Welcome to the Aehr Test Systems third quarter fiscal 2010 earnings conference call. During today’s presentation, all parties will be in a listen only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) Now, I’d like to turn the conference over to Mr. Lasse Glassen of the Financial Relations Board.

Thanks for joining us to discuss Aehr Test Systems’ results for the third quarter of fiscal 2010. By now you should have all received a copy of today’s press release. If not, you can call my office at area code 213-486-6546 and we’ll get you a copy right away. With us today from Aehr Test are Rhea Posedel, Chairman and Chief Executive Officer and Gary Larson, Vice President of Finance and Chief Financial Officer. Management will review its operating performance for the quarter before opening the call to your questions. Now, I’d like to turn the call over to Gary Larson.

Before we begin, I’d like to make a few comments about forward-looking statements. Please be advised that during the course of our discussion today we may make forward-looking statements that involve risks and uncertainties relating to projections regarding industry growth and customer demand for Aehr Test product as well as projections regarding Aehr Test’s future financial performance. Actual results may differ materially from projected results and should not be considered as an indication of future performance. These risks and uncertainties include, without limitation, world economic conditions, the timing of the recovery of the semiconductor equipment market, acceptance by customer of Aehr Test’s technologies, acceptance by customers of the systems shipped upon receipt of a purchase order, the ability of new products to meet customer needs or performance described, the company’s development, manufacture and marketing of a commercially successful wafer level test and burn in system and the potential emergency of alternative technologies, each of which could adversely affect demand for Aehr Test’s products in calendar year 2010. We refer you to our most recent 10K and 10Q reports and other reports from time-to-time filed with the US Securities & Exchange Commission for a more detailed description of the risks facing our business and factors that could cause actual results to differ materially from projected results. The company disclaims any obligation to update our information contained in any forward-looking statements to reflect events or circumstances occurring after the date of this conference call. Now, I’d like to introduce our chairman and CEO Rhea Posedel.

Welcome to our conference call for the third quarter of fiscal year 2010. Before I start, I just wanted to mention that in case the quality of the call is bad, I’m calling from Texas, I’m down here visiting on some potential customers I hope. I’m pleased to report that pro forma revenue for the third quarter was $2.5 million, up 49% on a sequential quarter basis. On a GAAP basis, our revenue for the third quarter was $5.2 million with a net profit of $1.5 million. The GAAP numbers includes the sale of the remainder of our Spansion US Bankruptcy claim primarily related to the cancelation of wafer pack orders that were mostly built. I would like to point out that our $2.5 million in revenues do not include the acceptance of the FOX-15 system we shipped to Micronas in our second quarter. Even though the system is running production wafers, the customer has not completed the formal acceptance process. We are now planning to receive customer acceptance and recognize revenue for the FOX-15 during our fiscal fourth quarter. There are several highlights from this past quarter that I’d like to bring to your attention. We are most excited about winning a production order for ABTS burn-in system from a major Japanese integrated device manufacturer. This customer ordered a specially configured ABTS optimized for burn-in and testing of their high end micro controllers. In addition, the ABTS will be designed to include a burn-in board automation which integrates in to their factory automation. The first order was for a single system, however, we hope to receive follow on production orders starting in our next fiscal year. This is an important order for Aehr Test for a couple of reasons. First, it’s a major accomplishment to win a production burn-in…

