(in thousands, except share data)

	March 31, 2021			September 30, 2020
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	40,399		$	45,070
Accounts receivable (less allowance for doubtful accounts of $194 and $159 at March 31, 2021, and September 30, 2020, respectively)		16,980			11,243
Inventories		16,389			17,277
Income taxes receivable		1,057			1,362
Other current assets		1,735			1,617
Total current assets		76,560			76,569
Property, Plant and Equipment - Net		12,025			11,995
Right-of-Use Assets - Net		6,016			5,124
Intangible Assets - Net		912			609
Goodwill - Net		11,150			6,633
Deferred Income Taxes - Net		566			566
Other Assets		707			602
Total Assets	$	107,936		$	102,098

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	5,878		$	2,676
Accrued compensation and related taxes		2,157			2,066
Accrued warranty expense		414			380
Other accrued liabilities		1,421			751
Current maturities of long-term debt		388			380
Contract liabilities		295			1,224
Total current liabilities		10,553			7,477
Long-Term Debt		4,601			4,798
Long-Term Lease Liability		5,803			5,064
Income Taxes Payable		3,471			3,240
Other Long-Term Liabilities		67			—
Total Liabilities		24,495			20,579
Commitments and Contingencies
Shareholders’ Equity
Preferred stock; 100,000,000 shares authorized; NaN issued		—			—
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,221,865 and 14,063,172 at March 31, 2021 and September 30, 2020, respectively		142			141
Additional paid-in capital		125,513			124,435
Accumulated other comprehensive loss		(276	)		(646	)
Retained deficit		(41,938	)		(42,411	)
Total shareholders’ equity		83,441			81,519
Total Liabilities and Shareholders’ Equity	$	107,936		$	102,098

December 31,
2017 September 30,
2017
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 52,696
$ 51,121
Restricted cash 9,913
24,640
Accounts receivable
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively) 24,365
22,519
Unbilled and other 21,620
14,275
Inventories 22,762
30,210
Vendor deposits 5,180
11,806
Other 2,310
2,542
Total current assets 138,846
157,113
Property, Plant and Equipment - Net 15,637
15,792
Intangible Assets - Net 3,378
3,495
Goodwill - Net 11,484
11,405
Investments 2,588
2,615
Deferred Income Taxes - Long-Term 200
200
Other Assets - Long-Term 980
1,003
Total Assets $ 173,113
$ 191,623
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable $ 20,483
$ 21,555
Accrued compensation and related taxes 7,422
7,592
Accrued warranty expense 1,401
1,254
Other accrued liabilities 2,918
2,056
Customer deposits 19,328
48,784
Current maturities of long-term debt 365
361
Deferred profit 5,632
4,081
Income taxes payable 1,608
286
Total current liabilities 59,157
85,969
Long-Term Debt 8,225
8,134
Income Taxes Payable - Long-Term 6,802
7,037
Total Liabilities 74,184
101,140
Commitments and Contingencies

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: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively 149
147
Additional paid-in capital 127,015
125,564
Accumulated other comprehensive loss (7,988 ) (8,529 )
Retained deficit (20,247 ) (26,699 )
Total stockholders’ equity 98,929
90,483
Total Liabilities and Stockholders’ Equity $ 173,113
$ 191,623

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 March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
Revenues, net of returns and allowances	$	19,790		$	14,460		$	37,765		$	35,152
Cost of sales		12,062			9,102			22,525			21,620
Gross profit		7,728			5,358			15,240			13,532

Selling, general and administrative		5,688			5,415			10,901			11,330
Research, development and engineering		1,869			915			3,114			1,537
Operating income (loss)		171			(972	)		1,225			665
Loss on sale of subsidiary		—			—			—			(2,793	)
Interest income (expense) and other, net		73			595			(182	)		525
Income (loss) from continuing operations before income taxes		244			(377	)		1,043			(1,603	)
Income tax provision		490			166			570			207
(Loss) income from continuing operations, net of tax		(246	)		(543	)		473			(1,810	)
Loss from discontinued operations, net of tax		—			(11,151	)		—			(11,816	)
Net (loss) income	$	(246	)	$	(11,694	)	$	473		$	(13,626	)

(Loss) Income Per Basic Share:
Basic (loss) income per share from continuing operations	$	(0.02	)	$	(0.04	)	$	0.03		$	(0.13	)
Basic loss per share from discontinued operations	$	—		$	(0.79	)	$	—		$	(0.83	)
Net (loss) income per basic share	$	(0.02	)	$	(0.83	)	$	0.03		$	(0.96	)

(Loss) Income Per Diluted Share:
Diluted (loss) income per share from continuing operations	$	(0.02	)	$	(0.04	)	$	0.03		$	(0.13	)
Diluted loss per share from discontinued operations	$	—		$	(0.79	)	$	—		$	(0.83	)
Net (loss) income per diluted share	$	(0.02	)	$	(0.83	)	$	0.03		$	(0.96	)

Weighted average shares outstanding - basic		14,151			14,150			14,121			14,193
Weighted average shares outstanding - diluted		14,151			14,150			14,217			14,193

Three Months Ended December 31,
2017 2016
Revenues, net of returns and allowances $ 73,611
$ 29,135

Cost of sales 53,274
20,692

Gross profit 20,337
8,443

Selling, general and administrative 10,580
6,996

Research, development and engineering 1,991
1,627

Operating income (loss) 7,766
(180 )
Loss from equity method investment (26 ) (143 )
Interest expense and other income, net (48 ) 81

Income (loss) before income taxes 7,692
(242 )
Income tax provision 1,240
90

Net income (loss) 6,452
(332 )

Add: net loss attributable to noncontrolling interest —
279

Net income (loss) attributable to Amtech Systems, Inc. $ 6,452
$ (53 )

Income (Loss) Per Share:

Basic income (loss) per share attributable to Amtech shareholders $ 0.44
$(0.00)
Weighted average shares outstanding 14,781
13,179

Diluted income (loss) per share attributable to Amtech shareholders $ 0.42
$(0.00)
Weighted average shares outstanding 15,298
13,179

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 March 31,						Six Months Ended March 31,
	2021			2020			2021		2020
Net (loss) income	$	(246	)	$	(11,694	)	$	473	$	(13,626	)
Foreign currency translation adjustment		(225	)		(459	)		370		622
Reclassification adjustment for net foreign currency translation losses included in net loss		—			7,205			—		8,797
Comprehensive (loss) income	$	(471	)	$	(4,948	)	$	843	$	(4,207	)

Three Months Ended December 31,
2017 2016
Net income (loss) $ 6,452
$ (332 )
Foreign currency translation adjustment 541
(941 )
Comprehensive income (loss) 6,993
(1,273 )

Comprehensive loss attributable to noncontrolling interest —
375

Comprehensive income (loss) attributable to Amtech Systems, Inc. $ 6,993
$ (898 )

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Cash Flows~~

Shareholders’ Equity

(Unaudited)

(in thousands)

	Common Stock						Treasury Stock									Accumulated Other			Retained Earnings			Total
	Shares			Par Value			Shares			Par Value			Additional Paid- In Capital			Comprehensive Income (Loss)			(Accumulated Deficit)			Shareholders' Equity
Balance at September 30, 2019		14,269		$	143			—		$	—		$	125,098		$	(11,233	)	$	(26,556	)	$	87,452
Net loss		—			—			—			—			—			—			(1,932	)		(1,932	)
Translation adjustment		—			—			—			—			—			2,673			—			2,673
Stock compensation expense		—			—			—			—			68			—			—			68
Stock options exercised		117			1			—			—			700			—			—			701
Balance at December 31, 2019		14,386			144			—			—			125,866			(8,560	)		(28,488	)		88,962
Net loss		—			—			—			—			—			—			(11,694	)		(11,694	)
Translation adjustment		—			—			—			—			—			6,746			—			6,746
Stock compensation expense		—			—			—			—			65			—			—			65
Stock repurchases		—			—			(366	)		(2,000	)		—			—			—			(2,000	)
Retirement of stock repurchases		(366	)		(4	)		366			2,000			(1,864	)		—			(132	)		—
Stock options exercised		21			—			—			—			78			—			—			78
Balance at March 31, 2020		14,041		$	140			—		$	—		$	124,145		$	(1,814	)	$	(40,314	)	$	82,157

Balance at September 30, 2020		14,063		$	141			—		$	—		$	124,435		$	(646	)	$	(42,411	)	$	81,519
Net income		—			—			—			—			—			—			719			719
Translation adjustment		—			—			—			—			—			595			—			595
Stock compensation expense		—			—			—			—			65			—			—			65
Stock options exercised		28			—			—			—			135			—			—			135
Balance at December 31, 2020		14,091			141			—			—			124,635			(51	)		(41,692	)		83,033
Net loss		—			—			—			—			—			—			(246	)		(246	)
Translation adjustment		—			—			—			—			—			(225	)		—			(225	)
Stock compensation expense		—			—			—			—			84			—			—			84
Stock options exercised		131			1			—			—			794			—			—			795
Balance at March 31, 2021		14,222		$	142			—		$	—		$	125,513		$	(276	)	$	(41,938	)	$	83,441

Three Months Ended December 31,
2017 2016
Operating Activities
Net income (loss) $ 6,452
$ (332 )
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:

