8. LEASES

12 Months Ended

May 31, 2020

Leases [Abstract]

8. LEASES

8. LEASES

    The Company leases most of its manufacturing and office space under operating leases. The Company entered into non-cancelable operating lease agreements for its United States manufacturing and office facilities and maintains equipment under non-cancelable operating leases in Germany. The Company’s principal administrative and production facilities are located in Fremont, California, in a 51,289 square foot building. The Company’s lease was renewed in February 2018 and expires in July 2023. The Company maintained a facility in Japan located in a 418 square foot office in Tokyo under a lease which expired in June 2020. The Company also maintained a 1,585 square foot warehouse in Yamanashi under a lease which expired in June 2020. The Company substantially closed its subsidiary Aehr Test Systems Japan K.K. in March 2020, completing the liquidation of the legal entity in July 2020, see Note 16, “Restructuring,” of the Notes to Consolidated Financial Statements. The Company leases a 492 square foot sales and support office in Utting, Germany. The lease, which began February 1, 1992 and expires on January 31, 2022, contains an automatic twelve months renewal, at rates to be determined, if no notice is given prior to six months from expiry. Under the lease agreements, the Company is responsible for payments of utilities, taxes and insurance.

    The Company has only operating leases for real estate including corporate offices, warehouse space and certain equipment. A lease with an initial term of 12 months or less is generally not recorded on the condensed consolidated balance sheet, unless the arrangement includes an option to purchase the underlying asset, or renew the arrangement that the Company is reasonably certain to exercise (short-term leases). The Company recognizes lease expense on a straight-line basis over the lease term for short-term leases that the Company does not record on its balance sheet. The Company’s operating leases have remaining lease terms of 4 months to 3 years.

    The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of the arrangement. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

    The weighted-average remaining lease term for the Company’s operating leases was 3.2 years at May 31, 2020 and the weighted-average discount rate was 5.5%.

    The Company’s operating lease cost under FASB ASC Topic 842 was $734,000 for the year ended May 31, 2020. Rent expense under FASB ASC Topic 840 was $787,000 for the year ended May 31, 2019.

    The following table presents supplemental cash flow information related to the Company’s operating leases (in thousands):

	Year Ended May 31, 2020
Cash paid for amounts included in the measurement of operating lease liabilities
Operating cash flows from operating leases	$	737

    The following table presents the maturities of the Company’s operating lease liabilities as of May 31, 2020 (in thousands):

Fiscal year	Operating Leases
2021	$	765
2022		779
2023		795
2024		134
2025		--
Thereafter		--
Total future minimum operating lease payments	$	2,473
Less: imputed interest		210
Present value of operating lease liabilities	$	2,263