As Rhea mentioned, net sales were $5.2 million in the third quarter of fiscal 2010. This compares to $1.2 million in the same quarter last year. In the third quarter of fiscal 2010 the company sold the remainder of its Spansion US Bankruptcy claim for net proceeds of approximately $4.6 million which resulted in the recording of $2.7 million as revenue related to cancellation chares, $1.3 million as deferred revenue and $.6 million as a reduction of operating expenses. Excluding the impact of the sale of the Spansion claim, fiscal 2010 third quarter product sales were $2.5 million. This compares to net sales of $1.2 million in the same quarter last year. The increase was the result of the high level of net sales of the company’s wafer level products. Gross profit was $4.0 million for the third quarter of fiscal 2010 or 77% of net sales. This included $2.7 million in gross profit related to the Spansion bankruptcy claim. In the third quarter last year the company recorded a gross loss of $6.8 million which included a $5.7 million provision for excess and obsolete inventory reserves that were primarily taken as a result of Spansion’s bankruptcy. SG&A was $1.7 million for the third quarter of fiscal 2010. This compares to $15.3 million in the prior year period which included a $13.7 million provision for bad debt due to the Spansion bankruptcy. Third quarter 2010 R&D expense was $1.5 million compared with $1.6 million in the third quarter of last year. R&D spending varies from quarter-to-quarter depending on the level of development of new product. As I noted earlier, fiscal 2010 third quarter operating expense was also reduced by 6/10ths of $1 million as a result of the sale of the remainder of the Spansion claim. Net income in the third quarter was $1.5 million or $0.18 per diluted share compared with a net loss of $27.7 million or $3.28 per diluted share a year ago. Pro forma net loss in the third quarter of fiscal 2010 was $1.5 million or $0.17 per diluted share compared with a pro forma net loss of $1.8 million or $0.21 per diluted share in the same period of the prior year. In determining the pro forma, or non-GAAP net loss in the third quarter of 2010 we’ve excluded the gain on the sale of the Spansion bankruptcy claim of $3.3 million and non-cash stock compensation expenses of $.3 million. Turning to the balance sheet, our cash and cash equivalent increased to $8.7 million at February 28, 2010 from $5.1 million at November 30, 2009. The increase was primarily due to the $4.6 million in cash received in January, 2010 from the sale of the remainder of the Spansion bankruptcy claim to a third party. We continue to remain debt free. This concludes our prepared remarks. We are now ready to answer your questions.

(Operator Instructions) Your first question comes from [Jeffrey Scott – Scott Asset Management]. [Jeffrey Scott – Scott Asset Management]: Gary, can you break down the $2.5 million in sales? You said $1 million was Spansion upgrades. Typically $200,000 or so is service and spares, what was the rest?

We don’t generally give a detailed breakdown of our sales but we thought it was important to mention the Spansion upgrades because all of those were written off materials. So basically those items has full 100% margin on them. [Jeffrey Scott – Scott Asset Management]: Was the rest the MAX equipment?

Again, we don’t generally give the full breakdown of the revenue?

There were spares. I believe we did sell a MAX to a local US company. [Jeffrey Scott – Scott Asset Management]: What will it take for Micronas to accept the FOX? What further demonstration do they need?

They’re running it in production. It’s one of these things where they need to take the system down to let us do some things and it’s basically just a timing. They don’t want to give up the system. It’s more of that than anything. So, it’s very little that has to be done so it’s just a matter of fitting in to their production schedule. Hopefully, we’re going to do that this quarter. [Jeffrey Scott – Scott Asset Management]: Do they owe you any more cash for it?

Yes, they owe 25% of the selling price. [Jeffrey Scott – Scott Asset Management]: So you have received 75% in cash already?

That’s correct. [Jeffrey Scott – Scott Asset Management]: What are you hearing about Spansion Japan?

I know it’s an excellent question and we’re always staying on top of that and as far as we’re hearing they’re not running wafers. It looks like they’re trying to sell off their equipment. [Jeffrey Scott – Scott Asset Management]: How many FOX machines are at Spansion Japan?

20. [Jeffrey Scott – Scott Asset Management]: And what will happen to them?

We don’t know. We actually would look forward to them being sold and purchased by another company besides Spansion. But, I don’t know. It’s very complicated so we just get second hand information from them. [Jeffrey Scott – Scott Asset Management]: Do you have any idea when that Spansion Japan will get resolved?

I don’t. Gary, do you have any information on that?

No, I don’t. As I’ve mentioned in the past, the status of the Spansion Japan bankruptcy is very difficult to assess. There’s little information that is publically shared. It is not at all like the US side where we have filings every day that we can review and go through. It really is a matter of just listening as well as we can and trying to get some insight but we haven’t heard anything as far as what might happen. Any equipment sale obviously would have to be approved by the bankruptcy court in Japan. We have heard that GE Credit has the task of trying to locate buyers. So again, as Rhea said, we’d be anxious to see a third party come in and buy that equipment and use it productively. [Jeffrey Scott – Scott Asset Management]: Would you expect GE Credit to go to both Spansion Austin and yourselves as a potential buyer of that FOX equipment?

