10-Q 1 asys-20231231.htm 10-Q 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: December 31, 2023

OR

 

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

For the transition period from ________________ to ________________

Commission File Number: 0-11412

img250509215_0.jpg 

 

AMTECH SYSTEMS, INC.

 

(Exact name of registrant as specified in its charter)

 

Arizona

 

86-0411215

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

131 South Clark Drive, Tempe, Arizona

 

85288

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: 480-967-5146

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ASYS

NASDAQ Global Select Market

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large Accelerated Filer

 

 

Accelerated Filer

Non-Accelerated Filer

 

 

Smaller Reporting Company

 

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

At February 2, 2024, there were outstanding 14,190,977 shares of Common Stock.

 


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

 

Page

Cautionary Statement Regarding Forward-Looking Statements

3

PART I. FINANCIAL INFORMATION

4

Item 1. Condensed Consolidated Financial Statements

4

Condensed Consolidated Balance Sheets December 31, 2023 (Unaudited) and September 30, 2023

4

Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 2023 and 2022

5

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended December 31, 2023 and 2022

6

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three Months Ended December 31, 2023 and 2022

7

Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, 2023 and 2022

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Overview

25

Results of Operations

26

Liquidity and Capital Resources

29

Off-Balance Sheet Arrangements

32

Contractual Obligations

32

Critical Accounting Estimates

32

Impact of Recently Issued Accounting Pronouncements

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

33

Item 4. Controls and Procedures

33

PART II. OTHER INFORMATION

34

Item 1. Legal Proceedings

34

Item 1A. Risk Factors

34

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

34

Item 3. Defaults Upon Senior Securities

35

Item 4. Mine Safety Disclosures

35

Item 5. Other Information

35

Item 6. Exhibits

36

SIGNATURES

37

 

2


 

Cautionary Note Regarding Forward-Looking Statements

 

Our discussion and analysis in this Quarterly Report on Form 10-Q ("Quarterly Report"), our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “2023 Form 10-K”), our other reports that we file with the SEC, our press releases and in public statements of our officers and corporate spokespersons contain “forward-looking” statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our or our officers’ current expectations or forecasts of future events. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. We have tried, wherever possible, to identify such statements by using words such as “may,” “plan,” “anticipate,” “seek,” “will,” “expect,” “intend,” “estimate,” “believe,” “continue,” “predict,” “potential,” “project,” “should,” “would,” “could,” “likely,” “future,” “target,” “forecast,” “goal,” “observe,” and “strategy” or the negative thereof or variations thereon or similar terminology relating to the uncertainty of future events or outcomes. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; our revenue and operating performance; difficulties in successfully executing our growth initiatives; difficulties in executing on our strategic initiatives with respect to our material and substrate business segment; our ability to effectively integrate our acquisition of Entrepix, Inc., which we acquired in January 2023; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; the cyclical nature of the semiconductor industry; pricing and gross profit pressures; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; business interruptions, and any future pandemic on our business operations, financial results and financial position; risks of future cybersecurity incidents; adverse developments affecting financial institutions, including bank failures; failure to comply with financial and other covenants under our credit agreement with UMB Bank; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the SEC. The occurrence of the events described, and the achievement of expected results, depend on many events, some or all of which are not predictable or within our control. These and many other factors could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.

 

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our or our officers’ current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to certain risks and uncertainties. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Annual Report on Form 10-K will in fact transpire or prove to be accurate. You should not place undue reliance on these forward-looking statements, which speak only as of the date they were made.

 

The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise after the date of this Annual Report on Form 10-K. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this cautionary statement. You are advised, however, to consult any further disclosures we make on related subjects in our subsequently filed Form 10-Q and Form 8-K reports and our other filings with the SEC. Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. Risk Factors” of this Annual Report on Form 10-K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is not possible to predict or identify all such factors.

 

Unless the context indicates otherwise, the terms “Amtech,” the “Company,” “we,” “us” and “our” refer to Amtech Systems, Inc., an Arizona corporation, together with its subsidiaries.

