UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

(Mark One)



[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, ~~2016~~2017



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 0-11412

AMTECH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)



Arizona	86-0411215
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

131 South Clark Drive, Tempe, Arizona	85281
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 480-967-5146

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ X ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer [ ]	Accelerated filer [X]

Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller Reporting Company [ ]
	Emerging Growth Company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Shares of Common Stock outstanding as of ~~July 28, 2016: 13,173,855~~August 4, 2017: 13,337,689

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS



	Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets June 30, ~~2016~~2017 (Unaudited) and September 30, ~~2015~~2016	3
Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended June 30, ~~2016~~2017 and ~~2015~~2016	4
Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss (Unaudited) Three and Nine Months Ended June 30, ~~2016~~2017 and ~~2015~~2016	5
Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended June 30, ~~2016~~2017 and ~~2015~~2016	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements	2218
Overview	2218
Results of Operations	2218
Liquidity and Capital Resources	2621
Off-Balance Sheet Arrangements	2722
Contractual Obligations	2722
Critical Accounting Policies	2722
Impact of Recently Issued Accounting Pronouncements	2722
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2822
Item 4. Controls and Procedures	2923
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	3024
Item 1A. Risk Factors	3024
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3025
Item 3. Defaults Upon Senior Securities	3025
Item 4. Mine Safety Disclosures	3025
Item 5. Other Information	3025
Item 6. Exhibits	3125
SIGNATURES	3226

PART I. FINANCIAL INFORMATION


Item 1.	Condensed Consolidated Financial Statements

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)


	June 30, 2016			September 30, 2015			June 30, 2017			September 30, 2016
Assets	(Unaudited)						(Unaudited)
Current Assets
Cash and cash equivalents	$	28,290		$	25,852		$	39,160		$	27,655
Restricted cash	606			638			4,671			893
Accounts receivable
Trade (less allowance for doubtful accounts of $3,477 and $5,009 at June 30, 2016, and September 30, 2015, respectively)	18,344			14,488
Trade (less allowance for doubtful accounts of $1,522 and $3,730 at June 30, 2017, and September 30, 2016, respectively)							24,685			17,642
Unbilled and other	8,215			8,494			12,157			8,634
Inventories	28,389			23,329			23,186			23,223
Deferred income taxes	2,050			2,050
Notes and other receivable	—			7,079
Refundable income taxes							—			260
Vendor deposits							7,626			1,962
Other	4,397			3,772			2,954			2,655
Total current assets	90,291			85,702			114,439			82,924
Property, Plant and Equipment - Net	15,998			17,761			15,080			15,960
Deferred income taxes - Long Term	430			430
Other Assets - Long Term	1,128			3,356
Deferred Income Taxes - Long-Term							200			200
Other Assets - Long-Term							1,026			1,095
Investments	2,960			2,733			2,831			3,032
Intangible Assets - Net	4,284			4,939			3,643			4,100
Goodwill	11,068			10,535
Goodwill - Net							11,220			11,119
Total Assets	$	126,159		$	125,456		$	148,439		$	118,430
Liabilities and Stockholders' Equity
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	18,411		$	15,646		$	22,484		$	15,397
Current maturities of long-term debt	723			919			817			1,134
Accrued compensation and related taxes	5,187			5,605			6,450			5,710
Accrued warranty expense	745			793			853			795
Deferred profit	3,983			4,873			5,449			4,709
Customer deposits	11,660			7,154			25,180			7,055
Other accrued liabilities	2,070			3,551			1,863			2,164
Income taxes payable	2,066			830			996			1,100
Total current liabilities	44,845			39,371			64,092			38,064
Long-term Debt	9,626			8,448
Income Taxes Payable - Long Term	5,970			4,990
Total liabilities	60,441			52,809
Long-Term Debt							9,732			9,097
Income Taxes Payable - Long-Term							6,520			5,930
Total Liabilities							80,344			53,091
Commitments and Contingencies
Stockholders' Equity
Stockholders’ Equity
Preferred stock; 100,000,000 shares authorized; none issued	—			—			—			—
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 13,173,855 and 13,150,469 at June 30, 2016, and September 30, 2015, respectively	132			131
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 13,328,656 and 13,179,355 at June 30, 2017 and September 30, 2016, respectively							133			132
Additional paid-in capital	111,285			110,191			113,501			111,631
Accumulated other comprehensive loss	(8,883		)	(8,666		)	(8,834		)	(8,876		)
Retained deficit	(35,544		)	(28,822		)	(34,018		)	(35,830		)
Total stockholders' equity	66,990			72,834
Total stockholders’ equity							70,782			67,057
Noncontrolling interest	(1,272		)	(187		)	(2,687		)	(1,718		)
Total equity	65,718			72,647			68,095			65,339
Total Liabilities and Stockholders' Equity	$	126,159		$	125,456
Total Liabilities and Stockholders’ Equity							$	148,439		$	118,430

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues, net of returns and allowances	$	33,342		$	40,016		$	77,899		$	76,685		$	47,760		$	33,342		$	109,839		$	77,899
Cost of sales	23,711			29,888			56,312			56,240			32,258			23,711			77,499			56,312
Gross profit	9,631			10,128			21,587			20,445			15,502			9,631			32,340			21,587

Selling, general and administrative	8,665			10,054			23,709			24,513			10,108			8,665			25,366			23,709
Research, development and engineering	1,568			1,308			6,015			3,894			1,423			1,568			4,586			6,015
Operating loss	(602		)	(1,234		)	(8,137		)	(7,962		)
Operating income (loss)													3,971			(602		)	2,388			(8,137		)
Gain on sale of other assets	—			—			2,576			—			—			—			—			2,576
Income (loss) from equity method investment	(444		)	—			227			—
(Loss) income from equity method investment													(110		)	(444		)	(200		)	227
Interest expense and other income, net	(265		)	(15		)	(434		)	(135		)	(34		)	(265		)	(151		)	(434		)
Loss before income taxes	(1,311		)	(1,249		)	(5,768		)	(8,097		)
Income (loss) before income taxes													3,827			(1,311		)	2,037			(5,768		)
Income tax provision	70			290			2,040			640			986			70			1,270			2,040
Net loss	(1,381		)	(1,539		)	(7,808		)	(8,737		)
Net income (loss)													2,841			(1,381		)	767			(7,808		)

Add: net loss (income) attributable to noncontrolling interest	172			(65		)	1,086			(382		)
Net loss attributable to Amtech Systems, Inc.	$	(1,209	)	$	(1,604	)	$	(6,722	)	$	(9,119	)
Add: net loss attributable to noncontrolling interest													446			172			1,045			1,086
Net income (loss) attributable to Amtech Systems, Inc.													$	3,287		$	(1,209	)	$	1,812		$	(6,722	)

Loss Per Share:
Income (Loss) Per Share:

Basic loss per share attributable to Amtech shareholders	$	(0.09	)	$	(0.12	)	$	(0.51	)	$	(0.78	)
Basic income (loss) per share attributable to Amtech shareholders													$	0.25		$	(0.09	)	$	0.14		$	(0.51	)
Weighted average shares outstanding	13,173			13,103			13,165			11,644			13,242			13,173			13,203			13,165
Diluted loss per share attributable to Amtech shareholders	$	(0.09	)	$	(0.12	)	$	(0.51	)	$	(0.78	)
Diluted income (loss) per share attributable to Amtech shareholders													$	0.25		$	(0.09	)	$	0.14		$	(0.51	)
Weighted average shares outstanding	13,173			13,103			13,165			11,644			13,398			13,173			13,288			13,165

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

Three Months Ended June 30, Nine Months Ended June 30,
2016 2015 2016 2015
Net loss $ (1,381 ) $ (1,539 ) $ (7,808 ) $ (8,737 )
Foreign currency translation adjustment (299 ) 213
(217 ) (3,168 )
Comprehensive loss (1,680 ) (1,326 ) (8,025 ) (11,905 )

Comprehensive (income) loss attributable to noncontrolling interest 197
(18 ) 1,084
(157 )
Comprehensive loss attributable to Amtech Systems, Inc. $ (1,483 ) $ (1,344 ) $ (6,941 ) $ (12,062 )



	Three Months Ended June 30,					Nine Months Ended June 30,
	2017		2016			2017		2016
Net income (loss)	$	2,841	$	(1,381	)	$	767	$	(7,808	)
Foreign currency translation adjustment	740		(299		)	118		(217		)
Comprehensive income (loss)	3,581		(1,680		)	885		(8,025		)

Comprehensive loss attributable to noncontrolling interest	302		197			969		1,084
Comprehensive income (loss) attributable to Amtech Systems, Inc.	$	3,883	$	(1,483	)	$	1,854	$	(6,941	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended June 30,						Nine Months Ended June 30,
	2016			2015			2017			2016
Operating Activities
Net loss	$	(7,808	)	$	(8,737	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss)							$	767		$	(7,808	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	2,559			2,488			1,871			2,559
Write-down of inventory	116			31			448			116
Capitalized interest							307			—
Deferred income taxes	6			914			(10		)	6
Non-cash share based compensation expense	1,059			864			978			1,059
Loss on sale of property, plant and equipment							107			—
Gain on sale of other assets	(2,576		)	—			—			(2,576		)
Income from equity method investment	(227		)	—
Reversal of allowance for doubtful accounts	(143		)	(300		)
Loss (gain) from equity method investment							200			(227		)
Reversal of allowance for doubtful accounts, net of provision							(898		)	(143		)
Changes in operating assets and liabilities:
Restricted cash	26			888			(3,576		)	26
Accounts receivable	(3,538		)	(4,193		)	(8,997		)	(3,538		)
Inventories	(4,794		)	(3,460		)	(245		)	(4,794		)
Accrued income taxes	1,617			(5,561		)	742			1,617
Other assets	(644		)	639
Vendor deposits and other assets							(5,521		)	(644		)
Accounts payable	2,842			4,514			6,616			2,842
Accrued liabilities and customer deposits	2,695			695			17,526			2,695
Deferred profit	(828		)	(1,156		)	626			(828		)
Net cash used in operating activities	(9,638		)	(12,374		)
Net cash provided by (used in) operating activities							10,941			(9,638		)
Investing Activities
Purchases of property, plant and equipment	(442		)	(511		)	(355		)	(442		)
Acquisitions, net of cash acquired	—			8,595
Proceeds from sale of property, plant and equipment							39			—
Proceeds from partial sale of subsidiary	7,012			—			—			7,012
Proceeds from sale of other assets	4,884			—			—			4,884
Net cash provided by investing activities	11,454			8,084
Net cash (used in) provided by investing activities							(316		)	11,454
Financing Activities
Proceeds from the exercise of stock options	34			521			894			34
Payments on long-term debt	(549		)	(311		)	(485		)	(549		)
Borrowings on long-term debt	1,145			557			384			1,145
Excess tax benefit of stock options	—			30
Net cash provided by financing activities	630			797			793			630
Effect of Exchange Rate Changes on Cash	(8		)	(159		)
Net Increase (Decrease) in Cash and Cash Equivalents	2,438			(3,652		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents							87			(8		)
Net Increase in Cash and Cash Equivalents							11,505			2,438
Cash and Cash Equivalents, Beginning of Period	25,852			27,367			27,655			25,852
Cash and Cash Equivalents, End of Period	$	28,290		$	23,715		$	39,160		$	28,290

Supplemental Cash Flow Information:
Cash paid for interest	$	257		$	426		$	202		$	257
Income tax refunds							$	262		$	—
Income tax payments	$	112		$	4,775		$	116		$	112
Transfer capital equipment to inventory	$	521		$	—		$	22		$	521
Issuance of common stock for acquisitions	$	—		$	26,625

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED JUNE 30, ~~2016~~2017 AND ~~2015~~2016

(UNAUDITED)


1.	Summary of Significant Accounting Policies

Nature of Operations and Basis of Presentation -– Amtech Systems, Inc. (the “Company”, “Amtech”, “we”, “us” or “our”) is a global manufacturer of capital equipment, atomic layer deposition (“ALD”) including thermal processing, silicon wafer handling automation, and related consumables used in fabricating solar cells, LED and semiconductor devices. ~~The Company sells~~We sell these products to solar cell and semiconductor manufacturers worldwide, particularly in Asia, the United States and Europe.

~~The Company serves~~We serve niche markets in industries that are experiencing rapid technological advances and which historically have been very cyclical. Therefore, future profitability and growth depend on ~~the Company’s~~our ability to develop or acquire and market profitable new products and on ~~its~~our ability to adapt to cyclical trends.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, ~~2015.~~2016.

The consolidated results of operations for the three and nine months ended June 30, ~~2016,~~2017, are not necessarily indicative of the results to be expected for the full fiscal year.

Principles of Consolidation –– The consolidated financial statements include the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiaries and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The equity method of accounting is used for investments over which the Company has a significant influence but not a controlling financial interest. All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates -– The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition ~~- The Company reviews~~– We review product and service sales contracts with multiple deliverables to determine if separate units of accounting are present. Where separate units of accounting exist, revenue allocated to delivered items is the lower of the relative selling price of the delivered items in the sales arrangement or the portion of the selling price that is not contingent upon performance of the service.

~~The Company recognizes~~We recognize revenue when persuasive evidence of an arrangement ~~exists between us and our customers. For example, when~~exists; the product has been delivered and title has transferred, or services have been ~~rendered, or~~rendered; and the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. For us, this policy generally results in revenue recognition at the following points:

For ~~the Company's~~our equipment business, transactions where legal title passes to the customer upon shipment, revenue is recognized upon shipment for those products where the customer’s defined specifications have been met with at least two similarly configured systems and processes for a comparably situated customer. Selling prices may include both equipment and services, i.e., installation and start-up services performed by our service technicians. The equipment and services are multiple deliverables. Certain equipment that has a positive track record of successful installation and customer acceptance are considered to be routine systems. Revenue recognition upon delivery of such equipment that has been routinely installed and accepted is equal to the total selling price minus the relative selling price of the undelivered services.

Where there have been installation and acceptance of more than two similarly configured items of equipment, but installation and acceptance have not become routine, recognition of revenue upon delivery of equipment is limited to the

lesser of (i) the total selling price minus the relative selling price of the undelivered services or (ii) the non-contingent amount.

Since ~~the Company~~we defer only ~~defers~~ those costs directly related to installation, or another unit of accounting not yet delivered, and the ~~contingent~~ portion of the contract price is often considerably greater than the relative selling price of those items, ~~the~~our policy at times will result in deferral of profit that is disproportionate in relation to the deferred revenue. When this is the case, the gross margin recognized in one period will be lower and the gross margin reported in a subsequent period will improve.

For products where the customer’s defined specifications have not been met with at least two similarly configured systems and processes, the revenue and directly related costs are deferred at the time of shipment and later recognized at the time of customer acceptance or when this criterion has been met. On occasion, ~~the Company has~~we have experienced longer than expected delays in receiving cash from certain customers pending final installation or system acceptance. If some customers refuse to pay the final payment, or otherwise delay final acceptance or installation, the deferred revenue would not be recognized, adversely affecting future cash flows and operating results.


3.	Sales of certain equipment, spare parts and consumables are recognized upon shipment, as there are no post shipment obligations other than standard warranties.


4.	Service revenue is recognized upon performance of the services requested by the customer. Revenue related to service contracts is recognized ratably over the period of the contract or in accordance with the terms of the contract, which generally coincides with the performance of the services requested by the customer.

Deferred Profit – Revenue deferred pursuant to ~~the Company’s~~our revenue recognition policy, net of the related deferred costs, if any, is recorded as deferred profit in current liabilities. The components of deferred profit are as follows:


	June 30, 2016		September 30, 2015		June 30, 2017		September 30, 2016
	(dollars in thousands)				(dollars in thousands)
Deferred revenues	$	6,290	$	7,280	$	10,024	$	7,029
Deferred costs	2,307		2,407		4,575		2,320
Deferred profit	$	3,983	$	4,873	$	5,449	$	4,709

Cash and Cash Equivalents – ~~The Company considers~~– We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of amounts invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts.

Restricted Cash – Restricted cash of ~~$0.6~~$4.7 million and $0.9 million as of June 30, ~~2016~~2017, and September 30, ~~2015,~~2016, respectively, includes collateral for bank guarantees required by certain customers from whom deposits have been received in advance of shipment. Restricted cash as of June 30, ~~2016~~2017 and September 30, ~~2015~~2016 includes $0.2 million relating ~~the Company's~~our proportional responsibility, assumed in connection with the BTU International Inc. (“BTU”) acquisition, for clean-up costs at a Superfund site. Refer to Note 8 to Condensed Consolidated Financial Statements, Commitments and Contingencies, for more detail regarding our proportional liability related to the Superfund site.

Accounts Receivable and Allowance for Doubtful Accounts –– Accounts receivable are recorded at the gross sales price of products sold to customers on trade credit terms. Accounts receivable are considered past due when payment has not been received from the customer within the normal credit terms extended to that customer. A valuation allowance is established for accounts when collection is no longer probable. Accounts are written off against the allowance when the probability of collection is remote.

Accounts Receivable - Unbilled and Other – Unbilled and other accounts receivable consist mainly of a contingent portion of the sales price that is not collectible until successful installation of the product. These amounts are generally billed upon final customer acceptance. Accounts receivable also includes Value-added tax ~~(“VAT”)~~ receivable.

Concentrations of Credit Risk –– Financial instruments that potentially subject ~~the Company~~us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. ~~The Company’s~~Our customers consist of solar cell and semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace. Credit risk is managed by performing ongoing credit evaluations of our customers’ financial condition, by requiring significant deposits where appropriate, and by actively monitoring collections. Letters of credit are required of certain customers depending on the size of the order, type of customer or its creditworthiness, and country of domicile. Reserves for potentially uncollectible receivables are maintained based on an assessment of collectability.

~~The Company maintains its~~

We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. ~~Approximately 75%~~As of ~~the Company's~~June 30, 2017, approximately 48% of our total cash balances are primarily invested in USU.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation ~~(FDIC)~~(“FDIC”). The remainder of ~~the Company’s~~our cash is maintained with financial institutions with reputable credit ratings in The Netherlands, France and China.

As of June 30, ~~2016 and September 30, 2015, no~~2017, one customer individually represented ~~greater than 10%~~32% of accounts receivable. As of September 30, 2016, one customer individually represented 11% of accounts receivable.

Refer to Note 6 to Condensed Consolidated Financial Statements, Major Customers and Foreign Sales, for information regarding revenue ~~and assets~~ in other countries subject to fluctuation in foreign currency exchange rates.

Inventories – ~~Inventories are stated~~We value our inventory at the lower of cost or net realizable value. ~~Approximately 60%~~Costs for approximately 50% of inventory is valued on an average cost basis with the remainder determined on a first-in, first-out (FIFO) basis. The components of inventories are as follows:


	June 30, 2016		September 30, 2015		June 30, 2017		September 30, 2016
	(dollars in thousands)				(dollars in thousands)
Purchased parts and raw materials	$	12,265	$	11,587	$	13,587	$	12,435
Work-in-process	11,832		5,089		6,711		7,044
Finished goods	4,292		6,653		2,888		3,744
	$	28,389	$	23,329	$	23,186	$	23,223

Property, Plant and Equipment – Property, plant and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred. The cost of property retired or sold and the related accumulated depreciation are removed from the applicable accounts when disposition occurs and any gain or loss is recognized. Depreciation and amortization is computed using the straight-line method. Useful lives for equipment, machinery and leasehold improvements range from three to seven years; for furniture and fixtures from five to ten years; and for buildings from ~~20-30~~20 to 30 years.

The following is a summary of property, plant and equipment:


	June 30, 2016			September 30, 2015			June 30, 2017			September 30, 2016
	(dollars in thousands)						(dollars in thousands)
Land, building and leasehold improvements	$	18,109		$	18,095		$	18,343		$	18,255
Equipment and machinery	9,166			9,709			8,631			9,056
Furniture and fixtures	5,397			5,465			5,338			5,426
	32,672			33,269			32,312			32,737
Accumulated depreciation and amortization	(16,674		)	(15,508		)	(17,232		)	(16,777		)
	$	15,998		$	17,761		$	15,080		$	15,960

Goodwill – Goodwill and intangible assets with indefinite lives are not subject to amortization, but are tested for impairment when it is determined that it is more likely than not that the fair value of a reporting unit or the indefinite-lived intangible asset is less than its carrying amount, typically at the end of the fiscal year, or more frequently if circumstances dictate.

The following is a summary of activity in goodwill:


	Solar			Semiconductor		Polishing		Total			Solar			Semiconductor		Polishing		Total
	(dollars in thousands)										(dollars in thousands)
Goodwill	$	6,617		$	4,463	$	728	$	11,808		$	6,597		$	5,063	$	728	$	12,388
Accumulated impairment losses	(1,273		)	—		—		(1,273		)	(1,269		)	—		—		(1,269		)
Carrying value at September 30, 2015	5,344			4,463		728		10,535
Goodwill recognized due to acquisitions	—			600		—		600
Carrying value at September 30, 2016											5,328			5,063		728		11,119
Net foreign exchange differences	(67		)	—		—		(67		)	101			—		—		101
Carrying value at June 30, 2016	$	5,277		$	5,063	$	728	$	11,068
Carrying value at June 30, 2017											$	5,429		$	5,063	$	728	$	11,220

Goodwill	$	6,533		$	5,063	$	728	$	12,324		$	6,726		$	5,063	$	728	$	12,517
Accumulated impairment losses	(1,256		)					(1,256		)	(1,297		)	—		—		(1,297		)
Carrying value at June 30, 2016	$	5,277		$	5,063	$	728	$	11,068
Carrying value at June 30, 2017											$	5,429		$	5,063	$	728	$	11,220

Intangibles – Intangible assets are capitalized and amortized on a straight-line basis over their useful ~~life~~lives if the life is determinable. If the life is not determinable, amortization is not recorded.

The following is a summary of intangibles:


	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		June 30, 2016							September 30, 2015								June 30, 2017							September 30, 2016
		(dollars in thousands)															(dollars in thousands)
Customer lists	10 years	$	2,425	$	(962	)	$	1,463	$	2,434	$	(808	)	$	1,626	6-10 years	$	2,446	$	(1,406	)	$	1,040	$	2,432	$	(1,164	)	$	1,268
Technology	5-10 years	3,183		(1,704		)	1,479		3,223		(1,368		)	1,855		5-10 years	3,274		(1,876		)	1,398		3,214		(1,678		)	1,536
Trade names	10-15 years	1,453		(150		)	1,303		1,456		(72		)	1,384		10-15 years	1,460		(257		)	1,203		1,455		(219		)	1,236
Other	2-10 years	275		(236		)	39		278		(204		)	74		2-10 years	283		(281		)	2		277		(217		)	60
		$	7,336	$	(3,052	)	$	4,284	$	7,391	$	(2,452	)	$	4,939		$	7,463	$	(3,820	)	$	3,643	$	7,378	$	(3,278	)	$	4,100

Long-lived assets – Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Warranty –– A limited warranty is provided free of charge, generally for periods of 12 to 24 months, for all purchases of ~~the Company’s~~our new products and systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized. Estimates are based on past experience and take into account the nature of the products under warranty. The following is a summary of activity in accrued warranty expense:


	Nine Months Ended June 30,						Nine Months Ended June 30,
	2016			2015			2017			2016
	(dollars in thousands)						(dollars in thousands)
Beginning balance	$	793		$	628		$	795		$	793
Warranty – BTU merger	—			806
Additions for warranties issued during the period	691			411			899			691
Reductions in the liability for payments made under the warranty	(624		)	(822		)
Reductions for payments made under the warranty							(269		)	(624		)
Changes related to pre-existing warranties	(121		)	92			(582		)	(121		)
Currency translation adjustment	6			(92		)	10			6
Ending balance	$	745		$	1,023		$	853		$	745

Stock-Based Compensation - ~~The Company measures~~– We measure compensation costs relating to share-based payment transactions based upon the grant date fair value of the award. Those costs are recognized as expense over the requisite service period, which is generally the vesting period. The benefits of tax deductions in excess of recognized compensation cost are credited to additional paid-in capital and reported as cash flow from financing activities.