Depreciation and amortization 471
654
Write-down of inventory 41
33
Capitalized interest 143
190
Deferred income taxes (7 ) 31
Non-cash share based compensation expense 253
319
Loss from equity method investment 26
143
Provision for (reversal of) allowance for doubtful accounts, net 48
(1,178 )
Changes in operating assets and liabilities:
Restricted cash 14,885
(2,425 )
Accounts receivable (8,869 ) (3,600 )
Inventories 7,558
1,621
Accrued income taxes 1,087
239
Vendor deposits and other assets 6,974
725
Accounts payable (1,255 ) 78
Customer deposits and accrued liabilities (29,023 ) 584
Deferred profit 1,479
(619 )
Net cash provided by (used in) operating activities 263
(3,537 )
Investing Activities
Purchases of property, plant and equipment (93 ) (86 )
Proceeds from sale of property, plant and equipment —
1
Net cash used in investing activities (93 ) (85 )
Financing Activities
Proceeds from the exercise of stock options 1,199
1
Payments on long-term debt (89 ) (160 )
Borrowings on long-term debt —
21
Net cash provided by (used in) financing activities 1,110
(138 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents 295
(257 )
Net Increase (Decrease) in Cash and Cash Equivalents 1,575
(4,017 )
Cash and Cash Equivalents, Beginning of Period 51,121
27,655
Cash and Cash Equivalents, End of Period $ 52,696
$ 23,638

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)

	Six Months Ended March 31,
	2021			2020
Operating Activities
Net income (loss)	$	473		$	(13,626	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		644			694
Write-down of inventory		230			330
Deferred income taxes		—			784
Non-cash share-based compensation expense		149			133
Loss on sales of subsidiaries		—			13,709
Provision for (reversal of) allowance for doubtful accounts, net		28			(32	)
Other, net		8			4
Changes in operating assets and liabilities:
Accounts receivable		(5,485	)		1,374
Inventories		859			(527	)
Other assets		(1,132	)		3,667
Accounts payable		3,122			(1,849	)
Accrued income taxes		536			(2,094	)
Accrued and other liabilities		1,232			(228	)
Contract liabilities		(929	)		(1,063	)
Net cash (used in) provided by operating activities		(265	)		1,276
Investing Activities
Purchases of property, plant and equipment		(433	)		(345	)
Acquisition, net of cash and cash equivalents acquired		(5,082	)		—
Net cash disposed of in sales of subsidiaries		—			(9,940	)
Net cash used in investing activities		(5,515	)		(10,285	)
Financing Activities
Proceeds from the exercise of stock options		930			779
Repurchase of common stock		—			(2,000	)
Payments on long-term debt		(189	)		(194	)
Net cash provided by (used in) financing activities		741			(1,415	)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash		368			558
Net Decrease in Cash, Cash Equivalents and Restricted Cash		(4,671	)		(9,866	)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period*		45,070			59,134
Cash, Cash Equivalents and Restricted Cash, End of Period	$	40,399		$	49,268

*	Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020.

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 SIX MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2017~~2021 AND ~~2016~~

2020

(UNAUDITED)

1. Basis of Presentation and Significant Accounting Policies

Nature of Operations and Basis of Presentation – Amtech Systems, Inc. (the ~~“Company”, “Amtech”, “we”,~~“Company,” “Amtech,” “we,” “our” or “us”) is a leading, global manufacturer of capital equipment, including thermal processing ~~silicon~~and wafer ~~handling automation,~~polishing, and related consumables used in fabricating ~~solar cells, LED~~semiconductor devices, such as silicon carbide (SiC) and ~~semiconductor devices.~~silicon power devices, analog and discrete devices, electronic assemblies and light-emitting diodes (LEDs). We sell these products to ~~solar cell~~semiconductor device and ~~semiconductor~~module manufacturers worldwide, particularly in Asia, ~~the United States~~North America and Europe.

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.

In the second quarter of fiscal 2019, we began the process to divest our solar business. As such, we have reported the results of the Solar segment as discontinued operations in our Condensed Consolidated Statements of Operations. These divestitures were completed in the second quarter of fiscal 2020. For additional information on the divestitures, see Note 12. For additional information on our segments, see Note 10.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. 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. The condensed consolidated balance sheet at September 30, 2020, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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.~~

2020.

Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2021 and 2020 relate to the fiscal year ending September 30, 2021 and the fiscal year ended September 30, 2020, respectively.

The consolidated results of operations for the three and six months ended ~~December~~March 31, ~~2017,~~2021, 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 our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest. We report non-controlling interests in consolidated entities as a component of equity separate from our equity. The equity method of accounting is used for investments over which we have asubsidiaries. All significant ~~influence but not a controlling financial interest. All material~~ intercompany ~~accounts~~balances and transactions have been eliminated in consolidation. Effective July 1, 2017, we purchased the non-controlling interest in SoLayTec B.V. (“SoLayTec”), pursuant to which SoLayTec became a wholly-owned subsidiary of Amtech. Beginning July 1, 2017, the non-controlling interest will no longer be reported. Prior amounts have not been restated.

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~~

Reclassifications – ~~We review product~~Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. These reclassifications had no effect on the previously reported consolidated financial statements for any period.

Divestitures – Significant accounting policies associated with a decision to dispose of a business are discussed below:

Discontinued Operations– A business is classified as discontinued operations if the disposal represents a strategic shift that will have a major effect on operations or financial results and ~~service sales contracts with multiple deliverables~~meets the criteria to ~~determine if~~be classified as held for sale or is disposed of by sale or otherwise. Significant judgments are involved in determining whether a business meets the criteria for discontinued operations reporting and the period in which these criteria are met. If a business is reported as a discontinued operation, the results of operations through the date of sale, including any gain or loss recognized on the disposition, are presented on a separate ~~units~~line of ~~accounting are present. Where separate units~~the Condensed Consolidated Statements of ~~accounting exist, revenue~~Operations. Interest on debt directly attributable to the discontinued operation is allocated to ~~delivered items~~discontinued operations.

Assets Held for Sale– An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale and the ~~lower~~sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control. The assets and related liabilities are aggregated and reported on separate lines 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.~~

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:

For our equipment business, transactions where legal title passes to the customer upon shipment, we recognize revenue 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. Our 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. Our recognition of revenue 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 the installation and acceptance of more than two similarly configured items of equipment 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 we defer only those costs directly related to installation, or another unit of accounting not yet delivered, and the portion of the contract price is often considerably greater than the relative selling price of those items, 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. We have, on occasion, 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. Service contract revenue is recognized as services are performed over the term of the contract, which generally results in ratable recognition over the period of the contract.

~~Deferred Profit~~ – Revenue deferred pursuant to our revenue 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, in thousands:

December 31,
2017 September 30,
2017
Deferred revenues $ 8,370
$ 6,822
Deferred costs 2,738
2,741
Deferred profit $ 5,632
$ 4,081

Condensed Consolidated Balance Sheets.

Shipping Expense – Shipping ~~expenses of $1.2~~and handling fees associated with inbound and outbound freight are expensed as incurred and included in selling, general and administrative expenses. Shipping expense was $0.2 million and ~~$0.4~~$0.1 million for the three months ended ~~December~~March 31, ~~2017~~2021 and ~~2016,~~2020, respectively, ~~are included~~and $0.3 million in ~~selling, general~~each of the six months ended March 31, 2021 and ~~administrative expenses.~~

2020, respectively.

Research, Development and Engineering Expense – The table below shows gross research and development expenses and grants earned, in thousands:

	Three Months Ended March 31,					Six Months Ended March 31,
	2021		2020			2021		2020
Research, development and engineering	$	1,869	$	1,017		$	3,114	$	1,780
Grants earned		—		(102	)		—		(243	)
Net research, development and engineering	$	1,869	$	915		$	3,114	$	1,537

Three Months Ended
December 31,
2017 December 31,
2016
Research, development and engineering $ 2,290
$ 1,830

Grants earned (299 ) (203 )
Net research, development and engineering $ 1,991
$ 1,627

~~Foreign Currency Transactions and Translation~~ – We use the U.S. dollar as our reporting currency. Our operations in Europe, China and other countries are primarily conducted in their functional currencies, the Euro, Renminbi, or the local country currency, respectively. Accordingly, assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the balance sheet dates. Income and expense items are translated at the average exchange rate for each month within the year. The resulting translation adjustments are recorded directly in accumulated other comprehensive income (loss), net of tax - foreign currency translation adjustments as a separate component of stockholders’ equity. Net foreign currency transaction gains/losses, including transaction gains/losses on intercompany balances that are not of a long-term investment nature and non-functional currency cash balances, are reported as a separate component of non-operating (income) expense in our consolidated statements of operations.

Concentrations of Credit Risk – Our customers consist of ~~solar cell and~~ semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. Credit risk is managed by performing ongoing credit evaluations of the 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.

As of ~~December~~March 31, ~~2017,~~2021, two Semiconductor segment customers individually represented ~~36%~~20% and 12% of accounts receivable. As of September 30, ~~2017,~~2020, two Semiconductor customers individually represented ~~24%~~11% and ~~11%~~10% of accounts receivable.

We maintain our cash and cash equivalents ~~and restricted cash~~ in multiple financial institutions. Balances in the United States, which account for approximately ~~56%~~86% and ~~45%~~89% of total cash balances as of ~~December~~March 31, ~~2017~~2021 and September 30, ~~2017,~~2020, 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.

We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. We have not experienced any losses on such accounts.

Refer to Note 911 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.

Impact of Recently Issued Accounting Pronouncements

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~~2020 that affect or may affect our consolidated financial statements.

