Last10K.com

Aehr Test Systems (AEHR) SEC Filing 10-Q Quarterly report for the period ending Saturday, November 30, 2019

Aehr Test Systems

CIK: 1040470 Ticker: AEHR

  Exhibit 99.1
 
 
 
FOR IMMEDIATE RELEASE
 
Contacts: 
 
Aehr Test Systems
MKR Investor Relations Inc.
Ken Spink
Todd Kehrli or Jim Byers
Chief Financial Officer
Analyst/Investor Contact
(510) 623-9400 x309
(323) 468-2300

aehr@mkr-group.com
 
Aehr Test Systems Reports 24% Sequential Revenue Growth in Second Quarter and Reiterates Guidance for Significant Growth for Fiscal 2020
 
Fremont, CA (January 9, 2020) – Aehr Test Systems (NASDAQ: AEHR), a worldwide supplier of semiconductor test and reliability qualification equipment, today announced financial results for its second quarter of fiscal 2020 ended November 30, 2019.
 
Fiscal Second Quarter Financial Results:
 
Net sales were $6.9 million, up 16% from $5.9 million in the second quarter of fiscal 2019, and up 24% compared to the first quarter of fiscal 2020.
GAAP net income was $251,000, or $0.01 per diluted share, compared to a GAAP net loss of $629,000, or $0.03 per diluted share, in the second quarter of fiscal 2019.
Non-GAAP net income was $456,000, or $0.02 per diluted share, which excludes the impact of stock-based compensation expense, compared to a non-GAAP net loss of $405,000, or $0.02 per diluted share, in the second quarter of fiscal 2019.
Backlog as of November 30, 2019 was $6.5 million.
 
Fiscal First Six Months Financial Results:
 
Net sales were $12.4 million, up 16% from $10.7 million in the first six months of fiscal 2019.
GAAP net loss was $162,000, or $0.01 per diluted share, compared to a GAAP net loss of $2.1 million, or $0.10 per diluted share, in the first six months of fiscal 2019.
Non-GAAP net income was $242,000, or $0.01 per diluted share, compared to a non-GAAP net loss of $1.7 million, or $0.07 per diluted share, in the first six months of fiscal 2019.
 
An explanation of the use of non-GAAP financial information and a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the accompanying tables.
 
Aehr Second Quarter and Recent Business Highlights:
 
Received and shipped its first order from a new customer for a production application for wafer level test and burn-in of silicon carbide (SiC) devices during the quarter. The order of more than $3 million included a FOX-XP™ multi-wafer system, WaferPak™ Aligner, and a set of WaferPak contactors.
 
 
 
 
Aehr Test Systems Reports Second Quarter Fiscal 2020 Financial Results
January 9, 2020
Page 2 of 6
 
 
Received follow-on orders of over $6 million for a FOX-XP multi-wafer test and burn-in system and multiple WaferPak contactors to provide additional high-volume test capacity to meet the customer’s increasing silicon photonics device production requirements.
Continued to see a significant silicon photonics market growth opportunity and reported that three of the company’s silicon photonics customers have moved from sample testing to volume production during the second quarter using its FOX-P™ family of test solutions.
Increased revenue contribution from its proprietary WaferPaks and DiePak® Carriers consumable business to 44% of total revenue in the second quarter of fiscal 2020, up from 30% in the preceding first quarter and up from 16% in the second quarter of fiscal 2019.
 
Gayn Erickson, President and CEO of Aehr Test Systems, commented:
 
“We are pleased to report a solid second quarter that includes total revenue of $6.9 million, up 24% sequentially from the first quarter, improved gross margins, a return to profitability on both a GAAP and non-GAAP basis, and strong bookings in the quarter of nearly $10 million.
 
“During the quarter, we successfully completed a new and unique production application for test and burn-in of silicon carbide devices and shipped our first production system to a leading supplier of automotive semiconductor devices. We are also engaged with multiple companies in this exciting new silicon carbide market.
 
“Silicon carbide is a new emerging market for our FOX-P family of products as our wafer level test and burn-in systems are cost effective solutions for improving the reliability of silicon carbide-based power devices used in electronic vehicles and other power conversion applications. The silicon carbide power device market and the need for reliability test solutions are expected to grow significantly over the next decade.
 