Stock-based compensation expense ~~reduced~~of $0.4 million in each of the ~~Company’s results of operations by~~three months ended June 30, 2017 and 2016, and $1.0 million and $1.1 million for the ~~following amounts:~~nine months ended June 30, 2017 and 2016, respectively, is included in selling, general and administrative expenses.

Three Months Ended June 30, Nine Months Ended June 30,
2016 2015 2016 2015
(dollars in thousands)
Effect on income before income taxes (1) $ (351 ) $ (296 ) $ (1,059 ) $ (864 )
Effect on income taxes 47
40
145
134
Effect on net income $ (304 ) $ (256 ) $ (914 ) $ (730 )


~~(1)~~	~~Stock-based compensation expense is included in selling, general and administrative expenses.~~

Stock options issued under the terms of ~~the Company's~~our option plans have, or will have, an exercise price equal to the fair market value of the common stock at the close of trading on the NASDAQ Stock Market the trading day prior to the date of the option grant and expire no later than 10 years from the date of grant, with the most recent option grant expiring in ~~2026.~~2027. Options issued by ~~the Company~~us generally vest over six months to four years, subject to ~~the Company's~~our board of ~~directors'~~directors’ (the “Board”) discretion pursuant to ~~the Company's~~our share-based compensation plans.

Stock option transactions and the options outstanding are summarized as follows:


	Nine Months Ended June 30,										Nine Months Ended June 30,
	2016					2015					2017					2016
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of period	1,627,477			$	9.11	1,063,324			$	7.37	1,841,567			$	8.15	1,627,477			$	9.11
Granted	350,075			5.25		327,500			9.74		145,000			5.23		350,075			5.25
Assumed - merger	—			—		367,229			14.19
Exercised	(9,846		)	3.46		(94,454		)	5.51		(149,301		)	5.99		(9,846		)	3.46
Forfeited	(129,430		)	12.87		(26,571		)	29.48		(107,480		)	12.68		(129,430		)	12.87
Outstanding at end of period	1,838,276			$	8.16	1,637,028			$	9.12	1,729,786			$	7.82	1,838,276			$	8.16

Exercisable at end of period	1,128,320			$	8.91	1,005,690			$	9.75	1,191,876			$	8.38	1,128,320			$	8.91
Weighted average fair value of options granted during the period	$	3.04				$	5.91				$	3.04				$	3.04

The fair value of options was estimated at the applicable grant date using the Black-Scholes option pricing model with the following assumptions:


	Nine Months Ended June 30,		Nine Months Ended June 30,
	2016	2015	2017	2016
Risk free interest rate	2%	2%	2%	2%
Expected life	6 years	6 years	6 years	6 years
Dividend rate	0%	0%	0%	0%
Volatility	63%	67%	63%	63%

To estimate expected lives for this valuation, it was assumed that options will be exercised at varying schedules after becoming fully vested. Forfeitures have been estimated at the time of grant and will be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based upon historical experience. Fair value computations are highly sensitive to the volatility factor assumed; the greater the volatility, the higher the computed fair value of the options granted. ~~The Company uses~~We use historical stock prices to determine the volatility factor.

~~The Company awards~~We award restricted shares under ~~its~~our existing share-based compensation plans. ~~The Company's~~Our restricted share awards ~~vest~~vested in equal annual installments over a two to four year period. The total value of these awards is expensed on a ratable basis over the service period of the employees receiving the grants. The “service period” is the time during which the employees receiving grants must remain employees for the shares granted to fully vest.

Restricted stock transactions and awards outstanding are summarized as follows:


	Nine Months Ended June 30,								Nine Months Ended June 30,
	2016				2015				2017			2016
	Awards		Weighted Average Grant Date Fair Value		Awards		Weighted Average Grant Date Fair Value		Awards	Weighted Average Grant Date Fair Value		Awards		Weighted Average Grant Date Fair Value
Beginning Outstanding	13,540		$	7.98	35,203		$	10.13	—	$	—	13,540		$	7.98
Released	(13,540	)	7.98		(21,663	)	11.47		—	—		(13,540	)	7.98
Ending Outstanding	—		$	—	13,540		$	7.98	—	$	—	—		$	—

Fair Value of Financial Instruments

– In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) Accounting Standards Codification (“ASC”), ~~the Company groups its~~we group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 - Valuation is based upon quoted market price for identical instruments traded in active markets.

Level 2 - Valuation is based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques include use of discounted cash flow models and similar techniques.

In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the FASB ASC, it is ~~the Company's~~our policy to use observable inputs whenever reasonably practicable in order to minimize the use of unobservable inputs when developing fair value measurements. When available, ~~the Company uses~~we use quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market based parameters including interest rate yield curves, option volatilities and currency rates. In certain cases, where market rate assumptions are not available, ~~the Company is~~we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Changes in the underlying

assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.

Cash, Cash Equivalents and Restricted Cash – Included in Cash and Cash Equivalents and Restricted Cash in the Condensed Consolidated Balance Sheets are money market funds invested in treasury bills, notes and other direct obligations of the U.S. Treasury or are in financial institutions insured by the ~~Federal Deposit Insurance Corporation (FDIC)~~FDIC and foreign bank operating and time deposit accounts. The fair value of this cash equivalent is based on Level 1 inputs in the fair value hierarchy.

Receivables and Payables – The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy.

Debt – The recorded amounts of these financial instruments, including long-term debt and current maturities of long-term debt, approximate fair value and are considered Level 2 in the fair value hierarchy.

Pensions and Other Benefit Plans – ~~The Company has~~We have retirement plans covering substantially all employees. The principal plans are the multiemployer defined benefit pension plans of ~~the Company’s~~our operations in The Netherlands and France and the plan for hourly union employees in Pennsylvania. The multiemployer plans in the United States and France are insignificant to ~~the Company's~~our results of operations and financial condition. ~~The Company's~~Our defined contribution plans cover substantially all of the employees in the United States. ~~The Company matches~~We match certain employee funds on a discretionary basis while certain subsidiaries require a minimum match to maintain their safe harbor status.

Shipping ~~expense~~Expense – Shipping expenses of ~~$0.8~~$0.5 million and ~~$1.2~~$0.8 million for the three months ended June 30, 2017 and 2016, respectively, and ~~2015, respectively, are included in selling, general and administrative expenses. Shipping expenses of $1.6~~$1.4 million and ~~$1.9~~$1.6 million for the nine months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, are included in selling, general and administrative expenses.

Research, ~~development~~Development and ~~engineering expense~~Engineering Expense – Research, development and engineering expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes; materials and supplies used in those activities; and product prototyping. ~~The Company receives~~We receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met. The table below shows gross research and development expenses and grants earned:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	(dollars in thousands)						(dollars in thousands)						(dollars in thousands)
Research, development and engineering	$	2,078		$	3,650		$	7,217		$	9,763		$	1,774		$	2,078		$	5,547		$	7,217
Grants earned	(510		)	(2,342		)	(1,202		)	(5,869		)	(351		)	(510		)	(961		)	(1,202		)
Net research, development and engineering	$	1,568		$	1,308		$	6,015		$	3,894		$	1,423		$	1,568		$	4,586		$	6,015

Impact of Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The guidance is intended to simplify the subsequent accounting for goodwill acquired in a business combination. Prior guidance required utilizing a two-step process to review goodwill for impairment. A second step was required if there was an indication that an impairment may exist, and the second step required calculating the potential impairment by comparing the implied fair value of the reporting unit’s goodwill (as if purchase accounting were performed on the testing date) with the carrying amount of the goodwill. The new guidance eliminates the second step from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss should not exceed the total amount of goodwill allocated to the reporting unit). The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to early adopt this guidance in the fourth quarter of fiscal 2017, or with any interim impairment tests during fiscal 2017, and do not expect it to have a significant impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows: Restricted Cash”. The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory”. The amendments in this ASU remove the prohibition against the recognition of current and deferred income tax effects of intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. These amendments provide cash flow statement classification guidance for: 1. Debt Prepayment or Debt Extinguishment Costs; 2. Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; 3. Contingent Consideration Payments Made after a Business Combination; 4. Proceeds from the Settlement of Insurance Claims; 5. Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; 6. Distributions Received from Equity Method Investees; 7. Beneficial Interests in Securitization Transactions; and 8. Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, including adoption in an interim period. We are currently in the process of evaluating the impact of the adoption on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. The new standard applies to financial assets measured at amortized cost basis, including receivables that result from revenue transactions and held-to-maturity debt securities. The new guidance will be effective for us starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. We are in the process of determining the effects the adoption will have on our consolidated financial statements as well as whether to adopt the new guidance early.

In May 2014, the FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. 2014-09 regarding ASC Topic 606, “Revenue from Contracts with ~~Customers (Topic 606)” and issued subsequent amendments~~Customers”. ASU 2014-09 provides principles for recognizing revenue to the initial guidance in August 2015, March 2016, April 2016 and May 2016 within ASU 2015-04, ASU 2016-08, ASU 2016-10 and ASU 2016-12, respectively. This ASU supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depictsdepict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In ~~July~~August 2015, the FASB ~~deferred~~issued ASU 2015-14 to defer the effective date ~~of this pronouncement~~ by one year ~~to December 15, 2017 for interim and annual reporting periods beginning after that date. Early~~with early adoption is permitted ~~but not before~~as of the original effective date. ASU 2014-09 will be effective for Amtech’s fiscal year beginning October 1, 2018 unless we elect the earlier date ~~which for annual periods was~~of October 1, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 in March 2016, April 2016, May 2016 and December ~~15, 2016. The Company is evaluating~~2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. We have determined that we will not early adopt the standard and are currently assessing the impact ofthat adopting this ~~pronouncement.~~new accounting standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU ~~No.~~ 2016-09, ~~Compensation~~“Compensation - Stock Compensation (Topic 718)”. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016 and for the interim periods therein. ~~The Company is~~We are currently assessing the impact that adopting this new accounting standard will have on ~~its~~our consolidated financial ~~statements and footnote disclosures.~~

In March 2016, the FASB issued ASU 2016-07, Equity Method and Joint Ventures affect all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership or degree of influence. ASU 2016-07 is effective for the Company beginning on ~~January 1, 2017, early adoption is permitted. The adoption of this guidance by the Company is not expected to have a material impact on its consolidated financial~~ statements.

In February 2016, the FASB issued ASU ~~No.~~ 2016-02, “Leases (Topic 842)”,” which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use-assets. ASU 2016-02 also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018 and early application is permitted. ~~The Company is~~We are currently in the process of evaluating the impact of this standard on ~~its~~our consolidated financial statements.

In January 2016, the FASB issued ASU ~~No.~~ 2016-01, ~~Financial~~“Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial ~~Liabilities,~~Liabilities”, which addresses certain aspects of recognition, measurement, presentation, and

disclosure of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017 and early adoption is not permitted. ~~The Company is~~We are currently evaluating the impact that the standard will have on ~~its~~our consolidated financial statements.

