| AEHR TEST SYSTEMS Item 1A Risk Factors |
| 9 Item 1A Risk Factors You should carefully consider the risks described below before making an investment decision |
| The Company believes that the risks and uncertainties described below are the principal material risks facing Aehr Test as of the date of this Form 10-K In the future, the Company may become subject to additional risks that are not currently known to the Company |
| If any of the following risks actually occur, the Companyapstas business, financial condition and operating results could be seriously harmed |
| As a result, the trading price of the Companyapstas common stock could decline, and you could lose all or part of the value of your investment |
| FLUCTUATIONS IN OPERATING RESULTS The Company has experienced and expects to continue to experience significant fluctuations in its quarterly and annual operating results |
| During fiscal 2006, 2005 and 2004, quarterly net sales have been as low as dlra2dtta1 million and as high as dlra7dtta0 million, and gross margins for quarterly sales have fluctuated between 18dtta0prca and 47dtta1prca |
| The Companyapstas future operating results will depend upon a variety of factors, including sales volume, the timing of significant orders, the mix of products sold, changes in pricing by the Company, its competitors, customers or suppliers, the length of sales cycles for the Companyapstas products, timing of new product announcements and releases by the Company and its competitors, market acceptance of new products and enhanced versions of the Companyapstas products, capital spending patterns by customers, manufacturing inefficiencies associated with new product introductions by the Company, the Companyapstas ability to produce systems and products in volume and meet customer requirements, product returns and customer acceptance of product shipments, volatility in the Companyapstas targeted markets, political and economic instability, natural disasters, regulatory changes, possible disruptions caused by expanding existing facilities or moving into new facilities, expenses associated with acquisitions and alliances, and various competitive factors, including price-based competition, competition from vendors employing other technologies, and the amount of products sold under volume purchase arrangements, which tend to have lower selling prices |
| Accordingly, past performance may not be indicative of future performance |
| DEPENDENCE ON TIMING AND SIZE OF SALES ORDERS AND SHIPMENT The Company derives a substantial portion of its revenues from the sale of a relatively small number of systems which typically range in purchase price from approximately dlra200cmam000 to over dlra1 million per system |
| As a result, the loss or deferral of a limited number of system sales could have a material adverse effect on the Companyapstas net sales and operating results in a particular period |
| All customer purchase orders are subject to cancellation or rescheduling by the customer with limited penalties, and, therefore, backlog at any particular date is not necessarily indicative of actual sales for any succeeding period |
| From time 9 to time, cancellations and rescheduling of customer orders have occurred, and delays by the Companyapstas suppliers in providing components or subassemblies to the Company have caused delays in the Companyapstas shipments of its own products |
| There can be no assurance that the Company will not be materially adversely affected by future cancellations and rescheduling |
| A substantial portion of net sales typically are realized near the end of each quarter |
| A delay or reduction in shipments near the end of a particular quarter, due, for example, to unanticipated shipment rescheduling, cancellations or deferrals by customers, customer credit issues, unexpected manufacturing difficulties experienced by the Company, or delays in deliveries by suppliers, could cause net sales in a particular quarter to fall significantly below the Companyapstas expectations |
| As the Company incurs expenses in anticipation of future sales levels, the Companyapstas results of operations may be adversely affected if such sales levels are not achieved |
| DEPENDENCE ON MARKET ACCEPTANCE OF FOX SYSTEM One element of the Companyapstas business strategy is to capture an increasing share of the test equipment market through sales of its FOX wafer-level test and burn-in system |
| The FOX system is newly designed to simultaneously burn-in and functionally test all of the die on a wafer |
| The market for the FOX systems is in the very early stages of development |
| The FOX-14 full wafer contact burn-in and parallel test system was introduced in July 2001 and the FOX-1 full wafer parallel test system was introduced in June 2005 |
| The Companyapstas strategy depends, in part, upon its ability to persuade potential customers that the FOX system can successfully contact and functionally test all of the die on a wafer simultaneously, and that this method of testing is cost-effective for the customer |
| There can be no assurance that the Companyapstas strategy will be successful |
| The failure of the FOX system to achieve market acceptance would have a material adverse effect on the Companyapstas future operating results and long-term prospects |
