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 28, 2022

 

 

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 par value of $0.01 per share

AEHR

The NASDAQ Capital Market

 

Number of shares of the registrant’s common stock, $0.01 par value, outstanding as of March 31, 2022 was 26,922,827.

 

 

 

 

AEHR TEST SYSTEMS

 

FORM 10-Q

 

FOR THE QUARTER ENDED FEBRUARY 28, 2022

 

INDEX

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

ITEM 1.

Financial Statements (Unaudited)

 

 3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at February 28, 2022 and May 31, 2021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 28, 2022 and 2021

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended February 28, 2022 and 2021

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended February 28, 2022 and 2021

 

 6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 28, 2022 and 2021

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

 

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 24

 

 

 

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risks

 

 30

 

 

 

 

 

 

ITEM 4.

Controls and Procedures

 

 30

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

ITEM 1.

Legal Proceedings

 

 31

 

 

 

 

 

 

ITEM 1A.

Risk Factors

 

 31

 

 

 

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 31

 

 

 

 

 

 

ITEM 3.

Defaults Upon Senior Securities

 

 31

 

 

 

 

 

 

ITEM 4.

Mine Safety Disclosures

 

 31

 

 

 

 

 

 

ITEM 5.

Other Information

 

 31

 

 

 

 

 

 

ITEM 6.

Exhibits

 

 32

 

 

 

 

 

 

SIGNATURES

 

 33

 

 

 
2

Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  FINANCIAL STATEMENTS (Unaudited)

 

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

 

 

February 28,

 

 

May 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

(1)

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$32,020

 

 

$4,582

 

Accounts receivable, net

 

 

8,543

 

 

 

5,202

 

Inventories

 

 

14,152

 

 

 

8,849

 

Prepaid expenses and other current assets

 

 

559

 

 

 

551

 

 

 

 

 

 

 

 

 

 

Total current assets 

 

 

55,274

 

 

 

19,184

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

776

 

 

 

677

 

Operating lease right-of-use assets

 

 

1,091

 

 

 

1,606

 

Other assets

 

 

214

 

 

 

198

 

 

 

 

 

 

 

 

 

 

Total assets

 

$57,355

 

 

$21,665

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

3,307

 

 

 

2,893

 

Accrued expenses

 

 

2,535

 

 

 

2,163

 

Operating lease liabilities, short-term

 

 

778

 

 

 

737

 

Customer deposits and deferred revenue, short-term

 

 

6,197

 

 

 

189

 

Line of credit

 

 

-

 

 

 

1,400

 

Current portion of long-term debt

 

 

-

 

 

 

1,679

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

12,817

 

 

 

9,061

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities, long-term

 

 

415

 

 

 

1,007

 

Deferred revenue, long-term

 

 

90

 

 

 

99

 

Other long-term liabilities

 

 

45

 

 

 

49

 

 

 

 

 

 

 

 

 

 

    Total liabilities

 

 

13,367

 

 

 

10,216

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value: Authorized: 75,000 shares; Issued and outstanding: 26,914 shares and 23,725 shares at February 28, 2022 and May 31, 2021, respectively

 

 

269

 

 

 

237

 

Additional paid-in capital

 

 

116,507

 

 

 

87,553

 

Accumulated other comprehensive loss

 

 

(131)

 

 

(28)

Accumulated deficit

 

 

(72,657)

 

 

(76,313)

 

 

 

 

 

 

 

 

 

Total shareholders' equity

 

 

43,988

 

 

 

11,449

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$57,355

 

 

$21,665

 

 

____________

(1)The condensed consolidated balance sheet at May 31, 2021 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.

 

 
3

Table of Contents

 

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$15,283

 

 

$5,267

 

 

$30,540

 

 

$8,962

 

Cost of sales

 

 

8,886

 

 

 

3,373

 

 

 

17,343

 

 

 

6,464

 

Gross profit

 

 

6,397

 

 

 

1,894

 

 

 

13,197

 

 

 

2,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,612

 

 

 

1,643

 

 

 

7,054

 

 

 

4,658

 

Research and development

 

 

1,529

 

 

 

903

 

 

 

4,163

 

 

 

2,623

 

Total operating expenses

 

 

4,141

 

 

 

2,546

 

 

 

11,217

 

 

 

7,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

2,256

 

 

 

(652)

 

 

1,980

 

 

 

(4,783)

Interest income (expense), net

 

 

1

 

 

 

(10)

 

 

(9)

 

 

(35)

Net gain from dissolution of Aehr Test Systems Japan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,186

 

Gain from forgiveness of PPP loan

 

 

-

 

 

 

-

 

 

 

1,698

 

 

 

-

 

Other income (expense), net

 

 

10

 

 

 

(39)

 

 

68

 

 

 

(139)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax (expense) benefit

 

 

2,267

 

 

 

(701)

 

 

3,737

 

 

 

(2,771)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

 

(24)

 

 

(34)

 

 

(81)

 

 

177

 

Net income (loss)

 

 

2,243

 

 

 

(735)

 

 

3,656

 

 

 

(2,594)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$0.08

 

 

$(0.03)

 

$0.14

 

 

$(0.11)

Diluted

 

$0.08

 

 

$(0.03)

 

$0.13

 

 

$(0.11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

26,871

 

 

 

23,525

 

 

 

25,684

 

 

 

23,390

 

Diluted

 

 

28,854

 

 

 

23,525

 

 

 

27,510

 

 

 

23,390

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
4

Table of Contents

 

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$2,243

 

 

$(735)

 

$3,656

 

 

$(2,594)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cumulative translation adjustments

 

 

(23)

 

 

39

 

 

 

(103)

 

 

143

 

Reclassification of cumulative translation adjustment as a result of dissolution of Aehr Test Systems Japan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,401)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

 

2,220

 

 

 

(696)

 

 

3,553

 

 

 

(4,852)

Less:  Comprehensive income attributable to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss), attributable to Aehr Test Systems

 

$2,220

 

 

$(696)

 

$3,553

 

 

$(4,873)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
5

Table of Contents

 

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Shareholders'

 

Three Months Ended February 28, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances, November 30, 2021

 

 

26,835

 

 

$268

 

 

$115,602

 

 

$(108)

 

$(74,900)

 

$40,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee plans

 

 

79

 

 

 

1

 

 

 

25

 

 

 

-

 

 

 

-

 

 

 

26

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

880

 

 

 

-

 

 

 

-

 

 

 

880

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,243

 

 

 

2,243

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(23)

 

 

-

 

 

 

(23)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, February 28, 2022

 

 

26,914

 

 

$269

 

 

$116,507

 

 

$(131)

 

$(72,657)

 

$43,988

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Shareholders'

 

Nine Months Ended February 28, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances, May 31, 2021

 

 

23,725

 

 

$237

 

 

$87,553

 

 

$(28)

 

$(76,313)

 

$11,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee plans

 

 

1,492

 

 

 

15

 

 

 

2,755

 

 

 

-

 

 

 

-

 

 

 

2,770

 

Proceeds from public offerings, net of issuance costs 

 

 

1,697

 

 

 

17

 

 

 

24,013

 

 

 

-

 

 

 

-

 

 

 

24,030

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

2,186

 

 

 

-

 

 

 

-

 

 

 

2,186

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,656

 

 

 

3,656

 

Foreign currency translation adjustment 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(103)

 

 

-

 

 

 

(103)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, February 28, 2022

 

 

26,914

 

 

$269

 

 

$116,507

 

 

$(131)

 

$(72,657)

 

$43,988

 

 

 

6

Table of Contents

 

 

 

 

 

 

 

 

 

Total Aehr

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Test

 

 

 

 

 

 

 

 

  Additional

 

 

Other

 

 

 

 Systems

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Shareholders’

 

 

Noncontrolling

 

 

Shareholders'

 

Three Months Ended February 28, 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

 (Loss) Income

 

 

Deficit

 

 

Equity

 

 

Interest

 

 

Equity

 

Balances, November 30, 2020

 

 

23,487

 

 

$235

 

 

$86,786

 

 

$(62)

 

$(76,167)

 

$10,792

 

 

$-

 

 

$10,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee plans

 

 

111

 

 

 

1

 

 

 

117

 

 

 

-

 

 

 

-

 

 

 

118

 

 

 

-

 

 

 

118

 

Stock-based compensation

 

 

-

 

 

 

 -

 

 

 

271

 

 

 

-

 

 

 

 -

 

 

 

271

 

 

 

 -

 

 

 

271

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(735)

 

 

(735)

 

 

-

 

 

 

(735)

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17

 

 

 

22

 

 

 

39

 

 

 

-

 

 

 

39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, February 28, 2021

 

 

23,598

 

 

$236

 

 

$87,174

 

 

$(45)

 

$(76,880)

 

$10,485

 

 

$-

 

 

$10,485

 

 

 

 

 

 

 

 

 

 

Total Aehr

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Test

 

 

 

 

 

 

 

 

  Additional

 

 

Other

 

 

 

    Systems

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

 Shareholders’

 

 

Noncontrolling

 

 

Shareholders'

 

Nine Months Ended February 28, 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

 Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Interest

 

 

Equity

 

Balances, May 31, 2020

 

 

23,107

 

 

$231

 

 

$85,898

 

 

$2,234

 

 

$(74,286)

 

$14,077

 

 

$(21)

 

$14,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee plans

 

 

491

 

 

 

5

 

 

 

478

 

 

 

-

 

 

 

-

 

 

 

483

 

 

 

-

 

 

 

483

 

Stock-based compensation

 

 

 -

 

 

 

 -

 

 

 

798

 

 

 

 -

 

 

 

 -

 

 

 

798

 

 

 

-

 

 

 

798

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,594)

 

 

(2,594)

 

 

-

 

 

 

(2,594)

Foreign currency translation adjustment 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

144

 

 

 

-

 

 

 

144

 

 

 

(1)

 

 

143

 

Reclassification of cumulative translation adjustment as a result of dissolution of Aehr Test Systems Japan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,423)

 

 

-

 

 

 

(2,423)

 

 

22

 

 

 

(2,401)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, February 28, 2021

 

 

23,598

 

 

$236

 

 

$87,174

 

 

$(45)

 

$(76,880)

 

$10,485

 

 

$-

 

 

$10,485

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
7

Table of Contents

  

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Nine Months Ended

 

 

 

February 28,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$3,656

 

 

$(2,594)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

2,186

 

 

 

798

 

Depreciation and amortization

 

 

226

 

 

 

239

 

Net gain from dissolution of Aehr Test Systems Japan

 

 

-

 

 

 

(2,186)

Income tax benefit related to dissolution of Aehr Test Systems Japan

 

 

-

 

 

 

(215)

Gain from forgiveness of PPP loan

 

 

(1,698)

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,454)

 

 

1,063

 

Inventories

 

 

(5,449)

 

 

(349)

Prepaid expenses and other assets

 

 

(28)

 

 

(45)

Accounts payable

 

 

444

 

 

 

78

 

Accrued expenses

 

 

375

 

 

 

179

 

Customer deposits and deferred revenue

 

 

5,999

 

 

 

475

 

Other long-term liabilities

 

 

-

 

 

 

43

 

Income taxes payable

 

 

18

 

 

 

3

 

Net cash provided by (used in) operating activities

 

 

2,275

 

 

 

(2,511)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(218)

 

 

(205)

Net cash used in investing activities

 

 

(218)

 

 

(205)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Line of credit (repayments) borrowings, net

 

 

(1,400)

 

 

1,400

 

Proceeds from issuance of common stock under employee plans, net of taxes paid related to share settlement of equity awards

 

 

2,770

 

 

 

483

 

Proceeds from issuance of common stock from public offering, net of issuance costs

 

 

24,030

 

 

 

-

 

Net cash provided by financing activities

 

 

25,400

 

 

 

1,883

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash, cash equivalents and restricted cash

 

 

(19)

 

 

138

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalent and restricted cash

 

 

27,438

 

 

 

(695)

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, beginning of period(1)

 

 

4,662

 

 

 

5,513

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period(1)

 

$32,100

 

 

$4,818

 

 

(1) Includes restricted cash in other assets.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
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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 (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, 2021 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, 2021. 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.

 

The Company (as defined below) has been impacted by the outbreak of the novel coronavirus, known as COVID-19, which has spread throughout the world. 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 May 31, 2021 and in the last quarter of fiscal year ended May 31, 2020. In response, the Company implemented cost reduction initiatives to mitigate operating losses, including mandatory vacation days, shutdown days, and executive staff pay reductions. The Company eliminated all cost reduction initiatives in the last quarter of the fiscal year ended May 31, 2021.

 

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.

 

PRINCIPLES OF CONSOLIDATION. The condensed consolidated financial statements include the accounts of Aehr Test Systems and its subsidiaries (collectively, the "Company"). On November 18, 2020, the Company established a wholly owned new subsidiary, Aehr Test Systems Philippines, which is in full operation as of March 31, 2021. All significant intercompany balances have been eliminated in consolidation. The liquidation of Aehr Test Systems Japan K.K. (“ATS-Japan”), the Company’s majority owned subsidiary, was completed on July 31, 2020 and the noncontrolling interest was eliminated. See Note 16.

 

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.

 

 

 
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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, 2021. There have been no significant changes in the Company’s significant accounting policies during the three and nine months ended February 28, 2022.

 

2. RECENT ACCOUNTING PRONOUNCEMENTS

 

Accounting Standards Adopted

 

Income Taxes

On December 18, 2019, the FASB issued Accounting Standards Update ASU 2019-12 on Simplifying the Accounting for Income Taxes. The board decided to remove the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or gain from other items (for example discontinued operations or other comprehensive income). There are also provisions related to state taxes and calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2020. The Company has adopted ASU 2019-12 in the quarter ended August 31, 2021 with no material impact.

 

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 2021 is permitted. The Company does not expect a material impact of this accounting standard on its consolidated financial statements.

 

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.

 

 

 
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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.

 

The Company sells its products primarily through a direct sales force. In certain international markets, the Company sells its products through independent distributors. The Company considers revenue to be earned when all of the following criteria are met:

 

 

·

The Company has a contract with a customer that creates enforceable rights and obligations,

 

 

 

 

·

Promised performance obligations are identified,

 

 

 

 

·

The transaction price, or the amount we expect to receive, is determinable and

 

 

 

 

·

The Company has satisfied the performance obligations to the customer.

 

Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to provide additional services.

 

Disaggregation of revenue

 

The following tables show revenues by major product categories. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and cash flow are substantially similar.

 

The Company’s revenues by product category are as follows (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Type of good / service:

 

 

 

 

 

 

 

 

 

 

 

 

Systems

 

$7,172

 

 

$2,435

 

 

$14,805

 

 

$3,407

 

Contactors

 

 

7,426

 

 

 

1,930

 

 

 

13,468

 

 

 

3,330

 

Services

 

 

685

 

 

 

902

 

 

 

2,267

 

 

 

2,225

 

 

 

$15,283

 

 

$5,267

 

 

$30,540

 

 

$8,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product lines:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wafer-level 

 

$14,879

 

 

$4,993

 

 

$29,130

 

 

$7,804

 

Test During Burn-In

 

 

404

 

 

 

274

 

 

 

1,410

 

 

 

1,158

 

 

 

$15,283

 

 

$5,267

 

 

$30,540

 

 

$8,962

 

 

 
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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 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Geographic region:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$1,057

 

 

$1,113

 

 

$2,458

 

 

$3,124

 

Asia

 

 

14,213

 

 

 

4,122

 

 

 

28,066

 

 

 

5,723

 

Europe

 

 

13

 

 

 

32

 

 

 

16

 

 

 

115

 

 

 

$15,283

 

 

$5,267

 

 

$30,540

 

 

$8,962

 

 

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 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Timing of revenue recognition:

 

 

 

 

 

 

 

 

 

 

 

 

Products and services transferred at a point in time

 

$14,932

 

 

$4,944

 

 

$29,492

 

 

$7,728

 

Services transferred over time

 

 

351

 

 

 

323

 

 

 

1,048

 

 

 

1,234

 

 

 

$15,283

 

 

$5,267

 

 

$30,540

 

 

$8,962

 

 

Contract balances

 

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 28, 2022 and May 31, 2021 were $6,287,000 and $288,000, respectively. During the three and nine months ended February 28, 2022, the Company recognized $22,000 and $163,000 respectively, of revenues that were included in contract liabilities as of May 31, 2021.

 

Remaining performance obligations

 

On February 28, 2022, the Company had $225,000 of remaining performance obligations, which were comprised of deferred service contracts and extended warranty contracts not yet delivered. The Company expects to recognize approximately 14% of its remaining performance obligations as revenue in fiscal 2022, and an additional 86% in fiscal 2023 and thereafter. The foregoing excludes the value of other remaining performance obligations as they have original durations of one year or less, and also excludes information about variable consideration allocated entirely to a wholly unsatisfied performance obligation.

 

Costs to obtain or fulfill a contract

 

The Company generally expenses sales commissions when incurred as a component of selling, general and administrative expense as the amortization period is typically less than one year. Additionally, the majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory and fixed assets, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing process.

 

 
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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, restricted stock units (“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):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28,

 

 

February 28, 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator: Net income (loss)  

 

$2,243

 

 

$(735)

 

$3,656

 

 

$(2,594)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

26,871

 

 

 

23,525

 

 

 

25,684

 

 

 

23,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in basic net income (loss) per share calculation   

 

 

26,871

 

 

 

23,525

 

 

 

25,684

 

 

 

23,390

 

Effect of dilutive securities

 

 

1,983

 

 

 

--

 

 

 

1,826

 

 

 

--

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for diluted net income (loss) per share

 

 

28,854

 

 

 

23,525

 

 

 

27,510

 

 

 

23,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

$0.08

 

 

$(0.03)

 

$0.14

 

 

$(0.11)

Diluted net income (loss) per share

 

$0.08

 

 

$(0.03)

 

$0.13

 

 

$(0.11)

 

For the purpose of computing diluted earnings per share, weighted average potential common shares do not include stock options with an exercise price greater than the average fair value of the Company’s common stock for the period, as the effect would be anti-dilutive. In the three and nine months ended February 28, 2022, stock options to purchase 11,000 shares of common stock were outstanding, but were not included in the computation of diluted net income per share, because the inclusion of such shares would be anti-dilutive. In the three and nine months ended February 28, 2021, potential common shares have not been included in the calculation of diluted net loss per share as the effect would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for these periods are the same. Stock options to purchase 2,804,000 shares of common stock, RSUs for 143,000 shares and ESPP rights to purchase 139,000 ESPP shares were outstanding as of February 28, 2021, but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive.

 

 
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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:

 

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 28, 2022 (in thousands):

 

 

 

Balance as of

 

 

 

 

 

 

 

 

 

 

February 28, 2022

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

 

$30,584

 

 

$30,584

 

 

$-

 

 

$-

 

Assets

 

$30,584

 

 

$30,584

 

 

$-

 

 

$-

 

 

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of May 31, 2021 (in thousands):

 

 

 

Balance as of

May 31, 2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

 

$580

 

 

$580

 

 

$-

 

 

$-

 

Assets

 

$580

 

 

$580

 

 

$-

 

 

$-

 

 

Included in money market funds as of February 28, 2022 and May 31, 2021 is $80,000 restricted cash representing a security deposit for the Company’s United States manufacturing and office space lease which is included in other assets in the consolidated balance sheets.

 

There were no financial liabilities measured at fair value as of February 28, 2022 and May 31, 2021.

 

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 28, 2022 and May 31, 2021, 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.

 

 
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7. INVENTORIES

 

Inventories are comprised of the following (in thousands):

 

 

 

February 28,

 

 

 May 31,

 

 

 

2022

 

 

2021

 

Raw materials and sub-assemblies

 

$9,286

 

 

$5,859

 

Work in process

 

 

4,866

 

 

 

2,988

 

Finished goods

 

 

-

 

 

 

2

 

 

 

$14,152

 

 

$8,849

 

 

For the three and nine months ended February 28, 2022, the Company wrote down $1,026,000 and $1,046,000 of inventory, respectively. For the three and nine months ended February 28, 2021, the Company wrote down $104,000 and $117,000 of inventory, respectively.

 

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 28, 2022 and 2021 (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at the beginning of the period

 

$415

 

 

$244

 

 

$494

 

 

$246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accruals for warranties issued during the period

 

 

37

 

 

 

78

 

 

 

294

 

 

 

270

 

Adjustments to previously existing warranty accruals

 

 

26

 

 

 

259

 

 

 

98

 

 

 

346

 

Consumption of reserves

 

 

(108)

 

 

(81)

 

 

(516)

 

 

(362)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at the end of the period

 

$370

 

 

$500

 

 

$370

 

 

$500

 

 

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 28,

 

 

  May 31,

 

 

 

2022

 

 

2021

 

Customer deposits

 

$6,043

 

 

$27

 

Deferred revenue

 

 

154

 

 

 

162

 

 

 

$6,197

 

 

$189

 

 

 
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10. INCOME TAXES

 

The Company is subject to U.S federal and state and foreign income taxes as a corporation. The Company’s tax provision and the resulting effective tax rate for the interim period is determined based upon its estimated annual effective tax rate adjusted for the effect of discrete items arising in that quarter. The Company recorded a provision for income tax of $24,000 and $81,000 for the three and nine months ended February 28, 2022 which consisted primarily of foreign withholding taxes and foreign income taxes. The Company recorded a tax expense of $34,000 for the three months ended February 28, 2021, and a tax benefit of $177,000 for the nine months ended February 28, 2021, primarily related to the dissolution of its Japan subsidiary. See Note 16.

 

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.

 

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 year to 4 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 1.7 years at February 28, 2022 and the weighted-average discount rate was 5.4%.

 

 

 
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The Company’s operating lease cost was $191,000 and $576,000 for the three and nine months ended February 28, 2022, respectively. For the three and nine months ended February 28, 2021, operating lease cost was $193,000 and $568,000, respectively.

 

The following table presents supplemental cash flow information related to the Company’s operating leases (in thousands):

 

 

 

Nine Months Ended

 

 

 

February 28,

 

 

 

     2022

 

 

2021

 

Cash paid for amounts included in the measurement of operating lease liabilities:

 

 

 

 

 

 

Operating cash flows from operating leases

 

$612

 

 

$579

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

 

-

 

 

 

-

 

 

The following table presents the maturities of the Company’s operating lease liabilities as of February 28, 2022 (in thousands):

 

Fiscal year

 

Operating Leases

 

2022 (remaining three months of 2022)

 

$202

 

2023

 

 

829

 

2024

 

 

168

 

2025

 

 

31

 

2026

 

 

19

 

Total future minimum operating lease payments

 

$1,249

 

Less: imputed interest

 

 

(56)

Present value of operating lease liabilities

 

$1,193

 

 

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 (“SVB”). Pursuant to the Loan Agreement, the Company may borrow up to (a) the lesser of (i) the revolving line of $4.0 million or (ii) the amount available under the borrowing base minus (b) the outstanding principal balance of any advances, under a revolving line of credit which is collateralized by all the Company’s assets except intellectual property. The borrowing base is 80% of eligible accounts, as determined by SVB from the Company’s most recent borrowing base statement; provided, however, SVB has the right to decrease the foregoing percentage in its good faith business judgment to mitigate the impact of certain events or conditions, which may adversely affect the collateral or its value. Subject to an event of default, the principal amount outstanding under the revolving line of credit will accrue interest at a floating per annum rate equal to the greater of (a) the prime rate plus an additional percentage of up to 1%, which additional percentage depends on the Company’s adjusted quick ratio, and (b) 4.75%. Interest is payable monthly on the last calendar day of each month and the outstanding principal amount, the unpaid interest and all other obligations are due on the maturity date, which is 364 days from the effective date of January 13, 2020.

 

On January 14, 2021, the Company entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) with Silicon Valley Bank. The First Amendment, among other things, extended the Revolving Line Maturity Date to July 14, 2021; provided, however, that if the Company achieved specified operating metrics on a consolidated basis on or prior to May 31, 2021 the Amended Revolving Line Maturity Date would be extended to January 13, 2022. As of November 30, 2021, the Revolving Line Maturity Date had been extended to January 13, 2022.

 

 

 
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On January 11, 2022, the Company entered into the Second Amendment to the Loan and Security Agreement (the “Second Amendment”) with Silicon Valley Bank. The Second Amendment, among other things, (A) increases the available amount of the line up to the lesser of (i) $10 million or (ii) the available amount under the borrowing base, under a revolving line of credit, (B) allows for borrowing up to $3 million of the available balance based upon eligible customer purchase orders, (C) reduces the interest rate for account advances under the line to the greater of (a) prime rate plus an additional percentage up to 1.0%, which additional percentage depends on the Company’s adjusted quick ratio, and (b) 3.25%, reduces the interest rate for purchase order advances under the line to the greater of (a) prime rate plus an additional percentage up to 1.5%, which additional percentage depends on the Company’s adjusted quick ratio, and (b) 3.75%, and (D) extends the maturity date on the loan to January 13, 2023.

 

At February 28, 2022, the Company had not drawn against the credit facility and was in compliance with all covenants related to obligations to meet reporting requirements. The balance available to borrow under the line at February 28, 2022 was $2,522,000. There are no financial covenants in the agreement.

 

13. LONG-TERM DEBT:

 

On April 23, 2020, the Company obtained the Paycheck Protection Program Loan (the “PPP Loan”) in the aggregate amount of $1,678,789 from SVB. The PPP Loan was evidenced by a promissory note dated April 23, 2020 (the “Note”) that matures on April 23, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 23, 2020. The PPP Loan proceeds were used for payroll, health care benefits, rent and utilities.

 

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. On June 12, 2021, the Company received confirmation from SVB that on June 4, 2021, the Small Business Administration approved the Company’s PPP Loan forgiveness application for the entire PPP Loan balance of $1,678,789 and interest totaling $18,933, and the Company recognized a gain on loan forgiveness of $1,697,722.

 

14. STOCK-BASED COMPENSATION

 

Stock-based compensation expense consists of expenses for stock options, RSUs including performance-based grants, 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 11 in the Company’s Annual Report on Form 10-K for fiscal 2021 filed on August 27, 2021 for further information regarding the 2016 Equity Incentive Plan (the “2016 Plan”) and the ESPP.

 

The following table summarizes the stock-based compensation expense for the three and nine months ended February 28, 2022 and 2021 (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28, 

 

 

February 28,  

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Stock-based compensation in the form of employee stock options, RSUs and ESPP purchase rights, included in:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

$90

 

 

$14

 

 

$248

 

 

$45

 

Selling, general and administrative

 

 

487

 

 

 

194

 

 

 

1,259

 

 

 

593

 

Research and development

 

 

303

 

 

 

63

 

 

 

679

 

 

 

160

 

Total stock-based compensation

 

$880

 

 

$271

 

 

$2,186

 

 

$798

 

 

 
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As of February 28, 2022 and 2021, there were no stock-based compensation expenses capitalized as part of inventory.

 

During the three months ended February 28, 2022 and 2021, the Company recorded stock-based compensation expense related to stock options and RSUs under the 2016 Plan of $516,000 and $253,000, respectively. During the nine months ended February 28, 2022 and 2021, the Company recorded stock-based compensation expense related to stock options and RSUs of $1,416,000 and $736,000, respectively.

 

As of February 28, 2022, the total compensation expense related to unvested stock-based awards under the 2016 Plan, but not yet recognized, was approximately $1,915,000. This expense will be amortized on a straight-line basis over a weighted average period of approximately 1.2 years.

 

During the three months ended February 28, 2022 and 2021, the Company recorded stock-based compensation expense related to the ESPP of $364,000 and $18,000, respectively. During the nine months ended February 28, 2022 and 2021, the Company recorded stock-based compensation expense related to the ESPP of $770,000 and $62,000, respectively.

 

As of February 28, 2022, the total compensation expense related to purchase rights under the ESPP but not yet recognized was approximately $648,000. This expense will be amortized on a straight-line basis over a weighted average period of approximately 1.0 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.

 

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 five or six 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.

 

 

 
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Fair Value. The fair values of the Company’s stock options granted to employees for the three and nine months ended February 28, 2022 and 2021, were estimated using the following weighted average assumptions in the Black-Scholes option valuation model:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

February 28,  

 

 

February 28,

 

 

 

2022

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

Expected term (in years)

 

 

5

 

 

 

6

 

 

 

6

 

Volatility

 

 

117%

 

 

77%

 

 

72%

Risk-free interest rate

 

 

1.56%

 

 

1.03%

 

 

0.39%

Weighted average grant date fair value

 

$9.43

 

 

$2.56

 

 

$1.09

 

 

There were no stock options granted during the three months ended February 28, 2021.

 

The fair values of the ESPP purchase rights granted for the nine months ended February 28, 2022 and 2021 were estimated using the following assumptions:

 

 

 

 Nine Months Ended

 

 

 Nine Months Ended

 

 

 

February 28, 2022

 

 

February 28, 2021

 

 

 

 

 

 

 

Expected term (in years)

 

0.5-2.0

 

 

0.5-2.0

 

Volatility

 

 101%-143%

 

 

     74%-82%

 

Risk-free interest rates

 

0.05%-0.27%

 

 

0.10%-0.14%

 

Weighted average grant date fair value

 

$9.57

 

 

$0.44

 

 

There were no ESPP purchase rights granted to employees for the three months ended February 28, 2022 and 2021. During the nine months ended February 28, 2022 and 2021, ESPP purchase rights of 103,000 and 81,000 were granted, respectively. Total ESPP shares issued during the nine months ended February 28, 2022 and 2021 were 75,000 and 72,000 shares, respectively. There were 361,000 and 511,000 ESPP shares available for issuance as of February 28, 2022 and 2021, respectively.

 

The following tables summarize the Company’s stock option and RSU transactions during the three and nine months ended February 28, 2022 and shows the shares available to be issued at the end of each period (in thousands):

 

 

 

Available

 

 

 

Shares

 

Balance, May 31, 2021

 

 

1,137

 

 

 

 

 

 

Options granted

 

 

(206)

RSUs granted

 

 

(238)

Options cancelled and adjusted

 

 

(8)

 

 

 

 

 

Balance, August 31, 2021

 

 

685

 

 

 

 

 

 

Options reserved                         

 

 

1,414

 

Options granted

 

 

(10)

RSUs granted

 

 

(14)

RSUs performance-based grants

 

 

(270)

Options cancelled

 

 

51

 

 

 

 

 

 

Balance, November 30, 2021

 

 

1,856

 

 

 

 

 

 

Options granted

 

 

(2)

RSUs cancelled

 

 

10

 

Options cancelled

 

 

41

 

 

 

 

 

 

Balance, February 28, 2022

 

 

1,905

 

 

 
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The following table summarizes the stock option transactions during the three and nine months ended February 28, 2022 (in thousands, except per share data):

 

 

 

           Outstanding Options

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Number

 

 

Average

 

 

Aggregate

 

 

 

of

 

 

Exercise

 

 

Intrinsic

 

 

 

Shares

 

 

Price

 

 

Value

 

Balances, May 31, 2021

 

 

2,766

 

 

$2.16

 

 

$807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

206

 

 

$2.93

 

 

 

 

 

Options cancelled

 

 

(6)

 

$1.95

 

 

 

 

 

Options exercised

 

 

(641)

 

$2.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, August 31, 2021

 

 

2,325

 

 

$2.14

 

 

$12,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

10

 

 

$19.85

 

 

 

 

 

Options cancelled

 

 

(51)

 

$1.73

 

 

 

 

 

Options exercised

 

 

(571)

 

$2.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, November 30, 2021

 

 

1,713

 

 

$2.26

 

 

$25,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

2

 

 

$11.55

 

 

 

 

 

Options cancelled

 

 

(41)

 

$1.22

 

 

 

 

 

Options exercised

 

 

(66)

 

$2.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, February 28, 2022

 

 

1,608

 

 

$2.29

 

 

$18,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options fully vested and expected to vest at February 28, 2022

 

 

1,582

 

 

$2.30

 

 

$17,952

 

 

 
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The options outstanding and exercisable at February 28, 2022 were in the following exercise price ranges (in thousands, except per share data):

 

 

 

Options Outstanding at February 28, 2022

 

 

Options Exercisable at February 28, 2022

 

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

 

$1.22-$1.34

 

 

51

 

 

 

5.64

 

 

$1.34

 

 

 

51

 

 

 

5.64

 

 

$1.34

 

 

 

 

$1.64-$1.86

 

 

671

 

 

 

4.27

 

 

$1.71

 

 

 

387

 

 

 

3.89

 

 

$1.69

 

 

 

 

$2.03-$2.46

 

 

547

 

 

 

3.13

 

 

$2.23

 

 

 

447

 

 

 

2.92

 

 

$2.23

 

 

 

 

$2.63-$2.93

 

 

223

 

 

 

5.87

 

 

$2.92

 

 

 

47

 

 

 

4.01

 

 

$2.86

 

 

 

 

$3.46-$3.93

 

 

104

 

 

 

2.42

 

 

$3.84

 

 

 

104

 

 

 

2.42

 

 

$3.84

 

 

 

 

$9.94-$19.85

 

 

12

 

 

 

6.69

 

 

$16.54

 

 

 

1

 

 

 

6.65

 

 

$19.46

 

 

 

 

$1.22-$19.85

 

 

1,608

 

 

 

4.04

 

 

$2.29

 

 

 

1,037

 

 

 

3.42

 

 

$2.19

 

 

$11,831

 

 

The total intrinsic value of options exercised during the three and nine months ended February 28, 2022 was $867,000 and $11,902,000, respectively. The total intrinsic value of options exercised during the three and nine months ended February 28, 2021 was $57,000 and $151,000, respectively. The weighted average remaining contractual life of the options exercisable and expected to be exercisable at February 28, 2022 was 4.04 years. The weighted average remaining contractual life of the options exercisable and expected to be exercisable at February 28, 2021 was 3.68 years.

 

There were no RSUs granted to employees during the three months ended February 28, 2022. During the nine months ended February 28, 2022, RSUs for 169,000 shares, net of 40,000 shares withheld to settle payroll taxes, were granted to employees. The weighted average market value on the date of the grant of these RSUs was $2.98 per share. During the three and nine months ended February 28,2022, 21,000 and 50,000 RSUs became fully vested, respectively. As of February 28, 2022, 475,000 RSUs remain unvested which had an intrinsic value of $6,460,000. During the three months ended February 28, 2021, RSUs for 4,000 shares, net of 4,000 shares withheld to settle payroll taxes, were granted and fully vested to employees. The market value on the date of the grant of these RSUs was $2.25 per share. During the nine months ended February 28, 2021, RSUs for 165,000 shares, net of 4,000 shares withheld to settle payroll taxes, were granted to employees. The weighted average market value on the date of the grant of these RSUs was $1.87 per share. During the three and nine months ended February 28, 2021, 19,000 and 34,000 RSUs became fully vested, respectively. As of February 28, 2021, 143,000 RSUs remain unvested which had an intrinsic value of $400,000.

 

Early in fiscal 2022, the Board of Directors approved the granting of performance-based RSUs to key officers based upon revenue thresholds for the year ended May 31, 2022. The total maximum amount of RSUs to be vested if all revenue goals are achieved will be approximately 270,000. As of February 28, 2022 none of the revenue goals have been achieved and thus none of the RSUs are vested. The Company expects that by year end all the revenue goals will be achieved. During the three and nine months ended February 28, 2022 the Company recognized approximately $278,000 and $524,000, respectively, in stock-based compensation expense for these performance RSUs.

 

 

 
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There were no RSUs granted to members of the Company’s Board of Directors during the three months ended February 28, 2022. During the nine months ended February 28, 2022, RSUs for 43,000 shares were granted to members of the Company’s Board of Directors. The weighted average market value on the dates of the grant of these RSUs was $8.02 per share. During the nine months ended February 28, 2022, 33,000 RSUs to the members of the Company’s Board of Directors became fully vested. As of February 28, 2022, 10,000 RSUs remain unvested which had an intrinsic value of $136,000. During the three months ended February 28, 2021, RSUs for 34,000 shares were granted to members of the Company’s Board of Directors. The market value on the date of the grant of these RSUs was $2.25 per share. During the nine months ended February 28, 2021, RSUs for 126,000 shares were granted to members of the Company’s Board of Directors. The weighted average market value on the date of the grant of these RSUs was $1.73 per share. All of these RSUs were immediately fully vested.

 

 

 

15. SEGMENT INFORMATION

 

The Company has only one reportable segment. The information for revenue category by type, product line, geography and timing of revenue recognition, is summarized in Note “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 28,

 

 

May 31,

 

 

 

2022

 

 

2021

 

United States

 

$739

 

 

$647

 

Asia

 

 

37

 

 

 

30

 

 

 

$776

 

 

$677

 

 

As of February 28, 2022, the operating lease right-of-use assets of $990,000 and $101,000 are allocated in the United States and Asia, respectively.

 

There were no revenues through distributors for the three and nine months ended February 28, 2022 and 2021.

 

Sales to the Company’s five largest customers accounted for approximately 99% and 97% of its net sales in the three and nine months ended February 28, 2022, respectively. One customer accounted for approximately 90% of the Company’s net sales in the three months ended February 28, 2022. One customer accounted for approximately 84% of the Company’s net sales in the nine months ended February 28, 2022. Sales to the Company’s five largest customers accounted for approximately 95% and 82% of its net sales in the three and nine months ended February 28, 2021, respectively. Four customers accounted for approximately 55%, 15%, 11% and 11% of the Company’s net sales in the three months ended February 28, 2021. Four customers accounted for approximately 33%, 15%, 14% and 11% of the Company’s net sales in the nine months ended February 28, 2021. No other customers represented more than 10% of the Company’s net sales in the three and nine months ended February 28, 2022 and 2021.

 

16. DISSOLUTION OF AEHR TEST SYSTEMS JAPAN

 

On July 31, 2020, the Company completed the liquidation of ATS-Japan, a majority owned subsidiary. Accordingly, the Company deconsolidated ATS-Japan and recognized an aggregate net gain of $2,401,000 for the period ended August 31, 2020. The net gain was mainly due to cumulative translation adjustment reclassified into earnings of $2,186,000 and the residual income tax effect in connection with the cumulative translation adjustment released into income tax benefits of $215,000.

 

17. EQUITY

 

On August 25, 2021, the Board authorized Management to take actions necessary for the execution of a $75 million shelf registration, which S-3 was filed with the SEC on September 3, 2021. A Prospectus Supplement for an "At the Market" ("ATM") sale of $25 million of common stock was subsequently filed on September 17, 2021. On October 8, 2021, the Company fully executed the ATM offering by selling 1,696,729 shares at an average selling price of $14.73. The gross proceeds to the Company were $25.0 million, before commission fees of $0.7 million and offering expenses of $0.3 million.

 

 
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Item 2. MANAGEMENT’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, 2021 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.

 

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.

 

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 Cybersecurity and Infrastructure Security Agency, we have supported and continue to support customers during the pandemic. In the interest of public health, all onsite operations generally use the minimum number of people to safely execute tasks and follow enhanced safety and health protocols including screenings, social distancing and use of personal protective equipment.

 

Due to the impact of the COVID-19 pandemic on customers and customers’ customers, the Company experienced a drop in customer orders and revenues during the fiscal year ended May 31, 2021 and in the last quarter of fiscal year ended May 31, 2020. In response, the Company implemented cost reduction initiatives to mitigate operating losses, including mandatory vacation days, shutdown days and executive staff pay reductions. The Company eliminated all cost reduction initiatives in the last quarter of the fiscal year ended May 31, 2021.

 

 
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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.

 

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 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 judgments, 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, 2021.

 

There have been no material changes to our critical accounting policies and estimates during the three and nine months ended February 28, 2022 compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

 

 
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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 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

100.0%

 

 

100.0%

 

 

100.0%

 

 

100.0%

Cost of sales

 

 

58.1

 

 

 

64.0

 

 

 

56.8

 

 

 

72.1

 

Gross profit

 

 

41.9

 

 

 

36.0

 

 

 

43.2

 

 

 

27.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

17.1

 

 

 

31.2

 

 

 

23.1

 

 

 

52.0

 

Research and development

 

 

10.0

 

 

 

17.2

 

 

 

13.6

 

 

 

29.3

 

Total operating expenses

 

 

27.1

 

 

 

48.4