AMTECH SYSTEMS INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following documents are filed as part of this Annual Report on Form 10-K: Financial Statements Reports of Independent Registered Public Accounting Firm 46 Consolidated Balance Sheets: September 30, 2020 and 2019 48 Consolidated Statements of Operations: Years ended September 30, 2020, 2019 and 2018 49 Consolidated Statements of Comprehensive Income (Loss): Years ended September 30, 2020, 2019 and 2018 50 Consolidated Statements of Shareholders’ Equity: Years ended September 30, 2020, 2019 and 2018 51 Consolidated Statements of Cash Flows: Years ended September 30, 2020, 2019 and 2018 52 Notes to Consolidated Financial Statements 53 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of: AMTECH SYSTEMS, INC. AND SUBSIDIARIES Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Amtech Systems, Inc. and Subsidiaries (the “Company”) as of September 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2020, 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, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 19, 2020 expressed an unqualified opinion. Adoption of New Accounting Standard As discussed in Note 1 to the financial statements, the Company changed its method of accounting for leases as a result of the adoption of Accounting Standards Codification Topic 842, Leases, effective October 1, 2019, under the retrospective method. 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 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 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/ MAYER HOFFMAN MCCANN P.C. We have served as the Company's auditor since 2005. Phoenix, Arizona November 19, 2020 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of: AMTECH SYSTEMS, INC. AND SUBSIDIARIES Opinion on Internal Control over Financial Reporting We have audited Amtech Systems, Inc. and Subsidiaries’ (“Company”) internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three year period ended September 30, 2020 and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated November 19, 2020 expressed an unqualified opinion that included an explanatory paragraph regarding the Company’s change in method of accounting for leases as a result of the adoption of Accounting Standards Codification Topic 842, Leases, effective October 1, 2019. Basis for Opinion The Company’s management is responsible 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 internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. 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 audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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 accounting principles generally accepted in the United States of America. 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 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. /s/ MAYER HOFFMAN MCCANN P.C. Phoenix, Arizona November 19, 2020 47 PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share and per share data) Assets September 30, 2020 September 30, 2019 Current Assets Cash and cash equivalents $ 45,070 $ 52,982 Restricted cash — 101 Accounts receivable (less allowance for doubtful accounts of $ 159 and $ 172 at September 30, 2020 and September 30, 2019, respectively) 11,243 12,873 Inventory 17,277 17,532 Contract assets — 36 Income taxes receivable 1,362 — Held-for-sale assets — 22,755 Other current assets 1,617 1,991 Total current assets 76,569 108,270 Property, Plant and Equipment - Net 11,995 10,217 Right-of-Use Assets - Net 5,124 — Intangible Assets - Net 609 870 Goodwill - Net 6,633 6,633 Deferred Income Taxes - Net 566 — Other Assets 602 487 Total Assets $ 102,098 $ 126,477 Liabilities and Shareholders’ Equity Current Liabilities Accounts payable $ 2,676 $ 4,371 Accrued compensation and related taxes 2,066 2,717 Accrued warranty expense 380 556 Other accrued liabilities 751 1,274 Current maturities of long-term debt 380 371 Contract liabilities 1,224 1,378 Income taxes payable — 1,434 Held-for-sale liabilities — 18,547 Total current liabilities 7,477 30,648 Long-Term Debt 4,798 5,178 Long-Term Lease Liability 5,064 — Income Taxes Payable 3,240 3,199 Total Liabilities 20,579 39,025 Commitments and Contingencies 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: 14,063,172 and 14,268,797 at September 30, 2020 and September 30, 2019, respectively 141 143 Additional paid-in capital 124,435 125,098 Accumulated other comprehensive loss ( 646 ) ( 11,233 ) Retained deficit ( 42,411 ) ( 26,556 ) Total Shareholders’ Equity 81,519 87,452 Total Liabilities and Shareholders’ Equity $ 102,098 $ 126,477 The accompanying notes are an integral part of these consolidated financial statements. 48 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share data) Years Ended September 30, 2020 2019 2018 Revenue, net of returns and allowances $ 65,463 $ 85,035 $ 100,053 Cost of sales 41,022 51,678 63,135 Gross profit 24,441 33,357 36,918 Selling, general and administrative 21,397 24,263 25,743 Research, development and engineering 3,312 3,068 2,856 Impairment charges — — 2,247 Restructuring charges 217 1,110 — Operating (loss) income ( 485 ) 4,916 6,072 Loss on sale of subsidiary ( 2,793 ) — — Gain on sale of other assets — — 2,883 Income from equity method investment — — 234 Interest income and other, net 162 852 738 (Loss) income from continuing operations before income taxes ( 3,116 ) 5,768 9,927 Income tax provision 791 2,633 3,296 (Loss) income from continuing operations, net of tax ( 3,907 ) 3,135 6,631 Loss from discontinued operations, net of tax ( 11,816 ) ( 8,297 ) ( 1,326 ) Net (loss) income $ ( 15,723 ) $ ( 5,162 ) $ 5,305 (Loss) Income Per Basic Share: Basic (loss) income per share from continuing operations $ ( 0.28 ) $ 0.22 $ 0.45 Basic loss per share from discontinued operations $ ( 0.83 ) $ ( 0.58 ) $ ( 0.09 ) Net (loss) income per basic share $ ( 1.11 ) $ ( 0.36 ) $ 0.36 (Loss) Income Per Diluted Share: Diluted (loss) income per share from continuing operations $ ( 0.28 ) $ 0.22 $ 0.44 Diluted loss per share from discontinued operations $ ( 0.83 ) $ ( 0.58 ) $ ( 0.09 ) Net (loss) income per diluted share $ ( 1.11 ) $ ( 0.36 ) $ 0.35 Weighted average shares outstanding - basic 14,159 14,240 14,833 Weighted average shares outstanding - diluted 14,159 14,275 15,065 The accompanying notes are an integral part of these consolidated financial statements. 49 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss) (in thousands) Years Ended September 30, 2020 2019 2018 Net (loss) income $ ( 15,723 ) $ ( 5,162 ) $ 5,305 Foreign currency translation adjustment 1,790 ( 1,746 ) ( 1,445 ) Reclassification adjustment for net foreign currency translation losses included in net (loss) income 8,797 487 — Comprehensive (loss) income $ ( 5,136 ) $ ( 6,421 ) $ 3,860 The accompanying notes are an integral part of these consolidated financial statements. 50 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, 2017 14,711 $ 147 — $ — $ 125,564 $ ( 8,529 ) $ ( 26,699 ) $ 90,483 Net income — — — — — — 5,305 5,305 Translation adjustment — — — — — ( 1,445 ) — ( 1,445 ) Repurchase of treasury stock — — ( 771 ) ( 4,000 ) — — — ( 4,000 ) Retirement of treasury stock ( 771 ) ( 8 ) 771 4,000 ( 3,992 ) — — — Stock compensation expense — — — — 855 — — 855 Stock options exercised 277 3 — — 1,889 — — 1,892 Balances at September 30, 2018 14,217 $ 142 — $ — $ 124,316 $ ( 9,974 ) $ ( 21,394 ) $ 93,090 Net loss — — — — — — ( 5,162 ) ( 5,162 ) Translation adjustment — — — — — ( 1,259 ) — ( 1,259 ) Stock compensation expense — — — — 573 — — 573 Stock options exercised 52 1 — — 209 — — 210 Balances at September 30, 2019 14,269 $ 143 — $ — $ 125,098 $ ( 11,233 ) $ ( 26,556 ) $ 87,452 Net loss — — — — — — ( 15,723 ) ( 15,723 ) Translation adjustment — — — — — 10,587 — 10,587 Stock compensation expense — — — — 326 — — 326 Repurchase of treasury stock — — ( 366 ) ( 2,000 ) — — — ( 2,000 ) Retirement of treasury stock ( 366 ) ( 4 ) 366 2,000 ( 1,864 ) — ( 132 ) — Stock options exercised 160 2 — — 875 — — 877 Balances at September 30, 2020 14,063 $ 141 — $ — $ 124,435 $ ( 646 ) $ ( 42,411 ) $ 81,519 The accompanying notes are an integral part of these consolidated financial statements. 51 AMTECH SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) Years Ended September 30, 2020 2019 2018 Operating Activities Net (loss) income $ ( 15,723 ) $ ( 5,162 ) $ 5,305 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 1,258 1,690 1,854 Non-cash impairment charges — — 7,006 Write-down of inventory 733 3,193 542 Provision for allowance for doubtful accounts 24 1,074 45 Deferred income taxes 218 220 209 Non-cash share based compensation expense 326 573 855 Loss (gain) on sales of subsidiaries 13,709 ( 1,614 ) — Gain on sale of other assets — — ( 2,883 ) Other, net 55 95 ( 183 ) Changes in operating assets and liabilities: Accounts receivable 1,359 299 3,274 Inventory ( 913 ) ( 435 ) 3,965 Contract and other assets 324 12,847 10,649 Accounts payable ( 3,620 ) ( 1,787 ) ( 10,164 ) Accrued income taxes ( 2,701 ) ( 3,011 ) ( 1,749 ) Accrued and other liabilities 4,658 ( 6,876 ) 1,960 Contract liabilities ( 1,371 ) ( 933 ) ( 34,453 ) Net cash (used in) provided by operating activities ( 1,664 ) 173 ( 13,768 ) Investing Activities Purchases of property, plant and equipment ( 2,676 ) ( 714 ) ( 1,495 ) Proceeds from sale of property, plant and equipment — — 114 Net cash disposed of in sales of subsidiaries ( 9,940 ) ( 1,112 ) — Proceeds from sale of other assets — — 5,732 Net cash (used in) provided by investing activities ( 12,616 ) ( 1,826 ) 4,351 Financing Activities Proceeds from the exercise of stock options 877 210 1,892 Repurchase of common stock ( 2,000 ) — ( 4,000 ) Payments on long-term debt ( 379 ) ( 376 ) ( 368 ) Borrowings on long-term debt — 9 — Net cash used in financing activities ( 1,502 ) ( 157 ) ( 2,476 ) Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 1,718 ( 1,552 ) ( 1,372 ) Net Decrease in Cash, Cash Equivalents and Restricted Cash ( 14,064 ) ( 3,362 ) ( 13,265 ) Cash, Cash Equivalents and Restricted Cash, Beginning of Year* 59,134 62,496 75,761 Cash, Cash Equivalents and Restricted Cash, End of Year* $ 45,070 $ 59,134 $ 62,496 Supplemental Cash Flow Information: Income tax (payments) refunds, net $ ( 2,116 ) $ 993 $ ( 980 ) Interest paid, net of capitalized interest 265 262 304 Supplemental Non-cash Financing and Investing Activities: Transfer of inventory to property, plant, and equipment $ 37 $ — $ 902 Leased assets obtained in exchange for new operating lease liabilities $ 5,262 $ — $ — * Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Consolidated Balance Sheets for periods prior to January 22, 2020. The accompanying notes are an integral part of these consolidated financial statements. 52 Notes to Consolidated Financial Statements For the Years Ended September 30, 2020, 2019 and 2018 1. Summary of Operations and Significant Accounting Policies Description of Business – Amtech is a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon power devices, analog and discrete devices, electronic assemblies and light-emitting diodes (LEDs). We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe. We 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. In the second quarter of fiscal 2019, we began the process to divest our solar business. As such, we classified substantially all of the Solar segment as held for sale in our Consolidated Balance Sheets and reported its results as discontinued operations in our Consolidated Statements of Operations. These divestitures were completed in the second quarter of fiscal 2020. For additional information on the divestiture, see Note 2. For additional information on our segments, see Note 18. Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2020, 2019 and 2018 relate to the fiscal years ended September 30, 2020, 2019 and 2018, respectively. The COVID-19 world-wide pandemic and the domestic and international impact of policy decisions being made in major countries around the world has had, and is expected to continue to have, an impact on various aspects of our business. While we and many of our semiconductor customers continue to operate as essential businesses, in accordance with the government regulations in place at each of our facilities, we have taken various actions to augment our operating and human resource policies and procedures to guard against the potential health hazards of COVID-19. These augmented procedures can have a negative impact on our operational efficiencies. Given the uncertainty surrounding the continuation of economic slow-downs domestically and abroad, we cannot predict with any level of certainty at this time what the future impact of COVID-19 and resulting business and economic policies in the United States and abroad will be on our future financial operating results. Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications – Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Results for all periods presented in this report have been reclassified for changes to our reportable segments (Note 18). These reclassifications had no effect on the previously reported Consolidated Financial Statements for any period. Divestitures – Significant accounting policies associated with a decision to dispose of a business are discussed below: Discontinued Operations – A business is classified as discontinued operations if the disposal represents a strategic shift that will have a major effect on operations or financial results and meets the criteria to be classified as held for sale or is disposed of by sale or otherwise. Significant judgments are involved in determining whether a business meets the criteria for discontinued operations reporting and the period in which these criteria are met. If a business is reported as a discontinued operation, the results of operations through the date of sale, including any gain or loss recognized on the disposition, are presented on a separate line of the Consolidated Statement of Operations. Interest on debt directly attributable to the discontinued operation is allocated to discontinued operations. 53 Assets Held for Sale – An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale and the sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control. The assets and related liabilities are aggregated and reported on separate lines of the Consolidated Balance Sheets. 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, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 89 % and 79 % of total cash balances at our continuing operations as of September 30, 2020 and 2019, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the FDIC. The remainder of our cash is maintained with financial institutions with reputable credit in China, the United Kingdom, Singapore and Malaysia. We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. We have not experienced any losses on such accounts. Restricted Cash – Restricted cash includes collateral for bank guarantees required by certain customers from whom deposits have been received in advance of shipment. Accounts Receivable and Allowance for Doubtful Accounts – Accounts receivable are recorded at the sales price of products sold to customers on trade credit terms. Accounts receivable are considered past due when payment has not been received from the customer within the normal credit terms extended to that customer. A valuation allowance is established for accounts when collection is no longer probable. Accounts are written off against the allowance when the probability of collection is remote. Inventory – We value our inventory at the lower of cost or net realizable value. Costs for over 90 % of inventory at our continuing operations as of September 30, 2020 and 2019 are determined on a FIFO basis, with the remainder determined on an average cost basis. 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 and product mix could result in further write-downs. We must order components for our products and build inventory in advance of product shipments through issuance of purchase orders based on projected demand. These commitments typically cover our requirements for periods ranging from 30 to 180 days or longer when there is a significant increase in demand or lead-times from suppliers. These purchase commitments may result in accepting delivery of components not needed to meet current demand. We accrue for estimated cancellation fees related to component orders that have been cancelled or are expected to be cancelled, and for excess inventories that will likely result in our taking delivery of ordered inventory items in excess of our projected needs. If there is an abrupt and substantial decline in demand for one or more of our products, an unanticipated change in technological requirements for any of our products, or a change in our suppliers’ practice of not enforcing purchase commitments, we may be required to record additional charges for these items. This would negatively impact gross margin in the period when the charges are recorded. Property, Plant and Equipment – Property plant, and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred. The cost of property retired or sold and the related accumulated depreciation 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 ; and for buildings from 20 to 30 years . 54 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. When an indication exists that the carrying amount of long-lived assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets. Intangible Assets – Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable. If the life is not determinable, amortization is not recorded. We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable. When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets. Patent costs consist primarily of legal and filing fees incurred to file patents on proprietary methods and technology developed by the Company. Patent costs are expensed when incurred as they are insignificant. In 2018, we recorded a charge for impairment of intangible assets in our former Solar segment. See Note 9 for a description of the facts and circumstances leading to the intangible asset impairment charge. 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 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, typically at the end of the fiscal year, or more frequently if circumstances dictate. If it is concluded that there is a potential 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). Impairment tests include the use of estimates and assumptions that are inherently uncertain. Changes in these estimates and assumptions could materially affect the determination of fair value or goodwill impairment, or both. In 2018, we recorded a charge for impairment of goodwill in our former Solar segment. See Note 10 for a description of the facts and circumstances leading to the goodwill impairment charge. Revenue Recognition – We adopted ASU No. 2014-09, “Revenue from Contracts with Customers,” which created FASB Topic 606 (“ASC 606”) with a date of initial application of October 1, 2018. Under ASC 606, revenue is recognized 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 for each performance obligation and is recognized as revenue upon satisfaction of the performance obligation. To achieve the core principle of the standard, we apply the following five steps: 1) Identify the contract with the customer A contract with a customer exists when (i) the Company enters 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) the Company determines that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. 55 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises to the customer in the contract. To the extent a contract includes multiple promised goods and services, the Company 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. Our equipment sales consist of multiple performance obligations, including the system itself and obligations that are not delivered simultaneously with the system, such as installation services and training. Customers who purchase new systems are provided an assurance-type warranty, generally for periods of 12 to 36 months . In accordance with ASC 606, assurance-type warranties are not considered a performance obligation. 3) Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. The transaction price for equipment sales is adjusted for estimated product returns that we expect to occur under our return policy based upon past return rates, which have historically been immaterial. In rare cases when the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period for any changes. The transaction price for all transactions is based on the price reflected in the individual customer’s purchase order. Variable consideration has not been identified as a significant component of the transaction price for any of our transactions. The Company has determined that most contracts will be completed in less than one year . The Company will not adjust promised consideration for the effects of a significant financing component if the Company expects at contract inception the period between when the Company transfers the promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those transactions that are expected to be completed after one year, the Company has assessed that there are no significant financing components because any difference between the promised consideration and the cash selling price of the good or service is for reasons other than the provision of financing. The Company excludes 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 some excise taxes). Sales taxes are presented on a net basis (excluded from revenues) in the Company's Consolidated Statements of Operations. 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 distinct performance obligations require an allocation of the transaction price to each distinct performance obligation on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to each distinct performance obligation or to a distinct service that forms part of a single performance obligation. Where required, the Company determines the SSP for each performance obligation based on consideration of both market and Company specific factors, including the selling price and profit margin for similar products. 56 For those contracts that contain multiple performance obligations (primarily system sales requiring installation services), the Company must determine the SSP. To determine the SSP for labor related performance obligations (such as the labor component of installation), the Company uses directly observable inputs based on the standalone sale prices for these services. The Company uses a cost-plus margin approach in determining the SSP for any materials-related performance obligations (e.g., system add-ons, spare parts, and systems). 5) Recognize revenue when, or as, the Company satisfies a performance obligation The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized over time if either 1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, 2) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does 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. Examples of control are using the asset to produce goods or services, enhance the value of other assets, settle liabilities, and holding or selling the asset. For over time recognition, ASC 606 requires the Company to select a single revenue recognition method for the performance obligation that faithfully depicts the Company’s performance in transferring control of the goods and services. The guidance allows entities to choose between two methods to measure progress toward complete satisfaction of a performance obligation: Output methods - recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract (e.g., surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units of produced or units delivered); and Input methods - recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. 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. For products where the customer’s defined specifications have not been met with at least two similarly configured systems and processes, the revenue and directly related costs are deferred at the time of shipment and later recognized at the time of customer acceptance or when this criterion has been met. For installation services, revenue is recognized at a point in time, when the equipment is shipped or delivered, depending on contractual terms. The nature of the installation services requires minimal effort and are perfunctory in nature. Therefore, equipment and any related installation are treated as one performance obligation. Maintenance and service contracts are recognized over time. Progress in the satisfaction of these performance obligations will be measured using an input method of either time elapsed in the case of fixed period contracts, or labor hours expended, in the case of project-based contracts. Cost to Obtain and Fulfill a Contract with a Customer The Company recognizes an asset related to incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The Company will recognize an asset from costs incurred to fulfill a contract only if such costs relate directly to a contract that the entity can specifically identify, the costs generate or enhance resources of the Company that will be used in satisfying performance obligations in the future, and the costs are expected to be recovered. Any assets recognized related to costs to obtain or fulfill a contract are amortized to selling, general and administrative expense on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. 57 In substantially all of our business 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. Under ASC 606, an asset shall be amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. However, ASC 606 provides 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 the Company’s contracts with customers, we expense all commissions as incurred based upon the expectation that the amortization period would be one year or less. The Company accounts 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. Revenue Categories used by Management Management reviews disaggregated revenue at the operating segment level. Revenue-generating transactions vary between our operating segments due to several factors. For example, lead times vary among our operating segments and among our products. Most of the revenue for our SiC/LED 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 operating segments. Due to these variations between operating segments, management determined that disaggregated revenue by segment sufficiently depicts how economic factors affect the nature, amount, timing and uncertainty of our revenue and cash flows. See Note 18 for additional information on our reportable business segments. Contract Assets – Contract assets consist of amounts the Company is not legally able to invoice but has 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., the Company has recognized revenue in an amount greater than the amount that is billable under the contract). Contract assets are reflected in other current assets on the Consolidated Balance Sheets. 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 profit. 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. This amount relates primarily to prepayments for system sales and installation services. Semiconductor system transactions have payment terms that generally require a payment due upon shipment of the system and a final payment due upon installation or acceptance. 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, generally upon shipment or acceptance, as determined under the revenue recognition policy above. On occasion, we have been required and may be required in the future to provide additional warranty coverage to ensure that the systems are ultimately accepted or to maintain customer goodwill. 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, 2020, 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. 