UNITED STATES
Washington, D.C. 20549
FORM 10-Q
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934 | |
For the quarterly period ended August 31, 2023 |
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934 |
For the transition period from _______________ to ______________ |
Commission File Number 000-22893
AEHR TEST SYSTEMS |
(Exact name of Registrant as Specified in its Charter) |
California | 94-2424084 | |
(State or | (I.R.S. Employer Identification No.) | |
400 Kato Terrace, Fremont, CA | 94539 | |
(Address of Principal Executive Offices) | (Zip Code) |
(510) 623-9400
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock par value of | AEHR | The NASDAQ Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period asthat the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicateindicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
There were 28,799,313 shares of the registrant’s common stock, $0.01 par value,Registrant’s Common Stock outstanding as of December 29, 2017 was 21,802,037.
1 | |
TABLE OF CONTENTS
Page | |||
Item 1. Condensed Consolidated Financial Statements (Unaudited) | 3 | ||
18 | |||
Item 3. Quantitative and Qualitative Disclosures About Market | 22 | ||
22 | |||
23 | |||
23 | |||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 23 | ||
23 | |||
23 | |||
23 | |||
24 | |||
25 |
PART I.I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited)
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 |
AEHR TEST SYSTEMS | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
| August 31, |
|
| May 31, |
| ||
(In thousands, except par value) |
| 2023 |
|
| 2023 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 50,955 |
|
| $ | 30,054 |
|
Short-term investments |
|
| - |
|
|
| 17,853 |
|
Accounts receivable, net |
|
| 13,161 |
|
|
| 16,594 |
|
Inventories |
|
| 31,557 |
|
|
| 23,908 |
|
Prepaid expenses and other current assets |
|
| 540 |
|
|
| 621 |
|
Total current assets |
|
| 96,213 |
|
|
| 89,030 |
|
Property and equipment, net |
|
| 3,083 |
|
|
| 2,759 |
|
Operating lease right-of-use assets, net |
|
| 5,951 |
|
|
| 6,123 |
|
Other non-current assets |
|
| 222 |
|
|
| 231 |
|
Total assets |
| $ | 105,469 |
|
| $ | 98,143 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 8,328 |
|
|
| 9,206 |
|
Accrued expenses |
|
| 4,536 |
|
|
| 4,143 |
|
Operating lease liabilities, short-term |
|
| 275 |
|
|
| 137 |
|
Deferred revenue, short-term |
|
| 6,114 |
|
|
| 2,822 |
|
Total current liabilities |
|
| 19,253 |
|
|
| 16,308 |
|
Operating lease liabilities, long-term |
|
| 5,997 |
|
|
| 6,163 |
|
Deferred revenue, long-term |
|
| 33 |
|
|
| 31 |
|
Other long-term liabilities |
|
| 41 |
|
|
| 41 |
|
Total liabilities |
|
| 25,324 |
|
|
| 22,543 |
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value: Authorized: 10,000 shares; |
|
|
|
|
|
|
|
|
Issued and outstanding: none |
|
| - |
|
|
| - |
|
Common stock, $0.01 par value: Authorized: 75,000 shares; |
|
|
|
|
|
|
|
|
Issued and outstanding: 28,763 shares and 28,539 shares at August 31, 2023 and May 31, 2023, respectively |
|
| 288 |
|
|
| 285 |
|
Additional paid-in-capital |
|
| 127,630 |
|
|
| 127,776 |
|
Accumulated other comprehensive loss |
|
| (141 | ) |
|
| (155 | ) |
Accumulated deficit |
|
| (47,632 | ) |
|
| (52,306 | ) |
Total shareholders' equity |
|
| 80,145 |
|
|
| 75,600 |
|
Total liabilities and shareholders’ equity |
| $ | 105,469 |
|
| $ | 98,143 |
|
The condensed consolidated balance sheet atCondensed Consolidated Balance Sheet as of May 31, 20172023 has been derived from the audited consolidated financial statements at that date.
See accompanying notes are an integral part of these
3 |
Table of Contents |
AEHR TEST SYSTEMS | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
| Three Months Ended August 31, |
| |||||
(In thousands, except per share data) |
| 2023 |
|
| 2022 |
| ||
Revenue: |
|
|
|
|
|
| ||
Product |
| $ | 19,357 |
|
| $ | 9,588 |
|
Services |
|
| 1,267 |
|
|
| 1,083 |
|
Total revenue |
|
| 20,624 |
|
|
| 10,671 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Product |
|
| 9,919 |
|
|
| 5,349 |
|
Services |
|
| 724 |
|
|
| 841 |
|
Total cost of revenue |
|
| 10,643 |
|
|
| 6,190 |
|
Gross profit |
|
| 9,981 |
|
|
| 4,481 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
| 2,457 |
|
|
| 1,498 |
|
Selling, general and administrative |
|
| 3,409 |
|
|
| 2,525 |
|
Total operating expenses |
|
| 5,866 |
|
|
| 4,023 |
|
Income from operations |
|
| 4,115 |
|
|
| 458 |
|
Interest income, net |
|
| 581 |
|
|
| 121 |
|
Other income (expense), net |
|
| (6 | ) |
|
| 24 |
|
Income before provision for income taxes |
|
| 4,690 |
|
|
| 603 |
|
Provision for income taxes |
|
| 16 |
|
|
| 14 |
|
Net income |
| $ | 4,674 |
|
| $ | 589 |
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.16 |
|
| $ | 0.02 |
|
Diluted |
| $ | 0.16 |
|
| $ | 0.02 |
|
Shares used in per share calculations: |
|
|
|
|
|
|
|
|
Basic |
|
| 28,649 |
|
|
| 27,242 |
|
Diluted |
|
| 29,632 |
|
|
| 28,788 |
|
See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)
4 |
Table of Contents |
AEHR TEST SYSTEMS | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Net income |
| $ | 4,674 |
|
| $ | 589 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
Net change in cumulative translation adjustment |
|
| (3 | ) |
|
| (45 | ) |
Net change in unrealized loss on investments |
|
| 17 |
|
|
| - |
|
Comprehensive income |
| $ | 4,688 |
|
| $ | 544 |
|
See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)
5 |
Table of Contents |
AEHR TEST SYSTEMS | ||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
| Total |
| |||||||
|
| Common Stock |
|
| Paid-in |
|
| Comprehensive |
|
| Accumulated |
|
| Shareholders' |
| |||||||||
(In thousands) |
| Shares |
|
| Amount |
|
| Capital |
|
| Income (loss) |
|
| Deficit |
|
| Equity |
| ||||||
Three Months Ended August 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances, May 31, 2023 |
|
| 28,539 |
|
| $ | 285 |
|
| $ | 127,776 |
|
| $ | (155 | ) |
| $ | (52,306 | ) |
| $ | 75,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee plans |
|
| 247 |
|
|
| 3 |
|
|
| 315 |
|
|
| - |
|
|
| - |
|
|
| 318 |
|
Shares repurchased for tax withholdings on vesting of restricted stock units |
|
| (23 | ) |
|
| - |
|
|
| (1,012 | ) |
|
| - |
|
|
| - |
|
|
| (1,012 | ) |
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| 551 |
|
|
| - |
|
|
| - |
|
|
| 551 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,674 |
|
|
| 4,674 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3 | ) |
|
| - |
|
|
| (3 | ) |
Net unrealized gains on investments |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 17 |
|
|
| - |
|
|
| 17 |
|
Balances, August 31, 2023 |
|
| 28,763 |
|
| $ | 288 |
|
| $ | 127,630 |
|
| $ | (141 | ) |
| $ | (47,632 | ) |
| $ | 80,145 |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
| Total |
| |||||||
|
| Common Stock |
|
| Paid-in |
|
| Comprehensive |
|
| Accumulated |
|
| Shareholders' |
| |||||||||
(In thousands) |
| Shares |
|
| Amount |
|
| Capital |
|
| Income (loss) |
|
| Deficit |
|
| Equity |
| ||||||
Three Months Ended August 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances, May 31, 2022 |
|
| 27,120 |
|
| $ | 271 |
|
| $ | 117,686 |
|
| $ | (105 | ) |
| $ | (66,863 | ) |
| $ | 50,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee plans |
|
| 422 |
|
|
| 4 |
|
|
| 451 |
|
|
| - |
|
|
| - |
|
|
| 455 |
|
Shares repurchased for tax withholdings on vesting of restricted stock units |
|
| (147 | ) |
|
| (1 | ) |
|
| (1,178 | ) |
|
| - |
|
|
| - |
|
|
| (1,179 | ) |
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| 709 |
|
|
| - |
|
|
| - |
|
|
| 709 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 589 |
|
|
| 589 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (45 | ) |
|
| - |
|
|
| (45 | ) |
Balances, August 31, 2022 |
|
| 27,395 |
|
| $ | 274 |
|
| $ | 117,668 |
|
| $ | (150 | ) |
| $ | (66,274 | ) |
| $ | 51,518 |
|
See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)
6 |
Table of Contents |
AEHR TEST SYSTEMS | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income |
| $ | 4,674 |
|
| $ | 589 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
| 522 |
|
|
| 710 |
|
Depreciation and amortization |
|
| 138 |
|
|
| 104 |
|
Accretion of investment discount |
|
| (130 | ) |
|
| - |
|
Non-cash lease expenses |
|
| 172 |
|
|
| 177 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 3,437 |
|
|
| 7,648 |
|
Inventories |
|
| (7,704 | ) |
|
| (2,323 | ) |
Prepaid expenses and other current assets |
|
| 90 |
|
|
| (210 | ) |
Accounts payable |
|
| (939 | ) |
|
| (769 | ) |
Accrued expenses |
|
| 355 |
|
|
| (1,130 | ) |
Deferred revenue |
|
| 3,294 |
|
|
| 855 |
|
Operating lease liabilities |
|
| (28 | ) |
|
| (192 | ) |
Income taxes payable |
|
| 20 |
|
|
| 2 |
|
Net cash provided by operating activities |
|
| 3,901 |
|
|
| 5,461 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (284 | ) |
|
| (84 | ) |
Proceeds from maturities of investments |
|
| 18,000 |
|
|
| - |
|
Net cash provided by (used in) investing activities |
|
| 17,716 |
|
|
| (84 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock under employee plans |
|
| 318 |
|
|
| 455 |
|
Shares repurchased for tax withholdings on vesting of restricted stock units |
|
| (1,012 | ) |
|
| (1,179 | ) |
Net cash used in financing activities |
|
| (694 | ) |
|
| (724 | ) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (22 | ) |
|
| 10 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash |
|
| 20,901 |
|
|
| 4,663 |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period (1) |
|
| 30,204 |
|
|
| 31,564 |
|
Cash, cash equivalents and restricted cash, end of period (1) |
| $ | 51,105 |
|
| $ | 36,227 |
|
(1) | Includes restricted cash in other assets. |
See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)
7 |
Table of Contents |
AEHR TEST SYSTEMS
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 |
Three Months Ended | Six Months Ended | |||
November 30, | November 30, | |||
2017 | 2016 | 2017 | 2016 | |
Net income (loss) | $60 | $(1,452) | $70 | $(2,207) |
Other comprehensive income (loss), net of tax: Net change in unrealized loss on investments | (3) | -- | (3) | -- |
Net change in cumulative translation adjustments | 1 | (55) | 60 | (48) |
Total comprehensive income (loss) | 58 | (1,507) | 127 | (2,255) |
Less: Comprehensive income attributable to the noncontrolling interest | -- | 2 | -- | 1 |
Comprehensive income (loss), attributable to Aehr Test Systems common shareholders | $58 | $(1,509) | $127 | $(2,256) |
Six Months Ended | ||
November 30, | ||
2017 | 2016 | |
Cash flows from operating activities: | ||
Net income (loss) | $70 | $(2,207) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Stock-based compensation expense | 580 | 534 |
(Recovery of) provision for doubtful accounts | (14) | 12 |
Amortization of debt issuance costs | -- | 89 |
Depreciation and amortization | 190 | 129 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 592 | (972) |
Inventories | (1,249) | 1,335 |
Prepaid expenses and other current assets | (1,135) | (138) |
Accounts payable | (1,005) | 721 |
Accrued expenses | 5 | (201) |
Customer deposits and deferred revenue | (178) | (739) |
Income taxes payable | (9) | 21 |
Net cash used in operating activities | (2,153) | (1,416) |
Cash flows from investing activities: | ||
Purchases of investments | (5,972) | -- |
Purchases of property and equipment | (313) | (88) |
Net cash used in investing activities | (6,285) | (88) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock under private placement, net of issuance costs | -- | 5,299 |
Proceeds from issuance of common stock under employee plans, net of taxes paid related to share settlement of equity awards | 601 | 463 |
Net cash provided by financing activities | 601 | 5,762 |
Effect of exchange rates on cash and cash equivalents | (7) | (43) |
Net (decrease) increase in cash and cash equivalents | (7,844) | 4,215 |
Cash and cash equivalents, beginning of period | 17,803 | 939 |
Cash and cash equivalents, end of period | $9,959 | $5,154 |
Supplemental disclosure of non-cash flow information: | ||
Fair value of common stock issued to settle accounts payable | $-- | $323 |
Transfers of property and equipment to inventories | $372 | $372 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATIONORGANIZATION AND SUMMARY OF SIGNIFICANT ACCCOUNTINGACCOUNTING POLICIES
Organization – Aehr Test Systems without audit, pursuant to(the “Company”) was incorporated in California in May 1977 and develops and manufactures test and burn-in equipment used in the semiconductor industry. The Company’s principal products are the FOX-XP, FOX-NP, and FOX-CP wafer contact and singulated die/module parallel test and burn-in systems, the WaferPak full wafer contactor, the DiePak carrier, the WaferPak aligner, the DiePak autoloader, and test fixtures.
