1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCCOUNTING POLICIES

The accompanying financial information has been prepared by Aehr Test Systems, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ~~or SEC.~~(the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ~~(GAAP)~~(“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the unaudited condensed consolidated financial statements for the interim periods presented have been prepared on a basis consistent with the May 31, ~~2017~~2021 audited consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the condensed consolidated financial position and results of operations as of and for such periods indicated. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, ~~2017.~~2021. Results for the interim periods presented herein are not necessarily indicative of results which may be reported for any other interim period or for the entire fiscal year.

The Company (as defined below) has been impacted by the outbreak of the novel coronavirus, known as COVID-19, which has spread throughout the world. Due to the impact of the COVID-19 pandemic on customers and customers’ customers, the Company experienced a drop in customer orders and revenues during the fiscal year ended May 31, 2021 and in the last quarter of fiscal year ended May 31, 2020. In response, the Company implemented cost reduction initiatives to mitigate operating losses, including mandatory vacation days, shutdown days, and executive staff pay reductions. The Company eliminated all cost reduction initiatives in the last quarter of the fiscal year ended May 31, 2021.

The Company will continue to monitor the situation. As of the date of this report, the Company cannot predict with certainty the potential effects the COVID-19 pandemic may have on the Company’s business and its operating results. While the overall environment remains uncertain, the Company continues to invest in priority areas with the objective of driving profitable growth over the long term.

PRINCIPLES OF CONSOLIDATION. The condensed consolidated financial statements include the accounts of Aehr Test Systems and its subsidiaries (collectively, the "Company"). On November 18, 2020, the Company established a wholly owned new subsidiary, Aehr Test Systems Philippines, which is in full operation as of March 31, 2021. All significant intercompany balances have been eliminated in consolidation. ~~For~~The liquidation of Aehr Test Systems Japan K.K. (“ATS-Japan”), the Company’s majority owned subsidiary, ~~Aehr Test Systems Japan K.K.,~~was completed on July 31, 2020 and the noncontrolling interest ~~of the portion the Company does not own~~ was ~~reflected on the Condensed Consolidated Balance Sheets in Shareholders’ Equity and in the Condensed Consolidated Statements of Operations.~~

eliminated. See Note 16.

ACCOUNTING ESTIMATES. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used to account for sales and revenue allowances, the allowance for doubtful accounts, inventory valuations, income taxes, stock-based compensation expenses, and product warranties, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ materially from those estimates.

REVENUE RECOGNITION. The Company recognizes revenue upon the shipment of products or the performance of services when: (1) persuasive evidence of the arrangement exists; (2) goods or services have been delivered; (3) the price is fixed or determinable; and (4) collectibility is reasonably assured. When a sales agreement involves multiple deliverables, such as extended support provisions, training to be supplied after delivery of the systems, and test programs specific to customers’ routine applications, the multiple deliverables are evaluated to determine the unit of accounting. Judgment is required to properly identify the accounting units of multiple element transactions and the manner in which revenue is allocated among the accounting units. Judgments made, or changes to judgments made, may significantly affect the timing or amount of revenue recognition.

Revenue related to the multiple elements is allocated to each unit of accounting using the relative selling price hierarchy. Consistent with accounting guidance, the selling price is based upon vendor specific objective evidence (VSOE). If VSOE is not available, third party evidence (TPE) is used to establish the selling price. In the absence of VSOE or TPE, estimated selling price is used.

During the first quarter of fiscal 2013, the Company entered into an agreement with a customer to develop a next generation system, and the Company shipped the first system in July 2016. The project identifies multiple milestones with values assigned to each. The consideration earned upon achieving the milestone is required to meet the following conditions prior to recognition: (i) the value is commensurate with the vendor’s performance to meet the milestone, (ii) it relates solely to past performance, (iii) and it is reasonable relative to all of the deliverables and payment terms within the arrangement. Revenue is recognized for the milestone upon acceptance by the customer.

The Company recognizes revenue in certain circumstances before physical delivery has occurred. In these arrangements, among other things, risk of ownership has passed to the customer, the customer has made a written fixed commitment to purchase the products, the customer has requested the products be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by the Company. For these transactions, the products are segregated from inventory and normal billing and credit terms granted.

Sales tax collected from customers is not included in net sales but rather recorded as a liability due to the respective taxing authorities. Provisions for the estimated future cost of warranty and installation are recorded at the time the products are shipped.

Royalty-based revenue related to licensing income from performance test boards and burn-in boards is recognized upon the earlier of the receipt by the Company of the licensee’s report related to its usage of the licensed intellectual property or upon payment by the licensee.

The Company’s terms of sales with distributors are generally FOB shipping point with payment due within 60 days. All products go through in-house testing and verification of specifications before shipment. Apart from warranty reserves, credits issued have not been material as a percentage of net sales. The Company’s distributors do not generally carry inventories of the Company’s products. Instead, the distributors place orders with the Company at or about the time they receive orders from their customers. The Company’s shipment terms to our distributors do not provide for credits or rights of return. Because the Company’s distributors do not generally carry inventories of our products, they do not have rights to price protection or to return products. At the time the Company ships products to the distributors, the price is fixed. Subsequent to the issuance of the invoice, there are no discounts or special terms. The Company does not give the buyer the right to return the product or to receive future price concessions. The Company’s arrangements do not include vendor consideration.

2.2021, the Revolving Line Maturity Date had been extended to January 13, 2022.

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On January 11, 2022, the Company entered into the Second Amendment to the Loan and Security Agreement (the “Second Amendment”) with Silicon Valley Bank. The Second Amendment, among other things, (A) increases the available amount of the line up to the lesser of (i) $10 million or (ii) the available amount under the borrowing base, under a revolving line of credit, (B) allows for borrowing up to $3 million of the available balance based upon eligible customer purchase orders, (C) reduces the interest rate for account advances under the line to the greater of (a) prime rate plus an additional percentage up to 1.0%, which additional percentage depends on the Company’s adjusted quick ratio, and (b) 3.25%, reduces the interest rate for purchase order advances under the line to the greater of (a) prime rate plus an additional percentage up to 1.5%, which additional percentage depends on the Company’s adjusted quick ratio, and (b) 3.75%, and (D) extends the maturity date on the loan to January 13, 2023.

At February 28, 2022, the Company had not drawn against the credit facility and was in compliance with all covenants related to obligations to meet reporting requirements. The balance available to borrow under the line at February 28, 2022 was $2,522,000. There are no financial covenants in the agreement.

13. LONG-TERM DEBT:

On April 23, 2020, the Company obtained the Paycheck Protection Program Loan (the “PPP Loan”) in the aggregate amount of $1,678,789 from SVB. The PPP Loan was evidenced by a promissory note dated April 23, 2020 (the “Note”) that matures on April 23, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 23, 2020. The PPP Loan proceeds were used for payroll, health care benefits, rent and utilities.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. On June 12, 2021, the Company received confirmation from SVB that on June 4, 2021, the Small Business Administration approved the Company’s PPP Loan forgiveness application for the entire PPP Loan balance of $1,678,789 and interest totaling $18,933, and the Company recognized a gain on loan forgiveness of $1,697,722.

14. STOCK-BASED COMPENSATION

Stock-based compensation expense consists of expenses for stock options, ~~restricted stock units, or~~ RSUs including performance-based grants, and ~~employee stock purchase plan, or~~ ESPP purchase rights. Stock-based compensation ~~cost~~expense for stock options and ESPP purchase rights ~~are~~is measured at each grant date, based on the fair value of the award using the Black-Scholes option valuation model, and is recognized as expense over the employee’s requisite service period. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of publicly traded options. For RSUs, stock-based compensation cost is based on the fair value of the Company’s common stock at the grant date. All of the Company’s stock-based compensation is accounted for as an equity instrument. See ~~Notes~~Note 11 ~~and 12~~ in the Company’s Annual Report on Form 10-K for fiscal ~~2017~~2021 filed on August ~~29, 2017~~27, 2021 for further information regarding the 2016 Equity Incentive Plan (the “2016 Plan”) and the ~~Amended and Restated 2006~~ ESPP.

The following table summarizes the stock-based compensation expense ~~related to the Company’s stock-based incentive plans~~ for the three and ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and ~~2016~~2021 (in thousands):

	Three Months Ended				Nine Months Ended
	February 28,				February 28,
	2022		2021		2022		2021
Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights, included in:
Cost of sales	$	90	$	14	$	248	$	45
Selling, general and administrative		487		194		1,259		593
Research and development		303		63		679		160
Total stock-based compensation	$	880	$	271	$	2,186	$	798

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As of ~~November 30, 2017~~February 28, 2022 and ~~2016,~~2021, there were no stock-based compensation ~~costs~~expenses capitalized as part of inventory.

During the three months ended ~~November 30, 2017~~February 28, 2022 and ~~2016,~~2021, the Company recorded stock-based compensation expense related to stock options and RSUs under the 2016 Plan of $516,000 and $253,000, respectively. During the nine months ended February 28, 2022 and 2021, the Company recorded stock-based compensation expense related to stock options and RSUs of ~~$207,000~~$1,416,000 and ~~$185,000,~~$736,000, respectively. ~~During the six months ended November 30, 2017 and 2016, the Company recorded stock-based compensation related to stock options and RSUs of $408,000 and $464,000, respectively.~~

As of ~~November 30, 2017,~~February 28, 2022, the total compensation ~~cost~~expense related to unvested stock-based awards under the ~~Company’s~~ 2016 ~~Equity Incentive Plans,~~Plan, but not yet recognized, was approximately ~~$1,316,000, which is net of estimated forfeitures of $3,000.~~$1,915,000. This ~~cost~~expense will be amortized on a straight-line basis over a weighted average period of approximately ~~2.5~~1.2 years.

During the three months ended ~~November 30, 2017~~February 28, 2022 and ~~2016,~~2021, the Company recorded stock-based compensation expense related to the ESPP of ~~$157,000~~$364,000 and ~~$30,000,~~$18,000, respectively. During the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and ~~2016,~~2021, the Company recorded stock-based compensation expense related to the ESPP of ~~$172,000~~$770,000 and ~~$70,000,~~$62,000, respectively. ~~The increase in the three and six months ended November 30, 2017 is primarily due to employees increasing their ESPP elections during the current ESPP purchase period.~~

As of ~~November 30, 2017,~~February 28, 2022, the total compensation ~~cost~~expense related to purchase rights under the ESPP but not yet recognized was approximately ~~$49,000.~~$648,000. This ~~cost~~expense will be amortized on a straight-line basis over a weighted average period of approximately ~~0.3~~1.0 years.

Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model and a single option award approach. The fair value under the single option approach is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

Expected Term. The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as evidenced by changes to the terms of its stock-based awards.

Volatility. Volatility is a measure of the amounts by which a financial variable such as stock price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses the historical volatility for ~~the past four~~five or ~~five~~six years ~~which matches~~based on weighted average of the expected term of ~~most of the~~ option grants, to estimate expected volatility. Volatility for each of the ESPP’s four time periods of six months, twelve months, eighteen months, and twenty-four months is calculated separately and included in the overall stock-based compensation ~~cost~~expense recorded.

Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield in effect at the time of option grant on U.S. Treasury zero-coupon issues with a remaining term equivalent to the expected term of the stock awards including the ESPP.

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Fair Value. The fair ~~value~~values of the Company’s stock options granted to employees for the three and ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and ~~2016~~2021, were estimated using the following weighted average assumptions in the Black-Scholes option valuation model:

	Three Months Ended			Nine Months Ended
	February 28,			February 28,
	2022			2022			2021

Expected term (in years)		5			6			6
Volatility		117	%		77	%		72	%
Risk-free interest rate		1.56	%		1.03	%		0.39	%
Weighted average grant date fair value	$	9.43		$	2.56		$	1.09

There were no stock options granted during the three months ended February 28, 2021.

The fair values of the ESPP purchase rights granted for the nine months ended February 28, 2022 and 2021 were estimated using the following assumptions:

	Nine Months Ended		Nine Months Ended
	February 28, 2022		February 28, 2021

Expected term (in years)	0.5-2.0		0.5-2.0
Volatility	101%-143%		74%-82%
Risk-free interest rates	0.05%-0.27%		0.10%-0.14%
Weighted average grant date fair value	$	9.57	$	0.44

There were no ESPP purchase rights granted to employees for the three ~~and six~~ months ended ~~November 30, 2017~~February 28, 2022 and ~~2016.~~

2021. During the nine months ended February 28, 2022 and 2021, ESPP purchase rights of 103,000 and 81,000 were granted, respectively. Total ESPP shares issued during the nine months ended February 28, 2022 and 2021 were 75,000 and 72,000 shares, respectively. There were 361,000 and 511,000 ESPP shares available for issuance as of February 28, 2022 and 2021, respectively.

The following tables summarize the Company’s stock option and RSU transactions during the three and ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and shows the shares available to be issued at the end of each period (in thousands):

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The following table summarizes the stock option transactions during the three and ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 (in thousands, except per share data):

	Options Outstanding at February 28, 2022						Options Exercisable at February 28, 2022
Range of Exercise Prices	Number Outstanding Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Aggregate Intrinsic Value
$1.22-$1.34		51		5.64	$	1.34		51		5.64	$	1.34
$1.64-$1.86		671		4.27	$	1.71		387		3.89	$	1.69
$2.03-$2.46		547		3.13	$	2.23		447		2.92	$	2.23
$2.63-$2.93		223		5.87	$	2.92		47		4.01	$	2.86
$3.46-$3.93		104		2.42	$	3.84		104		2.42	$	3.84
$9.94-$19.85		12		6.69	$	16.54		1		6.65	$	19.46
$1.22-$19.85		1,608		4.04	$	2.29		1,037		3.42	$	2.19	$	11,831

The total intrinsic value of options exercised during the three and ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 was ~~$269,000~~$867,000 and ~~$745,000,~~$11,902,000, respectively. The total intrinsic value of options exercised during the three and ~~six~~nine months ended ~~November 30, 2016~~February 28, 2021 was ~~$359,000~~$57,000 and ~~$411,000,~~$151,000, respectively. The weighted average remaining contractual life of the options exercisable and expected to be exercisable at ~~November 30, 2017~~February 28, 2022 was ~~3.56~~4.04 years.

~~3. EARNINGS PER SHARE~~

Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, RSUs and ESPP shares) outstanding during the period using the treasury stock method.

assets. The following table presents property and equipment information for geographic areas (in thousands):

	February 28,		May 31,
	2022		2021
United States	$	739	$	647
Asia		37		30
	$	776	$	677

As of February 28, 2022, the ~~computation~~operating lease right-of-use assets of ~~basic~~$990,000 and ~~diluted net income (loss) per share attributable to the Company’s common shareholders (in thousands, except per share data):~~

For the purpose of computing diluted earnings per share, the weighted average number of potential common shares does not include stock options with an exercise price greater than the average fair value of the Company’s common stock for the period, as the effect would be anti-dilutive. Stock options to purchase 263,000 shares of common stock were outstanding as of November 30, 2017 but were not included$101,000 are allocated in the ~~computation of diluted net income per share, because the inclusion of such shares would be anti-dilutive. In~~United States and Asia, respectively.

There were no revenues through distributors for the three and ~~six~~nine months ended ~~November 30, 2016, potential common shares have not been included in the calculation of diluted net loss per share as the effect would be anti-dilutive. As such, the numerator~~February 28, 2022 and the denominator used in computing both basic and diluted net loss per share for this period are the same. Stock options to purchase 3,229,000 shares of common stock, RSUs for 72,000 shares and ESPP rights to purchase 246,000 ESPP shares were outstanding as of November 30, 2016, but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. The 2,657,000 shares convertible under the convertible notes outstanding at November 30, 2017 and 2016 were not included in the computation of diluted net income (loss) per share, because the inclusion of such shares would be anti-dilutive.

~~4. CASH, CASH EQUIVALENTS AND INVESTMENTS~~

~~The following table summarizes the Company’s cash, cash equivalents and investments by security type at November 30, 2017 (in thousands):~~

Unrealized gains and temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive income ("AOCI"), net of any related tax effect. Upon realization, those amounts are reclassified from AOCI to results of operations.

~~The unrealized loss as of November 30, 2017 is not considered other-than-temporary.~~

~~5. FAIR VALUE OF FINANCIAL INSTRUMENTS~~

The Company’s financial instruments are measured at fair value consistent with authoritative guidance. This authoritative guidance defines fair value, establishes a framework for using fair value to measure assets and liabilities, and disclosures required related to fair value measurements.

The guidance establishes a fair value hierarchy based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

~~Level 1 - instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.~~

~~Level 2 - instrument valuations are obtained from readily-available pricing sources for comparable instruments.~~

~~Level 3 - instrument valuations are obtained without observable market values and require a high level of judgment to determine the fair value.~~

~~The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of November 30, 2017 (in thousands):~~

~~The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2017 (in thousands):~~

~~There were no financial liabilities measured at fair value as of November 30, 2017 and May 31, 2017.~~

~~There were no transfers between Level 1 and Level 2 fair value measurements during the three and six months ended November 30, 2017.~~

The carrying amounts of financial instruments including cash, cash equivalents, receivables, accounts payable and certain other accrued liabilities, approximate fair value due to their short maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, the carrying value of the debt approximates the fair value.

~~The Company has, at times, invested in debt and equity of private companies, and may do so again in the future, as part of its business strategy.~~

~~6. ACCOUNTS RECEIVABLE, NET~~

Accounts receivable represent customer trade receivables and is presented net of allowances for doubtful accounts of $47,000 at November 30, 2017 and $61,000 at May 31, 2017. Accounts receivable are derived from the sale of products throughout the world to semiconductor manufacturers, semiconductor contract assemblers, electronics manufacturers and burn-in and test service companies. The Company’s allowance for doubtful accounts is based upon historical experience and review of trade receivables by aging category to identify specific customers with known disputes or collection issues. Uncollectible receivables are recorded as bad debt expense when all efforts to collect have been exhausted and recoveries are recognized when they are received.

~~7. INVENTORIES~~

~~Inventories are comprised of the following (in thousands):~~

~~8. SEGMENT INFORMATION~~

~~The Company operates in one reportable segment: the design, manufacture and marketing of advanced test and burn-in products to the semiconductor manufacturing industry.~~

~~The following presents information about the Company’s operations in different geographic areas. Net sales are based upon ship-to location (in thousands).~~

The Company’s Japanese and German subsidiaries primarily comprise the foreign operations. Substantially all of the sales of the subsidiaries are made to unaffiliated Japanese or European customers. Net sales from outside the United States include those of Aehr Test Systems Japan K.K. and Aehr Test Systems GmbH.

2021.

Sales to the Company’s five largest customers accounted for approximately ~~94%~~99% and ~~96%~~97% of its net sales in the three and ~~six~~nine months ended ~~November 30, 2017,~~February 28, 2022, respectively. ~~Two customers~~One customer accounted for approximately ~~43% and 34%~~90% of the Company’s net sales in the three months ended ~~November 30, 2017. Two customers~~February 28, 2022. One customer accounted for approximately ~~43%, and 39%~~84% of the Company’s net sales in the ~~six~~nine months ended ~~November 30, 2017.~~February 28, 2022. Sales to the Company’s five largest customers accounted for approximately ~~96%~~95% and ~~95%~~82% of its net sales in the three and ~~six~~nine months ended ~~November 30, 2016,~~February 28, 2021, respectively. ~~Two~~Four customers accounted for approximately ~~60%~~55%, 15%, 11% and ~~22%~~11% of the Company’s net sales in the three months ended ~~November 30, 2016. Three~~February 28, 2021. Four customers accounted for approximately ~~50%~~33%, ~~19%~~15%, 14% and ~~16%~~11% of the Company’s net sales in the ~~six~~nine months ended ~~November 30, 2016.~~February 28, 2021. No other customers represented more than 10% of the Company’s net sales in the ~~six~~three and nine months ended ~~November 30, 2017~~February 28, 2022 and ~~2016.~~

~~9. PRODUCT WARRANTIES~~

~~The~~2021.

16. DISSOLUTION OF AEHR TEST SYSTEMS JAPAN

On July 31, 2020, the Company ~~provides~~completed the liquidation of ATS-Japan, a majority owned subsidiary. Accordingly, the Company deconsolidated ATS-Japan and recognized an aggregate net gain of $2,401,000 for the ~~estimated cost~~period ended August 31, 2020. The net gain was mainly due to cumulative translation adjustment reclassified into earnings of ~~product warranties at~~$2,186,000 and the ~~time revenues are recognized~~residual income tax effect in connection with the cumulative translation adjustment released into income tax benefits of $215,000.

17. EQUITY

On August 25, 2021, the Board authorized Management to take actions necessary for the execution of a $75 million shelf registration, which S-3 was filed with the SEC on September 3, 2021. A Prospectus Supplement for an "At the ~~products shipped. While~~Market" ("ATM") sale of $25 million of common stock was subsequently filed on September 17, 2021. On October 8, 2021, the Company ~~engages in extensive product quality programs and processes, including actively monitoring and evaluating~~fully executed the ~~quality~~ATM offering by selling 1,696,729 shares at an average selling price of its component suppliers, the Company’s warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company’s estimates, revisions$14.73. The gross proceeds to the ~~estimated warranty liability would be required.~~

~~The standard warranty period is one year for systems~~Company were $25.0 million, before commission fees of $0.7 million and ~~ninety days for parts and service.~~

~~The following is a summary~~offering expenses of ~~changes in the Company's liability for product warranties during the three and six months ended November 30, 2017 and 2016 (in thousands):~~

~~The accrued warranty balance is included in accrued expenses on the accompanying condensed consolidated balance sheets.~~

~~10. ACCUMULATED OTHER COMPREHENSIVE INCOME~~

~~Changes in the components of AOCI, net of tax, were as follows (in thousands):~~

~~11. INCOME TAXES~~

Income taxes have been provided using the liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and net operating loss and tax credit carryforwards measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse or the carryforwards are utilized. Valuation allowances are established when it is determined that it is more likely than not that such assets will not be realized.

Since fiscal 2009, a full valuation allowance was established against all deferred tax assets as management determined that it is more likely than not that certain deferred tax assets will not be realized.

The Company accounts for uncertain tax positions consistent with authoritative guidance. The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not expect any material change in its unrecognized tax benefits over the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes.

Although the Company files U.S. federal, various state, and foreign tax returns, the Company’s only major tax jurisdictions are the United States, California, Germany and Japan. Tax years 1997 - 2016 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years.

On December 22, 2017, the "Tax Cuts and Jobs Act" was signed into law, significantly impacting several sections of the Internal Revenue Code. The Company is currently analyzing the impact of these changes and therefore an estimate of the impact to income taxes is not yet available.

~~12. CUSTOMER DEPOSITS AND DEFERRED REVENUE, SHORT-TERM~~

~~Customer deposits and deferred revenue, short-term (in thousands):~~

~~13. LONG-TERM DEBT~~

On April 10, 2015, the Company entered into a Convertible Note Purchase and Credit Facility Agreement (the “Purchase Agreement”) with QVT Fund LP and Quintessence Fund L.P. (the “Purchasers”) providing for (a) the Company’s sale to the Purchasers of $4,110,000 in aggregate principal amount of 9.0% Convertible Secured Notes due 2017 (the “Convertible Notes”) and (b) a secured revolving loan facility (the “Credit Facility”) in an aggregate principal amount of up to $2,000,000. On August 22, 2016 the Purchase Agreement was amended to extend the maturity date of the Convertible Notes to April 10, 2019, decrease the conversion price from $2.65 per share to $2.30 per share, decrease the forced conversion price from $7.50 per share to $6.51 per share, and allow for additional equity awards.

The Convertible Notes bear interest at an annual rate of 9.0% and will mature on April 10, 2019 unless repurchased or converted prior to that date. Interest is payable quarterly on March 1, June 1, September 1 and December 1 of each year. Debt issuance costs of $356,000, which were accreted over the term of the original loan using the effective interest rate method, were offset against the loan balance.

