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

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

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

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 our ability to develop or acquire and market profitable new products and on 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, 2017.

The consolidated results of operations for the three and six months ended DecemberMarch 31, 2017,2018, are not necessarily indicative of the results to be expected for the full fiscal year.

We recognize revenue when persuasive evidence of an arrangement exists; the product has been delivered and title has transferred, or services have been 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:

As of DecemberMarch 31, 2017, two customers2018, one customer individually represented 36% and 12%41% of accounts receivable. As of September 30, 2017, two customers individually represented 24% and 11% of accounts receivable.

We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 56%64% and 45% of total cash balances as of DecemberMarch 31, 20172018 and September 30, 2017, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). The remainder of our cash is maintained with financial institutions with reputable credit ratings in The Netherlands, France, China, the United Kingdom, Singapore and Malaysia.

Refer to Note 9 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “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. This new standard increases volatility in the statement of operations by requiring all excess tax benefits and deficiencies to be recognized as discrete income tax benefits or expenses in the statement of operations in the period in which they occur. We adopted the new standard as of October 1, 2017, and prospectively applied the provisions in this guidance requiring recognition of excess tax benefits and deficits in the statement of operations. Also, as a result of the adoption of the new standard, we made an accounting policy election to recognize forfeitures as they occur and no longer estimate expected forfeitures. The provisions in this guidance requiring the use of a modified retrospective transition method would have required us to record a cumulative-effect adjustment in retained earnings as of October 1, 2017. On the basis of immateriality, we recorded such cumulative-effect adjustment as stock-based compensation in the first quarter of 2018 rather than adjusting retained earnings. Lastly, we applied the provisions of this guidance relating to classification on the statement of cash flows retrospectively with no material effect on our cash flows.

There have been no other material changes or additions to the recently issued accounting standards asother than those previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K, as amended, for the year ended September 30, 2017 that affect or may affect our financial statements.

Basic earnings per share (“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.

The components of inventories are as follows, in thousands:

Stock-based compensation expense was $0.2 million and $0.3 million in both the three months ended DecemberMarch 31, 2018 and 2017, respectively, and 2016,was $0.5 million and is$0.6 million in the six months ended March 31, 2018 and 2017, respectively, and was included in selling, general and administrative expenses.

The following table summarizes our stock option activity during the threesix months ended DecemberMarch 31, 2017:2018:

In December 2008, 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 our Series A Participating Preferred Stock (“Series A Preferred”) currently attached to each of our outstanding shares of common stock, par value $0.01 per share. As amended, each Right entitles the registered holder to purchase from 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 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 our common stock.  The Final Expiration Date (as defined in the Restated Rights Agreement) is December 14, 2018.

In October 2015, 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 in the Restated Rights Agreement to include any person that our Board of Directors (the “Board”), in its sole and absolute discretion, exempts from becoming an Acquiring Person (as defined in the Restated Rights Agreement) under the Second Restated Rights Agreement. A 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, in October 2015, we entered into a Letter Agreement (the “Agreement”) by and between Amtech and certain shareholders of Amtech who jointly file (the “Joint Filers”) under Section 13 of the Securities Exchange Act of 1934, as amended. One of the Joint Filers 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 Amtech that would, in the aggregate, bring the Joint Filers’ collective ownership to no more than 19.9% of our issued and outstanding common stock at any time. In the event the Joint Filers’ collective ownership at any time exceeds 19.9% of our issued and outstanding shares of common stock, we are entitled to specific performance and all other remedies entitled to us at law or equity, among others. Our Board approved the Agreement and transactions contemplated thereunder, and has the sole authority to terminate the Agreement at any time.

Solar – We are a leading supplier of thermal processing systems, including related automation, parts and services, to the solar/photovoltaic industry and also offer PECVD (plasma-enhanced chemical vapor deposition) equipment to the global solar market.

Semiconductor – We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.

Polishing – 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, in thousands:

* The financial statement 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.

Non-segment related assets include cash, property and other assets. We review our long-lived assets, including goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets, intangible assets and goodwill can be found in Note 1 of our Annual Report on Form 10-K, as amended, for the year ended September 30, 2017.

 

Our net revenues were to customers in the following geographic regions:

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 Item 1 of this 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, 2017.