2. Acquisition

On March 3, 2021, we acquired 100% of the issued and outstanding shares of capital stock of Intersurface Dynamics, Inc. (“IDI”), a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics, for a cash purchase price of $5,250,000. The purchase price allocation is not yet finalized; however, a substantial portion of the total purchase price was allocated to goodwill. IDI’s results of operations are included in our Material and Substrate segment from the date of acquisition.

3. Contracts with Customers

The components of contract liabilities are as follows, in thousands:

March 31,

2021

September 30,

2020

Customer deposits

295

1,224

Contract liabilities

295

1,224

4. Leases

We lease office space, buildings, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet. Instead, we recognize the lease expense as incurred over the lease term.

Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Significant Accounting Policy

We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in right-of-use (“ROU”) assets in our Condensed Consolidated Balance Sheets. Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our Condensed Consolidated Balance Sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The following table provides information about the financial statement classification of our lease balances reported within the Condensed Consolidated Balance Sheets as of March 31, 2021 and September 30, 2020, in thousands:

	March 31, 2021		September 30, 2020
Assets
Operating lease assets	$	6,016	$	5,124
Finance lease assets		20		26
Total lease assets	$	6,036	$	5,150
Liabilities
Current
Operating lease liabilities	$	295	$	113
Finance lease liabilities		9		11
Non-current
Operating lease liabilities		5,791		5,048
Finance lease liabilities		12		16
Total lease liabilities	$	6,107	$	5,188

The following table provides information about the financial statement classification of our lease expenses reported in the Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2021 and 2020, in thousands:

		Three Months Ended March 31,				Six Months Ended March 31,
Lease cost	Classification	2021		2020		2021		2020
Operating lease cost	Cost of sales	$	13	$	24	$	84	$	87
Operating lease cost	Selling, general and administrative expenses		96		15		144		28
Finance lease cost	Cost of sales		2		6		4		11
Finance lease cost	Selling, general and administrative expenses		1		2		3		4
Short-term lease cost	Cost of sales		49		—		76		—
Total lease cost		$	161	$	47	$	311	$	130

Future minimum lease payments under non-cancelable leases, including leases that are executed but not yet effective, as of March 31, 2021 are as follows, in thousands:

	Operating leases		Finance Leases		Total
Remainder of 2021	$	402	$	6	$	408
2022		1,055		8		1,063
2023		1,048		6		1,054
2024		1,028		2		1,030
2025		1,015		—		1,015
Thereafter		9,695		—		9,695
Total lease payments		14,243		22		14,265
Less: Interest		5,432		1		5,433
Present value of lease liabilities		8,811		21	$	8,832

Operating lease payments include $6.4 million related to optional lease extension periods for multiple leases that are not yet exercisable but are reasonably certain of being exercised.

The following table provides information about the remaining lease terms and discount rates applied as of March 31, 2021:

	March 31, 2021
Weighted average remaining lease term
Operating leases	17.35 years
Finance leases	2.50 years
Weighted average discount rate
Operating leases		4.17	%
Finance leases		4.17	%

5. Earnings Per Share

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.

For the three and six months ended ~~December~~March 31, ~~2017~~,2021, options for ~~120,000~~98,000 and 349,000 weighted average shares, ~~are~~respectively, were excluded from the diluted EPS calculations because they ~~are~~were anti-dilutive. For the three and six months ended ~~December~~March 31, ~~2016~~,2020, options for ~~1,886,000~~641,000 and 690,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could bebecome dilutive in the future.

~~The following table outlines~~

A reconciliation of the components of the basic and diluted EPS incalculations follows (in thousands, except per share ~~amounts:~~amounts):

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021		2020
Numerator:
Net (loss) income from continuing operations	$	(246	)	$	(543	)	$	473	$	(1,810	)
Net loss from discontinued operations	$	—		$	(11,151	)	$	—	$	(11,816	)
Net (loss) income	$	(246	)	$	(11,694	)	$	473	$	(13,626	)

Denominator:
Weighted-average shares used to compute basic EPS		14,151			14,150			14,121		14,193
Common stock equivalents (1)		—			—			96		—
Weighted-average shares used to compute diluted EPS		14,151			14,150			14,217		14,193

Basic (loss) income per share from continuing operations	$	(0.02	)	$	(0.04	)	$	0.03	$	(0.13	)
Basic loss per share from discontinued operations	$	—		$	(0.79	)	$	—	$	(0.83	)
Net (loss) income per basic share	$	(0.02	)	$	(0.83	)	$	0.03	$	(0.96	)

Diluted (loss) income per share from continuing operations	$	(0.02	)	$	(0.04	)	$	0.03	$	(0.13	)
Diluted loss per share from discontinued operations	$	—		$	(0.79	)	$	—	$	(0.83	)
Net (loss) income per diluted share	$	(0.02	)	$	(0.83	)	$	0.03	$	(0.96	)

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

Three Months Ended December 31,
2017 2016
Basic Income (Loss) Per Share Computation
Net income (loss) attributable to Amtech Systems, Inc. $ 6,452
$ (53 )
Weighted Average Shares Outstanding:
Common stock 14,781
13,179

Basic income (loss) per share attributable to Amtech shareholders $ 0.44
$(0.00)
Diluted Income (Loss) Per Share Computation
Net income (loss) attributable to Amtech Systems, Inc. $ 6,452
$ (53 )
Weighted Average Shares Outstanding:
Common stock 14,781
13,179

Common stock equivalents (1) 517
—

Diluted shares 15,298
13,179

Diluted income (loss) per share attributable to Amtech shareholders $ 0.42
$(0.00)

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

6. Inventory

The components of inventories are as follows, in thousands:

	March 31, 2021			September 30, 2020
Purchased parts and raw materials	$	12,519		$	14,530
Work-in-process		3,694			3,074
Finished goods		3,997			3,942
		20,210			21,546
Excess and obsolete reserves		(3,821	)		(4,269	)
	$	16,389		$	17,277

December 31,
2017 September 30,
2017
Purchased parts and raw materials $ 13,628
$ 14,789
Work-in-process 5,806
11,078
Finished goods 3,328
4,343
$ 22,762
$ 30,210

7. Equity and Stock-Based Compensation

Stock-based compensation expense was ~~$0.3 million~~immaterial in ~~both the three months ended December 31, 2017 and 2016, and~~all periods presented. Stock-based compensation expense is included in selling, general and administrative expenses.

The following table summarizes our stock option activity during the six months ended March 31, 2021:

	Options			Weighted Average Exercise Price
Outstanding at beginning of period		696,665		$	7.00
Granted		198,000			6.14
Exercised		(158,693	)		5.86
Forfeited		(31,076	)		13.99
Outstanding at end of period		704,896		$	6.71
Exercisable at end of period		471,814		$	7.01
Weighted average fair value of options granted during the period	$	3.27

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

	Six Months Ended March 31, 2021
Risk free interest rate		1	%
Expected life	6 years
Dividend rate		—	%
Volatility		59	%

On February 4, 2020, the Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased was subject to management’s discretion and depended on our stock price and other market conditions. We could have, in the sole discretion of the Board, terminated the repurchase program at any time while it was in effect. Repurchased shares were to be retired or kept in treasury for further issuance. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our Common Stock on the open market at a total cost of approximately $2.0 million (an average price of $5.46 per share). All shares repurchased during the year ended September 30, 2020 have been retired. The term of our repurchase program expired as of the quarter ended March 31, 2021. There were 0 repurchases during the quarter ended March 31, 2021.

On February 9, 2021, the Board approved a new stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding Common Stock over a one-year period, commencing on February 16, 2021. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the Securities and Exchange Commission; however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance. There were 0 repurchases during the quarter ended March 31, 2021.

8. Income Taxes

For the three months ended ~~December~~March 31, ~~2017:~~

Options
Weighted
Average
Exercise
Price
Outstanding at beginning of period 1,560,441
$ 7.95
Granted —
—
Exercised (165,839 ) 7.03
Forfeited (27,299 ) 20.04
Outstanding at end of period 1,367,303
$ 7.82

Exercisable at end of period 1,142,012
$ 8.06
Weighted average fair value of options
granted during the period
$ —

~~5. Income Taxes~~

2021 and 2020, we recorded income tax expense at our continuing operations of $0.5 million and $0.2 million, respectively. For the six months ended March 31, 2021 and 2020, we recorded income tax expense of $0.6 million and $0.2 million, respectively. Tax expense for the six months ended March 31, 2021, includes a benefit of approximately $0.3 million related to the reversal of previously recorded uncertain tax positions. In the three months ended March 31, 2020, we recorded income tax benefit of $0.1 million in our discontinued operations. In the six months ended March 31, 2020, we recorded income tax benefit of $47,000 in our discontinued operations. 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 we operate. However, losses in certain jurisdictions and discrete items are treated separately.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, included a provision for a five-year carryback of net operating losses. We have assessed the benefit of the provision and utilized a portion of the 2019 net operating loss carryback to offset income from 2018. The impacts of this provision were recognized during fiscal 2020.

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. 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. ~~In prior periods, we~~We established valuation allowances on substantially all net U.S. 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 these assets will be realized.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017, and permanently reduces the U.S. federal corporate tax rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limits the deduction of interest expense for certain companies. The Act is a fundamental change to the taxation of multinational companies, including a shift from a system of worldwide taxation with some deferral elements to a territorial system, current taxation of certain foreign income, a minimum tax on low-tax foreign earnings, and new measures to curtail base erosion and promote U.S. production.

