Gayn Erickson - President, Chief Executive Officer Ken Spink - Chief Financial Officer Jim Byers - IR, MKR Investor Relations

Good day ladies and gentlemen, and welcome to the Aehr Test Systems, First Quarter Fiscal 2022 Financial Results Call. Today’s conference is being recorded. At this time, I’d turn the conference over to Mr. Jim Byers of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to Aehr Test Systems’ first quarter fiscal ‘22 financial results conference call. With me on today’s call are Aehr Test Systems’ President and Chief Executive Officer, Gayn Erickson; and Chief Financial Officer, Ken Spink. Before I turn the call over to Gayn and Ken, I’d like to cover a few quick items. This afternoon right after market closed, Aehr Test issued a press release announcing its first quarter fiscal ’22 results. That release is available on the company’s website at aehr.com. This call is being broadcast live over the Internet for all interested parties and the webcast will be archived in the Investor Relations page of the company’s website. I’d like to remind everyone that on today’s call management will be making forward-looking statements today that are based on current information and estimates that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause the results to differ materially from those in the forward-looking statements are discussed in the company’s most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today’s call are only valid as of this date and Aehr Test Systems undertakes no obligation to update the forward-looking statements. Now, with that said, I’d like to turn the conference call over to Gayn Erickson, President and CEO.

Thanks, Jim. Good afternoon, everyone, and welcome to our first quarter fiscal ’22 earnings conference call. Thanks for joining us today. Hey Ken! I think if you could make sure you're muted over there. Thank you. Let's start with a quick summary of the highlights for the quarter and the strong business momentum we're experiencing, and then I'll give an update on our expectations for increased revenue growth this fiscal year. We're off to a strong start for fiscal ’22, finishing the quarter ending August 31 with record bookings for a single quarter of $20.7 million. Since the end of the quarter we have announced an additional $19.4 million in bookings, bringing our total bookings for the fiscal year to over $40 million as of today's date. Our strong bookings include several sizable orders received over the past few months from our lead silicon carbide Test and Burn-in customer for our FOX-XP wafer level test and burn-in systems and full wafer, WaferPak Contactors to support testing silicon carbide devices for electric vehicles. Each of these silicon carbide focused XP systems is configured to test 18 silicon carbide wafers in parallel, in the footprint of a single test wafer, test solution, while contacting and testing a 100% of the device has been parallel on each wafer. This Fortune 500 customer is a major automotive semiconductor supplier, and we continue to work closely with them to achieve their test and burn-in requirements and capacity needs. They continue to forecast orders for additional FOX systems and WaferPak this fiscal year and a significant number of systems and WaferPak over the next several years, driven by electric vehicle semiconductor test and burn-in demand. We're seeing very strong demand across the industry for wafer level burn-in of silicon carbide devices and continue to ramp our…

Great! Thank you, Gayn, and good afternoon everyone. As Gayn noted, we're off to a strong start for fiscal 2022. We finished the first quarter with record bookings for the company a single quarter of $20.7 million, and since the end of the quarter we've announced an additional $19.4 million in bookings, bringing our total bookings for the fiscal year to over $40 million as of today. Looking at our financial results. Net sales in the first quarter were $5.6 million, down 26% sequentially from $7.6 million in the fourth quarter and up 181% from $2 million in the first quarter last year. The sequential decrease in net sales from the preceding fourth quarter reflects a delay in receiving orders and time to ship during the quarter. Our fiscal Q2 will have much higher revenue and reflect profitability consistent with our operating model. The fiscal Q1 revenues reflect a decrease in wafer level burn-in revenue of $1.5 million and customer service revenues of $473,000. The decrease in wafer level burn-in revenue is primarily due to a decrease in WaferPak, DiePak revenue of $1.6 million. System revenues were flat. The increase from Q1 last year includes an increase of wafer level of burn-in revenue of $3.4 million and customer service revenue of $231,000. The increase in wafer level burn-in revenues is primarily due to an increase in system revenues of $3.1 million and an increase in WaferPak, DiePak revenue of $325,000. Non-GAAP net loss for the first quarter was $414,000 or $0.02 per diluted share, which excludes the impact of forgiveness of $1.7 million in loans from the Paycheck Protection Program which we received in fiscal year 2020. This compares to non-GAAP net income of $870,000 or $0.04 per diluted share in the preceding fourth quarter, and non-GAAP net loss of…

Thank you. [Operator Instructions]. We'll take our first question from Christian Schwab with Craig-Hallum Capital Group. Please go ahead.

