Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May 31, 2017 | Jul. 31, 2017 | Nov. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | AEHR TEST SYSTEMS | ||
Entity Central Index Key | 1,040,470 | ||
Document Type | 10-K | ||
Document Period End Date | May 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --05-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 39,151,174 | ||
Entity Common Stock, Shares Outstanding | 21,417,011 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 |
ASSETS | ||
Cash and cash equivalents | $ 17,803 | $ 939 |
Accounts receivable, net | 4,010 | 522 |
Inventories | 6,604 | 7,033 |
Prepaid expenses and other | 961 | 254 |
Total current assets | 29,378 | 8,748 |
Property and equipment, net | 1,419 | 1,204 |
Other assets | 95 | 94 |
Total assets | 30,892 | 10,046 |
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||
Accounts payable | 2,808 | 1,413 |
Accrued expenses | 1,609 | 1,553 |
Customer deposits and deferred revenue | 3,467 | 1,714 |
Total current liabilities | 7,884 | 4,680 |
Convertible notes, net of debt issuance costs | 6,110 | 5,962 |
Deferred revenue, long-term | 104 | 127 |
Total liabilities | 14,098 | 10,769 |
Aehr Test Systems shareholders' equity (deficit): | ||
Preferred stock, $0.01 par value: Authorized: 10,000 shares; Issued and outstanding: none | 0 | 0 |
Common stock, $0.01 par value: Authorized: 75,000 shares; Issued and outstanding: 21,340 shares and 13,216 shares at May 31, 2017 and 2016, respectively | 213 | 132 |
Additional paid-in capital | 81,128 | 58,052 |
Accumulated other comprehensive income | 2,249 | 2,237 |
Accumulated deficit | (66,777) | (61,124) |
Total Aehr Test Systems shareholders' equity (deficit) | 16,813 | (703) |
Noncontrolling interest | (19) | (20) |
Total Shareholders' equity (deficit) | 16,794 | (723) |
Total liabilities and shareholders' equity (deficit) | $ 30,892 | $ 10,046 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | May 31, 2017 | May 31, 2016 |
Consolidated Balance Sheets Parenthetical | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 21,340,000 | 13,216,000 |
Common stock, shares outstanding | 21,340,000 | 13,216,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Income Statement [Abstract] | |||
Net sales | $ 18,898 | $ 14,501 | $ 10,018 |
Cost of sales | 12,118 | 9,356 | 6,180 |
Gross profit | 6,780 | 5,145 | 3,838 |
Operating expenses: | |||
Selling, general and administrative | 7,052 | 6,975 | 6,470 |
Research and development | 4,657 | 4,324 | 4,062 |
Total operating expenses | 11,709 | 11,299 | 10,532 |
Loss from operations | (4,929) | (6,154) | (6,694) |
Interest expense | (678) | (605) | (130) |
Other (expense) income, net | (21) | (16) | 211 |
Loss before income tax expense | (5,628) | (6,775) | (6,613) |
Income tax expense | (25) | (10) | (34) |
Net loss | (5,653) | (6,785) | (6,647) |
Less: Net income attributable to the noncontrolling interest | 0 | 0 | 0 |
Net loss attributable to Aehr Test Systems common shareholders | $ (5,653) | $ (6,785) | $ (6,647) |
Net loss per share – basic and diluted | $ (0.35) | $ (0.52) | $ (0.55) |
Shares used in per share calculation – basic | 16,267,000 | 13,091,000 | 12,047,000 |
Shares used in per share calculation – diluted | 16,267,000 | 13,091,000 | 12,047,000 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Statement of Comprehensive Income [Abstract] | |||
Net loss | $ (5,653) | $ (6,785) | $ (6,647) |
Other comprehensive income (loss), net of tax: Foreign currency translation income loss | 13 | 4 | (254) |
Total comprehensive loss | (5,640) | (6,781) | (6,901) |
Less: Comprehensive income (loss) attributable to noncontrolling interest | 1 | (2) | 3 |
Comprehensive loss, attributable to Aehr Test Systems | $ (5,641) | $ (6,779) | $ (6,904) |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity (DEFICIT) - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Aehr Test Systems Shareholders' Equity (Deficit) | Noncontrolling Interest | Total |
Beginning Balance, Shares at May. 31, 2014 | 11,203,000 | ||||||
Beginning Balance, Amount at May. 31, 2014 | $ 112 | $ 52,142 | $ 2,488 | $ (47,692) | $ 7,050 | $ (21) | $ 7,029 |
Issuance of common stock under private placement, Shares | 1,065,000 | ||||||
Issuance of common stock under private placement, Amount | $ 11 | 2,563 | 0 | 0 | 2,574 | 0 | 2,574 |
Issuance of common stock under employee plans, Shares | 589,000 | ||||||
Issuance of common stock under employee plans, Amount | $ 6 | 849 | 0 | 0 | 855 | 0 | 855 |
Issuance of common stock under public offering, Amount | 0 | ||||||
Issuance of common stock in consideration for cancellation of outstanding vendor invoice, Amount | 0 | ||||||
Stock-based compensation | 0 | 993 | 0 | 0 | 993 | 0 | 993 |
Net loss | 0 | 0 | 0 | (6,647) | (6,647) | 0 | (6,647) |
Foreign currency translation adjustment | $ 0 | 0 | (257) | 0 | (257) | 3 | (254) |
Ending Balance, Shares at May. 31, 2015 | 12,857,000 | ||||||
Ending Balance, Amount at May. 31, 2015 | $ 129 | 56,547 | 2,231 | (54,339) | 4,568 | (18) | 4,550 |
Issuance of common stock under employee plans, Shares | 359,000 | ||||||
Issuance of common stock under employee plans, Amount | $ 3 | 509 | 0 | 0 | 512 | 0 | 512 |
Issuance of common stock under public offering, Amount | 0 | ||||||
Issuance of common stock in consideration for cancellation of outstanding vendor invoice, Amount | 0 | ||||||
Stock-based compensation | 0 | 996 | 0 | 0 | 996 | 0 | 996 |
Net loss | 0 | 0 | 0 | (6,785) | (6,785) | 0 | (6,785) |
Foreign currency translation adjustment | $ 0 | 0 | 6 | 0 | 6 | (2) | 4 |
Ending Balance, Shares at May. 31, 2016 | 13,216,000 | ||||||
Ending Balance, Amount at May. 31, 2016 | $ 132 | 58,052 | 2,237 | (61,124) | (703) | (20) | (723) |
Issuance of common stock under private placement, Shares | 2,722,000 | ||||||
Issuance of common stock under private placement, Amount | $ 27 | 5,272 | 0 | 0 | 5,299 | 0 | 5,299 |
Issuance of common stock under employee plans, Shares | 779,000 | ||||||
Issuance of common stock under employee plans, Amount | $ 8 | 696 | 0 | 0 | 704 | 0 | 704 |
Issuance of common stock under public offering, Shares | 4,423,000 | ||||||
Issuance of common stock under public offering, Amount | $ 44 | 15,788 | 0 | 0 | 15,832 | 0 | 15,832 |
Issuance of common stock in consideration for cancellation of outstanding vendor invoice, Shares | 200,000 | ||||||
Issuance of common stock in consideration for cancellation of outstanding vendor invoice, Amount | $ 2 | 321 | 0 | 0 | 323 | 0 | 323 |
Stock-based compensation | 0 | 999 | 0 | 0 | 999 | 0 | 999 |
Net loss | 0 | 0 | 0 | (5,653) | (5,653) | 0 | (5,653) |
Foreign currency translation adjustment | $ 0 | 0 | 12 | 0 | 12 | 1 | 13 |
Ending Balance, Shares at May. 31, 2017 | 21,340,000 | ||||||
Ending Balance, Amount at May. 31, 2017 | $ 213 | $ 81,128 | $ 2,249 | $ (66,777) | $ 16,813 | $ (19) | $ 16,794 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Cash flows from operating activities: | |||
Net loss | $ (5,653) | $ (6,785) | $ (6,647) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Stock-based compensation expense | 999 | 1,016 | 997 |
Provision (recovery of) for doubtful accounts | 53 | (13) | (30) |
Loss on disposal of asset | 0 | 2 | 0 |
Amortization of debt issuance costs | 148 | 177 | 31 |
Depreciation and amortization | 271 | 203 | 135 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (3,507) | 887 | 1,774 |
Inventories | 430 | 70 | (1,008) |
Prepaid expenses and other | (707) | 9 | 34 |
Accounts payable | 1,686 | 564 | (850) |
Accrued expenses | 53 | 539 | (371) |
Customer deposits and deferred revenue | 1,730 | (2,909) | 3,702 |
Income taxes payable | 2 | (41) | (15) |
Deferred rent | 0 | 0 | (8) |
Net cash used in operating activities | (4,495) | (6,281) | (2,256) |
Cash flows from investing activities: | |||
Purchases of property and equipment | (477) | (919) | (118) |
Net cash used in investing activities | (477) | (919) | (118) |
Cash flows from financing activities: | |||
Line of credit borrowings (repayments), net | 0 | 2,000 | (777) |
Proceed from issuance of convertible notes, net | 0 | (6) | 3,760 |
Proceeds from issuance of common stock under public offering, net of issuance costs | 15,832 | 0 | 0 |
Proceeds from issuance of common stock under private placement, net of issuance costs | 5,299 | 0 | 2,574 |
Proceeds from issuance of common stock under employee plans | 704 | 512 | 855 |
Net cash provided by financing activities | 21,835 | 2,506 | 6,412 |
Effect of exchange rates on cash and cash equivalents | 1 | 106 | (320) |
Net increase (decrease) in cash and cash equivalents | 16,864 | (4,588) | 3,718 |
Cash and cash equivalents, beginning of year | 939 | 5,527 | 1,809 |
Cash and cash equivalents, end of year | 17,803 | 939 | 5,527 |
Supplemental Cash Flow Information: | |||
Cash paid during the year for Income taxes | 18 | 47 | 26 |
Cash paid during the year for Interest | 516 | 302 | 130 |
Non-cash transactions: | |||
Net change in capitalized stock-based compensation | 0 | (20) | (4) |
Line of credit converted to convertible notes | 0 | 2,000 | 0 |
Fair value of common stock issued to settle accounts payable | $ 323 | $ 0 | $ 0 |
1. ORGANIZATION AND SUMMARY OF
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
May 31, 2017 | |
Organization And Summary Of Significant Accounting Policies | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BUSINESS: Aehr Test Systems (the “Company”) was incorporated in California in May 1977 and primarily designs, engineers and manufactures test and burn-in equipment used in the semiconductor industry. The Company’s principal products are the Advanced Burn-In and Test System, or ABTS, the FOX full wafer contact parallel test and burn-in systems, the MAX burn-in system, WaferPak full wafer contactor, the DiePak carrier and test fixtures. LIQUIDITY: Since inception, the Company has incurred substantial cumulative losses and negative cash flows from operations. In response, the Company took steps to minimize expense levels, entered into credit arrangements, and raised capital through public and private equity offerings, to increase the likelihood that it will have sufficient cash to support operations. In April 2017, the Company completed a public offering of its common stock raising net proceeds to the Company of $15.8 million. At May 31, 2017 the Company had $17.8 million in cash and cash equivalents. The Company anticipates that the existing cash balance together with income from operations, collections of existing accounts receivable, revenue from our existing backlog of products, the sale of inventory on hand, and deposits and down payments against significant orders will be adequate to meet its working capital and capital equipment requirements. CONSOLIDATION: The consolidated financial statements include the accounts of the Company and both its wholly-owned and majority-owned foreign subsidiaries. Intercompany accounts and transactions have been eliminated. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS: Assets and liabilities of the Company’s foreign subsidiaries and a branch office are translated into U.S. Dollars from their functional currencies of Japanese Yen, Euros and New Taiwan Dollars using the exchange rate in effect at the balance sheet date. Additionally, their net sales and expenses are translated using exchange rates approximating average rates prevailing during the fiscal year. Translation adjustments that arise from translating their financial statements from their local currencies to U.S. Dollars are accumulated and reflected as a separate component of shareholders’ equity (deficit). Transaction gains and losses that arise from exchange rate changes denominated in currencies other than the local currency are included in the Consolidated Statements of Operations as incurred. See Note 13 for the detail of foreign exchange transaction gains and losses for all periods presented. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Actual results could differ from those estimates. Significant estimates in the Company’s consolidated financial statements include allowance for doubtful accounts, valuation of inventory at the lower of cost or market, and warranty reserves. CASH EQUIVALENTS AND INVESTMENTS: Cash equivalents consist of money market instruments purchased with an original maturity of three months or less. These investments are reported at fair value. FAIR VALUE OF FINANCIAL INSTRUMENTS AND MEASUREMENT: The Company’s financial instruments are measured at fair value consistent with authoritative guidance. This authoritative guidance defines fair value, establishes a framework for using fair value to measure assets and liabilities, and disclosures required related to fair value measurements. The guidance establishes a fair value hierarchy based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels: Level 1 - instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 - instrument valuations are obtained from readily-available pricing sources for comparable instruments. Level 3 - instrument valuations are obtained without observable market values and require a high level of judgment to determine the fair value. The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2017 (in thousands): Balance as of May 31, 2017 Level 1 Level 2 Level 3 Money market funds $ 15,516 $ 15,516 $ — $ — Certificate of deposit 50 — 50 — Assets $ 15,566 $ 15,516 $ 50 $ — The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2016 (in thousands): Balance as of May 31, 2016 Level 1 Level 2 Level 3 Money market funds $ 1 $ 1 $ — $ — Certificate of deposit 50 — 50 — Assets $ 51 $ 1 $ 50 $ — There were no financial liabilities measured at fair value as of May 31, 2017 and 2016. There were no transfers between Level 1 and Level 2 fair value measurements during the fiscal year ended May 31, 2017 and 2016. The carrying amounts of financial instruments including cash, cash equivalents, receivables, accounts payable and certain other accrued liabilities, approximate fair value due to their short maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, the carrying value of the debt approximates the fair value. The Company has at times invested in debt and equity of private companies, and may do so again in the future, as part of its business strategy. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: Accounts receivable are derived from the sale of products throughout the world to semiconductor manufacturers, semiconductor contract assemblers, electronics manufacturers and burn-in and test service companies. Accounts receivable are recorded at the invoiced amount and are not interest bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible trade receivables. The Company also reviews its trade receivables by aging category to identify specific customers with known disputes or collection issues. The Company exercises judgment when determining the adequacy of these reserves as the Company evaluates historical bad debt trends, general economic conditions in the United States and internationally, and changes in customer financial conditions. Uncollectible receivables are recorded as bad debt expense when all efforts to collect have been exhausted and recoveries are recognized when they are received. No significant adjustments to the allowance for doubtful accounts were recorded during the years ended May 31, 2017, 2016 or 2015. CONCENTRATION OF CREDIT RISK: The Company sells its products primarily to semiconductor manufacturers in North America, Asia, and Europe. As of May 31, 2017, approximately 55%, 0% and 45% of gross accounts receivable were from customers located in Asia, Europe and North America, respectively. As of May 31, 2016, approximately 7%, 68% and 25% of gross accounts receivable were from customers located in Asia, Europe and North America, respectively. Three customers accounted for 47%, 40% and 11% of gross accounts receivable as of May 31, 2017. One customer accounted for 67% of gross accounts receivable as of May 31, 2016. Four customers accounted for 45%, 19%, 17% and 10% of net sales in fiscal 2017. Two customers accounted for 47% and 32% of net sales in fiscal 2016. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company uses letter of credit terms for some of its international customers. The Company’s cash and cash equivalents are generally deposited with major financial institutions in the United States, Japan, Germany and Taiwan. The Company invests its excess cash in money market funds. The money market funds bear the risk associated with each fund. The money market funds have variable interest rates. The Company has not experienced any material losses on its money market funds or short-term cash deposits. CONCENTRATION OF SUPPLY RISK: The Company relies on subcontractors to manufacture many of the components and subassemblies used in its products. Quality or performance failures of the Company’s products or changes in its manufacturers’ financial or business condition could disrupt the Company’s ability to supply quality products to its customers and thereby have a material and adverse effect on its business and operating results. Some of the components and technologies used in the Company’s products are purchased and licensed from a single source or a limited number of sources. The loss of any of these suppliers may cause the Company to incur additional transition costs, result in delays in the manufacturing and delivery of its products, or cause it to carry excess or obsolete inventory and could cause it to redesign its products. INVENTORIES: Inventories include material, labor and overhead, and are stated at the lower of cost (first-in, first-out method) or market. Provisions for excess, obsolete and unusable inventories are made after management’s evaluation of future demand and market conditions. The Company adjusts inventory balances to approximate the lower of its manufacturing costs or market value. If actual future demand or market conditions become less favorable than those projected by management, additional inventory write-downs may be required, and would be reflected in cost of product revenue in the period the revision is made. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Leasehold improvements are amortized over the lesser of their estimated useful lives or the term of the related lease. Furniture and fixtures, machinery and equipment, and test equipment are depreciated on a straight-line basis over their estimated useful lives. The ranges of estimated useful lives are generally as follows: Furniture and fixtures 2 to 6 years Machinery and equipment 3 to 6 years Test equipment 4 to 6 years REVENUE RECOGNITION: The Company recognizes revenue upon the shipment of products or the performance of services when: (1) persuasive evidence of the arrangement exists; (2) goods or services have been delivered; (3) the price is fixed or determinable; and (4) collectibility is reasonably assured. When a sales agreement involves multiple deliverables, such as extended support provisions, training to be supplied after delivery of the systems, and test programs specific to customers’ routine applications, the multiple deliverables are evaluated to determine the unit of accounting. Judgment is required to properly identify the accounting units of multiple element transactions and the manner in which revenue is allocated among the accounting units. Judgments made, or changes to judgments made, may significantly affect the timing or amount of revenue recognition. Revenue related to the multiple elements is allocated to each unit of accounting using the relative selling price hierarchy. Consistent with accounting guidance, the selling price is based upon vendor specific objective evidence (VSOE). If VSOE is not available, third party evidence (TPE) is used to establish the selling price. In the absence of VSOE or TPE, estimated selling price is used. During the first quarter of fiscal 2013, the Company entered into an agreement with a customer to develop a next generation system, and the Company shipped the first system in July 2016. The project identifies multiple milestones with values assigned to each. The consideration earned upon achieving the milestone is required to meet the following conditions prior to recognition: (i) the value is commensurate with the vendor’s performance to meet the milestone, (ii) it relates solely to past performance, (iii) and it is reasonable relative to all of the deliverables and payment terms within the arrangement. Revenue is recognized for the milestone upon acceptance by the customer. Sales tax collected from customers is not included in net sales but rather recorded as a liability due to the respective taxing authorities. Provisions for the estimated future cost of warranty and installation are recorded at the time the products are shipped. Royalty-based revenue related to licensing income from performance test boards and burn-in boards is recognized upon the earlier of the receipt by the Company of the licensee’s report related to its usage of the licensed intellectual property or upon payment by the licensee. The Company’s terms of sales with distributors are generally FOB shipping point with payment due within 60 days. All products go through in-house testing and verification of specifications before shipment. Apart from warranty reserves, credits issued have not been material as a percentage of net sales. The Company’s distributors do not generally carry inventories of the Company’s products. Instead, the distributors place orders with the Company at or about the time they receive orders from their customers. The Company’s shipment terms to our distributors do not provide for credits or rights of return. Because the Company’s distributors do not generally carry inventories of our products, they do not have rights to price protection or to return products. At the time we ship products to the distributors, the price is fixed. Subsequent to the issuance of the invoice, there are no discounts or special terms. The Company does not give the buyer the right to return the product or to receive future price concessions. The Company’s arrangements do not include vendor consideration. PRODUCT DEVELOPMENT COSTS AND CAPITALIZED SOFTWARE: Costs incurred in the research and development of new products or systems are charged to operations as incurred. Costs incurred in the development of software programs for the Company’s products are charged to operations as incurred until technological feasibility of the software has been established. Generally, technological feasibility is established when the software module performs its primary functions described in its original specifications, contains features required for it to be usable in a production environment, is completely documented and the related hardware portion of the product is complete. After technological feasibility is established, any additional costs are capitalized. Capitalization of software costs ceases when the software is substantially complete and is ready for its intended use. Capitalized costs are amortized over the estimated life of the related software product using the greater of the units of sales or straight-line methods over ten years. No system software development costs were capitalized or amortized in fiscal 2017, 2016 and 2015. IMPAIRMENT OF LONG-LIVED ASSETS: In the event that facts and circumstances indicate that the carrying value of assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying value to determine if a write-down is required. ADVERTISING COSTS: The Company expenses all advertising costs as incurred and the amounts were not material for all periods presented. SHIPPING AND HANDLING OF PRODUCTS: Amounts billed to customers for shipping and handling of products are included in net sales. Costs incurred related to shipping and handling of products are included in cost of sales. INCOME TAXES: Income taxes have been provided using the liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and net operating loss and tax credit carryforwards measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse or the carryforwards are utilized. Valuation allowances are established when it is determined that it is more likely than not that such assets will not be realized. A full valuation allowance was established against all deferred tax assets, as management determined that it is more likely than not that deferred tax assets will not be realized, as of May 31, 2017 and 2016. The Company accounts for uncertain tax positions consistent with authoritative guidance. The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not expect any material change in its unrecognized tax benefits over the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes. Although the Company files U.S. federal, various state, and foreign tax returns, the Company’s only major tax jurisdictions are the United States, California, Germany and Japan. Tax years 1997 – 2016 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years. STOCK-BASED COMPENSATION: Stock-based compensation expense consists of expenses for stock options, restricted stock units, or RSUs, 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, stock-based compensation expense is based on the fair value of the Company’s common stock at the grant date. All of the Company’s stock-based compensation is accounted for as equity instruments. The following table summarizes the stock-based compensation expense for the years ended May 31, 2017, 2016 and 2015 (in thousands, except per share data): Year Ended May 31, 2017 2016 2015 Stock-based compensation in the form of stock options, RSUs, and ESPP purchase rights, included in: Cost of sales $ 91 $ 87 $ 70 Selling, general and administrative 714 723 726 Research and development 194 206 201 Net effect on net loss $ 999 $ 1,016 $ 997 Effect on net loss per share: Basic $ 0.06 $ 0.08 $ 0.08 Diluted $ 0.06 $ 0.08 $ 0.08 During fiscal 2017, 2016 and fiscal 2015, the Company recorded stock-based compensation related to stock options and restricted stock units of $884,000, $894,000 and $857,000, respectively. As of May 31, 2017, the total compensation cost related to unvested stock-based awards under the Company’s 2006 Equity Incentive Plan and 2016 Equity Incentive Plan, but not yet recognized, was $886,000 which is net of estimated forfeitures of $2,000. This cost will be amortized on a straight-line basis over a weighted average period of approximately 2.3 years. During fiscal 2017, 2016 and fiscal 2015, the Company recorded stock-based compensation related to its ESPP of $115,000, $122,000 and $140,000, respectively. As of May 31, 2017, 2016 and 2015, stock-based compensation costs of zero, zero and $20,000, respectively, were capitalized as part of inventory. As of May 31, 2017, the total compensation cost related to purchase rights under the ESPP but not yet recognized was $33,000. This cost will be amortized on a straight-line basis over a weighted average period of approximately 0.7 years. Valuation Assumptions Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation method and a single option award approach. The fair value under the single option approach is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Expected Term. The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as evidenced by changes to the terms of its stock-based awards. Volatility. Volatility is a measure of the amounts by which a financial variable such as stock price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses the historical volatility for the past five years, 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 method 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 in fiscal 2017, 2016 and 2015 were estimated using the following weighted average assumptions in the Black-Scholes option valuation method: Year Ended May 31, 2017 2016 2015 Option plan shares Expected term (in years) 4 4 4 Volatility 0.81 0.86 0.90 Risk-free interest rates 1.02% 1.21% 1.20% Weighted-average grant date fair value $ 1.09 $ 1.31 $ 1.52 The fair value of our ESPP purchase rights for the fiscal 2017, 2016 and 2015 was estimated using the following weighted-average assumptions: Year End May 31, 2017 2016 2015 Employee stock purchase plan shares Expected term (in years) 0.5 – 2.0 0.5 – 2.0 0.5 – 2.0 Volatility 0.79 – 1.08 0.64 – 0.74 0.55 – 0.83 Risk-free interest rates 0.48%–0.80% 0.40%–0.76% 0.04%–0.55% Weighted-average grant date fair value $ 1.65 $ 0.80 $ 1.43 EARNINGS PER SHARE (“EPS”): Basic EPS is determined using the weighted average number of common shares outstanding during the period. Diluted EPS is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, and employee stock purchase plan shares) outstanding during the period using the treasury stock method. The following table presents the computation of basic and diluted net loss per share attributable to Aehr Test Systems common shareholders (in thousands, except per share data): Year Ended May 31, 2017 2016 2015 Numerator: Net loss $ (5,653 ) $ (6,785 ) $ (6,647 ) Denominator for basic net loss per share: Weighted-average shares outstanding 16,267 13,091 12,047 Shares used in basic net loss per share calculation 16,267 13,091 12,047 Effect of dilutive securities — — — Denominator for diluted net loss per share 16,267 13,091 12,047 Basic net loss per share $ (0.35 ) $ (0.52 ) $ (0.55 ) Diluted net loss per share $ (0.35 ) $ (0.52 ) $ (0.55 ) For the purpose of computing diluted earnings per share, the weighted average number of potential common shares does not include stock options with an exercise price greater than the average fair value of the Company’s common stock for the period, as the effect would be anti-dilutive. In the fiscal year’s ended May 31, 2017 and 2016, potential common shares have not been included in the calculation of diluted net loss per share as the effect would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for these periods are the same. Stock options to purchase 3,074,000, 3,201,000, and 3,686,000 shares of common stock were outstanding on May 31, 2017, 2016 and 2015, respectively, but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. RSUs for 32,000 and 35,000 shares were outstanding at May 31, 2017 and 2016, respectively, but not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. ESPP rights to purchase 169,000, 304,000 and 175,000 ESPP shares were outstanding on May 31, 2017, 2016 and 2015, respectively, but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. The 2,657,000 shares convertible under the Convertible Notes outstanding at May 31, 2017 and 2016 were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. COMPREHENSIVE LOSS: Comprehensive loss generally represents all changes in shareholders’ equity (deficit) except those resulting from investments or contributions by shareholders. Unrealized gains and losses on foreign currency translation adjustments are included in the Company’s components of comprehensive loss, which are excluded from net loss. Comprehensive loss is included in the statements of comprehensive loss. RECLASSIFICATION Certain reclassifications have been made to the consolidated financial statements to conform to the current period presentation. These reclassifications did not result in any change in previously reported net loss, total assets or shareholders’ equity (deficit). RECENT ACCOUNTING PRONOUNCEMENTS: In May 2014, as part of its ongoing efforts to assist in the convergence of GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued an accounting standard update related to revenue from contracts with customers. This standard sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The standard provides alternative methods of initial adoption and will become effective for the Company beginning in the first quarter of fiscal 2019. The FASB has issued several updates to the standard which i) defer the original effective date from January 1, 2017 to January 1, 2018, while allowing for early adoption as of January 1, 2017. ii) clarify the application of the principal versus agent guidance. and iii) clarify the guidance on inconsequential and perfunctory promises and licensing. In May 2016, the FASB issued an update to address certain narrow aspects of the guidance including collectibility criterion, collection of sales taxes from customers, noncash consideration, contract modifications and completed contracts. This issuance does not change the core principle of the guidance in the initial topic issued in May 2014. In December 2016, the FASB issued updated guidance regarding revenue from contracts with customers. Some topics that could impact the Company include corrections and improvements around the following: contract costs impairment testing, disclosure of remaining performance obligations and prior period obligations, contract modifications, and contract asset versus receivable. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements. In August 2014, the FASB issued authoritative guidance related to going concern. This guidance requires management to evaluate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and whether or not it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued. This guidance became effective for the Company for the annual period ending May 31, 2017. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements. In July 2015, the FASB issued an accounting standard update that requires management to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This new standard will be effective for us in fiscal year 2018. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In November 2015, the FASB issued an accounting standard update related to deferred tax assets and liabilities. This standard simplifies the presentation of deferred income taxes to be classified as noncurrent in the consolidated balance sheet. This new standard will be effective for us in fiscal year 2018. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In January 2016, the FASB issued an accounting standard update related to recognition and measurement of financial assets and financial liabilities. This standard changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This standard is effective for us in fiscal year 2020. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements. In February 2016, the FASB issued authoritative guidance related to leases. This guidance requires management to present all leases greater than one year on the balance sheet as a liability to make payments and an asset as the right to use the underlying asset for the lease term. This new standard will be effective for us in fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements. In March 2016, the FASB released an accounting standard update that simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The accounting standard will be effective for the Company beginning the first quarter of fiscal 2018, and early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In June 2016, the FASB issued an accounting standard update that requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021 on a modified retrospective basis, and early adoption in fiscal 2020 is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements. In August 2016, the FASB issued authoritative guidance related to the classification of certain cash receipts and cash payments on the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a retrospective basis, and early ad |
2. ACCOUNTS RECEIVABLE
2. ACCOUNTS RECEIVABLE | 12 Months Ended |
May 31, 2017 | |
Accounts Receivable, Net, Current [Abstract] | |
ACCOUNTS RECEIVABLE | 2. ACCOUNTS RECEIVABLE: Accounts receivable comprise (in thousands): May 31, 2017 2016 Accounts receivable $ 4,071 $ 530 Less: Allowance for doubtful accounts (61 ) (8 ) $ 4,010 $ 522 Additions Balance at charged to Balance beginning costs and at end of year expenses Deductions* of year Allowance for doubtful accounts receivable: May 31, 2017 $ 8 $ 53 $ — $ 61 May 31, 2016 $ 21 $ — $ (13 ) $ 8 * Deductions include write-offs of uncollectible accounts and collections of amounts previously reserved. |
3. INVENTORIES
3. INVENTORIES | 12 Months Ended |
May 31, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | 3. INVENTORIES: Inventories comprise (in thousands): May 31, 2017 2016 Raw materials and sub-assemblies $ 4,268 $ 2,839 Work in process 2,059 4,151 Finished goods 277 43 $ 6,604 $ 7,033 |
4. PROPERTY AND EQUIPMENT, NET
4. PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
May 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT, NET | 4. PROPERTY AND EQUIPMENT, NET: Property and equipment, net comprise (in thousands): May 31, 2017 2016 Leasehold improvements $ 1,145 $ 1,072 Furniture and fixtures 974 974 Machinery and equipment 3,035 2,330 Test equipment 2,268 2,581 7,422 6,957 Less: Accumulated depreciation and amortization (6,003 ) (5,753 ) $ 1,419 $ 1,204 |
5. PRODUCT WARRANTIES
5. PRODUCT WARRANTIES | 12 Months Ended |
May 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Product Warranties | 5. 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. Following is a summary of changes in the Company’s liability for product warranties during the fiscal years ended May 31, 2017 and 2016 (in thousands): May 31, 2017 2016 Balance at the beginning of the year $ 155 $ 137 Accruals for warranties issued during the year 123 334 Accruals and adjustments (change in estimates) related to pre-existing warranties during the year (54 ) — Settlement made during the year (in cash or in kind) (111 ) (316 ) Balance at the end of the year $ 113 $ 155 The accrued warranty balance is included in accrued expenses on the consolidated balance sheets. |
6. ACCRUED EXPENSES
6. ACCRUED EXPENSES | 12 Months Ended |
May 31, 2017 | |
Accrued Liabilities and Other Liabilities [Abstract] | |
ACCRUED EXPENSES | 6. ACCRUED EXPENSES: May 31, 2017 2016 Payroll related $ 934 $ 706 Professional services 161 166 Accrued interest 139 110 Commissions and bonuses 125 227 Warranty 113 155 Taxes payable 69 63 Investor relations 25 88 Other 43 38 $ 1,609 $ 1,553 |
7. INCOME TAXES
7. INCOME TAXES | 12 Months Ended |
May 31, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 7. INCOME TAXES: Domestic and foreign components of loss before income tax (expense) benefit are as follows (in thousands): Year Ended May 31, 2017 2016 2015 Domestic $ (5,663 ) $ (6,794 ) $ (6,871 ) Foreign 35 19 258 $ (5,628 ) $ (6,775 ) $ (6,613 ) The income tax (expense) benefit consists of the following (in thousands): Year Ended May 31, 2017 2016 2015 Federal income taxes: Current $ — $ — $ — Deferred — — — State income taxes: Current (8 ) 3 (19 ) Deferred — — — Foreign income taxes: Current (17 ) (13 ) (15 ) Deferred — — — $ (25 ) $ (10 ) $ (34 ) The Company’s effective tax rate differs from the U.S. federal statutory tax rate, as follows: Year Ended May 31, 2017 2016 2015 U.S. federal statutory tax rate 34.0 % 34.0 % 34.0 % State taxes, net of federal tax effect (0.1 ) — (0.2 ) Foreign rate differential 0.1 0.2 1.4 Stock-based compensation (2.8 ) (3.8 ) (2.2 ) Research and development credit 3.1 2.1 1.1 Change in valuation allowance (33.8 ) (32.5 ) (34.4 ) Other (0.9 ) (0.2 ) (0.2 ) Effective tax rate (0.4 )% (0.2 )% (0.5 )% The components of the net deferred tax assets are as follows (in thousands): Year Ended May 31, 2017 2016 Net operating losses $ 18,719 $ 16,643 Credit carryforwards 4,715 4,430 Inventory reserves 870 1,064 Reserves and accruals 1,566 1,606 Other 393 885 26,263 24,628 Less: Valuation allowance (26,263 ) (24,628 ) Net deferred tax assets $ — $ — The valuation allowance increased by $1,635,000 during fiscal 2017, increased by $421,000 during fiscal 2016, and increased by $2,223,000 during fiscal 2015. As of May 31, 2017 and 2016, the Company concluded that it is more likely than not that the deferred tax assets will not be realized and therefore provided a full valuation allowance against the deferred tax assets. The Company will continue to evaluate the need for a valuation allowance against its deferred tax assets on a quarterly basis. At May 31, 2017, the Company had federal and state net operating loss carryforwards of $51,851,000 and $30,351,000, respectively. The federal and state net operating loss carryforwards will begin to expire in 2024. At May 31, 2017, the Company also had federal and state research and development tax credit carryforwards of $1,982,000 and $5,164,000, respectively. The federal credit carryforward will begin to expire in 2019, and the California credit will carryforward indefinitely. These carryforwards may be subject to certain limitations on annual utilization in case of a change in ownership, as defined by tax law. The Company also has alternative minimum tax credit carryforwards of $91,000 for federal tax purposes and $34,000 for state purposes. The credits may be used to offset regular tax and do not expire. The Company has made no provision for U.S. income taxes on undistributed earnings of certain foreign subsidiaries because it is the Company’s intention to permanently reinvest such earnings in its foreign subsidiaries. If such earnings were distributed, the Company would be subject to additional U.S. income tax expense. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable. Foreign net operating loss carryforwards of $892,000 are available to reduce future foreign taxable income. The foreign net operating losses will begin to expire in 2018. The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available. The aggregate changes in the balance of gross unrecognized tax benefits are as follows (in thousands): Beginning balance as of May 31, 2014 $ 973 Decreases related to prior year tax positions — Decreases related to lapse of statute of limitations (54 ) Balance at May 31, 2015 $ 919 Decreases related to prior year tax positions (124 ) Decreases related to lapse of statute of limitations (6 ) Balance at May 31, 2016 $ 789 Decreases related to prior year tax positions — Decreases related to lapse of statute of limitations — Balance at May 31, 2017 $ 789 The ending balance of $789,000 of unrecognized tax benefits as of May 31, 2017, if recognized, would not impact the effective tax rate. Although the Company files U.S. federal, various state, and foreign tax returns, the Company’s only major tax jurisdictions are the United States, California, Germany and Japan. Tax years 1997 – 2016 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years. |
8. CUSTOMER DEPOSITS AND DEFERR
8. CUSTOMER DEPOSITS AND DEFERRED REVENUE | 12 Months Ended |
May 31, 2017 | |
Customer Deposits And Deferred Revenue | |
CUSTOMER DEPOSITS AND DEFERRED REVENUE | 8. CUSTOMER DEPOSITS AND DEFERRED REVENUE: Customer deposits and deferred revenue (in thousands): May 31, 2017 2016 Customer deposits $ 3,264 $ 540 Deferred revenue 203 1,174 $ 3,467 $ 1,714 |
9. LONG-TERM DEBT
9. LONG-TERM DEBT | 12 Months Ended |
May 31, 2017 | |
Long-term Debt, Unclassified [Abstract] | |
LONG-TERM DEBT | 9. LONG-TERM DEBT: On April 10, 2015, the Company entered into a Convertible Note Purchase and Credit Facility Agreement (the “Purchase Agreement”) with QVT Fund LP and Quintessence Fund L.P. (the “Purchasers”) providing for (a) the Company’s sale to the Purchasers of $4,110,000 in aggregate principal amount of 9.0% Convertible Secured Notes due 2017 (the “Convertible Notes”) and (b) a secured revolving loan facility (the “Credit Facility”) in an aggregate principal amount of up to $2,000,000. On August 22, 2016 the Purchase Agreement was amended to extend the maturity date of the Convertible Notes to April 10, 2019, decrease the conversion price from $2.65 per share to $2.30 per share, decrease the forced conversion price from $7.50 per share to $6.51 per share, and allow for additional equity awards. The Convertible Notes bear interest at an annual rate of 9.0% and will mature on April 10, 2019 unless repurchased or converted prior to that date. Interest is payable quarterly on March 1, June 1, September 1 and December 1 of each year. Debt issuance costs of $356,000, which are being accreted over the term of the original loan using the effective interest rate method, were offset against the loan balance. During fiscal years ended May 31, 2017 and 2016, $148,000 and $177,000, respectively, of amortization costs were recognized as interest expense. The conversion price for the Convertible Notes is $2.30 per share and is subject to adjustment upon the occurrence of certain specified events. Holders may convert all or any part of the principal amount of their Convertible Notes in integrals of $10,000 at any time prior to the maturity date. Upon conversion, the Company will deliver shares of its common stock to the holder of Convertible Notes electing such conversion. The Company may not redeem the Convertible Notes prior to maturity. On April 14, 2016, $900,000 drawn against the Credit Facility was converted into Convertible Notes. As of May 31, 2016, the Company had a balance of $1,100,000 against the Credit Facility. Upon maturity in July 2016, the $1,100,000 balance of the Credit Facility was converted into Convertible Notes. As of May 31, 2017, there was no remaining balance available on the Credit Facility. The Company’s obligations under the Purchase Agreement are secured by substantially all of the assets of the Company. Long-term debt, net of debt issuance costs (in thousands): May 31, May 31, 2017 2016 Principal $ 6,110 $ 6,110 Unamortized debt issuance costs — (148 ) $ 6,110 $ 5,962 |
10. EQUITY
10. EQUITY | 12 Months Ended |
May 31, 2017 | |
Equity [Abstract] | |
EQUITY | 10. EQUITY: On September 28, 2016, the Company sold 2,722,000 shares of its common stock in a private placement transaction to certain institutional and accredited investors. The purchase price per share of the common stock sold in the private placement was $2.15, resulting in gross proceeds to the Company of $5,851,000, before offering expenses. The net proceeds after offering expenses were $5,299,000. On April 19 2017, the Company completed a public offering of 4,423,000 shares of its common stock at a price to the public of $3.90 per share, including the underwriter’s exercise of its option to purchase 577,000 additional shares to cover over-allotments. The gross proceeds to the Company were $17,250,000, before underwriting discounts and offering expenses. The net proceeds after underwriting discounts and offering expenses were $15,832,000. |
11. CAPITAL STOCK
11. CAPITAL STOCK | 12 Months Ended |
May 31, 2017 | |
Capital Stock | |
CAPITAL STOCK | 11. CAPITAL STOCK: EQUITY INCENTIVE PLAN: In October 2006, the Company’s 2006 Equity Incentive Plan was approved by the shareholders, which provides for granting of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, performance shares and other stock or cash awards as the Company’s Board of Directors may determine. In October 2016, the Company’s 2016 Equity Incentive Plan was approved by the Company’s shareholders. The 2016 Equity Incentive Plan replaced our 2006 Equity Incentive Plan, which was scheduled to expire in October 2016, and will continue in effect until 2026. A total of 2,238,000 shares of common stock have been reserved for issuance under the Company’s 2016 Equity Incentive Plan, which includes 1,438,000 shares that remained available for issuance under the 2006 Equity Incentive Plan. See the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on November 14, 2016 for further information regarding the 2016 Equity Incentive Plan. As of May 31, 2017, out of the 5,275,000 shares authorized for grant under the 2006 Equity Incentive Plan and 2016 Equity Incentive Plan, 3,105,000 stock options and RSUs were outstanding. The following tables summarize the Company’s stock option and RSU transactions during fiscal 2017, 2016 and 2015 (in thousands): Available Shares Balances, May 31, 2014 1,145 Additional shares reserved 860 Options granted (1,253 ) Options terminated 93 Balances, May 31, 2015 845 Additional shares reserved 800 Options granted (92 ) RSUs granted (35 ) Options terminated 329 Balances, May 31, 2016 1,847 Additional shares reserved 2,238 Options granted (368 ) RSUs granted (157 ) Options terminated 55 Plan shares expired (1,446 ) Balances, May 31, 2017 2,169 The following table summarized the stock option transactions during fiscal 2017, 2016 and 2015 (in thousands, except per share data): Outstanding Options Weighted Number Average Aggregate of Exercise Intrinsic Shares Price Value Balances, May 31, 2014 3,002 $ 1.31 $ 2,913 Options granted 1,253 $ 2.38 Options terminated (93 ) $ 2.30 Options exercised (476 ) $ 1.33 Balances, May 31, 2015 3,686 $ 1.66 $ 2,946 Options granted 92 $ 2.12 Options terminated (329 ) $ 1.93 Options exercised (248 ) $ 1.34 Balances, May 31, 2016 3,201 $ 1.66 $ 189 Options granted 368 $ 1.83 Options terminated (55 ) $ 1.42 Options exercised (440 ) $ 1.35 Balances, May 31, 2017 3,074 $ 1.73 $ 8,763 Options exercisable and expected to be exercisable at May 31, 2017 3,030 $ 1.72 $ 8,654 The options outstanding and exercisable at May 31, 2017 were in the following exercise price ranges (in thousands, except per share data): Options Outstanding Options Exercisable at May 31, 2017 at May 31, 2017 Range of Exercise Prices Number Outstanding Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number Exercisable Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value $ 0.59-$0.97 514 1.77 $ 0.66 514 1.77 $ 0.66 $ 1.09-$1.40 784 2.41 $ 1.28 773 2.40 $ 1.28 $ 1.68-$2.06 542 5.12 $ 1.77 287 4.26 $ 1.85 $ 2.10-$2.81 1,234 4.53 $ 2.44 848 4.46 $ 2.46 $ 0.59-$2.81 3,074 3.63 $ 1.73 2,422 3.21 $ 1.63 $ 7,148 The total intrinsic values of options exercised were $810,000, $185,000 and $540,000 during fiscal 2017, 2016 and 2015, respectively. The weighted average contractual life of the options exercisable and expected to be exercisable at May 31, 2017 was 3.62 years. Options to purchase 2,422,000, 2,390,000 and 2,189,000 shares were exercisable at May 31, 2017, 2016 and 2015, respectively. These exercisable options had weighted average exercise prices of $3.21, $3.69 and $1.43 as of May 31, 2017, 2016 and 2015, respectively. During the fiscal year ended May 31, 2017, RSUs for 74,000 shares were granted to employees. The market value on the date of the grant of these RSUs was $1.68 per share. 42,000 RSUs became fully vested during the year ended May 31, 2017, and 32,000 RSUs were unvested at May 31, 2017. The intrinsic value of the unvested RSUs at May 31, 2017 was $145,000. During the fiscal year ended May 31, 2016, RSUs were granted to an employee for 35,000 shares. The market value on the date of the grant of these RSUs was $2.16 per share. The RSUs are performance-based and immediately vest upon attainment of goals established and have a term of one year. The 35,000 RSUs were outstanding and fully vested at May 31, 2016. The intrinsic value of the outstanding RSUs at May 31, 2016 was $35,000. There were no RSUs granted during fiscal 2015. During the fiscal year ended May 31, 2017, RSUs for 83,000 shares were granted to members of the Company’s Board of Directors. The weighted average market value on the date of the grant of these RSUs was $1.86 per share. All of these RSUs were fully vested at May 31, 2017. There were no RSUs granted to members of the Board of Directors during fiscal 2016 or 2015. |
12. EMPLOYEE BENEFIT PLANS
12. EMPLOYEE BENEFIT PLANS | 12 Months Ended |
May 31, 2017 | |
Employee Benefit Plans | |
EMPLOYEE BENEFIT PLANS | 12. EMPLOYEE BENEFIT PLANS: EMPLOYEE STOCK OWNERSHIP PLAN: The Company has a non-contributory, trusteed employee stock ownership plan for full-time employees who have completed three consecutive months of service and for part-time employees who have completed one year of service and have attained an age of 21. The Company can contribute either shares of the Company’s stock or cash to the plan. The contribution is determined annually by the Company and cannot exceed 15% of the annual aggregate salaries of those employees eligible for participation in the plan. On May 31, 2007, the Company converted the Aehr Test Systems Employee Stock Bonus Plan into the Aehr Test Systems Employee Stock Ownership Plan (the “Plan”). The stock bonus plan was converted to an employee stock ownership plan (“ESOP”) to enable the Plan to better comply with changes in the law regarding Company stock. Individuals’ account balances vest at a rate of 20% per year commencing upon completion of two years of service. Non-vested balances, which are forfeited following termination of employment, are allocated to the remaining employees in the Plan. Under the Plan provisions, each employee who reaches age fifty-five (55) and has been a participant in the Plan for ten years will be offered an election each year to direct the transfer of up to 25% of his/her ESOP account to the employee self-directed account in the Savings and Retirement Plan. For anyone who met the above prerequisites, the first election to diversify holdings was offered after May 31, 2008. In the sixth year, employees will be able to diversify up to 50% of their ESOP accounts. Contributions of $60,000 per year were authorized for the plan during fiscal 2017, 2016 and 2015. The contribution amounts are recorded as compensation expense, in the period authorized and included in accrued expenses, in the period authorized. Contributions of 59,000 shares were made to the ESOP during fiscal 2017 for fiscal 2016. Contributions of 25,000 shares were made to the ESOP during fiscal 2016 for fiscal 2015. Contributions of 27,000 shares were made to the ESOP during fiscal 2015 for fiscal 2014. The contribution for fiscal 2017 will be made in fiscal 2018. Shares held in the ESOP are included in the EPS calculation. 401(K) PLAN: The Company maintains a defined contribution savings plan (the “401(k) Plan”) to provide retirement income to all qualified employees of the Company. The 401(k) Plan is intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. The 401(k) Plan is funded by voluntary pre-tax contributions from employees. Contributions are invested, as directed by the participant, in investment funds available under the 401(k) Plan. The Company is not required to make, and did not make, any contributions to the 401(k) Plan during fiscal 2017, 2016 and 2015. EMPLOYEE STOCK PURCHASE PLAN: In October 2006, the Company’s shareholders approved the 2006 Employee Stock Purchase Plan. In October 2016, the Company’s Amended and Restated 2006 Employee Stock Purchase Plan, or Purchase Plan, was approved by the Company’s shareholders. The Purchase Plan extended the term of the 2006 Employee Stock Purchase Plan indefinitely. A total of 532,000 shares of the Company’s common stock were reserved for issuance under the Purchase Plan. See the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on November 14, 2016 for further information regarding the Purchase Plan. The Purchase Plan has consecutive, overlapping, twenty-four month offering periods. Each twenty-four month offering period includes four six month purchase periods. The offering periods generally begin on the first trading day on or after April 1 and October 1 each year. All employees who work a minimum of 20 hours per week and are customarily employed by the Company (or an affiliate thereof) for at least five months per calendar year are eligible to participate. Under the Purchase Plan, shares are purchased through employee payroll deductions at exercise prices equal to 85% of the lesser of the fair market value of the Company’s common stock at either the first day of an offering period or the last day of the purchase period. If a participant’s rights to purchase stock under all employee stock purchase plans of the Company accrue at a rate which exceeds $25,000 worth of stock for a calendar year, such participant may not be granted an option to purchase stock under the Purchase Plan. The maximum number of shares a participant may purchase during a single purchase period is 3,000 shares. During the fiscal years ended May 31, 2017, 2016 and 2015, ESPP purchase rights of 1,000, 304,000, and 222,000 shares, respectively, were granted. For the years ended May 31, 2017, 2016 and 2015, approximately 151,000, 86,000 and 87,000 shares of common stock, respectively, were issued under the plans. As of May 31, 2017, 1,119,000 shares have been issued under the ESPP, and there were 381,000 ESPP shares available for issuance. |
13. OTHER (EXPENSE) INCOME, NET
13. OTHER (EXPENSE) INCOME, NET | 12 Months Ended |
May 31, 2017 | |
Other Expense Income Net | |
OTHER (EXPENSE) INCOME, NET | 13. OTHER (EXPENSE) INCOME, NET: Other (expense) income, net comprises the following (in thousands): Year Ended May 31, 2017 2016 2015 Foreign exchange (loss) gain $ (21 ) $ (19 ) $ 194 Other, net — 3 17 $ (21 ) $ (16 ) $ 211 |
14. SEGMENT INFORMATION
14. SEGMENT INFORMATION | 12 Months Ended |
May 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | 14. SEGMENT INFORMATION: The Company operates in one reportable segment: the design, manufacture and marketing of advanced test and burn-in products to the semiconductor manufacturing industry. The following presents information about the Company’s operations in different geographic areas. Net sales are based upon ship-to location (in thousands): United States Asia Europe Total 2017: Net sales $ 7,762 $ 10,439 $ 697 $ 18,898 Property and equipment, net 1,364 40 15 1,419 2016: Net sales $ 2,957 $ 10,228 $ 1,316 $ 14,501 Property and equipment, net 1,151 39 14 1,204 2015: Net sales $ 3,648 $ 4,943 $ 1,427 $ 10,018 Property and equipment, net 432 34 12 478 The Company’s Japanese and German subsidiaries primarily comprise the foreign operations. Substantially all of the sales of the subsidiaries are made to unaffiliated Japanese or European customers. Net sales from outside the United States include those of Aehr Test Systems Japan K.K. and Aehr Test Systems GmbH. |
15. RELATED PARTY TRANSACTIONS
15. RELATED PARTY TRANSACTIONS | 12 Months Ended |
May 31, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 15. RELATED PARTY TRANSACTIONS: Mario M. Rosati, one of the Company’s directors, is also a member of Wilson Sonsini Goodrich & Rosati, Professional Corporation, which has served as the Company’s outside corporate counsel and has received compensation at normal commercial rates for these services. At May 31, 2017, the Company had $188,000 payable to Wilson Sonsini Goodrich & Rosati. |
16. COMMITMENTS AND CONTINGENCI
16. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
May 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 16. COMMITMENTS AND CONTINGENCIES: COMMITMENTS The Company leases most of its manufacturing and office space under operating leases. The Company entered into non-cancelable operating lease agreements for its United States manufacturing and office facilities and maintains equipment under non-cancelable operating leases in Germany. The Company’s principal administrative and production facilities are located in Fremont, California, in a 51,289 square foot building. The Company’s lease was renewed in November 2014 and expires in June 2018. The Company has an option to extend the lease for an additional three year period at rates to be determined. The Company’s facility in Japan is located in a 418 square foot office in Tokyo under a cancellable lease which expires in June 2019. The Company also maintains a 1,585 square foot warehouse in Yamanashi under a lease which expires in November 2017. The Company leases a sales and support office in Utting, Germany. The lease, which began February 1, 1992 and expires on January 31, 2019, contains an automatic twelve months renewal, at rates to be determined, if no notice is given prior to six months from expiry. Under the lease agreements, the Company is responsible for payments of utilities, taxes and insurance. Minimum annual rentals payments under non-cancellable operating leases in each of the next five fiscal years and thereafter are as follows (in thousands): Years Ending May 31, 2018 $ 502 2019 64 2020 1 2021 -- 2022 -- Thereafter -- Total $ 567 Rental expense for the years ended May 31, 2017, 2016 and 2015 was $509,000, $499,000 and $554,000, respectively. At May 31, 2017 and 2016, the Company had a $50,000 certificate of deposit 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 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. At May 31, 2017, the Company had $5,684,000 of purchase obligations which are due within the following 12 months. This amount does not include contractual obligations recorded on the consolidated balance sheets as liabilities. 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 flows. |
17. SELECTED QUARTERLY CONSOLID
17. SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) | 12 Months Ended |
May 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) | 17. SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) The following tables (presented in thousands, except per share data) sets forth selected unaudited condensed consolidated statements of operations data for each of the four quarters of the fiscal years ended May 31, 2017 and 2016. The unaudited quarterly information has been prepared on the same basis as the annual information presented elsewhere herein and, in the Company’s opinion, includes all adjustments (consisting only of normal recurring entries) necessary for a fair statement of the information for the quarters presented. The operating results for any quarter are not necessarily indicative of results for any future period and should be read in conjunction with the audited consolidated financial statements of the Company’s and the notes thereto included elsewhere herein. Three Months Ended Aug. 31, Nov. 30, Feb. 28, May 31, 2016 2016 2017 2017 Net sales $ 5,318 $ 4,216 $ 2,681 $ 6,683 Gross profit $ 2,206 $ 1,463 $ 503 $ 2,608 Net loss $ (755 ) $ (1,452 ) $ (2,651 ) $ (795 ) Net loss per share basic and diluted $ (0.06 ) $ (0.09 ) $ (0.16 ) $ (0.04 ) Three Months Ended Aug. 31, Nov. 30, Feb. 29, May 31, 2015 2015 2016 2016 Net sales $ 6,633 $ 4,620 $ 1,677 $ 1,571 Gross profit (loss) $ 3,383 $ 1,691 $ 169 $ (98 ) Net income (loss) $ 294 $ (1,048 ) $ (2,975 ) $ (3,056 ) Net income (loss) per share basic and diluted $ 0.02 $ (0.08 ) $ (0.23 ) $ (0.23 ) |
1. ORGANIZATION AND SUMMARY O25
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
May 31, 2017 | |
Accounting Policies [Abstract] | |
BUSINESS: | BUSINESS: Aehr Test Systems (the “Company”) was incorporated in California in May 1977 and primarily designs, engineers and manufactures test and burn-in equipment used in the semiconductor industry. The Company’s principal products are the Advanced Burn-In and Test System, or ABTS, the FOX full wafer contact parallel test and burn-in systems, the MAX burn-in system, WaferPak full wafer contactor, the DiePak carrier and test fixtures. |
LIQUIDITY: | LIQUIDITY: Since inception, the Company has incurred substantial cumulative losses and negative cash flows from operations. In response, the Company took steps to minimize expense levels, entered into credit arrangements, and raised capital through public and private equity offerings, to increase the likelihood that it will have sufficient cash to support operations. In April 2017, the Company completed a public offering of its common stock raising net proceeds to the Company of $15.8 million. At May 31, 2017 the Company had $17.8 million in cash and cash equivalents. The Company anticipates that the existing cash balance together with income from operations, collections of existing accounts receivable, revenue from our existing backlog of products, the sale of inventory on hand, and deposits and down payments against significant orders will be adequate to meet its working capital and capital equipment requirements. |
CONSOLIDATION: | CONSOLIDATION: The consolidated financial statements include the accounts of the Company and both its wholly-owned and majority-owned foreign subsidiaries. Intercompany accounts and transactions have been eliminated. |
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS: | FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS: Assets and liabilities of the Company’s foreign subsidiaries and a branch office are translated into U.S. Dollars from their functional currencies of Japanese Yen, Euros and New Taiwan Dollars using the exchange rate in effect at the balance sheet date. Additionally, their net sales and expenses are translated using exchange rates approximating average rates prevailing during the fiscal year. Translation adjustments that arise from translating their financial statements from their local currencies to U.S. Dollars are accumulated and reflected as a separate component of shareholders’ equity (deficit). Transaction gains and losses that arise from exchange rate changes denominated in currencies other than the local currency are included in the Consolidated Statements of Operations as incurred. See Note 13 for the detail of foreign exchange transaction gains and losses for all periods presented. |
USE OF ESTIMATES: | USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Actual results could differ from those estimates. Significant estimates in the Company’s consolidated financial statements include allowance for doubtful accounts, valuation of inventory at the lower of cost or market, and warranty reserves. |
CASH EQUIVALENTS AND INVESTMENTS: | CASH EQUIVALENTS AND INVESTMENTS: Cash equivalents consist of money market instruments purchased with an original maturity of three months or less. These investments are reported at fair value. |
FAIR VALUE OF FINANCIAL INSTRUMENTS AND MEASUREMENT: | FAIR VALUE OF FINANCIAL INSTRUMENTS AND MEASUREMENT: The Company’s financial instruments are measured at fair value consistent with authoritative guidance. This authoritative guidance defines fair value, establishes a framework for using fair value to measure assets and liabilities, and disclosures required related to fair value measurements. The guidance establishes a fair value hierarchy based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels: Level 1 - instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 - instrument valuations are obtained from readily-available pricing sources for comparable instruments. Level 3 - instrument valuations are obtained without observable market values and require a high level of judgment to determine the fair value. The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2017 (in thousands): Balance as of May 31, 2017 Level 1 Level 2 Level 3 Money market funds $ 15,516 $ 15,516 $ — $ — Certificate of deposit 50 — 50 — Assets $ 15,566 $ 15,516 $ 50 $ — The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2016 (in thousands): Balance as of May 31, 2016 Level 1 Level 2 Level 3 Money market funds $ 1 $ 1 $ — $ — Certificate of deposit 50 — 50 — Assets $ 51 $ 1 $ 50 $ — There were no financial liabilities measured at fair value as of May 31, 2017 and 2016. There were no transfers between Level 1 and Level 2 fair value measurements during the fiscal year ended May 31, 2017 and 2016. The carrying amounts of financial instruments including cash, cash equivalents, receivables, accounts payable and certain other accrued liabilities, approximate fair value due to their short maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, the carrying value of the debt approximates the fair value. The Company has at times invested in debt and equity of private companies, and may do so again in the future, as part of its business strategy. |
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: | ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: Accounts receivable are derived from the sale of products throughout the world to semiconductor manufacturers, semiconductor contract assemblers, electronics manufacturers and burn-in and test service companies. Accounts receivable are recorded at the invoiced amount and are not interest bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible trade receivables. The Company also reviews its trade receivables by aging category to identify specific customers with known disputes or collection issues. The Company exercises judgment when determining the adequacy of these reserves as the Company evaluates historical bad debt trends, general economic conditions in the United States and internationally, and changes in customer financial conditions. Uncollectible receivables are recorded as bad debt expense when all efforts to collect have been exhausted and recoveries are recognized when they are received. No significant adjustments to the allowance for doubtful accounts were recorded during the years ended May 31, 2017, 2016 or 2015. |
CONCENTRATION OF CREDIT RISK: | CONCENTRATION OF CREDIT RISK: The Company sells its products primarily to semiconductor manufacturers in North America, Asia, and Europe. As of May 31, 2017, approximately 55%, 0% and 45% of gross accounts receivable were from customers located in Asia, Europe and North America, respectively. As of May 31, 2016, approximately 7%, 68% and 25% of gross accounts receivable were from customers located in Asia, Europe and North America, respectively. Three customers accounted for 47%, 40% and 11% of gross accounts receivable as of May 31, 2017. One customer accounted for 67% of gross accounts receivable as of May 31, 2016. Four customers accounted for 45%, 19%, 17% and 10% of net sales in fiscal 2017. Two customers accounted for 47% and 32% of net sales in fiscal 2016. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company uses letter of credit terms for some of its international customers. The Company’s cash and cash equivalents are generally deposited with major financial institutions in the United States, Japan, Germany and Taiwan. The Company invests its excess cash in money market funds. The money market funds bear the risk associated with each fund. The money market funds have variable interest rates. The Company has not experienced any material losses on its money market funds or short-term cash deposits. |
CONCENTRATION OF SUPPLY RISK: | CONCENTRATION OF SUPPLY RISK: The Company relies on subcontractors to manufacture many of the components and subassemblies used in its products. Quality or performance failures of the Company’s products or changes in its manufacturers’ financial or business condition could disrupt the Company’s ability to supply quality products to its customers and thereby have a material and adverse effect on its business and operating results. Some of the components and technologies used in the Company’s products are purchased and licensed from a single source or a limited number of sources. The loss of any of these suppliers may cause the Company to incur additional transition costs, result in delays in the manufacturing and delivery of its products, or cause it to carry excess or obsolete inventory and could cause it to redesign its products. |
INVENTORIES: | INVENTORIES: Inventories include material, labor and overhead, and are stated at the lower of cost (first-in, first-out method) or market. Provisions for excess, obsolete and unusable inventories are made after management’s evaluation of future demand and market conditions. The Company adjusts inventory balances to approximate the lower of its manufacturing costs or market value. If actual future demand or market conditions become less favorable than those projected by management, additional inventory write-downs may be required, and would be reflected in cost of product revenue in the period the revision is made. |
PROPERTY AND EQUIPMENT: | PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Leasehold improvements are amortized over the lesser of their estimated useful lives or the term of the related lease. Furniture and fixtures, machinery and equipment, and test equipment are depreciated on a straight-line basis over their estimated useful lives. The ranges of estimated useful lives are generally as follows: Furniture and fixtures 2 to 6 years Machinery and equipment 3 to 6 years Test equipment 4 to 6 years |
REVENUE RECOGNITION: | REVENUE RECOGNITION: The Company recognizes revenue upon the shipment of products or the performance of services when: (1) persuasive evidence of the arrangement exists; (2) goods or services have been delivered; (3) the price is fixed or determinable; and (4) collectibility is reasonably assured. When a sales agreement involves multiple deliverables, such as extended support provisions, training to be supplied after delivery of the systems, and test programs specific to customers’ routine applications, the multiple deliverables are evaluated to determine the unit of accounting. Judgment is required to properly identify the accounting units of multiple element transactions and the manner in which revenue is allocated among the accounting units. Judgments made, or changes to judgments made, may significantly affect the timing or amount of revenue recognition. Revenue related to the multiple elements is allocated to each unit of accounting using the relative selling price hierarchy. Consistent with accounting guidance, the selling price is based upon vendor specific objective evidence (VSOE). If VSOE is not available, third party evidence (TPE) is used to establish the selling price. In the absence of VSOE or TPE, estimated selling price is used. During the first quarter of fiscal 2013, the Company entered into an agreement with a customer to develop a next generation system, and the Company shipped the first system in July 2016. The project identifies multiple milestones with values assigned to each. The consideration earned upon achieving the milestone is required to meet the following conditions prior to recognition: (i) the value is commensurate with the vendor’s performance to meet the milestone, (ii) it relates solely to past performance, (iii) and it is reasonable relative to all of the deliverables and payment terms within the arrangement. Revenue is recognized for the milestone upon acceptance by the customer. Sales tax collected from customers is not included in net sales but rather recorded as a liability due to the respective taxing authorities. Provisions for the estimated future cost of warranty and installation are recorded at the time the products are shipped. Royalty-based revenue related to licensing income from performance test boards and burn-in boards is recognized upon the earlier of the receipt by the Company of the licensee’s report related to its usage of the licensed intellectual property or upon payment by the licensee. The Company’s terms of sales with distributors are generally FOB shipping point with payment due within 60 days. All products go through in-house testing and verification of specifications before shipment. Apart from warranty reserves, credits issued have not been material as a percentage of net sales. The Company’s distributors do not generally carry inventories of the Company’s products. Instead, the distributors place orders with the Company at or about the time they receive orders from their customers. The Company’s shipment terms to our distributors do not provide for credits or rights of return. Because the Company’s distributors do not generally carry inventories of our products, they do not have rights to price protection or to return products. At the time we ship products to the distributors, the price is fixed. Subsequent to the issuance of the invoice, there are no discounts or special terms. The Company does not give the buyer the right to return the product or to receive future price concessions. The Company’s arrangements do not include vendor consideration. |
PRODUCT DEVELOPMENT COSTS AND CAPITALIZED SOFTWARE: | PRODUCT DEVELOPMENT COSTS AND CAPITALIZED SOFTWARE: Costs incurred in the research and development of new products or systems are charged to operations as incurred. Costs incurred in the development of software programs for the Company’s products are charged to operations as incurred until technological feasibility of the software has been established. Generally, technological feasibility is established when the software module performs its primary functions described in its original specifications, contains features required for it to be usable in a production environment, is completely documented and the related hardware portion of the product is complete. After technological feasibility is established, any additional costs are capitalized. Capitalization of software costs ceases when the software is substantially complete and is ready for its intended use. Capitalized costs are amortized over the estimated life of the related software product using the greater of the units of sales or straight-line methods over ten years. No system software development costs were capitalized or amortized in fiscal 2017, 2016 and 2015. |
IMPAIRMENT OF LONG-LIVED ASSETS: | IMPAIRMENT OF LONG-LIVED ASSETS: In the event that facts and circumstances indicate that the carrying value of assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying value to determine if a write-down is required. |
ADVERTISING COSTS: | ADVERTISING COSTS: The Company expenses all advertising costs as incurred and the amounts were not material for all periods presented. |
SHIPPING AND HANDLING OF PRODUCTS: | SHIPPING AND HANDLING OF PRODUCTS: Amounts billed to customers for shipping and handling of products are included in net sales. Costs incurred related to shipping and handling of products are included in cost of sales. |
INCOME TAXES: | INCOME TAXES: Income taxes have been provided using the liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and net operating loss and tax credit carryforwards measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse or the carryforwards are utilized. Valuation allowances are established when it is determined that it is more likely than not that such assets will not be realized. A full valuation allowance was established against all deferred tax assets, as management determined that it is more likely than not that deferred tax assets will not be realized, as of May 31, 2017 and 2016. The Company accounts for uncertain tax positions consistent with authoritative guidance. The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not expect any material change in its unrecognized tax benefits over the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes. Although the Company files U.S. federal, various state, and foreign tax returns, the Company’s only major tax jurisdictions are the United States, California, Germany and Japan. Tax years 1997 – 2016 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years. |
STOCK-BASED COMPENSATION: | STOCK-BASED COMPENSATION: Stock-based compensation expense consists of expenses for stock options, restricted stock units, or RSUs, 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, stock-based compensation expense is based on the fair value of the Company’s common stock at the grant date. All of the Company’s stock-based compensation is accounted for as equity instruments. The following table summarizes the stock-based compensation expense for the years ended May 31, 2017, 2016 and 2015 (in thousands, except per share data): Year Ended May 31, 2017 2016 2015 Stock-based compensation in the form of stock options, RSUs, and ESPP purchase rights, included in: Cost of sales $ 91 $ 87 $ 70 Selling, general and administrative 714 723 726 Research and development 194 206 201 Net effect on net loss $ 999 $ 1,016 $ 997 Effect on net loss per share: Basic $ 0.06 $ 0.08 $ 0.08 Diluted $ 0.06 $ 0.08 $ 0.08 During fiscal 2017, 2016 and fiscal 2015, the Company recorded stock-based compensation related to stock options and restricted stock units of $884,000, $894,000 and $857,000, respectively. As of May 31, 2017, the total compensation cost related to unvested stock-based awards under the Company’s 2006 Equity Incentive Plan and 2016 Equity Incentive Plan, but not yet recognized, was $886,000 which is net of estimated forfeitures of $2,000. This cost will be amortized on a straight-line basis over a weighted average period of approximately 2.3 years. During fiscal 2017, 2016 and fiscal 2015, the Company recorded stock-based compensation related to its ESPP of $115,000, $122,000 and $140,000, respectively. As of May 31, 2017, 2016 and 2015, stock-based compensation costs of zero, zero and $20,000, respectively, were capitalized as part of inventory. As of May 31, 2017, the total compensation cost related to purchase rights under the ESPP but not yet recognized was $33,000. This cost will be amortized on a straight-line basis over a weighted average period of approximately 0.7 years. Valuation Assumptions Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation method and a single option award approach. The fair value under the single option approach is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Expected Term. The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as evidenced by changes to the terms of its stock-based awards. Volatility. Volatility is a measure of the amounts by which a financial variable such as stock price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses the historical volatility for the past five years, 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 method 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 in fiscal 2017, 2016 and 2015 were estimated using the following weighted average assumptions in the Black-Scholes option valuation method: Year Ended May 31, 2017 2016 2015 Option plan shares Expected term (in years) 4 4 4 Volatility 0.81 0.86 0.90 Risk-free interest rates 1.02% 1.21% 1.20% Weighted-average grant date fair value $ 1.09 $ 1.31 $ 1.52 The fair value of our ESPP purchase rights for the fiscal 2017, 2016 and 2015 was estimated using the following weighted-average assumptions: Year End May 31, 2017 2016 2015 Employee stock purchase plan shares Expected term (in years) 0.5 – 2.0 0.5 – 2.0 0.5 – 2.0 Volatility 0.79 – 1.08 0.64 – 0.74 0.55 – 0.83 Risk-free interest rates 0.48%–0.80% 0.40%–0.76% 0.04%–0.55% Weighted-average grant date fair value $ 1.65 $ 0.80 $ 1.43 |
EARNINGS PER SHARE (“EPS”): | EARNINGS PER SHARE (“EPS”): Basic EPS is determined using the weighted average number of common shares outstanding during the period. Diluted EPS is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, and employee stock purchase plan shares) outstanding during the period using the treasury stock method. The following table presents the computation of basic and diluted net loss per share attributable to Aehr Test Systems common shareholders (in thousands, except per share data): Year Ended May 31, 2017 2016 2015 Numerator: Net loss $ (5,653 ) $ (6,785 ) $ (6,647 ) Denominator for basic net loss per share: Weighted-average shares outstanding 16,267 13,091 12,047 Shares used in basic net loss per share calculation 16,267 13,091 12,047 Effect of dilutive securities — — — Denominator for diluted net loss per share 16,267 13,091 12,047 Basic net loss per share $ (0.35 ) $ (0.52 ) $ (0.55 ) Diluted net loss per share $ (0.35 ) $ (0.52 ) $ (0.55 ) For the purpose of computing diluted earnings per share, the weighted average number of potential common shares does not include stock options with an exercise price greater than the average fair value of the Company’s common stock for the period, as the effect would be anti-dilutive. In the fiscal year’s ended May 31, 2017 and 2016, potential common shares have not been included in the calculation of diluted net loss per share as the effect would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for these periods are the same. Stock options to purchase 3,074,000, 3,201,000, and 3,686,000 shares of common stock were outstanding on May 31, 2017, 2016 and 2015, respectively, but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. RSUs for 32,000 and 35,000 shares were outstanding at May 31, 2017 and 2016, respectively, but not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. ESPP rights to purchase 169,000, 304,000 and 175,000 ESPP shares were outstanding on May 31, 2017, 2016 and 2015, respectively, but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. The 2,657,000 shares convertible under the Convertible Notes outstanding at May 31, 2017 and 2016 were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. |
COMPREHENSIVE LOSS: | COMPREHENSIVE LOSS: Comprehensive loss generally represents all changes in shareholders’ equity (deficit) except those resulting from investments or contributions by shareholders. Unrealized gains and losses on foreign currency translation adjustments are included in the Company’s components of comprehensive loss, which are excluded from net loss. Comprehensive loss is included in the statements of comprehensive loss. |
RECLASSIFICATION: | RECLASSIFICATION Certain reclassifications have been made to the consolidated financial statements to conform to the current period presentation. These reclassifications did not result in any change in previously reported net loss, total assets or shareholders’ equity (deficit). |
RECENT ACCOUNTING PRONOUNCEMENTS: | RECENT ACCOUNTING PRONOUNCEMENTS: In May 2014, as part of its ongoing efforts to assist in the convergence of GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued an accounting standard update related to revenue from contracts with customers. This standard sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The standard provides alternative methods of initial adoption and will become effective for the Company beginning in the first quarter of fiscal 2019. The FASB has issued several updates to the standard which i) defer the original effective date from January 1, 2017 to January 1, 2018, while allowing for early adoption as of January 1, 2017. ii) clarify the application of the principal versus agent guidance. and iii) clarify the guidance on inconsequential and perfunctory promises and licensing. In May 2016, the FASB issued an update to address certain narrow aspects of the guidance including collectibility criterion, collection of sales taxes from customers, noncash consideration, contract modifications and completed contracts. This issuance does not change the core principle of the guidance in the initial topic issued in May 2014. In December 2016, the FASB issued updated guidance regarding revenue from contracts with customers. Some topics that could impact the Company include corrections and improvements around the following: contract costs impairment testing, disclosure of remaining performance obligations and prior period obligations, contract modifications, and contract asset versus receivable. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements. In August 2014, the FASB issued authoritative guidance related to going concern. This guidance requires management to evaluate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and whether or not it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued. This guidance became effective for the Company for the annual period ending May 31, 2017. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements. In July 2015, the FASB issued an accounting standard update that requires management to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This new standard will be effective for us in fiscal year 2018. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In November 2015, the FASB issued an accounting standard update related to deferred tax assets and liabilities. This standard simplifies the presentation of deferred income taxes to be classified as noncurrent in the consolidated balance sheet. This new standard will be effective for us in fiscal year 2018. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In January 2016, the FASB issued an accounting standard update related to recognition and measurement of financial assets and financial liabilities. This standard changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This standard is effective for us in fiscal year 2020. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements. In February 2016, the FASB issued authoritative guidance related to leases. This guidance requires management to present all leases greater than one year on the balance sheet as a liability to make payments and an asset as the right to use the underlying asset for the lease term. This new standard will be effective for us in fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements. In March 2016, the FASB released an accounting standard update that simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The accounting standard will be effective for the Company beginning the first quarter of fiscal 2018, and early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In June 2016, the FASB issued an accounting standard update that requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021 on a modified retrospective basis, and early adoption in fiscal 2020 is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements. In August 2016, the FASB issued authoritative guidance related to the classification of certain cash receipts and cash payments on the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated statements of cash flows. In October 2016, the FASB issued an accounting standard update that requires recognition of the income tax consequences of intra-entity transfers of assets (other than inventory) at the transaction date. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a modified retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements. In November 2016, the FASB issued authoritative guidance related to statements of cash flows. This guidance clarifies that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements. In December 2016, the FASB issued authoritative guidance related to technical corrections and improvements. This guidance provides minor updates on a variety of codification topics and are not expected to have a significant effect on current accounting practice. Most of these corrections do not have a transition date as they are minor in nature. |
1. ORGANIZATION AND SUMMARY O26
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
May 31, 2017 | |
Organization And Summary Of Significant Accounting Policies Tables | |
Financial assets and liabilities measured at fair value on a recurring basis | The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2017 (in thousands): Balance as of May 31, 2017 Level 1 Level 2 Level 3 Money market funds $ 15,516 $ 15,516 $ — $ — Certificate of deposit 50 — 50 — Assets $ 15,566 $ 15,516 $ 50 $ — The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2016 (in thousands): Balance as of May 31, 2016 Level 1 Level 2 Level 3 Money market funds $ 1 $ 1 $ — $ — Certificate of deposit 50 — 50 — Assets $ 51 $ 1 $ 50 $ — |
Useful life for property and equipment | The ranges of estimated useful lives are generally as follows: Furniture and fixtures 2 to 6 years Machinery and equipment 3 to 6 years Test equipment 4 to 6 years |
Compensation costs related to the Company's stock-based compensation | The following table summarizes the stock-based compensation expense for the years ended May 31, 2017, 2016 and 2015 (in thousands, except per share data): Year Ended May 31, 2017 2016 2015 Stock-based compensation in the form of stock options, RSUs, and ESPP purchase rights, included in: Cost of sales $ 91 $ 87 $ 70 Selling, general and administrative 714 723 726 Research and development 194 206 201 Net effect on net loss $ 999 $ 1,016 $ 997 Effect on net loss per share: Basic $ 0.06 $ 0.08 $ 0.08 Diluted $ 0.06 $ 0.08 $ 0.08 |
Fair value assumptions for Option Valuation Model | Fair Value. The fair values of the Company’s stock options granted to employees in fiscal 2017, 2016 and 2015 were estimated using the following weighted average assumptions in the Black-Scholes option valuation method: Year Ended May 31, 2017 2016 2015 Option plan shares Expected term (in years) 4 4 4 Volatility 0.81 0.86 0.90 Risk-free interest rates 1.02% 1.21% 1.20% Weighted-average grant date fair value $ 1.09 $ 1.31 $ 1.52 |
Fair value assumption of the ESPP Purchase Rights | The fair value of our ESPP purchase rights for the fiscal 2017, 2016 and 2015 was estimated using the following weighted-average assumptions: Year End May 31, 2017 2016 2015 Employee stock purchase plan shares Expected term (in years) 0.5 – 2.0 0.5 – 2.0 0.5 – 2.0 Volatility 0.79 – 1.08 0.64 – 0.74 0.55 – 0.83 Risk-free interest rates 0.48%–0.80% 0.40%–0.76% 0.04%–0.55% Weighted-average grant date fair value $ 1.65 $ 0.80 $ 1.43 |
Basic and diluted EPS | The following table presents the computation of basic and diluted net loss per share attributable to Aehr Test Systems common shareholders (in thousands, except per share data): Year Ended May 31, 2017 2016 2015 Numerator: Net loss $ (5,653 ) $ (6,785 ) $ (6,647 ) Denominator for basic net loss per share: Weighted-average shares outstanding 16,267 13,091 12,047 Shares used in basic net loss per share calculation 16,267 13,091 12,047 Effect of dilutive securities — — — Denominator for diluted net loss per share 16,267 13,091 12,047 Basic net loss per share $ (0.35 ) $ (0.52 ) $ (0.55 ) Diluted net loss per share $ (0.35 ) $ (0.52 ) $ (0.55 ) |
2. ACCOUNTS RECEIVABLE (Tables)
2. ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
May 31, 2017 | |
Receivables [Abstract] | |
Accounts receivable | Accounts receivable comprise (in thousands): May 31, 2017 2016 Accounts receivable $ 4,071 $ 530 Less: Allowance for doubtful accounts (61 ) (8 ) $ 4,010 $ 522 Additions Balance at charged to Balance beginning costs and at end of year expenses Deductions* of year Allowance for doubtful accounts receivable: May 31, 2017 $ 8 $ 53 $ — $ 61 May 31, 2016 $ 21 $ — $ (13 ) $ 8 * Deductions include write-offs of uncollectible accounts and collections of amounts previously reserved. |
3. INVENTORIES (Tables)
3. INVENTORIES (Tables) | 12 Months Ended |
May 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories comprise (in thousands): May 31, 2017 2016 Raw materials and sub-assemblies $ 4,268 $ 2,839 Work in process 2,059 4,151 Finished goods 277 43 $ 6,604 $ 7,033 |
4. PROPERTY AND EQUIPMENT, NET
4. PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
May 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | Property and equipment, net comprise (in thousands): May 31, 2017 2016 Leasehold improvements $ 1,145 $ 1,072 Furniture and fixtures 974 974 Machinery and equipment 3,035 2,330 Test equipment 2,268 2,581 7,422 6,957 Less: Accumulated depreciation and amortization (6,003 ) (5,753 ) $ 1,419 $ 1,204 |
5. PRODUCT WARRANTIES (Tables)
5. PRODUCT WARRANTIES (Tables) | 12 Months Ended |
May 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Liability for product warranties | Following is a summary of changes in the Company’s liability for product warranties during the fiscal years ended May 31, 2017 and 2016 (in thousands): May 31, 2017 2016 Balance at the beginning of the year $ 155 $ 137 Accruals for warranties issued during the year 123 334 Accruals and adjustments (change in estimates) related to pre-existing warranties during the year (54 ) — Settlement made during the year (in cash or in kind) (111 ) (316 ) Balance at the end of the year $ 113 $ 155 |
6. ACCRUED EXPENSES (Tables)
6. ACCRUED EXPENSES (Tables) | 12 Months Ended |
May 31, 2017 | |
Payables and Accruals [Abstract] | |
Accrued expenses | May 31, 2017 2016 Payroll related $ 934 $ 706 Professional services 161 166 Accrued interest 139 110 Commissions and bonuses 125 227 Warranty 113 155 Taxes payable 69 63 Investor relations 25 88 Other 43 38 $ 1,609 $ 1,553 |
7. INCOME TAXES (Tables)
7. INCOME TAXES (Tables) | 12 Months Ended |
May 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Domestic and foreign components of loss before income tax (expenses) benefit | Domestic and foreign components of loss before income tax (expense) benefit are as follows (in thousands): Year Ended May 31, 2017 2016 2015 Domestic $ (5,663 ) $ (6,794 ) $ (6,871 ) Foreign 35 19 258 $ (5,628 ) $ (6,775 ) $ (6,613 ) |
Income tax (expense) benefit | The income tax (expense) benefit consists of the following (in thousands): Year Ended May 31, 2017 2016 2015 Federal income taxes: Current $ — $ — $ — Deferred — — — State income taxes: Current (8 ) 3 (19 ) Deferred — — — Foreign income taxes: Current (17 ) (13 ) (15 ) Deferred — — — $ (25 ) $ (10 ) $ (34 ) |
Income tax reconciliation | The Company’s effective tax rate differs from the U.S. federal statutory tax rate, as follows: Year Ended May 31, 2017 2016 2015 U.S. federal statutory tax rate 34.0 % 34.0 % 34.0 % State taxes, net of federal tax effect (0.1 ) — (0.2 ) Foreign rate differential 0.1 0.2 1.4 Stock-based compensation (2.8 ) (3.8 ) (2.2 ) Research and development credit 3.1 2.1 1.1 Change in valuation allowance (33.8 ) (32.5 ) (34.4 ) Other (0.9 ) (0.2 ) (0.2 ) Effective tax rate (0.4 )% (0.2 )% (0.5 )% |
Net deferred tax assets | The components of the net deferred tax assets are as follows (in thousands): Year Ended May 31, 2017 2016 Net operating losses $ 18,719 $ 16,643 Credit carryforwards 4,715 4,430 Inventory reserves 870 1,064 Reserves and accruals 1,566 1,606 Other 393 885 26,263 24,628 Less: Valuation allowance (26,263 ) (24,628 ) Net deferred tax assets $ — $ — |
Unrecognized tax benefits | The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available. The aggregate changes in the balance of gross unrecognized tax benefits are as follows (in thousands): Beginning balance as of May 31, 2014 $ 973 Decreases related to prior year tax positions — Decreases related to lapse of statute of limitations (54 ) Balance at May 31, 2015 $ 919 Decreases related to prior year tax positions (124 ) Decreases related to lapse of statute of limitations (6 ) Balance at May 31, 2016 $ 789 Decreases related to prior year tax positions — Decreases related to lapse of statute of limitations — Balance at May 31, 2017 $ 789 |
8. CUSTOMER DEPOSITS AND DEFE33
8. CUSTOMER DEPOSITS AND DEFERRED REVENUE (Tables) | 12 Months Ended |
May 31, 2017 | |
Customer Deposits And Deferred Revenue Tables | |
Customer deposits and deferred revenue | Customer deposits and deferred revenue (in thousands): May 31, 2017 2016 Customer deposits $ 3,264 $ 540 Deferred revenue 203 1,174 $ 3,467 $ 1,714 |
9. LONG-TERM DEBT (Tables)
9. LONG-TERM DEBT (Tables) | 12 Months Ended |
May 31, 2017 | |
Long-term Debt, Unclassified [Abstract] | |
Long-term debt, net of debt issuance costs | Long-term debt, net of debt issuance costs (in thousands): May 31, May 31, 2017 2016 Principal $ 6,110 $ 6,110 Unamortized debt issuance costs — (148 ) $ 6,110 $ 5,962 |
11. CAPITAL STOCK (Tables)
11. CAPITAL STOCK (Tables) | 12 Months Ended |
May 31, 2017 | |
Capital Stock Tables | |
Stock option transactions | The following tables summarize the Company’s stock option and RSU transactions during fiscal 2017, 2016 and 2015 (in thousands): Available Shares Balances, May 31, 2014 1,145 Additional shares reserved 860 Options granted (1,253 ) Options terminated 93 Balances, May 31, 2015 845 Additional shares reserved 800 Options granted (92 ) RSUs granted (35 ) Options terminated 329 Balances, May 31, 2016 1,847 Additional shares reserved 2,238 Options granted (368 ) RSUs granted (157 ) Options terminated 55 Plan shares expired (1,446 ) Balances, May 31, 2017 2,169 The following table summarized the stock option transactions during fiscal 2017, 2016 and 2015 (in thousands, except per share data): Outstanding Options Weighted Number Average Aggregate of Exercise Intrinsic Shares Price Value Balances, May 31, 2014 3,002 $ 1.31 $ 2,913 Options granted 1,253 $ 2.38 Options terminated (93 ) $ 2.30 Options exercised (476 ) $ 1.33 Balances, May 31, 2015 3,686 $ 1.66 $ 2,946 Options granted 92 $ 2.12 Options terminated (329 ) $ 1.93 Options exercised (248 ) $ 1.34 Balances, May 31, 2016 3,201 $ 1.66 $ 189 Options granted 368 $ 1.83 Options terminated (55 ) $ 1.42 Options exercised (440 ) $ 1.35 Balances, May 31, 2017 3,074 $ 1.73 $ 8,763 Options exercisable and expected to be exercisable at May 31, 2017 3,030 $ 1.72 $ 8,654 |
Options Outstanding | The options outstanding and exercisable at May 31, 2017 were in the following exercise price ranges (in thousands, except per share data): Options Outstanding Options Exercisable at May 31, 2017 at May 31, 2017 Range of Exercise Prices Number Outstanding Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number Exercisable Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value $ 0.59-$0.97 514 1.77 $ 0.66 514 1.77 $ 0.66 $ 1.09-$1.40 784 2.41 $ 1.28 773 2.40 $ 1.28 $ 1.68-$2.06 542 5.12 $ 1.77 287 4.26 $ 1.85 $ 2.10-$2.81 1,234 4.53 $ 2.44 848 4.46 $ 2.46 $ 0.59-$2.81 3,074 3.63 $ 1.73 2,422 3.21 $ 1.63 $ 7,148 |
13. OTHER (EXPENSE) INCOME, N36
13. OTHER (EXPENSE) INCOME, NET (Tables) | 12 Months Ended |
May 31, 2017 | |
Other Income and Expenses [Abstract] | |
Other (expense) income | Other (expense) income, net comprises the following (in thousands): Year Ended May 31, 2017 2016 2015 Foreign exchange (loss) gain $ (21 ) $ (19 ) $ 194 Other, net — 3 17 $ (21 ) $ (16 ) $ 211 |
14. SEGMENT INFORMATION (Tables
14. SEGMENT INFORMATION (Tables) | 12 Months Ended |
May 31, 2017 | |
Segment Reporting [Abstract] | |
Company's operations in different geographic areas | The following presents information about the Company’s operations in different geographic areas. Net sales are based upon ship-to location (in thousands): United States Asia Europe Total 2017: Net sales $ 7,762 $ 10,439 $ 697 $ 18,898 Property and equipment, net 1,364 40 15 1,419 2016: Net sales $ 2,957 $ 10,228 $ 1,316 $ 14,501 Property and equipment, net 1,151 39 14 1,204 2015: Net sales $ 3,648 $ 4,943 $ 1,427 $ 10,018 Property and equipment, net 432 34 12 478 |
16. COMMITMENTS AND CONTINGEN38
16. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
May 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum annual rentals payments under non-cancellable operating leases | Minimum annual rentals payments under non-cancellable operating leases in each of the next five fiscal years and thereafter are as follows (in thousands): Years Ending May 31, 2018 $ 502 2019 64 2020 1 2021 -- 2022 -- Thereafter -- Total $ 567 |
17. SELECTED QUARTERLY CONSOL39
17. SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (Tables) | 12 Months Ended |
May 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Consolidated Financial Data (unaudited) | The following tables (presented in thousands, except per share data) sets forth selected unaudited condensed consolidated statements of operations data for each of the four quarters of the fiscal years ended May 31, 2017 and 2016. The unaudited quarterly information has been prepared on the same basis as the annual information presented elsewhere herein and, in the Company’s opinion, includes all adjustments (consisting only of normal recurring entries) necessary for a fair statement of the information for the quarters presented. The operating results for any quarter are not necessarily indicative of results for any future period and should be read in conjunction with the audited consolidated financial statements of the Company’s and the notes thereto included elsewhere herein. Three Months Ended Aug. 31, Nov. 30, Feb. 28, May 31, 2016 2016 2017 2017 Net sales $ 5,318 $ 4,216 $ 2,681 $ 6,683 Gross profit $ 2,206 $ 1,463 $ 503 $ 2,608 Net loss $ (755 ) $ (1,452 ) $ (2,651 ) $ (795 ) Net loss per share basic and diluted $ (0.06 ) $ (0.09 ) $ (0.16 ) $ (0.04 ) Three Months Ended Aug. 31, Nov. 30, Feb. 29, May 31, 2015 2015 2016 2016 Net sales $ 6,633 $ 4,620 $ 1,677 $ 1,571 Gross profit (loss) $ 3,383 $ 1,691 $ 169 $ (98 ) Net income (loss) $ 294 $ (1,048 ) $ (2,975 ) $ (3,056 ) Net income (loss) per share basic and diluted $ 0.02 $ (0.08 ) $ (0.23 ) $ (0.23 ) |
1. ORGANIZATION AND SUMMARY O40
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 |
Money market funds | $ 15,516 | $ 1 |
Certificate of deposit | 50 | 50 |
Assets | 15,566 | 51 |
Level 1 | ||
Money market funds | 15,516 | 1 |
Certificate of deposit | 0 | 0 |
Assets | 15,516 | 1 |
Level 2 | ||
Money market funds | 0 | 0 |
Certificate of deposit | 50 | 50 |
Assets | 50 | 50 |
Level 3 | ||
Money market funds | 0 | 0 |
Certificate of deposit | 0 | 0 |
Assets | $ 0 | $ 0 |
1. ORGANIZATION AND SUMMARY O41
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - PROPERTY AND EQUIPMENT (Details 1) | 12 Months Ended |
May 31, 2017 | |
Furniture and fixtures | Minimum | |
Useful life | 2 years |
Furniture and fixtures | Maximum | |
Useful life | 6 years |
Machinery and equipment | Minimum | |
Useful life | 3 years |
Machinery and equipment | Maximum | |
Useful life | 6 years |
Test equipment | Minimum | |
Useful life | 4 years |
Test equipment | Maximum | |
Useful life | 6 years |
1. ORGANIZATION AND SUMMARY O42
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights included in: | |||
Total stock-based compensation | $ 999 | $ 1,016 | $ 997 |
Effect on net loss per share, Basic | $ 0.06 | $ 0.08 | $ 0.08 |
Effect on net loss per share, Diluted | $ 0.06 | $ 0.08 | $ 0.08 |
Cost Of Sales | |||
Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights included in: | |||
Total stock-based compensation | $ 91 | $ 87 | $ 70 |
Selling, General and Administrative | |||
Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights included in: | |||
Total stock-based compensation | 714 | 723 | 726 |
Research And Development | |||
Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights included in: | |||
Total stock-based compensation | $ 194 | $ 206 | $ 201 |
1. ORGANIZATION AND SUMMARY O43
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - Stock Option - $ / shares | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Fair Value Assumptions for Stock Options Granted | |||
Expected term (in years) | 4 years | 4 years | 4 years |
Volatility | 81.00% | 86.00% | 90.00% |
Risk-free interest rates | 1.02% | 1.21% | 1.20% |
Weighted Average Grant Date Fair Value | $ 1.09 | $ 1.31 | $ 1.52 |
1. ORGANIZATION AND SUMMARY O44
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - Employee Stock Purchase Plan - $ / shares | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Minimum | |||
Fair Value Assumptions for ESPP purchase rights granted | |||
Expected term (in years) | 6 months | 6 months | 6 months |
Volatility | 79.00% | 64.00% | 55.00% |
Risk-free interest rates | 0.48% | 0.40% | 0.04% |
Weighted Average Grant Date Fair Value | $ 1.65 | $ 0.80 | $ 1.43 |
Maximum | |||
Fair Value Assumptions for ESPP purchase rights granted | |||
Expected term (in years) | 2 years | 2 years | 2 years |
Volatility | 108.00% | 74.00% | 83.00% |
Risk-free interest rates | 0.80% | 0.76% | 0.55% |
Weighted Average Grant Date Fair Value | $ 1.65 | $ 0.80 | $ 1.43 |
1. ORGANIZATION AND SUMMARY O45
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2015 | May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Organization And Summary Of Significant Accounting Policies Details 5 | |||||||||||
Numerator: Net (loss) income | $ (795) | $ (2,651) | $ (1,452) | $ (755) | $ (3,056) | $ (2,975) | $ (1,048) | $ 294 | $ (5,653) | $ (6,785) | $ (6,647) |
Denominator for basic net loss per share: Weighted-average shares outstanding | 16,267,000 | 13,091,000 | 12,047,000 | ||||||||
Shares used in basic net loss per share calculation | 16,267,000 | 13,091,000 | 12,047,000 | ||||||||
Effect of dilutive securities | 0 | 0 | 0 | ||||||||
Denominator for diluted net loss per share | 16,267,000 | 13,091,000 | 12,047,000 | ||||||||
Basic net loss per share | $ (0.35) | $ (0.52) | $ (0.55) | ||||||||
Diluted net loss per share | $ (0.35) | $ (0.52) | $ (0.55) |
1. ORGANIZATION AND SUMMARY O46
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Apr. 19, 2017 | May 31, 2017 | May 31, 2016 | May 31, 2015 | May 31, 2014 | |
Cash and equivalents | $ 17,803 | $ 939 | $ 5,527 | $ 1,809 | |
Proceeds from issuance of common stock under public offering, net of issuance costs | $ 15,832 | 15,832 | 0 | 0 | |
STOCK BASED COMPENSATION: | |||||
Stock-based compensation costs capitalized as part of inventory | 0 | 0 | 20 | ||
Stock-based compensation expense related to stock options and restricted stock units | 884 | 894 | 857 | ||
Stock-based compensation related to the ESPP | 115 | $ 122 | $ 140 | ||
Compensation cost related to purchase rights under the ESPP but not yet recognized | $ 33 | ||||
Weighted average period for recognition of costs | 8 months 12 days | ||||
EARNINGS PER SHARE: | |||||
Options outstanding not included in the computation of diluted net loss per share | 3,074,000 | 3,201,000 | 3,686,000 | ||
2006 Stock Option Plan and 2016 Equity Incentive Plan | |||||
STOCK BASED COMPENSATION: | |||||
Unrecognized stock-based compensation | $ 886 | ||||
Estimated forfeitures of unvested stock based awards, amount | $ 2 | ||||
Weighted average period for recognition of costs | 2 years 3 months 18 days | ||||
Convertible Notes | |||||
EARNINGS PER SHARE: | |||||
Options outstanding not included in the computation of diluted net loss per share | 2,657,000 | 2,657,000 | |||
Asia | Accounts Receivable | |||||
Concentration risk | 55.00% | 7.00% | |||
Europe | Accounts Receivable | |||||
Concentration risk | 0.00% | 68.00% | |||
North America | Accounts Receivable | |||||
Concentration risk | 45.00% | 25.00% | |||
Customer One | Accounts Receivable | |||||
Concentration risk | 47.00% | 67.00% | |||
Customer One | Net Sales | |||||
Concentration risk | 45.00% | 47.00% | |||
Customer Two | Accounts Receivable | |||||
Concentration risk | 40.00% | ||||
Customer Two | Net Sales | |||||
Concentration risk | 19.00% | 32.00% | |||
Customer Three | Accounts Receivable | |||||
Concentration risk | 11.00% | ||||
Customer Three | Net Sales | |||||
Concentration risk | 17.00% | ||||
Customer Four | Net Sales | |||||
Concentration risk | 10.00% | ||||
ESPP | |||||
EARNINGS PER SHARE: | |||||
Options outstanding not included in the computation of diluted net loss per share | 169,000 | 304,000 | 175,000 | ||
RSUs | |||||
EARNINGS PER SHARE: | |||||
Options outstanding not included in the computation of diluted net loss per share | 32,000 | 35,000 |
2. ACCOUNTS RECEIVABLE (Details
2. ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Accounts Receivable Details | ||
Accounts receivable, Gross | $ 4,071 | $ 530 |
Allowance for doubtful accounts, Beginning | (8) | (21) |
Allowance for doubtful accounts, Additions charged to costs and expenses | (53) | 0 |
Allowance for doubtful accounts, Deductions | 0 | 13 |
Allowance for doubtful accounts, Ending | (61) | (8) |
Accounts receivable, Net | $ 4,010 | $ 522 |
3. INVENTORIES (Details)
3. INVENTORIES (Details) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 |
Inventory, Net [Abstract] | ||
Raw materials and sub-assemblies | $ 4,268 | $ 2,839 |
Work-in-process | 2,059 | 4,151 |
Finished goods | 277 | 43 |
Inventory | $ 6,604 | $ 7,033 |
4. PROPERTY AND EQUIPMENT, NE49
4. PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 | May 31, 2015 |
Property And Equipment Net Details | |||
Leasehold improvements | $ 1,145 | $ 1,072 | |
Furniture and fixtures | 974 | 974 | |
Machinery and equipment | 3,035 | 2,330 | |
Test equipment | 2,268 | 2,581 | |
Property and equipment, gross | 7,422 | 6,957 | |
Less: Accumulated depreciation and amortization | (6,003) | (5,753) | |
Property and equipment, net | $ 1,419 | $ 1,204 | $ 478 |
4. PROPERTY AND EQUIPMENT NET (
4. PROPERTY AND EQUIPMENT NET (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Property And Equipment Net Details Narrative | |||
Depreciation expense | $ 271 | $ 203 | $ 135 |
5. PRODUCT WARRANTIES (Details)
5. PRODUCT WARRANTIES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance at the beginning of the year | $ 155 | $ 137 |
Accruals for warranties issued during the year | 123 | 334 |
Accruals and adjustments (change in estimates) related to pre-existing warranties during the year | (54) | 0 |
Settlement made during the year (in cash or in kind) | (111) | (316) |
Balance at the end of the year | $ 113 | $ 155 |
6. ACCRUED EXPENSES (Details)
6. ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 | May 31, 2015 |
Accrued Expenses Details | |||
Payroll related | $ 934 | $ 706 | |
Professional services | 161 | 166 | |
Accrued interest | 139 | 110 | |
Commissions and bonuses | 125 | 227 | |
Warranty | 113 | 155 | $ 137 |
Taxes payable | 69 | 63 | |
Investor relations | 25 | 88 | |
Other | 43 | 38 | |
Accrued expenses | $ 1,609 | $ 1,553 |
7. INCOME TAXES (Details)
7. INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Components of Loss Before Income Tax (Expense) Benefit | |||
Domestic | $ (5,663) | $ (6,794) | $ (6,871) |
Foreign | 35 | 19 | 258 |
Loss before income tax expense | $ (5,628) | $ (6,775) | $ (6,613) |
7. INCOME TAXES (Details 1)
7. INCOME TAXES (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Federal income taxes: | |||
Current | $ 0 | $ 0 | $ 0 |
Deferred | 0 | 0 | 0 |
State income taxes: | |||
Current | (8) | 3 | (19) |
Deferred | 0 | 0 | 0 |
Foreign income taxes: | |||
Current | (17) | (13) | (15) |
Deferred | 0 | 0 | 0 |
Income tax benefit (expense) | $ (25) | $ (10) | $ (34) |
7. INCOME TAXES (Details 2)
7. INCOME TAXES (Details 2) | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Reconciliation of Federal Statutory Rate to Effective Rate | |||
U.S. federal statutory tax rate | 34.00% | 34.00% | 34.00% |
State taxes, net of federal tax effect | (0.10%) | 0.00% | (0.20%) |
Foreign rate differential | 0.10% | 0.20% | 1.40% |
Stock-based compensation | (2.80%) | (3.80%) | (2.20%) |
Research and development credit | 3.10% | 2.10% | 1.10% |
Change in valuation allowance | (33.80%) | (32.50%) | (34.40%) |
Other | (0.90%) | (0.20%) | (0.20%) |
Effective tax rate | (0.40%) | (0.20%) | (0.50%) |
7. INCOME TAXES (Details 3)
7. INCOME TAXES (Details 3) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 |
Components of Deferred Tax Assets | ||
Net operating losses | $ 18,719 | $ 16,643 |
Credit carryforwards | 4,715 | 4,430 |
Inventory reserves | 870 | 1,064 |
Reserves and accruals | 1,566 | 1,606 |
Other | 393 | 885 |
Gross deferred tax assets | 26,263 | 24,628 |
Less: Valuation allowance | (26,263) | (24,628) |
Net deferred tax assets | $ 0 | $ 0 |
7. INCOME TAXES (Details 4)
7. INCOME TAXES (Details 4) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Components of Unrecognized Tax Benefits | |||
Unrecognized tax benefit, Beginning | $ 789 | $ 919 | $ 973 |
Decreases related to prior year tax positions | 0 | (124) | 0 |
Decreases related to lapse of statute of limitations | 0 | (6) | (54) |
Unrecognized tax benefit, Ending | $ 789 | $ 789 | $ 919 |
7. INCOME TAXES (Details Narrat
7. INCOME TAXES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |||
May 31, 2017 | May 31, 2016 | May 31, 2015 | May 31, 2014 | |
Valuation Allowance | $ 1,635 | $ 421 | $ 2,223 | |
Foreign net operating loss carryforwards | 892 | |||
Unrecognized tax benefits | 789 | $ 789 | $ 919 | $ 973 |
Federal | ||||
Net operating loss carryforward | 51,851 | |||
Research and development tax credit carryforwards | 1,982 | |||
Alternative minimum tax credit carryforwards | 91 | |||
State | ||||
Net operating loss carryforward | 30,351 | |||
Research and development tax credit carryforwards | 5,164 | |||
Alternative minimum tax credit carryforwards | $ 34 |
8. CUSTOMER DEPOSITS AND DEFE59
8. CUSTOMER DEPOSITS AND DEFERRED REVENUE (Details) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 |
Customer Deposits And Deferred Revenue Details | ||
Customer deposits | $ 3,264 | $ 540 |
Deferred revenue | 203 | 1,174 |
Customer deposits and deferred revenue | $ 3,467 | $ 1,714 |
9. LONG-TERM DEBT (Details)
9. LONG-TERM DEBT (Details) - USD ($) $ in Thousands | May 31, 2017 | May 31, 2016 |
Debt Disclosure [Abstract] | ||
Principal | $ 6,110 | $ 6,110 |
Unamortized debt issuance costs | 0 | (148) |
Total | $ 6,110 | $ 5,962 |
9. LONG-TERM DEBT (Details Narr
9. LONG-TERM DEBT (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||||
May 31, 2017 | May 31, 2016 | May 31, 2015 | Jul. 17, 2016 | Apr. 14, 2016 | Apr. 10, 2015 | |
Debt Disclosure [Abstract] | ||||||
Convertible debt, principal amount | $ 6,110 | $ 6,110 | ||||
Convertible note, interest rate | 9.00% | |||||
Convertible note, maturity | Apr. 10, 2019 | |||||
Convertible note, interest payment | Interest is payable quarterly on March 1, June 1, September 1 and December 1 of each year. | |||||
Debt issuance costs | $ 356 | |||||
Amortization of debt issuance costs | 148 | 177 | $ 31 | |||
Unamortized debt issuance costs | $ 0 | $ (148) | ||||
Initial conversion price for the Convertible Notes | $ 2.30 | |||||
Convertible Notes, Terms of Conversion Feature | The conversion price for the Convertible Notes is $2.30 per share and is subject to adjustment upon the occurrence of certain specified events. Holders may convert all or any part of the principal amount of their Convertible Notes in integrals of $10,000 at any time prior to the maturity date. Upon conversion, the Company will deliver shares of its common stock to the holder of Convertible Notes electing such conversion. The Company may not redeem the Convertible Notes prior to maturity. | |||||
Line of credit, maximum borrowing capacity | $ 2,000 | $ 2,000 | ||||
Balance available to borrow under the line of credit | $ 0 | |||||
Convertible Debt Principal amount | $ 4,110 | |||||
Conversion from the Credit Facility to Convertible Note | $ 1,100 | $ 900 |
10. EQUITY (Details Narrative)
10. EQUITY (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Sep. 28, 2016 | Aug. 08, 2016 | Apr. 19, 2017 | May 31, 2017 | May 31, 2016 | May 31, 2015 |
Cancellation of invoice | $ 323 | $ 0 | $ 0 | |||
Number of shares sold | 2,722,000 | 4,423,000 | ||||
Purchase price per share of the common stock | $ 2.15 | $ 3.90 | ||||
Gross proceeds from sale of common stock | $ 5,851 | |||||
Net proceeds from sale of common stock | $ 5,299 | 5,299 | 0 | 2,574 | ||
Gross proceeds from issuance of follow on public offering | $ 17,250 | |||||
Proceeds from issuance of common stock under public offering, net of issuance costs | $ 15,832 | $ 15,832 | $ 0 | $ 0 | ||
Semics Inc, | ||||||
Issuance of common stock | 200,000 | |||||
Cancellation of invoice | $ 323 |
11. CAPITAL STOCK (Details)
11. CAPITAL STOCK (Details) - Stock Option - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Available Shares Stock Option Transactions | |||
Available Shares, Beginning | 1,847,000 | 845,000 | 1,145,000 |
Additional shares reserved | 2,238,000 | 800,000 | 860,000 |
Options granted | (368,000) | (92,000) | (1,253,000) |
RSUs granted | (157,000) | (35,000) | |
Options terminated | 55,000 | 329,000 | 93,000 |
Plan shares expired | (1,446,000) | ||
Available Shares, Ending | 2,169,000 | 1,847,000 | 845,000 |
Outstanding Options Stock Option Transactions | |||
Options Outstanding, Beginning | 3,201,000 | 3,686,000 | 3,002,000 |
Options Granted | 368,000 | 92,000 | 1,253,000 |
Options terminated | (55,000) | (329,000) | (93,000) |
Options exercised | (440,000) | (248,000) | (476,000) |
Number of Options Outstanding, Ending | 3,074,000 | 3,201,000 | 3,686,000 |
Options exercisable and expected to be exercisable | 3,030,000 | 3,137,000 | |
Weighted Average Exercise Price Outstanding, Beginning | $ 1.66 | $ 1.66 | $ 1.31 |
Weighted Average Exercise Price Granted | 1.83 | 2.12 | 2.38 |
Weighted Average Exercise Price Terminated | 1.42 | 1.93 | 2.30 |
Weighted Average Exercise Price Exercised | 1.35 | 1.34 | 1.33 |
Weighted Average Exercise Price Outstanding, Ending | 1.73 | $ 1.66 | $ 1.66 |
Weighted Average Exercise Price Exercisable and expected to be exercisable | $ 1.72 | ||
Aggregate Intrinsic Value, beginning balance | $ 189 | $ 2,946 | $ 2,913 |
Aggregate Intrinsic Value, ending balance | 8,763 | $ 189 | $ 2,946 |
Aggregate Intrinsic Value for Options exercisable and expected to be exercisable | $ 8,654 |
11. CAPITAL STOCK (Details 1)
11. CAPITAL STOCK (Details 1) $ / shares in Units, $ in Thousands | 12 Months Ended |
May 31, 2017USD ($)$ / sharesshares | |
Options exercisable and expected to be exercisable | shares | 2,422,000 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 3.21 |
$0.59-$0.97 | |
Number of Options Outstanding, Ending | shares | 514 |
Weighted Average Remaining Contractual Life (Years) Options Outstanding | 1 year 9 months 7 days |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 0.66 |
Options exercisable and expected to be exercisable | shares | 514 |
Weighted Average Remaining Contractual Life (Years) Options Exercisable | 1 year 9 months 7 days |
Weighted Average Exercise Price Exercisable | $ / shares | $ 0.66 |
$1.09-$1.40 | |
Number of Options Outstanding, Ending | shares | 784 |
Weighted Average Remaining Contractual Life (Years) Options Outstanding | 2 years 4 months 28 days |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 1.28 |
Options exercisable and expected to be exercisable | shares | 773 |
Weighted Average Remaining Contractual Life (Years) Options Exercisable | 2 years 4 months 24 days |
Weighted Average Exercise Price Exercisable | $ / shares | $ 1.28 |
$1.68-$2.06 | |
Number of Options Outstanding, Ending | shares | 542 |
Weighted Average Remaining Contractual Life (Years) Options Outstanding | 5 years 1 month 13 days |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 1.77 |
Options exercisable and expected to be exercisable | shares | 287 |
Weighted Average Remaining Contractual Life (Years) Options Exercisable | 4 years 3 months 4 days |
Weighted Average Exercise Price Exercisable | $ / shares | $ 1.85 |
$2.10-$2.81 | |
Number of Options Outstanding, Ending | shares | 1,234 |
Weighted Average Remaining Contractual Life (Years) Options Outstanding | 4 years 6 months 11 days |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 2.44 |
Options exercisable and expected to be exercisable | shares | 848 |
Weighted Average Remaining Contractual Life (Years) Options Exercisable | 4 years 5 months 16 days |
Weighted Average Exercise Price Exercisable | $ / shares | $ 2.46 |
$0.59-$2.81 | |
Number of Options Outstanding, Ending | shares | 3,074 |
Weighted Average Remaining Contractual Life (Years) Options Outstanding | 3 years 7 months 17 days |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 1.73 |
Options exercisable and expected to be exercisable | shares | 2,422 |
Weighted Average Remaining Contractual Life (Years) Options Exercisable | 3 years 2 months 16 days |
Weighted Average Exercise Price Exercisable | $ / shares | $ 1.63 |
Aggregate Intrinsic Value | $ | $ 7,148 |
11. CAPITAL STOCK (Details Narr
11. CAPITAL STOCK (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Total intrinsic values of options exercised | $ 810 | $ 185 | $ 540 |
Weighted average contractual life of the options exercisable and expected to be exercisable | 3 years 7 months 13 days | ||
Exercisable options to purchase | 2,422,000 | 2,390,000 | 2,189,000 |
Weighted average exercise prices | $ 3.21 | $ 3.69 | $ 1.43 |
RSUs vested | 42,000 | ||
RSUs unvested | 32,000 | ||
Market value on the date of the grant | $ 1.68 | $ 2.16 | |
Intrinsic value of RSUs, nonvested | $ 145 | ||
Intrinsic value of RSUs, vested | $ 35 | ||
2006 Stock Option Plan and 2016 Equity Incentive Plan | |||
Authorized Shares | 5,275,000 | ||
Outstanding Shares | 3,105,000 | ||
Employee Stock Purchase Plan | |||
Restricted Stock Units granted | 74,000 | 35,000 | 0 |
Board Of Directors | |||
Restricted Stock Units granted | 83,000 | ||
Market value on the date of the grant | $ 1.86 | ||
2016 Equity Incentive Plan | |||
Shares reserved for issuance | 2,238,000 | ||
2006 Equity Incentive Plan | |||
Shares remained available under 2006 Equity Incentive Plan | 1,438,000 |
12. EMPLOYEE BENEFIT PLANS (Det
12. EMPLOYEE BENEFIT PLANS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Contributions to ESOP | $ 60 | $ 60 | $ 60 |
Shares contributed to the ESOP for fiscal year | 59,000 | 25,000 | 27,000 |
2006 Purchase Plan | |||
Common stock issued under ESPP plan | 151,000 | 86,000 | 87,000 |
Shares issued under ESPP plan | 1,119,000 | ||
ESPP shares available for issuance | 381,000 | ||
Maximum calendar year contribution per employee | $ 25 | $ 25 | $ 25 |
Number of purchase rights share grants during the year | 1,000 | 304,000 | 222,000 |
13. OTHER (EXPENSE) INCOME, N67
13. OTHER (EXPENSE) INCOME, NET (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Other Expense Income Net Details | |||
Foreign exchange (loss) gain | $ (21) | $ (19) | $ 194 |
Other, net | 0 | 3 | 17 |
Other (expense) income, net | $ (21) | $ (16) | $ 211 |
14. SEGMENT INFORMATION (Detail
14. SEGMENT INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2015 | May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Net Sales | $ 6,683 | $ 2,681 | $ 4,216 | $ 5,318 | $ 1,571 | $ 1,677 | $ 4,620 | $ 6,633 | $ 18,898 | $ 14,501 | $ 10,018 |
Property and equipment, net | 1,419 | 1,204 | 1,419 | 1,204 | 478 | ||||||
US | |||||||||||
Net Sales | 7,762 | 2,957 | 3,648 | ||||||||
Property and equipment, net | 1,364 | 1,151 | 1,364 | 1,151 | 432 | ||||||
Asia | |||||||||||
Net Sales | 10,439 | 10,228 | 4,943 | ||||||||
Property and equipment, net | 40 | 39 | 40 | 39 | 34 | ||||||
Europe | |||||||||||
Net Sales | 697 | 1,316 | 1,427 | ||||||||
Property and equipment, net | $ 15 | $ 14 | $ 15 | $ 14 | $ 12 |
15. RELATED PARTY TRANSACTIONS
15. RELATED PARTY TRANSACTIONS (Details Narrative) $ in Thousands | May 31, 2017USD ($) |
Related Party Transactions Details Narrative | |
Payable to Wilson Sonsini Goodrich & Rosati | $ 188 |
16. COMMITMENTS AND CONTINGEN70
16. COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | May 31, 2017USD ($) |
Commitments And Contingencies Details | |
2,018 | $ 502 |
2,019 | 64 |
2,020 | 1 |
2,021 | 0 |
2,022 | 0 |
Thereafter | 0 |
Total | $ 567 |
16. COMMITMENTS AND CONTINGEN71
16. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Commitments And Contingencies Details Narrative | |||
Rental expense | $ 509 | $ 499 | $ 554 |
Certificate of deposit | $ 50 | $ 50 |
17. SELECTED QUARTERLY CONSOL72
17. SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2015 | May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Selected Quarterly Consolidated Financial Data Details | |||||||||||
Net sales | $ 6,683 | $ 2,681 | $ 4,216 | $ 5,318 | $ 1,571 | $ 1,677 | $ 4,620 | $ 6,633 | $ 18,898 | $ 14,501 | $ 10,018 |
Gross profit (loss) | 2,608 | 503 | 1,463 | 2,206 | (98) | 169 | 1,691 | 3,383 | 6,780 | 5,145 | 3,838 |
Net (loss) income | $ (795) | $ (2,651) | $ (1,452) | $ (755) | $ (3,056) | $ (2,975) | $ (1,048) | $ 294 | $ (5,653) | $ (6,785) | $ (6,647) |
Net (loss) income per share basic and diluted | $ (0.04) | $ (0.16) | $ (0.09) | $ (0.06) | $ (0.23) | $ (0.23) | $ (0.08) | $ 0.02 | $ (0.35) | $ (0.52) | $ (0.55) |