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
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 when we expect to recognize remaining performance
obligations and 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
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/),
COVID-19 PANDEMIC RESPONSE
The Company has been impacted by the outbreak of the novel coronavirus, known as
COVID-19, which has spread throughout the world. Our top priority during the
COVID-19 pandemic is protecting the health and safety of our employees and their
families, along with our customers and community. We introduced policies and
procedures to increase workplace flexibility, such as working remotely where
possible to reduce the number of people who are on campus each day. As a global
supplier of Critical Infrastructure Sectors, as defined by the
Due to the impact of the COVID-19 pandemic on customers and customers'
customers, the Company experienced a drop in customer orders and revenues during
the fiscal year ended
The Company will continue to monitor the situation. As of the date of this report, the Company cannot predict with certainty the potential effects the COVID-19 pandemic may have on the Company's business and its operating results. While the overall environment remains uncertain, the Company continues to invest in priority areas with the objective of driving profitable growth over the long term.
22 Table of Contents 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-XP, FOX-NP and FOX-CP wafer contact and singulated die/module parallel test and burn-in systems, WaferPak Aligner, WaferPak contactors, DiePak Loader, DiePak carriers and test fixtures.
Our net sales consist primarily of sales of systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak carriers, test fixtures, upgrades and spare parts, revenues from service contracts, and engineering development charges. Our selling arrangements may include contractual customer acceptance provisions, which are mostly deemed perfunctory or inconsequential, and installation of the product occurs after shipment and transfer of title.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in
There have been no material changes to our critical accounting policies and
estimates during the three months ended
23 Table of Contents 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 August 31, 2021 2020 Net sales 100.0 % 100.0 % Cost of sales 59.6 88.7 Gross profit 40.4 11.3 Operating expenses: Selling, general and administrative 34.6 75.3 Research and development 23.4 44.7 Total operating expenses 58.0 120.0 Loss from operations (17.6 ) (108.7 ) Interest expense, net (0.2 ) (0.6 ) Net gain from dissolution ofAehr Test Systems Japan -- 108.6 Gain from forgiveness of PPP loan 30.1 -- Other income (expense), net 0.4 (4.7 ) Income (loss) before income tax (expense) benefit 12.7 (5.4 ) Income tax (expense) benefit (0.4 ) 10.7 Net income 12.3 % 5.3 %
THREE MONTHS ENDED
GROSS PROFIT. Gross profit increased to
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to
RESEARCH AND DEVELOPMENT. R&D expenses increased to
24 Table of Contents
INTEREST EXPENSE, NET. Interest expense, net was
NET GAIN FROM DISSOLUTION OF AEHR TEST SYSTEMS
GAIN FROM FORGIVENESS OF PPP LOAN. On
OTHER INCOME (EXPENSE), NET. Other income, net was
INCOME TAX (EXPENSE) BENEFIT. Income tax expense was
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was
Net cash used in investing activities was
25 Table of Contents
Net cash provided by financing activities was
The effect of fluctuation in exchange rates decreased cash by
As of
We lease our manufacturing and office space under operating leases. We entered
into a non-cancelable operating lease agreement for our
From time to time, we evaluate potential acquisitions of businesses, products or technologies that complement our business. If consummated, any such transactions may use a portion of our working capital or require the issuance of equity. We have no present understandings, commitments or agreements with respect to any material acquisitions.
Since inception, we have incurred substantial cumulative losses and negative
cash flows from operations. In response, we took steps to minimize expense
levels, entered into credit arrangements, and raised capital through public and
private equity offerings, to increase the likelihood that we will have
sufficient cash to support operations. We anticipate that the existing cash
balance together with future income from operations, collections of existing
accounts receivable, revenue from our existing backlog of products as of this
filing date, the sale of inventory on hand, deposits and down payments against
significant orders will be adequate to meet our working capital and capital
equipment requirement needs over the next 12 months. Our future capital
requirements will depend on many factors, including our growth rate, the timing
and extent of our spending to support research and development activities, the
timing and cost of establishing additional sales and marketing capabilities, the
timing and cost to introduce new and enhanced products and the timing and cost
to implement new manufacturing technologies. In the event that additional
financing is required from outside sources, we may not be able to raise it on
terms acceptable to us or at all. Any additional debt financing obtained by us
in the future could also involve restrictive covenants relating to our
capital-raising activities and other financial and operational matters, which
may make it more difficult for us to obtain additional capital and to pursue
business opportunities, including potential acquisitions. Additionally, if we
raise additional funds through further issuances of equity, convertible debt
securities or other securities convertible into equity, our existing
stockholders could suffer significant dilution in their percentage ownership of
the Company, and any new equity securities we issue could have rights,
preferences and privileges senior to those of holders of our common stock. If we
are unable to obtain adequate financing or financing on terms satisfactory to us
when we require it, our ability to continue to grow or support our business and
to respond to business challenges could be significantly limited. As of the date
of this Report, the Company has raised
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any off-balance sheet financing arrangements and have not established any special purpose or variable interest entities.
26 Table of Contents
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
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