11. LONG-TERM DEBT AND LINE OF CREDIT

3 Months Ended

Aug. 31, 2015

Long-term Debt And Line Of Credit

11. LONG-TERM DEBT AND LINE OF CREDIT

11. LONG-TERM DEBT AND LINE OF CREDIT

    On April 10, 2015, Aehr Test Systems (the “Company”) entered into a Convertible Note Purchase and Credit Facility Agreement (the “Purchase Agreement”) with QVT Fund LP and Quintessence Fund L.P. (the “Purchasers”) providing for (a) the Company’s sale to the Purchasers of $4,110,000 in aggregate principal amount of 9.0% Convertible Secured Notes due 2017 (the “Convertible Notes”) and (b) a secured revolving loan facility (the “Credit Facility”) in an aggregate principal amount of up to $2,000,000.

    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.  Debt issuance costs of $356,000, which represent an effective interest rate of 4.3%, were offset against the loan balance and are amortized over the life of loan.  During three months ended August 31, 2015, $37,000 of amortization costs was recognized as interest expense.  Unamortized debt issuance costs of $282,000 were offset against the loan balance at August 31,2015.

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

	August 31,			May 31,
	2015			2015
Principal	$	4,110		$	4,110
Unamortized debt issuance costs		(282	)		(319	)
	$	3,828		$	3,791

    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 integrals 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 may not redeem the Convertible Notes prior to maturity.

    Advances under the Credit Facility will bear interest at an annual rate of 5%.  Each advance under the Credit Facility and any accrued and unpaid interest thereon must be repaid within 90 days from the date on which such advance is made.  Unless paid in full at maturity, amounts owing under the credit facility may be converted by the holder into Convertible Notes.  Advances under the Credit Facility may be prepaid without any prepayment premium or penalty and may be reborrowed (unless converted into Convertible Notes).  At August 31, 2015 and May 31, 2015, the Company has not drawn any amount against the Credit Facility.

    The Company’s obligations under the Purchase Agreement, Convertible Notes and the Credit Facility are secured by substantially all of the assets of the Company.