3


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

December 31,
2023

 

 

September 30,
2023

 

Assets

 

(Unaudited)

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

17,033

 

 

$

13,133

 

Accounts receivable (less allowance for credit losses of $83 and $146 at
   December 31, 2023 and September 30, 2023, respectively)

 

 

21,403

 

 

 

26,474

 

Inventories

 

 

34,030

 

 

 

34,845

 

Income taxes receivable

 

 

664

 

 

 

632

 

Other current assets

 

 

5,061

 

 

 

6,105

 

Total current assets

 

 

78,191

 

 

 

81,189

 

Property, Plant and Equipment - Net

 

 

9,353

 

 

 

9,695

 

Right-of-Use Assets - Net

 

 

10,541

 

 

 

11,217

 

Intangible Assets - Net

 

 

4,526

 

 

 

6,114

 

Goodwill

 

 

21,261

 

 

 

27,631

 

Deferred Income Taxes - Net

 

 

126

 

 

 

101

 

Other Assets

 

 

1,044

 

 

 

1,074

 

Total Assets

 

$

125,042

 

 

$

137,021

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

8,545

 

 

$

10,815

 

Accrued compensation and related taxes

 

 

2,652

 

 

 

3,481

 

Accrued warranty expense

 

 

791

 

 

 

965

 

Other accrued liabilities

 

 

1,461

 

 

 

1,551

 

Current maturities of finance lease liabilities and long-term debt

 

 

934

 

 

 

2,265

 

Current portion of long-term operating lease liabilities

 

 

2,292

 

 

 

2,623

 

Contract liabilities

 

 

9,518

 

 

 

8,018

 

Total current liabilities

 

 

26,193

 

 

 

29,718

 

Finance Lease Liabilities and Long-Term Debt

 

 

9,197

 

 

 

8,422

 

Long-Term Operating Lease Liabilities

 

 

8,598

 

 

 

8,894

 

Income Taxes Payable

 

 

1,384

 

 

 

1,575

 

Other Long-Term Liabilities

 

 

49

 

 

 

47

 

Total Liabilities

 

 

45,421

 

 

 

48,656

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

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:
14,190,977 and 14,185,977 at December 31, 2023
   and September 30, 2023, respectively

 

 

142

 

 

 

142

 

Additional paid-in capital

 

 

127,308

 

 

 

126,963

 

Accumulated other comprehensive loss

 

 

(1,426

)

 

 

(1,695

)

Retained deficit

 

 

(46,403

)

 

 

(37,045

)

Total Shareholders’ Equity

 

 

79,621

 

 

 

88,365

 

Total Liabilities and Shareholders’ Equity

 

$

125,042

 

 

$

137,021

 

 

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

4


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Revenues, net

 

$

24,920

 

 

$

21,558

 

Cost of sales

 

 

15,852

 

 

 

13,255

 

Intangible asset impairment

 

 

849

 

 

 

 

Gross profit

 

 

8,219

 

 

 

8,303

 

 

 

 

 

 

 

Selling, general and administrative

 

 

8,567

 

 

 

9,190

 

Research, development and engineering

 

 

1,588

 

 

 

1,393

 

Goodwill impairment

 

 

6,370

 

 

 

 

Intangible asset impairment

 

 

430

 

 

 

 

Severance expense

 

 

198

 

 

 

400

 

Operating loss

 

 

(8,934

)

 

 

(2,680

)

Interest income

 

 

19

 

 

 

290

 

Interest expense

 

 

(198

)

 

 

(2

)

Foreign currency loss

 

 

(187

)

 

 

(347

)

Other

 

 

-

 

 

 

(9

)

Loss before income tax provision

 

 

(9,300

)

 

 

(2,748

)

Income tax provision (benefit)

 

 

58

 

 

 

(4

)

Net loss

 

$

(9,358

)

 

$

(2,744

)

Loss Per Share:

 

 

 

 

 

 

Net loss per basic share

 

$

(0.66

)

 

$

(0.20

)

Net loss per diluted share

 

$

(0.66

)

 

$

(0.20

)

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

14,188

 

 

 

14,008

 

Diluted

 

 

14,188

 

 

 

14,008

 

 

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

5


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net loss

 

$

(9,358

)

 

$

(2,744

)

Foreign currency translation adjustment

 

 

269

 

 

 

416

 

Comprehensive loss

 

$

(9,089

)

 

$

(2,328

)

 

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

6


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

(in thousands)

 

 

 

Common Stock

 

 

 

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Additional Paid-
In Capital

 

 

Comprehensive
Income (Loss)

 

 

Retained
 Deficit

 

 

Shareholders'
Equity

 

Balance at September 30, 2022

 

 

13,994

 

 

$

140

 

 

$

124,458

 

 

$

(1,767

)

 

$

(24,463

)

 

$

98,368

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,744

)

 

 

(2,744

)

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

416

 

 

 

 

 

 

416

 

Stock compensation expense

 

 

 

 

 

 

 

 

164

 

 

 

 

 

 

 

 

 

164

 

Stock options exercised

 

 

9

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Balance at December 31, 2022

 

 

14,003

 

 

$

140

 

 

$

124,656

 

 

$

(1,351

)

 

$

(27,207

)

 

$

96,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2023

 

 

14,186

 

 

$

142

 

 

$

126,963

 

 

$

(1,695

)

 

$

(37,045

)

 

$

88,365

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,358

)

 

 

(9,358

)

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

269

 

 

 

 

 

 

269

 

Stock compensation expense

 

 

 

 

 

 

 

 

317

 

 

 

 

 

 

 

 

 

317

 

Stock options exercised

 

 

5

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

28

 

Balance at December 31, 2023

 

 

14,191

 

 

$

142

 

 

$

127,308

 

 

$

(1,426

)

 

$

(46,403

)

 

$

79,621

 

 

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

7


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Operating Activities

 

 

 

 

 

 

Net loss

 

$

(9,358

)

 

$

(2,744

)

Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

852

 

 

 

388

 

Write-down of inventory

 

 

572

 

 

 

48

 

Goodwill impairment

 

 

6,370

 

 

 

 

Intangible asset impairment

 

 

1,279

 

 

 

 

Deferred income taxes

 

 

(25

)

 

 

(35

)

Non-cash share-based compensation expense

 

 

317

 

 

 

164

 

Loss on sale of property, plant and equipment

 

 

20

 

 

 

 

(Reversal of) provision for allowance for credit losses

 

 

(42

)

 

 

35

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

5,114

 

 

 

3,194

 

Inventories

 

 

223

 

 

 

(2,796

)

Other assets

 

 

1,783

 

 

 

1,106

 

Accounts payable

 

 

(1,661

)

 

 

(643

)

Accrued income taxes

 

 

(222

)

 

 

(284

)

Accrued and other liabilities

 

 

(1,751

)

 

 

(665

)

Contract liabilities

 

 

1,500

 

 

 

(276

)

Net cash provided by (used in) operating activities

 

 

4,971

 

 

 

(2,508

)

Investing Activities

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(756

)

 

 

(224

)

Net cash used in investing activities

 

 

(756

)

 

 

(224

)

Financing Activities

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

28

 

 

 

34

 

Payments on long-term debt

 

 

(556

)

 

 

(14

)

Net cash (used in) provided by financing activities

 

 

(528

)

 

 

20

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

 

213

 

 

 

372

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

3,900

 

 

 

(2,340

)

Cash and Cash Equivalents, Beginning of Period

 

 

13,133

 

 

 

46,874

 

Cash and Cash Equivalents, End of Period

 

$

17,033

 

 

$

44,534

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

Income tax payments, net

 

$

280

 

 

$

378

 

Interest paid

 

$

195

 

 

$

2

 

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

8


 

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2023 AND 2022

(UNAUDITED)

 

1. Basis of Presentation and Significant Accounting Policies

 

Nature of Operations and Basis of Presentation – Amtech is a leading, global manufacturer of capital equipment, including thermal processing, wafer polishing and cleaning, 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, our future profitability and growth depend on our ability to develop or acquire and market profitable new products and on our ability to adapt to cyclical trends.

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed consolidated balance sheet at September 30, 2023, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

 

Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending or ended September 30, and the associated quarters, months, and periods of those fiscal years.

 

The consolidated results of operations for the three months ended December 31, 2023, are not necessarily indicative of the results to be expected for the full fiscal year.

 

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates – The preparation of consolidated financial statements in conformity with GAAP 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.

 

Accounts Receivable and Allowance for Credit Losses – Accounts receivable are recorded at the sales price of products sold to customers on trade credit terms. We establish a valuation allowance to reflect our best estimate of expected losses inherent in our accounts receivable balance. The allowance is based on our evaluation of the aging of the receivables, historical write-offs, the current economic environment and communications with the customer. We write off individual accounts against the allowance when we no longer believe that it is probable that we will collect the receivable because we become aware of a customer’s inability to meet its financial obligations.

 

Intangible Assets Intangible assets acquired in business combinations are capitalized and subsequently amortized on a straight-line basis over their estimated useful life. 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

9


 

or the carrying amount of these assets may not be recoverable. When indicators exist, recoverability of assets is measured by a comparison of the carrying value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group is determined not to be recoverable, the Company performs an analysis of the fair value of the individual long-lived assets and will recognize an impairment loss when the fair value is less than the carrying value of such long-lived assets. Patent costs consist primarily of legal and filing fees incurred to file patents on proprietary methods and technology we developed. Patent costs are expensed when incurred, as they are insignificant. Additional information on impairment testing of intangible assets can be found in Notes 1 and 9 of our Annual Report on Form 10-K for the year ended September 30, 2023.

 

In the first quarter of fiscal year 2024, we recorded an impairment of definite lived intangible assets in our Material and Substrate segment. See Note 7 for a description of the facts and circumstances leading to the intangible asset impairment.

 

Goodwill – Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is not subject to amortization but is tested for impairment annually or when it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that there is impairment, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit). Additional information on impairment testing of goodwill can be found in Notes 1 and 10 of our Annual Report on Form 10-K for the year ended September 30, 2023.

 

In the first quarter of fiscal year 2024, we recorded an impairment of goodwill in our Material and Substrate segment. See Note 7 for a description of the facts and circumstances leading to goodwill impairment.

 

Contract Liabilities – Contract liabilities are reflected in current liabilities on the Condensed Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months. 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. Contract liabilities consist of customer deposits and deferred revenue as of December 31, 2023 and September 30, 2023.

 

The following is a summary of activity for contract liabilities, in thousands:

 

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Beginning balance

 

$

8,018

 

 

$

7,231

 

New deposits

 

 

2,823

 

 

 

727

 

Deferred revenue

 

 

3

 

 

 

 

Revenue recognized

 

 

(1,326

)

 

 

(568

)

Adjustment

 

 

 

 

 

(435

)

Ending balance

 

$

9,518

 

 

$

6,955

 

 

As of December 31, 2023, we had approximately $50.0 million of remaining performance obligations, which included recognized contract liabilities as well as amounts to be invoiced and recognized in future periods. As of September 30, 2023, we had approximately $51.8 million of remaining performance obligations. The orders included in our remaining performance obligations are expected to ship within the next twelve months.

 

Warranty A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized. While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through December 31, 2023, we cannot guarantee that we will continue to experience a similar level of predictability regarding 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. Our accrued warranty expense was $0.8 million at December 31, 2023 and $1.0 million at September 30, 2023.

 

10


 

The following is a summary of activity in accrued warranty expense, in thousands:

 

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Beginning balance

 

$

965

 

 

$

871

 

Additions for warranties issued during the period

 

 

22

 

 

 

50

 

Costs incurred during the period

 

 

(8

)

 

 

(28

)

Changes related to pre-existing warranties

 

 

(188

)

 

 

(60

)

Ending balance

 

$

791

 

 

$

833

 

 

Shipping Expense – Shipping and handling fees associated with outbound freight are expensed as incurred and included in selling, general and administrative expenses. Shipping expense was $0.5 million and $0.6 million for the three months ended December 31, 2023 and 2022, respectively.

 

Concentrations of Credit Risk – Our customers are primarily manufacturers of semiconductor substrates and devices and electronic assemblies. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. Credit risk is managed by performing credit evaluations of the customers’ financial condition, by requiring significant deposits where appropriate, and by actively monitoring collections. Letters of credit are required of certain customers depending on the size of the order, type of customer or its creditworthiness, and country of domicile.

 

As of December 31, 2023, two Semiconductor segment customers individually represented 15% and 13% of accounts receivable. As of September 30, 2023, two Semiconductor segment customers individually represented 17% and 17% of accounts receivable.

 

We maintain our cash and cash equivalents in multiple financial institutions. Balances in the United States, which account for approximately 80% and 56% of total cash balances as of December 31, 2023 and September 30, 2023, respectively, are primarily invested in financial institutions insured by the FDIC as well as a money market account. The remainder of our cash is maintained with financial institutions with reputable credit in China, the United Kingdom, Singapore, and Malaysia. We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. We have not experienced any losses on such accounts.

 

Refer to Note 12 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.

 

Fair Value of Financial Instruments – We group our financial assets and liabilities measured at fair value on a recurring basis into three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

 

Level 1 – Valuation is based upon quoted market price for identical instruments traded in active markets.

 

Level 2 – Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

 

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques include use of discounted cash flow models and similar techniques.

 

It is our policy to use observable inputs whenever reasonably practicable in order to minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including interest rate yield curves, option volatilities and currency rates. In certain cases, where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future valuations.

11


 

 

Cash, Cash Equivalents and Restricted Cash – Included in cash and cash equivalents and restricted cash in the Consolidated Balance Sheets are money market funds and time deposit accounts. Cash equivalents are classified as Level 1 in the fair value hierarchy.

 

Receivables and Payables – The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments.

 

Debt – The carrying value of debt under our amended Loan Agreement is based on a floating per annum rate of interest equal to the Prime Rate, adjusted daily, plus a margin. At December 31, 2023, the carrying value of the Company's total debt was $10.0 million, which approximates fair value. The fair value for the amended Loan Agreement was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and is therefore classified as Level 2 in the fair value hierarchy.

 

Impact of Recently Issued Accounting Pronouncements

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures. Adjustments to the annual disclosure of income taxes include: a tabular rate reconciliation comprised of eight specific categories. Incomes taxes paid, disaggregated between significant federal, state, and foreign jurisdictions. Eliminating requirements to disclose the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made. Adds a requirement to disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations disaggregated between domestic and foreign. The ASU is effective for public business entities for fiscal years beginning on or after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 should be applied on a prospective basis. Retrospective application is permitted. This ASU is not expected to have a material effect on our financial condition or results of operations.

 

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for public business entities for fiscal years beginning after December 15, 2023, and for interim reporting periods within fiscal years beginning after December 15, 2024. Early adoption permitted. The amendments in ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

 

There were no other new accounting pronouncements issued or effective as of December 31, 2023 that had or are expected to have a material impact on our consolidated financial statements.

 

2. Long-Term Debt

 

Our finance lease liabilities and long-term debt consists of the following, in thousands:

 

 

 

December 31,
2023

 

 

September 30,
2023

 

Revolving credit facility

 

$

5,613

 

 

$

 

Term loan

 

 

4,423

 

 

 

10,573

 

Finance leases

 

 

95

 

 

 

114

 

Total

 

 

10,131

 

 

 

10,687

 

Less: current portion of finance lease liabilities
    and long-term debt

 

 

(934

)

 

 

(2,265

)

Finance Lease Liabilities and Long-Term Debt

 

$

9,197

 

 

$

8,422

 

 

12


 

 

Interest expense on finance lease liabilities and long-term debt was $0.2 million and less than $0.1 million for the three months ended December 31, 2023 and 2022, respectively.

 

Loan and Security Agreement

 

On January 17, 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”) among Amtech, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R. Hoffman Machine Products, Inc., an Arizona corporation, and Entrepix, Inc., (collectively the “Borrowers”) and UMB Bank, N.A., national banking association (the “Lender”). The Loan Agreement provides for (i) a term loan (the “Term Loan”) in the amount of $12.0 million maturing January 17, 2028, and (ii) a revolving loan facility (the “Revolver”) with an availability of $8.0 million maturing January 17, 2024. The recorded amount of the Term Loan has an interest rate of 6.38%. The Revolver has a floating per annum rate of interest equal to the Prime Rate, adjusted daily. Under the Loan Agreement, we are required to pay a non-utilization fee equal to 0.125% of any unused portion of the Revolver in excess of any letter of credit obligations.

 

The Term Loan and Revolver are secured by a first priority lien on substantially all of the Borrowers’ assets (other than certain customary excluded assets) and the Loan Agreement contains customary events of default, representations and warranties, and covenants that restrict the Borrowers’ ability to, among other things, incur additional indebtedness, other than permitted indebtedness, enter into mergers or acquisitions, sell or otherwise dispose of assets, or pay dividends, subject to customary exceptions.

 

The Loan Agreement additionally contains financial covenants such that, as of the end of each of their fiscal quarters, beginning March 31, 2023, the Borrowers must maintain (i) a ratio of consolidated debt owed to Lender to consolidated EBITDA (as defined in the Loan Agreement) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building four quarters (as described in the Loan Agreement), and then 1.00 to 1.00 each fiscal quarter thereafter, (ii) a ratio of (a) the total for such fiscal quarter of EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building four quarters (as described in the Loan Agreement), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $35.0 million.

 

At September 30, 2023, we were not in compliance with the Debt to EBITDA and Fixed Charge Coverage Ratio financial covenants under our Loan Agreement. On December 5, 2023, we entered into a Forbearance & Modification Agreement (the “Forbearance Agreement”) with UMB Bank related to such non-compliance, pursuant to which UMB Bank agreed to forbear from exercising its rights and remedies available to it as a result of such defaults. We will be operating under the terms of such Forbearance Agreement through January 17, 2025 (the “Forbearance Period”).

The Forbearance Agreement also amends the Loan Agreement to, among other things, (i) increase the availability under the revolving line of credit from $8.0 million to $14.0 million (the "Revolver"), and (ii) reduce the term loan commitment from $12.0 million to $4.4 million (the “Term Loan”). The Revolver maturity date was extended one year to January 17, 2025 and the Term Loan maturity date was extended one year to January 17, 2029. Both the Revolver and the Term Loan have a floating per annum rate of interest equal to the Prime Rate, adjusted daily, plus the Applicable Margin (as such terms are defined in the Loan Agreement). We are required to pay a non-utilization fee equal to 0.125% of any unused portion of the Revolver in excess of any letter of credit obligations. As of September 30, 2023, no amounts were borrowed against the Revolver and there were no letters of credit outstanding. As of the effective date of the Forbearance Agreement, $10.0 million will be drawn under the Loan Agreement, which includes $4.4 million under the Term Loan and $5.6 million under the Revolver. As of December 31, 2023, $5.6 million was

13


 

borrowed against the Revolver, and there was an outstanding letter of credit in the amount of $0.3 million. In January 2024, we made a $2.0 million principal payment on the Revolver.

Future borrowings, if any, under the Loan Agreement are subject to, among other things, having sufficient unencumbered Eligible Accounts, Eligible Foreign Accounts and Eligible Inventory (as such terms are defined in the Loan Agreement) to meet the borrowing base requirements included in the amended Loan Agreement.

Under the amended Loan Agreement, the Company is required to comply with the following financial covenants:

 

Maintaining, on a consolidated basis, a minimum EBITDA (as defined in the Loan Agreement) through the fiscal year ending September 30, 2024, measured on a quarterly basis (the “Minimum EBITDA Covenant”). The Minimum EBITDA Covenant amount increases each quarter during such period. At December 31, 2023, we were in compliance with the Minimum EBITDA Covenant for such period (not less than negative EBITDA of $1.2 million), with actual positive EBITDA of $0.2 million for such period. The Minimum EBITDA Covenant replaced the Senior Debt to EBITDA covenant set forth in the original Loan Agreement.
As of the end of each of the Company’s fiscal years, commencing for the fiscal year ending September 30, 2024, the Company must maintain a ratio of (a) the total for such fiscal year of EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a trailing four (4) quarter basis (the “Fixed Charge Coverage Ratio Covenant”). Prior to entering into the Forbearance Agreement, this covenant was measured as of the end of each of the Company’s fiscal quarters, beginning March 31, 2023.
As of the end of each of the Company’s fiscal quarters, commencing March 31, 2023, the Company must maintain a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $35.0 million. This financial covenant is unchanged in the Forbearance Agreement.

 

If the Lender does not extend the Forbearance Period or otherwise grant a waiver in the future for the covenant defaults described above, an event of default under the Loan Agreement would exist. To the extent the Lender so elects, the outstanding indebtedness under the Loan Agreement could be accelerated following the expiration of any applicable cure periods, causing such debt to be immediately due and payable. In addition, should the Company default in its obligation to comply with any of the covenants described immediately above during the Forbearance Period, an event of default would then exist, and, absent a further forbearance agreement or waiver granted by the Lender, the Lender would have the right to accelerate the indebtedness following the expiration of any applicable cure periods, causing such debt to be immediately due and payable. Both of the foregoing events would also result in the termination of all commitments to extend further credit under the Loan Agreement. There is no guarantee we will have sufficient liquidity to repay our outstanding debt under the Loan Agreement in full if such debt were accelerated. As of December 31, 2023, we had $17.0 million in cash and cash equivalents, and $10.0 million in debt under the Loan Agreement. If we are unable to pay such debt as it comes due, or obtain waivers for such payments, our Lender could foreclose on the assets securing such debt. These events could materially adversely affect our business, results of operations and financial condition.

 

Finance Lease Obligations

 

Our finance lease obligations totaled $0.1 million as of December 31, 2023 and September 30, 2023.

 

The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Condensed Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023. Further, see Note 6 for additional information.

14


 

 

3. Acquisition

 

Entrepix Merger

 

On January 17, 2023 (the “Closing Date”), the Company acquired 100% of the issued and outstanding shares of capital stock of Entrepix, Inc., an Arizona corporation (“Entrepix”), which primarily manufactures chemical mechanical polishing (“CMP”) technology, through a reverse triangular merger. Entrepix’s CMP technology portfolio and water cleaning equipment will complement our existing substrate polishing and wet process chemical offerings. Pursuant to the terms and conditions of the Agreement and Plan of Merger dated January 17, 2023 (the “Merger Agreement”), Emerald Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), merged with and into Entrepix (the “Merger”), resulting in Entrepix surviving the Merger and becoming a wholly-owned subsidiary of the Company (the “Acquisition” or “Transaction”).

 

On the Closing Date, in connection with the Merger Agreement and in contemplation of the Transaction, the Company entered into a Loan and Security Agreement with UMB Bank, N.A., under which the Lender provided the Company with (i) a $12.0 million term loan maturing January 17, 2028, and (ii) an $8.0 million revolving loan facility maturing January 17, 2024 (see Note 2). The proceeds of the Term Loan were used to partially fund the Transaction.

 

The Acquisition is accounted for using the acquisition method of accounting for business combinations under FASB Accounting Standard Codification Topic No. 805, Business Combinations (“ASC 805”), with Amtech representing the accounting acquirer under this guidance. The Company elected to apply pushdown accounting per ASC 805-50-50-5.

 

Summary of Consideration Transferred

 

The total consideration for the Acquisition was $39.2 million, consisting of $35.2 million cash consideration to the sellers and $4.0 million cash paid for debt and Entrepix transaction costs.

 

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Such assets include synergies the Company expects to achieve, such as deeper penetration into an overlapping customer base, complementary product offerings, and cost redundancy reductions. In accordance with the measurement principles in FASB Accounting Standard Codification Topic No. 820, Fair Value Measurement, the purchase consideration for the Acquisition has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including a residual amount of goodwill, none of which is deductible for tax purposes. Amtech’s acquisition costs incurred were $2.5 million as of the year ended September 30, 2023, and were recorded as “Selling, general and administrative expenses” in the accompanying Condensed

15


 

Consolidated Statements of Operations. The following table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed, in thousands:

 

 

 

January 17, 2023

 

Measurement Period Adjustments

 

September 30, 2023

 

Fair value of total cash consideration transferred

 

$

39,787

 

$

(560

)

$

39,227

 

Estimated fair value of identifiable assets acquired and liabilities assumed:

 

 

 

 

 

 

 

  Cash and cash equivalents

 

$

4,289

 

$

 

$

4,289

 

  Accounts receivable, net

 

 

5,681

 

 

203

 

 

5,884

 

  Inventories

 

 

5,683

 

 

 

 

5,683

 

  Other current assets

 

 

179

 

 

 

 

179

 

  Property, plant, and equipment

 

 

2,051

 

 

(11

)

 

2,040

 

  Right-of-use assets

 

 

2,246

 

 

 

 

2,246

 

  Intangible assets

 

 

12,800

 

 

800

 

 

13,600

 

  Goodwill

 

 

18,089

 

 

(1,626

)

 

16,463

 

  Other assets

 

 

31

 

 

49

 

 

80

 

Total assets acquired

 

 

51,049

 

 

(585

)

 

50,464

 

  Accounts payable

 

 

1,574

 

 

 

 

1,574

 

  Other accrued liabilities

 

 

1,170

 

 

824

 

 

1,994

 

  Contract liabilities

 

 

1,662

 

 

287

 

 

1,949

 

  Income taxes payable

 

 

1,447

 

 

(462

)

 

985

 

  Current portion of long-term operating lease liabilities

 

 

515

 

 

 

 

515

 

  Long-term operating lease liabilities

 

 

1,730

 

 

 

 

1,730

 

  Deferred tax liability

 

 

3,164

 

 

(674

)

 

2,490

 

Total liabilities assumed

 

 

11,262

 

 

(25

)

 

11,237

 

Net assets acquired

 

$

39,787

 

$

(560

)

$

39,227

 

 

The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgment. In accordance with ASC 805, the Company has up to one year from the acquisition date (referred to as the measurement period) to account for changes in the fair values of the identifiable assets acquired and the liabilities assumed in the acquired entity. As of the issuance of the condensed consolidated financial statements for the quarter ended December 31, 2023, the Company has not finalized its calculation of deferred tax assets or liabilities, income taxes payable, and the resulting adjustments to goodwill. The tax-related items will be finalized pending a consolidated analysis of the combined tax attributes of the Acquisition. If a change in any of these items is identified during the measurement period, the Company will record the cumulative impact of measurement period adjustments in the period the adjustment is identified.

 

The fair value associated with acquired intangible assets and their associated weighted-average amortization periods consist of the following, in thousands:

 

 

 

Classification of Amortization

 

Amount

 

 

Weighted-Average
Amortization Period

Developed technology

 

Cost of sales

 

$

6,700

 

 

5.0 years

Customer relationships

 

Selling, general and administrative

 

 

2,800

 

 

10.0 years

Backlog

 

Selling, general and administrative

 

 

2,100

 

 

1.0 year

Trade names

 

Selling, general and administrative

 

 

1,800

 

 

10.0 years

Noncompetition agreements

 

Selling, general and administrative

 

 

200

 

 

5.0 years

Total intangible assets

 

 

 

$

13,600

 

 

6.1 years

 

Unaudited Pro Forma Financial Information

 

The following unaudited pro forma financial information presents the combined results of operations of Amtech and Entrepix, in thousands, as if the acquisition occurred on October 1, 2021. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on the date indicated or of results that may occur in the future.

16


 

 

 

 

Three Months Ended December 31,

 

 

 

2022

 

Revenues, Net

 

$

29,155

 

Net Loss

 

$

(3,136

)

 

The unaudited pro forma financial information presented above include the following adjustments:

 

3 Months Ended December 31, 2022

incremental amortization expense on intangible assets acquired of $1.4 million for the three months ended December 31, 2022; and
incremental interest expense on the Term Loan of $0.1 million for the three months ended December 31, 2022.

 

The unaudited pro forma financial information includes adjustments to align accounting policies, which were materially similar to the Company’s accounting policies. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma financial information presented.

 

4. Earnings Per Share

 

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. Dilutive potential common shares include outstanding restricted stock units (“RSUs”) and stock options. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic EPS.

 

For the three months ended December 31, 2023 and 2022, options for 489,000 and 259,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could become dilutive in the future.

 

A reconciliation of the components of the basic and diluted EPS calculations follows, in thousands, except per share amounts:

 

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

Net loss

 

$

(9,358

)

 

$

(2,744

)

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

Weighted-average shares used to compute basic EPS

 

 

14,188

 

 

 

14,008

 

Dilutive potential common shares due to stock
    options (1)

 

 

 

 

 

 

Dilutive potential common shares due to RSUs (1)

 

 

 

 

 

 

Weighted-average shares used to compute diluted EPS

 

 

14,188

 

 

 

14,008

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

Net loss per basic share

 

$

(0.66

)

 

$

(0.20

)

Net loss per diluted share

 

$

(0.66

)

 

$

(0.20

)

 

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

 

17


 

5. Inventories

 

The components of inventories are as follows, in thousands:

 

 

 

December 31,
2023

 

 

September 30,
2023

 

Purchased parts and raw materials

 

$

22,083

 

 

$

22,627

 

Work-in-process

 

 

9,848

 

 

 

7,774

 

Finished goods

 

 

2,099

 

 

 

4,444

 

 

 

$

34,030

 

 

$

34,845

 

 

6. Leases

 

The following table provides information about the financial statement classification of our lease balances reported within the Condensed Consolidated Balance Sheets, in thousands:

 

 

 

December 31,
2023

 

 

September 30,
2023

 

Assets

 

 

 

 

 

 

Right-of-use assets - operating

 

$

10,541

 

 

$

11,217

 

Right-of-use assets - finance

 

 

110

 

 

 

123

 

Total right-of-use assets

 

$

10,651

 

 

$

11,340

 

Liabilities

 

 

 

 

 

 

Current

 

 

 

 

 

 

Operating lease liabilities

 

$

2,292

 

 

$

2,623

 

Finance lease liabilities

 

 

49

 

 

 

64

 

Total current portion of long-term lease liabilities

 

 

2,341

 

 

 

2,687

 

Long-term

 

 

 

 

 

 

Operating lease liabilities

 

 

8,598

 

 

 

8,894

 

Finance lease liabilities

 

 

46

 

 

 

50

 

Total long-term lease liabilities

 

 

8,644

 

 

 

8,944

 

Total lease liabilities

 

$

10,985

 

 

$

11,631

 

 

The following table provides information about the financial statement classification of our lease expenses reported in the Condensed Consolidated Statements of Operations, in thousands:

 

 

 

 

 

Three Months Ended December 31,

 

Lease cost

 

Classification

 

2023

 

 

2022

 

Operating lease cost

 

Cost of sales

 

$

745

 

 

$

461

 

Operating lease cost

 

Selling, general and administrative

 

 

204

 

 

 

177

 

Operating lease cost

 

Research, development and engineering

 

 

3

 

 

 

3

 

Finance lease cost

 

Cost of sales

 

 

1

 

 

 

1

 

Finance lease cost

 

Selling, general and administrative

 

 

20

 

 

 

18

 

Short-term lease cost

 

Cost of sales

 

 

 

 

 

8

 

Total lease cost

 

 

 

$

973

 

 

$

668

 

 

18


 

Future minimum lease payments under non-cancelable leases as of December 31, 2023 are as follows, in thousands:

 

 

 

Operating Leases

 

 

Finance Leases

 

 

Total

 

Remainder of 2024

 

$

2,317

 

 

$

47

 

 

$

2,364

 

2025

 

 

2,060

 

 

 

21

 

 

 

2,081

 

2026

 

 

1,726

 

 

 

21

 

 

 

1,747

 

2027

 

 

1,107

 

 

 

11

 

 

 

1,118

 

2028

 

 

1,115

 

 

 

2

 

 

 

1,117

 

Thereafter

 

 

5,146

 

 

 

 

 

 

5,146

 

Total lease payments