As a result of the Act, the statutory rate applicable to our fiscal year ending September 30, 2018 will be 24.5%, based on a fiscal year blended rate calculation. Accounting Standard Codification (“ASC”) 740 requires filers to record the effect of tax law changes in the period enacted. However, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), that permits filers to record provisional amounts during a measurement period ending no later than one year from the date of enactment. In the first quarter of fiscal 2018, we re-measured the applicable deferred tax assets based on the rates at which they are expected to reverse. We adjusted our gross deferred tax assets and liabilities and recorded a corresponding offset to our full valuation allowance against our net deferred tax assets, which resulted in minimal net effect to our provision for income taxes and effective tax rate. We have not made any other provisional adjustments as a result of the Act.

The Act includes a one-time mandatory repatriation transition tax on certain net accumulated earnings and profits of our foreign subsidiaries. We are still in the process of analyzing the earnings and profits and tax pools of our foreign subsidiaries to reasonably estimate the effects of the one-time transition tax and, therefore, have not recorded a provisional impact. The tax expense impact of the one-time transition tax to be determined may be partially or fully offset by a release of valuation allowance for the utilization of existing net operating losses and tax credits that may reduce the amount of related taxes payable. We expect the accounting for this aspect of the Act to be complete by the end of fiscal 2018. As of December 31, 2017, consistent with historical conclusions, our cash balances held in foreign locations are expected to be permanently reinvested outside the United States as the impact of the Act on our current position is not yet fully understood and is still under evaluation.

~~We are assessing the applicability of the other provisions in the Act and expect to complete this analysis by the end of fiscal 2018.~~

For the quarter ended December 31, 2017, we recorded income tax expense of $1.2 million. The difference in our effective tax rate from the U.S. statutory rate primarily reflects the impact of the mix of domestic and international pre-tax income and valuation allowance. In 2017 and the first quarter of 2018,2020, we reversed a portion of the valuation allowance related to ~~net operating loss carryforwards~~foreign deferred tax assets which we have determined will be utilized against net operating income in future years. We will continue to monitor our cumulative income and loss positions in the ~~current year.~~

U.S. and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate.

We classify all of our uncertain tax positions as income taxes payable long-term. At ~~December~~March 31, ~~2017~~2021 and September 30, ~~2017,~~2020, the total amount of unrecognized tax benefits was approximately ~~$4.3~~$0.9 million and ~~$4.2~~$1.2 million, respectively. Income taxes payable long-term includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid.

We classify interest and penalties related to unrecognized tax benefits as income tax expense. As of ~~December~~March 31, ~~2017~~2021 and September 30, ~~2017,~~2020, we had an accrual for potential interest and penalties of approximately ~~$2.7~~$0.6 million and ~~$2.6~~$0.8 million, respectively, classified with income taxes payable long-term.

Amtech and one or more of ~~our~~its subsidiaries file income tax returns in ~~The Netherlands, Germany, France,~~ China and other foreign jurisdictions, as well as in the U.S. and various states in the U.S. We have not signed any agreements with the Internal Revenue Service, any state or foreign jurisdiction to ~~the~~ extend the statute of limitations for any fiscal year. As such, the number of open years is the number of years dictated by statute in each of the respective taxing jurisdictions, which generally is from 3 to 5 years.

9. Commitments and Contingencies

Purchase Obligations – As of ~~December~~March 31, ~~2017~~,2021, we had unrecorded purchase obligations in the amount of ~~$26.4 million compared to~~ ~~$34.4 million~~ ~~as of September 30, 2017.~~ $11.8 million. 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 in the event that any agreements are renegotiated, canceled or terminated.

~~Development Projects~~

Legal Proceedings and Other Claims – In fiscal 2014, our wholly owned subsidiary, Tempress Systems, Inc. (“Tempress”), entered into an agreement with the Energy Research Centre of the Netherlands (“ECN”), a Netherlands government-sponsored research institute, for a joint research and development project. Under the terms of the agreement, Tempress sold an ion implanter (“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. Tempress 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 prior to fiscal 2017.

~~EPA Accrual~~ – As a result of the BTU International, Inc. (“BTU”) acquisition, 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 our proportional responsibility, as negotiated with and agreed to by the EPA, our liability related to this matter is less than $0.1 million, which is included in Other Accrued Liabilities in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017. In accordance with the agreement, BTU established a letter of credit for $0.2 million to the benefit of the EPA for potential cash payments as settlements for our proportional liability, which is included in Restricted Cash in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.

~~Legal Proceedings~~ ~~– We are defendants from~~From time to time, inwe are a party to claims and actions for matters arising out of our business operations. We regularly evaluate the status of the legal proceedings and other claims in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

Employment Contracts– We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If severance payments under the current employment ~~agreements~~contracts or ~~plan payments~~severance plans were to become payable, the severance payments would generally range from twelve to thirty-six months of salary.

~~7. Shareholder Rights Plan~~

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

10. Business Segment Information

Upon the ~~terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional shares~~acquisition 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 resultIDI in the ~~offeror beneficially owning 15% or more~~second quarter of 2021, we evaluated our ~~common stock. The Final Expiration Date (as defined in~~organizational structure and concluded that we have two reportable business segments following 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.acquisition. Our ~~Board approved the Agreement and transactions contemplated thereunder, and has the sole authority to terminate the Agreement at any time.~~


8.	~~Business Segment Information~~

~~Our three~~2 reportable segments are as follows:

~~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~~

Material and Substrate –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.

Our Material and Substrate segment includes our former SiC/LED segment in addition to IDI (see Note 2).

Information concerning our business segments is as follows, in thousands:


	Three Months Ended December 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2017			2016			2021			2020			2021			2020
Net Revenues:
Solar *	$	49,197		$	11,424
Semiconductor	20,891			15,703			$	17,119		$	11,992		$	32,694		$	29,224
Polishing	3,523			2,008
Material and Substrate								2,671			2,468			5,071			5,285
Non-segment related								—			—			—			643
	$	73,611		$	29,135		$	19,790		$	14,460		$	37,765		$	35,152
Operating income (loss):
Solar *	$	5,352		$	(1,023	)
Semiconductor	3,004			2,361			$	1,665		$	(18	)	$	3,862		$	2,704
Polishing	1,104			464
Material and Substrate								(253	)		421			(319	)		955
Non-segment related	(1,694		)	(1,982		)		(1,241	)		(1,375	)		(2,318	)		(2,994	)
	$	7,766		$	(180	)	$	171		$	(972	)	$	1,225		$	665

* 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.

	March 31, 2021		September 30, 2020
Identifiable Assets:
Semiconductor	$	56,079	$	51,648
Material and Substrate		19,714		12,717
Non-segment related*		32,143		37,733
	$	107,936	$	102,098

December 31,
2017 September 30,
2017
Identifiable Assets:
Solar $ 76,794
$ 97,999
Semiconductor 58,706
57,177
Polishing 5,912
5,078
Non-segment related 31,701
31,369
$ 173,113
$ 191,623

*	Non-segment related assets include cash, property, income tax assets and other assets.

Goodwill and other ~~assets.~~ long-lived assets

We review our long-lived assets, including goodwill, for impairment at least annually in our fourth quarter or 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~~Notes 1 and 10 of our Annual Report on Form 10-K ~~as amended,~~ for the year ended September 30, ~~2017.~~

9.2020.

11. Major Customers and Foreign Sales

During the ~~three~~six months ended ~~December~~March 31, ~~2017, one customer~~2021, two customers individually represented ~~50%~~17% and 10% of our net revenues. ~~No other customer represented greater than 10% of net revenues.~~ During the ~~three~~six months ended ~~December~~March 31, ~~2016, there were~~2020, no ~~customers who~~customer individually represented greater than 10% of our net revenues.

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

	Six Months Ended March 31,
	2021			2020
United States		24	%		34	%
Other		3	%		6	%
Total North America		27	%		40	%
China		28	%		24	%
Malaysia		5	%		4	%
Taiwan		20	%		11	%
Other		8	%		7	%
Total Asia		61	%		46	%
Germany		3	%		3	%
Other		9	%		11	%
Total Europe		12	%		14	%
		100	%		100	%

Three Months Ended December 31,
2017 2016
United States 7 % 18 %
Other 2 % 2 %
Total North America 9 % 20 %
China 71 % 26 %
Malaysia 3 % 17 %
Taiwan 2 % 12 %
Other 3 % 6 %
Total Asia 79 % 61 %
Germany 6 % 5 %
Other 6 % 14 %
Total Europe 12 % 19 %
100 % 100 %

12. Assets Held for Sale, Discontinued Operations and Disposals

Discontinued Operations

In April 2019, we announced that our Board determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. The divestitures of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. We classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations for periods reported subsequent to the announcement.

On June 7, 2019 (“SoLayTec Sale Date”), we completed the sale of our subsidiary, SoLayTec, to a third party located in the Netherlands. Upon the sale, we recognized a gain of approximately $1.6 million, which we reported as gain on sale of subsidiary in our Condensed Consolidated Statements of Operations for the three months ended June 30, 2019. Effective on the SoLayTec Sale Date, SoLayTec is no longer included in our consolidated financial statements.

Effective January 22, 2020 (“Tempress Sale Date”), we completed the sale of our subsidiary, Tempress Group Holding B.V. (“Tempress”) for nominal consideration to a third party located in the Netherlands. In connection with this sale transaction, we provided an unsecured term loan to Tempress in the principal sum of $2.25 million, to be used to fund Tempress’ working capital requirements and to facilitate the restructuring of Tempress’ operations. We forgave $0.5 million of the loan in accordance with the terms of the loan agreement. We recorded a pre-tax loss on deconsolidation of approximately $10.9 million, of which approximately $7.2 million was the recognition of previously recorded accumulated foreign currency translation losses. The total pre-tax loss does not have a material effect on our cash balances at our continuing operations. We also recognized a significant tax benefit relating to this loss, which can be carried over to future years. Effective on the Tempress Sale Date, Tempress is no longer included in our consolidated financial statements.