58 The following is a summary of activity in accrued warranty expense at our continuing operations (in thousands): Years Ended September 30, 2020 2019 2018 Beginning balance $ 556 $ 644 $ 710 Additions for warranties issued during the period 393 785 966 Reductions in the liability for payments made under the warranty ( 433 ) ( 693 ) ( 782 ) Changes related to pre-existing warranties ( 121 ) ( 179 ) ( 250 ) Currency translation adjustment ( 15 ) ( 1 ) — Ending balance $ 380 $ 556 $ 644 Shipping Expense – Shipping expenses at our continuing operations of $ 0.5 million in 2020 and $ 0.7 million in each of the years 2019 and 2018 are included in selling, general and administrative expenses. Advertising Expense – Advertising costs are expensed as incurred. Advertising expenses at our continuing operations of $ 0.3 million , $ 0.4 million and $ 0.5 million for 2020, 2019 and 2018, respectively, 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 highly subjective assumptions, including expected stock price volatility, expected life of the option and the risk-free interest rate. A change in one or more of the assumptions used in the model may result in a material change to the estimated fair value of the stock-based compensation. Research, Development and Engineering Expenses – 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, supplies and facilities used in producing prototypes. Payments received for research and development grants prior to the meeting of milestones are recorded as unearned research and development grant liabilities and included in other accrued liabilities on the balance sheet. When certain contract requirements are met, governmental research and development grants are netted against research, development and engineering expenses. The following is a summary of our research, development and engineering expense (in thousands): Years Ended September 30, 2020 2019 2018 Research, development and engineering $ 3,689 $ 3,112 $ 2,868 Grants earned ( 377 ) ( 44 ) ( 12 ) Net research, development and engineering $ 3,312 $ 3,068 $ 2,856 Foreign Currency Transactions and Translation – We use the U.S. dollar as our reporting currency. Our operations in Europe, China and other countries are primarily conducted in their functional currencies, the Euro, Renminbi, or the local country currency, respectively. Accordingly, assets and liabilities of the 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. 59 Income Taxes – We file consolidated federal income tax returns in the United States for all subsidiaries except those in China and the United Kingdom , where separate returns are filed. We compute deferred income tax assets and liabilities based upon cumulative temporary differences between financial reporting and taxable income, carryforwards available and enacted tax laws. We also accrue a liability for uncertain tax positions when it is more likely than not that such tax will be incurred. Deferred tax assets reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management and based on the weight of available evidence, it is more likely than not that all or a portion of the deferred tax asset will not be realized. Each quarter, the valuation allowance is re-evaluated. In 2020, we reversed a portion of the valuation allowance related to foreign deferred tax assets which we have determined will be utilized against net operating income in future years. In 2019 and 2018, we reversed a portion of the valuation allowance related to net operating loss carryforwards which we had determined would be utilized against net operating income in the respective years. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full or partial valuation allowances on net deferred tax assets are appropriate Concentrations of Credit Risk – Our customers consist of semiconductor manufacturers worldwide, as well as the lapping and polishing marketplace. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. Credit risk is managed by performing ongoing credit evaluations of the customers’ financial condition, by requiring significant deposits where appropriate, and by actively monitoring collections. Letters of credit are required of certain customers depending on the size of the order, type of customer or its creditworthiness, and country of domicile. As of September 30, 2020, two Semiconductor customers individually represented 11 % and 10 % of accounts receivable. As of September 30, 2019, one Semiconductor customer individually represented 15 % of accounts receivable. Refer to Note 20 for information regarding revenue and assets in other countries subject to fluctuation in foreign currency exchange rates. Fair Value of Financial Instruments – In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the FASB ASC, we group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1 – Valuation is based upon quoted market price for identical instruments traded in active markets. Level 2 – Valuation is based 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. In accordance with the requirements of the Fair Value Measurements and Disclosures Topic of the FASB ASC, 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 the results of current or future values. 60 Cash, Cash Equivalents and Restricted Cash – Included in c ash and c ash e quivalents and r estricted c ash in the Consolidated Balance Sheets are money market funds invested in treasury bills, notes and other direct obligations of the U.S. Treasury and foreign bank operating and time deposit accounts. The fair value of th e s e accounts are based on Level 1 inputs in the fair value hierarchy. Receivables and Payables – The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy. Debt – The recorded amounts of these financial instruments, including long-term debt and current maturities of long-term debt, approximate fair value and are considered Level 2 in the fair value hierarchy. Recently Issued Accounting Pronouncements Effective October 1, 2019 , we adopted the FASB ASU No. 2016-02—Leases (Topic 842), using the retrospective cumulative effect adjustment transition method. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. In addition, 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. We also made an accounting policy election to not record right of use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on our Consolidated Balance Sheet. Adoption of the new standard resulted in the recording of lease ROU assets and lease liabilities of approximately $ 195,000 and $ 163,000 , respectively, as of October 1, 2019. The standard did not materially impact our consolidated results from operations and had no impact on our cash flows upon adoption. However, during the third quarter of fiscal 2020, we recorded an additional $ 5.0 million of ROU assets and lease liabilities upon the commencement of our new SiC/LED building lease. Refer to Note 5 for further information regarding Topic 842. 2. Assets Held for Sale, Discontinued Operations and Disposals Discontinued Operations In April 2019, we announced that the Board determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. The Board made its decision, effective March 28, 2019, after analyzing current market conditions and the strategic outlook for its Solar segment, which operates in a highly competitive market among lower cost manufacturers, particularly in China. Historical fluctuations in the solar cell industry combined with downward pricing pressure has negatively affected the Company’s results of operations in recent years. In response, we had been pursuing strategic alternatives for the continued operations of the Solar segment, including the possibility of restructuring the Solar segment to achieve profitability and compete more effectively. After further assessment, however (including input from management of the Solar segment and our external advisors), the Board determined that the investment required to return our solar business to profitability would be better utilized to pursue strategic opportunities in the Semiconductor and SiC/LED segments. The divestiture of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. We adopted a plan to sell our Solar operations on or before March 31, 2020. As such, we classified substantially all of the Solar segment as held for sale in our Consolidated Balance Sheets and reported its results as discontinued operations in our Consolidated Statements of Operations. On June 7, 2019 (“SoLayTec Sale Date”), we completed the sale of SoLayTec to a third party located in the Netherlands. Upon the SoLayTec Sale Date, we recognized a gain of approximately $ 1.6 million, which we included in loss from discontinued operations reported in our Consolidated Statements of Operations for the year 61 ended September 30, 2019 . We recognized a tax benefit relating to this sale, which can be carried over to future years. E ffective on the SoLayTec Sale Date, SoLayTec is no longer included in our consolidated financial statements. Effective January 22, 2020 (“Tempress Sale Date”), we completed the sale of Tempress for nominal consideration to a third party located in the Netherlands. In connection with this sale transaction, we provided an unsecured term loan to Tempress in the principal sum of $ 2.25 million, to be used to fund Tempress’ working capital requirements and to facilitate the restructuring of Tempress’ operations. We forgave $ 0.5 million of the loan in accordance with the terms of the loan agreement. The balance of the loan was paid in full during fiscal 2020. We recorded a pre-tax loss on sale of approximately $ 10.9 million, of which approximately $ 7.2 million was the recognition of previously recorded accumulated foreign currency translation losses. The total pre-tax loss did not have a material effect on our cash balances at our continuing operations. We also recognized a significant tax benefit relating to this loss, which can be carried over to future years. Effective on the Tempress Sale Date, Tempress is no longer included in our consolidated financial statements. Operating results of our discontinued solar operations were as follows, in thousands: Years Ended September 30, 2020 2019 2018 Revenues, net of returns and allowances $ 7,442 $ 25,139 $ 76,395 Cost of sales 5,969 23,669 58,156 Gross profit 1,473 1,470 18,239 Selling, general and administrative 1,814 8,857 11,792 Research, development and engineering 540 3,039 4,944 Restructuring charges 37 567 897 Impairment charges — — 4,759 Operating loss ( 918 ) ( 10,993 ) ( 4,153 ) (Loss) gain on sale of subsidiary ( 10,916 ) 1,614 — Interest expense and other, net ( 29 ) ( 121 ) ( 249 ) Loss from discontinued operations before income taxes ( 11,863 ) ( 9,500 ) ( 4,402 ) Income benefit ( 47 ) ( 1,203 ) ( 3,076 ) Net loss $ ( 11,816 ) $ ( 8,297 ) $ ( 1,326 ) The following table presents a summary of the solar assets and liabilities held for sale included in our Consolidated Balance Sheets, in thousands: September 30, 2019 Assets Total current assets $ 17,591 Property, plant and equipment - net 5,164 Total assets included in the disposal group 22,755 Total current liabilities 18,272 Long-term debt 275 Total liabilities included in the disposal group 18,547 Net assets included in the disposal group $ 4,208 62 Amtech’s Consolidated Statement of Cash flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement category. The following table summarizes selected cash flow information for discontinued operations, in thousands: Years Ended September 30, 2020 2019 2018 Loss from discontinued operations, net of tax $ ( 11,816 ) $ ( 8,297 ) $ ( 1,326 ) Non-cash impairment charges $ — $ — $ 4,759 Depreciation and amortization $ 180 $ 562 $ 801 (Reversal of) provision for allowance for doubtful accounts, net $ ( 62 ) $ 874 $ ( 56 ) (Loss) gain on sale of subsidiary $ ( 10,916 ) $ 1,614 $ — Purchases of property, plant and equipment $ 1 $ 131 $ 1,403 Other Disposals R2D – On December 13, 2019 (“R2D Sale Date”), we finalized the sale of R2D to certain members of R2D’s management team. Upon the sale, we recognized a loss of approximately $ 2.8 million, which we reported as loss on sale of subsidiary in our Consolidated Statements of Operations for the year ended September 30, 2020. Effective on the R2D Sale Date, R2D is no longer included in our consolidated financial statements. R2D does not meet the discontinued operations or held-for-sale criteria. Kingstone – On September 16, 2015, we reduced our ownership to 15 % in Kingstone Hong Kong. Our investment in Kingstone Hong Kong was accounted for using the equity method for periods subsequent to the deconsolidation due to our ability to exert significant influence over the financial and operating policies of Kingstone Hong Kong, primarily through our representation on the board of directors. The resulting equity method investment was initially recorded at fair value at $ 2.7 million using the value the third-party purchaser placed on their investment in Kingstone Shanghai. The carrying value of the equity method investment in Kingstone Hong Kong was $ 2.6 million as of September 30, 2017. Effective June 29, 2018, we sold our remaining ownership interest in Kingstone Hong Kong to the majority owner for approximately $ 5.7 million, which was received in August 2018. We recognized a pre-tax gain of approximately $ 2.9 million, which is reported as gain on sale of other assets in our Consolidated Statements of Operations for the year ended September 30, 2018. 3. Earnings Per Share & Diluted Earnings Per Share Basic EPS is computed by dividing net income (loss) available to common shareholders 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, and the numerator is based on net income. In the case of a net loss, diluted EPS is calculated in the same manner as basic EPS. For the years 2020, 2019 and 2018, options for 642,000 , 978,000 and 434,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could become dilutive in the future. 63 A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share amounts): Years Ended September 30, 2020 2019 2018 Numerator: Net (loss) income from continuing operations $ ( 3,907 ) $ 3,135 $ 6,631 Net loss from discontinued operations $ ( 11,816 ) $ ( 8,297 ) $ ( 1,326 ) Net (loss) income $ ( 15,723 ) $ ( 5,162 ) $ 5,305 Denominator: Weighted-average shares used to compute basic EPS 14,159 14,240 14,833 Common stock equivalents (1) — 35 232 Weighted-average shares used to compute diluted EPS 14,159 14,275 15,065 Basic (loss) income per share from continuing operations $ ( 0.28 ) $ 0.22 $ 0.45 Basic loss per share from discontinued operations $ ( 0.83 ) $ ( 0.58 ) $ ( 0.09 ) Net (loss) income per basic share $ ( 1.11 ) $ ( 0.36 ) $ 0.36 Diluted (loss) income per share from continuing operations $ ( 0.28 ) $ 0.22 $ 0.44 Diluted loss per share from discontinued operations $ ( 0.83 ) $ ( 0.58 ) $ ( 0.09 ) Net (loss) income per diluted share $ ( 1.11 ) $ ( 0.36 ) $ 0.35 (1) The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period. 4. Contracts with Customers The components of contract assets, which are included in other current assets in our Consolidated Balance Sheets, are as follows, in thousands: September 30, 2020 September 30, 2019 Unbilled accounts receivable $ — $ 36 Contract assets $ — $ 36 The components of contract liabilities are as follows, in thousands: September 30, 2020 September 30, 2019 Customer deposits $ 1,224 $ 1,378 Contract liabilities $ 1,224 $ 1,378 5. Leases We lease office space, buildings, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet. Instead, we recognize the lease expense as incurred over the lease term. Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years . The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. 64 Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Significant Accounting Policy We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in right-of-use assets in our Consolidated Balance Sheet. Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our Consolidated Balance Sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of September 30, 2020 and October 1, 2019, in thousands: September 30, 2020 October 1, 2019 Assets Operating lease assets $ 5,124 $ 146 Finance lease assets 26 49 Total lease assets $ 5,150 $ 195 Liabilities Current Operating lease liabilities $ 113 $ 99 Finance lease liabilities 11 22 Non-current Operating lease liabilities 5,048 15 Finance lease liabilities 16 27 Total lease liabilities $ 5,188 $ 163 The following table provides information about the financial statement classification of our lease expenses reported in the Consolidated Statements of Operations for the year ended September 30, 2020, in thousands: Lease cost Classification Year Ended September 30, 2020 Operating lease cost Cost of sales $ 208 Operating lease cost Selling, general and administrative expenses 84 Finance lease cost Cost of sales 16 Finance lease cost Selling, general and administrative expenses 8 Short-term lease cost Cost of sales 164 Total lease cost $ 480 65 Future minimum lease payments under non-cancelable leases as of September 30, 2020 are as follows, in thousands: Operating Leases Finance Leases Total 2021 $ 325 $ 12 $ 337 2022 318 8 326 2023 314 7 321 2024 312 2 314 2025 298 — 298 Thereafter 6,944 — 6,944 Total lease payments 8,511 29 8,540 Less: Interest 3,350 2 3,352 Present value of lease liabilities $ 5,161 $ 27 $ 5,188 Operating lease payments include $ 3.9 million related to options to extend lease terms that are reasonably certain of being exercised. The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2020: September 30, 2020 Weighted average remaining lease term Operating leases 23.49 years Finance leases 2.79 years Weighted average discount rate Operating leases 4.17 % Finance leases 4.17 % 6. Restructuring Plans During 2019, the Company and its former Chief Executive Officer and President, Fokko Pentinga, agreed on a transition of leadership, pursuant to which Mr. Pentinga stepped down as the Chief Executive Officer, President and a director of the Company effective December 6, 2018 (the “Effective Date”). In connection with his departure, Mr. Pentinga and the Company entered into a Separation Agreement and General Release of all Claims, dated November 28, 2018 (the “Separation Agreement”). Pursuant to the Separation Agreement, Mr. Pentinga received the following benefits: • a severance payment of $ 864,000 in gross, less all customary and appropriate income and employment taxes; • a payment of $ 458,500 for all other amounts due him; • all of his time-based stock options (the “Options”) became fully vested and immediately exercisable. Mr. Pentinga has the right to exercise Options with an exercise price of $ 7.01 or less until December 31, 2019. The remaining Options were exercisable during the 90 -day period following the Effective Date, which resulted in an additional $ 108,000 in stock-based compensation expense; and • certain other benefits as set forth in the Separation Agreement. 66 The table below details the restructuring activity for the years ended September 30, 2020 and 2019 . The activity during 2019 is primarily related to the departure of our former CEO as well as additional headcount reductions as we consolidated satellite offices in our Semiconductor segment . The activity during 2020 is the result of staff reductions at our Massachusetts operations as we evaluated staffing across our Semiconductor operations. The outstanding obligations as of September 30, 2020 and September 30, 2019 , are as follows, in thousands: Years Ended September 30, 2020 2019 Balance at beginning of the year $ 40 $ — Severance expense, net of adjustments 217 1,110 Cash payments ( 155 ) ( 1,070 ) Balance at the end of the year $ 102 $ 40 7. Inventory The components of inventory are as follows (in thousands): September 30, 2020 September 30, 2019 Purchased parts and raw materials $ 14,530 $ 15,192 Work-in-process 3,074 4,215 Finished goods 3,942 3,183 21,546 22,590 Excess and obsolete reserves ( 4,269 ) ( 5,058 ) $ 17,277 $ 17,532 8. Property, Plant and Equipment The following is a summary of property, plant and equipment (in thousands): September 30, 2020 September 30, 2019 Land $ 3,240 $ 3,240 Buildings 5,396 5,396 Building and leasehold improvements 2,900 2,930 Equipment and machinery 6,231 5,488 Furniture and fixtures 1,344 1,312 19,111 18,366 Accumulated depreciation and amortization ( 7,116 ) ( 8,149 ) $ 11,995 $ 10,217 Depreciation was $ 0.8 million , $ 0.9 million and $ 1.1 million in 2020, 2019 and 2018, respectively. 9. Intangible Assets Intangible assets consist of the following (in thousands): September 30, 2020 September 30, 2019 Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer lists 6 years $ 1,219 $ ( 1,151 ) $ 68 $ 1,219 $ ( 948 ) $ 271 Trade names 15 years 869 ( 328 ) 541 869 ( 270 ) 599 $ 2,088 $ ( 1,479 ) $ 609 $ 2,088 $ ( 1,218 ) $ 870 67 In 2018, we conducted our periodic assessment of long-lived assets and identified the need for an intangible asset impairment charge in our Solar segment of $ 1.3 million due primarily to the decline in our expected performance of that segment. All remaining intangible assets are included in our Semiconductor segment. During 2020, we periodically assessed whether any indicators of impairment existed related to our intangible assets. As of each interim period end during the year, 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. Amortization expense related to intangible assets at our continuing operations was $ 0.3 million , $ 0.3 million and $( 20,000 ) in 2020, 2019 and 2018, respectively. The credit in 2018 was due to a one-time correction of previously recorded amortization expense. Future amortization expense for the remaining unamortized balance as of September 30, 2020, is estimated as follows: Years Ending September 30, Amortization Expense 2021 $ 126 2022 58 2023 58 2024 58 2025 58 Thereafter 251 Total $ 609 10. Goodwill The changes in the carrying amount of goodwill for the year ended September 30, 2020 are as follows (in thousands): Semiconductor SiC/LED Non-Segment Related Net Goodwill - Continuing Operations Discontinued Operations Net Goodwill Goodwill $ 5,905 $ 728 $ 3,595 $ 10,228 $ 3,367 $ 13,595 Accumulated impairment losses — — ( 3,595 ) ( 3,595 ) ( 3,367 ) ( 6,962 ) Balance at September 30, 2019 5,905 728 — 6,633 — 6,633 Impairment of goodwill — — — — — — Balance at September 30, 2020 $ 5,905 $ 728 $ — $ 6,633 $ — $ 6,633 Goodwill $ 5,905 $ 728 $ — $ 6,633 $ — $ 6,633 Accumulated impairment losses — — — — — — Balance at September 30, 2020 $ 5,905 $ 728 $ — $ 6,633 $ — $ 6,633 During 2020, we periodically assessed whether any indicators of impairment existed which would require us to perform an interim impairment review. As of each interim period end during the year, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of our reporting units below their carrying values. We performed our annual test of goodwill for impairment during the fourth quarter of 2020. The results of the first step of the goodwill impairment test indicated that the fair values of our Semiconductor and SiC/LED reporting units were in excess of the carrying values, and, thus, we did not require an impairment charge. While the quantitative analysis indicated no impairment of Semiconductor and SiC/LED segment goodwill existed as of September 30, 2020, if the future performance of these reporting units fall short of our expectations or if there are significant changes in operations due to changes in market conditions, we could be required to recognize material impairment charges in future periods. In 2018, we identified the need for a goodwill impairment charge in our former Solar segment of $ 5.7 million, due primarily to the decline in our expected performance of that segment. In 2019 and in 2020, we realigned our segments (see Note 18). 68 11. Income Taxes The following note related to income taxes includes both continuing and discontinued operations. The components of income (loss) before provision for income taxes are as follows (in thousands): Years Ended September 30, 2020 2019 2018 Domestic $ ( 18,652 ) $ 916 $ 7,845 Foreign 3,673 ( 4,648 ) ( 2,320 ) $ ( 14,979 ) $ ( 3,732 ) $ 5,525 The components of the provision for income taxes are as follows (in thousands): Years Ended September 30, 2020 2019 2018 Current: Domestic federal $ ( 239 ) $ — $ 1,167 Foreign 1,407 1,278 ( 1,404 ) Foreign withholding taxes 201 94 356 Domestic state ( 59 ) 58 101 Total current 1,310 1,430 220 Deferred: Foreign ( 566 ) — — Total deferred ( 566 ) — — Total provision $ 744 $ 1,430 $ 220 The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, included a provision for a five-year carryback of net operating losses. The company has assessed the benefit of the provision and utilized a portion of the 2019 net operating loss carryback to offset income from 2018. The income tax provision as of and for the year ended September 30, 2020 reflects such impact. Due to the tax treatment relating to the sales of SoLayTec and Tempress, we realized income tax benefits of $ 1.3 million and $ 11.1 million. We realized income tax expense of $ 0.2 million for the sale of R2D. The income tax benefits for SoLayTec and Tempress are reflected in our discontinued operations in 2019 and 2020, respectively. The income tax expense for R2D is reflected in our continuing operations in 2020. The income tax expense (benefit) is fully offset by a valuation allowance. The TCJA was enacted on December 22, 2017, and permanently reduces the U.S. federal corporate tax rate from 35 % to 21 %, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limits the deduction of interest expense for certain companies. The TCJA is a fundamental change to the taxation of multinational companies, including a shift from a system of worldwide taxation with some deferral elements to a territorial system, current taxation of certain foreign income, a minimum tax on low-tax foreign earnings, and new measures to curtail base erosion and promote U.S. production. As a result of the TCJA , the statutory rate applicable to our fiscal year ended September 30, 2018 was 24.3 %, based on a fiscal year blended rate calculation. ASC 740 requires filers to record the effect of tax law changes in the period enacted. In the first quarter of fiscal 2018, we re-measured the applicable deferred tax assets based on the rates at which they are expected to reverse. We adjusted our gross deferred tax assets and liabilities and recorded a corresponding offset to our full valuation allowance against our net deferred tax assets, which resulted in minimal net effect to our provision for income taxes and effective tax rate. The TCJA includes a one-time mandatory repatriation transition tax on certain net accumulated earnings and profits of our foreign subsidiaries. We have analyzed the earnings and profits of our foreign subsidiaries and determined that no transition taxes are due or expected. The other provisions of TCJA are either immaterial or not applicable. 69 A reconciliation of actual income taxes to income taxes at the expected United States federal corporate income tax rate is as follows (in thousands, except percentages): Years Ended September 30, 2020 2019 2018 Federal statutory rate 21.0 % 21.0 % 24.3 % Tax (benefit) expense at the federal statutory rate $ ( 3,146 ) $ ( 784 ) $ 1,342 Effect of permanent book-tax differences 145 272 75 State tax provision 34 31 76 Valuation allowance for net deferred tax assets 3,775 1,682 617 Uncertain tax items ( 47 ) 74 ( 3,013 ) Tax rate differential 222 150 1,107 Other items ( 239 ) 5 16 $ 744 $ 1,430 $ 220 Deferred income taxes reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and deferred tax liabilities are as follows (in thousands): September 30, 2020 September 30, 2019 Deferred tax assets (liabilities): Capitalized inventory costs $ 204 $ 168 Inventory write-downs 991 2,856 Accrued warranty 53 161 Deferred profits 1 346 Accruals and reserves not currently deductible 2,913 3,531 Stock option expense 806 849 Federal net operating loss carryforwards 18,445 6,979 Foreign and state net operating losses 231 10,481 Book vs. tax depreciation and amortization ( 1,465 ) ( 1,546 ) Other deferred tax assets 120 75 Total deferred tax assets 22,299 23,900 Valuation allowance ( 21,733 ) ( 23,900 ) Deferred tax assets, net of valuation allowance $ 566 $ — Changes in the deferred tax valuation allowance are as follows (in thousands): Years Ended September 30, 2020 2019 Balance at the beginning of the year $ 23,900 $ 23,769 (Reductions) additions to valuation allowance ( 2,167 ) 131 Balance at the end of the year $ 21,733 $ 23,900 The deferred tax valuation allowance decreased by $ 2.2 million and increased by $ 0.1 million for the years ended September 30, 2020 and 2019, respectively. 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 substantially all net U.S. deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized. In 2020, we reversed a portion of the valuation allowance related to foreign deferred tax assets which we have determined will be utilized against net 70 operating income in future years. In 2019 and 2018, we reversed a portion of the valuation allowance related to net operating loss carryforwards which we had determined would be utilized against net operating income in the respective years. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full or partial valuation allowances on net deferred tax assets are appropriate . As of September 30, 2020, we have federal net operating loss carryforwards of approximately $ 13.8 million that expire at various times between 2028 and 2035 . The utilization of those federal net operating losses are limited to approximately $ 0.8 million per year. Additionally, we have federal net operating loss carryforwards of approximately $ 74.1 million that have an indefinite carryforward period. The utilization of those federal net operating losses are limited to 80 % of taxable income after 2021. We have no foreign net operating loss carryforwards as of September 30, 2020. We have approximately $ 21.6 million of state net operating loss carryforwards. We apply the accounting guidance for uncertainty in income taxes using the provisions of ASC 740. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return that has not been reflected in measuring income tax expense for financial reporting purposes. Approximately $ 0.5 million of this total represents the amount that, if recognized, would favorably affect our effective income tax rate in future periods. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows (in thousands): Years Ended September 30, 2020 2019 2018 Balance at beginning of the year $ 1,272 $ 1,198 $ 4,210 Additions related to tax positions taken in prior years — 74 155 Reductions due to resolution of uncertain tax position ( 47 ) — ( 3,167 ) Balance at the end of the year $ 1,225 $ 1,272 $ 1,198 We have classified all of our liabilities for uncertain tax positions as income taxes payable long-term. Income taxes long-term also includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid. We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized a net expense (benefit) for interest and penalties of $ 4,000 , $ 0.1 million and $( 2.0 ) million for 2020, 2019 and 2018, respectively. Income taxes payable long-term on the Consolidated Balance Sheets includes a cumulative accrual for potential interest and penalties of $ 0.8 million as of September 30, 2020 and 2019. We do not expect that the amount of our tax reserves for uncertain tax positions will materially change in the next 12 months other than the continued accrual of interest and penalties. Amtech and one or more of our subsidiaries 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, but generally is from 3 to 5 years . 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. 71 12. Long-Term Debt We have a mortgage note secured by BTU’s real property in Billerica, Massachusetts. The note has a remaining balance of $ 5.2 million as of September 30, 2020 and a maturity date of September 26, 2023 . The debt was refinanced in September 2016 with an interest rate of 4.11 % through September 26, 2021, at which time the interest rate will be adjusted to a per annum fixed rate equal to the aggregate of the Federal Home Loan Board Five Year Classic Advance Rate plus two hundred forty basis points. Annual maturities relating to our long-term debt as of September 30, 2020 are as follows (in thousands): Annual Maturities 2021 $ 380 2022 396 2023 4,402 2024 — 2025 — Thereafter — Total $ 5,178 13. Equity and Stock-Based Compensation 2018 Stock Repurchase Plan On March 28, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we were authorized to repurchase up to $ 4 million of our outstanding common stock, par value $ 0.01 , over a one-year period, commencing on April 2, 2018. During the year ended September 30, 2018, we completed our repurchase program and repurchased 771,149 shares of our common stock on the open market at a total cost of approximately $ 4.0 million (an average price of $ 5.19 per share). All shares repurchased during the year ended September 30, 2018 have been retired. 2019 Stock Repurchase Plan On November 29, 2018, we announced that our Board of Directors approved a stock repurchase program, pursuant to which we were authorized to repurchase up to $ 4 million of our outstanding common stock, par value $ 0.01 per share, over a one-year period. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and depended on our stock price and other market conditions. Our Board could have terminated the repurchase program at any time while it was in effect. The term of our repurchase program expired as of the quarter ended December 31, 2019. There were no shares repurchased under this plan. 2020 Stock Repurchase Plan On February 4, 2020, the Board approved a new stock repurchase program, pursuant to which we may repurchase up to $ 4 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions. We may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our common stock on the open market at a total cost of approximately $ 2.0 million (an average price of $ 5.46 per share). All shares repurchased during the year ended September 30, 2020 have been retired. Approximately $ 2 million remain under the repurchase program as of September 30, 2020. 72 Stock-Based Compensation Expense Stock-based compensation expenses of $ 0.3 million , $ 0.6 million and $ 0.9 million for 2020, 2019 and 2018, respectively, are included in selling, general and administrative expenses. As of September 30, 2020, total compensation cost related to non-vested stock options not yet recognized is $ 0.1 million , which is expected to be recognized over the next 1.05 years on a weighted-average basis. Amtech Equity Compensation Plans The 2007 Employee Stock Incentive Plan (the “2007 Plan”), under which 500,000 shares could be granted, was adopted by our Board of Directors 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. 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. Equity compensation plans as of September 30, 2020 are summarized in the table below: Name of Plan Shares Authorized Shares Available for Grant Options Outstanding Plan Expiration 2007 Employee Stock Incentive Plan 3,000,000 1,083,744 491,648 Mar. 2024 Non-Employee Directors Stock Option Plan 500,000 83,934 205,017 Mar. 2024 1,167,678 696,665 Stock Options Stock options issued under the terms of the 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 6 months to 4 years. We estimate 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, 2020 2019 2018 Risk free interest rate 1 % 3 % 3 % Expected life 6 years 6 years 6 years Dividend rate 0 % 0 % 0 % Volatility 58 % 60 % 59 % 73 Stock option transactions and the options outstanding are summarized as follows: Years Ended September 30, 2020 2019 2018 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding at beginning of period 1,068,665 $ 7.04 1,248,758 $ 7.69 1,560,441 $ 7.95 Granted 32,500 5.34 198,850 5.35 44,000 7.40 Exercised ( 160,375 ) 5.47 ( 52,201 ) 4.02 ( 277,154 ) 6.71 Forfeited/expired ( 244,125 ) 7.94 ( 326,742 ) 9.00 ( 78,529 ) 16.12 Outstanding at end of period 696,665 $ 7.00 1,068,665 $ 7.04 1,248,758 $ 7.69 Exercisable at end of period 611,542 $ 7.19 842,083 $ 7.45 1,014,300 $ 7.93 Weighted average grant-date fair value of options granted during the period $ 2.89 $ 3.08 $ 4.20 The following table summarizes information for stock options outstanding and exercisable as of September 30, 2020: 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 2.95-4.77 83,500 5.01 $ 4.12 70,168 $ 4.00 4.85-5.07 59,350 7.43 4.95 53,100 4.93 5.25-5.25 85,912 4.81 5.25 85,912 5.25 5.40-5.40 6,000 5.29 5.40 6,000 5.40 5.52-5.52 100,000 6.80 5.52 49,625 5.52 5.75-6.60 30,500 7.23 5.99 22,000 5.75 7.01-7.01 70,000 3.00 7.01 70,000 7.01 7.40-7.98 123,767 3.45 7.76 117,101 7.78 8.20-9.94 17,935 1.63 9.31 17,935 9.31 9.98-22.26 119,701 3.21 11.72 119,701 11.72 696,665 4.67 $ 7.00 611,542 $ 7.19 The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2020 were $ 65,000 and $ 63,000 , respectively, which represents the total pretax intrinsic value, based on our closing stock price of $ 4.89 per share as of September 30, 2020, 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 intrinsic value of stock options exercised during the fiscal years ended September 30, 2020, 2019 and 2018 was $ 0.1 million , $ 0.1 million and $ 1.2 million, respectively. 14. Benefit 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 plan for hourly union employees in Pennsylvania. Both plans are insignificant. Defined Contribution Plan – Domestic employees of Amtech and its subsidiaries who meet certain eligibility requirements may participate, at the employee’s option, in the Amtech Systems, Inc. 401(k) Plan (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 employees’ elective deferrals, up to 3.6 % of the participants’ eligible compensation each payroll period. The match expense was $ 0.3 million , $ 0.3 million and $ 0.4 million in 2020, 2019 and 2018, respectively. 74 Pension Plan – Our hourly union employees in Pennsylvania participate in a multi-employer pension plan, the NIGPP, determined 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 2019 for a three-year term that expires September 30, 2022 . 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 contribution rate is $ 2.48 per hour, per employee. Our contributions to the NIGPP were $ 44,000 , $ 53,000 and $ 64,000 in 2020, 2019 and 2018, respectively. 15. Commitments and Contingencies Purchase Obligations – As of September 30, 2020, we had unrecorded purchase obligations at our continuing operations in the amount of $ 4.6 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 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 twelve to thirty-six months of salary. 16. Related Party Transaction Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation. In 2015, we deconsolidated Kingstone, reducing our ownership to 15 % of Kingstone Hong Kong. Effective June 29, 2018, we sold our remaining 15 % ownership interest in Kingstone Hong Kong to the majority owner for approximately $ 5.7 million. We recognized a pre-tax gain on the sale of approximately $ 2.9 million. The 2018 gain is reported as a gain on sale of other assets in our Consolidated Statements of Operations. Kingstone Hong Kong and its owners are no longer related parties of Amtech. 17. Cash Flows Non-cash investing activities for 2020 included $ 80,000 of capital expenditures in accounts payable, representing additions purchased at period end but not yet paid for in cash. Non-cash capital expenditures in accounts payable for the years ended September 30, 2019 and 2018 were immaterial. 18. Business Segments After announcing the planned divestiture of our Solar segment (see Note 2), we conducted an evaluation of our organizational structure. Beginning with the second quarter of fiscal 2019, we made changes to our reportable 75 segments. With the divesture of our Automation segment in the first quarter of fiscal 2020, we further evaluated our organizational structure and concluded that we have two reportable business segments following the divestiture. Prior period amounts have been revised to conform to the current period segment reporting structure. Our two reportable segments are as follows: 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. SiC/LED –We produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as sapphire substrates, optical components, silicon wafers, numerous types of crystal materials, ceramics and metal components. We formerly referred to our SiC/LED segment as “Polishing.” Information concerning our business segments is as follows (in thousands): Years Ended September 30, 2020 2019 2018 Net revenue: Semiconductor $ 54,516 $ 66,455 $ 80,163 SiC/LED 10,304 13,682 13,761 Non-segment related 643 4,898 6,129 $ 65,463 $ 85,035 $ 100,053 Operating income (loss): Semiconductor $ 4,168 $ 8,744 $ 11,848 SiC/LED 684 3,641 3,672 Non-segment related ( 5,337 ) ( 7,469 ) ( 9,448 ) $ ( 485 ) $ 4,916 $ 6,072 Years Ended September 30, 2020 2019 2018 Capital expenditures: Semiconductor $ 912 $ 379 $ 352 SiC/LED 1,724 171 603 Non-segment related 39 33 39 $ 2,675 $ 583 $ 994 Depreciation and amortization expense: Semiconductor $ 821 $ 828 $ 715 SiC/LED 197 136 136 Non-segment related 60 161 202 $ 1,078 $ 1,125 $ 1,053 September 30, 2020 September 30, 2019 Identifiable assets: Semiconductor $ 51,648 $ 56,855 SiC/LED 12,717 7,779 Non-segment related* 37,733 39,088 Held-for-sale assets** — 22,755 $ 102,098 $ 126,477 * Non-segment related assets include cash, accounts receivable, inventory, property and other assets. ** See Note 2 for additional information on held-for-sale assets. 76 19. Major Customers and Sales by Country In 2020, one Semiconductor customer accounted for 11 % of net revenues. In 2019, no individual customer accounted for 10% or more of net revenues. In 2018, one Semiconductor customer accounted for 14 % of net revenues. Our net revenues for 2020, 2019 and 2018 were to customers in the following geographic regions: Years Ended September 30, 2020 2019 2018 United States 28 % 35 % 21 % Other 7 % 6 % 3 % Total Americas 35 % 41 % 24 % China 25 % 18 % 30 % Malaysia 5 % 5 % 8 % Taiwan 15 % 10 % 9 % Other 7 % 8 % 5 % Total Asia 52 % 41 % 52 % Germany 3 % 8 % 10 % Other 10 % 10 % 14 % Total Europe 13 % 18 % 24 % 100 % 100 % 100 % 20. Geographic Regions We have continuing 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, 2020 2019 2018 Net revenue: United States $ 48,089 $ 65,942 $ 72,753 China 13,510 9,500 17,634 Other 3,864 9,593 9,666 $ 65,463 $ 85,035 $ 100,053 Operating income (loss): United States $ ( 5,814 ) $ 726 $ 2,755 China 4,744 3,686 5,445 Other 585 504 ( 2,128 ) $ ( 485 ) $ 4,916 $ 6,072 As of September 30, 2020 2019 Net property, plant and equipment: United States $ 11,804 $ 9,893 China 191 236 Other — 88 $ 11,995 $ 10,217 77 21. Supplementary Financial Information The following is a summary of the activity in our allowance for doubtful accounts (in thousands): Years Ended September 30, 2020 2019 2018 Balance at beginning of year $ 172 $ 454 $ 356 Provision 86 200 102 Write offs ( 26 ) ( 402 ) ( 9 ) Adjustment (1) ( 73 ) ( 80 ) 5 Balance at end of year $ 159 $ 172 $ 454 (1) Primarily foreign currency translation adjustments. 22. Selected Quarterly Data (Unaudited) The following table sets forth selected unaudited consolidated quarterly financial information for the years ended September 30, 2020 and 2019 (in thousands, except percentages and per share amounts): Fiscal Year 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net of returns and allowances $ 20,692 $ 14,460 $ 15,227 $ 15,084 Cost of sales 12,518 9,102 9,276 10,126 Gross profit 8,174 5,358 5,951 4,958 Selling, general and administrative 5,915 5,415 4,804 5,263 Research, development and engineering 622 915 899 876 Restructuring charges — — 217 — Operating income (loss) 1,637 ( 972 ) 31 ( 1,181 ) Loss on sale of subsidiary ( 2,793 ) — — — Interest (expense) income and other, net ( 70 ) 595 ( 13 ) ( 350 ) (Loss) income from continuing operations before income taxes ( 1,226 ) ( 377 ) 18 ( 1,531 ) Income tax provision 41 166 90 494 Loss from continuing operations, net of tax ( 1,267 ) ( 543 ) ( 72 ) ( 2,025 ) Loss from discontinued operations, net of tax ( 665 ) ( 11,151 ) — — Net loss $ ( 1,932 ) $ ( 11,694 ) $ ( 72 ) $ ( 2,025 ) Gross margin 39.5 % 37.1 % 39.1 % 32.9 % Operating margin 7.9 % ( 6.7 )% 0.2 % ( 7.8 )% Loss Per Basic Share: Basic loss per share from continuing operations $ ( 0.09 ) $ ( 0.04 ) $ ( 0.01 ) $ ( 0.14 ) Basic loss per share from discontinued operations $ ( 0.05 ) $ ( 0.79 ) $ — $ — Net loss per basic share $ ( 0.14 ) $ ( 0.83 ) $ ( 0.01 ) $ ( 0.14 ) Loss Per Diluted Share: Diluted loss per share from continuing operations $ ( 0.09 ) $ ( 0.04 ) $ ( 0.01 ) $ ( 0.14 ) Diluted loss per share from discontinued operations $ ( 0.05 ) $ ( 0.79 ) $ — $ — Net loss per diluted share $ ( 0.14 ) $ ( 0.83 ) $ ( 0.01 ) $ ( 0.14 ) Weighted average shares outstanding - basic 14,290 14,150 14,155 14,052 Weighted average shares outstanding - diluted 14,290 14,150 14,155 14,052 78 Fiscal Year 2019 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net of returns and allowances $ 23,225 $ 20,633 $ 21,003 $ 20,174 Cost of sales 14,205 12,706 13,153 11,614 Gross profit 9,020 7,927 7,850 8,560 Selling, general and administrative 6,626 5,793 5,718 6,126 Research, development and engineering 866 713 746 743 Restructuring charges 864 173 35 38 Operating income 664 1,248 1,351 1,653 Interest income and other, net 166 96 249 341 Income from continuing operations before income taxes 830 1,344 1,600 1,994 Income tax provision 582 332 707 1,012 Income from continuing operations, net of tax 248 1,012 893 982 (Loss) income from discontinued operations, net of tax ( 2,620 ) ( 6,647 ) 1,154 ( 184 ) Net (loss) income $ ( 2,372 ) $ ( 5,635 ) $ 2,047 $ 798 Gross margin 38.8 % 38.4 % 37.4 % 42.4 % Operating margin 2.9 % 6.0 % 6.4 % 8.2 % Income (Loss) Per Basic Share: Basic income per share from continuing operations $ 0.02 $ 0.07 $ 0.06 $ 0.07 Basic (loss) income per share from discontinued operations $ ( 0.18 ) $ ( 0.47 ) $ 0.08 $ ( 0.01 ) Net (loss) income per basic share $ ( 0.16 ) $ ( 0.40 ) $ 0.14 $ 0.06 Income (Loss) Per Diluted Share: Diluted income per share from continuing operations $ 0.02 $ 0.07 $ 0.06 $ 0.07 Diluted (loss) income per share from discontinued operations $ ( 0.18 ) $ ( 0.47 ) $ 0.08 $ ( 0.01 ) Net (loss) income per diluted share $ ( 0.16 ) $ ( 0.40 ) $ 0.14 $ 0.06 Weighted average shares outstanding - basic 14,220 14,228 14,245 14,266 Weighted average shares outstanding - diluted 14,252 14,258 14,316 14,304 79 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.