Thank you. Hey guys! Congratulations on a very robust outlook. Gayn, just sort of for clarity, I think last time you were really excited about silicon carbide. We had the lead customer, we had one person evaluation. It sounds like we've got another potential customer there or even more than that. Can you give us clarity of, are you working with two others so far or any directional help there would be great.

Okay. Yeah, let me make a stab at that. Obviously, I know the answer here. It's a very small community as it turns out. What I will stick to my guns on is we're talking with all the major suppliers, and we're explicitly going to try and muddy the water. I know that doesn't help with shareholders exactly, but due to competitive reasons, we're trying not to click off where people are in their benchmarks selection and ordering. But I'm feeling very good about our conversations and I will continue to give you guys’ updates. It may come more in the form of when the orders are booking, and a lot heads up exactly when all the orders are coming. I apologize for that, but as we started to put this script together, we started to realize that if we get too specific about it, anyone who may or may not be as far along could glean some insight that we have to be very careful about. Sorry about that.

No, I think that's a fair response. As you are talking to the different customers though in all the other major players, is there any reason for us to assume as they chose you that their initial ramp in order patterns would not be or would be potentially positively or less than your first customer who's now your main customer. In other words, when they start, they were similar about [inaudible]?

Yes, again, I want to be a little careful. What I've said in the past, and I think it's still, it's sort of the generic process by what I have seen in my 30 some years doing this and very often what happens is a customer will go through an evaluation, maybe order one or two systems. Keep in mind that even one of our multi wafer systems have 18 wafers worth of capacity compared to someone else who can buy – so buy maybe one at a time. Although you can get partially loaded systems to begin with if you needed. But it’s been my expectation that there'd be probably one system that goes through kind of a final qualification and then it probably jumps to multiple systems, perhaps some smaller number before higher volume. The spin in it right now that's a little different is that it's I guess relatively where I've seen this a few times in my whole history where you have so many customers at the same inflection point. Where there’s sort of a mad dash to go after all these electric vehicles and put this capacity in place, which creates sorts of a different dynamic which I think it's fair. It may speed up the process and get customers to move quicker once they have convinced themselves that we can do the job and that once they’ve seen our prices quite frankly, we are perhaps more likely than I've seen in recent years for somebody to start placing larger system orders. Now obviously, one of the other pieces of this thing is always how many wafers are they building per week? And there are different capacity levels, but all of them are relatively large. I have shared this in the past. I will go…

That’s really helpful Gayn. A popular question that I get asked a lot is on the competitive front. You know as we move to the adoption of silicon carbide, not only for electric vehicle transmission, but also obviously for charging stations. And you know if they are not using wafer level burn-in test from Aehr Test, is there any other substantial competitor that you can bump into that you are talking to, these leading OEMs or is there an internal technology that they may be debating between yours and theirs. Any clarity for investors I think would be very helpful.

That's a good one. And obviously, you always want to be a little careful getting too carried away. We are talking about all your competitors or competitive advantages etc., but this one's a little easier than normal. For clarity silicon carbide was shipping products before we shipped our first wafer level burn-in system into that market. So just so we're clear, this market has been around for years technically, but it really started to take off when Tesla introduce their Model 3 with a silicon carbide traction inverter in it, and then quickly shifted all of their products to it. Because the notability of it, being able to give an extended range or theoretically smaller battery life. That has completely turned the market on edge and created an opportunity along with the acceleration of electric vehicles for – basically everybody's pushing for silicon carbide because of the advantages and the efficiency performance advantages of going to that, right. At that time, obviously, they were doing something and what I want to make sure is its widely known and discussed at all – in the industry and across the board that all silicon carbide customers have an infant mortality issue, and what that means is these devices tend to fail in their first so many hours of operation. And if that gets all the way through to the car, this inverter MOSFET fails, you basically get out of your electric car and you walk home. So they have to do this burn-in, but the nice thing about silicon carbide is while it does have a high infant mortality through a relatively straightforward process of burn-in, you can actually weed out those infant mortalities and it's extremely robust. Those infant mortalities were all weeded out with what's referred to as a package…

Yeah, thanks for that clarity Gayn and congrats on the strong outlook. Those are all the questions I had. Thank you.

Thanks Christian.

We'll take our next question from Tom Diffely, D.A. Davidson. Please go ahead.

Yes, good afternoon and thanks for the question. So Gayn, I really appreciate the last question you answered, they are very important to the overall thesis here. But I'm curious, you know in the past when we've had these burning testers, one of the big issues has been ultimately that the companies, the customers have been able to significantly reduce their testing, just go do some really light sample testing over time. It sounds like silicon carbide at this point needs to be 100% tested and burned in. Is there anything on the horizon that could change that, because that is you know one of the biggest drivers of this market for you right now?

Okay, so as I understand and we've had some very deep dives even recently again with some PhD’s and folks on the reliability of this space. The physics of the way these plainer and trench based MOSFETs are designed and built into the silicon carbide substrates are such that they really do have these defects that need to be screened out and there's no belief by any of them that that's going to go away. Interestingly as people go to Gen2, Gen3, Gen4, which is what they refer to as shrinks if you will, it turns out as the devices get smaller the defect issues actually intensify. Whereas historically sometimes just things got smaller, maybe there was less defects because of defect density, that's not the case here. And so as the generations go on, it becomes maybe more important or certainly more – and they require more time to do it. I have not heard a single person talk about sampling. I personally reviewed the test data, and I would tell you there's no data to support these things are anywhere near or have any projections to do sampling. The defects are high enough. You would not want to be in a car that has not gone through burn-in on these devices. Now, the second thing is test times, and I will tell you there are a lot of folks out there that hire a full-time pay trying to figure out unique tricks and things and how do I stress devices and twist and turns and temperatures to try and reduce test time, and it's fully our expectation that customers will reduce their test times over time, particularly of mature designs, but perhaps as is historically the case with all burn-in over the last 40 years. New devices will start up with longer test times and as they mature, they will get lower. The big difference is they are never going to go to zero. In fact, they are never going to go to really short test times, and so it's our expectation that this will be a nice strong market for many, many years.

Well, okay, great. That's good to hear. And then maybe Ken, if I could ask a month-ling question. You know do you have a target model out there today? Can you give us a sense for what the current breakeven level is and what maybe some incremental margins might be above and beyond that level?

Yes, absolutely Tom. So, just to kind of reiterate what we talked at the last call, when we originally gave guidance of $28 million in revenue and said hey, we'd be profitable, you can imply that that's our breakeven and is consistent with what we've talked previously. And also from a model standpoint I think we talked about previously, is with every incremental dollar of revenue, about $0.50 on the dollars falls to the bottom line. So a simple model can basically say, hey, if you take our forecasted $50 million in revenues, compare that to the $28 million that we originally guided to, there's an incremental $22 million in revenue, and say $0.50 on the dollar that goes to the bottom line. It's reasonable to forecast us coming in at profitability and net income about $11 million. And from a gross margin standpoint, we also talked at our $28 million breakeven gross margin we were forecasting about 45%, and because of our relatively fixed overhead, as revenues increase that expected gross margin will increase up to basically 50% gross margin on the incremental for gross margin.

Okay, great. And just one housekeeping. On a tax basis do you have significant NOL’s at this point to work off?

Unfortunately, yes. We have very significant NOL’s that we have available to us. We report those in our 10-k’s every year if you want to go look at some of the details. And in terms of expiration dates on those, those will be available to us for quite some time.

Alright, for those folks that are online, that didn't catch the look-up table on that, NOL’s and Net Operating Losses. We have for several years been running at a loss, much of that related to the investments we're making in this new system. What that does from a tax basis is it allows us to use that against future profits, so that profits that would come in, for example as $11 million, would have the effect of being tax-free in the United States. So that's what that means. Other than that, you're very clear Ken, you don’t wiggle room around on that operating margin and I completely agree with you. Thanks Tom. Any other questions?

No, I appreciate your time. Thank you.

No problem.

We'll take our next question from Mike Dooling with Jacaranda Partners. Please go ahead.

Hi! Jacaranda Partners, Southern California. We specialize in large macro demand trends, both with venture as well as equities. So a question on the – you know this massive increase in revenue, do you have some target, gross margin assumptions that you look for say in fiscal ’22 or ‘23?

Hey Mike, welcome to – or was it Jack? Or was it Mike with Jack? I’m sorry.

No, it's Mike. I'm in Southern California. Jacaranda is a tree that has a Spanish name. So people just say Jacaranda, yeah.

Welcome to our call here. I know that you just got this. Ken was talking about kind of the simple model scale. You can start looking at say, 50% to the bottom line. We have talked in the past that around material margins etc., but we generally take – run our material margins somewhere around maybe 65%, including the manufacturing overhead and direct labor, warranty charges, etc. that gets us somewhere near 50%. I think it's a very healthy way to run this and it's respectful if you will, even with our customers and their ramps. And I think we have communicated that even quite frankly with some customers as we've done some deep dives on our financials, looking at how customers do deep dives on our capacity and capability of doing it and I think that's a good model going forward. Now having said that, our fixed overhead is pretty small and so the company, well theoretically has exponentially growth. You continue to get closer and closer to actually 50% to the bottom line, but for now I think that's a good model. As you look out at $50 million, $60 million, $80 million, $100 million or so, to just think of that $22 million breakeven and 50% to the bottom line thereafter.

Right. And then on lead customers, you know besides EZs [ph], I mean is there some testing that goes on in non-EZ, because obviously there's tons of semi’s in non-EZ others and what other addressable markets do you have; data centers as an example. So just a little comment on your target markets outside of EZ’s and the EZ structure.

Sure Mike, and I think maybe we could take some more time to spend with you and I’d encourage to look at some of the past calls. We tend to deep dive on a per call basis into different markets. But you know our key large markets, I mean in general automotive has been a rising tide if you will that's raising all ships as people have increased the content in it. And it's obviously more intuitive to think that semiconductors need to be pretty reliable within an automotive and that is true, and we have seen that in our package part burn-in systems and we have some other wafer level related opportunities that are related to microcontrollers and memories and other things, in particular those that might end up in automotive, so there's a broader stroke. Kind of the big waves if you will, and that's a term that we've been using. It's something I inherited from my previous companies that we were a part of, and that is the big one would be not just is this electric vehicle, which has lots of kind of components, but the power control systems inside of it related to silicon carbide. Obviously the conversion, which is both the onboard and off board and high voltage, what they call level three chargers are a huge opportunity that's driving a lot. Interestingly solar and other applications are also driving silicon carbide, and I've been meeting with some executives. I've actually met with executives of a couple of companies just recently, and the conversation is about just how ubiquitous silicon carbide seems to be going as it attacks the traditional markets of superjunction FETs and IGBTs. So, I probably could nerd out with you and talk a little bit more, but there's a number of applications and of course we did talk about silicon photonics in the data center, and then through the mobile sensors as other things that are driving our business particularly this year. I hope that helps.

Yes, well with the robust anticipated revenue gains and profitability and a pretty healthy balance sheet, it's just – I'm curious why you filed for – you know I think it's up to a $25 million offering. I mean, I assume your free cash flow will be strong, but is it just working capital for this huge increase in revenue or why do you need money?

Alright, well Mike, I'll tell what. Let me field that. I actually apologize, because I took the time to write it down a little bit. It's not to say it was rehearsed, but I've been encouraged to be very careful about how I talk about these things. But nevertheless, I mean many questions have surfaced around why we were raising capital at this time, and I think the answer is really a combination of three things: I mean with our confidence in winning multiple customers and particularly in silicon carbide, but also they will have test and burn-in deals in other markets. We're actively purchasing semiconductors and other long lead components that normally are pretty short lead times, and we're doing that to show we have significant capacity and upside to meet the customer forecast and opportunities. We actually started doing this at the beginning of the year, and have continually increased the spending based upon the increased confidence. So we're doing that outside of backlog, right? So as an example, because of the spending we had earlier this year, before we had orders from this lead customer, but again we understood what their forecast were. It's allowed us to not only meet their significant increase in orders, but also meet or exceed the requested ship dates. Our spread over the next nine months is their requested ship dates? In fact, quite frankly right before they ordered it, they have had them spread out over 12 months, then they dropped in I think three more systems, and then they pulled them in three months, and we were able to acknowledge all those ship dates, right. So not only can we do that over the next nine months, but we actually still have material and capacity to meet other customer needs…

The supply chain chaos that we keep reading about in semi’s, you were kind of ahead of the game I guess and built up your inventory, so you're not as impacted as auto manufacturers are and… [Cross talk]

Thank heaven, we did. I mean given the visibility and my conversations with other customers right now, it's important. I’m actually going to continue on, because it's not just that. There's two other items that we're doing and Ken alluded to that. I mean we're investing in research and development, not only maintaining our competitive advantage and differentiation, but also to expand the addressable market with new enhancements in these, so. We're also doing some cost down or assurance of supply projects to ensure we maintain our competitiveness as well, to ensure that we can meet the needs inside of the program showing development. I think I need to make sure the investor knows that when you're investing in an area, assure that we're working on some great products and enhancements in R&D and obviously we can't talk for competitive reasons about an IP, about things that we're working on, but part of the funds are applied to the programs and material need to build these initial prototypes, office systems and beta customer units, and we'll be talking more about that over the next three quarters. And then the third one and this is a real one. Although we continue to and get down payments on all large system and contact orders, that includes these orders that we just received, and that provides us with a buffer to meet large customer orders, it's fair that customers and shareholders will love to see Aehr have a stronger balance sheet and it helps to provide them with insurance that we’re in this for the long haul, and not only all the wherewithal, but the means to meet significant ramps in customer demand. This is particularly true with the silicon carbide state as I personally met the top executives at several silicon carbide companies just recently to discuss their forecast and how we can meet their capacity needs and this has come up. I met them face to face, like two of them, and they both expressed their added comfort in response to our public announcement, and our ability to raise a little capital to provide a buffer to meet the market potential silicon carbide test component and that's very real. [Cross Talk]

I assume that with the announcement of the quarter, the restrictions on discussing the offering are listed, and so will we be hearing a few more details in the next couple of days?

You know the basic process around the ATM as it gives you an opportunity to offer stock at appropriate times; it's certainly our intent not to put any pressure and to be I guess thoughtful in exactly how we would do it. Mechanically, we would [inaudible] out quarterly basis if and when we did any raises to an ATM at that time, and we'll be consistent with all of the rules and guidelines that the SEC has put in place and that's really all I can talk about. I apologize Mike…

This quarter that we're talking about, this was not a factor, but the next quarter, it would be, so we'd know at the end of this current quarter if you’d sold 400,000 shares or whatever.

Yes. We would report out quarterly, so each of the next several quarters or years until such time as it has been completed, we would give announcements, if and when sold…

Why do you want to do that instead of just have an offering, clean it up and get it done.

There's been a lot of discussion around that and certainly this is – we think this is an effective way and very inexpensive way for us to do it without having to take a haircut and provide those discounts to shareholders that want to come onboard. So with a lot of discussion we determined that this is probably the best process for us.

Okay, thank you for your time. I'm a new shareholder. So I appreciate connecting with you.

Excellent! Thank you, Mike.

We'll take our next question from Matt Winthrop with Aegis Capital. Please go ahead.

Hey Gayn! How are you, sir?

I’m really good, sir.

Fantastic! I'll keep it brief. You know I love following your guidance, sort of beat you up, but congratulations my friend. You know I've been – I'm a retail guy, I'm not an analyst, but I know a lot about the business. I’ve been with this for at least three years, plus more in the past, but god bless you. You’re doing great, fantastic! Your IR guy is great. Just keep your nose down and keep doing what you're doing man, and we will see a $20 and $300 million in sales in a couple of years.

Thank you, Matt. I appreciate the confidence and I'm happy to work hard for you guys. Okay?

God bless you!

[Operator Instructions] We'll go next to Larry Chlebina with Chlebina Capital. Please go ahead.

Good afternoon. I'll be quick. Gayn, your release states that this fiscal year you expect meaningful sales in 2D and 3D sensor applications. Is that going to be similar to that $4.3 million project that you had last year? Is that kind of what we're talking about or is it something different? Is it a follow-on to that project? Could you put a little more color on it?

Yes, let me give a little color. I mean, we historically have gotten follow-on business annually that's you know a reasonable amount, in both follow on projects that happen every year and new ones. And quite frankly, last year those programs did not go to production and we didn't see a lot. We saw the early ramp or what was it, like a $4 million deal, and then it didn't complete yet. It is our expectation that that will move into production, there will be more capacity this year, and we also have another program that we're working on. So I have – for those folks that have followed this story for a while, they know that there have been times that I sit on the edge of my seat and talk about just how awesome it's going to be and just the sea of testers that the 2D, 3D sensor might potentially buy, and quite frankly it hasn't worked out that way. While it's been good, high margin, quality business and that customer is very dependent upon us and we love them a lot, you know the dollars have been fairly I guess reasonable and nothing crazy. I still believe there is upside to this customer. We do know that one of the projects we're working on has a likelihood and is still being told to be actually done for 100% burn-in and it may not be a really, really high volume, but because it's 100% burn-in we'll make it higher. We also know that if some of the programs that were on that we’re sampling had been 100% burn-in, they would be massive. So what I'm going to do is I'm just going to stick to my knitting and when you get those orders, I will you know, but I'm kind of sick of forecasting how great it might be, because it has really burned into that much. But we do believe that it'll be material to our even current forecast and we do expect it. So I hope that helps. I know it's pretty illusive, but we’ve not lost any of those deals and they actually just shipped it out in time and we're expecting them at least this year to come in.

Okay. The CP business for the datacenter, that project, that's still out there or any updates on that?

Got it! Good one, Larry. You got to go back a little ways on that. That customer is still using that one tool consistently. They've actually been doing some things on the side a little bit, and they – about once a year for us, about two or three years we get our program pushed out another year. But I will tell you, there's an entire team of people that are still working on that particular product, that they would be using that and we believe significantly more systems has continued to move laterally and did not get released to production yet. I heard from the public statements, and again no one knows who it is and no one's guessed yet, is that they just simply were full with everything else going on through COVID and chose to push out that big program. So it's still there and we're – we just will probably get a heads up six to nine months when they turn that thing back on, and then I'll probably start to talk more about it, but they are still dependent upon it and use it every day and a bizarre – that’s almost kind of funny. We have not had the system have one issue and bizarrely our testers do break and we normally have the ability for the tester to self-diagnose and you can fix it really quickly, but this happens to be a customer that's pretty well locked down in COVID and so it's been sort of a challenge. So we've been doing some interesting things with them, with applications, along with other customers, where with certain customers we're now using these Microsoft HoloLens, which allows you to virtually be there. So you can actually put them on and if we're unable to get on-site immediately, they can simply point to something that we can help them diagnose the problem faster than we can even get on a plane. So, there's been some things we've actually enhanced through this craziness of COVID, but I'll tell you what, it's still – from a sales process, it's nowhere near as fun as being in front of them. I just got back from almost a two week trip in front of multiple large silicon carbide customers in particular, along with some other wafer level applications and I'll tell you what, I miss it. It was fantastic! Probably one of the best trips I've been on in well, perhaps ever. And so I’m – it's glad to be back on the road again and I’ll tell you what, planes aren’t full and hotels have lots of room for you. So I was able to travel comfortably?

That's good news. On this recent $19.4 million deal, my interpretation, although it was for Aehr’s XP’s were going to be delivered over the course of the next nine months, is it the hope that those would be delivered within this fiscal year, because it's going to be pretty close. And then the second question is, as that gets closer, I'm assuming your WaferPak that would be associated with that would then ship with them and then, so that order with the WaferPak would actually be closer to what, $30 million plus. Is that kind of the way to think about that?

Yeah, that's exactly right actually. You have all of it right, except for one thing. They actually currently are not forecasting all of them inside our fiscal year, even though we could. We've got a little of them straddling out into next fiscal year based upon their requirements. So that also is for us too, because we have additional capacity for other customers. But yes, they have not ordered the WaferPak for those systems yet and they will…

Yup, I got it. So then the final question, it looks like with your raise and the cash flow generated from all this business that's piling up, you're going to end the fiscal year close – in excess of $40 million in cash. Ken, is that your expectation in that ballpark close to it, give or take?

So if we act upon all of the drawdown, the ATM as per its entire $25 million with our existing cash balance, it will be very close to that amount.

So Gayn, now with the flush balance sheet, we talked to the past you had goals of developing an automated XP that would be applicable towards a memory project, memory fab. Is that your expectation that you will pursue that and launch that product? And then the follow on, is that – will that be applicable to silicon carbide as we scale up and particularly a potential customer that is in the process of building what's being held as the biggest silicon carbide fab in the world. I will be interesting if you could offer an automated system, whether that would be an advantage to a customer right there.

The advantage or disadvantage of being on cell phones is you can't see my big smile on my face right now. But listen, I think your hot on the trail there Larry and as I’ve said in the past, I always have done it, toning it down a little bit about knowing too much about my darn [ph] roadmap. But I have specifically talked about things that we're doing for enhancements for automation and I will let you know that dollars that are being as part of this raise and as part of our cash flow that we’re doing will be spent towards that project in general. That project does in fact – is applicable to silicon carbide, as well as could be applicable to flash memory and the couple of other applications we're talking to customers about.

Good. And so on a memory fab, and I know that you have mentioned this in the past that you had opportunities, but weren’t in a position to pursue it, but one of your – somebody else did and it didn't work out so well. But anyway, that potential on a fab, roughly how many units, automated units, XP units would be needed for typical memory fab; it's quite substantial isn’t it?

If customers, for example in the DRAM space were to shift from package part to wafer level and assuming their test times did not change, they would stay the same and moved it to that, a typical DRAM fab could take somewhere between 60 and 100 FOX-XP systems with 18 wafers at a time, so the capacity is in enormous. The flash memory is slightly bigger. There are fewer of those fabs, but what I always do as a caveat, while we are putting investments in it. I would ask customers or shareholders, please do not buy, because you think we're going to have significant or material revenue in that space in the near term, but I will let you know we are working on that.

Alright. Well, good job. It’s been a long time covering and congratulations.

Thanks, Larry. Appreciate all your support over the years.

We'll go next to Jon Gruber with Gruber & McBaine. Please go ahead.

Hey John!

Good afternoon, Congratulations on this! Hey! I just had a golf lesson by the way, but I listened to the whole thing. My question is, when are we going to get an announcement on the base business an order from Intel, TI, Silicon Optics. You only been announcing silicon optics – I mean, excuse me silicon carbide. When do we get some of the base business guys to step up? When do you think that – when are we going to get some orders on the base business?

We can never make you happy, John, boy I’ll tell you. Yeah, I've got some of that going out too. I tried to allude to some of the base business with respect to our silicon carbide customers, and then we had a little on the last month, although it's nice to get something into a new region like China. We do believe that there will be more and across a couple of different customers at least. There's also opportunities to win more customers in that space, and we certainly expect to see more 2D, 3D sensors as we were just describing. And there's some other base business that honestly was very quiet during the downturn that we experienced, I mean during the COVID, and so that will be coming, John. And I also things that the reality is there's some customers right now being on us pretty significantly related to capacity and benchmarks related to silicon carbide, and so I also want to make sure that we're appropriately focused on the right opportunities, but stay tuned John.

Okay, so since it's – you reported your quarter and your 10-Q is out, your quarterly is out soon, will the amount you raise in the ATM be in that Q? Because you said you were not in the end-to-end recorders, and we’re here at the quarter and you’ve announced the quarter today.

I think without directly answering that, I believe the SEC requirements is, if we had raised any of it through the ATM at that time, it would be – have to be announced at that time. That's correct.

Yes, it’s a material item. We would do it as a subsequent event in our 10-Q.

Okay, okay. So did you do some I hope?

I haven't answered that question yet John.

You are a sneaky guy. And I like those Larry questions, you guys got $40 million order and boy, a lot of big orders coming. Wow! Thank you very much. Keep up the good work.

Thank you, John. I appreciate it.

And I show there's no further questions at this time. I would like to turn the conference back to management for any additional or closing remarks.

Alright, well I really appreciate everybody's time. It’s a nice long conference call here and we’re really excited about your attendance. We actually think might had a record number of folks attending our call this time, and that's encouraging to. Really appreciate everybody. We'll be out here working hard for all the investors and we'll look forward to talking to you and again at the next call. Have a nice day! Bye-bye.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.