AMTECH SYSTEMS INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read together with our Consolidated Financial Statements and the accompanying notes included in "Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors including, but not limited to, those described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Please refer to page 5 for further information regarding forward-looking statements and “Item 1A. Risk Factors” for a description of our risk factors. Overview We provide equipment, consumables and services for semiconductor wafer fabrication and device packaging. Our products are used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon (Si) power devices, digital and analog devices, power electronic packages, advanced semiconductor packages and electronic assemblies. We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe. We operate in two reportable segments, based primarily on the industries they serve: (i) Thermal Processing Solutions (formerly called Semiconductor) and (ii) Semiconductor Fabrication Solutions (formerly called Material and Substrate). Our thermal processing solutions include reflow equipment for chip packaging and electronic assembly, diffusion furnaces and furnaces used to produce ceramic based power semiconductor packages and passive electronic components. Our semiconductor fabrication solutions include consumables, equipment and services for wafer polishing, cleaning, slicing and dicing. The markets we serve are historically cyclical, but not seasonal, with constantly evolving technical requirements and can be subject to tariffs and sourcing restrictions driven by geopolitical tensions. Our revenue is impacted by these broad industry trends. Growth and Investment Strategy We believe there are three key secular trends that are key to our future growth: • Advanced Mobility - Advanced Mobility encompasses both the development and adoption of electric vehicles and charging infrastructure, including both EV and HEV, as well as advanced automotive electronics including Advanced Driver Assistance Systems (ADAS), infotainment and telematics. Our products intersect these markets in multiple ways: CMP consumables and wafer cleaning systems for the SiC substrates used in the EV power invertors; thermal processing systems for producing EV battery cooling systems and ceramic substrates for HEV power semiconductor packaging; and reflow ovens for ADAS, infotainment and telematics component assemblies. • Supply Chain Resiliency - There is a global trend of creating supply chain resiliency by expanding and/or relocating operations outside of mainland China. These new facilities will create demand for new equipment and services in growing regions like Mexico and Southeast Asia. • Artificial Intelligence - With Artificial Intelligence (AI), our reflow oven systems are the favored choice for Outsourced Semiconductor Assembly and Test Services (OSATS) providers who perform advanced packaging of the AI chips. We continue to invest in research and development, including the introduction of our next-generation reflow platform, Aurora, in 2023. Historically, we have grown our business primarily through acquisitions, including the businesses that currently comprise our two reportable segments in the Thermal Processing Solutions and Semiconductor Fabrication Solutions industries: BTU, PR Hoffman, Intersurface Dynamics and Entrepix. Our 2023 acquisition of Entrepix bolstered our offerings in the CMP technology space and incorporated wafer cleaning into our existing capital 34 equipment product lines. We continue to believe this inorganic growth strategy is the backbone of who Amtech is as a company, we also have a complimentary strategy of pursuing organic growth, particularly during times when we lacked sufficient capital resources to pursue growth through acquisitions. We will continue to pursue acquisitions to supplement organic growth and have added market development resources globally to accelerate organic growth. In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located. In connection with this sale, we entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. In September 2023, we signed a lease for a new location with less square footage and completed the move to this location in June 2024. As we expand our use of contract manufacturers, we will continue to look for ways to reduce our real estate footprint. In March 2024, we completed the sale of our corporate headquarters real property in Arizona. The sale resulted in a net cash inflow of approximately $2.5 million, after settlement of related sale expenses. Following the closing of this transaction, we entered into a lease agreement for a new office for our corporate headquarters, which commenced during the third quarter of fiscal year 2024. In addition, we are evaluating business continuity and resiliency within our operations, our management information systems, and our needs to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans. As a capital equipment manufacturer, we will continue to invest in our business to drive future growth. Segment Reporting Changes We evaluated our organizational structure and concluded that we have two reportable segments; Thermal Processing Solutions (formerly called Semiconductor) and Semiconductor Fabrication Solutions (formerly called Material & Substrate). Our Semiconductor Fabrication Solutions segment includes Entrepix beginning at the date of acquisition. Industry Fluctuations Our quarterly and annual operating results have been and will continue to be impacted by the timing of large system orders. Further, the semiconductor equipment industry is highly cyclical, and the conditions of this industry remain volatile. Therefore, our order flow fluctuates quarter to quarter. For additional information regarding the risks related to our business and industry, please refer to “Item 1A. Risk Factors” within this Form 10-K. Fiscal Year Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2024, 2023 and 2022 relate to the fiscal years ended September 30, 2024, 2023 and 2022, respectively. 35 Results of Operations The following table sets forth certain financial data as a percentage of net revenue for the periods indicated: Years Ended September 30, 2024 2023 Net revenue 100 % 100 % Cost of sales 63 % 65 % Intangible asset impairment 1 % 4 % Gross margin 36 % 31 % Selling, general and administrative 33 % 37 % Research, development and engineering 4 % 6 % Gain on sale of fixed assets (2 )% — % Goodwill impairment 6 % — % Intangible asset impairment 1 % — % Severance 1 % 1 % Operating loss (7 )% (13 )% Interest income — % — % Interest expense — % — % Foreign currency (loss) gain — % — % Other — % — % (Loss) income before income taxes (7 )% (13 )% Income tax provision (benefit) 1 % (2 )% Net loss (8 )% (11 )% Fiscal 2024 compared to Fiscal 2023 Net Revenue Net revenue consists of revenue recognized upon shipment or delivery of equipment. 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, gross profit and operating income can be significantly impacted by the timing of system shipments. Our net revenue by reportable segment was as follows, dollars in thousands: Years Ended September 30, Increase Segment 2024 2023 (Decrease) % Change Thermal Processing Solutions $ 69,161 $ 77,595 $ (8,434 ) (11 )% Semiconductor Fabrication Solutions 32,053 35,720 (3,667 ) (10 )% Total net revenue $ 101,214 $ 113,315 $ (12,101 ) (11 )% Net revenue for the years ended September 30, 2024 and 2023 were $101.2 million and $113.3 million, respectively, a decrease of $12.1 million or 11%. Revenue from the Thermal Processing Solutions segment decreased $8.4 million, or 11%, over the prior year period. Our Thermal Processing Solution results for 2024 reflect decreases in belt furnace shipments partially offset by increases in shipments of our horizontal diffusion furnaces. We continue to experience softness in shipments of our advanced packaging and SMT equipment, primarily related to a slowdown in global demand in the consumer markets. Revenue from our Semiconductor Fabrication Solutions segment decreased $3.7 million, or 10%, due to decreases in shipments of our polishing equipment, which was eliminated at the end of 2023, with final shipments in 2024. Additionally, we experienced declines in our wafer cleaning equipment, partially offset by increases in our consumables shipments. 36 Orders and Backlog New orders booked by reportable segment were as follows, dollars in thousands: Years Ended September 30, Segment 2024 2023 Increase (Decrease) % Change Thermal Processing Solutions $ 49,318 $ 74,817 $ (25,499 ) (34 )% Semiconductor Fabrication Solutions 29,959 29,080 879 3 % Total new orders $ 79,277 $ 103,897 $ (24,620 ) (24 )% Our backlog by reportable segment was as follows, dollars in thousands: September 30, Segment 2024 2023 Increase (Decrease) % Change Thermal Processing Solutions $ 20,845 $ 45,233 $ (24,388 ) (54 )% Semiconductor Fabrication Solutions 4,467 6,561 (2,094 ) (32 )% Total backlog $ 25,312 $ 51,794 $ (26,482 ) (51 )% At the end of 2024, two customers individually accounted for 25% and 20% of our total backlog. No other customer accounted for more than 10% of our backlog as of September 30, 2024. 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. 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. During the three months ended June 30, 2024, a horizontal diffusion customer notified us of the cancelation of a furnace project for $4.5 million, which we believe is due to the slow-down in electric vehicle adoption. Also during this period, the improvement in lead times across all of our product lines favorably contributed to the decline in our backlog. Gross Profit and Gross Margin Gross profit is the difference between net revenue and cost of goods sold and intangible asset impairment. 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 reportable segment were as follows, dollars in thousands: Years Ended September 30, Segment 2024 Gross Margin 2023 Gross Margin Increase (Decrease) % Change Thermal Processing Solutions $ 24,269 35 % $ 29,184 38 % $ (4,915 ) (17 )% Semiconductor Fabrication Solutions 11,962 37 % 6,368 18 % 5,594 88 % Total gross profit $ 36,231 36 % $ 35,552 31 % $ 679 2 % Gross profit for the years ended September 30, 2024 and 2023 was $36.2 million and $35.6 million, respectively, representing an increase of $0.7 million, or 2%. Gross margin for 2024 and 2023 was 36% and 31%, respectively. Gross margin for the Thermal Processing Solutions segment decreased to 35% in 2024, compared to 38% in 2023, due primarily from product mix with decreases in shipments of our high-temperature furnaces, surface-mount technology (“SMT”) and packaging equipment, partially offset by increases in shipments of our horizontal diffusion furnaces. Gross margin for the Semiconductor Fabrication Solutions segment, increased to 37% in 2024, compared to 18% in 2023 due primarily to the 2023 impairment charge of $4.6 million for intangible assets and a charge in the amount of $1.5 million related to the write-off of inventory for our polishing machine products, partially offset by an additional intangible asset impairment charge in 2024 of $0.8 million. We are experiencing moderate material costs increases across all our segments. In response to such increased costs, we continually review our pricing plans and supplier agreements, with the objective of passing these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. We are also continuing to explore additional 37 partnerships with contract manufacturers, who can leverage their buying power on a larger scale. Throughout fiscal 2024, we made targeted labor reductions as a result of the shift to contract manufacturing and the continuing slowdown in the broader semiconductor industry. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses consist primarily 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. Our net SG&A expense by reportable segment was as follows, dollars in thousands: Years Ended September 30, Increase Segment 2024 2023 (Decrease) % Change Thermal Processing Solutions $ 15,110 $ 18,284 $ (3,174 ) (17 )% Semiconductor Fabrication Solutions 8,498 11,210 (2,712 ) (24 )% Non-segment related 10,206 12,508 (2,302 ) (18 )% Total selling, general and administrative expense $ 33,814 $ 42,002 $ (8,188 ) (19 )% Total SG&A expenses for the years ended September 30, 2024 and 2023 were $33.8 million and $42.0 million, respectively, representing a decrease of $8.2 million or 19.4%. This decrease was primarily due to staff reductions across all of our locations during 2024, resulting in lower employee expenses and employee-related expenses, such as travel, commissions and bonuses. Non-segment related SG&A expense includes $1.5 million and $1.3 million of non-cash stock-based compensation expense for 2024 and 2023, respectively. 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. RD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E. However, from time to time, we add functionality to our products or develop new products during engineering and manufacturing to fulfill specifications in a customer’s order, in which case the cost of development, along with other costs of the order, are charged to cost of goods sold. Our net research and development expense by reportable segment was as follows, dollars in thousands: Years Ended September 30, Increase Segment 2024 2023 (Decrease) % Change Thermal Processing Solutions $ 2,840 $ 3,993 $ (1,153 ) (29 )% Semiconductor Fabrication Solutions 1,353 3,318 (1,965 ) (59 )% Total research, development and engineering expense $ 4,193 $ 7,311 $ (3,118 ) (43 )% RD&E expenses for the years ended September 30, 2024 and 2023 were $4.2 million and $7.3 million, respectively, a decrease of $3.1 million. The decrease in RD&E expense is due to the timing of purchases related to specific strategic-development projects at our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments. Additionally, the prior year period included expenditures related to new product development projects at our Semiconductor Fabrication Solutions segment, which were terminated in the fourth quarter of 2023. Gain on Sale of Fixed Assets Gain on sale of fixed assets consists of the gain on the sale of our corporate headquarters in Arizona in March 2024. This sale resulted in a net gain of approximately $2.2 million, after settlement of related sale expenses and disposal of assets. The sale price for our BTU building in Massachusetts was $20.6 million, of which $0.7 million was deducted 38 at closing for commission and other closing expenses. In connection with the sale, we recognized a pre-tax gain on sale of $12.5 million in the year ended 2022. Intangible Asset Impairment In the first quarter of fiscal year 2024, we recognized impairment of our definite lived intangible assets of $1.3 million at our Semiconductor Fabrication Solutions segment. Of the $1.3 million, $0.8 million of this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in our Consolidated Statement of Operations. Additionally, during the year ended September 30, 2023, we recognized impairment of our definite lived intangible assets of $5.2 million at our Semiconductor Fabrication Solutions segment. Of the $5.2 million, $4.6 million of this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in our Consolidated Statement of Operations. See Note 9 for a description of the facts and circumstances leading to the intangible asset impairment events. Goodwill Impairment In the first quarter of fiscal year 2024, we recognized impairment of our goodwill of $6.4 million at our Semiconductor Fabrication Solutions segment as a result of a triggering event identified at the end of the first quarter. Severance Expense Severance expense was $0.4 million and $0.7 million in 2024 and 2023, respectively. Severance expense for the year ended September 30, 2024 relates to staff reductions across all of our divisions. Severance expense for year ended September 30, 2023 relates primarily to the retirement of our founder. Income Taxes Our effective tax rate was (13.0)% and 17.1% in 2024 and 2023, respectively. The effective tax rate is the ratio of total income tax expense to pre-tax income. The effective tax rates for 2024 and 2023 were lower than the U.S. statutory rate of 21%. The 2024 effective tax rate was negatively impacted by non-deductible expenses, including goodwill impairment, includible foreign income, foreign withholding tax and losses for which no tax benefit can be recognized. The 2023 effective tax rate was negatively impacted by non-deductible expenses, includible foreign income, foreign withholding tax and losses for which no tax benefit can be recognized. The 2023 effective tax rate was favorably impacted by the recognition of previously unrecognized tax benefits and the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition. In 2024 and 2023, we recorded income tax expense and (benefit) of $1.0 million and $(2.6) million, respectively. The income tax provisions are based upon estimates of annual income, annual permanent differences, statutory tax rates and credits in the various jurisdictions in which we operate. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Generally accepted accounting principles of the United States (“GAAP”) 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 objective negative evidence includes cumulative losses in recent years. Such objective negative evidence limits the ability to consider other subjective evidence, such as future projections. Based on the consideration of all available evidence, we have concluded that we will maintain a full valuation allowance for all net deferred tax assets related to the carryforwards of U.S. net operating losses and tax credits. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full valuation allowances on U.S. net deferred tax assets are appropriate. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740, "Income Taxes", states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be 39 sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. In 2023, we recognized $1.0 million of previously unrecognized tax benefits, and as of September 30, 2024, we have no unrecognized tax benefits recorded within our financial statements. We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward. 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-deductible expenses incurred as a percent of pre-tax income and the effectiveness of our tax planning strategies. Selected Quarterly Data (Unaudited) The following table sets forth selected unaudited consolidated quarterly financial information, in thousands, except percentages and per share amounts: Fiscal Year 2024 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 24,920 $ 25,433 $ 26,749 $ 24,112 Cost of sales 15,852 16,982 16,991 14,309 Intangible asset impairment 849 — — — Gross profit 8,219 8,451 9,758 9,803 Selling, general and administrative 8,567 8,252 8,209 8,786 Research, development and engineering 1,588 921 693 991 Gain on sale of fixed assets — (2,197 ) — — Goodwill impairment 6,370 — — — Intangible asset impairment 430 — — — Severance expense 198 112 40 — Operating (loss) income (8,934 ) 1,363 816 26 Interest income 19 14 2 22 Interest expense (198 ) (193 ) (107 ) (59 ) Foreign currency (loss) gain (187 ) — 182 (340 ) Other — 9 2 52 (Loss) income before income taxes (9,300 ) 1,193 895 (299 ) Income tax provision 58 223 457 237 Net (loss) income $ (9,358 ) $ 970 $ 438 $ (536 ) Gross margin 33.0 % 33.2 % 36.5 % 40.7 % Operating margin (35.9 )% 5.4 % 3.1 % 0.1 % (Loss) income Per Share: Net (loss) income per basic share $ (0.66 ) $ 0.07 $ 0.03 $ (0.04 ) Weighted average shares outstanding - basic 14,188 14,197 14,209 14,239 Net (loss) income per diluted share $ (0.66 ) $ 0.07 $ 0.03 $ (0.04 ) Weighted average shares outstanding - diluted 14,188 14,209 14,254 14,239 40 Fiscal Year 2023 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 21,558 $ 33,310 $ 30,740 $ 27,707 Cost of sales 13,255 19,840 19,755 20,268 Intangible asset impairment — — — 4,645 Gross profit 8,303 13,470 10,985 2,794 Selling, general and administrative 9,190 11,434 10,300 11,078 Research, development and engineering 1,393 1,517 1,804 2,597 Intangible asset impairment — — — 544 Severance expense 400 — — 265 Operating (loss) income (2,680 ) 519 (1,119 ) (11,690 ) Interest income 290 49 17 10 Interest expense (2 ) (155 ) (185 ) (178 ) Foreign currency (loss) gain (347 ) (168 ) 456 (30 ) Other (9 ) 13 15 12 (Loss) income before income taxes (2,748 ) 258 (816 ) (11,876 ) Income tax (benefit) provision (4 ) (2,946 ) 211 139 Net (loss) income $ (2,744 ) $ 3,204 $ (1,027 ) $ (12,015 ) Gross margin 38.5 % 40.4 % 35.7 % 10.1 % Operating margin (12.4 )% 1.6 % (3.6 )% (42.2 )% (Loss) income Per Share: Net (loss) income per basic share $ (0.20 ) $ 0.23 $ (0.07 ) $ (0.85 ) Weighted average shares outstanding - basic 14,008 14,028 14,058 14,166 Net (loss) income per diluted share $ (0.20 ) $ 0.23 $ (0.07 ) $ (0.85 ) Weighted average shares outstanding - diluted 14,008 14,157 14,058 14,166 Liquidity and Capital Resources Liquidity We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations through our industry cycles, under both normal and stressed conditions. We manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations throughout business cycles. We operate in the semiconductor capital equipment industry, which is cyclical, and we must ensure we have sufficient liquidity during the down cycles and varying macroeconomic conditions. Our liquidity plans are established within the context of our financial and strategic planning processes and consider the liquidity necessary to fund our operating commitments, which include purchase obligations for inventory and equipment, rent, payroll and general expenses. We also take into consideration our capital allocation and growth objectives, including investing in research and development and capital expenditures (including capacity assessments and IT systems). The success of our investment and 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 a loan and security agreement with UMB Bank, the sale of equity securities, which includes common stock sold in private transactions and public offerings, and cash generated from operations. 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. 41 Capital Allocation Our capital allocation strategy focuses on building shareholder value. We do this by first investing in ourselves and growing our capabilities. We then look to supplement and strengthen our capabilities through acquisitions and strategic investments. And finally, we provide the return realized by the investments to our stockholders. These three priorities are detailed as follows: • Invest in R&D and capital expenditures to strengthen our competitive position. Historically, our R&D efforts have focused on upgrades to existing product platforms as well as new product designs. Capital expenditures consist primarily of capacity expansion as well as investments in IT systems. • Invest in strategic acquisitions that will complement our strong platform of product offerings. In evaluating these opportunities, our objectives include enhancing our earnings and cash flows, adding complementary product offerings, expanding our geographic footprint, improving our production efficiency and expanding our customer base. As a result, we continue to manage our balance sheet to maintain adequate liquidity so that we may react quickly as opportunities arise. • Once the above priorities have been met, we evaluate the return of capital to shareholders, as we have done in the past. We have never paid dividends on our common stock, and we do not expect to pay dividends on common stock in the foreseeable future. However, our Board has from time to time authorized annual stock repurchase plans. Cash and Cash Flow The following table sets forth for the periods presented certain consolidated cash flow information, in thousands: Years Ended September 30, 2024 2023 2022 Net cash provided by (used in) operating activities $ 9,842 $ (7,701 ) $ 5,204 Net cash (used in) provided by investing activities $ (2,178 ) $ (37,830 ) $ 18,773 Net cash (used in) provided by financing activities $ (10,633 ) $ 11,738 $ (8,267 ) Effect of exchange rate changes on cash $ 922 $ 52 $ (1,672 ) Net (decrease) increase in cash and cash equivalents $ (2,047 ) $ (33,741 ) $ 14,038 Cash and cash equivalents, beginning of year $ 13,133 $ 46,874 $ 32,836 Cash and cash equivalents, end of year $ 11,086 $ 13,133 $ 46,874 A summary of our cash position, is as follows, in thousands, except working capital ratio: September 30, 2024 2023 Cash and cash equivalents $ 11,086 $ 13,133 Restricted cash $ — $ — Working capital $ 44,777 $ 51,471 Current ratio (current assets to current liabilities) 3.3:1 2.7:1 The decrease in cash and cash equivalents from September 30, 2023 of $2.0 million was primarily due to the full repayment of our term loan and revolving credit agreement with UMB Bank, which was funded with cash generated in operations. We maintain a portion of our cash and cash equivalents in Renminbis, a Chinese currency, at our operations in China; therefore, changes in the exchange rates have an impact on our cash balances. During periods of weakening demand, we typically generate cash from operating activities, which we may decide to reinvest in our business via strategic projects. Conversely, we are more likely to use operating cash flows for working capital requirements during periods of higher growth. 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, the incurrence of long-term debt and customer deposits. 42 Cash Flows from Operating Activities Cash provided by operating activities was $9.8 million in 2024 compared to cash used in operating activities of $7.7 million in 2023 and cash provided by operating activities of $5.2 million in 2022. During 2024, we decreased our accounts receivable, inventory, and contract asset balances as we completed shipments throughout the year, reducing our backlog. These cash inflows were partially offset by decreases in accounts payable and accrued liabilities as our purchasing activity decreased and the related liabilities were paid. During 2023, we used cash to increase our inventory balances in preparation for shipments scheduled over the next four quarters and to pay the related accounts payable. During 2022, we received several large customer deposits, primarily related to orders of our horizontal diffusion and high temp furnaces, which were expected to ship over the next four quarters. Cash Flows from Investing Activities Cash used in investing activities was $2.2 million in 2024, primarily consisting of $4.9 million in capital expenditures, partially offset by $2.7 million of proceeds from the sale of our real property in Arizona. Cash used in investing activities was $37.8 million in 2023, primarily consisting of $34.9 million in cash paid for the acquisition of Entrepix. Cash provided by investing activities was $18.8 million in 2022, primarily consisting of $19.9 million in proceeds from the sale of our real property in Massachusetts. Investing activities in 2024, 2023 and 2022 included capital expenditures of $4.9 million, $2.9 million and $1.1 million, respectively. We expect capital expenditures to decrease slightly in 2025, as we have completed our relocation projects but begain projects to implement new technology across our divisions. Cash Flows from Financing Activities In 2024, cash used in financing activities was $10.6 million, comprised primarily of $10.7 million payments on long-term debt. Our UMB term loan and revolving credit agreement has been paid in full and our remaining debt is a small amount of financing leases. In 2023, cash provided by financing activities was $11.7 million, comprised of $12.0 million in borrowings on our term loan and $1.2 million of proceeds received from the exercise of stock options partially offset by $1.5 million in payments on long-term debt. In 2022, cash used in financing activities was $8.3 million, comprised of $4.1 million of cash used for the repurchase of common stock and payments on long-term debt of $4.9 million, partially offset by $0.7 million of proceeds received from the exercise of stock options. Payments in long-term debt in 2022 include the full repayment of the $4.5 million mortgage balance on the real property in Massachusetts. Off-Balance Sheet Arrangements As of September 30, 2024, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the 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 We had the following contractual obligations as of September 30, 2024, in thousands: Contractual obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations $ 290 $ 101 $ 184 $ 5 $ — Lease obligations: Buildings 22,967 3,057 5,168 4,720 10,022 Office equipment — — — — — Vehicles 31 20 11 — — Total operating lease obligations 22,998 3,077 5,179 4,720 10,022 Purchase obligations 12,148 12,148 — — — Total $ 35,436 $ 15,326 $ 5,363 $ 4,725 $ 10,022 43 Acquisitions Our business strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable acquisition candidates, the negotiation of acceptable terms, our financial capabilities and access to capital, and general economic and business conditions. Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the foregoing. Critical Accounting Estimates See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the consolidated financial statements, the 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. On an on-going basis, we evaluate our estimates and judgments, including those related to income taxes, inventory valuation, business combinations, goodwill and long-lived assets. We base our estimates and judgments on historical experience, expectations regarding the future 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 estimate 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 “Item 1A. Risk Factors.” We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the estimates we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations. Refer to Note 1 to our consolidated financial statements included elsewhere in this report for a summary of each of the related accounting policies. Income Taxes. We file consolidated federal income tax returns in the United States for all subsidiaries except those in China, Singapore and the UK, where separate returns are filed. The calculation of tax liabilities for all jurisdictions involves significant judgment in identifying uncertain tax positions, estimating the amount of deferred tax assets that will be realized in the future and the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our operations and financial condition. For the years ended September 30, 2024 and 2023, we had no unrecognized tax benefit. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. It is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. If we were to determine that it is more likely than not that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that all or part of the net deferred tax assets would be realized, a tax benefit would be realized when all or part of the previously provided valuation allowance would be reversed. As of September 30, 2024, we have significant U.S. deferred tax assets that have a full valuation allowance and foreign deferred tax assets that have a partial valuation allowance. Any changes to the judgments related 44 to our valuation allowance could have a material impact on our results of operations. For the years ended September 30, 2024 and 2023, we had net deferred tax assets of $0.2 and $0.1 million. Inventory Valuation. We value our inventory at the lower of cost or net realizable value. Inventory cost includes the purchase price of parts or finished goods and freight and/or other overhead costs incurred to receive the inventory into our manufacturing facilities. We regularly review inventory quantities and record a write-down to net realizable value for excess and obsolete inventory. The write-down is primarily based on purchase history, historical inventory usage adjusted for expected changes in product demand, product offerings and production requirements. Our industry is characterized by customers in highly-cyclical industries, rapid technological changes, frequent new product developments and rapid product obsolescence. Changes in demand for our products or to our product offerings could result in further write-downs, which could have a material impact on our results of operations. During the year ended September 30, 2024, we recorded provisions to reduce inventories to their lower of cost and net realizable value of approximately $2.8 million compared to $2.6 million during the year ended September 30, 2023. Business Combination. We follow the acquisition method of accounting to record identifiable assets acquired and liabilities assumed in connection with acquired businesses at their estimated fair value as of the date of acquisition. Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and consist of non-compete agreements, backlog, customer relationships, developed technology and trade names. Determination of the estimated fair value of identifiable intangible assets requires judgment. The fair value of acquired identifiable intangible assets were estimated using various valuation methodologies. The multi-period excess earnings method was used to value the acquired developed technology and the distributor method for the acquired customer relationships. Both approaches are income-based methods, which required judgment in estimating appropriate discount rates, obsolescence, customer attrition, and remaining useful lives. Any adverse change in these factors, among others, could have a significant effect on the valuation of the intangible assets and could have a material effect on our consolidated financial statements. The acquired intangible assets all had finite lives, ranging from one to ten years. The fair value of identifiable intangible assets acquired in connection with our acquisition of Entrepix was $13.6 million. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. Goodwill . We perform an annual impairment test as of September 30, or more frequently if indicators of potential impairment exist, to determine whether the fair value of a reporting unit in which goodwill resides is less than its carrying value. We perform the first step of the goodwill impairment test, which compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired, and we are not required to perform additional analysis. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit). Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Our goodwill impairment test uses a weighting of the income approach and the market approach to estimate a reporting unit’s fair value. The income approach is based on a discounted future cash flow analysis that uses certain assumptions including: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments and working capital requirements to sustain and grow the business; and estimated discount rates based on the reporting unit’s weighted average cost of capital as derived by the Capital Asset Pricing Model and other methods, which includes observable market inputs and other data from identified comparable companies. The same estimates are also used internally for our capital budgeting process, and for long-term and short-term business planning and forecasting. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data, and we also perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units. The market approach is based on the application of appropriate market-derived multiples selected from (i) comparable publicly-traded companies and/or (ii) the implied transaction multiples derived from identified merger and acquisition activity in the market. Multiples are then selected based on a comparison of the reviewed data to that of the reporting unit and applied to relevant historical and 45 forecasted financial parameters such as levels of revenues, EBITDA, EBIT or other metrics. If actual results differ significantly from our projections, we may be required to record a material impairment charge. At the end of December 2023, we identified a triggering event. As a result of the decline in our stock price as of December 31, 2023, our book value materially exceeded our market value leading to a $6.4 million impairment charge in fiscal 2024. The impairment testing as of September 30, 2024, resulted in the fair value of our Thermal Processing Solutions segment exceeding its carrying value by approximately 44%, and the fair value of our Semiconductor Fabrication Solutions segment exceeding its carrying value by approximately 18%, resulting in no additional goodwill impairment. See Note 10 for additional information on goodwill by segment. Long-Lived Asset Impairment. Long-lived assets, including tangible and intangible assets with finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment whenever certain triggering events may indicate impairment. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset group to its carrying value. If the estimated undiscounted cash flows are not sufficient to recover the carrying value of the asset group, the Company then compares the carrying value of the individual long-lived assets with their estimated fair values. An impairment would be recorded for the excess of the carrying value over the fair value. If actual results differ significantly from our projections, we may be required to record a material impairment charge. As of September 30, 2024, the Company performed a qualitative impairment test on intangible assets and goodwill and concluded there was no further impairment. As of December 31, 2023, we identified a triggering event due to the decline in our stock price driving our market value materially below our book value. As a result, we recorded a $1.3 million impairment charge in fiscal 2024 to the intangible assets in our Semiconductor Fabrication Solutions segment. As of September 30, 2023, we identified a triggering event in our Semiconductor Fabrication Solutions segment primarily related to the prolonged downturn and general economic conditions in the semiconductor market, in addition to delays in the adoption of next-gen polishing tools, which reduced our cash flow projections. As a result, we recorded intangible asset impairment of $5.2 million. There were no impairments on long-lived assets during the year ended September 30, 2022. See Note 9 for additional information on intangible assets. Impact of Recently Issued Accounting Pronouncements For discussion of recently issued accounting pronouncements, see “Recently Issued Accounting Pronouncements” within “Note 1. Summary of Operations and Significant Accounting Policies” in “Item 8. Financial Statements and Supplementary Data.” ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, therefore, are not required to provide the information requested by this Item. 46 ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA The following documents are filed as part of this Annual Report on Form 10-K: Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID Number 185 ) 48 Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) 51 Consolidated Balance Sheets: September 30, 2024 and 2023 52 Consolidated Statements of Operations: Years ended September 30, 2024, 2023 and 2022 53 Consolidated Statements of Comprehensive Income (Loss): Years ended September 30, 2024, 2023 and 2022 54 Consolidated Statements of Shareholders’ Equity: Years ended September 30, 2024, 2023 and 2022 55 Consolidated Statements of Cash Flows: Years ended September 30, 2024, 2023 and 2022 56 Notes to Consolidated Financial Statements 57 Notes to Consolidated Financial Statements Note 1 Summary of Operations and Significant Accounting Policies 57 Note 2 Acquisitions 64 Note 3 Earnings Per Share & Diluted Earnings Per Share 66 Note 4 Severance 67 Note 5 Inventories 67 Note 6 Property, Plant and Equipment 68 Note 7 Sale and Leaseback of Real Estate 68 Note 8 Leases 69 Note 9 Intangible Assets 70 Note 10 Goodwill 71 Note 11 Income Taxes 72 Note 12 Long-Term Debt 76 Note 13 Equity and Stock-Based Compensation 78 Note 14 Benefit Plans 80 Note 15 Commitments and Contingencies 80 Note 16 Reportable Segments 81 Note 17 Major Customers and Sales by Country 82 Note 18 Geographic Regions 83 47 REPORT OF INDEPEND ENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors Amtech Systems, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheet of Amtech Systems, Inc. and subsidiaries (the Company) as of September 30, 2024, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and the results of its operations and its cash flows for the year ended September 30, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance 48 with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Entrepix Inc. developed technology intangible asset As discussed in Notes 1 and 9 to the consolidated financial statements, the Company regularly reviews intangible assets to determine if facts and circumstances exist which indicate the carrying amount of these assets may not be recoverable. When indicators exist, recoverability of assets is measured by comparison of the carrying value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group is determined not to be recoverable, the Company performs an analysis of the fair value of the individual long-lived assets and will recognize an impairment loss when fair value is less than the carrying value of such long-lived assets. In the first quarter of the year ended September 30, 2024, the Company recorded an impairment of the Entrepix Inc. developed technology intangible asset of $0.8 million. We identified the evaluation of the fair value of the Entrepix, Inc. developed technology intangible asset as of the end of the first quarter 2024 as a critical audit matter. There was a high degree of subjective auditor judgment in evaluating the key assumptions used in the multi-period excess earnings method to estimate the fair value of the Entrepix, Inc. developed technology asset. Specifically, minor changes to the key assumptions, including projected revenues and expenses, the long-term growth rate, contributory asset charges, and the discount rate, could have a significant effect on the Company’s assessment of the intangible asset fair value. Additionally, the use of professionals with specialized skills and knowledge was required to assess certain of these key assumptions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s long-lived asset impairment analysis process. These included controls related to the development of the key assumptions used to estimate fair value of the Entrepix, Inc. developed technology intangible asset. We evaluated the projected revenue and expenses by comparing them with the historical results of the asset group and assessing the impacts of internal and/or external economic factors. We involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating the long-term growth rate by comparing it to a long-term growth rate range that was independently developed using publicly available industry and economic growth rates • evaluating the contributory asset charges by comparing the risk profile of each contributory asset to the risk profile of the developed technology intangible asset and the risk of the overall business (Entrepix, Inc.) • evaluating the discount rate by comparing it to a discount rate that was independently developed using publicly available market data for comparable companies. 49 Valuation of the Semiconductor Fabrication Solutions reporting unit As discussed in Notes 1 and 10 to the consolidated financial statements, the Company evaluates goodwill for impairment on an annual basis as of September 30, or when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company's goodwill impairment test uses a weighting of the income and market approach to estimate a reporting unit’s fair value. The income approach is based on a discounted cash flow analysis and involves the use of assumptions, including projections of revenues and expenses, the long-term growth rate, and the selection of discount rates. In the first quarter of the year ended September 30, 2024, the Company recorded an impairment of goodwill in the Semiconductor Fabrication Solutions reporting unit of $6.4 million. The Company has $21.3 million of goodwill as of September 30, 2024, of which $15.4 million relates to the Semiconductor Fabrication Solutions reporting unit. We identified the evaluation of the fair value of the Semiconductor Fabrication Solutions reporting unit as of the end of the first quarter 2024 and as of September 30, 2024 as a critical audit matter. There was a high degree of subjective auditor judgment in evaluating the key assumptions used in the discounted cash flow analysis used to estimate the fair value of the Semiconductor Fabrication Solutions reporting unit. Specifically, minor changes to key assumptions, including projected revenue and expenses, the long-term growth rate, and the discount rate, could have a significant effect on the Company’s assessment of the fair value of the reporting unit. Additionally, the use of professionals with specialized skills and knowledge was required to assess these key assumptions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment process. These included controls related to the determination of the estimated fair value of the reporting unit and the development of the key assumptions. We evaluated the projected revenue and expenses by comparing them to the historical results of the reporting unit and assessing the impacts of internal and/or external economic factors. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating the long-term growth rate by comparing it to a long-term growth rate range that was independently developed using publicly available industry and economic growth rates • evaluating the discount rate by comparing it to a discount rate that was independently developed using publicly available market data for comparable companies. /s/ KPMG LLP We have served as the Company’s auditor since 2024. Phoenix, Arizona December 12, 2024 50 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Amtech Systems, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheet of Amtech Systems, Inc. (an Arizona corporation) and subsidiaries (the “Company”) as of September 30, 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the two years in the period ended September 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We served as the Company’s auditor from 2021 to 2024. Phoenix, Arizona December 14, 2023 51 PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated B alance Sheets (in thousands, except share and per share data) September 30, Assets 2024 2023 Current Assets Cash and cash equivalents $ 11,086 $ 13,133 Accounts receivable - Net 21,989 26,474 Inventories 26,867 34,845 Income taxes receivable 132 632 Other current assets 4,302 6,105 Total current assets 64,376 81,189 Property, Plant and Equipment - Net 11,647 9,695 Right-of-Use Assets - Net 16,596 11,217 Intangible Assets - Net 4,004 6,114 Goodwill 21,261 27,631 Deferred Income Taxes - Net 185 101 Other Assets 884 1,074 Total Assets $ 118,953 $ 137,021 Liabilities and Shareholders’ Equity Current Liabilities Accounts payable $ 5,356 $ 10,815 Accrued compensation and related taxes 2,057 3,481 Accrued warranty expense 602 965 Other accrued liabilities 477 1,551 Current portion of finance lease liabilities and long-term debt 101 2,265 Current portion of long-term operating lease liabilities 2,041 2,623 Contract liabilities 8,965 8,018 Total current liabilities 19,599 29,718 Finance Lease Liabilities and Long-Term Debt 189 8,422 Long-Term Operating Lease Liabilities 15,240 8,894 Income Taxes Payable 1,510 1,575 Other Long-Term Liabilities 57 47 Total Liabilities 36,595 48,656 Commitments and Contingencies (Note 15) Shareholders’ 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: 14,258,879 and 14,185,977 in 2024 and 2023, respectively 143 142 Additional paid-in capital 128,466 126,963 Accumulated other comprehensive loss ( 720 ) ( 1,695 ) Retained deficit ( 45,531 ) ( 37,045 ) Total Shareholders’ Equity 82,358 88,365 Total Liabilities and Shareholders’ Equity $ 118,953 $ 137,021 The accompanying notes are an integral part of these consolidated financial statements. 52 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statem ents of Operations (in thousands, except per share data) Years Ended September 30, 2024 2023 2022 Revenue, net $ 101,214 $ 113,315 $ 106,298 Cost of sales 64,134 73,118 66,787 Intangible asset impairment 849 4,645 — Gross profit 36,231 35,552 39,511 Selling, general and administrative 33,814 42,002 28,300 Research, development and engineering 4,193 7,311 6,390 Gain on sale of fixed assets ( 2,197 ) — ( 12,465 ) Goodwill impairment 6,370 — — Intangible asset impairment 430 544 — Severance expense 350 665 — Operating (loss) income ( 6,729 ) ( 14,970 ) 17,286 Interest income 57 366 210 Interest expense ( 557 ) ( 520 ) ( 164 ) Foreign currency (loss) gain ( 345 ) ( 89 ) 1,066 Other 63 31 387 (Loss) income before income taxes ( 7,511 ) ( 15,182 ) 18,785 Income tax (benefit) provision 975 ( 2,600 ) 1,418 Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 (Loss) Income Per Share: Net (loss) income per basic share $ ( 0.60 ) $ ( 0.89 ) $ 1.24 Net (loss) income per diluted share $ ( 0.60 ) $ ( 0.89 ) $ 1.22 Weighted average shares outstanding: Basic 14,208 14,065 14,014 Diluted 14,208 14,065 14,184 The accompanying notes are an integral part of these consolidated financial statements. 53 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of C omprehensive Income (Loss) (in thousands) Years Ended September 30, 2024 2023 2022 Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 Foreign currency translation adjustment 975 72 ( 1,781 ) Comprehensive (loss) income $ ( 7,511 ) $ ( 12,510 ) $ 15,586 The accompanying notes are an integral part of these consolidated financial statements. 54 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders’ Equity (in thousands) Common Stock Treasury Stock Accumulated Additional Other Total Par Paid-in Comprehensive Retained Shareholders’ Shares Value Shares Cost Capital Income (Loss) Deficit Equity Balances at September 30, 2021 14,304 $ 143 — $ — $ 126,380 $ 14 $ ( 40,903 ) $ 85,634 Net income — — — — — — 17,367 17,367 Translation adjustment — — — — — ( 1,781 ) — ( 1,781 ) Stock compensation expense — — — — 543 — — 543 Repurchase of treasury stock — — ( 434 ) ( 4,115 ) — — — ( 4,115 ) Retirement of treasury stock ( 434 ) ( 4 ) 434 4,115 ( 3,184 ) — ( 927 ) — Stock options exercised 124 1 — — 719 — — 720 Balances at September 30, 2022 13,994 $ 140 — $ — $ 124,458 $ ( 1,767 ) $ ( 24,463 ) $ 98,368 Net loss — — — — — — ( 12,582 ) ( 12,582 ) Translation adjustment — — — — — 72 — 72 Stock compensation expense — — — — 1,272 — — 1,272 Stock options exercised 192 2 — — 1,233 — — 1,235 Balances at September 30, 2023 14,186 $ 142 — $ — $ 126,963 $ ( 1,695 ) $ ( 37,045 ) $ 88,365 Net loss — — — — — — ( 8,486 ) ( 8,486 ) Translation adjustment — — — — — 975 — 975 Stock compensation expense — — — — 1,530 — — 1,530 Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes 58 1 — — ( 112 ) — — ( 111 ) Stock options exercised 15 — — — 85 — — 85 Balances at September 30, 2024 14,259 $ 143 — $ — $ 128,466 $ ( 720 ) $ ( 45,531 ) $ 82,358 The accompanying notes are an integral part of these consolidated financial statements. 55 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statem ents of Cash Flows (in thousands) Years Ended September 30, 2024 2023 2022 Operating Activities Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 3,029 5,012 1,729 Write-down of inventory 2,813 2,620 102 Non-cash intangible asset impairment 7,649 5,189 — Provision for allowance for doubtful accounts 18 14 ( 32 ) Deferred income taxes ( 84 ) ( 2,513 ) 592 Non-cash stock-based compensation expense 1,530 1,272 543 Gain on sale of fixed assets ( 2,197 ) — ( 12,465 ) Other, net — 196 — Changes in operating assets and liabilities: Accounts receivable 4,468 4,410 ( 2,479 ) Inventories 5,135 ( 6,294 ) ( 3,684 ) Contract and other assets 4,773 ( 529 ) ( 2,203 ) Accounts payable ( 4,942 ) 1,459 ( 1,080 ) Accrued income taxes 436 ( 2,897 ) 623 Accrued and other liabilities ( 5,248 ) ( 1,895 ) 584 Contract liabilities 948 ( 1,163 ) 5,607 Net cash provided by (used in) operating activities 9,842 ( 7,701 ) 5,204 Investing Activities Purchases of property, plant and equipment ( 4,878 ) ( 2,898 ) ( 1,135 ) Acquisitions, net of cash and cash equivalents acquired — ( 34,938 ) — Proceeds from sale of property, plant and equipment 2,700 6 19,908 Net cash (used in) provided by investing activities ( 2,178 ) ( 37,830 ) 18,773 Financing Activities Proceeds from the exercise of stock options 85 1,235 720 Repurchase of common stock — — ( 4,115 ) Payments on long-term debt ( 10,671 ) ( 1,497 ) ( 4,872 ) Borrowings on long-term debt 64 12,000 — Payment of payroll taxes on stock-based compensation through shares withheld ( 111 ) — — Net cash (used in) provided by financing activities ( 10,633 ) 11,738 ( 8,267 ) Effect of Exchange Rate Changes on Cash and Cash Equivalents 922 52 ( 1,672 ) Net (Decrease) Increase in Cash and Cash Equivalents ( 2,047 ) ( 33,741 ) 14,038 Cash and Cash Equivalents, Beginning of Year 13,133 46,874 32,836 Cash and Cash Equivalents, End of Year $ 11,086 $ 13,133 $ 46,874 Supplemental Cash Flow Information: Income tax payments, net $ 623 $ 2,818 $ 386 Interest paid $ 558 $ 461 $ 164 Supplemental Non-cash Operating, Financing and Investing Activities: Transfer of inventory to property, plant, and equipment $ 50 $ — $ 169 Transfer of property, plant, and equipment to inventory $ ( 20 ) $ — $ — Payables due for fixed asset additions $ 116 $ 633 $ 152 Return of fixed assets resulting in loan payoff $ — $ 184 $ — Modification of leased assets resulting in a reduction of lease liabilities $ — $ 2,254 $ — Leased assets obtained in exchange for new operating lease liabilities $ 8,160 $ 57 $ 3,686 Leased assets obtained in exchange for new finance lease liabilities $ 207 $ 46 $ 42 The accompanying notes are an integral part of these consolidated financial statements. 56 Notes to Consolidated Financial Statements For the Years Ended September 30, 2024, 2023 and 2022 1. Summary of Operatio ns and Significant Accounting Policies Description of Business – Amtech provides equipment, consumables and services for semiconductor wafer fabrication and device packaging. Our products are used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon (Si) power devices, digital and analog devices, power electronic packages, advanced semiconductor packages and electronic assemblies. We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe. We serve niche markets in industries that are experiencing 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. Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2024, 2023 and 2022 relate to the fiscal years ended September 30, 2024, 2023 and 2022 , respectively. Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates – The preparation of Consolidated Financial Statements in conformity with US GAAP requires us to make estimates and judgments that affect the amounts reported in our Consolidated Financial Statements and the accompanying notes. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, realizability of intangible assets, deferred costs and deferred tax assets, standalone selling prices and future contract volumes and the direct costs to complete the performance obligation for revenue recognition, fair value of stock options, performance-based restricted stock units and warrants. Cash and Cash Equivalents – We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our cash and cash equivalents consist of amounts invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts. We maintain our cash and cash equivalents in multiple financial institutions. Balances in the United States, which account for approximately 66 % and 56 % of total cash balances as of September 30, 2024 and 2023, respectively, are primarily invested in financial institutions insured by the FDIC as well as a money market account. The remainder of our cash is maintained with financial institutions with reputable credit in China, Singapore, the UK and Malaysia. We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. At September 30, 2024 and 2023, account balances exceeded insured limits by approximatel y $ 5.7 million and $ 6.0 million, respectively. We have not experienced any losses on such accounts. Accounts Receivable and Allowance for Credit Losses – Accounts receivable are recorded at the sales price of products sold to customers on trade credit terms. We establish a valuation allowance to reflect our best estimate of expected losses inherent in our accounts receivable balance. The allowance is based on our evaluation of the aging of the receivables, historical write-offs, the current economic environment and communications with the customer. We write off individual accounts against the allowance when we no longer believe that it is probable that we will collect the receivable because we become aware of a customer’s inability to meet its financial obligations. The following is a summary of the activity in our allowance for credit losses, in thousands: Years Ended September 30, 2024 2023 2022 Balance at beginning of year $ 146 $ 114 $ 188 Acquired allowance — 125 — Provision 18 14 ( 34 ) Write offs ( 48 ) ( 114 ) 6 Adjustment (1) ( 13 ) 7 ( 46 ) Balance at end of year $ 103 $ 146 $ 114 (1) Primarily foreign currency translation adjustments. 57 Our net accounts receivable as of September 30, 2024, 2023 and 2022 w as $ 22.0 m illion, $ 26.5 million and $ 25.0 million, respectively. Inventories – We value our inventory at the lower of cost (first-in, first-out method) or net realizable value. Inventory cost includes the purchase price of parts or finished goods, labor, overhead and any freight cost incurred to receive the inventory into our manufacturing facilities. We regularly review inventory quantities and record a write-down to net realizable value for excess and obsolete inventory. The write-down is primarily based on historical inventory usage adjusted for expected changes in product demand and production requirements. Our industry is characterized by customers in highly-cyclical industries, rapid technological changes, frequent new product developments and rapid product obsolescence. Changes in demand for our products could result in further write-downs. Other Current Assets – Other current assets consist of vendor deposits and prepaid expenses. No item included in other current assets makes up more than 5 % of total current assets. Property, Plant and Equipment – Property, plant and equipment are recorded at cost upon acquisition. We begin depreciation and amortization when an asset is both in the location and condition for its intended use. Maintenance and repairs are charged to expense as incurred. The cost of property retired or sold and the related accumulated depreciation and amortization are removed from the applicable accounts when disposition occurs and any gain or loss is recognized. Depreciation and amortization are computed using the straight-line method over the estimated useful life of the asset. Useful lives for equipment and machinery range from three to seven years ; for leasehold improvements from three to fifteen years ; for furniture and fixtures from five to ten years ; for software from three to seven years and for buildings from 20 to 30 years . Reviews are regularly performed to determine whether facts and circumstances exist which indicate that the useful life is shorter than originally estimated or the carrying amount of assets may not be recoverable. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets. Leases – 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 Consolidated Balance Sheets. Balances related to financing leases are immaterial and are included in property, plant and equipment, operating lease liabilities, finance lease liabilities and long-term debt in our 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 lease 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, which we include in the recognition of the ROU asset and lease liability, when it is reasonably certain that we will exercise that option. We lease office space, buildings, land, vehicles and equipment. We made an accounting policy election not to separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and buildings. Lease agreements with an initial term of 12 months or less with no renewal options are not recorded on the balance sheet. Instead, we recognize the lease expense as incurred over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have one lease that requires the underlying asset to be returned to its original condition at the end of the lease term. The related asset retirement obligation, which is immaterial, is reflected within other long-term liabilities in our Consolidated Balance Sheets. Certain lease agreements include one or more options to renew, with individual option terms that can extend the lease term from one to five years . The exercise of lease renewal options is at our sole discretion. Some equipment leases 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. In June 2022, we entered into a sale-leaseback transaction to facilitate a future move of our Massachusetts operations, pursuant to which we sold the property to a third party and agreed to lease the property back for two years. To determine whether the transfer of the property should be accounted for as a sale, we evaluated whether we transferred control to the third party in accordance with the revenue recognition guidance set forth in ASC 606. The transfer was 58 deemed to be a sale at market terms. Therefore, we recognized the transaction price for the sale based on the cash proceeds received, derecognized the carrying amount of the underlying assets and recognized a gain in the Consolidated Statements of Operations for the difference between the carrying value of the asset and the transaction price. We then accounted for the leaseback in accordance with our lease accounting policy. Intangible Assets – Intangible assets acquired in business combinations are capitalized and subsequently amortized on a straight-line basis over their estimated useful life. We review our intangible assets for impairment when events or circumstances indicate the carrying value may not be recoverable. When indicators exist, recoverability of assets is measured by a comparison of the carrying value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group is determined not to be recoverable, the Company performs an analysis of the fair value of the individual long-lived assets and will recognize an impairment loss when the fair value is less than the carrying value of such long-lived assets. Patent costs consist primarily of legal and filing fees incurred to file patents on proprietary methods and technology we developed. Patent costs are expensed when incurred, as they are insignificant. In the first quarter of the year ended September 30, 2024 and the fourth quarter of the year ended September 30, 2023, we recorded an impairment of definite lived intangible assets in our Semiconductor Fabrication Solutions segment. See Note 9 for a description of the facts and circumstances leading to the intangible asset impairment. Goodwill – Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is not subject to amortization but is tested for impairment annually or when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that there is impairment, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit). In the first quarter of the year ended September 30, 2024, we recorded an impairment of goodwill in our Semiconductor Fabrication Solutions segment. Additi onal information on impairment testing of goodwill is set forth in Note 10. Revenue Recognition – We recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a product or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation based upon the relative standalone selling price ("SSP") for each performance obligation and is recognized as revenue upon satisfaction of the performance obligation. We have elected the practical expedient in ASC 606 whereby an entity need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. We have also elected the practical expedient in ASC 606 whereby an entity may recognize revenue on an as-invoiced basis in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value the provided to the customer. To record revenue properly, we apply the following five steps: 1) Identify the contract with the customer A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that will be transferred is probable based on the customer’s intent and ability to pay the promised consideration. 2) Identify the performance obligations in the contract Performance obligations are identified based on the goods and services that will be transferred to the customer that are both (i) 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 (ii) are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises to the customer 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. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation. 59 Our equipment sales consist of multiple promises, including the delivery of the system itself and obligations that are not delivered simultaneously with the system, such as installation services and training. In most cases, these services require minimal effort and are immaterial in the context of the contract. Therefore, equipment and related services are treated as one performance obligation. Customers who purchase new systems are provided an assurance-type warranty, generally for periods of 12 to 36 months. Assurance-type warranties are not considered a performance obligation. We account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Our obligations for returns and/or refunds are immaterial in all periods presented. 3) Determine the transaction price The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods and services to the customer. The transaction price is based on the price reflected in the individual customer’s purchase order. Occasionally, our customers earn a commission on the purchase and/or resale of our products. These payments to customers are recorded as a reduction of revenue an d are less than 5 % of our total revenues. In substantially all of our sales transactions, we incur incremental costs to obtain contracts with customers, in the form of sales commissions. We maintain a commission program which rewards our sales representatives for system sales and our employees for system sales and other individual goals. We have elected a practical expedient to allow for the recognition of commission expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Based on the nature of our contracts with customers, we expense all commissions as incurred based upon the expectation that the amortization period would be one year or less. 4) Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each distinct performance obligation. When required, the SSP for each performance obligation is based on observable data from standalone sales. To determine the SSP for labor-related performance obligations, we use directly observable inputs based on the standalone sale prices for these services. 5) Recognize revenue when, or as, we satisfy a performance obligation We satisfy performance obligations either over time or at a point in time. Revenue is recognized over time if either (i) the customer simultaneously receives and consumes the benefits provided by our performance, (ii) our performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) our performance does not create an asset with an alternative use to the entity and we have an enforceable right to payment for performance completed to date. If we do not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer. For over time recognition, we are required to select a single revenue recognition method for the performance obligation that faithfully depicts our performance in transferring control of the goods and services. Equipment and related product revenues (e.g., furnace systems, system add-ons, machinery, consumables and spare parts) are recognized at a point in time, when they are shipped or delivered, depending on contractual terms. Revenue for services, including maintenance services, is recognized over time based on hours incurred, as the hours incurred align to the maintenance activities performed. We also utilize the as-invoiced practical expedient in certain 60 cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value provided to the customer. We exclude from the transaction price all sales taxes that are assessed by a governmental authority and that are imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (for example, sales, use, value added, and certain excise taxes). Sales taxes are presented on a net basis (excluded from revenues) in our Consolidated Statements of Operations. Our remaining performance obligations as of September 30, 2024, have an original duration o f one year or less. Our customers generally have payment terms of 30 - 90 days . We do not have any payment terms that exceed one year from the point we have satisfied the related performance obligations. Management reviews disaggregated revenue at the reportable segment level. Revenue-generating transactions vary between our reportable segments due to several factors. For example, lead times vary among our reportable segments and among our products. Most of the revenue for our Semiconductor Fabrication Solutions segment results from the sale of consumables, rather than equipment sales. These consumables have a much shorter production period than equipment produced by our other reportable segment. Due to these variations between reportable segments, management determined that disaggregated revenue by reportable segment sufficiently depicts how economic factors affect the nature, amount, timing and uncertainty of our revenue and cash flows. See Note 16 for additional information on our reportable segments. Contract Assets – Contract assets consist of amounts we are not legally able to invoice but have completed the related performance obligation. These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open performance obligations (e.g., we have recognized revenue in an amount greater than the amount that is billable under the contract). There wer e no co ntract assets at September 30, 2024 and 2023 . Contract Liabilities – Contract liabilities are reflected in current liabilities on the Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months. Contract liabilities include customer deposits and deferred revenue. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations. The following is a summary of activity for contract liabilities, in thousands: Years Ended September 30, 2024 2023 2022 Beginning balance $ 8,018 $ 7,231 $ 1,624 New deposits 5,442 4,058 7,231 Deferred revenue 168 169 — Revenue recognized ( 4,663 ) ( 3,005 ) ( 1,624 ) Adjustment — ( 435 ) — Ending balance $ 8,965 $ 8,018 $ 7,231 As of September 30, 2024, we had approximately $ 25.3 million of remaining performance obligations, which included recognized contract liabilities as well as amounts to be invoiced and recognized in future periods. As of September 30, 2023, we had approximately $ 51.8 million of remaining performance obligations. The orders included in our remaining performance obligations are expected to ship within the next twelve months. Warranty – A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized. While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through September 30, 2024, we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs. In addition, technological changes or previously unknown defects in raw materials or components may result in more extensive and frequent warranty service than anticipated, which could result in an increase in our warranty expense. 61 The following is a summary of activity in accrued warranty expense, in thousands: Years Ended September 30, 2024 2023 2022 Beginning balance $ 965 $ 871 $ 545 Additions for warranties issued during the period 226 590 821 Costs incurred during the period ( 19 ) ( 64 ) ( 36 ) Changes related to pre-existing warranties ( 570 ) ( 432 ) ( 459 ) Ending balance $ 602 $ 965 $ 871 Shipping Expense – Shipping expenses were $ 2.0 million, $ 2.6 million and $ 2.4 million for 2024, 2023 and 2022 , respectively, and are included in selling, general and administrative expenses. Advertising Expense – Advertising costs are expensed as incurred. Advertising expenses wer e $ 0.5 million, $ 0.6 million and $ 0.4 million for 2024, 2023 and 2022 , respectively, and are included in selling, general and administrative expenses. Stock-Based Compensation – We measure compensation costs relating to share-based payment transactions based upon the grant-date fair value of the award. Those costs are recognized as expense over the requisite service period, which is generally the vesting period, with forfeitures recognized as they occur. We estimate the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model requires us to apply estimates, including expected stock price volatility, expected life of the option and the risk-free interest rate. We issue new shares under our existing equity plans upon the exercise of stock options. We recognize compensation expense associated with the issuance of RSUs over the requisite service period for each respective grant. The total compensation expense associated with RSUs represents the value based upon the number of RSUs awarded multiplied by the closing price of our common stock on the date of grant. Recipients of RSUs do not have voting or dividend rights until the vesting conditions are satisfied and shares are released. We issue new shares under our existing equity plans upon the vesting of RSUs. Research, Development and Engineering Expenses – RD&E expenses consist primarily 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. RD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E. However, from time to time we add functionality to our products or develop new products during engineering and manufacturing to fulfill specifications in a customer’s order, in which case the cost of development, along with other costs of the order, are charged to cost of goods sold. Foreign Currency Transactions and Translation – We use the U.S. dollar as our reporting currency. Our operations in the UK, 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 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 shareholders’ 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. Income Taxes – We file consolidated federal income tax returns in the United States for all subsidiaries except those in China, Singapore and the UK, where separate returns are filed. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and deferred tax liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to 62 reverse. The effect of a change in tax rates on deferred tax assets and deferred tax liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law and results of recent operations. If we determine that we are not be able to realize our deferred tax assets, we make an adjustment to the deferred tax asset to recognize only the portion of the asset that is more likely than not to be realized by recording a valuation allowance. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to uncertain tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties, if applicable, are included on the income taxes payable long-term line in the Consolidated Balance Sheets. Concentrations of Credit Risk – Our customers are primarily manufacturers of semiconductor substrates and devices and electronic assemblies. 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 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 September 30, 2024, one Thermal Processing Solutions customer individually represe nted 12 % of accounts receivable. As of September 30, 2023 , two Thermal Processing Solutions customers individually represented 17 % and 17 % of accounts receivable. Refer to Note 18 for information regarding revenue and assets in other countries subject to fluctuation in foreign currency exchange rates. Fair Value of Financial Instruments – We group our financial assets and liabilities measured at fair value on a recurring basis into three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1 – Valuation is based upon quoted market price for identical instruments traded in active markets. Level 2 – Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques include use of discounted cash flow models and similar techniques. It is our policy to use observable inputs whenever reasonably practicable in order to minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including interest rate yield curves, option volatilities and currency rates. In certain cases, where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future valuations. Cash, and Cash Equivalent – Included in cash and cash equivalents in the Consolidated Balance Sheets are money market funds and time deposit accounts. Cash equivalents are classified as Level 1 in the fair value hierarchy. 63 Receivables and Payables – The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments. Debt – The Loan Agreement was fully repaid in the fourth quarter of 2024, and was subsequently terminated effective September 11, 2024. The carrying value of debt under our Loan Agreement was based on fixed interest rates. At September 30, 2023, the carrying value of the Company's total debt was $ 10.6 million, which approximated fair value. The fair value for the Loan Agreement was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and is therefore classified as Level 2 in the fair value hierarchy. Recently Issued Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2023-07”), which requires disclosure of additional information about specific expense categories underlying certain income statement expense line items. This ASU is effective for our annual periods beginning October 1, 2027, and requires either prospective or retrospective application. We are currently evaluating the impact of this ASU on our disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures. Adjustments to the annual disclosure of income taxes include: A tabular rate reconciliation comprised of eight specific categories. Income taxes paid, disaggregated between significant federal, state, and foreign jurisdictions. Eliminating requirements to disclose the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made. Adds a requirement to disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations disaggregated between domestic and foreign. The ASU is effective for public business entities for fiscal years beginning on or after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 should be applied on a prospective basis. Retrospective application is permitted. This ASU is not expected to have a material effect on our financial condition or results of operations. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for public business entities for fiscal years beginning after December 15, 2023, and for interim reporting periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact this ASU will have on our disclosures. There were no other new accounting pronouncements issued or effective as of September 30, 2024 that had or are expected to have a material impact on our consolidated financial statements. 2. Acquisi tion On January 17, 2023 (the “Closing Date”), the Company acquired through a reverse triangular merger 100 % of the issued and outstanding shares of capital stock of Entrepix, Inc., an Arizona corporation (“Entrepix”), which primarily manufactures chemical mechanical polishing (“CMP”) technology. Entrepix’s CMP technology portfolio and water cleaning equipment complements our existing substrate polishing and wet process chemical offerings. Under the terms of the Agreement and Plan of Merger dated January 17, 2023 (the “Merger Agreement”), Emerald Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), merged with and into Entrepix (the “Merger”), resulting in Entrepix surviving the Merger and becoming a wholly-owned subsidiary of the Company (the “Acquisition”). On the Closing Date, in contemplation of the Acquisition, the Company entered into a Loan and Security Agreement with UMB Bank, N.A. (the “Lender”), under which the Lender provided the Company with (i) a $ 12.0 million term loan maturing January 17, 2028 (“Term Loan”), and (ii) an $ 8.0 million revolving loan facility maturing January 17, 2024 (see Note 12). The proceeds of the Term Loan were used to partially fund the Acquisition. 64 The Acquisition is accounted for using the acquisition method of accounting for business combinations under FASB ASC Topic No. 805, Business Combinations (“ASC 805”), with Amtech representing the accounting acquirer under this guidance. The Company elected to apply pushdown accounting per ASC 805-50-50-5. Summary of Consideration Transferred – The total consideration for the Acquisition was $ 39.2 million, consisting of $ 35.2 million cash consideration to the sellers and $ 4.0 million cash paid for debt and Entrepix transaction costs. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Such assets include synergies the Company expects to achieve, such as deeper penetration into an overlapping customer base, complementary product offerings, and cost redundancy reductions. In accordance with the measurement principles in ASC 820, "Fair Value Measurement", the purchase consideration for the Acquisition has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including a residual amount of goodwill, none of which is deductible for tax purposes. The recorded amounts of acquired accounts receivable and accounts payable approximate their fair value because of the short maturities of these assets and liabilities. The fair value of acquired property, plant and equipment was based on quoted market prices for similar assets in active markets. The fair value of acquired identifiable intangible assets were estimated using various valuation methodologies, including the multi-period excess earnings method, the relief from royalty method and the distributor method. Amtech’s acquisition costs incurred we re $ 2.5 million as of the year ended September 30, 2023, and were recorded as selling, general and administrative expenses in the accompanying Consolidated Statements of Operations . The following table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed, in thousands: September 30, 2023 Fair value of total cash consideration transferred $ 39,227 Estimated fair value of identifiable assets acquired and liabilities assumed: Cash and cash equivalents $ 4,289 Accounts receivable, net 5,884 Inventories 5,683 Other current assets 179 Property, plant, and equipment 2,040 Right-of-use assets 2,246 Intangible assets 13,600 Goodwill 16,463 Other assets 80 Total assets acquired 50,464 Accounts payable 1,574 Other accrued liabilities 1,994 Contract liabilities 1,949 Income taxes payable 985 Current portion of long-term operating lease liabilities 515 Long-term operating lease liabilities 1,730 Deferred tax liability 2,490 Total liabilities assumed 11,237 Net assets acquired $ 39,227 The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgment. In accordance with ASC 805, the Company has up to one year from the acquisition date (referred to as the measurement period) to account for changes in the fair values of the identifiable assets acquired and the liabilities assumed in the acquired entity. As of January 17, 2024, the measurement period is closed. The fair value associated with acquired intangible assets and their associated weighted-average amortization periods consist of the following, in thousands: 65 Classification of Amortization Amount Weighted-Average Amortization Period Developed technology Cost of sales $ 6,700 5.0 years Customer relationships Selling, general and administrative 2,800 10.0 years Backlog Selling, general and administrative 2,100 1.0 year Trade names Selling, general and administrative 1,800 10.0 years Noncompetition agreements Selling, general and administrative 200 5.0 years Total intangible assets $ 13,600 6.1 years Unaudited Pro Forma Financial Information – Entrepix is included in the Company’s consolidated results beginning January 17, 2023. Total revenues and net loss attributable to Entrepix for the period from January 17, 2023 to September 30, 2023 wer e $ 18.6 million and $( 3.7 ) million, respectively. The following unaudited pro forma financial information presents the combined results of operations of Amtech and Entrepix, in thousands, as if the acquisition occurred on October 1, 2021. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on the date indicated or of results that may occur in the future. Year Ended September 30, 2023 2022 Revenues, Net $ 121,020 $ 129,781 Net (Loss) Income $ ( 13,099 ) $ 13,946 The unaudited pro forma financial information presented above include the following adjustments: Year ended September 30, 2023 and September 30, 2022 • incremental of amortization expense on intangible assets acquired of $ 1.0 million and $ 3.9 mill ion for the year ended September 30, 2023 and September 30, 2022, respectively; • reversal of depreciation expense for property, plant, and equipment of $ 0.2 million and $ 0.2 million for the year ended September 30, 2023 and September 30, 2022, respectively; • incremental interest expense on the Term Loan of $ 0.6 million and $ 0.7 million for the year ended September 30, 2023 and September 30, 2022, respectively; and • non-recurring adjustments directly attributable to the business combination, including acquisition related costs of $ 2.5 million for the year ended September 30, 2022. The unaudited pro forma financial information includes adjustments to align accounting policies, which were materially similar to the Company’s accounting policies. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma financial information presented. 3. Earnings Per Share & Diluted Earnings Per Share Basic EPS is computed by dividing net income 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. Dilutive potential common shares include outstanding RSUs and stock options. In the case of a net loss, diluted EPS is calculated in the same manner as basic EPS. For the years 2024, 2023 and 2022 , 798,000 , 327,000 and 189,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These share-based awards could become dilutive in the future. 66 A reconciliation of the denominators of the basic and diluted EPS calculations follows, in thousands, except per share amounts: Years Ended September 30, 2024 2023 2022 Numerator: Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 Denominator: Weighted-average shares used to compute basic EPS 14,208 14,065 14,014 Dilutive potential common shares due to stock options (1) — — 170 Dilutive potential common shares due to RSUs (1) — — — Weighted-average shares used to compute diluted EPS 14,208 14,065 14,184 (Loss) Income per share: Net (loss) income per basic share $ ( 0.60 ) $ ( 0.89 ) $ 1.24 Net (loss) income per diluted share $ ( 0.60 ) $ ( 0.89 ) $ 1.22 (1) The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period. 4. Seve rance In 2024, we recorded severance expense of $ 0.4 million. This related primarily to staff reductions across our locations as we shifted more work to contract manufacturers and dealt with decreasing demand. We recorded severance expense of $ 0.7 million in 2023. This charge primarily relates to the retirement of our founder. The outstanding obligations are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Balance at beginning of the year $ 154 $ — $ 17 Severance expense, net of adjustments 350 665 — Cash payments ( 504 ) ( 511 ) ( 17 ) Balance at the end of the year $ — $ 154 $ — 5. Inv entories The components of inventories are as follows, in thousands: September 30, 2024 2023 Purchased parts and raw materials $ 17,958 $ 22,627 Work-in-process 6,934 7,774 Finished goods 1,975 4,444 $ 26,867 $ 34,845 In the Semiconductor Fabrication Solutions segment, we recorded $ 0.4 million and $ 1.5 million related to the write-off of inventory for our polishing machine products in the years ended September 30, 2024 and 2023, respectively. 67 6. Property, Plan t and Equipment The following is a summary of property, plant and equipment, in thousands: September 30, 2024 2023 Land $ — $ 189 Buildings — 717 Building and leasehold improvements 5,985 2,881 Equipment and machinery 9,928 9,200 Furniture and fixtures 2,588 3,160 Software 1,986 1,970 20,487 18,117 Accumulated depreciation and amortization ( 8,840 ) ( 8,422 ) $ 11,647 $ 9,695 Depreciation wa s $ 2.1 mil lion, $ 1.9 million and $ 1.6 million in 2024, 2023 and 2022 , respectively. 7. Sale and Lea seback of Real Estate On June 23, 2022, BTU completed the sale and leaseback of its building in Massachusetts (the “Property”). The sale price was $ 20.6 million, of which $ 0.7 million was deducted at closing for commission and other closing expenses. Simultaneously with the closing, BTU entered into a two-year leaseback of the Property. The lease terms include annual base rent of $ 1.5 million in an absolute triple net lease. In connection with the sale, BTU recognized a pre-tax gain on sale of $ 12.5 million in 2022, which is recorded within operating expenses on the Consolidated Statement of Operations. This sale-leaseback transaction resulted in a net cash inflow of approximately $ 14.9 million in 2022, after repayment of the existing mortgage and settlement of related sale expenses. The leaseback ended in the third quarter of 2024. 68 8. Le ases The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets , in thousands: September 30, 2024 2023 Assets Right-of-use assets - operating $ 16,596 $ 11,217 Right-of-use assets - finance 227 123 Total right-of-use assets $ 16,823 $ 11,340 Liabilities Current Operating lease liabilities $ 2,041 $ 2,623 Finance lease liabilities 101 64 Total current portion of long-term lease liabilities 2,142 2,687 Long-term Operating lease liabilities 15,240 8,894 Finance lease liabilities 189 50 Total long-term lease liabilities 15,429 8,944 Total lease liabilities $ 17,571 $ 11,631 The following table provides information about the financial statement classification of our lease expenses reported in the Consolidated Statements of Operations, in thousands: Years Ended September 30, Lease cost Classification 2024 2023 2022 Operating lease cost Cost of sales $ 2,202 $ 2,318 $ 822 Operating lease cost Selling, general and administrative expenses 1,409 781 359 Operating lease cost Research, development and engineering 12 13 14 Finance lease cost Cost of sales 2 4 4 Finance lease cost Selling, general and administrative expenses 114 76 71 Short-term lease cost Cost of sales — 25 — Total lease cost $ 3,739 $ 3,217 $ 1,270 Future minimum lease payments under non-cancelable leases as of September 30, 2024 are as follows, in thousands: Years Ending September 30, Operating Leases Finance Leases Total 2025 $ 3,077 $ 118 $ 3,195 2026 2,881 118 2,999 2027 2,298 78 2,376 2028 2,338 5 2,343 2029 2,382 — 2,382 Thereafter 10,022 — 10,022 Total lease payments 22,998 319 23,317 Less: Interest 5,717 29 5,746 Present value of lease liabilities $ 17,281 $ 290 $ 17,571 Operating lease payments inclu de $ 2.3 mil lion related to options to extend lease terms that are reasonably certain of being exercised. During 2023, we reassessed the options to extend the term of the lease on our manufacturing facility in Carlisle, Pennsylvania, and determined it was not reasonably certain that Amtech would exercise those options. As a result, we reduced our ROU Asset and the related ROU Operating Lease liability by $ 2.7 million. 69 The following table provides information about the remaining lease terms and discount rates applied: September 30, 2024 2023 Weighted average remaining lease term Operating leases 8.47 years 7.31 years Finance leases 2.73 years 2.54 years Weighted average discount rate Operating leases 6.58 % 5.50 % Finance leases 6.43 % 4.91 % 9. Intangib le Assets Intangible assets consist of the following, in thousands: September 30, Amortization Period 2024 2023 Backlog 1 year $ 2,100 $ 2,100 Customer relationships 6 - 10 years 4,409 4,409 Developed technology 1.75 years 6,700 6,700 Noncompetition agreements 5 years 200 200 Trade names 3 - 15 years 2,679 2,679 16,088 16,088 Accumulated amortization ( 5,616 ) ( 4,785 ) Less asset impairments: Backlog ( 425 ) ( 425 ) Customer relationships ( 339 ) ( 119 ) Developed technology ( 5,494 ) ( 4,645 ) Noncompetition agreements ( 160 ) — Trade names ( 50 ) — Intangible assets, net $ 4,004 $ 6,114 Intangible assets are amortized over a weighted-average amortization period of 8.0 years. Our customer relationship and trade name intangible assets are amortized over weighted-average amortization periods of 4.6 and 3.4 years, respectively. We review our intangible assets for impairment when events or circumstances indicate the carrying value may not be recoverable. Except as discussed below, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of intangible assets below their carrying value. We identified a triggering event at the end of September 2023, primarily related to the prolonged downturn and general economic conditions in the semiconductor market, in addition to delays in the adoption of next-gen polishing tools, which reduced our cash flow projections. This triggering event indicated we should test the related long-lived assets for impairment in our Semiconductor Fabrication Solutions segment. We tested each identified asset group within our Semiconductor Fabrication Solutions segment by first performing a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value. This test indicted that the undiscounted cash flows were not sufficient to recover the carrying value of certain asset groups. We then compared the carrying value of the individual long-lived assets within those asset groups against their fair value in order to determine if impairment existed. Determining the fair value of those asset groups involves the use of significant estimates and assumptions, including projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends, and estimated discount rates based on the asset group's weighted average return on assets, as derived from various methods. The fair value of the intangible assets were estimated using various valuation methodologies, including the multi-period excess earnings method, the relief from royalty method and the distributor method. These fair value measurements fall under Level 3 of the fair value hierarchy. As a result, we recorded a total impairment charge for intangible assets in our Semiconductor Fabrication Solutions segment of $ 5.2 million during 70 the year ended September 30, 2023. This impairment charge relates to developed technology and backlog at Entrepix and customer relationships at Intersurface Dynamics. Additionally, at the end of December 2023, we identified a triggering event. As a result of the decline in our stock price as of December 31, 2023, our book value materially exceeded our market value. As discussed in the Goodwill section below, this resulted in a triggering event for impairment of goodwill. The results of the goodwill impairment test indicated that the book value of our Semiconductor Fabrication Solutions reporting unit was in excess of the fair value, and, thus, was impaired. Prior to recognizing any impairment of goodwill, we tested the related long-lived assets for impairment in our Semiconductor Fabrication Solutions segment. We tested each identified asset group within our Semiconductor Fabrication Solutions segment by first performing a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value. This test indicated that the undiscounted cash flows were not sufficient to recover the carrying value of certain asset groups. We then compared the carrying value of the individual long-lived assets within those asset groups against their fair value in order to determine if impairment existed. Determining the fair value of those asset groups involves the use of significant estimates and assumptions, including projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends, and estimated discount rates based on the asset group's weighted average return on assets, as derived from various methods. The fair value of the intangible assets were estimated using various valuation methodologies, including the multi-period excess earnings method, the relief from royalty method and the distributor method. These fair value measurements fall under Level 3 of the fair value hierarchy. As a result, we recorded a total impairment charge for intangible assets in our Semiconductor Fabrication Solutions segment of $ 1.3 million during the quarter ended December 31, 2023. This impairment charge relates to developed technology, trade name, customer relationships and non-competition agreements at Entrepix. Amortization expense related to intangible assets w as $ 0.8 mi llion, $ 3.1 million and $ 0.1 million in 2024, 2023 and 2022 , respectively. Future amortization expense for the remaining unamortized balance as of September 30, 2024 is estimated as follows, in thousands: Years Ending September 30, Amortization Expense 2025 $ 511 2026 511 2027 511 2028 511 2029 511 Thereafter 1,449 Total $ 4,004 10. Go odwill The changes in the carrying amount of goodwill, by reportable segment, are as follows, in thousands: Thermal Processing Solutions Semiconductor Fabrication Solutions Total Goodwill Goodwill $ 5,905 $ 21,726 $ 27,631 Accumulated impairment losses — — — Balance at September 30, 2023 5,905 21,726 27,631 Goodwill acquired — — — Impairment of goodwill — ( 6,370 ) ( 6,370 ) Balance at September 30, 2024 $ 5,905 $ 15,356 $ 21,261 Goodwill $ 5,905 $ 21,726 $ 27,631 Accumulated impairment losses — ( 6,370 ) ( 6,370 ) Balance at September 30, 2024 $ 5,905 $ 15,356 $ 21,261 On January 17, 2023, we acquired Entrepix, which has been integrated into our Semiconductor Fabrication Solutions segment. Under the purchase method of accounting, the purchase price for the acquisition was allocated to the tangible 71 and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired of approximately $ 16.5 million was recorded as goodwill in the Semiconductor Fabrication Solutions segment. The primary driver for this acquisition was to add CMP and wafer cleaning equipment to our existing substrate polishing and wet process chemical offerings. We review goodwill for impairment when events or circumstances indicate the carrying value may not be recoverable. We performed our annual test of goodwill impairment as of September 30. The results of the goodwill impairment test indicated that the fair value of both our Thermal Processing and Semiconductor Fabrication Solutions reporting units were in excess of the carrying value, and, thus, were not impaired. At the end of December 2023, we identified a triggering event. As a result of the decline in our stock price as of December 31, 2023, our book value materially exceeded our market value leading to a $ 6.4 million impairment charge in fiscal 2024. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Our goodwill impairment test uses a weighting of the income approach and the market approach to estimate a reporting unit’s fair value. The income approach is based on a discounted future cash flow analysis that uses certain assumptions including: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments and working capital requirements to sustain and grow the business; and estimated discount rates based on the reporting unit’s weighted average cost of capital as derived by the Capital Asset Pricing Model and other methods, which includes observable market inputs and other data from identified comparable companies. The same estimates are also used internally for our capital budgeting process, and for long-term and short-term business planning and forecasting. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data, and we also perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units. The market approach is based on the application of appropriate market-derived multiples selected from (i) comparable publicly-traded companies and/or (ii) the implied transaction multiples derived from identified merger and acquisition activity in the market. Multiples are then selected based on a comparison of the reviewed data to that of the reporting unit and applied to relevant historical and forecasted financial parameters such as levels of revenues, EBITDA, EBIT or other metrics. The calculation of fair value falls under Level 3 of the fair value hierarchy. 11. In come Taxes Income Tax (Benefit) Provision The components of (loss) income before (benefit) provision for income taxes are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Domestic $ ( 9,563 ) $ ( 17,271 ) $ 15,275 Foreign 2,052 2,089 3,510 $ ( 7,511 ) $ ( 15,182 ) $ 18,785 72 The components of the (benefit) provision for income taxes are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Current: Domestic federal $ ( 49 ) $ — $ — Foreign 793 ( 327 ) 711 Foreign withholding taxes 279 159 255 Domestic state 36 81 77 Total current 1,059 ( 87 ) 1,043 Deferred: Domestic federal — ( 2,207 ) ( 39 ) State — ( 284 ) — Foreign ( 84 ) ( 22 ) 414 Total deferred ( 84 ) ( 2,513 ) 375 Total provision (benefit) $ 975 $ ( 2,600 ) $ 1,418 A reconciliation of actual income taxes to income taxes at the expected U.S. federal corporate income tax rate is as follows, in thousands, except percentages: Years Ended September 30, 2024 2023 2022 Tax (benefit) expense at the federal statutory rate $ ( 1,577 ) 21.0 % $ ( 3,188 ) 21.0 % $ 3,945 21.0 % Effect of permanent book-tax differences 152 - 2.0 % 757 - 5.0 % 11 0.1 % State tax provision 18 - 0.3 % ( 395 ) 2.6 % 554 2.9 % Valuation allowance for net deferred tax assets 1,179 - 15.7 % 1,594 - 10.5 % ( 3,138 ) - 16.7 % Uncertain tax items — 0.0 % ( 1,004 ) 6.6 % 55 0.3 % Tax rate differential 580 - 7.7 % 358 - 2.4 % 535 2.8 % Goodwill impairment 1,334 - 17.8 % — 0.0 % — 0.0 % Other items ( 711 ) 9.5 % ( 722 ) 4.8 % ( 544 ) - 2.9 % $ 975 - 13.0 % $ ( 2,600 ) 17.1 % $ 1,418 7.5 % 73 Deferred Income Taxes and Valuation Allowance Deferred income taxes reflect the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to be realized. The components of deferred tax assets and deferred tax liabilities are as follows, in thousands: September 30, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 17,699 $ 17,112 Accruals and reserves 1,983 2,865 Income tax credits 2,163 1,618 Operating lease liabilities 4,150 2,719 Research and development costs 1,531 1,011 Foreign service fee 1,579 1,579 Other assets 878 731 Total deferred tax assets 29,983 27,635 Valuation allowance ( 22,658 ) ( 21,506 ) Deferred tax assets, net of valuation allowance 7,325 6,129 Deferred tax liabilities: Goodwill and identifiable intangible assets ( 1,124 ) ( 1,616 ) Property and equipment, net ( 1,860 ) ( 1,356 ) Operating lease, right-of-use assets ( 3,987 ) ( 2,720 ) Prepaid assets ( 169 ) ( 336 ) Total deferred tax liabilities ( 7,140 ) ( 6,028 ) Total deferred tax assets, net $ 185 $ 101 Changes in the deferred tax valuation allowance are as follows, in thousands: Years Ended September 30, 2024 2023 Balance at the beginning of the year $ 21,506 $ 20,000 Additions to valuation allowance 1,152 1,506 Balance at the end of the year $ 22,658 $ 21,506 The deferred tax valuation allowance increased by $ 1.2 million and $ 1.5 million for the years ended September 30, 2024 and 2023, respectively. During the year ended September 30, 2023, we released a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future income and tax planning strategies in making this assessment. We have established valuation allowances on 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 objective evidence, and determined it is not more likely than not that these assets will be realized. We have established a partial valuation allowance on certain foreign deferred tax assets that we consider it is more likely than not will not be realized. We intend to permanently reinvest undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the amount of tax that might be payable on the undistributed amounts. 74 Net Operating Losses As of September 30, 2024, we ha ve federal net operating loss carryforwards of approximately $ 10.0 million that expire at various times between 2032 and 2035 . The utilization of those federal net operating losses is limited to approximately $ 0.8 million per year. Additionally, we have federal net operating loss carryforwards of approximately $ 69.4 million that have an indefi nite carryforward period. The utilization of those federal net operating losses is limited to 80 % of taxable income after 2021. We h ave no foreign net operating loss carryforwards as of September 30, 2024. We have approximate ly $ 16.7 million of state net operating loss carryforwards, with various expiration dates and limitations on utilization, depending on the state. As of September 30, 2024 , we have approximately $ 1.8 million of Foreign Tax Credit carryforwards that expire at various times between 2030 and 2034 and approximately $ 0.5 million of Federal and State Research and Development credits that expire at various times between 2029 and 2043 . Uncertain Tax Positions We have included all of our liabilities for uncertain tax positions with income taxes payable long-term. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows, in thousands: Years Ended September 30, 2024 2023 2022 Balance at beginning of the year $ — $ 1,004 $ 949 Additions related to tax positions taken in prior years — — 55 Reductions due to resolution of uncertain tax position — ( 1,004 ) — Balance at the end of the year $ — $ — $ 1,004 During fiscal 2023, we reversed our previous accrual of uncertain tax positions in the amount of $ 1.0 million. This reversal was reflected in the income tax (benefit) provision line of the Consolidated Statements of Operations. The reversal resulted from the expiration of the applicable statute of limitations. Tax Return Matters We file income tax returns in China and other foreign jurisdictions, as well as 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 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. U.S. Federal tax returns generally have a 3-year statute of limitations. Therefore, U.S. federal returns for tax years ending on or a fter September 30, 2021 remain open for examination. In addition, the IRS may adjust attribute c arryforwards utilized in an open year even though the year the attributes originated may be closed. State and foreign statutes are generally 3 to 5 years but vary by jurisdiction. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of Amtech and our subsidiaries. 75 12. Long- Term Debt Our finance lease liabilities and long-term debt consists of the following, in thousands: September 30, 2024 2023 Revolving credit facility $ — $ — Term loan — 10,573 Finance leases 290 114 Total 290 10,687 Less: current portion of finance lease liabilities and long-term debt ( 101 ) ( 2,265 ) Finance Lease Liabilities and Long-Term Debt $ 189 $ 8,422 Interest expense on finance lease liabilities and long-term debt was $ 0.6 mil lion, $ 0.5 million and $ 0.1 million in 2024, 2023 and 2022, respectively. Annual maturities relating to our long-term debt as of September 30, 2024 are as follows, in thousands: Annual Maturities 2025 $ 101 2026 109 2027 75 2028 5 2029 — Thereafter — Total long-term debt $ 290 Loan and Security Agreement On January 17, 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”) by and among Amtech, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R. Hoffman Machine Products, Inc., an Arizona corporation, and Entrepix, Inc., an Arizona corporation (collectively the “Borrowers”) and UMB Bank, N.A., national banking association (the “Lender”). The Loan Agreement provides for (i) a term loan (the “Term Loan”) in the amount of $ 12.0 million maturing January 17, 2028 , and (ii) a revolving loan facility (the “Revolver”) with an availability of $ 8.0 million maturing January 17, 2024 . The recorded amount of the Term Loan has a fixed interest rate of 6.38 %. The Revolver has a floating per annum rate of interest equal to the Prime Rate, adjusted daily. Under the Loan Agreement, we are required to pay a non-utilization fee equal to 0.125% of any unused portion of the Revolver in excess of any letter of credit obligations. The Term Loan and Revolver are secured by a first priority lien on substantially all of the Borrowers’ assets (other than certain customary excluded assets) and the Loan Agreement contains customary events of default, representations and warranties, and covenants that restrict the Borrowers’ ability to, among other things, incur additional indebtedness, other than permitted indebtedness, enter into mergers or acquisitions, sell or otherwise dispose of assets, or pay dividends, subject to customary exceptions. The Loan Agreement additionally contains financial covenants such that, as of the end of each of their fiscal quarters, beginning March 31, 2023, the Borrowers must maintain (i) a ratio of consolidated debt owed to Lender to consolidated EBITDA (as defined in the Loan Agreement) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building four quarters (as described in the Loan Agreement), and then 1.00 to 1.00 each fiscal quarter thereafter, (ii) a ratio of (a) the total for such fiscal quarter of EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on 76 Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building four quarters (as described in the Loan Agreement), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $ 35.0 million. At September 30, 2023, we were not in compliance with the Debt to EBITDA and Fixed Charge Coverage Ratio financial covenants under our Loan Agreement. On December 5, 2023, we entered into a Forbearance & Modification Agreement (the “Forbearance Agreement”) with UMB Bank related to such non-compliance, pursuant to which UMB Bank agreed to forbear from exercising its rights and remedies available to it as a result of such defaults. We will be operating under the terms of such Forbearance Agreement through January 17, 2025 (the “Forbearance Period”). The Forbearance Agreement also amends the Loan Agreement to, among other things, (i) increase the availability under the revolving line of credit from $ 8.0 million to $ 14.0 million (the "Revolver"), and (ii) reduce the term loan commitment from $ 12.0 million to $ 4,423,200 (the “Term Loan”). The Revolver maturity date was extended one year to January 17, 2025 and the Term Loan maturity date was extended from January 17, 2028 to January 17, 2029 . Both the Revolver and the Term Loan have a floating per annum rate of interest equal to the Prime Rate, adjusted daily, plus the Applicable Margin (as such terms are defined in the Loan Agreement). We are required to pay a non-utilization fee equal to 0.125 % of any unused portion of the Revolver in excess of any letter of credit obligations. As of September 30, 2023, no amounts were borrowed against the Revolver and there were no letters of credit outstanding. As of the effective date of the Forbearance Agreement, $ 10.0 million will be drawn under the Loan Agreement, which includes $ 4.4 million under the Term Loan and $ 5.6 million under the Revolver. Future borrowings, if any, under the Loan Agreement are subject to, among other things, having sufficient unencumbered Eligible Accounts, Eligible Foreign Accounts and Eligible Inventory (as such terms are defined in the Loan Agreement) to meet the borrowing base requirements included in the amended Loan Agreement. Under the amended Loan Agreement, the Company is required to comply with the following financial covenants: (i) maintaining, on a consolidated basis, a minimum consolidated EBITDA (as defined in the Loan Agreement) for the fiscal quarter ending December 31, 2023 through the twelve-month period ending September 30, 2024, based on a building four quarters (as described in the Loan Agreement) (the “Minimum EBITDA Covenant”); (ii) commencing for the fiscal year ending September 30, 2024, a ratio of (a) the total for such fiscal year of EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a trailing four (4) quarter basis (the “Fixed Charge Coverage Ratio Covenant”); and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $ 35.0 million. The Minimum EBITDA Covenant replaced the Senior Debt to EBITDA covenant sent forth in the original Loan Agreement. The Loan Agreement was fully repaid in the fourth quarter of 2024, and was subsequently terminated effective September 11, 2024. Finance Lease Obligations Our finance lease obligations totaled $ 0.3 million and $ 0.1 million as of September 30, 2024 and September 30, 2023, respectively. The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Consolidated Balance Sheets as of September 30, 2024 and 2023. 77 13. Equity and Stock-B ased Compensation Stock Repurchase Plans The following table summarizes information related to our stock repurchase plans, in thousands, except share and per share amounts: Name of Stock Repurchase Plan Date Approved by Board Plan Term Amount Authorized ($) Amount Used for Repurchases ($) Average Price Paid per Share ($) Shares Repurchased (#) Amount Available for Repurchases ($) Plan Status Fiscal Year of Repurchases 2023 Stock Repurchase Plan 2/7/2023 1 year 5,000 — — — — Expired NA 2022 Stock Repurchase Plan 2/10/2022 1 year 5,000 1,400 9.78 143,430 — Expired 2022 2021 Stock Repurchase Plan 2/9/2021 1 year 4,000 2,700 9.31 291,383 — Expired 2022 All repurchased shares have been retired. Stock-Based Compensation Expense Stock-based compensation expenses of $ 1.5 million, $ 1.3 million and $ 0.5 million for 2024, 2023 and 2022, respectively, are included in selling, general and administrative expenses. As of September 30, 2024, total compensation cost related to non-vested stock options not yet recognized is $ 1.3 million, which is expected to be recognized over the next 1.33 years on a weighted-average basis. As of September 30, 2024, total compensation cost related to nonvested RSUs not yet recognized is $ 0.1 million, which is expected to be recognized over the next year. Amtech Equity Compensation Plans The 2022 Plan, under which 1,000,000 shares could be granted, was adopted by the Board of Directors in November 2021, and approved by the shareholders in March 2022. The 2007 Plan, under which 500,000 shares could be granted, was adopted by the Board in April 2007, and approved by the shareholders in May 2007. The 2007 Plan was amended in 2009, 2014 and 2015 to add 2,500,000 shares. The plan was also amended in 2019 to extend the term of the plan and allow for the grant of restricted stock units. Upon the adoption of the 2022 Plan, no further awards will be granted from the 2007 Plan. Previously issued awards will remain outstanding in accordance with their terms. The Non-Employee Directors Stock Option Plan was approved by the shareholders in 1996 for issuance of up to 100,000 shares of common stock to directors. The Non-Employee Directors Stock Option Plan was amended in 2005, 2009 and 2014 to add 400,000 shares. The plan was also amended in 2020 to extend the term of the plan. Upon the adoption of the 2022 Plan as stated above, no further awards will be granted from the Non-Employee Directors Stock Option Plan. Previously issued awards will remain outstanding in accordance with their terms. Equity compensation plans as of September 30, 2024 are summarized in the table below: Name of Plan Shares Authorized Shares Available for Grant Options Outstanding Unvested RSUs Outstanding Plan Expiration 2022 Plan 1,000,000 22,871 851,250 24,897 Mar. 2032 2007 Plan 3,000,000 — 151,766 — Mar. 2024 Non-Employee Directors Stock Option Plan 500,000 — 84,000 — Mar. 2024 22,871 1,087,016 24,897 78 Stock Options Stock options issued under the terms of our equity compensation plans have, or will have, an exercise price equal to or greater than the fair market value of the common stock at the date of the option grant and expire no later than 10 years from the date of grant. Options issued under the plans vest over 1 to 3 years. We estimated the fair value of stock option awards on the date of grant using the Black-Scholes option pricing model using the following assumptions: Years Ended September 30, 2024 2023 2022 Risk free interest rate 4 % 4 % 2 % Expected life 5 years 5 years 5 years Dividend rate 0 % 0 % 0 % Volatility 60 % 56 % 57 % The following table summarizes our stock option activity : Years Ended September 30, 2024 2023 2022 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding at beginning of period 672,924 $ 8.76 589,341 $ 8.06 608,269 $ 6.48 Granted 620,500 $ 5.66 322,500 $ 9.04 135,500 $ 12.80 Exercised ( 15,000 ) $ 5.67 ( 168,318 ) $ 6.01 ( 124,475 ) $ 5.78 Forfeited/expired ( 191,408 ) $ 9.12 ( 70,599 ) $ 10.73 ( 29,953 ) $ 6.92 Outstanding at end of period 1,087,016 $ 6.97 672,924 $ 8.76 589,341 $ 8.06 Exercisable at end of period 532,185 $ 7.64 374,728 $ 8.25 358,343 $ 6.92 Weighted average grant-date fair value of options granted during the period $ 2.50 $ 4.73 $ 6.39 The following table summarizes information for stock options outstanding and exercisable as of September 30, 2024: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Remaining Contractual Life (in years) Weighted Average Exercise Price Per Share Number Exercisable Weighted Average Exercise Price Per Share $ 4.32 -$ 4.70 8,000 9.41 $ 4.51 — $ — $ 4.73 -$ 4.73 109,500 9.45 $ 4.73 — $ — $ 4.77 -$ 5.52 118,233 4.62 $ 5.15 88,233 $ 5.08 $ 5.67 -$ 5.91 93,541 5.88 $ 5.76 63,541 $ 5.69 $ 6.00 -$ 6.00 400,000 4.42 $ 6.00 133,334 $ 6.00 $ 6.58 -$ 8.82 81,750 6.87 $ 8.21 52,250 $ 8.06 $ 9.00 -$ 9.00 150,000 8.87 $ 9.00 100,001 $ 9.00 $ 9.27 -$ 10.22 76,000 7.26 $ 9.61 50,167 $ 9.78 $ 11.51 -$ 11.51 12,000 6.48 $ 11.51 12,000 $ 11.51 $ 15.43 -$ 15.43 37,992 5.90 $ 15.43 32,659 $ 15.43 $ 4.32 -$ 15.43 1,087,016 6.18 $ 6.97 532,185 $ 7.64 The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2024 were approximate ly $ 0.2 million and $ 0.1 milli on, respectively, which represents the total pre-tax intrinsic value, based on our closing stock price of $ 5.80 per s hare as of September 30, 2024, the last business day of our fiscal year, which would have been received by the option holders had all option holders exercised their options as of that date. The total 79 intrinsic value of stock options exercised was $ 17,000 , $ 0.6 m illion and $ 0.8 million in 2024, 2023 and 2022, respectively. The following table summarizes our RSU activity during the year ended September 30, 2024: Number Weighted Average Grant Date Fair Value Fair Value Nonvested at beginning of year 75,977 $ 9.15 Granted 24,897 4.82 120,004 Vested, including shares withheld to cover taxes ( 75,977 ) 9.15 695,022 (1) Forfeited — — Nonvested at end of period 24,897 $ 4.82 $ 144,403 (2) (1) The aggregate fair value of vested RSU's represent the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSU's had all such holders sold their underlying shares on that date. (2) The aggregate fair value of the nonvested RSU's and represents the total pre-tax fair value, based on our closing stock price of $ 5.80 as of September 30, 2024, the last trading day of our fiscal year, which would have been received by holders of RSU's had all such holders sold their underlying shares on that date. 14. Bene fit Plans We have retirement plans covering substantially all our employees. The principal plans are our defined contribution plan that covers substantially all of our employees in the United States and the multi-employer pension plan for hourly union employees in Pennsylvania. Defined Contribution Plan – Domestic employees of Amtech and its subsidiaries who meet certain eligibility requirements may participate, at the employee’s option, in the 401(k) Plan. The 401(k) Plan is a defined contribution plan subject to the provisions of ERISA. We match employee contributions to the 401(k) Plan equal to 60 % of the participants' elective deferrals, up to 3.6 % of the participants’ eligible compensation each payroll period. Employees are auto-enrolled upon eligibility at a 6 % contribution rate; however, an employee may opt out at their election. The match expense w as $ 0.4 m illion, $ 0.5 million and $ 0.4 million in 2024, 2023 and 2022, respectively. Pension Plan – Our hourly union employees in Pennsylvania participate in a multi-employer pension plan, the NIGPP, in accordance with the union agreement between PR Hoffman and the United Automobile, Aerospace and Agriculture Implement Workers of America. The agreement was renewed in 2022 for a three-year term that expires September 30, 2025 . Every company participating in the plan pays a contribution per hour worked for each employee of the company that is eligible to participate in the NIGPP. Our contributions to the NIGPP were $ 35,000 , $ 36,000 and $ 38,000 in 2024, 2023 and 2022, respectively. 15. Commitments and Contingencies Purchase Obligations – As of September 30, 2024, we had unrecorded purchase obligations in the amount o f $ 12.1 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. Legal Proceedings and Other Claims – From time to time, we 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 80 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 contracts or severance plans were to become payable, the severance payments would generally range from six to twelve months of salary. 16. Report able Segments Amtech has two operating segments that are structured around the types of product offerings provided to our customers. In addition, the operating segments may be further distinguished by the Company’s respective brands. These two operating segments comprise our two reportable segments discussed below. Our two reportable segments are as follows: Thermal Processing Solutions (formerly 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. Semiconductor Fabrication Solutions (formerly Material and Substrate) – We provide consumables, parts and service, and equipment for producing silicon carbide, silicon and gallium nitride wafers, optical components and a variety of crystalline materials. Information concerning our reportable segments is as follows, in thousands: Years Ended September 30, 2024 2023 2022 Net revenue: Thermal Processing Solutions $ 69,161 $ 77,595 $ 87,982 Semiconductor Fabrication Solutions 32,053 35,720 18,316 $ 101,214 $ 113,315 $ 106,298 Operating income (loss): Thermal Processing Solutions $ 6,196 $ 6,907 $ 20,672 Semiconductor Fabrication Solutions ( 4,875 ) ( 8,765 ) 3,728 Non-segment related ( 8,050 ) ( 13,112 ) ( 7,114 ) $ ( 6,729 ) $ ( 14,970 ) $ 17,286 81 Years Ended September 30, 2024 2023 2022 Capital expenditures: Thermal Processing Solutions $ 3,431 $ 345 $ 452 Semiconductor Fabrication Solutions 1,276 1,092 411 Non-segment related 171 1,461 272 $ 4,878 $ 2,898 $ 1,135 Depreciation and amortization expense: Thermal Processing Solutions $ 788 $ 886 $ 1,101 Semiconductor Fabrication Solutions 2,154 4,045 565 Non-segment related 87 81 63 $ 3,029 $ 5,012 $ 1,729 September 30, 2024 2023 Identifiable assets: Thermal Processing Solutions $ 68,051 $ 72,466 Semiconductor Fabrication Solutions 46,915 61,576 Non-segment related* 3,987 2,979 $ 118,953 $ 137,021 * Non-segment related assets include cash, property and other assets. 17. Major Customer s and Sales by Country In 2024, no customers accounted for 10% of net revenues. In 2023 , one Thermal Processing Solutions customer accounted for 11 % of net revenues. In 2022 , two Thermal Processing Solutions customers accounted for 14 % and 12 % of net revenues. The percentages of our net revenues were to customers in the following geographic regions: Years Ended September 30, 2024 2023 2022 United States 39 % 39 % 27 % Canada 1 % 6 % 3 % Mexico 1 % 1 % 2 % Other — % 2 % 4 % Total Americas 41 % 48 % 36 % China 20 % 14 % 17 % Malaysia 12 % 6 % 7 % Taiwan 8 % 5 % 14 % Other 3 % 6 % 6 % Total Asia 43 % 31 % 44 % Czech Republic 3 % 5 % — % Austria 1 % 4 % 10 % Germany 6 % 2 % 4 % Other 6 % 10 % 6 % Total Europe 16 % 21 % 20 % 100 % 100 % 100 % 82 18. Geograph ic Regions We have operations in the United States and China, as well as satellite offices in Europe and Asia. Revenues, operating income (loss) and identifiable assets by geographic region are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Net revenue: United States* $ 73,340 $ 84,549 $ 89,197 China 24,048 24,969 13,854 Other 3,826 3,797 3,247 $ 101,214 $ 113,315 $ 106,298 Operating (loss) income: United States* $ ( 9,111 ) $ ( 17,874 ) $ 14,163 China 1,836 714 2,003 Other 546 2,190 1,120 $ ( 6,729 ) $ ( 14,970 ) $ 17,286 * United States revenue includ es $ 14.7 m illion, $ 17.0 million and $ 22.7 million in 2024, 2023 and 2022, respectively, related to the products manufactured in our China facility but sold through our Massachusetts facility. September 30, 2024 2023 Net property, plant and equipment: United States $ 10,572 $ 8,396 China 1,005 1,262 Other 70 37 $ 11,647 $ 9,695 83 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROL S AND PROCEDURES Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e). Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures in place were effective as of September 30, 2024 as described further below. Management’s Report on Internal Control Over Financial Reporting To the Shareholders of Amtech Systems, Inc. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management conducted an assessment of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) as issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation we believe that, as of September 30, 2024, our internal controls over financial reporting was effective based on those criteria. Our independent registered public accounting firm, KPMG LLP, has issued a Report of Independent Registered Public Accounting Firm related to our internal control over financial reporting, which can be found in Item 8 of this Annual Report on Form 10-K. Remediation of Previously Disclosed Material Weaknesses As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, we identified two material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In relation to the material weakness identified in the areas of goodwill and intangible assets, we have evaluated the design of internal controls over non-routine and complex transactions, including the preparation and review of the 84 third-party service provider valuation reports. As a result of our evaluation, our management, under the oversight of our Audit Committee, has redesigned existing controls and implemented new controls to remediate the control deficiencies giving rise to the material weakness. With respect to the material weakness related to general information technology controls, our management, under the oversight of our Audit Committee, has evaluated the current processes and has redesigned existing controls and implemented new controls to remediate the control deficiencies giving rise to this material weakness. Remediation efforts include, but are not limited to: • Assessing and formalizing the design of certain information technology policies. • Developing monitoring controls and protocols that will allow us to timely assess the design and operating effectiveness of the new controls. • Strengthening of user access reviews and enhanced procedures surrounding program change management for systems supporting substantially all of the Company’s internal control processes. • Assessing segregation of duties within the Company’s business processes. Based upon the above, we believe the steps taken have improved the effectiveness of our internal control over financial reporting and we have determined that these new or redesigned controls are operating effectively Changes in Internal Control Over Financial Reporting There have not been any changes in 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 quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of the Company. ITEM 9B. OTHE R INFORMATION None . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 85 PART III Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the information required by Part III of Form 10-K is incorporated by reference to the Proxy Statement to be filed within 120 days of September 30, 2024, our fiscal year end. In the event the Proxy Statement is not filed within 120 days, the information required by Part III of this Form 10-K will be filed pursuant to an amendment to this Annual Report on Form 10-K within the 120-day period. ITEM 10. DIRECTORS, EXECUT IVE OFFICERS AND GOVERNANCE The information required by this item (i) is incorporated herein by reference to the Proxy Statement or (ii) will be filed pursuant to an amendment to this Annual Report on Form 10-K, in each case, within 120 days of September 30, 2024, our fiscal year end. ITEM 11. EXECUT IVE COMPENSATION The information required by this item (i) is incorporated herein by reference to the Proxy Statement or (ii) will be filed pursuant to an amendment to this Annual Report on Form 10-K, in each case, within 120 days of September 30, 2024, our fiscal year end. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OW NERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item (i) is incorporated herein by reference to the Proxy Statement or (ii) will be filed pursuant to an amendment to this Annual Report on Form 10-K, in each case, within 120 days of September 30, 2024, our fiscal year end. ITEM 13. CERTAIN RELATIONSHIPS AND RELATE D TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item (i) is incorporated herein by reference to the Proxy Statement or (ii) will be filed pursuant to an amendment to this Annual Report on Form 10-K, in each case, within 120 days of September 30, 2024, our fiscal year end. ITEM 14. PRINCIPAL ACCO UNTING FEES AND SERVICES The information required by this item (i) is incorporated herein by reference to the Proxy Statement or (ii) will be filed pursuant to an amendment to this Annual Report on Form 10-K, in each case, within 120 days of September 30, 2024, our fiscal year end. 86 PART IV ITEM 15. EXHIBITS AND FIN ANCIAL STATEMENT SCHEDULES (a) Financial Statements and Schedules The consolidated financial statements required by this item are set forth on the pages indicated in Item 8. All financial statement schedules are omitted because they are either not applicable or because the required information is shown in the consolidated financial statements or notes thereto. (b) Exhibits The exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index immediately preceding the signature page hereto, which is incorporated herein by reference. ITEM 16. FORM 10-K SUMMARY None. EXHIBIT INDEX INCORPORATED BY REFERENCE EXHIBIT NO. EXHIBIT DESCRIPTION FORM FILE NO. EXHIBIT NO. FILING DATE FILED HEREWITH 3.1 Amended and Restated Articles of Incorporation, as amended through February 6, 2012 10-Q 000-11412 3.1 February 9, 2012 3.2 Amended and Restated Bylaws of Amtech Systems, Inc., dated as of September 23, 2020 8-K 000-11412 3.1 September 25, 2020 3.3 First Amendment to Amended and Restated and Restated Bylaws (effective as of November 16, 2021) 8-K 000-11412 3.1 November 19, 2021 4.1 Description of Capital Stock X 10.1 Non-Employee Directors Stock Option Plan, effective July 8, 2005 as amended through May 8, 2014 * 8-K 000-11412 10.1 May 14, 2014 10.1a Amendment to the Non-Employee Directors Stock Option Plan, effective March 4, 2020* DEF14A 000-11412 Appendix A January 24, 2020 10.2 2007 Employee Stock Incentive Plan of Amtech Systems, Inc., as amended, effective April 9, 2015* 8-K 000-11412 10.4 April 10, 2015 10.2a Amendment to 2007 Employee Stock Incentive Plan of Amtech Systems, Inc., effective March 6, 2019* DEF14A 000-11412 Appendix A January 25, 2019 87 10.3 Amtech Systems, Inc. 2022 Equity Incentive Plan* S-8 333-263875 99.1 March 25, 2022 10.4 Employment Agreement between Amtech Systems, Inc. and Robert C. Daigle, dated August 14, 2023* 10-K 000-11412 10.4 December 14, 2023 10.5 Amendment No. 1 to Employee Agreement between Amtech Systems, Inc. and Robert C. Daigle, dated effective as of February 29, 2024 X 10.6 Amendment No. 2 to Employee Agreement between Amtech Systems, Inc. and Robert C. Daigle, dated effective as of August 6, 2024 X 10.7 Agreement and Plan of Merger, dated January 17, 2023, by and among the Registrant, Emerald Merger Sub, Inc., an Arizona corporation and wholly owned subsidiary of the Registrant, Entrepix, Inc., an Arizona corporation, Timothy P. Tobin, solely in his capacity as the shareholders’ representative, and the Key Shareholders (as defined in the Agreement and Plan of Merger). 10-Q 000-11412 10.1 February 8, 2023 10.8 Loan and Security Agreement, dated as of January 17, 2023, by and among the Registrant, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R. Hoffman Machine Products, Inc., an Arizona corporation, and Entrepix, Inc., an Arizona corporation, as borrowers, and UMB Bank, N.A., national banking association, as lender. 10-Q 000-11412 10.2 February 8, 2023 10.9** Forbearance & Modification Agreement entered into effective as of December 5, 2023 by and between the Registrant, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R. Hoffman Machine Products, Inc., an Arizona corporation, Entrepix, Inc., an Arizona corporation, and Advanced Compound Materials, Inc., a Delaware corporation, as borrowers, and UMB Bank, N.A., national banking association, as lender. 10-K 000-11412 10.7 December 14, 2023 21.1 Subsidiaries of the Registrant X 88 23.1 Consent of Independent Registered Public Accounting Firm - KPMG LLP X 23.2 Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP X 24 Powers of Attorney X 31.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended X 31.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended X 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 97 Clawback Policy 10-K 000-11412 97 December 14, 2023 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.PRE Inline Taxonomy Presentation Linkbase Document X 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document X 101.LAB Inline XBRL Taxonomy Label Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 104 The cover page for the Company’s Annual Report on Form 10-K for the year ended September 30, 2024, has been formatted in Inline XBRL X * Indicates management contract or compensatory plan. ** Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of any of the omitted schedules upon request by the Securities and Exchange Commission. 89 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMTECH SYSTEMS, INC. December 12, 2024 By: /s/ Wade M. Jenke Wade M. Jenke, Vice President and Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE * Chairman and Chief Executive Officer December 12, 2024 Robert C. Daigle (Principal Executive Officer) /s/ Wade M. Jenke Vice President and Chief Financial Officer December 12, 2024 Wade M. Jenke (Principal Financial Officer and Principal Accounting Officer) * Director December 12, 2024 Robert M. Averick * Director December 12, 2024 Michael Garnreiter * Director December 12, 2024 Michael M. Ludwig *By: /s/ Wade M. Jenke Wade M. Jenke, Attorney-In-Fact** ** By authority of the power of attorney filed as Exhibit 24 hereto. 90