Operating results of our discontinued solar operations were as follows, in thousands:

	Three Months Ended March 31, 2020			Six Months Ended March 31, 2020
Revenues, net of returns and allowances	$	2,155		$	7,442
Cost of sales		1,830			5,969
Gross profit		325			1,473
Selling, general and administrative		476			1,814
Research, development and engineering		91			540
Restructuring charges		37			37
Operating loss		(279	)		(918	)
Loss on sale of subsidiary		(10,916	)		(10,916	)
Interest expense and other, net		(22	)		(29	)
Loss from discontinued operations before income taxes		(11,217	)		(11,863	)
Income tax benefit		(66	)		(47	)
Net loss from discontinued operations, net of tax	$	(11,151	)	$	(11,816	)

Amtech’s Condensed Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement category. The following table summarizes selected cash flow information for discontinued operations, in thousands:

	Six Months Ended March 31, 2020
Loss from discontinued operations, net of tax	$	(11,816	)
Depreciation and amortization	$	180
Reversal of allowance for doubtful accounts, net	$	(66	)
Purchases of property, plant and equipment	$	1

Other Disposal

On December 13, 2019 (“R2D Sale Date”), we finalized the sale of our subsidiary, R2D Automation SAS (“R2D”), to certain members of R2D’s management team. Upon the sale, we recognized a loss of approximately $2.8 million, which we reported as loss on sale of subsidiary in our Condensed Consolidated Statements of Operations for the six months ended March 31, 2020. Effective on the R2D Sale Date, R2D is no longer included in our consolidated financial statements. R2D does not meet the discontinued operations or held-for-sale criteria.

13. Subsequent Events

On April 12, 2021, we detected a data incident in which attackers acquired data and disabled some of the technology systems used by one of our subsidiaries. Upon learning of the incident, we immediately engaged external counsel and retained a team of third-party forensic, incident response, and security professionals to investigate and determine the full scope of this incident. Our investigation of the data incident is ongoing with the assistance from our outside professionals, and we are in the process of determining what data was affected and what customers or individuals require notice. We have notified law enforcement officials and confirmed that the incident is covered by our insurance.


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 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.~~

~~Cautionary Statement Regarding Forward-Looking Statements~~

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.~~ 2020.

Overview

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.

~~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 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~~manufacturer of capital equipment, including thermal processing ~~systems, including diffusion, plasma-enhanced chemical vapor deposition (“PECVD”), atomic layer deposition (“ALD”),~~and wafer polishing and related ~~automation, parts~~consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and ~~services,~~silicon power devices, analog and discrete devices, electronic assemblies and light-emitting diodes (LEDs). We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.

We operate in two reportable business segments, based primarily on the ~~solar photovoltaic industry.~~industry they serve: (i) Semiconductor, and (ii) Material and Substrate. In our Semiconductor segment, we supply thermal processing equipment, including solder reflow ~~equipment~~ovens, horizontal diffusion furnaces, and ~~related controls and diffusion~~custom high-temp belt furnaces for use by ~~leading~~ semiconductor, ~~manufacturers,~~electronics, and ~~in electronics~~electro/mechanical assembly ~~for automotive and other industries.~~manufacturers. In our ~~Polishing~~Material and Substrate segment, we produce substrate consumables, chemicals, and machinery for lapping (fine abrading) and polishing of materials, such as ~~sapphire substrates, optical components,~~ silicon wafers ~~numerous types of crystalline materials, ceramics~~for semiconductor products, sapphire wafers for LED applications, and ~~metal components.~~

compound substrates, like silicon carbide wafers, for power device applications.

Our semiconductor customers are primarily manufacturers of ~~solar cells~~integrated circuits and ~~integrated circuits.~~optoelectronics sensors and discrete (O-S-D) components used in analog, power and radio frequency (RF). The ~~solar cell and~~ semiconductor ~~industries are~~industry is cyclical and historically ~~have~~has 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.

Strategy

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~~our plans to profitably grow our business and ~~technologies,~~have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives. Our strategic growth plan ~~to seek further cost reductions to address~~calls for profitable growth as the ~~competition from Chinese equipment vendors.~~semi industry recovers, with the following areas of focus:

•

Emerging opportunities in the SiC industry – We believe we are well-positioned to take part in this significant growth area, specifically as it relates to silicon carbide wafer capacity expansion. We are working closely with our customers to understand their SiC growth plans and opportunities. We are investing in our capacity, next generation product development, and in our people. We believe these investments will help fuel our growth in the SiC industry.

•

300mm Horizontal Thermal Reactor – We have a highly successful and proven 300mmhorizontal diffusion solution for growing power semiconductor applications. We have a strong foundation with the leading 300mm power chip manufacturer, and, in fiscal 2019, we announced an order to another industry-leading manufacturer. In February 2020, we announced another order from a top-tier global power semiconductor customer in Asia, and in August 2020, we announced a repeat order for our 300mm solution. We believe we have a strong opportunity to continue expanding our customer base and grow revenue with our 300mm solution.

•

As a major revenue contributor to our organization, BTU International, Inc. (BTU) will continue to track semi industry growth cycles for our advanced semi-packaging and SMT products, in addition to specialized custom belt furnaces used in automotive and other specialized industrial applications. We believe that through investments in product innovation, BTU has an opportunity to grow further, especially in high growth applications of electric vehicles (EV) and 5G communications.

~~The equipment for~~

We anticipate that the ~~large follow-on turnkey order announced in April 2017 (“Phase II”) shipped~~required investments to achieve our revenue growth targets will be in the ~~first~~range of $6.0 - $8.0 million in research and development and capital expenditures. We may also need to make investments in other areas of our business, such as management information systems and capacity expansions at other existing manufacturing facilities. Our current capacity expansion plans include the relocation of our Shanghai, China manufacturing facility upon the expiration of the current lease in the third quarter of ~~fiscal 2018. Our quarterly~~2021. The new facility will increase capacity in support of our Pyramax product line, serving our Advanced Packaging, other semiconductor packaging and ~~annual operating results have been~~SMT customers. Additionally, as a capital equipment manufacturer, we will need working capital to support and fuel our future growth. We are 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~~closely scrutinize these planned investments, in light of the ~~industries~~COVID-19 challenges, and we ~~operate~~may defer some of our projects. However, we intend to continue to invest in ~~are volatile. Therefore, our order flow fluctuates quarter to quarter. For additional information regarding the risks related to~~ our business to support and ~~industry, please refer~~fuel our future growth.

In addition to ~~Item 1A. Risk Factors~~these investments in our ~~Annual~~organic growth, another key aspect of our capital allocation policy is our plan to grow through acquisitions. We have the expertise and track record to identify strong acquisition targets in the semi and SiC growth environment and to execute transactions and integrations to provide for value creating, profitable growth in both the short-term and long-term. On March 3, 2021, we acquired Intersurface Dynamics, Inc. (“IDI”), a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics. As of the date of the filing of this Quarterly Report on Form ~~10-K,~~10-Q, we do not have a definitive agreement to acquire any additional acquisition target.

Cybersecurity Incident

Despite this disruption, production continued in our facilities. Our previously disabled subsidiary network is now back up and running securely. Working alongside our security professionals, we have been safely bringing our subsidiary’s systems online with enhanced security controls. We have deployed an advanced next generation anti-virus and endpoint detection and response tool, as ~~amended, for~~well as Managed Detection & Response services. We remain committed to protecting the ~~fiscal year ended September 30, 2017.~~security of the personal information entrusted to us and providing high-quality products and service to our customers.

Solar and Automation Divestitures

On April 3, 2019, we announced that our Board of Directors (the “Board”) determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. We completed the sale of our solar subsidiaries, SoLayTec and Tempress, on June 7, 2019 and January 22, 2020, respectively. Additionally, on December 13, 2019, we completed the sale of our automation division, R2D, to certain members of R2D’s management team.

Segment Reporting Changes

Upon the acquisition of IDI in the second quarter of 2021, we evaluated our organizational structure and concluded that we have two reportable business segments following the acquisition. Our Material and Substrate segment includes our former SiC/LED segment in addition to IDI.

Results of Operations

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
Net revenue		100	%		100	%		100	%		100	%
Cost of sales		61	%		63	%		60	%		62	%
Gross margin		39	%		37	%		40	%		38	%
Selling, general and administrative		29	%		38	%		29	%		32	%
Research, development and engineering		9	%		6	%		8	%		4	%
Operating income (loss)		1	%		(7	)%		3	%		2	%
Loss on sale of subsidiary		—	%		—	%		—	%		(8	)%
Interest income and other, net		—	%		4	%		—	%		1	%
Income (loss) from continuing operations before income taxes		1	%		(3	)%		3	%		(5	)%
Income tax provision		2	%		1	%		2	%		—	%
(Loss) income from continuing operations, net of tax		(1	)%		(4	)%		1	%		(5	)%
Loss from discontinued operations, net of tax		—	%		(77	)%		—	%		(34	)%
Net (loss) income		(1	)%		(81	)%		1	%		(39	)%

Three Months Ended
December 31,
2017
December 31,
2016
Net revenue 100 % 100 %
Cost of sales 72 % 71 %
Gross margin 28 % 29 %
Selling, general and administrative 14 % 24 %
Research, development and engineering 3 % 6 %
Operating income (loss) 11 % (1 )%
Gain on sale of other assets 0 % 0 %
Income (loss) from equity method investment 0 % 0 %
Interest expense and other income, net 0 % 0 %
Income (loss) before income taxes 11 % (1 )%
Income taxes provision 2 % 0 %
Net income (loss) 9 % (1 )%
Add: net loss attributable to noncontrolling interest 0 % 1 %
Net income (loss) attributable to Amtech Systems, Inc. 9 % 0 %

In the second quarter of 2019, we began the process to divest our solar business, which we completed on January 22, 2020 with the sale of our Tempress subsidiary. As such, we have reported the results of the Solar segment as discontinued operations in our Condensed Consolidated Statements of Operations for 2020.