| The Companyapstas stock price may also decline |
| Market acceptance of the FOX system is subject to a number of risks |
| The Company must complete development of the FOX system and the manufacturing processes used to build it |
| Before a customer will incorporate the FOX system into a production line, lengthy qualification and correlation tests must be performed |
| The Company anticipates that potential customers may be reluctant to change their procedures in order to transfer burn-in and test functions to the FOX system |
| Initial purchases are expected to be limited to systems used for these qualifications and for engineering studies |
| Market acceptance of the FOX system also may be affected by a reluctance of IC manufacturers to rely on relatively small suppliers such as the Company |
| As is common with new complex products incorporating leading-edge technologies, the Company may encounter reliability, design and manufacturing issues as it begins volume production and initial installations of FOX systems at customer sites |
| While the Company places a high priority on addressing these issues as they arise, there can be no assurance that they can be resolved to the customerapstas satisfaction or that the resolution of such problems will not cause the Company to incur significant development costs or warranty expenses or to lose significant sales opportunities |
| DEPENDENCE ON MARKET ACCEPTANCE OF MTX SYSTEM A principal element of the Companyapstas business strategy is to capture an increasing share of the memory test equipment market through sales of the MTX massively parallel test system |
| The MTX is designed to perform both burn-in and many of the final test functions currently performed by high-cost memory testers |
| The Companyapstas strategy depends, in part, upon its ability to persuade potential customers that the MTX system can successfully perform a significant portion of such final test functions and that transferring such tests to MTX systems will reduce their overall capital and test costs |
| There can be no assurance that the Companyapstas strategy will be successful |
| The failure of the MTX system to achieve market acceptance would have a material adverse effect on the Companyapstas business, financial condition and operating results |
| Market acceptance of the MTX system is subject to a number of risks |
| Through the end of fiscal 2006, several companies purchased evaluation units of the MTX system, but only four customers have purchased production quantities |
| There are no long-term volume purchase commitments with any of these customers |
| There can be no assurance that these customers will continue to purchase MTX systems for their production facilities |
| Since most potential customers have successfully relied on memory testers for many years and their personnel understand the use and maintenance of such systems, the Company anticipates that they may be reluctant to change their procedures in order to transfer test functions to the MTX system |
| Before a customer will transfer test functions to the MTX, the test programs must be translated for use with the MTX system and lengthy correlation tests must be performed |
| Correlation testing may take up to six months or more |
| Furthermore, MTX system sales are expected to be primarily limited to new facilities and to existing facilities being upgraded to accommodate new product generations, such as the transition to new memory technologies, including newer generation flash memories, the Double Data Rate DRAMs, and DDR II DRAMs |
| Construction of new facilities and upgrades of existing facilities have in some cases been delayed or canceled during periodic semiconductor industry downturns |
| Other companies have purchased MTX systems which are being used only in quality assurance and engineering applications |
| Market acceptance of the MTX system may also be affected by a reluctance of IC manufacturers to rely on relatively small suppliers such as the Company |
| LIMITED MARKET FOR BURN-IN SYSTEMS Historically, a substantial portion of the Companyapstas net sales were derived from the sale of burn-in systems |
| Management believes that the market for burn-in systems is mature and does 10 not expect to have significant long-term growth |
| In general, process control improvements in the semiconductor industry have tended to reduce burn-in times |
| In addition, as a given IC product generation matures and yields increase, the required burn-in time may be reduced or eliminated |
| IC manufacturers, which historically have been the Companyapstas primary customer base, increasingly outsource test and burn-in to independent test labs which often build their own systems |
| There can be no assurance that the market for burn-in systems will grow, and sales of the Companyapstas burn-in products could decline |
| LENGTHY SALES CYCLE Sales of the Companyapstas systems depend, in significant part, upon the decision of a prospective customer to increase manufacturing capacity or to restructure current manufacturing facilities, either of which typically involve a significant commitment of capital |