“We also continue to be very optimistic about the silicon photonics market with three of our silicon photonics customers transitioning to high volume production test and burn-in during the quarter on our FOX-P systems. We are also currently engaged with several additional potential customers in the silicon photonics market to utilize our wafer level burn-in solutions for their engineering and production needs. Aehr is benefiting from the broad adoption of photonics devices in the data, telecom, and sensing markets as our existing customers expand their product portfolios and ramp manufacturing and new customers enter this high demand rapidly growing segment. 
 
“We feel good about our progress midway through our fiscal year and remain very optimistic about growth in sales of systems and consumables to our installed base of customers, as well as the expansion of sales to new customers with our family of FOX-P solutions. Looking ahead, we expect to see continued positive momentum, to generate significant year-over-year revenue growth in fiscal 2020 and to be profitable for the fiscal year.”
   
 
 
 
Aehr Test Systems Reports Second Quarter Fiscal 2020 Financial Results
January 9, 2020
Page 3 of 6
 
 
 
Fiscal 2020 Financial Guidance:
For the fiscal year ending May 31, 2020, the company reiterates its previously provided guidance for full year total revenue to be between $27 million and $31 million, which would represent growth between 28% and 47% year over year, and to be profitable for the fiscal year.
 
Management Conference Call and Webcast
Aehr Test Systems will host a conference call and webcast today at 5:00 p.m. Eastern (2:00 p.m. PT) to discuss its second quarter fiscal 2020 operating results. To access the call dial 800-458-4121 (+1 323-794-2093 outside the United States) and give the participant pass code 3970795. In addition, a live and archived webcast of the conference call will be available over the Internet at www.aehr.com in the Investor Relations section. A replay of the conference call will also be available via telephone beginning approximately two hours after conclusion of the call through 8:00 p.m. ET on January 16, 2020. To access the replay dial-in information, please click here.
 
About Aehr Test Systems
Headquartered in Fremont, California, Aehr Test Systems is a worldwide provider of test systems for burning-in and testing logic, optical and memory integrated circuits and has installed over 2,500 systems worldwide. Increased quality and reliability needs of the Automotive and Mobility integrated circuit markets are driving additional test requirements, incremental capacity needs, and new opportunities for Aehr Test products in package, wafer level, and singulated die/module level test. Aehr Test has developed and introduced several innovative products, including the ABTSTM and FOX-PTM families of test and burn-in systems and FOX WaferPakTM Aligner, FOX-XP WaferPak Contactor, FOX DiePak® Carrier and FOX DiePak Loader. The ABTS system is used in production and qualification testing of packaged parts for both lower power and higher power logic devices as well as all common types of memory devices. The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems used for burn-in and functional test of complex devices, such as leading-edge memories, digital signal processors, microprocessors, microcontrollers, systems-on-a-chip, and integrated optical devices. The FOX-CP system is a new low-cost single-wafer compact test and reliability verification solution for logic, memory and photonic devices and the newest addition to the FOX-P product family. The WaferPak contactor contains a unique full wafer probe card capable of testing wafers up to 300mm that enables IC manufacturers to perform test and burn-in of full wafers on Aehr Test FOX systems. The DiePak Carrier is a reusable, temporary package that enables IC manufacturers to perform cost-effective final test and burn-in of both bare die and modules. For more information, please visit Aehr Test Systems’ website at www.aehr.com.
 
Safe Harbor Statement
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to Aehr as of the date hereof and actual results could differ materially from those stated or implied due to risks and uncertainties. Forward-looking statements include statements regarding Aehr’s expectations, beliefs, intentions or strategies regarding its products and financial guidance, including statements regarding future market opportunities and conditions, expected product shipment dates, customer orders or commitments and future operating results. These risks and uncertainties include, without limitation, customer demand and acceptance of Aehr’s products, the ability of new products to meet customer needs or perform as described, as well as general market conditions, the deployment of new technologies, such as 5G networks, and Aehr’s ability to execute on its business strategy. See Aehr’s recent 10-K, 10-Q and other reports from time to time filed with the Securities and Exchange Commission for a more detailed description of the risks facing Aehr’s business. Aehr disclaims any obligation to update information contained in any forward-looking statement to reflect events or circumstances occurring after the date of this press release.

