AEHR TEST SYSTEMS
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10-Q
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly
period ended February 29, 2020
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)
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California
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94-2424084
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(State or other
jurisdiction of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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400 Kato
Terrace
Fremont,
CA
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94539
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(Address of
principal executive offices)
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(Zip
Code)
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(510)
623-9400
(Registrant's
telephone number, including area code)
Indicate by check
mark whether the registrant (1) has filed all reports
required to be
filed by Section 13 or 15(d) of the Securities Exchange Act
of
1934 during the
preceding 12 months (or for such shorter period that the
registrant was
required to file such reports), and (2) has been subject to
such
filing requirements for the past 90 days. Yes ☒ No
☐
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes ☒ No ☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated
filer ☐
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Accelerated filer
☐
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Non-accelerated
filer ☒
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Smaller reporting
company ☒
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Emerging growth
company ☐
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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 is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ☐ No ☒
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Trading
Symbol(s)
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Name
of each exchange on which registered
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Common
Stock
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AEHR
|
The
NASDAQ Capital Market
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Number
of shares of the registrant’s common stock, $0.01 par value,
outstanding as of March 31, 2020 was 23,014,962.
2
AEHR
TEST SYSTEMS
FORM
10-Q
FOR THE
QUARTER ENDED FEBRUARY 29, 2020
INDEX
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3
PART I.
F
INANCIAL INFORMATION
Item
1
.
FINANCIAL STATEMENTS
(Unaudited)
AEHR
TEST SYSTEMS
CONDENSED
CONSOLIDATED
B
ALANCE SHEETS
(in
thousands, except per share data)
(unaudited)
|
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February 29,
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May 31,
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2020
|
2019
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(1)
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$
5,058
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$
5,428
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Accounts
receivable, net
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3,511
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4,859
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Inventories
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9,330
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9,061
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Prepaid
expenses and other current assets
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586
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686
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Total
current assets
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18,485
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20,034
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Property
and equipment, net
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783
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1,045
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Operating
lease right-of-use assets
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2,260
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--
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Other
assets
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160
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228
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Total
assets
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$
21,688
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$
21,307
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable
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$
925
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$
1,933
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Accrued
expenses
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1,373
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2,034
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Operating
lease liabilities, short-term
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644
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--
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Customer
deposits and deferred revenue, short-term
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385
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1,545
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Total
current liabilities
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3,327
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5,512
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Operating
lease liabilities, long-term
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1,772
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--
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Deferred
rent
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--
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153
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Deferred
revenue, long-term
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34
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189
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Total
liabilities
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5,133
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5,854
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Aehr
Test Systems shareholders' equity:
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Common stock, $0.01 par value:
Authorized: 75,000 shares;
Issued
and outstanding: 23,015 shares and
22,669
shares at February 29, 2020 and
May
31, 2019, respectively
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230
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227
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Additional
paid-in capital
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85,530
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84,499
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Accumulated
other comprehensive income
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2,216
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2,230
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Accumulated
deficit
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(71,401
)
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(71,484
)
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Total
Aehr Test Systems shareholders' equity
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16,575
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15,472
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Noncontrolling
interest
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(20
)
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(19
)
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Total
shareholders' equity
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16,555
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15,453
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Total
liabilities and shareholders' equity
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$
21,688
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$
21,307
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(1)
The condensed
consolidated balance sheet at May 31, 2019 has been derived
from
the audited consolidated financial statements at that
date.
The
accompanying notes are an integral part of these
condensed
consolidated financial statements.
4
AEHR
TEST SYSTEMS
CONDENSED
CONSOLIDATED STATEMENTS OF
O
PERATIONS
(in
thousands, except per share data)
(unaudited)
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Three Months Ended
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Nine Months Ended
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February 29,
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February 28,
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February 29,
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February 28,
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2020
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2019
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2020
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2019
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Net
sales
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$
6,111
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$
3,163
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$
18,518
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$
13,814
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Cost
of sales
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3,120
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2,891
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10,054
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9,591
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Gross
profit
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2,991
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272
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8,464
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4,223
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Operating
expenses:
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Selling,
general and administrative
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1,891
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1,850
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5,856
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5,706
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Research
and development
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845
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931
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2,532
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3,033
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Restructuring
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--
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607
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--
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607
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Total
operating expenses
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2,736
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3,388
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8,388
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9,346
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Income
(loss) from operations
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255
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(3,116
)
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76
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(5,123
)
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Interest
income (expense), net
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13
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(76
)
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27
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(228
)
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Other
(expense) income, net
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(9
)
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(11
)
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6
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27
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Income
(loss) before income tax
(expense)
benefit
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259
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(3,203
)
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109
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(5,324
)
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Income
tax (expense) benefit
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(14
)
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2
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(26
)
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(21
)
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Net
income (loss)
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245
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(3,201
)
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83
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(5,345
)
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Less:
Net income attributable to the noncontrolling interest
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--
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--
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--
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--
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Net income (loss)
attributable to Aehr
Test
Systems common shareholders
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$
245
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$
(3,201
)
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$
83
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$
(5,345
)
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Net
income (loss) per share
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Basic
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$
0.01
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$
(0.14
)
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$
0.00
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$
(0.24
)
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Diluted
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$
0.01
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$
(0.14
)
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$
0.00
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$
(0.24
)
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Shares
used in per share calculations:
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Basic
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22,937
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22,459
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22,823
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22,314
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Diluted
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23,130
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22,459
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22,940
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22,314
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The
accompanying notes are an integral part of these
condensed
consolidated financial statements.
5
AEHR
TEST SYSTEMS
CONDENSED
CONSOLIDATED STATEMENTS OF
C
OMPREHENSIVE INCOME (LOSS)
(in
thousands, unaudited)
|
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Three Months Ended
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Nine Months Ended
|
||
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February 29,
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February 28,
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February 29,
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February 28,
|
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2020
|
2019
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2020
|
2019
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Net income
(loss)
|
$
245
|
$
(3,201
)
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$
83
|
$
(5,345
)
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Other comprehensive
income (loss), net of tax:
Net change in
cumulative translation adjustments
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5
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10
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(15
)
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(39
)
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Total comprehensive
income (loss)
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250
|
(3,191
)
|
68
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(5,384
)
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Less: Comprehensive
(loss) income attributable to noncontrolling interest
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--
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(1
)
|
(1
)
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1
|
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Comprehensive
income (loss)
, attributable
to
Aehr
Test Systems
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$
250
|
$
(3,190
)
|
$
69
|
$
(5,385
)
|
The
accompanying notes are an integral part of these
condensed
consolidated financial statements.
