,
                                                                              2008                   2009                   2010
                                                                                                                         (Unaudited)
              Accrued compensation and benefits                         $            796       $          1,042      $            1,083
              Accrued business expenses                                              537                    438                     591
              Taxes payable                                                           —                      —                      271
              Customer deposits                                                       56                     86                     213
              Accrued professional service fees                                       93                     60                     131
              Govern ment grants                                                     223                    174                     115
              Equip ment payable                                                     355                     —                       —
              Other liabilities                                                      389                    454                     658

                                                                        $          2,449       $          2,254      $            3,062


4. Acquisition

         On April 1, 2010, the Co mpany, through a wholly owned subsidiary, acquired 100% of the outstanding shares of SBDI for a total
consideration of $933,000. The consideration received fro m the Co mpany was used by the SBDI shareholders to purchase 1,432,29 8 shares of
the Co mpany's non-voting Series E convertible preferred stock ("Series E") at a price of $0.65 per share. SBDI specializes in microstructure
design, processing, manufacturing, packaging and testing service of silicon wafers for LED applications. The Co mpany acquired SBDI to
obtain certain packaging technology and related plant and equipment. The Co mpany expensed acquisition related costs in the amount of
$15,000. The acquisition was accounted for as a business combination using the purchase method of accounting. Accordingly, the results of
SBDI are included in the Co mpany's consolidated financial statements from the date of acquisition. The preliminary allocation of the total
purchase price to the

                                                                     F-16
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                                                         SEMIL EDS CORPORATION

                                           Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




assets acquired and liabilit ies assumed at their respective preliminary fair values on the acquisition date are as follows (in thousands):

                                                                                                 April 1, 2010
                                     Current assets                                          $                297
                                     Plant and equipment                                                      932
                                     Other assets                                                              59
                                     Core technology                                                          156
                                     Patents and trademarks                                                     4
                                     Accrued liabilities                                                     (515 )

                                     Total cash purchase price                               $                   933


            The Co mpany is still accumu lating in formation to determine the fair value of the acquired property, plant and equipment and c ertain
liab ilit ies of SBDI. The result of such determinations may result in future adjustments to the property, plant and equipment acquired and could
also result in a bargain purchase and a related gain wh ich would be included as other income in the statement of operations.

          The allocated fair values required management of the Co mpany to make significant estimates and as sumptions, especially with respect
to the fair value o f the intangible assets being acquired.

        The fo llo wing table presents the Company's unaudited pro forma results as if the acquisition of SBDI had been completed at the
beginning of each period presented (in thousands):

                                                                                          Years Ended
                                                                                           August 31,
                                                                                                                           Nine Months
                                                                                                                              Ended
                                                                                                                           May 31, 2010

                                                                                   2008                 2009
               Net product revenue (unaudited)                                 $    15,107         $      11,995       $           24,493
               Net inco me (loss) (unaudited)                                  $    (1,954 )       $      (4,775 )     $            4,923
               Net inco me (loss) per share of common stock, basic and
                 diluted (unaudited)                                           $      (0.03 )      $        (0.05 )    $              0.00

        The above unaudited pro forma informat ion does not reflect any incremental direct costs, including any restructuring charges to be
recorded in connection with the acquisition, or any potential cost savings that may result fro m the consolidation of certain operations of the
Co mpany or SBDI. Accordingly, the unaudited pro forma financial informat ion above is presented for comparative purposes only and is not
necessarily indicat ive of what would have occurred had the acquisition of SBDI been comp leted as of the beginning of each of the period being
presented, nor is it necessarily indicative o f future consolidated results.

5. Investments in Unconsoli dated Enti ties

         The Co mpany's unconsolidated entities are joint ventures that the Company accounts for as investments on an equity or cost me thod
basis. The equity method investments consist of SILQ Sdn Bhd ("SILQ"), China SemiLEDs Corporation (" China SemiLEDs"), and SS
Optoelectronics Co., Ltd. ("SS Optoelectronics"). The Co mpany's ownership interest and investments in unconsolidated entities

                                                                        F-17
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                                                       SEMIL EDS CORPORATION

                                          Notes to Consoli dated Financi al Statements (Conti nued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




as of August 31, 2008, 2009 and May 31, 2010 consist of the following (in thousands, except for percentages):

                                                     Percentage            August 31,             August 31,               May 31,
                                                     Ownership               2008                   2009                    2010
                                                                                                                         (Unaudited)
              Equity method investments:
                SILQ                                        50%        $                 —    $                 —    $             478
                China SemiLEDs                              49%                          —                      —               14,640
                SS Optoelectronics                          49%                          —                      —                  244
              Cost method investments                    Various                        714                    714                 714

              Total equity in investments of
                unconsolidated entities                                $                714   $                714   $          16,076


       There were no div idends received fro m unconsolidated entities during the years ended August 31, 2008, 2009 and the nine months
ended May 31, 2009 and 2010.

          Equi ty Method Investments —In September 2009, the Co mpany, through a wholly owned subsidiary, contributed $570,000 to form
SILQ, a jo int venture in Malaysia. The Co mpany and the other investor in the joint venture each hold a 50% ownership and voting interest in
SILQ's co mmon stock. The Co mpany entered into the joint venture agreement that established SILQ to design, manufacture and se ll lighting
fixtures and systems.

        In December 2009, the Co mpany entered into an agreement to establish China SemiLEDs in Guangdong, China for the purposes of
conducting research and development and producing LED ep itaxial wafers, chips and packaged products to be sold in China. The Co mpany
contributed $14.7 million to acquire a 49% ownership interest in China SemiLEDs.

         In December 2009, the Co mpany, through a wholly o wned subsidiary, entered into an agreement to contribute $980,000 fo r a 49%
ownership interest in SS Optoelectronics, a jo int venture in Taiwan. The investment is payable based upon a payment schedule set forth in the
agreement as follows: $245,000 upon signing the agreement, $245,000 after the incorporation of the joint venture and $490,000 upon reaching
a certain sales level. As of May 31, 2010, the Co mpany has contributed $245,000. The Co mpany entered into the joint venture agreement that
established SS Optoelectronics to facilitate sales of the Co mpany's LED chips to the other investor in the joint venture.

         As of May 31, 2010 there is no difference between the carrying amount and the underlying equity in the net assets of the Co mpany's
equity method investees. The aggregate fair value of the Co mpany's investments in the non -marketable stock of its equity method investees is
not readily available.

                                                                     F-18
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                                                          SEMIL EDS CORPORATION

                                          Notes to Consoli dated Financi al Statements (Conti nued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

        The financial in formation for the Co mpany's equity method investees consists of the following (in thousands):

                                                                                                     May 31,
                                                                                                      2010
                                                                                                   (Unaudited)
                                    Current assets                                             $            29,116
                                    Noncurrent assets                                                       17,407
                                    Current liab ilit ies                                                      104
                                    Noncurrent liab ilit ies                                                    —
                                    Stockholders' equity                                                    46,419



                                                                                                   Nine Months
                                                                                                      Ended
                                                                                                     May 31,
                                                                                                       2010
                                                                                                   (Unaudited)
                                    Revenues, net                                              $                 —
                                    Gross profit                                                                 —
                                    Loss from operations                                                       (230 )
                                    Net loss                                                                   (345 )

         Cost Method Investments —As of August 31, 2008, 2009 and May 31, 2010, the Co mpany holds investments in nonmarketable
common stock of three unaffiliated co mpanies with a carry ing amount of $714,000. The fair value of these investments is not r eadily available.
These investments are assessed for impairment when events or changes in circu mstances indicate that the carrying amounts may not
be recoverable.

6. Long-Term Debt

        Long-term debt as of August 31, 2008, 2009 and May 31, 2010 consists of the following (in thousands):

                                                                            August 31,                 August 31,             May 31,
                                                                              2008                       2009                  2010
                                                                                                                            (Unaudited)
              First note payable                                        $                 —        $          1,909     $            1,869
              Second note payable                                                         —                   1,506                  1,321
              Third note payable                                                          —                      —                   1,481
              Line of credit                                                             792                     —                     282

                Total long-term debt                                                  792                     3,415                  4,953
              Less current portion                                                   (792 )                    (420 )                 (989 )

                 Total long-term debt, excluding current portion        $                 —        $          2,995     $            3,964


         The long-term notes in the table above carry variable interest rates ranging from 1.7% to 1.8%, are payable in monthly installments,
and are secured by the Co mpany's property, plant and equipment.

                                                                      F-19
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                                                            SEMIL EDS CORPORATION

                                              Notes to Consoli dated Financi al Statements (Conti nued)

                                                 Years Ended August 31, 2007, 2008 an d 2009
                                          and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




The interest rates are based on the annual time deposit rate plus a certain spread. The first note payable requires monthly p ayments of principal
and interest in the amount of $12,000 over the 15 year term o f the note with final payment to occur in May 2024. The second note payable
requires monthly payments of principal and interest in the amount of $27,000 over the five year term of the note with final p ayment to occur in
August 2014. The third note payable requires monthly payments of principal and interest in the amount of $26,000 over the five year term of
the note with final payment to occur in March 2015. The notes do not have prepayment penalties or balloon payments upon maturity of
the notes.

          During the years ended August 31, 2007, 2008 and 2009 and the nine months ended May 31, 2010, the Co mpany utilized operating
lines of cred it with certain banks in order to fu lfill its short-term financing needs. The lines of credit have maturity dates of six months fro m the
date of draw and bear fixed interest rates of 4.0% as of August 31, 2008 and ranging fro m 1.3% to 1.8% as of May 31, 2010. The outstanding
balances of the lines of credit were $792,000, $0 and $282,000 as of August 31, 2008, 2009 and May 31, 2010. Unused amounts on the lines of
credit were $2.0 million, $3.3 million and $5.5 million as of August 31, 2008, 2009 and May 31, 2010.

        The Co mpany capitalized interest in the amount of $27,000, $24,000 and $6,000 during the year ended August 31, 2009 and the nine
months ended May 31, 2009 and 2010. There was no capitalized interest for the years ended August 31, 2007 and 2008.

         The scheduled principal pay ments for the Co mpany's long -term debt as of August 31, 2009 consist of the following (in thousands):

                                                                                             Scheduled
                                      Years Ending August 31,                            Principal Payments
                                      2010                                           $                      420
                                      2011                                                                  428
                                      2012                                                                  436
                                      2013                                                                  443
                                      2014                                                                  425
                                      Thereafter                                                          1,263

                                      Total                                          $                    3,415


        The table above does not incorporate activity in the Co mpany's long -term debt or lines of credit that occurred subsequent to
August 31, 2009. During the nine months ended May 31, 2010, the Co mpany incurred additional debt of $1.5 million by entering into the third
note payable agreement and another $1.4 million fro m draws on the lines of credit. A lso during the nine months ended May 31, 2010, the
Co mpany made payments on the long-term debt and lines of cred it of $1.5 million.

7. Commitments and Conti ngencies

         Operating Lease Agreements —The Co mpany leases plant and office space in Taiwan pursuant to four operating lease agreements
with unrelated parties which we re noncancellable and which exp ire at various dates between December 31, 2010 and December 31, 2020. As of
August 31, 2008, 2009 and May 31, 2010, the Co mpany held outstanding deposits for these leases in the amount of $162,000,

                                                                         F-20
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                                                           SEMIL EDS CORPORATION

                                             Notes to Consoli dated Financi al Statements (Conti nued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




$155,000 and $133,000 which were recorded as other long-term assets in the accompanying consolidated balance sheets. Lease expense related
to these noncancellable operating leases was $714,000, $715,000, $843,000, $591,000 and $431,000 during the years end ed August 31, 2007,
2008, 2009 and the nine months ended May 31, 2009 and 2010. Lease expense is recognized on a straight-line basis over the term of the lease.
The aggregate future noncancellable minimu m rental payments for the Co mpany's operating leases as of August 31, 2009 consist of the
following (in thousands):

                                     Years Ending August 31,                             Operating Leases
                                     2010                                            $                   456
                                     2011                                                                522
                                     2012                                                                544
                                     2013                                                                603
                                     2014                                                                622
                                     Thereafter                                                        1,789

                                     Total                                           $                 4,536


         The table above does not incorporate activity in the Co mpany's operating leases subsequent to August 31, 2009. Durin g the nine
months ended May 31, 2010, the Co mpany added two noncancellable operating leases through its acquisition of SBDI which h ave future
noncancellable pay ments in the amount of $34,000 and $29,000 for the years ending August 31, 2010 and 2011. The Co mpany also made
regular pay ments on its operating leases in the amount of $14,000 during the nine months ended May 31, 2010.

           Litigation —The Co mpany is subject to various claims arising in the ordinary course of business. Although no assurance may be
given, the Co mpany believes that it is not presently a party to any litigation of which the outcome, if determined adversely, would indiv idually
or in the aggregate be reasonably expected to have a material adverse effect on the business, operating results, cash flows o r fin ancial position
of the Co mpany.

          In May 2010, a comp laint was filed with the Un ited States District Court by an unrelated party against multip le co mpanies within the
LED industry, including the Co mpany. The co mplaint alleges infringement of c ertain patents in the United States and seeks injunctive relief
and monetary damages. Although the Company has not yet been formally served, management believes that it has a meritorious de fense to the
infringement allegations and intends to defend this lawsuit vigorously. However, there can be no assurance that the Company will be successful
in its defense and, even if it is successful, the Co mpany may incur substantial legal fees and other costs in defending the lawsuit.

         Third parties have fro m t ime to t ime claimed, and others may claim in the future, that the Co mpany has infringed their past, current or
future intellectual property rights. These claims, whether meritorious or not, could be time -consuming, result in costly litigation , require
expensive changes in the Company's methods of doing business or could require the Co mpany to enter into costly royalty or lic ensing
agreements, if available. As a result, these claims could harm the Co mpany's business, operating results, cash flows and financial position.

                                                                        F-21
Table of Contents


                                                        SEMIL EDS CORPORATION

                                          Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

          Indemnificati ons —Under the indemnification provisions of certain of the Co mpany's distributor agreements, the Co mpany agrees to
defend the distributors against third-party intellectual p roperty infringement claims. To date, there have been no material claims under such
indemn ification provisions.

8. Common and Converti ble Preferred Stock and Stockhol ders' Equity

           Common Stock —Co mmon stock is divided into Class A and Class B. The designations and rights of the Class A and Class B are
identical except for their respective voting rights as the Class A are allowed one vote on all matters subject to a vote of the stockholders and,
except as otherwise required by law, the Class B do not have the right to vote. Upon the closing of a qualifying underwritten public offering of
the Co mpany's common stock, the Class B will convert into shares of Class A on a one-for-one basis. As of August 31, 2008, 2009 and
May 31, 2010, the co mbined authorized shares of common stock in the amount of 206,483,335 consisted of 192,500,000 shares of Class A
and 13,983,335 shares of Class B. Shares of co mmon stock issued and outstanding as of August 31, 2008, 2009 and May 31, 2010 consist of
the following:

                                                                      August 31,            August 31,             May 31,
                                                                        2008                  2009                  2010
                                                                                                                 (Unaudited)
              Class A                                                    96,250,000           95,664,063            95,664,063
              Class B                                                       451,875              538,125             5,859,950

                                                                         96,701,875           96,202,188           101,524,013


           Common Stock Reserved for Issuance —As of August 31, 2009 and May 31, 2010, the Co mpany had reserved shares of common
stock for issuance as follows:

                                                                                        August 31, 2009         May 31, 2010
                                                                                                                (Unaudited)
              Issuance under stock option plan                                                15,145,210            10,023,385
              Conversion of convertible preferred stock                                      168,269,336           192,064,223

                                                                                             183,414,546           202,087,608


         Converti ble Preferred Stock —During the year ended August 31, 2007, the Co mpany issued 17,574,835 shares of Series C
convertible preferred stock ("Series C") fo r $0.59 per share and received total consideration of $10.4 million. The Co mpany als o issued
10,169,491 shares of Series C with $3.6 million in cash in exchange for certain manufacturing equip ment valued at $9.6 million .

         During the year ended August 31, 2008, the Co mpany issued another 16,440,677 shares of Series C for $0.59 per share and received
total consideration of $9.7 million. The Co mpany also issued 508,474 shares of Series C for an investment in a subsidiary with a fair value of
approximately $300,000.

         During the year ended August 31, 2009, the Co mpany issued 15,351,550 shares of Series D convertible p referred stock ("Series D")
for $0.65 per share and received total consideration of

                                                                      F-22
Table of Contents


                                                        SEMIL EDS CORPORATION

                                          Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




$10.0 million. The Co mpany repurchased 109,021 shares of Series C for $64,000 during the year ended August 31, 2009.

         During the nine months ended May 31, 2010, the Co mpany issued 23,093,935 shares of Series E for $0.65 per share and received total
consideration of $15.0 million. The Co mpany also issued 700,952 shares of Series E to two executives of a recently acquired subsidiary during
the nine months ended May 31, 2010.

         Authorized and outstanding convertible preferred stock as of August 31, 2009 and May 31, 2010 consist of the follo wing
(in thousands, except share data):

                                                                                August 31, 2009                                            May 31, 2010
                                                                                  Shares                                                    Shares
                                                           Shares               Issued and        Net Cash   Liquidation    Shares        Issued and       N
                                                          Authorized            Outstanding       Proceeds   Pref erence   Authorized     Outstanding      Pr
                                                                                                                                            (Unaudited)
                                        Series A            96,250,000            96,250,000 $ 15,000        $   15,000      96,250,000     96,250,000 $
                                        Series B            12,083,330            12,083,330    3,625             3,625      12,083,330     12,083,330
                                        Series C            59,406,778            44,584,456   20,005            26,305      44,584,456     44,584,456
                                        Series D            38,378,876            15,351,550   10,000            10,000      15,351,550     15,351,550
                                        Series E                    —                     —        —                 —       23,794,903     23,794,887

                                        Total              206,118,984           168,269,336 $ 48,630        $   54,930    192,064,239     192,064,223 $



         Net cash proceeds noted in the table above represent aggregate amounts received in cash fro m issuance of each Series of convertible
preferred stock less, if applicable, any amounts paid for repurchases.

        Significant terms of the Series A, B, C, D and E convertible preferred stock are as follows:

           Liquidation Preference —In the event of any liquidation, dissolution or winding up of the Co mpany, the holders of each outstanding
share of convertible preferred stock will be entitled to be paid, prio r and in preference to any p ayment or distribution on any shares of common
stock, the orig inal issue price with respect to each series of convertible preferred stock, plus all declared but unpaid dividends. The original
issue price of the Series A, B, C, D and E was $0.16, $0.30, $0.59, $0.65 and $0.65, respectively. If upon any liquidation, dissolution or
winding up of the Co mpany, the available funds and assets are insufficient to permit the payment to holders of the convertible preferred stock
of their full liqu idation preferences, then all of the remaining available funds and assets will be d istributed among the holders of the then
outstanding convertible preferred stock on a pro rata and equal priority basis according to their respective liquidation preferences.

         Conversion Rights —At any time and at the option of the holder, each share of Series A or Series D is convertible into fully paid and
nonassessable shares of Class A on a one-to-one basis, while each share of Series B, Series C or Series E is convertible into fu lly paid and
nonassessable shares of Class B on a one-to-one basis, subject to certain antidilution adjustments for common stock div idends and
combinations or splits, and certain additional issuances of shares.

         Automatic Conversion —Each share of Series A, B, C, D and E will automatically convert into fully paid and nonassessable shares of
Class A on a one-to-one basis (i) immediately prior to the closing of an underwritten public offering in which the aggregate public offering
price equals or exceeds

                                                                         F-23
Table of Contents


                                                          SEMIL EDS CORPORATION

                                           Notes To Consoli dated Fi nancial Statements (Continued)

                                                Years Ended August 31, 2007, 2008 and 2009
                                         and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




$50.0 million and the public offering price per share equals or exceeds three times the orig inal issue price of each respective series of
convertible preferred stock; or (ii) with respect to Series A, upon the Co mpany's receipt of the written consent of the holders of not less than a
majority of the then outstanding shares of Series A, voting as a single class on an as -converted basis, to the conversion of all th en outstanding
shares of Series A.

           Voting Rights —Each holder of shares of Series A and D is entitled to the number of votes equal to the number of whole shares of
Class A in which such shares of convertible preferred stock could be con verted at the record date for the determination of the stockholders
entitled to vote on such matters or, if no record date is established, the date such vote is taken or any written consent of stockholders is
solicited. The holders of Series B, C and E are not be entitled to any right to vote, except where required by law.

        With regard to the election of the Board of Directors, so long as at least a majo rity of the originally issued shares of Series A are
outstanding, the holders of the Series A, voting as a separate class, are entitled to elect two directors. The holders of the Class A, voting as a
separate class, are entitled to elect three directors.

          Dividend Rights —Each holder o f the convertible preferred stock is entitled to receive noncumulative d ividends at the rate of 8% of
the per share purchase price of the respective series of convertible preferred stock per annu m, prior and in preference to th e payment of any
dividends to the holders of the common stock. No dividends will be paid to the holders of the common stock unless dividends in the total
amount of the annual dividend rate for each series of the convertible preferred stock have been first paid to the holders of each such series of
convertible preferred stock. If, after dividends in the full preferential amounts for the convertible preferred stock have been paid, the Board of
Directors declares additional dividends, then such additional dividends are declared pro rata on the common stock according to the number of
shares of common stock held by such holders, where each holder of shares of convertible preferred stock is to be treated for th is purpose as
holding shares of common stock on an as -converted basis.

          Restriction on Dividend Distributions — In accordance with the Republic of China Co mpany Law, Taiwan SemiLEDs' Articles of
Incorporation stipulate that ten percent of annual earnings, net of losses from prior years, are to be retained as a statutory reserve until such
retention equals the amount of issued share capital. The distribution of any remain ing earnings should be proposed by the Board of Directors
and approved by the Company's stockholders. At least 0.00001% of the distributions should be appropriated as employee bonuses when the
stockholders approve such distributions.

         Redemption Rights —None of the Series A, B, C, D or E is redeemable.

9. Stock-based Compensation

         As of August 31, 2008, 2009 and May 31, 2010, the Co mpany had one stock-based compensation plan (the "Plan") which is discussed
further below. The Co mpany's stock-based compensation expense was $3,000, $8,000, $16,000, $12,000 and $100,000 during the years ended
August 31, 2007, 2008, 2009 and the nine months ended May 31, 2009 and 2010. The total stock-based compensation expense for each period
presented consists of stock-based compensation expense for stock options granted to employees and nonemployees of the Co mpany.

                                                                        F-24
Table of Contents


                                                        SEMIL EDS CORPORATION

                                          Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

          Stock Opti on Plan —During the period ended August 31, 2005, the Co mpany adopted the Plan pursuant to which the Board of
Directors may grant stock options to the Company's employees, officers, directors and nonemployees. The Plan originally autho rized grants of
options to purchase up to 13,983,335 shares of common stock, but was subsequently amended to increase the number of shares authorized to
15,683,335 during the year ended August 31, 2009 and to 15,883,335 during the nine months ended May 31, 2010. Options granted under the
Plan generally vest over four years at a rate of 25% on each anniversary of the option's vesting start date and expire ten ye ars from the date of
grant. Upon the exercise of a stock option granted under the Plan, the holder of the op tion will receive shares of Class B which do not allow the
holder voting rights, except as required by law.

          Empl oyee Stock-based Compensati on Expense —The total employee stock-based compensation expense for the years ended
August 31, 2007, 2008, 2009 and the nine months ended May 31, 2009 and 2010 are recognized in the consolidated statements of operations as
follows (in thousands):

                                                                                                                           Nine Months
                                                                                      Years Ended                             Ended
                                                                                       August 31,                            May 31,
                                                                           2007            2008         2009            2009         2010
                                                                                                                           (Unaudited)
              Costs of product revenues                                $          —      $    —     $          —    $       —     $         29
              Research and development expenses                                   —           —                —            —               18
              Selling, general and ad min istrative expenses                      3           8                16           12              53

                                                                       $          3      $      8   $          16   $       12    $     100


          Determining Fair Value of Stock Options —The fair value o f each grant of stock options during the years ended August 31, 2007,
2008, 2009 and the nine months ended May 31, 2010 were determined by the Company using the methods and assumptions discussed below.
Each of these inputs is subjective and generally requires significant judgment to determine.

         Valuation Method —The Company estimates the fair value of stock options granted using the Black -Scholes option-pricing model.

          Expected Term —The expected term represents the period that the Company's stock options are exp ected to be outstanding. The
expected term for options granted to employees of the Company is derived fro m historical data on employee exercises and post-vesting
emp loyment termination behavior after taking into account the contractual life of the award. T he expected term for nonemployee options is
equal to the contractual life of the option.

          Expected Volatility —The expected volatility was based on the historical stock volatilit ies of several of the Co mpany's
publicly-traded peers over a period equal to the expected terms of the options as the Company did not have a sufficient trading histor y to use
the volatility of its own co mmon stock.

          Fair Value of Common Stock —The fair value of the co mmon stock underlying the stock options has historically been determined by
the Board of Directors. Because there has been no public market for the Co mpany's commo n stock, the Board of Directors has determined fair
value of the common stock at the time o f grant by considering a number of objective and subjective factors including valuatio ns of comparable
companies, sales of convertible preferred stock to unrelated third parties,

                                                                      F-25
Table of Contents


                                                         SEMIL EDS CORPORATION

                                           Notes To Consoli dated Fi nancial Statements (Continued)

                                                 Years Ended August 31, 2007, 2008 and 2009
                                          and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




operating and financial performance, the lack of liquid ity of capital stock, and general and industry specific econo mic outlo ok, among other
factors. The fair value of the underlying common stock shall be determined by the Board of Directors until such time as the Co mpany's
common stock is listed on an established stock exchange or national market system.

        Risk-Free Interest Rate —The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant for zero
coupon U.S. Treasury notes with maturities appro ximately equal to the expected term of the related options.

         Expected Dividend —The expected dividend has been zero for the Co mpany's option grants as the Company has never paid div idends
and does not expect to pay dividends for the foreseeable future.

         Forfeiture Rate —The Co mpany estimates its forfeiture rate based on actual forfeiture experience, analysis of emp loyee turnover
behavior, and other factors. The impact fro m a forfeiture rate adjustment will be recognized in full in the period of ad justment and, if the actual
number of future forfeitures differs fro m that estimated, the Co mpany may be required to record adjustments to stock-based compensation
expense in future periods.

         Summary of Assumptions —The fair value of each emp loyee stock option was estimated at the date of grant using a Black -Scholes
option-pricing model with the following weighted-average assumptions for grants of options during the years ended August 31, 2007, 2008,
2009 and the nine months ended May 31, 2009 and 2010:

                                                                                                                 Nine Months
                                                                         Years Ended August 31,                 Ended May 31,
                                                                    2007          2008            2009        2009            2010
                                                                                                                  (Unaudited)
               Div idend rate                                            0%             0%             0%          0%              0%
               Risk-free interest rate                                 4.8 %          3.4 %          2.3 %       2.3 %           2.7 %
               Expected term (in years)                                5.8            5.8            5.9         5.9             6.2
               Expected volatility                                    47.0 %         61.6 %         61.6 %      61.6 %          69.8 %

         The weighted-average grant date fair value of the Co mpany's stock options granted during the years ended August 31, 2007, 2008,
2009 and the nine months ended May 31, 2009 and 2010 was $0.01, $0.01, $0.01, $0.01 and $0.50 per share. The aggregate grant date fair
value of the Co mpany's stock options granted to employees for the years ended August 31, 2007, 2008, 2009 and the nine months ended
May 31, 2009 and 2010 was $24,000, $9,000, $36,000, $36,000 and $822,000.

                                                                        F-26
Table of Contents


                                                       SEMIL EDS CORPORATION

                                         Notes To Consoli dated Fi nancial Statements (Continued)

                                              Years Ended August 31, 2007, 2008 and 2009
                                       and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

       A summary of the option activity under the Plan and changes for the years ended August 31, 2007, 2008, 2009 and the nine months
ended May 31, 2010 is presented below:

                                                                                                                 Weighted-
                                                                                                    Weighted-    Average
                                                                   Shares          Number of        Average     Remaining        Aggregate
                                                                  Available       Stock Options     Exercise    Contractual       Intrinsic
                                                                  for Grant        Outstanding       Price      Life (Years)        Value
                                                                                                                               (In thousands)
                        Outstanding—September 1, 2006               8,343,835         5,639,500     $    0.02            9.0     $          42

                                 Granted                           (1,119,000 )       1,119,000          0.04
                                 Forfeited                            295,625          (295,625 )        0.04
                                 Exercised                                 —           (426,875 )        0.02

                        Outstanding—August 31, 2007                 7,520,460         6,036,000          0.02            8.2                39

                                 Granted                           (3,790,400 )       3,790,400          0.06
                                 Forfeited                            673,100          (673,100 )        0.06
                                 Exercised                                 —            (25,000 )        0.03

                        Outstanding—August 31, 2008                 4,403,160         9,128,300          0.03            7.9                32
                                 Additional options
                                   authorized                       1,700,000                —
                                 Granted                           (4,424,800 )       4,424,800          0.06
                                 Forfeited                            168,850          (168,850 )        0.05
                                 Exercised                                 —            (86,250 )        0.05

                        Outstanding—August 31, 2009                 1,847,210       13,298,000           0.04            7.6                41
                                 Additional options
                                   authorized (unaudited)             200,000               —
                                 Granted (unaudited)               (1,742,700 )      1,742,700           0.07
                                 Forfeited (unaudited)                 50,100          (50,100 )         0.06
                                 Exercised (unaudited)                     —        (5,321,825 )         0.03

                        Outstanding—May 31, 2010
                          (unaudited)                                 354,610         9,668,775     $    0.05            7.8     $      5,674

                        Vested and expected to
                          vest—August 31, 2009                                      12,921,383      $    0.04            7.6     $          41
                        Vested—August 31, 2009                                       5,765,650      $    0.02            6.3     $          38
                        Vested and expected to
                          vest—May 31, 2010 (unaudited)                               9,333,708     $    0.05            7.8     $      5,480
                        Vested—May 31, 2010 (unaudited)                               2,967,425     $    0.04            6.3     $      1,784

        The aggregate intrinsic value of options exercised under the Plan was $3,000, $0, $0, $0 and $1.6 million for the years ended
August 31, 2007, 2008, 2009 and the nine months ended May 31, 2009 and 2010, determined as of the date of option exercise.

                                                                     F-27
Table of Contents


                                                         SEMIL EDS CORPORATION

                                            Notes To Consoli dated Fi nancial Statements (Continued)

                                                 Years Ended August 31, 2007, 2008 and 2009
                                          and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

         Additional informat ion regarding the Co mpany's stock options outstanding and vested as of August 31, 2009 is summarized belo w:

                                                                           Options Outstanding                                  Options Vested
                                                                            Weighted-Average
                                                                               Remaining           Weighted-Average                     Weighted-Average
                                                                            Contractual Term        Exercise Price                       Exercise Price
                                 Exercise Prices             Number              (Years )             per Share          Number            per Share
                                 $0.02                        4,335,000                    5.9           $      0.02     4,038,750            $     0.02
                                 $0.03                        1,362,000                    6.8                  0.03       884,000                  0.03
                                 $0.06                        6,321,000                    8.6                  0.06       842,900                  0.06
                                 $0.07                        1,280,000                    9.5                  0.07            —                   0.07

                                 $0.02 – $0.07               13,298,000                    7.6                  0.04     5,765,650                  0.02


         Additional informat ion regarding the Co mpany's stock options outstanding and vested as of May 31, 2010 (unaudited) is summarized
below:

                                                                          Options Outstanding                               Options Vested
                                                                          Weighted-Average
                                                                             Remaining           Weighted-Average                    Weighted-Average
                                                                          Contractual Term        Exercise Price                      Exercise Price
                                Exercise Prices            Number              (Years )             per Share          Number           per Share
                                $0.02                       1,212,500                    5.1         $       0.02      1,212,500          $       0.02
                                $0.03                         794,500                    6.0                 0.03        601,500                  0.03
                                $0.06                       4,892,825                    7.9                 0.06      1,087,175                  0.06
                                $0.07                       2,768,950                    9.3                 0.07         66,250                  0.07

                                $0.02 – $0.07               9,668,775                    7.8                 0.05      2,967,425                  0.04


         As of August 31, 2009 and May 31, 2010, total co mpensation cos t related to unvested stock options granted to employees under the
Plan, but not yet recognized, was $42,000 and $778,000, net of estimated forfeitures. This cost will be amortized on a straig ht-line basis over a
weighted-average remaining period of 2.5 years and 2.4 years, respectively, and will be adjusted for subsequent changes in estimated
forfeitures.

         There was no capitalized stock-based compensation cost and there were no recognized stock-based compensation tax b enefits during
the years ended August 31, 2007, 2008, 2009 or the nine months ended May 31, 2010.

          Common Stock subject to Repurchase —The Co mpany allo ws the holders of options to exercise prior to vesting, however, the
Co mpany maintains the right to repurchase these shares at the original exercise price paid by the emp loyee for these unvested but issued shares
of common stock. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related
dollar amount is recorded as a liability on the consolidated balance sheets. The liab ility is reclassified into stockholders' equity on a pro rata
basis as the shares vest. As of August 31, 2008, 2009 and May 31, 2010, the Co mpany had 125,000, 65,000 and 101,250 outstanding shares of
common stock subject to repurchase.

                                                                        F-28
Table of Contents


                                                        SEMIL EDS CORPORATION

                                          Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

          Restricted Stock —The Co mpany issued 96,250,000 shares of Class A to its founders when the Co mpany was established in 2005.
On the date of issuance, 25% of these shares vested immediately while the remain ing 72,187,500 shares were to vest in equal quarterly
installments over four years fro m the date of issuance if the founders remained with the Co mpany. During the year ended August 31, 2009,
585,937 of these shares were repurchased by the Company upon the resignation of one of the founders. Otherwise, the shares ve sted according
to plan and are no longer subject to repurchase as of August 31, 2009 and May 31, 2010. As of August 31, 2008, the Co mpany had
13,535,156 outstanding shares of restricted Class A.

          Stock Opti on Acti vity for Nonempl oyees —During the years ended August 31, 2007, 2008, 2009 and the nine months ended
May 31, 2009 and 2010, the Co mpany issued options to nonemployees for the purchase of 100,000, 0, 70,000, 70,000 and 50,000 shares of
common stock in exchange for services. These options were issued with an exercise price of $0.03 per share and $0.06 per share during the
years ended August 31, 2007 and 2009 and $0.06 and $0.07 per share during the nine months ended May 31, 2009 and 2010. These options
generally vest over four years. The Co mpany accounts for these nonemployee options based on the fair value of the awards thro ugh the vesting
period. The options were valued each reporting period using the Black-Scholes option-pricing model using the remaining contractual term as
the expected term.

       Total stock-based compensation related to nonemployees was not significant for the years ended August 31, 2007, 2008, 2009 and the
nine months ended May 31, 2009 and May 31, 2010.

          Other Stock-based Compensati on Acti vi ty —During the nine months ended May 31, 2010, the Co mpany issued 700,952 shares of
non-voting Series E to two SBDI executives as part of an employ ment agreement. The two senior executives are required to sell a portion of
their shares of Series E back to the Co mpany for a nominal amount if they resign fro m SBDI prio r to December 31, 2013. The shares subject to
the repurchase provision under the agreement are reduced each year as though the shares are ratably vesting at a rate of one -fourth of the shares
issued on December 31 st of each year. The aggregate fair value of the shares on the grant date was $457,000 and is being recorded as
compensation expense on a straight-line basis over the period the repurchase restrictions lapse. As of May 31, 2010, none of these shares had
vested and, therefore, are not outstanding for accounting purposes.

        Total stock-based compensation related to these shares was $25,000 during the nine months ended May 31, 2010.

10. Net Income (Loss) Per Share of Common Stock

         For the calculation of the net inco me (loss) per share of co mmon stock, the Co mpany comb ined the weighted-average Class A and
Class B because the respective net income (loss) per share amounts are the same and, therefore, the assumed conversion of the Class B into
shares of Class A would have no impact on the net income (loss) per share of common stock of either class on an individual or combined basis.
The following tables set forth the computation of the Co mpany's basic and diluted net income (loss) per share of common stock for the years
ended August 31, 2007, 2008,

                                                                      F-29
Table of Contents


                                                     SEMIL EDS CORPORATION

                                        Notes To Consoli dated Fi nancial Statements (Continued)

                                             Years Ended August 31, 2007, 2008 and 2009
                                      and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




2009 and the nine months ended May 31, 2009 and 2010 (in thousands, except for share and per share amounts):

                                                                Years Ended August 31,                     Nine Months Ended May 31,
                                                     2007                2008              2009            2009               2010
                                                                                                                  (Unaudited)
                      Nu merator:
                       Basic:
                         Net inco me (loss)     $           101 $              (814 ) $       (3,693 ) $       (2,084 ) $              5,525
                         8% noncumulat ive
                           dividends on
                           convertible
                           preferred stock                  (101 )                —               —                —               (4,198 )
                         Undistributed
                           earnings allocated
                           to convertible
                           preferred stock                    —                   —               —                —                    (867 )

                          Net inco me (loss)
                            attributable to
                            common stock,
                            basic               $             — $              (814 ) $       (3,693 ) $       (2,084 ) $               460

                        Diluted:
                         Net inco me (loss)
                            attributable to
                            common stock,
                            basic               $             — $              (814 ) $       (3,693 ) $       (2,084 ) $               460
                         Undistributed
                            earnings
                            re-allocated to
                            common stock                      —                   —               —                —                      27

                          Net inco me (loss)
                            attributable to
                            common stock,
                            diluted             $             — $              (814 ) $       (3,693 ) $       (2,084 ) $               487

                      Denominator:
                       Basic:
                        Shares used in
                          computing net
                          income (loss) per
                          share attributable
                          to common stock,
                          basic                     57,342,749          75,530,727        92,404,576       91,146,507         98,029,563

                        Diluted:
                         Shares used in
                            computing net
                            income (loss) per       57,342,749          75,530,727        92,404,576       91,146,507         98,029,563
    share attributable
    to common stock,
    basic
   Add weighted
    average effect of
    dilutive
    securities:
       Stock options            549,999               —                —                —           9,869,619

   Shares used in
     computing net
     income (loss) per
     share attributable
     to common stock,
     diluted                  57,892,748       75,530,727       92,404,576       91,146,507       107,899,182

Net inco me (loss) per
  share of common
  stock:
 Basic                    $         0.00 $          (0.01 ) $        (0.04 ) $        (0.02 ) $          0.00

 Diluted                  $         0.00 $          (0.01 ) $        (0.04 ) $        (0.02 ) $          0.00


                                             F-30
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                                                        SEMIL EDS CORPORATION

                                         Notes To Consoli dated Fi nancial Statements (Continued)

                                              Years Ended August 31, 2007, 2008 and 2009
                                       and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

         The fo llo wing co mmon stock equivalents were excluded fro m the comp utation of diluted net income (loss) per share of co mmon stock
for the periods presented because including them wou ld have been antidilutive:

                                                                       Years Ended August 31,                                Nine Months Ended May 31,
                                                          2007                  2008                   2009                  2009                2010
                                                                                                                                    (Unaudited)
                              Convertible
                                preferred stock         136,077,656              153,026,807       168,269,336              168,269,336         192,064,233
                              Stock options to
                                purchase
                                common stock                         —             9,128,300           13,298,000            13,294,000                  —
                              Co mmon stock
                                subject to
                                repurchase                           —               125,000                 65,000              65,000                  —

11. Income Taxes

       The Co mpany's income (loss) before provision for inco me taxes for the years ended August 31, 2007, 2008, 2009 and t he nine months
ended May 31, 2009 and 2010 consist of the following (in thousands):

                                                                 Years Ended August 31,                      Nine Months Ended May 31,
                                                        2007             2008             2009                 2009             2010
                                                                                                                    (Unaudited)
              Do mestic                             $      (186 )     $     (201 )    $       (266 )     $         (113 )   $        (436 )
              International                                 287             (613 )          (3,427 )             (1,971 )           6,232

              Income (loss) before provision
                for income taxes                    $       101       $     (814 )    $     (3,693 )     $       (2,084 )   $       5,796


                                                                          F-31
Table of Contents


                                                      SEMIL EDS CORPORATION

                                         Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

        The co mponents of the provision for inco me taxes for the years ended August 31, 2007, 2008, 2009 and the nine months ended
May 31, 2009 and 2010 consist of the follo wing (in thousands):

                                                                                                                       Nine Months Ended
                                                                       Years Ended August 31,                               May 31,
                                                                  2007          2008                2009               2009           2010
                                                                                                                          (Unaudited)
              Current:
                Federal                                       $        —        $       —       $          —      $         —       $      —
                State                                                  —                —                  —                —              —
                Foreign                                                —                —                  —                —             271

                    Total current                             $        —        $       —       $          —      $         —       $     271

              Deferred:
                Federal                                       $        —        $       —       $          —      $         —       $        —
                State                                                  —                —                  —                —                —
                Foreign                                                —                —                  —                —                —

                    Total deferred                                     —                —                  —                —                —

              Total provision for income taxes                $        —        $       —       $          —      $         —       $     271


        Net deferred tax assets as of August 31, 2008, 2009 and May 31, 2010 consist of the following (in thousands):

                                                                               August 31,            August 31,                  May 31,
                                                                                 2008                  2009                       2010
                                                                                                                               (Unaudited)
              Deferred tax assets:
                Depreciat ion and amort ization                            $             9      $                 10       $               10
                Accruals and other                                                     (66 )                      90                       51
                Inventory reserves                                                     185                       306                      267
                Income tax cred its                                                    882                     1,072                      540
                Net operating loss carryforward                                      1,343                     1,511                      488

                    Gross deferred tax asset                                          2,353                 2,989                        1,356
              Valuation allo wance                                                   (2,353 )              (2,989 )                     (1,356 )

              Net deferred tax assets                                      $                —   $                 —        $                 —


                                                                     F-32
Table of Contents


                                                         SEMIL EDS CORPORATION

                                            Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

         Reconciliations of the statutory federal inco me tax to the Co mpany's effective tax for the years ended August 31, 2007, 2008, 2009
and the nine months ended May 31, 2010 consist of the following (in thousands):

                                                                         Years Ended August 31,                Nine Months Ended May 31,
                                                              2007              2008              2009           2009             2010
                                                                                                                      (Unaudited)
              Tax at statutory federal rate               $       34         $      (277 )   $      (1,256 )   $   (709 )   $       1,970
              State tax—net of federal benefit                    —                   —                 —            —                 —
              Nondeductible expenses                              —                   —                 —            —                 —
              Foreign income rate differential                   (97 )               208             1,164          671            (2,123 )
              Foreign tax                                         —                   —                 —            —                271
              Other                                               —                   —                 —            —                 —
              Change in valuation allowance                       63                  69                92           38               153

              Provision for inco me taxes                 $          —       $        —      $           —     $      —     $         271


         A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The Co mp any has
established a valuation allowance to offset net deferred tax assets as o f August 31, 2008, 2009 and May 31, 2010 due to the uncertainty of
realizing future tax benefits fro m its net operating loss carryforwards and other deferred tax assets.

        The valuation allowance increased by $243,000 million and $636,000 during the years ended August 31, 2008 and 2009, and
decreased by $1.6 million during the nine months ended May 31, 2010.

        As of August 31, 2009, the Co mpany has federal net operating loss carryforwards of $1.0 million expiring beginning in 2025. As of
August 31, 2009, the Co mpany has state net operating loss carryforwards of $489,000, exp iring beginning in 2017.

        As of May 31, 2010, the Co mpany has federal net operating loss carryforwards of $1.3 million expiring beginning in 2025. As of
May 31, 2010, the Co mpany has state net operating loss carryforwards of $489,000, exp iring beginning in 2017.

         Internal Revenue Code section 382 p laces a limitation (the "Section 382 Limitation") on the amount of taxable inco me that can be
offset by net operating carryforwards after a change in control of a loss corporation. Generally, after a control change, a loss corporation cannot
deduct operating loss carryforwards in excess of the Section 382 Limitation. Management has not yet determined the impact such limitation
may have on the utilization of its operating loss carryforwards against taxable income in future periods.

Uncertain Tax Positions

        Effective September 1, 2007, the Co mpany adopted a new accounting standard that provides guidance on accounting for uncertainty in
income taxes. The adoption had no effect on the Company's consolidated financial statements. A reconciliat ion of the beginnin g and ending
balances of the

                                                                             F-33
Table of Contents


                                                         SEMIL EDS CORPORATION

                                          Notes To Consoli dated Fi nancial Statements (Continued)

                                               Years Ended August 31, 2007, 2008 and 2009
                                        and Nine Months Ended May 31, 2009 and 2010 (Unaudited)




unrecognized tax benefits during the years ended August 31, 2008, 2009 and the nine months ended May 31, 2010 consist of the following
(in thousands):

                                                                                    Years Ended August 31,
                                                                                                                              Nine Months
                                                                                                                             Ended May 31,
                                                                                                                                 2010

                                                                                      2008               2009
                                                                                                                              (Unaudited)
              Unrecognized benefit —beginning of period                           $       128        $       87          $                   119
              Gross increases—current period tax positions                                 74                46                               32
              Gross decreases—prior period tax positions                                 (115 )             (14 )                             —

              Unrecognized benefit —end of period                                 $          87      $      119          $                   151


        The entire amount of the unrecognized tax benefits would impact the Co mpany's effective tax rate if recognized.

          Accrued interest and penalties related to unrecognized tax benefits are classified as inco me tax expense and were immaterial. The
Co mpany files inco me tax returns in the United States, various states and certain foreign jurisdictions. The tax years 2005 through 2009 remain
open in most jurisdictions. The Co mpany is not currently under examination by income tax authorities in federal, state or other foreign
jurisdiction.

12. Related-Party Transacti ons

        The Co mpany had sales to a significant stockholder in the amount of approximately $29,000 and $72,000 during the years ended
August 31, 2008 and 2009. There were no sales to the significant shareholder during the nine months ended May 31, 2010. As of August 31,
2008, 2009 and May 31, 2010, there were no outstanding receivable or payable balances with the related party.

13. Information about Geographic Areas

         Revenues by geography are based on the billing address of the customer. The following table sets forth revenue by geographic area
(in thousands):

Revenues

                                                                                                                      Nine Months Ended
                                                                Years Ended August 31,                                     May 31,
                                                      2007              2008                 2009                   2009             2010
                                                                                                                         (Unaudited)
              China                               $     1,488       $       3,249        $         4,750        $     2,867       $      8,797
              Taiwan                                    2,871               6,225                  3,671              2,332             10,013
              Hong Kong                                   393                 167                    707                147              1,307
              USA                                         397                 240                    771                575                946
              Korea                                       322               3,746                    539                243              1,023
              Other                                     1,389               1,122                  1,113                846              2,189

              Total                               $     6,860       $     14,749         $        11,551        $     7,010       $     24,275


                                                                         F-34
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                                                       SEMIL EDS CORPORATION

                                         Notes To Consoli dated Fi nancial Statements (Continued)

                                              Years Ended August 31, 2007, 2008 and 2009
                                       and Nine Months Ended May 31, 2009 and 2010 (Unaudited)

Long-Li ved Assets

       Substantially all of the assets are located in Taiwan. An insignificant amount of the Co mpany's assets reside in Boise, Idaho where the
Co mpany is headquartered.

14. Subsequent Events

        In August 2010, the Co mpany's board of directors approved an amendment to the articles of incorporation that increases the authorized
shares of Class A to 310,000,000 and increases the authorized shares of Class B to 97,000,000, both with a par value of $0.0000004 per share.

         The Co mpany has evaluated subsequent events through August 6, 2010, the date on which the consolidated financial statements were
issued for inclusion in the Co mpany's registration statement on Form S-1.

                                                                  ******

                                                                     F-35
Table of Contents


                                                S EMILEDS CORPORATION

                                 SCHED ULE II—VALUATION AND QUALIFYING ACCOUNTS

                                                                                   Years Ended August 31,
                                                                            2007             2008         2009
                                                                                       (In thousands)
             Allowance for Doubtful Accounts:
               Beginning balance                                        $          —      $     —      $         92
               Charged to bad debt expense                                         —            92               24
               Write-offs of bad debt                                              —            —                (4 )

                Ending balance                                          $          —      $     92     $     112


                                                        F-36
Table of Contents




         Through and including                           , 2010 (the 25th day after the date of this prospectus), all dealers effecting transactions in
these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allot ments or subscriptions.

                                                                              Shares




                                                                Common Stock




                                                                   PROSPECTUS




                                                            BofA Merrill Lynch
                                                               Barclays Capital
                                                           Jefferies & Company
                                                            Canaccord Genuity
                                                          Caris & Company, Inc.
                                                                                , 2010
Table of Contents


                                                                      PART II

                                             INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

        The fo llo wing table sets forth the costs and expenses, other than underwrit ing discounts and commissions, payable by SemiLEDs in
connection with the sale of co mmon stock being registered. All amounts are estimates except the SEC reg istration fee and the FINRA filing fee
and the NASDAQ Global Market listing fee.

                                                                                               Amount to be Paid
                              SEC reg istration fee                                        $                 12,300
                              FINRA filing fee                                                               17,750
                              Initial NASDAQ Global Market listing fee                                                *
                              Printing and engraving expenses                                                         *
                              Legal fees and expenses                                                                 *
                              Accounting fees and expenses                                                            *
                              Blue Sky qualificat ion fees and expenses                                               *
                              Transfer Agent and Registrar fees                                                       *
                              Miscellaneous fees and expenses                                                         *

                              Total                                                        $                          *



                              *
                                      To be filed by Amendment


Item 14. Indemnification of Directors and Officers

         Section 145 of the Delaware General Corporat ion Law authorizes a court to award, o r a corporation to grant, indemnit y to directors
and officers, as well as other emp loyees and individuals, against expenses (including attorneys' fees), judgments, fines and amo unts paid in
settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, s uits or
proceedings in wh ich such person is made a party by reason of such person being or hav ing been a director, officer, employee o f or agent to the
corporation. The statute provides that it is not exclusive of other rights to which those seeking indemnification may be entit led under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Our amended and restated certificate of incorporation to be in
effect upon the completion of this offering provides for indemnification of our directors, officers, emp loyees and other agen ts to the maximu m
extent permitted by the Dela ware General Corporation Law, and our amended and restated bylaws to be in effect upon the completion of this
offering provide for indemnification of our directors, officers, employees and other agents to the maximu m extent permitted b y the Delaware
General Co rporation Law.

         In connection with this offering, we will obtain liab ility insurance for our d irectors and officers. Such insurance would be available to
our directors and officers in accordance with its terms.

         In addit ion, we have entered into indemnificat ion agreements with our directors and officers containing provisions which are in some
respects broader than the specific indemn ification provisions contained in the Delaware General Corporation Law. The indemnif ication
agreements may require us, among other things, to indemnify our directors against certain liabilities that may arise by reason of their status or
service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemn ified.

        At present, we are not aware of any pending or threatened litigation or proceeding involving any of our directors, officers, employees
or agents in which indemnificat ion would be required or

                                                                        II-1
Table of Contents




permitted. We believe that our charter provisions and indemn ification agreements are necessary to attract and reta in qualified p ersons as
directors and officers.

        The Underwriting Agreement (Exh ib it 1.1) also provides for cross -indemn ification among SemiLEDs, the Selling Stockholders and
the Underwriters with respect to certain matters, including matters arising under the Securit ies Act.

Item 15.   Recent Sales of Unregistered Securities

         Since September 1, 2006, we have granted stock options to purchase an aggregate of 11,076,900 shares of our commo n stock at
exercise prices ranging fro m $0.03 to $0.65 per share to a total of 234 employees, consultants and directors under our 2005 Equ ity Incentive
Plan. The sales of the above securities were deemed to be exempt fro m registration under the Securities Act in reliance upon Rule 701
promu lgated under Section 3(b) of the Securities Act as transactions by an issuer pursuant to benefit plans and contracts relatin g to
compensation as provided under Rule 701.

          Since September 1, 2006, we have issued and sold an aggregate of 5,859,950 shares of our common stock to employees, consultants
and directors at prices ranging fro m $0.015 to $0.65 per share pursuant to exercises of options and stock purchase rights gra nted under our
2005 Equity Incentive Plan for the aggregate purchase price of $110,128. The sales of the above securities were deemed to be exempt fro m
registration under the Securities Act in reliance upon Ru le 701 pro mu lgated under Section 3(b) o f the Securities Act as transactions by an issuer
pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.

         On December 1, 2006, we issued a warrant to purchase 4,067,796 shares of our Series C Convertible Preferred Stock at an exercise
price of $0.59 per share to Lu xxon Technology Corporation fo r aggregate consideration of $10.00. The issuance of the warrant was deemed to
be exempt fro m reg istration under the Securities Act in reliance upon Section 4(2) of the Securities Act as a transaction by an issuer not
involving any public offering.

         On December 1, 2006, December 5, 2006, January 4, 2007, May 11, 2007, May 21, 2007, January 21, 2008, May 15, 2008, May 19,
2008 and July 29, 2008, we issued and sold 44,584,456 shares of our Series C Convertible Preferred Stock to 8 investors at $0.59 per share for
aggregate proceeds of $26,304,828.45, including (i) cancellation of indebtedness of SemiLEDs owed to Simp lot Taiwan, Inc. in the amount of
$6,000,000 and (ii) cancellat ion of indebtedness of SemiLEDs Optoelectronic Co., Ltd. owed to Lu xxon Technology Corporation in the
amount of $6,000,000. The sales of the above securities were deemed to be exempt fro m registration under the Securities Act in reliance upon
Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.

          On September 30, 2008, we issued and sold 15,351,550 shares of our Series D Convertible Preferred Stock to Lite-On Technology
USA, Inc. at $0.6514 per share for aggregate proceeds of $9,999,999.67. The sales of the above securities were deemed to be exempt fro m
registration under the Securities Act in reliance upon Section 4(2) of the Securit ies Act as a transaction by an issuer not involving any public
offering.

         On April 1, 2010, we issued and sold 23,093,935 shares of our Series E Convertible Preferred Stock to 54 investors at $0.6514 per
share for aggregate proceeds of $15,043,389.49. The sales of the above securities were deemed to be exempt fro m registration under the
Securities Act in reliance upon Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering.

         On April 1, 2010, we issued and sold 700,952 shares of our Series E Convertib le Preferred Stock to two investors at $0.6514 per share
for cancellation indebtedness of SBDI owed to such investors in the aggregate amount of $456,600.14. The sales of the above s ecurities were
deemed to be exempt fro m registration under the Securities Act in reliance upon Section 4(2) o f the Securities Act as a transaction by an issuer
not involving any public offering.

                                                                        II-2
Table of Contents

          The recipients of the securities in each of the foregoing transactions represented their intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock
certificates issued in these transactions. All recipients had adequate access, through their relationships with SemiLEDs, to informat ion about
SemiLEDs.

Item 16.   Exhi bits and Financial Statement Schedules

(a)
       Exh ib its—See Exh ibit Index on page II-6

(b)
       Financial Statement Schedules

         Schedules not listed above have been omitted because they are not required, or not applicable or the informat ion is included in th e
financial statements or notes thereto.

Item 17.   Undertakings

          Insofar as indemnification fo r liab ilities arising under the Securities A ct of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securit ies
and Exchange Co mmission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnificat ion against such liabilit ies (other than the payment by the registrant of expenses incurred or p aid by a director,
officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such directo r, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnificat ion by it is against public
policy as expressed in the Act and will be governed by the final adjudication of such issue.

          The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwrit ing agre ements
certificates in such denominations and registered in such names as required by the underwriters to permit pro mpt delivery to each purchaser.

         The undersigned registrant hereby undertakes that:

(1)
       For purposes of determining any liability under the Securities Act of 1933, the info rmation o mitted fro m the form of prospectus filed as
       part of this registration statement in reliance upon Rule 430A and contained in a form o f prospectus filed by the registrant pursuant to
       Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of t he time it was
       declared effect ive.

(2)
       For the purpose of determin ing any liab ility under the Securit ies Act of 1933, each post -effective amend ment that contains a form of
       prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
       securities at that time shall be deemed to be the in itial bona fide o ffering thereof.

                                                                          II-3
Table of Contents


                                                                  SIGNATUR ES

        Pursuant to the requirements of the Securit ies Act of 1933, the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the city of Hong Kong, on August 6, 2010.

                                                                        SEMIL EDS CORPORATION

                                                                        By:                     /s/ TRUNG T. DOA N


                                                                                                Trung T. Doan
                                                                                      Chairman and Chief Executi ve Officer


                                                            POWER OF ATTORNEY

          KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints,
jointly and severally, Trung T. Doan and David Young, and each of them, as his attorney -in-fact, with full power of substitution, for h im in any
and all capacit ies, to sign any and all amend ments to this registration statement (including post -effective amend ments), and any and all
registration statements filed pursuant to Rule 462 under the Securities Act of 1933, as amended, in connection with or related to the offering
contemplated by this registration statement and its amendments, if any, and to file the same, with exhib its thereto and other documents in
connection therewith, with the Securities and Exchange Co mmission, hereby ratifying and confirming our signatures as they may be signed by
our said attorney to any and all amendments to said registration statement.

         Pursuant to the requirements of the Securit ies Act of 1933, th is registration statement has been signed by the follo wing persons in the
capacities and on the dates indicated.

                                Signature                                         Title                                 Date



                         /s/ TRUNG T. DOA N                     Chairman and Ch ief Executive Officer             August 6, 2010
                                                                     (principal executive officer)
                         Name: Trung T. Doan

                    /s/ DR. ANH CHUONG TRAN                     President, Ch ief Operating Officer and           August 6, 2010
                                                                                Director
                    Name: Dr. Anh Chuong Tran

                          /s/ DAVID YOUNG                          Chief Financial Officer (principal             August 6, 2010
                                                                    financial officer and principal
                                                                          accounting officer)
                         Name: Davi d Young

                        /s/ SCOTT R. SIMPLOT                                    Director                          August 6, 2010


                        Name: Scott R. Si mplot



                                                                        II-4
Table of Contents

                             Signature                   Title         Date



                    /s/ WILLIAM J. W HITA CRE          Director   August 6, 2010


                    Name: William J. Whitacre

                      /s/ RICHARD P. BECK              Director   August 6, 2010


                      Name: Richard P. Beck

                                                II-5
Table of Contents


                                                              EXHIB IT INDEX

    Number                                                                  Description
         1.1     Form of Underwriting Agreement*
         3.1 (a) Amended and Restated Certificate of Incorporation of SemiLEDs Corporat ion
         3.1 (b) Form of A mended and Restated Certificate of Incorporation of SemiLEDs Corporation, to be in effect upon the complet ion of
                 this offering*
         3.2 (a) Amended and Restated Bylaws of SemiLEDs Corporation
         3.2 (b) Form of A mended and Restated Bylaws of SemiLEDs Corporat ion, to be in effect upon the completion of this offering*
         4.1     Form of Co mmon Stock Certificate*
         4.2     Series E A mended and Restated Investor Rights Agreement by and among SemiLEDs Corporation and certain investors and
                 stockholders
         5.1     Opinion of Orrick, Herrington & Sutcliffe LLP regard ing the legality of the common stock being reg istered*
        10.1     2005 Equity Incentive Plan (amended March 1, 2010)
        10.2     2010 Equity Incentive Plan*
        10.3     Amended and Restated Employ ment Agreement with Trung T. Doan
        10.4     Amended and Restated Employ ment Agreement with Dr. Anh Chuong Tran
        10.5     Emp loy ment Agreement with David Young
        10.6     Emp loyee Agreement with Jack S. Yeh
        10.7     Emp loyee Agreement with Lanfang (Lydia) Chin
        10.8     Form of Proprietary In formation and Inventions Agreement*
        10.9     Form of Non-co mpetition Agreement*
       10.10     Form of Option Agreement*
       10.11     Form of Indemnificat ion Agreement with directors and officers*
       10.12     Pro moters Agreement of Xurui Co., Ltd. dated December 25, 2009 (translation)*
       10.13     Capital Increase Agreement of Xuru i Guangdian Co., Ltd. dated March 26, 2010 (translation)*
       10.14     Patent Assignment and License Agreement between SemiLEDs Corporat ion and Xurui Guangdian Co., Ltd. dated May 7,
                 2010 (t ranslation)*
       10.15     Patent Cross-license Agreement between SemiLEDs Corporation and Xuru i Guangdian Co., Ltd. dated May 7, 2010
                 (translation)*
       10.16     Trademark Cross-license Agreement between SemiLEDs Corporation and Xuru i Guangdian Co., Ltd. dated May 7, 2010
                 (translation)*
        21.1     List of Subsidiaries
        23.1     Consent of KPM G LLP, Independent Registered Public Accounting Firm
        23.2     Consent of Orrick, Herrington & Sutcliffe LLP (included in Exh ibit 5.1)*
        24.1     Power o f Attorney (included on page II-4)
        99.1     Amended and Restated Articles of Association of Xurui Guangdian Co., Ltd. dated March 26, 2010 (translation)*


*
        To be filed by amendment.


                                                                     II-6
                                                                                                                                     Exhi bit 3.1(a)

                                  AMENDED AND RES TATED CERTIFICATE OF INCORPORATION

                                                                        OF

                                                            SemiLEDS Corporation

         SemiLEDs Corporation, a Delaware corporation, hereby certifies that:

         1.               The name of the corporation is SemiLEDs Corporat ion. The date of filing of its orig inal Certificate of Incorporation
with the Secretary of State was January 4, 2005.

         2.              This Amended and Restated Certificate of Incorporation of the corporation attached hereto as Exhib it ―1‖ , which is
incorporated herein by this reference, and wh ich restates, integrates and further amends the provisions of the Certificate of Incorporation of this
corporation as previously amended or supplemented, has been duly adopted by the corporation ’s Board of Directors and a majo rity of the
stockholders in accordance with Sect ions 242 and 245 of the Delaware General Corporation Law, with the approval of the corpor ation’s
stockholders having been given by written consent without a meeting in accordance with Section 228 of the Delaware General Corporation
Law.

         IN WITNESS WHEREOF, said corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its
duly authorized officer and the foregoing facts stated herein are true and correct.

Dated:                  , 2010                                           SEMILEDS CORPORATION


                                                                         By:   /s/ Trung Tri Doan
                                                                               Trung Tri Doan
                                                                               Chief Executive Officer
                                                                EXHIB IT “1”

                                 AMENDED AND RES TATED CERTIFICATE OF INCORPORATION

                                                                     OF

                                                       SEMIL EDS CORPORATION

                                                            ARTICLE I: NAME

        The name of the corporation is: SemiLEDs Corporation.

                                                  ARTICLE II: REGIS TER ED AGENT

         The address of the registered office of the corporation in the State of Delaware is 615 South Dupont Highway, City of Dover, County
of Kent, Delaware 19901. The name of the registered agent of the Corporation at such address is National Corporate Research, Ltd.

                                                         ARTICLE III: PURPOS E

        The purpose of the corporation is to engage in any lawful act or activity fo r which a corporation may be organized under the Delaware
General Co rporation Law of the State of Delaware.

                                                ARTICLE IV: AUTHORIZED CAPITAL

        Effective immediately upon the filing of this Amended and Restated Certificate of Incorporation, the following events shall occur:

         1.            Authorized Capital . This corporation is authorized to issue two (2) classes of shares, designated ―Co mmon St ock‖
and ―Preferred Stock‖. The total nu mber of shares of Co mmon Stock authorized to be issued is 305,000,000 shares, $0.0000004 par value per
share. The total number of shares of Preferred Stock authorized to be issued is 192,064,239 shares, $0.0000004 par valu e per s hare.

         2.              Designation of Preferred Stock . The Preferred Stock shall be div ided into series. The first series shall consist of
96,250,000 shares and is designated ―Series A Preferred Stock.‖ The second series shall consist of 12,083,330 shares and is designated
―Series B Preferred Stock.‖ The third series shall consist of 44,584,456 shares and is designated ―Series C Preferred Stock.‖ The fourth series
shall consist of 15,351,550 shares and is designated ―Series D Preferred Stock.‖ The fifth series shall consist of 23,794,903 shares and is
designated ―Series E Preferred Stock.‖

         3.             Designation of Common Stock . The Co mmon Stock shall be div ided into two series. The first series shall consist
of 208,000,000 shares and is designated ―Class A Common Stock.‖ The second series shall consist of 97,000,000 shares and is designated
―Class B Co mmon Stock.‖ The designations, powers, preferences, and relative, participating, o ptional and

                                                                       2
other rights of the Class A Co mmon Stock and the Class B Co mmon Stock shall be identical except as provided in the ne xt sentence. Each
share of Class A Common Stock shall have one vote on all matters subject to a vote of the stockholders and, except as otherwise required by
law, no share of the Class B Co mmon Stock shall have the right to vote on any matter.

                                              ARTICLE V: TERMS OF CLASS ES AND S ERIES

           The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock and the Co mmon Stock are a s
follows:

           1.              Definitions .   For purposes of this Article V, the following defin itions apply:

                    1.1            ― Board ‖ shall mean the Board of Directors of the Corporat ion.

                    1.2            ― Corporation ‖ shall mean this corporation.

                    1.3            ― Common Stock ‖ shall mean the Class A Common Stock and Class B Co mmon Stock of the Corporation.

                  1.4           ― Common Stock Dividend ‖ shall mean a stock dividend declared and paid on the Co mmon Stock that is
payable in shares of Co mmon Stock.

                   1.5             ― Dividend Rate ‖ shall mean 8% of the per share purchase price of the respective series of the Preferred Stock
(as adjusted for any stock splits, stock dividends, recapitalizations or the like , with respect to each such Series of Preferred Stock) per annum.

                    1.6            ― Original Issue Date ‖ shall mean the date on which the first share of Series E Preferred Stock is issued by
the Corporation.

                    1.7            “Original Series A Issue Price” shall mean $0.15584416 per share for the Series A Preferred Stock.

                    1.8            “Original Series B Issue Price” shall mean $0.30 per share for the Series B Preferred Stock.

                    1.9            “Original Series C Issue Price” shall mean $0.59 per share for the Series C Preferred Stock.

                    1.10           “Original Series D Issue Price” shall mean $0.6514 per share for the Series D Preferred Stock.

                    1.11           “Original Series E Issue Price” shall mean $0.6514 per share for the Series E Preferred Stock.

                   1.12            ― Permitted Repurchases ‖ shall mean the repurchase by the Corporation of shares of Common Stock held by
emp loyees, officers, directors, consultants, independent contractors, advisors, or other persons performing services for the Corp oration or a
subsidiary that are subject to restricted stock purchase agreements or stock option exercise agreements

                                                                           3
under which the Corporation has the option to repurchase such shares: (i) at cost, upon the occurrence of certain events, such as the
termination of emp loy ment or services; or (ii) at any price pursuant to the Corporation’s exercise of a right of first refusal to repurchase such
shares.

                  1.13          ― Preferred Stock ‖ shall mean the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock.

                  1.14            ― Series A Preferred Stock ‖ shall mean the Series A Preferred Stock, $0.0000004 par value per share, of the
Corporation.

                  1.15            ― Series B Preferred Stock” shall mean the Series B Preferred Stock, $0.0000004 par value per share, of the
Corporation.

                  1.16            ― Series C Preferred Stock” shall mean the Series C Preferred Stock, $0.0000004 par value per share, of the
Corporation.

                  1.17            ― Series D Preferred Stock” shall mean the Series D Preferred Stock, $0.0000004 par value per share, of the
Corporation.

                  1.18            ― Series E Preferred Stock” shall mean the Series E Preferred Stock, $0.0000004 par value per share, of the
Corporation.

                  1.19            ― Subsidiary ‖ shall mean any corporation of which at least fifty percent (50%) of the outstanding voting stock
is at the time owned directly or indirect ly by the Corporation or by one or mo re of such subsidiary corporations.

         2.              Divi dend Rights .

                   2.1             Dividend Preference . In each calendar year, the holders of the then outstanding Preferred Stock shall be
entitled to receive, when, as and if declared by the Board, out of any funds and assets of the Corporation legally ava ilab le therefor,
noncumulative dividends at the annual Dividend Rate for each such series of Preferred Stock, prio r and in preference to the p ayment of any
dividends on the Common Stock in such calendar year (other than a Co mmon Stock Div idend). No dividends (other than a Common Stock
Div idend) shall be paid, with respect to the Common Stock during any calendar year unless dividends in the total amount of th e annual
Div idend Rate for each such series of Preferred Stock shall have first been paid or declare d and set apart for payment to the holders of each
such series of Preferred Stock, respectively, during that calendar year; provided , however , that this restriction shall not apply to Permitted
Repurchases. Pay ments of any dividends to the holders of each such series of Preferred Stock shall be paid p ro rata, on an equal priority, pari
passu basis according to their respective dividend preferences as set forth herein. Div idends on the Preferred Stock shall not be mandatory or
cumulat ive, and no rights or interest shall accrue to the holders of the Preferred Stock by reason of the fact that the Corporation shall fail to
declare or pay div idends on the Preferred Stock in the amount of the respective annual Div idend Rate for each such series or in any other
amount in any calendar year o r any fiscal year of the Corporation, whether or not the earnings of the Corporation in any cale ndar year or fiscal
year were sufficient to pay such dividends in whole or in part. Pay ments of any dividends to the holders of the Series A Preferred

                                                                          4
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be paid pro rata, on an
equal priority, pari parsu basis.

                   2.2              Participation Rights . If, after dividends in the full preferential amounts specified in this Section 2 for the
Preferred Stock have been paid or declared and set apart in any calendar year of the Corporation, the Board shall declare additional dividends
out of funds legally availab le therefor in that calendar year, then such additional dividends shall be declared pro rata on t he Co mmon Stock
according to the number of shares of Co mmon Stock held by such holders, where each holder of shares of Preferred Stock is to be treated for
this purpose as holding the greatest whole number of shares of Co mmon Stock then issuable upon conversion of a ll shares of Preferred Stock
held by such holder pursuant to Section 5.

                  2.3             Non-Cash Div idends . Whenever a dividend provided for in this Section 2 shall be payable in property other
than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board.

         3.               Liqui dation Rights . In the event of any liquidation, dissolution or wind ing up of the Corporation, whether
voluntary or involuntary, the funds and assets that may be legally distributed to the Corporation ’s stockholders (the ― Available Funds and
Assets ‖) shall be distributed to stockholders in the follo wing manner:

                   3.1             Liquidation Preferences . The holders of each share of Preferred Stock then outstanding shall be entitled to be
paid, pari passu, out of the Available Funds and Assets, and prior and in preference to any payment or distribution (or any s etting apart of any
payment or distribution) of any Available Funds and Assets on any shares of Common Stock, the amount respectively of (a) the Original
Series A Issue Price with respect to the Series A Preferred Stock (as adjusted for any stock dividends, combinations or splits), the Original
Series B Issue Price with respect to the Series B Preferred Stock (as adjusted for any stock dividends, combinations or splits), the Original
Series C Issue Price with respect to the Series C Preferred Stock (as adjusted for any stock dividends, combinations or splits), the Original
Series D Issue Price with respect to the Series D Preferred Stock (as adjusted for any stock dividends, combinations or splits), and the Original
Series E Issue Price with respect to the Series E Preferred Stock (as adjusted for any stock dividends, combinations or splits), plus (b) all
declared but unpaid dividends thereon. If upon any liquidation, dissolution or winding up of the Corporation the Availab le Fun ds and Assets
shall be insufficient to permit the pay ment to holders of the Preferred Stock of their full p referential amounts described in this subsection, then
all the remaining Availab le Funds and Assets shall be distributed among the holders of the then outstanding Preferred Stock p ro rata, on an
equal priority, pari passu basis, according to their respective liquidation preferences as set forth in this subsection 3.1.

                   3.2            Participation Rights . If there are any Availab le Funds and Assets remain ing after the payment or d istribution
(or the setting aside for payment or distribution) to the holders of the Preferred Stock of their fu ll preferential amounts d escribed above in this
Section 3, then all such remaining Availab le Funds and Assets shall be distributed among the holders of the then outstanding Common Stock
and the Preferred Stock pro rata accord ing to the number of shares held by such holders, where, for this purpose, holders of shares of Preferred

                                                                          5
Stock will be deemed to hold (in lieu of their Preferred Stock) the greatest whole number of shares of Co mmon Stock then issuable upon
conversion in full o f such shares of Preferred Stock pursuant to Section 5.

                   3.3             Deemed Liquidation Events . Each of the following transactions shall be deemed to be a liquidation,
dissolution or winding up of the Corporation as those terms are used in this Section 3 (each a ― Liquidation Event ‖): (a) any reorganization by
way of share exchange, consolidation or merger, in one transaction or series of related transactions (each, a ― combination transaction ‖), in
which the Co rporation is a constituent corporation or is a party with another entity if, as a result of such combination tran saction, the voting
securities of the Corporation that are outstanding immediately prior to the consummation of such combination transaction ( other than any
such securities that are held by an ―Acquiring Stockholder‖, as defined below) do not represent, or are not converted into, securities of the
surviving corporation of such combination transaction (or such surviving corporation ’s parent corporation if the surviving corporation is owned
by the parent corporation) that, immed iately after the consummat ion of such combination transaction, together possess a majority of the total
voting power of all securities of such surviving corporation (or its parent corporation, if applicable) that are outstanding immed iately after the
consummation of such combination trans action, including securities of such surviving corporation (or its parent corporation, if applicable) that
are held by the Acquiring Stockholder; or (b) a sale of all or substantially all of the assets (including the licensing of all or substantially all o f
the Co mpany’s intellectual property to a third party) of the Corporation. For purposes of this Section 3.3, an ― Acquiring Stockholder ‖ means
a stockholder or stockholders of the Corporation that (i) merges or comb ines with the Corporation in such combination transaction or (ii) o wns
or controls a majority of another corporation that merges or co mbines with the Corporation in such comb ination transaction.

                    3.4            Non-Cash Consideration . If any assets of the Corporation distributed to stockholders in connection with any
liquidation, d issolution or winding up of the Corporation are other than cash, then the value of such assets shall be their f air market value as
determined by the Board of Directors in good faith, except that any securities to be distributed to stockholders in a liquidation , dissolution or
winding up of the Corporation shall be valued as follows:

                            (a)             The method of valuation of securities not subject to investment letter or other similar restrict ions on
free marketability shall be as follows:

                                       (i)             unless otherwise specified in a defin itive agreement fo r the acquisition of the Corporat ion,
if the securities are then traded on a national securities exchange or the Nasdaq National Market (or a similar national quotation system), then
the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirt y (30) day period
ending three (3) days prior to the distribution; and

                                      (ii)            if (i) above does not apply but the securities are actively traded over-the-counter, then,
unless otherwise specified in a definit ive agreement for the acquisition of the Corporation, the value shall be deemed to be the average of the
closing bid prices over the thirty (30) calendar day period ending three (3) trading days prior to the distribution; and

                                                                           6
                                     (iii)           if there is no active public market as described in clauses (i) or (ii) above, then the value
shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.

                            (b)            The method of valuation of securities subject to investment letter or other restrictions on free
marketability shall be to make an appropriate discount from the market value determined as above in subparagraphs (a)(i),(ii) o r (iii) of this
subsection to reflect the approximate fair market value thereof, as determined in good faith by t he Board of Directors.

         4.               Voting Rights .

                  4.1           Co mmon Stock . Each holder of shares of Class A Co mmon Stock shall be entitled to one (1) vote for each
share thereof held. The holders of shares of Class B Co mmon Stock shall not be entitled to any right to vote, except where required by law.

                   4.2            Preferred Stock . Each holder of shares of the Series A Preferred Stock and Series D Preferred Stock shall be
entitled to the number of votes equal to the number of whole shares of Class A Co mmon Stock into which such shares of Preferred Stock could
be converted pursuant to the provisions of Section 5 belo w at the record date for the determination of the stockholders entitled to vote on such
matters or, if no such record date is established, the date such vote is taken or any written consent of stockholders is solicited. The holders of
shares of the Series B Preferred Stock, Series C Preferred Stock and Series E Preferred Stock shall not be entitled to any right to vote, except
where required by law.

                    4.3             General . A ll of the provisions of Section 6 below shall continue in fu ll force and effect and shall benefit only
the holders of at least a majority of the originally issued Series A Preferred Stock at any time outstanding. Subject to the immediately
preceding sentence and the other provisions of this Certificate of Incorporation, each holder of the Series A Preferred Stock and Series D
Preferred Stock shall have fu ll voting rights and powers equal to the voting rights and powers of the holders of Class A Co mmo n Stock, and
shall be entitled to notice of any stockholders ’ meeting in accordance with the bylaws of the Corporation (as in effect at the time in question)
and applicable law, and shall be entitled to vote, together with the holders of Class A Common Stock, with respect to any question upon which
holders of Class A Common Stock have the right to vote, except as may be otherwise provided by applicable law. Except as otherwise
expressly provided herein or as required by law, the holders of the Series A Preferred Stock and Series D Preferred Stock and t he holders of
Class A Common Stock shall vote together and not as separate classes.

                   4.4             Board of Directors Election and Removal .

                             (a)              Elect ion of Directors . (i) So long as at least a majority of the originally issued shares of the Series A
Preferred Stock are outstanding (such number of shares being subject to proportional adjustments to reflect co mbinations or subdivisions o f
such Preferred Stock o r div idends declared in shares of such stock), then the holders of the Series A Preferred Stock, voting as a separate class,
shall be entitled to elect two (2) d irectors of the Corporation; and (ii) the holders of the Class A Co mmon Stock, voting as a separate class, shall

                                                                           7
be entitled to elect three (3) d irectors of the Corporat ion.

                             (b)              Quorum; Required Vote .

                                     (i)               Quorum . At any meeting held fo r the purpose of electing directors, the presence in person
or by pro xy of the holders of a majority of the shares of the Series A Preferred Stock or Class A Co mmon Stock then outstanding, respectively,
shall constitute a quorum for the election of d irectors to be elected solely by the holders of the Seriers A Preferred Stock or Class A Co mmon
Stock, respectively.

                                      (ii)            Required Vote . With respect to the election of any director or directors by the holders of
the outstanding shares of a specified class of stock given the right to elect such director or directors pursuant to subsection 4.4(a) above (the ―
Specified Stock ‖), that candidate or those candidates (as applicable) shall be elected who eith er: (i) in the case of any such vote conducted at a
meet ing of the holders of such Specified Stock, receive the highest number of affirmat ive votes (on an as -converted basis) of the outstanding
shares of such Specified Stock; or (ii) in the case of any such vote taken by written consent without a meeting, are elected by the written
consent of the holders of a majo rity of outstanding shares of each class of such Specified Stock entitled to vote thereon.

                            (c)            Vacancy . If there shall be any vacancy in the office of a d irector elected or to be elected by the
holders of any Specified Stock, then a director to hold office fo r the unexp ired term of such directorship may be elected by the required vote of
holders of the shares of such Specified Stock specified in subsection 4.4(b)(ii) above that are entitled to elect such director.

                             (d)            Removal . Any director who shall have been elected to the Board by the holders of any Specified
Stock, or by any director or directors elected by holders of any Specified Stock as provided in subsection 4.4(c), may be remov ed during his or
her term of office, without cause, by, and only by, the affirmat ive vote of shares representing a majority of the voting powe r, on an
as-converted basis, of all the outstanding shares of such Specified Stock entitled to vote for such director or directors, given either at a meeting
of such stockholders duly called for that purpose or pursuant to a written consent of stockholders without a meeting. Any vacancy created by
such removal may be filled only in the manner provided in subsection 4.4(c).

                           (e)             Procedures . Any meeting of the holders of any Specified Stock, and any action taken by the holders
of any Specified Stock by written consent without a meeting, in order to elect or remove a director under this subsection 4.4 , shall be held in
accordance with the procedures and provisions of the Corporation’s Bylaws, the Delaware General Corporation Law and applicable law
regarding stockholder meet ings and stockholder actions by written consent, as such are then in effect (including but not limited to procedures
and provisions for determin ing the record date for shares entitled to vote).

                            (f)             Termination . Notwithstanding anything in this subsection 4.4 to the contrary, the provisions of this
subsection 4.4 shall cease to be of any further force o r effect upon the earliest to occur of: (i) upon the consummation of a Liq uidation Event;
(ii) upon the

                                                                         8
election of the Corporation to windup its affairs and dissolve; or (iii) the first date on which the total number of outstanding Series A Preferred
Stock is less than a majority of the number of shares of Series A Preferred Stock originally issued (such number of s hares being subject to
proportional adjustment to reflect all co mbinations or subdivisions of such Preferred Stock or div idends declared in such shares of stock).

                    4.5           Vote by Ballot .   Election of d irectors need not be by written ballot unless the Bylaws of the Corporation
shall so provide.

        5.           Conversion Rights .         The outstanding shares of Preferred Stock and Class B Co mmon Stock shall be convertible into
Class A Common Stock as follows:

                    5.1           Optional Conversion .

                            (a)              At the option of the holder thereof, each share of the Series A Preferred Stock or Series D Preferred
Stock shall be convertible, at any time o r fro m t ime to time prior to the close of business on the business day before any da te fixed for
redemption of such share, into fully paid and nonassessable shares of Class A Common Stock as provided herein.

                           (b)            At the option of the holder thereof, each share of the Series B Preferred Stock, Series C Preferred
Stock or Series E Preferred Stock shall be convertible, at any time or fro m time to time prior to the close of b usiness on the business day before
any date fixed for redemption of such share, into fully paid and nonassessable shares of Class B Co mmon Stock as provided herein.

                              (c)             Each holder of shares of the Preferred Stock who elects to convert the same into shares of Common
Stock shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporat ion or any transfer agent for the
Preferred Stock or Co mmon Stock, and shall g ive written notice to the Corporation at such office that such holder elects to convert the same
and shall state therein the number of shares of Preferred Stock being converted. Thereupon the Corporation shall pro mptly issue and deliver at
such office to such holder a certificate or certificates for the nu mber of shares of Co mmon Stock to which such holder is entitled upon such
conversion. Such conversion shall be deemed to have been made immediately prio r to the close of business on the date of such surrender of
the certificate or certificates representing the shares of the Preferred Stock to be converted, and the person entitled to receive the shares of
Co mmon Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common St ock on such
date. If a conversion election under this subsection 5.1 is made in connection with an underwritten offering of the Corporation ’s securities
pursuant to the Securities Act of 1933, as amended (the ― Securities Act ‖), (which underwritten offering does not cause an automat ic
conversion pursuant to subsection 5.2 to take place) the conversion may, at the option of the holder tendering shares of the Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale o f the Corporation’s securities pursuant to such offering, in which
event the holders making such elections who are entitled to receive Co mmon Stock upon conversion of their shares of the Prefe rred Stock shall
not be deemed to have converted such shares of Preferred Stock until immediately prio r to the closing of such sale of the Co rporation ’s
securities in the offering.

                                                                         9
                  5.2             Automatic Conversion .

                            (a)             Each share of Class B Co mmon Stock shall auto matically be converted into fully paid and
nonassessable shares of Class A Common Stock, on a one-to-one basis, immed iately prior to (i) the closing of a firm co mmit ment underwritten
public offering pursuant to an effective registration statement filed under the Securities Act, covering the offer and sale o f the Common Stock,
(ii) the consummation of a merger, consolidation, share exchange, sale of the Co rporation’s stock, or other reorganizat ion of the Corporation
(other than a reincorporation of the Co mpany), if after giving effect to such merger, consolidation or such other listed even ts, the Corporation’s
stockholders immed iately prior to such merger, consolidation or such other listed events do not represent a majority interest of the survivin g or
resulting entity after such merger, consolidation or such other listed events; or (iii) the sale of all or substantially all of the assets of the
Corporation.

                            (b)             Each share of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, as the case may be, shall automat ically be converted into fully paid and nonassessable
shares of Class A Common Stock, as provided herein : (i) immed iately prior to the closing of a firm co mmit ment underwritten public offering
pursuant to an effective registration statement filed under the Securities Act, covering the offer and sale of Co mmon Stock for t he accou nt of
the Corporation in which the aggregate public offering price (before deduction of underwriters ’ d iscounts and commissions) equals or exceeds
Fifty Million Do llars ($50,000,000) and the public offering price per share of wh ich equals or exceeds three (3) times the Original Series A
Issue Price with respect to the Series A Preferred Stock, three (3) times the Orig inal Series B Issue Price with respect to the Series B Preferred
Stock, three (3) times the Original Series C Issue Price with respect to the Series C Preferred Stock, three (3) times the Orig inal Series D Issue
Price with respect to the Series D Preferred Stock, and three (3) times the Orig inal Series E Issue Price with respect to the Series E Preferred
Stock, before deduction of underwriters ’ discounts and commissions (such price per share of Co mmon Stock to be appropriately adjusted to
reflect Co mmon Stock Events (as defined in subsection 5.4) (a ― Qualified Public Offeri ng ‖); or (ii) with respect to the Series A Preferred
Stock, upon the Corporation’s receipt of the written consent of the holders of not less than a majo rity of the then outstanding shares of Series A
Preferred Stock (voting as a single class on an as -converted basis) to the conversion of all then outstanding Series A Preferred Stock under this
Section 5.

                            (c)            Upon the occurrence of any event specified in subsection 5.2(b)(i) or (ii) above, the outstanding
shares of Preferred Stock shall be converted into Class A Common Stock auto matically without the need for any further action by the holders
of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided ,
however , that the Corporation shall not be obligated to issue certificates evidencing the shares of Co mmon Stock issuable upon such
conversion unless the certificates evidencing such shares of Preferred Stock are either delivered to the Corporation or its transfer agent as
provided below, or the holder notifies the Co rporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the Corporation fro m any loss incurred by it in connection with such
certificates. Upon the occurrence of such automatic conversion of the Preferred Stock, the

                                                                         10
holders of Preferred Stock shall surrender the certificates representing such shares at the office of the Corporation or any transfer agent for the
Preferred Stock or Class A Common Stock. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Clas s A Common Stock
into which the shares of Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred.

                    5.3             Conversion Price . Each share of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock shall be convertible in accordance with subsection 5.1 or subsection 5.2 above
into the number of shares of Co mmon Stock which results fro m d ivid ing the Original Series A Issue Price by the Series A Con version Price,
dividing the Orig inal Series B Issue Price by the Series B Conversion Price, d ividing the Original Series C Issue Price by the Series C
Conversion Price, div iding the Orig inal Series D Issue Price by the Series D Conversion Price, and dividing the Orig inal Series E Issue Price
by the Series E Conversion Price, as the case may be (as adjusted for any stock dividends, combinations or splits), determined as hereinaft er
provided, in effect on the date the certificate is surrendered for conversion. The price at wh ich shares of Co mmon Stock shall be deliverable
upon conversion of shares of the Series A Preferred Stock (the ― Series A Conversion Price ‖) shall in itially be the Original Series A Issue
Price. The price at which shares of Co mmon Stock shall be deliverable upon conversion of shares of the Series B Preferred St ock (the ―
Series B Conversion Price ‖) shall in itially be the Original Series B Issue Price. The price at which shares of Co mmon Stock shall be
deliverable upon conversion of shares of the Series C Preferred Stock (the ― Series C Conversion Price ‖) shall in itially be the Original
Series C Issue Price. The price at which shares of Co mmon Stock shall be deliverab le upon conversion of shares of the Series D Preferred
Stock (the ― Series D Conversion Price ‖) shall in itially be the Original Series D Issue Price. The price at wh ich shares of Common Stock
shall be deliverab le upon conversion of shares of the Series E Preferred Stock (the ― Series E Conversion Price ‖) shall init ially be the Original
Series E Issue Price. The Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price, the Series D Conversion
Price and the Series E Conversion Price may co llect ively be referred to hereinafter as the ― Conversion Price .‖ The Conversion Price shall be
subject to adjustment fro m time to time as provided below. Following each adjustment of the Conversion Price, such adjusted Conversion
Price shall remain in effect until a further adjustment of such Conversion Price hereunder.

                     5.4           Adjustment Upon Co mmon Stock Event . Upon the happening of a Co mmon Stock Event (as hereinafter
defined), the Conversion Price of each such series of Preferred Stock shall, simu ltaneous ly with the happening of such Commo n Stock Event,
be adjusted by mult iplying the Conversion Price of such series of Preferred Stock in effect immediately prio r to such Common Stock Event by
a fraction, (i) the nu merator of wh ich shall be the number of shares of Co mmon Stock issued and outstanding immed iately prior to such
Co mmon Stock Event, and (ii) the denominator of wh ich shall be the number of shares of Co mmon Stock issued and outstanding immed iately
after such Common Stock Event, and the product so obtained shall thereafter be the Conversion Price for such series of Preferred Stock. The
Conversion Price for a series of Preferred Stock shall be read justed in the same manner upon the happening of each subsequent Co mmon Stock
Event. As used herein, the term the ― Common Stock Event ‖ shall mean at any time or fro m t ime to t ime after the Orig inal Issue Date, (i) the

                                                                         11




issue by the Corporation of additional shares of Co mmon Stock as a div idend or other distribution on outstanding Common Stock , (ii) a
subdivision of the outstanding shares of Co mmon Stock into a greater nu mber of shares of Co mmon Stock, or (iii) a co mbinatio n of the
outstanding shares of Co mmon Stock into a smaller nu mber o f shares of Co mmon Stock.

                   5.5             Adjustments for Other Div idends and Distributions . If at any time or fro m t ime to t ime after the Orig inal
Issue Date the Corporation pays a dividend or makes another distribution to the holders of the Co mmon Stock payable in securities of the
Corporation, other than an event constituting a Co mmon Stock Event, then in each such event provision shall be made so that the holders of the
Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Co mmon Stock receivable upon co nversion
thereof, the amount of securities of the Corporation which they would have received had their Preferred Stock be en converted into Common
Stock on the date of such event (or such record date, as applicable) and had they thereafter, during the period fro m the date of such event (or
such record date, as applicable) to and including the conversion date, retained such se curities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under this Section 5 with respect to the rights of the holders of the
Preferred Stock or with respect to such other securities by th eir terms.

                  5.6              Adjustment for Reclassification, Exchange and Substitution . If at any time or fro m time to time after the
Original Issue Date the Co mmon Stock issuable upon the conversion of the Preferred Stock is changed into the same or a d iffer ent number of
shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise ( other than by a Co mmon Stock Event or a
stock dividend, reorganizat ion, merger, or consolidation provided for elsewhere in this Section 5), then in any such event each holder of
Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property
receivable upon such recapitalizat ion, reclassification or other change by holders of the number of shares of Co mmon Stock in to which such
shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or property by the terms thereof.
                   5.7              Reorganizations, Mergers and Consolidations . If at any time or fro m t ime to t ime after the Orig inal Issue
Date there is a reorganizat ion of the Corporat ion (other than a recapitalization, subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 5) o r a merger or consolidation of the Corporation with or into another corporation (except an event
which is governed under subsection 3.3), then, as a part of such reorganizat ion, merger or consolidation, provision shall be mad e so that the
holders of the Preferred Stock thereafter shall be entit led to receive, upon conversion of the Preferred Stock, the nu mber of shares of stock or
other securities or property of the Co rporation, or of such successor corp oration resulting fro m such reorganization, merger o r consolidation, to
which a holder of Co mmon Stock deliverable upon conversion would have been entitled on such reorganization, merger or consolidation. In
any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the
holders of the Preferred Stock after the reorganization, merger or consolidation to the end that the provisions of this Section 5 (including
adjustment of the Conversion Price then in effect and nu mber of shares

                                                                         12
issuable upon conversion of the Preferred Stock) shall be applicable after that event and be as nearly equivalent to the provisions hereof as may
be practicable. This subsection 5.7 shall similarly apply to successive reorganizations, mergers and consolidations. Notwithstanding anything
to the contrary contained in this Section 5, if any reorganization, merger or consolidation is approved by the vote of stockholders required by
Section 6 hereof, then such transaction and the rights of the holders of Preferred Stock and Co mmon Stock pursuant to such reorganiza t ion,
merger or consolidation will be governed by the documents entered into in connection with such transaction and not by the provisions of th is
Section 5.7.

                  5.8            Sale of Shares Below Conversion Price .

                            (a)             Adjustment Formula . If at any time o r fro m t ime to time after the Orig inal Issue Date the
Corporation issues or sells, or is deemed by the provisions of this subsection 5.8 to have issued or sold, Additional Shares of Co mmon Stock
(as hereinafter defined), otherwise than in connection with a Co mmon Stock Event as provided in subsection 5.4, a div idend or distribution as
provided in subsection 5.5 or a recapitalizat ion, reclassification or other change as provided in subsection 5.6, or a reorga nization, merger or
consolidation as provided in subsection 5.7, for an Effective Price (as hereinafter defined) that is less than the Conversion Price for any series
of Preferred Stock in effect immediately prior to such issue or sale (or deemed issue or sale), t hen, and in each such case, the Conversion Price
for such series of Preferred Stock shall be reduced, as of the close of business on the date of such issue or sale, to the price obtained by
mu ltip lying the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price wh ichever is applicab le, by a fraction:

                                     (i)             The numerator of which shall be the sum of (A ) the number of Co mmon Stock Equivalents
         Outstanding (as hereinafter defined) immediately prior to such issue or sale of Additional Shares of Co mmon Stock plus (B) th e
         quotient obtained by dividing the Aggregate Consideration Received (as hereinafter defined) by the Co rporation for the total number
         of Additional Shares of Co mmon Stock so issued or sold (or deemed so issued and sold) by the Conversion Price for such series of
         Preferred Stock in effect immed iately prior to such issue or sale; and

                                    (ii)          The denominator of which shall be the sum of (A) the nu mber of Co mmon Stock
         Equivalents Outstanding immed iately prior to such issue or sale plus (B) the number of Additional Shares of Co mmon Stock so issued
         or sold (or deemed so issued and sold).

                           (b)             Certain Definit ions . For the purposes of making any adjustment required under this subsection 5.8:

                                   (i)             ― Additional Shares of Common Stock ‖ shall mean all shares of Co mmon Stock issued by
the Corporation, or deemed issued as provided in Section 5.8(c) below, whether or not subsequently reacquired or retired by the Corporation,
other than:

                                              (A)            shares of Co mmon Stock issued or issuable upon

                                                                        13
conversion of the outstanding shares of the Preferred Stock;

                                               (B)            shares of Common Stock (o r options, warrants or rights therefor) granted or issued
hereafter to employees, officers, directors, contractors, consultants or advisers to, the Corporation or any Subsidiary pursu ant to incentive
agreements, stock purchase or s tock option plans, stock bonuses or awards, warrants, contracts or other arrangements that are approved by the
Corporation’s Board of Directors;

                                                (C)            shares of the Corporation’s Common Stock or Preferred Stock (and/or options or
warrants therefore) issued to parties that are strategic partners in connection with a co mmercial relat ionship with the Corpo rat ion, in each case,
approved by the Corporation’s Board of Directors;

                                                (D)           shares of the Corporation’s Common Stock or Preferred Stock (and/or options or
warrants therefore) issued to parties that are providing the Corporation with equip ment leases, real property leases, loans, credit lines,
guaranties of indebtedness, or bank credit or the like, under arrangements, in each case, approved by the Corporation ’s Board of Directors;

                                               (E)            shares of Co mmon Stock or Preferred Stock issued pursuant to the acquisition of
another corporation or entity by the Corporation by consolidation, merger, purchase of all or substantially all of the assets, or other
reorganizat ion in which the Corporation acquires, in a single transaction or series of related transactions, all or substantially all of the assets of
such other corporation or entity or fifty percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or
more of the equity ownership of such other entity; provided that such transaction or series of transactions has been approved by the
Corporation’s Board of Directors or pursuant to the purchase of less than a fifty percent (50%) equity ownership in connection with a joint
venture or other strategic arrangement or other co mmercial relationship, provided such an arrangement is approved by the Corporation’s Board
of Directors;

                                               (F)            shares of Common Stock or Preferred Stock issuable upon exercise of any warrants
or rights to purchase any securities of the Corporation outstanding as of the date of this Ame nded and Restated Certificate of In corporation and
any securities issuable upon the conversion thereof;

                                               (G)             shares of Co mmon Stock issued pursuant to a transaction described in Section 5.4
hereof;

                                            (H)            shares of Common Stock issued or issuable in a public offering prior to or in
connection with which all outstanding shares of Preferred Stock will be converted to Common Stock; and

                                             (I)             shares of Common Stock or Preferred Stock, issued or issuable hereafter that are
(i) approved by the Board, and (ii) approved by the vote of the holders of a majority of the then outstanding Preferred Stock (vo ting as a single
class on an as-

                                                                          14
converted to Co mmon Stock basis), as being excluded fro m the definition of ―Additional Shares of Co mmon Stock‖ under this subsection
5.8(b).

                                      (ii)             The ― Aggregate Consideration Received ‖ by the Corporation for any issue or sale (or
deemed issue or sale) of securit ies shall (A) to the extent it consists of cash, be computed at the gross amount of cash received by the
Corporation before deduction of any underwrit ing or similar co mmissions, compensation or concessions paid or allowed by the Corporation in
connection with such issue or sale and without deduction of any expenses payable by the Corporation; (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in good faith by the Board; and (C) if Additional Shares of
Co mmon Stock, Convertible Securit ies or Rights or Options to purchase either Additional Shares of Co mmon Stock or Convertible Securit ies
are issued or sold together with other stock or securities or other assets of the Corporation for a consideration wh ich covers both, be computed
as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional
Shares of Co mmon Stock, Convertible Securities or Rights or Options.

                                      (iii)          The ― Common Stock Equivalents Outstanding ‖ shall mean the number of shares of
Co mmon Stock that is equal to the sum of (A) all shares of Co mmon Stock of the Corporation that are outstanding at the time in question, plus
(B) all shares of Co mmon Stock of the Corporation issuable upon conversion of all shares of Preferred Stock or other Convertible Securities
that are outstanding at the time in question, plus (C) all shares of Co mmon Stock of the Corporation that are issuable upon the exercise of
Rights or Options that are outstanding at the time in question assuming the full conversion or exchange into Co mmon Stock of all such Rights
or Options that are Rights or Options to purchase or acquire Convertible Securities into or for Co mmon Stock.

                                  (iv)              The ― Convertible Securities ‖ shall mean stock or other securities convertible into or
exchangeable for shares of Co mmon Stock.

                                       (v)           The ― Effective Price ‖ of Additional Shares of Co mmon Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Co mmon Stock issued or sold, or deemed to have been issued or sold, by the
Corporation under this subsection 5.8, into the Aggregate Consideration Received, or deemed to have been received, by the Cor poration under
this subsection 5.8, for the issue of such Additional Shares of Co mmon Stock; and

                                 (vi)            The ― Rights or Options ‖ shall mean warrants, options or other rights to purchase or acquire
shares of Co mmon Stock or Convertible Securities.

                            (c)            Deemed Issuances . For the purpose of making any adjustment to the Conversion Price of any series
of Preferred Stock required under this subsection 5.8, if the Corporation issues or sells any Rights or Options or Convertible Securities and if
the Effective Price of the shares of Co mmon Stock issuable upon exercise of such Rights or Options and/or the conversion or exchange of
Convertible Securit ies (co mputed without reference to any additional or similar p rotective or antidilution clauses) is less t han the Conversion
Price then in effect for a

                                                                        15
series of Preferred Stock, then the Corporation shall be deemed to have issued (each a ― Deemed Issuance ‖), at the time of the issuance of
such Rights, Options or Convertible Securities, that number of Additional Shares of Co mmon Stock that is equal to the maximu m number of
shares of Co mmon Stock issuable upon exercise or conversion of such Rights, Options or Convertible Securities upon their issuance and to
have received, as the Aggregate Consideration Received for the issuance of such shares, an amount equal to the total amount o f the
consideration, if any, received by the Corporation for the issuance of s uch Rights or Options or Convertible Securities, plus, in the case of such
Rights or Options, the min imu m amounts of consideration, if any, payable to the Corporat ion upon the exercise in full of such Rights or
Options, plus, in the case of Convertible Securit ies, the min imu m amounts of consideration, if any, payable to the Corporat ion (other than by
cancellation of liabilit ies or obligations evidenced by such Convertible Securities) upon the conversion or exchange thereof; provided that :

                                     (i)              if the minimu m amounts of such consideration cannot be ascertained in such Deemed
Issuance, but are a function of antidilution or similar protective clauses, then the Corporation shall be deemed to have rece ived the minimu m
amounts of consideration without reference to such clauses;

                                    (ii)             if the min imu m amount of consideration payable to the Corporation upon the exercise of
Rights or Options or the conversion or exchange of Convertible Securit ies is reduced over time or upon the occurrence or non-occurrence of
specified events other than by reason of antidilution or similar protective adjustments, then the Effective Price shall be re calcu lated using the
figure to which such minimu m amount of cons ideration is reduced; and

                                    (iii)         if the minimu m amount of consideration payable to the Corporation upon the exercise of
such Rights or Options or the conversion or exchange of Convertib le Securities is subsequently increased , then the Effective Price shall again
be recalculated using the increased min imu m amount of consideration payable to the Corporation upon the exercise of such Rig h ts or Options
or the conversion or exchange of such Convertible Securities.

          No further ad justment of the Conversion Price, adjusted upon the issuance of such Rights or Options or Convertible Securit ies, shall
be made as a result of the actual issuance of shares of Co mmon Stock on the exercise of any such Rights or Options or the conversion or
exchange of any such Convertible Securities. If any such Rights or Options or the conversion rights represented by any such Convertible
Securities shall expire without having been fully exercised, then the Conversion Price as adjusted upon the issuance of such Rights or Options
or Convertib le Securities shall be readjusted to the Conversion Price which would have been in effect had an adjustment been made on the
basis that the only shares of Co mmon Stock so issued were the shares of Co mmon Stock, if any, th at were actually issued or sold on the
exercise of such Rights or Options or rights of conversion or exchange of such Convertible Securities, and such shares of Com mon Stock, if
any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually
received by the Corporation for the granting of all such Rights or Options, whether or not exercised, plus the consideration received for issuing
or selling all such Convertible Securit ies actually converted or

                                                                         16
exchanged, plus the consideration, if any, actually received by the Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) on the conversion or exchange of such Convertible Securit ies, provided that such readjustment shall not apply
to prior conversions of Preferred Stock.

                    5.9             Certificate of Adjustment . In each case of an adjustment or readjustment of the Conversion Price for a series
of Preferred Stock, the Corporation, at its expense, shall cause its Chief Financial Officer to co mpute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of the Preferred Stock at the holder’s address as shown in the Corporation’s books.

                  5.10            Fractional Shares . No fract ional shares of Co mmon Stock shall be issued upon any conversion of Preferred
Stock. In lieu of any fractional share to which the holder wou ld otherwise be entitled, the Corporation shall pay the holder cash eq ual to the
product of such fraction multip lied by the Co mmon Stock’s fair market value as determined in good faith by the Board as of the date of
conversion.

                   5.11            Reservation of Stock Issuable Upon Conversion . The Co rporation shall reserve and keep available out of its
authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred
Stock, such number of its shares of Class A Co mmon Stock as shall fro m time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Class A Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued shares of Class A Co mmon Stock to such number of shares as shall
be sufficient for such purpose. The Corporation shall reserve 111,601,550 shares of the Corporation ’s Class A Co mmon Stock for purpose of
effecting the conversion of shares of the Corporation’s Series A Preferred Stock and Series D Preferred Stock.

                   5.12           Notices . Any notice required by the provisions of these Certificate of Incorporation to be given to the holders
of shares of the Preferred Stock shall be deemed g iven upon the earlier of actual receipt or deposit in the United States mai l, by certified or
registered mail, return receipt requested, postage prepaid, or delivery by a recognized exp ress courier, fees prepaid, addressed to each holder of
record at the address of such holder appearing on the books of the Corporation.

         6.              Restrictions and Limi tations .

                  Class Protective Provisions . So long as a majority of the originally issued shares of Series A Preferred Stock remain
outstanding, the Corporation shall not (whether by amend ment, merger, consolidation or otherwise), without the approval, by v ote or written
consent, of the holders of at least a majority of shares of the Series A Preferred Stock then outstanding, voting as a single class on an as
converted to Class A Co mmon Stock basis:

                                                                        17
                            (a)             amend its Certificate of Incorporation or Bylaws;

                            (b)            reclassify any outstanding shares of capital stock of the Corporation into shares having rights,
preferences or privileges senior to or on parity with the Series A Preferred Stock;

                            (c)             create any capital stock having rights or preferences senior to or on parity with the Series A Preferred
Stock;

                            (d)             consummate a Liqu idation Event;

                            (e)             liquidate or dissolve;

                            (f)             change the authorized number of members of its Board of Directors;

                            (g)             make any adverse change to the rights, preferences, privileges, powers, and restrictions for the benefit
of the Series A Preferred Stock;

                            (h)             repurchases, redeems or retires any capital stock other than Permitted Repurchases;

                             (i)            results in the consolidation or merger of the Corporation with or into any other person or persons, the
sale, conveyance or disposition of all or substantially all of the assets of the Corporation or the effectuation by the Corporation of a transaction
or series of related transactions in which more than 50% of the voting power of the Corporation immed iately prior to such tra nsaction or series
of related transactions is disposed of;

                          (j)               results in the transfer or other disposition of any assets of the Corporation with an aggregate value in
excess of $1,000,000 in any fiscal year;

                            (k)             results in the creation of subsidiaries;

                            (l)             entering into transactions with affiliates; or

                            (m)             enter into any debt transaction, or allow any subsidiary or controlled a ffiliate of the Corporation to
enter into any debt transaction, corporate bond financing, assumption or guarantee of any liability for borrowed money or any other debt
financing, fo r more than US$4,000,000 other than equipment lease arrangements and other transactions in the normal course of business.

         7.              Miscellaneous

                  7.1            No Reissuance of Preferred Stock . No share or shares of Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired an d eliminated fro m
the shares which the Corporation shall be authorized to issue.

                                                                          18
                  7.2             Preemptive Rights . No stockholder of the Corporation shall have a right to purchase shares o f capital stock
of the Corporation sold or issued by the Corporation except to the extent that such a right may fro m time to time be set fort h in a written
agreement between the Corporation and a stockholder.

                                                  ARTICLE VI: AMENDMENT OF B YLAWS

         Except as limited under Article V, Section 6 hereof, the Board of Directors of the Corporat ion shall have the power to adopt, amend or
repeal Bylaws of the corporation.

                                                    ARTICLE VII: DIRECTOR LIAB ILITY

         To the fullest extent permitted by law, no d irector of the Corporation shall be personally liable for monetary damages for breach of
fiduciary duty as a director. Without limit ing the effect of the preceding sentence, if the Delaware General Corporat ion Law is hereafter
amended to authorize the further elimination or limitation of the liability of a director, then the liab ility of a d irector of the Corp oration shall be
eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

          To the fullest extent permitted by applicable law, this Corporation is authorized to provide indemnification of (and advancemen t of
expenses to) agents of this Corporation (and any other persons to which General Co rporation Law permits this Corporation to p rovide
indemn ification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested dire ctors or
otherwise, in excess of the indemnificat ion and advancement otherwise permitted by Section 145 of the General Corporation Law, subject only
to limits created by applicable General Corporation Law (statutory or non -statutory), with respect to actions for breach of duty to this
Corporation, its stockholders, and others.

Neither any amend ment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inco nsistent with
this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corp oration
existing at the time of such amendment, repeal or adoption of such an inconsistent provision.

                                                                       *********

                                                                            19
                                                   CERTIFICATE OF AMENDMENT OF

                                  AMENDED AND RES TATED CERTIFICATE OF INCORPORATION

                                                                       OF

                                                        SEMIL EDS CORPORATION

         The undersigned, Trung Tri Doan, hereby certifies that:

         1.              He is the duly elected and acting Chief Executive Officer of SemiLEDs Corporation, a Delaware corporation.

        2.               The Certificate of Incorporation of this corporation was originally filed with the Delaware Secretary of State on
January 4, 2005.

         3.           Pursuant to Section 242 o f the General Corporation Law of the State of Delaware, this Cert ificate of A mend ment of
Amended and Restated Certificate of Incorporation amends Article IV of this corporation’s Certificate of Incorporation to read in its entirety as
follows:

                                                 “ARTICLE IV: AUTHORIZED CAPITAL

                   Effective immediately upon the filing of this Amended and Restated Certificate of Incorporation, the following events shall
         occur:

                 1.              Authorized Capital . This corporation is authorized to issue two (2) classes of shares, designated ―Co mmon
         Stock‖ and ―Preferred Stock‖. The total number of shares of Co mmon Stock authorized to be issued is 407,000,000 shares,
         $0.0000004 par value per share. The total nu mber of shares of Preferred Stock authorized to be issued is 192,064,239 shares,
         $0.0000004 par value per share.

                  2.             Designation of Preferred Stock . The Preferred Stock shall be div ided into series. The first series shall
         consist of 96,250,000 shares and is designated ―Series A Preferred Stock.‖ The second series shall consist of 12,083,330 shares and is
         designated ―Series B Preferred Stock.‖ The third series shall consist of 44,584,456 shares and is designated ―Series C Preferred
         Stock.‖ The fourth series shall consist of 15,351,550 shares and is designated ―Series D Preferred Stock.‖ The fifth series shall
         consist of 23,794,903 shares and is designated ―Series E Preferred Stock.‖

                  3.              Designation of Common Stock . The Co mmon Stock shall be div ided into two series. The first series shall
         consist of 310,000,000 shares and is designated ―Class A Co mmon Stock.‖ The second series shall consist of 97,000,000 shares and
         is designated ―Class B Co mmon Stock.‖ The designations, powers, preferences, and relative, part icipating, optional and other rights
         of the Class A Common Stock and the Class B Co mmon Stock shall be identical except as provided in the next sentence. Each share
         of Class A Co mmon Stock shall have one vote on all matters subject to a vote of the stockholders and, except as otherwise required by
         law, no share of the Class B Co mmon Stock shall have the right to vote on any matter.‖
        4.              The foregoing Certificate of A mend ment has been duly adopted by this corporation’s Board of Directors and
stockholders in accordance with the applicable provisions of Sections 228 and 242 of the General Corporat ion Law of the State of Delaware.

                                                          [Signature Page Follows]
Executed    , 2010.


                                /s/ Trung Tri Doan
                                Trung Tri Doan
                                Chief Executive Officer

           SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT
                                 Exhi bit 3.2(a)

AMENDED AND RES TATED B YLAWS

                OF

   SEMIL EDS CORPORATION

      (a Delaware corporation)
                                                     TABLE OF CONTENTS

                                                                         Page


ARTICLE 1 Offices                                                               1
     1.1        Principal Office                                                1
     1.2        Additional Offices                                              1

ARTICLE 2 Meeting of Stockholders                                               1
     2.1       Place of Meeting                                                 1
     2.2       Annual Meeting                                                   1
     2.3       Special Meetings                                                 1
     2.4       Notice of Meetings                                               2
     2.5       Business Matter of a Special Meeting                             2
     2.6       List of Stockholders                                             2
     2.7       Organization and Conduct of Business                             2
     2.8       Quorum and Adjournments                                          2
     2.9       Vot ing Rights                                                   3
     2.10      Majority Vote                                                    3
     2.11      Record Date for Stockholder Notice and Voting                    3
     2.12      Pro xies                                                         3
     2.13      Inspectors of Elect ion                                          4
     2.14      Action Without Meeting by Written Consent                        4

ARTICLE 3 Directors                                                             4
     3.1        Nu mber; Qualifications                                         4
     3.2        Resignation and Vacancies                                       4
     3.3        Removal o f Directors                                           4
     3.4        Powers                                                          5
     3.5        Place of Meetings                                               5
     3.6        Annual Meetings                                                 6
     3.7        Regular Meetings                                                6
     3.8        Special Meetings                                                6
     3.9        Quorum and Adjournments                                         6
     3.10       Action Without Meeting                                          6
     3.11       Telephone Meetings                                              6
     3.12       Waiver of Notice                                                6
     3.13       Fees and Compensation of Directors                              6
     3.14       Rights of Inspection                                            7

ARTICLE 4 Co mmittees of Directors                                              7
     4.1      Selection                                                         7
     4.2      Power                                                             7
     4.3      Co mmittee Minutes                                                7

ARTICLE 5 Officers                                                              8
     5.1        Officers Designated                                             8
     5.2        Appointment of Officers                                         8

                                                               i
       5.3        Subordinate Officers                                           8
       5.4        Removal and Resignation of Officers                            8
       5.5        Vacancies in Offices                                           8
       5.6        Co mpensation                                                  8
       5.7        The Chairman of the Board                                      8
       5.8        The Chief Executive Officer                                    8
       5.9        The President                                                  9
       5.10       The Vice President                                             9
       5.11       The Secretary                                                  9
       5.12       The Assistant Secretary                                        9
       5.13       The Treasurer                                                 10
       5.14       The Assistant Treasurer                                       10

ARTICLE 6 Indemnificat ion of Directors, Officers, Employees and Other Agents   10
     6.1       Indemnification of Directors and Officers                        10
     6.2       Indemnification of Others                                        10
     6.3       Payment Of Expenses In Advance                                   11
     6.4       Indemnity Not Exclusive                                          11
     6.5       Insurance                                                        11
     6.6       Conflicts                                                        11

ARTICLE 7 Stock Certificates                                                    11
     7.1       Cert ificates for Shares                                         11
     7.2       Signatures on Certificates                                       12
     7.3       Transfer of Stock                                                12
     7.4       Registered Stockholders                                          12
     7.5       Record Date                                                      12
     7.6       Lost, Stolen or Destroyed Certificates                           12

ARTICLE 8 Notices                                                               13
     8.1       Notice                                                           13
     8.2       Waiver                                                           13

ARTICLE 9 General Provisions                                                    13
     9.1       Div idends                                                       13
     9.2       Div idend Reserve                                                13
     9.3       Annual Statement                                                 13
     9.4       Checks                                                           13
     9.5       Corporate Seal                                                   14
     9.6       Execution of Corporate Contracts and Instruments                 14

ARTICLE 10 A mend ments                                                         14

ARTICLE 11 Relationship to the Certificate of Incorporation                     14

CERTIFICATE OF SECRETARY                                                        14

                                                                   ii
                                                   AMENDED AND RES TATED B YLAWS

                                                                         OF

                                                          SEMIL EDS CORPORATION

                                                             (a Delaware corporation)

                                                                    ARTICLE 1

                                                                       Offices

         1.1       Principal Office . The Board of Directors (the ―Board‖) shall fix the location of the principal executive office of the
corporation at any place within or outside the State of Delaware.

         1.2       Additional Offices . The Board may at any time establish branch or subordinate offices at any place or places.

                                                                    ARTICLE 2

                                                              Meeting of Stockholders

          2.1        Place of Meeting . All meetings of the stockholders for the election of directors shall be held at the principal office of the
Corporation, at such place as may be fixed fro m time to time by the Board, o r at such other place either within or without the State of
Delaware, as shall be designated from t ime to time by the Board and stated in the notice of the meeting. Meetings of stockholders for any
purpose may be held at such time and place within o r without the State of Dela ware as the Board may fix fro m t ime to time, an d as shall be
stated in the notice of the meeting or in a duly executed waiver of notice thereof.

         2.2       Annual Meeting . Annual meetings of stockholders shall be held at such date and time as shall be designated from t ime to
time by the Board and stated in the notice of the meeting. At such annual meet ings, the stockholders shall elect a Board and transact such other
business as may properly be brought before the meetings.

          2.3        Special Meetings . Special meetings of the stockholders may be called for any purpose or purposes, unless otherwise
prescribed by the statute or by the Certificate of Incorporation, at the request of the Board, the Chairman of the Board, the President or the
holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting, or such additional persons as may b e provided in
the Certificate of Incorporation or these Bylaws. Such request shall state the purpose or purposes of the proposed meeting. Upon request in
writing that a special meeting of stockholders be called for any proper purpose, directed to the Chairman of the Board, the P resident, the Vice
President or the Secretary, by any person (other than the Board) entitled to call a spe cial meet ing of stockholders, the person forthwith shall
cause notice to be given to the stockholders entitled to vote that a meeting will be held at a t ime requested by the person o r persons calling the
meet ing, such time not to be less than thirty-five

                                                                          1
(35) nor more than sixty (60) days after receipt of the request. Such request shall state the purpose or purposes of the proposed meeting.

         2.4       Notice of Meetings . Written notice of stockholders ’ meetings, stating the place, date and time of the meeting, and t he
purpose or purposes for wh ich the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten
(10) nor more than sixty (60) days prior to the meet ing.

          When a meeting is adjourned to another place, date or time, written notice need not be given of the ad journed meeting if the place,
date and time thereof are announced at the meeting at which the adjourn ment is taken; provided, however, that if the date of any adjourned
meet ing is more than thirty (30) days after the date for which the meeting was original ly noticed, or if a new record date is fixed for the
adjourned meeting, written notice of the place, date and time o f the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

        2.5         Business Matter of a Special Meeting . Business transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.

          2.6        List of Stockholders . The officer in charge of the stock ledger of the Corporation or the transfer agent shall prepare and
make, at least ten (10) days before every meeting of stockholders, a co mplete list of the stockholders entitled to vote at the meeting arranged in
alphabetical order, and showing the address of each stockholder and the number of shares registered in the name o f each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to the meet ing, during ordinary business hours, for a period of at
least ten (10) days prior to the meeting, at a p lace within the city where the meeting is to be held, which p lace, if other than the place o f the
meet ing, shall be specified in the notice of the meet ing. The list shall also be produced and kept at the place of the meet ing during the whole
time thereof, and may be inspected by any stockholder who is present in person thereat.

         2.7        Organizat ion and Conduct of Business . The Chairman of the Board or, in h is or her absence, the President of the
Corporation or, in their absence, such person as the Board may have designated or, in the absence of such a person, such pers on as may be
chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meet ing of the
stockholders and act as Chairman of the meeting. In the absence of the Secretary of the Corporation, the Secretary of the meeting shall be such
person as the Chairman appoints.

         The Chairman of any meet ing of stockholders shall determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seems to him or her in order.

         2.8       Quoru m and Adjourn ments . Except where otherwise provided by law or in the Certificate of Incorporation or these
Bylaws, the holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meet ings of the stockholders. The stockholders present at a duly called or held meeting at which a q uorum is present
may continue to do business until adjournment,

                                                                         2
notwithstanding the withdrawal of enough stockholders to have less than a quorum if any action taken (other than adjournment) is approved by
at least a majority of the shares required to constitute a quorum. At such adjourned meeting at which a quoru m is present or represented, any
business may be transacted which might have been transacted at the meeting as orig inally noticed. If, however, a quoru m shall not be present
or represented at any meeting of the stockholders, the stockhold ers entitled to vote thereat who are present in person or represented by proxy
shall have the power to adjourn the meeting fro m t ime to t ime, without notice other than announcement at the meeting, until a q uorum shall be
present or represented.

         2.9       Voting Rights . Unless otherwise provided in the Cert ificate of Incorporation, each stockholder shall at every meet ing of
the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held b y such stockholder.

         2.10      Majority Vote . When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question brought before such meeting , unless the question is one upon which,
by express provision of the statutes or of the Certificate of Incorporation or of these Bylaws, a d ifferent vote is required, in which case such
express provision shall govern and control the decision of such question.

          2.11       Record Date for Stockholder Notice and Vot ing . For purposes of determin ing the stockholders (a) entitled to notice of any
meet ing or to vote, or (b) entit led to receive pay ment of any dividend or other distribution, or (c) entitled to exercise any right in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful act ion, the Board may fix, in advance, a reco rd date, which
shall not be more than sixty (60) days, nor less than ten (10) days before the date of any such meeting, nor more than sixty (60) days before any
other action.

         If the Board does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meet ing of
stockholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the meet ing is held.

         2.12        Pro xies . Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or
by one or more agents authorized by a written pro xy signed by the person and filed with the Secretary of the Corporation. A proxy shall be
deemed signed if the stockholder’s name is placed on the pro xy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder’s attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (a) revoked by the person executing it, befo re the vote pursuant to that proxy, by a writin g delivered to
the Corporation stating that the proxy is revoked or by a subsequent proxy executed by the maker o f the pro xy, o r by that person’s attendance
and vote at the meeting; or (b ) written notice of the death or incapacity of the maker of that pro xy is received by the Corporatio n before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall be v alid after the exp iration of eleven months from the date of
the proxy, unless otherwise provided in the pro xy.

                                                                           3
          2.13       Inspectors of Election . Before any meet ing of stockholders, the Board may appoint any person other than nominees for
office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the Chairman of the
meet ing may, and on the request of any stockholder or a stockholder’s pro xy shall, appoint inspectors of election at the meet ing. The nu mber
of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meet ing on the request of one or more stockholders or proxies,
the holders of a majority of shares or their pro xies present at the meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the meeting may, and upon the
request of any stockholder or a stockholder’s pro xy shall, appoint a person to fill that vacancy.

          2.14       Action Without Meeting by Written Consent . All actions required to be taken at any annual or special meet ing may be
taken without a meeting, without prior notice and without a vote, if a consent or consents in writ ing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimu m nu mber of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present and voted, and shall be delivered to the Corpor ation by delivery to
its registered office, its principal p lace of business, or an officer or agent of the corporation having custody of the book in which proceedings of
meet ingsor stockholders are recorded.

                                                                     ARTICLE 3

                                                                       Directors

          3.1         Nu mber; Qualifications . The authorized number of d irectors shall be three (3), unless and until changed by an amendment
to this Section 3.1. The authorized nu mber of directors may be changed fro m time to time by resolution of the Board amendin g this
Section 3.1. Notwithstanding the foregoing, so long as the authorized number of directors is three (3), amending this Section 3.1 shall require
the approval of holders of the Corporation’s Series A Preferred Stock. Each of the directors shall hold office until h is successor is elected and
qualified, or until h is earlier resignation or removal. Directors need not be stockholders.

         3.2        Resignation and Vacancies . A vacancy or vacancies in the Board shall be deemed to exist in the case of the death,
resignation or removal of any director, or if the authorized number of directors be increased. Vacancies may be filled by a majority of the
remain ing directors, though less than a quorum, or by a sole remaining director, unless otherwise provided in the Cert ificate of
Incorporation. The stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. If the
Board accepts the resignation of a director tendered to take effect at a future time, the Board shall have power to elect a s uccessor to take office
when the resignation is to become effective. If there are no directors in office, then an election of directors may be held in the manner
provided by statute.

          3.3        Removal of Directors . Unless otherwise restricted by statute, or by the Certificate of Incorporation or these Bylaws, any
director or the entire Board may be removed, with or without cause, by the holders of at least a majority of the shares entit led to vote at an
election of directors.

                                                                           4



        3.4        Powers . The business of the Corporation shall be managed by or under the direction of the Board wh ich may exercise all
such powers of the Corporation and do all such lawful acts and things which are not by statute or by the Certificate of Incor poration or by these
Bylaws directed or required to be exercised or done by the stockholders.

         Without prejudice to these general powers, and subject to the same limitat ions, the directors shall have the power to:

          (a)      Select and remove all officers, agents and employees of the Corporation; prescribe any powers and duties for them that are
consistent with law, with the Certificate of Incorporation and with these Bylaws; fix their co mpensation; and require fro m th em security for
faithful service;

         (b)        Confer upon any office the power to appoint, remove and suspend subordinate officers, employees and agents;

          (c)      Change the principal executive o ffice or the principal business office in the State of Ca liforn ia, or any other state, fro m one
location to another; cause the Corporation to be qualified to do business in any other state, territory, dependency or countr y, and conduct
business within or without the State of Californ ia; and designate any place with in or without the State of California for the hold ing of any
stockholders meeting, o r meetings, including annual meetings;

          (d)      Adopt, make and use a corporate seal; prescribe the forms of certificates of stock; and alter the form of the seal and
certificates;
         (e)       Authorize the issuance of shares of stock of the Corporat ion on any lawfu l terms, in consideration of money paid, labor
done, services actually rendered, debts or securities canceled, tangible or intangible property actua lly received;

         (f)       Borrow money and incur indebtedness on behalf of the Corporation, and cause to be executed and delivered for the
Corporation’s purposes, in the corporate name, pro missory notes, bonds, debentures, deeds of trust, mortgages, p ledges, hypothecation and
other evidences of debt and securities;

          (g)      Declare div idends from time to time in accordance with law;

        (h)       Adopt fro m t ime to time such stock option, stock purchase, bonus or other compensation plans for d irectors, officers,
emp loyees and agents of the Corporation and its subsidiaries as it may determine; and

          (i)      Adopt from time to time regulations not inconsistent with these Bylaws for the management of the Corporation ’s business
and affairs.

          3.5      Place of Meetings . The Board may hold meetings, both regular and special, either within or without the State of Delaware.

                                                                        5
         3.6       Annual Meetings . The annual meet ing of the Board shall be held immed iately fo llowing the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the Board, provided a quoru m shall be present. The annual meet ings shall be
for the purposes of organization, for an election of officers and for the transaction of other business.

          3.7        Regular Meetings . Regular meetings of the Board may be held without notice at such time and place as may be de termined
fro m t ime to time by the Board.

         3.8       Special Meetings . Special meetings of the Board may be called by the Chairman of the Board, the President, a Vice
President or a majority of the Board, upon one (1) day’s notice to each director.

          3.9       Quoru m and Adjourn ments . At all meetings of the Board, a majority of the directors then in office shall constitute a
quorum for the transaction of business, and the act of a majority of the directors present at any meeting at wh ich there is a quorum shall be the
act of the Board, except as may otherwise be specifically provided by law or by the Cert ificate of Incorporation. If a quoru m is not present at
any meeting of the Board, the directors present may adjourn the meeting fro m t ime to t i me, without notice other than announcement at the
meet ing at which the adjourn ment is taken, until a quoru m shall be present. A meeting at wh ich a quorum is in itially present may continue to
transact business notwithstanding the withdrawal of directors, if any action taken is approved of by at least a majority of the req uired quorum
for that meeting.

         3.10      Action Without Meeting . Unless otherwise restricted by the Cert ificate of Incorporation or by these Bylaws, any action
required or permitted to be taken at any meet ing of the Board o r of any co mmittee thereof may be taken without a meeting, if all members of
the Board or co mmittee, as the case may be, consent thereto in writing, and the writ ing or writings are filed with the minute s of proceedings of
the Board or co mmittee.

         3.11      Telephone Meetings . Unless otherwise restricted by the Certificate of Incorporation or by these Bylaws, any memb er of
the Board or of any co mmittee may participate in a meeting by means of conference telephon e or similar co mmun ications equipment by means
of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute p resence in person at
the meeting.

          3.12       Waiver of Notice . Notice of a meet ing need not be given to any director who signs a waiver of notice or a consent to
holding the meeting or an approval o f the minutes thereof, whether before or after the meet ing, or who attends the meeting without protesting,
either prior thereto or at its co mmencement, the lack of notice to such director. A ll such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meet ing.

          3.13      Fees and Co mpensation of Directors . Un less otherwise restricted by the Certificate of Incorporation or by these Bylaws,
the Board shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, o f attendance at each
meet ing of the Board, and may be paid a fixed sum for attendance at each meeting of the Board or a stated salary as director. No such payment
shall preclude any director fro m serving

                                                                         6
the Corporation in any other capacity and receiving co mpensation therefor. Members of special or standing committees may b e allowed like
compensation for attending committee meet ings.

         3.14      Rights of Inspection . Every director shall have the absolute right at any reasonable time to inspect and copy all books,
records and documents of every kind, and to inspect the physical properties of the Corporation and also of its subs idiary corporations, domestic
or foreign. Such inspection by a director may be made in person or by agent or attorney, and includes the right to copy and obtain extrac ts.

                                                                   ARTICLE 4

                                                             Co mmittees of Directors

         4.1      Select ion . The Board may, by resolution passed by a majority of the entire Board, designate one or more co mmittees, each
committee to consist of one or more of the directors of the Corporation. The Board may designate one or more d irectors as alternate members
of any committee, who may replace any absent or disqualified member at any meeting of the committee.

          In the absence or disqualificat ion of a member of a co mmittee, the member o r members thereof present at any meeting and not
disqualified fro m voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at
the meeting in the place of any such absent or disqualified member.

          4.2          Power . Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all o f the
powers and authority of the Board in the management of the business and affairs of the Co rporation, and may authorize the sea l of the
Corporation to be affixed to all papers which may require it; but no such commit tee shall have the power or authority in reference to amending
the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions prov iding for the issuance
of shares of stock adopted by the Board as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of t he preferences
or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or
the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stoc k of the
Corporation), adopting an agreement of merger or consolidation, reco mmending to the stockholders the sale, lease or exchan ge of all or
substantially all o f the Co rporation’s property and assets, recommend ing to the stockholders a dissolution of the Corporation or a revocation of
dissolution, removing or indemn ify ing directors or amending the By laws of the Corporation; and, un less the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize t he issuance of
stock or to adopt a certificate of ownership and merger. Such committee or co mmittees shall have such name or names as may be determined
fro m t ime to time by resolution adopted by the Board.

            4.3    Co mmittee M inutes . Each co mmittee shall keep regular minutes of its meetings and report the same to the Board when
required.

                                                                         7
                                                                     ARTICLE 5

                                                                       Officers

          5.1       Officers Designated . The officers of the Corporation shall be chosen by the Board and shall be a President, a Secret ary and
a Treasurer. The Board may also choose a Chairman of the Board, one or more Vice Presidents, and one or more assistant Secretaries and
assistant Treasurers. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise
provide.

           5.2       Appointment of Officers . The officers of the Corporation, except such officers as may be appointed in accordance with the
provisions of Section 5.3 or Section 5.5 hereof, shall be appointed by the Board, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employ ment.

         5.3        Subordinate Officers . The Board may appoint, and may empower the President to appoint, such other officers and agents
as the business of the Corporation may require, each of who m shall hold office for such period, have such authority and perfo rm such duties as
are provided in the Bylaws or as the Board may fro m t ime to time determine.

         5.4       Removal and Resignation of Officers . Subject to the rights, if any, of an officer under any contract of employ ment, any
officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board, at any regular or special meeting of
the Board, or, except in case of an officer chosen by the Board, by any officer upon who m such power of removal may be confer red by the
Board.

          Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later t ime specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, o f the Corporat ion under any contract to
which the officer is a party.

          5.5         Vacancies in Offices . A vacancy in any office because of death, resignation, removal, d isqualification or any other cause
shall be filled in the manner prescribed in these Bylaws for regular appoint ment to that office.

          5.6       Co mpensation . The salaries of all officers of the Corporat ion shall be fixed fro m time to time by the Board, and no officer
shall be prevented from receiving a salary because he is also a director of the Corporation.

         5.7        The Chairman of the Board . The Chairman o f the Board, if such an officer be elected, shall, if present, perform such other
powers and duties as may be assigned to him fro m time to time by the Board. If there is no Ch ief Executive Officer or President, the Chairman
of the Board shall also be the Chief Executive Officer o f the Corporat ion and shall have the powers and duties prescribed in Section 5.8 hereof.

         5.8     The Ch ief Executive Officer . The Chief Executive Officer shall, subject to the control of the Board, have general an d
active management, supervision, direction and control of

                                                                           8
the business and the officers of the Co rporation, and shall see that all orders and resolutions of the Board are carried into effect. The Chief
Executive Officer, if a member of the Board, shall preside at all meet ings of the stockholders, and in the absence or nonexis tence of a Chairman
of the Board, at all meet ings of the Board.

          5.9        The President . Subject to such supervisory powers, if any, as may be g iven by the Board to the Chairman of the Board or
the Chief Executive Officer, if there is such an officer, the President shall have the general powers and duties of managemen t usually vested in
the office of the President of the Corporation, and shall have such other powers and duties as may be prescribed by the Board o r by these
Bylaws. The President may also be the Chief Executive Officer of the Corporation and, if so designated by th e Board, shall have the powers
and duties prescribed in Section 5.8. In the absence or disability of the Chairman of the Board and any Chief Executive Officer, the President
shall preside at all meet ings of the stockholders and at all meetings of the Board.

          5.10       The Vice President . The Vice President (or in the event there be more than one, the Vice Presidents in the order designated
by the directors, or in the absence of any designation, in the order of their election), shall, in the absence o f the President or in the event of his
disability or refusal to act, perfo rm the duties of the President, and when so acting, shall have the powers of and be subjec t to all the restrictions
upon the President. The Vice President(s) shall perform such other duties and have such other powers as may fro m time to time be prescribed
for him or her or them by the Board, the President, the Chairman of the Board or these Bylaws.

          5.11       The Secretary . The Secretary shall attend all meet ings of the Board and of the stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose, and shall perform like duties for the standing committees, wh en
required. The Secretary shall give, o r cause to be given, notice of all meetings of stockholders and special meetings of the Board, and shall
perform such other duties as may fro m time to time be prescribed by the Board, the Chairman of the Board or the President, un der whose
supervision he or she shall act. The Secretary shall have custody of the seal of the Corporation, and the Secretary, or an Assistant Secretary,
shall have authority to affix the same to any instrument requiring it, and, when so affixed, the seal may b e attested by his or her signature or by
the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to
attest the affixing thereof by his or her signature. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office
of the Corporation’s transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register, sho wing
the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellat ion of every certificate surrendered for cancellat ion.

         5.12        The Assistant Secretary . The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order
designated by the Board (or in the absence of any designation, in the order of their elect ion) shall, in the absence of the S ecretary, or in the
event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such ot her duties
and have such other powers as may fro m time to time be prescribed by the Board.

                                                                           9
         5.13        The Treasurer . The Treasurer shall have the custody of the Corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the
Board, at its regular meetings, or when the Board so requires, an account of all of h is or her transactions as Treasurer a nd of the financial
condition of the Corporation.

         5.14        The Assistant Treasurer . The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order
designated by the Board (or in the absence of any designation, in the order of their elect ion) shall, in the absence of the Treasurer or in the
event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer, and shall perfo rm such other duties
and have such other powers as may fro m time to time be prescribed by the Board.

                                                                   ARTICLE 6

                                                      Indemnification of Directors, Officers,
                                                          Emp loyees and Other Agents

          6.1       Indemn ification of Directors and Officers . The Corporat ion shall, to the maximu m extent and in the manner permit ted by
the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys ’ fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such
person is or was an agent of the Corporation. For purposes of this Section 6.1, a ―director‖ or ―officer‖ of the Corporation includes any person
(a) who is or was a director or officer of the Corporation, (b) who is or was serving at the request of the Corporation as a direct or or officer of
another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a corporation which was a
predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.

         6.2         Indemn ification of Others . The Corporation shall have the power, to the maximu m extent and in the manner permit ted by
the General Corporation Law of Delaware, to indemn ify each of its employees and agents (other than directors and officers) ag ainst expenses
(including attorneys’ fees), judg ments, fines, settlements and other amounts actually and reasonably incurred in connection wit h any
proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Section 6.2, an
―emp loyee‖ or ―agent‖ of the Corporation (other than a director or o fficer) includes any person (a) who is or was an emp loyee or agent of the
Corporation, (b) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an emp loyee or agent of a corporation which was a predecessor corporation of the Corporation
or of another enterprise at the request of such predecessor corporation.

                                                                        10
          6.3       Pay ment Of Expenses In Advance . Expenses incurred in defending any action or proceeding for which indemn ification is
required pursuant to Section 6.1 hereof, or for which indemn ification is permitted pursuant to Section 6.2 hereof, fo llo wing authorizat ion
thereof by the Board, shall be paid by the Corporation in advance of the final d isposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount, if it shall ult imately be determined that the indemnified party is not
entitled to be indemn ified as authorized in this Article 6.

         6.4         Indemn ity Not Exclusive . The indemn ification provided for under this Article 6 shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disin terested directors
or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the exten t that such
additional rights to indemnification are authorized in the Certificate of Incorporation.

          6.5       Insurance . The Corporation may purchase and maintain insurance on behalf of any person who is or was a d irector,
officer, emp loyee or agent of the Corporation, or who is or was serving at the request of the Corporation as a director, officer, emp loyee or
agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by
him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the p ower to indemn ify
him or her against such liab ility under the provisions of the General Co rporation Law of Delaware.

        6.6       Conflicts . No indemnification or advance shall be made under this Article 6, except where such indemn ification or
advance is mandated by law or the order, judg ment or decree of any court of co mpetent jurisdiction, in any circu mstance where it appears:

        (a)        That it would be inconsistent with a provision of the Certificate of Incorporation, these Bylaws, a resolution of the
stockholders or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses
were incurred or other amounts were paid, wh ich prohibits or otherwise limits indemnification; or

         (b)       That it would be inconsistent with any condition exp ressly imposed by a court in approving a settlement.

                                                                    ARTICLE 7

                                                                 Stock Certificates

          7.1      Certificates for Shares . The shares of the Corporation shall be represented by certificates or shall be
uncertificated. Certificates shall be signed by, or be in the name of the Corporation by, the Chairman of the Board, or the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary o r an Assistant Secretary of the Corporation.

         Within a reasonable time after the issuance or transfer of uncertified stock, the Co rporation shall send to the registered owner thereof a
written notice containing the information required by the General Corporation Law of the State of Delaware or a state ment that the

                                                                         11
Corporation will furn ish without charge to each stockholder who so requests the powers, designations, preferen ces and relative participating,
optional or other special rights of each class of stock or series thereof, and the qualificat ions, limitations or restriction s of such preferences
and/or rights.

          7.2       Signatures on Certificates . Any or all of the signatures on a certificate may be a facsimile. In case any officer, tran sfer
agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be suc h officer, transfer
agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.

          7.3        Transfer of Stock . Upon surrender to the Corporation or the transfer agent of the Corporation of a cert ificate of shares duly
endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a
new certificate to the person entitled thereto, to cancel the old certificate and record the transaction upon its books. Upon receipt of proper
transfer instructions fro m the registered owner of uncertificated shares, such uncertificated shares shall be canceled, and issuance of new
equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto, and the transaction shall be recorded upon the
books of the Corporation.

          7.4       Reg istered Stockholders . The Corporation shall be entit led to recognize the exclusive rig ht of a person registered on its
books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a percent registered
on its books as the owner of shares, and shall not be bound to recognize any eq uitable or other claim to or interest in such share or shares on the
part of any other person, whether or not it shall have exp ress or other notice thereof, except as otherwise provided by the laws of Delaware.

          7.5        Record Date . In order that the Corporation may determine the stockholders of record who are entitled to receive notice of,
or to vote at, any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing w ithout a meet ing, or
entitled to receive pay ment of any dividend or other distribution or allot ment of any rights, or to exercise any rights in re spect of any change,
conversion, or exchange of stock or for the purpose of any lawful act ion, the Board may fix, in advance, a re cord date which shall not be more
than sixty (60) nor less than ten (10) days prior to the date of such meeting, nor mo re than sixty (60) days prior to the date of any other
action. A determination of stockholders of record entitled to notice or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

          7.6          Lost, Stolen or Destroyed Certificates . The Board may direct that a new certificate or cert ificates be issued to replace any
certificate or cert ificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the ma king of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen or destroyed and on such terms and conditions as the Board may
require. The Board may require indemnification of the Corporation secured by a bond or other adequate security sufficient to protect t he
Corporation against any claim that may be made against it, includ ing any expense or liability, on account of the alleged loss, theft or
destruction of the certificate or the issuance of the replacement certificate. When authorizing the issue of a new cert ificate or certificates, the
Board may, in its

                                                                          12
discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen or destroyed certifica te or certificates, or his
or her legal representative, to advertise the same in such manner as it shall require, and/or to give th e Corporation a bond in such sum as it may
direct as indemn ity against any claim that may be made against the Corporation with respect to the certificate alleged to hav e been lost, stolen
or destroyed.

                                                                     ARTICLE 8

                                                                        Notices

          8.1       Notice . Whenever, under the provisions of the statutes or of the Cert ificate of Incorporation or o f these Bylaws, notice is
required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may b e giv en in writ ing,
by mail, addressed to such director or stockholder, at his or her address as it appears on the records of the Corporation, wit h postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United S tates mail. Notice to
directors may also be given by telegram, telephone or electronic mail.

         8.2        Waiver . Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto.

                                                                     ARTICLE 9

                                                                  General Provisions

         9.1      Dividends . Dividends upon the capital stock of the Corporation, subject to any restrictions contained in the General
Corporation Laws of Delaware or the provisions of the Cert ificate of Incorporation, if any, may be declared by the Board at a ny regular o r
special meeting. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.

          9.2        Dividend Reserve . Before pay ment of any dividend, there may be set aside out of any funds of the Corporation available
for div idends, such sum or sums as the directors fro m t ime to t ime, in their absolute discretion, think proper as a reserve o r reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, o r for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the directors may mod ify or abolish any such reserve in the manner in
which it was created.

         9.3        Annual Statement . The Board shall present at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation.

         9.4       Checks . All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board may fro m time to time designate.

                                                                          13
        9.5        Corporate Seal . The Board may provide a suitable seal, containing the name of the Corporation, which seal shall be in the
charge of the Secretary. If and when so directed by the Board or a co mmittee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or an Assistant Treasurer.

         9.6        Execution of Corporate Contracts and Instruments . The Board, except as otherwise provided in these Bylaws, may
authorize any officer o r officers, or agent or agents, to enter into any contract or execute any instrument in the name of an d on behalf of the
Corporation; such authority may be general or confined to specific instances. Un less so authorized or ratified by the Board or within the
agency power of an officer, no officer, agent or emp loyee shall have any power or authority to bind the Corporation by any co ntract or
engagement, or to pledge its credit or to render it liable for any purpose or for any amount.

                                                                   ARTICLE 10

                                                                    Amend ments

        In addition to the right of the stockholders of the Corporation to make, alter, amend, change, add to or repeal the Bylaws of the
Corporation, the Board shall have the power (without the assent or vote of the stockholders) to make, alter, amend, change, add to or repeal the
Bylaws of the Corporat ion. Notwithstanding any provision to the contrary, so long as the authorized nu mber of d iretors is three (3), any
amend ment to the Bylaws shall require the approval of the holders of the Corporation’s Series A Preferred Stock.

                                                                   ARTICLE 11

                                                  Relationship to the Certificate of Incorporation

         In the event of any conflict between the provisions of these Bylaws and the Certificate of Incorporation of the Corporation, the
provisions of the Certificate of Incorporation shall govern.

                                                                        ***

                                                                         14
                                                   CERTIFICATE OF S ECRETARY

        I, the undersigned, hereby certify:

        1.        That I am the duly elected, acting and qualified Secretary of SemiLEDs Corporation, a Delaware corporation; and

        2.        That the foregoing Bylaws, co mprising 17 pages, constitute the Amended and Restated Bylaws of such corporation as duly
adopted by the Board of Directors and stockholders of such corporation pursuant to written consent dated effective March 14, 2005

        IN WITNESS WHEREOF, I have hereunto subscribed my name effective as of March 14, 2005.


                                                                     /s/ Tan Dinh
                                                                     Tan Dinh, Secretary

                                                                    15
                                                                                                                                      Exhi bit 4.2

                                                        SEMIL EDS CORPORATION

                                                        AMENDED AND RES TATED

                                                    INVES TOR RIGHTS AGREEMENT

          This Amended and Restated Investor Rights Agreement (this ― Agreement ‖) is made and entered into as of April 1, 2010, by and
among SemiLEDs Co rporation, a Delaware corporation (the ― Company ‖), the persons listed on Exhi bit A attached hereto (the ― Stockholders
‖), and the persons listed on Exhi bi ts B and C attached hereto or as may be added in the future as signatories to this Agreement in connection
with purchases of Series E Preferred Stock of the Co mpany (collect ively, the ― Investors ‖).

         WHEREAS, certain of the Investors (the ― Existing Investors ‖) hold shares of the Co mpany’s Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and possess registration rights and other rights pursuant to the Amended
and Restated Investor Rights Agreement, dated September 30, 2008, by and between the Co mpany and the Existing Investors and
Stockholders (the ― Prior Rights Agreement ‖);

         WHEREAS, the Existing Investors and the Stockholders agree to terminate the Prior Rights Agreement and to accept the rights
created pursuant hereto in lieu of the rights granted to them under the Prior Rights Agreement;

       WHEREAS, the Existing Investors and the Stockholders possess a sufficient number o f shares required to amend the Prior Rig hts
Agreement; and

         WHEREAS, certain Investors have agreed to purchase from the Co mpany, and the Company has agreed to sell to such Investors,
shares of the Co mpany’s Series E Preferred Stock (the ― Series E Preferred Stock ‖) as set forth in Exhi bit C hereto, such purchase being on
the terms and conditions set forth in that certain Series E Preferred Stock Purchase Agreement, of even date herewith, by and between the
Co mpany and such Investors (the ― Series E Agreement ‖), certain of the Co mpany’s and such Investors’ obligations under which are
conditioned upon the execution and delivery of this Agreement by the Existing Investors, the Stockholders and the Company.

         NOW, THEREFORE, in consideration of the foregoing recitals and the mutual pro mises herein contained, and for other considerat ion,
the receipt and adequacy of which is hereby acknowledged, the Investors, the Stockholders and the Co mpany hereby agree that the Prior Rights
Agreement is hereby terminated and shall be superseded and replaced in its entirety by this Agreement, and the parties furthe r agree as follo ws:

         1.        INFORMATION RIGHTS .

                1.1      Basic Financial Informati on . The Co mpany covenants and agrees that, commencing on the date of this
Agreement, the Co mpany will deliver to each Major Investor (as defined below):

                                                                        1
                            (a)       Annual Reports . As soon as practicable and in any event within one hundred twenty (120) days after the
end of each fiscal year of the Co mpany, an annual audited financial report as of the end of such fiscal year fro m a qualified cert ified public
accounting firm, together with a copy of the auditor’s letter to management, all prepared in accordance with United States generally accepted
accounting principles and practices (― US GAAP ”) .

                          (b)       Annual Budget : At least thirty (30) days before the end of each fiscal year, a budget, including pro jected
income statement, cash flow and balance sheet, on a monthly basis for the ensuing fiscal year together with a brief qualitative d escription of the
Co mpany’s plan by the Chief Executive Officer in support of that budget.

                            (c)       Quarterly Reports . As soon as practicable, and in any case within forty-five (45) days after the end of
each fiscal quarter of the Co mpany (except the last quarter of the Co mpany ’s fiscal year), a quarterly financial report prepared in accordance
with US GAAP, including an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an
unaudited balance sheet and a statement of stockholder’s equity as of the end of such fiscal quarter.

                          (d)       Non-Co mpliance . Within ten (10) days after the discovery of any material default in the terms of the
Series E Agreement or any of the Related Agreements as defined therein, a statement outlining such default and management ’s proposed
response. Notwithstanding elsewhere to the contrary, the right under this Section 1.1(d) will be applicable to only the original holder of the
Co mpany’s Series A Preferred Stock o r its affiliates.

                            (e)       Other Information . Upon the written request by Major Investor, such other information as Major Investor
shall reasonably request.

                    1.2       Inspecti on Rights . The Majo r Investor, at the Major Investor’s expense, shall have the right to visit and inspect
the Co mpany’s properties, to examine its books of account and records and to discuss the Company ’s affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by such Major Investor.

                    1.3       Confi dentiality . Investor agrees to hold all informat ion received pursuant to this Section 1 in confidence, and not
to use or disclose any of such information to any third party, except to the extent such information may be made publicly ava ilable by the
Co mpany; provided, however, that Investor may d isclose confidential info rmation to any of its affiliates or to any employee of such
affiliate. Notwithstanding the foregoing, Investor may, if required and upon advance written notice to the Co mpany, disclose such information
concerning the Company as may be required to be disclosed to any regulator/stock exchange to which Investor or its affiliates are subjec t, such
notice shall state the informat ion to be disclosed, the party to whom such information is to be disclosed, the date such d isclosure is to be made
and the reason such disclosure is required.

                  1.4       Termination of Certain Rights . The Co mpany’s obligations under Sections 1.1 and 1.2 above will terminate
upon the closing of the Co mpany’s initial public offering of Co mmon Stock pursuant to an effective registration statement filed under the U.S.

                                                                         2
Securities Act of 1933, as amended (the ― Securities Act ‖); provided, however, that continuing for so long as Major Investor holds any
Preferred Stock, the Co mpany shall deliver to such Major Investor copies of the Co mpany ’s 10-K’s, 10-Q’s, 8-K’s and Annual Reports to
Shareholders promptly after such documents are filed with the Securities and Exchange Co mmission (the ― SEC ‖).

         2.         REGIS TRATION RIGHTS .

                  2.1        Definitions . For purposes of this Section 2:

                            (a)       Form S-3 . The term ― Form S-3 ‖ means such form under the Securities Act as is in effect on the date
hereof or any successor registration form under the Securities Act subsequently adopted by the SEC wh ich permits inclusion or incorporation
of substantial information by reference to other documents filed by the Co mpany with the SEC.

                            (b)        Holder . The term ― Holder ‖ means any person owning of record Reg istrable Securities or any assignee
of record of such Registrable Securit ies to whom rights set forth herein have been duly assigned in accordance with this Agreement; provided ,
however , that for purposes of this Agreement, a record holder of shares of Preferred Stock convertible into such Registrable Securit ies shall be
deemed to be the Holder o f such Registrable Securities; provided further , that a holder o f Excluded Shares (as defined in Section 2.1(d)) shall
not be a Holder with respect to such Excluded Shares for purposes of Sections 2.2, 2.4 or 3 of this Agreement; and provided , further , that the
Co mpany shall in no event be obligated to register shares of Preferred Stock, and that Holders of Reg istrable Securities will not be required to
convert their shares of Preferred Stock into Co mmon Stock in o rder to exercise the registration rights granted hereunder, unt il immediately
before the closing of the offering to which the registration relates.

                            (c)       Major Investor . The term ― Major Investor ‖ means:

                                      (1)        a person or entity which, together with its affiliates holds at least ten percent (10%) of the
Registrable Securit ies (subject to appropriate adjustments for stock splits, stock dividends, combinations and other recapita lizations); and

                                       (2)       Lite-On Technology USA, Inc (― Lite-On ‖), WI Harper Inc. Fund VI Ltd. (― W I Harper ‖),
Powerchip Semiconductor Corp. (― PSC ‖) and Lu xxon Technology Corporation (― Luxxon ‖), so long as Lite-On, WI Harper, PSC or
Lu xxon, as the case might be, continues to hold all of the Registrable Securit ies originally purchased. For purpose of this Section 2.1(c),
(i) inspection of facilities of the Co mpany shall be excluded fro m the application of this Section 2.1(c), and (ii) the application of Section 1.1
and 2.1(c) shall not include any equip ment list, suppliers, names of emp loyees, consultants, processes, technologies related info rmation,
specifications and related documentations.

                            (d)        Registrable Securities . The term ― Registrable Securities ‖ means:

                                     (1)     all the shares of Co mmon Stock of the Co mpany issued or issuable upon the conversion of any
shares of Preferred Stock that are now owned or may hereafter be acquired by any Investor or any Investor’s permitted successors and assigns;

                                                                           3
                                     (2)      the shares of Common Stock of the Co mpany now held by the Stockholders and set forth in
Exhi bit A attached hereto (the ― Stockholders’ Shares ‖); and

                                      (3)       any shares of Common Stock of the Co mpany issued (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued) (i) as a dividend or other distribution with respect to, or in exchange for or in
replacement of, all such shares of Co mmon Stock described in clause (1) or (2) of this subsection (b); or (ii) in a transaction that is excluded
fro m the definition of ―New Securities‖ under Section 3.2 hereof if the Board of Directors determines that such shares should receive
registration rights under Section 2.3 hereof (the ― Additional Shares ‖); excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement or any Reg istrable Securities
with respect to which, pursuant to Section 2.11 hereof, the holders are no longer entitled to reg istration rights pursuant to Sections 2.2, 2.3 or
2.4 hereof, provided , however , that notwithstanding anything herein to the contrary, the Additional Shares, the Stockholders ’ Shares and any
shares of Co mmon Stock described in clause (3) of this Section 2.1(d) that are issued in respect of any Stockholders ’ Shares (which with the
Stockholders’ Shares are collectively hereinafter referred to as the ― Excluded Shares ‖), shall not be Reg istrable Securities for purposes of
Sections 2.2, 2.4, 2.12 or 3 of this Agreement.

                            (e)        Registrable Securities Then Outstanding . The number of shares of ― Registrable Securities then
outstanding ‖ shall mean the number of shares of Co mmon Stock wh ich are Registrable Securit ies that are then (1) issued and outstanding or
(2) issuable pursuant to the exercise or conversion of then outstanding and then exercisable and qualify ing options, wa rrants or convertible
securities.

                            (f)         Registration . The terms ― register ,‖ ― registration ‖ and ― registered ‖ refer to a registration effected by
preparing and filing a registration statement in co mpliance with the Securit ies Act, and the declaration or ordering of effectiven ess of such
registration statement.

                            (g)        SEC . The term ― SEC ‖ or ― Commission ‖ means the U.S. Securities and Exchange Co mmission.

                  2.2        Demand Registration .

                             (a)        Request by Holders . If the Co mpany shall receive at any time after the earlier of (i) five (5) years fro m
the date of this Agreement or (ii) six (6) months after the effective date of the Co mpany’s init ial public offering of its securities pursuant to a
registration filed under the Securit ies Act, a written request from the Holders of at least forty percent (40%) o f the Reg ist rable Securities then
outstanding that the Company file a registration statement under the Securities Act covering the registration of Registrable Secu rit ies pursuant
to this Section 2.2, then the Co mpany shall, within t wenty (20) days after the receipt of such written request, give written notice of such request
(the ― Request Notice ‖) to all Holders, and effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities
which Holders request to be registered and included in such registration by written notice given by such Holders to the Compa n y within t wenty
(20) days after receipt of the Reques t Notice, subject only to the limitations of this Section 2; prov ided that the Registrable Securities requested
by all

                                                                          4
Holders to be registered pursuant to such request must either (i) be at least thirty percent (30%) of all Registrable Securit ies then outstanding or
(ii) have an anticipated aggregate public offering price (before any underwriting discounts and commissions ) of not less than Seven Million
Five Hundred Thousand Dollars ($7,500,000).

                             (b)        Underwriting . If the Ho lders init iating the registration request under this Section 2.2 (the ― Initiating
Holders ‖) intend to distribute the Registrable Securities covered by their request by means of an underwriting, then they shall so advise the
Co mpany as a part of their request made pursuant to this Section 2.2 and the Co mpany shall include such information in the written notice
referred to in subsection 2.2(a). In such event, the right of any Holder to include his, her, or its Registrable Securit ies in such registration shall
be conditioned upon such Holder’s participation in such underwrit ing and the inclusion of such Holder’s Registrable Securit ies in the
underwrit ing (unless otherwise mutually agreed by a majority in interest of the Initiat ing Holders and such Holder) to the extent provided
herein. A ll Ho lders proposing to distribute their securities through such underwriting shall enter into an underwrit ing agreement in customary
form with the managing underwriter o r underwriters selected for such underwriting by the Co mpany. The Co mpany shall not be required to
include any securities of any Holder in such underwriting unless such Holder accepts the terms of the underwrit ing as agreed upon between the
Co mpany and the underwriters selected by the Co mpany and enters into an underwriting agreement in customary form with the und erwriter or
underwriters selected by the Company. Notwithstanding any other provision of this Section 2.2, if the underwriter(s) advise(s) the Co mpany in
writing that marketing factors require a limitation of the nu mber of securit ies to be underwritten then the Company shall so advise all Ho lders
of Reg istrable Securities that would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that
may be included in the underwriting shall be reduced as required by the underwriter(s) and allocated among the Holders of Registrable
Securities on a pro rata basis according to the number of Registrable Securit ies then outstanding held by each Holder requesting registration
(including the In itiating Holders); provided , however , that the number of shares of Registrable Securities to be included in such u nderwrit ing
and registration shall not be reduced unless all other securities of the Co mpany are first entirely excluded fro m the underwr it ing and
registration. Any Registrable Securit ies excluded and withdrawn fro m such underwriting shall be withdrawn fro m the registration.

                            (c)        Maximu m Nu mber of Demand Registrations . The Co mpany is obligated to effect only three (3) such
registrations pursuant to this Section 2.2.

                             (d)       Deferral . Notwithstanding the foregoing, if the Co mpany s hall fu rnish to Holders requesting the filing
of a registration statement pursuant to this Section 2.2, a certificate signed by the President or Chief Executive Officer of the Company stating
that in the good faith judg ment of the Board of Directors of the Co mpany, it would be seriously detrimental to the Co mpany and its
stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, then the
Co mpany shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of t he request of the
Initiat ing Holders; provided, however , that the Company may not utilize this right more than once in any twelve -month period.

                                                                          5
                              (e)       Expenses . All expenses incurred in connection with a registration pursuant to this Section 2.2, includ ing
without limitation all reg istration and qualificat ion fees, printers ’ and accounting fees, fees and disbursements of counsel for th e Co mpany, and
the reasonable fees and disbursements of one counsel for the selling Ho lders (but excluding underwriters ’ d iscounts and commissions), shall be
borne by the Company. Each Holder part icipating in a reg istration pursuant to this Section 2.2 shall bear such Holder’s proportionate share
(based on the number of shares sold by such Holder over the total nu mber of shares included in such registration at the time it is declared
effective) o f all discounts, commissions or other amounts payable to underwriters or bro kers in connection with such
offering. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun
pursuant to this Section 2.2 if the registration request is subsequently withdrawn at the request of the Holders of a majo rity of th e Registrable
Securities to be registered, unless the Holders of a majo rity of the Registrable Securit ies then outstanding agree to forfeit their right to one
(1) demand registration pursuant to this Section 2.2 (in wh ich case such right shall be forfeited by all Holders of Registrable Securities);
provided , further , however , that if at the time of such withdrawal, the Ho lders have learned of a material adverse change in the condition,
business, or prospects of the Company not known to the Holders at the time of their request for such registration and have withdrawn their
request for registration with reasonable promptness after learning of such material adverse change, then the Holders shall not be req uired to pay
any of such expenses and shall retain their demand registration rights pursuant to this Section 2.2.

                            (f)        No Right to Reg istration . The Co mpany shall not be required to effect a registration pursuant to this
Section 2.2:

                                    (i)         during the period starting with the date of filing of, and ending on the date one hundred eighty
(180) days following the effective date of the registration statement pertaining to the Co mpany ’s initial public offering; provided that the
Co mpany uses its reasonable best efforts to cause such registration statement t o become effective;

                                     (ii)      if within 30 days of receipt of a written request from the Init iating Ho lders pursuant to this
Section 2.2, the Co mpany gives notice to the Initiating Ho lders of the Co mpany ’s intention to file a reg istration statement pertaining to such
initial public offering within 90 days;

                                     (iii)     if the Init iating Ho lders propose to dispose of shares of Registrable Securities wh ich may be
immed iately reg istered on Form S-3 pursuant to a request made under Section 2.4 hereof; and

                                    (iv)       the registration statement filed pursuant to the request of the Initiating Holders may include other
securities of the Co mpany, with respect to which registration rights have been granted, and may include securities of the Co mp any being sold
for the account of the Company.

                   2.3        Piggyback Registrations . The Co mpany shall notify all Holders of Registrable Securit ies in writing at least thirty
(30) days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the
Co mpany

                                                                          6
(including, but not limited to, registration statements relating to secondary offerings of securities of the Co mpany, but excludin g registration
statements relating to any registration under Section 2.2 or Section 2.4 of th is Agreement or to any employee benefit plan or a corporate
reorganizat ion or other transaction covered by Rule 145 pro mulgated under the Securities Act, or a registration on any registration form which
does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration
statement covering the sale of Registrable Securities,) and will afford each such Holder an opportunity to include in such re gistration statement
all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or
any part of the Registrable Securities held by such Holder shall, within t wenty (20) days after receipt of the above -described notice fro m the
Co mpany, so notify the Co mpany in writ ing, and in such notice shall inform the Co mpany of the nu mber of Reg istrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any reg istratio n statement
thereafter filed by the Co mpany, such Holder shall nevertheless continue to have the right to include any Registrable Securit ies in any
subsequent registration statement or registration statements as may be filed by the Co mpany with respect to offerings of its securit ies, all upon
the terms and conditions set forth herein.

                             (a)         Underwriting . If a registration statement under which the Co mpany gives notice under this Section 2.3 is
for an underwritten offering, then the Co mpany shall so advise the Holders of Registrable Securities. In such event, the right of any such
Holder’s Registrable Securit ies to be included in a reg istration pursuant to this Section 2.3 shall be conditioned upon such Holder’s
participation in such underwrit ing and the inclusion of such Holder’s Registrable Securit ies in the underwriting to the extent provided
herein. A ll Ho lders proposing to distribute their Registrable Securit ies through such underwriting shall enter into an underwriting a greement in
customary form with the managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding any other provision of this
Agreement, if the managing underwriter determine(s) in good faith that marketing factors require a limitation of the nu mber of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securit ies) fro m the registration and the
underwrit ing, and the number of shares that may be included in the registration and the underwriting shall b e allocated, first , to the Co mpany,
second to Holders requesting inclusion of Registrable Securit ies in such registration statement on a pro rata basis based on the number o f such
Registrable Securit ies each such Holder has requested to be included in the registration, and third , to each of the Ho lders of Excluded Shares
on a pro rata basis based on the total number of Registrable Securit ies then held by each such Holder; provided however , that the right of the
underwriters to exclude shares (including Registrable Securit ies) fro m the registration and underwrit ing as described above shall be restricted
so that the number of Registrable Securities included in any such registration is not reduced below thirty percent (30%) of t he shares included
in the registration, except for a reg istration relat ing to the Co mpany’s initial public offering, fro m which all Registrable Securit ies may be
excluded. If any Holder d isapproves of the terms of any such underwrit ing, such Holder may elect to withdraw therefro m by w ritten notice,
given in accordance with Sect ion 6.1 hereof, to the Co mpany and the underwriter, delivered at least twenty (20) days prior to the effective date
of the registration statement. Any Registrable Securities excluded or withdrawn fro m such underwrit ing shall be excluded and withdrawn fro m
the registration. For any Ho lder that is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the
estates and family members of any such partners and retired partners and any

                                                                          7
trusts for the benefit of any of the foregoing persons shall be deemed to be a single ―Ho lder,‖ and any pro rata reduction with respect to such
―Holder‖ shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals include d in such
―Holder,‖ as defined in this sentence.

                              (b)       Expenses . All expenses incurred in connection with a reg istration pursuant to this Section 2.3, including
without limitation all reg istration and qualificat ion fees, printers ’ and accounting fees, fees and disbursements of counsel for th e Co mpany, and
the reasonable fees and disbursements of one counsel for the selling Ho lders (but excluding underwriters ’ d iscounts and commissions), shall be
borne by the Company. Each Holder part icipating in a reg istration pursuant to this Section 2.3 shall bear such Holder’s proportionate share
(based on the number of shares sold by such Holder over the total nu mber of shares included in such registration at the time it g oes effective) of
all discounts, commissions or other amounts payable to underwriters or bro kers in connection with such offering.

                             (c)      Not Demand Registration. Registration pursuant to this Section 2.3 shall not be deemed to be a demand
registration as described in Section 2.2 above. Except as otherwise provided herein, there shall be no limit on the number of t imes the Holders
may request registration of Registrable Securities under this Section 2.3.

                    2.4       Form S-3 Registration . In case the Co mpany shall receive fro m any Holder or Holders of at least thirty percent
(30%) of all Registrable Securities then outs tanding a written request or requests that the Company effect a registration on Form S-3 and any
related qualificat ion or co mpliance with respect to all or a part of the Registrable Securit ies owned by such Holder or Holde rs, t hen the
Co mpany will do the following:

                            (a)        Notice . Pro mptly give written notice of the proposed registration and the Holder’s or Holders’ request
therefor, and any related qualification or co mpliance, to all other Holders of Registrable Securit ies.

                             (b)       Registration . As soon as practicable, effect such registration and all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Ho lders’ Reg istrable
Securities as are specified in such request, together with all or such portion of the Registrable Securit ies of any other Holder or Holders jo ining
in such request as are specified in a written request given within t wenty (20) days after receipt of such wr itten notice fro m the Company;
provided , however , that the Co mpany shall not be obligated to effect any such registration, qualificat ion or co mpliance pursuant to this
Section 2.4:

                                      (1)        if Fo rm S-3 is not available for such offering;

                                     (2)         if the Ho lders, together with the holders of any other securities of the Co mpany entitled to
inclusion in such registration, propose to sell Reg istrable Securit ies and such other securities (if any) at an aggregate price to the public of less
than Three Million Dollars ($3,000,000);

                                   (3)        if the Co mpany shall furnish to the Holders a certificate signed by the President or Chief
Executive Officer of the Co mpany stating that in the good faith

                                                                           8
judgment of the Board of Directors of the Co mpany, it would be seriously detrimental to the Co mpany and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Co mpany shall have the right to defer the filing of the Form S-3 reg istration
statement no more than once during any twelve (12) month period for a period of not more than one hundred twenty (120) days after receipt of
the request of the Holder or Holders under this Section 2.4;

                                     (4)      if the Co mpany has, within the twelve (12) month period preceding the date of such request,
already effected two (2) registrations on Form S-3 for the Ho lders pursuant to this Section 2.4; or

                                     (5)        in any particular jurisdiction in which the Co mpany would be required to qualify to do business
or to execute a general consent to service of process in effect ing such registration, qualification o r co mpliance.

                              (c)       Expenses . Subject to the foregoing, the Co mpany shall file a Form S-3 registration statement covering
the Registrable Securities and other securities so requested to be registered pursuant to this Section 2.4 as soon as practicable after receipt of the
request or requests of the Holders for such registration. The Co mpany shall pay all expenses incurred in connection with each registration
requested pursuant to this Section 2.4, (excluding underwriters’ or brokers’ discounts and commissions), including without limitation all filing,
registration and qualification , printers’ and accounting fees and the reasonable fees and disbursements of one (1) counsel for th e selling Holder
or Holders and counsel for the Co mpany. Each Holder participating in a registration pursuant to this Section 2.3 shall bear such Holder’s
proportionate share (based on the number of shares sold by such Holder over the total number of shares included in such regis tration at the time
it goes effective) of all discounts, commissions or other amounts payable to underwriters or brokers in connection with such offering.

                             (d)        Not Demand Reg istration . Fo rm S-3 registrations shall not be deemed to be demand registrations as
described in Section 2.2 above. Except as otherwise provided herein, there shall be no limit on the number of times the Ho lders may request
registration of Reg istrable Securities under this Section 2.4.

                  2.5      Obligations of the Company . Whenever required to effect the registration of any Registrable Securities under
this Agreement, the Co mpany shall, subject to the provisions of Section 2.5(i) belo w, as expedit iously as reasonably possible:

                             (a)       Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use
reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Reg istrable
Securities reg istered thereunder, keep such registration statement effective for up to one hundred twenty (120) days.

                            (b)         Prepare and file with the SEC such amend ments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securit ies covered by such registration statement.

                                                                           9



                            (c)        Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securit ies Act, and such other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securit ies owned by them that are included in such registration.

                             (d)      Use its best efforts to register and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Co mpany shall not be
required in connection therewith or as a condition thereto to qualify to do business or to file a general consen t to service of process in any such
states or jurisdictions unless the Company is already subject to service in such jurisdiction and except as may be required b y the Securit ies Act.

                           (e)       In the event of any underwritten public offering, enter into and perform its obligations under an
underwrit ing agreement, in usual and customary form, with the managing underwriter(s) of such offering.

                            (f)        Notify each Holder of Registrable Securit ies covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of wh ich the prospectus
included in such registration statement, as then in effect, includes an untrue statement of a material fact or o mits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading in the light of the circu mstances then existing.

                          (g)       Cause all such Registrable Securities registered pursuant to this Section 2 to be listed on a national
exchange or trading system and on each securities exchange and trading system on which similar securities issued by the Comp a ny are then
listed.
                          (h)       Provide a transfer agent and registrar fo r all Reg is trable Securities registered pursuant hereunder and a
CUSIP nu mber for all such Registrable Securities, in each case not later than the effective date of such registration.

                            (g)        Notwithstanding any other provision of this Agreement, fro m and aft er the time a registration statement
filed under this Section 2 covering Reg istrable Securities is declared effective, the Co mpany shall have the right to suspend the registration
statement and the related prospectus in order to, in the good faith judgment of the Board of Directors of the Co mpany, prevent premature
disclosure of any material non-public info rmation that, if disclosed at such time, would be materially harmful to the interests of the Co mpany
and its stockholders by delivering notice of such suspension to the Holders, provided, however, that the Co mpany may exercise the right to
such suspension only once in any 12-month period and for a period not to exceed 120 days, and provided, however, further that during any
such period all executive officers and directors of the Co mpany are also prohibited fro m selling securities of the Co mpany (or any security of
any of the Co mpany’s subsidiaries or affiliates). Fro m and after the date of a notice of suspension under this Section 2.5(g), each Holder
agrees not to use the registration statement or the related prospectus for resale of any Registrable Security until the earlier of (1) notice fro m the
Co mpany that such suspension has been lifted or (2) the 120 th day follo wing the giving of the notice of suspension. In the event of the
suspension of effectiveness of any registration statement pursuant to this Section 2.5(g), the applicable t ime period during which

                                                                          10
such registration statement is to remain effect ive shall be extended by that number of days equal to the number of days the e ffectiveness of such
registration statement was suspended.

                   2.6         Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action
pursuant to Sections 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Co mpany such information regarding themselves, the
Registrable Securit ies held by them, and the intended method of disposition of such securities as shall be required to timely effect the
registration of their Reg istrable Securit ies.

                 2.7        Delay of Registrati on . No Holder shall have any right to obtain or seek an in junction restraining or otherwise
delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this
Section 2.

                   2.8       Indemnification . In the event any Registrable Securities are included in a registration statement under
Sections 2.2, 2.3 or 2.4 :

                             (a)       By the Co mpany . To the extent permitted by law, the Co mpany will indemn ify and hold harmless each
Holder, the partners, officers and directors of each Holder, any underwriter (as defined in the Securit ies Act) for such Holder an d each person ,
if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securit ies Exchange Act of 19 34, as amended,
(the ― Exchange Act ‖), against any losses, claims, damages, or liabilities (joint or several) to wh ich they may beco me subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, o r liabilit ies (or actions in respect
thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, the ― Violations ‖ and,
individually, a ― Violation ‖):

                                    (1)      any untrue statement or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; or

                                   (2)       the o mission or alleged o mission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or

                                       (3)         any vio lation or alleged vio lation by the Co mpany of the Securit ies Act, the Exchange Act, any
federal or state securities la w or any ru le or regulation pro mulgated under the Securities Act, the Exchange Act or any federal o r state securities
law in connection with the offering covered by such registration statement.

The Co mpany will reimbu rse each such Holder, partner, officer or director, underwriter or controlling person for any legal or ot her expenses
reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action;
provided however , that the indemnity agreement contained in this subsection 2.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liab ility or action if such settlement is effected without the consent of the Company (wh ich consent sha ll n ot be
unreasonably withheld), nor shall the Co mpany be liable in any such case for any such loss, claim, damage, liability or act ion to the extent that
it arises out of or is based upon a Vio lation

                                                                          11
which occurs in reliance upon and in conformity with written information furn ished expressly for use in connection with such registration by
such Holder, partner, officer, d irector, underwriter or controlling person of such Holder.

                                (b)        By Selling Holders . To the extent permitted by law, each selling Holder will indemn ify and hold
harmless the Company, each of its directors, each of its officers who have signed the regist ration statement, each person, if any, who controls
the Co mpany within the meaning of the Securit ies Act, any underwriter and any other Holder selling securities under such registration
statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to wh ich the Co mpan y or any such
director, officer, controlling person, underwriter or other such Holder, partner or d irector, o fficer or controlling person of such other Holder
may beco me subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or
liab ilit ies (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that suc h
Vio lation occurs in reliance upon and in conformity with written informat ion furnished by such Holder exp ressly for use in co nnection with
such registration. Each such Holder will reimburse any legal or other expenses reasonably incurred by the Co mpany or any such director,
officer, controlling person, underwriter or other Holder, partner, officer, d irector or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action; within three months after a request for reimbu r sement has been
received by the indemn ifying Holder, provided , however , that the indemn ity agreement contained in this subsection 2.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the co nsent of the Holder,
which consent shall not be unreasonably withheld; and provided further , that the total amounts payable in indemnity by a Hold er under this
Section 2.8(b ) in respect of any Violat ion shall not exceed the net proceeds received by such Holder in the registered offering out of which such
Vio lation arises.

                             (c)       Notice . Pro mptly after receipt by an indemnified party under this Section 2.8 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof. The
indemn ify ing party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other
indemn ify ing party similarly noticed, to assume the defense thereof with coun sel mutually satisfactory to the parties; provided , however , that
an indemn ified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifyin g party, if
representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential
conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time o f the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemn ify ing party of any liab ility to the indemnified party under this Section 2.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party other wise than under this
Section 2.8.

                                                                           12
                            (d)        Defect Eliminated in Final Prospectus . The foregoing indemn ity agreements of the Company and
Holders are subject to the condition that, insofar as they relate to any Violation made in a prel iminary prospectus but eliminated or remed ied in
the amended prospectus on file with the SEC at the time the reg istration statement in question becomes effective or the amend ed prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the ― Final Prospectus ‖), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party and was not furnished to the person asserting the loss, liability,
claim or damage at or prio r to the time such action is required by the Securit ies Act.

                              (e)        Contribution . If the indemn ification provided for in this Section 2.8 is held by a court of co mpetent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the
indemn ify ing party, in lieu of indemn ifying the indemnified party, shall contribute to the amount paid or payable by such indemn ified party
with respect to such loss, liab ility, claim, damage or expense in the proportion that is appropriate to reflect the relative fau lt of t he indemn ifying
party and the indemnified party in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified party s hall be determined
by reference to, among other things, whether the untrue or alleged untrue statement of material fact or the o mission or alleged o mission to state
a material fact relates to information supplied by the indemnifying party or by the indemnified party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission. In any such case, (A) no such Holder will
be required to contribute any amount in excess of the public offering price of all such Reg istrable Securities offered and sold by such Holder
pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (with in the meaning of
Section 11(f) of the Securities Act) will be entit led to contribution fro m any person or entity who was not guilty of such fraudulent
misrepresentation; provided further, that in no event shall a Holder ’s liability pursuant to this Section 2.8(e) , when co mbined with the amounts
paid or payable by such holder pursuant to Section 2.8(b) , exceed the proceeds fro m the offering (net of any underwrit ing discounts or
commissions) received by such Holder, except in the case of willful fraud by such Holder.

                             (f)      Conflict with Underwriting Agreement. Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwrit ing agreement entered into in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in the und erwriting agreement will control.

                            (g)       Survival . The obligations of the Co mpany and Holders under this Section 2.8 shall survive the
complet ion of any offering of Registrable Securit ies in a registration statement, and otherwise.

                  2.9      “ Market Stand-Off” Agreement . Each Ho lder hereby agrees that it shall not, to the extent requested by the
Co mpany or an underwriter of securities of the Co mpany, sell or otherwise transfer or dispose of any Registrable Securities o r other shares of
stock of the Co mpany then owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound) for up to
one hundred eighty (180) days following the effective date of

                                                                           13
any registration statement of the Co mpany filed under the Securities Act; provided , however , that:

                            (a)        such agreement shall be applicab le only to the first such registration statement of the Co mpany wh ich
covers securities to be sold on its behalf to the public in an underwritten offering but not to Registrable Securit ies sold p ursuant to such
registration statement; and

                           (b)       (i) all officers and directors of the Co mpany then holding Co mmon Stock of the Co mpany and (ii) all
stockholders holding in the aggregate at least 1% of the total equity of the Co mpany, enter into similar agreements.

          For purposes of this Section 2.9, the term ―Co mpany‖ shall include any wholly-owned subsidiary of the Co mpany into wh ich the
Co mpany merges or consolidates. In order to enforce the foregoing covenant, the Co mpany shall have the right to place restrictive legends on
the certificates representing the shares subject to this Section and to impose stop transfer instructions with respect to the Registrable Securities
and such other shares of stock of each Holder (and the shares or securities of every other person subject to the foregoing re striction) until the
end of such period. Each Holder further agrees to enter into any agreement reasonably required by the underwriters to imp lement the
foregoing within any reasonable timeframe so requested.

                   2.10    Rule 144 Reporting . With a v iew to making availab le the benefits of certain rules and regulations of the
Co mmission which may at any time permit the sale of the Reg istrable Securities to the public without registration, after such time as a public
market exists for the Co mmon Stock of the Co mpany, the Co mpany agrees to:

                               (a)       Make and keep public informat ion availab le, as those terms are understood and defined in Rule 144 under
the Securities Act, at all t imes after the effective date of the first registration under the Securities Act filed by the Co mpany for an offering of
its securities to the general public;

                          (b)      Use reasonable, diligent efforts to file with the Co mmission in a timely manner all reports and other
documents required of the Co mpany under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting
requirements); and

                              (c)        So long as a Holder owns any Registrable Securit ies, to furnish to the Holder forthwith upon request a
written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninet y (90) days after
the effective date of the first registration statement filed by the Co mpany for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to the reporting requirements of the Exchange Act), a copy of the
most recent annual or quarterly report of the Co mpany, and such other reports and documents of the Company as a Holder may r easonably
request in availing itself of any ru le or regulation of the Co mmission allowing a Holder to sell any such securities without registration (at any
time after the Co mpany has become subject to the reporting requirements of the Exchange Act).

                                                                          14
                   2.11       Terminati on of the Company’s Obligations . The Co mpany shall have no obligations pursuant to Sections 2.2
through 2.4 with respect to: (a) any request or requests for registration made by any Holder on a date more than five (5) years after the closing
date of a firm co mmit ment underwritten public o ffering of the Co mpany ’s Co mmon Stock; or (b) any Registrable Securit ies proposed to be
sold by a Holder in a reg istration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel to the Company, all such Regis trable Securities
proposed to be sold by a Holder may be sold in a three (3) month period without registration under the Securities Act pursuant to Rule 144
under the Securities Act.

                   2.12      Li mitations on Subsequent Registration Rights . Fro m and after the date of this Agreement, the Co mpany shall
not, without the prior written consent of the Holders of at least a majority of the Registrable Securities then outstanding, enter into any
agreement with any holder or p rospective holder of any securities of the Co mpany wh ich would allow such holder or prospective holder (a) to
include such securities in any registration filed under Sect ion 2.2 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Ho lders which is included, or (b) to make a demand registration which could result in such registration
statement being declared effective prior to the earlier of either of the dates set forth in subsection 2.2(a), or within one hundred twenty (120)
days of the effective date of any registration effected pursuant to Section 2.2.

         3.         RIGHT OF FIRS T REFUSAL .

                     3.1       General . Each Major Investor and any party to whom such Major Investor’s rights under this Section 3 have been
duly assigned in accordance with Section 5.1(b) ( each such Major Investor or assignee being hereinafter referred to as a ― Rights Holder ‖) has
the right of first refusal to purchase such Rights Holder’s Pro Rata Share (as defined belo w), of all (or any part) of any ―New Securities‖ (as
defined in Sect ion 3.2) that the Co mpany may fro m time to time issue after the date of this Agreement, provided , however , such Rights
Holder shall have no right to purchase any such New Securities if such Rights Holder cannot demonstrate to the Company ’s reasonable
satisfaction that such Rights Holder is at the time of the proposed issuance of such New Securit ies an ―accredited investor‖ as such term is
defined in Regulation D under the Securit ies Act. A Rights Holder’s ― Pro Rata Share ‖ for purposes of this right of first refusal is the ratio of
(a) the number of Registrable Securit ies as to which such Rights Holder is the Ho lder (and/or is deemed to be the Holder under Se ction 2.1(b )),
to (b) a nu mber of shares of Co mmon Stock of the Co mpany equal to the sum of (1) the total number of shares of Co mmon Stock of the
Co mpany then outstanding, (2) the total nu mber of shares of Co mmon Stock of the Co mpany into wh ich all then outstanding s hares of
Preferred Stock of the Co mpany are then convertible, (3) the nu mber of shares of Co mmon Stock o f the Co mpany outstanding under any stock
purchase and stock option plans of the Co mpany and outstanding warrants, and (4) the nu mber of shares of capital stock of the Co mpany
reserved for issuance under any then outstanding agreements, commit ments or other rights to acquire capital stock of the Co mp any.

                 3.2       New Securities . ― New Securities ‖ shall mean any Co mmon Stock or Preferred Stock of the Co mpany, whether
now authorized or not, and rights, options or warrants to purchase such Common Stock or Preferred Stock, and securities of an y type
whatsoever that

                                                                         15
are, or may become, convertible or exchangeable into such Common Stock or Preferred Stock; provided , however , that the term ―New
Securities‖ does not include :

                            (a)        shares of Co mpany Co mmon Stock issued or issuable upon conversion of the outstanding shares of the
Preferred Stock;

                            (b)        any shares of Co mpany Co mmon Stock (or options, warrants or rights therefor) or Preferred Stock (or
options, warrants or rights therefor) granted or issued hereafter to employees, officers, directors, contractors, consultants or advisers to, the
Co mpany or any Subsidiary pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, wa rrants,
contracts or other arrangements that are approved by the Company ’s Board of Directors;

                              (c)       any shares of the Co mpany’s Co mmon Stock o r Preferred Stock (and/or options or warrants therefore)
issued to parties that are strategic partners in connection with a co mmercial relat ionship with the Co mpany, in each case, approved by the
Co mpany’s Board of Directors;

                             (d)       any shares of the Co mpany’s Common Stock or Preferred Stock (and/or options or warrants therefore)
issued to parties that are providing the Co mpany with equipment leases, real property leases, loans, credit lines, guaranties of indebtedness, or
bank credit or the like, under arrangements, in each case, approved by the Board of Directors;

                             (e)       shares of Co mmon Stock or Preferred Stock issued pursuant to the acquisition of another corporation or
entity by the Company by consolidation, merger, purchase of all or substantially all of the assets, or other reorganization in wh ich the Co mpany
acquires, in a single transaction or series of related transactions, all o r substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more o f the voting power of such other corporation or entity or fifty percent (50%) or mo re of the equity own ership of such
other entity; provided that such transaction or series of transactions has been approved by the Company ’s Board of Directors or pursuant to the
purchase of less than a fifty percent (50%) equity ownership in connection with a joint venture or other st rategic arrangement o r other
commercial relat ionship, provided such an arrangement is approved by the Board of Directors;

                            (f)      shares of Co mmon Stock or Preferred Stock issuable upon exercise of any options, warrants or rights to
purchase any securities of the Co mpany outstanding as of the date hereof and any securities issuable upon the conversion thereof; and

                             (g)        any shares of Co mmon Stock or Preferred Stock (or options, or warrants or rights to acquire same), issued
or issuable hereafter that are (i) approved by the Board, and (ii) approved by the vote of the holders of a majority of the Preferred Stock (voting
as a single class on an as-converted basis) as being excluded fro m the defin ition of ―New Securities‖ under this section 3.2.

                  3.3      Procedures . In the event that the Company proposes to undertake an issuance of New Securities, it shall give to
each Rights Holder a written notice of its intention to issue New Securit ies (the ― Notice ‖), describing the type of New Securit ies and the price
and the general terms upon which the Co mpany proposes to issue such New Securit ies given in

                                                                           16
accordance with Section 6.1 hereof. Each Rights Holder shall have thirty (30) days fro m the date such Notice is effective, as determined
pursuant to Section 6.1 hereof based upon the manner or method of notice, to agree in writ ing to purchase such Rights Holder’s Pro Rata Share
of such New Securities for the price and upon the general terms specified in the Not ice by giving written notice to the Compa ny and stating
therein the quantity of New Securit ies to be purchased (not to exceed such Rights Holder’s Pro Rata Share). If any Rights Holder fails to so
agree in writing within such thirty (30) day period to purchase such Rights Holder’s full Pro Rata Share o f an offering of New Securities (a ―
Nonpurchasing Holder ‖), then such Nonpurchasing Holder shall forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he, she or it did not so agree to purchase and the Company shall pro mptly g ive each Rights Holder who has timely agreed
to purchase his full Pro Rata Share of such offering of New Securit ies (a ― Purchasing Holder ‖) written notice of the failure of any
Nonpurchasing Holder to purchase such Nonpurchasing Rights Holder’s full Pro Rata Share of such offering of New Securit ies (the ―
Overallotment Notice ‖). Each Purchasing Holder shall have a right of overallot ment such that such Purchasing Holder may agree to purchase
a portion of the Nonpurchasing Holders ’ unpurchased Pro Rata Shares of such offering on a pro rata basis according to the relative Pro Rata
Shares of the Purchasing Rights Holders, at any time within five (5) days after receiv ing the Overallot ment Notice.

                   3.4        Failure to Exercise . In the event that the Rights Holders fail to exercise in fu ll the right of first refusal within
such thirty (30) plus five (5) day period, then the Co mpany shall have one hundred twenty (120) days thereafter to sell the New Securit ies with
respect to which the Rights Holders’ rights of first refusal hereunder were not exercised, at a price and upon general terms not materially mo re
favorable to the purchasers thereof than specified in the Co mpany ’s Notice to the Rights Holders. In the event that the Compa ny has not
issued and sold the New Securities within such one hundred twenty (120) day period, then the Co mpany shall not thereafter iss ue or sell any
New Securities without again first offering such New Securit ies to the Rights Holders pursuant to this Se ction 3.

                    3.5       Terminati on . This right of first refusal shall terminate at the earlier of: (a) the sale of securities pursuant to a
registration statement filed by the Co mpany under the Securities Act in connection with its init ial public o ffer ing; (b) when the Co mpany first
becomes subject to the periodic reporting requirement of Sect ion 13 or 15 of the Exchange Act; or (c) upon (1) the acquisition of all or
substantially all the assets of the Co mpany or (2) a reorganization, consolidation or merger (or similar transaction or series of transactions) of
the Co mpany with or into any other corporation or corporations in which the holders of the Co mpany ’s outstanding shares immediately before
such transaction or series of related transactions do not, immediately after such transaction or series of related transactions, retain stock
representing a majority of the voting power of the surviving corporation (or its parent corporation if the surviving corporat ion is wholly owned
by the parent corporation) of such transaction or series of related transactions.

         4.         COVENANTS .

                  4.1     Employees . Unless approved by the Board of Directors of the Co mpany, following the date of this Agreement, all
emp loyees of the Company who shall purchase, or receive options to purchase, shares of the Company’s Co mmon Stock shall b e required to

                                                                         17
execute stock purchase or option agreements providing for vesting of shares over a four-year period with the first 25% of such shares vesting
following twelve (12) months of continued employ ment or services, and the remain ing shares vesting in equal quarte rly installments over the
following 12 quarters thereafter. The vesting commencement date for each such emp loyee shall be the employee ’s first day of emp loyment
with the Co mpany.

                 4.2      Confi dential Informati on and Inventi on Assignment Agreement . The Co mpany and each person now or
hereafter employed, whether as an officer, emp loyee, consultant or advisor, shall enter into the Co mpany ’s form of Emp loyee Invention
Assignment and Confidentiality Agreement, or an emp loyment or consulting agreement co ntaining substantially similar terms.

         5.         ASSIGNMENT AND AMENDMENT .

                  5.1       Assignment . Notwithstanding anything herein to the contrary:

                             (a)        Informat ion Rights . The rights of a Major Investor under Section 1 hereof may be assigned only to a
party who acquires at least the min imu m nu mber of shares of Registrable Securit ies as would qualify such assignee as a Major Investor, or that
such assignee is an affiliate to, or subsidiary, parent or partner o f, a Major Investor.

                            (b)       Registration Rights . The registration rights of a Ho lder under Section 2 hereof may be assigned only to a
party who acquires 1,500,000 shares of Preferred Stock and/or an equivalent number (on an as -converted basis) of Registrable Securities issued
upon conversion thereof, or who is an affiliate, subsidiary, parent or partner of a Ho lder; provided , however that no party may be assigned any
of the foregoing rights unless the Company is given written notice by the assigning party at the time of such assignment stating the name and
address of the assignee and identifying the securities of the Co mpany as to which the rights in question are being assigned; provided further ,
that any such assignee of such rights is not deemed by the Board of Directors of the Co mpany, in its reasonable judgment, to be a co mpetitor of
the Co mpany; and provided further that any such assignee shall receive such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 5.

                             (c)       Refusal Rights . The rights of first refusal of a Rights Holder under Section 3 hereof may be assigned
only to a party who acquires at least the min imu m nu mber of shares of Preferred Stock and/or an equivalent number (on an as -converted basis)
of Reg istrable Securities issued upon conversion thereof as would qualify such assignee as a Major Investor, or who is an affiliate, subsidiary,
parent or partner of a Holder; provided , however that no party may be assigned any of the foregoing rights unless the Company is given
written notice by the assigning party at the time o f such assignment stating the name and address of the assignee and identifying the securities
of the Co mpany as to which the rights in question are being assigned; provided further , that any such assignee of such rights is not deemed by
the Co mpany, in its reasonable judgment, to be a co mpetitor of the Co mpany; and provided further that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Section 5.

                                                                         18



                  5.2             Amendment and Wai ver of Rights . Subject to Section 5.3, any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or pr ospectively), only
with the written consent of the Company and Investors holding at least a majority of the Preferred Stock, provided , however , t hat the
piggyback registration rights granted to the Stockholders under Section 2 o f this Agreement may not be eliminated or materially and adversely
changed without the written consent of persons holding a majority of the Stockholders ’ Shares; and provided , further , that the grant to third
parties of piggyback registration rights under Section 2.3 hereof on a pari passu basis with the piggyback registration rights of the
Stockholders’ Shares under Section 2.3 shall not be deemed to be a material and adverse change to the piggyback registration rights of the
Stockholders under this Agreement and shall not require the consent of either the Stockholders or the Investors.

         6.              GENERAL PROVIS IONS .

                    6.1            Notices . Any and all notices required or permitted to be given to a party pursuant to the provisions of this
Agreement will be in writ ing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of
the following: (i) at the time o f personal delivery, if delivery is in person; (ii) the same business day after transmission by confirmed electronic
mail, facsimile or telecopier, addressed to the other party at its confirmed electronic mail address or facsimile nu mber or telecopier address
specified herein (or hereafter noticed to the parties hereto), with confirmat ion of transmission, if sent during normal busin ess hours of the
recipient (if not, then on the next business day); (iii) one (1) business day after deposit with an express overnight courier for Un ited States
deliveries, or five (5) business days after such deposit for deliveries outside of the United States, with proof of del ivery fro m the courier
requested; or (iv) three (3) business days after deposit in the United States mail by cert ified mail (return receipt requested) for United States
deliveries.
                             All notices not delivered personally will be sent with postage and/or oth er charges prepaid and properly addressed to
the party to be notified at the address as follows, or at such other address as such other party may designate by one of the indicated means of
notice herein to the other parties hereto as follo ws:

                           (a)             if to an Investor, at such Investor’s respective address as set forth on Exhi bit B or C attached hereto.

                          (b)          if to the Co mpany, marked ―Attention: Corporate Secretary‖, at 999 Main St, Suite 1010,
Boise, Idaho 83702; Fax: +1-208-389-7515, with a copy to: Attention: Tho mas H. Tobiason, Orrick, Herrington & Sutcliffe LLP, 1000
Marsh Road, California 94025; Fax: +1-650-614-7401.

                           (c)             if to a Stockholder, at such Stockholder’s address as set forth on Exhi bit A hereto.

                   6.2            Entire Agreement . Th is Agreement and the documents referred to herein, together with all the Exh ib its
hereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, an d supersede any
and all prior

                                                                        19
understandings and agreements, whether oral o r written, between or among the parties hereto with respect to the specific subject matter hereo f.

                    6.3            Governing Law . Th is Agreement will be governed by and construed in accord ance with the laws of the State
of Californ ia, without giving effect to that body of laws pertaining to conflict of laws.

                    6.4             Severability . If any provision of this Agreement is determined by any court or arbitrator of co mpetent
jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximu m extent po ssible given the
intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken fro m this Agreement and the
remainder o f this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable)
never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the
bargain for any party is materially impaired, which determination as made by the presiding court or arb itrator of co mpetent jurisdiction shall be
binding, then both parties agree to substitute such provision(s) through good faith negotiations.

                   6.5             Third Parties . Nothing in this Agreement, express or imp lied, is intended to confer upon any person, other
than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

                   6.6           Successors and Assigns . Subject to the provisions of Section 5.1, th is Agreement, and the rights and
obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors,
administrators and legal representatives.

                  6.7            Titles and Headings . The t itles, captions and headings of this Agreement are included for ease of reference
only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to
―sections‖ and ―exh ibits‖ will mean ―sections‖ and ―exhibits‖ to this Agreement.

                 6.8            Counterparts . This Agreement may be executed in any number of counterparts, each of which when so
executed and delivered will be deemed an original, and all o f which together shall constitute one and the same agreement.

                  6.9             Adjustments for Stock S plits, Etc . Wherever in this Agreement there is a reference to a specific nu mber of
shares of Co mmon Stock or Preferred Stock of the Co mpany of any class or series, then, upon the occurrence of any subdivision , comb ination
or stock dividend of such class or series of stock, the specific nu mber o f shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such class or series of stock by such subdivision, combination or stock
dividend.

                   6.10        Further Assurances . The parties agree to execute such further documents and instruments and to take such
further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

                                                                         20
                  6.11           Facsimile Signatures . This Agreement may be executed and delivered by facsimile and upon such delivery
the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other party.

                   6.12          Subsequent Cl osings . In the event that the Company will conduct subsequent sales of Series E Preferred
Stock or otherwise sell Series E Preferred Stock or grant options or warrants therefor, any holder of such shares of Series E Preferred Stock o r
securities convertible into Series E Preferred Stock will be deemed a Holder with all o f the rights of a Holder u nder this Agreement; provided
that, as a condition thereto such holder and the Company will sign a counterpart signature page to this Agreement.

         7.              DISPUTE .

                   7.1           Dispute Resoluti on . Any and all d isputes, controversies or claims concerning or relating to this Agreement
(a ― Dispute ‖) will be addressed in accordance with the procedures specified in this Section 7, which will be the sole and exclu sive procedures
for the resolution of such Disputes. All negotiations pursuant to this provision are confidential and shall be treated as compro mise and
settlement negotiations for purpose of the United States Federal Ru les of Evidence and state rules of evidence.

                 7.2           Negotiation . The parties will attempt in good faith to resolve any Dispute promptly by negotiation. If the
Dispute has not been resolved within sixty (60) days of a party ’s request for negotiation, either party may in itiate med iation as provided in
Section 7.3.

                   7.3            Nonbi nding Medi ation . A party may init iate mediat ion by giving notice to the other party. Mediation will
be nonbinding and before the Judicial A rbitration and Mediation Services, Inc. (―JAMS‖) under the then effective JAMS Rules of Pract ice and
Procedure. The Mediat ion shall take p lace in Santa Clara County, Califo rnia. The parties shall attempt to reach agreement on the appointment
of a mediator. If they cannot so agree, the med iator shall be appointed by JAMS and pursuant to JAMS Rules of Practice and Procedure. The
med iator will be a fo rmer judge of a federal or state court. The mediation shall be co mpleted within sixty (60) days of its initiation, unless the
parties otherwise agree. The part ies will bear their own costs and expenses for participating in med iation under this Section 7.3, including,
without limitation, attorney’s fees, and shall shares equally the mediator’s fees and expenses.

                    7.4             Binding Arbitration . Any Dispute that has not been resolved by mediation as provided in Section 7.3 may
be submitted to binding arbitration by the American Arbitrat ion Association (―AAA‖). There will be one (1) neutral, independent and
impart ial arbitrator selected in accordance with the AAA rules and procedures then in effect; provided, however, the arb itrator may not vary,
modify or d isregard any of the provisions contained in this Section 7. The parties shall attempt to reach agreement on the appointment of an
arbitrator. If they cannot so agree, the arbitrator shall be appointed by the AAA. The arbitration shall take place in Santa Clara County,
California. As part of any arbitrat ion conducted under this Section 7.4, each party may (a) request from the other party documents and other
materials relevant to the Dispute and likely to bear on the issues in such Dispute, (b) conduct no more than five (5) oral depositions each of
which will be limited to a maximu m o f seven hours in

                                                                         21
testimony, (c) p ropound to the other party no more than two sets of interrogatories comprising a total of 35 questions, and (d) two sets of
requests for admissions comprising a total of 10 requested admissions maximu m. The decision and any award resulting fro m such arbitration
shall be final and binding. Any final decision or award fro m arb itration will be in writing and reasoned. The judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction thereof. The arbit rator is not empowered to award d amages in
excess of compensatory damages and each party hereby irrevocably waives any right to recover such damages with respect to a ny Dispute
resolved by arbitration. Each party shall bear its own expenses (including attorney’s fees) and an equal share of the expenses of the arbitrator
and the AAA fees.

                   7.5             Confi denti ality in Dispute Resoluti on . The parties, their representatives, other participants and the
med iator and arbitrator shall hold the existence, content and result of the med iation and arbitrat ion in confidence. A ll the dispute resolution
proceedings contemplated in this Section 7 will be as confidential and private as permitted by law. The parties will not disclose the existence,
content or results of any proceedings conducted in accordance with this Section 7, and materials submitted in connection with such proceedings
will not be admissible in any other proceeding, provided however, that this confidentiality provision will not prevent a petition to vacate or
enforce an arbitration award, and shall not bar disclosures required by law.

                    7.6            Injunctions; Wai ver . Nothing in this Section 7 shall be construed to preclude any party from seeking
injunctive relief fro m a court without posting bond or other security, in order to protect its rights pending mediation or ar bit ration. If either
party chooses to seek such relief fro m a court, the parties consent to the exclusive jurisdiction and venue of the courts located in Santa Clara
County, California. A request by a party to a court for such injunctive relief shall not be deemed a waiver of the obligation to me d iate or
arbitrate. EA CH PARTY A CKNOWLEDGES THAT THIS A GREEM ENT TO A RBITRATE DISPUTES WAIVES THE PA RTY’S RIGHT
TO TRIAL BY JURY OR COURT OR TO HA VE DISCOVERY UNDER COURT RULES.

                                                             [Signature Page Follows]

                                                                         22
        IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Co mpany :                                                          SEMILEDS CORPORATION


                                                                    By:   /s/ Trung Tri Doan
                                                                          Trung Tri Doan, Chairman & CEO

                                    SIGNATURE PAGE TO S EMIL EDS CORPORATION
                                AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
        IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Stockholders :                                                      /s/ Trung Tri Doan
                                                                    TRUNG TRI DOA N


                                                                    /s/ Anh Chuong Tran
                                                                    ANH CHUONG TRAN

                                    SIGNATURE PAGE TO S EMIL EDS CORPORATION
                                AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
         IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                          /s/ Trung Tri Doan
                                                                     TRUNG TRI DOA N


                                                                     /s/ Anh Chuong Tran
                                                                     ANH CHUONG TRAN

                                     SIGNATURE PAGE TO S EMIL EDS CORPORATION
                                 AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                 SIMPLOT TAIWAN, INC.


                                                            By:      /s/ Scott R. Simp lot

                                                            Name:

                                                            Title:

                            SIGNATURE PAGE TO S EMIL EDS CORPORATION
                        AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                 WI HA RPER INC. FUND VI LTD.


                                                            By:      /s/

                                                            Name:

                                                            Title:

                            SIGNATURE PAGE TO S EMIL EDS CORPORATION
                        AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                 LITE-ON TECHNOLOGY USA, INC.


                                                            By:      /s/ David Lin

                                                            Name:    David Lin

                                                            Title:

                            SIGNATURE PAGE TO S EMIL EDS CORPORATION
                        AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT




IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                 JRS PROPERTIES III L.P.


                                                            By:      /s/ Scott R. Simp lot

                                                            Name:

                                                            Title:

                            SIGNATURE PAGE TO S EMIL EDS CORPORATION
                        AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
         IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                          /s/ Cm Chen
                                                                     CM CHEN

                                     SIGNATURE PAGE TO S EMIL EDS CORPORATION
                                 AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
         IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                                          /s/ James Chen
                                                                     JAMES CHEN

                                     SIGNATURE PAGE TO S EMIL EDS CORPORATION
                                 AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the date and year first written above.


Investors :                                           [                                                             ]


                                                      By:                /s/ Wan-Tsai, Chien

                                                      Name:              Chien, Wan-Tsai

                                                      Title:

                            SIGNATURE PAGE TO S EMIL EDS CORPORATION
                        AMENDED AND RES TATED INVESTOR RIGHTS AGREEMENT
                              EXHIB IT A

                          List of Stockhol ders

                                                              Numbe r of Shares
Name and Address                                           of Common Stock Held
Trung Tri Doan                                                            45,000,000
101 Lasuen Ct
Los Gatos, CA 95032

Anh Chuong Tran                                                           45,000,000
Ln 81 N1 Songcui Rd
Baoshan Hsinchu 308
Taiwan

Tan Dinh                                                                    5,664,063
146 Green wood Drive
Pleasant Hill, CA 94523

                                                  TOTA L                  95,664,063
                                            EXHIB IT B

                                   LIST OF EXIS TING INVES TORS

                                                                      Number of Shares of
                                                                   Series A, Series B, Se ries C
Name and Address                                                  and Series D Pre ferre d Stock
Simp lot Taiwan, Inc.                                                                 123,546,324
999 Main Street, Suite 1300
Boise, Idaho 83702

Trung Tri Doan                                                                             666,666
101 Lasuen Court
Los Gatos, California 95032-3900

Anh Chuong Tran                                                                            333,333
Lane 81, No.1, Songcuei Rd.
Baoshan Township, Taiwan 308

Shawn B. Smith                                                                             333,333
201 Lavaca Street #630
Austin, Texas 78701

Khe Chanh Nguyen                                                                           266,666

Brad L. Sargent                                                                            250,000

Thomas G. & N. Robertson                                                                   100,000

Steven C. Cintron                                                                            66,666
10 Mounds Road #3C
San Mateo, CA 94402

D. & J. Schatz Family Trust                                                                  84,745

Andy Tran                                                                                    84,745

WK Growth Enterprise                                                                       169,491

Michael Gough                                                                                66,666
1166 Ruth Drive
San Jose, California 95125

Powerchip Semiconductor Corp.                                                            6,101,694
15F, 68, Sec.3, Nanking E. Rd.
Taipei, Taiwan, R.O.C

Nanoteco, Japan                                                                            508,475

Lu xxon Technology Corporation                                                          10,169,491
Taoyuan County, Taiwan
                                                 Number of Shares of
                                              Series A, Series B, Se ries C
Name and Address                             and Series D Pre ferre d Stock
WI Harper Inc. Fund VI Ltd.                                        10,169,491
P.O. Bo x 309 GT
Ugland House, South Church Street
George Town, Grand Cay man

Lite-On Technology USA, Inc.                                       15,351,550
90 Chien 1 Road, Chung Ho
Taipei Hsien 235, Taiwan

                                    TOTA L                       168,269,336
                                                               EXHIB IT C

                                                   LIST OF S ERIES E INVES TORS

                                                                                             Numbe r of
Name and Address                                                                              Shares
Simp lot Taiwan, Inc.                                                                             15,044,519
999 Main Street, Suite 1300
Boise, Idaho 83702

JRS Properties III L.P.                                                                            4,345,169
999 W. Main Street, Su ite 1300
Boise, Idaho 83702

WI Harper Inc. Fund VI Ltd.                                                                          871,179
P.O. Bo x 309 GT
Ugland House, South Church Street
George Town, Grand Cay man

Trung Tri Doan                                                                                        57,111
101 Lasuen Court
Los Gatos, California 95032-3900

Anh Chuong Tran                                                                                       28,555
Lane 81, No.1, Songcuei Rd.
Baoshan Township, Taiwan 308

Lite-On Technology USA, Inc.                                                                       1,315,104
90 Chien 1 Road, Chung Ho
Taipei Hsien 235, Taiwan

CM Chen                                                                                              688,096

James Chen                                                                                            12,856

Chien, Wan-Tsai                                                                                      119,793
308
No.8, Ln. 8, Zhu’an 3rd Rd., Daqi Village District 8, Baoshan Township, Hsinchu County 308

Liu,Ming-Cheng                                                                                        33,854
300
No.1, Bochuan 2nd Rd., Caiq iao Zone #20, East Dist., Hsinchu City 300

Chen, Chih-M ing                                                                                      97,657
302
8F., No.78, Xian zheng 10th St., Beilun Zone #5, Zhubei City, Hsinchu County 302
                                                                                              Numbe r of
Name and Address                                                                               Shares
Huang, Fei-Chi                                                                                         47,526
302
8F., No.78, Xian zheng 10th St., Beilun Zone #5, Zhubei City, Hsinchu County 302

Ho, Kuei-Chang                                                                                             1,171
300
No.142, Zefan Rd., Caiqiao Zone #21, East Dist., Hsinchu City 300

Lu, Hu i-Yun                                                                                               6,510
300
No.11, Aly. 2, Ln. 173, Gaocui Rd., Gaofeng Zone #1, East Dist., Hsinchu City 300

Chen, Chiang-Yuan                                                                                          2,604
304
No.239, Hongmao, Xinfeng Village District 3, Xinfeng Township, Hsinchu County 304

Chen, Cheng-Chin                                                                                       42,188
103
3F., No.55, Ln. 282, Sec. 4, Yanping N. Rd., Laoshi Zone #22, Datong Dist., Taipei City 103

Yang,Shih-Yi                                                                                           65,105
300
No.3, Ln. 65, Dunfeng Rd., Xiangshan Dist. #14, Hsinchu City 300

Chien, Yu-Ch i                                                                                         39,063
308
No.8, Ln. 8, Zhu’an 3rd Rd., Daqi Village District 8, Baoshan Township, Hsinchu County 308

Chien, Fan-Tse                                                                                         39,193
308
No.8, Ln. 8, Zhu’an 3rd Rd., Daqi Village District 8, Baoshan Township, Hsinchu County 308

Lung, Hsing-Chu                                                                                        19,531
300
No.25, Ln. 349, Niupu Rd., Xiangshan Dist., Hsinchu City 300

Teng,Ming-Yu                                                                                           13,021
302
No.37, Shengli 6th St., Shixing Zone #28, Zhubei City, Hsinchu County 302

Teng,Ming-Hui                                                                                              6,510
302
No.7, Ln. 35, Guangming 10th St., Doulun Zone #11, Zhubei City, Hsinchu County 302
                                                                                                   Numbe r of
Name and Address                                                                                    Shares
Wu, Hsin-Hsien                                                                                              39,063
300
5F., No.3, Aly. 7, Ln. 384, Sec. 1, Zhonghua Rd., Fu xing Zone #14, East Dist., Hsinchu City 300

Tsai,Chao-Chieh                                                                                             52,084
704
No.19, Ln. 182, Yude 2nd Rd., Chengde Zone #29, North Dist., Tainan City 704

Lin, Shao-Min                                                                                               13,021
302
No.3, Aly. 19, Ln. 285, Sec. 2, Dongxing Rd., Donghai Zone #2, Zhubei City, Hsinchu County 302

Jong, Charng-Shyang                                                                                             2,604
300
6F-2, No.133, Puding Rd., Puding Zone #2, East Dist., Hsinchu City 300

Lin, Hsin-Chen                                                                                                  1,302
358
No.87-1, Jiaopu, Jiaopu Zone #8, Yuan li Township, Miao li County 358

Chang, Yu-Hui                                                                                                   2,604
741
No.32, Aly. 71, Xinyi Rd., Zuojia Zone #13, Shanhua Township, Tainan County 741

Hsu, Yung-Tzu                                                                                                   2,604
712
No.289, Zhongzheng Rd., Wuan Zone #3, Xinhua Township, Tainan County 712

Wu,Chun-Fan                                                                                                     2,604
830
No.1-4, Ln. 338, Zhongshan W. Rd., Zhongyi Zone #7, Fengshan City, Kaohsiung County 830

Hsieh, Kuang-Yu                                                                                                 1,953
402
No.178, Deji St., Shude Zone #30, South Dist., Taichung City 402

Huang, Jin-Ten                                                                                                  2,604
709
No.24, Ln. 42, Sec. 1, Gong xue Rd., Gongqin Zone #7, Annan Dist., Tainan City 709
                                                                                            Numbe r of
Name and Address                                                                             Shares
Chien, Tien-Sheng                                                                                    13,021
201
No.1-42, Shen’aokeng Rd., Xiao xian Zone #11, Xinyi Dist., Keelung City 201

Chuang,Wei-Chou                                                                                          6,510
302
No.6, Ln. 88, Wenping Rd., Shixing Zone #40, Zhubei City, Hsinchu County 302

Tu Chien, Yueh                                                                                       13,021
220
No.181-3, Siwei Rd., Mingcui Zone #20, Banqiao City, Taipei County 220

Shen, Teng-Hsien                                                                                         3,906
202
2F-3, No.213, Zhongzheng Rd., Zhongzheng Dist. #11, Keelung City 202

Tu, Yi-Ju                                                                                                6,510
220
6F., No.157, Hansheng W. Rd., Wende Zone #11, Banqiao City, Taipei County 220

Chien, Su-Ying                                                                                           6,510
220
2F., No.15, Zhuangjing Rd., Zhongcui Zone #20, Banqiao City, Taipei County 220

Chien, Chun-Hua                                                                                      13,021
235
No.3-2, Aly. 33, Ln. 335, Yuantong Rd., Jinchang Zone #5, Zhonghe City, Taipei County 235

Tu, Wan-I                                                                                                6,510
220
No.181-3, Siwei Rd., Mingcui Zone #20, Banqiao City, Taipei County 220

Tu, Yi-Ling                                                                                              6,510
220
5F., No.157, Hansheng W. Rd., Wende Zone #11, Banqiao City, Taipei County 220

Yang, Ming-Hsiang                                                                                    13,021
300
No.14, Ln. 29, You le St., Dazhuang Zone #12, Xiangshan Dist., Hsinchu City 300

Chou, Chen-Ho                                                                                            7,812
310
No.10, Ln. 16, Fugui St., Touchong Zone #6, Zhudong Township, Hsinchu County 310
                                                                                                         Numbe r of
Name and Address                                                                                          Shares
Chen,Mei-Hsin                                                                                                         1,302
404
6F-6, No.62, Taip ing Rd., Jinping Zone #1, North Dist., Taichung City 404

Fan,Ch iang-Shen                                                                                                      6,510
111
2F., No.11, Aly. 23, Ln . 290, Sec. 6, Zhongshan N. Rd., Lanya Zone #14, Shilin Dist., Taipei City 111

Wang, Hui-Chen                                                                                                   110,678
701
No.15, Yu xin 6th St., Yuesheng Zone #9, East Dist., Tainan City 701

Chu, Li-Chuan                                                                                                    260,420
300
No.5, Aly. 5, Ln. 6, Fuqun St., Dong xiang Zone #13, Xiangshan Dist., Hsinchu City 300

Yen, Hsiu-Rong                                                                                                    39,063
103
3F., No.16, Gangu St., Yongle Zone #4, Datong Dist., Taipei City 103

Huang,Chiao-Chiang                                                                                                91,147
112
2F-1, No.298, Daye Rd., Zhongyang Zone #24, Beitou Dist., Taipei City 112

Chien, Ch ih-Ta                                                                                                       1,302
228
No.56, Ren’ai Rd., Renli Village #14, Gongliao Township, Taipei County 228

Chou, Shu-Fang                                                                                                        6,510
302
8F., No.118, Shengli 2nd Rd., Shixing Zone #11, Zhubei City, Hsinchu County 302

Lai, Yu-Pen                                                                                                           1,302
300
5F., No.67, Changchun St., Xin zhuang Zone #18, East Dist., Hsinchu City 300

Chien, Shih                                                                                                           5,208
228
No.56, Ren’ai Rd., Renli Village #14, Gongliao Township, Taipei County 228

Chang, Bii-Cheng                                                                                                  26,042
300
No.6, Ln. 79, Xinzhuang St., Xinzhuang Zone #26, East Dist., Hsinchu City 300
                                                                                          Numbe r of
Name and Address                                                                           Shares
Tong Seng Applied Materials Inc.                                                                  130,210
303
No.16, Guangfu S. Rd., Shengli Village, Hukou Township, Hsinchu County 303

Yang, Cheng-Chung                                                                                      2,083
503
No.26, Ln. 47, Fude St., Wende Village District 3, Huatan Township, Changhua County 503

TOTAL                                                                                          23,794,887
                                                                                                                                    Exhi bit 10.1

                                                  SEMILEDS CORPORATION
                                      ACTION BY WRITTEN CONSENT OF THE STOCKHOLDERS

The undersigned, being holders of outstanding voting shares of SemiLEDs Corporation, a Delaware corporation (the ―Co mpany‖), do by this
written Action consent to and adopt the follo wing resolutions in lieu of a meeting, pursuant to Section 228 of the Delaware Gen eral
Corporation Law:

2005 EQUIT Y INCENTIV E PLAN

         WHEREAS, the Board of Directors of the Co mpany (the ―Board‖), subject to the approval of the Co mpany’s shareholders, adopted
         the SemiLEDs Co rporation 2005 Equ ity Incentive Plan (the ―Plan‖), under wh ich employees (includ ing officers), non-employee
         members of the Board and consultants of the Company may be offered the opportunity to acquire shares of the Co mpany ’s Class B
         Co mmon Stock; and

         WHEREAS, the Board, subject to the approval of the stockholders, reserved additional 200,000 shares and 15,883,335 shares in
         totality of the Class B Co mmon Stock for issuance over the term of the Plan.

         RESOLVED , that the adoption of the Plan, in substantially the fo rm approved by the Board and attached hereto as Exhi bit A , be,
         and it hereby is, approved in its entirety; and

         RESOLVED Further , that the reservation of additional 200,000 shares and of 15,883,335 shares in totality of Class B Co mmon
         Stock for issuance under the Plan be, and it is herby, approved.

This action may be signed in one or mo re counterparts, each of which shall be deemed an original and all of which shall const itute one
instrument. A facsimile signature page shall be deemed an original.

         IN WITNESS WHEREOF, the undersigned has executed this written Action as of the date written below.

Simp lot Taiwan Inc.


By: /s/ Bill Whitacre                            By: /s/ Trung T. Doan                            By: /s/ Chuong A. Tran
Name: Bill Whitacre                              Name: Trung T. Doan                              Name: Chuong A. Tran
Title: President                                 Date: 3/01/2010                                  Date: 3/01/2010
Date: 3/1/ 2010
         Exhi bit A

2005 EQUITY INCENTIVE PLAN

             2
                                                          SEMIL EDS CORPORATION

                                                       2005 EQUIT Y INCENTIV E PLAN

As Adopted on June 21, 2005 (and Amended on November 29, 2005 , November 4, 2009 and March 1, 2010)

          1.              PURPOS E . The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to the success of the Co mp any, its Parent and Subsidiaries, by offering them an opportunity to
participate in the Co mpany’s future performance through awards of Options and Restricted Stock. Capitalized terms not defined in the text are
defined in Sect ion 22 hereof. Although this Plan is intended to be a written compensatory benefit plan within the mean ing of Rule 701
promu lgated under the Securities Act, grants may be made pursuant to this Plan that do not qualify for exemption under Rule 701 or certain
state securities regulations (for examp le, Section 25102(o ) of the California Corporations Code, to the extent that such Section is intended to be
applied) (together, the ― Regulations ‖). Any requirement of this Plan wh ich is required in law only because of such Regulatio ns need not
apply if the Co mmittee so provides.

         2.              SHARES S UBJ ECT TO THE PLAN .

                   2.1           Number of Shares Avail able . Subject to Sect ions 2.2 and 17 hereof, the total number of Shares reserved and
available for grant and issuance pursuant to this Plan will be 15,883,335 Shares or such lesser number of Shares as permitted by applicable
law. Subject to Sections 2.2, 5.10 and 17 hereof, Shares subject to Awards previously granted will again be available for grant and issuance in
connection with future Awards under this Plan to the extent such Shares: (i) cease to be subject to issuance upon exercise of an Option, other
than due to exercise of such Option; (ii) are subject to an Award granted hereunder but the Shares subject to such Award are forfeited or
repurchased by the Company at the original issue price; or (iii) are subject to an Award that otherwise terminates without Shares being
issued. At all times the Co mpany will reserve and keep available a sufficient number of Shares as will be required to satisfy the req uirements
of all Awards granted and outstanding under this Plan.

                   2.2            Adjustment of Shares . In the event that the number of outstanding shares of the Co mpany ’s Common Stock
is changed by a stock dividend, recapitalizat ion, stock split, reverse stock split, subdivision, combination, reclassificat io n or similar change in
the capital structure of the Co mpany without consideration, then (i) the number of Shares reserved for issuance under this Plan, (ii) the Exercise
Prices of and number of Shares subject to outstanding Options and (iii) the Pu rchase Prices of and number of Shares subject to other
outstanding Awards will be p roportionately adjusted, subject to any required action by the Board or the stockholders of the Compan y and
compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either b e paid in cash at the
Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Co mmit tee, and
provided, further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares.

                                                                          3
          3.            ELIGIB ILITY . ISOs (as defined in Sect ion 5 hereof) may be g ranted only to employees (including officers and
directors who are also employees) of the Co mpany or of a Parent or Subsidiary of the Co mpany. NSOs (as defined in Section 5 hereof) and
Restricted Stock Awards may be granted to employees, officers, d irectors and co nsultants of the Company or any Parent or Subsidiary of the
Co mpany; provided such consultants render bona fide services not in connection with the offer and sale of securities in a cap ital-raising
transaction. A person may be granted more than one Award under this Plan.

         4.             ADMINIS TRATION .

                  4.1           Committee Authority . This Plan will be admin istered by the Committee or the Board if no Co mmittee is
created by the Board. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Co mmittee will
have full power to implement and carry out this Plan. Without limitation, the Co mmittee will have the authority to:

                           (a)            construe and interpret this Plan, any Award Agreement and any other agreement or docu ment
executed pursuant to this Plan;

                           (b)            prescribe, amend and rescind rules and regulations relating to this Plan;

                           (c)            approve persons to receive Awards;

                           (d)            determine the form and terms of Awards;

                           (e)            determine the nu mber of Shares or other consideration subject to Awards;

                            (f)              determine whether Awards will be granted singly, in comb ination with, in tandem with, in
replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Co mpany
or any Parent or Subsidiary of the Co mpany;

                           (g)            grant waivers of any conditions of this Plan or any Award;

                           (h)            determine the terms of vesting, exercisability and payment of Awards;

                       (i)            correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any
Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement;

                           (j)             determine whether an Award has been earned;

                           (k)            make all other determinations necessary or advisable for the administration of this Plan; and

                           (l)             extend the vesting period beyond a Participant’s Termination Date.

                                                                        4
                    4.2            Committee Discretion . Un less in contravention of any express terms of this Plan or Award, any
determination made by the Co mmittee with respect to any Award will be made in its sole discretion either (i) at the time of gran t of the Award,
or (ii) subject to Section 5.9 hereof, at any later time. Any such determination will be final and binding on the Co mpany and on all persons
having an interest in any Award under this Plan. The Co mmittee may delegate to one or more o fficers of the Co mpany the authority to grant
an Award under this Plan, provided such officer or officers are members of the Board.

         5.             OPTIONS . The Co mmittee may grant Options to elig ible persons described in Section 3 hereof and will determine
whether such Options will be Incentive Stock Options within the mean ing of the Code (― ISOs ‖) or Nonstatutory Stock Options (― NSOs ‖),
the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all
other terms and conditions of the Option, subject to the following:

                   5.1            Form of Opti on Grant . Each Option granted under this Plan will be evidenced by an Award Agreement
which will exp ressly identify the Option as an ISO or an NSO (― Stock Option Agreement ‖), and will be in such form and contain such
provisions (which need not be the same for each Participant) as the Co mmittee may fro m time to time approve, and which will comply with
and be subject to the terms and conditions of this Plan.

                   5.2             Date of Grant . The date of grant of an Option will be the date on which the Co mmittee makes the
determination to grant such Option, unless a later date is otherwise specified by the Co mmittee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant with in a reasonable time after the granting of the Option.

                  5.3              Exercise Period . Options may be exercisable immediately but subject to repurchase pursuant to Section 11
hereof or may be exercisable within the times or upon the events determined by the Co mmittee as set forth in the Stock Option Agreement
governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years fro m the date the Option is
granted; and provided further that no ISO granted to a person who directly or b y attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Co mpany or of any Parent or Subsidiary of the Co mpany (― Ten Percent Shareholder ‖)
will be exercisable after the exp iration of five (5) years fro m the date the ISO is granted. The Co mmittee also may provide for Options to
become exercisable at one time or fro m t ime to t ime, periodically or otherwise, in such number of Shares or percentage of Sha res as the
Co mmittee determines. Subject to earlier termination of the Option as provided herein, to the extent certain Regulations is intended to apply,
each Participant who is not an officer, director or consultant of the Company or of a Parent or Subsidiary of the Co mpany sha ll have the right to
exercise an Option granted hereunder at the rate of no less than twenty percent (20%) per year over five (5) years fro m the date such Option is
granted.

                   5.4            Exercise Price . The Exercise Price of an Option will be determined by the Co mmittee when the Option is
granted and may not be less than eighty-five percent (85%) of the Fair Market Value of the Shares on the date of grant; provided that (i) the
Exercise Price of an ISO will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and
(ii) the Exercise Price of any Option granted to a Ten Percent

                                                                        5
Shareholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment fo r the
Shares purchased must be made in accordance with Section 7 hereof.

                   5.5            Method of Exercise . Options may be exercised only by delivery to the Co mpany of a written stock option
exercise agreement (the ― Exercise Agreement ‖) in a fo rm approved by the Co mmittee (wh ich need not be the same for each
Participant). The Exercise Agreement will state (i) the number of Shares being purchased, (ii) the restrict ions imposed on the Shares
purchased under such Exercise Agreement, if any, and (iii) such representations and agreements regarding Part icipant’s investment intent and
access to informat ion and other matters, if any, as may be required or desirable by the Co mpany to comply with applicable securit ies
laws. Part icipant shall execute and deliver to the Co mpany the Exercise Agreement together with payment in full of the Exercise Price, and
any applicable taxes, for the number o f Shares being purchased.

                  5.6              Terminati on . Subject to earlier termination pursuant to Sections 17 and 18 hereof and notwithstanding the
exercise periods set forth in the Stock Option Agreement, exercise of an Opt ion will always be subject to the following:

                            (a)            If the Part icipant is Terminated for any reason other than death, Disability or for Cause, then the
Participant may exercise such Participant’s Options only to the extent that such Options are exercisable as to Vested Shares upon the
Termination Date or as otherwise determined by the Committee. Such Opt ions must be exercised by the Participant, if at all, as to all or so me
of the Vested Shares calculated as of the Termination Date or such other date determined by the Co mmittee, within three (3) months after the
Termination Date (or within such shorter time period, not less than thirty (30) days, or within such longer time period, not exceeding five
(5) years, after the Termination Date as may be determined by the Co mmittee, with any exercise beyond three (3) months after the Termination
Date deemed to be an NSO) but in any event, no later than the expiration date of the Options.

                            (b)            If the Part icipant is Terminated because of Participant’s death or Disability (o r the Part icipant dies
within three (3) months after a Terminat ion other than for Cause), then Participant’s Options may be exercised only to the exten t that such
Options are exercisable as to Vested Shares by Participant on the Termination Date or as otherwise determined by the Co mmitte e. Such
options must be exercised by Participant (or Participant’s legal representative or authorized assignee), if at all, as to all or so me of the Vested
Shares calculated as of the Termination Date or such other date determined by the Co mmittee, within t welve (12) months after the Termination
Date (or within such shorter time period, not less than six (6) months, or within such longer time period, not exceed ing five (5) years, after the
Termination Date as may be determined by the Co mmittee, with any exercise beyond (i) three (3) months after the Termination Date when the
Termination is for any reason other than the Participant’s death or disability, within the meaning of Section 22(e)(3) of the Code, or (ii) twelve
(12) months after the Termination Date when the Termination is for Part icipant’s disability, within the meaning of Section 22(e)(3) of the
Code, deemed to be an NSO) but in any event no later than the expiration date of the Options.

                                                                         6
                            (c)            If the Part icipant is terminated for Cause, the Participant may exercise such Participant ’s Options, but
not to an extent greater than such Options are exercisable as to Vested Shares upon the Termination Date and Part icipant’s Options shall expire
on such Participant’s Termination Date, or at such later time and on such conditions as are determined by the Co mmittee.

                  5.7            Limitati ons on Exercise . The Co mmittee may specify a reasonable min imu m nu mber o f Shares that may be
purchased on any exercise of an Option, provided that such minimu m nu mber will not prevent Participant fro m exercising the Op tion for the
full nu mber of Shares for which it is then exercisable.

                    5.8           Limitati ons on ISOs . The aggregate Fair Market Value (determined as of the date of grant) of Shares with
respect to which ISOs are exercisable for the first time by a Participant during any calendar yea r (under this Plan or under any other incentive
stock option plan of the Co mpany or any Parent or Subsidiary of the Co mpany) will not exceed One Hundred Thousand Dollars ($1 00,000). If
the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any
calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000)
worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hun dred Thousand
Dollars ($100,000) that become exercisable in that calendar year will be NSOs. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date (as defined in Section 18 hereof) to provide for a d ifferent limit on the Fair Market Value of
Shares permitted to be subject to ISOs, then such different limit will be automat ically incorporated herein and will apply to any Options granted
after the effective date of such amend ment.

                    5.9            Modification, Extension or Renewal . The Co mmittee may mod ify, extend or renew outstanding Options
and authorize the grant of new Options in substitution therefor, provid ed that any such action may not, without the written consent of a
Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified , extended,
renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Sect ion 5.10 hereof, the Co mmittee
may reduce the Exercise Price of outstanding Options without the consent of Participants by a written notice to them; provide d, however, that
the Exercise Price may not be reduced below the min imu m Exercise Price that would be permitted under Section 5.4 hereof for Options granted
on the date the action is taken to reduce the Exercise Price; provided, further, that the Exercise Price will not be reduced below the par value of
the Shares, if any.

                   5.10         No Disqualification . Notwithstanding any other provision in this Plan, no term of this Plan relat ing to ISOs
will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan
under Section 422 o f the Code or, without the consent of the Participant, to disqualify any Participant ’s ISO under Section 422 of the Code. In
no event shall the total number of Shares issued (counting each reissuance of a Share that was previously issued and then forfeit ed or
repurchased by the Company as a separate issuance) under the Plan upon exercise of ISOs exceed the nu mber of shares specified in Section 2.1
(subject to any amendment thereof, and adjusted in proportion to any adjustments under Section 2.2 hereof) over the term of the Plan.

                                                                         7
          6.               RESTRICTED S TOCK . A Restricted Stock Award is an offer by the Co mpany to sell to an eligible person Shares
that are subject to certain specified restrict ions. The Co mmittee will determine to who m an offer will be made, the number o f Shares the
person may purchase, the Purchase Price, the restrictions to which the Shares will be subject, and all other terms and condit ions of the
Restricted Stock Award, subject to the following:

                   6.1            Form of Restricted Stock Award . All purchases under a Restricted Stock Award made pursuant to this Plan
will be evidenced by an Award Agreement (― Restricted Stock Purchase Agreement ‖) that will be in such form (wh ich need not be the same
for each Part icipant) as the Co mmittee will fro m t ime to time approve, and will co mp ly with and be subject to the terms and c onditions of this
Plan. The Restricted Stock Award will be accepted by the Participant’s execution and delivery o f the Restricted Stock Purchase Agreement
and full pay ment for the Shares to the Company within thirty (30) days fro m the date the Restricted Stock Purchase Agreement is delivered to
the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full pay ment for t he Shares to the
Co mpany within such thirty (30) days, then the offer will terminate, unless otherwise determined by the Co mmittee.

                   6.2            Purchase Price . The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined
by the Committee and will be at least eighty-five percent (85%) o f the Fair Market Value of the Shares on the date the Restricted Stock Award
is granted or at the time the purchase is consummated, except in the case of