2021 Annual Report
Aehr Test Systems
Meeting the Production Test and Burn-in Needs
of Semiconductor Devices for Electric Vehicles,
Solar Power Conversion, Data Center and 5G
Infrastructure, and Mobile and Wearable Devices
FINANCIAL HIGHLIGHTS
PRODUCTS
The FOX-P platform can be used in a wide range of test and reliability screening (burn-in)
applications for high reliability applications, such as automotive, mobile devices, networking,
telecommunications, sensors, photonics and laser devices. The FOXTM-XP Burn-in and Test
System is designed for single-touchdown testing of up to 18 wafers at a time and for testing
singulated die or small modules. The FOX-NP is a low-cost entry-level system to provide a
configuration and price point for companies to do initial production qualification and new
product introduction, enabling an easier transition to the FOX-XP system for high volume
production test. The FOX-CP is a new low-cost single-wafer compact test and reliability
verification solution for logic, memory and photonic devices where test times ranging from
minutes to a few hours or where multiple touchdowns are required to test the entire wafer. It
complements the capabilities of the FOX-XP and FOX-NP systems, which are optimal when
the test time is measured in hours or days and the full wafer can be tested in a single
touchdown.
The FOX-1P Full Wafer Parallel Test System is designed for massively parallel testing in
wafer sort. By utilizing Design for Testability (DFT) or Built-In Self-Test (BIST) all devices
on a wafer are tested at one time, test costs can be decreased significantly due to the high
throughput of the system, enabling the user to significantly reduce the capital investment
required for high-volume production test.
Aehr Test’s patented WaferPak Contactor and DiePak® Carriers connect electrical test
resources from Aehr’s FOX systems to the customer’s wafer or singulated die/modules to be
tested or burned-in. Both products contain micro-miniature probes to contact all the
die/modules in a single insertion.
The ABTSTM Advanced Burn-In and Test System is Aehr Test’s family of Test During Burn-In
systems for packaged parts. It is being used for many applications in the mobility and automotive
markets. It can be configured with up to 320 I/O channels and up to 72 Burn-in boards for
testing and burning-in advanced logic devices. It offers an individual device temperature control
option for higher-power applications such as applications processors.
This Annual Report contains certain “forward-looking” statements based on current expectations, forecasts and assumptions that involve risks and
uncertainties. Forward-looking statements include statements relating to future market opportunities and conditions, industry growth and customer
demand for Aehr Test's products. Actual results may differ materially from those stated or implied due to risks and uncertainties. See Aehr Test's recent
10-K report that is part of this Annual Report for a more detailed description of the risks facing our business. Aehr Test disclaims any obligation to
update information contained in any forward-looking statement to reflect events or circumstances occurring after the date of this Annual Report.
(in thousands, except per share data) For the years ended May 31, 2021 2020 2019 Net sales $16,600 $22,291 $21,056 Loss from operations (4,182) (2,765) (5,000) Net loss attributable to common shareholders (2,027) (2,802) (5,235) Net loss per share - diluted (0.09) (0.12) (0.23) Cash and cash equivalents 4,582 5,433 5,428 Working capital 10,123 13,786 14,522 Shareholders’ equity 11,449 14,056 15,453 L
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Dear Shareholders, Customers, Partners, and Employees,
Fiscal 2021, which started June 1, 2020, right after the worldwide COVID-19-related lockdowns
kicked into full swing, was a very challenging year. We experienced several customer production ramp
delays and push outs related to the ongoing uncertainties around COVID-19 that lasted through our
fiscal year. Yet through the disruption of the pandemic, we remained engaged with our key customers,
maintained our existing business, and captured additional customer engagements while carefully
managing our cash and inventory. As I firmly believed when I wrote last year’s letter, we have
emerged from this challenging period a stronger Company, with more production customers, more
markets and applications, and higher value products than we had before the pandemic. In fact, as I
write this today, just a few months in to our fiscal 2022 year, we have already generated bookings to
date of over $40 million, which is by far the largest in Company history.
Silicon Carbide Driving Largest Backlog in Company History
This past fiscal year we made significant inroads into the emerging silicon carbide device market,
which continues to be a very promising growth driver for Aehr and will be a major focus in the new
fiscal year. Our lead silicon carbide customer qualified our FOX-XP system for high volume
production burn-in and infant mortality screening of their silicon carbide power devices at wafer level
for electric vehicles. This customer is a leading Fortune 500 supplier of semiconductor devices with a
significant customer base in the automotive semiconductor market. They have now qualified several
devices for automotive applications on our solution, ordered a significant number of FOX-XP
systems, and purchased multiple new WaferPak Contactor designs that are expected to be qualified
and move to production during this new fiscal year. This customer continues to forecast orders for
multiple additional FOX systems and WaferPak Contactors this fiscal year and a significant number of
systems and WaferPaks over the next several years driven by electric vehicle semiconductor test and
burn-in demand.
In addition to the large opportunity for silicon carbide with our lead customer, we are currently in
active discussions with several other major silicon carbide suppliers regarding our wafer level test and
burn-in solutions and we expect to move to on-wafer evaluations with multiple potential new
customers this fiscal year.
Silicon carbide power semiconductors have emerged as the preferred technology for battery electric
vehicle power conversion in on-board and off-board electric vehicle battery chargers and the electric
power conversion and control of the electric engines. Our FOX-P family of products are cost-
effective solutions for ensuring the critical quality and reliability of devices in this market, where
performance and reliability can not only mean increased battery life, but also whether you have to
walk home from a vehicle whose power semiconductor fails in the power train.
Aehr’s FOX-XP solution allows for one of the key reliability screening tests to be completed on an
entire wafer full of devices, basically testing all of them at one time, while also testing and monitoring
every device for failures during the burn-in process to provide critical information on those devices.
This is an enormously valuable capability, as it allows our customers to screen devices that would
otherwise fail after they are packaged into multi-die modules where the yield impact is 10 times or
even 100 times as costly.
We anticipate that wafer level test and burn-in will become the industry standard for quality and
reliability screening of silicon carbide devices for the automotive market, and with the most cost-
effective solution on the market to address this opportunity, we believe that Aehr has the chance to
build a dominant market share.
Silicon Photonics Market Opportunity Being Driven By Data Center Expansion and 5G
While the silicon photonics market was significantly impacted by the pandemic this past fiscal year,
late in the year we saw another existing customer begin using our FOX-XP system for high-volume
production test and burn-in of their silicon photonics devices. This customer is a major supplier of
fiber optic transceivers in the Data Center Interconnect (DCI) market and will need incremental
capacity for FOX systems and our WaferPak Contactors with each increment in their volume
production forecast.
We currently have five customers in the silicon photonics space that are shipping products to their
customers using our FOX solutions and see a significant opportunity for growth as we expand within
these customers and add additional new silicon photonics customers in this new fiscal year. We
continue to be optimistic about the silicon photonics market, which is seeing increasing deployment
of devices used in the expansion of bandwidth and infrastructure to meet the explosive growth of
data center and 5G. Long term, we see integrated silicon photonics devices being integrated directly
into other semiconductors directly or using multi-die or 3D packaging technologies that will further
increase the total available market and demand for our FOX wafer level and singulated die products.
Mobile Device Sensor Market Drives Demand for Our FOX Systems and DiePaks
During the year our major mobile device customer selected Aehr for a critical new high-volume
application for production test and burn-in of mobile sensors. Aehr won this application due to our
unique technical capabilities and cost-effectiveness of our solution critical to this application, which
we understand at this time will require 100% test, burn-in, traceability and validation of the devices.
Within the mobile sensor market, this past year we successfully implemented our FOX systems and
DiePak Carriers for production test and burn-in of two new applications for 2D/3D sensors for
mobile devices and have successfully executed on several programs for highly custom and unique
sensors in packages and configurations unlike any other devices on the market.
Aehr’s engineering team has been able to design and develop custom DiePak carriers and contactors
to address the unique electrical, mechanical, optical, and thermal needs of these devices with our
FOX-XP systems and proprietary DiePak carriers.
We continue to be optimistic about the mobile sensor market space and are seeing increasing interest
in our FOX systems and DiePaks for production test and burn-in of complex 2D and 3D sensors in
multiple mobile applications. We expect to see follow-on orders for system capacity and DiePaks this
fiscal year.
Consumables Revenue Continues to Grow
Our FOX family of test systems includes our consumable customized WaferPaks and DiePaks that
are proprietary full wafer, singulated die and module contactors, and are needed not only for new
systems orders, but also for each new design win and each new device added to production test.
Late in the fiscal year we launched our newest DiePak solution, which is capable of handling
extremely small and complex devices and very high power-density devices with higher parallelism than
available before. This new class of DiePak can handle devices small enough to rest on the tip of a pen
or pencil. Devices this small are extremely hard to handle and particularly in any kind of parallelism.
Often, a discrete device this small is handled with special handling equipment and a tester that can
only test one device at a time. This new FOX-XP system and DiePak solution is capable of testing
very complex die and modules in addition to them being tiny. This solution is a great addition to our
product family, and we believe it further sets us apart from any other company in the industry.
As we increase our installed base of FOX systems with current and new customers, particularly with
our FOX-NP and XP multi-wafer and singulated die module test and burn-in systems, we expect our
consumables business will continue to grow in absolute value and as a percentage of our total sales.
Over the long-term, we expect these recurring consumable sales to account for up to half or even
more of our total annual revenue.
Expect Significant Revenue Growth in Fiscal 2022
As we move into fiscal 2022, we are excited to see a recovery across our customer base, along with
significant demand for wafer level test and burn-in of silicon carbide devices for electric vehicles,
silicon photonics devices for data center and 5G infrastructure, and 2D/3D sensors for mobile
devices. Silicon carbide appears to be one of the hottest potential application spaces Aehr Test has
seen in many years, and we are extremely excited about our unique ability to service this emerging
market that we expect will be a significant growth driver for Aehr for several years. While this past
year was challenging, we made tremendous progress growing our customers, expanding our markets,
and adding to our capabilities, and expect to generate significant revenue growth year over year in our
new fiscal year.
I continue to be grateful to our employees, customers, partners and shareholders for their support.
Gayn Erickson, President and CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X]
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended May 31, 2021
or
[ ]
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number: 000-22893.
AEHR TEST SYSTEMS
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of
incorporation or organization)
94-2424084
(IRS Employer Identification Number)
400 KATO TERRACE, FREMONT, CA
(Address of principal executive offices)
94539
(Zip Code)
Registrant’s telephone number, including area code: (510) 623-9400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock,
par value $0.01 per share
AEHR
The NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Securities Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]
No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files).
Yes [X]
No [ ]
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [X]
Smaller reporting company [X]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]
No [X]
The aggregate market value of the registrant’s common stock, par value $0.01 per share, held by non-affiliates of the
registrant, based upon the closing price of $1.65 on November 30, 2020, as reported on the NASDAQ Capital Market,
was $34,124,251. For purposes of this disclosure, shares of common stock held by persons who hold more than 5% of
the outstanding shares of common stock (other than such persons of whom the Registrant became aware only through
the filing of a Schedule 13G filed with the Securities and Exchange Commission) and shares held by officers and
directors of the Registrant have been excluded because such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily conclusive for other purposes.
The number of shares of registrant’s common stock, par value $0.01 per share, outstanding at July 31, 2021 was
24,168,522.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders are incorporated
by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be
filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended
May 31, 2021.
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AEHR TEST SYSTEMS
FORM 10-K
FISCAL YEAR ENDED MAY 31, 2021
TABLE OF CONTENTS
PART I
Item 1.
Business ................................................................................................................................................................ 4
Item 1A. Risk Factors .......................................................................................................................................................... 11
Item 1B. Unresolved Staff Comments ............................................................................................................................. 17
Properties .............................................................................................................................................................. 18
Item 2.
Legal Proceedings ............................................................................................................................................... 18
Item 3.
Mine Safety Disclosures ..................................................................................................................................... 18
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ..................................................................................................................... 18
Selected Consolidated Financial Data ............................................................................................................. 19
Item 6.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ................ 21
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ..................................................................... 28
Financial Statements and Supplementary Data ............................................................................................. 29
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............... 56
Item 9A. Controls and Procedures .................................................................................................................................... 56
Item 9B. Other Information ............................................................................................................................................. 56
PART III
Item 10.
Item 11.
Item 12.
Directors, Executive Officers and Corporate Governance .......................................................................... 57
Executive Compensation .................................................................................................................................... 57
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Item 13.
Item 14.
Matters ................................................................................................................................................................ 57
Certain Relationships and Related Transactions, and Director Independence ......................................... 57
Principal Accountant Fees and Services ........................................................................................................... 57
Item 15.
Exhibits, Financial Statement Schedules .......................................................................................................... 58
PART IV
Signatures ............................................................................................................................................................... 61
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This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Section 27A of
the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). All statements contained in this Annual Report on Form 10-K other than statements of
historical fact, including statements regarding our future results of operations and financial position, our business
strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,”
“may,” “will,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “expect,” “could,” “target,” “project,” “should,”
“predict,” “potential,” “would,” “seek” and similar expressions and the negative of those expressions are intended to
identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties
and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those
expressed in any forward-looking statements. These risks include but are not limited to those factors identified in “Risk
Factors” beginning on page 11 of this Annual Report on Form 10-K, those factors that we may from time to time
identify in our periodic filings with the Securities and Exchange Commission, as well as other factors beyond our
control. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Unless
the context requires otherwise, references in this Form 10-K to “Aehr Test,” the “Company,” “we,” “us” and “our”
refer to Aehr Test Systems.
Investors and others should note that we announce material financial information to our investors using our investor
relations website (https://www.aehr.com/investor-relations/), SEC filings, press releases, public conference calls and
webcasts. We use these channels to communicate with our investors and the public about our company, our products
and services and other issues. It is possible that the information we post on our investor relations website could be
deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company
to review the information we post on our investor relations website.
PART I
Item 1. Business
THE COMPANY
Aehr Test was incorporated in the state of California on May 25, 1977. We develop, manufacture and sell solutions
that are designed to reduce the cost of testing and to perform reliability screening and stress testing, burn-in or cycling,
of homogeneous and heterogenous logic and memory semiconductor integrated circuits, sensors, power and optical
devices. These solutions can be used to simultaneously perform parallel testing and burn-in of packaged devices,
singulated bare die or semiconductor devices while still in wafer form. The expanding automotive, mobility, networking,
and telecommunications markets require semiconductor devices that meet increased quality and reliability specifications.
To meet these needs, device manufacturers are increasing capacity and performing additional testing and burn-in of their
products, creating opportunities for Aehr Test products in package and wafer-level testing. Leveraging its expertise as a
long-time leading provider of burn-in equipment, and having installed over 2,500 systems worldwide, the Company has
developed and introduced several innovative product families, including the ABTSTM and FOXTM family of systems, the
WaferPakTM Contactor and the DiePak® Carrier for making electrical and thermal contact with devices under test, and
WaferPak Aligners and DiePak Autoloaders for handling and alignment of devices into the corresponding WaferPaks
and DiePaks. The ABTS family of packaged part burn-in and test systems can perform test during burn-in of complex
devices, such as digital signal processors, microprocessors, microcontrollers, memory and systems-on-a-chip, and offers
individual temperature control for high-power advanced logic devices while in a packaged form. The FOX family of
systems are parallel test and burn-in systems designed to contact all devices on one or more wafers or panels of devices
simultaneously, thus enabling cost effective full wafer parallel test and burn-in. The FOX systems are also used for
parallel test and burn-in of singulated die or very small multi-IC modules. The WaferPak Contactor includes a full-wafer
probe card for use in testing wafers in FOX systems. The DiePak Carrier is a reusable, temporary package that enables
IC manufacturers to perform cost-effective test and burn-in of singulated bare die or very small multi-IC modules.
INDUSTRY BACKGROUND
Semiconductor manufacturing is a complex, multi-step process, and defects or weaknesses that may result in the
failure of a semiconductor device may be introduced at any process step. Failures may occur immediately or at any time
during the operating life of the device, sometimes after several months of normal use. Semiconductor manufacturers
rely on testing and reliability screening to identify and eliminate defects that occur during the manufacturing process.
Testing and reliability screening involve multiple steps. The first set of tests is typically performed by semiconductor
device manufacturers before the processed semiconductor wafer is cut into individual die, in order to avoid the cost of
packaging defective die into their packages. This “wafer probe” testing can be performed on one or many die at a time,
including testing the entire wafer at once. Most leading-edge microprocessors, microcontrollers, digital signal
processors, memory ICs, sensors, power and optical devices (such as vertical-cavity surface-emitting lasers, or VCSELs)
then undergo an extensive reliability screening and stress testing procedure known as burn-in or cycling, depending on
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the application. This can either be done at the wafer level, before the die are packaged, or at the package level, after the
die are packaged. The burn-in process screens for early failures by operating the device at elevated voltages and
temperatures, at up to 150 degrees Celsius (302 degrees Fahrenheit) or higher. Depending upon the application, the
burn-in times can range anywhere from minutes to hours or even days. A typical burn-in system can process thousands
of devices simultaneously. After burn-in, the devices undergo a final test process using automatic test equipment, or
testers. For example, this cycling process screens silicon carbide semiconductor devices used in electric vehicle engine
controller inverters and their corresponding on-board battery chargers for failure to meet current carrying, power loss
and leakage specifications, as well as endurance requirements.
MARKETS
The Company’s semiconductor test and reliability qualification solutions address multiple test and burn-in segments
including silicon carbide devices for electric vehicles, silicon photonics markets that include data center infrastructure
and worldwide 5G infrastructure, 2D/3D sensor markets related to consumer electronics and automotive applications,
and the data storage and memory markets.
Silicon Carbide
Silicon carbide power semiconductors have emerged as the preferred technology for battery electric vehicle power
conversion in on-board and off-board electric vehicle battery chargers, and the electric power conversion and control of
the electric engines. These devices reduce power loss by as much as greater than 75% over power silicon alternatives like
IGBT (Insulated-Gate Bipolar Transistor) devices, which has essentially changed the entire market dynamic. With this
development, the Company sees most, if not every automotive company that is working on electric vehicles, moving to
silicon carbide-based powertrain and charging systems in the near future.
Aehr’s FOX-XP test and burn-in system allows for one of the key reliability screening tests to be completed on an
entire wafer full of devices, testing all of them at one time, while also testing and monitoring every device for failures
during the burn-in process to provide critical information on those devices. This is an enormously valuable capability, as
it allows its customers to screen devices that would otherwise fail after they are packaged into multi-die modules where
the yield impact is 10 times or even 100 times as costly. The Company’s FOX-P family of products are very cost-
effective solutions for ensuring the critical quality and reliability of devices in this market, where performance and
reliability can not only mean increased battery life, but also assurance against failure of a vehicle whose power
semiconductor fails in the power train.
Silicon Photonics
The silicon photonics market is seeing increasing deployment of devices used in the expansion of bandwidth and
infrastructure to meet the explosive growth of data center and 5G infrastructure.
The rapid growth of integrated optical devices in data centers and data center interconnect infrastructure, mobile
devices, automotive applications, and wearable biosensor markets is driving substantially higher requirements for initial
quality and long-term reliability, and they are increasing with every new product generation.
Silicon photonics devices are highly integrated silicon-based semiconductors that have embedded or integrated the
non-silicon based laser transmitters and receivers to enable a smaller, lower cost, higher reliable alternative to traditional
fiber optic transceivers currently used in data center and telecommunication infrastructure. These require a process step
in manufacturing called stabilization where the devices are subjected to high temperatures and power to stabilize their
output power. The Company’s solution makes it feasible to burn-in integrated silicon photonics devices while still in
wafer form without adding the cost to the transceiver printed circuit board and other mechanical infrastructure of the
final transceiver module, and that has both yield and significant cost savings. In the case of silicon photonics, the laser
devices are bonded directly to a silicon-based device that has all the logic multiplexing and de-multiplexing, and other
high-speed communication subsystems, all integrated into a silicon-based integrated circuit.
Mobile 2D and 3D Sensors
Sensors used in mobile devices such as smartphones, tablets, wearables such as watches and fitness bands, and audio
devices have become pervasive. Initially, sensors on smartphones allowed basic functions we have all come to expect
such as touchscreens, rotational sensors, and fingerprint sensors, but have gotten more complex with added capabilities
such as 3D facial recognition and time of flight distance measurements. We will see the addition of health monitoring
sensors, 3D measurement capability, and other advanced sensors in the future. As sensors become more pervasive and
add critical new functionality to devices, it becomes more and more important that the data collected be accurate and
reliable, which we believe will drive more and more requirements for our solutions for production test and burn-in of
these sensors.
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In addition, the rapid growth and increasing demand for reliability in automotive sensor technologies is a key market
driver for the Company. These technologies include ADAS (Advanced Driver Assistance Systems) capabilities such as
collision avoidance systems using laser, LIDAR (Light Detection and Ranging), and RADAR (Radio Detection and
Ranging) or other sensing technologies. More and more new vehicles now include as standard capabilities collision
avoidance systems that detect obstacles and monitor the vehicle’s surroundings to notify the driver of dangerous
conditions and take evasive action. In addition to autonomous vehicles that require extremely high reliability of the
devices in these systems, more and more vehicles around the world are embedding these systems and sensors into their
everyday driving features. The Company sees the rising tide of the increasing number of embedded sensors and electrical
and optical systems in vehicles as a key driver of the increasing market need for more and more reliable semiconductors.
This, in turn, is increasing the need for 100% production test and burn-in of devices in order to lower the infant
mortality rate and ensure that these devices and systems operate over the life of the vehicles.
Data Storage and Memory
The Company also sees the data storage and memory markets as critical new opportunities for its systems where these
end markets and customers require devices to have extremely high levels of quality and long-term reliability.
PRODUCTS
The Company manufactures and markets full wafer contact test systems, test during burn-in systems, test fixtures and
related accessories.
All of the Company’s systems are platform-based systems with a portfolio of current, voltage, digital and thermal
capabilities, allowing them to be configured with optional features to meet customer requirements. Systems can be
configured for use in production applications, where capacity, throughput and price are most important, or for reliability
engineering and quality assurance applications, where performance and flexibility, such as extended temperature ranges,
are essential.
FULL WAFER CONTACT SYSTEMS
The FOX-XP test and burn-in system, introduced in July 2016, is designed for devices in wafer, singulated die, and
module form that require test and burn-in times typically measured in hours to days. The FOX-XP system can test and
burn-in up to 18 wafers at a time. For high reliability applications, such as automotive, mobile devices, networking,
telecommunications, sensors, power and solid-state devices, the FOX-XP system is a cost-effective solution for
producing tested and burned-in die for use in multi-chip packages. Using Known-Good Die, or KGD, which are fully
burned-in and tested die, in multi-chip/heterogeneous packages helps assure the reliability of the final product and
lowers costs by increasing the yield of high-cost multi-chip packages. Wafer-level burn-in and test enables lower cost
production of KGD for multi-chip modules, 3-D stacked packages and systems-in-a-package. The FOX-XP platform
has been extended for burn-in and test of small multi-die modules by using DiePak Carriers. The DiePak Carrier with
its multi-module sockets and high wattage dissipation capabilities has a capacity of hundreds of die or modules, much
higher than the capacity of a traditional burn-in system with traditional single-device sockets and heat sinks. This
capability was introduced in March 2017.
The FOX-NP was introduced in January 2019 and is a low-cost entry-level system to provide a configuration and
price point for companies to do initial production qualification and new product introduction, enabling an easier
transition to the FOX-XP system for high volume production test. The FOX-NP system is 100% compatible with the
FOX-XP system and is configurable with up to two slot assemblies per system compared to up to 18 slot assemblies in
the FOX-XP system.
The FOX-CP was introduced in February 2019 and is a low-cost single-wafer compact test and reliability verification
solution for logic, memory, power and photonic devices. The FOX-CP reduces test cost by functionally testing wafers
during reliability screening to identify failing logic, memory, power or photonic die before the die are integrated into
their final package, and is optimal for test times ranging from minutes to a few hours or where multiple touchdowns are
required to test the entire wafer. The FOX-CP includes an integrated prober which is equipped with optics for automatic
pattern recognition so that the wafer is aligned properly for the testing process. It complements the capabilities of the
FOX-XP and FOX-NP systems, which are optimal when the test time is measured in hours or days and the full wafer
can be tested in a single touchdown.
The FOX-1P full wafer parallel test system, introduced in October 2014, is designed for massively parallel testing of
devices at wafer level. The FOX-1P system is designed to make electrical contact to and test all of the die on a wafer in
a single touchdown. The FOX-1P test head and WaferPak Contactor are compatible with industry-standard 300 mm
wafer probers, which provide the wafer handling and alignment automation for the FOX-1P system. The FOX-1P
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pattern generator is designed to functionally test industry-standard memory devices such as flash and DRAMs, and it is
optimized to test memory or logic ICs that incorporate design for testability, or DFT, and built-in self-test, or BIST.
The FOX-1P universal per-pin architecture is designed to provide per-pin electronics and per-device power supplies and
is tailored to full-wafer functional test. The Company believes that the FOX-1P system can significantly reduce the cost
of testing IC wafers. The Company’s FOX-1P system was partially funded through a development agreement with a
leading semiconductor manufacturer. The Company received the first production order of this new system and shipped
the first system in July 2016.
One of the key components of the FOX systems is the patented WaferPak Contactor. The WaferPak Contactor
contains a full-wafer single-touchdown probe card which is easily removable from the system. Traditional probe cards
often are only able to contact only a portion of the wafer, requiring multiple touchdowns to test the entire wafer.
Traditional probe cards also require the use of a dedicated wafer prober handler for each wafer in order to press the
wafer up to make contact with the probe card. The need for a wafer prober per wafer is a significant cost adder to the
cost of testing a wafer, and also creates the need for significant clean room space to facility the footprint of a wafer
prober per wafer. The unique design of the WaferPak as well as the FOX-XP and FOX-NP systems remove the need
for a dedicated wafer prober per wafer. A single FOX-XP system with a set of WaferPak Contactors can test up to 18
wafers at a time in the same footprint as a single-wafer wafer prober and test system offered by Aehr’s competitors. The
WaferPak Contactor is intended to accommodate a wide range of contactor technologies so that the contactor
technology can evolve along with the changing requirements of the customer’s wafers. The WaferPak Contactors are
custom designed for each device type, each of which has a typical lifetime of two to seven years, depending on the
device life cycle. Therefore, multiple sets of WaferPak Contactors could be purchased over the life of a FOX system.
Another key component of the FOX-XP and FOX-NP systems is the patented DiePak Carrier. The DiePak Carrier,
which is easily removable from the system, contains many multi-module or die sockets with very fine-pitch probes.
Traditional sockets contact only a single device, requiring multiple large numbers of sockets and burn-in boards to test a
production lot of devices. The unique design accommodates a wide range of socket sizes and densities so that the
DiePak Carrier technology can evolve along with the changing requirements of the customer’s devices. The DiePak
Carriers are custom designed for each device type, each of which has a typical lifetime of two to seven years, depending
on the device life cycle. Therefore, multiple sets of DiePak Carriers could be purchased over the life of a FOX-XP or
FOX-NP system.
Another key component of our FOX-XP and FOX-NP and test solution is the WaferPak Aligner. The WaferPak
Aligner performs alignment of the customer’s wafer to the WaferPak Contactor so that the wafer can be tested and
burned-in by the FOX-XP and FOX-NP systems. The Company offers an automated aligner for high volume
production applications, which can support several FOX-XP or FOX-NP systems, and a manual aligner for low volume
production or engineering applications.
Similar to the WaferPak Aligner for WaferPak Contactors, the Company offers the DiePak Loader for DiePak
Carriers. The DiePak Loader performs automatic loading of the customer’s modules to the DiePak Carrier so that the
modules can be tested and burned-in by the FOX-XP and FOX-NP system. Typically, one DiePak Loader can support
several FOX-XP or FOX-NP systems.
Net sales of full wafer contact product lines, systems, WaferPak Contactors, DiePaks Carriers and services for fiscal
2021, 2020 and 2019 were $15.0 million, $19.8 million, and $14.6 million, respectively, and accounted for approximately
90%, 89% and 69% of the Company’s net sales in fiscal 2021, 2020 and 2019, respectively.
SYSTEMS FOR PACKAGED PARTS
Test during burn-in, or TDBI, systems consist of several subsystems: pattern generation and test electronics, control
software, network interface and environmental chamber. The test pattern generator allows duplication of most of the
functional tests performed by a traditional tester. Pin electronics at each burn-in board, or BIB, position are designed to
provide accurate signals to the ICs being tested and detect whether a device is failing the test.
Devices being tested are placed on BIBs and loaded into environmental chambers which typically operate at
temperatures from 25 degrees Celsius (77 degrees Fahrenheit) up to 150 degrees Celsius (302 degrees Fahrenheit). Using
our optional chambers, our systems can produce temperatures as low as -55 degrees Celsius (-67 degrees Fahrenheit). A
single BIB can hold up to several hundred ICs, and a production chamber holds up to 72 BIBs, resulting in thousands of
memory or logic devices being tested in a single system.
The Advanced Burn-in and Test System, or ABTS, was introduced in fiscal 2008. Several updates to the ABTS
system have been made since its introduction, including the ABTS-P system released in 2012. The ABTS family of
products is based on a hardware and software architecture that is intended to address not only today’s devices, but also
future devices for many years to come. The ABTS system can test and burn-in both high-power logic and low-power
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ICs. It can be configured to provide individual device temperature control for devices up to 70W or more and with up
to 320 I/O channels.
Net sales of packaged part product lines, systems and services for fiscal 2021, 2020 and 2019 were $1.6 million, $2.5
million, and $6.4 million, respectively, and accounted for approximately 10%, 11% and 31% of the Company’s net sales
in fiscal 2021, 2020 and 2019, respectively.
CUSTOMERS
The Company markets and sells its products throughout the world to semiconductor manufacturers, semiconductor
contract assemblers, electronics manufacturers and burn-in and test service companies.
Sales to the Company’s five largest customers accounted for approximately 84%, 87%, and 80% of its net sales in
fiscal 2021, 2020 and 2019, respectively. During fiscal 2021, Advanced Semiconductor Engineering, Inc., ON
Semiconductor Korea, Ltd., or ON Semiconductor, Intel Corporation, or Intel, and Inphi International Pte. Ltd, or
Inphi, accounted for approximately 24%, 23%, 20% and 10%, respectively, of the Company’s net sales. During fiscal
2020, Intel, ON Semiconductor and STMicroelectronics, Inc., or STMicroelectronics, accounted for approximately 43%,
16% and 15%, respectively, of the Company’s net sales. During fiscal 2019, Intel, Texas Instruments Incorporated, or
Texas Instruments, Cypress Semiconductor Corporation, or Cypress Semiconductor, and STMicroelectronics accounted
for approximately 36%, 14%, 12% and 10%, respectively, of the Company’s net sales. No other customers accounted
for more than 10% of the Company’s net sales for any of these periods. The Company expects that sales of its products
to a limited number of customers will continue to account for a high percentage of net sales for the foreseeable future.
In addition, sales to particular customers may fluctuate significantly from quarter to quarter. Such fluctuations may
result in changes in utilization of the Company’s facilities and resources. The loss of or reduction or delay in orders
from a significant customer or a delay in collecting or failure to collect accounts receivable from a significant customer
could materially and adversely affect the Company’s business, financial condition and operating results.
MARKETING, SALES AND CUSTOMER SUPPORT
The Company has sales and service operations in the United States, Philippines and Taiwan, dedicated service
resources in Germany, China and South Korea, and has established a network of distributors and sales representatives in
certain key parts of the world. In fiscal 2020, the Company moved to a sales representative distributorship model for
sales in Japan and Germany, substantially closing its subsidiary in Japan, see Note 17, “Restructuring,” of the Notes to
Consolidated Financial Statements, and eliminating the direct sales staff at its Germany subsidiary. See “REVENUE
RECOGNITION” in Item 7 under “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” for a further discussion of the Company’s relationship with distributors, and its effects on revenue
recognition.
The Company’s customer service and support program includes system installation, system repair, applications
engineering support, spare parts inventories, customer training and documentation. The Company has applications
engineering and field service personnel located near and sometimes co-located at our customers and includes resources
at the corporate headquarters in Fremont, California, at customer locations in Texas, at the Company’s subsidiaries in
Germany and Philippines, at its branch office in Taiwan, and also through 3rd party agreements in China and South
Korea. The Company’s distributors provide applications and field service support in other parts of the world. The
Company customarily provides a warranty on its products. The Company offers service contracts on its systems directly
and through its subsidiaries, distributors and representatives. The Company believes that maintaining a close
relationship with customers and providing them with ongoing engineering support improves customer satisfaction and
will provide the Company with a competitive advantage in selling its products to the Company’s customers.
BACKLOG
At May 31, 2021, the Company’s backlog was $1.6 million compared with $2.5 million at May 31, 2020. The
Company’s backlog consists of product orders for which confirmed purchase orders have been received and which are
scheduled for shipment within 12 months. Due to the possibility of customer changes in delivery schedules or
cancellations and potential delays in product shipments or development projects, the Company’s backlog as of a
particular date may not be indicative of net sales for any succeeding period.
RESEARCH AND PRODUCT DEVELOPMENT
The Company historically has devoted a significant portion of its financial resources to research and development
programs and expects to continue to allocate significant resources to these efforts. Certain research and development
expenditures related to non-recurring engineering milestones have been transferred to cost of goods sold, reducing
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research and development expenses. The Company’s research and development expenses during fiscal 2021, 2020 and
2019 were $3.7 million, $3.4 million and $4.2 million, respectively.
The Company conducts ongoing research and development to design new products and to support and enhance
existing product lines. Building upon the expertise gained in the development of its existing products, the Company has
developed the FOX family of systems for performing test and burn-in of entire processed wafers, and burn-in of devices
in singulated die and module form, including the FOX-NP and FOX-CP systems released during fiscal 2019. The
Company is developing enhancements to our packaged parts and wafer level burn-in products, intended to improve the
capability and performance for testing and burn-in of future generation devices and provide the flexibility in a wide
variety of applications.
MANUFACTURING
The Company assembles its products from components and parts manufactured by others, including environmental
chambers, power supplies, metal fabrications, printed circuit assemblies, ICs, burn-in sockets, high-density interconnects,
wafer contactors and interconnect substrates. The Company’s strategy is to use in-house manufacturing only when
necessary to protect a proprietary process or when a significant improvement in quality, cost or lead time can be
achieved and relies on subcontractors to manufacture many of the components and subassemblies used in its products.
Final assembly and testing are performed at the Company’s principal manufacturing facility located in Fremont,
California.
COMPETITION
The semiconductor equipment industry is intensely competitive. Significant competitive factors in the semiconductor
equipment market include price, technical capabilities, quality, flexibility, automation, cost of ownership, reliability,
throughput, product availability and customer service. In each of the markets it serves, the Company faces competition
from established competitors and potential new entrants, many of which have greater financial, engineering,
manufacturing and marketing resources than the Company.
The Company’s FOX full wafer contact systems face competition from larger systems manufacturers that have
significant technological know-how and manufacturing capability. Competing suppliers of full wafer contact systems
include Advantest Corporation, Chroma ATE Inc., Teradyne Inc., Micronics Japan Co., Ltd., and Tokyo Electron
Limited.
The Company’s ABTS TDBI systems face increasingly severe competition, especially from several regional, low-cost
manufacturers and from systems manufacturers that offer higher power dissipation per device under test. Some users of
such systems, such as independent test labs, build their own burn-in systems, while others, particularly large IC
manufacturers in Asia, acquire burn-in systems from captive or affiliated suppliers. The market for burn-in systems is
highly fragmented, with many domestic and international suppliers. Competing suppliers of burn-in and functional test
systems that compete with ABTS systems include Dong-Il Corporation, Micro Control Company, Incal Technology and
Advantest Corporation.
The Company’s WaferPak products are facing and are expected to face increasing competition. Several companies
have developed or are developing full-wafer and single-touchdown probe cards. As the full-wafer test market develops,
the Company expects that other competitors will emerge. The primary competitive factors in this market are cost,
performance, reliability and assured supply. Competing suppliers of full-wafer probe cards include FormFactor, Inc.,
Japan Electronic Materials Corporation and Micronics Japan Co., Ltd.
The Company expects that its DiePak products for burning-in and testing multiple singulated die and small modules
face significant competition. The Company believes that several companies have developed or are developing products
which are intended to enable test and burn-in of multiple bare die, and small modules. The Company expects that other
competitors will emerge. The Company expects that the primary competitive factors in this market will be cost,
performance, reliability and assured supply. Suppliers with products that compete with our single die DiePak products
include Chroma ATE Inc.
The Company expects its competitors to continue to improve the performance of their current products and to
introduce new products with improved price and performance characteristics. New product introductions by the
Company’s competitors or by new market entrants could cause a decline in sales or loss of market acceptance of the
Company’s products. The Company has observed price competition in the systems market, particularly with respect to
its less advanced products. Increased competitive pressure could also lead to intensified price-based competition,
resulting in lower prices which could adversely affect the Company’s operating margins and results. The Company
believes that to remain competitive it must invest significant financial resources in new product development and expand
9
its customer service and support worldwide. There can be no assurance that the Company will be able to compete
successfully in the future.
PROPRIETARY RIGHTS
The Company relies primarily on the technical and creative ability of its personnel, its proprietary software, and trade
secrets and copyright protection, rather than on patents, to maintain its competitive position. The Company’s
proprietary software is copyrighted and licensed to the Company’s customers. At May 31, 2021, the Company held 52
issued United States patents with expiration date ranges from 2022 to 2038 and had several additional United States
patent applications and foreign patent applications pending.
The Company’s ability to compete successfully is dependent in part upon its ability to protect its proprietary
technology and information. Although the Company attempts to protect its proprietary technology through patents,
copyrights, trade secrets and other measures, there can be no assurance that these measures will be adequate or that
competitors will not be able to develop similar technology independently. Further, there can be no assurance that claims
allowed on any patent issued to the Company will be sufficiently broad to protect the Company’s technology, that any
patent will be issued to the Company from any pending application or that foreign intellectual property laws will protect
the Company’s intellectual property. Litigation may be necessary to enforce or determine the validity and scope of the
Company’s proprietary rights, and there can be no assurance that the Company’s intellectual property rights, if
challenged, will be upheld as valid. Any such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company’s business, financial condition and operating results, regardless of
the outcome of the litigation. In addition, there can be no assurance that any of the patents issued to the Company will
not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages
to the Company. Also, there can be no assurance that the Company will have the financial resources to defend its
patents from infringement or claims of invalidity.
There are currently no pending claims against the Company regarding infringement of any patents or other intellectual
property rights of others. However, the Company may, from time to time, receive communications from third parties
asserting intellectual property claims against the Company. Such claims could include assertions that the Company’s
products infringe, or may infringe, the proprietary rights of third parties, requests for indemnification against such
infringement or suggest the Company may be interested in acquiring a license from such third parties. There can be no
assurance that any such claim made in the future will not result in litigation, which could involve significant expense to
the Company, and, if the Company is required or deems it appropriate to obtain a license relating to one or more
products or technologies, there can be no assurance that the Company would be able to do so on commercially
reasonable terms, or at all.
HUMAN CAPITAL RESOURCES
As of May 31, 2021, the Company, including its foreign subsidiaries and one branch office, employed 79 persons
collectively, on a regular full-time basis, of whom 16 were engaged in research, development and related engineering, 21
were engaged in manufacturing, 34 were engaged in marketing, sales and customer support and 8 were engaged in
general administration and finance functions. In addition, the Company from time to time employs a number of
contractors, temporary, and part-time employees, particularly to perform customer support and manufacturing.
The Company’s employees are dispersed across principal offices in the United States, Germany, Taiwan, and
Philippines. In addition, our service and support organization has employees located worldwide, at or near customer
facilities, to provide timely customer response. As of May 31, 2021 regular full-time employees were located in the
following geographic areas: 59 United States, 1 Germany, 4 Taiwan, and 15 in the Philippines.
The Company’s success is in part dependent on its ability to attract and retain highly skilled workers, who are in high
demand. None of the Company’s employees are represented by a union and the Company has never experienced a
work stoppage. The Company’s management considers its relations with its employees to be good. The Company
regularly evaluates its ability to attract and retain its employees. The Company has had relatively low turnover rates
within its workforce, with 60% of its United States workforce being with the Company for 10 years or more.
The Company believes that the investments we make in driving a strong, values-based culture and supporting its
employees through programs, development, and competitive pay enhances its organizational capability. Company
management quarterly reviews retention and turnover, employee communications, performance review status, and
compensation and benefits to identify potential issues or opportunities. The Company periodically performs employee
surveys to monitor employee satisfaction and the Company follows-up with an action planning process to actively
respond to employee feedback.
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The Company has been impacted by the outbreak of the novel coronavirus, known as COVID-19, which has spread
throughout the world. Our business’ top priority during the COVID-19 pandemic is protecting the health and safety of
our employees and their families, customers and community. We introduced policies and procedures to increase
workplace flexibility such as working remotely where possible to reduce the number of people who are on campus each
day. As a global supplier of Critical Infrastructure Sectors, as defined by the cybersecurity and Infrastructure Security
Agency, we have supported and continue to support customers during the pandemic. In the interest of public health, all
onsite operations generally use the minimum number of people to safely execute tasks and follow enhanced safety and
health protocols including screenings, social distancing, and use of personal protective equipment.
BUSINESS SEGMENT DATA AND GEOGRAPHIC AREAS
The Company operates in a single business segment, the designing, manufacturing and marketing of advanced test
and burn-in products to the semiconductor manufacturing industry in several geographic areas. Selected financial
information, including net sales and property and equipment, net for each of the last three fiscal years, by geographic
area is included in Part II, Item 8, Note 2, “Revenue” and Note 15, “Segment Information” and certain risks related to
such operations are discussed in Part I, Item 1A, Risk Factors, under the heading “We sell our products and services
worldwide, and our business is subject to risks inherent in conducting business activities in geographic regions outside of
the United States.”
AVAILABLE INFORMATION
The Company’s common stock trades on the NASDAQ Capital Market under the symbol “AEHR.” The Company’s
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these
reports that are filed with the United States Securities and Exchange Commission, or SEC, pursuant to Section 13(a) or
15(d) of the Exchange Act, are available free of charge through the Company’s website at www.aehr.com as soon as
reasonably practicable after we electronically file them with, or furnish them to the SEC.