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, 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~~system 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):

	Three Months Ended March 31,									Six Months Ended March 31,
Segment	2021		2020		Incr (Decr)		% Change			2021		2020		Incr (Decr)			% Change
Semiconductor	$	17,119	$	11,992	$	5,127		43	%	$	32,694	$	29,224	$	3,470			12	%
Material and Substrate		2,671		2,468		203		8	%		5,071		5,285		(214	)		(4	)%
Non-segment related		—		—		—		—	%		—		643		(643	)		(100	)%
Total net revenue	$	19,790	$	14,460	$	5,330		37	%	$	37,765	$	35,152	$	2,613			7	%

Three Months Ended December 31,
Segment 2017 2016 Incr (Decr) % Change
Solar $ 49,197
$ 11,424
$ 37,773
331%
Semiconductor 20,891
15,703
5,188
33%
Polishing 3,523
2,008
1,515
75%
Total net revenue $ 73,611
$ 29,135
$ 44,476
153%

~~Net~~

Total net revenue for the quarters ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 was ~~$73.6~~$19.8 million and ~~$29.1~~$14.5 million, respectively, an increase of ~~$44.5~~approximately $5.3 million or ~~153%~~37%. ~~Revenue from~~Our semiconductor segment revenues are dependent on our customers’ expansions, and our 2020 results were negatively impacted by the ~~Solar segment increased 331% compared to~~uncertainty in the ~~prior year quarter~~global economy due primarily to ~~shipments relating to Phase II~~the impact of the ~~turnkey order, previously announced~~COVID-19 virus, as well as lingering trade tensions between the U.S. and China. Beginning in ~~April 2017.~~the third quarter of 2020, we experienced a return to near-capacity in our China factory. This trend has continued into fiscal 2021. Material and Substrate revenue increased due to higher machine and machine parts sales between periods. Despite the uncertainty caused by the COVID-19 virus, we believe there remains significant potential in the SiC industry and long-term growth in power semiconductor.

Total net revenue for the six months ended March 31, 2021 and 2020 was $37.8 million and $35.2 million, respectively, an increase of approximately $2.6 million or 7%. Revenue from the Semiconductor segment increased ~~33%~~$3.5 million compared to the prior year ~~quarter~~period. This change is primarily attributable to higher shipments of our diffusion furnaces in the 2021 period. Revenue from our Material and Substrate segment decreased $0.2 million due primarily to ~~strong customer demand for our thermal processing systems and diffusion furnaces. Revenue from~~lower machine sales in the ~~Polishing segment increased 75% compared~~2021 period, partially offset by an increase in consumable sales. Non-segment related revenues relate to R2D, the ~~prior year quarter due primarily to strong customer demand leading to increased sales of polishing templates and equipment.~~

automation division that we divested in December 2019.

Backlog and Orders

Our backlog as of ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 was ~~$65.9 million and $51.5 million, respectively, an increase of $14.4 million or 28%. Our backlog~~ as ~~of December 31, 2017 includes approximately $39.3 million of orders and deferred revenue from our Solar segment customers compared to $35.8 million at December 31, 2016.~~ follows (dollars in thousands):

	March 31,
Segment	2021		2020		Incr (Decr)			% Change
Semiconductor	$	25,281	$	17,799	$	7,482			42	%
Material and Substrate		1,253		1,819		(566	)		(31	)%
Total backlog	$	26,534	$	19,618	$	6,916			35	%

New orders booked in the ~~quarter~~three and six months ended ~~December~~March 31, ~~2017~~2021 and 2020 were ~~$37.3 million ($7.3 million Solar) compared to $34.7 million ($15.9 million Solar) of customer orders~~as follows (dollars in the quarter ended December 31, 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.thousands):

	Three Months Ended March 31,										Six Months Ended March 31,
Segment	2021		2020		Incr (Decr)			% Change			2021		2020		Incr (Decr)			% Change
Semiconductor	$	29,651	$	17,019	$	12,632			74	%	$	45,134	$	32,113	$	13,021			41	%
Material and Substrate		2,875		3,607		(732	)		(20	)%		5,261		6,138		(877	)		(14	)%
Total new orders	$	32,526	$	20,626	$	11,900			58	%	$	50,395	$	38,251	$	12,144			32	%

As of ~~December~~March 31, ~~2017, two~~2021, three Semiconductor customers individually accounted for ~~19%~~22%, 22% and 11% of our backlog. No other customer accounted for more than 10% of our ~~backlog.~~backlog as of March 31, 2021. Four customers accounted for 64% of our backlog as of March 31, 2021. 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. Our gross profit and gross margin by operating segment were as follows (dollars in thousands):

	Three Months Ended March 31,													Six Months Ended March 31,
Segment	2021		Gross Margin			2020		Gross Margin			Incr (Decr)			2021		Gross Margin			2020		Gross Margin			Incr (Decr)
Semiconductor	$	7,093		41	%	$	4,413		37	%	$	2,680		$	14,005		43	%	$	11,599		40	%	$	2,406
Material and Substrate		635		24	%		945		38	%		(310	)		1,235		24	%		1,924		36	%		(689	)
Non-segment related		—		—	%		—		—	%		—			—		—	%		9		1	%		(9	)
Total gross profit	$	7,728		39	%	$	5,358		37	%	$	2,370		$	15,240		40	%	$	13,532		38	%	$	1,708

Three Months Ended December 31,
Segment 2017 Gross Margin 2016 Gross Margin Incr (Decr)
Solar $ 11,313
23% $ 1,611
14% $ 9,702

Semiconductor 7,488
36% 6,095
39% 1,393

Polishing 1,536
44% 737
37% 799

Total gross profit $ 20,337
28% $ 8,443
29% $ 11,894

Gross profit for the three months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 was ~~$20.3~~$7.7 million ~~(28%~~(39% of net revenue) and ~~$8.4~~$5.4 million ~~(29%~~(37% of net revenue), respectively, an increase of ~~$11.9~~$2.4 million. Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross margin on products from our ~~Solar~~Semiconductor segment increased compared to the three months ended ~~December~~March 31, ~~2016,~~2020, due primarily to ~~higher sales volumes of higher-margin~~increased capacity utilization and favorable product mix, partially offset by an increase in discounts

offered in the 2021 period for multi-unit orders. Gross margin on products from our Material and Substrate segment decreased compared to the ~~first quarter~~three months ended March 31, 2020, due primarily to increased raw material costs which were not passed on to customers, as well as increased inventory obsolescence charges. We are experiencing increased material costs across all our segments and expect this to continue through at least the end of fiscal ~~2017.~~ 2021. We are reviewing our pricing plans and supplier agreements; however, we continue to feel pricing pressure from our customers, so we are unable to determine how long we will continue to absorb these additional costs.

Gross profit for the six months ended March 31, 2021 and 2020 was $15.2 million (40% of net revenue) and $13.5 million (38% of net revenue), respectively, an increase of $1.7 million. Gross margin on products from our Semiconductor segment increased compared to the six months ended March 31, 2020, due primarily to ~~increased sales volume in the first quarter~~favorable product mix and lower labor costs as a portion of ~~2018, with gross margin decreasing due to product mix.~~our engineers finished customer-specific design projects and began work on strategic-development projects. Gross ~~profit and gross~~ margin on products from our ~~Polishing~~Material and Substrate segment ~~increased from~~decreased compared to the ~~prior year period, primarily due to higher sales of new products with higher margins. For the three~~six months ended ~~December~~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 million.~~

2020, due primarily to lower capacity utilization resulting from lower machine and consumable sales.

Selling, General and Administrative

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 ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 were ~~$10.6~~$5.7 million and ~~$7.0~~$5.4 million, respectively. SG&A increased compared to the prior year quarter due primarily to ~~$1.8 million of~~increased commissions on higher ~~commissions, freight~~sales and ~~other selling expenses~~increased legal fees related to ~~increased revenue. Also,~~the acquisition of IDI, partially offset by lower travel and trade show expense due to the COVID-19 pandemic.

SG&A expenses for the ~~three~~six months ended ~~December~~March 31, ~~2016,~~2021 and 2020 were $10.9 million and $11.3 million, respectively. SG&A ~~expenses were reduced by~~decreased compared to the ~~collections of previously reserved accounts receivable of approximately $1.0 million.~~

prior year period due primarily to no longer having R2D SG&A included in our results and lower travel and trade show expense due to the COVID-19 pandemic.

Research, Development and Engineering

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 ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 were ~~$2.0~~$1.9 million and ~~$1.6~~$0.9 million, respectively, anand $3.1 million and $1.5 million in the six months ended March 31, 2021 and 2020. The increase ~~of $0.4 million,~~in RD&E expenses is due ~~primarily~~ to increased ~~R&D spending~~labor expense related to a portion of our engineers as they completed customer-specific design projects and began work on strategic-development projects. Grants earned are immaterial in ~~our Solar segment.~~

all periods presented.

Income Taxes

Our effective tax rate continues to be higher than the statutory rate as a result of higher income in foreign jurisdictions. We expect this trend to continue throughout 2021. For the three months ended ~~December~~March 31, ~~2017~~2021 and 2020, we recorded income tax expense at our continuing operations of $0.5 million and $0.2 million, respectively. For the six months ended March 31, 2021 and 2020, we recorded income tax expense of ~~$1.2~~$0.6 million ~~resulting in an effective~~and $0.2 million, respectively. Tax expense for the six months ended March 31, 2021, includes a benefit of approximately $0.3 million related to the reversal of previously recorded uncertain tax ~~rate of 16.1%. For~~positions. In the three months ended ~~December~~March 31, ~~2016~~2020, we recorded income tax ~~expense~~benefit of $0.1 million ~~a 37.5% effective~~in our discontinued operations. In the six months ended March 31, 2020, we recorded an income tax ~~rate.~~benefit of $47,000 in our discontinued operations. 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~~

~~the overall assessment. As a result of the review, where cumulative losses had been incurred,~~We have concluded that we ~~continue to~~will maintain a full valuation allowance for ~~substantially~~ all net deferred tax assets ~~in the U.S. and foreign jurisdictions, including~~related to the carryforwards of U.S. net operating losses and foreign tax ~~credits, which were acquired~~credits. We will continue to monitor our cumulative income and loss positions in the ~~merger with BTU International, Inc.~~U.S. and ~~net operating losses in Europe.~~

~~For the quarter ending December 31, 2017, we determined that a portion of the deferred tax asset previously covered by the~~foreign jurisdictions to determine whether full valuation ~~allowance would be realized in the current tax period. We realized $1.4 million of~~allowances on net deferred tax assets are appropriate.

Our future effective income tax rate depends on various factors, such as the amount of income (loss) in each tax jurisdiction, tax regulations governing each region, non-tax deductible expenses incurred as a ~~discrete item~~percent of pre-tax income and the effectiveness of our tax planning strategies.

Discontinued Operations

As disclosed previously in the ~~quarter.~~

“Solar and Automation Divestitures” section, we announced that our Board determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities we believe are presented in those areas. The divestitures included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. As such, we reported the results of the Solar segment as discontinued operations in our Condensed Consolidated Statements of Operations. SoLayTec was sold effective June 7, 2019, and Tempress was sold effective January 22, 2020 (see Note 12 for additional information).

Liquidity and Capital Resources

The following table sets forth for the periods presented certain consolidated cash flow information (in thousands):

	Six Months Ended March 31,
	2021			2020
Net cash (used in) provided by operating activities	$	(265	)	$	1,276
Net cash used in investing activities		(5,515	)		(10,285	)
Net cash provided by (used in) financing activities		741			(1,415	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		368			558
Net decrease in cash, cash equivalents and restricted cash		(4,671	)		(9,866	)
Cash, cash equivalents and restricted cash, beginning of period*		45,070			59,134
Cash, cash equivalents and restricted cash, end of period	$	40,399		$	49,268

*	Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020.

~~At December 31, 2017~~

Cash and ~~September 30, 2017,~~Cash Flow

The decrease in cash and cash equivalents ~~were $52.7 million and $51.1 million, respectively, an increase of $1.6 million. Restricted cash decreased by $14.7 million to $9.9 million at December 31, 2017~~ from ~~$24.6 million at~~ September 30, ~~2017. Our working capital was $79.7 million as~~2020 of ~~December 31, 2017 and $71.1 million as of September 30, 2017.~~

~~The increase in cash during the first three months of fiscal 2018 of $1.6~~$4.7 million was primarily due to cash paid for the acquisition of IDI, partially offset by proceeds received from the exercise of stock options. We maintain a portion of our cash and cash equivalents in ~~Euros~~RMB at ~~our Dutch and French operations and in RMB in~~ our Chinese operations; therefore, changes in the exchange ~~rate~~rates have an impact on our cash balances. ~~Restricted cash decreased~~Our working capital was $66.0 million as of March 31, 2021 and $69.1 million as of September 30, 2020. The decrease in our working capital occurred primarily due to ~~the shipments of Phase II of the Solar turnkey order,~~decreases in cash and inventory balances and an increase in accounts payable, which ~~released the restrictions on the downpayment.~~were partially offset by an increase in accounts receivable. Our ratio of current assets to current liabilities was ~~2.3:~~7.3:1 as of ~~December~~March 31, ~~2017,~~2021, and ~~1.8:~~10.2:1 as of September 30, ~~2017.~~

2020.

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 when needed or 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 Flows from Operating Activities

Cash ~~provided by~~used in our operating activities was approximately $0.3 million for the ~~three~~six months ended ~~December~~March 31, ~~2017,~~2021, compared to ~~$3.5~~cash provided by operating activities of $1.3 million ~~used in operations~~ for the ~~three~~six months ended ~~December~~March 31, ~~2016, an improvement~~2020, a decrease of ~~$3.8~~approximately $1.5 million. During the ~~three~~six months ended ~~December~~March 31, ~~2017, cash was primarily generated through~~2021, net income adjusted for non-cash items of ~~$7.4~~$1.5 million was offset by $1.8 million of cash used in operations as a result of changes in operating assets and liabilities. During the six months ended March 31, 2020, net loss adjusted for non-cash items provided cash of $2.0 million, which was partially offset by ~~other increases and decreases~~$0.7 million of cash used in operations as a result of changes in operating assets ~~primarily related to~~and liabilities.

Cash Flows from Investing Activities

For the turnkey project. A significant portion of the revenue and related cash payments related to the turnkey project are deferred and restricted, respectively, until completion of the integration of the equipment and transfer of the technology. During the threesix months ended ~~December~~March 31, ~~2016,~~2021 and 2020, cash used in investing activities was ~~reduced by increases~~$5.5 million compared to $10.3 million in ~~accounts receivable~~the prior year period. The amount for the first half of fiscal 2021 includes $5.1 million net cash paid for the acquisition of IDI in addition to $0.4 million of cash used for capital expenditures. The amount for the second quarter of fiscal 2020 reflects the divestiture of our solar business. We expect capital expenditures to increase throughout 2021 as we initiate and ~~restricted cash, offset by decreases~~complete the relocation of our Semiconductor manufacturing facility in ~~inventory.~~

Shanghai, China after the current lease expires in the third quarter of 2021.

Cash Flows from Financing Activities

For the ~~three~~six months ended ~~December~~March 31, ~~2017, $1.1~~2021, $0.7 million of cash provided by financing activities was comprised of ~~$1.2~~approximately $0.9 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 ~~three~~six months ended ~~December~~March 31, ~~2016, $0.1~~2020, $1.4 million of cash used in financing activities was ~~primarily related to~~comprised of $0.8 million of proceeds received from the exercise of stock options, which was fully offset by $2.0 million used for stock repurchases and payments on long-term debt of $0.2 ~~million net of borrowings of less than $0.1~~ million.

Off-Balance Sheet Arrangements

As of ~~December~~March 31, ~~2017,~~2021, 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~~SEC 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.

Contractual Obligations

Unrecorded purchase obligations at our continuing operations were ~~$26.4~~$11.8 million as of ~~December~~March 31, ~~2017,~~2021, compared to ~~$34.4~~$4.6 million as of September 30, ~~2017, a decrease~~2020, an increase of ~~$8.0 million~~$7.2 million. This increase primarily reflects the inventory required due ~~primarily~~ to ~~reduced vendor commitments~~the increase in orders for our diffusion furnaces as ~~we complete~~well as increased orders for products sold by our Shanghai, China location.

There were no other material changes to the ~~first two phases of the large solar project. Approximately $5.2 million of the December 31, 2017 and $11.8 million of the September 30, 2017~~ contractual obligations ~~were prepaid as of those dates~~included 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.~~

~~Critical Accounting Policies~~

~~“Management’s~~Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2020.

Critical Accounting Policies

Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report 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.~~2020. 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 7:7. 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~~2020 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 ~~three~~six months ended ~~December~~March 31, ~~2017.~~

2021.

Impact of Recently Issued Accounting Pronouncements

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


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There have been no material changes~~

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in ~~our reported market risks, as described in “Quantitative~~Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, ~~Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K, as amended, for~~therefore, are not required to provide the ~~year ended September 30, 2017.~~

information requested by this Item.


Item 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including ~~the~~our Chief Executive Officer (“CEO”) and ~~the~~our Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of ~~December~~March 31, ~~2017,~~2021, 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~~SEC’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~~have not been any changes in ~~Amtech’s~~the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~three months ended December 31, 2017~~second fiscal quarter to which this report relates that ~~has~~ materially affected, or isare reasonably likely to materially affect, ~~its~~the internal control over financial ~~reporting.~~

reporting of the Company.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

For discussion of legal proceedings, see Note 9 to our condensed consolidated financial statements under “Part I, Item 1:1. Financial Information” under “Commitments and ~~Contingencies.”~~

Contingencies” of this Quarterly Report.


Item 1A.	Risk Factors

~~In addition~~

We refer you to documents filed by us with the ~~other information set forth~~SEC, specifically “Item 1A. Risk Factors” 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~~2020 (the “2020 Form 10-K”), which identifies important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” immediately preceding “Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our 2020 Form 10-K and any described herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our 2020 Form ~~10-K,~~10-K.

Information security breaches or failures of our information technology systems may have a negative impact on our operations and our reputation.

We may be subject to information security breaches or failures of our information technology systems caused by advanced persistent threats, unauthorized access, sabotage, vandalism, terrorism or accident. Compromises and failure to our information technology networks and systems could result in unauthorized release of our confidential or proprietary information, or that of our customers and suppliers, as ~~amended, for the fiscal year ended September 30, 2017, other than~~well as ~~described~~employee personal data. The costs to protect against or alleviate breaches and systems failures require significant human and financial capital expenditures, which in ~~the Overview above, and the supplemental risk factor set forth below:~~

~~Recent changes to U.S. tax laws may adversely affect~~turn could potentially disrupt our ~~financial condition or results of operation and create the risk that we may need to adjust~~continuing operations, increase our ~~accounting for these changes.~~

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,liability as a result of ~~lower corporate tax rates, the Act tends~~compromises to ~~reduce both the value of deferred tax assets~~personally identifiable information, and ~~the amount of deferred tax liabilities. It also limits interest rate deductions~~may lead to a material and ~~the amount of net operating losses that can be used each year~~adverse effect on our financial reporting, reputation and ~~alters the expensing of capital expenditures. Other provisions have international tax consequences for businesses like ours that operate internationally. The Act is unclear~~business.

On April 12, 2021, we detected a data incident in ~~certain respects~~which attackers acquired data 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, anddisabled 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~~technology systems used by one of our ~~analysis and computations~~subsidiaries. Upon learning of the ~~tax effects~~incident, we immediately engaged external counsel and retained a team of third-party forensic, incident response, and security professionals to investigate and determine the full scope of this incident. Our investigation of the ~~Act on us~~data incident is ~~partially, but not entirely, complete. For instance,~~ongoing with the assistance from our outside professionals, and we are ~~still~~ in the process of ~~analyzing~~determining what data was affected and what customers or individuals require notice. We have notified law enforcement officials and confirmed that the ~~earnings~~incident is covered by our insurance.

Despite this disruption, production continued in our facilities. Our previously disabled subsidiary network is now back up and ~~profits and tax pools of~~running securely. Working alongside 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 December 31, 2017, to the extentsecurity professionals, we have been ~~able to make such preliminary determinations. Although we believe these estimates are reasonable, they are provisional~~safely bringing our subsidiary’s systems online with enhanced security controls. We have deployed an advanced next generation anti-virus 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~~endpoint detection and response tool, as well as Managed Detection & Response services.

While our ~~provisional estimates or the effects of currently unknown impacts~~investigation of the ~~Act~~April 2021 data incident remains ongoing, this incident could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant judgements against us, penalties and fines.

The cost of investigating, mitigating and responding to data incidents and complying with any applicable breach notification obligations to individuals, regulators, customers and others, including the April 2021 data incident, could be significant. Our insurance policy has a specific payout limit. Based on information available to us, we expect that our claim will not exceed this limit, but that will depend on the ultimate amount of costs and other losses arising from such disruptions, failures, attempted attacks or security breaches. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, defending a suit, regardless of its merit, could ~~affect~~be costly, divert management attention and harm our ~~current or future financial statements, or both.~~reputation.

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

Issuer Purchases of Equity Securities

On February 4, 2020, the Board approved a stock repurchase program, pursuant to which the Company may repurchase up to $4 million of its outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, the Company had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased was subject to management’s discretion and depended on the Company’s stock price and other market conditions. The Company could have, in the sole discretion of the Board, terminated the repurchase program at any time while it was in effect. Repurchased shares were to be retired or kept in treasury for further issuance. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our Common Stock on the open market at a total cost of approximately $2.0 million (an average price of $5.46 per share). All shares repurchased during the year ended September 30, 2020 have been retired. The term of our repurchase program expired as of the quarter ended March 31, 2021.

On February 9, 2021, the Board approved a new stock repurchase program, pursuant to which the Company may repurchase up to $4 million of its outstanding Common Stock over a one-year period, commencing on February 16, 2021. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the Securities and Exchange Commission; however, the Company has no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions. The Company may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance.

During the three months ended March 31, 2021, we did not repurchase any of our equity securities nor did we sell any equity securities that were not registered under the Securities Act of 1933, as amended.

~~None.~~


Item 3.	Defaults Upon Senior Securities

None.

~~None.~~


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.

~~Item 6.~~

Item 6.

Exhibits

EXHIBIT

~~EXHIBIT~~

INCORPORATED BY REFERENCE

FILED

NO.

EXHIBIT DESCRIPTION

~~FORM~~

FORM

FILE NO.

EXHIBIT NO.

FILING DATE

HEREWITH

~~31.1~~

31.1

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

~~31.2~~

31.2

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

~~32.1~~

32.1

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

~~32.2~~

32.2

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

~~101.INS~~

101.INS

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Inline XBRL Taxonomy Extension Schema Document

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101.PRE

Inline Taxonomy Presentation Linkbase Document

~~101.CAL~~

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document

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101.LAB

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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.

Arizona		86-0411215

~~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)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		ASYS		NASDAQ.Global Select Market

Large Accelerated Filer	☐			Accelerated Filer	☐
Non-Accelerated Filer
~~Large accelerated filer [ ]~~ ☒	~~Accelerated filer [X]~~
~~Non-accelerated filer [ ] (Do not check if a smaller reporting company)~~		Smaller Reporting Company ~~[ ]~~	☒
				Emerging Growth Company ~~[ ]~~	☐

	Page
Cautionary Statement Regarding Forward-Looking Statements	3
	~~Page~~
PART I. FINANCIAL INFORMATION	4
Item 1. Condensed Consolidated Financial Statements	4
Condensed Consolidated Balance Sheets ~~December~~ March 31, ~~2017~~2021 (Unaudited) and September 30, ~~2017~~2020	3 4
Condensed Consolidated Statements of Operations (Unaudited) Three and Six Months Ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020	4 5
Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ (Unaudited) Three and Six Months Ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020	5 6
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three and Six Months Ended March 31, 2021 and 2020	7
Condensed Consolidated Statements of Cash Flows (Unaudited) ~~Three~~ Six Months Ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020	6 8
Notes to Condensed Consolidated Financial Statements (Unaudited)	7 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
~~Cautionary Statement Regarding Forward-Looking Statements~~Overview	13 20
~~Overview~~	14
Results of Operations	14 22
Liquidity and Capital Resources	17 25
Off-Balance Sheet Arrangements	17 26
Contractual Obligations	17 26
Critical Accounting Policies	18 27
Impact of Recently Issued Accounting Pronouncements	18 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18 27
Item 4. Controls and Procedures	18 27
PART II. OTHER INFORMATION	28
Item 1. Legal Proceedings	19 28
Item 1A. Risk Factors	19 28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19 29
Item 3. Defaults Upon Senior Securities	19 29
Item 4. Mine Safety Disclosures	19 29
Item 5. Other Information	19 29
Item 6. Exhibits	20 30
SIGNATURES	21 31


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


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



	December 31, 2017			September 30, 2017
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	52,696		$	51,121
Restricted cash	9,913			24,640
Accounts receivable
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively)	24,365			22,519
Unbilled and other	21,620			14,275
Inventories	22,762			30,210
Vendor deposits	5,180			11,806
Other	2,310			2,542
Total current assets	138,846			157,113
Property, Plant and Equipment - Net	15,637			15,792
Intangible Assets - Net	3,378			3,495
Goodwill - Net	11,484			11,405
Investments	2,588			2,615
Deferred Income Taxes - Long-Term	200			200
Other Assets - Long-Term	980			1,003
Total Assets	$	173,113		$	191,623
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	20,483		$	21,555
Accrued compensation and related taxes	7,422			7,592
Accrued warranty expense	1,401			1,254
Other accrued liabilities	2,918			2,056
Customer deposits	19,328			48,784
Current maturities of long-term debt	365			361
Deferred profit	5,632			4,081
Income taxes payable	1,608			286
Total current liabilities	59,157			85,969
Long-Term Debt	8,225			8,134
Income Taxes Payable - Long-Term	6,802			7,037
Total Liabilities	74,184			101,140
Commitments and Contingencies
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: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively	149			147
Additional paid-in capital	127,015			125,564
Accumulated other comprehensive loss	(7,988		)	(8,529		)
Retained deficit	(20,247		)	(26,699		)
Total stockholders’ equity	98,929			90,483
Total Liabilities and Stockholders’ Equity	$	173,113		$	191,623



	December 31, 2017		September 30, 2017
Deferred revenues	$	8,370	$	6,822
Deferred costs	2,738		2,741
Deferred profit	$	5,632	$	4,081



	Three Months Ended
	December 31, 2017			December 31, 2016
Research, development and engineering	$	2,290		$	1,830
Grants earned	(299		)	(203		)
Net research, development and engineering	$	1,991		$	1,627



	Options			Weighted Average Exercise Price
Outstanding at beginning of period	1,560,441			$	7.95
Granted	—			—
Exercised	(165,839		)	7.03
Forfeited	(27,299		)	20.04
Outstanding at end of period	1,367,303			$	7.82

Exercisable at end of period	1,142,012			$	8.06
Weighted average fair value of options granted during the period	$	—

/s/ Lisa D. Gibbs

~~February 8, 2018~~

May 5, 2021

Lisa D. Gibbs

Vice President –and Chief ~~Accounting~~Financial Officer

(Principal ~~Accounting~~Financial Officer and Duly Authorized Officer)