| In addition, the approval process for MTX and FOX system and DiePak carrier sales may require lengthy qualification and correlation testing |
| In view of the significant investment or strategic issues that may be involved in a decision to purchase MTX and FOX systems or DiePak carriers, the Company may experience delays following initial qualification of the Companyapstas systems as a result of delays in a customerapstas approval process |
| For these reasons, the Companyapstas systems typically have a lengthy sales cycle during which the Company may expend substantial funds and management effort in securing a sale |
| Lengthy sales cycles subject the Company to a number of significant risks, including inventory obsolescence and fluctuations in operating results, over which the Company has little or no control |
| The loss of individual orders due to the lengthy sales and evaluation cycle, or delays in the sale of even a limited number of systems could have a material adverse effect on the Companyapstas business, operating results and financial condition and, in particular, could contribute to significant fluctuations in operating results on a quarterly basis |
| DEPENDENCE ON INTERNATIONAL SALES AND OPERATIONS Approximately 85dtta0prca, 81dtta2prca and 84dtta5prca of the Companyapstas net sales for fiscal 2006, 2005 and 2004, respectively, were attributable to sales to customers for delivery outside of the United States |
| The Company operates sales, service and limited manufacturing organizations in Japan and Germany and a sales and support organization in Taiwan |
| The Company expects that sales of products for delivery outside of the United States will continue to represent a substantial portion of its future revenues |
| The future performance of the Company will depend, in significant part, upon its ability to continue to compete in foreign markets which in turn will depend, in part, upon a continuation of current trade relations between the United States and foreign countries in which semiconductor manufacturers or assemblers have operations |
| A change toward more protectionist trade legislation in either the United States or such foreign countries, such as a change in the current tariff structures, export compliance or other trade policies, could adversely affect the Companyapstas ability to sell its products in foreign markets |
| In addition, the Company is subject to other risks associated with doing business internationally, including longer receivable collection periods and greater difficulty in accounts receivable collection, the burden of complying with a variety of foreign laws, difficulty in staffing and managing global operations, risks of civil disturbance or other events which may limit or disrupt markets, international exchange restrictions, changing political conditions and monetary policies of foreign governments |
| Turmoil in the Asian financial markets has resulted, and may result in the future, in dramatic currency devaluations, stock market declines, restriction of available credit and general financial weakness |
| In addition, flash, DRAM, and other memory device prices in Asia have on occasion declined dramatically, and will likely do so again in the future |
| These developments may affect the Company in several ways |
| The Company believes that many international semiconductor manufacturers limited their capital spending (including the purchase of MTXs) in fiscal years 2003 and 2002, and that the uncertainty of the memory market may cause some manufacturers in the future to again delay capital spending plans |
| The economic conditions in Asia may also affect the ability of the Companyapstas customers to meet their payment obligations, resulting in cancellations or deferrals of existing orders and the limitation of additional orders |
| In addition, Asian governments have subsidized some portion of fabrication construction |
| Financial turmoil may reduce these governments &apos willingness to continue such subsidies |
| Such developments could have a material adverse affect on the Companyapstas business, financial condition and results of operations |
| Because a substantial portion of the Companyapstas net sales is from sales of products for delivery outside the United States, an increase in the value of the US Dollar relative to foreign currencies would increase the cost of the Companyapstas products compared to products sold by local companies in such markets |
| Approximately 87dtta5prca, 8dtta2prca and 4dtta3prca of the Companyapstas net sales for fiscal 2006 were denominated in US Dollars, Japanese Yen and Euros |
| Although a large percentage of net sales to European customers is denominated in US Dollars, substantially all sales to Japanese customers are denominated in Yen |
| Since the price is determined at the time a purchase order is accepted, the Company is exposed to the risks of fluctuations in the Yen-US Dollar exchange rate during the lengthy period from the date a purchase order is received until payment is made |
| This exchange rate risk is partially offset to the extent the Companyapstas Japanese subsidiary incurs expenses payable in Yen |
| To date, the Company has not invested in instruments designed to hedge currency risks |
| In addition, the Companyapstas Japanese subsidiary typically carries debt or other obligations due to the Company that may be denominated in either Yen or US Dollars |
| 11 A substantial portion of the worldapstas manufacturers of memory devices are in South Korea, Japan, Taiwan and China, and growth in the Companyapstas net sales depends in large part upon its ability to penetrate these markets |
| Both the South Korean and Japanese markets are difficult for foreign companies to penetrate |
| The Company has served the Japanese market through its Japanese subsidiary, which has experienced limited success and has incurred operating losses in recent years |
| Sales into South Korea have not been significant in recent years |
| Taiwan and China represent an increasingly important portion of the memory manufacturer market |
| The Company established a support organization in Taiwan in fiscal 2001 and subsequently added a sales function |
| The lack of local manufacturing may impede the Companyapstas efforts to develop the Japanese, South Korean, Taiwanese and Chinese markets |
| There can be no assurance that the Companyapstas efforts in Japan, South Korea, Taiwan or China will be successful or that the Company will be able to achieve and sustain significant sales to, or be able to successfully compete in, these markets |
| RAPID TECHNOLOGICAL CHANGE; IMPORTANCE OF TIMELY PRODUCT INTRODUCTION The semiconductor equipment industry is subject to rapid technological change and new product introductions and enhancements |
| The Companyapstas ability to remain competitive will depend in part upon its ability to develop new products and to introduce these products at competitive prices and on a timely and cost-effective basis |
| The Companyapstas success in developing new and enhanced products depends upon a variety of factors, including product selection, timely and efficient completion of product design, timely and efficient implementation of manufacturing and assembly processes, product performance in the field and effective sales and marketing |
| Because new product development commitments must be made well in advance of sales, new product decisions must anticipate both future demand and the technology that will be available to supply that demand |
| Furthermore, introductions of new and complex products typically involve a period in which design, engineering and reliability issues are identified and addressed by the Company and its suppliers |
| This process in the past required and in the future is likely to require the Company to incur unreimbursed engineering expenses, and from time to time to experience warranty claims or product returns |
| There can be no assurance that the Company will be successful in selecting, developing, manufacturing and marketing new products that satisfy market demand |
| Any such failure would materially and adversely affect the Companyapstas business, financial condition and results of operations |
| Because of the complexity of the Companyapstas products, significant delays can occur between a productapstas introduction and the commencement of volume production of such product |
| The Company has experienced, from time to time, significant delays in the introduction of, and technical and manufacturing difficulties with, certain of its products and may experience delays and technical and manufacturing difficulties in future introductions or volume production of new products |
| The Companyapstas inability to complete new product development, or to manufacture and ship products in volume and in time to meet customer requirements would materially adversely affect the Companyapstas business, financial condition and results of operations |
| As is common with new complex and software-intensive products, the Company has encountered reliability, design and manufacturing issues as it began volume production and initial installations of certain products at customer sites |
| The Company places a high priority on addressing these issues as they arise |
| Certain of these issues in the past have been related to components and subsystems supplied to the Company by third parties which have in some cases limited the ability of the Company to address such issues promptly |
| In the early stages of product development, there can be no assurance that reliability, design and manufacturing issues will not be discovered or, that if such issues arise, they can be resolved to the customers &apos satisfaction or that the resolution of such problems will not cause the Company to incur significant development costs or warranty expenses or to lose significant sales opportunities |
| Future improvements in semiconductor design and manufacturing technology may reduce or eliminate the need for the Companyapstas products |
| For example, the introduction of viable wafer-level test and burn-in systems, improvements in BIST technology, and improvements in conventional test systems, such as reduced cost or increased throughput, may significantly reduce or eliminate the market for one or more of the Companyapstas products |
| If the Company is not able to improve its products or develop new products or technologies quickly enough to maintain a competitive position in its markets, the Company may not be able to grow its business |