The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room
at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operations of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site, www.sec.gov, that
contains reports, proxy and information statements and other information regarding issuers that file electronically with
the SEC.
In addition, information regarding the Company’s code of conduct and ethics and the charters of its Audit,
Compensation and Nominating and Governance Committees, are available free of charge on the Company’s website
listed above.
Item 1A. Risk Factors
You should carefully consider the risks described below. These risks are not the only risks that we may face.
Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become
important factors that affect us. If any of the following risks occur, our business, financial condition or results of
operations could be materially and adversely affected which could cause our actual operating results to differ materially
from those indicated or suggested by forward-looking statements made in this Annual Report on Form 10-K or
presented elsewhere by management from time to time.
Risks Related to our Business and Industry
The effects of the COVID-19 pandemic have disrupted, and may continue to significantly disrupt, our
operations, including our ability to manufacture and supply products and perform research and development
activities, and our customers’ usage of our products, all of which have had and may continue to have a material
and adverse effect on our business, future revenues and financial condition. We are unable to predict the
extent to which the pandemic and related impacts will continue to adversely impact our business operations,
financial performance, results of operations and the achievement of our strategic objectives.
Our business, results of operation and financial performance have been negatively impacted by the COVID-19
pandemic and related public health responses, such as shelter-in-place orders, social distancing protocols, and travel
restrictions in many of the countries and regions in which we have operations or manufacturing partners. Due to these
impacts and measures, we have experienced and may continue to experience significant and unpredictable reductions in
the demand for our products. In addition, our customers may delay, cancel or redirect planned capital expenditures in
order to focus resources differently during or as a result of the COVID-19 pandemic. The effects of this outbreak on
our business has included and could continue to include disruptions or restrictions on our employees’ ability to travel in
affected regions, as well as temporary closures of the facilities of our suppliers, customers, or other vendors in our
11
supply chain, which could impact our business, interactions and relationships with our customers, third-party suppliers
and contractors, and results of operations.
As a result of the COVID-19 outbreak around the world, we implemented certain travel restrictions, temporarily
limited the number of employees permitted onsite in our offices and implemented work-from-home rules. This has
caused disruption and delays in our ability to operate and manufacture, test and assemble products in our internal
facilities, and has limited our ability to continue certain research and development activities which could materially and
adversely affect our ability to develop or deliver products on the timelines we previously anticipated.
The COVID-19 pandemic has created economic uncertainty and volatility in the financial markets around the world,
resulting in economic uncertainty that has affected and will likely continue to affect demand for our products and impact
our results of operations. As a result, this may lead to periods of regional, national, and global economic slowdown or
regional, national, or global recessions that would curtail or delay spending by semiconductor manufacturers and
contract assemblers and affect demand for our products as well as increase the risk of customer defaults or delays in
payments. Our customers may delay or cancel orders for our products due to bankruptcy, lack of liquidity, lack of
funding, operational failures, or other reasons. The ultimate impact of the COVID-19 pandemic on our operations and
financial performance depends on many factors that are not within our control, including, but not limited, to:
government’s, business’ and individuals’ actions that have been and may continue to be taken in response to the
pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and
actions taken in response to global and regional economies, travel, and economic activity; the availability of federal, state,
local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility;
global economic conditions and levels of economic growth; and the pace of recovery as the COVID-19 pandemic
subsides. Although the magnitude of the continuing impact of COVID-19 on our business operations remains
uncertain and difficult to predict, and this remains a highly dynamic situation, we have experienced and will continue to
experience in subsequent periods, disruptions to our business that will likely continue to impact our business, financial
condition and results of operations.
We generate a large portion of our sales from a small number of customers. If we were to lose one or more of
our large customers, operating results could suffer dramatically.
The semiconductor manufacturing industry is highly concentrated, with a relatively small number of large
semiconductor manufacturers and contract assemblers accounting for a substantial portion of the purchases of
semiconductor equipment. Sales to our five largest customers accounted for approximately 84%, 87%, and 80% of our
net sales in fiscal 2021, 2020 and 2019, respectively. During fiscal 2021, Advanced Semiconductor Engineering, Inc.,
ON Semiconductor, Intel and Inphi accounted for approximately 24%, 23%, 20% and 10%, respectively, of the
Company’s net sales. During fiscal 2020, Intel, ON Semiconductor and STMicroelectronics, accounted for
approximately 43%, 16% and 15%, respectively, of the Company’s net sales. During fiscal 2019, Intel, Texas
Instruments, Cypress Semiconductor and STMicroelectronics, accounted for approximately 36%, 14%, 12% and 10%,
respectively, of the Company’s net sales. No other customers accounted for more than 10% of our net sales for any of
these periods.
We expect that sales of our products to a limited number of customers will continue to account for a high percentage
of our net sales for the foreseeable future. In addition, sales to particular customers may fluctuate significantly from
quarter to quarter. The loss of, or reduction or delay of, an order or orders from a significant customer or customers, or
a delay in collecting or failure to collect accounts receivable from a significant customer or customers, could adversely
affect our business, financial condition and operating results.
The semiconductor equipment industry is intensely competitive. In each of the markets we serve, we face
competition from established competitors and potential new entrants, many of which have greater financial,
engineering, manufacturing and marketing resources than us.
Our FOX wafer-level and singulated die/module test and burn in systems face competition from larger systems
manufacturers that have significant technological know-how and manufacturing capability. Our ABTS TDBI systems
have faced and are expected to continue to face increasingly severe competition, especially from several regional, low-
cost manufacturers and from systems manufacturers that offer higher power dissipation per device under test. Some
users of such systems, such as independent test labs, build their own burn-in systems, while others, particularly large IC
manufacturers in Asia, acquire burn-in systems from captive or affiliated suppliers. Our WaferPak products are facing
and are expected to face increasing competition. Several companies have developed or are developing full-wafer and
single-touchdown probe cards.
We expect our competitors to continue to improve the performance of their current products and to introduce new
products with improved price and performance characteristics. New product introductions by our competitors or by
new market entrants could cause a decline in sales or loss of market acceptance of our products. We have observed
12
price competition in the systems market, particularly with respect to its less advanced products. Increased competitive
pressure could also lead to intensified price-based competition, resulting in lower prices which could adversely affect our
operating margins and results. We believe that to remain competitive we must invest significant financial resources in
new product development and expand our customer service and support worldwide. There can be no assurance that we
will be able to compete successfully in the future.
We rely on increasing market acceptance for our FOX system, and we may not be successful in attracting new
customers or maintaining our existing customers.
A principal element of our business strategy is to increase our presence in the test equipment market through system
sales in our FOX wafer-level and singulated die/module test and burn-in product family. Market acceptance of the
FOX system is subject to a number of risks. Before a customer will incorporate the FOX system into a production line,
lengthy qualification and correlation tests must be performed. We anticipate that potential customers may be reluctant
to change their procedures in order to transfer burn-in and test functions to the FOX system. Initial purchases are
expected to be limited to systems used for these qualifications and for engineering studies. Market acceptance of the
FOX system also may be affected by a reluctance of IC manufacturers to rely on relatively small suppliers such as us. As
is common with new complex products incorporating leading-edge technologies, we may encounter reliability, design
and manufacturing issues as we begin volume production and initial installations of FOX systems at customer sites. The
failure of the FOX system to achieve increased market acceptance would have a material adverse effect on our future
operating results, long-term prospects and our stock price.
A substantial portion of our net sales is generated by relatively small volume, high value transactions.
We derive a substantial portion of our net sales from the sale of a relatively small number of systems which typically
range in purchase price from approximately $300,000 to well over $1 million per system. As a result, the loss or deferral
of a limited number of system sales could have a material adverse effect on our net sales and operating results in a
particular period. Most customer purchase orders are subject to cancellation or rescheduling by the customer with
limited penalties, and, therefore, backlog at any particular date is not necessarily indicative of actual sales for any
succeeding period. From time to time, cancellations and rescheduling of customer orders have occurred, and delays by
our suppliers in providing components or subassemblies to us have caused delays in our shipments of our own products.
There can be no assurance that we will not be materially adversely affected by future cancellations or rescheduling by our
customers or other delays in our shipments. For non-standard products where we have not effectively demonstrated the
ability to meet specifications in the customer environment, we defer revenue until we have met such customer
specifications. Any delay in meeting customer specifications could have a material adverse effect on our operating
results. A substantial portion of net sales typically are realized near the end of each quarter. A delay or reduction in
shipments near the end of a particular quarter, due, for example, to unanticipated shipment rescheduling, cancellations
or deferrals by customers, customer credit issues, unexpected manufacturing difficulties experienced by us or delays in
deliveries by suppliers, could cause net sales in a particular quarter to fall significantly.
We may experience increased costs associated with new product introductions.
As is common with new complex products incorporating leading-edge technologies, we have encountered reliability,
design and manufacturing issues as we began volume production and initial installations of certain products at customer
sites. Some of these issues in the past have been related to components and subsystems supplied to us by third parties
who have in some cases limited the ability of us to address such issues promptly. This process in the past required and
in the future is likely to require us to incur un-reimbursed engineering expenses and to experience larger than anticipated
warranty claims which could result in product returns. In the early stages of product development there can be no
assurance that we will discover any reliability, design and manufacturing issues or, that if such issues arise, that they can
be resolved to the customers’ satisfaction or that the resolution of such problems will not cause us to incur significant
development costs or warranty expenses or to lose significant sales opportunities.
The Company is exposed to cybersecurity threats or incidents.
We collect, maintain, and transmit data on information systems. These systems include those owned and maintained
by the Company or by third parties. In addition, we use cloud-based enterprise resource planning, ERP, software to
manage the business integrating all facets of operations, including manufacturing, finance, and sales and marketing. The
data maintained on these systems includes confidential and proprietary information belonging to us, our customers,
suppliers, and others. While the Company devotes significant resources to protect its systems and data from
unauthorized access or misuse, we are exposed to cybersecurity risks. Our systems are subject to computer viruses, data
breach, phishing schemes, and other malicious software programs or attacks. We have experienced cyber threats and
incidents in the past. Although past threats and incidents have not resulted in a material adverse effect, cybersecurity
incidents may result in business disruption, loss of data, or unauthorized access to intellectual property which could
adversely affect our business.
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Our industry is subject to rapid technological change and our ability to remain competitive depends on our
ability to introduce new products in a timely manner.
The semiconductor equipment industry is subject to rapid technological change and new product introductions and
enhancements. Our ability to remain competitive depends in part upon our ability to develop new products and to
introduce them at competitive prices and on a timely and cost-effective basis. Our success in developing new and
enhanced products depends upon a variety of factors, including product selection, timely and efficient completion of
product design, timely and efficient implementation of manufacturing and assembly processes, product performance in
the field and effective sales and marketing. Because new product development commitments must be made well in
advance of sales, new product decisions must anticipate both future demand and the technology that will be available to
supply that demand. Furthermore, introductions of new and complex products typically involve a period in which
design, engineering and reliability issues are identified and addressed by our suppliers and by us. There can be no
assurance that we will be successful in selecting, developing, manufacturing and marketing new products that satisfy
market demand. Any such failure would materially and adversely affect our business, financial condition and results of
operations.
Because of the complexity of our products, significant delays can occur between a product’s introduction and the
commencement of the volume production of such product. We have experienced, from time to time, significant delays
in the introduction of, and technical and manufacturing difficulties with, certain of our products and may experience
delays and technical and manufacturing difficulties in future introductions or volume production of our new products.
Our inability to complete new product development, or to manufacture and ship products in time to meet customer
requirements would materially adversely affect our business, financial condition and results of operations.
A decrease in customer device failure rates may result in a decrease in demand for our products.
Customer tool utilization is driven by many factors including failure rates of customer devices. Improvements in yield
may result in customers decreasing test and burn-in times, or electing to perform sampling rather than 100% burn-in of
their devices. Based upon data obtained from our systems customers may revise internal manufacturing processes to
decrease failure rates. A decrease in customer tool utilization may result in a decrease in demand for our products
impacting our business and results of operations.
Future changes in semiconductor technologies may make our products obsolete.
Future improvements in semiconductor design and manufacturing technology may reduce or eliminate the need for
our products. For example, improvements in semiconductor process technology and improvements in conventional test
systems, such as reduced cost or increased throughput, may significantly reduce or eliminate the market for one or more
of our products. If we are not able to improve our products or develop new products or technologies quickly enough to
maintain a competitive position in our markets, our business may decline.
Operational and Other Risks
Supply chain issues, including a shortage of critical components or contract manufacturing capacity, could
result in a delay in fulfillment of customer orders, or an increase in costs, resulting in an adverse impact on our
business and operating results.
Our sales growth depends on our ability to obtain timely deliveries of parts from our suppliers and contract
manufacturers. There is currently a market shortage of semiconductor and other component supply which has affected,
and could further affect, lead times, the cost of supply, and our ability to meet customer demand for our products. While
we have taken steps to obtain an assurance of supply from our key suppliers, the market shortage of semiconductor
supply may impact our ability to meet customer order fulfillments, or result in a significant increase in costs of our
inventories. Manufacturing issues or capacity problems experienced by our suppliers or contract manufacturers could
impact our ability to secure sufficient supply of critical components. Due to the market shortage of semiconductor
supply, suppliers and contract manufacturers may commit their capacity to others, limiting our supplies or increasing
costs. The failure to obtain timely delivery of supplies, or a significant increase in costs, could result in a material impact
in our business and results from operations.
We sell our products and services worldwide, and our business is subject to risks inherent in conducting
business activities in geographic regions outside of the United States.
Approximately 68%, 39%, and 36% of our net sales for fiscal 2021, 2020 and 2019, respectively, were attributable to
sales to customers for delivery outside of the United States. We operate sales and service in Taiwan, a service
14
organization in Germany and Philippines, as well as direct support through third party agreements in China and South
Korea. We expect that sales of products for delivery outside of the United States will continue to represent a substantial
portion of our future net sales. Our future performance will depend, in significant part, upon our ability to continue to
compete in foreign markets which in turn will depend, in part, upon a continuation of current trade relations between
the United States and foreign countries in which semiconductor manufacturers or assemblers have operations. A change
toward more protectionist trade legislation in either the United States or such foreign countries, such as a change in the
current tariff structures, export compliance or other trade policies, could adversely affect our ability to sell our products
in foreign markets. In addition, we are subject to other risks associated with doing business internationally, including
longer receivable collection periods and greater difficulty in accounts receivable collection, the burden of complying with
a variety of foreign laws, difficulty in staffing and managing global operations, the impact of the COVID-19 pandemic
on the global economy and financial markets, risks of civil disturbance or other events which may limit or disrupt
markets, international exchange restrictions, changing political conditions and monetary policies of foreign governments.
Our net sales for fiscal 2021 were primarily denominated in U.S. Dollars. However, because a substantial portion of
our net sales is from sales of products for delivery outside the United States, an increase in the value of the U.S. Dollar
relative to foreign currencies would increase the cost of our products compared to products sold by local companies in
such markets. In addition, since the price is determined at the time a purchase order is accepted, we are exposed to the
risks of fluctuations in the U.S. Dollar exchange rate during the lengthy period from the date a purchase order is received
until payment is made. This exchange rate risk is partially offset to the extent our foreign operations incur expenses in
the local currency. To date, we have not invested in any instruments designed to hedge currency risks. Our operating
results could be adversely affected by fluctuations in the value of the U.S. Dollar relative to other currencies.
We purchase materials from suppliers worldwide, which subjects the Company to increased risk.
We purchase components, sub-assemblies, and chambers from suppliers outside the United States. Increases in
tariffs, additional taxes, disruptions due to the COVID-19 pandemic or trade barriers may result in an increase in our
manufacturing costs. A decrease in the value of the U.S. Dollar relative to foreign currencies would increase the cost of
our materials. Should the Company increase its sales prices to recover the increase in costs, this could result in a decrease
in the competitiveness of our products. In addition, we are subject to other risks associated with purchasing materials
from suppliers worldwide. Government authorities may also implement protectionist policies or impose limitations on
the transfer of intellectual property. This may limit our ability to obtain products from certain geographic regions and
require us to identify and qualify new suppliers. The process of qualifying suppliers could be lengthy, and no assurance
can be given that any additional sources would be available to us on a timely basis. Changes in trade relations, currency
fluctuations, or protectionist policies could have a material adverse effect on our business, financial condition or results
of operations.
Our dependence on subcontractors and sole source suppliers may prevent us from delivering our products on
a timely basis and expose us to intellectual property infringement.
We rely on subcontractors to manufacture many of the components or subassemblies used in our products. Our
FOX and ABTS systems, WaferPak contactors, DiePak carriers, WaferPak Aligners, and DiePak Loaders contain several
components, including environmental chambers, power supplies, high-density interconnects, wafer contactors, module
contactors, signal distribution substrates, and certain ICs that are currently supplied by only one or a limited number of
suppliers. Our reliance on subcontractors and single source suppliers involves a number of significant risks, including
the loss of control over the manufacturing process, the potential absence of adequate capacity and reduced control over
delivery schedules, manufacturing yields, quality and costs. In the event that any significant subcontractor or single
source supplier is unable or unwilling to continue to manufacture subassemblies, components or parts in required
volumes, we would have to identify and qualify acceptable replacements. The process of qualifying subcontractors and
suppliers could be lengthy, and no assurance can be given that any additional sources would be available to us on a
timely basis. Any delay, interruption or termination of a supplier relationship could adversely affect our ability to deliver
products, which would harm our operating results.
Our suppliers manufacture components, tooling, and provide engineering services. During this process, our suppliers
are allowed access to our intellectual property. While we maintain patents to protect from intellectual property
infringement, there can be no assurance that technological information gained in the manufacture of our products will
not be used to develop a new product, improve processes or techniques which compete against our products. Litigation
may be necessary to enforce or determine the validity and scope of our proprietary rights, and there can be no assurance
that our intellectual property rights, if challenged, will be upheld as valid.
15
Periodic economic and semiconductor industry downturns could negatively affect our business, results of
operations and financial condition.
Periodic global economic and semiconductor industry downturns have negatively affected and could continue to
negatively affect our business, results of operations, and financial condition. Financial turmoil in the banking system and
financial markets has resulted, and may result in the future, in a tightening of the credit markets, disruption in the
financial markets and global economy downturn. These events may contribute to significant slowdowns in the industry
in which we operate. Difficulties in obtaining capital and deteriorating market conditions can pose the risk that some of
our customers may not be able to obtain necessary financing on reasonable terms, which could result in lower sales.
Customers with liquidity issues may lead to additional bad debt expense.
Turmoil in the international financial markets has resulted, and may result in the future, in dramatic currency
devaluations, stock market declines, restriction of available credit and general financial weakness. In addition, flash
memory and other similar device prices have historically declined and will likely do so again in the future. These
developments may affect us in several ways. The market for semiconductors and semiconductor capital equipment has
historically been cyclical, and we expect this to continue in the future. The uncertainty of the semiconductor market may
cause some manufacturers in the future to further delay capital spending plans. Economic conditions may also affect the
ability of our customers to meet their payment obligations, resulting in cancellations or deferrals of existing orders and
limiting additional orders. In addition, some governments have subsidized portions of fabrication facility construction,
and financial turmoil may reduce these governments’ willingness to continue such subsidies. Such developments could
have a material adverse effect on our business, financial condition and results of operations.
The current economic conditions and uncertainty about future economic conditions make it challenging for us to
forecast our operating results, make business decisions, and identify the risks that may affect our business, financial
condition and results of operations. If such conditions recur, and we are not able to timely and appropriately adapt to
changes resulting from the difficult macroeconomic environment, our business, financial condition or results of
operations may be materially and adversely affected.
If we are not able to reduce our operating expenses sufficiently during periods of weak revenue, or if we utilize
significant amounts of cash to support operating losses, we may erode our cash resources and may not have
sufficient cash to operate our business.
In recent years, in the face of a downturn in our business and a decline in our net sales, we implemented a variety of
cost controls and restructured our operations with the goal of reducing our operating costs to position ourselves to more
effectively meet the needs of the then weak market for test and burn-in equipment. In fiscal 2019 and 2020, we
implemented restructuring plans in order to streamline our operations and better align our structure with our objectives
going forward. While we took significant steps to minimize our expense levels and to increase the likelihood that we
would have sufficient cash to support operations during the downturn, from fiscal 2009 through fiscal 2020, with the
exception of fiscal 2014 and 2018, we experienced operating losses. We anticipate that our 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 our working capital and capital equipment requirements. Depending on our rate of growth and profitability, and
our ability to obtain significant orders with down payments, we may require additional equity or debt financing to meet
our working capital requirements or capital equipment needs. There can be no assurance that additional financing will
be available when required, or if available, that such financing can be obtained on terms satisfactory to us.
We may be subject to litigation relating to intellectual property infringement which would be time-consuming,
expensive and a distraction from our business.
If we do not adequately protect our intellectual property, competitors may be able to use our proprietary information
to erode our competitive advantage, which could harm our business and operating results. Litigation may be necessary
to enforce or determine the validity and scope of our proprietary rights, and there can be no assurance that our
intellectual property rights, if challenged, will be upheld as valid. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our operating results, regardless of the outcome of the
litigation. In addition, there can be no assurance that any of the patents issued to us will not be challenged, invalidated
or circumvented or that the rights granted thereunder will provide competitive advantages to us.
There are no pending claims against us regarding infringement of any patents or other intellectual property rights of
others. However, in the future we may receive communications from third parties asserting intellectual property claims
against us. Such claims could include assertions that our products infringe, or may infringe, the proprietary rights of
third parties, requests for indemnification against such infringement or suggestions that we may be interested in
acquiring a license from such third parties. There can be no assurance that any such claim will not result in litigation,
which could involve significant expense to us, and, if we are required or deem it appropriate to obtain a license relating
16
to one or more products or technologies, there can be no assurance that we would be able to do so on commercially
reasonable terms, or at all.
While we believe we have complied with all applicable environmental laws, our failure to do so could adversely
affect our business as a result of having to pay substantial amounts in damages or fees.
Federal, state and local regulations impose various controls on the use, storage, discharge, handling, emission,
generation, manufacture and disposal of toxic and other hazardous substances used in our operations. We believe that
our activities conform in all material respects to current environmental and land use regulations applicable to our
operations and our current facilities, and that we have obtained environmental permits necessary to conduct our
business. Nevertheless, failure to comply with current or future regulations could result in substantial fines, suspension
of production, alteration of our manufacturing processes or cessation of operations. Such regulations could require us
to acquire expensive remediation equipment or to incur substantial expenses to comply with environmental regulations.
Any failure to control the use, disposal or storage of or adequately restrict the discharge of, hazardous or toxic
substances could subject us to significant liabilities.
Risks Related to Ownership of our Common Stock
Our stock price may fluctuate.
The price of our common stock has fluctuated in the past and may fluctuate significantly in the future. We believe
that factors such as announcements of developments related to our business, fluctuations in our operating results,
general conditions in the semiconductor and semiconductor equipment industries as well as the worldwide economy,
announcement of technological innovations, new systems or product enhancements by us or our competitors,
fluctuations in the level of cooperative development funding, acquisitions, changes in governmental regulations,
developments in patents or other intellectual property rights and changes in our relationships with customers and
suppliers could cause the price of our common stock to fluctuate substantially. In addition, in recent years the stock
market in general, and the market for small capitalization and high technology stocks in particular, have experienced
extreme price fluctuations which have often been unrelated to the operating performance of the affected companies.
Such fluctuations could adversely affect the market price of our common stock.
Risks Related to our Legal/Organizational Structure
We depend on our key personnel and our success depends on our ability to attract and retain talented
employees.
Our success depends to a significant extent upon the continued service of Gayn Erickson, our President and Chief
Executive Officer, as well as other executive officers and key employees. We do not maintain key person life insurance
for our benefit on any of our personnel, and none of our employees are subject to a non-competition agreement with us.
The loss of the services of any of our executive officers or a group of key employees could have a material adverse effect
on our business, financial condition and operating results. Our future success will depend in significant part upon our
ability to attract and retain highly skilled technical, management, sales and marketing personnel. There are a limited
number of personnel with the requisite skills to serve in these positions, and it has become increasingly difficult for us to
hire such personnel. Competition for such personnel in the semiconductor equipment industry is intense, and there can
be no assurance that we will be successful in attracting or retaining such personnel. Changes in management could
disrupt our operations and adversely affect our operating results.
If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of
our financial reporting may be adversely affected.
We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. The provisions of the act require,
among other things, that we maintain effective internal control over financial reporting and disclosure controls and
procedures. Preparing our financial statements involves a number of complex processes, many of which are done
manually and are dependent upon individual data input or review. These processes include, but are not limited to,
calculating revenue, deferred revenue and inventory costs. While we continue to automate our processes and enhance
our review and put in place controls to reduce the likelihood for errors, we expect that for the foreseeable future, many
of our processes will remain manually intensive and thus subject to human error.
Item 1B. Unresolved Staff Comments
None.
17
Item 2. Properties
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 February 2018 and expires in July 2023. The Company
maintained a facility in Japan located in a 418 square foot office in Tokyo under a lease which expired in June 2020. The
Company also maintained a 1,585 square foot warehouse in Yamanashi under a lease which expired in June 2020. The
Company substantially closed its subsidiary Aehr Test Systems Japan K.K. in March 2020, completing the liquidation of
the legal entity in July 2020, see Note 17, “Restructuring,” of the Notes to Consolidated Financial Statements. The
Company leases a 492 square foot sales and support office in Utting, Germany. The lease, which began February 1,
1992 and expires on January 31, 2023, contains an automatic twelve months renewal, at rates to be determined, if no
notice is given prior to six months from expiry. On November 18, 2020, the Company established a wholly owned new
subsidiary, Aehr Test Systems Philippines Inc., which has been in full operation since March 2021. The Company leases
a facility in Philippines located in a 2,713 square foot building in Clark Freeport Zone, Pampanga. The lease, which
began January 1, 2021 and expires on December 31, 2025, contains an option to renew for another three years at rates
stipulated in the contract, notice for renewal is given six months from expiry. The Company periodically evaluates its
global operations and facilities to bring its capacity in line with demand and to provide cost efficient services for its
customers. In prior years, through this process, the Company has moved from certain facilities that exceeded the
capacity required to satisfy its needs. The Company believes that its existing facilities are adequate to meet its current
and reasonably foreseeable requirements. The Company regularly evaluates its expected future facilities requirements and
believes that alternate facilities would be available if needed.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not Applicable
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
The Company’s common stock is publicly traded on the NASDAQ Capital Market under the symbol “AEHR”. The
following table sets forth, for the periods indicated, the high and low sale prices for the common stock on such market.
These quotations represent prices between dealers and do not include retail markups, markdowns or commissions and
may not necessarily represent actual transactions.
Fiscal 2021:
First quarter ended August 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter ended November 30, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter ended February 28, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter ended May 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020:
First quarter ended August 31, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter ended November 30, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter ended February 29, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter ended May 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$2.49
1.90
3.60
3.17
$1.87
2.33
2.78
2.24
$1.63
1.15
1.56
1.94
$1.27
1.28
1.75
1.10
At August 3, 2021, the Company had 120 holders of record of its common stock. A substantially greater number of
holders of the Company’s common stock are “street name” or beneficial holders whose shares are held by banks,
brokers and other financial institutions.
The Company has not paid cash dividends on its common stock or other securities. The Company currently
anticipates that it will retain its future earnings, if any, for use in the expansion and operation of its business and does
not anticipate paying any cash dividends on its common stock in the foreseeable future.
The Company did not repurchase any of its common stock during the fiscal year ended May 31, 2021.
18
PERFORMANCE MEASUREMENT COMPARISON
The following graph shows a comparison of total shareholder return for holders of the Company's common stock for
the last five fiscal years ended May 31, 2021, compared with the NASDAQ Composite Index and the Philadelphia
Semiconductor Index. The graph assumes that $100 was invested in the Company's common stock, in the NASDAQ
Composite Index and the Philadelphia Semiconductor Index on May 31, 2016, and that all dividends were reinvested.
The Company believes that while total shareholder return can be an important indicator of corporate performance, the
stock prices of semiconductor equipment companies like us are subject to a number of market-related factors other than
company performance, such as competitive announcements, mergers and acquisitions in the industry, the general state
of the economy and the performance of other semiconductor equipment company stocks. Stock prices and shareholder
returns over the indicated period should not be considered indicative of future stock prices or shareholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Aehr Test Systems, the NASDAQ Composite Index
and the PHLX Semiconductor Index
$600
$500
$400
$300
$200
$100
$0
5/16
5/17
5/18
5/19
5/20
5/21
Aehr Test Systems
NASDAQ Composite
PHLX Semiconductor
*$100 invested on 5/31/16 in stock or index, including reinvestment of dividends.
Fiscal year ending May 31.
Item 6. Selected Consolidated Financial Data
The selected consolidated financial data set forth below should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements
and related notes included elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data in
this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the
consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.
We derived the statements of operations data for the fiscal years ended May 31, 2021, 2020 and 2019 and the balance
sheet data as of May 31, 2021 and 2020 from our audited consolidated financial statements and related notes, which are
included elsewhere in this Annual Report on Form 10-K. We derived the statements of operations data for the fiscal
years ended May 31, 2018 and 2017 and the balance sheet data as of May 31, 2019, 2018 and 2017 from our audited
consolidated financial statements and related notes which are not included in this Annual Report on Form 10-K. We
have not declared or distributed any cash dividends.
19
CONSOLIDATED STATEMENTS OF
OPERATIONS:
2021
Fiscal Year Ended May 31,
2020
2018
2019
(In thousands, except per share data)
2017
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,600
$22,291
$21,056
$29,555
$18,898
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . .
10,568
13,920
13,454
17,169
12,118
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . .
6,032
8,371
7,602
12,386
6,780
Operating expenses:
Selling, general and administrative. . . . . . .
Research and development. . . . . . . . . . . . .
Restructuring. . . . . . . . . . . . . . . . . . . . . . .
6,562
3,652
--
7,530
3,386
220
7,724
4,153
725
7,290
4,181
--
7,052
4,657
--
Total operating expenses . . . . . . . . . . . .
10,214
11,136
12,602
11,471
11,709
(Loss) income from operations. . . . . . . . . .
(4,182)
(2,765)
(5,000)
915
(4,929)
Interest (expense) income, net. . . . . . . . . . .
Net gain from dissolution of Aehr Test
Systems Japan . . . . . . . . . . . . . . . . . . . . .
Other (expense) income, net . . . . . . . . . . . .
(Loss) income before income tax
benefit (expense) . . . . . . . . . . . . . . . . . . .
Income tax benefit (expense). . . . . . . . . . . .
Net (loss) income. . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to the
noncontrolling interest . . . . . . . . . . . .
Net (loss) income attributable to Aehr
Test Systems common shareholders. . . .
Net (loss) income per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in per share calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED BALANCE SHEETS:
(46)
10
(252)
(399)
(678)
2,186
(162)
--
(11)
--
44
--
(61)
--
(21)
(2,204)
177
(2,027)
(2,766)
(5,208)
455
(5,628)
(36)
(2,802)
(27)
(5,235)
73
528
(25)
(5,653)
--
--
--
--
--
$(2,027)
$(2,802)
$(5,235)
$ 528
$(5,653)
$ (0.09)
$ (0.09)
$(0.12)
$(0.12)
$(0.23)
$(0.23)
23,457
23,457
22,882
22,882
22,387
22,387
$0.02
$0.02
21,732
22,782
$(0.35)
$(0.35)
16,267
16,267
2021
2020
May 31,
2019
2018
2017
Cash and cash equivalents. . . . . . . . . . . . . . .
Working capital. . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,582
10,123
21,665
$ 5,433
13,786
20,574
$ 5,428
14,522
21,307
$16,848
18,308
30,955
$17,803
21,494
30,892
Long-term obligations, less current portion .
Total shareholders' equity. . . . . . . . . . . . . . .
1,155
11,449
2,653
14,056
342
15,453
522
19,285
6,214
16,794
20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations should be read in
conjunction with our “Selected Consolidated Financial Data” and our consolidated financial statements and related
notes included elsewhere in this Annual Report on Form 10-K.
COVID-19 PANDEMIC RESPONSE
The Company has been impacted by the outbreak of the novel coronavirus, known as COVID-19, which has spread
throughout the world. Our business’ top priority during the COVID-19 pandemic is protecting the health and safety of
our employees and their families, customers and community. We introduced policies and procedures to increase
workplace flexibility such as working remotely where possible to reduce the number of people who are on campus each
day. As a global supplier of Critical Infrastructure Sectors, as defined by the Cybersecurity and Infrastructure Security
Agency, we have supported and continue to support customers during the pandemic. In the interest of public health, all
onsite operations generally use the minimum number of people to safely execute tasks and follow enhanced safety and
health protocols including screenings, social distancing, and use of personal protective equipment.
Due to the impact of the COVID-19 pandemic on customers and customers’ customers, we experienced a significant
drop in customer orders and revenues in the fiscal year ended May 31, 2021 and the last quarter of fiscal year ended May
31, 2020. In response, we have implemented cost reduction initiatives to mitigate operating losses, including mandatory
vacation days, shutdown days, and executive staff pay reductions. On April 23, 2020, we received proceeds of
$1,679,000 from a Paycheck Protection Program Loan (the “PPP Loan”), under the CARES Act which we used to retain
employees, maintained payroll and made lease and utility payments. The entire PPP Loan balance and interest were
forgiven on June 4, 2021, see Note 18, “Subsequent Event” of the Notes to Consolidated Financial Statements.
We will continue to monitor the situation. As of the date of this report, we cannot predict with certainty the potential
effects the COVID-19 pandemic may continue to have on our business and our operating results. While the overall
environment remains uncertain, we continue to aggressively invest in priority areas with the objective of driving
profitable growth over the long term.
OVERVIEW
We were founded in 1977 to develop and manufacture burn-in and test equipment for the semiconductor industry.
Since our inception, we have installed over 2,500 systems at semiconductor manufacturers, semiconductor contract
assemblers and burn-in and test service companies worldwide. Our principal products currently are the FOX-XP, FOX-
NP, and FOX-CP wafer contact and singulated die/module parallel test and burn-in systems, WaferPak Aligner,
WaferPak contactors, DiePak Loader, DiePak carriers and test fixtures.
Our net sales consist primarily of sales of systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors,
DiePak carriers, test fixtures, upgrades and spare parts, revenues from service contracts, and engineering development
charges. Our selling arrangements may include contractual customer acceptance provisions, which are mostly deemed
perfunctory or inconsequential, and installation of the product occurs after shipment and transfer of title.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to customer
programs and incentives, product returns, bad debts, inventories, investments, income taxes, financing operations,
warranty obligations, and long-term service contracts, among others. Our estimates are derived from historical
experience and on various other assumptions that are believed to be reasonable under the circumstances. Those results
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the
preparation of our consolidated financial statements.
21
REVENUE RECOGNITION
The Company recognizes revenue when promised goods or services are transferred to customers in an amount that
reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by
following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the
contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the
Company satisfies a performance obligation, as further described below.
Performance obligations include sales of systems, contactors, spare parts, and services, as well as installation and
training services included in customer contracts.
A contract’s transaction price is allocated to each distinct performance obligation. In determining the transaction
price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to
which the Company expects to be entitled. The Company generally does not grant return privileges, except for defective
products during the warranty period.
For contracts that contain multiple performance obligations, the Company allocates the transaction price to the
performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple
factors including, but not limited to, historical discounting trends for products and services and pricing practices in
different geographies.
Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery.
Revenue from services is recognized over time as services are completed or ratably over the contractual period of
generally one year or less.
The Company has elected the practical expedient to not assess whether a contract has a significant financing
component as the Company’s standard payment terms are less than one year.
We sell our products primarily through a direct sales force. In certain international markets, we sell our products
through independent distributors. We consider revenue to be earned when all of the following criteria are met:
• We have a contract with a customer that creates enforceable rights and obligations,
• Promised performance obligations are identified,
• The transaction price, or the amount we expect to receive, is determinable and
• We have satisfied the performance obligations to the customer.
Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to
provide additional services.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
We maintain an allowance for doubtful accounts to reserve for potentially uncollectible trade receivables. We also
review our trade receivables by aging category to identify specific customers with known disputes or collection issues.
We exercise judgment when determining the adequacy of these reserves as we evaluate 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.
WARRANTY OBLIGATIONS
We provide and record the estimated cost of product warranties at the time revenues are recognized on products
shipped. While we engage in extensive product quality programs and processes, including actively monitoring and
evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material
usage and service delivery costs incurred in correcting a product failure. Our estimate of warranty reserve is based on
management’s assessment of future warranty obligations and on historical warranty obligations. Should actual product
failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability
would be required.
INVENTORY OBSOLESCENCE
In each of the last three fiscal years, we wrote down our inventory for estimated obsolescence or unmarketable
inventory by an amount equal to the difference between the cost of inventory and the estimated market value based
22
upon assumptions about future demand and market conditions, see Note 6, “Balance Sheet Detail.” If future market
conditions are less favorable than those projected by management, additional inventory write-downs may be required.
INCOME TAXES
Income taxes are accounted for under the asset-and-liability method as required by FASB ASC Topic 740,
Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period corresponding to the enactment date. Under ASC 740, a valuation
allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be
realized through generating sufficient future taxable income.
FASB ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes, (“ASC 740-10”) defines the
criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in
financial statements prepared in conformity with GAAP. The Company may recognize the tax benefit from an
uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the
taxing authorities, based solely on the technical merits of the respective tax position. The tax benefits recognized
in the financial statements from such a tax position should be measured based on the largest benefit having a
greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. In accordance with
the disclosure requirements of ASC 740-10, the Company’s policy on income statement classification of interest
and penalties related to income tax obligations is to include such items as part of income taxes.
STOCK-BASED COMPENSATION EXPENSE
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 cost 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. Our
employee stock options have characteristics significantly different from those of publicly traded options. For RSUs,
stock-based compensation cost is based on the fair value of our common stock at the grant date, and is recognized as
expense over the employee’s requisite service period. All of our stock-based compensation is accounted for as an equity
instrument.
The fair value of each option grant and the right to purchase shares under our ESPP are estimated on the date of
grant using the Black-Scholes option valuation model with assumptions concerning expected term, stock price volatility,
expected dividend yield, risk-free interest rate and the expected life of the award. See Note 11 to our consolidated
financial statements for detailed information relating to stock-based compensation and the stock option plan and the
ESPP.
RESTRUCTURING
We record a charge for restructuring when management commits to a restructuring plan, the restructuring plan
identifies all significant actions, the period of time to complete the restructuring plan indicates that significant changes to
the plan are not likely, and individuals who are impacted have been notified of the pending involuntary termination.
Restructuring charges include severance payments, legal fees, and write-off of assets. For employees that are not
required to render services beyond a minimum retention period, the severance expense is recognized at the
communication date based upon its fair value. For employees who are required to render service until they are
terminated in order to receive the severance, the severance costs are measured initially at the communication date based
upon its fair value, and recognized ratably over the future service period.
There were no restructuring charges during fiscal year ended May 31, 2021. In the fiscal year ended May 31, 2020, we
recognized $220,000 in restructuring charges related to the dissolution of Aehr Test Systems Japan K.K (“ATS-Japan”),
a majority owned subsidiary. The restructuring charges included severance payments for individuals impacted in this
reduction, legal fees associated with the dissolution process, and write-off of assets. Restructuring charges for the fiscal
year ended May 31, 2019 were related to a restructuring plan implemented in order to streamline our operations and
better align our structure with our objectives going forward. We recognized $725,000 of employee termination expenses
for the fiscal year ended May 31, 2019.
23
RESULTS OF OPERATIONS
The following table sets forth statements of operations data as a percentage of net sales for the periods indicated.
2021
Year Ended May 31,
2020
2019
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0%
63.7
36.3
100.0%
62.4
37.6
100.0%
63.9
36.1
Operating expenses:
Selling, general and administrative . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39.5
22.0
--
33.8
15.2
1.0
36.7
19.7
3.4
Total operating expenses. . . . . . . . . . . . . . . . . . . . . .
61.5
50.0
59.8
Loss from operations. . . . . . . . . . . . . . . . . . . . . . . . . .
(25.2)
(12.4)
(23.7)
Interest (expense) income, net . . . . . . . . . . . . . . . . . . . .
Net gain from dissolution of Aehr Test Systems Japan. .
Other (expense) income, net. . . . . . . . . . . . . . . . . . . . . .
(0.3)
13.2
(1.0)
--
--
--
(1.2)
--
0.2
Loss before income tax benefit (expense) . . . . . . . . . .
(13.3)
(12.4)
(24.7)
Income tax benefit (expense). . . . . . . . . . . . . . . . . . . . . .
1.1
(0.2)
(0.2)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12.2)
(12.6)
(24.9)
Less: Net income attributable
to the noncontrolling interest. . . . . . . . . . . . . . . . . . .
Net loss attributable to Aehr Test Systems
common shareholders. . . . . . . . . . . . . . . . . . . . . . . . . .
--
--
--
(12.2)%
(12.6)%
(24.9)%
FISCAL YEAR ENDED MAY 31, 2021 COMPARED TO FISCAL YEAR ENDED MAY 31, 2020
NET SALES. Net sales decreased to $16.6 million for the fiscal year ended May 31, 2021 from $22.3 million for the
fiscal year ended May 31, 2020, a decrease of 25.5%. The decrease in net sales for the fiscal year ended May 31, 2021
was impacted by the continued challenging global business environment created by the COVID-19 pandemic which
resulted in the decrease in net sales of both our wafer-level products and Test During Burn-in (TDBI) products. Net
sales of our wafer-level products for fiscal 2021 were $15.0 million, and decreased approximately $4.8 million from fiscal
2020. Net sales of our TDBI products for fiscal 2021 were $1.6 million, and decreased approximately $928,000 from
fiscal 2020.
GROSS PROFIT. Gross profit decreased to $6.0 million for the fiscal year ended May 31, 2021 from $8.4 million for
the fiscal year ended May 31, 2020, a decrease of 27.9%. Gross profit margin decreased to 36.3% for the fiscal year
ended May 31, 2021 from 37.6% for the fiscal year ended May 31, 2020. The decrease in gross profit margin was
primarily due to manufacturing inefficiencies due to a lower level of net sales and increased warranty provision related to
a voluntary replacement of a component to improve long term reliability of our systems, partially offset by a lower level
of inventory reserves recorded.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses were $6.6 million for the fiscal year ended
May 31, 2021, compared with $7.5 million for the fiscal year ended May 31, 2020, a decrease of 12.9%. The decrease in
SG&A expenses was primarily due to decreases in employment related expenses as a result of cost reduction initiatives
implemented in fiscal 2021.
RESEARCH AND DEVELOPMENT. R&D expenses were $3.7 million for the fiscal year ended May 31, 2021,
compared with $3.4 million for the fiscal year ended May 31, 2020, an increase of 7.9%. The increase in R&D expenses
was primarily due to increases in project expenses of $169,000 and employment related expenses of $104,000.
24
RESTRUCTURING. There were no restructuring charges for the fiscal year ended May 31, 2021. Restructuring
charges for the fiscal year ended May 31, 2020 were related to the dissolution of Aehr Test Systems Japan K.K (ATS-
Japan), a majority owned subsidiary. In connection with the dissolution plan, the Company recognized approximately
$220,000 related to severance payments for individuals impacted in this reduction and legal fees associated with the
dissolution process in the fourth quarter of fiscal 2020.
INTEREST (EXPENSE) INCOME, NET. Interest expense, net was $46,000 for the fiscal year ended May 31, 2021
compared with interest income, net which was $10,000 for the fiscal year ended May 31, 2020. The interest expense for
the fiscal year ended May 31, 2021 was from the PPP Loan that we obtained on April 23, 2020.
NET GAIN FROM DISSOLUTION OF AEHR TEST SYSTEMS JAPAN. Net gain from dissolution of Aehr Test
Systems Japan was $2.2 million for the fiscal year ended May 31, 2021, due to the release of the cumulative translation
adjustment in connection with the complete liquidation of Aehr Test Systems Japan subsidiary in July 2020.
OTHER (EXPENSE) INCOME, NET. Other expense, net was $162,000 and $11,000 for the fiscal year ended May
31, 2021 and 2020, respectively. The change in other expense, net was primarily due to losses realized in connection
with the fluctuation in the value of the dollar compared to foreign currencies during the referenced periods.
INCOME TAX BENEFIT (EXPENSE). Income tax benefit for the fiscal year ended May 31, 2021 was $177,000
compared with income tax expense of $36,000 for the fiscal year ended May 31, 2020. During the fiscal year ended May
31, 2021, the currency translation adjustment balance was released and the residual income tax effect of $215,000 was
recorded pursuant to the inter-period allocation rules in connection with the complete liquidation of Aehr Test Systems
Japan subsidiary in July 2020.
FISCAL YEAR ENDED MAY 31, 2020 COMPARED TO FISCAL YEAR ENDED MAY 31, 2019
NET SALES. Net sales increased to $22.3 million for the fiscal year ended May 31, 2020 from $21.1 million for the
fiscal year ended May 31, 2019, an increase of 5.9%. The increase in net sales in fiscal 2020 resulted primarily from the
increase in net sales of our wafer-level products, partially offset by the decrease in net sales of our TDBI products. Net
sales of our wafer-level products for fiscal 2020 were $19.8 million, and increased approximately $5.2 million from fiscal
2019. Net sales of our TDBI products for fiscal 2020 were $2.5 million, and decreased approximately $3.9 million from
fiscal 2019.
GROSS PROFIT. Gross profit increased to $8.4 million for the fiscal year ended May 31, 2020 from $7.6 million for
the fiscal year ended May 31, 2019, an increase of 10.1%. Gross profit margin increased to 37.6% for the fiscal year
ended May 31, 2020 from 36.1% for the fiscal year ended May 31, 2019. The increase in gross profit margin was
primarily the result of change in product mix in net sales which wafer-level products revenues, contributing higher
margins, accounted for 89% of revenues in fiscal year ended May 31, 2020 compared to 69% of revenues in fiscal year
ended May 31, 2019. The increase was partially offset by the impact of excess and obsolete charges mainly related to
ABTS products reaching the end of product life.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses were $7.5 million for the fiscal year ended
May 31, 2020, compared with $7.7 million for the fiscal year ended May 31, 2019, a decrease of 2.5%. The decrease in
SG&A expenses was primarily due to decreases in employment related expenses as a result of cost reduction initiatives
implemented in fiscal 2019.
RESEARCH AND DEVELOPMENT. R&D expenses were $3.4 million for the fiscal year ended May 31, 2020,
compared with $4.2 million for the fiscal year ended May 31, 2019, a decrease of 18.5%. The decrease in R&D expenses
was primarily due to decreases in employment related expenses of $500,000 and project expenses of $267,000.
RESTRUCTURING. Restructuring charges for the fiscal year ended May 31, 2020 were related to the dissolution of
Aehr Test Systems Japan K.K (ATS-Japan), a majority owned subsidiary. In connection with the dissolution plan, the
Company recognized approximately $220,000 related to severance payments for individuals impacted in this reduction
and legal fees associated with the dissolution process in the fourth quarter of fiscal 2020. Restructuring charges for the
fiscal year ended May 31, 2019 were related to a restructuring plan implemented in February 2019 in order to streamline
our operations and better align our structure with our objectives going forward. We recognized $725,000 of employee
termination expenses for the fiscal year ended May 31, 2019.
INTEREST INCOME (EXPENSE), NET. Interest income, net was $10,000 for the fiscal year ended May 31, 2020
compared with interest expense, net of $252,000 for the fiscal year ended May 31, 2019. The decrease in interest
expense, net was primarily due to the repayment of convertible notes which matured on April 10, 2019, partially offset
by a decrease in interest income due to a decrease in our investment portfolio.
25
OTHER (EXPENSE) INCOME, NET. Other expense, net was $11,000 for the fiscal year ended May 31, 2020
compared with other income, net of $44,000 for the fiscal year ended May 31, 2019. The change in other (expense)
income, net was due primarily to losses or gains realized in connection with the fluctuation in the value of the dollar
compared to foreign currencies during the referenced periods.
INCOME TAX (EXPENSE) BENEFIT. Income tax expense was $36,000 and $27,000 for the fiscal year ended
May 31, 2020 and 2019, respectively.
LIQUIDITY AND CAPITAL RESOURCES
We consider cash and cash equivalents as liquid and available for use. As of May 31, 2021 and 2020, respectively, we
had $4.6 million and $5.4 million in cash and cash equivalents.
Net cash used in operating activities was $2.7 million and $2.0 million for the fiscal years ended May 31, 2021 and
2020, respectively. For the fiscal year ended May 31, 2021, net cash used in operating activities was primarily the result
of the net loss of $2.0 million, as adjusted to exclude the effect of net gain from dissolution of Aehr Test Systems Japan
of $2.4 million, including an income tax benefit of $215,000, a non-cash charge for stock-based compensation expense
of $1.1 million and depreciation and amortization of $310,000. Net cash used in operations was also impacted by
increases in accounts receivable and inventories of $1.4 million and $972,000, respectively, partially offset by increases in
accounts payable and accrued expenses of $1.9 million and $732,000, respectively. The increase in accounts receivable
was primarily due to higher shipment activities toward the end of fiscal year ended May 31, 2021. The increase in
inventory was to support expected future shipments for customer orders. The increase in accounts payable was
primarily due to inventory purchases to support future shipments. The increase in accrued expenses was primarily due to
increases in warranty provision and accrued employment related expenses. For the fiscal year ended May 31, 2020, net
cash used in operating activities was primarily the result of the net loss of $2.8 million, as adjusted to exclude the effect
of non-cash charges of stock-based compensation expense of $910,000 and depreciation and amortization of $384,000.
Net cash used in operations was also impacted by decreases in customer deposits and deferred revenue of $1.5 million
and in accounts payable of $1.0 million, partially offset by decreases in inventories and accounts receivable of $1.2
million each. The decrease in customer deposits and deferred revenue was primarily due to the decrease in backlog of
customer orders with down payments. The decrease in accounts payable was primarily due to a reduction in inventory
purchases. The decrease in inventories was primarily due to the increase in inventory reserves related to older products.
The decrease in accounts receivable was primarily due to lower shipment activities toward the end of the fiscal year
ended May 31, 2020.
Net cash used in investing activities was $227,000 and $163,000 for the fiscal years ended May 31, 2021 and 2020,
respectively. Net cash used in investing activities for the fiscal years ended May 31, 2021 and 2020 was due to the
purchases of property and equipment.
Net cash provided by financing activities was $2.0 million and $2.2 million for the fiscal year ended May 31, 2021 and
2020, respectively. Net cash provided by financing activities during the fiscal year ended May 31, 2021 was due to $1.4
million borrowing from our line of credit and $560,000 in proceeds from the issuance of common stock under employee
plans. Net cash provided by financing activities during the fiscal year ended May 31, 2020 was due to the proceeds of
$1.7 million from the PPP Loan, and the net proceeds from issuance of common stock under employee plans of
$493,000.
The effect of fluctuation in exchange rates increased cash by $117,000 and $20,000 for the fiscal year ended May 31,
2021 and 2020, respectively. The changes were due to the fluctuation in the value of the dollar compared to foreign
currencies.
As of May 31, 2021 and 2020, we had working capital of $10.1 million and $13.8 million, respectively.
For the fiscal year ended May 31, 2019, net cash used in operating activities was primarily the result of the net loss of
$5.2 million, as adjusted to exclude the effect of non-cash charges of stock-based compensation expense of $905,000
and depreciation and amortization of $431,000, an increase in accounts receivable of $2.0 million, and a decrease in
customer deposits and deferred revenue of $355,000, partially offset by an increase in accrued expenses of $402,000.
The increase in accounts receivable was primarily due to large shipments toward the end of fiscal 2019. The decrease in
customer deposits and deferred revenue was primarily due to the decrease in backlog of customer orders with down
payments. The increase in accrued expenses was primarily due to severance expenses accrued as a result of our
restructuring plan implemented in February 2019.
Net cash used in investing activities was $173,000 for the fiscal year ended May 31, 2019 was due to the purchase of
property and equipment.
26
Net cash used in financing activities of $5.6 million for the fiscal year ended May 31, 2019 was primarily due to the
repayment of certain convertible notes in the aggregate amount of $6.1 million on the maturity date of April 10, 2019,
partially offset by proceeds from issuance of common stock under employee plans of $559,000.
The effect of fluctuation in exchange rates decreased cash by $59,000 for the fiscal year ended May 31, 2019 due to
the fluctuation in the value of the dollar compared to foreign currencies.
As of May 31, 2019, we had working capital of $14.5 million.
We lease our manufacturing and office space under operating leases. We entered into a non-cancelable operating
lease agreement for our United States manufacturing and office facilities, which was renewed in February 2018 and
expires in July 2023. Under that lease agreement, we are responsible for payments of utilities, taxes and insurance.
From time to time, we evaluate potential acquisitions of businesses, products or technologies that complement our
business. If consummated, any such transactions may use a portion of our working capital or require the issuance of
equity. We have no present understandings, commitments or agreements with respect to any material acquisitions.
Since inception, we have incurred substantial cumulative losses and negative cash flows from operations. In response,
we took steps to minimize expense levels, entered into credit arrangements, and raised capital through public and private
equity offerings, to increase the likelihood that we will have sufficient cash to support operations. We anticipate that the
existing cash balance together with future income from operations, collections of existing accounts receivable, revenue
from our existing backlog of products as of this filing date, the sale of inventory on hand, deposits and down payments
against significant orders will be adequate to meet our working capital and capital equipment requirement needs over the
next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and
extent of our spending to support research and development activities, the timing and cost of establishing additional
sales and marketing capabilities, the timing and cost to introduce new and enhanced products and the timing and cost to
implement new manufacturing technologies. In the event that additional financing is required from outside sources, we
may not be able to raise it on terms acceptable to us or at all. Any additional debt financing obtained by us in the future
could also involve restrictive covenants relating to our capital-raising activities and other financial and operational
matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities,
including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity,
convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant
dilution in their percentage ownership of the Company, and any new equity securities we issue could have rights,
preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate
financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our
business and to respond to business challenges could be significantly limited.
OFF-BALANCE SHEET FINANCING
We have not entered into any off-balance sheet financing arrangements and have not established any special purpose
or variable interest entities.
OVERVIEW OF CONTRACTUAL OBLIGATIONS
The following table provides a summary of such arrangements, or contractual obligations.
Lease obligations . . . . . . . . . . . . . . . . .
Line of credit . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . .
Interest on long-term debt (1) . . . . . . .
Purchases (2) . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$1,861
1,400
1,679
16
3,377
$8,333
Less than
1 year
Payments Due by Period (in thousands)
3-5
years
$51
--
--
--
--
$51
1-3
years
$997
--
--
--
--
$997
$ 813
1,400
1,679
16
3,377
$7,285
More than
5 years
$ --
--
--
--
--
$ --
(1) Based on 1% interest rate of PPP Loan. See Note 10, “Long-term Debt.”
(2) Shown above are our binding purchase obligations. The large majority of our purchase orders are cancelable by either
party, which if canceled may result in a negotiation with the vendor to determine if there shall be any restocking or
cancellation fees payable to the vendor.
27
In the normal course of business to facilitate sales of our products, we indemnify other parties, including customers,
with respect to certain matters. We have agreed to hold the other party harmless against losses arising from a breach of
representations or covenants, or from intellectual property infringement or other claims. These agreements may limit
the time period within which an indemnification claim can be made and the amount of the claim. In addition, we have
entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification
obligations to our 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, our payments under these agreements have not had a material impact on our operating results,
financial position or cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated
effects, if any, on our consolidated financial statements, see Note 1, “Organization and Summary of Significant
Accounting Policies,” of the Notes to Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We had no holdings of derivative financial or commodity instruments at May 31, 2021.
We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates. We
only invest our short-term excess cash in government-backed securities with maturities of 18 months or less. We do not
use any financial instruments for speculative or trading purposes. Fluctuations in interest rates would not have a
material effect on our financial position, results of operations or cash flows.
A majority of our revenue and capital spending is transacted in U.S. Dollars. We also enter into transactions in other
currencies, primarily Euros, New Taiwan Dollar, and Philippine Peso. Since our subsidiaries’ financial statements are
based in their local currency and our condensed consolidated financial statements are based in U.S. Dollars, our
subsidiaries and we recognize foreign exchange gains or losses in any period in which the value of the local currency
rises or falls in relation to the U.S. Dollar. A 10% decrease in the value of the subsidiaries’ local currency as compared
with the U.S. Dollar would not be expected to result in a significant change to our net income or loss. There have been
no material changes in our risk exposure since the end of the last fiscal year, nor are any material changes to our risk
exposure anticipated.
28
Item 8. Financial Statements and Supplementary Data
INDEX
Consolidated Financial Statements of Aehr Test Systems
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Consolidated Balance Sheets at May 31, 2021 and 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Statements of Operations for the years ended May 31, 2021, 2020 and 2019. . . . . . . . . . . . . . . . . . .33
Consolidated Statements of Comprehensive Loss for the years ended May 31, 2021, 2020 and 2019 . . . . . . . . . . 34
Consolidated Statements of Shareholders' Equity for the years ended May 31, 2021, 2020 and 2019 . . . . . . . . . . .35
Consolidated Statements of Cash Flows for the years ended May 31, 2021, 2020 and 2019. . . . . . . . . . . . . . . . . . 36
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Financial statement schedules not listed above are either omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or in the Notes thereto.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Aehr Test Systems
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Aehr Test Systems and its subsidiaries (the
“Company”) as of May 31, 2021 and 2020, the related consolidated statements of operations, comprehensive
loss, shareholders’ equity, and cash flows for each of the three years in the period ended May 31, 2021, and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in
the period ended May 31, 2021, in conformity with accounting principles generally accepted in the United States
of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we
are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on
the critical audit matter or on the accounts or disclosures to which it relates.
Inventory Valuation – Adjustments for Excess or Obsolete Inventory
As described in Note 1 to the consolidated financial statements, the Company’s consolidated inventories
balance was $8.8 million as of May 31, 2021. The Company’s inventory is stated at the lower of cost, which is
determined on a standard cost basis on a first-in, first-out method, or net realizable value. The Company
evaluates the net realizable value by considering obsolescence, excessive levels of inventory, deterioration and
other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for
estimated excess, obsolescence or impaired inventory. If actual demand were to be substantially lower than
30
estimated, there could be a significant adverse impact on the carrying value of the inventory and results of
operations.
The principal considerations for our determination that performing procedures relating to adjustments for
excess or obsolete inventory is a critical audit matter are the significant amount of judgement by management
in developing the assumptions of the forecasted product demand, which in turn led to significant auditor
judgement, subjectivity, and effort in performing audit procedures and evaluating audit evidence relating to the
forecasted product demand. Additionally, for certain new sales channels there may be limited historical data
with which to evaluate forecasts.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included, among
others, testing management’s process for developing the estimate of the adjustments for excess or obsolete
inventory, testing the completeness and accuracy of the underlying data used in the estimate, and evaluating
management’s assumptions of forecasted product demand. Evaluating management’s demand forecast for
reasonableness involved considering historical sales of its products, comparing prior period estimates to actual
results of the same period, and determining whether the demand forecast used was consistent with evidence
obtained in other areas of the audit.
/s/ BPM LLP
We have served as the Company’s auditor since 2005.
San Jose, California
August 27, 2021
31
AEHR TEST SYSTEMS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . .
May 31,
2021
2020
$4,582
5,202
8,849
551
$5,433
3,717
7,989
512
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,184
17,651
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
677
1,606
198
663
2,107
153
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,665
$20,574
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities, short-term. . . . . . . . . . . . . . . .
Customer deposits and deferred revenue, short-term . . .
Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt. . . . . . . . . . . . . . . . . .
$2,893
2,163
737
189
1,400
1,679
$ 945
1,439
658
170
--
653
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
9,061
3,865
Operating lease liabilities, long-term . . . . . . . . . . . . . . . . .
Long-term debt, net of current portion . . . . . . . . . . . . . . .
Deferred revenue, long-term . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .
1,007
--
99
49
1,605
1,026
22
--
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,216
6,518
Commitments and contingencies (Note 20)
Aehr Test Systems shareholders' equity:
Preferred stock, $0.01 par value: Authorized: 10,000 shares;
Issued and outstanding: none . . . . . . . . . . . . . . . . . . . .
Common stock, $0.01 par value: Authorized: 75,000 shares;
Issued and outstanding: 23,725 shares and 23,107
shares at May 31, 2021 and 2020 respectively . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . .
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Aehr Test Systems shareholders' equity . . . . . . . .
Noncontrolling interest. . . . . . . . . . . . . . . . . . . . . . . . . . .
--
--
237
87,553
(28)
(76,313)
11,449
--
231
85,898
2,234
(74,286)
14,077
(21)
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . .
11,449
14,056
Total liabilities and shareholders' equity . . . . . . . . . . .
$21,665
$20,574
The accompanying notes are an integral part of these consolidated financial statements.
32
AEHR TEST SYSTEMS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2021
Year Ended May 31,
2020
2019
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,600
10,568
6,032
$22,291
13,920
8,371
$21,056
13,454
7,602
Operating expenses:
Selling, general and administrative . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,562
3,652
--
7,530
3,386
220
7,724
4,153
725
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . .
10,214
11,136
12,602
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,182)
(2,765)
(5,000)
Interest (expense) income, net. . . . . . . . . . . . . . . . . . . . . . .
Net gain from dissolution of Aehr Test Systems Japan. . . .
Other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . .
(46)
2,186
(162)
10
--
(11)
(252)
--
44
Loss before income tax benefit (expense). . . . . . .
(2,204)
(2,766)
(5,208)
Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . .
177
(36)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,027)
(2,802)
(27)
(5,235)
Less: Net income attributable
to the noncontrolling interest. . . . . . . . . . . . . . . . . . . . .
Net loss attributable to Aehr Test Systems
common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . .
--
--
--
$(2,027)
$(2,802)
$(5,235)
Net loss per share – basic and diluted . . . . . . . . . . . . . . .
Shares used in per share calculation – basic. . . . . . . . . . . .
Shares used in per share calculation – diluted . . . . . . . . . .
$ (0.09)
23,457
23,457
$ (0.12)
22,882
22,882
$ (0.23)
22,387
22,387
The accompanying notes are an integral part of these consolidated financial statements.
33
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
AEHR TEST SYSTEMS AND SUBSIDIARIES
(IN THOUSANDS)
2021
Year Ended May 31,
2020
2019
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,027)
$(2,802)
$(5,235)
Other comprehensive income (loss), net of tax:
Foreign currency translation income (loss) . . . . . . . .
Reclassification of cumulative
translation adjustment as a result of
dissolution of Aehr Test Systems Japan. . . . . . . .
160
2
(61)
(2,401)
--
--
Total comprehensive loss. . . . . . . . . . . . . . . . . . . . . . .
(4,268)
(2,800)
(5,296)
Less: Comprehensive income (loss) attributable to
noncontrolling interest . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss, attributable to
Aehr Test Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
(2)
1
$(4,289)
$(2,798)
$(5,297)
The accompanying notes are an integral part of these consolidated financial statements.
34
AEHR TEST SYSTEMS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
Accumulated
Additional
Other
Total Aehr
Test
Systems
Total
Common Stock
Paid-in
Comprehensive
Accumulated
Shareholders’
Noncontrolling
Shareholders'
Shares
22,143
Amount
$221
Capital
Income
$83,041
$2,292
Deficit
$(66,249)
Equity
$ 19,305
Interest
Equity
$ 19,285
$(20)
Balances, May 31, 2018
Issuance of common stock
6
under employee plans . . . . . . .
Stock-based compensation. . . . . . -- --
--
Net loss . . . . . . . . . . . . . . . . . . . . .
--
526
553
905
--
--
--
--
--
--
(5,235)
559
905
(5,235)
--
--
--
559
905
(5,235)
Foreign currency
translation adjustment . . . . . . .
--
--
--
(62)
--
(62)
1
(61)
Balances, May 31, 2019
22,669
227
84,499
2,230
(71,484)
15,472
(19)
15,453
Issuance of common stock
under employee plans. . . . . . .
444
Shares repurchased for tax
withholdings on vesting of RSUs
Stock-based compensation. . . . .
Net loss . . . . . . . . . . . . . . . . . . . .
Foreign currency
(6)
--
--
translation adjustment. . . . . .
--
4
--
--
--
--
499
(10)
910
--
--
--
--
--
--
503
--
503
--
--
(2,802)
(10)
910
(2,802)
--
--
--
(10)
910
(2,802)
--
4
--
4
(2)
2
Balances, May 31, 2020 23,107
231
85,898
2,234
(74,286)
14,077
(21)
14,056
Issuance of common stock
under employee plans. . . . . . . .
Shares repurchased for tax
withholdings on vesting of RSUs
Stock-based compensation. . . . .
Net loss . . . . . . . . . . . . . . . . . . . .
Reclassification of cumulative
translation adjustment
Foreign currency
translation adjustment. . . . . . .
627
(9)
--
--
--
--
6
--
--
--
--
--
574
--
--
580
--
580
(20)
1,101
--
--
--
--
--
--
(2,027)
(20)
1,101
(2,027)
--
--
--
(20)
1,101
(2,027)
--
(2,401)
--
(2,401)
--
(2,401)
--
139
--
139
21 160
Balances, May 31, 2021
23,725
$237
$87,553
$ (28)
$(76,313)
$11,449
--
$11,449
The accompanying notes are an integral part of these consolidated financial statements.
35
AEHR TEST SYSTEMS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . .
Recovery of doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain from dissolution of Aehr Test Systems Japan. . . . . .
Income tax benefit related to dissolution of
Aehr Test Systems Japan. . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits and deferred revenue. . . . . . . . . . . . . . . .
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in operating activities. . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Purchases of property and equipment. . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Repayment of convertible notes. . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Line of credit borrowings, net. . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock
under employee plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased for tax withholdings on vesting
of restricted stock units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities. . . . . . . . .
Effect of exchange rates on cash, cash equivalents and
restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
Year Ended May 31,
2020
2019
$(2,027)
$ (2,802)
$(5,235)
1,101
--
310
--
(2,186)
(215)
(1,373)
(972)
(81)
1,877
732
96
--
47
(10)
(2,701)
(227)
(227)
--
--
1,400
580
(20)
1,960
910
--
384
45
--
--
1,161
1,164
271
(1,024)
(589)
(1,542)
--
--
(2)
(2,024)
905
(3)
431
--
--
--
(2,043)
(112)
84
210
402
(355)
90
--
(11)
(5,637)
(163)
(163)
(173)
(173)
--
1,679
--
(6,110)
--
--
503
559
(10)
2,172
--
(5,551)
117
20
(59)
Net (decrease) increase in cash, cash equivalents and
restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash, beginning of year. . . . .
(851)
5,513
Cash, cash equivalents and restricted cash, end of year. . . . . . . . . .
$ 4,662
5
5,508
$ 5,513
(11,420)
16,928
$ 5,508
Supplemental cash flow information:
Cash paid during the year for:
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosure of non-cash flow information:
Net transfer of equipment between inventory
$ 15
$ 6
$ 42
$ --
$
$
37
610
and property and equipment. . . . . . . . . . . . . . . . . . . . . . . . .
$ 113
$ 112
$ 119
The accompanying notes are an integral part of these consolidated financial statements.
36
AEHR TEST SYSTEMS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 FOX-XP, FOX-NP, and FOX-CP wafer contact parallel test and burn-in systems, the WaferPak full wafer
contactor, the DiePak carrier, the WaferPak aligner, the DiePak autoloader, 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.
At May 31, 2021, the Company had $4.6 million in cash and cash equivalents. The Company anticipates that the
existing cash and cash equivalents balance together with income from operations, collections of existing accounts
receivable, revenue from its existing backlog of products, the sale of inventory on hand, deposits and down payments
against significant orders will be adequate to meet its working capital and capital equipment requirements, and its
anticipated cash needs over the next 12 months. The Company’s future capital requirements will depend on many
factors, including the Company’s growth rate, the timing and extent of its spending to support research and
development activities, the timing and cost of establishing additional sales and marketing capabilities, the timing and cost
to introduce new and enhanced products and the timing and cost to implement new manufacturing technologies. In the
event that additional financing is required from outside sources, the Company may not be able to raise it on terms
acceptable to the Company or at all. Any additional debt financing obtained by the Company in the future could also
involve restrictive covenants relating to the Company’s capital-raising activities and other financial and operational
matters, which may make it more difficult for the Company to obtain additional capital and to pursue business
opportunities, including potential acquisitions. Additionally, if the Company raises additional funds through further
issuances of equity, convertible debt securities or other securities convertible into equity, its existing stockholders could
suffer significant dilution in their percentage ownership of the Company, and any new equity securities the Company
issue could have rights, preferences and privileges senior to those of holders of the Company’s common stock. If the
Company is unable to obtain adequate financing or financing on terms satisfactory to the Company when the Company
requires it, the Company’s ability to continue to grow or support its business and to respond to business challenges
could be significantly limited. On April 23, 2020, we received proceeds of $1,679,000 from a Paycheck Protection
Program Loan (the “PPP Loan”), under the CARES Act which we used to retain employees, maintained payroll and
made lease and utility payments. The entire PPP Loan balance and interest were forgiven on June 4, 2021, see Note 18,
“Subsequent Event” of the Notes to Consolidated Financial Statements.
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 Euros, Philippines Peso 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.
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, “Other (Expense)
Income, Net” 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
37
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 net realizable value, and warranty reserves.
CASH EQUIVALENTS:
Cash equivalents consist of money market instruments purchased with an original maturity of three months or less.
These investments are reported at fair value.
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 fiscal years ended May 31, 2021, 2020 or 2019.
CONCENTRATION OF CREDIT RISK:
The Company sells its products primarily to semiconductor manufacturers in North America, Asia, and Europe. As
of May 31, 2021, approximately 2%, 98% and 0% of gross accounts receivable were from customers located in North
America, Asia and Europe, respectively. As of May 31, 2020, approximately 13%, 62% and 25% of gross accounts
receivable were from customers located in North America, Asia and Europe, respectively. Three customers accounted
for 51%, 24% and 19% of gross accounts receivable as of May 31, 2021. Two customers accounted for 45% and 18%
of gross accounts receivable as of May 31, 2020. Four customers accounted for 24%, 23%, 20% and 10% of net sales in
fiscal 2021. Three customers accounted for 43%, 16% and 15% of net sales in fiscal 2020. 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, Philippines, Germany and Taiwan. The Company invests its excess cash in money market funds and U.S.
Treasury securities. 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 net
realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less costs of
completion, disposal and transportation. 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 net realizable 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 sales in the period the revision is made. During fiscal 2021, 2020 and 2019 the Company
recognized a provision for inventory reserves of $176,000, $1,669,000, and $1,168,000, respectively.
38
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 when promised goods or services are transferred to customers in an amount that
reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by
following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the
contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the
Company satisfies a performance obligation, as further described below.
Performance obligations include sales of systems, contactors, spare parts, and services, as well as installation and
training services included in customer contracts.
A contract’s transaction price is allocated to each distinct performance obligation. In determining the transaction
price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to
which the Company expects to be entitled. The Company generally does not grant return privileges, except for defective
products during the warranty period.
For contracts that contain multiple performance obligations, the Company allocates the transaction price to the
performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple
factors including, but not limited to, historical discounting trends for products and services and pricing practices in
different geographies.
Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery.
Revenue from services is recognized over time as services are completed or ratably over the contractual period of
generally one year or less.
The Company has elected the practical expedient to not assess whether a contract has a significant financing
component as the Company’s standard payment terms are less than one year.
We sell our products primarily through a direct sales force. In certain international markets, we sell our products
through independent distributors. We consider revenue to be earned when all of the following criteria are met:
• We have a contract with a customer that creates enforceable rights and obligations,
• Promised performance obligations are identified,
• The transaction price, or the amount we expect to receive, is determinable and
• We have satisfied the performance obligations to the customer.
Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to
provide additional services.
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 2021, 2020 and 2019.
39
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 are accounted for under the asset-and-liability method as required by FASB ASC Topic 740,
Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period corresponding to the enactment date. Under ASC 740, a valuation
allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be
realized through generating sufficient future taxable income.
FASB ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes, (“ASC 740-10”) defines the
criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in
financial statements prepared in conformity with GAAP. The Company may recognize the tax benefit from an
uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the
taxing authorities, based solely on the technical merits of the respective tax position. The tax benefits recognized
in the financial statements from such a tax position should be measured based on the largest benefit having a
greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. In accordance with
the disclosure requirements of ASC 740-10, the Company’s policy on income statement classification of interest
and penalties related to income tax obligations is to include such items as part of income taxes.
COMPREHENSIVE LOSS:
Comprehensive loss generally represents all changes in shareholders’ equity 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. In fiscal 2021 the Company
recognized comprehensive income of $2,401,000 related to the completed liquidation of ATS-Japan, a majority owned
subsidiary. Refer to Note 16, “Dissolution of Aehr Test Systems Japan,” for a further discussion of the transaction.
Comprehensive loss is included in the statements of comprehensive loss.
RECENT ACCOUNTING PRONOUNCEMENTS:
Accounting Standards Not Yet Adopted
Financial Instruments
In June 2016, the FASB issued an accounting standard update (“ASU”) 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 collectability of the reported amount. Due to a subsequent ASU in November 2019,
the accounting standard will be effective for the Company beginning in the first quarter of fiscal 2024 on a modified
retrospective basis, and early adoption in fiscal 2020 is permitted. The Company does not expect a material impact of
this accounting standard on its consolidated financial statements.
Income Taxes
On December 18, 2019, the FASB issued Accounting Standards Update ASU 2019-12 on Simplifying the Accounting
for Income Taxes. The board decided to remove the exception to the incremental approach for intra-period tax
allocation when there is a loss from continuing operations and income or gain from other items (for example
discontinued operations or other comprehensive income). There are also provisions related to state taxes and calculating
40
income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The new guidance is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2020. The
Company has not yet adopted ASU 2019-12 and believes upon adoption there would be no material impact.
2. REVENUE:
Disaggregation of revenue
The following tables show revenues by major product categories. Within each product category, contract terms,
conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and
cash flow are substantially similar.
The Company’s revenues by product category are as follows (in thousands):
Type of good / service:
Systems. . . . . . . . . . . . . . . . . . . .
Contactors . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . .
Product lines:
Wafer-level. . . . . . . . . . . . . . . . .
Test During Burn-In. . . . . . . . .
Year Ended May 31,
2021
2020
2019
$ 7,250
5,837
3,513
$16,600
$15,004
1,596
$16,600
$8,099
10,784
3,408
$22,291
$19,768
2,523
$22,291
$9,566
6,154
5,336
$21,056
$14,618
6,438
$21,056
The following presents information about the Company’s operations in different geographic areas. Net sales are
based upon ship-to location (in thousands):
Geographic region:
United States . . . . . . . . . . . . . . .
Asia. . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . .
Year Ended May 31,
2021
2020
2019
$5,386
11,074
140
$16,600
$13,544
7,556
1,191
$22,291
$13,468
5,648
1,940
$21,056
With the exception of the amount of service contracts and extended warranties, the Company’s product category
revenues are recognized at point in time when control transfers to customers. The following presents revenue based on
timing of recognition (in thousands):
Timing of revenue recognition (in thousands):
Products and services transferred at
a point in time. . . . . . . . . . . . . . . . .
Services transferred over time . . . . . .
Contract balances
Year Ended May 31,
2021
2020
2019
$15,009
1,591
$16,600
$19,948
2,343
$22,291
$18,473
2,583
$21,056
A receivable is recognized in the period the Company delivers goods or provides services or when the Company’s
right to consideration is unconditional. The Company usually does not record contract assets because the Company has
an unconditional right to payment upon satisfaction of the performance obligation, and therefore, a receivable is more
commonly recorded than a contract asset.
41
Contract liabilities include payments received in advance of performance under a contract and are satisfied as the
associated revenue is recognized. Contract liabilities are reported on the consolidated balance sheets at the end of each
reporting period as a component of deferred revenue. Contract liabilities as of May 31, 2021 and 2020 were $288,000
and $192,000, respectively. During the fiscal years ended May 31, 2021 and 2020, the Company recognized $164,000
and $1,545,000 of revenues that were included in contract liabilities as of May 31, 2020 and 2019, respectively.
Remaining performance obligations
On May 31, 2021, the Company had $194,000 of remaining performance obligations, which were comprised of
deferred service contracts and extended warranty contracts not yet delivered. The Company expects to recognize
approximately 49% of its remaining performance obligations as revenue in fiscal 2022, and an additional 51% in fiscal
2023 and thereafter. The foregoing excludes the value of other remaining performance obligations as they have original
durations of one year or less, and also excludes information about variable consideration allocated entirely to a wholly
unsatisfied performance obligation.
Costs to obtain or fulfill a contract
The Company generally expenses sales commissions when incurred as a component of selling, general and
administrative expense as the amortization period is typically less than one year. Additionally, the majority of the
Company’s cost of fulfillment as a manufacturer of products is classified as inventory and fixed assets, which are
accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due
to the nature of the Company’s products and their respective manufacturing process.
3. 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, RSUs and ESPP 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):
Numerator: Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
$ (2,027)
Year Ended May 31,
2020
$ (2,802)
2019
$ (5,235)
Denominator for basic net loss per share:
Weighted average shares outstanding . . . . . . . . . . . . . . . . . .
23,457
22,882
22,387
Shares used in basic net loss per share calculation . . . . . . . . .
23,457
22,882
22,387
Effect of dilutive securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .
--
--
--
Denominator for diluted net loss per share . . . . . . . . . . . . . . .
23,457
22,882
22,387
Basic net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.09)
$ (0.12)
$ (0.23)
Diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.09)
$ (0.12)
$ (0.23)
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 years ended May 31, 2021, 2020 and 2019, 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 2,766,000, 3,153,000 and 3,107,000 shares of common stock were
outstanding on May 31, 2021, 2020 and 2019, respectively, but were 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 239,000, 192,000 and
297,000 ESPP shares were outstanding on May 31, 2021, 2020 and 2019, 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 132,000
shares, 10,000 shares and 23,000 shares were outstanding on May 31, 2021, 2020 and 2019, respectively, but were not
included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive.
42
4. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company’s financial instruments are measured at fair value consistent with authoritative guidance. This
authoritative guidance defines fair value, establishes a framework for using fair value to measure assets and liabilities, and
disclosures required related to fair value measurements.
The guidance establishes a fair value hierarchy based on inputs to valuation techniques that are used to measure fair
value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use
in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect
a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following
three levels:
Level 1 - instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving
identical assets.
Level 2 - instrument valuations are obtained from readily-available pricing sources for comparable instruments.
Level 3 - instrument valuations are obtained without observable market values and require a high level of judgment to
determine the fair value.
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May
31, 2021 (in thousands):
Money market funds. . . . .
Assets. . . . . . . . . . . . . . . .
Balance as of
May 31, 2021
$580
$580
Level 1
$ 580
$ 580
Level 2
$ --
$ --
Level 3
$ --
$ --
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May
31, 2020 (in thousands):
Money market funds. . . . .
Assets. . . . . . . . . . . . . . . .
Balance as of
May 31, 2020
$ 80
$ 80
Level 1
$ 80
$ 80
Level 2
Level 3
$ --
$ --
$ --
$ --
Included in money market funds as of May 31, 2021 and 2020 is $80,000 of restricted cash representing a security
deposit for the Company’s United States manufacturing and office space lease.
There were no financial liabilities measured at fair value as of May 31, 2021 and 2020.
There were no transfers between Level 1 and Level 2 fair value measurements during the fiscal years ended May 31,
2021 and 2020.
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.
5. ACCOUNTS RECEIVABLE:
Accounts receivable comprise (in thousands):
Accounts receivable. . . . . . . . . . . . . . . . . . . .
Less: Allowance for doubtful accounts . . . . .
May 31,
2021
$5,202
--
$5,202
2020
$3,717
--
$3,717
Accounts receivable represent customer trade receivables. As of May 31, 2021 and 2020, there were no allowances for
doubtful accounts.
43
6. BALANCE SHEET DETAIL:
INVENTORIES:
(In Thousands)
Raw materials and sub-assemblies. . . . . .
Work in process. . . . . . . . . . . . . . . . . . . .
Finished goods. . . . . . . . . . . . . . . . . . . . .
May 31,
2021
2020
$5,859
2,988
2
$8,849
$5,055
2,917
17
$7,989
During the year ended May 31, 2021, 2020, and 2019, the Company wrote down $176,000, $1,669,000, and $1,168,000
of inventory, respectively.
PROPERTY AND EQUIPMENT, NET:
(In Thousands)
Leasehold improvements. . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . .
Machinery and equipment. . . . . . . . . . . .
Test equipment. . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation
and amortization. . . . . . . . . . . . . . . . . .
May 31,
2021
$1,214
627
3,343
2,525
7,709
2020
$1,201
612
3,038
2,516
7,367
(7,032)
$677
(6,704)
$ 663
Depreciation expense was $310,000, $384,000 and $431,000 for fiscal 2021, 2020, and 2019, respectively.
ACCRUED EXPENSES:
(In Thousands)
Payroll related. . . . . . . . . . . . . . . . . . . . . . .
Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions and bonuses. . . . . . . . . . . . .
Professional services. . . . . . . . . . . . . . . . . .
Investor relations . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
$ 1,020
494
413
168
22
16
5
--
25
$2,163
May 31,
2020
$ 791
246
139
173
19
--
30
8
33
$1,439
CUSTOMER DEPOSITS AND DEFERRED REVENUE, SHORT-TERM:
(In Thousands)
Customer deposits. . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . .
7. INCOME TAXES:
May 31,
2021
2020
$ 27
162
$189
$ --
170
$170
Domestic and foreign components of loss before income tax benefit (expense) are as follows (in thousands):
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended May 31,
2020
$(2,751)
(15)
$(2,766)
2019
$(5,273)
65
$(5,208)
2021
$ (13,064)
10,860
$ (2,204)
44
The income tax benefit (expense) consists of the following (in thousands):
Federal income taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign income taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . .
2021
$ 163
--
13
--
Year Ended May 31,
2020
2019
$ --
--
(30)
--
$ --
--
(6)
--
1
--
$ 177
(6)
--
$ (36)
(21)
--
$ (27)
The Company’s effective tax rate differs from the U.S. federal statutory tax rate, as follows:
U.S. federal statutory tax rate. . . . . . . . . . . . . .
State taxes, net of federal tax effect. . . . . . . . .
Foreign rate differential. . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . .
Research and development credit . . . . . . . . . .
Change in valuation allowance. . . . . . . . . . . . .
Federal rate change impact . . . . . . . . . . . . . . .
Federal AMT refund . . . . . . . . . . . . . . . . . . .
ASU 2016-09 adoption . . . . . . . . . . . . . . . . . .
Controlled Foreign Corporation Liquidation. .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate. . . . . . . . . . . . . . . . . . . . . . .
2021
21.0 %
0.6
9.8
(4.7)
4.0
(32.1)
--
--
--
9.8
(0.4)
8.0%
Year Ended May 31,
2020
21.0 %
1.4
(21.5)
(4.0)
--
4.3
--
--
--
--
(2.5)
(1.3)%
2019
21.0 %
(1.0)
(0.7)
(2.8)
1.5
(15.6)
--
--
--
--
(2.9)
(0.5)%
The components of the net deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating losses. . . . . . . . . . . . . . . . .
Lease Liability . . . . . . . . . . . . . . . . . . . . .
Credit carryforwards. . . . . . . . . . . . . . . . .
Inventory reserves . . . . . . . . . . . . . . . . . .
Reserves and accruals. . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Operating lease right-of-use assets. . . . . .
Less: Valuation allowance . . . . . . . . . . . .
Net deferred tax assets (liabilities). . . . . .
Year Ended May 31,
2021
2020
$15,584
372
5,298
1,006
890
450
23,600
$13,634
483
5,089
1,005
739
319
21,269
(342)
(23,258)
--
$
(449)
(20,820)
$
--
The valuation allowance increased by $2,438,000 during fiscal 2021, decreased by $118,000 during fiscal 2020, and
increased by $813,000 during fiscal 2019. As of May 31, 2021 and 2020, 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, 2021 and 2020, the Company has federal net operating loss carryforwards of approximately $64,298,000
and $54,601,000 respectively, to reduce future taxable income. A portion of the federal net operating losses will begin to
expire in 2024. Federal net operating losses of $13,383,000 will carryforward indefinitely and would be subject to an
45
80% taxable income limitation in the year utilized. At May 31, 2021 and 2020, the Company has state net operating loss
carryforwards of $29,812,000 and $29,386,000, respectively, to reduce future taxable income. The state net operating
loss carryforwards will begin to expire in 2028.
At May 31, 2021 and 2020, the Company has federal research and development credit carryforwards of approximately
$2,201,000 and $2,113,000 respectively, to offset future tax liability. The federal credit carryforwards will begin to expire
in 2022. At May 31, 2021 and 2020, The Company has state research and development credit carryforwards of
approximately $5,955,000 and $5,782,000 respectively, to offset future tax liability. The credit carryforwards are not
subject to expiration. The Company also has alternative minimum tax credit carryforwards of $34,000 for state purposes.
The credits may be used to offset regular tax and do not expire.
ATS Japan was completely liquidated in July 2020. Thus, there is no more foreign net operating loss carryforward
related to the Japan entity to the future.
Internal Revenue Code of 1986, as amended (“IRC”) Section 382 (“§382”) limits the use of NOL and tax
credit carryforwards in certain situations where changes occur in the stock ownership of a company. In general, if
we experience a greater than 50% aggregate change in ownership over a 3-year period, we are subject to an
annual limitation under IRC §382 on the utilization of the Company’s pre-change NOL carryforwards. California
and other states have similar laws. The annual limitation generally is determined by multiplying the value of the
Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term
exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization.
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.
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, 2018. . . . . . . . . . . . .
Decreases related to prior year tax positions. . . . . . . . .
Increases related to current year tax positions. . . . . . .
Balance at May 31, 2019 . . . . . . . . . . . . . . . . . . . . . . .
Decreases related to prior year tax positions. . . . . . . .
Increases related to current year tax positions. . . . . . .
Balance at May 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
Increases related to prior year tax positions. . . . . . . .
Increases related to current year tax positions. . . . . .
Balance at May 31, 2021 . . . . . . . . . . . . . . . . . . . . . . .
$1,785
(41)
65
$1,809
(11)
54
$1,852
11
65
$1,928
As of May 31, 2021 and 2020, the Company has not recorded interest and penalties associated with its
unrecognized tax benefits. The Company’s unrecognized gross tax benefits would not reduce the annual effective tax
rate if recognized because it has recorded a full valuation allowance on its deferred tax assets. The Company
does not foresee any material changes to the gross unrecognized tax benefit within the next twelve months. The
Company’s policy is to recognize interest and penalties in income tax expense.
The Company’s federal and state income tax returns are subject to possible examination by the taxing
authorities until the expiration of the related statutes of limitations on those tax returns. In general, the federal
income tax returns have a three-year statute of limitations, and the state income tax returns have a four-year
statute of limitations. The Company’s foreign income tax returns are also subject to examination by the foreign tax
authorities with the longest statute of limitations period of four-year.
On March 27, 2020, the CARES Act was signed into law. The CARES Act includes provisions relating to refundable
payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods,
46
alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections
to tax depreciation methods for qualified improvement property. The CARES Act did not have material impact to
income taxes as the Company is in a historical loss position.
On December 27, 2020, the Consolidated Apportions Act of 2021 (“CCA”), a tax, funding and spending bill was
signed into law and the Company does not believe the CAA will materially impact the 2021 income tax provision.
On June 29, 2020, California Governor Gavin Newsom signed Assembly Bill 85 (“AB 85”) into law as part of the
California 2020 Budget Act, which temporarily suspends the use of California net operating losses and imposes a cap on
the amount of business incentive tax credits that companies can utilize against their net income for tax years 2020, 2021,
and 2022. We analyzed the provisions of AB 85 and determined there was no impact on our provision for income taxes
for the current period and will continue to evaluate the impact, if any, AB 85 may have on our condensed consolidated
financial statements and disclosures.
8. LEASES
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
February 2018 and expires in July 2023. The Company maintained a facility in Japan located in a 418 square foot office
in Tokyo under a lease which expired in June 2020. The Company also maintained a 1,585 square foot warehouse in
Yamanashi under a lease which expired in June 2020. The Company substantially closed its subsidiary Aehr Test
Systems Japan K.K. in March 2020, completing the liquidation of the legal entity in July 2020, see Note 17,
“Restructuring,” of the Notes to Consolidated Financial Statements. The Company leases a 492 square foot sales and
support office in Utting, Germany. The lease, which began February 1, 1992 and expires on January 31, 2023, contains
an automatic twelve months renewal, at rates to be determined, if no notice is given prior to six months from expiry. On
November 18, 2020, the Company established a wholly owned new subsidiary, Aehr Test Systems Philippines Inc.,
which has been in full operation since March 2021. The Company leases a facility in Philippines located in a 2,713
square foot building in Clark Freeport Zone, Pampanga. The lease, which began January 1, 2021 and expires on
December 31, 2025, contains an option to renew for another three years at rates stipulated in the contract, notice for
renewal is given 6 months from expiry. Under the lease agreements, the Company is responsible for payments of
utilities, taxes and insurance.
The Company has only operating leases for real estate including corporate offices, warehouse space and certain
equipment. A lease with an initial term of 12 months or less is generally not recorded on the condensed consolidated
balance sheet, unless the arrangement includes an option to purchase the underlying asset, or renew the arrangement that
the Company is reasonably certain to exercise (short-term leases). The Company recognizes lease expense on a straight-
line basis over the lease term for short-term leases that the Company does not record on its balance sheet. The
Company’s operating leases have remaining lease terms of 1 year to 5 years.
The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances
present at the inception of the arrangement. Operating lease liabilities and their corresponding right-of-use assets are
recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease
contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing
rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease
payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items
such as initial direct costs paid or incentives received.
The weighted average remaining lease term for the Company’s operating leases was 2.4 years at May 31, 2021 and the
weighted average discount rate was 5.4%.
The Company’s operating lease cost under FASB ASC Topic 842 was $761,000 for the year ended May 31, 2021. The
Company’s operating lease cost under FASB ASC Topic 842 was $734,000 for the year ended May 31, 2020.
The following table presents supplemental cash flow information related to the Company’s operating leases (in
thousands):
47
Year Ended May 31,
2021
2020
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases
$779
$ 737
Right-of-use assets obtained in exchange for operating leases liabilities
147
2,859
The following table presents the maturities of the Company’s operating lease liabilities as of May 31, 2021 (in
thousands):
Fiscal year
2022
2023
2024
2025
2026
Thereafter
Total future minimum operating lease payments
Less: imputed interest
Present value of operating lease liabilities
Operating Leases
$ 813
829
168
32
19
--
1,861
(117)
$1,744
9. BORROWING AND FINANCING ARRANGEMENTS:
On January 16, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon
Valley Bank (“SVB”). Pursuant to the Loan Agreement, the Company may borrow up to (a) the lesser of (i) the
revolving line of $4.0 million or (ii) the amount available under the borrowing base minus (b) the outstanding principal
balance of any advances, under a revolving line of credit which is collateralized by all the Company’s assets except
intellectual property. The borrowing base is 80% of eligible accounts, as determined by SVB from the Company’s most
recent borrowing base statement; provided, however, SVB has the right to decrease the foregoing percentage in its good
faith business judgment to mitigate the impact of certain events or conditions, which may adversely affect the collateral
or its value. Subject to an event of default, the principal amount outstanding under the revolving line of credit will accrue
interest at a floating per annum rate equal to the greater of (a) the prime rate plus an additional percentage of up to 1%,
which additional percentage depends on the Company’s adjusted quick ratio, and (b) 4.75%. Interest is payable monthly
on the last calendar day of each month and the outstanding principal amount, the unpaid interest and all other
obligations are due on the maturity date, which is 364 days from the effective date of January 13, 2020.
On January 14, 2021, the Company entered into the First Amendment to Loan and Security Agreement (the
“Amendment”) with Silicon Valley Bank. The Amendment, among other things, extends the Revolving Line Maturity
Date to July 14, 2021; provided, however, that if the Company achieves specified operating metrics on a consolidated
basis on or prior to May 31, 2021 the Amended Revolving Line Maturity Date is extended to January 13, 2022. On July
8, 2021 the Company received confirmation from SVB that the Revolving Line Maturity Date has been extended to
January 13, 2022.
At May 31, 2021, the Company had drawn $1,400,000 against the credit facility and was in compliance with all
covenants related to obligations to meet reporting requirements. The balance available to borrow under the line at May
31, 2021 was $308,000. There are no financial covenants in the agreement.
10. LONG-TERM DEBT:
On April 23, 2020, the Company obtained the PPP Loan in the aggregate amount of $1,678,789 from SVB. The PPP
Loan was evidenced by a promissory note dated April 23, 2020 (the “Note”) that matures on April 23, 2022 and bears
interest at a rate of 1% per annum, payable monthly commencing on November 23, 2020. The PPP Loan proceeds were
used for payroll, health care benefits, rent and utilities.
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion
of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan
48
proceeds for payment of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred by
the Company. On June 4, 2021, the entire PPP Loan balance and interest were forgiven, see Note 18, “Subsequent Event”
of the Notes to Consolidated Financial Statements.
11. STOCKHOLDERS’ EQUITY AND 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, and is recognized as expense over the employee’s requisite service period. 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 fiscal years ended May 31, 2021, 2020
and 2019 (in thousands, except per share data):
Stock-based compensation in the form of stock options,
RSUs, and ESPP purchase rights, included in:
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative. . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . .
Net effect on net loss. . . . . . . . . . . . . . . . . . . . . . . . .
Effect on net loss per share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021
Year Ended May 31,
2020
2019
$70
816
215
$ 80
631
199
$104
545
256
$1,101
$910
$905
$0.05
$0.05
$0.04
$0.04
$0.04
$0.04
As of May 31, 2021, 2020 and 2019, there were no stock-based compensation expenses capitalized as part of
inventory.
During fiscal 2021, 2020 and fiscal 2019, the Company recorded stock-based compensation related to stock options
and restricted stock units of $993,000, $751,000 and $650,000, respectively.
As of May 31, 2021, the total compensation expense related to unvested stock-based awards under the Company’s
2016 Equity Incentive Plan, but not yet recognized, was $1,022,000 which is net of estimated forfeitures of $3,000. This
expense will be amortized on a straight-line basis over a weighted average period of approximately 2.4 years.
During fiscal 2021, 2020 and fiscal 2019, the Company recorded stock-based compensation related to its ESPP of
$108,000, $159,000 and $255,000, respectively. The increase in fiscal 2019 is primarily due to employees increasing their
ESPP elections during the fiscal year.
As of May 31, 2021, the total compensation expense related to purchase rights under the ESPP but not yet recognized
was $229,000. This expense will be amortized on a straight-line basis over a weighted average period of approximately
1.2 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.
49
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 2021, 2020 and 2019 were
estimated using the following weighted average assumptions in the Black-Scholes option valuation method:
Year Ended May 31,
2021
2020
2019
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates. . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average grant date fair value. . . . . . . . . . . . .
6
72.0%
0.44%
$1.12
5
71.5%
1.56%
$0.95
5
71.9%
2.83%
$1.33
The fair value of our ESPP purchase rights for the fiscal 2021, 2020 and 2019 was estimated using the following
weighted average assumptions:
Year End May 31,
2021
2020
2019
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . .
Volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates. . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average grant date fair value. . . . . . . . . . . . .
0.5 – 2.0
74% – 88%
0.04%–0.17%
$1.03
0.5 – 2.0
62% – 77%
0.14%–1.81%
$0.79
0.5 – 2.0
48% – 78%
2.33%–2.82%
$1.14
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, non-statutory 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 3,435,000 shares of common stock have been reserved for issuance
under the Company’s 2016 Equity Incentive Plan, which includes 1,835,000 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 22, 2019 for further information regarding the 2016 Equity Incentive Plan.
As of May 31, 2021, out of the 4,036,000 shares authorized for grant under the 2016 Equity Incentive Plan, 2,898,000
stock options and RSUs were outstanding. As of May 31, 2020, out of the 4,813,000 shares authorized for grant under
the 2016 Equity Incentive Plan, 3,163,000 stock options and RSUs were outstanding.
The following tables summarize the Company’s stock option and RSU transactions during fiscal 2021, 2020 and 2019
(in thousands):
50
Balance, May 31, 2018. . . . . . . . . . . . . . . .
Options granted. . . . . . . . . . . . . . . . . . .
RSUs cancelled . . . . . . . . . . . . . . . . . . .
Options terminated . . . . . . . . . . . . . . . .
Options expired. . . . . . . . . . . . . . . . . . .
Balance, May 31, 2019 . . . . . . . . . . . . . . . .
Additional shares reserved. . . . . . . . . . .
Options granted. . . . . . . . . . . . . . . . . . .
RSUs granted. . . . . . . . . . . . . . . . . . . . .
Shares withheld for taxes and not issued
Options terminated . . . . . . . . . . . . . . . .
Options expired. . . . . . . . . . . . . . . . . . .
Balance, May 31, 2020 . . . . . . . . . . . . . . . .
Options granted. . . . . . . . . . . . . . . . . . .
RSUs granted. . . . . . . . . . . . . . . . . . .
RSUs cancelled…………………….
Shares withheld for taxes and not issued
Options terminated . . . . . . . . . . . . . . . .
Options expired. . . . . . . . . . . . . . . . . . .
Balance, May 31, 2021 . . . . . . . . . . . . . . . .
Available
Shares
1,812
(804)
8
195
(64)
1,147
1,196
(738)
(25)
6
457
(393)
1,650
(297)
(340)
1
9
455
(341)
1,137
The following table summarized the stock option transactions during fiscal 2021, 2020 and 2019 (in thousands,
except per share data):
Balances, May 31, 2018. . . . . . . . . . . . . . .
Options granted. . . . . . . . . . . . . . . . . . .
Options terminated . . . . . . . . . . . . . . . .
Options exercised. . . . . . . . . . . . . . . . . .
Balances, May 31, 2019. . . . . . . . . . . . . . . .
Options granted. . . . . . . . . . . . . . . . . . .
Options terminated . . . . . . . . . . . . . . . .
Options exercised. . . . . . . . . . . . . . . . . .
Balances, May 31, 2020. . . . . . . . . . . . . . . .
Options granted. . . . . . . . . . . . . . . . . . .
Options terminated . . . . . . . . . . . . . . . .
Options exercised. . . . . . . . . . . . . . . . . .
Balances, May 31, 2021. . . . . . . . . . . . . . . .
Options fully vested and expected to vest
at May 31, 2021
Outstanding Options
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
$2.04
$ 1,987
$2.19
$2.32
$0.85
$2.20
$1.61
$1.98
$1.22
$2.17
$1.78
$2.31
$1.54
$2.16
$ 283
$ 102
$ 807
Number
of
Shares
2,859
804
(195)
(361)
3,107
738
(457)
(235)
3,153
297
(455)
(229)
2,766
2,732
$2.16
$795
The options outstanding and exercisable at May 31, 2021 were in the following exercise price ranges (in thousands,
except per share data):
51
Options Outstanding
at May 31, 2021
Options Exercisable
at May 31, 2021
Weighted
Average
Remaining
Contractual
Life (Years)
6.05
4.80
3.09
0.46
3.16
Weighted
Average
Exercise
Price
$1.27
$1.70
$2.21
$2.72
$3.86
Number
Outstanding
Shares
133
1,040
1,035
358
200
Weighted
Average
Remaining
Contractual
Life (Years)
6.15
4.33
2.68
0.45
3.16
Weighted
Average
Exercise
Price
$1.29
$1.69
$2.20
$2.72
$3.85
Number
Exercisable
Shares
56
625
814
357
193
Range of
Exercise
Prices
$1.22-$1.34
$1.64-$1.86
$2.03-$2.46
$2.65-$2.81
$3.46-$3.93
Aggregate
Intrinsic
Value
$1.22-$3.93
2,766
3.54
$2.16
2,045
2.94
$2.26
$492
The total intrinsic values of options exercised were $152,000, $160,000 and $338,000 during fiscal 2021, 2020 and
2019, respectively. The weighted average contractual life of the options exercisable and expected to be exercisable at
May 31, 2021 was 3.52 years.
Options to purchase 2,045,000, 2,203,000 and 2,314,000 shares were exercisable at May 31, 2021, 2020 and 2019,
respectively. These exercisable options had weighted average exercise prices of $2.26, $2.25 and $2.14 as of May 31,
2021, 2020 and 2019, respectively.
During the fiscal year ended May 31, 2021, RSUs for 170,000 shares, net of 9,000 shares withheld to settle payroll
taxes, were granted and fully vested to employees. The weighted average market value on the date of the grant of these
RSUs was $1.92 per share. During the fiscal year ended May 31, 2021, 37,000 RSUs became fully vested and 1,000 RSUs
were cancelled. 132,000 RSUs were outstanding and unvested at May 31, 2021. The intrinsic value of the outstanding
and unvested RSUs at May 31, 2021 was $297,000. During the fiscal year ended May 31, 2020, RSUs for 10,000 shares,
net of 6,000 shares withheld to settle payroll taxes, were granted and fully vested to employees. The market value on the
date of the grant of these RSUs was $1.64 per share. During the fiscal year ended May 31, 2020, 13,000 RSUs became
fully vested and there was no cancellation. 10,000 RSUs were outstanding and unvested at May 31, 2020. The intrinsic
value of the outstanding and unvested RSUs at May 31, 2020 was $16,000. During the fiscal year ended May 31, 2019,
there were no RSUs granted to employees. During the fiscal year ended May 31, 2019, 16,000 RSUs became fully vested
and 8,000 RSUs were cancelled. 23,000 RSUs were outstanding and unvested at May 31, 2019. The intrinsic value of the
outstanding and unvested RSUs at May 31, 2019 was $40,000.
During the fiscal year ended May 31, 2021, RSUs for 161,000 shares were granted and fully vested to members of the
Company’s Board of Directors. The weighted average market value on the date of the grant of these RSUs was $1.81
per share. During the fiscal year ended May 31, 2020, RSUs for 9,000 shares were granted and fully vested to members
of the Company’s Board of Directors. The weighted average market value on the date of the grant of these RSUs was
$1.64 per share. There were no RSUs granted to members of the Board of Directors during fiscal 2019.
EMPLOYEE STOCK PURCHASE PLAN:
In October 2006, the Company’s shareholders approved the 2006 Employee Stock Purchase Plan. In October 2016,
the Company’s shareholders approved the Company’s Amended and Restated 2006 Employee Stock Purchase Plan (the
“Purchase Plan”), which amended and restated the 2006 Employee Stock Purchase Plan. The Purchase Plan extended
the term of the 2006 Employee Stock Purchase Plan indefinitely. See the Company’s Registration Statements on Form
S-8 filed with the Securities and Exchange Commission on November 14, 2016 and November 21, 2018 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. In October
2020, the Company’s shareholders approved an amendment to the Purchase Plan to increase the number of shares
authorized for issuance thereunder by an additional 350,000 shares of the Company’s common stock. After such
amendment, a total of 2,200,000 shares of the Company’s common stock have been authorized for issuance under the
Purchase Plan. During the fiscal years ended May 31, 2021, 2020 and 2019, ESPP purchase rights of 279,000, 55,000,
52
and 379,000 shares, respectively, were granted. For the fiscal years ended May 31, 2021, 2020 and 2019, approximately
147,000, 136,000 and 125,000 shares of common stock, respectively, were issued under the Purchase Plan. As of May
31, 2021, a total of 1,764,000 shares have been issued under the Purchase Plan, and 436,000 ESPP shares remain
available for issuance.
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 2021, 2020 and 2019. The contribution amounts are
recorded as compensation expense, in the period authorized and included in accrued expenses, in the period authorized.
Contributions of 36,000 shares were made to the ESOP during fiscal 2021 for fiscal 2020. Contributions of 34,000
shares were made to the ESOP during fiscal 2020 for fiscal 2019. Contributions of 23,000 shares were made to the
ESOP during fiscal 2019 for fiscal 2018. The contribution for fiscal 2021 will be made in fiscal 2022. 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 2021, 2020 and
2019.
13. OTHER (EXPENSE) INCOME, NET:
Other (expense) income, net comprises the following (in thousands):
Foreign exchange (loss) gain. . . . . . . . . . . . . . . . . .
Other (expense) income, net. . . . . . . . . . . . . . . . . .. .
14. PRODUCT WARRANTIES:
2021
$(111)
(51)
$(162)
Year Ended May 31,
2020
$(12)
1
$(11)
2019
$43
1
$44
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, 2021 and 2020 (in thousands):
53
Balance at the beginning of the year. . . . . . . . . . . . . . .
Accruals for warranties issued during the year . . . . . . .
Adjustment to previously existing warranty . . . . . . . . .
Consumption of reserves . . . . . . . . . . . . . . . . . . . . . . .
May 31,
2021
2020
$ 246
390
346
(488)
$ 154
299
--
(207)
Balance at the end of the year. . . . . . . . . . . . . . . . . . . .
$ 494
$ 246
The accrued warranty balance is included in accrued expenses on the consolidated balance sheets.
15. SEGMENT INFORMATION:
The Company has only one reportable segment. The information for revenue category by type, product line,
geography and timing of revenue recognition, is summarized in Note 2, “Revenue.”
Property and equipment information is based on the physical location of the assets. The following table presents
property and equipment information for geographic areas (in thousands):
United States. . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 31,
2021
2020
$647
30
--
$677
$662
1
--
$663
As of May 31, 2021, the operating lease right-of-use assets of $1,480,000 and $126,000 were allocated in the United
States and Asia, respectively.
There were no revenues through distributors for the fiscal years ended May 31, 2021 and 2020.
16. DISSOLUTION OF AEHR TEST SYSTEMS JAPAN
On July 31, 2020, the Company completed the liquidation of ATS-Japan, a majority owned subsidiary. Accordingly,
the Company deconsolidated ATS-Japan and recognized an aggregate net gain of $2,401,000 for the period ended
August 31, 2020. The net gain was mainly due to cumulative translation adjustment reclassified into earnings of
$2,186,000 and the residual income tax effect in connection with the cumulative translation adjustment released into
income tax benefits of $215,000.
17. RESTRUCTURING:
During the fiscal year ended May 31, 2020, the Company approved the dissolution of Aehr Test Systems Japan K.K
(“ATS-Japan”), a majority owned subsidiary. In connection with the dissolution plan, the Company recognized
approximately $220,000 in the fourth quarter of fiscal 2020 related to severance payments for individuals impacted in
this reduction, legal fees associated with the dissolution process, and write-off of assets. The ATS-J subsidiary was
dissolved in March 2020. The liquidation process occurred from March 2020 through the final liquidation in July 2020,
allowing creditors time to submit claims and time for ATS-J to wind down and disposition any assets.
During the fiscal year ended May 31, 2019, the Company implemented a restructuring plan in order to streamline its
operations and better align its structure with its objectives going forward. In connection with the restructuring plan, the
Company recognized $725,000 of restructuring charges related to employee termination expenses during the fiscal year
ended May 31, 2019. The Company paid $317,000 of the restructuring charge during fiscal year ended May 31, 2019.
At May 31, 2019, the balance of $408,000 of the restructuring charge was included in accrued expenses on the
accompanying condensed consolidated balance sheets and was paid in fiscal year 2020. The Company does not expect
to incur any further expenses in connection with this restructuring plan.
54
18. SUBSEQUENT EVENT
On June 12, 2021, the Company received confirmation from the SVB that on June 4, 2021, the Small Business
Administration approved the Company’s PPP Loan forgiveness application for the entire PPP Loan balance of
$1,678,789 and interest totaling $18,933, and that the remaining PPP Loan balance is zero.
19. RELATED PARTY TRANSACTIONS:
Mario M. Rosati, one of the Company’s directors, was 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. Mario M. Rosati retired from Wilson Sonsini Goodrich & Rosati on
January 31, 2020. The amounts of transactions during fiscal years ended May 31, 2020 were $78,000. At May 31, 2020
the Company had a prepayment to Wilson Sonsini Goodrich & Rosati of $14,000.
20. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
At both May 31, 2021 and 2020, the Company had restricted cash of $80,000 held by a financial institution,
representing a security deposit for its United States manufacturing and office space lease. This amount is included in
other assets on the 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, 2021, the Company had $3,377,000 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.
21. 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, 2021 and 2020.
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.
55
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share basic and diluted. . .
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit (loss). . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income per share basic and diluted. . .
Three Months Ended
Aug. 31,
2020
$ 2,012
$ 227
$ 107
$ 0.00
Nov. 30,
2020
$ 1,683
$ 377
$(1,966)
$ (0.08)
Feb. 28,
2021
$ 5,267
$ 1,894
$ (735)
$ (0.03)
May 31,
2021
$ 7,638
$ 3,534
$ 567
$ 0.02
Three Months Ended
Aug. 31,
2019
$ 5,533
$ 2,271
$ (413)
$ (0.02)
Nov. 30,
2019
$ 6,874
$ 3,202
$ 251
$ 0.01
Feb. 29,
2020
$ 6,111
$ 2,991
$ 245
$ 0.01
May 31,
2020
$ 3,773
$ (93)
$ (2,885)
$ (0.13)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer,
the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our
Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are
effective to ensure that information we are required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities
and Exchange Commission rules and forms, and that such information is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely
decisions regarding required disclosure.
(b) Management’s report on internal control over financial reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of
our internal control over financial reporting based upon the framework in “Internal Control – Integrated Framework” (2013
Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that
evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of
May 31, 2021. This annual report does not include an attestation report of the Company’s registered public accounting
firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit
the Company to provide only management’s report in this Annual Report.
(c) Changes in internal controls over financial reporting.
There were no changes in our internal controls over financial reporting that occurred during the period covered
by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.
Item 9B. Other Information
None.
56
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the
Securities and Exchange Commission in connection with our 2021 Annual Meeting of Shareholders.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the
Securities and Exchange Commission in connection with our 2021 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the
Securities and Exchange Commission in connection with our 2021 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the
Securities and Exchange Commission in connection with our 2021 Annual Meeting of Shareholders.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the
Securities and Exchange Commission in connection with our 2021 Annual Meeting of Shareholders.
57
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Report:
PART IV
1. Financial Statements
See Index under Item 8.
2. Financial Statement Schedule
See Index under Item 8.
3. Exhibits
See Item 15(b) below.
(b) Exhibits
The following exhibits are filed as part of or incorporated by reference into this Report:
58
Exhibit No.
-----------
3.1(1)
3.2(2)(25)
4.1(3)
4.2(4)
4.3
10.1(5)
10.2(6)
10.3(7)
10.4(8)
10.5(9)
10.6(10)
10.7(11)
10.8(12)
10.9(13)
Description
------------------------------------------------------------------------------------------------------------
Restated Articles of Incorporation of Registrant.
Amended and Restated Bylaws of Registrant.
Form of Common Stock certificate.
Registration Rights Agreement by and among the Company and the
Investors (as defined therein), dated as of September 22, 2016.
Description of Securities (filed herewith)
2006 Equity Incentive Plan.*
Amended and Restated 2006 Employee Stock Purchase Plan.*
2016 Equity Incentive Plan.*
Form of Indemnification Agreement entered into between Registrant
and its directors and executive officers.*
Form of Change of Control Agreement.*
Lease dated August 3, 1999 for facilities located at Building C,
400 Kato Terrace, Fremont, California.
First Amendment dated May 06, 2008 for facilities located at
400 Kato Terrace, Fremont, California.
Second Amendment dated November 7, 2014 for facilities located at
400 Kato Terrace, Fremont, California.
Third Amendment dated February 27, 2018 for facilities located at
400 Kato Terrace, Fremont, California.
Offer Letter dated January 3, 2012, between the Company and Gayn Erickson.*
Offer Letter dated March 5, 2013, between the Company and Rhea Posedel.*
Change of Control Severance Agreement dated January 3, 2012, between the Company and Gayn
10.10(14)
10.11(15)
10.12(16)
Erickson.*
10.13(17)
10.15(18)
10.16(19)
10.17(20)
10.18(21)
10.19(22)
Amended and Restated Change of Control Severance Agreement dated March 5, 2013, between the
Company and Rhea J. Posedel.*
Form of 2006 Equity Incentive Plan Stock Option Award Agreement.*
Form of 2006 Equity Incentive Plan Restricted Stock Unit Award.*
Form of 2016 Equity Incentive Plan Stock Option Award Agreement.*
Form of 2016 Equity Incentive Plan Restricted Stock Unit Award.*
Purchase Agreement by and among the Company and the Investors (as
defined therein), dated as of September 22, 2016.
Loan and Security Agreement, dated as of January 13, 2020 and effective on January 16, 2020, by and
10.20(23)
between Silicon Valley Bank and Aehr Test Systems.
10.21(24)
Promissory Note, dated April 23, 2020, with Silicon Valley Bank as Lender and Aehr Test Systems as
Borrower.
10.22(26) First Amendment, dated as of January 14, 2021, to Loan and Security Agreement by and between
21.1
23.1
24.1
31.1
31.2
32.1
Silicon Valley Bank and Aehr Test Systems, dated January 13, 2020
Subsidiaries of the Company (filed herewith).
Consent of BPM LLP - Independent Registered Public Accounting Firm (filed herewith).
Power of Attorney (incorporated by reference to the signature page of this
Annual Report on Form 10-K).
Certification Statement of Chief Executive Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification Statement of Chief Financial Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
herewith).
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
------------------------
(1) Incorporated by reference to the same-numbered exhibit previously filed with the Company’s Registration Statement
on Form S-1 filed June 11, 1997 (File No. 333-28987).
(2) Incorporated by reference to the same-numbered exhibit previously filed with the Company’s Current Report on
Form 8-K filed September 11, 2019 (File No. 000-22893).
59
(3) Incorporated by reference to the same-numbered exhibit previously filed with Amendment No.1 to the Company’s
Registration Statement on Form S-1 filed July 17, 1997 (File No. 333-28987).
(4) Incorporated by reference to Exhibit 10.2 previously filed with the Company’s Current Report on Form 8-K filed
September 28, 2016 (File No. 000-22893).
(5) Incorporated by reference to Exhibit 4.1 previously filed with the Company’s Registration Statement on Form S-8
filed October 27, 2006 (File No. 333-138249).
(6) Incorporated by reference to Exhibit 4.2 previously filed with the Company’s Registration Statement on Form S-8
filed November 14, 2016 (File No. 333-214589).
(7) Incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement filed September 26, 2019
(File No. 333-214589).
(8) Incorporated by reference to Exhibit 10.4 previously filed with Amendment No.1 to the Company’s Registration
Statement on Form S-1 filed July 17, 1997 (File No. 333-28987).
(9) Incorporated by reference to Exhibit 10.14 previously filed with the Company’s Form 10-K for the year ended May
31, 2001 filed August 29, 2001 (File No. 000-22893).
(10) Incorporated by reference to Exhibit 10.12 exhibit previously filed with the Company’s Form 10-K for the year
ended May 31, 1999 filed August 30, 1999 (File No. 000-22893).
(11) Incorporated by reference to Exhibit 10.15 previously filed with the Company’s Current Report on Form 8-K filed
May 9, 2008 (File No. 000-22893).
(12) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Current Report on Form 8-K filed
November 12, 2014 (File No. 000-22893).
(13) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Current Report on Form 8-K filed
March 2, 2018 (File No. 000-22893).
(14) Incorporated by reference to Exhibit No. 10.1 previously filed with the Company's Current Report on Form 8-K
filed January 9, 2012 (File No. 000-22893).
(15) Incorporated by reference to Exhibit No. 10.1 previously filed with the Company's Current Report on Form 8-K
filed March 8, 2013 (File No. 000-22893).
(16) Incorporated by reference to Exhibit No. 10.3 previously filed with the Company's Current Report on Form 8-K
filed January 9, 2012 (File No. 000-22893).
(17) Incorporated by reference to Exhibit No. 10.2 previously filed with the Company's Current Report on Form 8-K
filed March 8, 2013 (File No. 000-22893).
(18) Incorporated by reference to Exhibit 10.17 previously filed with the Company’s Annual Report on Form 10-K filed
August 29, 2016 (File No. 000-22893).
(19) Incorporated by reference to Exhibit 10.18 previously filed with the Company’s Annual Report on Form 10-K filed
August 29, 2016 (File No. 000-22893).
(20) Incorporated by reference to Exhibit 10.19 previously filed with the Company’s Annual Report on Form 10-K filed
August 29, 2017 (File No. 000-22893).
(21) Incorporated by reference to Exhibit 10.20 previously filed with the Company’s Annual Report on Form 10-K filed
August 29, 2017 (File No. 000-22893).
(22) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Current Report on Form 8-K filed
September 28, 2016 (File No. 000-22893).
(23) Incorporated by references to Exhibit 10.1 previously filed with the Company’s Current Report on Form 8-K filed
January 1, 2020 (File No. 000-22893).
(24) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Current Report on Form 8-K filed
April 28, 2020 (File No. 000-22893).
(25) Incorporated by reference to Exhibit 3.1 previously filed with the Company’s Current Report on Form 8-K filed
September 2, 2020 (File No. 000-22893).
(26) Incorporated by reference to Exhibit 10.1 previously filed with the Company’s Current Report on Form 8-K filed
January 14, 2021 (File No. 000-22893).
* Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to
participate.
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 27, 2021
AEHR TEST SYSTEMS
By: /s/ GAYN ERICKSON
---------------------------------------
Gayn Erickson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Gayn Erickson and Kenneth B. Spink, jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and
to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
-------------------------- ----------------------------------- -----------------
President, Chief Executive
Officer, and Director
/s/ GAYN ERICKSON (Principal Executive Officer) August 27, 2021
-------------------------- -----------------
Gayn Erickson Vice President of Finance
and Chief Financial Officer
/s/ KENNETH B. SPINK (Principal Financial and August 27, 2021
-------------------------- Accounting Officer) -----------------
Kenneth B. Spink
/s/ FARIBA DANESH Director August 27, 2021
-------------------------- -----------------
Fariba Danesh
/s/ LAURA OLIPHANT Director August 27, 2021
-------------------------- -----------------
Laura Oliphant
/s/ RHEA J. POSEDEL Chairman August 27, 2021
-------------------------- -----------------
Rhea J. Posedel
/s/ MARIO M. ROSATI Director August 27, 2021
-------------------------- -----------------
Mario M. Rosati
/s/ GEOFFREY G. SCOTT Director August 27, 2021
-------------------------- -----------------
Geoffrey G. Scott
/s/ HOWARD T. SLAYEN Director August 27, 2021
-------------------------- -----------------
Howard T. Slayen
61
DESCRIPTION OF SECURITIES
Exhibit 4.3
The following summary of the terms of our capital stock is based upon our Restated Articles of Incorporation (the “Articles of Incorporation”)
and our Amended and Restated Bylaws (the “Bylaws”). The summary is not complete, and is qualified by reference to our Articles of
Incorporation and Bylaws which are filed as exhibits to this Annual Report on Form 10-K and are incorporated by reference herein. We
encourage you to read our Articles of Incorporation, our Bylaws and the applicable provisions of the California Corporations Code for additional
information.
Authorized Shares of Capital Stock
Our authorized capital stock consists of 75 million shares of common stock, $0.01 par value, and 10 million shares of
preferred stock, $0.01 par value.
Listing
Our common stock is listed and principally traded on The Nasdaq Capital Market under the symbol “AEHR.”
Voting Rights
Each holder of shares of our common stock is entitled to one vote for each share held of record by such holder on the
applicable record date on all matters submitted to a vote of shareholders. At a shareholders' meeting at which directors
are to be elected, no shareholder shall be entitled to cumulate votes unless the candidates' names have been placed in
nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the
voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder
entitled to vote may cumulate votes for candidates placed in nomination and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are entitled,
or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks
fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. On
all other matters submitted to the shareholders, the affirmative vote of the majority of the voting power of the shares
present in person or represented by proxy and entitled to vote shall be the act of the shareholders.
Dividend Rights
Subject to any preferential dividend rights granted to the holders of any shares of our preferred stock that may at the time
be outstanding, holders of our common stock are entitled to receive dividends as may be declared from time to time by
our board of directors out of funds legally available therefor.
Rights upon Liquidation
Subject to any preferential rights of outstanding shares of preferred stock, holders of our common stock are entitled to
share pro rata, upon any liquidation or dissolution of Aehr, in all remaining assets legally available for distribution to
shareholders.
Other Rights and Preferences
Our common stock has no sinking fund, redemption provisions, or preemptive, conversion, or exchange rights. Special
meetings of shareholders may be called by shareholders holding shares representing not less than 10% of the outstanding
votes entitled to vote at the meeting. Holders of our common stock may also act by unanimous written consent.
Transfer Agent and Registrar
Computershare Trust Company, N.A. is the transfer agent and registrar for our common stock.
Certain Anti-Takeover Effects
As a California corporation, Aehr is subject to the provisions of Section 1203 of the California General Corporation Law,
which requires it to provide a fairness opinion to its shareholders in connection with their consideration of any proposed
“interested party” reorganization transaction.
62
SUBSIDIARIES OF AEHR TEST SYSTEMS
Exhibit 21.1
1. Aehr Test Systems GmbH, incorporated in Germany
2. Aehr Test Systems Philippines Inc., incorporated in Philippines
63
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-
216792, 333-214218 and 333-204008) and the Registration Statements on Form S-8 (No. 333-250175, 333-235105, 333-
228509, 333-214589, 333-208130, 333-200442, 333-184865, 333-177954, 333-163100, 333-155389, 333-138249, 333-
119636, 333-52592 and 333-40577) of Aehr Test Systems of our report dated August 27, 2021 relating to the
consolidated financial statements, which appears in this Form 10-K.
Exhibit 23.1
/s/ BPM LLP
San Jose, California
August 27, 2021
64
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT
I, Gayn Erickson, certify that:
1. I have reviewed this annual report on Form 10-K of Aehr Test Systems;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: August 27, 2021
/s/ GAYN ERICKSON
-----------------------------------------------
Gayn Erickson
President and Chief Executive Officer
(Principal Executive Officer)
65
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT
I, Kenneth B. Spink, certify that:
1. I have reviewed this annual report on Form 10-K of Aehr Test Systems;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: August 27, 2021
/s/ KENNETH B. SPINK
--------------------------------------------------------------------
Kenneth B. Spink
Vice President of Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
66
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gayn Erickson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report of Aehr Test Systems on Form 10-K for the period ending May 31,
2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial
condition and results of operations of Aehr Test Systems.
Date: August 27, 2021
By:
/s/ GAYN ERICKSON
----------------------------------------------------------------
Gayn Erickson
President and Chief Executive Officer
(Principal Executive Officer)
I, Kenneth B. Spink, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report of Aehr Test Systems on Form 10-K for the period ending May 31,
2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial
condition and results of operations of Aehr Test Systems.
Date: August 27, 2021
By:
/s/ KENNETH B. SPINK
-----------------------------------------------------------------
Kenneth B. Spink
Vice President of Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
The foregoing certifications are not deemed filed with the Securities and Exchange Commission for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), and are not to be incorporated by
reference into any filing of Aehr Test Systems under the Securities Act of 1933, as amended, or the Exchange Act,
whether made before or after the date hereof, regardless of any general incorporation language in such filing.
67
DIRECTORS Rhea J. Posedel Chairman Gayn Erickson President Chief Executive Officer Fariba Danesh(2) Chief Operating Officer PsiQuantum Advisory to Photonics corps Laura Oliphant (1) (2) (3) Independent consultant and investor Mario M. Rosati (3) Retired Member Wilson Sonsini Goodrich & Rosati, Professional Corporation Geoffrey G. Scott (1) (3) Private Investor Howard T. Slayen (1) (2) Retired Partner PricewaterhouseCoopers (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Corporate Governance and Nominating Committee OFFICERS Gayn Erickson President Chief Executive OfficerKenneth B. Spink Vice President of Finance Chief Financial Officer Michael Brannan Vice President of Operations David S. Hendrickson Chief Technology Officer Donald P. Richmond II Vice President of Engineering Vernon Rogers Executive V.P. of Sales and Marketing CORPORATE HEADQUARTERS 400 Kato Terrace Fremont, CA 94539 Telephone: 510.623.9400 Fax: 510.623.9450 Website: www.aehr.com SUBSIDIARIES Aehr Test SystemsPhilippines Inc. Bldg. 10 Berthaphil II South Industrial Park, Manunggal Street, Clark Freeport Zone, Pampanga, 2023 Philippines Telephone: 63.454994671 Email: atsphsupport@aehr.com Aehr Test Systems GmbH Industriestrasse 9 D-86919 Utting Germany Telephone: 49.8806.2021 Fax: 49.8806.2024 Email: atsg@aehr.com SHAREHOLDER INFORMATION Legal Counsel Latham & Watkins, LLP Menlo Park, CA Independent Registered Public Accounting Firm BPM LLP San Jose, CA Transfer Agent and Registrar Computershare Trust Company, N.A. P. O. Box 505000 Louisville, KY 40233-5000 Toll free: 800.962.4284 (US, Canada, Puerto Rico) 781.575.3100 (non-US) Investor Relations MKR Group, Inc. Telephone: 323.468.2300 Email: aehr@mkr-group.com Annual Meeting The annual meeting of shareholders will be held at 4:00 p.m. on October 19, 2021 at the Company’s Corporate Headquarters. CORPORATE INFORMATION Aehr Test Systems’ corporate headquarters has been certified to the International Standards Organization (ISO) 9001 standard since 1997. CORPORATE HEADQUARTERS
400 KATO TERRACE
FREMONT, CA 94539
TELEPHONE: 510.623.9400
FAX: 510.623.9450
WEB: WWW.AEHR.COM