AMTECH SYSTEMS INC [ASYS] Filings

10-Q 1 asys-20240630.htm 10-Q 10-Q

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: June 30, 2024


☐	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

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.)

58 South River Drive Suite 370, 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 August 2, 2024, there were outstanding 14,218,795 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 June 30, 2024 (Unaudited) and September 30, 2023	4
Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended June 30, 2024 and 2023	5
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three and Nine Months Ended June 30, 2024 and 2023	6
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three and Nine Months Ended June 30, 2024 and 2023	7
Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended June 30, 2024 and 2023	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	30
Off-Balance Sheet Arrangements	32
Contractual Obligations	32
Critical Accounting Estimates	33
Impact of Recently Issued Accounting Pronouncements	33
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	33
PART II. OTHER INFORMATION	35
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36
SIGNATURES	37

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 Securities and Exchange Commission (“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 of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (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; 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; the impact of any future pandemic or other business interruptions 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 and other requirements under our credit agreement and forbearance agreement with UMB Bank, as well as the ability to extend, if necessary the forbearance period or obtain a waiver of the applicable defaults; 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 Quarterly Report. 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-K, 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 our 2023 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.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)


	June 30, 2024			September 30, 2023
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	13,183		$	13,133
Accounts receivable (less allowance for credit losses of $89 and $146 at June 30, 2024 and September 30, 2023, respectively)		24,292			26,474
Inventories		28,753			34,845
Income taxes receivable		91			632
Other current assets		4,074			6,105
Total current assets		70,393			81,189
Property, Plant and Equipment - Net		12,362			9,695
Right-of-Use Assets - Net		17,559			11,217
Intangible Assets - Net		4,178			6,114
Goodwill		21,261			27,631
Deferred Income Taxes - Net		115			101
Other Assets		1,191			1,074
Total Assets	$	127,059		$	137,021

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	8,330		$	10,815
Accrued compensation and related taxes		1,762			3,481
Accrued warranty expense		749			965
Other accrued liabilities		1,348			1,551
Current maturities of finance lease liabilities and long-term debt		4,064			2,265
Current portion of long-term operating lease liabilities		1,856			2,623
Contract liabilities		9,291			8,018
Total current liabilities		27,400			29,718
Finance Lease Liabilities and Long-Term Debt		177			8,422
Long-Term Operating Lease Liabilities		16,129			8,894
Income Taxes Payable		1,582			1,575
Other Long-Term Liabilities		53			47
Total Liabilities		45,341			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: 14,208,795 and 14,185,977 at June 30, 2024 and September 30, 2023, respectively		142			142
Additional paid-in capital		128,146			126,963
Accumulated other comprehensive loss		(1,575	)		(1,695	)
Retained deficit		(44,995	)		(37,045	)
Total Shareholders’ Equity		81,718			88,365
Total Liabilities and Shareholders’ Equity	$	127,059		$	137,021

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2024			2023			2024			2023
Revenues, net	$	26,749		$	30,740		$	77,102		$	85,608
Cost of sales		16,991			19,755			49,825			52,850
Intangible asset impairment		—			—			849			—
Gross profit		9,758			10,985			26,428			32,758

Selling, general and administrative		8,209			10,300			25,028			30,924
Research, development and engineering		693			1,804			3,202			4,714
Gain on sale of fixed assets		—			—			(2,197	)		—
Goodwill impairment		—			—			6,370			—
Intangible asset impairment		—			—			430			—
Severance expense		40			—			350			400
Operating income (loss)		816			(1,119	)		(6,755	)		(3,280	)
Interest income		2			17			35			356
Interest expense		(107	)		(185	)		(498	)		(342	)
Foreign currency gain (loss)		182			456			(5	)		(59	)
Other		2			15			11			19
Income (loss) before income tax provision		895			(816	)		(7,212	)		(3,306	)
Income tax provision (benefit)		457			211			738			(2,739	)
Net income (loss)	$	438		$	(1,027	)	$	(7,950	)	$	(567	)
Income (Loss) Per Share:
Net income (loss) per basic share	$	0.03		$	(0.07	)	$	(0.56	)	$	(0.04	)
Net income (loss) per diluted share	$	0.03		$	(0.07	)	$	(0.56	)	$	(0.04	)
Weighted average shares outstanding:
Basic		14,209			14,058			14,198			14,031
Diluted		14,254			14,058			14,198			14,031

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2024			2023			2024			2023
Net income (loss)	$	438		$	(1,027	)	$	(7,950	)	$	(567	)
Foreign currency translation adjustment		(99	)		(962	)		120			(162	)
Comprehensive income (loss)	$	339		$	(1,989	)	$	(7,830	)	$	(729	)

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

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 (Loss) Income			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
Net income		—		—		—		—			3,204			3,204
Translation adjustment		—		—		—		384			—			384
Stock compensation expense		—		—		174		—			—			174
Stock options exercised		36		—		297		—			—			297
Balance at March 31, 2023		14,039		140		125,127		(967	)		(24,003	)		100,297
Net loss		—		—		—		—			(1,027	)		(1,027	)
Translation adjustment		—		—		—		(962	)		—			(962	)
Stock compensation expense		—		—		190		—			—			190
Stock options exercised		37		1		208		—			—			209
Balance at June 30, 2023		14,076	$	141	$	125,525	$	(1,929	)	$	(25,030	)	$	98,707


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
Net income		—		—		—		—			970			970
Translation adjustment		—		—		—		(50	)		—			(50	)
Stock compensation expense		—		—		350		—			—			350
Stock options exercised		18		—		—		—			—			—
Balance at March 31, 2024		14,209		142		127,658		(1,476	)		(45,433	)		80,891
Net income		—		—		—		—			438			438
Translation adjustment		—		—		—		(99	)		—			(99	)
Stock compensation expense		—		—		488		—			—			488
Balance at June 30, 2024		14,209	$	142	$	128,146	$	(1,575	)	$	(44,995	)	$	81,718

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended June 30,
	2024			2023
Operating Activities
Net loss	$	(7,950	)	$	(567	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,310			3,435
Write-down of inventory		1,367			1,233
Goodwill impairment		6,370			—
Intangible asset impairment		1,279			—
Deferred income taxes		(13	)		(3,430	)
Non-cash share-based compensation expense		1,155			528
Gain on sale of property, plant and equipment		(2,197	)		—
Provision for allowance for credit losses		(21	)		109
Changes in operating assets and liabilities:
Accounts receivable		2,204			2,391
Inventories		4,695			(4,724	)
Other assets		4,205			1,775
Accounts payable		(1,965	)		(1,586	)
Accrued income taxes		548			(1,947	)
Accrued and other liabilities		(4,298	)		(2,993	)
Contract liabilities		1,274			(1,374	)
Net cash provided by (used in) operating activities		8,963			(7,150	)
Investing Activities
Purchases of property, plant and equipment		(5,310	)		(1,922	)
Proceeds from the sale of property, plant and equipment		2,700			6
Acquisition, net of cash and cash equivalents acquired		—			(34,938	)
Net cash used in investing activities		(2,610	)		(36,854	)
Financing Activities
Proceeds from the exercise of stock options		28			539
Payments on long-term debt		(6,668	)		(949	)
Borrowings on long-term debt		—			12,000
Net cash (used in) provided by financing activities		(6,640	)		11,590
Effect of Exchange Rate Changes on Cash and Cash Equivalents		337			(155	)
Net Increase (Decrease) in Cash and Cash Equivalents		50			(32,569	)
Cash and Cash Equivalents, Beginning of Period		13,133			46,874
Cash and Cash Equivalents, End of Period	$	13,183		$	14,305
Supplemental Cash Flow Information:
Income tax payments, net	$	189		$	2,559
Interest paid	$	498		$	283

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED JUNE 30, 2024 AND 2023

(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 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 highly 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 and nine months ended June 30, 2024, 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.

Reclassifications – Certain reclassifications have been made to prior year financial statement footnotes to conform to the current year presentation. These reclassifications, which include the breakout of contract liability activity, had no effect on the previously reported consolidated financial statements for any period.

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 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. 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 June 30, 2024 and September 30, 2023.

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


	Three Months Ended June 30,						Nine Months Ended June 30,
	2024			2023			2024			2023
Beginning balance	$	9,015		$	9,661		$	8,018		$	7,231
Acquired deposits		—			—			—			2,077
New deposits		1,484			593			5,031			2,794
Deferred revenue		(12	)		(125	)		(18	)		(125	)
Refunds of deposits		—			—			—			(467	)
Revenue recognized		(1,196	)		(2,323	)		(3,740	)		(3,736	)
Adjustment		—			1		—				33
Ending balance	$	9,291		$	7,807		$	9,291		$	7,807

As of June 30, 2024, we had approximately $28.1 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 June 30, 2024, 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.

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


	Nine Months Ended June 30,
	2024			2023
Beginning balance	$	965		$	871
Additions for warranties issued during the period		203			411
Costs incurred during the period		(19	)		35
Changes in estimate for pre-existing warranties		(400	)		(284	)
Ending balance	$	749		$	1,033

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 in the three months ended June 30, 2024 and 2023, respectively, and $1.6 million and $2.0 million for the nine months ended June 30, 2024 and 2023, 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 June 30, 2024, one Semiconductor segment customer represented 18% of accounts receivable. As of September 30, 2023, two Semiconductor segment customers each represented 17% of accounts receivable.

We maintain our cash and cash equivalents in multiple financial institutions. Balances in the United States, which account for approximately 70% and 56% of total cash balances as of June 30, 2024 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. At June 30, 2024 and September 30, 2023 Amtech’s balances exceeded insured limits by approximately $7.9 million and $6.0 million, respectively. 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 to minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including interest rate yield curves, option volatilities and currency rates. In certain cases, where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future valuations.

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

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 June 30, 2024, the carrying value of the Company's total debt was $4.0 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 is permitted. The amendments in ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

There were no other new accounting pronouncements issued or effective as of June 30, 2024 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:


	June 30, 2024			September 30, 2023
Revolving credit facility	$	—		$	—
Term loan		3,981			10,573
Finance leases		260			114
Total		4,241			10,687
Less: current portion of finance lease liabilities and long-term debt		(4,064	)		(2,265	)
Finance Lease Liabilities and Long-Term Debt	$	177		$	8,422

Interest expense on finance lease liabilities and long-term debt was $0.1 and $0.2 million for the three months ended June 30, 2024 and 2023, and $0.5 million and $0.3 million for the nine months ended June 30, 2024 and 2023, 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., BTU International, Inc., Intersurface Dynamics, Incorporated, P.R. Hoffman Machine Products, Inc., 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 (as defined below) 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 was drawn under the Loan Agreement, which included $4.4 million under the Term Loan and $5.6 million under the Revolver. As of June 30, 2024, $4.0 million was outstanding under the Term Loan, no amounts were borrowed against the Revolver, and there was an outstanding letter of credit in the amount of $0.3 million.

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 June 30, 2024, we were in compliance with the Minimum EBITDA Covenant for such period (not less than EBITDA of $800,000 for the nine-month period ended June 30, 2024), with actual positive EBITDA of $3.2 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 remained 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 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 June 30, 2024, we had $13.2

million in cash and cash equivalents, and $4.0 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. As of June 30, 2024, all outstanding debt under the Loan Agreement was classified as current as a result of the Lender’s ability, in its sole discretion, to call the amounts due thereunder at the end of the Forbearance Period.

Finance Lease Obligations

Our finance lease obligations totaled $0.3 million and $0.1 million as of June 30, 2024 and September 30, 2023, respectively.

The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Condensed Consolidated Balance Sheets as of June 30, 2024 and September 30, 2023. See Note 6 for additional information.

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 wafer 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