Basis of Presentation – The unaudited Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and the rules and regulations of the Securities and Exchange Commission or SEC. Certain(the “SEC”) for interim reporting. Accordingly, the unaudited Condensed Consolidated Financial Statements do not include certain information and footnote disclosures normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations.
Principles of results which may be reported for any other interim period or for the entire fiscal year.
Critical Accounting Policies and use of Estimates– The Company’s significant accounting policies are disclosed in consolidation. For the Company’s majority owned subsidiary, Aehr Test Systems Japan K.K.,Annual Report on Form 10-K for the noncontrolling interest of the portion the Company does not own was reflected on the Condensed Consolidated Balance Sheets in Shareholders’ Equity andyear ended May 31, 2023. There have been no significant changes in the Condensed Consolidated Statements of Operations.
Reclassifications - Certain reclassifications have been made to the prior period Condensed Consolidated Financial Statements to conform to the current period presentation. The reclassifications had no impact on net income, total assets, total liabilities, or shareholders’ equity.
Concentration of Credit Risk – Financial instruments which subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company recognizes revenue upon the shipmentperforms credit evaluations 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;its customers’ financial condition 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.
|
| Three Months Ended August 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Customer A |
|
| 88.0 | % |
|
| 67.3 | % |
Customer B |
| * |
|
|
| 22.9 | % |
The Company had gross accounts receivable from inventory and normal billing and credit terms granted.
|
| August 31, |
|
| May 31, |
| ||
|
| 2023 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Customer A |
|
| 74.0 | % |
|
| 81.6 | % |
Customer C |
|
| 18.0 | % |
|
| 16.5 | % |
8 |
Table of Contents |
Recent Accounting Pronouncements — The Company’s accounts receivable are recorded at invoiced amounts less allowance for any credit losses. According to the timeFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 that the products are shipped.
Although there are several other new accounting pronouncements issued by the Company ofFASB, the licensee’s report related to its usage of the licensed intellectual property or upon payment by the licensee.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value of Measurements — The Company measures its cash equivalents and money market funds at fair value on a recurring basis. Fair value is an exit price, representing the buyer the rightamount that would be received to return the productsell an asset or paid to receive future price concessions. The Company’s arrangements do not include vendor consideration.
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for fiscal 2017 filed on August 29, 2017identical assets or liabilities in active markets.
Level 2 — Inputs that are based upon quoted prices for further information regardingsimilar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the 2016 Equity Incentive Planmarket or can be derived from observable market data. Where applicable, these models project future cash flows and discount the Amendedfuture amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and Restated 2006 ESPP.
Level 3 — Unobservable inputs that are supported by little or no market activities.
The following table summarizes the stock-based compensation expense related torepresents the Company’s stock-based incentive plansassets measured at fair value on a recurring basis as of August 31, 2023, and the basis for that measurement:
|
| Balance as of |
|
|
|
|
|
|
|
|
|
| ||||
(In thousands) |
| August 31, 2023 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Money market funds |
| $ | 48,975 |
|
| $ | 48,975 |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 48,975 |
|
| $ | 48,975 |
|
| $ | - |
|
| $ | - |
|
The following table represents the Company’s assets measured at fair value on a recurring basis as of May 31, 2023, and the basis for that measurement:
|
| Balance as of |
|
|
|
|
|
|
|
|
|
| ||||
|
| May 31, 2023 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds |
| $ | 27,022 |
|
| $ | 27,022 |
|
| $ | - |
|
| $ | - |
|
U. S. treasury securities |
|
| 17,853 |
|
|
| 17,853 |
|
|
|
|
|
|
|
|
|
Total |
| $ | 44,875 |
|
| $ | 44,875 |
|
| $ | - |
|
| $ | - |
|
9 |
Table of Contents |
Included in money market funds as of August 31, 2023 and May 31, 2023 is $150,000 restricted cash representing a security deposit for the threeCompany’s United States manufacturing and six months ended November 30, 2017 and 2016 (in thousands):
Three Months Ended | Six Months Ended | |||
November 30, | November 30, | |||
2017 | 2016 | 2017 | 2016 | |
Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights, included in: | ||||
Cost of sales | $57 | $23 | $79 | $47 |
Selling, general and administrative | 218 | 141 | 368 | 388 |
Research and development | 89 | 51 | 133 | 99 |
Total stock-based compensation | $364 | $215 | $580 | $534 |
Three Months Ended | Six Months Ended | |||
November 30, | November 30, | |||
2017 | 2016 | 2017 | 2016 | |
Expected term (in years) | 4 | 4 | 4 | 4 |
Volatility | 0.74 | 0.81 | 0.77 | 0.81 |
Risk-free interest rate | 1.92% | 1.10% | 1.77% | 1.02% |
Weighted average grant date fair value | $1.93 | $1.66 | $2.22 | $1.09 |
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 |
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 |
Three Months Ended | Six Months Ended | |||
November 30, | November 30, | |||
2017 | 2016 | 2017 | 2016 | |
Numerator: Net income (loss) | $60 | $(1,452) | $70 | $(2,207) |
Denominator for basic net income (loss) per share: | ||||
Weighted average shares outstanding | 21,645 | 16,029 | 21,531 | 14,673 |
Shares used in basic net income (loss) per share calculation | 21,645 | 16,029 | 21,531 | 14,673 |
Effect of dilutive securities | 1,238 | -- | 1,406 | -- |
Denominator for diluted net income (loss) per share | 22,883 | 16,029 | 22,937 | 14,673 |
Basic net income (loss) per share | $0.00 | $(0.09) | $0.00 | $(0.15) |
Diluted net income (loss) per share | $0.00 | $(0.09) | $0.00 | $(0.15) |
The following table summarizes the Company’s cash, cash equivalents and investments by security type at November 30, 2017 (in thousands):
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 |
Balances as of August 31, 2023 |
|
|
|
| Gross Unrealized |
|
| Estimated |
| |||
(In thousands) |
| Cost |
|
| Loss |
|
| Fair Value |
| |||
Cash |
| $ | 2,130 |
|
| $ | - |
|
| $ | 2,130 |
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 48,825 |
|
| $ | - |
|
| $ | 48,825 |
|
Total cash and cash equivalents |
| $ | 50,955 |
|
| $ | - |
|
| $ | 50,955 |
|
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 150 |
|
| $ | - |
|
| $ | 150 |
|
Total cash, cash equivalents and investments |
| $ | 51,105 |
|
| $ | - |
|
| $ | 51,105 |
|
|
|
|
| Gross |
|
|
| |||||
Balances as of May 31, 2023 |
|
|
|
| Unrealized |
|
| Estimated |
| |||
(In thousands) |
| Cost |
|
| Loss |
|
| Fair Value |
| |||
Cash |
| $ | 3,182 |
|
| $ | - |
|
| $ | 3,182 |
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 26,872 |
|
| $ | - |
|
| $ | 26,872 |
|
Total cash and cash equivalents |
| $ | 30,054 |
|
| $ | - |
|
| $ | 30,054 |
|
Short term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
U. S. treasury securities |
| $ | 17,870 |
|
| $ | (17 | ) |
| $ | 17,853 |
|
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 150 |
|
| $ | - |
|
| $ | 150 |
|
Total cash, cash equivalents and investments |
| $ | 48,074 |
|
| $ | (17 | ) |
| $ | 48,057 |
|
Long-term investments are included in other assets on the accompanying condensed consolidated balance sheets. Unrealized gains and temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive income ("AOCI"),loss, net of any related tax effect. Upon realization, those amounts are reclassified from AOCIaccumulated other comprehensive loss to results of operations.
10 |
Table of Contents |
Inventories
Inventories consisted of the following three levels:
|
| August 31, |
|
| May 31, |
| ||
(In thousands) |
| 2023 |
|
| 2023 |
| ||
Raw materials and sub-assemblies |
| $ | 19,422 |
|
| $ | 15,953 |
|
Work in process |
|
| 9,617 |
|
|
| 5,764 |
|
Finished goods |
|
| 2,518 |
|
|
| 2,191 |
|
|
| $ | 31,557 |
|
| $ | 23,908 |
|
Property and require a high level of judgment to determine the fair value.
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 | $-- |
Property and six months.
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 | $-- |
|
| Useful life |
| August 31, |
|
| May 31, |
| ||
(In thousands) |
| (In years) |
| 2023 |
|
| 2023 |
| ||
Leasehold improvements |
| * |
| $ | 1,325 |
|
| $ | 1,310 |
|
Machinery and equipment |
| 3 - 6 |
|
| 5,787 |
|
|
| 5,445 |
|
Test equipment |
| 4 - 6 |
|
| 3,083 |
|
|
| 2,998 |
|
Furniture and fixtures |
| 2 - 6 |
|
| 725 |
|
|
| 706 |
|
|
|
|
|
| 10,920 |
|
|
| 10,459 |
|
Less: accumulated depreciation and amortization |
|
|
|
| (7,837 | ) |
|
| (7,700 | ) |
|
|
|
| $ | 3,083 |
|
| $ | 2,759 |
|
* Lesser of private companies, and may do so again in the future, as part of its business strategy.
November 30, | May 31, | |
2017 | 2017 | |
Raw materials and sub-assemblies | $5,020 | $4,268 |
Work in process | 2,970 | 2,059 |
Finished goods | 235 | 277 |
$8,225 | $6,604 |
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 |
Product warranties
The Company provides for the estimated cost of product warranties at the time revenues are recognized on the products shipped. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality 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 to the estimated warranty liability would be required.
The following is a summary of changes in the Company's liability for product warranties during the three and six months ended November 30, 2017August 31, 2023 and 2016 (in thousands):
Three Months Ended | Six Months Ended | |||
November 30, | November 30, | |||
2017 | 2016 | 2017 | 2016 | |
Balance at the beginning of the period | $119 | $90 | $113 | $155 |
Accruals for warranties issued during the period | 152 | 11 | 246 | 11 |
Accruals and adjustments (change in estimates) related to pre-existing warranties during the period | -- | -- | -- | (54) |
Settlement made during the period (in cash or in kind) | (138) | (29) | (226) | (40) |
Balance at the end of the period | $133 | $72 | $133 | $72 |
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Balance at the beginning of the period |
| $ | 267 |
|
| $ | 410 |
|
Accruals for warranties issued during the period |
|
| 65 |
|
|
| 118 |
|
Adjustments to previously existing warrany accruals |
|
| - |
|
|
| 61 |
|
Consumption of reserves |
|
| (100 | ) |
|
| (165 | ) |
Balance at the end of the period |
| $ | 232 |
|
| $ | 424 |
|
The accrued warranty balance is included in accrued expenses on the accompanying condensed consolidated balance sheets.
Deferred revenue
Deferred revenue, short-term consisted of the following:
|
| August 31, |
|
| May 31, |
| ||
(In thousands) |
| 2023 |
|
| 2023 |
| ||
Customer deposits |
| $ | 2,008 |
|
| $ | 2,690 |
|
Deferred revenue |
|
| 4,106 |
|
|
| 132 |
|
|
| $ | 6,114 |
|
| $ | 2,822 |
|
11 |
Table of Contents |
4. INCOME
The Company is subject to U.S federal and state and foreign income taxes as a corporation. The Company’s tax provision and the resulting effective tax rate for the interim period is determined based upon its estimated annual effective tax rate adjusted for the effect of discrete items arising in that quarter. The Company recorded a provision for income taxes of $16,000 and $14,000 for the componentsthree months ended August 31, 2023 and 2022, respectively, which consisted primarily of AOCI, net of tax, were as follows (in thousands):
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 |
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 iswas more likely than not that certain deferred tax assets willwould 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.
5. BORROWING ARRANGEMENTS
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.
November 30, | May 31, | |
2017 | 2017 | |
Customer deposits | $2,755 | $3,264 |
Deferred revenue | 387 | 203 |
$3,142 | $3,467 |
On January 14, 2021, the Company entered into the First Amendment to Loan and Security Agreement (the “Amendment”) with SVB. The Amendment, among other things, extended the Revolving Line Maturity Date to July 14, 2021; provided, however, that if the Company achieved specified operating metrics on a consolidated basis on or prior to May 31, 2021 the Amended Revolving Line Maturity Date would be extended to January 13, 2022.
On January 11, 2022, the Company entered into the Second Amendment to the Loan and Security Agreement (the “Second Amendment”) with SVB. The Second Amendment, among other things, (A) increased the available amount of the Convertible Notesline up to April 10, 2019, decrease the conversion price from $2.65 per sharelesser of (i) $10 million or (ii) the available amount under the borrowing base, under a revolving line of credit, (B) allowed for borrowing up 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.
12 |
Table of Contents |
On January 10, 2023, the Company entered into the Third Amendment to the Loan and Security Agreement (the “Third Amendment”) with SVB. The Third Amendment, among other things, extends the Revolving Line Maturity Date to January 13, 2024, provided, however, that (i) if the Company submits a fiscal year 2024 plan of record that is generally acceptable to SVB, and (ii) the minimum net liquidity at the end of November 30, 2023 is at least $20.0 million, the Amended Revolving Line Maturity Date would be extended to January 13, 2025.
As of August 31, 2023, the Company had not drawn against the loan balance.
6. COMMITMENTS AND CONTINGENCIES
Commitments
As of August 31, 2023 and May 31, 2023, the Company had restricted money market funds of $150,000, held by a financial institution, representing a security deposit for its United States manufacturing and office space lease. This amount is included in other assets on the Convertible Notes is $2.30 per shareCondensed Consolidated Balance Sheets.
Purchase Obligations
The Company has purchase obligations to certain suppliers. In some cases, the products the Company purchases are unique and is subject to adjustment upon the occurrence of certain specified events. Holders may convert all or any parthave provisions against cancellation 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. order.
Contingencies
The Company may, from time to time, be involved in legal proceedings arising in the ordinary course of business. While there can be no assurances as to the ultimate outcome of any litigation involving the Company, management does not redeembelieve any pending legal proceedings will result in judgment or settlement that will have a material adverse effect on the Convertible Notes priorCompany’s consolidated financial position, results of operations or cash flows.
In the normal course of business to maturity.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and at November 30, 2017 there was no remaining balance available to be drawnthe unique facts and circumstances involved in each particular agreement. To date, payments made by the Company under these agreements have not had a material impact on the Credit Facility.
7. SHAREHOLDERS’ EQUITY
On August 25, 2021, the Board of Directors authorized management to take actions necessary for the execution of a $75 million shelf registration. A Registration Statement on Form S-3 was filed with the SEC on September 3, 2021. A Prospectus Supplement for an "At the Market" ("ATM") sale of $25 million of common stock was subsequently filed on September 17, 2021. On October 8, 2021, the Company executed the ATM offering by selling 1,696,729 shares of common stock at an average selling price of $14.73 per share. The Company’s obligations undergross proceeds to the Purchase Agreement are securedCompany were $25.0 million, before commission fees of $0.7 million and offering expenses of $0.3 million. Another Prospectus Supplement for an ATM sale of $25 million of common stock was subsequently filed on February 8, 2023. The Company partially executed the ATM offering by substantially allselling 208,917 shares of common stock at an average selling price of $34.78 per share. The gross proceeds to the Company were $7.3 million, before commissions of $0.2 million and offering expenses of $0.2 million. As of August 31, 2023, the remaining amount of the assets of the Company.
13 |
Table of Contents |
8. ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in the convergencecomponents of GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued an accounting standard update related toaccumulated other comprehensive loss, net of tax, were as follows (in thousands):
|
| Cumulative |
|
| Unrealized loss |
|
|
|
| |||
(In thousands) |
| translation adjustment |
|
| on investments, net |
|
| Total |
| |||
Balance as of May 31, 2023 |
| $ | (138 | ) |
| $ | (17 | ) |
| $ | (155 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (3 | ) |
|
| 17 |
|
|
| 14 |
|
Balance as of August 31, 2023 |
| $ | (141 | ) |
| $ | - |
|
| $ | (141 | ) |
9. REVENUE
Revenue recognition
The Company recognizes 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 ofwhen promised goods or services are transferred to customers in an amount that reflects what itthe consideration to which the Company expects to be entitled in exchange for thethose goods or services.services by following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.
Performance obligations include sales of systems, contactors, spare parts, and services, as well as installation and training services included in customer contracts. A contract’s transaction price is allocated to each distinct performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company generally does not grant return privileges, except for defective products during the warranty period.
For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to historical discounting trends for products and services and pricing practices in different geographies. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less.
The Company has elected the practical expedient to not assess whether a contract has a significant financing component as the Company’s standard also requirespayment terms are less than one year. The Company sells its products primarily through a direct sales force. In certain international markets, the Company sells its products through independent distributors.
Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to provide additional services.
Disaggregation of revenue
The following presents information about the Company’s net revenues in different geographic areas, which are based upon ship-to locations, and by product category:
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Asia |
| $ | 19,231 |
|
| $ | 7,808 |
|
United States |
|
| 789 |
|
|
| 2,863 |
|
Europe |
|
| 604 |
|
|
| - |
|
|
| $ | 20,624 |
|
| $ | 10,671 |
|
14 |
Table of Contents |
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Systems |
| $ | 8,093 |
|
| $ | 9,094 |
|
Contactors |
|
| 11,264 |
|
|
| 494 |
|
Services |
|
| 1,267 |
|
|
| 1,083 |
|
|
| $ | 20,624 |
|
| $ | 10,671 |
|
With the exception of the amount of service contracts and extended warranties, the Company’s product net revenues are recognized at a point in time when control transfers to the customer. The following presents net revenues based on timing of recognition:
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Timing of revenue recognition: |
|
|
|
|
|
| ||
Products and services transferred at a point in time |
| $ | 20,011 |
|
| $ | 10,254 |
|
Services transferred over time |
|
| 613 |
|
|
| 417 |
|
|
| $ | 20,624 |
|
| $ | 10,671 |
|
Contract balances
A receivable is recognized in the period the Company delivers goods or provides services or when the Company’s right to consideration is unconditional. The Company usually does not record contract assets because the Company has an unconditional right to payment upon satisfaction of the performance obligation, and therefore, a receivable is more detailed disclosurescommonly recorded than a contract asset.
Contract liabilities include payments received in advance of performance under a contract and provides additional guidance for transactionsare satisfied as the associated revenue is recognized. Contract liabilities are reported on the Condensed Consolidated Balance Sheets at the end of each reporting period as a component of deferred revenue. Contract liabilities as of August 31, 2023 and May 31, 2023 were $6.1 million and $2.9 million, respectively. During the three months ended August 31, 2023, the Company recognized $0.7 million of revenues that were not addressed completelyincluded in the prior accounting guidance. The standard provides alternative methodscontract liabilities as of initial adoption and will become effective forMay 31, 2023.
Remaining performance obligations
On August 31, 2023, 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, disclosurehad $0.1 million of remaining performance obligations, which were comprised of deferred service contracts and prior period obligations, contract modifications, and contract asset versus receivable.extended warranty contracts not yet delivered. The Company is currently evaluating the impactexpects to recognize approximately 72% of adopting this new guidance on its consolidated financial statements.
Costs to obtain or fulfill a contract
The Company generally expenses sales commissions when incurred as a component of selling, general and administrative expenses as the amortization period is typically less than one year. Additionally, the majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory and fixed assets, which are accounted for under the respective guidance for those asset types. Other costs of completion, disposal, and transportation. The Company adopted this new standard in fiscal year 2018. The adoptioncontract fulfillment are immaterial due to the nature of this guidance does not have a significant impact on the Company’s consolidated financial statements.
10. STOCK-BASED COMPENSATION
Stock-based compensation expense consists 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 impactexpenses for stock options, restricted stock units (“RSUs”), performance RSUs, or PRSUs, restricted shares, performance restricted shares and employee stock purchase plan, or ESPP, purchase rights. Stock-based compensation expense for stock options and ESPP purchase rights is measured at each grant date, based on the Company’s consolidated financial statements.
15 |
Table of Contents |
The following table summarizes the stock-based compensation expense for the three months ended August 31, 2023 and disclosure requirements for financial instruments. In addition, it clarifies guidance related to2022:
|
| Three Months Ended August 31, |
| |||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||
Cost of sales |
| $ | 63 |
|
| $ | 91 |
|
Research and development |
|
| 153 |
|
|
| 154 |
|
Selling, general and administrative |
|
| 306 |
|
|
| 465 |
|
|
| $ | 522 |
|
| $ | 710 |
|
There were $149,000 and $120,000 in stock-based compensation expense capitalized as part of inventory as of August 31, 2023 and as of May 31, 2023, respectively.
There were no options granted during the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This standardthree months ended August 31, 2023. There were no ESPP purchase rights granted during the three months ended August 31, 2023 and 2022.
Nonvested restricted stock units activity during the three months ended August 31, 2023, was as follows:
|
|
|
|
| Weighted |
| ||
|
|
|
| Average Grant |
| |||
|
|
|
|
| Date Fair |
| ||
|
| Shares |
|
| Value |
| ||
|
| (in thousands) |
|
| Per Share |
| ||
Unvested May 31, 2023 |
|
| 345 |
|
| $ | 6.40 |
|
Granted |
|
| - |
|
|
|
|
|
Vested |
|
| (77 | ) |
|
| 7.16 |
|
Forfeited |
|
| (52 | ) |
|
| 5.79 |
|
Unvested August 31, 2023 |
|
| 216 |
|
| $ | 6.27 |
|
11. NET INCOME PER SHARE
Basic net income per share is effective for us in fiscal year 2020. Early adoptiondetermined using the weighted average number of common shares outstanding during the period. Diluted net income per share is permitted.determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, unvested RSUs, and ESPP shares) outstanding during the period using the treasury stock method. The Company is currently evaluatingfollowing table presents the impactcomputation of this new guidance on its consolidated financial statements.
|
| Three Months Ended August 31, |
| |||||
(In thousands, except per share data) |
| 2023 |
|
| 2022 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net income |
| $ | 4,674 |
|
| $ | 589 |
|
Denominator: |
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
| 28,649 |
|
|
| 27,242 |
|
Dilutive effect of common equivalent shares outstanding |
|
| 983 |
|
|
| 1,546 |
|
Diluted weighted average shares outstanding |
|
| 29,632 |
|
|
| 28,788 |
|
|
|
|
|
|
|
|
|
|
Net income per share - Basic |
| $ | 0.16 |
|
| $ | 0.02 |
|
Net income per share - Diluted |
| $ | 0.16 |
|
| $ | 0.02 |
|
16 |
Table of Contents |
For the FASB issued authoritative guidance related to leases. This guidance requires management to present all leasespurpose of computing diluted net income per share, weighted average potential common shares do not include stock options with an exercise price greater than one year on the balance sheet as a liability to make payments and an assetaverage fair value of the Company’s common stock for the period, as the righteffect would be anti-dilutive. Stock options to usepurchase 2,000 and 152,000 shares of common stock were outstanding as of August 31, 2023 and 2022, respectively, but were not included in the underlying assetcomputation of diluted net income per share, because the inclusion of such shares would be anti-dilutive.
12. SEGMENT AND CONCENTRATION INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in deciding how to allocate resources and in assessing performance.
The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis 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 impactpurposes of adopting this new guidance on its consolidatedregularly making operating decisions and assessing financial statements.
Long-lived 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.
|
| August 31, |
|
| May 31, |
| ||
(In thousands) |
| 2023 |
|
| 2023 |
| ||
United States |
| $ | 3,041 |
|
| $ | 2,713 |
|
International |
|
| 42 |
|
|
| 46 |
|
Total long-lived assets, net |
| $ | 3,083 |
|
| $ | 2,759 |
|
17 |
Table of Contents |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of theour 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 and the consolidated financial statements and notes thereto.
Overview
Aehr Test Systems is a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor industry. Since our inception, wedevices in wafer level, singulated die, and package part form, and has installed thousands of systems worldwide. Increasing quality, reliability, safety, and security needs of semiconductors used across multiple applications, including electric vehicles, electric vehicle charging infrastructure, solar and wind power, computing, data and telecommunications infrastructure, and solid-state memory and storage, are driving additional test requirements, incremental capacity needs, and new opportunities for Aehr Test products and solutions.
We have sold more than 2,500 systems to semiconductor manufacturers, semiconductor contract assemblersdeveloped and introduced several innovative products including the FOX-P family of test and burn-in systems and test service companies worldwide. Our principal products currentlyFOX WaferPak Aligner, FOX WaferPak Contactor, FOX DiePak Carrier and FOX DiePak Loader. The FOX-XP and FOX-NP systems are the Advanced Burn-in and Test System, or ABTS, the FOX full wafer contact paralleland singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and other power semiconductors, 2D and 3D sensors used in mobile phones, tablets, and other computing devices, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices. The FOX-CP system is a low-cost single-wafer compact test solution for logic, memory and photonic devices and the newest addition to the FOX-P product family. The FOX WaferPak contactors,Contactor contains a unique full wafer contactor capable of testing wafers up to 300mm that enables Integrated Circuit manufacturers to perform test, burn-in, and stabilization of full wafers on the FOX-P systems. The FOX DiePak carrierCarrier allows testing, burning in, and test fixtures.
Our net sales consistrevenue consists primarily of sales of FOX-P systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak Carriers,carriers, test fixtures, upgrades and spare parts, revenues from service contracts revenues, and non-recurring 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 Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidatedCondensed 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 consolidatedCondensed 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,credit losses, 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.
There have been no material changes to our critical accounting policies and estimates during the sixthree months ended November 30, 2017August 31, 2023 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2017.
18 |
Table of Contents |
Results of operations as a percentageOperations
Discussion of net salesResults of Operations for the periods indicated.
Three Months Ended | Six Months Ended | |||
November 30, | November 30, | |||
2017 | 2016 | 2017 | 2016 | |
Net sales | 100.0% | 100.0% | 100.0% | 100.0% |
Cost of sales | 60.5 | 65.3 | 59.4 | 61.5 |
Gross profit | 39.5 | 34.7 | 40.6 | 38.5 |
Operating expenses: | ||||
Selling, general and administrative | 23.4 | 40.5 | 24.5 | 35.9 |
Research and development | 13.7 | 24.7 | 13.7 | 22.0 |
Total operating expenses | 37.1 | 65.2 | 38.2 | 57.9 |
Income (loss) from operations | 2.4 | (30.5) | 2.4 | (19.4) |
Interest expense, net | (1.3) | (4.3) | (1.4) | (3.8) |
Other (expense) income, net | (0.2) | 1.1 | (0.5) | 0.4 |
Income (loss) before income tax expense | 0.9 | (33.7) | 0.5 | (22.8) |
Income tax expense | (0.1) | (0.7) | -- | (0.3) |
Net income (loss) | 0.8 | (34.4) | 0.5 | (23.1) |
Less: Net income attributable to the noncontrolling interest | -- | -- | -- | -- |
Net income (loss) attributable to Aehr Test Systems common shareholders | 0.8% | (34.4)% | 0.5% | (23.1)% |
Revenues
Revenue by Category |
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Products |
| $ | 19,357 |
|
| $ | 9,588 |
|
|
| 102 | % |
Services |
|
| 1,267 |
|
|
| 1,083 |
|
|
| 17 | % |
Total revenues |
| $ | 20,624 |
|
| $ | 10,671 |
|
|
| 93 | % |
Products as a percentage of total revenues |
|
| 93.9 | % |
|
| 89.9 | % |
|
|
|
|
Services as a percentage of total revenues |
|
| 6.1 | % |
|
| 10.1 | % |
|
|
|
|
Revenue increased to $7.9$20.6 million for the three months ended November 30, 2017August 31, 2023 from $4.2$10.7 million for the three months ended November 30, 2016, an increase of 87.9%. The increaseAugust 31, 2022. Our contactor revenue increased by $10.8 million and our service revenue increased by $0.2 million, partially offset by a $1.0 million decrease in net sales forour system revenues.
Revenue by Geography |
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Asia |
| $ | 19,231 |
|
| $ | 7,808 |
|
|
| 146 | % |
United States |
|
| 789 |
|
|
| 2,863 |
|
| (72 | )% | |
Europe |
| $ | 604 |
|
| $ | - |
|
|
| 100 | % |
Total revenues |
| $ | 20,624 |
|
| $ | 10,671 |
|
|
| 93 | % |
Asia as a percentage of total revenues |
|
| 93.3 | % |
|
| 73.2 | % |
|
|
|
|
United States as a percentage of total revenues |
|
| 3.8 | % |
|
| 26.8 | % |
|
|
|
|
Europe as a percentage of total revenues |
|
| 2.9 | % |
|
| 0.0 | % |
|
|
|
|
On a geographic basis, revenues represent products that were shipped to or services that were performed at our customer locations. For the three months period ended November 30, 2017 was primarily dueAugust 31, 2023, international revenues significantly increased, compared to the increasessame period in both net sales of our Test During Burn-in (TDBI) products and wafer-level products. Net salesthe prior year, primarily as a result of the TDBI products forshipments to our main customer in Asia, partially offset by the three months ended November 30, 2017 were $5.1 million, and increased approximately $2.4 milliondecline in net revenue from a customer in 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.
Gross Margin
Gross Profit by Category |
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Products |
| $ | 9,438 |
|
| $ | 4,239 |
|
|
| 123 | % |
Services |
|
| 543 |
|
|
| 242 |
|
|
| 124 | % |
Gross profit |
| $ | 9,981 |
|
| $ | 4,481 |
|
|
| 123 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin by Category |
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
| 48.8 | % |
|
| 44.2 | % |
|
|
|
|
Services |
|
| 42.9 | % |
|
| 22.3 | % |
|
|
|
|
Gross margin |
|
| 48.4 | % |
|
| 42.0 | % |
|
|
|
|
19 |
Table of Contents |
Gross profit increased to $3.1$10.0 million for the three months ended November 30, 2017August 31, 2023 from $4.5 million for the three months ended August 31, 2022. Gross margin increased to 48.4% for the three months ended August 31, 2023 from 42.0% for the three months ended August 31, 2022. The increase in gross margin of 6.4 percentage points was primarily due to the increased sales of higher margin contactor products, as well as a reduction in manufacturing overhead due to higher production rates for future sales.
Research and Development
|
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Research and development |
| $ | 2,457 |
|
| $ | 1,498 |
|
|
| 64 | % |
As a percentage of total revenues |
|
| 11.9 | % |
|
| 14.0 | % |
|
|
|
|
Research and development expenses consist primarily of personnel-related costs to support product development activities, including compensation and benefits, outside development services, travel, facilities cost allocations, and stock-based compensation charges. Research and development expenses increased to $2.5 million for the three months ended August 31, 2023, compared to $1.5 million for the three months ended November 30, 2016, anAugust 31, 2022. The increase of 114.0%. Gross profit margin increased to 39.5% for the three months ended November 30, 2017 from 34.7% for the three months ended November 30, 2016. The increase in gross profit margin$1.0 million was primarilymostly due to manufacturing efficiencies due tonon-recurring engineering services charges for $0.6 million, an increase in net sales resulting in a 6.7% gross profit margin increase, partially offset byrecruiting fees for $0.2 million and an increase in warranty provision resultingemployment costs due to bonus/other compensation for $0.2 million. We anticipate our expenses in research and development will fluctuate in absolute dollars from period to period as a 1.7% decrease in gross profit margin.
Selling, General and Administrative
|
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Selling, general and administrative |
| $ | 3,409 |
|
| $ | 2,525 |
|
|
| 35 | % |
As a percentage of total revenues |
|
| 16.5 | % |
|
| 23.7 | % |
|
|
|
|
Selling, general and administrative expenses consist primarily of compensation and benefits for sales, marketing and general and administrative personnel, legal and accounting services, marketing communications, travel and facilities cost allocations, and stock-based compensation charges. Selling, general and administrative expenses increased to $1.9$3.4 million for the three months ended November 30, 2017 from $1.7August 31, 2023, compared to $2.5 million for the three months ended November 30, 2016,August 31, 2022. The increase of $0.9 million was mostly due to headcount increase, higher employee-related compensation expense for $0.6 million and increased audit and professional fees for $0.2 million.
Interest and Other Income (Expense), Net
|
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Interest income |
| $ | 581 |
|
| $ | 121 |
|
|
| 380 | % |
Other income (expense), net |
|
| (6 | ) |
|
| 24 |
|
| (125 | %) | |
Interest and other income (expense), net |
| $ | 575 |
|
| $ | 145 |
|
|
| 297 | % |
Interest and other income (expense), net, primarily consists of interest income and foreign currency transaction exchange gain (loss). Interest and other income (expense), net, increased for the three months ended August 31, 2023, compared to the year-ago period primarily due to net favorable interest income due to higher yields from our investments in money market funds.
Provision for Income Taxes
|
| Three Months Ended August 31, |
|
| Percent |
| ||||||
(Dollars in thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Provision for income taxes |
| $ | 16 |
|
| $ | 14 |
|
|
| 14 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense was not significant due to the available net operating losses and research and development credits carryforwards.
20 |
Table of Contents |
Liquidity and Capital Resources
Cash, cash equivalents, restricted cash and short-term investments were $51.1 million as of August 31, 2023, compared to $48.1 million as of May 31, 2023. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.
|
| Three Months Ended August 31, |
|
|
|
| ||||||
(In thousands) |
| 2023 |
|
| 2022 |
|
| Change |
| |||
Operating activities |
| $ | 3,901 |
|
| $ | 5,461 |
|
| $ | (1,560 | ) |
Investing activities |
|
| 17,716 |
|
|
| (84 | ) |
|
| 17,800 |
|
Financing activities |
|
| (694 | ) |
|
| (724 | ) |
|
| 30 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (22 | ) |
|
| 10 |
|
|
| (32 | ) |
Net increase in cash, cash equivalents and restricted cash |
| $ | 20,901 |
|
| $ | 4,663 |
|
| $ | 16,238 |
|
Net Cash Flows Provided by Operating Activities
Cash flow from operating activities during the three months ended August 31, 2023 mostly consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, share-based compensation expense and non-cash lease expenses. The $1.6 million decrease in cash flows from operating activities for the three months ended August 31, 2023, compared to the year-ago period, was driven primarily by an increase of 8.6%. The increase in SG&A expenses was primarilycash used in inventory production for $5.4 million due to anticipated customer demand, a decrease in cash provided by accounts receivable due to an increase in employment related expenses.
Net Cash Flows Provided by (Used in) Investing Activities
Net cash provided by investing activities increased to $1.1by $18.0 million for the three months ended November 30, 2017 from $1.0 millionAugust 31, 2023 compared for the year-ago period. The increase was primarily due to the maturity of our short-term investments, currently invested in our money market accounts.
Net Cash Flows Used in Financing Activities
Net cash used in financing activities was flat for the three months ended November 30, 2016, an increase of 4.8%. The increase in R&D expenses was primarily dueAugust 31, 2023, compared to an increase in employment related expenses.
Off-Balance Sheet Agreements
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 and expires in June 2018. Under the lease agreement, we are responsible for payments of utilities, taxes and insurance.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As a material effect on our financial position, results of operations or cash flows.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, evaluated, with the participation of our Chief Executive Officerchief executive officer, or CEO, and our Chief Financial Officer,chief financial officer, or CFO, evaluated the effectiveness of our disclosure"disclosure controls and procedures,procedures" as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of August 31, 2023, in connection with the endfiling of the period covered by this Quarterly Report on Form 10-Q. Based on thisthat evaluation as of August 31, 2023, our Chief Executive OfficerCEO and our Chief Financial Officer haveCFO concluded that our disclosure controls and procedures arewere 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 of the SEC and that such information is accumulated and communicated to our management as appropriate to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There waswere no changechanges in ourthe Company's 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-Qthree months ended August 31, 2023, that hashave materially affected, or isare reasonably likely to materially affect, ourthe Company's internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are subject to various claims and Chief Financial Officer, doeslegal proceedings that arise in the ordinary course of business. We accrue for losses related to litigation when a potential loss is probable and the loss can be reasonably estimated in accordance with FASB requirements. During the reported period, we were not expect that our disclosure controlsa party to any material legal proceedings, thus no loss was probable and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectivesamount was accrued as of August 31, 2023.
Item 1A. Risk Factors
Item 1A, “Risk Factors,” on pages 10 through 16 of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
Not Applicable
Item 5. OTHER INFORMATION
None.
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Item 6. Exhibits
Exhibit Number | Description | ||
101.INS | XBRL Instance | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
1 | Incorporated by reference to the same-numbered exhibit previously filed with the Company’s Registration Statement on Form S-1 filed June 11, 1997 (File No. 333-28987). |
2
Incorporated by reference to Exhibit 3.1 previously filed with the Company’s Current Report on Form 8-K filed September 9, 2020 (File No. 000-22893).
3
Incorporated by reference to the same-numbered exhibit previously filed with Amendment No.1 to the Company’s Registration Statement on Form S-1 filed July 17, 1997 (File No. 333-28987).
†
Filed herewith.
**
Furnished, and not filed.
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SIGNATURES
Pursuant to Exhibit No. 3.1 previously filed with the Company’s Current Report on Form 8-K filed October 31, 2017 (File No. 000-22893).
AEHR TEST SYSTEMS | |||
Date: October 13, 2023 | By: | /s/ GAYN ERICKSON | |
Gayn Erickson | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) |
Date: October 13, 2023 | By: | /s/ CHRIS P. SIU | |
Chris P. Siu | |||
Executive Vice President of Finance, Chief Financial Officer and Secretary | |||
(Principal Financial and Accounting Officer) |
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