6
AEHR
TEST SYSTEMS
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
E
QUITY
(in
thousands)
(unaudited)
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Total
Aehr
|
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Accumulated
|
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Test
|
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Additional
|
Other
|
|
Systems
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Total
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Common
Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
Shareholders’
|
Noncontrolling
|
Shareholders'
|
|
|
Three Months Ended February 29,
2020
|
Shares
|
Amount
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Capital
|
Income
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Deficit
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Equity
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Interest
|
Equity
|
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Balances,
November 30, 2019
|
22,914
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$
229
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$
85,194
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$
2,211
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$
(71,646
)
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$
15,988
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$
(20
)
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$
15,968
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Issuance of common stock
under
employee plans
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101
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1
|
129
|
--
|
--
|
130
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--
|
130
|
|
Stock-based compensation
|
--
|
--
|
207
|
--
|
--
|
207
|
--
|
207
|
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Net income
|
--
|
--
|
--
|
--
|
245
|
245
|
--
|
245
|
|
Foreign currency
translation
adjustment
|
--
|
--
|
--
|
5
|
--
|
5
|
--
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5
|
|
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Balances,
February 29, 2020
|
23,015
|
$
230
|
$
85,530
|
$
2,216
|
$
(71,401
)
|
$
16,575
|
$
(20
)
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$
16,555
|
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Total Aehr
|
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Accumulated
|
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Test
|
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Additional
|
Other
|
|
Systems
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Total
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Common
Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
Shareholders’
|
Noncontrolling
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Shareholders'
|
|
|
Nine Months Ended February 29,
2020
|
Shares
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Amount
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Capital
|
Income
|
Deficit
|
Equity
|
Interest
|
Equity
|
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Balances,
May 31, 2019
|
22,669
|
$
227
|
$
84,499
|
$
2,230
|
$
(71,484
)
|
$
15,472
|
$
(19
)
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$
15,453
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Issuance of common stock
under
employee plans
|
346
|
3
|
420
|
--
|
--
|
423
|
--
|
423
|
|
Stock-based compensation
|
--
|
--
|
611
|
--
|
--
|
611
|
--
|
611
|
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Net
income
|
--
|
--
|
--
|
--
|
83
|
83
|
--
|
83
|
|
Foreign currency
translation
adjustment
|
--
|
--
|
--
|
(14
)
|
--
|
(14
)
|
(1
)
|
(15
)
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Balances,
February 29, 2020
|
23,015
|
$
230
|
$
85,530
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$
2,216
|
$
(71,401
)
|
$
16,575
|
$
(20
)
|
$
16,555
|
|
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Total
Aehr
|
|
|
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Accumulated
|
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Test
|
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Additional
|
Other
|
|
Systems
|
|
Total
|
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|
Common
Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
Shareholders’
|
Noncontrolling
|
Shareholders'
|
|
|
Three Months Ended February 28,
2019
|
Shares
|
Amount
|
Capital
|
Income
|
Deficit
|
Equity
|
Interest
|
Equity
|
|
Balances,
November 30, 2018
|
22,356
|
$
224
|
$
83,830
|
$
2,241
|
$
(68,393
)
|
$
17,902
|
$
(18
)
|
$
17,884
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee
plans
|
206
|
2
|
121
|
--
|
--
|
123
|
--
|
123
|
|
Stock-based
compensation
|
--
|
--
|
225
|
--
|
--
|
225
|
--
|
225
|
|
Net
loss
|
--
|
--
|
--
|
--
|
(3,201
)
|
(3,201
)
|
--
|
(3,201
)
|
|
Foreign currency translation adjustment
|
--
|
--
|
--
|
11
|
--
|
11
|
(1
)
|
10
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
February 28, 2019
|
22,562
|
$
226
|
$
84,176
|
$
2,252
|
$
(71,594
)
|
$
15,060
|
$
(19
)
|
$
15,041
|
|
|
|
|
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Total Aehr
|
|
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Accumulated
|
|
Test
|
|
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|
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Additional
|
Other
|
|
Systems
|
|
Total
|
|
|
|
Common Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
Shareholders’
|
Noncontrolling
|
Shareholders'
|
|
|
Nine Months Ended February 28,
2019
|
Shares
|
Amount
|
Capital
|
Income
|
Deficit
|
Equity
|
Interest
|
Equity
|
|
Balances,
May 31, 2018
|
22,143
|
$
221
|
$
83,041
|
$
2,292
|
$
(66,249
)
|
$
19,305
|
$
(20
)
|
$
19,285
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee
plans
|
419
|
5
|
430
|
--
|
--
|
435
|
--
|
435
|
|
Stock-based
compensation
|
--
|
--
|
705
|
--
|
--
|
705
|
--
|
705
|
|
Net
loss
|
--
|
--
|
--
|
--
|
(5,345
)
|
(5,345
)
|
--
|
(5,345
)
|
|
Net
unrealized loss on investments
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
Foreign currency translation adjustment
|
--
|
--
|
--
|
(40
)
|
--
|
(40
)
|
1
|
(39
)
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
February 28, 2019
|
22,562
|
$
226
|
$
84,176
|
$
2,252
|
$
(71,594
)
|
$
15,060
|
$
(19
)
|
$
15,041
|
The
accompanying notes are an integral part of these
condensed
consolidated financial statements.
7
AEHR
TEST SYSTEMS
CONDENSED
CONSOLIDATED STATEMENTS OF
C
ASH
FLOWS
(in
thousands)
(unaudited)
|
|
Nine Months
Ended
|
|
|
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
|
Cash
flows from operating activities:
|
|
|
|
Net
income (loss)
|
$
83
|
$
(5,345
)
|
|
Adjustments to reconcile net income (loss) to
net
cash used in operating activities:
|
|
|
|
Stock-based
compensation expense
|
611
|
705
|
|
Recovery
of doubtful accounts
|
--
|
(3
)
|
|
Depreciation
and amortization
|
298
|
333
|
|
Gain
on disposal of fixed asset
|
(2
)
|
--
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
1,360
|
871
|
|
Inventories
|
(157
)
|
(121
)
|
|
Prepaid expenses and other assets
|
170
|
(47
)
|
|
Accounts
payable
|
(1,033
)
|
(1,132
)
|
|
Accrued
expenses
|
(674
)
|
431
|
|
Customer
deposits and deferred revenue
|
(1,315
)
|
(582
)
|
|
Deferred
rent
|
--
|
88
|
|
Income
taxes payable
|
19
|
9
|
|
|
|
|
|
Net
cash used in operating activities
|
(640
)
|
(4,793
)
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Purchases
of property and equipment
|
(151
)
|
(124
)
|
|
Proceeds
from sales of property and equipment
|
2
|
--
|
|
|
|
|
|
Net
cash used in investing activities
|
(149
)
|
(124
)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
Proceeds from issuance of common stock
under
employee plans, net of taxes paid related to share settlement of
equity awards
|
423
|
435
|
|
|
|
|
|
Net cash provided by financing activities
|
423
|
435
|
|
|
|
|
|
Effect
of exchange rates on cash and cash equivalents
|
(4
)
|
(66
)
|
|
|
|
|
|
Net decrease in cash, cash equivalent and
restricted
cash
|
(370
)
|
(4,548
)
|
|
|
|
|
|
Cash,
cash equivalents and restricted cash, beginning of
period
|
5,508
|
16,848
|
|
|
|
|
|
Cash,
cash equivalents and restricted cash, end of period
|
$
5,138
|
$
12,300
|
|
Supplemental
disclosure of non-cash flow information:
|
|
|
|
Transfers
of property and equipment to inventories
|
$
112
|
$
20
|
The
accompanying notes are an integral part of these
condensed
consolidated financial statements.
8
AEHR
TEST SYSTEMS
N
OTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCCOUNTING
POLICIES
The
accompanying financial information has been prepared by Aehr Test
Systems, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the “SEC”).
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles in the United States (“GAAP”)
have been condensed or omitted pursuant to such rules and
regulations.
In
the opinion of management, the unaudited condensed consolidated
financial statements for the interim periods presented have been
prepared on a basis consistent with the May 31, 2019 audited
consolidated financial statements and reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of the condensed consolidated financial position and
results of operations as of and for such periods indicated. These
unaudited condensed consolidated financial statements and notes
thereto should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 2019.
Results for the interim periods presented herein are not
necessarily indicative of results which may be reported for any
other interim period or for the entire fiscal year.
PRINCIPLES
OF CONSOLIDATION. The condensed consolidated financial statements
include the accounts of Aehr Test Systems and its subsidiaries
(collectively, the "Company"). All significant intercompany
balances have been eliminated in consolidation. For the
Company’s majority owned subsidiary, Aehr Test Systems Japan
K.K., the noncontrolling interest of the portion the Company does
not own was reflected on the Condensed Consolidated Balance Sheets
in Shareholders’ Equity and in the Condensed Consolidated
Statements of Operations.
ACCOUNTING
ESTIMATES. The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Estimates are used to account
for sales and revenue allowances, the allowance for doubtful
accounts, inventory valuations, income taxes, stock-based
compensation expenses, and product warranties, among others. The
Company bases its estimates on historical experience and on various
other assumptions that it believes to be reasonable under the
circumstances. Actual results could differ materially from those
estimates.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES. The Company’s significant
accounting policies are disclosed in the Company’s Annual
Report on Form 10-K for the year ended May 31, 2019.
