AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Condensed Consolidated Statements of Cash Flows

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 29, 2026 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 29, 2026.

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.

Change in Fiscal Year

On April 2, 2026, the Company’s board of directors approved a change in the Company’s fiscal year-end from the 52- or 53-week period ending on the Friday in May nearest May 31 to the 52- or 53-week period ending on the Friday in June nearest June 30. The change became effective beginning in fiscal year 2027, which began on June 27, 2026 and will end on June 25, 2027. This Quarterly Report on Form 10-Q includes unaudited financial information for the period from May 30, 2026 to June 26, 2026, which represents the one-month transition period resulting from the change in fiscal year-end. The audited financial information for this transition period will be included in the Company’s Annual Report on Form 10-K for the fiscal year ending June 25, 2027.

Financial information for the three months ended September 26, 2025 has not been included in this Form 10-Q because: (i) the three months ended August 29, 2025 provide a meaningful comparison to the three months ended September 25, 2026; (ii) there are no significant seasonal or other factors that would materially impact comparability of information if the results for the three months ended September 26, 2025 were presented in lieu of results for the three months ended August 29, 2025; and (iii) it was not practicable or cost justified to prepare such information.

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 29, 2026. There have been no significant changes to the Company’s critical accounting policies during the three months ended September 25, 2026. 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:

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 Adopted

In July 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. The Company has adopted the guidance, and the adoption did not have a material impact on its Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements Not Yet Adopted

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 expense 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 December 2025, the FASB issued ASU 2025-11,Interim Reporting (Topic 270): Narrow-Scope Improvements. This update clarifies certain interim reporting requirements, including the applicability of interim reporting guidance and the form and content of interim financial statements. This ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its Condensed Consolidated Financial Statements and related disclosures.

In December 2025, the FASB issued ASU 2025-12,Codification Improvements, which clarifies, corrects errors, and makes minor improvements to various areas of the Accounting Standards Codification. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its Condensed Consolidated Financial Statements and related disclosures.

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 September 25, 2026, and the basis for that measurement:

The following table represents the Company’s assets measured at fair value on a recurring basis as of June 26, 2026, 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 29, 2026, and the basis for that measurement:

Included in money market funds as of September 25, 2026, June 26, 2026 and May 29, 2026 was $0.2 million restricted cash representing a security deposit for the Company’s United States manufacturing and office space lease. There were no financial liabilities measured at fair value as of September 25, 2026, June 26, 2026 and May 29, 2026. There were no transfers between Level 1 and Level 2 fair value measurements during the three months ended September 25, 2026 or for the one month ended June 26, 2026. 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 maturities.

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 for both the three months ended September 25, 2026 and August 29, 2025. Depreciation expense was $0.1 million for the one month ended June 26, 2026.

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 months ended September 25, 2026 and August 29, 2025 and during the one month ended June 26, 2026:

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 months ended September 25, 2026 and August 29, 2025, and during the one month ended June 26, 2026.

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 for both the three months ended September 25, 2026 and August 29, 2025. Amortization expense was $0.1 million for the one month ended June 26, 2026. There were no impairments to purchased intangible assets during the three months ended September 25, 2026 and August 29, 2025, and during the one month ended June 26, 2026.

As of September 25, 2026, 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 differs from the U.S. federal statutory rate of 21% primarily due to executive compensation and stock-based compensation expenses that are recognized for financial reporting purposes but are not deductible for income tax purposes, as well as discrete tax benefits associated with stock-based compensation.

For the three months ended September 25, 2026, the Company calculated its interim income tax provision using an estimated annual effective tax rate applied to year-to-date ordinary income, adjusted for discrete items. The Company recognized an income tax benefit despite pretax income, primarily due to discrete tax benefits associated with disqualified dispositions and excess tax benefits from the vesting of restricted stock units.

For the three months ended August 29, 2025, the Company calculated its U.S. interim tax provision on a year-to-date discrete basis under Accounting Standards Codification (“ASC”) 740-270-30-18 because the near break-even level of forecasted United States pretax income and significant permanent differences caused the estimated annual effective tax rate to be highly sensitive to relatively small changes in forecasted income.

For the one-month transition period ended June 26, 2026, the Company recognized an income tax benefit due to a pretax loss 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 October 16, 2024, the Company filed a complaint with the Suzhou Intermediate People’s 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 petitions 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 decisions have been issued for both patents upholding part of the claims. In addition, the Company received a suspension ruling from the 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 appeals for both cases on January 4, 2026. On January 27, 2026, Semight filed another petition for invalidation of one of the two aforementioned Chinese patents with the Department of National Intellectual Properties in Beijing. On June 2, 2026, a hearing was held before the Supreme People’s Court of China in connection with the Company’s appeal. The hearing focused primarily on infringement comparison issues, including whether the accused products contain certain claim features at issue. The appeal proceedings remain ongoing, and the Company expects that an additional hearing may be scheduled. In June 2026, the Company received a first-instance judgment from the Beijing Intellectual Property Court in connection with one of the patent invalidation proceedings. The judgment was favorable to the Company on certain issues but did not resolve all matters in the Company’s favor. The Company appealed certain aspects of the judgment. On October 20, 2026, a hearing was held before the Supreme People’s Court of China on the second-instance administrative proceeding concerning the validity of the patent, and a ruling is pending. Meanwhile, the administrative proceedings concerning another patent are still pending at the Beijing Intellectual Property Court at the first-instance stage.

In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, with respect to certain matters, including, for example, 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 flows.

7. 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 are 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 September 25, 2026, June 26, 2026, and May 29, 2026, unbilled receivables were $0.8 million, $1.7 million, and $1.9 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 September 25, 2026, June 26, 2026, and May 29, 2026 were $8.0 million, $6.8 million, and $5.2 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 months ended September 25, 2026, the Company recognized $2.9 million in revenue which was included in contract liabilities as of May 29, 2026. Revenue recognized during the one month ended June 26, 2026 that was included in contract liabilities as of May 29, 2026 was not material.

Remaining performance obligations

As of September 25, 2026, the remaining performance obligations, exclusive of customer deposits, which consisted 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.

8. 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 2026 filed on July 27, 2026 for further information regarding the equity incentive plans and the ESPP.

The following table summarizes the stock-based compensation expense for the three months ended September 25, 2026 and August 29, 2025, and for the one month ended June 26, 2026:

Stock-based compensation expense capitalized in inventory was $0.4 million as of each of September 25, 2026, June 26, 2026, and May 29, 2026.

The Company’s nonvested RSU, PRSU and restricted share activities for the three months ended September 25, 2026 and for the one month ended June 26, 2026 were as follows:

There were no options granted during the three months ended September 25, 2026 and August 29, 2025, or during the one month ended June 26, 2026. There were no ESPP purchase rights granted during the three months ended September 25, 2026 and August 29, 2025, or during the one month ended June 26, 2026.

9. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is determined using the weighted average number of common shares outstanding during the period. Diluted net income 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 income per share.

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

10. 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: