11. LONG-TERM DEBT

12 Months Ended

May. 31, 2015

Long-term Debt, Unclassified [Abstract]

Long-Term debt

11. LONG-TERM DEBT:

    On April 10, 2015, Aehr Test Systems (the “Company”) entered into a Convertible Notes Purchase and Credit Facility Agreement (the “Purchase Agreement”) with QVT Fund LP and Quintessence Fund L.P., (the “Purchasers”) providing for the Company’s sale to the Purchasers of $4,110,000 in aggregate principal amount of 9.0% Convertible Secured Notes due April 2017 (the “Convertible Notes”).   See Note 9, “LINE OF CREDIT,” for a description of the Purchase Agreement.  Debt issuance costs of $350,000 were offset against the loan balance and are amortized over the life of the loan.  During fiscal 2015, $31,000 of amortization costs was recognized as interest expense.  Unamortized debt issuance costs of $319,000 were offset against the loan balance at May 31, 2015.

    Long-term debt, net of debt issuance costs (in thousands):

	May 31,
	2015			2014
Principal	$	4,110		$	--
Unamortized debt issuance costs		(319	)		--
	$	3,791		$	--

    The Convertible Notes bear interest at an annual rate of 9.0% and will mature on April 10, 2017 unless repurchased or converted prior to that date.  Interest is payable quarterly on March 1, June 1, September 1 and December 1 of each year.  The $350,000 in debt issuance costs, amortized over the life of the loan, represent an effective interest rate of 4.3%.  The Company may not redeem the Convertible Notes prior to maturity.

    The initial conversion price for the Convertible Notes is $2.65 per share of the Company’s common stock and is subject to adjustment upon the occurrence of certain specified events (as adjusted, the “Conversion Price”).   Holders may convert all or any part of the principal amount of their Convertible Notes in integral multiples of $10,000 at any time prior to the maturity date.  Upon conversion, the Company will deliver shares of its common stock to the holder of Convertible Notes electing such conversion.

    The Company’s obligations under the Convertible Notes are secured by substantially all of the assets of the Company.