There have been no
significant changes in the Company’s significant accounting
policies during the three and nine months ended February 29, 2020,
except for the adoption of Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Update No. 2016-02, Leases, as discussed in
Note “2. RECENT ACCOUNTING
PRONOUNCEMENTS.”
9
2.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting
Standards Adopted
Financial
Instruments
In
January 2016, the FASB issued an accounting standard update related
to the recognition and measurement of financial assets and
financial liabilities. This standard changes accounting for equity
investments and financial liabilities under the fair value option
and the presentation and disclosure requirements for financial
instruments. In addition, this standard clarifies guidance related
to the valuation allowance assessment when recognizing deferred tax
assets resulting from unrealized losses on available-for-sale debt
securities. The Company adopted this new standard in fiscal year
2020. The adoption of this standard did not have a significant
impact on the Company’s consolidated financial
statements.
Leases
In
February 2016, the FASB issued ASC Update No. 2016-02, Leases (FASB
ASC Topic 842, Leases). The Company adopted the standard as of June
1, 2019, using the modified retrospective approach and the
transition method provided by ASC Update No. 2018-11, Leases (Topic
842): Targeted Improvements. Under this method, the Company applied
the new leasing rules on the date of adoption and recognized the
cumulative effect of initially applying the standard as an
adjustment to its opening balance sheet, rather than at the
earliest comparative period presented in the financial statements.
Prior periods presented are in accordance with the previous lease
guidance under FASB ASC Topic 840, Leases.
In
addition, the Company applied the package of practical expedients
permitted under FASB ASC Topic 842 transition guidance to its
entire lease portfolio at June 1, 2019. As a result, the Company
was not required to reassess (i) whether any expired or existing
contracts are or contain leases, (ii) the classification of any
expired or existing leases or (iii) the treatment of initial direct
costs for any existing leases. Furthermore, the Company elected not
to separate lease and non-lease components for the majority of its
leases. Instead, for all applicable classes of underlying assets,
the Company accounted for each separate lease component and the
non-lease components associated with that lease component as a
single lease component.
As
a result of adopting FASB ASC Topic 842, Leases, on June 1, 2019,
the Company recognized right-of-use assets of $2.7 million and
corresponding liabilities of $2.8 million for its existing
operating lease portfolio on its unaudited condensed consolidated
balance sheet. Operating lease right-of-use assets are presented
within Operating lease right-of-use assets and corresponding
liabilities are presented within Operating lease liabilities,
short-term and Operating lease liabilities, long-term on the
Company’s unaudited condensed consolidated balance sheet.
There was no material impact to the Company’s unaudited
condensed consolidated statements of operations or unaudited
condensed consolidated statements of cash flows as a result of FASB
ASC Topic 842, Leases. Please refer to Note “11.
LEASES” for information regarding the Company’s lease
portfolio as of February 29, 2020 as accounted for under FASB ASC
Topic 842, Leases.
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.
10
3.
REVENUE
Revenue recognition
The
Company recognizes revenue when promised goods or services are
transferred to customers in an amount that reflects the
consideration to which the Company expects to be entitled in
exchange for those goods or services by following a five-step
process: (1) identify the contract with a customer, (2) identify
the performance obligations in the contract, (3) determine the
transaction price, (4) allocate the transaction price, and (5)
recognize revenue when or as the Company satisfies a performance
obligation, as further described below.
Performance
obligations include sales of systems, contactors, spare parts, and
services, as well as installation and training services included in
customer contracts.
A
contract’s transaction price is allocated to each distinct
performance obligation. In determining the transaction price, the
Company evaluates whether the price is subject to refund or
adjustment to determine the net consideration to which the Company
expects to be entitled. The Company generally does not grant return
privileges, except for defective products during the warranty
period.
For
contracts that contain multiple performance obligations, the
Company allocates the transaction price to the performance
obligations on a relative standalone selling price basis.
Standalone selling prices are based on multiple factors including,
but not limited to, historical discounting trends for products and
services and pricing practices in different
geographies.
Revenue
for systems and spares are recognized at a point in time, which is
generally upon shipment or delivery. Revenue from services is
recognized over time as services are completed or ratably over the
contractual period of generally one year or less.
The
Company has elected the practical expedient to not assess whether a
contract has a significant financing component as the
Company’s standard payment terms are less than one
year.
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.
11
The
Company’s revenues by product category are as follows (in
thousands):
|
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
|
February
29,
|
February
28,
|
February
29,
|
February
28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
Type
of good / service:
|
|
|
|
|
|
Systems
|
$
2,138
|
$
404
|
$
8,099
|
$
5,922
|
|
Contactors
|
3,094
|
1,445
|
7,790
|
3,541
|
|
Services
|
879
|
1,314
|
2,629
|
4,351
|
|
|
$
6,111
|
$
3,163
|
$
18,518
|
$
13,814
|
|
|
|
|
|
|
|
Product
lines:
|
|
|
|
|
|
Wafer-level
|
$
5,408
|
$
2,046
|
$
16,570
|
$
8,240
|
|
Test
During Burn-In
|
703
|
1,117
|
1,948
|
5,574
|
|
|
$
6,111
|
$
3,163
|
$
18,518
|
$
13,814
|
The
following presents information about the Company’s operations
in different geographic areas. Net sales are based upon ship-to
location (in thousands):
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
Geographic
region:
|
|
|
|
|
|
United
States
|
$
5,014
|
$
2,203
|
$
12,698
|
$
9,407
|
|
Asia
|
891
|
746
|
4,758
|
3,814
|
|
Europe
|
206
|
214
|
1,062
|
593
|
|
|
$
6,111
|
$
3,163
|
$
18,518
|
$
13,814
|
With the exception
of the amount of service contracts and extended warranties, the
Company’s product category revenues are recognized at a point
in time when control transfers to customers. The following presents
revenue based on timing of recognition (in thousands):
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
Timing
of revenue recognition:
|
|
|
|
|
|
Products
and services transferred
at
a point in time
|
$
5,485
|
$
2,507
|
$
16,666
|
$
11,897
|
|
Services
transferred over time
|
626
|
656
|
1,852
|
1,917
|
|
|
$
6,111
|
$
3,163
|
$
18,518
|
$
13,814
|
12
A
receivable is recognized in the period the Company delivers goods
or provides services or when the Company’s right to
consideration is unconditional. The Company usually does not record
contract assets because the Company has an unconditional right to
payment upon satisfaction of the performance obligation, and
therefore, a receivable is more commonly recorded than a contract
asset.
Contract
liabilities include payments received in advance of performance
under a contract and are satisfied as the associated revenue is
recognized. Contract liabilities are reported on the Condensed
Consolidated Balance Sheets at the end of each reporting period as
a component of deferred revenue. Contract liabilities as of
February 29, 2020 and May 31, 2019 were $419,000 and $1,734,000,
respectively. During the three and nine months ended February 29,
2020, the Company recognized $135,000 and $1,316,000 respectively,
of revenues that were included in contract liabilities as of May
31, 2019.
Remaining performance obligations
On
February 29, 2020, the Company had $284,000 of remaining
performance obligations, which were comprised of deferred service
contracts and extended warranty contracts not yet delivered. The
Company expects to recognize approximately 33% of its remaining
performance obligations as revenue in fiscal 2020, and an
additional 67% in fiscal 2021 and thereafter. The foregoing
excludes the value of other remaining performance obligations as
they have original durations of one year or less, and also excludes
information about variable consideration allocated entirely to a
wholly unsatisfied performance obligation.
Costs to obtain or fulfill a contract
The
Company generally expenses sales commissions when incurred as a
component of selling, general and administrative expense as the
amortization period is typically less than one year. Additionally,
the majority of the Company’s cost of fulfillment as a
manufacturer of products is classified as inventory and fixed
assets, which are accounted for under the respective guidance for
those asset types. Other costs of contract fulfillment are
immaterial due to the nature of the Company’s products and
their respective manufacturing process.
4.
