SEC Comment Letter for SemiLEDs Corp (LEDS) (CIK 0001333822) (LEDS) — Oct 22, 2010
SemiLEDs Corp (LEDS) (CIK 0001333822)
Date: Oct. 22, 2010 · CIK: 0001333822 · Accession: 0000000000-10-062694
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-161052
Referenced dates: September 14, 2010
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
DIVISION OF CORPORATION FINANCE
October 21, 2010
National Corporate Research Ltd. As Agent for SemiLEDs Corporation 615 South DuPont Highway Dover, DE 19901 Re: SemiLEDs Corporation Amendment No. 3 to Registrati on Statement on Form S-1 Filed October 6, 2010 File No. 333-161052
Ladies and Gentlemen:
We have reviewed your registration statem ent and have the following comments. In some of our comments, we may ask you to provi de us with information so we may better understand your disclosure. Please respond to this letter by amending your registration statement and providing the requested information. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your re gistration statement and the information you provide in response to these comments , we may have additional comments. Prospectus
1. Please expand your response to prior comment 2 to disclose your ownership interest in the Malaysia and Taiwan joint ventures. Risk Factors, page 12
We may not be successful in expanding…, page 20
2. It is unclear from your response to the sec ond bullet point of prior comment 7 and your revisions to pages 4 and 96 – 97 of your registration statem ent whether in weighing the benefits versus the risks of your litigation strategy you have considered the loss of revenues and income that you may suffer from the combined effect of (i) possible infringement in the countries in which you choose to operate and (ii) your unwillingness
National Corporate Research Ltd. As Agent for SemiLEDs Corporation October 21, 2010 Page 2 to market your products outside those limited countries with an accep table risk profile. Please clarify. The marketing and distribution efforts…, page 22
3. Please note that we may have further comme nts after you file the distribution agreement with Intematix. In addition, please confirm that, other th an the currently disclosed agreements with Nanoteco and Intematix, you have no additional material distribution and supply agreements. We may undertake join t ventures…, page 26
4. Please reconcile the third sentence in this ri sk factor with your response to prior comment 2 where you indicate that it is not your general strategy to rely on joint venture arrangements. We are a multinational organization…, page 29
5. We note your response to prior comment 11. However, it remains unclear why you removed disclosure related to the uncertainty of tax laws that may have a material impact on your company. Please restore this risk fact or and provide appropriate tax opinions or provide an expanded analysis as to why you are not required to do so. With respect to the tax opinion(s), please note that the presence or absence of direct additional taxes on the company’s shareholders is not determina tive of whether a tax opinion is required. Liquidity and capital resources, page 79
6. We note that you have not described the materi al terms of your loan agreements, filed as exhibits 10.22 to 10.24, and your Agreement for Issuance of Overseas Letter of Credit, filed as exhibit 10.17. Please advise. Industry, page 84
Increased LED Performance, page 84
7. Please tell us how the data in Annex A th at you provided in response to prior comment 19 supports your statement in this sec tion that LED “is becoming increasingly competitive with respect to energy savings.”
National Corporate Research Ltd. As Agent for SemiLEDs Corporation October 21, 2010 Page 3 Business, page 88
Competitive Manufacturing Cost Structure, page 89
8. It is unclear from your revisions to prior comment 20 the extent to which you can reuse sapphires. Given that this is one of your key strengths, your disclosure should clearly indicate the level of advantag e that this technology provides. We therefore reissue our comment. Expand our Manufacturing Capacity…, page 91
9. We note your response to prior comment 22. Please revise this section or under “Facilities” on page 100 to disclose that 70% of your current fac ilities are devoted to manufacturing operations. In a ddition, please disclose, as indicated in your response, that you do not expect to have to purchase or le ase additional facilities for corporate or manufacturing use in Taiwan for at least the next twelve months. 10. We note your revisions in response to prio r comment 23; however, it is unclear how a prospective investor can evaluate the signi ficance of your expansion strategy without disclosure of added capacity. Please disclose capacity to be added from your planned expansion. Facilities, page 100
11. Please disclose the amount of your rent as well as any other material terms of your leases. With regard to the Luxxon lease, you may wish to cross-reference your disclosure under “Certain Relationship and Related Transactions” on page 128. Sales by China SemiLEDs and Taiwan…, page 103
12. Please disclose the substance of the last tw o sentences of your response to prior comment 26. In addition: • with regard to your added disclosure in the first full sentence of page 104, provide examples of the “individua l situations” you refer to; • with regard to the fifth paragraph on pa ge 102 and your response to prior comment 42, clarify the reason for ente ring into a joint ve nture in order to sell chips to a specific customer instead of selling chip s directly to this customer; and • tell us where you have disclosed the info rmation contained in the third-to-last paragraph of your response to commen t 55 of your letter dated September 14, 2010.
Board of Directors of China SemiLEDs, page 104
13. We note your response to prior comment 28; however, the formula by which you determine the number of directors that you ma y appoint remains unclear. Please clarify.
National Corporate Research Ltd. As Agent for SemiLEDs Corporation October 21, 2010 Page 4 Management, page 107
14. Please fully account for the business experience of your management during the past five years. We note, for example, that it appears th ere are gaps in the biographies of Mr. Beck and Ms. Chin. Executive Compensation, page 112
15. Your response to prior comment 30 repeats your response to comment 61 in your letter dated September 14, 2010. Please tell us w hy you cannot make the determination required under Item 402(s) of Regulation S-K and when you intend to make such determination. Base Salaries, page 113
16. Your added disclosure in re sponse to prior comment 31 indi cates that the semiconductor industry was used as a reference point for th e LED industry. It is unclear how companies in the semiconductor industry are considered “similar companies” as you state in the fourth sentence of this secti on. Please revise or advise.
Warranty Agreement, page 127
17. We note your response to prior comment 35. W ith a view to disclosure, please tell us which liabilities and obligations of Taiw an SemiLEDs survive the expiration or termination of the agreement, and for how long. Intellectual Property Cr oss-Licensing…, page 128
18. We note your response to prior comment 36 and reissue. Please disclose the material terms, including duration, of your related pa rty agreements as required by Item 404 of Regulation S-K.
19. We note your description of the patent cross- license agreement. Please disclose whether patents acquired by China SemiLEDs and licensed to you or your affiliates for use in manufacturing or selling LED chip or packages will be royalty-free, exclusive and non-transferrable. 20. We note your disclosure in the last senten ce of the first full paragraph on page 129. Given the broad exceptions noted in that se ntence, please clarify the circumstances in which the termination right would be tri ggered (e.g., an amendment to the Promoters Agreement).
National Corporate Research Ltd. As Agent for SemiLEDs Corporation October 21, 2010 Page 5 Effects of Certain Provisions, page 135
21. We note your response to prior comment 38. We may have additional comment after you file your amended and restated bylaws. Index to Consolidated Financial Statements, page F-1
22. We note your response to prior comment 39. Plea se revise your filing as indicated within your response to include updated financial st atements and related disclosures in your filing in accordance with Rule 3-12 of Regulation S-X. Notes to Consolidated Financial Statements, page F-7
Note 5. Investments in Uncons olidated Entities, page F-17
23. We note your response to prior comment 40. Sp ecifically referring to the response to the fourth bullet point, you state in your response that the genera l manager is tasked with carrying out the business plans as approve d by the Shareholder Group. However, your disclosures on page 104 regard ing the management of China SemiLEDS simply refer to the general manager reporting to the Board of Directors. Please revise your disclosures to clarify how the Shareholder Group has ove rsight over the activit ies of the general manager. 24. We note your response to prior comment 40 and your disclosures on page F-7 and on page F-18. With a view towards enhanced disclosure, please revise your filing to disclose in more detail your basis for not consolidating China SemiLEDS and accounting for your investment in this entity on an equity basis of accounting. 25. We note your response to prior comment 41. Please provide us your significance calculations that support that you are not required to pr ovide financial statements pursuant to the requirements of Rule 3-09 of Regulation S-X related to your equity method investment in China SemiLEDs.
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the filing incl udes the information the Securities Act of 1933 and all applicable Securities Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. Notwithstanding our comments, in the event you request acceleration of the effective date of the pending registration statement please pr ovide a written statement from the company acknowledging that:
National Corporate Research Ltd. As Agent for SemiLEDs Corporation October 21, 2010 Page 6 • should the Commission or the staff, acting purs uant to delegated authority, declare the filing effective, it does not foreclose the Co mmission from taking any action with respect to the filing;
• the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the company from its full responsibility for the adequacy and accuracy of the disclosure in the filing; and
• the company may not assert staff comments a nd the declaration of effectiveness as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Please refer to Rules 460 and 461 regarding re quests for acceleration. We will consider a written request for acceleration of the effective date of the regi stration statement as confirmation of the fact that those reques ting acceleration are aware of thei r respective responsibilities under the Securities Act of 1933 and the Securities Excha nge Act of 1934 as they relate to the proposed public offering of the securities specified in the above registration stat ement. Please allow adequate time for us to review any amendment prior to the requested effective date of the registration statement. You may contact Tara Harkins at (202) 551-3639 or Kevin Vaughn, Accounting Branch Chief, at (202) 551-3643 if you have questions regarding comments on the financial statements and related matters. Please cont act Gabriel Eckstein at (202) 551-3286 or Daniel Morris, Special Counsel, at (202) 551-3314 if you have any other questions.
Sincerely,
M a r t i n J a m e s A c t i n g A s s i s t a n t D i r e c t o r cc (via fax): Mark J. Lee Orrick, Herrington & Sutcliffe LLP
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
October 21, 2010
National Corporate Research Ltd. As Agent for SemiLEDs Corporation 615 South DuPont Highway Dover, DE 19901
Re: SemiLEDs Corporation
Amendment No. 3 to Registrati on Statement on Form S-1
Filed October 6, 2010
File No. 333-161052
Ladies and Gentlemen:
We have reviewed your registration statem ent and have the following comments. In
some of our comments, we may ask you to provi de us with information so we may better
understand your disclosure.
Please respond to this letter by amending your registration statement and providing the
requested information. If you do not believe our comments apply to your facts and
circumstances or do not believe an amendment is appropriate, please tell us why in your
response.
After reviewing any amendment to your re gistration statement and the information you
provide in response to these comments , we may have additional comments.
Prospectus
1. Please expand your response to prior comment 2 to disclose your ownership interest in the Malaysia and Taiwan joint ventures.
Risk Factors, page 12
We may not be successful in expanding…, page 20
2. It is unclear from your response to the sec ond bullet point of prior comment 7 and your
revisions to pages 4 and 96 – 97 of your registration statem ent whether in weighing the
benefits versus the risks of your litigation strategy you have considered the loss of
revenues and income that you may suffer from the combined effect of (i) possible
infringement in the countries in which you choose to operate and (ii) your unwillingness
National Corporate Research Ltd.
As Agent for SemiLEDs Corporation
October 21, 2010 Page 2
to market your products outside those limited countries with an accep table risk profile.
Please clarify.
The marketing and distribution efforts…, page 22
3. Please note that we may have further comme nts after you file the distribution agreement
with Intematix. In addition, please confirm that, other th an the currently disclosed
agreements with Nanoteco and Intematix, you have no additional material distribution and supply agreements.
We may undertake join t ventures…, page 26
4. Please reconcile the third sentence in this ri sk factor with your response to prior comment
2 where you indicate that it is not your general strategy to rely on joint venture
arrangements.
We are a multinational organization…, page 29
5. We note your response to prior comment 11. However, it remains unclear why you
removed disclosure related to the uncertainty of tax laws that may have a material impact
on your company. Please restore this risk fact or and provide appropriate tax opinions or
provide an expanded analysis as to why you are not required to do so. With respect to the
tax opinion(s), please note that the presence or absence of direct additional taxes on the
company’s shareholders is not determina tive of whether a tax opinion is required.
Liquidity and capital resources, page 79
6. We note that you have not described the materi al terms of your loan agreements, filed as
exhibits 10.22 to 10.24, and your Agreement for Issuance of Overseas Letter of Credit,
filed as exhibit 10.17. Please advise.
Industry, page 84
Increased LED Performance, page 84
7. Please tell us how the data in Annex A th at you provided in response to prior comment
19 supports your statement in this sec tion that LED “is becoming increasingly
competitive with respect to energy savings.”
National Corporate Research Ltd.
As Agent for SemiLEDs Corporation
October 21, 2010 Page 3 Business, page 88
Competitive Manufacturing Cost Structure, page 89
8. It is unclear from your revisions to prior comment 20 the extent to which you can reuse
sapphires. Given that this is one of your key strengths, your disclosure should clearly
indicate the level of advantag e that this technology provides. We therefore reissue our
comment.
Expand our Manufacturing Capacity…, page 91
9. We note your response to prior comment 22. Please revise this section or under
“Facilities” on page 100 to disclose that 70% of your current fac ilities are devoted to
manufacturing operations. In a ddition, please disclose, as indicated in your response, that
you do not expect to have to purchase or le ase additional facilities for corporate or
manufacturing use in Taiwan for at least the next twelve months.
10. We note your revisions in response to prio r comment 23; however, it is unclear how a
prospective investor can evaluate the signi ficance of your expansion strategy without
disclosure of added capacity. Please disclose capacity to be added from your planned expansion.
Facilities, page 100
11. Please disclose the amount of your rent as well as any other material terms of your leases. With regard to the Luxxon lease, you may wish to cross-reference your disclosure under
“Certain Relationship and Related Transactions”
on page 128.
Sales by China SemiLEDs and Taiwan…, page 103
12. Please disclose the substance of the last tw o sentences of your response to prior comment
26. In addition:
• with regard to your added disclosure in the first full sentence of page 104, provide
examples of the “individua l situations” you refer to;
• with regard to the fifth paragraph on pa ge 102 and your response to prior comment
42, clarify the reason for ente ring into a joint ve nture in order to sell chips to a
specific customer instead of selling chip s directly to this customer; and
• tell us where you have disclosed the info rmation contained in the third-to-last
paragraph of your response to commen t 55 of your letter dated September 14, 2010.
Board of Directors of China SemiLEDs, page 104
13. We note your response to prior comment 28; however, the formula by which you
determine the number of directors that you ma y appoint remains unclear. Please clarify.
National Corporate Research Ltd.
As Agent for SemiLEDs Corporation
October 21, 2010 Page 4 Management, page 107
14. Please fully account for the business experience of your management during the past five
years. We note, for example, that it appears th ere are gaps in the biographies of Mr. Beck
and Ms. Chin.
Executive Compensation, page 112
15. Your response to prior comment 30 repeats your response to comment 61 in your letter
dated September 14, 2010. Please tell us w hy you cannot make the determination
required under Item 402(s) of Regulation S-K and when you intend to make such
determination.
Base Salaries, page 113
16. Your added disclosure in re sponse to prior comment 31 indi cates that the semiconductor
industry was used as a reference point for th e LED industry. It is unclear how companies
in the semiconductor industry are considered “similar companies” as you state in the
fourth sentence of this secti on. Please revise or advise.
Warranty Agreement, page 127
17. We note your response to prior comment 35. W ith a view to disclosure, please tell us
which liabilities and obligations of Taiw an SemiLEDs survive the expiration or
termination of the agreement, and for how long.
Intellectual Property Cr oss-Licensing…, page 128
18. We note your response to prior comment 36 and reissue. Please disclose the material
terms, including duration, of your related pa rty agreements as required by Item 404 of
Regulation S-K.
19. We note your description of the patent cross- license agreement. Please disclose whether
patents acquired by China SemiLEDs and licensed to you or your affiliates for use in
manufacturing or selling LED chip or packages will be royalty-free, exclusive and non-transferrable.
20. We note your disclosure in the last senten ce of the first full paragraph on page 129.
Given the broad exceptions noted in that se ntence, please clarify the circumstances in
which the termination right would be tri ggered (e.g., an amendment to the Promoters
Agreement).
National Corporate Research Ltd.
As Agent for SemiLEDs Corporation
October 21, 2010 Page 5 Effects of Certain Provisions, page 135
21. We note your response to prior comment 38. We may have additional comment after you
file your amended and restated bylaws.
Index to Consolidated Financial Statements, page F-1
22. We note your response to prior comment 39. Plea se revise your filing as indicated within
your response to include updated financial st atements and related disclosures in your
filing in accordance with Rule 3-12 of Regulation S-X.
Notes to Consolidated Financial Statements, page F-7
Note 5. Investments in Uncons olidated Entities, page F-17
23. We note your response to prior comment 40. Sp ecifically referring to the response to the
fourth bullet point, you state in your response that the genera l manager is tasked with
carrying out the business plans as approve d by the Shareholder Group. However, your
disclosures on page 104 regard ing the management of China SemiLEDS simply refer to
the general manager reporting to the Board of Directors. Please revise your disclosures to clarify how the Shareholder Group has ove rsight over the activit ies of the general
manager.
24. We note your response to prior comment 40 and your disclosures on page F-7 and on
page F-18. With a view towards enhanced disclosure, please revise your filing to
disclose in more detail your basis for not consolidating China SemiLEDS and accounting
for your investment in this entity on an equity basis of accounting.
25. We note your response to prior comment 41. Please provide us your significance
calculations that support that you are not required to pr ovide financial statements
pursuant to the requirements of Rule 3-09 of Regulation S-X related to your equity
method investment in China SemiLEDs.
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing incl udes the information the Securities Act of 1933 and
all applicable Securities Act rules require. Since the company and its management are in
possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Notwithstanding our comments, in the event you request acceleration of the effective date
of the pending registration statement please pr ovide a written statement from the company
acknowledging that:
National Corporate Research Ltd.
As Agent for SemiLEDs Corporation October 21, 2010 Page 6
• should the Commission or the staff, acting purs uant to delegated authority, declare the
filing effective, it does not foreclose the Co mmission from taking any action with respect
to the filing;
• the action of the Commission or the staff, acting pursuant to delegated authority, in
declaring the filing effective, does not relieve the company from its full responsibility for
the adequacy and accuracy of the disclosure in the filing; and
• the company may not assert staff comments a nd the declaration of effectiveness as a
defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Please refer to Rules 460 and 461 regarding re quests for acceleration. We will consider a
written request for acceleration of the effective date of the regi stration statement as confirmation
of the fact that those reques ting acceleration are aware of thei r respective responsibilities under
the Securities Act of 1933 and the Securities Excha nge Act of 1934 as they relate to the proposed
public offering of the securities specified in the above registration stat ement. Please allow
adequate time for us to review any amendment prior to the requested effective date of the registration statement.
You may contact Tara Harkins at (202) 551-3639 or Kevin Vaughn, Accounting Branch
Chief, at (202) 551-3643 if you have questions regarding comments on the financial statements
and related matters. Please cont act Gabriel Eckstein at (202) 551-3286 or Daniel Morris, Special
Counsel, at (202) 551-3314 if you have any other questions.
Sincerely,
M a r t i n J a m e s A c t i n g A s s i s t a n t D i r e c t o r cc (via fax): Mark J. Lee Orrick, Herrington & Sutcliffe LLP