| CYCLICALITY OF SEMICONDUCTOR INDUSTRY AND CUSTOMER PURCHASES; RISK OF CANCELLATIONS AND RESCHEDULINGS The Companyapstas operating results depend primarily upon the capital expenditures of semiconductor manufacturers, semiconductor contract assemblers and burn-in and test service companies worldwide, which in turn depend on the current and anticipated market demand for ICs and products utilizing ICs |
| The semiconductor and semiconductor equipment industries in general, and the market for DRAMs and other memory devices in particular, historically have been highly volatile and have experienced periodic downturns and slowdowns, which have had severe negative effects on the semiconductor industryapstas demand for semiconductor capital equipment, including test and burn-in systems manufactured and marketed by the Company |
| These downturns and slowdowns have adversely affected the Companyapstas operating results in the past |
| In addition, the purchasing patterns of 12 the Companyapstas customers are also highly cyclical because most customers purchase the Companyapstas products for use in new production facilities or for upgrading existing test lines for the introduction of next generation products |
| Construction of new facilities and upgrades of existing facilities have in some cases been delayed or canceled during the most recent semiconductor industry downturn |
| A large portion of the Companyapstas net sales are attributable to a few customers and therefore a reduction in purchases by one or more customers could materially adversely affect the Companyapstas financial results |
| There can be no assurance that the semiconductor industry will grow in the future at the same rates as it has grown historically |
| Any downturn or slowdown in the semiconductor industry would have a material adverse effect on the Companyapstas business, financial condition and operating results |
| In addition, the need to maintain investment in research and development and to maintain customer service and support will limit the Companyapstas ability to reduce its expenses in response to any such downturn or slowdown period |
| The semiconductor equipment manufacturing industry has historically been subject to a relatively high rate of purchase order cancellation by customers as compared to other high technology industry sectors |
| Manufacturing companies that are the customers of semiconductor equipment companies frequently revise, postpone and cancel capital facility expansion plans |
| In such cases, semiconductor equipment companies may experience a significant rate of cancellations and reschedulings of purchase orders |
| There can be no assurance that the Company will not be materially adversely affected by future cancellations and reschedulings |
| POSSIBLE VOLATILITY OF STOCK PRICE The market price of the Companyapstas Common Stock has been, and may continue to be, extremely volatile |
| The Company believes that factors such as announcements of developments related to the Companyapstas business, fluctuations in the Companyapstas operating results, failure to meet securities analysts &apos expectations, general conditions in the semiconductor and semiconductor equipment industries and the worldwide economy, announcement of technological innovations, new systems or product enhancements by the Company or its competitors, fluctuations in the level of cooperative development funding, acquisitions, changes in governmental regulations, developments in patents or other intellectual property rights and changes in the Companyapstas relationships with customers and suppliers could cause the price of the Companyapstas Common Stock to fluctuate substantially |
| In addition, in recent years the stock market in general, and the market for small capitalization and high technology stocks in particular, has experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies |
| Such fluctuations could adversely affect the market price of the Companyapstas Common Stock |
| MANAGEMENT OF CHANGING BUSINESS If the Company is to be successful, it must expand its operations |
| Such expansion will place a significant strain on the Companyapstas administrative, operational and financial resources |
| Further, such expansion will result in a continuing increase in the responsibility placed upon management personnel and will require development or enhancement of operational, managerial and financial systems and controls |
| If the Company is unable to manage the expansion of its operations effectively, the Companyapstas business, financial condition and operating results will be materially and adversely affected |
| DEPENDENCE ON KEY PERSONNEL; ABILITY TO ATTRACT AND RETAIN SKILLED PERSONNEL The Companyapstas success depends to a significant extent upon the continued service of Rhea Posedel, its Chief Executive Officer, as well as other executive officers and key employees |
| The Company does not maintain key person life insurance for its benefit on any of its personnel, and none of the Companyapstas employees is subject to a non-competition agreement with the Company |
| The loss of the services of any of its executive officers or a group of key employees could have a material adverse effect on the Companyapstas business, financial condition and operating results |
| The Companyapstas future success will depend in significant part upon its ability to attract and retain highly skilled technical, management, sales and marketing personnel |
| There is a limited number of personnel with the requisite skills to serve in these positions, and it has become increasingly difficult for the Company to hire such personnel |
| Competition for such personnel in the semiconductor equipment industry is intense, and there can be no assurance that the Company will be successful in attracting or retaining such personnel |
| The Companyapstas inability to attract and retain the executive management and other key personnel it requires will limit its ability to expand its business and would have a material adverse effect on the Companyapstas business, financial condition and operating results |
| INTELLECTUAL PROPERTY PROTECTION AND INFRINGEMENT The Companyapstas ability to compete successfully is dependent in part upon its ability to protect its proprietary technology and information |
| Although the Company attempts to protect its proprietary technology through patents, copyrights, trade secrets and other measures, there can be no assurance that these measures will be adequate or that competitors will not be able to develop similar technology independently |
| These competitors would then be able to offer services and develop, manufacture and sell products, which compete directly with the Companyapstas services and products |
| In that case, the Companyapstas revenues and operating results could decline |
| Further, there can be no assurance that claims allowed on any patent issued to the Company will be sufficiently broad to protect the Companyapstas technology, that any patent will issue from any pending application or that foreign intellectual 13 property laws will protect the Companyapstas intellectual property |
| The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the US, and many companies have encountered significant problems in protecting their proprietary rights in these foreign countries |
| These problems can be caused by, for example, a lack of rules and processes allowing for meaningfully defending intellectual property rights |
| If the Company does not adequately protect its intellectual property, competitors may be able to practice the Companyapstas technologies and erode the Companyapstas competitive advantage, and the Companyapstas business and operating results could be harmed |
| Litigation may be necessary to enforce or determine the validity and scope of the Companyapstas proprietary rights, and there can be no assurance that the Companyapstas intellectual property rights, if challenged, will be upheld as valid |
| Such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on the Companyapstas business, financial condition and operating results, regardless of the outcome of the litigation |
| In addition, there can be no assurance that any of the patents issued to the Company will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to the Company |
| The Company will be able to protect its proprietary rights from unauthorized use by third parties only to the extent that the Companyapstas proprietary technologies are covered by valid and enforceable patents or are effectively maintained trade secrets |
| There are no pending claims against the Company regarding infringement of any patents or other intellectual property rights of others |
| However, the Company may receive, in the future, communications from third parties asserting intellectual property claims against the Company |
| Such claims could include assertions that the Companyapstas products infringe, or may infringe, the proprietary rights of third parties, requests for indemnification against such infringement or suggestions that the Company may be interested in acquiring a license from such third parties |
| There can be no assurance that any such claim made in the future will not result in litigation, which could involve significant expense to the Company, and, if the Company is required or deems it appropriate to obtain a license relating to one or more products or technologies, there can be no assurance that the Company would be able to do so on commercially reasonable terms, or at all |
| ENVIRONMENTAL REGULATIONS Federal, state and local regulations impose various controls on the use, storage, discharge, handling, emission, generation, manufacture and disposal of toxic or other hazardous substances used in the Companyapstas operations |
| The Company believes that its activities conform in all material respects to current environmental and land use regulations applicable to its operations and its current facilities and that it has obtained environmental permits necessary to conduct its business |
| Nevertheless, the failure to comply with current or future regulations could result in substantial fines being imposed on the Company, suspension of production, alteration of its manufacturing processes or cessation of operations |
| Such regulations could require the Company to acquire expensive remediation equipment or to incur substantial expenses to comply with environmental regulations |
| Any failure by the Company to control the use, disposal or storage of, or adequately restrict the discharge of, hazardous or toxic substances could subject the Company to significant liabilities |
| 14 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY The directors of the Company are elected annually |
| The executive officers of the Company serve with no specific term of office |
| The executive officers and directors of the Company are as follows: Name of Executive Officer Age Positions with the Company - ---------------------------- ---- ----------------------------------- Rhea J Posedel |
| 64 Chief Executive Officer and Chairman of the Board of Directors Gary L Larson |
| 60 Director and Secretary - ---------------------------- (1) Member of the Audit Committee |
| (2) Member of the Compensation Committee |
| (3) Member of the Nominating and Governance Committee |
| From the Companyapstas inception through May 2000, Mr |
| Prior to founding the Company, Mr |
| Posedel held various project engineering and engineering managerial positions at Lockheed Martin Corporation (formerly Lockheed Missile & Space Corporation), Ampex Corporation, and Cohu, Inc |
| He received a BS in Electrical Engineering from the University of California, Berkeley, an MS in Electrical Engineering from San Jose State University and an MBA from Golden Gate University |
| GARY L LARSON joined the Company in April 1991 as Chief Financial Officer and was elected Vice President of Finance in February 1992 |
| From 1986 to 1990, he served as Chief Financial Officer, and from 1988 to 1990 also as President and Chief Operating Officer, of Nanometrics Incorporated, a manufacturer of measurement and inspection equipment for the semiconductor industry |
| Larson received a BS in Mathematics/Finance from Harvey Mudd College |
| CARL N BUCK joined the Company as a Product Marketing Manager in 1983 and held various positions until he was elected Vice President of Engineering in November 1992, Vice President of Research and Development Engineering in November 1996, Vice President of Marketing in September 1997, Vice President of Contactor Business Group in May 2002 and Vice President of Marketing and Contactor Business Group in October 2005 |
| Buck served as Product Marketing Manager at Intel Corporation, an integrated circuit and microprocessor company |
| Buck received a BSEE from Princeton University, an MS in Electrical Engineering from the University of Maryland and an MBA from Stanford University |
| Hendrickson served as Platform General Manager, and from 1998 to 1999 as Engineering Director and Software Director, of Siemens Medical (formerly Acuson Corporation), a medical ultrasound products company |
| Hendrickson served as Director of Engineering and Director of Software of Teradyne Inc |
| (formerly Megatest Corporation), a manufacturer of semiconductor capital equipment |
| Hendrickson received a BS in Computer Science from Illinois Institute of Technology |
| GREGORY M PERKINS joined the Company as Vice President of Worldwide Sales and Service in June 2004 |
| Perkins served as Vice President of North America Customer Operations and then Vice President of North American and European Sales, for Electroglas Corporation, a producer of semiconductor wafer probers |
| From 1999 to 2001, he served as Vice President of Sales at Advantest America, Inc, a semiconductor tester company, and from 1997 to 1999 as Vice President of Worldwide Sales and Field Operations at LTX Corporation, a semiconductor tester company |
| Perkins held multiple management positions over 19 years with General Electric Company including Senior Vice President of Marketing and Business Development for GE Capital Computer Leasing |
| Perkins received a BS in Environmental Health Technologies from Quinnipiac University |
| KUNIO SANO joined the Company as Vice President, Aehr Test Systems Japan KK, the Companyapstas subsidiary in Japan, in June 1998 and was elected President, Aehr Test Systems Japan KK in January 2001 |
| From 1991 to 1998, he served as Manager of Development Engineering Department at Tokyo Electron Yamanashi Limited, a leading worldwide semiconductor equipment manufacturer |
| ROBERT R ANDERSON was appointed to the Companyapstas Board of Directors in October 2000 |
| Anderson is a private investor |
| From January 1994 to January 2001, he was Chairman of Silicon Valley Research, Inc, a semiconductor design automation software company, and its Chief Executive Officer from December 1996 to August 1998, and from April 1994 to July 1995 |
| He also served as Chairman of Yield Dynamics, Inc, a private semiconductor process control software company, from October 1998 to October 2000, and as Chief Executive Officer from October 1998 to April 2000 |
| Anderson co- founded KLA Instruments Corporation, now KLA-Tencor Corporation, a supplier of semiconductor process control systems, in 1975 and served in various capacities including Chief Operating Officer, Chief Financial Officer, Vice Chairman and Chairman before he retired from that company in 1994 |
| Anderson is Chairman of Aviza Technology, Inc, a semiconductor equipment company, and is a director of MKS Instruments, Inc, a semiconductor components and equipment supplier |
| He also serves as a director for two private companies |
| WILLIAM W R ELDER has been a director of the Company since 1989 |
| Elder was the Chief Executive Officer of Genus, Inc |
| a semiconductor equipment company, which was recently acquired by AIXTRON AG ( "e AIXTRON "e ), and he currently serves as the Chairman of the Silicon Semiconductor Technologies Group and as a member of the Executive Board of AIXTRON Dr |
| Elder also serves as a Board Member of Maskless Lithography Inc, a capital equipment start-up company based in San Jose, California |
| Elder holds a BSIE and an honorary Doctorate Degree from the University of Paisley in Scotland |
| MUKESH PATEL was appointed to the Companyapstas Board of Directors in June 1999 |
| Patel is a leading entrepreneur in the Silicon Valley who founded Sparkolor Corporation, acquired by Intel Corporation in late 2002, and co- founded SMART Modular Technologies, Inc, a high value added memory products company, acquired by Solectron Corporation in late 1999 |
| Patel holds a BS degree in Engineering with an emphasis in digital electronics from Bombay University, India |
| Patel also serves as a Board member for several privately-held companies |
| MARIO M ROSATI has been a director of the Company since 1977 |
| Rosati holds a BA from the University of California, Los Angeles and a JD from the University of California, Berkeley, Boalt Hall School of Law |
| Rosati is a director of Sanmina-SCI Corporation, an electronics manufacturing services company, Symyx Technologies, Inc, a combinatorial materials science company, and Vivus Inc, a specialty pharmaceutical company, all publicly held companies, as well as several privately-held companies |
| DIRECTORS &apos COMPENSATION AND OTHER ARRANGEMENTS Rhea J Posedel, the only inside director of the Company, does not receive any cash compensation for his services as a member of the Board of Directors |
| Each outside director receives (1) an annual retainer of dlra15cmam000, (2) dlra1cmam875 for each regular board meeting he attends, and (3) dlra1cmam125 for each committee meeting he attends if not held in conjunction with a regular board meeting, in addition to being reimbursed for certain expenses incurred in attending Board and committee meetings |
| Prior to each annual meeting of shareholders, each outside director may elect to receive an additional stock 16 option grant in lieu of any cash payments throughout the year |
| An inside director is a director who is a regular employee of the Company, whereas an outside director is not an employee of the Company |
| Directors are eligible to participate in the Companyapstas stock option plans |
| In fiscal 2004, outside directors Robert Anderson, William Elder, Mukesh Patel and Mario Rosati were each granted options to purchase 5cmam000 shares at dlra3dtta79 per share |
| Additionally, Robert Anderson and Mukesh Patel were each granted options to purchase 9cmam499 shares at dlra3dtta79 per share pursuant to an agreement to take these options in lieu of cash payments throughout the fiscal year |
| In fiscal 2005, outside directors Robert Anderson, William Elder, Mukesh Patel and Mario Rosati were each granted options to purchase 5cmam000 shares at dlra2dtta89 per share |
| Additionally, Robert Anderson and Mukesh Patel were each granted options to purchase 12cmam676 shares at dlra2dtta84 per share pursuant to an agreement to take these options in lieu of cash payments throughout the fiscal year |
| In fiscal 2006, outside directors Robert Anderson, William Elder, Mukesh Patel and Mario Rosati were each granted options to purchase 5cmam000 shares at dlra3dtta66 per share |
| Additionally, Robert Anderson and Mukesh Patel were each granted options to purchase 14cmam754 shares at dlra3dtta66 per share pursuant to an agreement to take these options in lieu of cash payments throughout the fiscal year |
| The Board of Directors has a Compensation Committee, an Audit Committee and a Nominating and Governance Committee |
| The Compensation Committee makes recommendations to the Board of Directors regarding executive compensation matters, including decisions relating to salary and bonus and grants of stock options |
| The Audit Committee approves the appointment of the Companyapstas independent registered public accounting firm, reviews the results and scope of annual audits and other accounting related services, and reviews and evaluates the Companyapstas internal control functions |
| The Nominating and Governance Committee reviews and makes recommendations to the Board of Directors regarding matters concerning corporate governance; reviews the composition and evaluates the performance of the Board of Directors; selects, or recommends for the selection of the Board of Directors, director nominees; and evaluates director compensation; reviews the composition of committees of the Board of Directors and recommends persons to be members of such committee; and reviews conflicts of interest of members of the Board of Directors and corporate officers |
| The information required by this item relating to the audit committee expert is incorporated by reference to the section entitled "e Audit Committee "e of the Proxy Statement |
| The information required by this item relating to Code of Ethics is incorporated by reference to the section entitled "e Code of Ethics "e of the Proxy Statement |