AEHR TEST SYSTEMS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

(1) Includes restricted cash within prepaid expenses and other current assets and other non-current assets.

AEHR TEST SYSTEMS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization** **

Aehr Test Systems (the “Company”) was incorporated in California in May 1977 and develops and manufactures test and burn-in equipment used in the semiconductor industry. The Company’s principal products are the FOX-XP, FOX-NP, and FOX-CP wafer contact and singulated die/module parallel test and burn-in systems, the Sonoma, Tahoe and Echo packaged parts burn-in products, the WaferPak full wafer contactor, the DiePak carrier, the WaferPak aligner, the DiePak autoloader, and test fixtures.

Basis of Presentation** **

The unaudited Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting. Accordingly, the unaudited Condensed Consolidated Financial Statements do not include certain information and footnote disclosures normally included in the annual consolidated financial statements. 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 30, 2025 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 should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended May 30, 2025.

Principles of Consolidation** **

The Company’s Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries and all significant intercompany accounts and transactions have been eliminated upon consolidation.

Critical Accounting Policies and use of Estimates

The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended May 30, 2025. There have been no significant changes to the Company’s critical accounting policies during the six months ended November 28, 2025. 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, the 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. Critical accounting estimates in these Condensed Consolidated Financial Statements include valuation of inventory at the lower of cost or net realizable value, valuation of intangible assets and impairment of long-lived assets and goodwill. Actual results could differ from those estimates.

Concentration of Credit Risk** **

Financial instruments which subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company performs credit evaluations of its customers’ financial condition and generally requires no collateral. The Company had revenues from individual customers in excess of 10% of total revenues as follows:

• Amount was less than 10% of total revenues

The Company had gross accounts receivable from individual customers in excess of 10% of gross accounts receivable as follows:

• Amount was less than 10% of total gross accounts receivable

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the United States and foreign jurisdictions. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, an accounting standard update to improve income statement expenses disclosures. The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets.* *The new guidance allows companies to apply a practical expedient when estimating credit losses on current accounts receivable and contract assets. This ASU is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted for periods in which financial statements have not yet been issued or made ready for issuance on a prospective basis. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements.

2. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures its cash equivalents and money market funds at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.

Level 3 — Unobservable inputs that are supported by little or no market activities.

The following table represents the Company’s assets measured at fair value on a recurring basis as of November 28, 2025, and the basis for that measurement:

The following table represents the Company’s assets measured at fair value on a recurring basis as of May 30, 2025, and the basis for that measurement:

As of November 28, 2025 and May 30, 2025, restricted cash of $0.2 million representing a security deposit for the Company’s United States manufacturing and office space lease was included in money market funds. There were no financial liabilities measured at fair value as of November 28, 2025 and May 30, 2025. There were no transfers between Level 1 and Level 2 fair value measurements during the six months ended November 28, 2025. The carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable and certain other accrued liabilities, approximate fair value due to their short maturity.

3. BALANCE SHEET INFORMATION

Inventories

Inventories consisted of the following:

Property and equipment

Property and equipment, net consisted of the following:

• Lesser of estimated useful life or lease term.

Depreciation expense was $0.4 million and $0.8 million for the three and six months ended November 28, 2025, respectively. Depreciation expense was $0.2 million and $0.4 million for the three and six months ended November 29, 2024, respectively.

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 six months ended November 28, 2025 and November 29, 2024:

Adjustments to previously existing warranty accruals represent changes in estimates based on updated information regarding historical warranty experience and expected future claims. The accrued warranty balance is included in accrued expenses on the accompanying Condensed Consolidated Balance Sheets.

Deferred revenue

Deferred revenue, short-term consisted of the following:

4. GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

There were no impairments to goodwill during the three and six months ended November 28, 2025 and November 29, 2024, respectively.

Purchased Intangible Assets

The Company’s purchased intangible assets, net, were as follows:

Amortization expense related to purchased intangible assets with finite lives was $0.3 million and $0.6 million for the three and six months ended November 28, 2025, respectively. Amortization expense was $0.3 million and $0.5 million for the three and six months ended November 29, 2024, respectively. There were no impairments to purchased intangible assets during the three and six months ended November 28, 2025 and November 29, 2024, respectively.

As of November 28, 2025, the estimated future amortization expense of purchased intangible assets with finite lives is as follows:

5. INCOME TAXES

The following table provides details of income taxes:

The Company’s effective tax rate varies from the U.S. federal statutory rate of 21% primarily due to the tax deduction from stock-based compensation. During interim periods, tax expenses are recorded for jurisdictions that are anticipated to be profitable for fiscal 2026.

In accordance with ASC 740-270, Interim Reporting,* *the provision for income taxes for interim periods is based on the Company’s estimated annual effective tax rate. For the three and six months ended November 28, 2025 and November 29, 2024, the Company recognized income tax benefits primarily related to quarter-to-date and year-to-date losses in the United States.

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 recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes.

6. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

The Company has purchase obligations to certain suppliers. In some cases, the products the Company purchases are unique and have provisions against cancellation of the order.

Contingencies

The Company may, from time to time, be involved in legal proceedings arising in the ordinary course of business. While there can be no assurances as to the ultimate outcome of any litigation involving the Company, management does not believe any pending legal proceedings will result in judgment or settlement that will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

On December 3, 2024, a putative shareholder class action lawsuit captioned Lucid Alternative Fund, LP v. Aehr Test Systems, Inc. was filed in the United States District Court for the Northern District of California against the Company. The lawsuit alleged, in part, that the Company and certain of its executives made materially false and misleading statements regarding the Company’s earnings guidance and other financial projections for 2024. The lawsuit sought unspecified monetary damages and purported to represent purchasers of the Company’s securities between January 9, 2024 and March 24, 2024. On February 3, 2025, Lucid and individual investor Yue Guo each filed motions requesting appointment as lead plaintiff. On March 19, 2025, the court appointed Yue Guo, who was represented by Rosen Law, as lead plaintiff in the shareholder class action. On April 4, 2025, the court ordered lead plaintiff to file an amended complaint or designate the existing complaint as operative by May 16, 2025; defendants to file their anticipated motion to dismiss by June 6, 2025; lead plaintiff to respond to the motion by June 27, 2025; and defendants to reply by July 11, 2025. The court scheduled a hearing on defendants’ motion to dismiss for August 8, 2025. On May 16, 2025, the court-appointed lead plaintiff elected to dismiss the case voluntarily, with all parties to bear their own fees and costs. The Court subsequently closed the case. Additionally, two shareholder derivative complaints were filed, alleging breaches of fiduciary duties and other misconduct by certain directors and officers of the Company. The derivative complaints were consolidated before the same judge as the putative shareholder class action lawsuit under the captionIn re Aehr Test Systems, Inc. Stockholder Derivative Litigation, No. 3:24-cv-09236-SI. On April 28, 2025, the court entered an order staying the consolidated action pending resolution of any motion(s) to dismiss, including any related appeal(s), in theLucidlitigation. On June 9, 2025, the court dismissed the derivative action without prejudice pursuant to the parties’ stipulation. The Company believes the claims in all three lawsuits were without merit. Following the voluntary dismissal of the shareholder class action and the court’s dismissal of the consolidated derivative action, no related proceedings are currently pending.

On October 16, 2024, the Company filed a complaint with the China Suzhou Intermediate Court to protect its intellectual property rights in China against Suzhou Semight Instruments Co., Ltd. (“Semight”) and its related entities and/or distributors, alleging infringement of the Company’s two patents related to wafer burn-in systems and wafer reliability test systems. The Company is seeking injunctive relief and damage compensation, claiming that Semight’s actions have infringed upon its intellectual property rights and caused substantial harm to its business. The Company believes its claims are valid and is vigorously pursuing its legal remedies. At this stage, the outcome of the litigation is uncertain, and the Company is unable to predict the likelihood of success or estimate the potential financial impact, if any, on its condensed consolidated financial statements. The Company has also incurred and expects to continue to incur legal expenses related to this matter. On November 15 and December 6, 2024, Semight filed a petition for invalidation to the two aforementioned Chinese patents with the Department of National Intellectual Properties in Beijing, respectively. The oral hearings for both of the patents have been held, and the decision has been issued for both patents that upholds part of the claims. In addition, the Company received a suspension ruling from Suzhou Intermediate People’s Court on the infringement proceedings, pending the outcome of the validity rulings.* *With both patents having been upheld, the suspended infringement proceedings have resumed. The hearing for the divisional patent was held on August 28, 2025, and the hearing for the parent patent was held on October 17, 2025. In December 2025, the Company received a first-instance judgment from the Suzhou Intermediate People’s Court with respect to the infringement cases, which dismissed the Company’s claims based on the court’s opinion that there was insufficient evidence to establish infringement. The Company filed the appeals for both cases on January 4, 2026.

In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, with respect to certain matters, for example, including against losses arising from a breach of representations or covenants, or from intellectual property infringement or other claims. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, payments made by the Company under these agreements have not had a material impact on the Company’s operating results, financial position or cash flow.

7. SHAREHOLDERS’ EQUITY

On October 15, 2024, the Board of Directors authorized management to execute a $100 million shelf registration, and a Registration Statement on Form S-3 was filed with the SEC. Additionally, a Prospectus Supplement for sales of $40 million of common stock pursuant to an ATM offering program was subsequently filed on October 29, 2024. In November 2025, the Company sold 384,380 shares of common stock at an average selling price of $25.89 per share. The gross proceeds to the Company were approximately $10.0 million, before commission fees of $0.3 million and offering expenses of $0.3 million. As of November 28, 2025, the remaining amount of the ATM offering program was approximately $30.0 million.

8. 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, 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 is recognized at a point in time, which is generally upon shipment or delivery and evidenced by transfer of title and risk of loss to the customer. Revenue from services is recognized over time as the customer receives the benefit 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.

Disaggregation of revenue

The following presents information about the Company’s net revenues in different geographic areas, which are based upon ship-to locations, and by product category:

With the exception of the amount of service contracts and extended warranties, the Company’s product net revenues are recognized at a point in time when control transfers to the customer. The following presents net revenues based on timing of recognition:

Contract balances

Accounts receivable is recognized in the period the Company delivers goods or provides services and when the Company’s right to payment is unconditional. Contract assets include unbilled receivables which represent revenues that are earned in advance of scheduled billings to customers. These amounts are primarily related to product sales where transfer of control has occurred but the Company has not yet invoiced. As of November 28, 2025 and May 30, 2025, unbilled receivables were $1.9 million and $3.6 million, respectively, and were included in prepaid expenses and other current assets on the accompanying Condensed Consolidated Balance Sheets.

Contract liabilities include payments received in advance of performance under a contract and are satisfied as the associated revenue is recognized. Contract liabilities as of November 28, 2025 and May 30, 2025 were $0.5 million and $2.0 million, respectively, and were included in deferred revenue, short-term and deferred revenue, long-term on the accompanying Condensed Consolidated Balance Sheets. During the three and six months ended November 28, 2025, the Company recognized $0.1 million and $1.8 million in revenue, respectively, which were included in contract liabilities as of May 30, 2025.

Remaining performance obligations

As of November 28, 2025, the remaining performance obligations, exclusive of customer deposits, which were comprised of deferred service contracts and extended warranty contracts not yet delivered, are not material. The foregoing excludes the value of other remaining performance obligations as they have original durations of one year or less and 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 expenses 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.