The conversion price for the Convertible Notes is $2.30 per share and is subject to adjustment upon the occurrence of certain specified events. Holders may convert all or any part of the principal amount of their Convertible Notes in integrals of $10,000 at any time prior to the maturity date. Upon conversion, the Company will deliver shares of its common stock to the holder of Convertible Notes electing such conversion. The Company may not redeem the Convertible Notes prior to maturity.

The maximum amount of $2,000,000 drawn against the Credit Facility has been converted to Convertible Notes, and at November 30, 2017 there was no remaining balance available to be drawn on the Credit Facility.

~~The Company’s obligations under the Purchase Agreement are secured by substantially all of the assets of the Company.~~

~~14. RECENT ACCOUNTING PRONOUNCEMENTS~~

In May 2014, as part of its ongoing efforts to assist in the convergence of GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued an accounting standard update related to revenue from contracts with customers. This standard sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The standard provides alternative methods of initial adoption and will become effective for the Company beginning in the first quarter of fiscal 2019. The FASB has issued several updates to the standard which i) defer the original effective date from January 1, 2017 to January 1, 2018, while allowing for early adoption as of January 1, 2017. ii) clarify the application of the principal versus agent guidance. and iii) clarify the guidance on inconsequential and perfunctory promises and licensing. In May 2016, the FASB issued an update to address certain narrow aspects of the guidance including collectibility criterion, collection of sales taxes from customers, noncash consideration, contract modifications and completed contracts. This issuance does not change the core principle of the guidance in the initial topic issued in May 2014. In December 2016, the FASB issued updated guidance regarding revenue from contracts with customers. Some topics that could impact the Company include corrections and improvements around the following: contract costs impairment testing, disclosure of remaining performance obligations and prior period obligations, contract modifications, and contract asset versus receivable. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.

In July 2015, the FASB issued an accounting standard update that requires management to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted this new standard in fiscal year 2018. The adoption of this guidance does not have a significant impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued an accounting standard update related to deferred tax assets and liabilities. This standard simplifies the presentation of deferred income taxes to be classified as noncurrent in the consolidated balance sheet. The Company adopted this new standard in fiscal year 2018. The adoption of this guidance does not have a significant impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued an accounting standard update related to recognition and measurement of financial assets and financial liabilities. This standard changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This standard is effective for us in fiscal year 2020. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

In February 2016, the FASB issued authoritative guidance related to leases. This guidance requires management to present all leases greater than one year on the balance sheet as a liability to make payments and an asset as the right to use the underlying asset for the lease term. This new standard will be effective for us in fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.

In March 2016, the FASB released an accounting standard update that simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this new standard in fiscal year 2018. The adoption of this guidance does not have a significant impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued an accounting standard update that requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021 on a modified retrospective basis, and early adoption in fiscal 2020 is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

In August 2016, the FASB issued authoritative guidance related to the classification of certain cash receipts and cash payments on the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated statements of cash flows.

In October 2016, the FASB issued an accounting standard update that requires recognition of the income tax consequences of intra-entity transfers of assets (other than inventory) at the transaction date. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a modified retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

In November 2016, the FASB issued authoritative guidance related to statements of cash flows. This guidance clarifies that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report and with our Annual Report on Form 10-K for the fiscal year ended May 31, ~~2017~~2021 and the consolidated financial statements and notes thereto.

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this report, including those made by our management, other than statements of historical fact, are forward-looking statements. These statements typically may be identified by the use of forward-looking words or phrases such as "believe," "expect," "intend," "anticipate," "should," "planned," "estimated," and "potential," among others and include, but are not limited to, statements concerning our expectations regarding our operations, business, strategies, prospects, revenues, expenses, costs and resources. These forward-looking statements include management’s judgments, estimates and assumptions and are subject to certain risks and uncertainties that could cause our actual results to differ materially from ~~those~~ anticipated results or other expectations reflected in ~~the~~ forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and other factors beyond our control, and in particular, the risks discussed in “Part II, Item 1A. Risk Factors” and those discussed in other documents we file with the SEC. All forward-looking statements included in this document are based on our current expectations, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Investors and others should note that we announce material financial information to our investors using our investor relations website (https://www.aehr.com/investor-relations/), SEC filings, press releases, public conference calls and webcasts. We use these channels to communicate with our investors and the public about our company, our products and services and other issues. It is possible that the information we post on our investor relations website could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on our investor relations website.

COVID-19 PANDEMIC RESPONSE

The Company has been impacted by the outbreak of the novel coronavirus, known as COVID-19, which has spread throughout the world. Our top priority during the COVID-19 pandemic is protecting the health and safety of our employees and their families, along with our customers and community. We introduced policies and procedures to increase workplace flexibility, such as working remotely where possible to reduce the number of people who are on campus each day. As a global supplier of Critical Infrastructure Sectors, as defined by the Cybersecurity and Infrastructure Security Agency, we have supported and continue to support customers during the pandemic. In the interest of public health, all onsite operations generally use the minimum number of people to safely execute tasks and follow enhanced safety and health protocols including screenings, social distancing and use of personal protective equipment.

Due to the impact of the COVID-19 pandemic on customers and customers’ customers, the Company experienced a drop in customer orders and revenues during the fiscal year ended May 31, 2021 and in the last quarter of fiscal year ended May 31, 2020. In response, the Company implemented cost reduction initiatives to mitigate operating losses, including mandatory vacation days, shutdown days and executive staff pay reductions. The Company eliminated all cost reduction initiatives in the last quarter of the fiscal year ended May 31, 2021.

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The Company will continue to monitor the situation. As of the date of this report, the Company cannot predict with certainty the potential effects the COVID-19 pandemic may have on the Company’s business and its operating results. While the overall environment remains uncertain, the Company continues to invest in priority areas with the objective of driving profitable growth over the long term.

OVERVIEW

We were founded in 1977 to develop and manufacture burn-in and test equipment for the semiconductor industry. Since our inception, we have sold more than 2,500 systems to semiconductor manufacturers, semiconductor contract assemblers and burn-in and test service companies worldwide. Our principal products currently are the ~~Advanced Burn-in~~FOX-XP, FOX-NP and ~~Test System, or ABTS, the FOX full~~FOX-CP wafer contact and singulated die/module parallel test and burn-in ~~system,~~systems, WaferPak Aligner, WaferPak contactors, ~~the~~ DiePak ~~carrier~~Loader, DiePak carriers and test fixtures.

Our net sales consist primarily of sales of systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak ~~Carriers,~~carriers, test fixtures, upgrades and spare parts, revenues from service contracts, and engineering development charges. Our selling arrangements may include contractual customer acceptance provisions, which are mostly deemed perfunctory or inconsequential, and installation of the product occurs after shipment and transfer of title.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, assumptions and judgments, including those related to customer programs and incentives, product returns, bad debts, inventories, income taxes, financing operations, warranty obligations, and long-term service contracts. Our estimates are derived from historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Those results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a discussion of the critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended May 31, ~~2017.~~

2021.

There have been no material changes to our critical accounting policies and estimates during the ~~six~~three and nine months ended ~~November 30, 2017~~February 28, 2022 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, ~~2017.~~

2021.

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RESULTS OF OPERATIONS

The following table sets forth items in our unaudited condensed consolidated statements of operations as a percentage of net sales for the periods indicated.

~~THREE MONTHS ENDED NOVEMBER 30, 2017 COMPARED TO THREE MONTHS ENDED NOVEMBER 30, 2016~~

	Three Months Ended							Nine Months Ended
	February 28,						��	February 28,
	2022			2021				2022			2021

Net sales		100.0	%		100.0	%			100.0	%		100.0	%
Cost of sales		58.1			64.0				56.8			72.1
Gross profit		41.9			36.0				43.2			27.9

Operating expenses:
Selling, general and administrative		17.1			31.2				23.1			52.0
Research and development		10.0			17.2				13.6			29.3
Total operating expenses		27.1			48.4				36.7			81.3

Income (loss) from operations		14.8			(12.4	)			6.5			(53.4	)

Interest income (expense), net		--			(0.2	)			(0.1	)		(0.4	)
Net gain from dissolution of Aehr Test Systems Japan		--			--				--			24.4
Gain from forgiveness of PPP loan		--			--				5.6			--
Other income (expense), net		--			(0.7	)			0.2			(1.5	)

Income (loss) before income tax (expense) benefit		14.8			(13.3	)			12.2			(30.9	)

Income tax (expense) benefit		(0.1	)		(0.7	)			(0.2	)		2.0
Net income (loss)		14.7	%		(14.0	)%			12.0	%		(28.9	)%

THREE MONTHS ENDED FEBRUARY 28, 2022 COMPARED TO THREE MONTHS ENDED FEBRUARY 28, 2021

NET SALES. Net sales increased to ~~$7.9~~$15.3 million for the three months ended ~~November 30, 2017~~February 28, 2022 from ~~$4.2~~$5.3 million for the three months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~87.9%~~190.2%. The increase in net sales for the three months ended ~~November 30, 2017~~February 28, 2022 was primarily due to the increases in ~~both~~ net sales of both our wafer-level products and Test During Burn-in (TDBI) ~~products and wafer-level~~ products. Net sales of our wafer-level products for the three months ended February 28, 2022 were $14.9 million, and increased approximately $9.9 million from the three months ended February 28, 2021 due to stronger demand from the market. Net sales of our TDBI products for the three months ended ~~November 30, 2017~~February 28, 2022 were ~~$5.1 million,~~$404,000, and increased ~~approximately $2.4 million~~$130,000 from the three months ended November 30, 2016. Net sales of the wafer-level products for the three months ended November 30, 2017 were $2.8 million, and increased approximately $1.4 million from the three months ended November 30, 2016.

February 28, 2021.

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GROSS PROFIT. Gross profit increased to ~~$3.1~~$6.4 million for the three months ended ~~November 30, 2017~~February 28, 2022 from ~~$1.5~~$1.9 million for the three months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~114.0%~~237.8%. Gross profit margin increased to ~~39.5%~~41.9% for the three months ended ~~November 30, 2017~~February 28, 2022 from ~~34.7%~~36.0% for the three months ended ~~November 30, 2016.~~February 28, 2021. The increase in gross profit margin was primarily ~~due to~~the result of manufacturing efficiencies due to an increase in net sales resulting in a ~~6.7%~~10.5% gross profit margin increase, partially offset by ~~an increase in warranty provision~~a write-down of $1.0 million inventory related to legacy products resulting in a ~~1.7% decrease in~~4.7% gross ~~profit margin.~~

margin decrease.

SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to ~~$1.9~~$2.6 million for the three months ended ~~November 30, 2017~~February 28, 2022 from ~~$1.7~~$1.6 million for the three months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~8.6%~~59.0%. The increase in SG&A expenses was primarily the result of additional headcount and increased commission expense due to an increase in ~~employment related expenses.~~

net sales.

RESEARCH AND DEVELOPMENT. R&D expenses increased to ~~$1.1~~$1.5 million for the three months ended ~~November 30, 2017~~February 28, 2022 from ~~$1.0 million~~$903,000 for the three months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~4.8%~~69.3%. The increase in R&D expenses was primarily due to ~~an increase~~increases in employment related ~~expenses.~~

expenses of $463,000, outside services of $102,000, and project expenses of $52,000.

INTEREST ~~EXPENSE.~~INCOME (EXPENSE), NET. Interest ~~expense was $105,000~~income, net for the three months ended ~~November 30, 2017~~February 28, 2022 was $1,000 compared with ~~$181,000~~interest expense, net for the three months ended ~~November 30, 2016.~~February 28, 2021 of $10,000. The ~~decrease in~~ interest expense ~~in the three months ended November 30, 2017 was primarily due to the debt issuance costs related to the convertible notes becoming fully amortized at the end of fiscal 2017.~~

~~OTHER (EXPENSE) INCOME, NET. Other expense, net was $7,000~~ for the three months ended ~~November 30, 2017 compared with other~~February 28, 2021 was from the PPP Loan that we obtained on April 23, 2020.

OTHER INCOME (EXPENSE), NET. Other income, net ~~of $43,000~~ for the three months ended ~~November 30, 2016. The change between~~February 28, 2022 was $10,000 compared with other expense, ~~and~~net for the three months ended February 28, 2021 of $39,000. The changes in other income (expense), net was primarily due to ~~losses~~gains or ~~gains~~losses realized in connection with the fluctuation in the value of the dollar compared to foreign currencies during the referenced periods.

INCOME TAX ~~EXPENSE.~~(EXPENSE) BENEFIT. Income tax ~~expenses were $15,000~~expense was $24,000 and ~~$30,000~~$34,000 for the three months ended ~~November 30, 2017~~February 28, 2022 and ~~2016,~~2021, respectively.

~~SIX MONTHS ENDED NOVEMBER 30, 2017 COMPARED TO SIX MONTHS ENDED NOVEMBER 30, 2016~~

NINE MONTHS ENDED FEBRUARY 28, 2022 COMPARED TO NINE MONTHS ENDED FEBRUARY 28, 2021

NET SALES. Net sales increased to ~~$14.9~~$30.5 million for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 from ~~$9.5~~$9.0 million for the ~~six~~nine months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~56.2%~~240.8%. The increase in net sales for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 was primarily due to the increases in ~~both~~ net sales of both our ~~Test During Burn-in (TDBI)~~wafer-level products and ~~wafer-level~~TDBI products. Net sales of our wafer-level products for the nine months ended February 28, 2022 were $29.1 million, and increased approximately $21.3 million from the nine months ended February 28, 2021 due to stronger demand from the market. Net sales of our TDBI products for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 were ~~$7.9~~$1.4 million, and increased ~~approximately $2.6 million~~$252,000 from the ~~six~~nine months ended November 30, 2016. Net sales of the wafer-level products for the six months ended November 30, 2017 were $7.0 million, and increased approximately $2.8 million from the six months ended November 30, 2016.

February 28, 2021.

GROSS PROFIT. Gross profit increased to ~~$6.0~~$13.2 million for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 from ~~$3.7~~$2.5 million for the ~~six~~nine months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~64.9%~~428.3%. Gross profit margin increased to ~~40.6%~~43.2% for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 from ~~38.5%~~27.9% for the ~~six~~nine months ended ~~November 30, 2016.~~February 28, 2021. The increase in gross profit margin was primarily ~~due to~~the result of manufacturing efficiencies due to an increase in net sales resulting in a ~~6.6%~~14.4% gross profit margin increase, partially offset by ~~an increase in warranty provision~~a write-down of $1.0 million inventory related to legacy products resulting in a 2.1% ~~decrease in~~ gross ~~profit~~ margin ~~an increase in shipping cost resulting in a 0.9% decrease in gross profit margin, and an increase in direct material costs resulting in a 1.1% decrease in gross profit margin.~~

decrease.

SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to ~~$3.6~~$7.1 million for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 from ~~$3.4~~$4.7 million for the ~~six~~nine months ended ~~November 30, 2016,~~February 28, 2021, an increase of ~~6.5%~~51.4%. The increase in SG&A expenses was primarily the result of additional headcount and increased commission expense due to an increase in ~~employment related expenses.~~

net sales.

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RESEARCH AND DEVELOPMENT. R&D expenses ~~decreased~~increased to ~~$2.0~~$4.2 million for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 from ~~$2.1~~$2.6 million for the ~~six~~nine months ended ~~November 30, 2016, a decrease~~February 28, 2021, an increase of ~~2.6%~~58.7%. The ~~decrease~~increase in R&D expenses was primarily due to ~~a decrease~~increases in employment related expenses of $1.0 million, outside services of $306,000, and project ~~expenses.~~

expenses of $177,000.

INTEREST ~~EXPENSE.~~INCOME (EXPENSE), NET. Interest expense, net was ~~$212,000~~$9,000 and $35,000 for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and 2021, respectively. The interest expense for the nine months ended February 28, 2021 was from the PPP Loan that we obtained on April 23, 2020.

NET GAIN FROM DISSOLUTION OF AEHR TEST SYSTEMS JAPAN. Net gain from dissolution of Aehr Test Systems Japan was $2.2 million for the nine months ended February 28, 2021, due to the release of the cumulative translation adjustment in connection with the complete liquidation of Aehr Test Systems Japan subsidiary in July 2020.

GAIN FROM FORGIVENESS OF PPP LOAN. On June 12, 2021, we received confirmation from the SVB that on June 4, 2021, the Small Business Administration approved our PPP Loan forgiveness application for the entire PPP Loan balance of $1,678,789 and interest totaling $18,933, and we recognized a gain of $1,697,722.

OTHER INCOME (EXPENSE), NET. Other income, net for the nine months ended February 28, 2022 was $68,000 compared with ~~$359,000~~other expense, net for the ~~six~~nine months ended ~~November 30, 2016.~~February 28, 2021 of $139,000. The ~~decrease~~changes in ~~interest expense in the six months ended November 30, 2017~~other income (expense), net was primarily due to ~~the debt issuance costs related to the convertible notes becoming fully amortized at the end of fiscal 2017.~~

OTHER (EXPENSE) INCOME, NET. Other expense, net was $67,000 for the six months ended November 30, 2017 compared with other income, net of $40,000 for the six months ended November 30, 2016. The change between other expense and other income was primarily due togains or losses ~~or gains~~ realized in connection with the fluctuation in the value of the dollar compared to foreign currencies during the referenced periods.

INCOME TAX ~~EXPENSE.~~(EXPENSE) BENEFIT. Income tax ~~expenses were $10,000 and $34,000~~expense for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 was $81,000 compared with income tax benefit of $177,000 for the nine months ended February 28, 2021. During the nine months ended February 28, 2021, the currency translation adjustment balance was released and ~~2016, respectively.~~

~~LIQUIDITY AND CAPITAL RESOURCES~~

the residual income tax effect of $215,000 was recorded pursuant to the inter-period allocation rules in connection with the complete liquidation of Aehr Test Systems Japan subsidiary in July 2020.

LIQUIDITY AND CAPITAL RESOURCES

Net cash ~~used in~~provided by operating activities was ~~$2.2 million and $1.4~~$2.3 million for the ~~six~~nine months ended ~~November 30, 2017 and 2016, respectively. For the six months ended November 30, 2017,~~February 28, 2022, compared with net cash used inby operating activities of $2.5 million for the nine months ended February 28, 2021. For the nine months ended February 28, 2022, net cash provided by operating activities was primarily the result of net income of ~~$70,000,~~$3.7 million, as adjusted to exclude the effect of forgiveness of PPP loan of $1.7 million, and a non-cash charge of stock-based compensation expense of ~~$0.6~~$2.2 million and depreciation and amortization ~~expense~~ of ~~$0.2 million. Net~~$226,000. Other changes in cash ~~used in~~from operations ~~was also impacted by~~primarily resulted from an increase ~~in inventories of $1.2 million, an increase in prepaid expenses and other current assets of $1.1 million, a decrease in accounts payable of $1.0 million, and a decrease~~ in customer deposits and deferred revenue of ~~$0.2~~$6.0 million, partially offset by ~~a decrease~~increases in inventories of $5.4 million and accounts receivable of ~~$0.6~~$3.5 million. The increase in inventories is to support future shipments for customer orders. The increase in prepaid expenses and other current assets was primarily due to down payments to certain vendors. The decrease in accounts payable was primarily due to timing of vendor payments. The decrease in customer deposits and deferred revenue was primarily due to the receipt of additional down payments from certain customers. The increase in inventory was to support expected future shipments ~~against~~for customer ~~orders with down payments.~~orders. The ~~decrease~~increase in accounts receivable was primarily due to ~~improvements in customer payment terms.~~the timing of revenue generated toward the end of the fiscal quarter. For the ~~six~~nine months ended ~~November 30, 2016,~~February 28, 2021, net cash used in operating activities was primarily the result of net loss of ~~$2.2~~$2.6 million, as adjusted to exclude the effect of net gain from dissolution of Aehr Test Systems Japan of $2.4 million, including an income tax benefit of $215,000, a non-cash charge of stock-based compensation expense of ~~$0.5 million.~~$798,000 and depreciation and amortization of $239,000. Net cash used in operations was also impacted by ~~an increase~~a decrease in accounts receivable of ~~$1.0 million and a decrease in customer deposits and deferred revenue of $0.7 million, partially offset by a decrease in inventories of $1.3 million and an increase in accounts payable of $0.7~~$1.1 million. The ~~increase~~decrease in accounts receivable was primarily due to ~~large shipments toward the end of the quarter ended November 30, 2016. The~~a decrease in ~~customer deposits and deferred revenue was primarily due to shipments to customers with down payments. The decrease in inventories is primarily due~~sales for the nine months ended February 28, 2021 compared to the ~~sales of systems on-hand at~~same period in the ~~beginning of the period. The increase in accounts payable was primarily due to inventory and capital equipment purchases.~~

Financing activities provided cash of ~~$0.6~~$25.4 million and ~~$5.8~~$1.9 million for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and ~~2016,~~2021, respectively. Net cash provided by financing activities during the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 was primarily due to the net proceeds from issuance of common stock from public offering of $24.0 million, and the proceeds from the issuance of common stock under employee benefit plans of $2.8 million, partially offset by the net payment of the line of credit of $1.4 million. Net cash provided by financing activities during the nine months ended February 28, 2021 was due to ~~$0.6~~$1.4 million borrowing from our line of credit and $483,000 in proceeds from the issuance of common stock under employee plans. Net cash provided by financing activities during the six months ended November 30, 2016 was due to the net proceeds of $5.3 million from the sale of our common stock in a private placement transaction with certain institutional and accredited investors that closed on September 28, 2016 and $0.5 million in proceeds from the issuance of common stock under employee plans.

The effect of fluctuation in exchange rates ~~used~~decreased cash ~~of $7,000~~by $19,000 for the ~~six~~nine months ended ~~November 30, 2017~~February 28, 2022 and ~~$43,000~~increased cash by $138,000 for the ~~six~~nine months ended ~~November 30, 2016.~~February 28, 2021. The ~~change in cash used was~~changes were due to the fluctuation in the value of the dollar compared to foreign currencies.

As of ~~November 30, 2017~~February 28, 2022 and May 31, ~~2017, the Company~~2021, we had working capital of ~~$23.2~~$42.5 million and ~~$21.5~~$10.1 million, respectively. ~~Working capital consists of cash and cash equivalents, short-term investments, accounts receivable, inventory and other current assets, less current liabilities.~~

We lease our manufacturing and office space under operating leases. We entered into a non-cancelable operating lease agreement for our United States manufacturing and office facilities, which was renewed in ~~November 2014~~February 2018 and expires in ~~June 2018.~~July 2023. As of February 28, 2022 our operating lease liability totals $1,193,000. Under the lease agreement, we are responsible for payments of utilities, taxes and insurance.

From time to time, we evaluate potential acquisitions of businesses, products or technologies that complement our business. If consummated, any such transactions may use a portion of our working capital or require the issuance of equity. We have no present understandings, commitments or agreements with respect to any material acquisitions.

We anticipate that the existing cash balance together with future income from operations, collections of existing accounts receivable, revenue from our existing backlog of products as of this filing date, the sale of inventory on hand, ~~and~~ deposits and down payments against significant orders will be adequate to meet our ~~liquidity requirements for~~working capital and capital equipment requirement needs over the next 12 months.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the timing and cost to introduce new and enhanced products and the timing and cost to implement new manufacturing technologies. While we successfully raised $25 million in the ATM public offering in October 2021 as a portion of a $75 million shelf registration, in the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Any additional debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of the Company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

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OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any off-balance sheet financing arrangements and have not established any special purpose or variable interest entities.

OVERVIEW OF CONTRACTUAL OBLIGATIONS

There have been no material changes in the composition, magnitude or other key characteristics of our contractual obligations or other commitments as disclosed in ~~our~~the Company's Annual Report on Form 10-K for the year ended May 31, ~~2017.~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We had no holdings of derivative financial or commodity instruments as of ~~November 30, 2017~~February 28, 2022 or May 31, ~~2017.~~

2021.

We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates. ~~We only invest our short-term excess cash in government-backed securities with maturities of 18 months or less.~~ We do not use any financial instruments for speculative or trading purposes. Fluctuations in interest rates would not have a material effect on our financial position, results of operations or cash flows.

A majority of our revenue and capital spending is transacted in U.S. Dollars. We ~~however,~~also enter into transactions in other currencies, primarily Euros, New Taiwan Dollar, and Japanese Yen. Since the price is determined at the time a purchase order is accepted, we are exposed to the risks of fluctuations in the foreign currency-U.S. Dollar exchange rates during the lengthy period from purchase order to ultimate payment. This exchange rate risk is partially offset to the extent that our subsidiaries incur expenses payable in their local currency. To date, we have not invested in instruments designed to hedge currency risks. In addition, our subsidiaries typically carry debt or other obligations due us that may be denominated in either their local currency or U.S. Dollars.Philippine Peso. Since our subsidiaries’ financial statements are based in their local currency and our condensed consolidated financial statements are based in U.S. Dollars, weour subsidiaries and ~~our subsidiaries~~we recognize foreign exchange gains or losses in any period in which the value of the local currency rises or falls in relation to the U.S. Dollar. A 10% decrease in the value of the subsidiaries’ local currency as compared with the U.S. Dollar would not be expected to result in a significant change to our net income or loss. There have been no material changes in our risk exposure since the end of the last fiscal year, nor are any material changes to our risk exposure anticipated.

Item 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management as appropriate to allow for timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. There was no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 1. LEGAL PROCEEDINGS

None.

Item 1A. RISK FACTORS

Please refer to the description of the risk factors associated with our business previously disclosed in Part I, Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the year ended May 31, ~~2017~~2021 filed with the Securities and Exchange Commission on August ~~29, 2017. There have been no material changes from the risk factors previously described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2017.~~

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

~~The Exhibits listed on the accompanying "Index to Exhibits" are filed as part of, or incorporated by reference into, this report.~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.~~

(2) Incorporated by reference to Exhibit 4.2 previously filed with the Company’s Form S-8 filed November 14, 2016 (File No. 333-214589), as deemed to be amended by the share increase approved at the 2020 Annual Meeting of Shareholders.

(3) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Form 8-K filed with the SEC on January 20, 2021 (File No. 000-22893).

(4) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Form 8-K filed with the SEC on January 13, 2022 (File No. 000-22893).

*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _________ to __________

California		94-2424084
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
~~incorporation or organization)~~

400 Kato Terrace, Fremont, CA		94539
~~Fremont, CA~~ (Address of principal executive offices)		~~94539~~ (Zip Code)
~~(Address of principal~~		~~(Zip Code)~~
~~executive offices)~~

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock par value of $0.01 per share	AEHR	The NASDAQ Capital Market

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)		3

	Condensed Consolidated Balance Sheets at~~November 30, 2017~~ February 28, 2022 and May 31, ~~2017~~2021	4	3

	Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended~~November 30, 2017~~ February 28, 2022 and ~~2016~~ 2021	5	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for theThree and ~~Six~~Nine Months Ended~~November 30, 2017~~ February 28, 2022 and ~~2016~~2021	6	5

	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended February 28, 2022 and 2021		6

	Condensed Consolidated Statements of Cash Flows for the~~Six~~ Nine Months Ended~~November 30, 2017~~ February 28, 2022 and ~~2016~~2021	7	8

	Notes to Condensed Consolidated Financial Statements	8	9

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20	24

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risks	25	30

ITEM 4.	Controls and Procedures	26	30


PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	27	31

ITEM 1A.	Risk Factors	27	31

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27	31

ITEM 3.	Defaults Upon Senior Securities	27	31

ITEM 4.	Mine Safety Disclosures		31

ITEM 5.	Other Information		31

ITEM 6.	Exhibits		32

SIGNATURES			33

~~California~~		~~94-2424084~~ AEHR TEST SYSTEMS
(Exact name of Registrant as specified in its charter)


~~ITEM 4. Mine Safety Disclosures~~	272

~~ITEM 5. Other Information~~	27Table of Contents

~~ITEM 6. Exhibits~~	27

~~SIGNATURES~~	28

~~Index to Exhibits~~	29

	November 30,	May 31,
	2017	2017
		(1)
ASSETS
Current assets:
Cash and cash equivalents	$9,959	$17,803
Short-term investments	5,969	--
Accounts receivable, net	3,490	4,010
Inventories	8,225	6,604
Prepaid expenses and other current assets	2,098	961

Total current assets	29,741	29,378

Property and equipment, net	1,166	1,419
Other assets	94	95
Total assets	$31,001	$30,892

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$1,789	2,808
Accrued expenses	1,607	1,609
Customer deposits and deferred revenue, short-term	3,142	3,467

Total current liabilities	6,538	7,884

Long-term debt	6,110	6,110
Deferred revenue, long-term	251	104
Total liabilities	12,899	14,098

Aehr Test Systems shareholders' equity:
Common stock, $0.01 par value:
Authorized: 75,000 shares; Issued and outstanding: 21,797 shares and 21,340 shares at November 30, 2017 and May 31, 2017, respectively	218	213
Additional paid-in capital	82,304	81,128
Accumulated other comprehensive income	2,306	2,249
Accumulated deficit	(66,707)	(66,777)

Total Aehr Test Systems shareholders' equity	18,121	16,813
Noncontrolling interest	(19)	(19)

Total shareholders' equity	18,102	16,794
Total liabilities and shareholders' equity	$31,001	$30,892

	Three Months Ended		Six Months Ended
	November 30,		November 30,
	2017	2016	2017	2016


Net sales	$7,923	$4,216	$14,893	$9,534
Cost of sales	4,792	2,753	8,844	5,865
Gross profit	3,131	1,463	6,049	3,669

Operating expenses:
Selling, general and administrative	1,854	1,707	3,645	3,423
Research and development	1,090	1,040	2,045	2,100
Total operating expenses	2,944	2,747	5,690	5,523

Income (loss) from operations	187	(1,284)	359	(1,854)

Interest expense, net	(105)	(181)	(212)	(359)
Other (expense) income, net	(7)	43	(67)	40

Income (loss) before income tax expense	75	(1,422)	80	(2,173)

Income tax expense	(15)	(30)	(10)	(34)
Net income (loss)	60	(1,452)	70	( 2,207)
Less: Net income attributable to the noncontrolling interest	--	--	--	--

Net income (loss) attributable to Aehr Test Systems common shareholders	$60	$(1,452)	$70	$(2,207)

Net income (loss) per share
Basic	$0.00	$(0.09)	$0.00	$(0.15)
Diluted	$0.00	$(0.09)	$0.00	$(0.15)

Shares used in per share calculations:
Basic	21,645	16,029	21,531	14,673
Diluted	22,883	16,029	22,937	14,673

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Shareholders'
Three Months Ended February 28, 2022	Shares		Amount		Capital		Loss			Deficit			Equity
Balances, November 30, 2021		26,835	$	268	$	115,602	$	(108	)	$	(74,900	)	$	40,862

Issuance of common stock under employee plans		79		1		25		0			0			26
Stock-based compensation		-		0		880		0			0			880
Net income		-		-		0		0			2,243			2,243
Foreign currency translation adjustment		-		0		0		(23	)		0			(23	)

Balances, February 28, 2022		26,914	$	269	$	116,507	$	(131	)	$	(72,657	)	$	43,988

														Total Aehr
								Accumulated						Test
					Additional			Other						Systems					Total
	Common Stock					Paid-in		Comprehensive			Accumulated			Shareholders’			Noncontrolling		Shareholders'
Three Months Ended February 28, 2021	Shares		Amount			Capital		(Loss) Income			Deficit			Equity			Interest		Equity
Balances, November 30, 2020		23,487	$	235		$	86,786	$	(62	)	$	(76,167	)	$	10,792		$	0	$	10,792

Issuance of common stock under employee plans		111		1			117		-			-			118			0		118
Stock-based compensation		-		0			271		0			0			271			-		271
Net loss		-		0			0		-			(735	)		(735	)		0		(735	)
Foreign currency translation adjustment		-		0			0		17			22			39			0		39

Balances, February 28, 2021		23,598	$	236		$	87,174	$	(45	)	$	(76,880	)	$	10,485		$	0	$	10,485

	·	The Company has a contract with a customer that creates enforceable rights and obligations,

	·	Promised performance obligations are identified,

	·	The transaction price, or the amount we expect to receive, is determinable and

	·	The Company has satisfied the performance obligations to the customer.

	Balance as of
	February 28, 2022		Level 1		Level 2		Level 3
Money market funds	$	30,584	$	30,584	$	0	$	0
Assets	$	30,584	$	30,584	$	0	$	0

Fiscal year	Operating Leases
2022 (remaining three months of 2022)	$	202
2023		829
2024		168
2025		31
2026		19
Total future minimum operating lease payments	$	1,249
Less: imputed interest		(56	)
Present value of operating lease liabilities	$	1,193

		Available
		Shares
Balance, May 31, ~~2017~~2021	~~2,169~~		1,137

Options granted			(~~224~~206	)
RSUs granted			(64238	)
~~Shares~~ Options cancelled and adjusted	--		(8	)

Balance, August 31, ~~2017~~2021	~~1,881~~		685

Options ~~granted~~reserved	~~(41~~)		1,414
~~RSUs~~ Options granted	--		(10	)
~~Shares cancelled~~ RSUs granted	--		(14	)
RSUs performance-based grants			(270	)
Options cancelled			51

Balance, November 30, ~~2017~~2021	~~1,840~~		1,856

Options granted			(2	)
RSUs cancelled			10
Options cancelled			41

Balance, February 28, 2022			1,905

	Three Months Ended				Nine Months Ended
	February 28,				February 28,
	2022		2021		2022		2021
Type of good / service:
Systems	$	7,172	$	2,435	$	14,805	$	3,407
Contactors		7,426		1,930		13,468		3,330
Services		685		902		2,267		2,225
	$	15,283	$	5,267	$	30,540	$	8,962

Product lines:
Wafer-level	$	14,879	$	4,993	$	29,130	$	7,804
Test During Burn-In		404		274		1,410		1,158
	$	15,283	$	5,267	$	30,540	$	8,962

	Outstanding Options
		Weighted
	Number	Average	Aggregate
	of	Exercise	Intrinsic
	Shares	Price	Value
Balances, May 31, 2017	3,074	$1.73	$8,763

Options granted	224	$3.93
Options cancelled	--	$--
Options exercised	(189)	$1.23

Balances, August 31, 2017	3,109	$1.92	$4,612

Options granted	41	$3.46
Options cancelled	--	$--
Options exercised	(132)	$1.46

Balances, November 30, 2017	3,018	$1.96	$2,230

Options fully vested and expected to vest at November 30, 2017	2,984	$1.95	$2,220

	Outstanding Options
				Weighted
	Number			Average		Aggregate
	of			Exercise		Intrinsic
	Shares			Price		Value
Balances, May 31, 2021		2,766		$	2.16	$	807

Options granted		206		$	2.93
Options cancelled		(6	)	$	1.95
Options exercised		(641	)	$	2.46

Balances, August 31, 2021		2,325		$	2.14	$	12,365

Options granted		10		$	19.85
Options cancelled		(51	)	$	1.73
Options exercised		(571	)	$	2.14

Balances, November 30, 2021		1,713		$	2.26	$	25,997

Options granted		2		$	11.55
Options cancelled		(41	)	$	1.22
Options exercised		(66	)	$	2.03

Balances, February 28, 2022		1,608		$	2.29	$	18,248

Options fully vested and expected to vest at February 28, 2022		1,582		$	2.30	$	17,952

	Options Outstanding			Options Exercisable
	at November 30, 2017			at November 30, 2017
Range of Exercise Prices	Number Outstanding Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number Exercisable Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Aggregate Intrinsic Value
$0.59-$0.97	424	1.31	$0.68	424	1.31	$0.68
$1.09-$1.36	645	2.11	$1.27	645	2.10	$1.27
$1.68-$2.06	487	4.73	$1.74	276	4.03	$1.79
$2.10-$2.81	1,197	4.01	$2.45	953	3.99	$2.47
$3.46-$3.93	265	6.66	$3.88	22	6.66	$3.88
$0.59-$3.93	3,018	3.57	$1.96	2,320	3.00	$1.74	$1,985

	Cost	Gross Unrealized Loss	Estimated Fair Value

Cash	$1,802	$--	$1,802
Cash equivalents:
Money market funds	4,164	--	4,164
U.S. Treasury securities	3,993	--	3,993
Total Cash equivalents	8,157	--	8,157
Total Cash and Cash equivalents	$9,959	$--	$9,959
Short-term investments:
U.S. Treasury securities	$5,972	$3	$5,969
Total Cash, Cash equivalents and Investments	$15,931	$3	$15,928

	Balance as of
	November 30, 2017	Level 1	Level 2	Level 3
Money market funds	$4,164	$4,164	$--	$--
U.S. Treasury securities	9,962	9,962	--	--
Certificate of deposit	50	--	50	--
Assets	$14,176	$14,126	$50	$--

	Balance as of
	May 31, 2017	Level 1	Level 2	Level 3
Money market funds	$15,516	$15,516	$--	$--
Certificate of deposit	50	--	50	--
Assets	$15,566	$15,516	$50	$--

	United
	States	Asia	Europe	Total
Three months ended November 30, 2017:
Net sales	$1,964	$5,909	$50	$7,923
Property and equipment, net	1,116	39	11	1,166

Six months ended November 30, 2017:
Net sales	$3,254	$11,569	$70	$14,893
Property and equipment, net	1,116	39	11	1,166

Three months ended November 30, 2016:
Net sales	$1,709	$2,256	$251	$4,216
Property and equipment, net	740	39	14	793

Six months ended November 30, 2016:
Net sales	$4,873	$4,166	$495	$9,534
Property and equipment, net	740	39	14	793

	Cumulative Translation Adjustments	Unrealized Loss on Investments, Net	Total

Balance at May 31, 2017	$2,249	$--	$2,249
Other comprehensive income (loss) before reclassifications	60	(3)	57
Amounts reclassified out of AOCI	--	--	--
Other comprehensive income (loss), net of tax	60	(3)	57
Balance at November 30, 2017	$2,309	$(3)	$2,306

Exhibit No.	~~Aehr Test Systems~~ ~~(Registrant)~~	Description

~~Date: January 12, 2018~~ 3.1 (1)	~~By:~~	~~/s/GAYN ERICKSON~~
		~~Gayn Erickson~~
		~~President and Chief Executive Officer~~

~~Date: January 12, 2018~~	~~By:~~	~~/s/KENNETH B. SPINK~~
		~~Kenneth B. Spink~~
		~~Vice President of Finance and Chief Financial Officer~~

~~Exhibit No.~~		~~Description~~
~~3.1(1)~~		Amended and Restated Bylaws of the Registrant.

4.2 (2)		Amended and Restated 2006 Employee Stock Purchase Plan.

10.1(3)		First Amendment to Loan and Security Agreement, dated as of January 14, 2021, by and between Silicon Valley Bank and Aehr Test Systems.

10.1(4)		Second Amendment to Loan and Security Agreement, dated as of January 11, 2022, by and between Silicon Valley Bank and Aehr Test Systems.

31.1		Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	Aehr Test Systems (Registrant)

Date: April 13, 2022	By:	/s/ GAYN ERICKSON
		Gayn Erickson
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: April 13, 2022	By:	/s/ KENNETH B. SPINK
		Kenneth B. Spink
		Vice President of Finance and Chief Financial Officer
		(Principal Financial and Accounting Officer)