LEASES

12 Months Ended

May 31, 2022

LEASES

LEASES

8. LEASES

The Company leases its manufacturing and office space under operating leases. The principal administrative and production facility is located in Fremont, California, in a 51,289 square foot building. The Company entered into a non-cancelable operating lease agreement for its United States manufacturing and office facility, which was renewed in February 2018 and expires in July 2023. 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, 2024, contains an automatic twelve months renewal, at rates to be determined, if no notice is given prior to six months from expiry. On November 18, 2020, the Company established a wholly owned new subsidiary, Aehr Test Systems Philippines Inc., which has been in full operation since March 2021. The Company leases a facility in Philippines located in a 2,713 square foot building in Clark Freeport Zone, Pampanga. The lease, which began January 1, 2021 and expires on December 31, 2025, contains an option to renew for another three years at rates stipulated in the contract, notice for renewal is given 6 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 1 year to 4 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 1.4 years at May 31, 2022 and the weighted average discount rate was 5.4%.

The Company’s operating lease cost under FASB ASC Topic 842 was $766,000 for the year ended May 31, 2022. The Company’s operating lease cost under FASB ASC Topic 842 was $761,000 for the year ended May 31, 2021.

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

	Year Ended May 31,
	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	813	$	779
Right-of-use assets obtained in exchange for operating leases liabilities		-		147

The following table presents the maturities of the Company’s operating lease liabilities as of May 31, 2022 (in thousands):

Fiscal year	Operating Leases
2023	$	829
2024		168
2025		31
2026		19
Thereafter		-
Total future minimum operating lease payments		1,047
Less: imputed interest		(41	)
Present value of operating lease liabilities	$	1,006