9. STOCK-BASED COMPENSATION

Stock-based compensation expense consists of expenses for stock options, restricted stock units (“RSUs”), performance RSUs (“PRSUs”), restricted shares, performance restricted shares and employee stock purchase plan (“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, PRSUs, restricted shares and performance restricted shares, stock-based compensation expense is based on the fair value of the Company’s common stock at the grant date and is recognized as expense over the employee’s requisite service period. All of the Company’s stock-based compensation is accounted for as equity instruments. See Note 12 in the Company’s Annual Report on Form 10-K for fiscal 2025 filed on July 28, 2025 for further information regarding the equity incentive plans and the ESPP.

The following table summarizes the stock-based compensation expense for the three and six months ended November 28, 2025 and November 29, 2024:

Stock-based compensation expense totaling $0.4 million and $0.3 million was capitalized as part of inventory as of November 28, 2025 and May 30, 2025, respectively.

The Company’s nonvested RSU, PRSU and restricted shares activities during the six months ended November 28, 2025 were as follows:

There were no options granted during the three and six months ended November 28, 2025 and November 29, 2024.

During the six months ended November 28, 2025 and November 29, 2024, the Company issued 67,000 and 41,000 shares, respectively, under the ESPP. As of November 28, 2025 and November 29, 2024, there were 443,000 and 285,000 shares, respectively, available for issuance under the ESPP.

On October 20, 2025, the Company’s shareholders approved amendments to the 2023 Equity Incentive Plan and the Amended and Restated 2006 Employee Stock Purchase Plan to increase the share reserves by 2,500,000 shares and 300,000 shares, respectively. The additional shares became available for future issuance upon shareholder approval.

10. RESTRUCTURING CHARGES

During the three months ended May 30, 2025, the Company initiated a restructuring plan to consolidate facilities and optimize cost structure in order to more effectively support the Company’s long-term strategic objectives. Restructuring charges relate to impairment of long-lived assets that will no longer be used in operations, including right-of-use assets and facility-related property, contract termination costs and facility exit-related costs. During the three months ended November 28, 2025, the Company entered into a lease termination agreement with the landlord and paid a termination fee of $0.2 million and was released from its remaining lease obligation. Consequently, the Company recognized a credit to the restructuring charge of $0.2 million during the period. There was no restructuring liability outstanding as of November 28, 2025.

Separately, the Company implemented a workforce reduction to align resources with its business needs in the three months ended August 29, 2025. The Company recorded $0.2 million of restructuring charges in the Condensed Consolidated Statements of Operations during the three months ended August 29, 2025, primarily related to employee termination benefits. There were no additional charges incurred related to this reduction during the three months ended November 28, 2025. No restructuring liability remained as of November 28, 2025, related to this initiative.

There were no restructuring charges during the three and six months ended November 29, 2024.

11. EMPLOYEE RETENTION CREDIT

The Company filed claims for the Employee Retention Credit (“ERC”) with the Internal Revenue Service in February 2024 under the provisions of the Coronavirus Aid, Relief, and Economic Security Act, as amended. During the three months ended August 29, 2025, the Company received a refund of approximately $1.3 million, which was recognized as other income in the Condensed Consolidated Statements of Operations.

In connection with filing the ERC claims, the Company engaged a third-party service provider under a contingent-fee arrangement. As a result, the Company incurred a service fee of approximately $0.3 million, which was recorded in other expense in the Condensed Consolidated Statements of Operations during the three months ended August 29, 2025.

There was no additional ERC-related activity during the three months ended November 28, 2025.

12. NET LOSS PER SHARE

Basic net loss per share is determined using the weighted average number of common shares outstanding during the period. Diluted net loss per share is determined using the weighted average number of common shares and potential common shares (representing the hypothetical number of incremental shares issuable under the assumed exercise of outstanding stock options, and vesting of outstanding RSUs and ESPP shares) during the period using the treasury stock method. The calculation of dilutive shares outstanding excludes securities that would have an antidilutive effect on net loss per share.

The following table presents the computation of basic and diluted net loss per share:

13. SEGMENT AND CONCENTRATION INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions and assessing financial performance. Accordingly, the Company considers itself to be in one operating segment.

Property and equipment, net by geographic area are as follows: