What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-25 compared with 2021-02-26 · 103 added, 130 removed, 954 unchanged (20% of the section changed)

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Other Information.

In connection with his retirement, John E.

Aldeborgh, Executive Vice President, Global Customer Operations, has submitted his resignation as an executive officer of the Company, effective March 1, 2021.

Low has assumed the title of Executive Vice President, Global Customer and Engineering Operations, and will lead both Axcelis’ engineering functions as well as global customer operations.

To facilitate this transition, Mr.

Aldeborgh will serve as a senior advisor to Dr.

Low for some period following his retirement.

Disclosure regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

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● “Corporate Governance—Certain Relationships and Related Transactions.”

Principal Accounting Fees and Services

Principal Accountant Fees and Services

The information required by Item 14 of Form 10-K is incorporated by reference from the information responsive thereto contained in the section captioned “Proposal 2:

Ratification of the Appointment of our Independent Registered Public Accounting Firm” in the Proxy Statement.

Exhibits, Financial Statement Schedules.

Exhibits and Financial Statement Schedules.

The following documents are filed as part of this Report:

1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Operations — For the years ended December 31, 2021, 2020 and 2019

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2022 expressed an unqualified opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 9 to the consolidated financial statements, the Company changed its method for accounting for leases in 2019.

Basis for Opinion

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As discussed in Note 2 and Note 3 to the consolidated financial statements, the Company generates revenue from the sale of ion implantation and other processing equipment used in the manufacture of semiconductor chips (“systems revenue”).

The Company’s revenue contracts for systems have

multiple performance obligations, including the systems themselves and obligations that are not delivered simultaneously with the systems.

The Company’s revenue contracts for systems have multiple performance obligations, including the systems themselves and obligations that are not delivered simultaneously with the systems.

Systems revenue accounted for $454.6 million of the Company’s total revenue of $662.4 million in 2021.

Auditing the Company’s determination of the distinct performance obligations related to its systems revenue contracts involved extensive audit effort to identify all of the promised products and services in an arrangement and assess distinct performance obligations.

These determinations have a significant effect on the pattern of revenue recognition.

These determinations have a significant

effect on the pattern of revenue recognition.

How We Addressed the Matter in Our Audit

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Twelve months ended

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation adjustments

Amortization of actuarial loss and other adjustments from pension plan, net of tax

Total other comprehensive income (loss)

Amortization of actuarial gain (loss) and other adjustments from pension plan, net of tax

Total other comprehensive (loss) income

Comprehensive income

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Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total stockholders’ equity

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Issuance of restricted common shares

Adjustment to Retained Earnings upon ASC 606 Adoption

Stock-based compensation expense

Repurchase of common stock

Balance at December 31, 2019

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Provision for excess and obsolete inventory

Changes in operating assets & liabilities:

Changes in operating assets and liabilities:

Accounts receivable

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Foreign currency transaction gains and losses are included in other income (expense) in the Consolidated Statements of Operations.

For the year ended December 31, 2020 we had $ 1.4 million in foreign exchange gain.

For the year ended December 31, 2021 we had $ 2.5 million in foreign exchange loss.

For the year ended December 31, 2020 we had $ 1.4 million in foreign exchange gain.

For the year ended December 31, 2019 we had $ 0.6 million in foreign exchange loss.

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Inventories are carried at the lower of cost or net realizable value, determined using the first-in, first-out (“FIFO”) method.

We periodically review our inventories and make provisions as necessary for estimated obsolescence or damaged goods to ensure values approximate lower of cost or net realizable value.

We periodically review our inventories and make provisions as necessary for estimated obsolescence or damaged

goods to ensure values approximate lower of cost or net realizable value.

The amount of such markdowns is equal to the difference between cost of inventory and the estimated market value based upon assumptions about future demands, selling prices, and market conditions.

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We retained the historical costs of the property and the related accumulated depreciation on our financial books within property, plant and equipment and will continue to depreciate the property for financial reporting purposes over the lesser of its remaining useful life or its initial lease term of 22 years .

On January 1, 2019, we adopted Accounting Standard Update (“ASU”) No.

2016-02 “Leases.” This update requires operating lease assets and finance lease assets be classified separately from owned assets on the balance sheet.

See Note 9 for further discussion.

Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets as follows:

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For the year ended December 31, 2021 we had two customers representing 17.8 % and 15.4 % of total revenue, respectively.

For the year ended December 31, 2019, we had three customers representing 18.2 %, 14.2 % and 12.0 % of total revenue, respectively.

For the year ended December 31, 2020, we had two customers representing 17.9 % and 16.4 % of total revenue, respectively.

For the year ended December 31, 2019, we had three customers representing 18.2 %, 14.2 % and 12.0 % of total revenue, respectively.

As of December 31, 2021, we had two customers account for 29.1 % and 13.6 % of consolidated accounts receivable, respectively.

As of December 31, 2019, we had three customers account for 24.9 %, 15.3 % and 11.1 % of consolidated accounts receivable, respectively.

As of December 31, 2020, we had two customers account for 23.8 % and 11.9 % of consolidated accounts receivable, respectively.

Some of the components and sub-assemblies included in our products are obtained either from a sole source or a limited group of suppliers.

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(i) Revenue Recognition

Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers or (“ASC 606”).

In accordance with ASC 606, we changed certain characteristics of our revenue recognition accounting policy as described below.

On adoption, ASC 606 was applied only to open contracts using the modified retrospective method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018.

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers or (“ASC 606”).

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

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Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract.

To the extent a contract includes multiple promised goods and services, we must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract.

To the extent a contract includes multiple promised goods and services, we must apply judgment to determine whether promised goods and services

are capable of being distinct and distinct in the context of the contract.

If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.

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We use a cost plus margin approach in determining the SSP for any materials related performance obligations (such as upgrades, spare parts, systems).

To determine the SSP for labor related performance obligations (such as the labor component of installation), we use directly observable inputs based on the standalone sale prices for these services.

To determine the SSP for labor related performance obligations (such as the labor component of installation), we use

directly observable inputs based on the standalone sale prices for these services.

5) Recognize revenue when or as we have satisfied a performance obligation

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We recognize an asset related to incremental costs incurred by us to obtain a contract with a customer if we expect to recover those costs.

We will recognize an asset from costs incurred to fulfill a contract only if such costs relate directly to a contract with an entity that we can specifically identify, the costs incurred will generate or enhance resources that will be used in satisfying performance obligations in the future, and the costs are expected to be recovered.

used in satisfying performance obligations in the future, and the costs are expected to be recovered.

Any assets recognized related to costs to obtain or fulfill a contract are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

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Net income per share

Diluted weighted average common shares outstanding does not include restricted stock units outstanding to purchase 1,951 common equivalent shares and 232,844 common equivalent shares for the periods ended December 31, 2020 and 2019, respectively, as their effect would have been anti-dilutive.

Diluted weighted average common shares outstanding does not include restricted stock units outstanding to purchase 2,554 , 1,951 and 232,844 common equivalent shares for the periods ended December 31, 2021, 2020 and 2019, respectively, as their effect would have been anti-dilutive.

(o) Accumulated Other Comprehensive Income (Loss)

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Balance at December 31, 2020

Other comprehensive income and pension reclassification

Other comprehensive loss and pension reclassification

Balance at December 31, 2021

(p) Recent Accounting Guidance

Accounting Standards Update 2019-04 on Financial Instruments;

Topic 326, Topic 815 and Topic 825 Effective January 1, 2020

Accounting Standards Update 2019-12 Income Taxes (Topic 740)

We adopted Financial Accounting Standards Board ASU No.

2019-04 “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” as of January 1, 2020, using the modified-retrospective approach resulting in no cumulative adjustment to retained earnings.

The amendments in this Update clarify the guidance within Topic 326 relating to credit losses.

Topic 326 replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.

Due to the requirements of Topic 326, management reviews the average annual write-off rate along with an assessment of current micro and macro-economic factors to determine any expected losses.

The adoption of this Update did not have a material impact on our results of operations or cash flows.

See Note 5 for further discussion.

2019-12 “ Income Taxes (Topic 740) ” (“ASU 2019-12”) as of January 1, 2021 on a prospective basis.

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions from the previous standard as well as requiring entities to include franchise tax partially based on income as an income based tax and to account for an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

The guidance in ASU 2019-12 is required for annual reporting periods beginning after December 15, 2020.

Adoption of ASU 2019-12 had no material effect on our consolidated financial statements and disclosures.

We design, manufacture and service ion implantation and other processing equipment used in the fabrication of semiconductor chips and sell our products to leading semiconductor chip manufacturers worldwide.

We offer a complete line of high energy, high current and medium current implanters for all application requirements.

We offer a complete

line of high energy, high current and medium current implanters for all application requirements.

In addition, we provide extensive aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance service and customer training.

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(in thousands)

CS&I/Aftermarket

Total Revenue

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Global economic conditions have a direct impact on our revenue.

We are substantially dependent on sales of our products and services to customers outside the United States.

We are substantially dependent on sales of our products and services to customers outside of the United States.

Adverse economic conditions, political instability, potential adverse tax consequences, regulatory changes and volatility in exchange rates pose a risk that our clients may reduce, postpone or cancel spending for our products and services, which would impact our revenue.

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This amount relates primarily to prepayments made prior to system delivery as well as to installation and non-standard warranty performance obligations for system sales.

Long-term deferred revenue of $ 1.8 million as of December 31, 2020 relates primarily to extended warranty performance obligations that we expect to be completed in excess of the next 12 months but within the next 24 months .

Long-term deferred revenue of $ 8.0 million as of December 31, 2021 relates prepayments made prior to system delivery as well as to extended warranty performance obligations that we expect to be completed in excess of the next 12 months but within the next 24 months .

The majority of our system transactions have payment terms that are 90 % due upon shipment of the tool and 10 % due upon installation.

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The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

Axcelis evaluates the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect its customers’ ability to pay.

Axcelis evaluates the credit risk of the customer when extending credit based on a combination of various financial

and qualitative factors that may affect its customers’ ability to pay.

These factors may include the customer’s financial condition, past payment experience, and credit ratings from credit bureaus, as well as the value of the underlying collateral.

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Purchasing and usage alternatives are also explored to mitigate inventory exposure.

In 2020, we recorded a net slight increase of $ 0.1 million in inventory reserves.

As of December 31, 2020 and 2019, inventories are stated net of inventory reserves of $ 8.3 million and $ 8.2 million, respectively.

In 2021, we recorded a decrease of $ 1.9 million in inventory reserves.

At December 31, 2021 and 2020, inventories are stated net of inventory reserves of $ 6.5 million and $ 8.3 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, we recorded charges to cost of sales of $ 3.8 million, $ 3.7 million and $ 2.8 million, respectively, to reflect the lower of cost or net realizable value.

We have inventory on consignment at customer locations as of December 31, 2020 and 2019, of $ 4.9 million and $ 5.0 million, respectively.

We have inventory on consignment at customer locations at December 31, 2021 and 2020, of $ 5.5 million and $ 4.9 million, respectively.

Property, Plant and Equipment, net

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Depreciation expense was $ 5.3 million, $ 5.2 million and $ 3.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We have operating leases for office space, warehouse space, computer and office equipment and vehicles used in our business operations.

We have operating leases for manufacturing, office space, warehouse space, computer and office equipment and vehicles used in our business operations.

We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts.

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An agreement contains a lease component if it provides the use of a specific physical space or a specific physical item.

Upon adoption of Topic 842 on January 1, 2019, we recognized operating lease obligations on a discounted basis using the explicit or implicit discount rate stated within the agreement.

We recognize operating lease obligations under Accounting Standards Codification Leases (Topic 842).

The guidance in Topic 842 requires recognition of lease assets and related liabilities on a discounted basis using the explicit or implicit discount rate stated within the agreement.

We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any.

For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate.

The value of the right-of-use asset is initially determined based on the net present value of the associated liability, and is adjusted for deferred costs and possible impairments, if any.

The value of the right-of-use asset is initially determined based on the net present value of the associated

liability, and is adjusted for deferred costs and possible impairments, if any.

We have made the following policy elections:

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(in thousands)

Operating lease

Operating leases

Operating lease assets

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Total lease liabilities

* Finance lease assets are recorded net of accumulated depreciation of $ 48.4 million and include $ 0.7 million of prepaid financing costs as of December 31, 2020.

Finance lease assets are recorded net of accumulated depreciation of $ 47.4 million and include $ 0.7 million of prepaid financing costs as of December 31, 2019.

* Finance lease assets are recorded net of accumulated depreciation of $ 48.6 million and includes $ 0.7 million of prepaid financing costs as of December 31, 2021.

Finance lease assets are recorded net of accumulated depreciation of $ 48.4 million and includes $ 0.7 million of prepaid financing costs as of December 31, 2020.

All of our office locations support selling and servicing functions.

We also have a manufacturing facility in South Korea.

Lease expense, depreciation expense relating to finance leased assets and interest expense relating to our finance lease obligation recognized within our consolidated statement of operations for the twelve-month periods ended December 31, 2021, 2020 and 2019 are as follows:

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Total lease cost

* Sales and marketing, general and administrative expense also includes short-term lease and variable lease costs of approximately $ 1.2 million and $ 0.9 million for the twelve months ended December 31, 2020 and 2019, respectively.

* Sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $ 1.9 million, $ 1.2 million and $ 0.9 million for the twelve months ended December 31, 2021, 2020 and 2019, respectively.

Our corporate headquarters, shown below under finance leases, has an original lease term of 22 years .

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These cash flows are included within the operating section of our statement of cash flows.

Our cash flows from our finance lease include an interest and payment of principal component.

Our cash flows from our finance

lease include an interest and payment of principal component.

The table below shows our cash outflows, by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets:

Year ended December 31,

Cash paid for amounts included in the measurement of lease liabilities

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On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank, in its capacity as administrative agent and collateral agent for itself and as a lender, and such other banks and financial institutions or entities that from time to time join as lenders under the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $ 40.0 million.

Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $ 40.0 million.

Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens.

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As of December 31, 2021, we were in compliance with all covenant requirements of the Credit Agreement.

As of such date, no borrowings had been made under the Credit Agreement, although a letter of credit for $ 5.9 million, previously issued by Silicon Valley Bank, had been rolled under the Credit Agreement, reducing the funds available for borrowing under the credit line.

As of such date, no borrowings had been made under the Credit Agreement, although a letter of credit for $ 5.9 million reduces the funds available for borrowing under the credit line.

We entered into a First Amendment to the Credit Agreement with Silicon Valley Bank in March 2021 to (i) align the covenants with our 2021 stock repurchase program, and (ii) establish terms to transition from a Eurodollar based interest rate option to an interest rate benchmark using a secured overnight financing rate (known as “SOFR”) published by the Federal Reserve Bank of New York.

Employee Benefit Plans

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(in thousands)

Accrued compensation

Total current liabilities

Other long-term liabilities

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We maintain the Axcelis Technologies, Inc.

2012 Equity Incentive Plan (the “2012 Equity Plan”), which became effective on May 2, 2012.

Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and no new grants may be made under that plan after that date.

However, awards granted under the 2000 Stock Plan prior to the expiration remain outstanding and subject to the terms of the 2000 Stock Plan.

2012 Equity Incentive Plan (the “2012 Equity Plan” or the “Plan”), which became effective on May 2, 2012.

The 2012 Equity Plan, as amended, reserves 9.5 million shares of common stock, $ 0.001 par value, for grant and permits the issuance of options, stock appreciation rights, restricted stock, restricted stock units, stock equivalents and awards of shares of common stock that are not subject to restrictions or forfeiture to selected employees, directors and consultants of the Company.

The 2012 Equity Plan includes shares specifically approved by the stockholders of the Company.

The total number of shares reserved for issuance under the Plan is the sum of 7.76 million shares approved by the shareholders, and 1.78 million shares added in accordance with the terms of the Plan as a result of

the expiration or forfeiture of awards granted under our prior equity plan.

Shares that are not issued under an award (because such award expires, is terminated unexercised or is forfeited) revert back to the Plan.

The reserve under the Plan is also increased by expirations and forfeitures of awards outstanding under the 2000 Stock Plan as of May 2, 2012.

The term of stock options granted under these plans is specified in the award agreements.

The term of stock options granted under the Plan is specified in the award agreements.

Unless a lesser term is otherwise specified by the Compensation Committee of the Company’s Board of Directors, awards under the 2012 Equity Plan will expire seven years from the date of grant.

In general, all awards issued under the 2000 Stock Plan expire ten years from the date of grant.

Under the terms of these stock plans, the exercise price of a stock option may not be less than the fair market value of a share of the Company’s common stock on the date of grant.

Under the terms of the Plan, the exercise price of a stock option may not be less than the fair market value of a share of the Company’s common stock on the date of grant.

Under the 2012 Equity Plan, fair market value is defined as the last reported sale price of a share of the Company’s common stock on a national securities exchange as of any applicable date, as long as the Company’s shares are traded on such exchange.

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Restricted stock units granted to employees during 2021 had both service-based vesting provisions and performance-based vesting provisions.

Restricted stock units granted to employees generally vest over a service period of

four years , while restricted stock units granted to non-employee members of the Company’s Board of Directors generally vest over a service period of six months .

Restricted stock units granted to employees generally vest over a service period of four years , while restricted stock units granted to non-employee members of the Company’s Board of Directors generally vest over a service period of six months .

We have granted restricted stock units to executive officers and other senior employees with performance vesting conditions, which may be subject to further service-based vesting terms.

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We settle restricted stock units upon vesting with newly issued common shares.

No restricted stock was granted under either stock plan during the three year period ended December 31, 2020.

No restricted stock was granted during the three year period ended December 31, 2021.

As of December 31, 2021, there were 1.5 million shares available for grant under the 2012 Equity Plan.

No shares are available for grant under the 2000 Stock Plan.

As of December 31, 2020, there were 0.5 million options outstanding under the 2012 Equity Plan and the 2000 Stock Plan, collectively, and 1.1 million unvested restricted stock units outstanding under the 2012 Stock Plan.

As of December 31, 2021, there were 0.1 million options outstanding and 0.9 million unvested restricted stock units outstanding under the 2012 Stock Plan.

(b) Employee Stock Purchase Plan

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The 2020 ESPP is considered compensatory and as such, compensation expense has been recognized based on the benefit of the discounted stock price, amortized to compensation expense over each offering period of six months .

Compensation expense relating to the 2020 ESPP and our prior employee stock purchase plan (“Purchase Plan”) was approximately $ 0.2 million for the years ended December 31, 2020.

Compensation expense under the Purchase Plan was approximately $ 0.2 million for the years ended December 31, 2019 and 2018.

Compensation expense relating to the 2020 ESPP was approximately $ 0.2 million for the year ended December 31, 2021.

Compensation expense under the 2020 ESPP and our prior employee stock purchase plan (the “2000 ESPP”) was approximately $ 0.2 million for the year ended December 31, 2020.

Compensation expense under the 2000 ESPP was approximately $ 0.2 million for the year ended December 31, 2019.

As of December 31, 2021, there were approximately 1.0 million shares reserved for issuance and available for purchase under the 2020 ESPP, with 10,588 shares purchased on that date to be issued pending settlement.

The Company’s Employee Stock Purchase plan effective in June 2000 (the “2000 ESPP”) expired in June 2020.

Less than 0.1 million shares were purchased under the 2000 ESPP in each of the years ended December 31, 2020, 2019 and 2018.

Less than 0.1 million shares were purchased under the 2020 ESPP for the year ended December 31, 2021.

The 2000 ESPP expired in June 2020.

Less than 0.1 million shares were purchased under the 2020 ESPP and 2000 ESPP for the year ended December 31, 2020.

Less than 0.1 million shares were purchased under the 2000 ESPP in the year ended December 31, 2019.

For the purpose of valuing stock options with service conditions, we use the Black-Scholes option pricing model to calculate the grant-date fair value of an award.

Year ended December 31,

Weighted-average expected volatility

Weighted-average expected term

Risk-free interest rate

Expected dividend yield

There were no stock option awards granted in 2020 and 2019.

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For the years ended December 31, 2021, 2020 and 2019, we recognized stock-based compensation expense of $ 12.1 million, $ 10.5 million and $ 8.2 million, respectively.

We present the expenses related to stock-based compensation

in the same expense line items as cash compensation paid to our employees.

We present the expenses related to stock-based compensation in the same expense line items as cash compensation paid to our employees.

For the years ended December 31, 2021, 2020 and 2019, we used restricted stock units in our annual equity compensation program.

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The total intrinsic value, which is defined as the difference between the market price at exercise and the price paid by the employee to exercise the options, for options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 12.8 million, $ 18.4 million and $ 10.9 million, respectively.

The total fair value of stock options vested during the years ended December 31, 2020, 2019 and 2018 was $ 0.1 million, $ 0.9 million and $ 1.9 million respectively.

As of December 31, 2020, there was no unrecognized compensation cost related to non-vested stock options granted under the 2012 Equity Incentive Plan and the 2000 Stock Plan.

No stock options vested during the year ended December 31, 2021.

The total fair value of stock options vested during the years ended December 31, 2020 and 2019 was $ 0.1 million and $ 0.9 million respectively.

As of December 31, 2021, there was less than $ 0.1 million of unrecognized compensation cost related to non-vested stock options granted under the 2012 Equity Incentive Plan.

(f) Restricted Stock Units and Restricted Stock

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Vesting activity above reflects shares vested before net share settlement.

As of December 31, 2020, there was $ 16.8 million of total forfeiture-adjusted unrecognized compensation cost related to non-vested restricted stock units granted under the 2012 Equity Incentive Plan.

As of December 31, 2021, there was

$ 18.5 million of total forfeiture-adjusted unrecognized compensation cost related to non-vested restricted stock units granted under the 2012 Equity Incentive Plan.

That cost is expected to be recognized over a weighted-average period of 2.4 years.

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We may issue up to 75 million shares of common stock without additional shareholder approval.

As of December 31, 2020 and 2019, there were 33.6 million and 32.6 million outstanding shares of common stock, respectively.

On January 12, 2021, we announced that our Board of Directors authorized a one-year share repurchase program of up to $ 100 million of our common stock.

These shares may be purchased in the open market or through privately negotiated transactions.

We have no obligation to repurchase shares under the authorization, and the timing, actual number and value of shares which are repurchased will depend on a number of factors, including the price of our common stock, general business and market conditions, and alternative investment opportunities.

We may suspend or discontinue the repurchase program at any time.

At December 31, 2021 and 2020, there were 33.2 million and 33.6 million outstanding shares of common stock, respectively.

Fair Value Measurements

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Level 2 —applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets;

quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions

(less active markets);

quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets);

or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

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Commitments and Contingencies

(a) Lease Commitments

We lease manufacturing and office facilities and certain equipment under operating and capital leases that expire through 2037.

Rental expense was $ 5.2 million, $ 4.8 million and $ 4.6 million under operating leases for the years

ended December 31, 2020, 2019 and 2018, respectively.

Future minimum lease commitments on non-cancelable operating leases for the year ended December 31, 2020 are as follows:

(in thousands)

Total operating lease payments

(b) Sale Leaseback Financing Obligation

In addition to the lease commitments as described above, in 2015 we entered into a 22-year lease agreement relating to our corporate headquarters in Beverly, Massachusetts.

The following table relates to the cash payment schedule associated with this lease obligation as of December 31, 2020:

(in thousands)

Total finance lease payments

Less interest portion

Sale leaseback obligation

We have contracts and purchase orders for inventory and other expenditures of $ 92.7 million at December 31, 2020.

(d) Litigation

In addition to the finance and operating leases discussed in Note 9, we have purchase commitments and other contingency considerations.

(a) Purchase Commitments

We have contracts and purchase orders for inventory and other expenditures of $ 226.4 million at December 31, 2021, approximately $ 224 million are expected to occur in 2022.

(b) Litigation

We are not presently a party to any litigation that we believe might have a material adverse effect on our business operations.

We are, from time to time, a party to litigation that arises in the normal course of our business operations.

(e) Indemnifications

Our system sales agreements typically include provisions under which we agree to take certain actions, provide certain remedies and defend our customers against third-party claims of intellectual property infringement under specified conditions and to indemnify customers against any damage and costs awarded in connection with such claims.

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Long-lived assets consist of property, plant and equipment, net, and assets manufactured for internal use, net.

Operations in Europe and Asia Pacific consist of sales and service organizations.

Operations in Asia Pacific consist of manufacturing, sales and service organizations.

Operations in Europe consist of sales and service organizations.

International revenue, which includes export sales from U.S.

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Income tax provision

Reconciliation of income taxes at the United States Federal statutory rate to the effective income tax rate is as follows:

Reconciliation of income taxes at the United States Federal statutory rate to the effective income tax rate of 18.1% is as follows:

Year ended December 31,

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Right-of-use asset

Internal Revenue Code 481(a) adjustment

Gross deferred tax liabilities

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Our deferred tax assets and liabilities are measured at the enacted tax rate expected to apply when these temporary differences are expected to be realized or settled.

At December 31, 2020, we had $ 57.9 million of deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, which are available to reduce income taxes in future years.

At December 31, 2021, we had $ 35.5 million of net deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, which are available to reduce income taxes in future years.

At December 31, 2021, we maintain a $ 7.7 million valuation allowance in the U.S.

against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these attributes.

This represents an increase of $ 0.8 million from the prior year.

This represents a decrease of $ 1.4 million from the prior year.

At December 31, 2021, we have federal and state net operating loss carryforwards of $ 30.5 million and $ 13.6 million, respectively.

Federal and state net operating losses will expire between 2021 and 2034.

Federal and net operating losses will expire between 2033 and 2034.

State net operating losses will expire between 2022 and 2034.

The federal net operating loss carryforwards are subject to an uncertain tax position reserve of $ 3.7 million.

6 unchanged sentences

income taxes have been provided thereon.

As of December 31, 2020, the amount of

cash associated with indefinitely reinvested foreign earnings was approximately $ 14.0 million.

As of December 31, 2021, the amount of cash associated with indefinitely reinvested foreign earnings was approximately $ 10.4 million.

We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

4 unchanged sentences

We believe that we have appropriate support for the income tax positions taken and to be taken on our tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

At December 31, 2020, we had unrecognized tax benefits related to uncertain tax positions of approximately $ 10.0 million, of which approximately $ 9.6 million reduced the Company’s deferred tax assets and the offsetting valuation allowance and $ 0.5 million was recorded in other long-term liabilities.

At December 31, 2021, we had unrecognized tax benefits related to uncertain tax positions of approximately $ 10.0 million, all of which reduced the Company’s deferred tax assets and the offsetting valuation allowance.

A reconciliation of the beginning and ending balance of unrecognized tax benefits are as follows:

2 unchanged sentences

Balance at beginning of year

Increase / (decrease) in unrecognized tax benefits as a result of tax positions taken during a prior period

(Decrease) / increase in unrecognized tax benefits as a result of tax positions taken during a prior period

Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitation

25 unchanged sentences

Axcelis Technologies, Inc.

2000 Stock Plan, as amended through November 13, 2014.

Incorporated by reference to Exhibit 10.1 of the Company’s Form 10-K for the year ended December 31, 2014 filed with the Commission on March 11, 2015.

Axcelis Technologies, Inc.

2012 Equity Incentive Plan, as approved by stockholders on May 14, 2019.

6 unchanged sentences

Incorporated by reference to Exhibit 10.6 of the Company’s Form 10-K for the year ended December 31, 2016 filed with the Commission on March 14, 2017.

Form of Employee non-qualified stock option grant under the 2000 Stock Plan, updated as of April 5, 2002.

Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10-Q filed with the Commission on November 9, 2004.

Form of Non-Employee Director stock non-qualified stock option grant under the 2000 Stock Plan, updated as of July 12, 2004.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-Q filed with the Commission on November 9, 2004.

Form of Employee Non-Qualified Stock Option Certificate under the 2012 Equity Incentive Plan, adopted June 18, 2012.

53 unchanged sentences

February 25, 2022

John Fletcher

February 26, 2021

John Fletcher

/s/ Arthur L.

8 unchanged sentences

Jorge Titinger

February 25, 2022

Dipti Vachani

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures