Ramesh Misra – Collins Steward LLC Brian Wilkinson – Lewis Asset Management Jeffrey Scott – Scott Asset Management Larry Brooks – Maloney Securities

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the Aehr Test Systems secondquarter 2008 conference call. Duringtoday’s presentation all parties will be in a listen only mode. Following the presentation the conference willbe opened for questions. (OperatorInstructions) This conference is being recorded January 7, 2008. I would now like to turn the conference overto Tricia Ross with the financial relations board. Please go ahead ma’am.

Good afternoon and thanks for joining us to discuss AehrTest Systems’ results for the second quarter of fiscal 2008. By now you should have all received a copy oftoday’s press release. If not, you cancall my office at 213-486-6540 and we will get one to you right away. With us today from Aehr Test are RheaPosedel, Chairman and Chief Executive Officer and Gary Larson, Vice Presidentof Finance & Chief Financial Officer. Management will review its operating performance for the quarter beforeopening the call to your questions. I’dnow like to turn the call over to Gary Larson. Go ahead Gary.

Thank you to everyone for joining us today. Before we begin I’d like to make a fewcomments about forward-looking statements. Please be advised that during the course of our discussion today we maymake forward-looking statements that involve risks and uncertainties relatingto projections regarding industry growth and customer demand for Aehr Test’sproducts as well as for projections regarding Aehr Test’s future financialperformance. Actual results may differmaterially from projected results and should not be considered as an indicationof future performance. These risks anduncertainties include without limitation economic conditions in Asia andelsewhere, world events, acceptance by customers or our FOX, MTX, MAX andDiePak technologies, end conversion of quote activity to purchase orders andacceptance by customers of products shipped upon receipt of a purchase order,the ability of new products to meet customer needs or performance described,the company’s development and manufacture of a commercially successful waferlevel test and burn-in system and the potential emergence of alternativetechnology each of which could adversely affect demand for Aehr Test’s productsin calendar year 2008. We refer you to our most recent 10K report and other reportsfiled from time-to-time with the Securities & Exchange Commission for amore detailed description of the risks facing our business and factors thatcould cause actual results to differ materially from projected results. The company disclaims any obligation toupdate information contained in any forward-looking statements reflected andfor circumstances occurring after the date of this conference call. Now, I’d like to introduce you to ourchairman and CEO Rhea Posedel.

Welcome to our conference call for the second quarter offiscal 2008. We are pleased to reportthat we had one of the best quarters we’ve had in a number of years. Net sales for the second quarter of fiscal2008 were $9.7 million up 55% over the same quarter of the prior year and up26% sequentially. Importantly asignificant portion of our revenue increase flowed to operating income whichincreased by $1.7 million over the same quarter of the prior year. We continued to be excited about the significant growth opportunities we seefor our FOX-1 testers and WaferPaks. Earlier this quarter we announced a $13 million follow on order formultiple FOX-1 testers for a new 300mm fab. Our highly paralleled FOX-1 full wafer tester and its WaferPakcontactors moves the company into the large growing market for wafer protesting. This is a new market Aehr Testand it significantly expands our addressable markets. Industry experts estimate that the totalavailable market for wafer pro testing including the consumable probe cards isin excess of $3 billion per year. Withour FOX-1 product we are targeting the market segments for ICs with long testtimes such as flash memories. Also orders for our WaferPak contactors were solid during thequarter providing further evidence that this can bea potential strongrevenue stream and we expect additional orders as our installed based of 300mmFOX-1 testers increases. Our full Wafercontactors are customdesigned for each wafer device type. Itis a keytechnology that enables our FOX-1 system to parallel test thousands of die ina singletouchdown. Designing and producingcustomer WaferPak contactors that can contact thousand of die over a300mm wafer is a majortechnical challenge. During thequarter we continued to invest inthe development ofdesign tools and manufacturing processes to increase our WaferPak capacity andreduce our cycle times. I’m pleased to saythat we made significant progress this past quarter but we…

Net sales were $9.7 million in the second quarter of fiscal2008 an increase of 55% from $6.2 million in the second quarter fiscal 2007 andan increase of 26% from $7.7 million in the prior quarter. In the second quarter of fiscal 2008 FOX-1systems and contactors represented the majority of our net sales. As Rhea had mentioned earlier we shipped theFOX-15 system this quarter. We expect torecord revenue for it upon completion of customer acceptance. Gross margin was 50% for the second quarter compared with47% in the year ago quarter. Grossmargin increased primarily because FOX products with somewhat higher marginsrepresented a higher portion of net sales. On a going forward basis we believe that the typical gross margin willbe about 50%. SG&A was $1.8 million in the second quarter comparedwith $1.5 million in the prior year period. The increase in SG&A dollars is primarily attributable to anincrease in headcount as we added support resources to address the expectedgrowth in our business. Second quarter 2008 R&D expense was $1.4 million down slightlyfrom $1.5 million in the second quarter of last year. R&D expense varies fromquarter-to-quarter depending on product development expenses and this quarter’slevel was lower than is typical. Weexpect R&D expense to increase somewhat during the second half of thisfiscal year as we add engineering resources to grow our custom WaferPakcontactor business. Income from operations for the second quarter of 2008 was$1.6 million compared to a loss from operations of $82,000 for the secondquarter of 2007. Comparing this quarterto the same quarter of the prior year operating income increased by nearly $1.7million while sales were up $3.4 million. This demonstrates the leverage available to the company when sales aregrowing and product mix is shifting more towards FOX products. Our net income for the second quarter was $1.4 million or$0.16 per share compared…

We will now begin the question and answer session. (Operator Instructions) Our first question comes from Ramesh Misrafrom Collins Stewart. Please go ahead. Ramesh Misra –Collins Steward LLC: My first question Rhea was for you. Can you qualitatively talk about what thebook to build or backlog number was? Iknow you tend to report backlog normally at the end of the fiscal year but canyou at least give a directional indication?

Okay. As you know wedon’t report bookings per quarter but we did announce $13 million worth of FOXsystem orders early in the quarter.

We announced itearly in thequarter.

For the prior quarter and the quarter just finished. In the second quarter we announced $13million worth of FOX system bookings and we also talked about receivingadditional WaferPak bookings for those systems. Obviously our book to build was higher than what we shipped but we don’treport bookings primarily because we have a very lumpy bookings per quarter andoften times a week or so can make a significant change in whether the bookingsis one and a half to one book to build or half depending on when the ordercomes in. And often times our customer’sknow that and put pressure on us for discounts at the end of a quarter, youknow, book order. So, by not reportingbookings it actually saves trying to accelerate bookings and giving additionaldiscounts. Ramesh Misra –Collins Steward LLC: You alluded to orders for the WaferPak for these 10 systemsthat you received orders for. Typicallyhow many WaferPaks are ordered for each of the FOX-1 systems?

I would say somewhere from one and half to two. Ramesh Misra –Collins Steward LLC: Okay. So, have youreceived WaferPaks for all of the systems that you received orders for?

They tend to delay them somewhat but, I don’t know wehaven’t tried to match them up. Ramesh Misra –Collins Steward LLC: In terms of these systems, the $13 million order that youreceived by when do you expect it to be shipped? So, I’m talking shipment not recognizingrevenues.

I think we would actually ship during this fiscal year. Ramesh Misra – CollinsSteward LLC: So, by the end of May you should have it shipped? If this is a repeat customer Rhea, would theacceptance cycle be shrunk?

Yes.

Basically, on these repeat orders when the customer hasalready accepted the initial system then the revenue is recorded on shipmentfor the follow on unit. Ramesh Misra –Collins Steward LLC: So basically it’s reasonable to expect that the revenues forthese 10 systems should be recognized also by the end of the current fiscalyear?

Yep. Ramesh Misra –Collins Steward LLC: Now shifting again to thewafer related to thecomplexity of theparts or ASPs, they’re actually decline?

That’s agood question. I would saythe ASPs – let’s saythe selling price canvary anywhere from $200,000 to $500,000. I think a goodrule of thumb would bearound $300,000 conservatively. Ramesh Misra –Collins Steward LLC: Okay.

And to answer your other question itis going up a littlebit as we see waferswith more die on them. Then, weobviously have ahigher number of pins and theselling price increased because theselling prices is based on thenumber of contacts or thenumber of pins we provide. Ramesh Misra –Collins Steward LLC: Now clearly one of the issues you had previously Rhea wasthe ability to supply enough WaferPaks. Can you talk about how you resolved that or how far are you along in theprocess of resolving that?

As I mentioned inthe conference callscript designing and producing WaferPaks is amajor challenge. I think initially whenwe started this project we were selling 200mm FOX-1 and 200mm WaferPaks and Ithink we’ve been able to overcome delivers on the200mm at least most ofthem and now we’re facing thechallenge of developing or designing 300mm WaferPaks. And, as I mentioned we’ve invested alot in design tools inorder to reduce our cycle times. So,it’s a lengthy processbut we feel we’re making good progress on that. Ramesh Misra – CollinsSteward LLC: Related to the delivery of the FOX-1 systems. Obviously, the customer wouldn’t want thesystem to be sitting there without WaferPaks. Do you have the capability to supply the contactors as well by the timethese systems are delivered before the end of the fiscal year?

I believe so. Ramesh Misra –Collins Steward LLC: Okay.

I think historically they tend to buy more WaferPaks thanthey have systems for. Ramesh Misra –Collins Steward LLC: Right.

We will have enough WaferPaks we believe for our installedbasis systems. Ramesh Misra –Collins Steward LLC: And again, this entire order was for 300mm tools soclearly all of theWaferPaks are 300mm

Yes. Currently thenew WaferPaks are 300mm. Ramesh Misra –Collins Steward LLC: Shifting gears a little but your R&D expense I recognizethe fact that year-over-year was down actually I think the lowest level thatits ever been in the last four quarters or so. Obviously, there’s a lot ofvariation in it but does this reflect the conclusion of any particular projectyou might have been working on?

Well, there are always projects that are ongoing and projects that are comingcloser to fruition. What this shows isthat a number of expenses that would have more recently showed up in R&Dexpenses were showing up in inventory and costs of goods and that’s because aproduct has reached a point of maturity where we’re allowed to do that by theaccounting rules. And, that was mycomment about variations from quarter-to-quarter. You will see ups and downs in particularly inthe R&D expense arena we’ll have substantial material expenses that willshow up in R&D expense and then in another quarter just as we saw this timearound those similar expenses may be counted as inventory or cost of goodsbased on the nature of that particular product. Ramesh Misra –Collins Steward LLC: Okay. And just aclarification on that comment about second half R&D expense. Are you suggesting that it just goes back tothe historical level that it has been? Or, do you think the second half will actually be modestly high than arolling quarter average R&D expenditure has been?

Well definitely higher than the quarter just ended. That was the message we were trying tosend. But, as you point out since we aregearing up on the WaferPak contactors in a way we haven’t before it wouldn’t besurprising if we saw the R&D expense go higher than the recentaverages. Ramesh Misra –Collins Steward LLC: That helps. Inregards to the tax rate this quarter’s tax rate was about 10% or so Gary. How should we think of tax rate goingforward? I know its difficult to predictthat with a fine degree of precision but all the same its been running a lotlower than previously and I believe you might – some of your NOLs might becoming to an end. So, how should wethink of tax rate going forward?

I would say that the best thing you can do at this point isto assume similar rates to what you’ve seen us booking in the first and secondquarter of this fiscal year. You’reright we do have NOLs in the US andNOLS in Japan. Some of those NOLs in Japanare going to be completely consumed this year resulting in a higher effectivetax rate and that’s what we’re trying to reflect. It will depend on how the business plays outbetween the US, Japanand our other subsidiaries what the ultimate rate may be. But, I would say looking at the rates webooked in Q1 and Q2 would be the best way to estimate it at this point. Ramesh Misra –Collins Steward LLC: Looking at these revenues Rhea, can you give us a sense ofhow much of it came from the FOX systems and how much came from your legacy MAXand MTS systems?

In the conference call I mentioned that the majority of ourbusiness did come from FOX products this quarter. Ramesh Misra –Collins Steward LLC: Can you give us any indication of what’s happening on thelegacy side further down the line? Clearly there is a slowdown in overall cap ex spending in the industryso do you anticipate that your legacy business will remain subdued on accountof that?

You’re correct in that we’re seeing certainly the capacitybias aren’t there for core products for burn-in and parallel test. And, this is why we’re taking a proactiveapproach to enhance and roll out new products that allows us to compete in somenew market places for our MAX and MTX. We believe we can – certainly we talked about rolling them out the nextsix to 12 months and we think these new products should start having revenueagain in the next fiscal year. Ramesh Misra – Collins Steward LLC: So these are redesigned MAX and MTX systems?

Right. They would bea next generation MAX or a next generation MTX using the core hardware softwarethat we developed for our FOX products. So we will migrate that technology to our MAX and MTX. Ramesh Misra –Collins Steward LLC: Okay. Again, kind oftrying to look at it more finely do you anticipate the FOX-1 revenues to bealso up in the February quarter?

On a quarter-to-quarter basis? Ramesh Misra –Collins Steward LLC: Yes.

We haven’t given that guidance. But, we are expecting revenue to be up on aquarter-to-quarter basis but we’re not breaking that guidance down by product. Ramesh Misra –Collins Steward LLC: I think that covers most of my questions for now. Thank you gentlemen.

Our next question comes from Brian Wilkinson from LewisAsset Management. Please go ahead. Brian Wilkinson –Lewis Asset Management: I think Ramesh covered most of what I was thinkingabout. I was just going to ask about theaddressable market in general how much of that $3 billion probe carb market?

I’d say it was a wafer probe test market. Brian Wilkinson –Lewis Asset Management: How much do you cover currently with products that you haveto market and the customers and perspective customers that you’re touchingright now? What’s the addressable – yourpart of it?

We provide in our financial picture a company estimate ofwhat we believe our segment for FOX products is and we estimate it to be about$250 million by the year 2009. Brian Wilkinson –Lewis Asset Management: By the year 2009?

Calendar 2009. Brian Wilkinson –Lewis Asset Management: And what are you right now for 08?

Say it again? Brian Wilkinson –Lewis Asset Management: What’s the current addressable market? How much for 08?

What we’re saying for calendar 08 would be somewhere around$140 million, $120 million. Brian Wilkinson –Lewis Asset Management: But double that by next year this time?

Correct.

Our next question comes from Jeffery Scott from Scott AssetManagement. Please go ahead. Jeffrey Scott – ScottAsset Management: FOX-1 you said on the technology side you still have a wayto go. Can you explain what problemsneed to be resolved?

I meant on the WaferPak, reducing the cycle time from whenwe get the order until when we deliver it. Jeffrey Scott – ScottAsset Management: So, the production technology is okay it’s just a questionof the turnaround time?

Correct. When westarted developing WaferPaks initially it took us months and months to designit which is too long and then we had to shorten that design phase where thecustomers expecting deliveries in say three months. We need to get down to that level two to threemonths. So, our delivery lead times aretoo long. Jeffrey Scott – ScottAsset Management: The FOX-15 customer is that a new customer to Aehr Test?

No, it’s a customer that we had sold MAX products to. It’s a new customer for FOX but it’s acustomer we had sold MAX. Jeffrey Scott – ScottAsset Management: Everything’s a new customer for FOX.

That’s correct. Jeffrey Scott – ScottAsset Management: So, they new you via the old legacy MAX product?

That’s correct. So,that’s how we had the relationship and that’s how we basically got in and wereable to sell them on our FOX technology. Jeffrey Scott – ScottAsset Management: And these have been delivered to a USdomestic location?

No, I didn’t say that. Jeffrey Scott – ScottAsset Management: Okay.

I would say its an international location. Jeffrey Scott – ScottAsset Management: Okay. How manysystems could this particular customer order?

When we talked to them initially he was saying somewherebetween five and 10 over a number of years of course. Jeffrey Scott – ScottAsset Management: Somewhere between five and 10. You still have just the order for one, right?

Correct. Jeffrey Scott – ScottAsset Management: So five to 10 would be over some period of time?

Correct. Jeffrey Scott – ScottAsset Management: What do you think you have to do to get the customer toorder more?

As I highlighted in the conference call I think what he islooking for is a system that offers the reliability and the repeatability thathe needs to ensure that he meets his customer’s stringent requirements forwafer level burn-in. So, he’s a verydetailed customer. I mean, certainly wecan do the job but he wants to see 100% of his wafers work every time andthat’s the challenge that we have to get towards. We have to give him a high confidence that wecan get some high yields when he processes wafers. The only way you’re going to do that is torun multiple wafers and see what the issues are and if there are any then fixthem. Jeffrey Scott – ScottAsset Management: Are you expecting significant issues?

Yeah I guess you always expect there to be issues but you’realways hoping for the best. So, you haveto be prepared to deal with some of these issues. Jeffrey Scott – ScottAsset Management: Okay. The five to 10over time those will be delivered to the same location the first one went to?

Yes. Jeffrey Scott – ScottAsset Management: Are there other locations?

No, this customer just has one location. Jeffrey Scott – ScottAsset Management: Just one location.

What would have to also happen is heprobably would need to – as headds more devices. So, this is onedevice type so thisone device type is maybe one or two systems and as headds more device types itcould be moresystems. But, again I think theleverage here could bethat the end customeris a leading carmanufacturer and if that carmanufacturer likes thewafer technology and if itprovides them with reliable quality die then our hope is that they require someof their IC suppliers to use our FOX product. So, that’s where thebig leverage couldbe. If we can besuccessful in thisproject. Jeffrey Scott – ScottAsset Management: That would actually play out over some number of years wouldit not?

That’s correct. But,that would broaden our customer base instead of one customer it could bemultiple customers who would be interested in our FOX product. Jeffrey Scott – ScottAsset Management: All driven by the success.

Of this one large – as you know there’s only a few largeautomotive companies in the world. Jeffrey Scott – ScottAsset Management: You talked about theFOX-15 having applications for other people that were inthe known good diebusiness. What other, other than autoswould you characterize this as being in?

One customer that we’re talking with is aDRAM customer and they’re looking atselling their DRAM chip into astack package that goes into handheld communication devices. That’s avery broad application soit’s stack packages, vertical stack packages for thehandheld consumer market. Jeffrey Scott – ScottAsset Management: Is that something that would play out over a shorter periodof time?

If we’re successful with that customer that could happenwithin the next 12 months. Jeffrey Scott – ScottAsset Management: You still have a goal of one new customer for FOX-1 and onenew customer for FOX-15, right?

That is correct. Ormore. Jeffrey Scott – ScottAsset Management: Have you been able to – are you more hopeful now than youwere three months ago that you’ve found that particular new customer?

I think shipping the FOX-15 certainly helps on the waferlevel burn-in front because it really validates that our technology works andcertainly reduces barriers that prevent people from buying these kinds ofproducts. And, on the FOX-1 side I thinkwe’ve come closer to selling a few customers. So, yeah I think we’re further than three months ago.

(Operator Instructions) Our next question is a follow up from Ramesh Misra. Please go ahead. Ramesh Misra –Collins Steward LLC: Just a quick clarification. You previously talked about the burn in system has being FOX-14. Is the FOX-15 just a slightly modifiedversion with one additional slot or are there some additional fundamentalchanges because I know you had shown the FOX-15 at the show in July last yearnot the FOX-14.

I think initially when we sold the order to our automotiveIC manufacturer it was a FOX-14 system which was our first generation waferlevel burn-in and test system. And, aswe got further into the project we decided to basically upgrade the technology,hardware software taking it from the FOX-1 and using that hardware softwareplatform and at the same time we also added one additional wafer slot. But, not only is it a 15 slot system butbasically it’s almost from a ground up everything is new and enhanced from ourFOX-14 system. So, it truly is a nextgeneration wafer level burn-in and test system from the ground up.

Our next question comes from Larry Brooks from MaloneySecurities. Please go ahead. Larry Brooks –Maloney Securities: I’m wondering the approximate value for a sale on a FOX-15what that would go for?

If you looked at the system and the 15 wafer pack contactorsit would be in excess of $2 million. Larry Brooks –Maloney Securities: With the current products that you are manufacturing are youhaving any supply issues and problems getting the components that you need tomake the products?

I don’t think any more than we would on the MAX or theMTX. I think we have hired a new VP ofoperations Joel Bustos and I think he’s certainly strengthened the supplychain. So, I think we see less issues onthe material side. Larry Brooks –Maloney Securities: You of course talked about your account receivables and itof course being a Japanese company, is this a new group that you’re dealingwith or is this someone that you’ve dealt with before?

No, we’ve dealt with this customer before. Larry Brooks –Maloney Securities: Okay. So logicallyyou don’t expect to see any problems?

No. Larry Brooks –Maloney Securities: I guess the last thing is the seasonality of yourcompany. are you seeing any issues whereone quarter is generally stronger than another?

I can’t see over the 30 years that we’ve been in busy thatthere’s been any seasonality. It variesmore I guess with the ups and downs of the semiconductor industry.

At this time we have no further questions in queue. I would like to send the conference back tomanagement for any concluding comments. Please go ahead.

I’d like to thank you for joining us this afternoon and welook forward to next quarter’s conference call. Thanks again.

Ladies and gentlemen that does conclude theAehr Test System’s second quarter 2008 conference. We thank you again for your participationtoday. You may now disconnect.