 

Certain information contained or incorporated by reference in this Quarterly Report is forward-looking in nature. All statements included or incorporated by reference in this Quarterly Report or made by management of Amtech Systems, Inc. and its subsidiaries (the “Company” or “Amtech”), 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 forward-looking statements in this Quarterly Report relate only to events or information as of the date on which the statements are made in this Quarterly Report. Examples of forward-looking statements include statements regarding 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. 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. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; our ability to successfully complete the turnkey orders and the associated costs and risks related thereto; difficulties in successfully executing our growth initiatives; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the United States Securities and Exchange Commission. 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 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 Annual Report on Form 10-K, as amended, that we filed with the Securities and Exchange Commission for the year-ended September 30, 2017 listed various important factors that could affect 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 “Item 1A. Risk Factors” in the Annual Report on Form 10-K, as amended, and investors should refer to 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.

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:

 

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”), atomic layer deposition (“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 and diffusion for use by leading semiconductor manufacturers, and in electronics assembly for automotive and other industries. In our Polishing 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. 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. Our high throughput equipment platforms, technologies for higher cell efficiency, greater knowledge of the complete cell manufacturing process and advanced automation have contributed significantly to our success in securing the large orders for the first two phases of a multi-phase turnkey project announced in January and April of 2017 from a new solar cell manufacturer in China. For equipment orders that are not part of turnkey projects, we compete with Chinese equipment manufacturers that offer lower prices, coupled with liberal payment terms.terms and have a more substantial local presence. We are finding it more difficult to participate in the capacity expansions of those Chinese companies that already have significant experience with all facets of producing solar cells and at least some prior experience working with the local equipment vendors. While we will continue to focus on developing advanced products and technologies, we plan to seek further cost reductions to address the competition from Chinese equipment vendors. We are investigating various aspects of outsourcing some of our key solar products to China in order to lower the cost of our products and expand our presence in that market.

The equipment for the large follow-on turnkey order announced in April 2017 (“Phase II”) shipped in the first quarter of fiscal 2018.2018 and we continue to recognize revenue from the associated installation, integration and start-up services for Phase I. Our quarterly and annual operating results have been and will continue to be impacted by the timing of large system orders. Further, the solar and semiconductor equipment industries are highly cyclical and the conditions of the industries we operate in are volatile. Therefore, our order flow fluctuates quarter to quarter. For additional information regarding the risks related to our business and industry, please refer to Item 1A. Risk Factors in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2017.

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

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, which is generally ratable 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. Our net revenue by operating segment was as follows (dollars in thousands):

NetTotal net revenue for the quarters ended DecemberMarch 31, 2018 and 2017 and 2016 was $73.6$32.8 million and $29.1$32.9 million, respectively, an increasea decrease of $44.5approximately $0.2 million or 153%less than 1%. Revenue from the Solar segment decreased 24% compared to the prior year quarter due to lower shipments of our solar equipment. We are operating in a challenging competitive environment due to lower prices and liberal payment terms that are offered from Chinese equipment manufacturers. These competitive pricing pressures are making it increasingly difficult for us to participate in our customers’ solar expansions. Revenue from our Semiconductor segment increased 331%23% compared to the prior year quarter due primarily to shipments relating to Phase II of the turnkey order, previously announced in April 2017. Revenue from the Semiconductor segment increased 33% compared to the prior year quarter due primarily tofavorable market conditions and strong customer demand for our thermal processing systems and diffusion furnaces.systems. Revenue from the Polishing segment increased 75%22% compared to the prior year quarter due primarily to strong customer demand leading to increased sales of polishing templates and equipment.

Our backlog as of DecemberMarch 31, 2018 and 2017 and 2016 was $65.9$63.1 million and $51.5$87.4 million, respectively, an increasea decrease of $14.4$24.3 million or 28%. Our backlog as of DecemberMarch 31, 20172018 includes approximately $39.3$35.0 million of orders and deferred revenue from our Solar segment customers compared to $35.8$66.9 million at DecemberMarch 31, 2016.2017, with the decrease primarily due to the shipment of the Phase I and Phase II equipment. New orders booked in the quarter ended DecemberMarch 31, 20172018 were $37.3$28.8 million ($7.37.0 million Solar)Solar segment) compared to $34.7$68.2 million ($15.946.9 million Solar)Solar segment) of customer orders in the quarter ended DecemberMarch 31, 2016.2017. 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 DecemberMarch 31, 2017,2018, two customers individually accounted for 19%14% and 10%12% of our backlog. 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 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. Our gross profit and gross margin by operating segment were as follows (dollars in thousands):

Gross profit for the three months ended DecemberMarch 31, 2018 and 2017 and 2016 was $20.3$11.7 million (28%(36% of net revenue) and $8.4 million (29%(25% of net revenue), respectively, an increase of $11.9$3.3 million. Gross margin on products from our Solar segment increased compared to the three months ended DecemberMarch 31, 2016,2017, due primarily to higher-margin product mix and recognition of previously deferred revenue. Gross profit on products from our Semiconductor segment increased compared to the three months ended March 31, 2017, due primarily to increased sales volume in the second quarter of 2018. Gross profit and gross margin on products from our Polishing segment increased from the prior year period, primarily due to increased sales volume and product mix. For the three months ended March 31, 2018, we recognized previously deferred gross profit of $0.8 million. For the three months ended March 31, 2017, we deferred gross profit of $1.2 million.

Gross profit for the six months ended March 31, 2018 and 2017 was $32.1 million (30% of net revenue) and $16.8 million (27% of net revenue), respectively, an increase of $15.2 million. Gross margin on products from our Solar segment increased compared to the six months ended March 31, 2017, due primarily to fixed costs being spread over higher sales volumes of higher-margin products compared toduring the first quarterhalf of fiscal 2017.2018. Gross profit on products from our Semiconductor segment increased due to increased sales volume in the first quarterhalf of 2018, with gross margin decreasing due to product mix. Gross profit and gross margin on products from our Polishing segment increased from the prior year period, primarily due to higher sales of new products with higher margins. For the threesix months ended DecemberMarch 31, 2018, we deferred gross profit of $1.3 million. For the six months ended March 31, 2017, we deferred gross profit of $2.1 million. For the three months ended December 31, 2016, we recognized previously-deferred gross profit of $0.3$0.9 million.

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

SG&A expenses for the three months ended DecemberMarch 31, 2018 and 2017 and 2016 were $10.6$9.5 million and $7.0$8.3 million, respectively. SG&A increased compared to the prior year quarter due primarily to $1.8increased selling, freight and employee-related expenses.

Research, development and engineering (“RD&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.

 

RD&E expense, net of grants earned, for the three months ended DecemberMarch 31, 2018 and 2017 and 2016 were $2.0$2.2 million and $1.6$1.5 million, respectively, an increase of $0.4$0.6 million, due primarily to increased R&D spending in our Solar segment. RD&E expense, net of

grants earned, for the six months ended March 31, 2018 and 2017 were $4.2 million and $3.2 million, respectively, an increase of $1.0 million, due primarily to increased R&D spending in our Solar segment.

For the three and six months ended DecemberMarch 31, 2018 we recorded an income tax benefit of $2.8 million and $1.5 million, respectively. For the three and six months ended March 31, 2017 we recorded income tax expense of $1.2$0.2 million resultingand $0.3 million, respectively. During the quarter ended March 31, 2018, we resolved an uncertain tax position and reversed the associated accrued tax, penalties and interest, which total $3.1 million. This reversal resulted in an effectiveincome tax rate of 16.1%. Forbenefit for the three and six months ended DecemberMarch 31, 2016 we recorded2018, which was partially offset by income tax expense of $0.1 million, a 37.5% effective tax rate.on our consolidated pre-tax income. 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.

Generally accepted accounting principles require that a valuation allowance be established 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 needs 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 those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Therefore, in fiscal 2017, cumulative losses weighed heavily in

At DecemberMarch 31, 20172018 and September 30, 2017, cash and cash equivalents were $52.7$50.5 million and $51.1 million, respectively, an increasea decrease of $1.6$0.6 million. Restricted cash decreased by $14.7$15.0 million to $9.9$9.7 million at DecemberMarch 31, 20172018 from $24.6 million at September 30, 2017. Our working capital was $79.7$79.8 million as of DecemberMarch 31, 20172018 and $71.1 million as of September 30, 2017.

The increasedecrease in cash during the first threesix months of fiscal 2018 of $1.6$0.6 million was primarily due to cash used in operations partially offset by proceeds from the exercise of stock options. 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 decreased primarily due to the shipments of Phase II of the Solar turnkey order and achievement of the first of three acceptance tests for Phase I, which releasedresulted in the release of restrictions on the downpayment.downpayments. Our ratio of current assets to current liabilities was 2.3:2.4:1 as of DecemberMarch 31, 2017,2018, and 1.8:1 as of September 30, 2017.

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 includes common stock sold in private transactions and public offerings, long-term debt and customer deposits. There can be no assurance that we can raise such additional capital resources on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.

 

Cash provided byused in our operating activities was $0.3$1.8 million for the threesix months ended DecemberMarch 31, 2018, compared to cash provided by operations of $11.6 million for the six months ended March 31, 2017, compared to $3.5 million used in operations for the three months ended December 31, 2016, an improvementa decrease of $3.8$13.4 million. During the threesix months ended DecemberMarch 31, 2017,2018, cash was primarily generated through net income adjusted for non-cash items of $7.4$10.9 million, which was offset by other increases and decreasesan increase in operating assets,working capital, primarily related to the turnkey project. A significant portion of the revenue and related cash payments related to the turnkey project areremain deferred and restricted, respectively, until completion and acceptance of the integration of the equipment and transfer of the technology. During the threesix months ended DecemberMarch 31, 2016,2017, cash was reducedprovided primarily by increasesan increase in accounts receivable and restricted cash,customer deposits, partially offset by decreasesadvances made to vendors and an increase in inventory. restricted cash. 

For the threesix months ended DecemberMarch 31, 2017, $1.12018, $1.2 million of cash provided by financing activities was comprised of $1.2$1.3 million of proceeds received from the exercise of stock options, partially offset by payments on long-term debt of $0.1$0.2 million. For the threesix months ended DecemberMarch 31, 2016,2017, $0.1 million of cash used in financing activities was primarily related tocomprised of payments on long-term debt of $0.2$0.3 million net of borrowings of less than $0.1 million.

As of DecemberMarch 31, 2017,2018, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the Securities and Exchange Commission that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Unrecorded purchase obligations were $26.4$19.3 million as of DecemberMarch 31, 2017,2018, compared to $34.4 million as of September 30, 2017, a decrease of $8.0$15.1 million due primarily to reduced vendor commitments as we completecompleted shipment of the first two phasesequipment for Phase II of the large solar turnkey project. Approximately $5.2$3.0 million of the December 31, 2017 and $11.8 million of the March 31, 2018 and September 30, 2017 contractual obligations, respectively, were prepaid as of those dates in the form of advances to vendors.

Refer to Amtech’s Annual Report on Form 10-K, as amended, for the year ended September 30, 2017 for additional information on our other contractual obligations. 

“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, 2017. 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, 2017 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 threesix months ended DecemberMarch 31, 2017.2018.

 

 

Our management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of DecemberMarch 31, 2017,2018, 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 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.

 

 

There were no changes in Amtech’s internal control over financial reporting during the threesix months ended DecemberMarch 31, 20172018 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2017. There have been no material changes to the risk factors previously disclosed in our Form 10-K, as amended, for the fiscal year ended September 30, 2017, other than as described in the Overview above, and the supplemental risk factorfactors set forth below:

The Tax Cuts and Jobs Act (the “Act”), enacted on December 22, 2017, makes significant changes to U.S. tax laws and includes numerous provisions that affect businesses, including ours. For instance, as a result of lower corporate tax rates, the Act tends to reduce both the value of deferred tax assets and the amount of deferred tax liabilities. It also limits interest rate deductions and the amount of net operating losses that can be used each year and alters the expensing of capital expenditures. Other provisions have international tax consequences for businesses like ours that operate internationally. The Act is unclear in certain respects and will require interpretations and implementing regulations by the Internal Revenue Service, as well as state tax authorities, and the Act could be subject to amendments and technical corrections, any of which could lessen or increase the adverse (and positive) impacts of the Act. The accounting treatment of these tax law changes is complex, and some of the changes may affect both current and future periods. Others will primarily affect future periods. As discussed elsewhere in this Quarterly Report on Form 10-Q, we believe our analysis and computations of the tax effects of the Act on us is partially, but not entirely, complete. For instance, we are still in the process of analyzing the earnings and profits and tax pools of our foreign subsidiaries to estimate the effects of the one-time repatriation transaction tax on certain net accumulated earnings and profits of our foreign subsidiaries. Consistent with guidance from the Securities and Exchange Commission, our financial statements reflect our estimates of the tax effects of the Act on us as of DecemberMarch 31, 2017,2018, to the extent we have been able to make such preliminary determinations. Although we believe these estimates are reasonable, they are provisional and may be adjusted prior to the end of fiscal 2018. We intend to complete accounting for the Act by the end of fiscal 2018. Any adjustments to our provisional estimates or the effects of currently unknown impacts of the Act on us could affect our current or future financial statements, or both.

SIGNATURES