 
 
 
 
– Financial Tables to Follow –
 
 
 
 
Aehr Test Systems Reports Second Quarter Fiscal 2020 Financial Results
January 9, 2020
Page 4 of 6
 
 
 
AEHR TEST SYSTEMS AND SUBSIDIARIES
 
 
Condensed Consolidated Statements of Operations
 
 
(in thousands, except per share data)
 
 
(unaudited)
 
 
 
 
 
 
 
Three Months Ended 
 
 
Six Months Ended 
 
 
 
Nov 30,
 
 
Aug 31,
 
 
Nov 30,
 
 
Nov 30,
 
 
Nov 30,
 
 
 
2019
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 $6,874 
 $5,533 
 $5,911 
 $12,407 
 $10,651 
Cost of sales
  3,672 
  3,262 
  3,513 
  6,934 
  6,700 
Gross profit
  3,202 
  2,271 
  2,398 
  5,473 
  3,951 
 
    
    
    
    
    
Operating expenses:
    
    
    
    
    
  Selling, general and administrative
  2,157 
  1,808 
  1,977 
  3,965 
  3,856 
  Research and development
  795 
  892 
  986 
  1,687 
  2,102 
      Total operating expenses
  2,952 
  2,700 
  2,963 
  5,652 
  5,958 
 
    
    
    
    
    
      Income (loss) from operations
  250 
  (429)
  (565)
  (179)
  (2,007)
 
    
    
    
    
    
Interest income (expense), net
  2 
  12 
  (74)
  14 
  (152)
Other income, net
  5 
  10 
  29 
  15 
  38 
 
    
    
    
    
    
       Income (loss) before income tax expense
  257 
  (407)
  (610)
  (150)
  (2,121)
 
    
    
    
    
    
Income tax expense
  (6)
  (6)
  (19)
  (12)
  (23)
 
    
    
    
    
    
       Net income (loss)
  251 
  (413)
  (629)
  (162)
  (2,144)
 
    
    
    
    
    
Less: Net income attributable to the noncontrolling interest
  - 
  - 
  - 
  - 
  - 
 
    
    
    
    
    
Net income (loss) attributable to Aehr Test Systems common shareholders
 $251 
 $(413)
 $(629)
 $(162)
 $(2,144)
 
    
    
    
    
    
Net income (loss) per share
    
    
    
    
    
        Basic
 $0.01 
 $(0.02)
 $(0.03)
 $(0.01)
 $(0.10)
        Diluted
 $0.01 
 $(0.02)
 $(0.03)
 $(0.01)
 $(0.10)
 
    
    
    
    
    
Shares used in per share calculations:
    
    
    
    
    
        Basic
  22,823 
  22,708 
  22,294 
  22,765 
  22,242 
        Diluted
  22,912 
  22,708 
  22,294 
  22,765 
  22,242 

-more-
 
 
Aehr Test Systems Reports Second Quarter Fiscal 2020 Financial Results
January 9, 2020
Page 5 of 6
 
 
 
AEHR TEST SYSTEMS AND SUBSIDIARIES
 
 
Reconciliation of GAAP and Non-GAAP Results
 
 
(in thousands, except per share data)
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
Nov 30,
 
 
Aug 31,
 
 
Nov 30,
 
 
Nov 30,
 
 
Nov 30,
 
 
 
2019
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
 $251 
 $(413)
 $(629)
 $(162)
 $(2,144)
Stock-based compensation expense
  205 
  199 
  224 
  404 
  480 
Non-GAAP net income (loss)
 $456 
 $(214)
 $(405)
 $242 
 $(1,664)
 
    
    
    
    
    
GAAP net income (loss) per diluted share
 $0.01 
 $(0.02)
 $(0.03)
 $(0.01)
 $(0.10)
Non-GAAP net income (loss) per diluted share
 $0.02 
 $(0.01)
 $(0.02)
 $0.01 
 $(0.07)
Shares used in GAAP diluted shares calculation
  22,912 
  22,708 
  22,294 
  22,765 
  22,242 
Shares used in non-GAAP diluted shares calculation
  22,912 
  22,708 
  22,294 
  22,846 
  22,242 
 
    
    
    
    
    
 
Non-GAAP net income (loss) is a non-GAAP measure and should not be considered a replacement for GAAP results. Non-GAAP net income (loss) is a financial measure the Company uses to evaluate the underlying results and operating performance of the business. The limitation of this measure is that it excludes items that impact the Company's current period net income. This limitation is best addressed by using this measure in combination with net income (loss) (the most directly comparable GAAP financial measure). These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies.
 
We believe these measures enhance investors’ ability to review the company’s business from the same perspective as the company’s management and facilitate comparisons of this period’s results with prior periods.
 
 
 
 
 
 
 
 
 
 
 
 
 
  -more-
 
 
Aehr Test Systems Reports Second Quarter Fiscal 2020 Financial Results
January 9, 2020
Page 6 of 6
 
 
AEHR TEST SYSTEMS AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
 
 
 
November 30,
 
 
August 31,
 
 
May 31,
 
 
 
2019
 
 
2019
 
 
2019
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
  Cash and cash equivalents
 $5,302 
 $5,266 
 $5,428 
  Accounts receivable, net
  5,231 
  3,287 
  4,859 
  Inventories
  9,800 
  9,217 
  9,061 
  Prepaid expenses and other
  534 
  523 
  686 
      Total current assets
  20,867 
  18,293 
  20,034 
 
    
    
    
Property and equipment, net
  860 
  1,000 
  1,045 
Operating lease right-of-use assets
  2,387 
  2,533 
  - 
Other assets
  186 
  199 
  228 
      Total assets
 $24,300 
 $22,025 
 $21,307 
 
    
    
    
LIABILITIES AND SHAREHOLDERS' EQUITY
    
    
    
 
    
    
    
Current liabilities:
    
    
    
  Accounts payable
 $2,320 
 $1,742 
 $1,933 
  Accrued expenses
  1,596 
  1,577 
  2,034 
  Operating lease liabilities, short-term
  619 
  606 
  - 
  Customer deposits and deferred revenue, short-term
  1,809 
  615 
  1,545 
      Total current liabilities
  6,344 
  4,540 
  5,512 
 
    
    
    
Deferred rent
  - 
  - 
  153 
Operating lease liabilities, long-term
  1,924 
  2,086 
  - 
Deferred revenue, long-term
  64 
  113 
  189 
      Total liabilities
  8,332 
  6,739 
  5,854 
 
    
    
    
Aehr Test Systems shareholders' equity
  15,988 
  15,306 
  15,472 
Noncontrolling interest
  (20)
  (20)
  (19)
      Total shareholders' equity
  15,968 
  15,286 
  15,453 
      Total liabilities and shareholders' equity
 $24,300 
 $22,025 
 $21,307 
 
    # # # 
 
 

The following information was filed by Aehr Test Systems (AEHR) on Thursday, January 9, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
 

 
  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 November 30, 2019
 
OR
 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to __________
 
Commission file number: 000-22893
 
AEHR TEST SYSTEMS
(Exact name of Registrant as specified in its charter)
 
California
 
94-2424084
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
400 Kato Terrace
Fremont, CA
 
94539
(Address of principal executive offices)
 
(Zip Code)
 
(510) 623-9400
(Registrant's telephone number, including area code)
 
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.
 
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒

Emerging growth company ☐ 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant 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:
 
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock
AEHR
The NASDAQ Capital Market
 
Number of shares of the registrant’s common stock, $0.01 par value, outstanding as of December 31, 2019 was 22,915,648.
 