In November 2015, the FASB issued ASU ~~No.~~ 2015-17, ~~Balance~~“Balance Sheet Classification of Deferred ~~Taxes.~~Taxes”. This ASU requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The adoption of this guidance ~~by the Company~~ is not expected to have a material impact on ~~its~~our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which simplifies the accounting for measurement-period adjustments to provisional amounts recognized in a business combination. ASU 2015-16 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2016. The provisions of ASU 2015-16 are not expected to have a material effect on the Company's financial condition, results of operations, or cash flows.

~~In July 2015, the FASB issued ASU No.~~ 2015-11, ~~Simplifying~~“Simplifying the Measurement of ~~Inventory.~~Inventory”. This ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and for interim periods therein. ~~The Company does~~We do not expect adoption of this ASU to have a material impact on ~~the Company's~~our consolidated financial position and results of operations.


2.	Income Taxes

The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which ~~the Company operates.~~we operate. However, losses in certain jurisdictions and discrete items are treated separately. The gain on the Kingstone Technology Hong Kong Limited (“Kingstone”) transaction, described in Note 10, was treated as a discrete item and accounted for $1.7 million of the tax expense in the nine months ended June 30, 2016, with the tax calculated utilizing the effective tax rate and other discrete items nearly offsetting each other.

Deferred tax assets and liabilities reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. ~~The Company records~~We record a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Our expectations regarding realization of our deferred tax assets is based upon the weight of all available evidence, including such factors as our recent earnings history, expected future taxable income and available tax planning strategies. ~~The Company maintains a~~In prior periods, we established valuation ~~allowance with respect to certain state, federal and foreign~~allowances on substantially all net deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that ~~may not~~these assets will be ~~recovered. Each quarter,~~realized. As of June 30, 2017, we reversed a portion of the valuation allowance ~~is re-evaluated. During the nine months ended June 30, 2016 the valuation allowance increased by a net of $1.6 million primarily due~~related to net operating ~~losses in The Netherlands, France and China, partially offset by a decrease~~loss carryforwards which we have determined will be utilized against net operating income in the ~~valuation allowance due to utilization of net operating losses in the United States.~~current year.

~~The Company classifies~~We classify all of our uncertain tax positions as ~~non-current~~ income taxes ~~payable.~~payable long-term. At June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, the total amount of unrecognized tax benefits was approximately ~~$1.8~~$3.9 million. If recognized, these amounts would favorably impact the effective tax rate. Income taxes payable long-term primarily includes, among other items, withholding taxes that are not due until the related intercompany service fees are paid.

~~The Company classifies~~We classify interest and penalties related to unrecognized tax benefits as income tax expense. As of June 30, ~~2016~~2017 and September 30, ~~2015, the Company~~2016, we had an accrual for potential interest and penalties of approximately ~~$2.3~~$2.6 million and ~~$2.0~~$2.3 million, respectively, classified with ~~non-current~~ income taxes ~~payable.~~payable long-term.

~~The Company~~We and one or more of ~~its~~our subsidiaries file income tax returns in The Netherlands, France, China, Singapore, Malaysia, Hong Kong, and Germany, as well as in the U.S. and various states in the U.S. The Company and its subsidiaries have a number of open tax years dictated by statute in each of their respective taxing jurisdictions, but generally it is from 3 to 5 years in the jurisdictions in which ~~the Company files~~we file tax returns.


3.	Earnings Per Share

Basic earnings per share ~~("EPS"~~(“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic EPS.

For the three and nine months ended June 30, ~~2016~~2017, options for ~~1,840,000~~1,152,000 and 1,649,000 weighted average shares, respectively, are excluded from the diluted EPS calculations because they are anti-dilutive. For the three and nine months ended June 30, ~~2015~~2016, options for ~~1,640,000~~1,840,000 weighted average shares ~~and 14,000 restricted stock awards~~ were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could be dilutive in the future.

The following table outlines basic and diluted EPS:

Three Months Ended June 30, Nine Months Ended June 30,
2016 2015 2016 2015
(in thousands, except per share amounts) (in thousands, except per share amounts)
Basic Loss Per Share Computation
Net loss attributable to Amtech Systems, Inc. $ (1,209 ) $ (1,604 ) $ (6,722 ) $ (9,119 )
Weighted Average Shares Outstanding:
Common stock 13,173
13,103
13,165
11,644
Basic loss per share attributable to Amtech shareholders $ (0.09 ) $ (0.12 ) $ (0.51 ) $ (0.78 )
Diluted Loss Per Share Computation
Net loss attributable to Amtech Systems, Inc. $ (1,209 ) $ (1,604 ) $ (6,722 ) $ (9,119 )
Weighted Average Shares Outstanding:
Common stock 13,173
13,103
13,165
11,644
Diluted shares 13,173
13,103
13,165
11,644
Diluted loss per share attributable to Amtech shareholders $ (0.09 ) $ (0.12 ) $ (0.51 ) $ (0.78 )



	Three Months Ended June 30,					Nine Months Ended June 30,
	2017		2016			2017		2016
	(in thousands, except per share amounts)
Basic Income (Loss) Per Share Computation
Net income (loss) attributable to Amtech Systems, Inc.	$	3,287	$	(1,209	)	$	1,812	$	(6,722	)
Weighted Average Shares Outstanding:
Common stock	13,242		13,173			13,203		13,165
Basic income (loss) per share attributable to Amtech shareholders	$	0.25	$	(0.09	)	$	0.14	$	(0.51	)
Diluted Income (Loss) Per Share Computation
Net income (loss) attributable to Amtech Systems, Inc.	$	3,287	$	(1,209	)	$	1,812	$	(6,722	)
Weighted Average Shares Outstanding:
Common stock	13,242		13,173			13,203		13,165
Common stock equivalents (1)	156		—			85		—
Diluted shares	13,398		13,173			13,288		13,165
Diluted income (loss) per share attributable to Amtech shareholders	$	0.25	$	(0.09	)	$	0.14	$	(0.51	)


~~(1)~~	~~The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period.~~

(1) The number of common stock equivalents is calculated using the treasury method and the average market price during the period.

4. ~~Stockholders'~~Stockholders’ Equity

Shareholder Rights Plan -– On December 15, 2008, ~~the Company~~Amtech and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”), entered into an Amended and Restated Rights Agreement (the “Restated Rights Agreement”) which amended and restated the terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional shares of ~~the Company’s~~our Series A Participating Preferred Stock (“Series A Preferred”) currently attached to each of ~~the Company’s~~our outstanding Common Shares, par value $0.01 per share (“Common Shares”). As amended, each Right entitles the registered holder to purchase from ~~the Company~~us one one-thousandth of a share of Series A Preferred at an exercise price of $51.60 (the “Exercise Price”), subject to adjustment. The Rights will expire 10 years after issuance and will be exercisable if (a) a person or group becomes the beneficial owner of 15% or more of ~~the Company’s~~our common stock or (b) a person or group commences a tender or exchange offer that would result in the offeror beneficially owning 15% or more of ~~the Company’s~~our common stock. The Final Expiration Date (as defined in the Restated Rights Agreement) is December 14, 2018.

On October 1, 2015, ~~the Company~~we entered into a Second Amended and Restated Rights Agreement (the “Second Restated Rights Agreement”) with the Rights Agent, which expands the definition of Exempted Person ~~as defined in the Second Restated Rights Agreement~~ to include any person that the Board, in its sole and absolute discretion, exempts from becoming an Acquiring Person ~~as defined in~~under the Second Restated Rights Agreement. A ~~Person~~person deemed an Exempted Person under the Second Restated Rights Agreement cannot trigger any of the Rights provided therein so long as such Exempted Person complies with the terms and conditions by which the Board approved such exemption from the Restated Rights Agreement.

As previously disclosed, on October 8, 2015, ~~the Company~~we entered into a Letter Agreement (the “Agreement”) by and between ~~the Company~~Amtech and certain shareholders of ~~the Company~~Amtech who jointly file (the “Joint Filers”) under Section 13 of the Securities Exchange Act of 1934, as ~~amended (the “Exchange Act”).~~amended. One of the Joint Filers ~~has~~ became a member of our Board after the Agreement was approved by the Board. The Agreement permits the Joint Filers, pursuant to the Second Restated Rights Agreement, to

individually acquire shares of common stock of ~~the Company~~Amtech that would, in the aggregate, bring the Joint Filers’ collective ownership to no more than 19.9% of ~~the Company’s~~our issued and outstanding common stock at any time. In the event the Joint Filers’ collective ownership at any time exceeds 19.9% of ~~the Company’s~~our issued and outstanding shares of common stock, ~~the Company is~~we are entitled to specific performance and all other remedies entitled to ~~the Company~~us at law or equity, among others. ~~The Company’s~~Our Board approved the Agreement and transactions contemplated thereunder, and ~~the Board~~ has the sole authority to terminate the Agreement at any time.


5.	Business Segment Information

~~The Company’s~~Our three reportable segments are as follows:

Solar - ~~The Company is~~–We are a leading supplier of thermal processing systems, ALD, related automation, parts and services, to the solar/photovoltaic industry and also ~~offers~~offer PECVD (plasma-enhanced chemical vapor deposition) equipment to the global solar market. On December 24, 2014, the Company acquired a 51% controlling interest in SoLayTec B.V. (“SoLayTec”) and beginning in the second quarter of 2015, its business has been included in the results for this segment.

Semiconductor - –In ~~the Company’s~~our Semiconductor segment, ~~it designs, manufactures, sells~~we design, manufacture, sell and ~~services~~service thermal processing equipment and related controls and parts for use by leading semiconductor manufacturers, and in electronics, automotive and other industries. ~~On January 30, 2015, the Company completed its acquisition of BTU and, since the second quarter of 2015, its business has been included in the results for this segment.~~

Polishing - –In ~~the Company's~~our Polishing segment, ~~the Company produces~~we produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers, numerous types of crystal materials, ceramics and metal components.

Information concerning our business segments is as follows:


	Three Months ended June 30,						Nine Months Ended June 30,						Three Months Ended June 30,						Nine Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
	(dollars in thousands)												(dollars in thousands)
Net Revenues:
Solar (1)	$	19,001		$	24,392		$	38,346		$	42,141
Solar *													$	28,981		$	19,001		$	56,960		$	38,346
Semiconductor	12,200			12,945			33,406			25,765			15,951			12,200			45,097			33,406
Polishing	2,141			2,679			6,147			8,779			2,828			2,141			7,782			6,147
	$	33,342		$	40,016		$	77,899		$	76,685		$	47,760		$	33,342		$	109,839		$	77,899
Operating income (loss):
Solar (1)	$	(402	)	$	1,232		$	(4,532	)	$	(1,987	)
Solar *													$	2,991		$	(402	)	$	90		$	(4,532	)
Semiconductor	1,056			(1,113		)	777			(483		)	2,250			1,056			6,013			777
Polishing	343			574			899			1,917			738			343			1,705			899
Non-segment related	(1,599		)	(1,927		)	(5,281		)	(7,409		)	(2,008		)	(1,599		)	(5,420		)	(5,281		)
	$	(602	)	$	(1,234	)	$	(8,137	)	$	(7,962	)	$	3,971		$	(602	)	$	2,388		$	(8,137	)

~~(1)~~* The ~~financial statement~~revenue and operating income of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment revenue.


	June 30, 2016		September 30, 2015		June 30, 2017		September 30, 2016
	(dollars in thousands)				(dollars in thousands)
Identifiable Assets:
Solar	$	50,580	$	45,717	$	69,935	$	42,962
Semiconductor	47,874		46,912		56,208		51,985
Polishing	5,274		5,793		4,510		4,819
Non-segment related	22,431		27,034		17,786		18,664
	$	126,159	$	125,456	$	148,439	$	118,430

6. Major Customers and Foreign Sales

During the nine months ended June 30, ~~2016~~2017, 1two customers individually represented 18% and 11% of our net revenues. No other customer represented ~~14%~~greater than 10% of net revenues. During the nine months ended June 30, ~~2015~~, ~~two~~ ~~customers individually~~2016, one customer represented ~~18% and~~ ~~12%~~14% of our net revenues.

~~The Company has~~We have operations in The Netherlands, United States, France, and China. Our net revenues were to customers in the following geographic regions:


	Nine Months Ended June 30,				Nine Months Ended June 30,
	2016		2015		2017		2016
United States	20	%	25	%	13	%	20	%
Other	2	%	2	%	1	%	2	%
Total North America	22	%	27	%	14	%	22	%

China	24	%	26	%	43	%	24	%
Malaysia	22	%	10	%	11	%	22	%
Taiwan	13	%	15	%	10	%	13	%
Other	6	%	8	%	8	%	6	%
Total Asia	65	%	59	%	72	%	65	%
Germany	2	%	5	%	5	%	2	%
Other	11	%	9	%	9	%	11	%
Total Europe	13	%	14	%	14	%	13	%
	100	%	100	%	100	%	100	%

7. ~~Long-term~~Long-Term Debt

~~In January 2015,~~We hold debt in the ~~Company acquired $7.2 million~~form of ~~long-term debt as part of the BTU acquisition. The debt is~~a mortgage note secured by ~~the Company's~~our real property in Billerica, Massachusetts ~~and~~that has a remaining balance of ~~$6.6~~$6.3 million as of June 30, ~~2016.~~2017. The debt has an interest rate of ~~4.4%~~4.11% through September 26, ~~2018,~~2021, at which time the interest rate will be adjusted to a per annum fixed rate equal to the aggregate of the Federal Home Loan Board Five Year Classic Advance Rate plus two hundred forty basis points. The maturity date of the debt is September 26, 2023.

~~In December 2014, the Company acquired $2.0 million~~SoLayTec B.V. (“SoLayTec”), a division of our Solar segment, holds long-term debt ~~as part~~with a remaining balance of ~~the SoLayTec acquisition.~~$4.2 million. During the nine months ended June 30, ~~2016,~~2017, SoLayTec borrowed ~~an additional $1.1~~approximately $0.4 million. ~~As of June 30, 2016 the SoLayTec long-term~~The debt has ~~a remaining balance of $3.7 million, with~~ interest ~~capitalized per the agreement bearing interest at~~ rates ranging from ~~5.95%~~4.5% to ~~10%~~12.5% and maturity dates ranging from fiscal 2017 to fiscal 2021. See Note 11 for details on subsequent events related to outstanding SoLayTec loans payable.

8. Commitments and Contingencies

Purchase Obligations – As of June 30, ~~2016~~2017, ~~the Company~~we had unrecorded purchase obligations in the amount of ~~$15.8~~$44.5 million compared to $~~9.8~~11.3 million as of September 30, ~~2015.~~2016. These purchase obligations consist of outstanding purchase orders for goods and services. While the amount represents purchase agreements, the actual amounts to be paid may be less if any agreements are renegotiated, canceled or terminated.

Development ~~projects~~Projects – In fiscal 2014, our wholly owned subsidiary, Tempress Systems, Inc. ~~("Tempress"~~(“Tempress”), entered into an agreement with the Energy Research Centre of the Netherlands ~~("ECN"~~(“ECN”), a Netherlands ~~government sponsored~~government-sponsored research institute, for a joint research and development project. Under the terms of the agreement, Tempress sold an ion implanter ~~("Equipment"~~(“Equipment”) to ECN for $1.4 million. Both Tempress and ECN are performing research and development projects utilizing the Equipment at the ECN facilities. Each party to the agreement will have 100% rights to the results of the projects developed separately by the individual parties. Any results co-developed will be jointly owned. ~~Over the four-year period of the agreement,~~ Tempress ~~is required~~met its requirement to contribute $1.4 million to the project in the form of installation of the equipment, acceptance testing, project meeting attendance, training, parts, and service, including keeping the equipment in good condition and repair for the first two years of the ~~agreement. As of June 30, 2016, Tempress has contributed all of the required $1.4 million~~agreement prior to ~~the project.~~fiscal 2017.

EPA Accrual -– As a result of the BTU acquisition, ~~the Company~~we assumed BTU’s proportional responsibility for clean-up costs at a Superfund site. As an equipment manufacturer, BTU generated and disposed of small quantities of solid waste that were considered hazardous under Environment Protection Agency (“EPA”) regulations. Because BTU historically used a waste disposal firm that disposed of the solid waste at a site that the EPA designated as a Superfund site, BTU was named by the EPA as one of the entities responsible for a portion of the expected clean-up costs. Based on ~~the Company's~~our proportional responsibility, as negotiated with and agreed to by the EPA, ~~the Company's~~our liability related to this matter is less than $0.1 million, which is included in Other Accrued Liabilities on the Condensed Consolidated Balance ~~Sheet~~Sheets as of June 30, 2017 and September 30, 2016. In accordance with the agreement, ~~the Company~~we established a letter of credit for $0.2 million to the benefit of the EPA for potential cash payments as settlements for ~~the Company’s~~our proportional liability.

Legal Proceedings –– The Company and its subsidiaries are defendants from time to time in actions for matters arising out of their business operations. ~~The Company does~~We do not believe that any matters or proceedings presently pending will have a material adverse effect on ~~its~~our consolidated financial position, results of operations or liquidity.

As previously disclosed in ~~the Company’s~~our filings with the SEC, shortly after ~~the Company~~we entered into the merger agreement with BTU, two separate putative stockholder class action complaints (together, the ~~"Stockholder Actions"~~“Stockholder Actions”) were filed in the Court of Chancery of the State of Delaware (the ~~"Delaware Court"~~“Delaware Court”). The first was filed on November 4, 2014 and the second on November 17, 2014, on behalf of BTU’s public stockholders, against BTU, members of the BTU board of directors, Amtech and the special purpose merger subsidiary. The Stockholder Actions were consolidated on December 4, 2014. The complaints generally alleged that, in connection with entering into the merger agreement, the BTU board of directors breached certain fiduciary duties owed to ~~BTU's~~BTU’s stockholders. The complaints sought various forms of declaratory and injunctive relief, as well as compensatory damages.

On February 18, 2016, the Delaware Court entered the Order approving the Amended Stipulation of Settlement. As a result, the Released Claims were dismissed with prejudice and without any admission of wrongdoing by any of the parties to the Stockholder Actions. Pursuant to the Amended Stipulation of Settlement, BTU, its insurer(s), or its successor(s) in interest are responsible for payment of fees and expenses in the amount of $325,000 which were paid in full on April 1, 2016.

~~As described above, the~~The Released Claims are limited solely to claims related to any disclosures (or lack thereof) to BTU’s stockholders concerning the merger and any fiduciary claims concerning the decision to enter into the merger. While we are currently unaware of any other pending or threatened litigation related to additional claims arising from the Stockholder Actions, any future claims are uncertain, so additional harm could potentially result ~~to the Company~~ from this litigation, which may cause ~~the Company~~us to incur substantial costs and divert management’s attention from operational matters.

9. Investments

~~The Company’s equity method investments include~~Our long-term investment consists of a 15% interest in Kingstone Technology Hong Kong Limited (“Kingstone”). ~~The Company recognizes its~~We recognize our portion of net income or losses on a one-quarter lag. The carrying value of the equity method investment in Kingstone was ~~$3.0~~$2.8 million and ~~$2.7~~$3.0 million as of June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively. For the three and nine months ended June 30, 2017 we recognized investment loss of $0.1 million and $0.2 million, respectively. For the three and nine months ended June 30, 2016, we recognized investment loss of $0.4 million and ~~for the nine months ended June 30, 2016 we recognized~~ investment income of $0.2 ~~million.~~million, respectively.

10. Related Party Transactions

~~In the fourth quarter~~As of 2015, the Company deconsolidated Kingstone, reducing its ownership to 15% of the Hong Kong holding company. Upon the deconsolidation, Kingstone became a related party of the Company. Based on the terms of the transaction agreements in the second quarter of 2016, the Company received a payment of $4.9June 30, 2017, SoLayTec has borrowed approximately $1.8 million from ~~Kingstone~~its shareholder, TNO Technostarters B.V. The loans have varying interest rates from 9.5% to 12.5% and mature in 2021. See Note 11 for ~~its exclusive sale and service rights in the solar ion implant equipment. The company recognized a gain~~details on the sale of $2.6 million for the nine months ended June 30, 2016, which is included in our condensed consolidated statement of operations in Gain on sale of other assets. At June 30, 2016, the Company'ssubsequent events related ~~accounts receivable due from Kingstone were $0.3 million, which are included in Accounts Receivable on the Condensed Consolidated Balance Sheet.~~to outstanding SoLayTec loans payable.

11. Subsequent Event

On July 31, 2017, Tempress entered into an Exit Agreement (the “Agreement”) with the two minority owners of SoLayTec (“Minority Owners”) to acquire their shares of SoLayTec, resulting in Tempress becoming the sole owner of SoLayTec. The terms of the Agreement, which is effective as of July 1, 2017, state that the Minority Owners will sell all of their SoLayTec shares to Tempress for a nominal fee and waive all right to future repayment of principal and interest on loans payable to the Minority Owners. As a result of the effectiveness of the Agreement, SoLayTec will have no further liability under the loans. The principal balance of these loans at June 30, 2017 is approximately $2.3 million, which management expects to record as a capital contribution, with no impact on the Consolidated Statement of Operations.


Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included in Item 1, “Condensed Consolidated Financial Statements” in this ~~quarterly report~~Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, ~~2015.~~2016.

Cautionary Statement Regarding Forward-Looking Statements

Certain information contained or incorporated by reference in this Quarterly Report ~~on Form 10-Q~~ is forward-looking in nature. All statements included or incorporated by reference in this Quarterly Report, ~~on Form 10-Q,~~ or made by management of Amtech Systems, Inc. and its subsidiaries (“Company”, “Amtech”, “we” or “our”), other than statements of historical fact, are hereby identified as “forward-looking statements” (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange ~~Act“~~Act”)). In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “would,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include statements regarding ~~Amtech's~~Amtech’s future financial results, operating results, business strategies, projected costs, products under development, competitive positions and plans and objectives of the Company and its management for future operations. These and many other factors could affect Amtech’s future operating results and financial condition, and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.

You should not place undue reliance on these forward-looking statements. We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are ~~reasonable.~~reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The Form 10-K, as amended, that we filed with the Securities and Exchange Commission for the year-ended September 30, ~~2015~~2016 listed various important factors that could affect ~~Amtech's~~Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Risk Factors” in the Form 10-K, as amended, and investors should refer to ~~them.~~them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties. Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

Introduction

Management’s Discussion and Analysis (“MD&A”) is intended to facilitate an understanding of our business and results of operations. MD&A consists of the following sections:

Overview

Results of Operations

Liquidity and Capital Resources

~~Off – Balance~~Off-Balance Sheet Arrangements

Contractual Obligations

Critical Accounting Policies

Impact of Recently Issued Accounting Pronouncements

Overview

We operate in three reportable business segments: (i) solar, (ii) semiconductor and (iii) polishing. In our solar segment, we are a leading global supplier of thermal processing systems, including diffusion, plasma-enhanced chemical vapor deposition ~~(PECVD)~~(“PECVD”), atomic layer deposition ~~(ALD)~~(“ALD”), and related automation, parts and services, to the solar/photovoltaic industry. In our semiconductor segment, we supply thermal processing equipment, including solder reflow equipment and related controls for use by leading semiconductor manufacturers, and in electronics assembly for automotive and other industries. In our polishing ~~supplies~~ segment, we produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers, numerous types of crystalline materials, ceramics and metal components.

Our customers are primarily manufacturers of solar cells and integrated circuits. The solar cell and semiconductor industries are cyclical and historically have experienced significant fluctuations. Our revenue is impacted by these broad industry trends. Since 2012, the solar cell industry has experienced a structural imbalance between supply and demand. This imbalance has increased competitive pressure on selling prices and negatively impacted our results of operations.

We believe that at least several solar cell manufacturers are now producing at near practical capacity, which is consistent with recently announced cell capacity expansion plans within the industry. Our ~~strategy has been,~~high throughput equipment platforms, technologies for higher cell efficiency, and ~~continues~~greater knowledge of the complete cell manufacturing process have contributed significantly to ~~be,~~our success in securing the large turnkey orders announced in January and April of 2017 from a new solar cell manufacturer in China. For individual equipment orders, we compete with Chinese equipment manufacturers that offer lower prices coupled with liberal payment terms. Thus, we are finding it more difficult to grow the Company through strategic product development and acquisitions. In addition to internal product development, we have acquired companies with complementary products or products that serve adjacent process steps. On January 30, 2015, we completed the acquisition of BTU International Inc. (“BTU”), which provides complementary thermal processing technologiesparticipate in the ~~semiconductor, electronics~~capacity expansions of those Chinese companies that already have significant experience with all facets of producing solar cells and ~~solar sectors,~~at least some prior experience working with the local equipment vendors. While we will continue to focus on developing advanced products and ~~strengthens our footprint in China and other key geographic markets. On December 24, 2014,~~technologies, we ~~expanded our participation in~~plan to seek further cost reductions to address the ~~solar market by acquiring a 51% controlling interest in SoLayTec B.V. (“SoLayTec”), which provides atomic layer deposition systems used in high efficiency solar cells.~~

In September 2015, we sold a portion of our interest in Kingstone, a Shanghai-based technology company specializing in ion implant solutions for the solar and semiconductor industries (in which we acquired a 55% ownership in February 2011), to a China-based venture capital firm. Proceedscompetition from ~~the sale of shares were paid to Amtech and used to support the company's core strategic initiatives. We now own 15% of the Hong Kong holding company following consummation of the transaction.~~

Chinese equipment vendors.

Results of Operations

The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015		June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Net revenue	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%
Cost of sales	71	%	75	%	72	%	73	%	68	%	71	%	71	%	72	%
Gross margin	29	%	25	%	28	%	27	%	32	%	29	%	29	%	28	%
Selling, general and administrative	26	%	25	%	30	%	32	%	21	%	26	%	23	%	30	%
Research, development and engineering	5	%	3	%	8	%	5	%	3	%	5	%	4	%	8	%
Operating loss	(2	)%	(3	)%	(10	)%	(10	)%
Operating income (loss)									8	%	(2	)%	2	%	(10	)%
Gain on sale of other assets	0	%	0	%	3	%	0	%	0	%	0	%	0	%	3	%
Income (loss) from equity method investment	(1	)%	0	%	0	%	0	%	0	%	(1	)%	0	%	0	%
Interest expense and other income, net	(1	)%	0	%	0	%	0	%	0	%	(1	)%	0	%	0	%
Loss before income taxes	(4	)%	(3	)%	(7	)%	(10	)%
Income (loss) before income taxes									8	%	(4	)%	2	%	(7	)%
Income taxes provision	0	%	1	%	3	%	1	%	2	%	0	%	1	%	3	%
Net loss	(4	)%	(4	)%	(10	)%	(11	)%
Add: net loss (income) attributable to noncontrolling interest	0	%	0	%	1	%	0	%
Net loss attributable to Amtech Systems, Inc.	(4	)%	(4	)%	(9	)%	(11	)%
Net income (loss)									6	%	(4	)%	1	%	(10	)%
Add: net loss attributable to noncontrolling interest									1	%	0	%	1	%	1	%
Net income (loss) attributable to Amtech Systems, Inc.									7	%	(4	)%	2	%	(9	)%

Net Revenue

Net revenue consists of revenue recognized upon shipment or installation of equipment, with the exception of products using new technology, for which revenue is recognized upon customer acceptance. Spare parts sales are recognized upon shipment and service revenue is recognized upon completion of the service activity or ratably over the term of the service contract. Since the majority of our revenue is generated from large system sales, revenue and operating income can be significantly impacted by the timing of system shipments, and recognition of revenue based on customer acceptances. The revenue of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and microelectromechanical (“MEMS”) industries, comprising less than 25% of the Solar segment revenue.


	Three Months Ended June 30,									Nine Months Ended June 30,									Three Months Ended June 30,							Nine Months Ended June 30,
Segment	2016		2015		Incr (Decr)			% Change		2016		2015		Incr (Decr)			% Change		2017		2016		Incr (Decr)		% Change	2017		2016		Incr (Decr)		% Change
	(dollars in thousands)																		(dollars in thousands)
Solar	$	19,001	$	24,392	$	(5,391	)	(22	)%	$	38,346	$	42,141	$	(3,795	)	(9	)%	$	28,981	$	19,001	$	9,980	53%	$	56,960	$	38,346	$	18,614	49%
Semiconductor	12,200		12,945		(745		)	(6	)%	33,406		25,765		7,641			30	%	15,951		12,200		3,751		31%	45,097		33,406		11,691		35%
Polishing	2,141		2,679		(538		)	(20	)%	6,147		8,779		(2,632		)	(30	)%	2,828		2,141		687		32%	7,782		6,147		1,635		27%
Total net revenue	$	33,342	$	40,016	$	(6,674	)	(17	)%	$	77,899	$	76,685	$	1,214		2	%	$	47,760	$	33,342	$	14,418	43%	$	109,839	$	77,899	$	31,940	41%

Net revenue for the quarters ended June 30, 2017 and 2016 was $47.8 million and ~~2015 were~~ $33.3 million, ~~and $40.0 million,~~ respectively, ~~a decrease~~an increase of ~~$6.7~~$14.4 million or ~~17%~~43%. Revenue from the solar segment ~~decreased 22%~~increased 53% compared to the prior year quarter ~~when we shipped a greater number~~due primarily to shipments relating to the large turn-key order, previously announced on January 24, 2017, slightly offset by lower sales of ~~PECVD equipment than we did~~our ALD equipment. The turn-key order shipments in the third quarter of fiscal ~~2016. The decrease in sales~~2017 included a higher mix of our PECVD equipment ~~was partially offset by an increase in sales of our ALD equipment in the third quarter of fiscal 2016~~ compared to the third quarter of fiscal 2015 used in PERC applications. We experience significant variability in orders and shipments from quarter-to-quarter; we believe the $15.3 million of PECVD solar equipment orders booked year-to-date orders better reflects the success of our PECVD solar equipment than the shipments in a single quarter. Contributing2016. Also contributing to the ~~decrease in sales from the solar segment, we had~~increase was a lower net deferral of revenue in the third quarter of fiscal ~~2016~~2017, compared to ~~net recognition of previously-deferred revenue in~~ the third quarter of fiscal ~~2015.~~

2016. Revenue from the semiconductor segment ~~decreased 6%~~increased 31% compared to the prior year quarter due primarily to ~~lower shipments caused by the cyclical nature of this industry.~~strong customer demand for our thermal processing systems and diffusion furnaces. Revenue from the polishing segment ~~decreased 20%~~increased 32% compared to the prior year quarter due primarily to ~~decreases in~~increased sales of polishing templates and ~~equipment resulting from competitive pressures caused, in part, by the strength of the U.S. dollar versus other currencies in the markets in which we compete.~~equipment.

Net revenue for the nine months ended June 30, 2017 and 2016 ~~and 2015~~ was ~~$77.9~~$109.8 million and ~~$76.7~~$77.9 million, respectively, an increase of ~~$1.2~~$31.9 million or 2%41%. Revenue from the solar segment ~~decreased 9%~~increased 49% compared to the first nine months of ~~2015~~2016 due primarily to ~~lower~~increases in shipments of our solar equipment, which includes a higher mix of our PECVD ~~sales~~equipment, and includes shipments relating to the large turn-key order, previously announced on January 24, 2017. The increase was partially offset by ~~higher ALD sales, as discussed above. Contributing~~a net deferral of revenue in the first nine months of fiscal 2017 compared to net recognition of previously-deferred revenue in the ~~decrease in sales from the solar segment, are less revenues due to the deconsolidation~~first nine months of ~~Kingstone.~~fiscal 2016. Revenue from the semiconductor segment increased ~~30%~~35% compared to the first nine months of ~~2015 due primarily to~~2016 for the ~~inclusion of BTU for all nine months in 2016 versus five months in 2015, partially offset by lower shipments of diffusion furnaces to the semiconductor industry.~~same reasons discussed above. Revenue from the polishing segment ~~decreased 30%~~increased 27% compared to the first nine months of ~~2015 for the reasons mentioned~~2016 primarily due to increased sales as discussed above.

Backlog and Orders

Our order backlog as of June 30, 2017 and 2016 ~~and 2015~~ was ~~$63.8~~$125.7 million and ~~$46.9~~$63.8 million, respectively, an increase of ~~$16.9~~$61.9 million or ~~36%~~97%. Our backlog as of June 30, ~~2016~~2017 includes approximately ~~$45.3~~$98.2 million of orders and deferred revenue from our solar industry customers, compared to ~~$35.0~~$45.3 million at June 30, ~~2015.~~2016. New orders booked in the quarter ended June 30, ~~2016~~2017 were ~~$30.0~~$79.9 million ($~~13.2~~54.2 million solar) compared to ~~$30.2~~$30.0 million ($~~15.2~~13.2 million solar) of customer orders in the quarter ended June 30, ~~2015.~~ 2016. The backlog of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment backlog.

As of June 30, ~~2016~~2017, one customer individually accounted for ~~29%~~53% of our ~~backlog.~~backlog, primarily related to the n-type bi-facial turnkey order discussed in the January 24, 2017 order announcement as well as the follow-on turnkey order announced in April 2017. The large turnkey order announced in January 2017 (“Phase I”) began shipping in the third quarter of this fiscal year, with continued shipments in the fourth quarter of this fiscal year. A meaningful portion of the revenue from Phase I will be recognized upon installation and acceptance, which is expected in fiscal 2018. The large follow-on turnkey order announced in April 2017 (“Phase II”) is also included in the backlog as of June 30, 2017 and is expected to ship in the first half of fiscal 2018, with a deferral of revenue similar to Phase I. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped, but which have not met the criteria for revenue recognition.

Gross Profit and Gross Margin

Gross profit is the difference between net revenue and cost of goods sold. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue.


	Three Months ended June 30,									Nine Months Ended June 30,									Three Months Ended June 30,								Nine Months Ended June 30,
Segment	2016		2015		Incr (Decr)			% Change		2016		2015		Incr (Decr)			% Change		2017		Gross Margin	2016		Gross Margin	Incr (Decr)		2017		Gross Margin	2016		Gross Margin	Incr (Decr)
	(dollars in thousands)
Solar	$	4,241	$	5,638	$	(1,397	)	(25	)%	$	7,409	$	9,398	$	(1,989	)	(21	)%	$	7,948	27%	$	4,241	22%	$	3,707	$	11,506	20%	$	7,409	19%	$	4,097
Semiconductor	4,764		3,504		1,260			36	%	12,388		7,835		4,553			58	%	6,428		40%	4,764		39%	1,664		18,151		40%	12,388		37%	5,763
Polishing	626		986		(360		)	(37	)%	1,790		3,212		(1,422		)	(44	)%	1,126		40%	626		29%	500		2,683		34%	1,790		29%	893
Total gross profit	$	9,631	$	10,128	$	(497	)	(5	)%	$	21,587	$	20,445	$	1,142		6	%	$	15,502	32%	$	9,631	29%	$	5,871	$	32,340	29%	$	21,587	28%	$	10,753

Gross profit for the three months ended June 30, 2017 and 2016 was $15.5 million (32% of net revenue) and ~~2015 was~~ $9.6 million ~~and $10.1 million,~~(29% of net revenue), respectively, ~~a decrease~~an increase of ~~$0.5~~$5.9 million. ~~In the quarter ended June 30, 2016, gross margins~~Gross margin on products from our solar segment ~~benefited from cancellation revenue of $0.8 million related to 2011 orders, resulting in steady gross margins~~increased compared to the ~~quarter~~three months ended June 30, ~~2015.~~2016, due primarily to higher sales volumes and product mix, slightly offset by less usage of previously reserved inventory during the third quarter of fiscal 2017. Gross margin on products from our semiconductor segment increased slightly due to higher sales volumes, offset by a lower margin product mix. Gross profit and gross margin on products from our polishing segment increased, primarily due to ~~favorable product mix. Gross margins on our polishing segments decreased primarily due to lower~~higher sales ~~volumes.~~of higher margin products. For the three months ended June 30, 2017, we deferred gross profit of $0.2 million. For the three months ended June 30, 2016, we deferred gross profit of $0.6 million. ~~For the three months ended June 30, 2015 we recognized previously-deferred profit of $0.5 million.~~Deferred commissions are included in selling, general and administrative expenses (“SG&A”).

Gross profit for the nine months ended June 30, 2017 and 2016 was $32.3 million (29% of net revenue) and ~~2015 was~~ $21.6 million ~~and $20.4 million,~~(28% of net revenue), respectively, an increase of ~~$1.1~~$10.8 million. Gross margin on products from our solar segment ~~decreased~~increased compared to the first nine months of fiscal ~~2015,~~2016, due primarily to ~~high margins on ion implant revenue in the first quarter~~higher sales volumes, offset by a net deferral of ~~fiscal 2015. Since the deconsolidation~~profit compared to a net recognition of ~~Kingstone as~~previously deferred profit, and less usage of ~~September 30, 2015, the revenue from ion implanters is no longer included in our consolidated results.~~previously reserved inventory. In the semiconductor segment, gross profit and gross margin increased primarily due to ~~the BTU acquisition.~~higher sales volumes, improved product mix, and higher capacity utilization. Gross profit and margin on products from our polishing segment ~~decreased~~increased primarily due to ~~lower~~higher sales ~~volumes.~~volumes and improved product mix. For the nine months ended June 30, 2017, we deferred gross profit of $1.0 million. For the nine months ended June 30, 2016, ~~and 2015,~~ we recognized previously-deferred gross profit of $0.8 ~~million and $1.0 million, respectively.~~million. Deferred commissions are included in SG&A.

Selling, General and Administrative

~~Selling, general and administrative expenses ("~~SG~~&A") consist~~&A consists of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal, accounting expenses and bad debt expense.

SG&A expenses for the three months ended June 30, 2017 and 2016 were $10.1 million and ~~2015 were~~ $8.7 million, ~~and~~ ~~$10.1 million~~, respectively. SG&A ~~decreased~~increased compared to the prior year quarter due primarily to ~~lower commission~~higher commissions, severance and shipping expense resulting from lower shipments, and $0.7 million from our cost reductions efforts. SG&A expense includes $0.4 million and $0.3 million of stock-based compensation expense for the three months ended June 30, 2016 and 2015, respectively.other employee-related expenses.

SG&A expenses for the nine months ended June 30, 2017 and 2016 were $25.4 million and ~~2015 were~~ $23.7 million, ~~and $24.5 million,~~ respectively. ~~SG&A decreased primarily due~~Compared to lower shipping and commissions expense resulting from lower shipments and lower acquisition and legal fees related to our acquisition of BTU in January 2015, partially offset by higher expenses incurred by BTU which reflects nine months of expenses in fiscal 2016 year-to-date versus five months in fiscal 2015 year-to-date. SG&A expense includes $1.1 million and $0.9 million of stock-based compensation expense for the nine months ended June 30, 2016, ~~and 2015, respectively.~~the increase in SG&A, primarily due to higher commissions related to higher revenues, was partially offset by the collection of previously reserved accounts receivable of approximately $1.0 million.

Research, Development and Engineering

Research, development and engineering ("(“RD~~&E"~~&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. We receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met.


	Three Months ended June 30,											Nine Months Ended June 30,											Three Months Ended June 30,											Nine Months Ended June 30,
	2016			2015			Incr. (Decr.)			% Change		2016			2015			Incr. (Decr.)			% Change		2017			2016			Incr. (Decr.)			% Change		2017			2016			Incr. (Decr.)			% Change
	(dollars in thousands)											(dollars in thousands)											(dollars in thousands)
Research, development and engineering	$	2,078		$	3,650		$	(1,572	)	(43	)%	$	7,217		$	9,763		$	(2,546	)	(26	)%	$	1,774		$	2,078		$	(304	)	(15	)%	$	5,547		$	7,217		$	(1,670	)	(23	)%
Grants earned	(510		)	(2,342		)	1,832			(78	)%	(1,202		)	(5,869		)	4,667			(80	)%	(351		)	(510		)	$	159		(31	)%	(961		)	(1,202		)	$	241		(20	)%
Net research, development and engineering	$	1,568		$	1,308		$	260		20	%	$	6,015		$	3,894		$	2,121		54	%	$	1,423		$	1,568		$	(145	)	(9	)%	$	4,586		$	6,015		$	(1,429	)	(24	)%

RD&E expense, net of grants earned, for the three months ended June 30, ~~2016 increased $0.3~~2017, decreased $0.1 million compared to the three months ended June 30, ~~2015. For~~2016, due primarily to the completion of a grant project in a prior quarter. RD&E expense, net of grants earned, for the nine months ended June 30, ~~2016, RD&E expense, net of grants, increased $2.1~~2017, decreased $1.4 million compared to the nine months ended June 30, ~~2015. For the three and nine months ended June 30,~~ 2016, ~~spending, grants earned and net expense were lower than in fiscal 2015~~ due primarily to ~~the deconsolidation of Kingstone in fiscal 2015. This lower activity was partially offset by~~reduced spending on RD&E ~~spending~~ at ~~BTU~~our solar segment and ~~SoLayTec which were acquired during fiscal 2015.~~the completion of a grant project in a prior quarter.

Gain on Sale of Other Assets

For the nine months ended June 30, 2016, we recognized a gain of $2.6 million on the receipt of sale of our exclusive ~~sale~~sales and service rights in the Kingstone Hong Kong Limited (“Kingstone”) solar ion ~~implanter. We did not recognize any gain on~~implant equipment, with no comparable items in the ~~sale of assets for the nine months ended June 30, 2015.~~fiscal 2017 period.

Income (Loss) from Equity Method Investment

For the three and nine months ended June 30, 2017 we recognized investment loss of $0.1 million and $0.2 million, respectively, related to our 15% equity investment in Kingstone. For the three and nine months ended June 30, 2016, we recognized investment loss of $0.4 million ~~related to our 15% equity investment in Kingstone. For the nine months ended June 30, 2016 we recognized~~and investment income of $0.2 million, ~~related to our 15% equity investment in Kingstone. We did not recognize any investment income for the three and nine months ended June 30, 2015.~~respectively.

Income Taxes

For the three and nine months ended June 30, 2017 we recorded income tax expense of $1.0 million and $1.3 million, respectively. For the three and nine months ended June 30, 2016 ~~and 2015~~ we recorded income tax expense of $0.1 million and ~~$0.3~~$2.0 million, respectively. For the nine months ended June 30, 2016 and 2015 we recorded income tax expense of $2.0 million and $0.6 million respectively, with the increase primarily due to the $1.7 million of tax on the gain from the sale of the Kingstone exclusive sale and service rights. The income tax provisions are based upon estimates of annual income, annual permanent differences and statutory tax rates in the various jurisdictions in which we operate, except that certain loss jurisdictions and discrete items are treated separately. ~~During~~The gain on the ~~nine months ended June 30, 2016, the valuation allowance on deferred tax assets increased due to net operating losses in The Netherlands, France~~Kingstone transaction, described above, was treated as a discrete item and ~~China, partially offset by a reduction~~accounted for $1.7 million of the ~~valuation allowance due to the utilization of net operating losses~~tax expense in the ~~United States.~~2016 second fiscal quarter, with the tax calculated utilizing the effective tax rate and other discrete items nearly offsetting each other.

~~The Company establishes~~We establish a valuation allowance when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence isneeds to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to ~~the accounting~~those standards, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Therefore, cumulative losses weigh heavily in the overall assessment. As a result of the ~~merger with BTU,~~review, where cumulative losses had been incurred, we ~~determined~~concluded in 2015 and 2016 that it is more likely than not that some of our U.S. federal deferred tax assets would not be realized, and thus the Company recorded a partial valuation allowance in the U.S. In making this determination, we considered the cumulative losses in the U.S., including those of BTU, expected future taxable income and available tax planning strategies. The Company continueswas appropriate to ~~have~~maintain a full valuation allowance ~~on the deferred tax assets related to The Netherlands, China and the United Kingdom and a partial valuation allowance on the~~for substantially all net deferred tax assets in foreign jurisdictions and the ~~United States~~carryforwards of U.S. net operating losses and ~~France.~~foreign tax credits, which were acquired in the merger with BTU International, Inc. Tax planning strategies to reduce sources of future taxable income caused us to conclude in the fourth quarter of fiscal 2016 that a valuation allowance should be established on the remaining U.S. deferred tax assets.

~~Our future effective income~~

For the quarter ending June 30, 2017, we determined that a portion of the deferred tax ~~rate depends on various factors, such as~~asset previously covered by the ~~amount~~valuation allowance would be realized in the current tax period. We have realized the value of ~~income (loss) in each tax jurisdiction, tax regulations governing each region, non-tax deductible expenses incurred~~the asset, $1.4 million, as a ~~percent of pre-tax income and~~discrete item in the effectiveness of our tax planning strategies. At the end of 2011, we restructured our European operations to lower the tax rate on The Netherlands operations from 35% to a marginal rate of 25%, as we intend to permanently reinvest future Dutch earnings in our foreign operations. The effect of the restructure on our tax rate depends on the amount of income or loss earned in The Netherlands, as well as the portion of such income that can be demonstrated to have been derived from qualified new technologies, as well as the factors mentioned above.quarter.

Liquidity and Capital Resources

At June 30, ~~2016,~~2017 and September 30, ~~2015,~~2016, cash and cash equivalents were ~~$28.3~~$39.2 million and ~~$25.9~~$27.7 million, ~~respectively. At~~respectively, an increase of $11.5 million between periods. Restricted cash increased by $3.8 million to $4.7 million at June 30, ~~2016, and~~2017 from $0.9 million at September 30, ~~2015, restricted cash was $0.6 million.~~2016. Our working capital was ~~$45.4~~$50.3 million as of June 30, ~~2016~~2017 and ~~$46.3~~$44.9 million as of September 30, ~~2015.~~2016.

The increase in cash ~~for~~during the first nine months of fiscal ~~2016~~2017 of ~~$2.4~~$11.5 million was primarily due to ~~proceeds~~the significant customer deposits received ~~from the partial sale of~~in by our ~~equity interest in Kingstone of $7.0 million~~Solar segment related to Phase I and ~~the sale~~Phase II of the ~~related sale and service rights for $4.9 million, along with net borrowings on long-term debt~~large turnkey project. The increased cash is facilitating the fulfillment of ~~$0.6 million. These increases were partially offset by cash used in operating activities of $9.6 million and capital expenditures of $0.4 million.~~those orders. We maintain a portion of our cash and cash equivalents in Euros at our Dutch and French operations and in RMB in our Chinese operations; therefore, changes in the exchange rate have an impact on our cash balances. Restricted cash increased due to an increase in customer deposits requiring bank guarantees collateralized by cash. Our ratio of current assets to current liabilities was ~~2.0:~~1.8:1 as of June 30, 2017, and 2.2:1 as of ~~June 30, 2016, and~~ September 30, ~~2015, respectively.~~2016. We have never paid dividends on our common stock.

The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which include common and preferred stock sold in private transactions and public offerings, ~~capital leases~~long-term debt and ~~long-term debt.~~customer deposits. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months.

Cash Flows from Operating Activities

Cash ~~used in~~provided by our operating activities was $~~9.6~~10.9 million for the nine months ended June 30, ~~2016,~~2017, compared to ~~$12.4~~$9.6 million used in ~~such activities~~operations for the nine months ended June 30, ~~2015.~~2016, a $20.6 million improvement in cash flow from operations. During the nine months ended June 30, 2017, cash was primarily generated through net income adjusted for non-cash items of $3.8 million and increases in current liabilities, such as customer deposits and accounts payable. These increases were partially offset by an increase in restricted cash, an increase in accounts receivable due to the high volumes of shipments during the quarter, and advances made to to vendors. During the nine months ended June 30, 2016, net loss adjusted for non-cash items resulted in the use of $7.0 million, which was partially offset by $5.5 million provided by increases in accounts payable and accrued liabilities, offset by $8.3 million used in ~~losses on operations, net of non-cash charges and cash of $2.6 million was used by~~ accounts receivable and ~~purchases of inventory, offset by income taxes, accounts payable and other accrued liabilities~~inventories.

Cash Flows from Investing Activities

InOur investing activities for the nine months ended June 30, 2017 and 2016 included purchases of property, plant and equipment of approximately $0.4 million in both periods. Additionally, in the nine months ended June 30, 2016, we received cash of $7.0 million from the partial sale of our equity interest in Kingstone and $4.9 million from the sale of the related ~~sale~~sales and service rights. In the nine months ended June 30, 2015 we acquired a 51% interest SoLayTec, for an investment of $0.3 million and acquired $8.8 million in the acquisition of BTU. The cash provided by those investing activities were partially offset by purchases of property, plant and equipment of approximately $0.4 million and $0.5 million during the nine months ended June 30, 2016 and 2015, respectively.

Cash Flows from Financing Activities

For the nine months ended June 30, ~~2016,~~2017, $0.8 million of cash provided by financing activities was primarily comprised of $0.9 million of proceeds received from the ~~primary source~~exercise of stock options, partially offset by payments on long-term debt of $0.5 million, net of borrowings of $0.4 million. For the nine months ended June 30, 2016, $0.6 million of cash provided by financing activities ~~were~~was primarily ~~comprised of~~related to borrowings of long-term debt of $1.1 million, net of payments of $0.5 million. ~~For the nine months ended June 30, 2015, the primary source of $0.8 million of cash provided by financing activities were proceeds from the exercise of stock options.~~

Off-Balance Sheet Arrangements

As of June 30, ~~2016,~~2017, Amtech had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the Securities and Exchange Commission.

Contractual Obligations

~~Purchase~~Unrecorded purchase obligations were ~~$15.8~~$44.5 million as of June 30, ~~2016,~~2017, compared to ~~$9.8~~$11.3 million as of September 30, ~~2015,~~2016, an increase of ~~$6.0~~$33.2 million due primarily to ~~increased customer orders.~~the large solar orders received in 2017. Approximately $7.6 million of the June 30, 2017 obligation has been prepaid in the form of advances to vendors.

During the nine months ended June 30, ~~2016,~~2017, SoLayTec B.V. borrowed an additional ~~$1.1~~$0.4 million. As of June 30, ~~2016~~2017, the SoLayTec ~~long-term~~ debt has a remaining balance of ~~$3.7~~$4.2 million, with interest capitalized per the agreement bearing interest at rates ranging from ~~5.95%~~4.5% to ~~10%~~12.5% and maturity dates ranging from fiscal 2017 to fiscal 2021. For discussion of subsequent events related to SoLayTec’s debt, see “Part I, Item 1: Financial Information” under “Note 11. Subsequent Event.”

Refer to Amtech’s ~~annual report~~Annual Report on Form 10-K, as amended, for the year ended September 30, ~~2015,~~2016, for additional information on ~~the Company’s~~our other contractual obligations.

Critical Accounting Policies

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, accounts and notes receivable collectability, warranty and impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A critical accounting policy is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our Annual Report on Form 10-K, as amended, for the year ended September 30, ~~2015.~~2016. We believe our critical accounting policies relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements.

We believe the critical accounting policies discussed in the section entitled “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, ~~2015~~2016 represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no significant changes in our critical accounting policies during the nine months ended June 30, ~~2016.~~2017.

Impact of Recently Issued Accounting Pronouncements

For discussion of the impact of recently issued accounting pronouncements, see ~~“Item~~“Part I, Item 1: Financial Information” under “Impact of Recently Issued Accounting ~~Pronouncements”.~~

Pronouncements.”


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to foreign currency exchange rates to the extent sales contracts, purchase contracts, assets or liabilities of our operations are denominated in currencies other than their functional currency. Our operations in the United States are generally conducted in U.S. dollars. Our operations in Europe, China and other countries conduct business primarily in their respective functional currencies, but occasionally we enter into transactions in non-functional currencies. It is highly uncertain how currency exchange rates will fluctuate in the future. Actual changes in foreign exchange rates could adversely affect our operating results or financial condition.

During fiscal ~~2015~~2016 and in the first nine months of fiscal ~~2016,~~2017, we did not hold any stand-alone or separate derivative instruments. We incurred net foreign currency transaction losses of less than $0.1 million during both the nine month periods ended June 30, 2017 and ~~gains~~2016.

We incurred a foreign currency translation gain of $0.1 million and a loss of $0.2 million during the nine months ended June 30, ~~2016~~2017 and ~~2015, respectively.~~

~~We incurred foreign currency translation losses of $0.2 million and $3.2 million during the nine months ended June 30,~~ 2016, ~~and 2015,~~ respectively, a type of other comprehensive income (loss), which is a direct adjustment to stockholders’ equity. Our net investment in and advances to our foreign operations totaled ~~$20.7~~$52.3 million as of June 30, ~~2016.~~2017. A 10% change in the value of the foreign currencies relative to the U.S. dollar would cause approximately ~~$2.1~~$5.0 million of other comprehensive income (loss).

As of June 30, ~~2016,~~2017, sales commitments denominated in a currency other than the functional currency of our transacting operation totaled approximately ~~$11.5~~$15.5 million. Our lead-times to fulfill these commitments generally range between 13 and 26 weeks. A 10% change in the relevant exchange rates between the time the order was taken and the time of shipment cause our gross profit on such orders to be ~~$1.2~~$1.6 million greater or less than expected on the date the order was taken.

As of June 30, ~~2016,~~2017, purchase commitments denominated in a currency other than the functional currency of our transacting operation totaled ~~$1.0~~$6.2 million. A 10% change in the relevant exchange rates between the time the purchase order was placed and the time the order is received would not cause our cost of such items to be significantly greater or less than expected on the date the purchase order was placed.


Item 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including the Chief Executive Officer (“CEO”) and the ~~interim~~ Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, ~~2016,~~2017, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange ~~Commission's~~Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures in place were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in ~~Amtech's~~Amtech’s internal control over financial reporting during the nine months ended June 30, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

The Company and its subsidiaries are defendants from time to time in actions for matters arising out of their business operations. The Company does not believe that any matters or proceedings presently pending will have a material adverse effect on its consolidated financial position, results orof operations or liquidity. As previously disclosed in the Company’s filings with the SEC, shortly after the Company entered into the merger agreement with BTU, two separate putative stockholder class action complaints (together, the ~~"Stockholder Actions"~~“Stockholder Actions”) were filed in the Court of Chancery of the State of Delaware (the ~~"Delaware Court"~~“Delaware Court”). The first was filed on November 4, 2014 and the second on November 17, 2014, on behalf of BTU’s public stockholders, against BTU, members of the BTU board of directors, Amtech and the special purpose merger subsidiary. The Stockholder Actions were consolidated on December 4, 2014. The complaints generally alleged that, in connection with entering into the merger agreement, the BTU board of directors breached certain fiduciary duties owed to ~~BTU's~~BTU’s stockholders. The complaints sought various forms of declaratory and injunctive relief, as well as compensatory damages.

~~As described above, the~~The Released Claims are limited solely to claims related to any disclosures (or lack thereof) to BTU’s stockholders concerning the merger and any fiduciary claims concerning the decision to enter into the merger. While we are currently unaware of any other pending or threatened litigation related to additional claims arising from the Stockholder Actions, any future claims are uncertain, so additional harm could potentially result to the Company from this litigation, which may cause the Company to incur substantial costs and divert management’s attention from operational matters.


Item 1A.	Risk Factors

~~The most significant~~In addition to the risk factors ~~applicable to Amtech are described~~below and the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A (Risk Factors) of ~~Amtech’s~~our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, ~~2015. There~~2016.

If the United States were to withdraw from or materially modify certain international trade agreements, or change tax provisions related to the global manufacturing and sales of our products, our financial condition and results of operations could be adversely affected.

Aportion of our business activities are conducted in foreign countries, including China, Malaysia, Taiwan, and the Netherlands. Our business benefits from free trade agreements, and we also rely on various U.S. corporate tax provisions related to international commerce as we build, market and sell our products globally. The current presidential administration has made comments suggesting that it is not supportive of certain existing international trade agreements. At this time, it remains unclear what the current presidential administration will do with respect to these international trade agreements and U.S. tax provisions related to international commerce. Any action to withdraw from or materially modify international trade agreements, or change corporate tax policy related to international commerce, could adversely affect our financial condition and results of operations.

The number of turnkey project order opportunities is uncertain and such projects may increase our risks relating to current and future performance, project management, supplier fulfillment, unforeseen site conditions, and the regulatory environment, which could have a material adverse effect on our financial condition and results of operations.

A turnkey project is a complete solar cell manufacturing line, including equipment manufactured by third parties, and the design, delivery, installation, start-up, and qualification of the entire line. While we have successfully participated in turnkey projects in the past, historically, those and other orders have been nofor shipments of our equipment. The demand for turnkey projects from our customers can fluctuate significantly, and, therefore, the magnitude and frequency of previously announced turnkey orders may not be indicative of future turnkey orders or our financial performance. Additionally, turnkey orders may provide additional risks to us in executing the project, such as:

project management, including potentially lower-than-expected revenue due to project delays and cost over-runs;

organizational stress/burden that could impact order fulfillment of other orders;

project duration and customer acceptance;

use of and reliance on subcontractors;

supplier relationships and constraints;

pricing and fulfillment;

turnkey site conditions, such as readiness of customer facilities and access restrictions; and

local regulations and policies.

Such risks could make it difficult or impossible to complete a turnkey order or cause us to incur unforeseen costs and expenses to complete a turnkey order. Failure to complete a turnkey order or unforeseen costs and expenses incurred in completing a turnkey order could have a material ~~changes to the risk factors previously disclosed in~~adverse effect on our ~~Form 10-K for the fiscal year ended September 30, 2015.~~financial condition and results of operations.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.


Item 6.	Exhibits



31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended	*

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended	*

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

101.INS	XBRL Instance Document	*

101.SCH	XBRL Taxonomy Extension Schema Document	*

101.PRE	Taxonomy Presentation Linkbase Document	*

101.CAL	XBRL Taxonomy Calculation Linkbase Document	*

101.LAB	XBRL Taxonomy Label Linkbase Document	*

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	*

____________________


*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMTECH SYSTEMS, INC.



By	/s/ Robert T. Hass	Dated:	August ~~4, 2016~~9, 2017
	Robert T. Hass
	Vice President ~~& Interim~~– Finance and Chief Financial Officer
	(Principal Financial Officer, & Principal Accounting Officer, and Duly Authorized Officer)

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