EARNINGS PER SHARE
Basic
earnings per share is determined using the weighted average number
of common shares outstanding during the period. Diluted earnings
per share is determined using the weighted average number of common
shares and potential common shares (representing the dilutive
effect of stock options, RSUs and Amended and Restated 2006
Employee Stock Purchase Plan (“ESPP”) shares)
outstanding during the period using the treasury stock
method.
The
following table presents the computation of basic and diluted net
income (loss) per share attributable to Aehr Test Systems common
shareholders (in thousands, except per share data):
13
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Numerator:
Net income (loss)
|
$
245
|
$
(3,201
)
|
$
83
|
$
(5,345
)
|
|
|
|
|
|
|
|
Denominator
for basic net income (loss) per share:
|
|
|
|
|
|
Weighted
average shares outstanding
|
22,937
|
22,459
|
22,823
|
22,314
|
|
|
|
|
|
|
|
Shares
used in basic net income
(loss)
per share calculation
|
22,937
|
22,459
|
22,823
|
22,314
|
|
Effect
of dilutive securities
|
193
|
--
|
117
|
--
|
|
|
|
|
|
|
|
Denominator
for diluted net income
(loss)
per share
|
23,130
|
22,459
|
22,940
|
22,314
|
|
|
|
|
|
|
|
Basic
net income (loss) per share
|
$
0.01
|
$
(0.14
)
|
$
0.00
|
$
(0.24
)
|
|
Diluted
net income (loss) per share
|
$
0.01
|
$
(0.14
)
|
$
0.00
|
$
(0.24
)
|
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 periods presented, as
the effect would be anti-dilutive. Stock options to purchase
2,505,000 shares of common stock were outstanding as of February
29, 2020 but were not included in the computation of diluted net
income per share for the periods, because the inclusion of such
shares would be anti-dilutive. In the three and nine months ended
February 28, 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 3,220,000
shares of common stock, and 34,000 RSUs under the Company’s
2016 Equity Incentive Plan (“2016 Plan”) and rights to
purchase 327,000 ESPP shares were outstanding as of February 28,
2019 but were not included in the computation of diluted net loss
per share for the periods, because the inclusion of such shares
would be anti-dilutive. The 2,657,000 shares convertible under the
convertible notes outstanding at February 28, 2019 were not
included in the computation of diluted net income (loss) per share
for the periods presented, because the inclusion of such shares
would be anti-dilutive.
5. FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
Company’s financial instruments are measured at fair value
consistent with authoritative guidance. This authoritative guidance
defines fair value, establishes a framework for using fair value to
measure assets and liabilities, and disclosures required related to
fair value measurements.
The
guidance establishes a fair value hierarchy based on inputs to
valuation techniques that are used to measure fair value that are
either observable or unobservable. Observable inputs reflect
assumptions market participants would use in pricing an asset or
liability based on market data obtained from independent sources
while unobservable inputs reflect a reporting entity’s
pricing based upon their own market assumptions. The fair value
hierarchy consists of the following three levels:
14
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 February 29, 2020
(in thousands):
|
|
Balance as of
|
|
|
|
|
|
February 29
,
2020
|
Level 1
|
Level 2
|
Level 3
|
|
Money
market funds
|
$
80
|
$
80
|
$
--
|
$
--
|
|
Assets
|
$
80
|
$
80
|
$
--
|
$
--
|
The
following table summarizes the Company’s financial assets
measured at fair value on a recurring basis as of May 31, 2019 (in
thousands):
|
|
Balance as of
May 31, 2019
|
Level 1
|
Level 2
|
Level 3
|
|
Money
market funds
|
$
3,017
|
$
3,017
|
$
--
|
$
--
|
|
Assets
|
$
3,017
|
$
3,017
|
$
--
|
$
--
|
Included in Money market funds as of February 29, 2020 and
May 31, 2019 is $80,000 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 February
29, 2020 and May 31, 2019.
There
were no transfers between Level 1 and Level 2 fair value
measurements during the three and nine months ended February 29,
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.
6.
ACCOUNTS RECEIVABLE, NET
Accounts receivable
represent customer trade receivables. As of February 29, 2020 and
May 31, 2019, there were no allowances 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. The Company’s allowance for doubtful
accounts is based upon historical experience and review of trade
receivables by aging category to identify specific customers with
known disputes or collection issues. Uncollectible receivables are
recorded as bad debt expense when all efforts to collect have been
exhausted and recoveries are recognized when they are
received.
15
7.
INVENTORIES
Inventories
are comprised of the following (in thousands):
|
|
February 29,
|
May 31,
|
|
|
2020
|
2019
|
|
Raw
materials and sub-assemblies
|
$
6,449
|
$
5,471
|
|
Work
in process
|
2,875
|
3,580
|
|
Finished
goods
|
6
|
10
|
|
|
$
9,330
|
$
9,061
|
8.
PRODUCT WARRANTIES
The
Company provides for the estimated cost of product warranties at
the time revenues are recognized on the products shipped. While the
Company engages in extensive product quality programs and
processes, including actively monitoring and evaluating the quality
of its component suppliers, the Company’s warranty obligation
is affected by product failure rates, material usage and service
delivery costs incurred in correcting a product failure. Should
actual product failure rates, material usage or service delivery
costs differ from the Company’s estimates, revisions to the
estimated warranty liability would be required.
The
standard warranty period is one year for systems and ninety days
for parts and service.
The
following is a summary of changes in the Company's liability for
product warranties during the three and nine months ended February
29, 2020 and February 28, 2019 (in thousands):
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Balance
at the beginning of the period
|
$
190
|
$
163
|
$
154
|
$
135
|
|
|
|
|
|
|
|
Accruals
for warranties issued
during
the period
|
26
|
30
|
167
|
176
|
|
Consumption
of reserves
|
(30
)
|
(30
)
|
(135
)
|
(148
)
|
|
|
|
|
|
|
|
Balance
at the end of the period
|
$
186
|
$
163
|
$
186
|
$
163
|
The
accrued warranty balance is included in accrued expenses on the
accompanying condensed consolidated balance sheets.
9.
CUSTOMER DEPOSITS AND DEFERRED REVENUE, SHORT-TERM
Customer
deposits and deferred revenue, short-term (in
thousands):
|
|
February 29,
|
May 31,
|
|
|
2020
|
2019
|
|
Customer
deposits
|
$
135
|
$
1,003
|
|
Deferred
revenue
|
250
|
542
|
|
|
$
385
|
$
1,545
|
16
10.
INCOME TAXES
Income
taxes have been provided using the liability method whereby
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and net operating loss and tax credit carryforwards
measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse or the
carryforwards are utilized. Valuation allowances are established
when it is determined that it is more likely than not that such
assets will not be realized.
Since
fiscal 2009, a full valuation allowance was established against all
deferred tax assets as management determined that it is more likely
than not that certain deferred tax assets will not be
realized.
The
Company accounts for uncertain tax positions consistent with
authoritative guidance. The guidance prescribes a “more
likely than not” recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return.
The Company does not expect any material change in its unrecognized
tax benefits over the next twelve months. The Company recognizes
interest and penalties related to unrecognized tax benefits as a
component of income taxes.
On
March 27, 2020, the “Coronavirus Aid, Relief and Economic
Security (CARES) Act” was signed into law. The Act includes
provisions relating to refundable payroll tax credits, deferment of
the employer portion of certain payroll taxes, net operating loss
carryback periods, alternative minimum tax credit refunds,
modifications to the net interest deduction limitations and
technical corrections to tax depreciation methods for qualified
improvement property. The Company is currently analyzing the impact
of these changes and therefore an estimate of the impact to income
taxes is not yet available.
11.
LEASES
The
Company has only operating leases for real estate including
corporate offices, warehouse space and certain equipment. A lease
with an initial term of 12 months or less is generally not recorded
on the condensed consolidated balance 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 to
3 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 3.4 years at February 29, 2020 and the
weighted-average discount rate was 5.5%.
17
The
Company’s operating lease cost was $183,000 and $548,000 for
the three and nine months ended February 29, 2020,
respectively.
The
following table presents supplemental cash flow information related
to the Company’s operating leases (in
thousands):
|
|
Three Months Ended
February 29, 2020
|
Nine Months Ended
February 29, 2020
|
|
Cash
paid for amounts included in the measurement of operating lease
liabilities
|
|
|
|
Operating
cash flows from operating leases
|
$
184
|
$
550
|
The
following table presents the maturities of the Company’s
operating lease liabilities as of February 29, 2020 (in
thousands):
|
Fiscal year
|
Operating Leases
|
|
2020
(excluding the first nine months of 2020)
|
$
187
|
|
2021
|
765
|
|
2022
|
779
|
|
2023
|
795
|
|
2024
|
132
|
|
Thereafter
|
--
|
|
Total
future minimum operating lease payments
|
$
2,658
|
|
Less:
imputed interest
|
242
|
|
Present
value of operating lease liabilities
|
$
2,416
|
12.
BORROWING AND FINANCING ARRANGEMENTS
On
January 16, 2020, the Company entered into a Loan and Security
Agreement (the “Loan Agreement”) with Silicon Valley
Bank (the “Bank”). 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. The borrowing base is 80% of
eligible accounts, as determined by the Bank from the
Company’s most recent borrowing base statement; provided,
however, the Bank 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. At February 29, 2020, the Company had not drawn
against the credit facility and was in compliance with all
covenants related to obligations to meet reporting requirements.
There are no financial covenants in the agreement.
18
13.
STOCK-BASED COMPENSATION
Stock-based
compensation expense consists of expenses for stock options,
restricted stock units (“RSUs”), and 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 cost is
based on the fair value of the Company’s common stock at the
grant date. All of the Company’s stock-based compensation is
accounted for as an equity instrument. See Note 10 in the
Company’s Annual Report on Form 10-K for fiscal 2019 filed on
August 28, 2019 for further information regarding the 2016 Plan and
the ESPP.
The
following table summarizes the stock-based compensation expense for
the three and nine months ended February 29, 2020 and February 28,
2019 (in thousands):
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February
29
,
|
February
28
,
|
February
29
,
|
February
28
,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
Stock-based
compensation in the form of employee stock options, RSUs and ESPP
purchase rights, included in:
|
|
|
|
|
|
Cost
of sales
|
$
19
|
$
24
|
$
58
|
$
83
|
|
Selling,
general and administrative
|
137
|
137
|
401
|
421
|
|
Research
and development
|
51
|
64
|
152
|
201
|
|
Total
stock-based compensation
|
$
207
|
$
225
|
$
611
|
$
705
|
As
of February 29,2020 and February 28, 2019, there were no
stock-based compensation expenses capitalized as part of
inventory.
During
the three months ended February 29, 2020 and February 28, 2019, the
Company recorded stock-based compensation expense related to stock
options and RSUs under 2016 Plan of $166,000 and $166,000,
respectively. During the nine months ended February 29, 2020 and
February 28, 2019, the Company recorded stock-based compensation
expense related to stock options and RSUs of $480,000 and $505,000,
respectively.
As
of February 29, 2020, the total compensation expense related to
unvested stock-based awards under the 2016 Plan, but not yet
recognized, was approximately $1,244,000, 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
2.7 years.
During
the three months ended February 29, 2020 and February 28, 2019, the
Company recorded stock-based compensation expense related to the
ESPP of $41,000 and $59,000, respectively. During the nine months
ended February 29, 2020 and February 28, 2019, the Company recorded
stock-based compensation expense related to the ESPP of $131,000
and $200,000, respectively.
As
of February 29, 2020, the total compensation expense related to
purchase rights under the ESPP but not yet recognized was
approximately $77,000. This expense will be amortized on a
straight-line basis over a weighted average period of approximately
0.8 years.
Valuation Assumptions
Valuation
and Amortization Method. The Company estimates the fair value of
stock options granted using the Black-Scholes option valuation
model and a single option award approach. The fair value under the
single option approach is amortized on a straight-line basis over
the requisite service periods of the awards, which is generally the
vesting period.
19
Expected
Term. The Company’s expected term represents the period that
the Company’s stock-based awards are expected to be
outstanding and was determined based on historical experience,
giving consideration to the contractual terms of the stock-based
awards, vesting schedules and expectations of future employee
behavior as evidenced by changes to the terms of its stock-based
awards.
Volatility.
Volatility is a measure of the amounts by which a financial
variable such as stock price has fluctuated (historical volatility)
or is expected to fluctuate (expected volatility) during a period.
The Company uses the historical volatility for the past four or
five years based on weighted average of the expected term of option
grants, to estimate expected volatility. Volatility for each of the
ESPP’s four time periods of six months, twelve months,
eighteen months, and twenty-four months is calculated separately
and included in the overall stock-based compensation expense
recorded.
Risk-Free
Interest Rate. The Company bases the risk-free interest rate used
in the Black-Scholes option valuation model on the implied yield in
effect at the time of option grant on U.S. Treasury zero-coupon
issues with a remaining term equivalent to the expected term of the
stock awards including the ESPP.
Fair
Value. The fair value of the Company’s stock options granted
to employees for the three and nine months ended February 29, 2020
and February 28, 2019, were estimated using the following weighted
average assumptions in the Black-Scholes option valuation
model:
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Expected
term (in years)
|
5
|
5
|
5
|
5
|
|
Volatility
|
0.72
|
0.69
|
0.71
|
0.72
|
|
Risk-free
interest rate
|
1.57
%
|
2.77
%
|
1.85
%
|
2.83
%
|
|
Weighted
average grant date fair value
|
$
1.37
|
$
1.01
|
$
0.98
|
$
1.34
|
The
fair values of the ESPP purchase rights granted for the nine months
ended February 29, 2020 were estimated using the following
weighted-average assumptions:
|
|
Nine Months Ended
|
|
|
February 29, 2020
|
|
|
|
|
Expected
term (in years)
|
0.5-2.0
|
|
Volatility
|
0.62-0.71
|
|
Expected
dividend
|
$
0.00
|
|
Risk-free
interest rates
|
1.56
%-1.81%
|
|
Estimated
forfeiture rate
|
0
%
|
|
Weighted
average grant date fair value
|
$
0.80
|
There
were no ESPP purchase rights granted to employees for the three
months ended February 29, 2020 and February 28, 2019. During the
nine months ended February 29, 2020 and February 28, 2019, ESPP
purchase rights of 38,000 and 327,000 were granted, respectively.
Total ESPP shares issued during the nine months ended February 29,
2020 and February 28, 2019 were 71,000 and 64,000 shares,
respectively. As of February 29, 2020, there were 299,000 ESPP
shares available for issuance.
20
The
following tables summarize the Company’s stock option and RSU
transactions during the three and nine months ended February 29,
2020 (in thousands):
|
|
Available
|
|
|
Shares
|
|
Balance,
May 31, 2019
|
1,147
|
|
|
|
|
Options
granted
|
(527
)
|
|
Options
cancelled
|
151
|
|
Options
expired
|
(119
)
|
|
|
|
|
Balance,
August 31, 2019
|
652
|
|
|
|
|
Options
reserved
|
1,196
|
|
Options
granted
|
(58
)
|
|
Options
cancelled
|
280
|
|
Options
expired
|
(256
)
|
|
|
|
|
Balance,
November 30, 2019
|
1,814
|
|
|
|
|
Options
granted
|
(6
)
|
|
Options cancelled
|
11
|
|
Options expired
|
(8
)
|
|
|
|
|
Balance,
February 29, 2020
|
1,811
|
The
following table summarizes the stock option transactions during the
three and nine months ended February 29, 2020 (in thousands, except
per share data):
|
|
Outstanding Options
|
||
|
|
|
Weighted
|
|
|
|
Number
|
Average
|
Aggregate
|
|
|
of
|
Exercise
|
Intrinsic
|
|
|
Shares
|
Price
|
Value
|
|
Balances,
May 31, 2019
|
3,107
|
$
2.20
|
$
282
|
|
|
|
|
|
|
Options
granted
|
527
|
$
1.64
|
|
|
Options
cancelled
|
(151
)
|
$
1.50
|
|
|
Options
exercised
|
(49
)
|
$
1.27
|
|
|
|
|
|
|
|
Balances,
August 31, 2019
|
3,434
|
$
2.16
|
$
41
|
|
|
|
|
|
|
Options
granted
|
58
|
$
1.77
|
|
|
Options
cancelled
|
(280
)
|
$
2.19
|
|
|
Options
exercised
|
(85
)
|
$
1.06
|
|
|
|
|
|
|
|
Balances,
November 30, 2019
|
3,127
|
$
2.18
|
$
358
|
|
|
|
|
|
|
Options
granted
|
6
|
$
2.30
|
|
|
Options
cancelled
|
(11
)
|
$
2.42
|
|
|
Options
exercised
|
(98
)
|
$
1.34
|
|
|
|
|
|
|
|
Balances,
February 29, 2020
|
3,024
|
$
2.21
|
$
544
|
|
|
|
|
|
|
Options
fully vested and expected to
vest
at February 29, 2020
|
2,989
|
$
2.21
|
$
536
|
21
The
options outstanding and exercisable at February 29, 2020 were in
the following exercise price ranges (in thousands, except per share
data):
|
|
Options
Outstanding
|
Options
Exercisable
|
|||||
|
|
at February 29,
2020
|
at February 29,
2020
|
|||||
|
Range of
Exercise
Prices
|
Number
Outstanding Shares
|
Weighted Average
Remaining Contractual Life (Years)
|
Weighted Average
Exercise Price
|
Number
Exercisable Shares
|
Weighted Average
Remaining Contractual Life (Years)
|
Weighted Average
Exercise Price
|
Aggregate
Intrinsic Value
|
|
$
1.09-$1.28
|
177
|
0.32
|
$
1.28
|
177
|
0.32
|
$
1.28
|
|
|
$
1.64-$2.06
|
1,183
|
5.30
|
$
1.76
|
520
|
4.28
|
$
1.80
|
|
|
$
2.10-$2.81
|
1,436
|
2.90
|
$
2.43
|
1,166
|
2.31
|
$
2.43
|
|
|
$
3.46-$3.93
|
228
|
4.41
|
$
3.85
|
162
|
4.44
|
$
3.81
|
|
|
$
1.09-$3.93
|
3,024
|
3.80
|
$
2.21
|
2,025
|
2.81
|
$
2.28
|
$
301
|
The
total intrinsic value of options exercised during the three and
nine months ended February 29, 2020 was $92,000 and $159,000,
respectively. The total intrinsic value of options exercised during
the three and nine months ended February 28, 2019 was $160,000 and
$322,000, respectively. The weighted average remaining contractual
life of the options exercisable and expected to be exercisable at
February 29, 2020 was 3.78 years.
There
were no RSUs granted to employees during the three and nine months
ended February 29, 2020 and February 28, 2019. During the three and
nine months ended February 29, 2020, 3,000 and 10,000 RSUs became
fully vested, respectively. During the three and nine months ended
February 28, 2019, 4,000 and 13,000 RSUs became fully vested,
respectively. As of February 29, 2020, 13,000 RSUs remain unvested
which had an intrinsic value of $27,000. As of February 28, 2019,
34,000 RSUs remain unvested which had an intrinsic value of
$50,000.
14.
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 “3.
REVENUE.”
Property
and equipment information is based on the physical location of the
assets. The following table presents property and equipment
information for geographic areas (in thousands):
|
|
February 29,
|
May 31,
|
|
|
2020
|
2019
|
|
United
States
|
$
744
|
$
1,005
|
|
Asia
|
39
|
40
|
|
Europe
|
--
|
--
|
|
|
$
783
|
$
1,045
|
As
of February 29, 2020, the operating lease right-of-use assets of
$2,260,000 were allocated in the United States.
There
were no revenues through distributors for the three and nine months
ended February 29, 2020 and February 28, 2019.
22
The
Company’s Japanese and German subsidiaries primarily comprise
the foreign operations. Substantially all of the sales by the
Company’s subsidiaries are made to unaffiliated Japanese or
European customers. Net sales from outside the United States
include those of Aehr Test Systems Japan K.K. and Aehr Test Systems
GmbH.
Sales
to the Company’s five largest customers accounted for
approximately 94% and 89% of its net sales in the three and nine
months ended February 29, 2020, respectively. One customer
accounted for approximately 71% of the Company’s net sales in
the three months ended February 29, 2020. Two customers accounted
for approximately 51% and 18% of the Company’s net sales in
the nine months ended February 29, 2020. Sales to the
Company’s five largest customers accounted for approximately
90% and 81% of its net sales in the three and nine months ended
February 28, 2019, respectively. Four customers accounted for
approximately 27%, 25%, 22% and 13%, respectively, of the
Company’s net sales in the three months ended February 28,
2019. Four customers accounted for approximately 31%, 18%, 16% and
12%, respectively, of the Company’s net sales in the nine
months ended February 28, 2019. No other customers represented more
than 10% of the Company’s net sales in the three and nine
months ended February 29, 2020 and February 28, 2019.
15.
SUBSEQUENT EVENT
On
March 19, 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
expects to incur charges of approximately $150,000 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. The Company expects the dissolution of
ATS-Japan will result in a cost saving of approximately $90,000
each quarter beginning in fiscal 2021.
Item 2.
M
ANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion of the financial condition and results of
operations should be read in conjunction with the unaudited
condensed consolidated financial statements and the related notes
that appear elsewhere in this report and with our Annual Report on
Form 10-K for the fiscal year ended May 31, 2019 and the
consolidated financial statements and notes thereto.
In
addition to historical information, this report contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements in this
report, including those made by our management, other than
statements of historical fact, are forward-looking statements.
These statements typically may be identified by the use of
forward-looking words or phrases such as "believe," "expect,"
"intend," "anticipate," "should," "planned," "estimated," and
"potential," among others and include, but are not limited to,
statements concerning our expectations regarding our operations,
business, strategies, prospects, revenues, expenses, costs and
resources. These forward-looking statements include
management’s judgments, estimates and assumptions and are
subject to certain risks and uncertainties that could cause our
actual results to differ materially from anticipated results or
other expectations reflected in forward-looking statements. Factors
that could cause or contribute to such differences include, but are
not limited to, those discussed in this report and other factors
beyond our control, and in particular, the risks discussed in
“Part II, Item 1A. Risk Factors” and those discussed in
other documents we file with the SEC. All forward-looking
statements included in this document are based on our current
expectations, and we undertake no obligation to revise or publicly
release the results of any revision to these forward-looking
statements. Given these risks and uncertainties, readers are
cautioned not to place undue reliance on such forward-looking
statements.
23
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.
OVERVIEW
We
were founded in 1977 to develop and manufacture burn-in and test
equipment for the semiconductor industry. Since our inception, we
have sold more than 2,500 systems to semiconductor manufacturers,
semiconductor contract assemblers and burn-in and test service
companies worldwide. Our principal products currently are the FOX
full wafer contact parallel test and burn-in system, WaferPak
contactors, the DiePak carrier, test fixtures and the Advanced
Burn-in and Test System, or ABTS.
Our
net sales consist primarily of sales of systems, 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 condensed consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
preparation of these condensed consolidated financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, assumptions and
judgements, including those related to customer programs and
incentives, product returns, bad debts, inventories, income taxes,
financing operations, warranty obligations, and long-term service
contracts. Our estimates are derived from historical experience and
on various other assumptions that are believed to be reasonable
under the circumstances. Those results form the basis for making
judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions. For a discussion of the critical accounting policies,
see “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Critical
Accounting Policies and Estimates” in our Annual Report on
Form 10-K for the fiscal year ended May 31, 2019.
There
have been no material changes to our critical accounting policies
and estimates during the nine months ended February 29, 2020
compared to those discussed in our Annual Report on Form 10-K for
the fiscal year ended May 31, 2019,
except for the adoption
of FASB ASC Topic 842, Leases, as discussed in Note “2.
RECENT ACCOUNTING PRONOUNCEMENTS.”
24
RESULTS
OF OPERATIONS
The
following table sets forth items in our unaudited condensed
consolidated statements of operations as a percentage of net sales
for the periods indicated.
|
|
Three Months Ended
|
Nine Months Ended
|
||
|
|
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
100.0
%
|
100.0
%
|
100.0
%
|
100.0
%
|
|
Cost
of sales
|
51.1
|
91.4
|
54.3
|
69.4
|
|
Gross
profit
|
48.9
|
8.6
|
45.7
|
30.6
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Selling,
general and administrative
|
30.9
|
58.5
|
31.6
|
41.3
|
|
Research
and development
|
13.8
|
29.4
|
13.7
|
22.0
|
|
Restructuring
|
--
|
19.2
|
--
|
4.4
|
|
Total
operating expenses
|
44.7
|
107.1
|
45.3
|
67.7
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
4.2
|
(98.5
)
|
0.4
|
(37.1
)
|
|
|
|
|
|
|
|
Interest
income (expense), net
|
0.2
|
(2.4
)
|
0.2
|
(1.7
)
|
|
Other
(expense) income, net
|
(0.2
)
|
(0.4
)
|
--
|
0.3
|
|
|
|
|
|
|
|
Income
(loss) before income tax (expense) benefit
|
4.2
|
(101.3
)
|
0.6
|
(38.5
)
|
|
|
|
|
|
|
|
Income
tax (expense) benefit
|
(0.2
)
|
0.1
|
(0.2
)
|
(0.2
)
|
|
Net
income (loss)
|
4.0
|
(101.2
)
|
0.4
|
(38.7
)
|
|
Less:
Net income attributable to the noncontrolling interest
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
Net
income
(loss)
attributable
to Aehr Test Systems common shareholders
|
4.0
%
|
(101.2
)%
|
0.4
%
|
(38.7
)%
|
THREE
MONTHS ENDED FEBRUARY 29, 2020 COMPARED TO THREE MONTHS ENDED
FEBRUARY 28, 2019
NET
SALES. Net sales increased to $6.1 million for the three months
ended February 29, 2020 from $3.2 million for the three months
ended February 28, 2019, an increase of 93.2%. The increase in net
sales for the three months ended February 29, 2020 was primarily
due to the increase in net sales of our wafer-level products,
partially offset by the decrease in net sales of our Test During
Burn-in (TDBI) products. Net sales of the wafer-level products for
the three months ended February 29, 2020 were $5.4 million, and
increased approximately $3.4 million from the three months ended
February 28, 2019. Net sales of the TDBI products for the three
months ended February 29, 2020 were $703,000, and decreased
approximately $414,000 from the three months ended February 28,
2019.
25
GROSS
PROFIT. Gross profit increased to $3.0 million for the three months
ended February 29, 2020 from $272,000 for the three months ended
February 28, 2019. Gross profit margin increased to 48.9% for the
three months ended February 29, 2020 from 8.6% for the three months
ended February 28, 2019. The lower gross profit margin for the
three months ended February 28, 2019 was primarily due to a higher
level of inventory write-downs recorded and higher unabsorbed
overhead charged to cost of goods sold due to lower manufacturing
and revenue levels in that quarter.
SELLING,
GENERAL AND ADMINISTRATIVE. SG&A expenses were flat at $1.9
million for the three months ended February 29, 2020 compared to
the three months ended February 28, 2019.
RESEARCH
AND DEVELOPMENT. R&D expenses decreased to $845,000 for the
three months ended February 29, 2020 from $931,000 for the three
months ended February 28, 2019, a decrease of 9.2%. The decrease in
R&D expenses was primarily due to the decrease in employment
related expenses.
RESTRUCTURING.
There were no restructuring charges incurred for the three months
ended February 29, 2020. Restructuring charges for the three months
ended February 28, 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.
As part of this plan, we recognized $607,000 of employee
termination expenses for the three months ended February 28,
2019.
INTEREST
INCOME (EXPENSE), NET. Interest income, net for the three months
ended February 29, 2020 was $13,000 compared with interest expense,
net of $76,000 for the three months ended February 28, 2019. The
decrease in interest expense for the three months ended February
29, 2020 was primarily due to the repayment of the convertible
notes on the maturity date of April 10, 2019.
OTHER
(EXPENSE) INCOME, NET. Other expense, net was $9,000 and $11,000
for the three months ended February 29, 2020 and February 28, 2019,
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 (EXPENSE) BENEFIT. Income tax expense was $14,000 for the three
months ended February 29, 2020 compared with income tax benefit of
$2,000 for the three months ended February 28, 2019.
NINE
MONTHS ENDED FEBRUARY 29, 2020 COMPARED TO NINE MONTHS ENDED
FEBRUARY 28, 2019
NET
SALES. Net sales increased to $18.5 million for the nine months
ended February 29, 2020 from $13.8 million for the nine months
ended February 28, 2019, an increase of 34.1%. The increase in net
sales for the nine months ended February 29, 2020 was primarily due
to 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 the wafer-level products for the nine months ended February 29,
2020 were $16.6 million, and increased approximately $8.3 million
from the nine months ended February 28, 2019. Net sales of the TDBI
products for the nine months ended February 29, 2020 were $1.9
million, and decreased approximately $3.6 million from the nine
months ended February 28, 2019.
GROSS
PROFIT. Gross profit increased to $8.5 million for the nine months
ended February 29, 2020 from $4.2 million for the nine months ended
February 28, 2019, an increase of 100.4%. Gross profit margin
increased to 45.7% for the nine months ended February 29, 2020 from
30.6% for the nine months ended February 28, 2019. The lower gross
profit margin for the nine months ended February 28, 2019 was
primarily a result of the higher level of inventory write-downs
recorded and manufacturing inefficiencies due to a lower level of
net sales in the nine months ended February 28, 2019.
26
SELLING,
GENERAL AND ADMINISTRATIVE. SG&A expenses increased to $5.9
million for the nine months ended February 29, 2020 from $5.7
million for the nine months ended February 28, 2019, an increase of
2.6%. The increase in SG&A expenses was primarily due to an
increase in outside services expenses.
RESEARCH
AND DEVELOPMENT. R&D expenses decreased to $2.5 million for the
nine months ended February 29, 2020 from $3.0 million for the nine
months ended February 28, 2019, a decrease of 16.5%. The decrease
in R&D expenses was primarily due to a decrease in project
expenses.
RESTRUCTURING.
There were no restructuring charges incurred for the nine months
ended February 29, 2020. Restructuring charges for the nine months
ended February 28, 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.
As part of this plan, we recognized $607,000 of employee
termination expenses for the nine months ended February 28,
2019.
INTEREST
INCOME (EXPENSE), NET. Interest income, net for the nine months
ended February 29, 2020 was $27,000 compared with interest expense,
net of $228,000 for the nine months ended February 28, 2019. The
decrease in interest expense for the nine months ended February 29,
2020 was primarily due to the repayment of the convertible notes on
the maturity date of April 10, 2019.
OTHER
INCOME (EXPENSE), NET. Other income, net was $6,000 and $27,000 for
the nine months ended February 29, 2020 and February 28, 2019,
respectively. The change in other income, net was primarily due to
gains realized in connection with the fluctuation in the value of
the dollar compared to foreign currencies during the referenced
periods.
INCOME
TAX BENEFIT (EXPENSE). Income tax expense was $26,000 and $21,000
for the nine months ended February 29, 2020 and February 28, 2019,
respectively.
LIQUIDITY
AND CAPITAL RESOURCES
Net
cash used in operating activities was $640,000 and $4.8 million for
the nine months ended February 29, 2020 and February 28, 2019,
respectively. For the nine months ended February 29, 2020, net cash
used in operating activities was primarily the result of net income
of $83,000, as adjusted to exclude the effect of non-cash charges
of stock-based compensation expense of $611,000 and depreciation
and amortization expenses of $298,000. Net cash used in operations
was also impacted by a decrease in accounts receivable of $1.4
million, partially offset by a decrease in customer deposits and
deferred revenue of $1.3 million and a decrease in accounts payable
of $1.0 million. The decrease in accounts receivable was primarily
due to improvements in customer payment terms. 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 lower inventory
purchases. For the nine months ended February 28, 2019, net cash
used in operating activities was primarily the result of net loss
of $5.3 million, as adjusted to exclude the effect of non-cash
charges of stock-based compensation expense of $705,000 and
depreciation and amortization expenses of $333,000. Net cash used
in operations was also impacted by a decrease in accounts payable
of $1.1 million, partially offset by a decrease in accounts
receivable of $871,000. The decrease in accounts payable was
primarily due to lower expenditures associated with lower revenue.
The decrease in accounts receivable was primarily due to a decrease
in sales.
27
Net
cash used in investing activities was $149,000 and $124,000 for the
nine months ended February 29, 2020 and February 28, 2019,
respectively. Net cash used in investing activities during the nine
months ended February 29, 2020 and February 28, 2019 was primarily
due to purchases of property and equipment.
Financing
activities provided cash of $423,000 and $435,000 for the nine
months ended February 29, 2020 and February 28, 2019, respectively.
Net cash provided by financing activities during the nine months
ended February 29, 2020 and February 28, 2019 was due to the
proceeds from the issuance of common stock under employee
plans.
The
effect of fluctuation in exchange rates decreased cash by $4,000
and $66,000 for the nine months ended February 29, 2020 and
February 28, 2019, respectively. The changes were due to the
fluctuation in the value of the dollar compared to foreign
currencies.
As
of February 29, 2020 and May 31, 2019, we had working capital of
$15.2 million and $14.5 million, respectively.
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 the lease
agreement, we are responsible for payments of utilities, taxes and
insurance.
From
time to time, we evaluate potential acquisitions of businesses,
products or technologies that complement our business. If
consummated, any such transactions may use a portion of our working
capital or require the issuance of equity. We have no present
understandings, commitments or agreements with respect to any
material acquisitions.
We
anticipate that the existing cash balance together with 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 liquidity requirements for the next 12
months.
OFF-BALANCE
SHEET ARRANGEMENTS
We
have not entered into any off-balance sheet financing arrangements
and have not established any variable interest
entities.
OVERVIEW
OF CONTRACTUAL OBLIGATIONS
There
have been no material changes in the composition, magnitude or
other key characteristics of our contractual obligations or other
commitments as disclosed in the Company's Annual Report on Form
10-K for the year ended May 31, 2019 except for the Loan and
Security Agreement with Silicon Valley Bank discussed in Note
12.
Item 3.
Q
UANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISKS
We
had no holdings of derivative financial or commodity instruments as
of February 29, 2020 or May 31, 2019.
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.
28
A
majority of our revenue and capital spending is transacted in U.S.
Dollars. We, however, enter into transactions in other currencies,
primarily Euros and Japanese Yen. Since the price is determined at
the time a purchase order is accepted, we are exposed to the risks
of fluctuations in the foreign currency-U.S. Dollar exchange rates
during the lengthy period from purchase order to ultimate payment.
This exchange rate risk is partially offset to the extent that our
subsidiaries incur expenses payable in their local currency. To
date, we have not invested in instruments designed to hedge
currency risks. In addition, our subsidiaries typically carry debt
or other obligations due to us that may be denominated in either
their local currency or U.S. Dollars. Since our subsidiaries’
financial statements are based in their local currency and our
condensed consolidated financial statements are based in U.S.
Dollars, we and our subsidiaries recognize foreign exchange gains
or losses in any period in which the value of the local currency
rises or falls in relation to the U.S. Dollar. A 10% decrease in
the value of the subsidiaries’ local currency as compared
with the U.S. Dollar would not be expected to result in a
significant change to our net income or loss. There have been no
material changes in our risk exposure since the end of the last
fiscal year, nor are any material changes to our risk exposure
anticipated.
Item 4.
C
ONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES. Our management evaluated,
with the participation of our Chief Executive Officer and our Chief
Financial Officer, the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based on this evaluation, our Chief Executive
Officer and our Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to ensure that
information we are required to disclose in reports that we file or
submit under the Securities and Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms, and that such
information is accumulated and communicated to management as
appropriate to allow for timely decisions regarding required
disclosure.
CHANGES
IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. There was no change
in our internal control over financial reporting, as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred
during the period covered by this Quarterly Report on Form 10-Q
that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
INHERENT
LIMITATIONS OF INTERNAL CONTROLS. Our management, including our
Chief Executive Officer and Chief Financial Officer, does not
expect that our disclosure controls and procedures or our internal
controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the
control system are met. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within us have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and
that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts
of some persons, by collusion of two or more people, or by
management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed in achieving our stated goals under all
potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be
detected.
29
P
ART II - OTHER INFORMATION
Item 1.
L
EGAL PROCEEDINGS
None.
Item
1A.
R
ISK FACTORS
Please
refer to the description of the risk factors associated with our
business previously disclosed in Part I, Item 1A - "Risk Factors"
of our Annual Report on Form 10-K for the year ended May 31, 2019
filed with the Securities and Exchange Commission on August 28,
2019 and the following additional risk factor.
We face risks related to health pandemics, particularly the recent
outbreak of COVID-19, which could adversely affect our business and
results of operations.
Our
business could be materially adversely affected by a widespread
outbreak of contagious disease, including the recent outbreak of
the novel coronavirus, known as COVID-19, which has spread to many
countries throughout the world. 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 supply chain, which
could impact our business, interactions and relationships with our
customers, third-party suppliers and contractors, and results of
operations. In addition, a significant outbreak of contagious
disease in the human population could result in a widespread health
crisis that could adversely affect the economies and financial
markets of many countries, resulting in an economic downturn that
could reduce the demand for our products and likely impact our
results of operations. The extent to which COVID-19 outbreak will
impact business and the economy is highly uncertain and cannot be
predicted. Accordingly, we cannot predict the extent to which our
financial condition and results of operations will be
affected.
Item 2.
U
NREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
None.
Item 3.
D
EFAULTS UPON SENIOR
SECURITIES
None.
Item 4.
M
INE SAFETY DISCLOSURES
Not
Applicable
Item 5.
O
THER INFORMATION
None.
30
Item 6.
E
XHIBITS
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
Loan
and Security Agreement, effective on January 13, 2020, by and
between Silicon Valley Bank and Aehr Test Systems (incorporated by
reference herein from the Current Report on Form 8-K (File No.
000-22893) filed on January 21, 2020).
|
|
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to Rules
13a-14(a) and 15d-14(a) promulgated under the Securities Exchange
Act of 1934, as amended, as adopted pursuant to Section 302(a) of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to Rules
13a-14(a) and 15d-14(a) promulgated under the Securities Exchange
Act of 1934, as amended, as adopted pursuant to Section 302(a) of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*This
exhibit shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise
subject to the liabilities of that Section, nor shall it be deemed
incorporated by reference in any filings under the Securities Act
of 1933 or the Securities Exchange Act of 1934, whether made before
or after the date hereof and irrespective of any general
incorporation language in any filings.
31
S
IGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
Aehr Test
Systems
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
Date:
April 14,
2020
|
By:
|
/s/ GAYN
ERICKSON
|
|
|
|
|
Gayn
Erickson
|
|
|
|
|
President and Chief
Executive Officer
|
|
|
|
|
|
|
|
Date:
April 14,
2020
|
By:
|
/s/ KENNETH B.
SPINK
|
|
|
|
|
Kenneth B.
Spink
|
|
|
|
|
Vice President of
Finance and Chief Financial Officer
|
|
32
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial Statements (unaudited)Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RisksItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits