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What changed in AMTECH SYSTEMS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AMTECH SYSTEMS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+431 added−380 removedSource: 10-K (2023-12-14) vs 10-K (2022-11-30)

Top changes in AMTECH SYSTEMS INC's 2023 10-K

431 paragraphs added · 380 removed · 240 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

107 edited+80 added−46 removed64 unchanged
Biggest changeAND SUBSIDIARIES Consolidated Statem ents of Cash Flows (in thousands) Years Ended September 30, 2022 2021 2020 Operating Activities Net income (loss) $ 17,367 $ 1,508 $ ( 15,723 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,729 1,398 1,258 Write-down of inventory 102 544 733 (Reversal of) provision for allowance for doubtful accounts ( 32 ) 44 24 Deferred income taxes 592 ( 65 ) 218 Non-cash share-based compensation expense 543 401 326 Loss on sales of subsidiaries — — 13,709 Gain on sale of fixed assets ( 12,465 ) — — Other, net — 43 55 Changes in operating assets and liabilities: Accounts receivable ( 2,479 ) ( 11,023 ) 1,359 Inventories ( 3,684 ) ( 5,180 ) ( 913 ) Contract and other assets ( 2,203 ) ( 686 ) 324 Accounts payable ( 1,080 ) 5,472 ( 3,620 ) Accrued income taxes 623 353 ( 2,701 ) Accrued and other liabilities 584 829 4,658 Contract liabilities 5,607 400 ( 1,371 ) Net cash provided by (used in) operating activities 5,204 ( 5,962 ) ( 1,664 ) Investing Activities Purchases of property, plant and equipment ( 1,135 ) ( 3,012 ) ( 2,676 ) Proceeds from sale of property, plant and equipment 19,908 — — Net cash disposed of in sales of subsidiaries — — ( 9,940 ) Acquisition, net of cash and cash equivalents acquired — ( 5,082 ) — Net cash provided by (used in) investing activities 18,773 ( 8,094 ) ( 12,616 ) Financing Activities Proceeds from the exercise of stock options 720 1,546 877 Repurchase of common stock ( 4,115 ) — ( 2,000 ) Payments on long-term debt ( 4,872 ) ( 380 ) ( 379 ) Net cash (used in) provided by financing activities ( 8,267 ) 1,166 ( 1,502 ) Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 1,672 ) 656 1,718 Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 14,038 ( 12,234 ) ( 14,064 ) Cash, Cash Equivalents and Restricted Cash, Beginning of Year* 32,836 45,070 59,134 Cash, Cash Equivalents and Restricted Cash, End of Year $ 46,874 $ 32,836 $ 45,070 Supplemental Cash Flow Information: Income tax payments, net $ 386 $ 1,868 $ 2,116 Interest paid, net of capitalized interest $ 164 $ 241 $ 265 Supplemental Non-cash Financing and Investing Activities: Transfer of inventory to property, plant, and equipment $ 169 $ 39 $ 37 Leased assets obtained in exchange for new operating lease liabilities $ 3,686 $ 3,680 $ 5,262 Leased assets obtained in exchange for new finance lease liabilities $ 42 $ 160 $ — Accrued for asset retirement obligation $ — $ 36 $ — * Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Consolidated Balance Sheets for periods prior to January 22, 2020.
Biggest changeAND SUBSIDIARIES Consolidated Statem ents of Cash Flows (in thousands) Years Ended September 30, 2023 2022 2021 Operating Activities Net (loss) income $ ( 12,582 ) $ 17,367 $ 1,508 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 5,012 1,729 1,398 Write-down of inventory 2,620 102 544 Non-cash intangible asset impairment 5,189 — — Provision for allowance for doubtful accounts 14 ( 32 ) 44 Deferred income taxes ( 2,513 ) 592 ( 65 ) Non-cash stock-based compensation expense 1,272 543 401 Gain on sale of fixed assets — ( 12,465 ) — Other, net 196 — 43 Changes in operating assets and liabilities: Accounts receivable 4,410 ( 2,479 ) ( 11,023 ) Inventories ( 6,294 ) ( 3,684 ) ( 5,180 ) Contract and other assets ( 529 ) ( 2,203 ) ( 686 ) Accounts payable 1,459 ( 1,080 ) 5,472 Accrued income taxes ( 2,897 ) 623 353 Accrued and other liabilities ( 1,895 ) 584 829 Contract liabilities ( 1,163 ) 5,607 400 Net cash (used in) provided by operating activities ( 7,701 ) 5,204 ( 5,962 ) Investing Activities Purchases of property, plant and equipment ( 2,898 ) ( 1,135 ) ( 3,012 ) Acquisitions, net of cash and cash equivalents acquired ( 34,938 ) — ( 5,082 ) Proceeds from sale of property, plant and equipment 6 19,908 — Net cash (used in) provided by investing activities ( 37,830 ) 18,773 ( 8,094 ) Financing Activities Proceeds from the exercise of stock options 1,235 720 1,546 Repurchase of common stock — ( 4,115 ) — Payments on long-term debt ( 1,497 ) ( 4,872 ) ( 380 ) Borrowings on long-term debt 12,000 — — Net cash provided by (used in) financing activities 11,738 ( 8,267 ) 1,166 Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 52 ( 1,672 ) 656 Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash ( 33,741 ) 14,038 ( 12,234 ) Cash, Cash Equivalents and Restricted Cash, Beginning of Year 46,874 32,836 45,070 Cash, Cash Equivalents and Restricted Cash, End of Year $ 13,133 $ 46,874 $ 32,836 Supplemental Cash Flow Information: Income tax payments, net $ 2,818 $ 386 $ 1,868 Interest paid $ 461 $ 164 $ 241 Supplemental Non-cash Operating, Financing and Investing Activities: Transfer of inventory to property, plant, and equipment $ — $ 169 $ 39 Payables due for fixed asset additions $ 633 $ 152 $ — Return of fixed assets resulting in loan payoff $ 184 $ — $ — Modification of leased assets resulting in a reduction of lease liabilities $ 2,254 $ — $ — Leased assets obtained in exchange for new operating lease liabilities $ 57 $ 3,686 $ 3,680 Leased assets obtained in exchange for new finance lease liabilities $ 46 $ 42 $ 160 Accrued for asset retirement obligation $ — $ — $ 36 The accompanying notes are an integral part of these consolidated financial statements. 60 Notes to Consolidated Financial Statements For the Years Ended September 30, 2023, 2022 and 2021 1.
We have established valuation allowances on all net U.S. deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.
We have established valuation allowances on all net U.S. deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical objective evidence, and determined it is not more likely than not that these assets will be realized.
We completed the investigation of the data incident with assistance from our outside professionals, and indications were that the unauthorized third-party gained access to certain personal information relating to employees and their beneficiaries for some of our operations. There was no indication of any misuse of this information. Despite this disruption, production continued in our facilities.
We completed the investigation of the data incident with assistance from our outside professionals, and indications were that the unauthorized third-party gained access to certain personal information relating to 85 employees and their beneficiaries for some of our operations. There was no indication of any misuse of this information. Despite this disruption, production continued in our facilities.
To record revenue properly, we apply the following five steps: 1) Identify the contract with the customer A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. 57 2) Identify the performance obligations in the contract Performance obligations are identified based on the goods and services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and (ii) are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises to the customer in the contract.
To record revenue properly, we apply the following five steps: 63 1) Identify the contract with the customer A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that will be transferred is probable based on the customer’s intent and ability to pay the promised consideration. 2) Identify the performance obligations in the contract Performance obligations are identified based on the goods and services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and (ii) are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises to the customer in the contract.
If accruals are not appropriate, we further evaluate 73 each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses.
If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses.
Acquisition On March 3, 2021 , we acquired 100 % of the issued and outstanding capital stock of Intersurface Dynamics, a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics, for a cash purchase price of $ 5.3 million.
Intersurface Dynamics On March 3, 2021 , we acquired 100 % of the issued and outstanding capital stock of Intersurface Dynamics, a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics, for a cash purchase price of $ 5.3 million.
The remainder of our cash is maintained with financial institutions with reputable credit in China, the United Kingdom 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.
The remainder of our cash is maintained with financial institutions with reputable credit in China, Singapore, the United Kingdom 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.
To determine the SSP for labor-related performance obligations, we use directly observable inputs based on the standalone sale prices for these services. 5) Recognize revenue when, or as, we satisfy a performance obligation We satisfy performance obligations either over time or at a point in time.
To determine the SSP for labor-related performance obligations, we use directly observable inputs based on the standalone sale prices for these services. 64 5) Recognize revenue when, or as, we satisfy a performance obligation We satisfy performance obligations either over time or at a point in time.
Goodwill acquired approximated $ 4.5 million, which was recorded in our Material and Substrate segment. Intersurface Dynamics's results of operations are included in our Material and Substrate segment from the date of acquisition. Our historical results would not have been materially affected by the acquisition of Intersurface Dynamics. 3.
Goodwill acquired approximated $ 4.5 million, which was recorded in our Material and Substrate segment. Intersurface Dynamics's results of operations are included in our Material and Substrate segment from the date of acquisition. Our historical results would not have been materially affected by the acquisition of Intersurface Dynamics. 70 3.
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax 60 consequences of events that have been included in the financial statements.
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in the financial statements.
Income Taxes – We file consolidated federal income tax returns in the United States for all subsidiaries except those in China and the UK, where separate returns are filed.
Income Taxes – We file consolidated federal income tax returns in the United States for all subsidiaries except those in China, Singapore and the UK, where separate returns are filed.
These consumables have a much shorter production period than equipment produced by our other reportable segment. Due to these variations between reportable segments, management determined that disaggregated revenue by reportable segment sufficiently depicts how economic factors affect the nature, amount, timing and uncertainty of our revenue and cash flows. See Note 18 for additional information on our reportable segments.
These consumables have a much shorter production period than equipment produced by our other reportable segment. Due to these variations between reportable segments, management determined that disaggregated revenue by reportable segment sufficiently depicts how economic factors affect the nature, amount, timing and uncertainty of our revenue and cash flows. See Note 16 for additional information on our reportable segments.
Sale and Leaseback of Real Estate On June 23, 2022, BTU completed the sale and leaseback of its building in Massachusetts (the “Property”). The sale price was $ 20.6 million, of which $ 0.7 million was deducted at closing for commission and other closing expenses. Simultaneously with the closing, BTU entered into a two-year leaseback of the Property.
Sale and Lea seback of Real Estate On June 23, 2022, BTU completed the sale and leaseback of its building in Massachusetts (the “Property”). The sale price was $ 20.6 million, of which $ 0.7 million was deducted at closing for commission and other closing expenses. Simultaneously with the closing, BTU entered into a two-year leaseback of the Property.
Under the purchase method of accounting, the purchase price for the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired of approximately $ 4.5 million was recorded as goodwill in the Material and Substrate segment.
Under the purchase method of accounting, the purchase price for the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired of approximately $ 16.5 million was recorded as goodwill in the Material and Substrate segment.
While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through September 30, 2022, we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs.
While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through September 30, 2023, we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs.
The 2007 Plan was amended in 2009, 2014 and 2015 to add 2,500,000 shares. The 71 plan was also amended in 2019 to extend the term of the plan and allow for the grant of restricted stock units. Upon the adoption of the 2022 Plan, no further awards will be granted from the 2007 Plan.
The 2007 Plan was amended in 2009, 2014 and 2015 to add 2,500,000 shares. The plan was also amended in 2019 to extend the term of the plan and allow for the grant of restricted stock units. Upon 80 the adoption of the 2022 Plan, no further awards will be granted from the 2007 Plan.
Our lease terms may 56 include options to extend or terminate the lease, which we include in the recognition of the ROU asset and lease liability, when it is reasonably certain that we will exercise that option. We lease office space, buildings, land, vehicles and equipment.
Our lease terms may include options to extend or terminate the lease, which we include in the recognition of the ROU asset and lease liability, when it is reasonably certain that we will exercise that option. 62 We lease office space, buildings, land, vehicles and equipment.
If it is concluded that there is a potential impairment, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).
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).
Equipment and related product revenues (e.g., furnace systems, system add-ons, machinery, consumables and spare parts) are recognized at a point in time, when they are shipped or delivered, depending on contractual terms. 58 Revenue for maintenance services are recognized over time based on hours incurred, as the hours incurred align to the maintenance activities performed.
Equipment and related product revenues (e.g., furnace systems, system add-ons, machinery, consumables and spare parts) are recognized at a point in time, when they are shipped or delivered, depending on contractual terms. Revenue for services, including maintenance services, is recognized over time based on hours incurred, as the hours incurred align to the maintenance activities performed.
This sale-leaseback transaction resulted in a net cash inflow of approximately $ 14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. 64 9.
This sale-leaseback transaction resulted in a net cash inflow of approximately $ 14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. 8.
Summary of Operations and Significant Accounting Policies Description of Business – Amtech is a leading, global manufacturer of capital equipment, including thermal processing and wafer polishing, and related consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon power devices, analog and discrete devices, electronic assemblies and light-emitting diodes (LEDs).
Summary of Operatio ns and Significant Accounting Policies Description of Business – 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").
During 2022, we signed a final settlement agreement with our insurer resulting in total reimbursement of approximately $ 0.6 million, which included $ 0.4 million received during the quarter ended December 31, 2021 and $ 0.2 million received during the quarter ended March 31, 2022. No portion of the reimbursement remains outstanding as of September 30, 2022. 62 4.
During 2022, we signed a final settlement agreement with our insurer resulting in total reimbursement of approximately $ 0.6 million, which included $ 0.4 million received during the quarter ended December 31, 2021 and $ 0.2 million received during the quarter ended March 31, 2022. No portion of the reimbursement remained outstanding as of September 30, 2022. 20.
Contract Liabilities – Contract liabilities are reflected in current liabilities on the Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months. Contract liabilities include customer deposits and deferred profit, if any. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract.
Contract Liabilities – Contract liabilities are reflected in current liabilities on the Consolidated Balance Sheets as all performance obligations are expected to be satisfied within the next 12 months. Contract liabilities include customer deposits and deferred revenue. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract.
These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of Amtech and our subsidiaries. 70 13.
These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of Amtech and our subsidiaries. 78 12.
Our remaining performance obligations as of September 30, 2022 , have an original duration of one year or less. Our customers generally have payment terms of 60 - 90 days . We do not have any payment terms that exceed one year from the point we have satisfied the related performance obligations.
Our remaining performance obligations as of September 30, 2023, have an original duration o f one year or less. Our customers generally have payment terms of 60 - 90 days . We do not have any payment terms that exceed one year from the point we have satisfied the related performance obligations.
Stock-Based Compensation Expense Stock-based compensation expenses of $ 0.5 million, $ 0.4 million and $ 0.3 million for 2022, 2021 and 2020, respectively, are included in selling, general and administrative expenses.
Stock-Based Compensation Expense Stock-based compensation expenses of $ 1.3 million, $ 0.5 million and $ 0.4 million for 2023, 2022 and 2021, respectively, are included in selling, general and administrative expenses.
These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open performance obligations (e.g., we have recognized revenue in an amount greater than the amount that is billable under the contract). There were no contract assets at September 30, 2022 and 2021 .
These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open performance obligations (e.g., we have recognized revenue in an amount greater than the amount that is billable under the contract). There wer e no co ntract assets at September 30, 2023 and 2022 .
Recently Issued Accounting Pronouncements There were no new accounting pronouncements issued or effective as of September 30, 2022 that had or are expected to have a material impact on our consolidated financial statements. 2.
There were no other new accounting pronouncements issued or effective as of September 30, 2023 that had or are expected to have a material impact on our consolidated financial statements. 2.
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 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. 67 Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market.
While the quantitative analysis indicated no impairment of Semiconductor and Material and Substrate segment goodwill existed as of September 30, 2022 , if the future performance of these reporting units fall short of our expectations or if there are significant changes in operations due to changes in market conditions, we could be required to recognize material impairment charges in future periods. 12.
While the quantitative analysis indicated no impairment of Semiconductor and Material and Substrate segments as of September 30, 2023 , if the future performance of these reporting units fall short of our expectations or if there are significant changes in operations due to changes in market conditions, we could be required to recognize material impairment charges in future periods. 11.
As of September 30, 2022, total compensation cost related to non-vested stock options not yet recognized is $ 0.7 m illion, which is expected to be recognized over the next 1.19 y ears on a weighted-average basis.
As of September 30, 2023, total compensation cost related to non-vested stock options not yet recognize d is $ 1.0 m illion, which is expected to be recognized over the next 1.52 y ears on a weighted-average basis.
Equity and Stock-Based Compensation Stock Repurchase Plans The following table summarizes information related to our stock repurchase plans, in thousands, except share and per share amounts: Name of Stock Repurchase Plan Date Approved by Board Plan Term Amount Authorized ($) Amount Used for Repurchases ($) Average Price Paid per Share ($) Shares Repurchased (#) Amount Available for Repurchases ($) Plan Status Fiscal Year of Repurchases 2022 Stock Repurchase Plan 2/10/2022 1 year 5,000 1,400 9.78 143,430 3,600 Open 2022 2021 Stock Repurchase Plan 2/9/2021 1 year 4,000 2,700 9.31 291,383 — Expired 2022 2020 Stock Repurchase Plan 2/4/2020 1 year 4,000 2,000 5.46 366,000 — Expired 2020 2019 Stock Repurchase Plan 11/29/2018 1 year 4,000 — — — — Expired NA All repurchased shares have been retired.
Equity and Stock-B ased Compensation Stock Repurchase Plans The following table summarizes information related to our stock repurchase plans, in thousands, except share and per share amounts: Name of Stock Repurchase Plan Date Approved by Board Plan Term Amount Authorized ($) Amount Used for Repurchases ($) Average Price Paid per Share ($) Shares Repurchased (#) Amount Available for Repurchases ($) Plan Status Fiscal Year of Repurchases 2023 Stock Repurchase Plan 2/7/2023 1 year 5,000 — — — 5,000 Open NA 2022 Stock Repurchase Plan 2/10/2022 1 year 5,000 1,400 9.78 143,430 — Expired 2022 2021 Stock Repurchase Plan 2/9/2021 1 year 4,000 2,700 9.31 291,383 — Expired 2022 All repurchased shares have been retired.
Major Customers and Sales by Country In 2022, two Semiconductor customers accounted for 14 % and 12 % of net revenues. In 2021 , two Semiconductor customers accounted for 14 % and 13 % of net revenues. In 2020 , one Semiconductor customer accounted for 11 % of net revenues.
Major Customer s and Sales by Country In 2023, one Semiconductor customer accounted for 11 % of net revenues. In 2022 , two Semiconductor customers accounted for 14 % and 12 % of net revenues.
Geographic Regions We have continuing operations in the United States and China, as well as satellite offices in Europe and Asia.
Geograph ic Regions We have operations in the United States and China, as well as satellite offices in Europe and Asia.
The outstanding obligations as of September 30, 2022 and 2021 are as follows, in thousands: Years Ended September 30, 2022 2021 Balance at beginning of the year $ 17 $ 102 Severance expense, net of adjustments — 86 Cash payments ( 17 ) ( 171 ) Balance at the end of the year $ — $ 17 63 6.
The outstanding obligations as of and for the years ended September 30, 2023, 2022 and 2021 are as follows, in thousands: Years Ended September 30, 2023 2022 2021 Balance at beginning of the year $ — $ 17 $ 102 Severance expense, net of adjustments 665 — 86 Cash payments ( 511 ) ( 17 ) ( 171 ) Balance at the end of the year $ 154 $ — $ 17 5 .
T he utilization of those federal net operating losses is limited to approximately $ 0.8 million per year. Additionally, we have federal net operating loss carryforwards of approximately $ 68.0 million that have an indefinite carryforward period. The utilization of those federal net operating losses is limited to 80 % of taxable income after 2021.
The utilization of those federal net operating losses is limited to approximately $ 0.8 million per year. Additionally, we have federal net operating loss carryforwards of approximately $ 67.2 million that have an indefi nite carryforward period. The utilization of those federal net operating losses is limited to 80 % of taxable income after 2021.
The match expense was $ 0.4 million in 2022 and $ 0.3 million in 2021 and 2020. Pension Plan – Our hourly union employees in Pennsylvania participate in a multi-employer pension plan, the NIGPP, in accordance with the union agreement between PR Hoffman and the United Automobile, Aerospace and Agriculture Implement Workers of America.
The match expense w as $ 0.5 m illion, $ 0.4 million and $ 0.3 million in 2023, 2022 and 2021, respectively. 82 Pension Plan – Our hourly union employees in Pennsylvania participate in a multi-employer pension plan, the NIGPP, in accordance with the union agreement between PR Hoffman and the United Automobile, Aerospace and Agriculture Implement Workers of America.
It is not practicable to estimate the amount of tax that might be payable on the undistributed amounts. 69 Net Operating Losses As of September 30, 2022, we have federal net operating loss carryforwards of approximately $ 10.0 million that expire at various times between 2032 and 2035 .
It is not practicable to estimate the amount of tax that might be payable on the undistributed amounts. 77 Net Operating Losses As of September 30, 2023, we ha ve federal net operating loss carryforwards of approximately $ 9.8 million that expire at various times between 2032 and 2035 .
Equity compensation plans as of September 30, 2022 are summarized in the table below: Name of Plan Shares Authorized Shares Available for Grant Options Outstanding Plan Expiration 2022 Plan 1,000,000 946,000 54,000 Mar. 2032 2007 Plan 3,000,000 — 397,341 Mar. 2024 Non-Employee Directors Stock Option Plan 500,000 — 138,000 Mar. 2024 946,000 589,341 Stock Options Stock options issued under the terms of our equity compensation plans have, or will have, an exercise price equal to or greater than the fair market value of the common stock at the date of the option grant and expire no later than 10 years from the date of grant.
Equity compensation plans as of September 30, 2023 are summarized in the table below: Name of Plan Shares Authorized Shares Available for Grant Options Outstanding Unvested RSUs Outstanding Plan Expiration 2022 Plan 1,000,000 558,268 340,750 75,977 Mar. 2032 2007 Plan 3,000,000 — 248,174 — Mar. 2024 Non-Employee Directors Stock Option Plan 500,000 — 84,000 — Mar. 2024 558,268 672,924 75,977 Stock Options Stock options issued under the terms of our equity compensation plans have, or will have, an exercise price equal to or greater than the fair market value of the common stock at the date of the option grant and expire no later than 10 years from the date of grant.
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 had no effect on the previously reported consolidated financial statements for any 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 breakout of non-operating income and expenses in the statements of operations, had no effect on the previously reported consolidated financial statements for any period.
Our contributions to the NIGPP were $ 38,000 , $ 39,000 and $ 44,000 in 2022, 2021 and 2020, respectively. 16. Commitments and Contingencies Purchase Obligations – As of September 30, 2022 , we had unrecorded purchase obligations in the amount of $ 20.0 million. These purchase obligations consist of outstanding purchase orders for goods and services.
Our contributions to the NIGPP were $ 36,000 , $ 38,000 and $ 39,000 in 2023, 2022 and 2021, respectively. 15. Commitments and Contingencies Purchase Obligations – As of September 30, 2023, we had unrecorded purchase obligations in the amount o f $ 24.3 million. These purchase obligations consist of outstanding purchase orders for goods and services.
AND SUBSIDIARIES Consolidated Statements of Shareholders’ Equity (in thousands) Common Stock Treasury Stock Accumulated Additional Other Total Par Paid-in Comprehensive Retained Shareholders’ Shares Value Shares Cost Capital Income (Loss) Deficit Equity Balances at September 30, 2019 14,269 $ 143 — $ — $ 125,098 $ ( 11,233 ) $ ( 26,556 ) $ 87,452 Net loss — — — — — — ( 15,723 ) ( 15,723 ) Translation adjustment — — — — — 10,587 — 10,587 Stock compensation expense — — — — 326 — — 326 Repurchase of treasury stock — — ( 366 ) ( 2,000 ) — — — ( 2,000 ) Retirement of treasury stock ( 366 ) ( 4 ) 366 2,000 ( 1,864 ) — ( 132 ) — Stock options exercised 160 2 — — 875 — — 877 Balances at September 30, 2020 14,063 $ 141 — $ — $ 124,435 $ ( 646 ) $ ( 42,411 ) $ 81,519 Net income — — — — — — 1,508 1,508 Translation adjustment — — — — — 660 — 660 Stock compensation expense — — — — 401 — — 401 Stock options exercised 241 2 — — 1,544 — — 1,546 Balances at September 30, 2021 14,304 $ 143 — $ — $ 126,380 $ 14 $ ( 40,903 ) $ 85,634 Net income — — — — — — 17,367 17,367 Translation adjustment — — — — — ( 1,781 ) — ( 1,781 ) Stock compensation expense — — — — 543 — — 543 Repurchase of treasury stock — — ( 434 ) ( 4,115 ) — — — ( 4,115 ) Retirement of treasury stock ( 434 ) ( 4 ) 434 4,115 ( 3,184 ) — ( 927 ) — Stock options exercised 124 1 — — 719 — — 720 Balances at September 30, 2022 13,994 $ 140 — $ — $ 124,458 $ ( 1,767 ) $ ( 24,463 ) $ 98,368 The accompanying notes are an integral part of these consolidated financial statements. 53 AMTECH SYSTEMS, INC.
AND SUBSIDIARIES Consolidated Statements of Shareholders’ Equity (in thousands) Common Stock Treasury Stock Accumulated Additional Other Total Par Paid-in Comprehensive Retained Shareholders’ Shares Value Shares Cost Capital Income (Loss) Deficit Equity Balances at September 30, 2020 14,063 $ 141 — $ — $ 124,435 $ ( 646 ) $ ( 42,411 ) $ 81,519 Net income — — — — — — 1,508 1,508 Translation adjustment — — — — — 660 — 660 Stock compensation expense — — — — 401 — — 401 Stock options exercised 241 2 — — 1,544 — — 1,546 Balances at September 30, 2021 14,304 $ 143 — $ — $ 126,380 $ 14 $ ( 40,903 ) $ 85,634 Net income — — — — — — 17,367 17,367 Translation adjustment — — — — — ( 1,781 ) — ( 1,781 ) Stock compensation expense — — — — 543 — — 543 Repurchase of treasury stock — — ( 434 ) ( 4,115 ) — — — ( 4,115 ) Retirement of treasury stock ( 434 ) ( 4 ) 434 4,115 ( 3,184 ) — ( 927 ) — Stock options exercised 124 1 — — 719 — — 720 Balances at September 30, 2022 13,994 $ 140 — $ — $ 124,458 $ ( 1,767 ) $ ( 24,463 ) $ 98,368 Net loss — — — — — — ( 12,582 ) ( 12,582 ) Translation adjustment — — — — — 72 — 72 Stock compensation expense — — — — 1,272 — — 1,272 Stock options exercised 192 2 — — 1,233 — — 1,235 Balances at September 30, 2023 14,186 $ 142 — $ — $ 126,963 $ ( 1,695 ) $ ( 37,045 ) $ 88,365 The accompanying notes are an integral part of these consolidated financial statements. 59 AMTECH SYSTEMS, INC.
AND SUBSIDIARIES Consolidated Statements of C omprehensive Income (Loss) (in thousands) Years Ended September 30, 2022 2021 2020 Net income (loss) $ 17,367 $ 1,508 $ ( 15,723 ) Foreign currency translation adjustment ( 1,781 ) 660 1,790 Reclassification adjustment for net foreign currency translation losses included in net loss — — 8,797 Comprehensive income (loss) $ 15,586 $ 2,168 $ ( 5,136 ) The accompanying notes are an integral part of these consolidated financial statements. 52 AMTECH SYSTEMS, INC.
AND SUBSIDIARIES Consolidated Statements of C omprehensive Income (Loss) (in thousands) Years Ended September 30, 2023 2022 2021 Net (loss) income $ ( 12,582 ) $ 17,367 $ 1,508 Foreign currency translation adjustment 72 ( 1,781 ) 660 Comprehensive (loss) income $ ( 12,510 ) $ 15,586 $ 2,168 The accompanying notes are an integral part of these consolidated financial statements. 58 AMTECH SYSTEMS, INC.
A reconciliation of the denominators of the basic and diluted EPS calculations follows, in thousands, except per share amounts: Years Ended September 30, 2022 2021 2020 Numerator: Net income (loss) from continuing operations $ 17,367 $ 1,508 $ ( 3,907 ) Net loss from discontinued operations $ — $ — $ ( 11,816 ) Net income (loss) $ 17,367 $ 1,508 $ ( 15,723 ) Denominator: Weighted-average shares used to compute basic EPS 14,014 14,189 14,159 Common stock equivalents (1) 170 151 — Weighted-average shares used to compute diluted EPS 14,184 14,340 14,159 Basic income (loss) per share from continuing operations $ 1.24 $ 0.11 $ ( 0.28 ) Basic loss per share from discontinued operations $ — $ — $ ( 0.83 ) Net income (loss) per basic share $ 1.24 $ 0.11 $ ( 1.11 ) Diluted income (loss) per share from continuing operations $ 1.22 $ 0.11 $ ( 0.28 ) Diluted loss per share from discontinued operations $ — $ — $ ( 0.83 ) Net income (loss) per diluted share $ 1.22 $ 0.11 $ ( 1.11 ) (1) The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period. 5.
A reconciliation of the denominators of the basic and diluted EPS calculations follows, in thousands, except per share amounts: Years Ended September 30, 2023 2022 2021 Numerator: Net (loss) income $ ( 12,582 ) $ 17,367 $ 1,508 Denominator: Weighted-average shares used to compute basic EPS 14,065 14,014 14,189 Dilutive potential common shares due to stock options (1) — 170 151 Dilutive potential common shares due to RSUs (1) — — — Weighted-average shares used to compute diluted EPS 14,065 14,184 14,340 (Loss) Income per share: Net (loss) income per basic share $ ( 0.89 ) $ 1.24 $ 0.11 Net (loss) income per diluted share $ ( 0.89 ) $ 1.22 $ 0.11 (1) The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period. 4.
Goodwill The changes in the carrying amount of goodwill, by reportable segment, for the year ended September 30, 2022 are as follows, in thousands: Semiconductor Material and Substrate Total Goodwill Goodwill $ 5,905 $ 5,263 $ 11,168 Accumulated impairment losses — — — Balance at September 30, 2021 5,905 5,263 11,168 Goodwill acquired during 2022 — — — Impairment of goodwill during 2022 — — — Balance at September 30, 2022 $ 5,905 $ 5,263 $ 11,168 Goodwill $ 5,905 $ 5,263 $ 11,168 Accumulated impairment losses — — — Balance at September 30, 2022 $ 5,905 $ 5,263 $ 11,168 On March 3, 2021, we acquired Intersurface Dynamics, which has been integrated into our Material and Substrate segment.
Go odwill The changes in the carrying amount of goodwill, by reportable segment, for the year ended September 30, 2023 are as follows, in thousands: Semiconductor Material and Substrate Total Goodwill Goodwill $ 5,905 $ 5,263 $ 11,168 Accumulated impairment losses — — — Balance at September 30, 2022 5,905 5,263 11,168 Goodwill acquired — 16,463 16,463 Impairment of goodwill — — — Balance at September 30, 2023 $ 5,905 $ 21,726 $ 27,631 Goodwill $ 5,905 $ 21,726 $ 27,631 Accumulated impairment losses — — — Balance at September 30, 2023 $ 5,905 $ 21,726 $ 27,631 On January 17, 2023, we acquired Entrepix, which has been integrated into our Material and Substrate segment.
Our net revenues for 2022, 2021 and 2020 were to customers in the following geographic regions: Years Ended September 30, 2022 2021 2020 United States 27 % 22 % 28 % Other 9 % 5 % 7 % Total Americas 36 % 27 % 35 % China 17 % 29 % 25 % Malaysia 7 % 3 % 5 % Taiwan 14 % 15 % 15 % Other 6 % 11 % 7 % Total Asia 44 % 58 % 52 % Germany 4 % 5 % 3 % Austria 10 % 3 % — % Other 6 % 7 % 10 % Total Europe 20 % 15 % 13 % 100 % 100 % 100 % 75 20.
In 2021 , two Semiconductor customers accounted for 14 % and 13 % of net revenues. 84 The percentages of our net revenues for 2023, 2022 and 2021 were to customers in the following geographic regions: Years Ended September 30, 2023 2022 2021 United States 39 % 27 % 22 % Other 9 % 9 % 5 % Total Americas 48 % 36 % 27 % China 14 % 17 % 29 % Malaysia 6 % 7 % 3 % Taiwan 5 % 14 % 15 % Other 6 % 6 % 11 % Total Asia 31 % 44 % 58 % Czech Republic 5 % — % — % Austria 4 % 10 % 3 % Germany 2 % 4 % 5 % Other 10 % 6 % 7 % Total Europe 21 % 20 % 15 % 100 % 100 % 100 % 18 .
Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future valuations. 61 Cash, Cash Equivalents and Restricted Cash – Included in cash and cash equivalents and restricted cash in the Consolidated Balance Sheets are money market funds invested in treasury bills, notes and other direct obligations of the U.S.
Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future valuations. 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.
We estimated the fair value of stock option awards on the date of grant using the Black-Scholes option pricing model using the following assumptions: Years Ended September 30, 2022 2021 2020 Risk free interest rate 2 % 1 % 1 % Expected life 5 years 6 years 6 years Dividend rate 0 % 0 % 0 % Volatility 57 % 58 % 58 % The following table summarizes our stock option activity du ring 2022, 2021 and 2020: Years Ended September 30, 2022 2021 2020 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding at beginning of period 608,269 $ 6.48 696,665 $ 7.00 1,068,665 $ 7.04 Granted 135,500 $ 12.80 204,000 $ 6.25 32,500 $ 5.34 Exercised ( 124,475 ) $ 5.78 ( 241,320 ) $ 6.40 ( 160,375 ) $ 5.47 Forfeited/expired ( 29,953 ) $ 6.92 ( 51,076 ) $ 13.01 ( 244,125 ) $ 7.94 Outstanding at end of period 589,341 $ 8.06 608,269 $ 6.48 696,665 $ 7.00 Exercisable at end of period 358,343 $ 6.92 403,853 $ 6.87 611,542 $ 7.19 Weighted average grant-date fair value of options granted during the period $ 6.39 $ 3.33 $ 2.89 72 The following table summarizes information for stock options outstanding and exercisable as of September 30, 2022: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Remaining Contractual Life (in years) Weighted Average Exercise Price Per Share Number Exercisable Weighted Average Exercise Price Per Share $ 2.95 -$ 4.90 62,000 5.72 $ 4.64 62,000 $ 4.64 $ 5.07 -$ 5.52 86,883 5.80 $ 5.38 66,717 $ 5.39 $ 5.67 -$ 5.67 113,958 8.13 $ 5.67 38,626 $ 5.67 $ 5.75 -$ 7.01 77,000 2.20 $ 6.70 77,000 $ 6.70 $ 7.40 -$ 9.98 114,000 4.98 $ 8.75 84,000 $ 9.12 $ 9.99 -$ 9.99 6,000 8.87 $ 9.99 6,000 $ 9.99 $ 10.22 -$ 10.22 24,000 9.42 $ 10.22 — — $ 10.71 -$ 10.71 6,000 2.52 $ 10.71 6,000 $ 10.71 $ 11.51 -$ 11.51 18,000 8.48 $ 11.51 18,000 $ 11.51 $ 15.43 -$ 15.43 81,500 9.13 $ 15.43 — — $ 2.95 -$ 15.43 589,341 6.30 $ 8.06 358,343 $ 6.92 The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2022 were approximately $ 1.0 million and $ 0.7 million , respectively, which represents the total pre-tax intrinsic value, based on our closing stock price of $ 8.50 per share as of September 30, 2022, the last business day of our fiscal year, which would have been received by the option holders had all option holders exercised their options as of that date.
We estimated the fair value of stock option awards on the date of grant using the Black-Scholes option pricing model using the following assumptions: Years Ended September 30, 2023 2022 2021 Risk free interest rate 4 % 2 % 1 % Expected life 5 Years 5 years 6 years Dividend rate 0 % 0 % 0 % Volatility 56 % 57 % 58 % The following table summarizes our stock option activity du ring 2023, 2022 and 2021: Years Ended September 30, 2023 2022 2021 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding at beginning of period 589,341 $ 8.06 608,269 $ 6.48 696,665 $ 7.00 Granted 322,500 $ 9.04 135,500 $ 12.80 204,000 $ 6.25 Exercised ( 168,318 ) $ 6.01 ( 124,475 ) $ 5.78 ( 241,320 ) $ 6.40 Forfeited/expired ( 70,599 ) $ 10.73 ( 29,953 ) $ 6.92 ( 51,076 ) $ 13.01 Outstanding at end of period 672,924 $ 8.76 589,341 $ 8.06 608,269 $ 6.48 Exercisable at end of period 374,728 $ 8.25 358,343 $ 6.92 403,853 $ 6.87 Weighted average grant-date fair value of options granted during the period $ 4.73 $ 6.39 $ 3.33 81 The following table summarizes information for stock options outstanding and exercisable as of September 30, 2023: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Remaining Contractual Life (in years) Weighted Average Exercise Price Per Share Number Exercisable Weighted Average Exercise Price Per Share $ 4.77 -$ 5.26 71,183 5.07 $ 4.98 69,517 $ 4.97 $ 5.40 -$ 5.52 17,550 4.18 $ 5.48 17,550 $ 5.48 $ 5.67 -$ 5.67 71,791 7.13 $ 5.67 55,958 $ 5.67 $ 5.75 -$ 8.82 111,250 7.54 $ 7.92 43,959 $ 7.01 $ 8.93 -$ 8.93 5,000 9.66 $ 8.93 — $ — $ 9.00 -$ 9.00 150,000 9.87 $ 9.00 50,000 $ 9.00 $ 9.27 -$ 9.27 90,500 9.17 $ 9.27 12,000 $ 9.27 $ 9.98 -$ 10.22 80,000 3.28 $ 10.03 80,000 $ 10.03 $ 11.51 -$ 11.51 12,000 7.48 $ 11.51 12,000 $ 11.51 $ 15.43 -$ 15.43 63,650 8.07 $ 15.43 33,744 $ 15.43 $ 4.77 -$ 15.43 672,924 7.44 $ 8.76 374,728 $ 8.25 The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2023 were approximate ly $ 0.4 million and $ 0.4 milli on, respectively, which represents the total pre-tax intrinsic value, based on our closing stock price of $ 7.62 per s hare as of September 29, 2023, the last business day of our fiscal year, which would have been received by the option holders had all option holders exercised their options as of that date.
Revenues, operating income (loss) and identifiable assets by geographic region are as follows, in thousands: Years Ended September 30, 2022 2021 2020 Net revenue: United States* $ 89,197 $ 58,937 $ 48,089 China 13,854 22,828 13,510 Other 3,247 3,440 3,864 $ 106,298 $ 85,205 $ 65,463 Operating income (loss): United States* $ 14,163 $ ( 4,174 ) $ ( 5,814 ) China 2,003 6,958 4,744 Other 1,120 941 585 $ 17,286 $ 3,725 $ ( 485 ) * United States revenue includes $ 22.7 million, $ 19.7 million and $ 14.9 million in 2022, 2021 and 2020, respectively, related to the products manufactured in our China facility but sold through our Massachusetts facility.
Revenues, operating income (loss) and identifiable assets by geographic region are as follows, in thousands: Years Ended September 30, 2023 2022 2021 Net revenue: United States* $ 84,549 $ 89,197 $ 58,937 China 24,969 13,854 22,828 Other 3,797 3,247 3,440 $ 113,315 $ 106,298 $ 85,205 Operating income (loss): United States* $ ( 17,874 ) $ 14,163 $ ( 4,174 ) China 714 2,003 6,958 Other 2,190 1,120 941 $ ( 14,970 ) $ 17,286 $ 3,725 * United States revenue includ es $ 17.0 m illion, $ 22.7 million and $ 19.7 million in 2023, 2022 and 2021, respectively, related to the products manufactured in our China facility but sold through our Massachusetts facility.
Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E.
RD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E.
The components of deferred tax assets and deferred tax liabilities are as follows, in thousands: September 30, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 17,180 $ 20,650 Accruals and reserves 1,441 1,250 Foreign tax credit 811 1,207 Operating lease liabilities 2,492 1,119 Foreign service fee 1,579 1,635 Other assets 467 1,092 Total deferred tax assets 23,970 26,953 Valuation allowance ( 20,000 ) ( 23,292 ) Deferred tax assets, net of valuation allowance 3,970 3,661 Deferred tax liabilities: Goodwill and identifiable intangible assets ( 321 ) ( 499 ) Property and equipment, net ( 758 ) ( 1,201 ) Operating lease, right-of-use assets ( 2,494 ) ( 1,119 ) Prepaid assets ( 318 ) ( 211 ) Total deferred tax liabilities ( 3,891 ) ( 3,030 ) Total deferred tax assets (liabilities) $ 79 $ 631 Changes in the deferred tax valuation allowance are as follows, in thousands: Years Ended September 30, 2022 2021 Balance at the beginning of the year $ 23,292 $ 21,733 (Reductions) additions to valuation allowance ( 3,292 ) 1,559 Balance at the end of the year $ 20,000 $ 23,292 The deferred tax valuation allowance decreased by $ 3.3 million and increased by $ 1.6 million for the years ended September 30, 2022 and 2021, respectively.
The components of deferred tax assets and deferred tax liabilities are as follows, in thousands: September 30, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 17,112 $ 17,180 Accruals and reserves 2,865 1,441 Foreign tax credit 1,618 811 Operating lease liabilities 2,719 2,492 Research and development costs 1,011 — Foreign service fee 1,579 1,579 Other assets 731 467 Total deferred tax assets 27,635 23,970 Valuation allowance ( 21,506 ) ( 20,000 ) Deferred tax assets, net of valuation allowance 6,129 3,970 Deferred tax liabilities: Goodwill and identifiable intangible assets ( 1,616 ) ( 321 ) Property and equipment, net ( 1,356 ) ( 758 ) Operating lease, right-of-use assets ( 2,720 ) ( 2,494 ) Prepaid assets ( 336 ) ( 318 ) Total deferred tax liabilities ( 6,028 ) ( 3,891 ) Total deferred tax assets, net $ 101 $ 79 Changes in the deferred tax valuation allowance are as follows, in thousands: Years Ended September 30, 2023 2022 Balance at the beginning of the year $ 20,000 $ 23,292 Additions (reductions) to valuation allowance 1,506 ( 3,292 ) Balance at the end of the year $ 21,506 $ 20,000 The deferred tax valuation allowance increased by $ 1.5 million and decreased by $ 3.3 million for the years ended September 30, 2023 and 2022, respectively.
Supplementary Financial Information The following is a summary of the activity in our allowance for doubtful accounts, in thousands: Years Ended September 30, 2022 2021 2020 Balance at beginning of year $ 188 $ 159 $ 172 Provision ( 34 ) 44 86 Write offs 6 ( 2 ) ( 26 ) Adjustment (1) ( 46 ) ( 13 ) ( 73 ) Balance at end of year $ 114 $ 188 $ 159 (1) Primarily foreign currency translation adjustments.
Historically, these write-offs have been immaterial. 61 The following is a summary of the activity in our allowance for doubtful accounts, in thousands: Years Ended September 30, 2023 2022 2021 Balance at beginning of year $ 114 $ 188 $ 159 Acquired allowance 125 — — Provision 14 ( 34 ) 44 Write offs ( 114 ) 6 ( 2 ) Adjustment (1) 7 ( 46 ) ( 13 ) Balance at end of year $ 146 $ 114 $ 188 (1) Primarily foreign currency translation adjustments.
We recognize interest and penalties related to uncertain tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the income taxes payable long-term line in the Consolidated Balance Sheets. Concentrations of Credit Risk – Our customers are primarily manufacturers of semiconductor substrates and devices and electronic assemblies.
We recognize interest and penalties related to uncertain tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties, if applicable, are included on the income taxes payable long-term line in the Consolidated Balance Sheets.
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.
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.
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.
See Note 9 for a description of the facts and circumstances leading to the intangible asset impairment. Goodwill – Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired.
The principal plans are our defined contribution plan that covers substantially all of our employees in the United States and the multi-employer pension plan for hourly union employees in Pennsylvania. Expense related to both plans is insignificant.
Bene fit Plans We have retirement plans covering substantially all our employees. The principal plans are our defined contribution plan that covers substantially all of our employees in the United States and the multi-employer pension plan for hourly union employees in Pennsylvania.
Long-Term Debt We had a mortgage note secured by BTU’s real property in Massachusetts, which was paid in full upon the closing of the sale of this facility in June 2022 (see Note 8). Our remaining long-term debt consists of an equipment finance agreement.
Mortgage We had a mortgage note secured by BTU’s real property in Massachusetts, which was paid in full upon the closing of the sale of this facility in June 2022 (see Note 7). 13.
For the years 2022, 2021 and 2020 , options for 189,000 , 101,000 and 642,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could become dilutive in the future.
In the case of a net loss, diluted EPS is calculated in the same manner as basic EPS. For the years 2023, 2022 and 2021 , options for 327,000 , 189,000 and 101,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could become dilutive in the future.
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. In the case of a net loss, diluted EPS is calculated in the same manner as basic EPS.
Diluted EPS is computed similarly to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued. Dilutive potential common shares include outstanding RSUs and stock options.
AND SUBSIDIARIES Consolidated B alance Sheets (in thousands, except share and per share data) September 30, Assets 2022 2021 Current Assets Cash and cash equivalents $ 46,874 $ 32,836 Accounts receivable - Net 25,013 22,502 Inventories 25,488 22,075 Income taxes receivable — 1,046 Other current assets 5,561 2,407 Total current assets 102,936 80,866 Property, Plant and Equipment - Net 6,552 14,083 Right-of-Use Assets - Net 11,258 8,646 Intangible Assets - Net 758 858 Goodwill 11,168 11,168 Deferred Income Taxes - Net 79 631 Other Assets 783 661 Total Assets $ 133,534 $ 116,913 Liabilities and Shareholders’ Equity Current Liabilities Accounts payable $ 7,301 $ 8,229 Accrued compensation and related taxes 4,109 2,881 Accrued warranty expense 871 545 Other accrued liabilities 900 903 Current maturities of finance lease liabilities and long-term debt 107 396 Current portion of long-term operating lease liabilities 2,101 531 Contract liabilities 7,231 1,624 Income taxes payable 6 — Total current liabilities 22,626 15,109 Finance Lease Liabilities and Long-Term Debt 220 4,402 Long-Term Operating Lease Liabilities 9,395 8,389 Income Taxes Payable 2,849 3,277 Other Long-Term Liabilities 76 102 Total Liabilities 35,166 31,279 Commitments and Contingencies (Note 16) Shareholders’ Equity Preferred stock ; 100,000,000 shares authorized; no ne issued — — Common stock; $ 0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 13,994,154 and 14,304,492 in 2022 and 2021, respectively 140 143 Additional paid-in capital 124,458 126,380 Accumulated other comprehensive (loss) income ( 1,767 ) 14 Retained deficit ( 24,463 ) ( 40,903 ) Total Shareholders’ Equity 98,368 85,634 Total Liabilities and Shareholders’ Equity $ 133,534 $ 116,913 The accompanying notes are an integral part of these consolidated financial statements. 50 AMTECH SYSTEMS, INC.
AND SUBSIDIARIES Consolidated B alance Sheets (in thousands, except share and per share data) September 30, Assets 2023 2022 Current Assets Cash and cash equivalents $ 13,133 $ 46,874 Accounts receivable - Net 26,474 25,013 Inventories 34,845 25,488 Income taxes receivable 632 — Other current assets 6,105 5,561 Total current assets 81,189 102,936 Property, Plant and Equipment - Net 9,695 6,552 Right-of-Use Assets - Net 11,217 11,258 Intangible Assets - Net 6,114 758 Goodwill 27,631 11,168 Deferred Income Taxes - Net 101 79 Other Assets 1,074 783 Total Assets $ 137,021 $ 133,534 Liabilities and Shareholders’ Equity Current Liabilities Accounts payable $ 10,815 $ 7,301 Accrued compensation and related taxes 3,481 4,109 Accrued warranty expense 965 871 Other accrued liabilities 1,551 900 Current portion of finance lease liabilities and long-term debt 2,265 107 Current portion of long-term operating lease liabilities 2,623 2,101 Contract liabilities 8,018 7,231 Income taxes payable — 6 Total current liabilities 29,718 22,626 Finance Lease Liabilities and Long-Term Debt 8,422 220 Long-Term Operating Lease Liabilities 8,894 9,395 Income Taxes Payable 1,575 2,849 Other Long-Term Liabilities 47 76 Total Liabilities 48,656 35,166 Commitments and Contingencies (Note 15) Shareholders’ Equity Preferred stock ; 100,000,000 shares authorized; no ne issued — — Common stock; $ 0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,185,977 and 13,994,154 in 2023 and 2022, respectively 142 140 Additional paid-in capital 126,963 124,458 Accumulated other comprehensive loss ( 1,695 ) ( 1,767 ) Retained deficit ( 37,045 ) ( 24,463 ) Total Shareholders’ Equity 88,365 98,368 Total Liabilities and Shareholders’ Equity $ 137,021 $ 133,534 The accompanying notes are an integral part of these consolidated financial statements. 56 AMTECH SYSTEMS, INC.
We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 84 % and 83 % of total cash balances as of September 30, 2022 and 2021 , respectively, are primarily invested in AAA-rated U.S Treasury and U.S.
We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately 56 % and 84 % of total cash balances as of September 30, 2023 and 2022, respectively, are primarily invested in financial institutions insured by the FDIC as well as a money market account.
Income and expense items are translated at the average exchange rate for each month within the year. The resulting translation adjustments are recorded directly in accumulated other comprehensive income (loss), net of tax - foreign currency translation adjustments as a separate component of shareholders’ equity.
The resulting translation adjustments are recorded directly in accumulated other comprehensive income (loss), net of tax - foreign currency translation adjustments as a separate component of shareholders’ equity.
We have no foreign net operating loss carryforwards as of September 30, 2022 . We have approximately $ 14.0 million of state net operating loss carryforwards, with various expiration dates and limitations on utilization, depending on the state.
We h ave no forei gn net operating loss carryforwards as of September 30, 2023. We have approximately $ 16.1 million o f state net operating loss carryforwards, with various expiration dates and limitations on utilization, depending on the state.
Our remaining performance obligations as of September 30, 2022, have an original duration of one year or less. Our obligations for returns and/or refunds are immaterial in all periods presented. 3) Determine the transaction price The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods and services to the customer.
Our obligations for returns and/or refunds are immaterial in all periods presented. 3) Determine the transaction price The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods and services to the customer. The transaction price is based on the price reflected in the individual customer’s purchase order.
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows (in thousands): Years Ended September 30, 2022 2021 2020 Balance at beginning of the year $ 949 $ 1,225 $ 1,272 Additions related to tax positions taken in prior years 55 — — Reductions due to resolution of uncertain tax position — ( 276 ) ( 47 ) Balance at the end of the year $ 1,004 $ 949 $ 1,225 Approximately $ 1.0 million of our total unrecognized tax benefits, inclusive of penalties and interest, represents the amount that, if recognized, would favorably affect our effective income tax rate in future periods.
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows, in thousands: Years Ended September 30, 2023 2022 2021 Balance at beginning of the year $ 1,004 $ 949 $ 1,225 Additions related to tax positions taken in prior years — 55 — Reductions due to resolution of uncertain tax position ( 1,004 ) — ( 276 ) Balance at the end of the year $ — $ 1,004 $ 949 During fiscal 2023, we reversed our previous accrual of uncertain tax positions in the amount of $ 1.0 million.
Furthermore, the IRS may adjust attribute c arryforwards utilized in an open year even though the year the attributes originated may be closed. State and foreign statutes are generally 3 to 5 years but vary by jurisdiction.
Therefore, U.S. federal returns for tax years ending on or a fter September 30, 2020 remain open for examination. In addition, the IRS may adjust attribute c arryforwards utilized in an open year even though the year the attributes originated may be closed. State and foreign statutes are generally 3 to 5 years but vary by jurisdiction.
AND SUBSIDIARIES Consolidated Statem ents of Operations (in thousands, except per share data) Years Ended September 30, 2022 2021 2020 Revenue, net $ 106,298 $ 85,205 $ 65,463 Cost of sales 66,787 50,675 41,022 Gross profit 39,511 34,530 24,441 Selling, general and administrative 28,300 24,740 21,397 Research, development and engineering 6,390 5,979 3,312 Gain on sale of fixed assets ( 12,465 ) — — Severance expense — 86 217 Operating income (loss) 17,286 3,725 ( 485 ) Loss on sale of subsidiary — — ( 2,793 ) Interest income (expense) and other, net 1,499 ( 291 ) 162 Income (loss) from continuing operations before income taxes 18,785 3,434 ( 3,116 ) Income tax provision 1,418 1,926 791 Income (loss) from continuing operations, net of tax 17,367 1,508 ( 3,907 ) Loss from discontinued operations, net of tax — — ( 11,816 ) Net income (loss) $ 17,367 $ 1,508 $ ( 15,723 ) Income (Loss) Per Basic Share: Basic income (loss) per share from continuing operations $ 1.24 $ 0.11 $ ( 0.28 ) Basic loss per share from discontinued operations $ — $ — $ ( 0.83 ) Net income (loss) per basic share $ 1.24 $ 0.11 $ ( 1.11 ) Income (Loss) Per Diluted Share: Diluted income (loss) per share from continuing operations $ 1.22 $ 0.11 $ ( 0.28 ) Diluted loss per share from discontinued operations $ — $ — $ ( 0.83 ) Net income (loss) per diluted share $ 1.22 $ 0.11 $ ( 1.11 ) Weighted average shares outstanding - basic 14,014 14,189 14,159 Weighted average shares outstanding - diluted 14,184 14,340 14,159 The accompanying notes are an integral part of these consolidated financial statements. 51 AMTECH SYSTEMS, INC.
AND SUBSIDIARIES Consolidated Statem ents of Operations (in thousands, except per share data) Years Ended September 30, 2023 2022 2021 Revenue, net $ 113,315 $ 106,298 $ 85,205 Cost of sales 73,118 66,787 50,675 Intangible asset impairment 4,645 — — Gross profit 35,552 39,511 34,530 Selling, general and administrative 42,002 28,300 24,740 Research, development and engineering 7,311 6,390 5,979 Gain on sale of fixed assets — ( 12,465 ) — Intangible asset impairment 544 — — Severance expense 665 — 86 Operating (loss) income ( 14,970 ) 17,286 3,725 Interest income 366 210 53 Interest expense ( 520 ) ( 164 ) ( 239 ) Foreign currency (loss) gain ( 89 ) 1,066 ( 389 ) Other 31 387 284 (Loss) income before income taxes ( 15,182 ) 18,785 3,434 Income tax (benefit) provision ( 2,600 ) 1,418 1,926 Net (loss) income $ ( 12,582 ) $ 17,367 $ 1,508 (Loss) Income Per Share: Net (loss) income per basic share $ ( 0.89 ) $ 1.24 $ 0.11 Net (loss) income per diluted share $ ( 0.89 ) $ 1.22 $ 0.11 Weighted average shares outstanding: Basic 14,065 14,014 14,189 Diluted 14,065 14,184 14,340 The accompanying notes are an integral part of these consolidated financial statements. 57 AMTECH SYSTEMS, INC.
Treasury and foreign bank operating 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.
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 Loan Agreement is based on fixed interest rates.
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.
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.
Useful lives for equipment and machinery range from three to seven years ; for leasehold improvements from three to fifteen years ; for furniture and fixtures from five to ten years ; and for buildings from 20 to 30 years .
Depreciation and amortization are computed using the straight-line method over the estimated useful life of the asset. Useful lives for equipment and machinery range from three to seven years ; for leasehold improvements from three to fifteen years ; for furniture and fixtures from five to ten years ; and for buildings from 20 to 30 years .
Property, Plant and Equipment The following is a summary of property, plant and equipment, in thousands: September 30, 2022 2021 Land $ 189 $ 3,240 Buildings 717 5,396 Building and leasehold improvements 2,694 4,622 Equipment and machinery 7,238 6,261 Furniture and fixtures 2,307 2,458 13,145 21,977 Accumulated depreciation and amortization ( 6,593 ) ( 7,894 ) $ 6,552 $ 14,083 Depreciation was $ 1.6 million, $ 1.2 million and $ 0.8 million in 2022, 2021 and 2020 , respectively. 8.
Property, Plan t and Equipment The following is a summary of property, plant and equipment, in thousands: September 30, 2023 2022 Land $ 189 $ 189 Buildings 717 717 Building and leasehold improvements 2,881 2,694 Equipment and machinery 9,200 7,238 Furniture and fixtures 3,160 2,307 Software 1,970 — 18,117 13,145 Accumulated depreciation and amortization ( 8,422 ) ( 6,593 ) $ 9,695 $ 6,552 Depreciation was $ 1.9 mil lion, $ 1.6 million and $ 1.2 million in 2023, 2022 and 2021 , respectively. 7.
The primary driver for this acquisition was to bolster our offerings in the substrate consumables space and incorporate wafer processing coolants and chemicals to our existing consumable and machine product lines. During each fiscal year, we periodically assessed whether any indicators of impairment existed which would require us to perform an interim impairment review.
The primary driver for this acquisition was to add CMP and wafer cleaning equipment to our existing substrate polishing and wet process chemical offerings. During each fiscal year, we periodically assess whether any indicators of impairment existed which would require us to perform an interim impairment review.
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.
Unless otherwise stated, references to the years 2023, 2022 and 2021 relate to the fiscal years ended September 30, 2023, 2022 and 2021 , respectively. Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Future amortization expense for the remaining unamortized balance as of September 30, 2022 is estimated as follows, in thousands: Years Ending September 30, Amortization Expense 2023 $ 100 2024 98 2025 97 2026 97 2027 97 Thereafter 269 Total $ 758 66 11.
Future amortization expense for the remaining unamortized balance as of September 30, 2023 is estimated as follows, in thousands: Years Ending September 30, Amortization Expense 2024 $ 929 2025 828 2026 828 2027 828 2028 613 Thereafter 2,088 Total $ 6,114 10.
The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2022 and 2021: September 30, 2022 2021 Weighted average remaining lease term Operating leases 12.65 years 16.92 years Finance leases 2.45 years 2.79 years Weighted average discount rate Operating leases 4.17 % 4.17 % Finance leases 4.17 % 4.17 % 10 .
The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2023 and 2022: September 30, 2023 2022 Weighted average remaining lease term Operating leases 7.31 years 12.65 years Finance leases 2.54 years 2.45 years Weighted average discount rate Operating leases 5.50 % 4.17 % Finance leases 4.91 % 4.17 % As of September 30, 2023, we have entered into a lease that has not yet commenced.
Research, Development and Engineering Expenses – RD&E expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. RD&E expenses may vary from period to period depending on the engineering projects in process.
We issue new shares under our existing equity plans upon the vesting of RSUs. Research, Development and Engineering Expenses – RD&E expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes.
Stock-Based Compensation – We measure compensation costs relating to share-based payment transactions based upon the grant-date fair value of the award. Those costs are recognized as expense over the requisite service period, which is generally the vesting period, with forfeitures recognized as they occur.
Those costs are recognized as expense over the requisite service period, which is generally the vesting period, with forfeitures recognized as they occur. We estimate the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model.
Leases The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of September 30, 2022 and 2021, in thousands: September 30, 2022 2021 Assets Right-of-use assets - operating $ 11,258 $ 8,646 Right-of-use assets - finance 149 174 Total right-of-use assets $ 11,407 $ 8,820 Liabilities Current Operating lease liabilities $ 2,101 $ 470 Finance lease liabilities 71 61 Total current portion of long-term lease liabilities 2,172 531 Long-term Operating lease liabilities 9,395 8,279 Finance lease liabilities 76 110 Total long-term lease liabilities 9,471 8,389 Total lease liabilities $ 11,643 $ 8,920 The following table provides information about the financial statement classification of our lease expenses reported in the Consolidated Statements of Operations for the years ended September 30, 2022 and 2021, in thousands: Years Ended September 30, Lease cost Classification 2022 2021 2020 Operating lease cost Cost of sales $ 822 $ 536 $ 208 Operating lease cost Selling, general and administrative expenses 359 256 84 Operating lease cost Research, development and engineering 14 — — Finance lease cost Cost of sales 4 5 16 Finance lease cost Selling, general and administrative expenses 71 17 8 Short-term lease cost Cost of sales — 191 164 Total lease cost $ 1,270 $ 1,005 $ 480 Future minimum lease payments under non-cancelable leases as of September 30, 2022 are as follows, in thousands: Operating Leases Finance Leases Total 2023 $ 2,535 $ 76 $ 2,611 2024 2,136 57 2,193 2025 978 9 987 2026 861 9 870 2027 773 3 776 Thereafter 7,863 — 7,863 Total lease payments 15,146 154 15,300 Less: Interest 3,650 7 3,657 Present value of lease liabilities $ 11,496 $ 147 $ 11,643 65 Operating lease payments include $ 6.2 million related to options to extend lease terms that are reasonably certain of being exercised.
Le ases The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of September 30, 2023 and 2022, in thousands: September 30, 2023 2022 Assets Right-of-use assets - operating $ 11,217 $ 11,258 Right-of-use assets - finance 123 149 Total right-of-use assets $ 11,340 $ 11,407 Liabilities Current Operating lease liabilities $ 2,623 $ 2,101 Finance lease liabilities 64 71 Total current portion of long-term lease liabilities 2,687 2,172 Long-term Operating lease liabilities 8,894 9,395 Finance lease liabilities 50 76 Total long-term lease liabilities 8,944 9,471 Total lease liabilities $ 11,631 $ 11,643 72 The following table provides information about the financial statement classification of our lease expenses reported in the Consolidated Statements of Operations for the years ended September 30, 2023, 2022 and 2021, in thousands: Years Ended September 30, Lease cost Classification 2023 2022 2021 Operating lease cost Cost of sales $ 2,318 $ 822 $ 536 Operating lease cost Selling, general and administrative expenses 781 359 256 Operating lease cost Research, development and engineering 13 14 — Finance lease cost Cost of sales 4 4 5 Finance lease cost Selling, general and administrative expenses 76 71 17 Short-term lease cost Cost of sales 25 — 191 Total lease cost $ 3,217 $ 1,270 $ 1,005 Future minimum lease payments under non-cancelable leases as of September 30, 2023 are as follows, in thousands: Years Ending September 30, Operating Leases Finance Leases Total 2024 $ 3,131 $ 68 $ 3,199 2025 2,040 20 2,060 2026 1,707 20 1,727 2027 1,100 12 1,112 2028 1,108 2 1,110 Thereafter 5,160 — 5,160 Total lease payments 14,246 122 14,368 Less: Interest 2,729 8 2,737 Present value of lease liabilities $ 11,517 $ 114 $ 11,631 Operating lease payments inclu de $ 2.3 mil lion related to options to extend lease terms that are reasonably certain of being exercised.
Property, Plant and Equipment – Property, plant and equipment are recorded at cost upon acquisition. We begin depreciation and amortization when an asset is both in the location and condition for its intended use. Maintenance and repairs are charged to expense as incurred.
We begin depreciation and amortization when an asset is both in the location and condition for its intended use. Maintenance and repairs are charged to expense as incurred. The cost of property retired or sold and the related accumulated depreciation and amortization are removed from the applicable accounts when disposition occurs and any gain or loss is recognized.
A reconciliation of actual income taxes to income taxes at the expected U.S. federal corporate income tax rate is as follows, in thousands, except percentages: Years Ended September 30, 2022 2021 2020 Federal statutory rate 21.0 % 21.0 % 21.0 % Tax expense (benefit) at the federal statutory rate $ 3,945 $ 722 $ ( 3,146 ) Effect of permanent book-tax differences 11 54 145 State tax provision 554 24 34 Valuation allowance for net deferred tax assets ( 3,138 ) 842 3,775 Uncertain tax items 55 ( 276 ) ( 47 ) Tax rate differential 535 267 222 Other items ( 544 ) 293 ( 239 ) $ 1,418 $ 1,926 $ 744 68 Deferred Income Taxes and Valuation Allowance Deferred income taxes reflect the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to be realized.
In come Taxes Income Tax (Benefit) Provision The components of (loss) income before (benefit) provision for income taxes are as follows, in thousands: Years Ended September 30, 2023 2022 2021 Domestic $ ( 17,271 ) $ 15,275 $ ( 3,320 ) Foreign 2,089 3,510 6,754 $ ( 15,182 ) $ 18,785 $ 3,434 The components of the (benefit) provision for income taxes are as follows, in thousands: Years Ended September 30, 2023 2022 2021 Current: Domestic federal $ — $ — $ — Foreign ( 327 ) 711 1,999 Foreign withholding taxes 159 255 292 Domestic state 81 77 ( 300 ) Total current ( 87 ) 1,043 1,991 Deferred: Domestic federal ( 2,207 ) ( 39 ) — State ( 284 ) — — Foreign ( 22 ) 414 ( 65 ) Total deferred ( 2,513 ) 375 ( 65 ) Total (benefit) provision $ ( 2,600 ) $ 1,418 $ 1,926 A reconciliation of actual income taxes to income taxes at the expected U.S. federal corporate income tax rate is as follows, in thousands, except percentages: Years Ended September 30, 2023 2022 2021 Tax (benefit) expense at the federal statutory rate $ ( 3,188 ) 21.0 % $ 3,945 21.0 % $ 722 21.0 % Effect of permanent book-tax differences 757 - 5.0 % 11 0.1 % 54 1.6 % State tax provision ( 395 ) 2.6 % 554 2.9 % 24 0.7 % Valuation allowance for net deferred tax assets 1,594 - 10.5 % ( 3,138 ) - 16.7 % 842 24.5 % Uncertain tax items ( 1,004 ) 6.6 % 55 0.3 % ( 276 ) - 8.0 % Tax rate differential 358 - 2.4 % 535 2.8 % 267 7.8 % Other items ( 722 ) 4.8 % ( 544 ) - 2.9 % 293 8.4 % $ ( 2,600 ) 17.1 % $ 1,418 7.5 % $ 1,926 56.0 % 76 Deferred Income Taxes and Valuation Allowance Deferred income taxes reflect the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to be realized.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome key parts to our products are subject to long lead times and/or are obtainable only from a single supplier or limited group of suppliers. Cyclical industry conditions and the volatility of demand for manufacturing equipment increase capital, technical, operational and other risks for us and for companies throughout our supply chain.
Biggest changeOur business depends on timely supply of equipment, services and related products that meet the rapidly changing technical and volume requirements of our customers. Some key parts to our products are subject to long lead times and/or are obtainable only from a single supplier or limited group of suppliers.
We may not be able to generate sufficient cash flows or obtain access to external financing necessary to fund existing operations and our growth plan. Cash flows may be insufficient to provide adequate working capital in the future and we may require additional financing to fund existing operations as well as our growth plan.
We may not be able to generate sufficient cash flows or obtain access to external financing necessary to fund existing operations and our growth plan. Our cash flows may be insufficient to provide adequate working capital in the future and we may require additional financing to fund existing operations as well as our growth plan.
Changing customer demands, supplier lead times and uncertainty surrounding new product launches expose us to risks associated with excess inventory or shortages. Our products are manufactured using a wide variety of purchased parts and raw materials and we must maintain sufficient inventory levels to meet the demand for the products we sell, which can change rapidly and unexpectedly.
Changing customer demands, supplier lead times and uncertainty surrounding new product launches expose us to risks associated with excess inventory or shortages. Our products are manufactured using a wide variety of purchased parts and raw materials and we must maintain sufficient inventory levels to meet the demand for the products we sell, which can change rapidly and 23 unexpectedly.
Additionally, we generally experience a one-to-two quarter lag between upturns/downturns experienced by larger equipment manufacturers. When cyclical fluctuations result in lower than expected revenue levels, our operating results are adversely affected. Cost reduction measures may be necessary in order for us to remain competitive and financially sound.
Additionally, we generally experience a one-to-two quarter lag between upturns/downturns experienced by larger equipment manufacturers. When cyclical fluctuations result in lower than expected revenue levels, our operating results are adversely affected. Cost reduction measures may be necessary for us to remain competitive and financially sound.
The following risk factors should be read in conjunction with all of the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Risks Related to the Semiconductor Industry There is ongoing volatility in the semiconductor equipment industry.
The following risk factors should be read in conjunction with all the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. 17 Risks Related to the Semiconductor Industry There is ongoing volatility in the semiconductor equipment industry.
We may engage vendors and 26 third-party business partners to sell our products or services and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated organizations. These activities raise our anti-corruption/anti-bribery risk exposure.
We may engage vendors and third-party business partners to sell our products or services and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated organizations. These activities raise our anti-corruption/anti-bribery risk exposure.
We may in the future be the target of securities litigation due to volatility in the market price of our common stock or for other reasons. Any securities litigation could result in substantial costs and could divert the attention and resources of our management. Where appropriate, we intend to vigorously defend all claims.
We may in the future be the target of securities litigation due to volatility in the market price of our common stock or for other reasons. Any securities litigation could result in substantial costs and could divert the attention and resources of our management. 28 Where appropriate, we intend to vigorously defend all claims.
Our future performance depends, in part, upon our ability to continue to compete successfully in these markets. Some of our competitors are diversified companies with extensive financial resources and research, engineering, manufacturing, 18 marketing and customer service and support capabilities that are greater than ours.
Our future performance depends, in part, upon our ability to continue to compete successfully in these markets. Some of our competitors are diversified companies with extensive financial resources and research, engineering, manufacturing, marketing and customer service and support capabilities that are greater than ours.
We are continuing to evaluate the impact of the announced and other proposed tariffs on products that we import from China, and we may experience a material increase in the cost of our products, which may result in our products becoming less attractive relative to products offered by our competitors.
We are continuing to evaluate the impact of the announced and other proposed tariffs on products that we import from China, and we may experience a material 27 increase in the cost of our products, which may result in our products becoming less attractive relative to products offered by our competitors.
We cannot be certain our existing customers will generate significant revenue for us in the future or that these new customer relationships will continue to develop. If we are unable to maintain or expand our customer base, we may not be able to maintain or increase our revenue.
We cannot be certain our existing customers will generate significant revenue for us in the future or that these new customer relationships will be maintained or continue to develop. If we are unable to maintain or expand our customer base, we may not be able to maintain or increase our revenue.
In the event of supplier capacity constraints, production disruptions, or failure to meet our requirements concerning quality, cost or performance factors, we may transfer our business to alternative sourcing which could lead to further delays, additional costs or other difficulties.
In the event of supplier capacity constraints, production disruptions, or failure to meet our requirements concerning quality, cost or performance factors, we may seek to transfer our business to alternative sourcing which could lead to further delays, additional costs or other difficulties.
In particular, political and economic instability, geopolitical conflicts, political unrest, civil strife, terrorist activity, acts of war, public corruption, expropriation, nationalism and other economic or political uncertainties in the United States or internationally could interrupt and negatively affect the sale of our products or other business operations.
Political and economic instability, geopolitical conflicts, political unrest, civil strife, terrorist activity, acts of war, public corruption, expropriation, nationalism and other economic or political uncertainties in the United States or internationally could interrupt and negatively affect the sale of our products or other business operations.
It may be time-consuming and expensive for us to alter our business operations in order to adapt to or comply with any such changes. Changes or proposed changes in U.S. or other countries' trade policies may result in restrictions and economic disincentives on international trade.
It may be time-consuming and expensive for us to alter our business operations to adapt to or comply with any such changes. Changes or proposed changes in U.S. or other countries' trade policies may result in restrictions and economic disincentives on international trade.
If we do not timely and appropriately adapt to changes resulting from these uncertain macroeconomic environment and industry conditions, or to difficulties in the financial markets, our business, financial condition and results of operations may be materially and adversely affected.
If we do not timely and appropriately adapt to changes resulting from these uncertain macroeconomic and industry conditions, or to difficulties in the financial markets, our business, financial condition and results of operations may be materially and adversely affected.
The rapid change in technology in our industry requires that we continue to make investments in research and development in order to enhance the performance, functionality and cost of ownership of our products to keep pace with competitors’ products and to satisfy customer demands for improved performance, features and functionality.
The rapid change in technology in our industry requires that we continue to make investments in research and development to enhance the performance, functionality and cost of ownership of our products to keep pace with competitors’ products and to satisfy customer demands for improved performance, features and functionality.
More generally, any of these events could cause consumer confidence and spending to decrease and/or result in increased volatility in the worldwide financial markets and economy. They also could result in economic recession either globally or in the markets in which we operate.
More generally, any of these events could cause consumer confidence and spending to decrease and/or result in increased volatility in the worldwide financial 24 markets and economy. They also could result in economic recession either globally or in the markets in which we operate.
We also may experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services or increased costs as a result of any of the following: • the failure or inability of suppliers to deliver sufficient quantities of quality parts on a cost-effective and timely basis; • volatility in the availability and cost of materials, including rare earth elements; • difficulties or delays in obtaining required import or export approvals; • information technology or infrastructure failures; and • natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war), particularly where we conduct manufacturing operations.
We also may experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services or increased costs as a result of any of the following: (a) the failure or inability of suppliers to deliver sufficient quantities of quality parts on a cost-effective and timely basis; (b) volatility in the availability and cost of materials, including rare earth elements; (c) difficulties or delays in obtaining required import or export approvals; (d) information technology or infrastructure failures; and (e) natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war), particularly where we conduct manufacturing operations.
The semiconductor equipment industry is highly competitive and, because we are relatively small in size and have fewer financial and other resources compared to our competitors, we may not be able to compete successfully with them. Our industry includes large manufacturers with substantial resources to support customers worldwide.
The semiconductor equipment industry is highly competitive and, because we are relatively small and have fewer financial and other resources compared to our competitors, we may not be able to compete successfully with them. Our industry includes large manufacturers with substantial resources to support customers worldwide.
Amtech, similar to many other multinational corporations, does a significant amount of business that would be impacted by changes to the trade policies of the United States and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions).
Amtech, like many other multinational corporations, does a significant amount of business that would be impacted by changes to the trade policies of the United States and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions).
Our amended and restated articles of incorporation and amended and restated bylaws contain provisions that: • authorize “blank check” preferred stock, which could be issued by our Board of Directors without shareholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; • specify that special meetings of our shareholders can be called only by our Board of Directors, the Chairperson of our Board of Directors, our Chief Executive Officer, or a majority of the Board of Directors; • provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, though not less than a quorum; • specify that only our Board of Directors may change the size of our Board of Directors; • establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to our Board of Directors; and • expressly authorize our Board of Directors to modify, alter or repeal our bylaws.
Our amended and restated articles of incorporation and amended and restated bylaws contain provisions that: (a) authorize “blank check” preferred stock, which could be issued by our Board of Directors without shareholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; (b) specify that special meetings of our shareholders can be called only by our Board of Directors, the Chairperson of our Board of Directors, our Chief Executive Officer, or a majority of the Board of Directors; (c) provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, though not less than a quorum; (d) specify that only our Board of Directors may change the size of our Board of Directors; (e) establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to our Board of Directors; and (f) expressly authorize our Board of Directors to modify, alter or repeal our bylaws.
Entity List, there can be no assurance that licenses will be 27 granted. In addition, the U.S.
Entity List, there can be no assurance that licenses will be granted. In addition, the U.S.
Our directors, executive officers and holders of five percent or more of our outstanding common stock and their affiliates represent a significant portion of our common stock held as of September 30, 2022, and, therefore, have significant influence over our management and corporate policies.
Our directors, executive officers and holders of five percent or more of our outstanding common stock and their affiliates represent a significant portion of our common stock held as of September 30, 2023, and, therefore, have significant influence over our management and corporate policies.
As such, demand for, and the profitability of, our products can change significantly from period to period as a result of numerous factors, including the following: • changes in global and regional economic conditions; • the shift of semiconductor production to Asia, where there often is increased price competition; • tariffs, quotas and international trade barriers; • changes in capacity utilization and production volume of manufacturers of semiconductors, silicon wafers and MEMS; • the profitability and capital resources of those manufacturers; and • challenges associated with marketing and selling manufacturing equipment and services to a diverse and diffuse customer base.
As such, demand for, and the profitability of, our products can change significantly from period to period as a result of numerous factors, including the following: (a) changes in global and regional economic conditions; (b) the shift of semiconductor production to Asia, where there often is increased price competition; (c) tariffs, quotas and international trade barriers; (d) changes in capacity utilization and production volume of manufacturers of semiconductors, silicon wafers and MEMS; (e) the profitability and capital resources of those manufacturers; and (f) challenges associated with marketing and selling manufacturing equipment and services to a diverse and diffuse customer base.
Our assumptions regarding the durability and reliability of our products may not be accurate, and because our products have relatively long warranty periods, we cannot assure you that the amount of accrued warranty by us for our products will be adequate in light of the actual performance of our products or that we won't experience higher than expected warranty claims.
Our assumptions regarding the durability and reliability of our products may not be accurate, and because our products have relatively long warranty periods, we cannot assure you that the amount of accrued warranty by us for our products will be adequate considering the actual performance of our products or that we won't experience higher than expected warranty claims.
To successfully manage our growth through such market fluctuations, we believe we must effectively: • maintain the appropriate number and mix of permanent, part-time, temporary and contract employees to meet the fluctuating demand for our products; • train, integrate and manage personnel, particularly process engineers, field service engineers, sales and marketing personnel, and financial and information technology personnel to maintain and improve skills and morale; • retain key management and augment our management team, particularly if we lose key members; • continue to enhance our customer resource and manufacturing management systems to maintain high levels of customer satisfaction and efficiencies, including inventory control; • implement and improve existing and new administrative, financial and operations systems, procedures and controls; • expand and upgrade our technological capabilities; and • manage multiple relationships with our customers, suppliers and other third parties.
To successfully manage our growth through such market fluctuations, we believe we must effectively: (a) maintain the appropriate number and mix of permanent, part-time, temporary and contract employees to meet the fluctuating demand for our products; (b) train, integrate and manage personnel, particularly process engineers, field service engineers, sales and marketing personnel, and financial and information technology personnel to maintain and improve skills and morale; (c) retain key management and augment our management team, particularly if we lose key members; (d) continue to enhance our customer resource and manufacturing management systems to maintain high levels of customer satisfaction and efficiencies, including inventory control; (e) implement and improve existing and new administrative, financial and 20 operations systems, procedures and controls; (f) expand and upgrade our technological capabilities; and (g) manage multiple relationships with our customers, suppliers and other third parties.
We currently sell to a relatively small number of customers and expect to do so for the foreseeable future. Therefore, our operating results depend on the ability of these customers to sell products that require our equipment in their manufacture.
We currently sell to a relatively small number of customers and expect to do so for the foreseeable future. Therefore, our operating results depend on the ability of these customers to sell products that require our equipment in their manufacturing operations.
If we lose any of our largest customers (as we have in the past from time to time), experience a significant reduction in sales to any such customers or no longer manufacture a particular product line for one of our largest customers, we would experience a significant reduction in our revenue.
If we lose any of our largest customers (as we have in the past from time to time), experience a 21 significant reduction in sales to any such customers or no longer manufacture a particular product line for one of our largest customers, we will experience a significant reduction in our revenue.
Additionally, the marketing and sale of our products to international markets expose us to a number of risks, including the following: • increased costs associated with maintaining the ability to understand the local markets and follow their trends and customs, as well as developing and maintaining an effective marketing and distributing presence; • limitations on our ability to require advance payments from our customers; • difficulty in providing customer service and support in local markets; 22 • difficulty in staffing and managing overseas operations; • longer sales cycles and collection periods; • fewer or weaker legal protections for our intellectual property rights; • failure to develop appropriate risk management and internal control structures tailored to overseas operations; • difficulty and costs relating to compliance with the different or changing commercial and legal requirements of our overseas markets; • fluctuations in foreign currency exchange and interest rates; • failure to obtain or maintain certifications for our products or services in these markets; and • international trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses.
Additionally, the marketing and sale of our products to international markets expose us to a number of risks, including the following: (a) increased costs associated with maintaining the ability to understand the local markets and follow their trends and customs, as well as developing and maintaining an effective marketing and distributing presence; (b) limitations on our ability to require advance payments from our customers; (c) difficulty in providing customer service and support in local markets; (d) difficulty in staffing and managing overseas operations; (e) longer sales cycles and collection periods; (f) fewer or weaker legal protections for our intellectual property rights; (g) failure to develop appropriate risk management and internal control structures tailored to overseas operations; (h) difficulty and costs relating to compliance with the different or changing commercial and legal requirements of our overseas markets; (i) fluctuations in foreign currency exchange and interest rates; (j) failure to obtain or maintain certifications for our products or services in these markets; and (k) international trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses.
We may be unable to sell sufficient quantities of products in the event that market demand changes, resulting in increased risk of excess inventory that could lead to obsolescence 23 or reduced liquidity as we fulfill our purchase commitments.
We may be unable to sell sufficient quantities of products if market demand changes, resulting in increased risk of excess inventory that could lead to obsolescence or reduced liquidity as we fulfill our purchase commitments.
We may be unable to successfully expand or contract our business to meet fluctuating demands. Market fluctuations place significant strain on our management, personnel, systems and resources.
We may not be able to manage our business successfully through severe business cycles. We may be unable to successfully expand or contract our business to meet fluctuating demands. Market fluctuations place significant strain on our management, personnel, systems, and resources.
As of September 30, 2022 and 2021, our accrued warranty costs amounted to $0.9 million and $0.5 million, respectively.
As of September 30, 2023 and 2022, our accrued warranty costs amounted to $1.0 million and $0.9 million, respectively.
As of September 30, 2022, one Semiconductor customer individually represented 12% of our accounts receivable. A concentration of our receivables from one or a small number of customers places us at risk.
As of September 30, 2023, two Semiconductor customers each individually represented 17% of our accounts receivable. A concentration of our receivables from one or a small number of customers places us at risk.
Our business, operating results or financial condition could be adversely affected and may result in, among other things: • increased operating costs, including increased legal expenses, insurance, administrative expenses and associated costs incurred in connection with director election contests; • uncertainties as to our future direction, which could result in the loss of potential business opportunities and could make it more difficult to attract, retain, or motivate qualified personnel, and strain relationships with investors and customers; and • reduction or delay in our ability to effectively execute our current business strategy and to implement new strategies. 30 There are provisions in our corporate governing documents that could make an acquisition of the Company more difficult and limit attempts by our shareholders to replace or remove our current management.
Our business, operating results or financial condition could be adversely affected and may result in, among other things: (a) increased operating costs, including increased legal expenses, insurance, administrative expenses and associated costs incurred in connection with director election contests; (b) uncertainties as to our future direction, which could result in the loss of potential business opportunities and could make it more difficult to attract, retain, or motivate qualified personnel, and strain relationships with investors and customers; and (c) reduction or delay in our ability to effectively execute our current business strategy and to implement new strategies.
There is no assurance that any additional financing will be available if and when required, or, even if available, that it would not materially dilute the ownership percentage of our then existing shareholders, result in increased expenses or result in covenants or special rights that would restrict our operations. 19 We may not be able to manage our business successfully through severe business cycles.
There is no assurance that any additional financing will be available if required, or, even if available, that it would not materially dilute the ownership percentage of our then existing shareholders, result in increased expenses or result in covenants or special rights that would restrict our operations.
Natural disasters such as earthquakes, floods, severe weather conditions, outbreaks of infectious diseases in addition to COVID-19 or other catastrophic events may severely affect our operations or those of our suppliers and customers.
Natural disasters, outbreaks of infectious diseases, terrorist attacks, wars and threats of war may negatively impact our operations, revenue, costs, and stock price. Natural disasters such as earthquakes, floods, severe weather conditions, outbreaks of infectious diseases in addition to COVID-19 or other catastrophic events may severely affect our operations or those of our suppliers and customers.
The application of these laws to us also may place us at a competitive disadvantage to foreign companies that are not subject to similar laws/regulations.
The application of these laws to us also may place us at a competitive disadvantage to foreign companies that are not subject to similar laws/regulations. Environmental Laws and Regulations - We are subject to a variety of national, state, regional and local environmental laws and regulations.
Additionally, our customers may cancel their agreements with us if we fail to meet certain product specifications, materially breach agreements or encounter insolvency or bankruptcy. They also may seek to renegotiate the terms of current agreements or renewals.
Additionally, our customers may cancel their agreements or orders with us if we fail to meet certain product specifications, materially breach agreements or encounter insolvency or bankruptcy. Any such cancellations may result in inventory that we may not be able to quickly resell. They also may seek to renegotiate the terms of current agreements or renewals.
Loss of our competitive position due to any of these factors could impair our prices, customer orders, revenue, gross margin and market share, any of which would negatively affect our business, financial position and results of operations.
Loss of our competitive position due to any of these factors could impair our prices, customer orders, revenue, gross margin, and market share, any of which would negatively affect our business, financial position and results of operations. Risks Related to Our Business Our leverage may make it difficult for us to service our debt and operate our business.
Technical innovations are inherently complex and require long development cycles and appropriate professional staffing. Our future business success depends on our ability to develop and introduce new products, or new uses for existing products, that successfully address changing customer needs and win market acceptance. We also must manufacture these new products in a timely and cost-effective manner.
Our future success depends on our ability to develop and introduce new products, or new uses for existing products, that successfully address changing customer needs and gain market acceptance. We also must manufacture these new products in a timely and cost-effective manner.
Any of these risks could have a material adverse effect on our business, results of operations, financial condition, or cash flows, particularly in the case of a large acquisition.
Any of these risks could have a material adverse effect on our business, results of operations, financial condition, or cash flows, particularly in the case of a large acquisition. Our reliance on sales to a few major customers, often on credit terms, places us at financial risk.
If any one or more of our major customers were to seek to re-negotiate their agreements on more favorable terms, or not pay us or continue business with us, it could adversely affect our business, financial position and results of operations. Our customers could cancel or fail to accept a large system order.
If any one or more of our major customers were to seek to re-negotiate their agreements on more favorable terms, or not pay us or continue business with us, it could adversely affect our business, financial position and results of operations. Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs.
Our operations are subject to numerous foreign and domestic regulatory regimes, including taxation policies, governance and audit requirements, employment and labor laws, transportation regulations, import and export regulations and tariffs, possible foreign exchange restrictions and international monetary fluctuations.
Our operations are subject to an array of governmental regulations in each of the jurisdictions in which we operate, including taxation policies, governance and audit requirements, employment and labor laws, environmental regulations, transportation regulations, import and export regulations and tariffs, possible foreign exchange restrictions and international monetary fluctuations.
In addition, involvement of certain activist shareholders may impact our ability to recruit and retain talent or otherwise distract management or make decisions that we believe are in the long-term interest of all shareholders. 24 Information security breaches or failures of our information technology systems may have a negative impact on our operations and our reputation.
In 30 addition, involvement of certain activist shareholders may impact our ability to recruit and retain talent or otherwise distract management or make decisions that we believe are in the long-term interest of all shareholders. Shareholder activists could cause a disruption to our business.
In addition, the laws of certain territories, such as China, in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States. 29 We may face intellectual property infringement claims that could be time-consuming and costly to defend and could result in our loss of significant rights and the assessment of treble damages.
In addition, the laws of certain territories, such as China, in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States.
Our major customers may seek and, on occasion, may receive pricing, payment or other commercial terms that are less favorable to us than the current terms we 21 customarily obtain.
We also require letters of credit from certain customers depending on the size of the order, type of customer or its creditworthiness and its country of domicile. Our major customers may seek and, on occasion, may receive pricing, payment or other commercial terms that are less favorable to us than the current terms we customarily obtain.
In addition, amounts required to be paid in settlement of any claims, and the legal fees and other costs associated with their defense or settlement, cannot be estimated and could, individually or in the aggregate, materially harm our financial condition. 28 Risks Related to Our Research and Development and Intellectual Property Activities We may not be able to keep pace with the rapid change in the technology needed to meet customer requirements.
In addition, amounts required to be paid in settlement of any claims, and the legal fees and other costs associated with their defense or settlement, cannot be estimated and could, individually or in the aggregate, materially harm our financial condition.
In such a scenario, a significant change in the liquidity or financial position of any of our customers that purchase large systems could have a material impact on the collectability of our accounts receivable and our future operating results.
A significant change in the liquidity or financial position of any of our customers that purchase large systems could have a material impact on the collectability of our accounts receivable and our future operating results. We attempt to manage this credit risk by requiring significant partial payments prior to shipment, where appropriate, and by actively monitoring collections.
Research and development costs are typically incurred before we confirm the technical feasibility and commercial viability of a product, and not all development activities result in commercially viable products. We cannot assure that products or enhancements will receive market acceptance, or that we will be able to sell these products at prices that are favorable to us, or at all.
Research and development costs are typically incurred before we confirm the technical feasibility and commercial viability of a product, and not all development activities result in commercially viable products.
Additional factors may affect our stock price, including sales of our common stock by us or our existing shareholders as well as changes to the coverage and/or rating of our stock by securities analysts. Shareholder activists could cause a disruption to our business.
Additional factors may affect our stock price, including sales of our common stock by us or our existing shareholders as well as changes to the coverage and/or rating of our stock by securities analysts. Our officers, directors and largest shareholders could choose to act in their best interests and not necessarily those of our other shareholders.
However, these employees, consultants and third parties may breach these agreements, and we may not have adequate remedies for wrongdoing.
We also maintain exclusive and non-exclusive licenses with third parties for the technology used in certain products. However, these employees, consultants and third parties may breach these agreements, and we may not have adequate remedies for wrongdoing.
Further, these conditions may cause some suppliers to scale back operations, exit businesses, merge with other companies, file for bankruptcy protection or possibly cease operations.
Cyclical industry conditions and the volatility of demand for manufacturing equipment increase capital, technical, operational and other risks for us and for companies throughout our supply chain. Further, these conditions may cause some suppliers to scale back operations, exit businesses, merge with other companies, file for bankruptcy protection or possibly cease operations.
We can face criminal liability and other serious consequences for violations of these laws and regulations which can harm our business. We are a U.S.-based multinational company with extensive operations in Asia and elsewhere. We operate in several high-risk jurisdictions, including, but not limited to China.
Anti-Corruption Laws and Regulations - We are a U.S.-based multinational company with extensive operations in Asia and elsewhere. We operate in several high-risk jurisdictions, including, but not limited to China. Various U.S. and certain non-U.S. anti-corruption/anti-bribery and other international trade laws and regulations apply to us and our businesses.
The manufacture and sale of our products, which, in our customers’ operations, involve toxic materials and robotic machinery, involve the risk of product liability claims. In addition, a failure of one of our products at a customer site could interrupt the business operations of our customer.
In addition, a failure of one of our products at a customer site could interrupt the business operations of our customer.
Travel Act, domestic anticorruption laws such as 18 U.S.C. §201, the Money Laundering Control Act of 1986, the USA PATRIOT Act, the U.S. Export Control Reform Act of 2018, the U.S. Export Administration Regulations (15 C.F.R. §§730 et seq.), U.S. sanctions contained in 31 C.F.R. Parts 500-599, the U.S. International Emergency Economic Powers Act, the U.S.
Export Administration Regulations (15 C.F.R. §§730 et seq.), U.S. sanctions contained in 31 C.F.R. Parts 500-599, the U.S. International Emergency Economic Powers Act, the U.S. Trading with the Enemy Act, the International Boycott Provisions (Section 999) of the U.S.
Success in the semiconductor equipment industry depends, in part, on continual improvement of existing technologies and rapid innovation of new solutions. For example, the semiconductor industry continues to shrink the size of semiconductor devices. This and other evolving customer needs require us to continually respond with new product developments.
For example, the semiconductor industry continues to shrink the size of semiconductor devices. This trend and other evolving customer needs require us to continually respond with new product developments. Technical innovations are inherently complex and require long development cycles and appropriate professional staffing.
We also maintain trademarks on certain of our products and claim copyright protection for certain proprietary software and documentation. We can give no assurance, however, that our trademarks and copyrights will be upheld or will successfully deter infringement by third parties.
We also maintain trademarks on certain of our products and claim copyright protection for certain proprietary software and documentation.
We face a risk of product liability claims or other litigation, which could be expensive and may divert management’s attention from running our business. Amtech and our subsidiaries are defendants from time to time in actions for matters arising out of our business operations.
Similar actions by the U.S. government or another country could impact our ability to provide our products and services to existing and potential customers. We face a risk of product liability claims or other litigation, which could be expensive and may divert management’s attention from running our business.
Each geographic region in which we, our customers, and our suppliers operate exhibits unique characteristics that can cause capital equipment investment patterns to vary significantly from period to period.
In 2023, 52% of our net revenue came from customers outside of North America as follows: Asia - 31% (including China - 14%, Taiwan - 5% and Malaysia - 6%); and Europe - 21% (including Czech Republic - 5%, Austria - 4% and Germany - 2%). 22 Each geographic region in which we, our customers, and our suppliers operate exhibits unique characteristics that can cause capital equipment investment patterns to vary significantly from period to period.
We attempt to protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers, employees and consultants and through other security measures. We also maintain exclusive and non-exclusive licenses with third parties for the technology used in certain products.
We can give no assurance, however, that our trademarks and copyrights will be upheld or will successfully deter infringement by third parties. 29 We attempt to protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers, employees and consultants and through other security measures.
Various U.S. and certain non-U.S. anti-corruption/anti-bribery and other international trade laws and regulations apply to our company entities and businesses. These laws and regulations may include, among others, the Foreign Corrupt Practices Act of 1977, as amended, the U.S.
These laws and regulations may include, among others, the Foreign Corrupt Practices Act of 1977, as amended, the U.S. Travel Act, domestic anti-corruption laws such as 18 U.S.C. §201, the Money Laundering Control Act of 1986, the USA PATRIOT Act, the U.S. Export Control Reform Act of 2018, the U.S.
No assurance can be given that we will be able to successfully complete future strategic acquisitions if we cannot reach agreement on acceptable terms or for other reasons.
There can be no assurance that we will be able to identify suitable acquisition opportunities in the future or that we will be able to consummate any such transactions on terms and conditions acceptable to us. Additionally, we cannot predict if or when acquisitions will be completed, and we may face significant competition for acquisition targets.
Removed
Risks Related to Our Business and Our Operations Business interruptions, including those related to COVID-19, have had an adverse impact on our operations, including among others, our manufacturing and supply chain, sales and product development, and could have an adverse impact on our business, financial condition and results of operations in future periods.
Added
As of September 30, 2023, we had $10.7 million of total indebtedness, consisting of $10.6 million of borrowings under our Loan and Security Agreement (“Loan Agreement”) with UMB Bank, N.A. (“UMB Bank” or “Lender”).
Removed
The COVID-19 pandemic and the resulting containment measures have caused economic and financial disruptions globally, including in most of the regions in which we sell our products and conduct our business operations. Beginning in the second half of fiscal 2020, the COVID-19 pandemic negatively impacted consumer and business spending generally and has significantly contributed to deteriorating macroeconomic conditions.
Added
Our leverage could have important consequences, including: (a) making it more difficult to satisfy our obligations with respect to our various debt and liabilities; (b) requiring us to dedicate a substantial portion of our cash flow from operations to debt payments, thus reducing the availability of cash flow to fund internal growth through working 18 capital and capital expenditures for general corporate purposes; (c) increasing our vulnerability to a downturn in our business or adverse economic or industry conditions; (d) placing us at a competitive disadvantage compared to our competitors that have less debt in relation to cash flow and that, therefore, may be able to take advantage of opportunities that our leverage would prevent us from pursuing; (e) limiting our flexibility in planning for or reacting to changes in our business and industry; (f) restricting us from pursuing strategic acquisitions or exploiting certain business opportunities or causing us to make non-strategic divestitures; (g) requiring additional monitoring, reporting and borrowing base requirements under our Loan Agreement if borrowings significantly increase or if certain liquidity thresholds are not satisfied; and (h) limiting our ability to borrow additional funds or raise equity capital in the future and increasing the costs of such additional financings.
Removed
We continue to experience significant supply constraints seen industry-wide due to component shortages which have resulted in extended lead times and higher supply chain costs. The magnitude and duration of the disruption, its continuing impact on us, and resulting decline in global business activity is uncertain.
Added
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.
Removed
While we continue to monitor and assess the impact on our business from the spread of COVID-19 and related new strains and the ever evolving actions implemented by governments across the globe, our global operations have returned to normal.
Added
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.
Removed
The degree to which COVID-19 impacts our future business and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, spread and severity of the outbreak, new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
Added
We will be operating under the terms of such Forbearance Agreement through January 17, 2025 (the “Forbearance Period”).
Removed
In particular, the continued spread and/or resurgence of COVID-19 globally and/or the emergence of new strains of COVID-19, such as the Omicron BA.5 variant, could result in a widespread health crisis and/or change in consumer behavior that could adversely affect the global economy and financial markets, resulting in an economic downturn, and could also adversely impact our operations, including, without limitation, our manufacturing and supply chain, sales and product development operations, particularly our prospective sales if the Semiconductor and Material and Substrate segments we seek to serve suffer long-term damage.
Added
Our ability to comply with terms of the Loan Agreement and the Forbearance Agreement, as well as meet our debt service obligations or to refinance our debt depends on our future operating and financial performance, which will be affected by our ability to successfully implement our business strategy as well as general economic, financial, competitive, regulatory and other factors beyond our control.
Removed
Such an economic downturn could have an adverse impact on the successful and timely implementation of our strategic growth plan and on our business, financial condition and results of operations.
Added
If our business does not generate sufficient cash flow from operations, or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness on or before its maturity, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on our operations.
Removed
We are similarly unable to predict the extent to which the pandemic impacts our customers, suppliers and other partners and their financial conditions, but adverse effects on these parties could also adversely affect us.
Added
In addition, we may not be able to affect any of these actions, if necessary, on commercially reasonable terms or at all. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Removed
Finally, the impact of COVID-19 can also exacerbate other risks discussed in this Risk Factors section and throughout this report, which could in turn have a material adverse effect on us. Developments related to COVID-19 have been unpredictable, and additional impacts and risks may arise that we are not aware of or able to respond to appropriately.
Added
The terms of our existing or future debt instruments may limit or prevent us from taking any of these actions.
Removed
Acquisitions can result in an increase in our operating costs, divert management’s attention away from other operational matters and expose us to other risks. We continually evaluate potential acquisitions and consider acquisitions an important part of our future growth strategy.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeLease 40,500 sf Bethel, Connecticut Office & Mfg. Lease 18,830 sf 31
Biggest changeLease 37,000 sf Phoenix, Arizona Manufacturing Lease 8,200 sf Bethel, Connecticut Office & Mfg. Lease 18,830 sf Carlisle, Pennsylvania Office & Mfg. Lease 40,500 sf Spartanburg, South Carolina Manufacturing Lease 23,100 sf Singapore, Asia Office Lease 947 sf
Location Use Own or Lease Size Corporate Tempe, Arizona Corporate Headquarters Own 15,000 sf Semiconductor Segment North Billerica, Massachusetts Office, Mfg. & Warehouse Lease 150,000 sf Ashvale, Surrey, United Kingdom Office Lease 1,900 sf Shanghai, China Office, Mfg. & Warehouse Lease 76,530 sf Penang, Malaysia Office Lease 1,570 sf Material and Substrate Segment Carlisle, Pennsylvania Office & Mfg.
Location Use Own or Lease Size Corporate Tempe, Arizona Corporate Headquarters Own 15,000 sf Semiconductor Segment North Billerica, Massachusetts Office, Mfg. & Warehouse Lease 150,000 sf Ashvale, Surrey, United Kingdom Office Lease 1,900 sf Shanghai, China Office, Mfg. & Warehouse Lease 76,530 sf Penang, Malaysia Office Lease 1,570 sf Westford, Massachusetts Office, Mfg. & Warehouse Lease 57,025 sf Material and Substrate Segment Phoenix, Arizona Office & Mfg.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−5 removed4 unchanged
Biggest changeOur present policy is to apply cash to investments in product development and upgrades, acquisitions or expansion; consequently, we do not expect to pay dividends on our Common Stock in the foreseeable future.
Biggest changeOur present policy is to apply cash to investments in product development and upgrades, acquisitions or expansion, and debt repayments; consequently, we do not expect to pay dividends on our Common Stock in the foreseeable future. However, once the above priorities have been met, we will evaluate the returning of capital to shareholders, as we have done in the past.
ISSUER PURCHASES OF EQUITY SECURITIES Share Repurchase Programs On February 10, 2022, the Board approved a stock repurchase program, pursuant to which we may repurchase up to $5 million of our outstanding Common Stock over a one-year period, commencing on February 16, 2022.
ISSUER PURCHASES OF EQUITY SECURITIES Share Repurchase Programs On February 7, 2023, the Board approved a stock repurchase program, pursuant to which we may repurchase up to $5 million of our outstanding Common Stock over a one-year period, commencing on February 10, 2023.
During the three months ended September 30, 2022, we did not repurchase any of our equity securities nor did we sell any equity securities that were not registered under the Securities Act of 1933, as amended. As of September 30, 2022, $3.6 million remains available for repurchases.
During the three months ended September 30, 2023, we did not repurchase any of our equity securities nor did we sell any equity securities that were not registered under the Securities Act of 1933, as amended. As of September 30, 2023, $5.0 million remains available for repurchases.
On February 9, 2021, the Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding Common Stock over a one-year period, commencing on February 16, 2021.
On February 10, 2022, the Board approved a stock repurchase program, pursuant to which we may repurchase up to $5 million of our outstanding Common Stock over a one-year period, commencing on February 16, 2022.
HOLDERS As of November 9, 2022, there were 319 shareholders of record of our Common Stock. Based upon a recent survey of brokers, we estimate there were approximately an additional 6,889 beneficial shareholders who held shares in brokerage or other investment accounts as of that date. DIVIDENDS We have never paid dividends on our Common Stock.
HOLDERS As of November 17, 2023, there were 297 shareholders of record of our Common Stock. Based upon a recent survey of brokers, we estimate there were approximately an additional 5,922 beneficial shareholders who held shares in brokerage or other investment accounts as of that date. DIVIDENDS We have never paid dividends on our Common Stock.
Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased was subject to management’s discretion and depended on our stock price and other market conditions.
Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the Securities and Exchange Commission; however, we have no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on our stock price and other market conditions.
We could have, in the sole discretion of the Board, terminated the repurchase program at any time while it was in effect. Repurchased shares were to be retired or kept in treasury for further issuance.
We may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. Repurchased shares may be retired or kept in treasury for further issuance. During the year ended September 30, 2023, did not repurchase any shares of our common stock.
Removed
During the quarter ended December 31, 2021, we repurchased 291,383 shares of our Common Stock on the open market at a total cost of approximately $2.7 million (an average price of $9.31 per share). All repurchased shares have been retired. The term of this repurchase program expired during the quarter ended March 31, 2022.
Added
UNREGISTERED SALES OF EQUITY SECURITIES There were no unregistered sales of equity securities in fiscal 2023. 33 ITEM 6. R ESERVED 34
Removed
However, once the above priorities have been met, we will evaluate the returning of capital to shareholders, as we have done in the past. 33 UNREGISTERED SALES OF EQUITY SECURITIES There were no unregistered sales of equity securities in fiscal 2022.
Removed
COMPARISON OF STOCK PERFORMANCE The following line graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Exchange Act, each as amended, except to the extent that we specifically incorporated by reference it into such filing.
Removed
The following line graph compares cumulative total shareholder return, assuming reinvestment of dividends, for our Common Stock, the NASDAQ Composite Index and the NASDAQ Industrial Index. Because we did not pay dividends on our Common Stock during the measurement period, the calculation of the cumulative total shareholder return on our Common Stock did not include dividends.
Removed
The following graph assumes that $100 was invested on October 1, 2017. ITEM 6. R ESERVED 34

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+44 added−39 removed33 unchanged
Biggest changeOur future effective income tax rate depends on various factors, such as the amount of income (loss) in each tax jurisdiction, tax regulations governing each region, non-deductible expenses incurred as a percent of pre-tax income and the effectiveness of our tax planning strategies. 40 Selected Quarterly Data (Unaudited) The following table sets forth selected unaudited consolidated quarterly financial information for the years ended September 30, 2022 and 2021, in thousands, except percentages and per share amounts: Fiscal Year 2022 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 26,463 $ 27,556 $ 19,964 $ 32,315 Cost of sales 16,565 16,396 14,064 19,762 Gross profit 9,898 11,160 5,900 12,553 Selling, general and administrative 7,086 6,765 7,157 7,292 Research, development and engineering 1,572 1,800 1,646 1,372 Gain on sale of fixed assets — — (12,465 ) — Operating income 1,240 2,595 9,562 3,889 Interest (expense) income and other, net (83 ) 30 680 872 Income before income taxes 1,157 2,625 10,242 4,761 Income tax provision 160 660 20 578 Net income $ 997 $ 1,965 $ 10,222 $ 4,183 Gross margin 37.4 % 40.5 % 29.6 % 38.8 % Operating margin 4.7 % 9.4 % 47.9 % 12.0 % Income Per Share: Net income per basic share $ 0.07 $ 0.14 $ 0.74 $ 0.30 Weighted average shares outstanding - basic 14,254 13,979 13,889 13,933 Net income per diluted share $ 0.07 $ 0.14 $ 0.73 $ 0.30 Weighted average shares outstanding - diluted 14,485 14,144 14,026 14,080 Fiscal Year 2021 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 17,975 $ 19,790 $ 23,100 $ 24,340 Cost of sales 10,463 12,062 13,021 15,129 Gross profit 7,512 7,728 10,079 9,211 Selling, general and administrative 5,213 5,688 7,281 6,558 Research, development and engineering 1,245 1,869 1,523 1,342 Restructuring charges — — 71 15 Operating income 1,054 171 1,204 1,296 Interest (expense) income and other, net (255 ) 73 (155 ) 46 Income before income taxes 799 244 1,049 1,342 Income tax provision 80 490 680 676 Net income (loss) $ 719 $ (246 ) $ 369 $ 666 Gross margin 41.8 % 39.1 % 43.6 % 37.8 % Operating margin 5.9 % 0.9 % 5.2 % 5.3 % Income (Loss) Per Share: Net income (loss) per basic share $ 0.05 $ (0.02 ) $ 0.03 $ 0.05 Weighted average shares outstanding - basic 14,072 14,151 14,176 14,190 Net income (loss) per diluted share $ 0.05 $ (0.02 ) $ 0.03 $ 0.05 Weighted average shares outstanding - diluted 14,117 14,151 14,373 14,387 Liquidity and Capital Resources Liquidity We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations through our industry cycles, under both normal and stressed 41 conditions.
Biggest changeOur future effective income tax rate depends on various factors, such as the amount of income (loss) in each tax jurisdiction, tax regulations governing each region, non-deductible expenses incurred as a percent of pre-tax income and the effectiveness of our tax planning strategies. 40 Selected Quarterly Data (Unaudited) The following table sets forth selected unaudited consolidated quarterly financial information for the years ended September 30, 2023 and 2022, in thousands, except percentages and per share amounts: Fiscal Year 2023 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 21,558 $ 33,310 $ 30,740 $ 27,707 Cost of sales 13,255 19,840 19,755 20,268 Intangible asset impairment — — — 4,645 Gross profit 8,303 13,470 10,985 2,794 Selling, general and administrative 9,190 11,434 10,300 11,078 Research, development and engineering 1,393 1,517 1,804 2,597 Intangible asset impairment — — — 544 Severance expense 400 — — 265 Operating (loss) income (2,680 ) 519 (1,119 ) (11,690 ) Interest income 290 49 17 10 Interest expense (2 ) (155 ) (185 ) (178 ) Foreign currency (loss) gain (347 ) (168 ) 456 (30 ) Other (9 ) 13 15 12 (Loss) income before income taxes (2,748 ) 258 (816 ) (11,876 ) Income tax (benefit) provision (4 ) (2,946 ) 211 139 Net (loss) income $ (2,744 ) $ 3,204 $ (1,027 ) $ (12,015 ) Gross margin 38.5 % 40.4 % 35.7 % 10.1 % Operating margin (12.4 )% 1.6 % (3.6 )% (42.2 )% (Loss) income Per Share: Net (loss) income per basic share $ (0.20 ) $ 0.23 $ (0.07 ) $ (0.85 ) Weighted average shares outstanding - basic 14,008 14,028 14,058 14,166 Net (loss) income per diluted share $ (0.20 ) $ 0.23 $ (0.07 ) $ (0.85 ) Weighted average shares outstanding - diluted 14,008 14,157 14,058 14,166 41 Fiscal Year 2022 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 26,463 $ 27,556 $ 19,964 $ 32,315 Cost of sales 16,565 16,396 14,064 19,762 Gross profit 9,898 11,160 5,900 12,553 Selling, general and administrative 7,086 6,765 7,157 7,292 Research, development and engineering 1,572 1,800 1,646 1,372 Gain on sale of fixed assets — — (12,465 ) — Operating income 1,240 2,595 9,562 3,889 Interest income 11 5 33 161 Interest expense (75 ) (48 ) (43 ) 2 Foreign currency (loss) gain (270 ) (3 ) 631 710 Other 251 76 59 (1 ) Income before income taxes 1,157 2,625 10,242 4,761 Income tax provision 160 660 20 578 Net income $ 997 $ 1,965 $ 10,222 $ 4,183 Gross margin 37.4 % 40.5 % 29.6 % 38.8 % Operating margin 4.7 % 9.4 % 47.9 % 12.0 % Income Per Share: Net income per basic share $ 0.07 $ 0.14 $ 0.74 $ 0.30 Weighted average shares outstanding - basic 14,254 13,979 13,889 13,933 Net income per diluted share $ 0.07 $ 0.14 $ 0.73 $ 0.30 Weighted average shares outstanding - diluted 14,485 14,144 14,026 14,080 Liquidity and Capital Resources Liquidity We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations through our industry cycles, under both normal and stressed conditions.
We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. Capital Allocation Our capital allocation strategy focuses on building shareholder value. We do this by first investing in ourselves and growing our capabilities. We then look to supplement and strengthen our capabilities through acquisitions and strategic investments.
We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. 42 Capital Allocation Our capital allocation strategy focuses on building shareholder value. We do this by first investing in ourselves and growing our capabilities. We then look to supplement and strengthen our capabilities through acquisitions and strategic investments.
In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located. In connection with this sale, we entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses.
In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located. In connection with this sale, 35 we entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses.
COVID-19 In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak became increasingly widespread, including in all of the markets in which we operate. We continue to monitor 36 the impact of COVID-19 on all aspects of our business.
COVID-19 In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak became increasingly widespread, including in all of the markets in which we operate. We continue to monitor the impact of COVID-19 on all aspects of our business.
If 45 the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).
If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).
A critical accounting policy is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in “Item 1A.
A critical accounting estimate is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in “Item 1A.
We anticipate future investments will be required to meet the expected demand from our growing served markets to achieve our revenue growth targets, including investments in research and development as well as capital expenditures, which also includes further investments in capacity expansion, talent, and management information systems.
We anticipate future investments will be required to meet the expected demand from our growing served markets to achieve our revenue growth targets, including investments in research and development as well as capital expenditures, which also includes further investments in talent and management information systems.
Cash Flows from Financing Activities In 2022, cash used in financing activities was $8.3 million, comprised of $4.1 million of cash used for the repurchase of common stock and payments on long-term debt of $4.9 million, partially offset by $0.7 million of proceeds received from the exercise of stock options.
In 2022, cash used by financing activities was $8.3 million, comprised of $4.1 million of cash used for the repurchase of common stock and payments on long-term debt of $4.9 million, partially offset by 44 $0.7 million of proceeds received from the exercise of stock options.
No other customer accounted for more than 10% of our backlog as of September 30, 2022. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months.
No other customer accounted for more than 10% of our backlog as of September 30, 2023. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months.
As of September 30, 2022, we have significant U.S. deferred tax assets that have a full valuation allowance and foreign deferred tax assets that have a partial valuation allowance. Any changes to the judgments related to our valuation allowance could have a material impact on our results of operations.
As of September 30, 2023, we have significant U.S. deferred tax assets that have a full valuation allowance and foreign deferred tax assets that have a partial valuation allowance. Any changes to the judgments related to our valuation allowance could have a material impact on our results of operations.
Our liquidity plans are established within the context of our financial and strategic planning processes and consider the liquidity necessary to fund our operating commitments, which include purchase obligations for inventory and equipment, payroll and general expenses.
Our liquidity plans are established within the context of our financial and strategic planning processes and consider the liquidity necessary to fund our operating commitments, which include debt payments, purchase obligations for inventory and equipment, payroll and general expenses.
Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, and cash generated from operations. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms.
Our sources of capital in the past have included our loan and security agreement, the sale of equity securities, which includes common stock sold in private transactions and public offerings, and cash generated from operations. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms.
Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the foregoing. Critical Accounting Policies See “Item 7.
Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stock or some combination of the foregoing. Critical Accounting Estimates See “Item 7.
The 2022 effective tax rate was lower than the statutory rate due to a substantial portion of the earnings in the US resulting from the gain on the sale of our Massachusetts property for which no tax expense was recognized due to the utilization of net operating losses and foreign tax credits, which are fully valued.
The 2022 effective tax rate was favorably impacted due to a substantial portion of the earnings in the US resulting from the gain on the sale of our Massachusetts property for which no tax expense was recognized due to the utilization of net operating losses and foreign tax credits, which are fully valued.
On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, income taxes, inventory valuation, and goodwill. We base our estimates and judgments on historical experience, expectations regarding the future and on various other factors that we believe to be reasonable under the circumstances.
On an on-going basis, we evaluate our estimates and judgments, including those related to income taxes, inventory valuation, business combinations, goodwill and long-lived assets. We base our estimates and judgments on historical experience, expectations regarding the future and on various other factors that we believe to be reasonable under the circumstances.
Cash used in investing activities was $8.1 million in 2021, primarily consisting of $5.1 million net cash paid for the acquisition of Intersurface Dynamics and capital expenditures primarily related to the relocation of our Shanghai manufacturing facility.
Cash used in investing activities was $8.1 million in 2021, primarily consisting of $5.1 million net cash paid for the acquisition of Intersurface Dynamics and capital expenditures primarily related to the relocation of our Shanghai manufacturing facility. Investing activities in 2023, 2022 and 2021 included capital expenditures of $2.9 million, $1.1 million and $3.0 million, respectively.
Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. 38 Gross Profit and Gross Margin Gross profit is the difference between net revenue and cost of goods sold.
Our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. Gross Profit and Gross Margin Gross profit is the difference between net revenue and cost of goods sold.
The sale price was $20.6 million, of which $0.7 million was deducted at closing for commission and other closing expenses. In connection with the sale, BTU recognized a pre-tax gain on sale of $12.5 million.
Gain on Sale of Fixed Assets Gain on sale of fixed assets consists primarily of the gain on the sale of BTU’s building in Massachusetts. The sale price was $20.6 million, of which $0.7 million was deducted at closing for commission and other closing expenses. In connection with the sale, we recognized a pre-tax gain on sale of $12.5 million.
Our revenue is impacted by these broad industry trends. Strategy We continue to focus on our plans to profitably grow our business and have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives.
The semiconductor industry is cyclical, but not seasonal, and historically has experienced fluctuations. Our revenue is impacted by these broad industry trends. Strategy We continue to focus on our plans to profitably grow our business and have developed a strategic growth plan and a capital allocation plan that we believe will support our growth objectives.
Therefore, our order flow fluctuates quarter to quarter. For additional information regarding the risks related to our business and industry, please refer to "Item 1A. Risk Factors" within this Form 10-K. Fiscal Year Our fiscal year is from October 1 to September 30.
For additional information regarding the risks related to our business and industry, please refer to “Item 1A. Risk Factors” within this Form 10-K. Fiscal Year Our fiscal year is from October 1 to September 30.
Cash Flows from Investing Activities Cash provided by investing activities was $18.8 million in 2022, primarily consisting of $19.9 million in proceeds from the sale of our real property in Massachusetts.
Cash Flows from Investing Activities Cash used in investing activities was $37.8 million in 2023, primarily consisting of $34.9 million in cash paid for the acquisition of Entrepix. Cash provided by investing activities was $18.8 million in 2022, primarily consisting of $19.9 million in proceeds from the sale of our real property in Massachusetts.
ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We currently have $1.0 million of unrecognized tax benefits recorded within our financial statements.
ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
Results of Operations The following table sets forth certain financial data as a percentage of net revenue for the periods indicated: Years Ended September 30, 2022 2021 Net revenue 100 % 100 % Cost of sales 63 % 59 % Gross margin 37 % 41 % Selling, general and administrative 27 % 29 % Research, development and engineering 6 % 7 % Gain on sale of fixed assets (12 %) — % Operating income 16 % 5 % Interest income (expense) and other, net 1 % (1 %) Income before income taxes 17 % 4 % Income tax provision 1 % 2 % Net income 16 % 2 % 37 Fiscal 2022 compared to Fiscal 2021 Net Revenue Net revenue consists of revenue recognized upon shipment or delivery of equipment.
Unless otherwise stated, references to the years 2023, 2022 and 2021 relate to the fiscal years ended September 30, 2023, 2022 and 2021, respectively. 36 Results of Operations The following table sets forth certain financial data as a percentage of net revenue for the periods indicated: Years Ended September 30, 2023 2022 Net revenue 100 % 100 % Cost of sales 65 % 63 % Intangible asset impairment 4 % — % Gross margin 31 % 37 % Selling, general and administrative 37 % 27 % Research, development and engineering 6 % 6 % Gain on sale of fixed assets — % (12 )% Intangible asset impairment — % — % Severance 1 % — % Operating (loss) income (13 )% 16 % Interest income — % — % Interest expense — % — % Foreign currency (loss) gain — % 1 % Other — % — % (Loss) income before income taxes (13 )% 17 % Income tax (benefit) provision (2 )% 1 % Net (loss) income (11 )% 16 % Fiscal 2023 compared to Fiscal 2022 Net Revenue Net revenue consists of revenue recognized upon shipment or delivery of equipment.
Given the uncertainty surrounding the COVID-19 pandemic, there can be no assurance that our Shanghai facility will be allowed to remain open on a consistent basis. Segment Reporting Changes Upon the acquisition of Intersurface Dynamics in the second quarter of 2021, we evaluated our organizational structure and concluded that we have two reportable segments following the acquisition.
Given the uncertainty surrounding the COVID-19 pandemic, there can be no assurance that our Shanghai facility will be allowed to remain open on a consistent basis. Segment Reporting Changes We evaluated our organizational structure and concluded that we have two reportable segments. Our Material and Substrate segment includes Intersurface Dynamics and Entrepix beginning at each respective date of acquisition.
The income tax provisions are based upon estimates of annual income, annual permanent differences, statutory tax rates and credits in the various jurisdictions in which we operate. Significant judgments and estimates are required in the determination of the consolidated income tax expense.
In 2023 and 2022, we recorded income tax (benefit) and expense of $(2.6) million and $1.4 million, respectively. The income tax provisions are based upon estimates of annual income, annual permanent differences, statutory tax rates and credits in the various jurisdictions in which we operate. Significant judgments and estimates are required in the determination of the consolidated income tax expense.
The factory was allowed to partially reopen in May 2022 and fully reopened on June 1, 2022. After the reopening on June 1, 2022, the factory was able to operate near full capacity for the entire month of June. We were able to make up the shipments missed in the fourth quarter and are now operating at normal capacity levels.
The factory was allowed to partially reopen in May 2022 and fully reopened on June 1, 2022. After the reopening on June 1, 2022, the factory was able to operate near full capacity for the entire month of June and operate at normal capacity levels thereafter.
During 2022, we received several large customer deposits, primarily related to orders of our horizontal diffusion and high temp furnaces, which are expected to ship over the next four quarters. During 2021, we increased our inventory balances in preparation for shipments scheduled for the first half of fiscal 2022.
During 2023, we used cash to increase our inventory balances in preparation for shipments scheduled over the next four quarters and to pay the related accounts payable. During 2022, we received several large customer deposits, primarily related to orders of our horizontal diffusion and high temp furnaces, which were expected to ship over the next four quarters.
Additionally, our accounts receivable increased during this period as most of our shipments occurred late in the fourth quarter and our customers generally have payment terms of 60-90 days.
During 2021, we increased our inventory balances in preparation for shipments scheduled for the first half of fiscal 2022. Additionally, our accounts receivable increased during this period as most of our shipments occurred late in the fourth quarter and our customers generally have payment terms of 60-90 days.
Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E.
RD&E expenses may vary from period to period depending on the engineering projects in process. Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E.
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available.
In 2023, we recognized $1.0 million of previously unrecognized tax benefits, and as of September 30, 2023, we have no unrecognized tax benefits recorded within our financial statements. We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available.
This closure resulted in decreased utilization during the closure period as we continued to pay our employees while ceasing production entirely for the first eight weeks of the third quarter of fiscal 2022. Additionally, Semiconductor material costs increased approximately 39% over the 2021 period due to product mix changes and rising prices.
This closure resulted in decreased utilization during the closure period as we continued to pay our employees while ceasing production entirely for the first eight weeks of the third quarter of fiscal 2022.
In our Material and Substrate segment, we produce substrate consumables, chemicals and machinery for lapping (fine abrading) and polishing of materials, such as silicon wafers for semiconductor products, sapphire wafers for LED applications, and compound substrates, like silicon carbide wafers, for power device applications. The semiconductor industry is cyclical, but not seasonal, and historically has experienced fluctuations.
In our Material and Substrate segment, we produce wafer cleaning equipment as well as substrate consumables and chemicals for lapping (fine abrading) and polishing of materials, such as silicon wafers for semiconductor products, sapphire wafers for LED applications, and compound substrates, like SiC wafers, for power device applications.
Gross margin for 2022 and 2021 was 37% and 41%, respectively. Gross margin for the Semiconductor segment decreased to 35% in 2022, compared to 42% in 2021, due primarily to the above-mentioned closure of our Shanghai manufacturing facility.
Gross margin for 2023 and 2022 was 31% and 37%, respectively. Gross margin for the Semiconductor segment increased to 38% in 2023, compared to 35% in 2022, due primarily to improved utilization at our Massachusetts facility as well as the above-mentioned closure of our Shanghai manufacturing facility in the 2022 period.
Our Material and Substrate segment includes our former SiC/LED segment in addition to Intersurface Dynamics beginning at the date of acquisition. Industry Fluctuations Our quarterly and annual operating results have been and will continue to be impacted by the timing of large system orders. Further, the semiconductor equipment industry is highly cyclical, and the conditions of this industry remain volatile.
Industry Fluctuations Our quarterly and annual operating results have been and will continue to be impacted by the timing of large system orders. Further, the semiconductor equipment industry is highly cyclical, and the conditions of this industry remain volatile. Therefore, our order flow fluctuates quarter to quarter.
Our gross profit and gross margin by reportable segment for the years ended September 30, 2022 and 2021 were as follows, dollars in thousands: Years Ended September 30, Segment 2022 Gross Margin 2021 Gross Margin Increase (Decrease) % Change Semiconductor $ 30,880 35 % $ 30,336 42 % $ 544 2 % Material and Substrate 8,631 47 % 4,194 32 % 4,437 106 % Total gross profit $ 39,511 37 % $ 34,530 41 % $ 4,981 14 % Gross profit for the years ended September 30, 2022 and 2021 was $39.5 million and $34.5 million, respectively, representing an increase of $5.0 million, or 14%.
Our gross profit and gross margin by reportable segment for the years ended September 30, 2023 and 2022 were as follows, dollars in thousands: Years Ended September 30, Segment 2023 Gross Margin 2022 Gross Margin Increase (Decrease) % Change Semiconductor $ 29,184 38 % $ 30,880 35 % $ (1,696 ) (5 )% Material and Substrate 6,368 18 % 8,631 47 % (2,263 ) (26 )% Total gross profit $ 35,552 31 % $ 39,511 37 % $ (3,959 ) (10 )% Gross profit for the years ended September 30, 2023 and 2022 was $35.6 million and $39.5 million, respectively, representing a decrease of $4.0 million, or 10%.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. U.S.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether valuation allowances on deferred tax assets are appropriate. We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward.
We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward.
In 2020, cash used in financing activities was $1.5 million, consisting of $0.9 million of proceeds received from the exercise of stock options, which was fully offset by $2.0 million used for stock repurchases and payments on long-term debt of $0.4 million.
Cash Flows from Financing Activities In 2023, cash provided by financing activities was $11.7 million, comprised of $12.0 million in borrowings on our term loan and $1.2 million of proceeds received from the exercise of stock options partially offset by $1.5 million in payments on long-term debt.
The same estimates are also used internally for our capital budgeting process, and for long-term and short-term business planning and forecasting. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data.
The same estimates are also used internally for our capital budgeting process, and for long-term and short-term business planning and forecasting.
The write-down is primarily based on historical inventory usage adjusted for expected changes in product demand and production requirements. Our industry is characterized by customers in highly-cyclical industries, rapid technological changes, frequent new product developments and rapid product obsolescence. Changes in demand for our products could result in further write-downs. Goodwill .
Our industry is characterized by customers in highly-cyclical industries, rapid technological changes, frequent new product developments and rapid product obsolescence. Changes in demand for our products or to our product offerings could result in further write-downs, which could have a material impact on our results of operations.
Inventory cost includes the purchase price of parts or finished goods and freight and/or other overhead costs incurred to receive the inventory into our manufacturing facilities. We regularly review inventory quantities and record a write-down to net realizable value for excess and obsolete inventory.
For the years ended September 30, 2023 and 2022, we had net deferred tax assets of $0.1 million. Inventory Valuation. We value our inventory at the lower of cost or net realizable value. Inventory cost includes the purchase price of parts or finished goods and freight and/or other overhead costs incurred to receive the inventory into our manufacturing facilities.
Research, Development and Engineering Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. RD&E expenses may vary from period to period depending on the engineering projects in process.
SG&A expense includes $1.3 million and $0.5 million of non-cash stock-based compensation expense for 2023 and 2022, respectively. Research, Development and Engineering Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes.
We expect capital expenditures to increase in 2023 as we make targeted investments in our production capacity and IT systems.
We expect capital expenditures to remain relatively flat in 2024 as we make targeted investments in our production capacity and IT systems, including the relocation of our Massachusetts production facility and the addition of new capacity in South Carolina.
Cash and Cash Flow The following table sets forth for the periods presented certain consolidated cash flow information, in thousands: Years Ended September 30, 2022 2021 2020 Net cash provided by (used in) operating activities $ 5,204 $ (5,962 ) $ (1,664 ) Net cash provided by (used in) investing activities $ 18,773 $ (8,094 ) $ (12,616 ) Net cash (used in) provided by financing activities $ (8,267 ) $ 1,166 $ (1,502 ) Effect of exchange rate changes on cash $ (1,672 ) $ 656 $ 1,718 Net increase (decrease) in cash, cash equivalents and restricted cash $ 14,038 $ (12,234 ) $ (14,064 ) Cash, cash equivalents and restricted cash, beginning of year* $ 32,836 $ 45,070 $ 59,134 Cash, cash equivalents and restricted cash, end of year $ 46,874 $ 32,836 $ 45,070 * Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Consolidated Balance Sheets for periods prior to January 22, 2020. 42 As of September 30, 2022 and 2021, cash and cash equivalents were $46.9 million and $32.8 million, respectively.
Cash and Cash Flow The following table sets forth for the periods presented certain consolidated cash flow information, in thousands: Years Ended September 30, 2023 2022 2021 Net cash (used in) provided by operating activities $ (7,701 ) $ 5,204 $ (5,962 ) Net cash (used in) provided by investing activities $ (37,830 ) $ 18,773 $ (8,094 ) Net cash provided by (used in) financing activities $ 11,738 $ (8,267 ) $ 1,166 Effect of exchange rate changes on cash $ 52 $ (1,672 ) $ 656 Net (decrease) increase in cash, cash equivalents and restricted cash $ (33,741 ) $ 14,038 $ (12,234 ) Cash, cash equivalents and restricted cash, beginning of year $ 46,874 $ 32,836 $ 45,070 Cash, cash equivalents and restricted cash, end of year $ 13,133 $ 46,874 $ 32,836 A summary of our cash position as of September 30, 2023 and 2022, is as follows, in thousands, except working capital ratio: September 30, 2023 2022 Cash and cash equivalents $ 13,133 $ 46,874 Restricted cash $ — $ — Working capital $ 51,471 $ 80,310 Current ratio (current assets to current liabilities) 2.7:1 4.5:1 The decrease in cash and cash equivalents from September 30, 2022 of $33.7 million was primarily due to the acquisition of Entrepix, which was partially funded with cash on-hand as well as with a new term loan (see Note 2).
And finally, we provide the return realized by the investments to our stockholders. These three priorities are detailed as follows: • Invest in R&D and capital expenditures to strengthen our competitive position. Historically, our R&D efforts have focused on upgrades to existing product platforms as well as new product designs.
Under the terms of our Loan Agreement, we are required to remit certain funds resulting from specific transactions to pay down the balance of our term loan. • Invest in R&D and capital expenditures to strengthen our competitive position. Historically, our R&D efforts have focused on upgrades to existing product platforms as well as new product designs.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.
We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full valuation allowances on U.S. net deferred tax assets are appropriate. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations." Our net revenue by reportable segment for the years ended September 30, 2022 and 2021 were as follows, dollars in thousands: Years Ended September 30, Increase Segment 2022 2021 (Decrease) % Change Semiconductor $ 87,982 $ 72,086 $ 15,896 22 % Material and Substrate 18,316 13,119 5,197 40 % Total net revenue $ 106,298 $ 85,205 $ 21,093 25 % Net revenue for the years ended September 30, 2022 and 2021 were $106.3 million and $85.2 million, respectively, an increase of $21.1 million or 25%.
Our net revenue by reportable segment for the years ended September 30, 2023 and 2022 were as follows, dollars in thousands: Years Ended September 30, Increase Segment 2023 2022 (Decrease) % Change Semiconductor $ 77,595 $ 87,982 $ (10,387 ) (12 )% Material and Substrate 35,720 18,316 17,404 95 % Total net revenue $ 113,315 $ 106,298 $ 7,017 7 % Net revenue for the years ended September 30, 2023 and 2022 were $113.3 million and $106.3 million, respectively, an increase of $7.0 million or 7%.
According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Based on the consideration of all available evidence, we have concluded that we will maintain a full valuation allowance for all U.S. net deferred tax assets and a portion of foreign deferred tax assets.
Such objective negative evidence limits the ability to consider other subjective evidence, such as future projections. Based on the consideration of all available evidence, we have concluded that we will maintain a full valuation allowance for all net deferred tax assets related to the carryforwards of U.S. net operating losses and tax credits.
Orders and Backlog New orders booked in the years ended September 30, 2022 and 2021 were as follows, dollars in thousands: Years Ended September 30, Increase Segment 2022 2021 (Decrease) % Change Semiconductor $ 94,268 $ 101,988 $ (7,720 ) (8 )% Material and Substrate 19,685 13,456 6,229 46 % Total new orders $ 113,953 $ 115,444 $ (1,491 ) (1 )% Our backlog as of September 30, 2022 and 2021 was as follows, dollars in thousands: Segment September 30, 2022 September 30, 2021 Increase (Decrease) % Change Semiconductor $ 48,011 $ 42,743 $ 5,268 12 % Material and Substrate 2,769 1,400 1,369 98 % Total backlog $ 50,780 $ 44,143 $ 6,637 15 % At the end of 2022, three customers individually accounted for 21%, 17% and 14% of our total backlog.
Entrepix accounted for approximately $18.6 million of revenue in the Material and Substrate segment during 2023. 37 Orders and Backlog New orders booked in the years ended September 30, 2023 and 2022 were as follows, dollars in thousands: Years Ended September 30, Segment 2023 2022 Increase (Decrease) % Change Semiconductor $ 74,817 $ 94,268 $ (19,451 ) (21 )% Material and Substrate 29,080 19,685 9,395 48 % Total new orders $ 103,897 $ 113,953 $ (10,056 ) (9 )% Our backlog as of September 30, 2023 and 2022 was as follows, dollars in thousands: September 30, Segment 2023 2022 Increase (Decrease) % Change Semiconductor $ 45,233 $ 48,011 $ (2,778 ) (6 )% Material and Substrate 6,561 2,769 3,792 137 % Total backlog $ 51,794 $ 50,780 $ 1,014 2 % At the end of 2023, three customers individually accounted for 27%, 21% and 14% of our total backlog.
Total SG&A expenses for the years ended September 30, 2022 and 2021 were $28.3 million and $24.7 million, respectively, representing an increase of $3.6 million or 14.4%. This increase was primarily due to increases of $2.1 million in employee-related expenses and $1.6 million in freight expenses, driven by higher revenues and increased shipping rates.
Total SG&A expenses for the years ended September 30, 2023 and 2022 were $42.0 million and $28.3 million, respectively, representing an increase of $13.7 million or 48.2%.
Impact of Recently Issued Accounting Pronouncements For discussion of recently issued accounting pronouncements, see “Recently Issued Accounting Pronouncements” within "Note 1. Summary of Operations and Significant Accounting Policies” in “Item 8. Financial Statements and Supplementary Data.”
There were no impairments on long-lived assets during the years ended September 30, 2022 and 2021. See Note 9 for additional information on intangible assets. Impact of Recently Issued Accounting Pronouncements For discussion of recently issued accounting pronouncements, see “Recently Issued Accounting Pronouncements” within “Note 1. Summary of Operations and Significant Accounting Policies” in “Item 8.
This new location increases our capacity and allows us to streamline our manufacturing processes, thus reducing our lead times. In addition, we are evaluating our management information systems and needs in order to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans.
In addition, we are evaluating business continuity and resiliency within our operations, our management information systems, and our needs to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans. As a capital equipment manufacturer, we will continue to invest in our business to drive future growth.
Revenue from the Semiconductor segment increased $15.9 million, or 22%, over the prior year period. Our Semiconductor results for 2022 reflect the closure of our Shanghai manufacturing facility, which partially reopened in mid-May and fully reopened on June 1, 2022.
We continue to experience softness in shipments of our advanced packaging and SMT equipment, primarily related to a slowdown in global demand in the consumer markets. Our Semiconductor results for 2022 reflect the closure of our Shanghai manufacturing facility, which partially reopened in mid-May and fully reopened on June 1, 2022.
Occasionally, we receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met. 39 RD&E expenses, net of grants earned, for the years ended September 30, 2022 and 2021 were $6.4 million and $6.0 million, respectively, an increase of $0.4 million.
RD&E expenses for the years ended September 30, 2023 and 2022 were $7.3 million and $6.4 million, respectively, an increase of $0.9 million.
Off-Balance Sheet Arrangements As of September 30, 2022, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. 43 Contractual Obligations and Commercial Commitments We had the following contractual obligations and commercial commitments as of September 30, 2022, in thousands: Contractual obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations $ 352 $ 119 $ 152 $ 81 $ — Lease obligations: Buildings 15,110 2,513 3,100 1,634 7,863 Office equipment 8 5 3 — — Vehicles 28 17 11 — — Total operating lease obligations 15,146 2,535 3,114 1,634 7,863 Purchase obligations 19,975 19,929 46 — — Total $ 35,473 $ 22,583 $ 3,312 $ 1,715 $ 7,863 Acquisitions Our business strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations.
Off-Balance Sheet Arrangements As of September 30, 2023, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
GAAP requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.
Generally accepted accounting principles of the United States (“GAAP”) require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized.
Based on the nature of our contracts with customers, we expense all commissions as incurred based upon the expectation that the amortization period would be one year or less. Income Taxes. We file consolidated federal income tax returns in the United States for all subsidiaries except those in China and the UK, where separate returns are filed.
Refer to Note 1 to our consolidated financial statements included elsewhere in this report for a summary of each of the related accounting policies. Income Taxes. We file consolidated federal income tax returns in the United States for all subsidiaries except those in China, Singapore and the UK, where separate returns are filed.
Restructuring Charges We recorded restructuring charges of $0.1 million in 2021. These one-time charges relate to staff reductions in our Semiconductor and Material and Substrate operations. Income Taxes Our effective tax rate was 7.5% and 56.1% in 2022 and 2021, respectively. The effective tax rate is the ratio of total income tax expense to pre-tax income.
Severance Expense We recorded severance expense of $0.7 million in 2023. This charge primarily relates to the retirement of our founder, Mr. J.S. Whang. There was no severance expense recorded in 2022. Income Taxes Our effective tax rate was 17.1% and 7.5% in 2023 and 2022, respectively.
We maintain cash accounts denominated in currencies other than our reporting currency, which expose us to foreign exchange rate fluctuations. Cash Flows from Operating Activities Cash provided by operating activities was $5.2 million in 2022 compared to cash used in operating activities of $6.0 million in 2021 and cash used in operating activities of $1.7 million in 2020.
See Note 20 for additional information regarding the Forbearance Agreement and related amendments to the Loan Agreement. Cash Flows from Operating Activities Cash used in operating activities was $7.7 million in 2023 compared to cash provided by operating activities of $5.2 million in 2022 and cash used in operating activities of $6.0 million in 2021.
During the two-year leaseback period, we will conduct a search for a new manufacturing facility more in line with the needs of our Semiconductor product lines. In the fourth quarter of 2021, we completed the move of our Shanghai facility to a new location.
In September 2023, we signed a lease for a new location more in line with the needs of our Semiconductor product lines. The new location has less square footage as we expand our use of contract manufacturers. We expect to complete the move to this new facility in the third quarter of fiscal 2024.
Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our operations and financial condition. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.
Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our operations and financial condition. For the year ended September 30, 2023, we had no unrecognized tax benefit. For the year ended September 30, 2022, we had unrecognized tax benefits of $1.0 million.
During periods of weakening demand, we typically generate cash from operating activities. Conversely, we are more likely to use operating cash flows for working capital requirements during periods of higher growth.
Conversely, we are more likely to use operating cash flows for working capital requirements during periods of higher growth. Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, the incurrence of 43 long-term debt and customer deposits.
Our Power Semiconductor strategic growth plan leverages our experience, products and capabilities in pursuit of growth, profitability and sustainability. Our core focus areas are: • Emerging opportunities in the SiC industry – We believe we are well-positioned to take part in this significant growth area, specifically as it relates to silicon carbide wafer capacity expansion.
Our Power Semiconductor strategic growth plan leverages our experience, products and capabilities in pursuit of growth, profitability and sustainability.
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We are working closely with our customers to understand their SiC growth plans, needs and opportunities. We are investing in our capacity, next generation product development, and in our people. During 2021, we completed the acquisition of Intersurface Dynamics, which added numerous coolants and chemical products to our existing consumable and machine product lines.
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Our core focus areas are: • Advanced Mobility - Advanced Mobility encompasses both the development and adoption of electric vehicles and charging infrastructure, including both EV and HEV, as well as advanced automotive electronics including Advanced Driver Assistance Systems (ADAS), infotainment and telematics.
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We believe these investments will help fuel our growth in the emerging growth SiC industry. • 300mm Horizontal Diffusion Furnace – We have a highly successful and proven 300mm horizontal diffusion furnace solution used for power semiconductor device manufacturing applications.
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Our products intersect these markets in multiple ways: consumables and wafer cleaning systems for the SiC substrates used in the power modules; thermal processing systems for cooling modules and DBC substrate manufacturing; and reflow ovens for ADAS, infotainment and telematics component assemblies. • Supply Chain Resiliency - There is a global trend of creating supply chain resiliency by expanding and/or relocating operations outside of mainland China.
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We have a strong foundation with the leading 300mm power chip manufacturer, and, in the last three years, we have received 23 orders from top-tier customers.
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These factory openings will create demand for new equipment and services in growing regions like Mexico and Southeast Asia. • Artificial Intelligence - With Artificial Intelligence (AI), our reflow oven systems are the favored choice for Outsourced Semiconductor Assembly and Test Services (OSATS) providers who perform advanced packaging of the AI chips.
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We believe we have a strong opportunity to continue expanding our customer base and grow revenue with our 300mm solution. • As the largest revenue contributor to our organization, we expect our subsidiary, BTU, will continue to track semiconductor industry growth cycles for our advanced semi-packaging and SMT products, in addition to specialized custom belt furnaces used in automotive and other specialized industrial applications.
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Revenue from the Semiconductor segment decreased $10.4 million, or 12%, over the prior year period. Our Semiconductor results for 2023 reflect increases in belt furnace shipments more than offset by decreases in shipments of our horizontal diffusion furnaces, SMT and packaging equipment.
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We believe that our investments in product innovation will provide BTU with opportunities 35 to grow further, especially in high growth applications of consumer and industrial electronics, IoT, electric vehicles and 5G communications.
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Revenue from our Material and Substrate segment increased $17.4 million, or 95%, due to the addition of Entrepix, effective January 17, 2023, partially offset by decreases in shipments of our polishing equipment.
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As a capital equipment manufacturer, we will continue to invest in our business to drive future growth. In addition to investments in our organic growth, another key aspect of our capital allocation policy is our plan to grow through acquisitions.
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In the Material and Substrate segment, gross margin decreased to 18% in 2023, compared to 47% in 2022 due primarily to an impairment charge of $4.6 million for intangible assets and a charge in the amount of $1.5 million related to the write-off of inventory for our polishing machine products.
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We have the expertise and track record to identify complimentary and synergistic acquisition targets in the Semiconductor and SiC growth environments and to execute transactions and integrations to provide for value creating, profitable growth in both the short-term and long-term.
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Additionally, we had higher equipment sales, primarily at Entrepix, which have lower margins than our consumables. We are experiencing increased material costs across all our segments.
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On March 3, 2021, we acquired Intersurface Dynamics, a Connecticut-based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics. As of the date of the filing of this Annual Report on Form 10-K, we do not have an agreement to acquire any acquisition target.
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In response to such increased costs, we continually review our pricing plans and supplier agreements, with the objective of passing these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. We are also continuing to explore partnerships with contract manufacturers, who can leverage their buying power on a larger scale.
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Cybersecurity Incident On April 12, 2021, we detected a data incident in which attackers acquired data and disabled some of the technology systems used by one of our subsidiaries.

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