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3. EARNINGS PER SHARE

3 Months Ended

Aug. 31, 2017

Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, RSUs and ESPP shares) outstanding during the period using the treasury stock method.

The following table presents the computation of basic and diluted net income (loss) per share attributable to Aehr Test Systems common shareholders (in thousands, except per share data):

	Three Months Ended
	August 31,
	2017		2016

Numerator: Net income (loss)	$	10	$	(755	)

Denominator for basic net income (loss) per share:
Weighted average shares outstanding		21,417		13,317
Shares used in basic net income (loss) per share calculation		21,417		13,317
Effect of dilutive securities		1,574		--
Denominator for diluted net income (loss) per share		22,991		13,317
Basic net income (loss) per share	$	0.00	$	(0.06	)
Diluted net income (loss) per share	$	0.00	$	(0.06	)

For the purpose of computing diluted earnings per share, the weighted average number of potential common shares does not include stock options with an exercise price greater than the average fair value of the Company’s common stock for the period, as the effect would be anti-dilutive. Stock options to purchase 140,000 shares of common stock were outstanding as of August 31, 2017 but were not included in the computation of diluted net income per share, because the inclusion of such shares would be anti-dilutive. In the three months ended August 31, 2016, potential common shares have not been included in the calculation of diluted net loss per share as the effect would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for this period are the same. Stock options to purchase 3,382,000 shares of common stock, RSUs for 74,000 shares and ESPP rights to purchase 304,000 ESPP shares were outstanding as of August 31, 2016 but were not included in the computation of diluted net loss per share, because the inclusion of such shares would be anti-dilutive. The 2,657,000 shares convertible under the convertible notes outstanding at August 31, 2017 and 2016 were not included in the computation of diluted net income (loss) per share, because the inclusion of such shares would be anti-dilutive.