 
2
 
AEHR TEST SYSTEMS
 
FORM 10-Q
 
FOR THE QUARTER ENDED NOVEMBER 30, 2019
 
INDEX
 
 
 
 
 
 
 
 
 
 
4
 
 
 
 
5
 
 
 
 
6
 
 
 
 
7
 
 
 
 
8
 
 
 
 
9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
3
 
PART I. FINANCIAL INFORMATION
 
Item 1. FINANCIAL STATEMENTS (Unaudited)
 
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
 
 
 
November 30,
 
 
May 31,
 
 
 
2019
 
 
2019
 
 
  (1)
ASSETS
 
 
 
    
Current assets:
 
 
 
    
  Cash and cash equivalents
 $5,302 
 $5,428 
  Accounts receivable, net
  5,231 
  4,859 
  Inventories
  9,800 
  9,061 
  Prepaid expenses and other current assets
  534 
  686 
 
    
    
    Total current assets
  20,867 
  20,034 
 
    
    
Property and equipment, net
  860 
  1,045 
Operating lease right-of-use assets
  2,387 
  -- 
Other assets
  186 
  228 
 
    
    
    Total assets
 $24,300 
 $21,307 
 
    
    
LIABILITIES AND SHAREHOLDERS' EQUITY
    
    
Current liabilities:
    
    
  Accounts payable
 $2,320 
 $1,933 
  Accrued expenses
  1,596 
  2,034 
  Operating lease liabilities, short-term
  619 
  -- 
  Customer deposits and deferred revenue, short-term
  1,809 
  1,545 
 
    
    
  Total current liabilities
  6,344 
  5,512 
 
    
    
Operating lease liabilities, long-term
  1,924 
  -- 
Deferred rent
  -- 
  153 
Deferred revenue, long-term
  64 
  189 
 
    
    
    Total liabilities
  8,332 
  5,854 
 
    
    
Aehr Test Systems shareholders' equity:
    
    
  Common stock, $0.01 par value:
    Authorized: 75,000 shares;
    
    
    Issued and outstanding: 22,914 shares and 22,669 shares at November 30, 2019 and May 31, 2019, respectively
  229 
  227 
  Additional paid-in capital
  85,194 
  84,499 
  Accumulated other comprehensive income
  2,211 
  2,230 
  Accumulated deficit
  (71,646)
  (71,484)
 
    
    
    Total Aehr Test Systems shareholders' equity
  15,988 
  15,472 
Noncontrolling interest
  (20)
  (19)
 
    
    
    Total shareholders' equity
  15,968 
  15,453 
 
    
    
    Total liabilities and shareholders' equity
 $24,300 
 $21,307 
 
(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 OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
November 30,
 
 
November 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 $6,874 
 $5,911 
 $12,407 
 $10,651 
Cost of sales
  3,672 
  3,513 
  6,934 
  6,700 
Gross profit
  3,202 
  2,398 
  5,473 
  3,951 
 
    
    
    
    
Operating expenses:
    
    
    
    
 Selling, general and administrative
  2,157 
  1,977 
  3,965 
  3,856 
 Research and development
  795 
  986 
  1,687 
  2,102 
   Total operating expenses
  2,952 
  2,963 
  5,652 
  5,958 
 
    
    
    
    
Income (loss) from operations
  250 
  (565)
  (179)
  (2,007)
 
    
    
    
    
Interest income (expense), net
  2 
  (74)
  14 
  (152)
Other income, net
  5 
  29 
  15 
  38 
 
    
    
    
    
Income (loss) before income tax expense
  257 
  (610)
  (150)
  (2,121)
 
    
    
    
    
Income tax expense
  (6)
  (19)
  (12)
  (23)
Net income (loss)
  251 
  (629)
  (162)
  (2,144)
  Less: Net income attributable to the noncontrolling interest
  -- 
  -- 
  -- 
  -- 
 
    
    
    
    
Net income (loss) attributable to Aehr Test Systems common shareholders
 $251 
 $(629)
 $(162)
 $(2,144)
 
    
    
    
    
 
    
    
    
    
Net income (loss) per share
    
    
    
    
  Basic
 $0.01 
 $(0.03)
 $(0.01)
 $(0.10)
  Diluted
 $0.01 
 $(0.03)
 $(0.01)
 $(0.10)
 
    
    
    
    
Shares used in per share calculations:
    
    
    
    
  Basic
  22,823 
  22,294 
  22,765 
  22,242 
  Diluted
  22,912 
  22,294 
  22,765 
  22,242 
 
The accompanying notes are an integral part of these
condensed consolidated financial statements.
 
 
5
 
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, unaudited)
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
November 30,
 
 
November 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 $251 
 $(629)
 $(162)
 $(2,144)
 
    
    
    
    
Other comprehensive income (loss), net of tax:
    
    
    
    
    Net change in cumulative translation, adjustments
  (5)
  (34)
  (20)
  (49)
 
    
    
    
    
Total comprehensive income (loss)
  246 
  (663)
  (182))
  (2,193)
Less: Comprehensive income attributable to the noncontrolling interest
  -- 
  1 
  (1)
  2 
 
    
    
    
    
Comprehensive income (loss), attributable to Aehr Test Systems common shareholders
 $246 
 $(664)
 $(181)
 $(2,195)
 
The accompanying notes are an integral part of these
condensed consolidated financial statements.
 
 
6
 
 
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Aehr
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Test
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
Other
 
 
 
 
 
Systems
 
 
 
 
 
Total
 

 
Common Stock
 
 
Paid-in
 
 
Comprehensive
 
 
Accumulated
 
 
 Shareholders’
 
 
Noncontrolling
 
 
Shareholders'
 
Three Months Ended November 30, 2019
 
Shares
 
 
Amount
 
 
Capital
 
 
 Income
 
 
Deficit
 
 
Equity
 
 
Interest
 
 
Equity
 
Balances, August 31, 2019
  22,721 
 $227 
 $84,760 
 $2,216 
 $(71,897)
 $15,306 
 $(20)
 $15,286 
 
    
    
    
    
    
    
    
    
Issuance of common stock under employee plans
  193 
  2 
  229 
  -- 
  -- 
  231 
  -- 
  231 
Stock-based compensation
  --
 
  --
 
  205
 
  --
 
  --
 
  205
 
  --
 
  205
 
Net loss
  -- 
  -- 
  -- 
  -- 
  251 
  251 
  -- 
  251 
Foreign currency translation adjustment
  -- 
  -- 
  -- 
  (5)
  -- 
  (5)
  -- 
  (5)
 
    
    
    
    
    
    
    
    
Balances, November 30, 2019
  22,914 
 $229 
 $85,194 
 $2,211 
 $(71,646)
 $15,988 
 $(20)
 $15,968 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Aehr
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Test
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
Other
 
 
 
 
 
Systems
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-in
 
 
Comprehensive
 
 
Accumulated
 
 
 Shareholders’
 
 
Noncontrolling
 
 
Shareholders'
 
Six Months Ended November 30, 2019
 
Shares
 
 
Amount
 
 
Capital
 
 
 Income
 
 
Deficit
 
 
Equity
 
 
Interest
 
 
Equity
 
Balances, May 31, 2019
  22,669 
 $227 
 $84,499 
 $2,230 
 $(71,484)
 $15,472 
 $(19)
 $15,453 
 
    
    
    
    
    
    
    
    
Issuance of common stock under employee plans
  245 
  2 
  291 
  -- 
  -- 
  293 
  -- 
  293 
Stock-based compensation
  --
 
  --
 
  404
 
  --
 
  --
 
  404
 
  --
 
  404
 
Net loss
  -- 
  -- 
  -- 
  -- 
  (162)
  (162)
  -- 
  (162)
Foreign currency translation adjustment
  -- 
  -- 
  -- 
  (19)
  -- 
  (19)
  (1)
  (20)
 
    
    
    
    
    
    
    
    
Balances, November 30, 2019
  22,914 
 $229 
 $85,194 
 $2,211 
 $(71,646)
 $15,988 
 $(20)
 $15,968 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Aehr
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Test
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
Other
 
 
 
 
 
Systems
 
 
 
 
 
Total
 

 
Common Stock
 
 
Paid-in
 
 
Comprehensive
 
 
Accumulated
 
 
 Shareholders’
 
 
Noncontrolling
 
 
Shareholders'
 
Three Months Ended November 30, 2018
 
Shares
 
 
Amount
 
 
Capital
 
 
 Income
 
 
Deficit
 
 
Equity
 
 
Interest
 
 
Equity
 
Balances, August 31, 2018
  22,245 
 $222 
 $83,405 
 $2,276 
 $(67,764)
 $18,139 
 $(19)
 $18,120 
 
    
    
    
    
    
    
    
    
Issuance of common stock under employee plans
  111 
  2 
  201 
  -- 
  -- 
  203 
  -- 
  203 
Stock-based compensation
  -- 
  -- 
  224 
  -- 
  -- 
  224 
  -- 
  224 
Net income
  -- 
  -- 
  -- 
  -- 
  (629)
  (629)
  -- 
  (629)
Foreign currency translation adjustment
  -- 
  -- 
  -- 
  (35)
  -- 
  (35)
  1 
  (34)
 
    
    
    
    
    
    
    
    
Balances, November 30, 2018
  22,356 
 $224 
 $83,830 
 $2,241 
 $(68,393)
 $17,902 
 $(18)
 $17,884 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Aehr
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Test
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
Other
 
 
 
 
 
Systems
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-in
 
 
Comprehensive
 
 
Accumulated
 
 
 Shareholders’
 
 
Noncontrolling
 
 
Shareholders'
 
Six Months Ended November 30, 2018
 
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
  213 
  3 
  309 
  -- 
  -- 
  312 
  -- 
  312 
Stock-based compensation
  --
 
  --
 
  480
 
  --
 
  --
 
  480
 
  --
 
  480
 
Net income
  -- 
  -- 
  -- 
  -- 
  (2,144)
  (2,144)
  -- 
  (2,144)
Foreign currency translation adjustment
  -- 
  -- 
  -- 
  (51)
  -- 
  (51)
  2 
  (49)
 
    
    
    
    
    
    
    
    
Balances, November 30, 2018
  22,356 
 $224 
 $83,830 
 $2,241 
 $(68,393)
 $17,902 
 $(18)
 $17,884 
 
The accompanying notes are an integral part of these
condensed consolidated financial statements.
 
 
7
 
 
AEHR TEST SYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
 
Six Months Ended
 
 
 
November 30,
 
 
 
2019
 
 
2018
 
Cash flows from operating activities:
 
 
 
 
 
 
  Net loss
 $(162)
 $(2,144)
  Adjustments to reconcile net loss to net cash used in operating activities:
    
    
   Stock-based compensation expense
  404 
  480 
   Recovery of doubtful accounts
  -- 
  (3)
   Depreciation and amortization
  193 
  230 
   Changes in operating assets and liabilities:
    
    
     Accounts receivable
  (372)
  (1,068)
     Inventories
  (627)
  (935)
     Prepaid expenses and other assets
  194 
  23 
     Accounts payable
  389 
  302 
     Accrued expenses
  (438)
  (175)
     Customer deposits and deferred revenue
  139 
  231 
     Deferred rent
  -- 
  84 
     Income taxes payable
  4 
  18 
       Net cash used in operating activities
  (276)
  (2,957)
 
    
    
Cash flows from investing activities:
    
    
     Purchases of property and equipment
  (123)
  (103)
       Net cash used in investing activities
  (123)
  (103)
 
    
    
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
  293 
  312 
       Net cash provided by financing activities
  293 
  312 
 
    
    
Effect of exchange rates on cash and cash equivalents
  (20)
  (98)
 
    
    
       Net decrease in cash, cash equivalents and restricted cash
  (126)
  (2,846)
 
    
    
Cash, cash equivalents and restricted cash, beginning of period
  5,508 
  16,848 
 
    
    
Cash, cash equivalents and restricted cash, end of period
 $5,382 
 $14,002 
 
    
    
Supplemental disclosure of non-cash flow information:
    
    
  Transfers of property and equipment to inventories
 $112 
 $-- 

The accompanying notes are an integral part of these
condensed consolidated financial statements.
 
 
8
 
 
AEHR TEST SYSTEMS
NOTES 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, or 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 six months ended November 30, 2019, 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 and (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. Please refer to Note “11. LEASES” for information regarding the Company’s lease portfolio as of November 30, 2019 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 collectibility 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
 
 
Six Months Ended
 
 
 
November 30,
 
 
November 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Type of good / service:
 
 
 
 
 
 
 
 
 
 
 
 
Systems
 $3,027 
 $3,712 
 $5,961 
 $5,518 
Contactors
  3,046 
  943 
  4,696 
  2,096 
Services
  801 
  1,256 
  1,750 
  3,037 
 
 $6,874 
 $5,911 
 $12,407 
 $10,651 
 
    
    
    
    
Product lines: