UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR |
For the quarterly period ended August 31, 2023 |
For the quarterly period ended February 28, 2023or
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR |
For the transition period from _______________ to ______________ |
For the transition period from _________ to __________
Commission file number: File Number 000-22893
AEHR TEST SYSTEMS |
|
California |
| 94-2424084 |
(State or |
| (I.R.S. Employer Identification No.) |
| ||
|
| |
400 Kato Terrace, | ||
Fremont, CA |
| 94539 |
|
| (Zip Code) |
|
(510) 623-9400
(Registrant's telephone number, including area code)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 $0.01 per share | 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 that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☒ No ☐
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 accelerated filer,” “accelerated filer,” “smaller reporting company,”company” and “emerging growth 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).
Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
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|
Number ofThere were 28,799,313 shares of the registrant’s common stock, $0.01 par value,Registrant’s Common Stock outstanding as of March 31, 2023 was 28,338,209.October 9, 2023.
| 1 |
AEHR TEST SYSTEMSTABLE OF CONTENTS
FORM 10-Q
FOR THE QUARTER ENDED FEBRUARY 28, 2023
INDEX
| 2 |
| Table of Contents |
PART I.I — FINANCIAL INFORMATION
Item 1.1. Financial StatementsFINANCIAL STATEMENTS (Unaudited)
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) |
|
|
|
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|
|
|
|
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 as of May 31, 2023 has been derived from the audited consolidated financial statements at that date.
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
|
| February 28, |
|
| May 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
| (1) | ||
ASSETS |
|
|
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
| |
Cash and cash equivalents |
| $ | 17,188 |
|
| $ | 31,484 |
|
Short-term investments |
|
| 25,577 |
|
|
| - |
|
Trade and other accounts receivable, net |
|
| 11,389 |
|
|
| 12,859 |
|
Inventories |
|
| 21,619 |
|
|
| 15,051 |
|
Prepaid expenses and other current assets |
|
| 808 |
|
|
| 613 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
| 76,581 |
|
|
| 60,007 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 1,281 |
|
|
| 1,203 |
|
Operating lease right-of-use assets |
|
| 6,293 |
|
|
| 917 |
|
Other assets |
|
| 241 |
|
|
| 201 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 84,396 |
|
| $ | 62,328 |
|
|
|
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|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 4,988 |
|
|
| 4,195 |
|
Accrued expenses |
|
| 3,489 |
|
|
| 3,610 |
|
Operating lease liabilities, short-term |
|
| 68 |
|
|
| 794 |
|
Customer deposits and deferred revenue, short-term |
|
| 843 |
|
|
| 2,415 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
| 9,388 |
|
|
| 11,014 |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities, long-term |
|
| 6,324 |
|
|
| 212 |
|
Deferred revenue, long-term |
|
| 8 |
|
|
| 69 |
|
Other long-term liabilities |
|
| 42 |
|
|
| 44 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 15,762 |
|
|
| 11,339 |
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|
|
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|
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Shareholders' equity: |
|
|
|
|
|
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|
|
Common stock, $0.01 par value: Authorized: 75,000 shares; Issued and outstanding: 28,320 shares and 27,120 shares as of February 28, 2023 and May 31, 2022, respectively |
|
| 283 |
|
|
| 271 |
|
Additional paid-in capital |
|
| 126,930 |
|
|
| 117,686 |
|
Accumulated other comprehensive loss |
|
| (162 | ) |
|
| (105 | ) |
Accumulated deficit |
|
| (58,417 | ) |
|
| (66,863 | ) |
|
|
|
|
|
|
|
|
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Total shareholders' equity |
|
| 68,634 |
|
|
| 50,989 |
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|
|
|
|
|
|
|
|
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Total liabilities and shareholders' equity |
| $ | 84,396 |
|
| $ | 62,328 |
|
|
|
TheSee accompanying notes are an integral part of these condensed consolidated financial statements.Notes to Condensed Consolidated Financial Statements (unaudited)
| 3 |
| Table of Contents |
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
AEHR TEST SYSTEMS | AEHR TEST SYSTEMS | |||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
|
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|
| February 28, |
| February 28, |
|
| Three Months Ended August 31, |
| ||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
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| 2022 |
| ||||||||||||
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Net sales |
| $ | 17,206 |
| $ | 15,283 |
| $ | 42,692 |
| $ | 30,540 |
| |||||||||||
Cost of sales |
|
| 8,331 |
|
|
| 8,886 |
|
|
| 21,425 |
|
|
| 17,343 |
| ||||||||
(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 |
|
| 8,875 |
|
|
| 6,397 |
|
|
| 21,267 |
|
|
| 13,197 |
|
| 9,981 |
| 4,481 |
| |||
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| |||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Research and development |
| 2,457 |
| 1,498 |
| |||||||||||||||||||
Selling, general and administrative |
| 3,250 |
| 2,612 |
| 8,650 |
| 7,054 |
|
|
| 3,409 |
|
|
| 2,525 |
| |||||||
Research and development |
|
| 1,832 |
|
|
| 1,529 |
|
|
| 4,881 |
|
|
| 4,163 |
| ||||||||
Total operating expenses |
|
| 5,082 |
|
|
| 4,141 |
|
|
| 13,531 |
|
|
| 11,217 |
|
|
| 5,866 |
|
|
| 4,023 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Income from operations |
| 3,793 |
| 2,256 |
| 7,736 |
| 1,980 |
|
| 4,115 |
| 458 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest income (expense), net |
| 374 |
| 1 |
| 758 |
| (9 | ) | |||||||||||||||
Gain from forgiveness of PPP loan |
| - |
| - |
| - |
| 1,698 |
| |||||||||||||||
Other (expense) income, net |
|
| (18 | ) |
|
| 10 |
|
|
| 1 |
|
|
| 68 |
| ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Income before income tax expense |
| 4,149 |
| 2,267 |
| 8,495 |
| 3,737 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Income tax expense |
|
| (17 | ) |
|
| (24 | ) |
|
| (49 | ) |
|
| (81 | ) | ||||||||
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 |
| $ | 4,132 |
|
| $ | 2,243 |
|
| $ | 8,446 |
|
| $ | 3,656 |
|
| $ | 4,674 |
|
| $ | 589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Earnings per share |
|
|
|
|
|
|
|
|
| |||||||||||||||
Net income per share: |
|
|
|
|
| |||||||||||||||||||
Basic |
| $ | 0.15 |
| $ | 0.08 |
| $ | 0.31 |
| $ | 0.14 |
|
| $ | 0.16 |
| $ | 0.02 |
| ||||
Diluted |
| $ | 0.14 |
| $ | 0.08 |
| $ | 0.29 |
| $ | 0.13 |
|
| $ | 0.16 |
| $ | 0.02 |
| ||||
|
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|
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|
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|
|
|
| |||||||||||||||
Shares used in per share calculations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic |
| 27,893 |
| 26,871 |
| 27,571 |
| 25,684 |
|
| 28,649 |
| 27,242 |
| ||||||||||
Diluted |
| 29,373 |
| 28,854 |
| 29,080 |
| 27,510 |
|
| 29,632 |
| 28,788 |
| ||||||||||
TheSee accompanying notes are an integral part of these condensed consolidated financial statements.Notes to Condensed Consolidated Financial Statements (unaudited)
| 4 |
| Table of Contents |
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
AEHR TEST SYSTEMS | AEHR TEST SYSTEMS | |||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
|
| ||||||||||||||||||
|
| February 28, |
| February 28, |
|
| Three Months Ended August 31, |
| ||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
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|
|
|
|
|
| |||||||||||||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||||||||||||||||||
Net income |
| $ | 4,132 |
| $ | 2,243 |
| $ | 8,446 |
| $ | 3,656 |
|
| $ | 4,674 |
| $ | 589 |
| ||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Other comprehensive (loss) income before reclassification: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Other comprehensive income (loss), net of tax: |
|
|
|
|
| |||||||||||||||||||
Net change in cumulative translation adjustment |
| (3 | ) |
| (45 | ) | ||||||||||||||||||
Net change in unrealized loss on investments |
| (16 | ) |
| - |
| (22 | ) |
| - |
|
|
| 17 |
|
|
| - |
| |||||
Net change in cumulative translation adjustments |
|
| 9 |
|
|
| (23 | ) |
|
| (35 | ) |
|
| (103 | ) | ||||||||
Other comprehensive loss, net of tax |
|
| (7 | ) |
|
| (23 | ) |
|
| (57 | ) |
|
| (103 | ) | ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Comprehensive income |
| $ | 4,125 |
|
| $ | 2,220 |
|
| $ | 8,389 |
|
| $ | 3,553 |
|
| $ | 4,688 |
|
| $ | 544 |
|
TheSee accompanying notes are an integral part of these condensed consolidated financial statements.Notes to Condensed Consolidated Financial Statements (unaudited)
| 5 |
| Table of Contents |
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
AEHR TEST SYSTEMS | ||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
|
|
|
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|
|
|
| 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 |
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
| Additional |
| Other |
|
| Total |
|
|
|
|
|
| Additional |
| Other |
|
| Total |
| ||||||||||||||||||||||||||
|
| Common Stock |
| Paid-in |
| Comprehensive |
| Accumulated |
| Shareholders' |
|
| Common Stock |
| Paid-in |
| Comprehensive |
| Accumulated |
| Shareholders' |
| ||||||||||||||||||||||||||
Three Months Ended February 28, 2023 |
| Shares |
|
| Amount |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
| ||||||||||||||||||||||||||||||
Balances, November 30, 2022 |
| 27,732 |
| $ | 277 |
| $ | 119,094 |
| $ | (155 | ) |
| $ | (62,549 | ) |
| $ | 56,667 |
| ||||||||||||||||||||||||||||
(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 |
| 395 |
| 4 |
| 849 |
| - |
| - |
| 853 |
|
| 422 |
| 4 |
| 451 |
| - |
| - |
| 455 |
| ||||||||||||||||||||||
Shares repurchased for tax withholdings on vesting of restricted stock units |
| (16 | ) |
| - |
| (464 | ) |
| - |
| - |
| (464 | ) |
| (147 | ) |
| (1 | ) |
| (1,178 | ) |
| - |
| - |
| (1,179 | ) | |||||||||||||||||
Proceeds from public offerings, net of issuance costs |
| 209 |
| 2 |
| 6,851 |
| - |
| - |
| 6,853 |
| |||||||||||||||||||||||||||||||||||
Stock-based compensation |
| - |
| - |
| 600 |
| - |
| - |
| 600 |
|
| - |
| - |
| 709 |
| - |
| - |
| 709 |
| ||||||||||||||||||||||
Net income |
| - |
| - |
| - |
| - |
| 4,132 |
| 4,132 |
|
| - |
| - |
| - |
| - |
| 589 |
| 589 |
| ||||||||||||||||||||||
Net unrealized loss on investments |
| - |
| - |
| - |
| (16 | ) |
| - |
| (16 | ) | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9 |
|
|
| - |
|
|
| 9 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (45 | ) |
|
| - |
|
|
| (45 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Balances, February 28, 2023 |
|
| 28,320 |
|
| $ | 283 |
|
| $ | 126,930 |
|
| $ | (162 | ) |
| $ | (58,417 | ) |
| $ | 68,634 |
| ||||||||||||||||||||||||
Balances, August 31, 2022 |
|
| 27,395 |
|
| $ | 274 |
|
| $ | 117,668 |
|
| $ | (150 | ) |
| $ | (66,274 | ) |
| $ | 51,518 |
| ||||||||||||||||||||||||
|
|
|
| Accumulated |
|
|
|
|
| |||||||||||||||
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
| Total |
| |||||||||
|
| Common Stock |
|
| Paid-in |
|
| Comprehensive |
|
| Accumulated |
|
| Shareholders' |
| |||||||||
Nine Months Ended February 28, 2023 |
| Shares |
|
| Amount |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
| ||||||
Balances, May 31, 2022 |
|
| 27,120 |
|
| $ | 271 |
|
| $ | 117,686 |
|
| $ | (105 | ) |
| $ | (66,863 | ) |
| $ | 50,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee plans |
|
| 1,156 |
|
|
| 11 |
|
|
| 1,954 |
|
|
| - |
|
|
| - |
|
|
| 1,965 |
|
Shares repurchased for tax withholdings on vesting of restricted stock units |
|
| (165 | ) |
|
| (1 | ) |
|
| (1,679 | ) |
|
| - |
|
|
| - |
|
|
| (1,680 | ) |
Proceeds from public offerings, net of issuance costs |
|
| 209 |
|
|
| 2 |
|
|
| 6,851 |
|
|
| - |
|
|
| - |
|
|
| 6,853 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| 2,118 |
|
|
| - |
|
|
| - |
|
|
| 2,118 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 8,446 |
|
|
| 8,446 |
|
Net unrealized loss on investments |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (22 | ) |
|
| - |
|
|
| (22 | ) |
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (35 | ) |
|
| - |
|
|
| (35 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, February 28, 2023 |
|
| 28,320 |
|
| $ | 283 |
|
| $ | 126,930 |
|
| $ | (162 | ) |
| $ | (58,417 | ) |
| $ | 68,634 |
|
See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)
| 6 |
| Table of Contents |
|
|
|
|
|
|
|
| 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 |
|
|
| - |
|
|
| - |
|
|
| 26 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| 880 |
|
|
| - |
|
|
| - |
|
|
| 880 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,243 |
|
|
| 2,243 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (23 | ) |
|
| - |
|
|
| (23 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, February 28, 2022 |
|
| 26,914 |
|
| $ | 269 |
|
| $ | 116,507 |
|
| $ | (131 | ) |
| $ | (72,657 | ) |
| $ | 43,988 |
|
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 |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||||||||
|
|
|
| Additional |
|
| Other |
|
|
|
|
| Total |
| ||||||||||
|
| Common Stock |
|
| Paid-in |
|
| Comprehensive |
|
| Accumulated |
|
| Shareholders' |
| |||||||||
Nine Months Ended February 28, 2022 |
| Shares |
|
| Amount |
|
| Capital |
|
| Loss |
|
| Deficit |
|
| Equity |
| ||||||
Balances, May 31, 2021 |
|
| 23,725 |
|
| $ | 237 |
|
| $ | 87,553 |
|
| $ | (28 | ) |
| $ | (76,313 | ) |
| $ | 11,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee plans |
|
| 1,492 |
|
|
| 15 |
|
|
| 2,755 |
|
|
| - |
|
|
| - |
|
|
| 2,770 |
|
Proceeds from public offerings, net of issuance costs |
|
| 1,697 |
|
|
| 17 |
|
|
| 24,013 |
|
|
| - |
|
|
| - |
|
|
| 24,030 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| 2,186 |
|
|
| - |
|
|
| - |
|
|
| 2,186 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,656 |
|
|
| 3,656 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (103 | ) |
|
| - |
|
|
| (103 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, February 28, 2022 |
|
| 26,914 |
|
| $ | 269 |
|
| $ | 116,507 |
|
| $ | (131 | ) |
| $ | (72,657 | ) |
| $ | 43,988 |
|
(1) | Includes restricted cash in other assets. |
TheSee accompanying notes are an integral part of these condensed consolidated financial statements.Notes to Condensed Consolidated Financial Statements (unaudited)
| 7 |
| Table of Contents |
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
| Nine Months Ended |
| |||||
|
| February 28, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income |
| $ | 8,446 |
|
| $ | 3,656 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
| 2,095 |
|
|
| 2,186 |
|
Provision for doubtful accounts |
|
| 24 |
|
|
| - |
|
Depreciation and amortization |
|
| 337 |
|
|
| 262 |
|
Non-cash operating lease expense |
|
| 10 |
|
|
| (36 | ) |
Accretion of investment discount |
|
| (305 | ) |
|
| - |
|
Gain from forgiveness of PPP loan |
|
| - |
|
|
| (1,698 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade and other accounts receivable |
|
| 1,414 |
|
|
| (3,454 | ) |
Inventories |
|
| (6,783 | ) |
|
| (5,449 | ) |
Prepaid expenses and other assets |
|
| (167 | ) |
|
| (28 | ) |
Accounts payable |
|
| 822 |
|
|
| 444 |
|
Accrued expenses |
|
| (126 | ) |
|
| 375 |
|
Customer deposits and deferred revenue |
|
| (1,633 | ) |
|
| 5,999 |
|
Income taxes payable |
|
| 9 |
|
|
| 18 |
|
Net cash provided by operating activities |
|
| 4,143 |
|
|
| 2,275 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of investments |
|
| (33,294 | ) |
|
| - |
|
Proceeds from maturities of investments |
|
| 8,000 |
|
|
| - |
|
Purchases of property and equipment |
|
| (178 | ) |
|
| (218 | ) |
Net cash used in investing activities |
|
| (25,472 | ) |
|
| (218 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Line of credit repayments, net |
|
| - |
|
|
| (1,400 | ) |
Proceeds from issuance of common stock under employee plans |
|
| 1,965 |
|
|
| 3,139 |
|
Shares repurchased for tax withholdings on vesting of restricted stock units |
|
| (1,680 | ) |
|
| (369 | ) |
Proceeds from issuance of common stock from public offering, net of issuance costs |
|
| 6,853 |
|
|
| 24,030 |
|
Net cash provided by financing activities |
|
| 7,138 |
|
|
| 25,400 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash, cash equivalents and restricted cash |
|
| (35 | ) |
|
| (19 | ) |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
| (14,226 | ) |
|
| 27,438 |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period(1) |
|
| 31,564 |
|
|
| 4,662 |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period(1) |
| $ | 17,338 |
|
| $ | 32,100 |
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
AEHR TEST SYSTEMS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)(Unaudited)
1. BASIS OF PRESENTATIONORGANIZATION AND SUMMARY OF SIGNIFICANT ACCCOUNTINGACCOUNTING POLICIES
The accompanying financial information has been prepared byOrganization – 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 (the “SEC”). Certain 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.
statements. In the opinion of management, the unaudited condensed consolidated financial statementsCondensed Consolidated Financial Statements for the interim periods presented have been prepared on a basis consistent with the May 31, 20222023 audited consolidated financial statementsConsolidated 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 theretoCondensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto includedConsolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2022. Results for the interim periods presented herein are not necessarily indicative2023.
Principles of results which may be reported for any other interim period or for the entire fiscal year.
PRINCIPLES OF CONSOLIDATION. Consolidation – The condensed consolidated financial statementsCompany’s Condensed Consolidated Financial Statements include the accounts of Aehr Test Systemsthe Company and its wholly-owned subsidiaries (collectively, the "Company"). Alland all significant intercompany balancesaccounts and transactions have been eliminated inupon consolidation.
ACCOUNTING ESTIMATES.Critical Accounting Policies and use of Estimates– The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended May 31, 2023. There have been no significant changes in the Company’s significant accounting policies during the three months ended August 31, 2023. 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, andthe 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 forSignificant estimates in these Condensed Consolidated Financial Statements include valuation of inventory at the standalone selling prices related to revenue recognition, saleslower of cost or net realizable value 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.warranty reserves. Actual results could differ materially from those estimates.
RECLASSIFICATIONS. Reclassifications - Certain reclassifications have been made to the prior year condensed consolidated financial statementsperiod Condensed Consolidated Financial Statements to conform to the current period presentation. The reclassifications had no impact on net loss,income, total assets, total liabilities, or shareholders’ equity.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. 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 performs credit evaluations of its customers’ financial condition and generally requires no collateral. The Company had revenues from an individual customer in excess of 10% of total revenues as follows:
|
| Three Months Ended August 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Customer A |
|
| 88.0 | % |
|
| 67.3 | % |
Customer B |
| * |
|
|
| 22.9 | % | |
The Company had gross accounts receivable from individual customers in excess of 10% of gross accounts receivable as follows:
|
| 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 significant accounting policiesaccounts receivable are disclosed in the Company’s Annual Report on Form 10-Krecorded at invoiced amounts less allowance for the year ended May 31, 2022. There have been no significant changes in the Company’s significant accounting policies during the three and nine months ended February 28, 2023.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Not Yet Adopted
In June 2016,any credit losses. According to the Financial Accounting Standards Board (“FASB”) issued Accounting StandardStandards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326), that requires measurement and recognitionthe Company adopted on June 1, 2023, the Company recognizes credit losses based on forward-looking current expected credit losses (“CECL”). The Company makes estimates of expected credit losses for financial assets held based on historical experience,upon its assessment of various factors, including the age of accounts receivable balances, credit quality of its customers, current economic conditions, and reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. The allowance for credit losses is recognized in the collectabilitycondensed consolidated statements of operations. The uncollectible accounts receivable are written off in the reported amount. Due toperiod in which a subsequent ASU in November 2019, the accounting standard will be effectivedetermination is made that all commercially reasonable means of recovering them have been exhausted. The total allowance for credit losses was $0 at both August 31, 2023 and May 31, 2023, and there was no write-off of accounts receivable for the Company beginning inperiods presented. The adoption of ASU 2016-13 did not have a material impact on the first quarter of fiscal 2024 on a modified retrospective basis. TheCompany’s Condensed Consolidated Financial Statements.
Although there are several other new accounting pronouncements issued by the FASB, the Company does not expectbelieve any of these accounting pronouncements had or will have a materialsignificant impact of this accounting standard on its condensed consolidated financial statements.Condensed Consolidated Financial Statements.
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 amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Inputs that are based upon quoted prices for similar 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 market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.
Level 3 — Unobservable inputs that are supported by little or no market activities.
The following table represents the Company’s assets 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 |
3. REVENUE
Revenue recognition
The Company recognizes revenue when promised goods or services are transferred to customersIncluded in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or 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 payment 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 tables show net sales by major product categories. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and cash flow are substantially similar.
The Company’s net sales by product category are as follows (in thousands):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Type of good / service: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Systems |
| $ | 9,821 |
|
| $ | 7,172 |
|
| $ | 26,315 |
|
| $ | 14,805 |
|
Contactors |
|
| 6,299 |
|
|
| 7,426 |
|
|
| 13,400 |
|
|
| 13,468 |
|
Services |
|
| 1,086 |
|
|
| 685 |
|
|
| 2,977 |
|
|
| 2,267 |
|
|
| $ | 17,206 |
|
| $ | 15,283 |
|
| $ | 42,692 |
|
| $ | 30,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wafer-level |
| $ | 16,810 |
|
| $ | 14,879 |
|
| $ | 41,532 |
|
| $ | 29,130 |
|
Test During Burn-In |
|
| 396 |
|
|
| 404 |
|
|
| 1,160 |
|
|
| 1,410 |
|
|
| $ | 17,206 |
|
| $ | 15,283 |
|
| $ | 42,692 |
|
| $ | 30,540 |
|
The following presents information about the Company’s net sales in different geographic areas. Net sales are based upon ship-to location (in thousands):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Geographic region: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
| $ | 2,343 |
|
| $ | 1,057 |
|
| $ | 7,761 |
|
| $ | 2,458 |
|
Asia |
|
| 14,849 |
|
|
| 14,213 |
|
|
| 34,873 |
|
|
| 28,066 |
|
Europe |
|
| 14 |
|
|
| 13 |
|
|
| 58 |
|
|
| 16 |
|
|
| $ | 17,206 |
|
| $ | 15,283 |
|
| $ | 42,692 |
|
| $ | 30,540 |
|
With the exception of the amount of service contracts and extended warranties, the Company’s product net sales are recognized at a point in time when control transfers to the customer. The following presents net sales based on timing of recognition (in thousands):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Products and services transferred at a point in time |
| $ | 16,863 |
|
| $ | 14,932 |
|
| $ | 41,523 |
|
| $ | 29,492 |
|
Services transferred over time |
|
| 343 |
|
|
| 351 |
|
|
| 1,169 |
|
|
| 1,048 |
|
|
| $ | 17,206 |
|
| $ | 15,283 |
|
| $ | 42,692 |
|
| $ | 30,540 |
|
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 commonly recorded than a contract asset.
Contract liabilities include payments received in advance of performance under a contract and are 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 liabilitiesmoney market funds as of February 28,August 31, 2023 and May 31, 20222023 is $150,000 restricted cash representing a security deposit for the Company’s United States manufacturing and office space lease. There were $851,000no financial liabilities measured at fair value as of August 31, 2023 and $2,484,000, respectively. DuringMay 31, 2023. There were no transfers between Level 1 and Level 2 fair value measurements during the three and nine months ended February 28, 2023, the Company recognized $42,000August 31, 2023. The carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable and $2,157,000, respectively, of revenues that were included in contractcertain other accrued liabilities, as of May 31, 2022.
approximate fair value due to their short maturities.
Remaining performance obligations
On February 28, 2023, the Company had $90,000 of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts not yet delivered. The Company expects to recognize approximately 24% of its remaining performance obligations as revenue in the remainder of fiscal 2023, and an additional 76% in fiscal 2024 and thereafter. The foregoing excludes the value of other remaining performance obligations as they have original durations of one year or less, and also excludes information about variable consideration allocated entirely to a wholly unsatisfied performance obligation.
Costs to obtain or fulfill a contract
The Company generally expenses sales commissions when incurred as a component of selling, general and administrative expense 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 contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing process.
4. 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, restricted shares, restricted stock units (“RSUs”), Performance RSUs (“PRSUs”) and Amended and Restated 2006 Employee Stock Purchase Plan (“ESPP”) shares) outstanding during the period using the treasury stock method.
The following table presents the computation of basic and diluted earnings per share (in thousands, except per share data):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Numerator: Net income |
| $ | 4,132 |
|
| $ | 2,243 |
|
| $ | 8,446 |
|
| $ | 3,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
| 27,893 |
|
|
| 26,871 |
|
|
| 27,571 |
|
|
| 25,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in basic earnings per share calculation |
|
| 27,893 |
|
|
| 26,871 |
|
|
| 27,571 |
|
|
| 25,684 |
|
Effect of dilutive securities |
|
| 1,480 |
|
|
| 1,983 |
|
|
| 1,509 |
|
|
| 1,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share |
|
| 29,373 |
|
|
| 28,854 |
|
|
| 29,080 |
|
|
| 27,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
| $ | 0.15 |
|
| $ | 0.08 |
|
| $ | 0.31 |
|
| $ | 0.14 |
|
Diluted earnings per share |
| $ | 0.14 |
|
| $ | 0.08 |
|
| $ | 0.29 |
|
| $ | 0.13 |
|
For the purpose of computing diluted earnings per share, weighted average potential common shares do 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. In the three and nine months ended February 28, 2023, stock options to purchase 15,000 shares of common stock were outstanding, but were not included in the computation of diluted earnings per share, because the inclusion of such shares would be anti-dilutive. In the three and nine months ended February 28, 2022, stock options to purchase 11,000 shares of common stock were outstanding, but were not included in the computation of diluted earnings per share, because the inclusion of such shares would be anti-dilutive.
5. CASH, CASH EQUIVALENTS AND INVESTMENTS
The following table summarizes the Company’s cash, cash equivalents and investments by security type as of February 28,August 31, 2023 (in thousands):and May 31, 2023, respectively:
|
| Cost |
|
| Gross Unrealized Loss |
|
| Estimated Fair Value |
| |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Balances as of August 31, 2023 |
|
|
| Gross Unrealized |
| Estimated |
| |||||||||||||||||
(In thousands) |
| Cost |
|
| Loss |
|
| Fair Value |
| |||||||||||||||
Cash |
| $ | 1,479 |
|
| $ | - |
|
| $ | 1,479 |
|
| $ | 2,130 |
|
| $ | - |
|
| $ | 2,130 |
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Money market funds |
| 11,726 |
| - |
| 11,726 |
|
| $ | 48,825 |
|
| $ | - |
|
| $ | 48,825 |
| |||||
U.S. treasury securities |
|
| 3,983 |
|
|
| - |
|
|
| 3,983 |
| ||||||||||||
Total cash equivalents |
|
| 15,709 |
|
|
| - |
|
|
| 15,709 |
| ||||||||||||
Total cash and cash equivalents |
| $ | 17,188 |
|
| $ | - |
|
| $ | 17,188 |
|
| $ | 50,955 |
|
| $ | - |
|
| $ | 50,955 |
|
Short-term investments: |
|
|
|
|
|
|
| |||||||||||||||||
U.S. treasury securities |
| $ | 25,599 |
|
| $ | (22 | ) |
| $ | 25,577 |
| ||||||||||||
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Money market funds |
| $ | 150 |
|
|
| - |
|
| $ | 150 |
|
| $ | 150 |
|
| $ | - |
|
| $ | 150 |
|
Total cash, cash equivalents and investments |
| $ | 42,937 |
|
| $ | (22 | ) |
| $ | 42,915 |
|
| $ | 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 loss, net of any related tax effect. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to results of operations.
The unrealized loss of $22,000 as of February 28, 2023 is not considered other-than-temporary, and has been in an unrealized loss position for less than a year.
6. 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.
| Table of Contents |
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of February 28, 2023 (in thousands):
|
| Balance as of |
|
|
|
|
|
|
|
| ||||||
|
| February 28, 2023 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Money market funds |
| $ | 11,876 |
|
| $ | 11,876 |
|
| $ | - |
|
| $ | - |
|
U.S. treasury securities |
|
| 29,560 |
|
|
| 29,560 |
|
|
| - |
|
|
| - |
|
Total |
| $ | 41,436 |
|
| $ | 41,436 |
|
| $ | - |
|
| $ | - |
|
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2022 (in thousands):
|
| Balance as of May 31, 2022 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
| $ | 28,609 |
|
| $ | 28,609 |
|
| $ | - |
|
| $ | - |
|
Included in money market funds as of February 28, 2023 and May 31, 2022 is $150,000 and $80,000 in restricted cash, respectively, representing a security deposit for the Company’s United States manufacturing and office space lease which is included in other assets in the condensed consolidated balance sheets.
There were no financial liabilities measured at fair value as of February 28, 2023 and May 31, 2022.
There were no transfers between Level 1 and Level 2 fair value measurements during the three and nine months ended February 28, 2023.
The carrying amounts of financial instruments including cash equivalents, accounts receivable, accounts payable and certain other accrued liabilities, approximate fair value due to their short maturities.
7. TRADE AND OTHER ACCOUNTS RECEIVABLE, NET
Trade accounts receivable represent customer trade receivables. As of February 28, 2023 and May 31, 2022, there were no allowances for doubtful accounts. Trade accounts receivable is derived from the sale of products throughout the world to semiconductor manufacturers, semiconductor contract assemblers, electronics manufacturers and burn-in and test service companies. Other accounts receivable represents non-customer trade related receivables that are derived from the sale of raw materials to our subcontractors. 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.
8. INVENTORIES
Inventories are comprisedconsisted of the following (in thousands):following:
|
| February 28, |
| May 31, |
|
| August 31, |
| May 31, |
| ||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
(In thousands) |
| 2023 |
|
| 2023 |
| ||||||||||
Raw materials and sub-assemblies |
| $ | 13,906 |
| $ | 9,507 |
|
| $ | 19,422 |
| $ | 15,953 |
| ||
Work in process |
| 7,147 |
| 5,461 |
|
| 9,617 |
| 5,764 |
| ||||||
Finished goods |
|
| 566 |
|
|
| 83 |
|
|
| 2,518 |
|
|
| 2,191 |
|
|
| $ | 21,619 |
|
| $ | 15,051 |
|
| $ | 31,557 |
|
| $ | 23,908 |
|
9. PRODUCT WARRANTIESProperty and equipment
Property and equipment, net consisted of the following:
|
| 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 estimated useful life or lease term.
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 standard warranty period is one year for systems and ninety days for parts and service.
The following is a summary of changes in the Company's liability for product warranties during the three and nine months ended February 28,August 31, 2023 and 2022 (in thousands):2022:
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended August 31, |
| ||||||||||||||||
|
| February 28, |
| February 28, |
| |||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
(In thousands) |
| 2023 |
|
| 2022 |
| ||||||||||||||||||
Balance at the beginning of the period |
| $ | 311 |
| $ | 415 |
| $ | 410 |
| $ | 494 |
|
| $ | 267 |
| $ | 410 |
| ||||
Accruals for warranties issued during the period |
| 84 |
| 37 |
| 207 |
| 294 |
|
| 65 |
| 118 |
| ||||||||||
Adjustments to previously existing warranty accruals |
| - |
| 26 |
| 61 |
| 98 |
| |||||||||||||||
Adjustments to previously existing warrany accruals |
| - |
| 61 |
| |||||||||||||||||||
Consumption of reserves |
|
| (107 | ) |
|
| (108 | ) |
|
| (390 | ) |
|
| (516 | ) |
|
| (100 | ) |
|
| (165 | ) |
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at the end of the period |
| $ | 288 |
|
| $ | 370 |
|
| $ | 288 |
|
| $ | 370 |
|
| $ | 232 |
|
| $ | 424 |
|
The accrued warranty balance is included in accrued expenses on the accompanying condensed consolidated balance sheets.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 |
|
| Table of Contents |
10. CUSTOMER DEPOSITS AND DEFERRED REVENUE, SHORT-TERM
Customer deposits and deferred revenue, short-term (in thousands):
|
| February 28, |
|
| May 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Customer deposits |
| $ | 760 |
|
| $ | 2,263 |
|
Deferred revenue |
|
| 83 |
|
|
| 152 |
|
|
| $ | 843 |
|
| $ | 2,415 |
|
11. ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in the components of accumulated other comprehensive loss, net of tax, were as follows (in thousands):
|
| Cumulative Translation Adjustments |
|
| Unrealized Loss on Investments, Net |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance as of May 31, 2022 |
| $ | (105 | ) |
| $ | - |
|
| $ | (105 | ) |
Other comprehensive loss before reclassifications |
|
| (35 | ) |
|
| (22 | ) |
|
| (57 | ) |
Other comprehensive loss, net of tax |
|
| (35 | ) |
|
| (22 | ) |
|
| (57 | ) |
Balance as of February 28, 2023 |
| $ | (140 | ) |
| $ | (22 | ) |
| $ | (162 | ) |
12.4. INCOME TAXESTAX
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 taxtaxes of $17,000$16,000 and $49,000$14,000 for the three and nine months ended February 28,August 31, 2023 and 2022, respectively, which consisted primarily of foreign withholding taxes and foreign income taxes. The Company recorded a provision for income tax of $24,000 and $81,000 for the three and nine months ended February 28, 2022 which consisted primarily of foreign withholding taxes and foreign income taxes. The provision for federal and state income taxes was not significant due to available net operating loss and research and development credit carryforwards.
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 will adjustcontinues to reassess the need for a valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized.on a quarterly basis.
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.
13. LEASES
The Company has only operating leases for real estate including corporate offices, warehouse space and certain equipment. A lease with an initial term of 12 months or less is generally not recorded on the condensed consolidated balance sheets, unless the arrangement includes an option to purchase the underlying asset, or renew the arrangement that the Company is reasonably certain to exercise (short-term leases). The Company recognizes lease expense on a straight-line basis over the lease term for short-term leases that the Company does not record on its condensed consolidated balance sheets. The Company’s operating leases have remaining lease terms of 1 year to 8 years.
The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of the arrangement. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received.
In December 2022, the Company amended its lease agreement to extend the lease term of an existing office facility located in the United States, which is considered a lease modification not accounted for as a separate contract. The total commitments, net of tenant incentives expected to be received, under the modified lease are $8.6 million. The modified lease expires in fiscal 2031 and contains an option to further extend the lease. The lease modification resulted in an increase in the Company’s operating lease right-of-use assets and operating lease liabilities of $5.9 million each.
As of February 28, 2023, the weighted-average remaining lease term for the Company’s operating leases was 7.5 years and the weighted-average discount rate was 7.5%.
The Company’s operating lease cost was $256,000 and $634,000 for the three and nine months ended February 28, 2023, respectively. For the three and nine months ended February 28, 2022, operating lease cost was $191,000 and $576,000, respectively.
The following table presents supplemental cash flow information related to the Company’s operating leases (in thousands):
|
| Nine Months Ended |
| |||||
|
| February 28, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Cash paid for amounts included in the measurement of operating lease liabilities: |
|
|
|
|
|
| ||
Operating cash flows from operating leases |
| $ | 624 |
|
| $ | 612 |
|
The following table presents the maturities of the Company’s operating lease liabilities as of February 28, 2023 (in thousands):
Fiscal year |
| Operating Leases |
| |
2023 (remaining three months of 2023) |
| $ | 211 |
|
2024 |
|
| 608 |
|
2025 |
|
| 1,143 |
|
2026 |
|
| 1,174 |
|
2027 |
|
| 1,195 |
|
Thereafter |
|
| 4,309 |
|
Total future minimum operating lease payments |
|
| 8,640 |
|
Less: imputed interest |
|
| (2,248 | ) |
Present value of operating lease liabilities |
| $ | 6,392 |
|
14.5. BORROWING AND FINANCING ARRANGEMENTS
On January 16, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”). Pursuant to the Loan Agreement, the Company may borrow up to (a) the lesser of (i) the revolving line of $4.0 million or (ii) the amount available under the borrowing base under a revolving line of credit which is collateralized by all the Company’s assets except intellectual property. The borrowing base is 80% of eligible accounts, as determined by SVB from the Company’s most recent borrowing base statement; provided, however, SVB has the right to decrease the foregoing percentage in its good faith business judgment to mitigate the impact of certain events or conditions, which may adversely affect the collateral or its value. Subject to an event of default, the principal amount outstanding under the revolving line of credit will accrue interest at a floating per annum rate equal to the greater of (a) the prime rate plus an additional percentage of up to 1%, which additional percentage depends on the Company’s adjusted quick ratio, and (b) 4.75%. Interest is payable monthly on the last calendar day of each month and the outstanding principal amount, the unpaid interest and all other obligations are due on the maturity date, which is 364 days from the effective date of January 13, 2020.
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 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) allowed for borrowing up to $3 million of the available balance based upon eligible customer purchase orders, (C) reduced 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) extended the maturity date to January 13, 2023.
| 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 February 28,August 31, 2023, 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 as of February 28,August 31, 2023 was $6,949,000.$5,396,000. There are no financial covenants in the agreement.
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 Condensed Consolidated Balance Sheets.
Purchase Obligations
The Company has purchase obligations to certain suppliers. In some cases, the products the Company purchases are unique and have provisions against cancellation of the 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 believe any pending legal proceedings will result in judgment or settlement that will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, with respect to certain matters, for example, including against losses arising from a breach of representations or covenants, or from intellectual property infringement or other claims. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the 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 Company’s operating results, financial position or cash flow.
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 gross proceeds to the Company 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 selling 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 ATM offering was $17.7 million.
| Table of Contents |
15. LONG-TERM DEBT:8. ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in the components of accumulated 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 when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or 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 payment 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 commonly recorded than a contract asset.
Contract liabilities include payments received in advance of performance under a contract and are 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 included in contract liabilities as of May 31, 2023.
Remaining performance obligations
On April 23, 2020,August 31, 2023, the Company obtained the Paycheck Protection Program Loan (the “PPP Loan”)had $0.1 million of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts not yet delivered. The Company expects to recognize approximately 72% of its remaining performance obligations as revenue in the aggregate amountremainder of $1,679,000 from SVB.fiscal 2024, and an additional 28% in fiscal 2025 and thereafter. The PPP Loan was evidenced byforegoing excludes the value of other remaining performance obligations as they have original durations of one year or less, and also excludes information about variable consideration allocated entirely to a promissory note dated April 23, 2020 (the “Note”) that matured on April 23, 2022 and bore 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.wholly unsatisfied performance obligation.
UnderCosts 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 termsamortization period is typically less than one year. Additionally, the majority of the CARES Act, PPP loan recipients can applyCompany’s cost of fulfillment as a manufacturer of products is classified as inventory and fixed assets, which are accounted for and be granted forgiveness for all or a portion of loans granted under the PPP. On June 12, 2021,respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the Company received confirmation from SVB that, on June 4, 2021, the Small Business Administration approvednature of the Company’s PPP Loan forgiveness application for the entire PPP Loan balance of $1,679,000products and interest totaling $19,000, and the Company recognized a gain on loan forgiveness of $1,698,000.their respective manufacturing process.
16.10. STOCK-BASED COMPENSATION
Stock-based compensation expense consists of expenses 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 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, PRSUs, restricted shares and performance restricted shares, stock-based compensation costexpense is based on the fair value of the Company’s common stock at the grant date.date and is recognized as expense over the employee’s requisite service period. All of the Company’s stock-based compensation is accounted for as an equity instrument.instruments. See Note 1113 in the Company’s Annual Report on Form 10-K for fiscal 20222023 filed on August 26, 202228, 2023 for further information regarding the 2016 Equity Incentive Plan (the “2016 Plan”) and the ESPP.
The following table summarizes the stock-based compensation expense for the three and nine months ended February 28, 2023 and 2022 (in thousands):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Stock-based compensation in the form of stock options, RSUs, restricted shares and ESPP purchase rights, included in: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of sales |
| $ | 75 |
|
| $ | 90 |
|
| $ | 252 |
|
| $ | 248 |
|
Selling, general and administrative |
|
| 359 |
|
|
| 487 |
|
|
| 1,330 |
|
|
| 1,259 |
|
Research and development |
|
| 158 |
|
|
| 303 |
|
|
| 513 |
|
|
| 679 |
|
Total stock-based compensation |
| $ | 592 |
|
| $ | 880 |
|
| $ | 2,095 |
|
| $ | 2,186 |
|
As of February 28, 2023, there were $110,000 stock-based compensation expenses capitalized as part of inventory. As of February 28, 2022, there were no stock-based compensation expenses capitalized as part of inventory.
During the three months ended February 28, 2023 and 2022, the Company recorded stock-based compensation expense related to stock options, RSUs, PRSUs, performance restricted shares and restricted shares under the 2016 Plan of $424,000 and $516,000, respectively. During the nine months ended February 28, 2023 and 2022, the Company recorded stock-based compensation expense related to stock options, RSUs and restricted shares of $1,536,000 and $1,416,000, respectively. For Performance RSUs and performance restricted shares, the Company evaluates compensation expense quarterly and recognizes expense for performance-based awards only if it determines it is probable that performance criteria for the awards will be met.
As of February 28, 2023, the total compensation expense related to unvested stock-based awards under the 2016 Plan, but not yet recognized, was approximately $3,348,000, which is net of estimated forfeitures of $8,000. This expense will be amortized on a straight-line basis over a weighted average period of approximately 2.1 years.
During the three months ended February 28, 2023 and 2022, the Company recorded stock-based compensation expense related to the ESPP of $168,000 and $364,000, respectively. During the nine months ended February 28, 2023 and 2022, the Company recorded stock-based compensation expense related to the ESPP of $559,000 and $770,000, respectively.
As of February 28, 2023, the total compensation expense related to purchase rights under the ESPP but not yet recognized was approximately $261,000. This expense will be amortized on a straight-line basis over a weighted average period of approximately 1.0 years.
Valuation Assumptions
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, which matches 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 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.
Fair Value. The fair values of the Company’s stock options granted to employees for the three and nine months ended February 28, 2023 and 2022, was estimated using the following weighted average assumptions in the Black-Scholes option valuation model:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Expected term (in years) |
|
| 5 |
|
|
| 5 |
|
|
| 5 |
|
|
| 6 |
|
Volatility |
|
| 90 | % |
|
| 117 | % |
|
| 116 | % |
|
| 77 | % |
Risk-free interest rate |
|
| 3.58 | % |
|
| 1.56 | % |
|
| 3.11 | % |
|
| 1.03 | % |
Weighted average grant date fair value |
| $ | 24.30 |
|
| $ | 9.43 |
|
| $ | 7.24 |
|
| $ | 2.56 |
|
The fair values of the ESPP purchase rights granted for the nine months ended February 28, 2023 and 2022 were estimated using the following assumptions:
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||
|
| February 28, 2023 |
|
| February 28, 2022 |
| ||
|
|
|
|
|
| |||
Expected term (in years) |
| 0.5-2.0 |
|
| 0.5-2.0 |
| ||
Volatility |
| 90%-203 | % |
| 101%-143 | % | ||
Risk-free interest rates |
| 3.97%-4.12 | % |
| 0.05%-0.27 | % | ||
Weighted average grant date fair value |
| $ | 11.17 |
|
| $ | 9.57 |
|
There were no ESPP purchase rights granted to employees for the three months ended February 28, 2023 and 2022. During the nine months ended February 28, 2023 and 2022, ESPP purchase rights of 43,000 and 103,000 were granted, respectively. Total ESPP shares issued during the nine months ended February 28, 2023 and 2022 were 109,000 and 75,000 shares, respectively. There were 499,000 ESPP shares available for issuance as of February 28, 2023.
The following tables summarize the Company’s stock option and RSU transactions during the three and nine months ended February 28, 2023 and shows the shares available to be issued at the end of each period (in thousands):
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| Table of Contents |
The following table summarizes the stock option transactionsstock-based compensation expense for the three months ended August 31, 2023 and 2022:
|
| 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 three and nine months ended February 28, 2023 (in thousands, except per share data):
|
| Outstanding Options |
| |||||||||
|
|
|
|
| Weighted |
|
|
|
| |||
|
| Number |
|
| Average |
|
| Aggregate |
| |||
|
| of |
|
| Exercise |
|
| Intrinsic |
| |||
|
| Shares |
|
| Price |
|
| Value |
| |||
Balances, May 31, 2022 |
|
| 1,597 |
|
| $ | 2.70 |
|
| $ | 9,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
| 103 |
|
| $ | 8.00 |
|
|
|
|
|
Options cancelled |
|
| (6 | ) |
| $ | 2.41 |
|
|
|
|
|
Options exercised |
|
| (102 | ) |
| $ | 2.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, August 31, 2022 |
|
| 1,592 |
|
| $ | 3.08 |
|
| $ | 18,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
| 4 |
|
| $ | 21.22 |
|
|
|
|
|
Options exercised |
|
| (168 | ) |
| $ | 2.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, November 30, 2022 |
|
| 1,428 |
|
| $ | 3.23 |
|
| $ | 32,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
| 1 |
|
| $ | 34.00 |
|
|
|
|
|
Options cancelled |
|
| (8 | ) |
| $ | 7.40 |
|
|
|
|
|
Options exercised |
|
| (360 | ) |
| $ | 2.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, February 28, 2023 |
|
| 1,061 |
|
| $ | 3.54 |
|
| $ | 31,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options fully vested and expected to vest on February 28, 2023 |
|
| 1,045 |
|
| $ | 3.53 |
|
| $ | 31,177 |
|
The options outstanding and exercisable on February 28, 2023August 31, 2023. There were in the following exercise price ranges (in thousands, except per share data):
|
|
| Options Outstanding |
|
| Options Exercisable |
| |||||||||||||||||||||||
|
|
| at February 28, 2023 |
|
| at February 28, 2023 |
| |||||||||||||||||||||||
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 |
| ||||||||
| $ | 1.34 |
|
|
| 41 |
|
|
| 4.64 |
|
| $ | 1.34 |
|
|
| 41 |
|
|
| 4.64 |
|
| $ | 1.34 |
|
|
|
| |
$1.64-$1.86 |
|
|
| 413 |
|
|
| 3.57 |
|
| $ | 1.72 |
|
|
| 298 |
|
|
| 3.43 |
|
| $ | 1.70 |
|
|
|
| ||
$2.03-$2.40 |
|
|
| 196 |
|
|
| 2.85 |
|
| $ | 2.15 |
|
|
| 184 |
|
|
| 2.71 |
|
| $ | 2.15 |
|
|
|
| ||
$2.76-$2.93 |
|
|
| 167 |
|
|
| 4.98 |
|
| $ | 2.92 |
|
|
| 50 |
|
|
| 4.07 |
|
| $ | 2.89 |
|
|
|
| ||
$3.46-$3.93 |
|
|
| 47 |
|
|
| 1.42 |
|
| $ | 3.83 |
|
|
| 47 |
|
|
| 1.42 |
|
| $ | 3.83 |
|
|
|
| ||
$8.00-$34.00 |
|
|
| 197 |
|
|
| 6.22 |
|
| $ | 9.63 |
|
|
| 32 |
|
|
| 6.14 |
|
| $ | 10.17 |
|
|
|
| ||
$1.34-$34.00 |
|
|
| 1,061 |
|
|
| 4.10 |
|
| $ | 3.54 |
|
|
| 652 |
|
|
| 3.33 |
|
| $ | 2.46 |
|
| $ | 20,151 |
| |
The total intrinsic value of options exercisedno ESPP purchase rights granted during the three and nine months ended February 28,2023 was $10,827,000August 31, 2023 and $14,183,000, respectively. The total intrinsic value of options exercised2022.
Nonvested restricted stock units activity during the three and nine months ended February 28, 2022August 31, 2023, was $867,000 and $11,902,000, respectively. Theas 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 determined using the weighted average remaining contractual lifenumber of common shares outstanding during the options exercisable and expected to be exercisable on February 28, 2023 was 4.09 years. Theperiod. Diluted net income per share is determined using the weighted average remaining contractual lifenumber of common shares and potential common shares (representing the dilutive effect of stock options, exercisableunvested RSUs, and expected to be exercisable on February 28, 2022 was 4.04 years.ESPP shares) outstanding during the period using the treasury stock method. The following table presents the computation of basic and diluted net income per share:
|
| 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 |
|
| Table of Contents |
The following table summarizes RSUs, PRSUs, restrictedFor the purpose of computing diluted net income per share, weighted average potential common shares and performance restricted shares granted to employees and membersdo not include stock options with an exercise price greater than the average fair value of the Company’s Boardcommon stock for the period, as the effect would be anti-dilutive. Stock options to purchase 2,000 and 152,000 shares of Directors during the three and nine months ended February 28,common stock were outstanding as of August 31, 2023 and 2022:2022, respectively, but were not included in the computation of diluted net income per share, because the inclusion of such shares would be anti-dilutive.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Employees: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Annual RSUs granted |
|
| -- |
|
|
| -- |
|
|
| 151,800 |
|
|
| 120,000 |
|
Weighted average market value on the date of the grant of annual RSUs |
|
| - |
|
|
| - |
|
| $ | 8.03 |
|
| $ | 3.17 |
|
Annual restricted shares granted |
|
| -- |
|
|
| -- |
|
|
| 7,500 |
|
|
| -- |
|
Weighted average market value on the date of the grant of annual restricted shares |
|
| - |
|
|
| - |
|
| $ | 8.00 |
|
|
| - |
|
RSUs granted in lieu of cash payment for salary reductions |
|
| -- |
|
|
| -- |
|
|
| -- |
|
|
| 89,000 |
|
Weighted average market value on the date of the grant of RSU in lieu of cash payment |
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 2.50 |
|
Maximum PRSUs to be vested if all revenue goals are achieved |
|
| -- |
|
|
| -- |
|
|
| 80,400 |
|
|
| 270,000 |
|
Maximum Performance restricted shares to be vested if all revenue goals are achieved |
|
| -- |
|
|
| -- |
|
|
| 23,700 |
|
|
| -- |
|
Weighted average market value on the date of the grant of PRSUs, performance restricted shares |
|
| - |
|
|
| - |
|
| $ | 8.00 |
|
| $ | 3.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members of Board of Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs granted |
|
| - |
|
|
| -- |
|
|
| 44,000 |
|
|
| 43,000 |
|
Weighted average market value on the date of the grant of RSUs |
|
| - |
|
|
| - |
|
| $ | 11.35 |
|
| $ | 8.02 |
|
Maximum PRSUs granted to be vested if all revenue goals are achieved |
|
| - |
|
|
| - |
|
|
| 30,000 |
|
|
| -- |
|
Weighted average market value on the date of the grant of PRSUs |
|
| -- |
|
|
| -- |
|
| $ | 8.00 |
|
|
| -- |
|
12. SEGMENT AND CONCENTRATION INFORMATION
PRSUs were grantedOperating 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 key officersallocate resources and members of Board of Directors based upon revenue target thresholds for fiscal 2023 and 2022.in assessing performance.
The following table summarizesCompany’s chief operating decision maker, the RSUschief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions and PRSUs vested and unvested duringassessing financial performance. Accordingly, the three and nine months ended February 28, 2023 and 2022:Company considers itself to be in one operating segment.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net RSUs and PRSUs vested |
|
| 19,000 |
|
|
| 21,000 |
|
|
| 221,000 |
|
|
| 83,000 |
|
Shares withheld to settle payroll taxes |
|
| 16,000 |
|
|
| -- |
|
|
| 165,000 |
|
|
| -- |
|
RSUs and PRSUs unvested |
|
| 406,000 |
|
|
| 485,000 |
|
|
| 406,000 |
|
|
| 485,000 |
|
Intrinsic value of unvested RSUs and PRSUs (in thousands) |
| $ | 13,540 |
|
| $ | 6,596 |
|
| $ | 13,540 |
|
| $ | 6,596 |
|
Long-lived assets, net by geographic area are as follows:
|
| 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. SEGMENT AND CONCENTRATION INFORMATION
The Company has only one reportable segment. The information for revenue category by type, product line, geography and timing of revenue recognition, is summarized in Note “3. REVENUE.”
Property and equipment information is based on the physical location of the assets.
The following table presents property and equipment information for geographic areas (in thousands):
|
| February 28, |
|
| May 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
United States |
| $ | 1,229 |
|
| $ | 1,156 |
|
Asia |
|
| 50 |
|
|
| 47 |
|
Europe |
|
| 2 |
|
|
| - |
|
|
| $ | 1,281 |
|
| $ | 1,203 |
|
As of February 28, 2023, the operating lease right-of-use assets of $6,169,000, $76,000 and $48,000 are allocated in the United States, Asia, and Europe, respectively. As of May 31, 2022, the operating lease right-of-use assets of $822,000 and $95,000 were allocated in the United States and Asia, respectively.
There were no revenues through distributors for the three and nine months ended February 28, 2023 and 2022.
Sales to the Company’s five largest customers accounted for approximately 98% and 97% of its net sales in the three and nine months ended February 28, 2023, respectively. Two customers accounted for approximately 82% and 12% of the Company’s net sales in the three months ended February 28, 2023. Two customers accounted for approximately 77% and 16% of the Company’s net sales in the nine months ended February 28, 2023. Sales to the Company’s five largest customers accounted for approximately 99% and 97% of its net sales in the three and nine months ended February 28, 2022, respectively. One customer accounted for approximately 90% of the Company’s net sales in the three months ended February 28, 2022. One customer accounted for approximately 84% of the Company’s net sales in the nine months ended February 28, 2022. No other customers represented more than 10% of the Company’s net sales in the three and nine months ended February 28, 2023 and 2022.
18. 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 Market" ("ATM") sale of $25 million of common stock was subsequently filed on September 17 2021. On October 8, 2021, the Company fully executed the ATM offering by selling 1,696,729 shares at an average selling price of $14.73. The gross proceeds to the Company 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 selling 208,917 shares at an average selling price of $34.78. The gross proceeds to the Company were $7.3 million, before commissions of $0.2 million and offering expenses of $0.2 million.
| Table of Contents |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement’s Discussion and Analysis of Financial Condition and Resultsof 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, 2022 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.1934. All statements in this Report, including those made by our management, other than statements of historical fact may be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential”, “target” or “continue,” the negative effect of terms like these or other similar expressions. Any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by us or our subsidiaries, which may be provided by us are also 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, estimatesare only predictions. Forward-looking statements are based on current expectations and assumptionsprojections about future events and are inherently subject to certaina variety of risks and uncertainties, thatmany of which are beyond our control, which could cause our actual results to differ materially from those anticipated results or other expectations reflected in 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.projected. All forward-looking statements included in this document are based on our current expectations,information available to us on the date of filing and we undertakefurther caution investors that our business and financial performance are subject to substantial risks and uncertainties. We assume no obligation to revise or publicly release the results ofupdate any revision to thesesuch forward-looking statements. GivenIn evaluating these risksstatements, you should specifically consider various factors, including the risk factors set forth in Item 1. “Business” and uncertainties, readers are cautioned notItem 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended May 31, 2023, filed with the Securities and Exchange Commission on August 28, 2023. All references to place undue reliance on such forward-looking statements.“we”, “us”, “our”, “Aehr Test”, “Aehr Test Systems” or the “Company” refer to Aehr Test Systems.
InvestorsOverview
Aehr Test Systems is a leading provider of test solutions for testing, burning-in, 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 callsstabilizing semiconductor devices in wafer level, singulated die, and webcasts. We use these channels to communicate with our investorspackage part form, and the public about our company, ourhas 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 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.
OVERVIEWsolutions.
We were founded in 1977 to develophave developed and manufacture burn-in andintroduced several innovative products including the FOX-P family of 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 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 FOX-XP, FOX-NP and FOX-CPfull wafer contact and singulated die/module parallel 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 Aligner, 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 Loader,Carrier allows testing, burning in, and stabilization of singulated bare die and modules up to 1,024 devices in parallel per DiePak carrierson the FOX-NP and test fixtures.FOX-XP systems up to nine DiePaks at a time.
Our net sales consistrevenue consists primarily of sales of FOX-P systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak 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.title and risk of loss.
CRITICAL ACCOUNTING POLICIES AND ESTIMATESCritical 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 obligations, 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, 2022.2023.
There have been no material changes to our critical accounting policies and estimates during the three and nine months ended February 28,August 31, 2023 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.2023.
| Table of Contents |
RESULTS OF OPERATIONSResults of Operations
The following table sets forth items in our unaudited condensed consolidated statementsDiscussion of operations as a percentageResults of net salesOperations for the periods indicated.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| February 28, |
|
| February 28, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of sales |
|
| 48.4 |
|
|
| 58.1 |
|
|
| 50.2 |
|
|
| 56.8 |
|
Gross profit |
|
| 51.6 |
|
|
| 41.9 |
|
|
| 49.8 |
|
|
| 43.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 18.9 |
|
|
| 17.1 |
|
|
| 20.3 |
|
|
| 23.1 |
|
Research and development |
|
| 10.7 |
|
|
| 10.0 |
|
|
| 11.4 |
|
|
| 13.6 |
|
Total operating expenses |
|
| 29.6 |
|
|
| 27.1 |
|
|
| 31.7 |
|
|
| 36.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
| 22.0 |
|
|
| 14.8 |
|
|
| 18.1 |
|
|
| 6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
| 2.2 |
|
|
| -- |
|
|
| 1.8 |
|
|
| (0.1 | ) |
Gain from forgiveness of PPP loan |
|
| -- |
|
|
| -- |
|
|
| -- |
|
|
| 5.6 |
|
Other (expense) income, net |
|
| (0.1 | ) |
|
| -- |
|
|
| -- |
|
|
| 0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
| 24.1 |
|
|
| 14.8 |
|
|
| 19.9 |
|
|
| 12.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.2 | ) |
Net income |
|
| 24.0 | % |
|
| 14.7 | % |
|
| 19.8 | % |
|
| 12.0 | % |
THREE MONTHS ENDED FEBRUARY 28,Three Months Ended August 31, 2023 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,compared to the Three Months Ended August 31, 2022
NET SALES. Net salesRevenues
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 $17.2$20.6 million for the three months ended February 28,August 31, 2023 from $15.3$10.7 million for the three months ended February 28, 2022, an increase of 12.6%. 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 February 28,August 31, 2023, was primarily dueinternational revenues significantly increased, compared to the increasessame period in the prior year, primarily as a result of the shipments to our main customer in Asia, partially offset by the decline in net sales of our wafer-level products. Net sales of our wafer-level products forrevenue from a customer in the three months ended February 28, 2023 were $16.8 million, and increased approximately $1.9 million from the three months ended February 28, 2022 due to stronger demand related to silicon carbide applications.United States.
GROSS PROFIT. Gross profit increased to $8.9 million for the three months ended February 28, 2023 from $6.4 million for the three months ended February 28, 2022, an increase of 38.7%. Gross profit margin increased to 51.6% for the three months ended February 28, 2023 from 41.9% for the three months ended February 28, 2022. The increase in gross profit margin of 9.7% was primarily due to decreased direct material costs as a percentage of sales resulting in a 2.9% gross profit margin increase, decreased provision for inventory reserves resulting in a 5.5% gross profit margin increase, and manufacturing efficiencies from the increase in net sales resulting in a 1.3% gross profit margin increase.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 | % |
|
|
|
|
| Table of Contents |
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expensesGross profit increased to $3.3$10.0 million for the three months ended February 28,August 31, 2023 from $2.6$4.5 million for the three months ended February 28, 2022, an increase of 24.4%.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 SG&A expensesgross margin of 6.4 percentage points was primarily due to the resultincreased sales of increaseshigher margin contactor products, as well as a reduction in headcount, bonuses, travel expenses and sales commissions.manufacturing overhead due to higher production rates for future sales.
RESEARCH AND DEVELOPMENT. R&DResearch 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 $1.8$2.5 million for the three months ended February 28,August 31, 2023, fromcompared to $1.5 million for the three months ended February 28, 2022,August 31, 2022. The increase of $1.0 million was mostly due to non-recurring engineering services charges for $0.6 million, an increase of 19.8%. Thein recruiting fees for $0.2 million and an increase in R&D expenses was primarilyemployment costs due to increasesbonus/other compensation for $0.2 million. We anticipate our expenses in employment-related expenses, project expensesresearch and outside services.development will fluctuate in absolute dollars from period to period as a result of the timing of product development projects and revenue generating activity requirements.
INTEREST INCOME (EXPENSE), NET. Interest income, net was $374,000Selling, General and $1,000Administrative
|
| 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 $3.4 million for the three months ended February 28,August 31, 2023, and 2022, respectively. The interest incomecompared to $2.5 million for the three months ended February 28, 2023August 31, 2022. The increase of $0.9 million was from interest earned on U.S. treasurymostly due to headcount increase, higher employee-related compensation expense for $0.6 million and government securities while the Company had no such investments during the three months ended February 28,2022.increased audit and professional fees for $0.2 million.
OTHER (EXPENSE) INCOME, NET.Interest and Other expense,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 February 28,August 31, 2023, was $18,000 compared with other income, net forto the three months ended February 28, 2022 of $10,000. The changes in other (expense) income, net wasyear-ago period primarily due to losses or gains realizednet favorable interest income due to higher yields from our investments in connection with the fluctuation in the value of the dollar compared to foreign currencies during the referenced periods.money market funds.
INCOME TAX EXPENSE.Provision for Income tax expense was $17,000 and $24,000 for the three months ended February 28, 2023 and 2022, respectively. 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 losslosses and research and development creditcredits carryforwards.
NINE MONTHS ENDED FEBRUARY 28, 2023 COMPARED TO NINE MONTHS ENDED FEBRUARY 28, 2022
NET SALES. Net sales increased to $42.7 million for the nine months ended February 28, 2023 from $30.5 million for the nine months ended February 28, 2022, an increase of 39.8%. The increase in net sales for the nine months ended February 28, 2023 was primarily due to the increases in net sales of our wafer-level products. Net sales of our wafer-level products for the nine months ended February 28, 2023 were $41.5 million, and increased approximately $12.4 million from the nine months ended February 28, 2022 due to stronger demand related to silicon carbide applications.
GROSS PROFIT. Gross profit increased to $21.3 million for the nine months ended February 28, 2023 from $13.2 million for the nine months ended February 28, 2022, an increase of 61.2%. Gross profit margin increased to 49.8% for the nine months ended February 28, 2023 from 43.2% for the nine months ended February 28, 2022. The increase in gross profit margin of 6.6% was primarily due to decreased provision for inventory reserves as a percentage of sales resulting in a 2.6% gross profit margin increase, manufacturing efficiencies from the increase in net sales resulting in a 2.2% gross profit margin increase, and decreased direct material costs as a percentage of sales resulting in a 1.2% gross profit margin increase.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to $8.7 million for the nine months ended February 28, 2023 from $7.1 million for the nine months ended February 28, 2022, an increase of 22.6%. The increase in SG&A expenses was primarily the result of increases in headcount, bonuses, and stock-based compensation expenses.
RESEARCH AND DEVELOPMENT. R&D expenses increased to $4.9 million for the nine months ended February 28, 2023 from $4.2 million for the nine months ended February 28, 2022, an increase of 17.2%. The increase in R&D expenses was primarily due to increases in employment-related expenses and project expenses.
| Table of Contents |
INTEREST INCOME (EXPENSE), NET. Interest income, netLiquidity 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 ninenext 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 February 28,August 31, 2023 was $758,000 compared with interestmostly consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, share-based compensation expense netand non-cash lease expenses. The $1.6 million decrease in cash flows from operating activities for the ninethree months ended February 28, 2022August 31, 2023, compared to the year-ago period, was driven primarily by an increase in cash 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 collections of $9,000. The interest$4.2 million, partially offset by higher net income for the nine months ended February 28, 2023 wasof $4.1 million, an increase in cash from interest earned on U.S. treasuryan increase in deferred revenue due to higher collection of deposits from customers by $2.4 million and government securities while no such investments were held during the nine months ended February 28, 2022. The interest expense for the nine months ended February 28, 2022 wasan increase cash of $1.5 million from the PPP Loan that we obtained on April 23, 2020.changes in accrued expenses due higher bonus accruals and timing of payments.
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 $1,679,000 and interest totaling $19,000. As a result, we recognized a gain of $1,698,000.
OTHER (EXPENSE) INCOME, NET. Other income, net was $1,000 and $68,000 for the nine months ended February 28, 2023 and 2022, respectively. The changes in other income, net was primarily due to gains realized in connection with the fluctuation in the value of the dollar compared to foreign currencies during the referenced periods.
INCOME TAX EXPENSE. Income tax expense was $49,000 and $81,000 for the nine months ended February 28, 2023 and 2022, respectively. Income tax expense was not significant due to available net operating loss and research and development credit carryforwards.
LIQUIDITY AND CAPITAL RESOURCESNet Cash Flows Provided by (Used in) Investing Activities
Net cash provided by operatinginvesting activities was $4.1 million and $2.3increased by $18.0 million for the ninethree months ended February 28,August 31, 2023 and 2022, respectively. Forcompared for the nine months ended February 28, 2023, net cash provided by operating activities was primarily the result of net income of $8.4 million, as adjusted to exclude the effect of a non-cash charge of stock-based compensation expense of $2.1 million, depreciation and amortization of $337,000 and accretion of investment discount of $305,000. Other changes in cash from operations primarily resulted from an increase in inventories of $6.8 million, a decrease in customer deposits and deferred revenue of $1.6 million, a decrease in trade and other accounts receivable of $1.4 million and an increase in accounts payable of $822,000.year-ago period. The increase in inventory was to support expected future shipments for customer orders. The decrease in customer deposits and deferred revenue was primarily due to the decreasematurity of our short-term investments, currently invested in backlog of customer orders with down payments. The decreaseour money market accounts.
Net Cash Flows Used in trade and other accounts receivable was primarily due to improvements in customer payment terms. The increase in accounts payable was primarily due to higher expenditures associated with higher revenue. For the nine months ended February 28, 2022, net cash provided by operating activities was primarily the result of net income of $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 $2.2 million and depreciation and amortization of $226,000. Other changes in cash from operations primarily resulted from an increase in customer deposits and deferred revenue of $6.0 million, and increases in inventories of $5.4 million and accounts receivable of $3.5 million. The increase 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 for customer orders. The increase in accounts receivable was primarily due to the timing of revenue generated toward the end of the fiscal quarter.Financing Activities
Net cash used in investingfinancing activities was $25.5 million and $218,000flat for the ninethree months ended February 28,August 31, 2023, and 2022, respectively. Duringcompared to the nineyear-ago period. For the three months ended February 28,August 31, 2023, net cash used in investingfinancing activities was dueprimarily consisted of cash used to the purchasesrepurchase shares of U.S. treasury securitiesour common stock on vesting of $33.2 million,RSUs, partially offset by proceeds from maturities of U.S. treasury securities of $8 million, and the purchases of property and equipment of $178,000. During the nine months ended February 28, 2022 net cash used in investing activities was due to purchases of property and equipment.
Financing activities provided cash of $7.1 million and $25.4 million for the nine months ended February 28, 2023 and 2022, respectively. Net cash provided by financing activities during the nine months ended February 28, 2023 was primarily due to the net proceeds from issuance of common stock from public offering net of issuance costs of $6.9 million, and the proceeds from the issuance of common stock under our employee benefit plans of $2.0 million, partially offset by the shares repurchased for tax withholdings on vesting of RSUs of $1.7 million. Net cash provided by financing activities during the nine months ended February 28, 2022 was primarily due to the net proceeds from issuance of common stock from public offering net of issuance costs of $24.0 million, and the proceeds from the issuance of common stock under employee benefit plans of $3.1 million, partially offset by the shares repurchased for tax withholdings on vesting of RSUs of $369,000, and by the net payment of the line of credit of $1.4 million.plans.
The effect of fluctuation in exchange rates decreased cash by $35,000 and $19,000 for the nine months ended February 28, 2023 and 2022, respectively. The changes were due to the fluctuation in the value of the dollar compared to foreign currencies.
As of February 28, 2023 and May 31, 2022, we had working capital of $67.2 million and $49.0 million, respectively.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 December 2022 and expires in September 2030. As of February 28, 2023 our operating lease liabilities totaled $6,392,000. 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, require the issuance of equity or entering into debt agreements. Wedo not have no present understandings, commitments or agreements with respect to any material acquisitions.
We anticipate that the existing cash balance and the available line of credit 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, deposits and down payments against significant orders will be adequate to meet our 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. We successfully raised $25 million ATM offering in October 2021 and $7.3 million of $25 million ATM offering in February 2023; however, 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.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any off-balance sheet financing arrangements, and have not established anyinvestments in special purpose entities or variable interest entities.
OVERVIEW OF CONTRACTUAL OBLIGATIONS
undisclosed borrowings or debt. There have been no material changes in the composition, magnitude or other key characteristics of our contractual obligations or other commitments as disclosed in the Company's Annual Report on Form 10-K for the year ended May 31, 2022.2023.
| 21 |
| Table of Contents |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information under this item.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS4. Controls and Procedures
We had no holdingsEvaluation of derivative financial or commodity instruments as of February 28, 2023 or May 31, 2022.Disclosure Controls and Procedures
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 12 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 also enter into transactions in other currencies, primarily Euros, New Taiwan Dollar, and 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, our subsidiaries and 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 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.disclosures.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. 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.
| 22 |
| Table of Contents |
INHERENT LIMITATIONS OF INTERNAL CONTROLS. Our management, including our Chief Executive Officer
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 ofCompany’s Annual Report on Form 10-K for 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 usyear ended May 31, 2023, provides information on the significant risks associated with our business. There have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty,no subsequent material changes to these risks.
Item 2. Unregistered Sales of Equity Securities and that breakdowns can occur becauseUse 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.Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| Table of Contents |
PART II - OTHER INFORMATION
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, 2022 filed with the Securities and Exchange Commission on August 26, 2022 and the following additional risk factor.
The collapse of certain U.S. banks and potentially other financial institutions may have adverse impacts on our business.
On March 10, 2023, SVB was shut down, followed on March 11, 2023 by Signature Bank and the Federal Deposit Insurance Corporation was appointed as receiver for those banks. Since that time, there have been reports of instability at other U.S. banks. On March 15, 2023, the Company filed a Current Report on Form 8-K with the SEC, disclosing its exposure to SVB and stating that the Company did not expect significant impact to its operations.
Despite the limited exposure and steps taken to date by U.S. agencies to protect depositors, the follow-on effects of the events surrounding the SVB and Signature Bank failures and pressure on other banks are unknown, and could include failures of other financial institutions to which we may encounter direct or indirect exposure. The extent of such impacts is uncertain, and there may be additional risks that we have not yet identified. We continue to monitor the situation on U.S. financial institutions and potential impact on our business.
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
On March 28, 2023, Kenneth B. Spink, the Company’s Chief Financial Officer (“CFO”), notified the Company of his intention to retire after the end of current fiscal year end reporting. The Company has initiated a search to identify a new CFO. To facilitate an orderly transition, Mr. Spink intends to remain at the Company and continue to serve in his current role until a successor is hired.
Item 6. EXHIBITSExhibits
Exhibit Number | Description | |
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101.INS |
| XBRL Instance |
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101.SCH |
| XBRL Taxonomy Extension Schema |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase |
_________________________
| 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). |
| 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). |
| Incorporated by reference to |
† | Filed herewith. |
** | Furnished, and not filed. |
*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.
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: | By: | /s/ GAYN ERICKSON |
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| Gayn Erickson |
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| President and Chief Executive Officer |
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| (Principal Executive Officer) | |
Date: October 13, 2023 | By: | /s/ CHRIS P. SIU |
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Chief Financial Officer and Secretary |
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(Principal Financial and Accounting Officer) |
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