If I were GE Credit I would go to any entities that I think I could sell it to. The difficulty in the past has been since Spansion US is also in bankruptcy is getting the two different bankruptcy courts to agree on anything. They haven’t been very successful in that so far. [Jeffrey Scott – Scott Asset Management]: What are you hearing about the Spansion US bankruptcy?

Spansion US bankruptcy, they had previously announced that they expected to exit bankruptcy in the first calendar quarter. [Jeffrey Scott – Scott Asset Management]: That was today.

Very good. I was going to point that out if nobody else did. I’ve noticed on their docket filings that they’re scheduling continuation hearings in to April and May. So it would obviously be possible at any point in time for them to exit, but since I’m still seeing substantive meetings out there I’m guess that we’re at least talking about the later part of the second quarter. [Jeffrey Scott – Scott Asset Management]: Is that delaying their ordering pattern any?

The impression that we’ve gotten on that is that they’re only allowed to order on a hand to mouth basis. So if they have current order activity that they would have to walk away from if they didn’t order equipment, then they’re allowed to order it. But, they’re not really allowed to anticipate business that might come down the pipe six months out or nine months out. Most semiconductor manufacturers due that kind of anticipative ordering so we would hope when they exit bankruptcy that could benefit us. [Jeffrey Scott – Scott Asset Management]: So they can order spares and things like that, they can’t order a new wafer pack.

No, they can if they have a production need for it and they can prove they have a production need for it to ship product in the current quarter, they can order it. But, they can’t forecast and say, “We think the next two quarters we’re going to need additional systems or additional wafer packs.” Maybe the product is not ready or the customer hasn’t given them the firm orders yet, they can’t buy that type of equipment. But, if they can prove they need systems or wafer packs to meet shipments, to make shipment requirements then they can order it. [Jeffrey Scott – Scott Asset Management]: There was $1 million worth of deliveries in the February quarter, can you be more specific about their ordering pattern subsequent to the February 28th quarter?

I think what we’re looking at now, again, the visibility from them is very short, but it would probably be this quarter if they order anything, it would be wafer packs not system upgrades. We’ve upgraded four or five system from 200 to 300 millimeter and we’d expect maybe to get some wafer pack orders to fill up those systems. [Jeffrey Scott – Scott Asset Management]: On the website, the Aehr Test website, there are no jobs posted. What has you headcount been over the past quarter?

We haven’t added any bodies over the last quarter. I did say we would increase R&D but probably won’t increase headcount so we have variable labor opportunities that we could either hire temporary people, we have a number of software people in India and various places that we can add and expand. It would probably be our engineering expenses will go up because of some consulting but also some materials that we have to buy for some of the new developments that we’re doing for our Japanese customer. [Jeffrey Scott – Scott Asset Management]: What kind of additional features do you need to put on to your machines in order to make them saleable? What I’m trying to get at is [inaudible]?

One large customer for example, they wanted to change minor things like changing the board to board spacing, or we need to reconfigure the ABTS for higher power applications. So as we said all along, it’s a very configurable system so the electronics can be plugged in to different back planes. So in some way we’re creating a new back plane or new interface for the burn-in board. It’s more development type engineering as opposed to R&D. It’s not doing advanced work in that sense. It’s maybe repackaging our ABTS technology for different applications. [Jeffrey Scott – Scott Asset Management]: It’s really reconfiguring?

Correct. Reconfiguring might be a back plane, or interface board or something of that sort, or racks. In one case we’re putting in burn-in board automation so we can automatically load the burn-in boards in and out of the system, things of that sort. [Jeffrey Scott – Scott Asset Management]: Is this an existing customer that has asked you to do this?

No, these would be new customers for ABTS. [Jeffrey Scott – Scott Asset Management]: Is it kind of your understanding that if you can get the ABTS configured that way that they will buy it?

That’s correct. If it meets their qualifications. [Jeffrey Scott – Scott Asset Management]: So you’re well down the sales cycle with them?

Correct. So hopefully the next quarter or two we’ll have another announcement of another major account win for the ABTS. [Jeffrey Scott – Scott Asset Management]: How many ABTS systems have you now delivered?

Somewhere between five to 10, I’m not sure. It’s mostly with different customers.

Probably on the lower end of that range. [Jeffrey Scott – Scott Asset Management]: What are you finding in terms of your cost of goods sold as you manufacturer more systems? Is the cost coming down?

Because of the very low volume level that we’ve had during the past year it’s a little bit hard to give any good cost of goods information on the ABTS. Our MAX and MTX products, when we were at more traditional volume levels were typically in the high 40% range, our FOX products were generally in the low 50% range and we would expect the ABTS on an ongoing basis to be probably in the low 50% range. [Jeffrey Scott – Scott Asset Management]: That’s where you are or what you want to get to?

Again, there have been so few ABTS’ right now that it’s hard to generalize on our costs particularly with the volume levels that we’ve been seeing. We’ll have to hold off on what it will look like. I was just giving you my guess.

Certainly, we’re not there now as Gary mentioned. It’s where we want to get to basically. [Jeffrey Scott – Scott Asset Management]: The MAX-4i that you talked about, what was new and different about that particular [inaudible]?

What was exciting for us was that we penetrated a major Japanese manufacturer. What was unique about it for him was that they were using traditional Japanese burn-in systems but our MAX4-200 could deliver higher [kern], the oven could provide higher power dissipation than the current system they’re using. It’s a proven solution, we had 96 channels and it could also do this independent temperature control per [duct] so we had that feature in the MAX-4 and it’s the i feature, there’s additional power supplies and reconfiguring the driver boards to provide the extra current so that’s why they bought the MAX4. They couldn’t burn-in these high powered devices under existing systems without a huge amount of modification. [Jeffrey Scott – Scott Asset Management]: These were micro controllers?

Micro controllers for high end consumer products, maybe like 3D TVs, things like that sort. So the volume of systems they’ll buy in the future could be a lot or a few depending on how well their product succeeds in the marketplace. [Jeffrey Scott – Scott Asset Management]: This was a new customer?

A new customer. This is a new customer, I don’t think we’ve sold to this customer ever. The first ABTS customer we had sold products 15 years ago to or 20 years ago. [Jeffrey Scott – Scott Asset Management]: The second one, the MAX-4i, this is for production?

It’s for production, the plan is for production. [Jeffrey Scott – Scott Asset Management]: So there is large hope for more orders from that particular customer?

That’s the plan and that’s the hope. If we’re successful with our first system we’d expect to see follow on orders within the first half of fiscal 2011.

Your next question comes from John Evans – Edmunds White Partners. John Evans – Edmunds White Partners: Can you talk a little bit about I guess with the increases you’re going to have in R&D kind of where you estimate you guys will be from a breakeven point or where you have to get to from a revenue standpoint? Then, I don’t know if you talk about this but can you give us kind of a sense of book to build, was your bookings stronger than kind of your deliveries or can you give us any kind of insight?

We don’t generally talk about our book to build, we do declare our backlog at the end of the fiscal year but we don’t give interim bookings or backlog information. Generally, if we have what we consider to be important orders either from the standpoint of size, or if we consider them to be critical new customer opportunities, then we will put those orders out on press releases. So, it’s somewhat easy to at least keep track of the big ones that have come through that way. With regard to the R&D, Rhea did mention that we anticipate some additional R&D spending. But, what we also see is R&D often times in our business is quite variable from one quarter to the next so there isn’t a set number that we’re putting out there. We just wanted to put out an early warning that R&D might start to climb somewhat. As far as a breakeven point, in the past what we’ve said is everything is very much dependent upon mix because as we’ve discussed some of our products right now, written off materials end up having 100% margin and then there are more standard products that are less, and we’re also at quite a low level right now. So, it’s hard to really access the breakeven. What we’ve said in the past, at our current expense level, probably we’d be in the $5 to $6 million range to see breakeven. John Evans – Edmunds White Partners: Several of your big customers I think, Texas is your biggest customer, they’ve all talked about having capacity constraints on the test side. I guess if you look at a lot of the back end companies, they’ve started to see that. I guess can you help us understand maybe why you potentially are a lager in that or why you haven’t seen as much ramp yet?

That’s a good question. In particular, speaking about Texas Instruments where they certainly had bottlenecks in testers so I think we’re kind of at the end of that chain for them. First, they need fab capacity, then it becomes assembly, then test capacity and then I think after that hopefully it’s going to be they need more burn-in capacity. Jon Evans – Edmunds White Partners: But you don’t believe that you’ve lost share at Texas?

No, no, no, I don’t think so. I’ll find out more tomorrow. Then Austin, I’m going to go to Dallas tomorrow. It’s my mission. Jon Evans – Edmunds White Partners: So what we should believe is they’re saying on their conference call that they’re saying they’re getting more in line from the test side, hopefully 60, 90 or 120 days from that you should see that in on the burn-in side?

At least some of it. It depends on where they are capacity wide in our systems and product mix. Some of their devices maybe don’t need burn-in or they don’t do as much burn-in on them and other ones do. So, different devices at different times require more or less. They’re automotive devices require 24 hour burn-in, they’re DSPs maybe require less, or just early life type burn-in so it does depend on their product mix somewhat. But, if general, if they’re seeing a push in all areas then I think that’s going to be to our advantage. They had a number of our test systems turned off in 2009 when they’re volumes were low. Now, I think pretty much all of them are turned back on. So if they see any increase in capacity they’ll have to add burn-in systems. But, we haven’t lost share with them. Jon Evans – Edmunds White Partners: I know you didn’t want to answer this before and it’s difficult because of the different products and mixes, but I guess can you help us understand maybe why you feel comfortable with kicking R&D up with sales at such low levels? What I guess I’m trying to get to is can you help us understand from a cash basis, will you not burn cash then over the next couple of quarters? Can you give us any insight in to that?

Basically I looked at it as a positive in the sense that, and maybe Jeff kind of alluded, he was prying me on that, what is it for? It’s not major new developments but it’s doing some customization or specialization and modification of these system for a few customers to get qualified and get some production orders. It’s just spending money on materials to win some new accounts. That’s all. It’s not going to be 50% higher or whatever, but maybe 10% or 20% higher than what we’re normally running. It’s things that we need to do to win orders and it means that we’re fairly far along the sales cycle to win these orders. Jon Evans – Edmunds White Partners: May I just ask you then relative to that, can you give us any kind of sense of size of those if you’re successful in basically redoing the system to those specifications? How much business potentially is there to win here?

That’s a good question. It could be 10 to 50 systems over a few years. Jon Evans – Edmunds White Partners: The last question I had for you is when you think about test capacity, the test companies kind of talk about utilization, capacity utilization, is there any way for you to talk to your customers or give us a sense of kind of utilization of your systems and kind of what’s the breaking point before they have to start to add significant capacity?

It really depends on which ones we have service contracts in. For example, at Texas Instruments we have service contracts so we know what systems are turned on and turned off and are utilized. But, other accounts we don’t have that visibility and there are a lot of accounts that we’re not in so it’s hard for us to figure that out. There’s no research that’s done in our sector. The only way you can do it is go around and call on customers and try and find out that way and how they’re doing. But our objective is to penetrate more new accounts with our products. That’s our major goal this year so we can spread our customer base rather than just have Spansion and Texas Instructions, we want to have multiple production customers.

Your next question comes from [Joy Muckergee] – Unidentified. [Joy Muckergee] – Unidentified: Most of the questions have been answered but will you talk a little bit about the NOR market and what the outlook is for NOR flash?

Well, I think certainly the growth that you read about is in the NAN Flash. Obviously Spansion is bullish about their business going forward although they’ve shrunk it kind of jettison the mobile market. But, we feel there’s still growth at Spansion because right now they just have a few FOX-1s and wafer packs so most of the systems that we sold them are in Japan in the bankrupt part of their company. I think that NOR flash is still going to be there, there’s still a market for it and I don’t see it going away any time soon. A NAN flash if you need high density memory, cheap memory that’s flash memory, that’s the way to go. But, there’s a lot of applications where you don’t need that much memory that you need the reliability of the NOR flash. So there is this strong segment for NOR flash. I don’t see anything that is going to change it. As they grow in density, the test times get longer so they need more test equipment. [Joy Muckergee] – Unidentified: Then on the competitive front, has anything changed? Is Form Factor a bigger player against what you do?

Form Factor makes the prob cards. They can compete against us I guess on our wafer packs for the FOX-1s if they can do full wafer up to that density, maybe. Certainly, they’re trying to. [Joy Muckergee] – Unidentified: So other than that you haven’t seen much of change in the landscape?

Not on the system approach arena.

Management, I’m showing no further questions. Please continue with any further remarks.

This is Rhea and I’d like to thank you for joining us this afternoon and we look forward to next quarter’s conference call. Thanks and good evening.