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What changed in AMTECH SYSTEMS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AMTECH SYSTEMS INC's 2023 and 2024 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 2024 report.

+301 added−319 removedSource: 10-K (2024-12-12) vs 10-K (2023-12-14)

Top changes in AMTECH SYSTEMS INC's 2024 10-K

301 paragraphs added · 319 removed · 230 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

121 edited+24 added−23 removed107 unchanged
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.
Biggest changeAND SUBSIDIARIES Consolidated Statem ents of Cash Flows (in thousands) Years Ended September 30, 2024 2023 2022 Operating Activities Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 3,029 5,012 1,729 Write-down of inventory 2,813 2,620 102 Non-cash intangible asset impairment 7,649 5,189 — Provision for allowance for doubtful accounts 18 14 ( 32 ) Deferred income taxes ( 84 ) ( 2,513 ) 592 Non-cash stock-based compensation expense 1,530 1,272 543 Gain on sale of fixed assets ( 2,197 ) — ( 12,465 ) Other, net — 196 — Changes in operating assets and liabilities: Accounts receivable 4,468 4,410 ( 2,479 ) Inventories 5,135 ( 6,294 ) ( 3,684 ) Contract and other assets 4,773 ( 529 ) ( 2,203 ) Accounts payable ( 4,942 ) 1,459 ( 1,080 ) Accrued income taxes 436 ( 2,897 ) 623 Accrued and other liabilities ( 5,248 ) ( 1,895 ) 584 Contract liabilities 948 ( 1,163 ) 5,607 Net cash provided by (used in) operating activities 9,842 ( 7,701 ) 5,204 Investing Activities Purchases of property, plant and equipment ( 4,878 ) ( 2,898 ) ( 1,135 ) Acquisitions, net of cash and cash equivalents acquired — ( 34,938 ) — Proceeds from sale of property, plant and equipment 2,700 6 19,908 Net cash (used in) provided by investing activities ( 2,178 ) ( 37,830 ) 18,773 Financing Activities Proceeds from the exercise of stock options 85 1,235 720 Repurchase of common stock — — ( 4,115 ) Payments on long-term debt ( 10,671 ) ( 1,497 ) ( 4,872 ) Borrowings on long-term debt 64 12,000 — Payment of payroll taxes on stock-based compensation through shares withheld ( 111 ) — — Net cash (used in) provided by financing activities ( 10,633 ) 11,738 ( 8,267 ) Effect of Exchange Rate Changes on Cash and Cash Equivalents 922 52 ( 1,672 ) Net (Decrease) Increase in Cash and Cash Equivalents ( 2,047 ) ( 33,741 ) 14,038 Cash and Cash Equivalents, Beginning of Year 13,133 46,874 32,836 Cash and Cash Equivalents, End of Year $ 11,086 $ 13,133 $ 46,874 Supplemental Cash Flow Information: Income tax payments, net $ 623 $ 2,818 $ 386 Interest paid $ 558 $ 461 $ 164 Supplemental Non-cash Operating, Financing and Investing Activities: Transfer of inventory to property, plant, and equipment $ 50 $ — $ 169 Transfer of property, plant, and equipment to inventory $ ( 20 ) $ — $ — Payables due for fixed asset additions $ 116 $ 633 $ 152 Return of fixed assets resulting in loan payoff $ — $ 184 $ — Modification of leased assets resulting in a reduction of lease liabilities $ — $ 2,254 $ — Leased assets obtained in exchange for new operating lease liabilities $ 8,160 $ 57 $ 3,686 Leased assets obtained in exchange for new finance lease liabilities $ 207 $ 46 $ 42 The accompanying notes are an integral part of these consolidated financial statements. 56 Notes to Consolidated Financial Statements For the Years Ended September 30, 2024, 2023 and 2022 1.
Amtech’s acquisition costs incurred we re $ 2.5 million as of year ended September 30, 2023, and were recorded as selling, general and administrative expenses in the accompanying Consolidated Statements of Operations .
Amtech’s acquisition costs incurred we re $ 2.5 million as of the year ended September 30, 2023, and were recorded as selling, general and administrative expenses in the accompanying Consolidated Statements of Operations .
During the year ended September 30, 2023, we released of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
During the year ended September 30, 2023, we released a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
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.
To record revenue properly, we apply the following five steps: 1) Identify the contract with the customer A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that will be transferred is probable based on the customer’s intent and ability to pay the promised consideration. 2) Identify the performance obligations in the contract Performance obligations are identified based on the goods and services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and (ii) are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises to the customer in the contract.
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.
Equity and Stock-B ased Compensation Stock Repurchase Plans The following table summarizes information related to our stock repurchase plans, in thousands, except share and per share amounts: Name of Stock Repurchase Plan Date Approved by Board Plan Term Amount Authorized ($) Amount Used for Repurchases ($) Average Price Paid per Share ($) Shares Repurchased (#) Amount Available for Repurchases ($) Plan Status Fiscal Year of Repurchases 2023 Stock Repurchase Plan 2/7/2023 1 year 5,000 — — — — Expired NA 2022 Stock Repurchase Plan 2/10/2022 1 year 5,000 1,400 9.78 143,430 — Expired 2022 2021 Stock Repurchase Plan 2/9/2021 1 year 4,000 2,700 9.31 291,383 — Expired 2022 All repurchased shares have been retired.
The Loan Agreement additionally contains financial covenants such that, as of the end of each of their fiscal quarters, beginning March 31, 2023, the Borrowers must maintain (i) a ratio of consolidated debt owed to Lender to consolidated EBITDA (as defined in the Loan Agreement) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building four quarters (as described in the Loan Agreement), and then 1.00 to 1.00 each fiscal quarter thereafter, (ii) a ratio of (a) the total for such fiscal quarter of EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance 79 Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building four quarters (as described in the Loan Agreement), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $35.0 million.
The Loan Agreement additionally contains financial covenants such that, as of the end of each of their fiscal quarters, beginning March 31, 2023, the Borrowers must maintain (i) a ratio of consolidated debt owed to Lender to consolidated EBITDA (as defined in the Loan Agreement) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building four quarters (as described in the Loan Agreement), and then 1.00 to 1.00 each fiscal quarter thereafter, (ii) a ratio of (a) the total for such fiscal quarter of EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on 76 Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building four quarters (as described in the Loan Agreement), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $ 35.0 million.
It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.
It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the 80 resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.
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.
We issue new shares under our existing equity plans upon the vesting of RSUs. Research, Development and Engineering Expenses – RD&E expenses consist primarily of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes.
Multiples are then selected based on a comparison of the reviewed data to that of the reporting unit and applied to relevant historical and forecasted financial parameters such as levels of revenues, EBITDA, EBIT or other metrics. The calculation of fair value falls under Level 3 of the fair value hierarchy.
Multiples are then selected based on a comparison of the reviewed data to that of the reporting unit and applied to relevant historical and forecasted financial parameters such as levels of revenues, EBITDA, EBIT or other metrics. The calculation of fair value falls under Level 3 of the fair value hierarchy. 11.
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.
The 2007 Plan was amended in 2009, 2014 and 2015 to add 2,500,000 shares. The plan was also amended in 2019 to extend the term of the plan and allow for the grant of restricted stock units. Upon the adoption of the 2022 Plan, no further awards will be granted from the 2007 Plan.
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.
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.
The lease terms include annual base rent of $ 1.5 million in an absolute triple net lease. In connection with the sale, BTU recognized a pre-tax gain on sale of $ 12.5 million, which is recorded within operating expenses on the Consolidated Statement of Operations.
The lease terms include annual base rent of $ 1.5 million in an absolute triple net lease. In connection with the sale, BTU recognized a pre-tax gain on sale of $ 12.5 million in 2022, which is recorded within operating expenses on the Consolidated Statement of Operations.
To determine whether the transfer of the property should be accounted for as a sale, we evaluated whether we transferred control to the third party in accordance with the revenue recognition guidance set forth in ASC 606. The transfer was deemed to be a sale at market terms.
To determine whether the transfer of the property should be accounted for as a sale, we evaluated whether we transferred control to the third party in accordance with the revenue recognition guidance set forth in ASC 606. The transfer was 58 deemed to be a sale at market terms.
Under this method, we determine deferred tax assets and deferred tax liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.
Under this method, we determine deferred tax assets and deferred tax liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to 62 reverse.
We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data, and we also perform a reconciliation of our total market 75 capitalization to the estimated fair value of all of our reporting units.
We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data, and we also perform a reconciliation of our total market capitalization to the estimated fair value of all of our reporting units.
Accordingly, assets and liabilities of the subsidiaries are translated into U.S. dollars at the exchange rate in effect at the balance sheet dates. Income and expense items are translated at the average 66 exchange rate for each month within the year.
Accordingly, assets and liabilities of the subsidiaries are translated into U.S. dollars at the exchange rate in effect at the balance sheet dates. Income and expense items are translated at the average exchange rate for each month within the year.
We also utilize the as-invoiced practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value provided to the customer.
We also utilize the as-invoiced practical expedient in certain 60 cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value provided to the customer.
The unaudited pro forma financial information includes adjustments to align accounting policies, which were materially similar to the Company’s accounting policies. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma financial information presented.
The unaudited pro forma financial information includes adjustments to align accounting policies, which were materially similar to the Company’s accounting policies. Any differences in accounting policies were adjusted to reflect the accounting policies of the Company in the unaudited pro forma financial information presented. 3.
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.
Therefore, U.S. federal returns for tax years ending on or a fter September 30, 2021 remain open for examination. In addition, the IRS may adjust attribute c arryforwards utilized in an open year even though the year the attributes originated may be closed. State and foreign statutes are generally 3 to 5 years but vary by jurisdiction.
These 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 .
These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open performance obligations (e.g., we have recognized revenue in an amount greater than the amount that is billable under the contract). There wer e no co ntract assets at September 30, 2024 and 2023 .
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.
While our warranty costs have historically been within our expectations and we believe that the amounts accrued for warranty expenditures are sufficient for all systems sold through September 30, 2024, we cannot guarantee that we will continue to experience a similar level of predictability with regard to warranty costs.
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.
Unless otherwise stated, references to the years 2024, 2023 and 2022 relate to the fiscal years ended September 30, 2024, 2023 and 2022 , respectively. Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Acquisi tions Entrepix On January 17, 2023 (the “Closing Date”), the Company acquired through a reverse triangular merger 100 % of the issued and outstanding shares of capital stock of Entrepix, Inc., an Arizona corporation (“Entrepix”), which primarily manufactures chemical mechanical polishing (“CMP”) technology.
Acquisi tion On January 17, 2023 (the “Closing Date”), the Company acquired through a reverse triangular merger 100 % of the issued and outstanding shares of capital stock of Entrepix, Inc., an Arizona corporation (“Entrepix”), which primarily manufactures chemical mechanical polishing (“CMP”) technology.
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.
These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of Amtech and our subsidiaries. 75 12.
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.
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows, in thousands: Years Ended September 30, 2024 2023 2022 Balance at beginning of the year $ — $ 1,004 $ 949 Additions related to tax positions taken in prior years — — 55 Reductions due to resolution of uncertain tax position — ( 1,004 ) — Balance at the end of the year $ — $ — $ 1,004 During fiscal 2023, we reversed our previous accrual of uncertain tax positions in the amount of $ 1.0 million.
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.
Our remaining performance obligations as of September 30, 2024, have an original duration o f one year or less. Our customers generally have payment terms of 30 - 90 days . We do not have any payment terms that exceed one year from the point we have satisfied the related performance obligations.
As of September 30, 2022, we had approximately $ 50.8 million of remaining performance obligations. The orders included in our remaining performance obligations are expected to ship within the next twelve months. Warranty – A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and systems.
As of September 30, 2023, we had approximately $ 51.8 million of remaining performance obligations. The orders included in our remaining performance obligations are expected to ship within the next twelve months. Warranty – A limited warranty is provided free of charge, generally for periods of 12 to 36 months to all purchasers of our new products and systems.
Advertising Expense – Advertising costs are expensed as incurred. Advertising expenses wer e $ 0.6 million, $ 0.4 million and $ 0.2 million for 2023, 2022 and 2021 , respectively, and are included in selling, general and administrative expenses. Stock-Based Compensation – We measure compensation costs relating to share-based payment transactions based upon the grant-date fair value of the award.
Advertising Expense – Advertising costs are expensed as incurred. Advertising expenses wer e $ 0.5 million, $ 0.6 million and $ 0.4 million for 2024, 2023 and 2022 , respectively, and are included in selling, general and administrative expenses. Stock-Based Compensation – We measure compensation costs relating to share-based payment transactions based upon the grant-date fair value of the award.
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.
The match expense w as $ 0.4 m illion, $ 0.5 million and $ 0.4 million in 2024, 2023 and 2022, respectively. Pension Plan – Our hourly union employees in Pennsylvania participate in a multi-employer pension plan, the NIGPP, in accordance with the union agreement between PR Hoffman and the United Automobile, Aerospace and Agriculture Implement Workers of America.
We made an accounting policy election not to separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and buildings. Lease agreements with an initial term of 12 months or less with no renewal options are not recorded on the balance sheet.
We lease office space, buildings, land, vehicles and equipment. We made an accounting policy election not to separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and buildings. Lease agreements with an initial term of 12 months or less with no renewal options are not recorded on the balance sheet.
This triggering event indicated we should test the related long-lived assets for impairment in our Material and Substrate segment. We tested each identified asset group within our Material and Substrate segment by first performing a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value.
This triggering event indicated we should test the related long-lived assets for impairment in our Semiconductor Fabrication Solutions segment. We tested each identified asset group within our Semiconductor Fabrication Solutions segment by first performing a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value.
Subseque nt Events 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.
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.
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 utilization of those federal net operating losses is limited to approximately $ 0.8 million per year. Additionally, we have federal net operating loss carryforwards of approximately $ 69.4 million that have an indefi nite carryforward period. The utilization of those federal net operating losses is limited to 80 % of taxable income after 2021.
These adjustments were all offset against goodwill. 69 The fair value associated with acquired intangible assets and their associated weighted-average amortization periods consist of the following, in thousands: Classification of Amortization Amount Weighted-Average Amortization Period Developed technology Cost of sales $ 6,700 5.0 years Customer relationships Selling, general and administrative 2,800 10.0 years Backlog Selling, general and administrative 2,100 1.0 year Trade names Selling, general and administrative 1,800 10.0 years Noncompetition agreements Selling, general and administrative 200 5.0 years Total intangible assets $ 13,600 6.1 years Unaudited Pro Forma Financial Information – Entrepix is included in the Company’s consolidated results beginning January 17, 2023.
The fair value associated with acquired intangible assets and their associated weighted-average amortization periods consist of the following, in thousands: 65 Classification of Amortization Amount Weighted-Average Amortization Period Developed technology Cost of sales $ 6,700 5.0 years Customer relationships Selling, general and administrative 2,800 10.0 years Backlog Selling, general and administrative 2,100 1.0 year Trade names Selling, general and administrative 1,800 10.0 years Noncompetition agreements Selling, general and administrative 200 5.0 years Total intangible assets $ 13,600 6.1 years Unaudited Pro Forma Financial Information – Entrepix is included in the Company’s consolidated results beginning January 17, 2023.
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.
Stock-Based Compensation Expense Stock-based compensation expenses of $ 1.5 million, $ 1.3 million and $ 0.5 million for 2024, 2023 and 2022, respectively, are included in selling, general and administrative expenses.
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.
We maintain our cash and cash equivalents in multiple financial institutions. Balances in the United States, which account for approximately 66 % and 56 % of total cash balances as of September 30, 2024 and 2023, respectively, are primarily invested in financial institutions insured by the FDIC as well as a money market account.
Management reviews disaggregated revenue at the reportable segment level. Revenue-generating transactions vary between our reportable segments due to several factors. For example, lead times vary among our reportable segments and among our products. Most of the revenue for our Material and Substrate segment results from the sale of consumables, rather than equipment sales.
Management reviews disaggregated revenue at the reportable segment level. Revenue-generating transactions vary between our reportable segments due to several factors. For example, lead times vary among our reportable segments and among our products. Most of the revenue for our Semiconductor Fabrication Solutions segment results from the sale of consumables, rather than equipment sales.
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.
Under the purchase method of accounting, the purchase price for the acquisition was allocated to the tangible 71 and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over fair value of net assets acquired of approximately $ 16.5 million was recorded as goodwill in the Semiconductor Fabrication Solutions segment.
In accordance with ASC 805, the Company has up to one year from the acquisition date (referred to as the measurement period) to account for changes in the fair values of the identifiable assets acquired and the liabilities assumed in the acquired entity.
In accordance with ASC 805, the Company has up to one year from the acquisition date (referred to as the measurement period) to account for changes in the fair values of the identifiable assets acquired and the liabilities assumed in the acquired entity. As of January 17, 2024, the measurement period is closed.
The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Consolidated Balance Sheets as of September 30, 2023 and 2022.
The current and long-term portions of our finance leases are included in the current and long-term portions of finance lease liabilities and long-term debt in the table above and in our Consolidated Balance Sheets as of September 30, 2024 and 2023. 77 13.
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.
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.
Earnings Per Share & Diluted Earnings Per Share Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period.
Earnings Per Share & Diluted Earnings Per Share Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period.
(2) The aggregate fair value of the nonvested RSU's and represents the total pre-tax fair value, based on our closing stock price of $ 7.62 as of September 29, 2023, the last trading day of our fiscal year, which would have been received by holders of RSU's had all such holders sold their underlying shares on that date. 14.
(2) The aggregate fair value of the nonvested RSU's and represents the total pre-tax fair value, based on our closing stock price of $ 5.80 as of September 30, 2024, the last trading day of our fiscal year, which would have been received by holders of RSU's had all such holders sold their underlying shares on that date. 14.
The following is a summary of activity for contract liabilities, in thousands: Years Ended September 30, 2023 2022 2021 Beginning balance $ 7,231 $ 1,624 $ 1,224 New deposits 4,058 7,231 1,624 Deferred revenue 169 — — Revenue recognized ( 3,005 ) ( 1,624 ) ( 1,224 ) Adjustment ( 435 ) — — Ending balance $ 8,018 $ 7,231 $ 1,624 65 As of September 30, 2023, we had approximately $ 51.8 million of remaining performance obligations, which included recognized contract liabilities as well as amounts to be invoiced and recognized in future periods.
The following is a summary of activity for contract liabilities, in thousands: Years Ended September 30, 2024 2023 2022 Beginning balance $ 8,018 $ 7,231 $ 1,624 New deposits 5,442 4,058 7,231 Deferred revenue 168 169 — Revenue recognized ( 4,663 ) ( 3,005 ) ( 1,624 ) Adjustment — ( 435 ) — Ending balance $ 8,965 $ 8,018 $ 7,231 As of September 30, 2024, we had approximately $ 25.3 million of remaining performance obligations, which included recognized contract liabilities as well as amounts to be invoiced and recognized in future periods.
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 .
It is not practicable to estimate the amount of tax that might be payable on the undistributed amounts. 74 Net Operating Losses As of September 30, 2024, we ha ve federal net operating loss carryforwards of approximately $ 10.0 million that expire at various times between 2032 and 2035 .
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.
Our contributions to the NIGPP were $ 35,000 , $ 36,000 and $ 38,000 in 2024, 2023 and 2022, respectively. 15. Commitments and Contingencies Purchase Obligations – As of September 30, 2024, we had unrecorded purchase obligations in the amount o f $ 12.1 million. These purchase obligations consist of outstanding purchase orders for goods and services.
As of September 30, 2023, two Semiconductor customers individually represe nted 17 % a nd 17 % of accounts receivable. As of September 30, 2022 , one Semiconductor customer individually represented 12 % of accounts receivable. Refer to Note 18 for information regarding revenue and assets in other countries subject to fluctuation in foreign currency exchange rates.
As of September 30, 2024, one Thermal Processing Solutions customer individually represe nted 12 % of accounts receivable. As of September 30, 2023 , two Thermal Processing Solutions customers individually represented 17 % and 17 % of accounts receivable. Refer to Note 18 for information regarding revenue and assets in other countries subject to fluctuation in foreign currency exchange rates.
Annual maturities relating to our long-term debt as of September 30, 2023 are as follows, in thousands: Annual Maturities 2024 $ 2,265 2025 2,368 2026 2,525 2027 2,685 2028 844 Thereafter — Total long-term debt $ 10,687 Loan and Security Agreement On January 17, 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”) by and among Amtech, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R.
Annual maturities relating to our long-term debt as of September 30, 2024 are as follows, in thousands: Annual Maturities 2025 $ 101 2026 109 2027 75 2028 5 2029 — Thereafter — Total long-term debt $ 290 Loan and Security Agreement On January 17, 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”) by and among Amtech, its U.S. based wholly owned subsidiaries Bruce Technologies, Inc., a Massachusetts corporation, BTU International, Inc., a Delaware corporation, Intersurface Dynamics, Incorporated, a Connecticut corporation, P.R.
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.
This sale-leaseback transaction resulted in a net cash inflow of approximately $ 14.9 million in 2022, after repayment of the existing mortgage and settlement of related sale expenses. The leaseback ended in the third quarter of 2024. 68 8.
As of September 30, 2023, total compensation cost related to nonvested RSUs not yet recognized i s $ 0.5 million, which is expected to be recognized over the next year.
As of September 30, 2024, total compensation cost related to nonvested RSUs not yet recognized is $ 0.1 million, which is expected to be recognized over the next year.
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.
In the case of a net loss, diluted EPS is calculated in the same manner as basic EPS. For the years 2024, 2023 and 2022 , 798,000 , 327,000 and 189,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive.
Long- Term Debt Our finance lease liabilities and long-term debt consists of the following, in thousands: September 30, 2023 2022 Revolving credit facility $ — $ — Term loan 10,573 — Finance leases 114 147 Equipment finance — 180 Total 10,687 327 Less: current portion of finance lease liabilities and long-term debt ( 2,265 ) ( 107 ) Finance Lease Liabilities and Long-Term Debt $ 8,422 $ 220 Interest expense on finance lease liabilities and long-term debt was $ 0.5 mil lion, $ 0.1 million and $ 0.2 million in 2023, 2022 and 2021, respectively.
Long- Term Debt Our finance lease liabilities and long-term debt consists of the following, in thousands: September 30, 2024 2023 Revolving credit facility $ — $ — Term loan — 10,573 Finance leases 290 114 Total 290 10,687 Less: current portion of finance lease liabilities and long-term debt ( 101 ) ( 2,265 ) Finance Lease Liabilities and Long-Term Debt $ 189 $ 8,422 Interest expense on finance lease liabilities and long-term debt was $ 0.6 mil lion, $ 0.5 million and $ 0.1 million in 2024, 2023 and 2022, respectively.
(the “Lender”), under which the Lender provided the Company with (i) a $ 12.0 million term loan maturing January 17, 2028 (“Term Loan”), and (ii) an $ 8.0 million revolving loan facility maturing January 17, 2024 (see Note 12). The proceeds of the Term Loan were used to partially fund the Acquisition.
(the “Lender”), under which the Lender provided the Company with (i) a $ 12.0 million term loan maturing January 17, 2028 (“Term Loan”), and (ii) an $ 8.0 million revolving loan facility maturing January 17, 2024 (see Note 12).
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.
These share-based awards could become dilutive in the future. 66 A reconciliation of the denominators of the basic and diluted EPS calculations follows, in thousands, except per share amounts: Years Ended September 30, 2024 2023 2022 Numerator: Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 Denominator: Weighted-average shares used to compute basic EPS 14,208 14,065 14,014 Dilutive potential common shares due to stock options (1) — — 170 Dilutive potential common shares due to RSUs (1) — — — Weighted-average shares used to compute diluted EPS 14,208 14,065 14,184 (Loss) Income per share: Net (loss) income per basic share $ ( 0.60 ) $ ( 0.89 ) $ 1.24 Net (loss) income per diluted share $ ( 0.60 ) $ ( 0.89 ) $ 1.22 (1) The number of common stock equivalents is calculated using the treasury stock method and the average market price during the period. 4.
Intangib le Assets Intangible assets consist of the following, in thousands: September 30, Amortization Period 2023 2022 Backlog 1 year $ 2,100 $ — Customer relationships 6 - 10 years 4,409 1,609 Developed technology 5 years 6,700 — Noncompetition agreements 5 years 200 — Trade names 3 - 15 years 2,679 879 16,088 2,488 Accumulated amortization ( 4,785 ) ( 1,730 ) Less asset impairments: Backlog ( 425 ) — Customer relationships ( 119 ) — Developed technology ( 4,645 ) — Intangible assets, net $ 6,114 $ 758 Intangible assets are amortized over a weighted-average amortization period of 6.6 years.
Intangib le Assets Intangible assets consist of the following, in thousands: September 30, Amortization Period 2024 2023 Backlog 1 year $ 2,100 $ 2,100 Customer relationships 6 - 10 years 4,409 4,409 Developed technology 1.75 years 6,700 6,700 Noncompetition agreements 5 years 200 200 Trade names 3 - 15 years 2,679 2,679 16,088 16,088 Accumulated amortization ( 5,616 ) ( 4,785 ) Less asset impairments: Backlog ( 425 ) ( 425 ) Customer relationships ( 339 ) ( 119 ) Developed technology ( 5,494 ) ( 4,645 ) Noncompetition agreements ( 160 ) — Trade names ( 50 ) — Intangible assets, net $ 4,004 $ 6,114 Intangible assets are amortized over a weighted-average amortization period of 8.0 years.
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.
AND SUBSIDIARIES Consolidated Statements of C omprehensive Income (Loss) (in thousands) Years Ended September 30, 2024 2023 2022 Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 Foreign currency translation adjustment 975 72 ( 1,781 ) Comprehensive (loss) income $ ( 7,511 ) $ ( 12,510 ) $ 15,586 The accompanying notes are an integral part of these consolidated financial statements. 54 AMTECH SYSTEMS, INC.
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 .
The outstanding obligations are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Balance at beginning of the year $ 154 $ — $ 17 Severance expense, net of adjustments 350 665 — Cash payments ( 504 ) ( 511 ) ( 17 ) Balance at the end of the year $ — $ 154 $ — 5.
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.
In come Taxes Income Tax (Benefit) Provision The components of (loss) income before (benefit) provision for income taxes are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Domestic $ ( 9,563 ) $ ( 17,271 ) $ 15,275 Foreign 2,052 2,089 3,510 $ ( 7,511 ) $ ( 15,182 ) $ 18,785 72 The components of the (benefit) provision for income taxes are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Current: Domestic federal $ ( 49 ) $ — $ — Foreign 793 ( 327 ) 711 Foreign withholding taxes 279 159 255 Domestic state 36 81 77 Total current 1,059 ( 87 ) 1,043 Deferred: Domestic federal — ( 2,207 ) ( 39 ) State — ( 284 ) — Foreign ( 84 ) ( 22 ) 414 Total deferred ( 84 ) ( 2,513 ) 375 Total provision (benefit) $ 975 $ ( 2,600 ) $ 1,418 A reconciliation of actual income taxes to income taxes at the expected U.S. federal corporate income tax rate is as follows, in thousands, except percentages: Years Ended September 30, 2024 2023 2022 Tax (benefit) expense at the federal statutory rate $ ( 1,577 ) 21.0 % $ ( 3,188 ) 21.0 % $ 3,945 21.0 % Effect of permanent book-tax differences 152 - 2.0 % 757 - 5.0 % 11 0.1 % State tax provision 18 - 0.3 % ( 395 ) 2.6 % 554 2.9 % Valuation allowance for net deferred tax assets 1,179 - 15.7 % 1,594 - 10.5 % ( 3,138 ) - 16.7 % Uncertain tax items — 0.0 % ( 1,004 ) 6.6 % 55 0.3 % Tax rate differential 580 - 7.7 % 358 - 2.4 % 535 2.8 % Goodwill impairment 1,334 - 17.8 % — 0.0 % — 0.0 % Other items ( 711 ) 9.5 % ( 722 ) 4.8 % ( 544 ) - 2.9 % $ 975 - 13.0 % $ ( 2,600 ) 17.1 % $ 1,418 7.5 % 73 Deferred Income Taxes and Valuation Allowance Deferred income taxes reflect the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to be realized.
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.
Equity compensation plans as of September 30, 2024 are summarized in the table below: Name of Plan Shares Authorized Shares Available for Grant Options Outstanding Unvested RSUs Outstanding Plan Expiration 2022 Plan 1,000,000 22,871 851,250 24,897 Mar. 2032 2007 Plan 3,000,000 — 151,766 — Mar. 2024 Non-Employee Directors Stock Option Plan 500,000 — 84,000 — Mar. 2024 22,871 1,087,016 24,897 78 Stock Options Stock options issued under the terms of our equity compensation plans have, or will have, an exercise price equal to or greater than the fair market value of the common stock at the date of the option grant and expire no later than 10 years from the date of grant.
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.
Major Customer s and Sales by Country In 2024, no customers accounted for 10% of net revenues. In 2023 , one Thermal Processing Solutions customer accounted for 11 % of net revenues. In 2022 , two Thermal Processing Solutions customers accounted for 14 % and 12 % of net revenues.
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.
Revenues, operating income (loss) and identifiable assets by geographic region are as follows, in thousands: Years Ended September 30, 2024 2023 2022 Net revenue: United States* $ 73,340 $ 84,549 $ 89,197 China 24,048 24,969 13,854 Other 3,826 3,797 3,247 $ 101,214 $ 113,315 $ 106,298 Operating (loss) income: United States* $ ( 9,111 ) $ ( 17,874 ) $ 14,163 China 1,836 714 2,003 Other 546 2,190 1,120 $ ( 6,729 ) $ ( 14,970 ) $ 17,286 * United States revenue includ es $ 14.7 m illion, $ 17.0 million and $ 22.7 million in 2024, 2023 and 2022, respectively, related to the products manufactured in our China facility but sold through our Massachusetts facility.
The following table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed, in thousands: January 17, 2023 Measurement Period Adjustments September 30, 2023 Fair value of total cash consideration transferred $ 39,787 $ ( 560 ) $ 39,227 Estimated fair value of identifiable assets acquired and liabilities assumed: Cash and cash equivalents $ 4,289 $ — $ 4,289 Accounts receivable, net 5,681 203 5,884 Inventories 5,683 — 5,683 Other current assets 179 — 179 Property, plant, and equipment 2,051 ( 11 ) 2,040 Right-of-use assets 2,246 — 2,246 Intangible assets 12,800 800 13,600 Goodwill 18,089 ( 1,626 ) 16,463 Other assets 31 49 80 Total assets acquired 51,049 ( 585 ) 50,464 Accounts payable 1,574 — 1,574 Other accrued liabilities 1,170 824 1,994 Contract liabilities 1,662 287 1,949 Income taxes payable 1,447 ( 462 ) 985 Current portion of long-term operating lease liabilities 515 — 515 Long-term operating lease liabilities 1,730 — 1,730 Deferred tax liability 3,164 ( 674 ) 2,490 Total liabilities assumed 11,262 ( 25 ) 11,237 Net assets acquired $ 39,787 $ ( 560 ) $ 39,227 The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgment.
The following table summarizes the provisional fair values assigned to identifiable assets acquired and liabilities assumed, in thousands: September 30, 2023 Fair value of total cash consideration transferred $ 39,227 Estimated fair value of identifiable assets acquired and liabilities assumed: Cash and cash equivalents $ 4,289 Accounts receivable, net 5,884 Inventories 5,683 Other current assets 179 Property, plant, and equipment 2,040 Right-of-use assets 2,246 Intangible assets 13,600 Goodwill 16,463 Other assets 80 Total assets acquired 50,464 Accounts payable 1,574 Other accrued liabilities 1,994 Contract liabilities 1,949 Income taxes payable 985 Current portion of long-term operating lease liabilities 515 Long-term operating lease liabilities 1,730 Deferred tax liability 2,490 Total liabilities assumed 11,237 Net assets acquired $ 39,227 The establishment of the allocation to goodwill requires the extensive use of accounting estimates and management judgment.
Other Current Assets – Other current assets consist of vendor deposits and prepaid expenses. No item included in other current assets makes up more than 5 % of total current assets. Property, Plant and Equipment – Property, plant and equipment are recorded at cost upon acquisition.
Changes in demand for our products could result in further write-downs. Other Current Assets – Other current assets consist of vendor deposits and prepaid expenses. No item included in other current assets makes up more than 5 % of total current assets. Property, Plant and Equipment – Property, plant and equipment are recorded at cost upon acquisition.
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.
We are currently evaluating the impact this ASU will have on our disclosures. There were no other new accounting pronouncements issued or effective as of September 30, 2024 that had or are expected to have a material impact on our consolidated financial statements. 2.
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.
AND SUBSIDIARIES Consolidated Statem ents of Operations (in thousands, except per share data) Years Ended September 30, 2024 2023 2022 Revenue, net $ 101,214 $ 113,315 $ 106,298 Cost of sales 64,134 73,118 66,787 Intangible asset impairment 849 4,645 — Gross profit 36,231 35,552 39,511 Selling, general and administrative 33,814 42,002 28,300 Research, development and engineering 4,193 7,311 6,390 Gain on sale of fixed assets ( 2,197 ) — ( 12,465 ) Goodwill impairment 6,370 — — Intangible asset impairment 430 544 — Severance expense 350 665 — Operating (loss) income ( 6,729 ) ( 14,970 ) 17,286 Interest income 57 366 210 Interest expense ( 557 ) ( 520 ) ( 164 ) Foreign currency (loss) gain ( 345 ) ( 89 ) 1,066 Other 63 31 387 (Loss) income before income taxes ( 7,511 ) ( 15,182 ) 18,785 Income tax (benefit) provision 975 ( 2,600 ) 1,418 Net (loss) income $ ( 8,486 ) $ ( 12,582 ) $ 17,367 (Loss) Income Per Share: Net (loss) income per basic share $ ( 0.60 ) $ ( 0.89 ) $ 1.24 Net (loss) income per diluted share $ ( 0.60 ) $ ( 0.89 ) $ 1.22 Weighted average shares outstanding: Basic 14,208 14,065 14,014 Diluted 14,208 14,065 14,184 The accompanying notes are an integral part of these consolidated financial statements. 53 AMTECH SYSTEMS, INC.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Our goodwill impairment test uses a weighting of the income approach and the market approach to estimate a reporting unit’s fair value.
Our goodwill impairment test uses a weighting of the income approach and the market approach to estimate a reporting unit’s fair value.
As of each interim period end during each fiscal year, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of intangible assets below their carrying value.
Except as discussed below, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of intangible assets below their carrying value.
Leases – We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in right-of-use ("ROU") assets in our Consolidated Balance Sheets. Balances related to financing leases are immaterial and are included in property, plant and equipment and finance lease liabilities and long-term debt in our Consolidated Balance Sheets.
Leases – We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in right-of-use ("ROU") assets in our Consolidated Balance Sheets.
As of September 30, 2023, we have approxim ately $ 1.3 m illion of Foreign Tax Credit carryforwards that expire at various times between 2030 and 2033 and approximately $ 0.3 million of Federal and State Research and Development credits that expire at various times between 2029 and 2043 .
As of September 30, 2024 , we have approximately $ 1.8 million of Foreign Tax Credit carryforwards that expire at various times between 2030 and 2034 and approximately $ 0.5 million of Federal and State Research and Development credits that expire at various times between 2029 and 2043 .
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.
We estimated the fair value of stock option awards on the date of grant using the Black-Scholes option pricing model using the following assumptions: Years Ended September 30, 2024 2023 2022 Risk free interest rate 4 % 4 % 2 % Expected life 5 years 5 years 5 years Dividend rate 0 % 0 % 0 % Volatility 60 % 56 % 57 % The following table summarizes our stock option activity : Years Ended September 30, 2024 2023 2022 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Options Weighted Average Exercise Price Outstanding at beginning of period 672,924 $ 8.76 589,341 $ 8.06 608,269 $ 6.48 Granted 620,500 $ 5.66 322,500 $ 9.04 135,500 $ 12.80 Exercised ( 15,000 ) $ 5.67 ( 168,318 ) $ 6.01 ( 124,475 ) $ 5.78 Forfeited/expired ( 191,408 ) $ 9.12 ( 70,599 ) $ 10.73 ( 29,953 ) $ 6.92 Outstanding at end of period 1,087,016 $ 6.97 672,924 $ 8.76 589,341 $ 8.06 Exercisable at end of period 532,185 $ 7.64 374,728 $ 8.25 358,343 $ 6.92 Weighted average grant-date fair value of options granted during the period $ 2.50 $ 4.73 $ 6.39 The following table summarizes information for stock options outstanding and exercisable as of September 30, 2024: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Remaining Contractual Life (in years) Weighted Average Exercise Price Per Share Number Exercisable Weighted Average Exercise Price Per Share $ 4.32 -$ 4.70 8,000 9.41 $ 4.51 — $ — $ 4.73 -$ 4.73 109,500 9.45 $ 4.73 — $ — $ 4.77 -$ 5.52 118,233 4.62 $ 5.15 88,233 $ 5.08 $ 5.67 -$ 5.91 93,541 5.88 $ 5.76 63,541 $ 5.69 $ 6.00 -$ 6.00 400,000 4.42 $ 6.00 133,334 $ 6.00 $ 6.58 -$ 8.82 81,750 6.87 $ 8.21 52,250 $ 8.06 $ 9.00 -$ 9.00 150,000 8.87 $ 9.00 100,001 $ 9.00 $ 9.27 -$ 10.22 76,000 7.26 $ 9.61 50,167 $ 9.78 $ 11.51 -$ 11.51 12,000 6.48 $ 11.51 12,000 $ 11.51 $ 15.43 -$ 15.43 37,992 5.90 $ 15.43 32,659 $ 15.43 $ 4.32 -$ 15.43 1,087,016 6.18 $ 6.97 532,185 $ 7.64 The aggregate intrinsic values of options outstanding and options exercisable as of September 30, 2024 were approximate ly $ 0.2 million and $ 0.1 milli on, respectively, which represents the total pre-tax intrinsic value, based on our closing stock price of $ 5.80 per s hare as of September 30, 2024, the last business day of our fiscal year, which would have been received by the option holders had all option holders exercised their options as of that date.
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 Shareholders’ Equity (in thousands) Common Stock Treasury Stock Accumulated Additional Other Total Par Paid-in Comprehensive Retained Shareholders’ Shares Value Shares Cost Capital Income (Loss) Deficit Equity Balances at September 30, 2021 14,304 $ 143 — $ — $ 126,380 $ 14 $ ( 40,903 ) $ 85,634 Net income — — — — — — 17,367 17,367 Translation adjustment — — — — — ( 1,781 ) — ( 1,781 ) Stock compensation expense — — — — 543 — — 543 Repurchase of treasury stock — — ( 434 ) ( 4,115 ) — — — ( 4,115 ) Retirement of treasury stock ( 434 ) ( 4 ) 434 4,115 ( 3,184 ) — ( 927 ) — Stock options exercised 124 1 — — 719 — — 720 Balances at September 30, 2022 13,994 $ 140 — $ — $ 124,458 $ ( 1,767 ) $ ( 24,463 ) $ 98,368 Net loss — — — — — — ( 12,582 ) ( 12,582 ) Translation adjustment — — — — — 72 — 72 Stock compensation expense — — — — 1,272 — — 1,272 Stock options exercised 192 2 — — 1,233 — — 1,235 Balances at September 30, 2023 14,186 $ 142 — $ — $ 126,963 $ ( 1,695 ) $ ( 37,045 ) $ 88,365 Net loss — — — — — — ( 8,486 ) ( 8,486 ) Translation adjustment — — — — — 975 — 975 Stock compensation expense — — — — 1,530 — — 1,530 Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes 58 1 — — ( 112 ) — — ( 111 ) Stock options exercised 15 — — — 85 — — 85 Balances at September 30, 2024 14,259 $ 143 — $ — $ 128,466 $ ( 720 ) $ ( 45,531 ) $ 82,358 The accompanying notes are an integral part of these consolidated financial statements. 55 AMTECH SYSTEMS, INC.
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.
Property, Plan t and Equipment The following is a summary of property, plant and equipment, in thousands: September 30, 2024 2023 Land $ — $ 189 Buildings — 717 Building and leasehold improvements 5,985 2,881 Equipment and machinery 9,928 9,200 Furniture and fixtures 2,588 3,160 Software 1,986 1,970 20,487 18,117 Accumulated depreciation and amortization ( 8,840 ) ( 8,422 ) $ 11,647 $ 9,695 Depreciation wa s $ 2.1 mil lion, $ 1.9 million and $ 1.6 million in 2024, 2023 and 2022 , respectively. 7.
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.
Cash equivalents are classified as Level 1 in the fair value hierarchy. 63 Receivables and Payables – The recorded amounts of these financial instruments, including accounts receivable and accounts payable, approximate their fair value because of the short maturities of these instruments.
During 2023, we reassessed the options to extend the term of the lease on our manufacturing facility in Carlisle, Pennsylvania, and determined it was not reasonably certain that Amtech would exercise those options. As a result, we reduced our ROU Asset and the related ROU Operating Lease liability by $ 2.7 million.
During 2023, we reassessed the options to extend the term of the lease on our manufacturing facility in Carlisle, Pennsylvania, and determined it was not reasonably certain that Amtech would exercise those options.
The Company elected to apply pushdown accounting per ASC 805-50-50-5. 68 Summary of Consideration Transferred – The total consideration for the Acquisition was $ 39.2 million, consisting of $ 35.2 million cash consideration to the sellers and $ 4.0 million cash paid for debt and Entrepix transaction costs.
Summary of Consideration Transferred – The total consideration for the Acquisition was $ 39.2 million, consisting of $ 35.2 million cash consideration to the sellers and $ 4.0 million cash paid for debt and Entrepix transaction costs.
We also identified a triggering event at the end of September 2023. The triggering event coincided with our annual goodwill impairment testing date. The results of the goodwill impairment test indicated that the fair value of both our Semiconductor and Material and Substrate reporting units were in excess of the carrying value, and, thus, were not impaired.
The results of the goodwill impairment test indicated that the fair value of both our Thermal Processing and Semiconductor Fabrication Solutions reporting units were in excess of the carrying value, and, thus, were not impaired. At the end of December 2023, we identified a triggering event.
The following table summarizes our RSU activity during the year ended September 30, 2023: Number Weighted Average Grant Date Fair Value Fair Value Nonvested at beginning of year — $ — $ — Granted 78,977 9.17 723,856 Vested ( 3,000 ) 9.61 28,830 (1) Forfeited — — — Nonvested at end of period 75,977 $ 9.15 $ 578,945 (2) (1) The aggregate fair value of vested RSU's represent the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSU's had all such holders sold their underlying shares on that date.
The following table summarizes our RSU activity during the year ended September 30, 2024: Number Weighted Average Grant Date Fair Value Fair Value Nonvested at beginning of year 75,977 $ 9.15 Granted 24,897 4.82 120,004 Vested, including shares withheld to cover taxes ( 75,977 ) 9.15 695,022 (1) Forfeited — — Nonvested at end of period 24,897 $ 4.82 $ 144,403 (2) (1) The aggregate fair value of vested RSU's represent the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSU's had all such holders sold their underlying shares on that date.
To the extent a contract includes multiple promised goods and services, we must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
To the extent a contract includes multiple promised goods and services, we must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract.
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.
We h ave no foreign net operating loss carryforwards as of September 30, 2024. We have approximate ly $ 16.7 million of state net operating loss carryforwards, with various expiration dates and limitations on utilization, depending on the state.
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 .
The percentages of our net revenues were to customers in the following geographic regions: Years Ended September 30, 2024 2023 2022 United States 39 % 39 % 27 % Canada 1 % 6 % 3 % Mexico 1 % 1 % 2 % Other — % 2 % 4 % Total Americas 41 % 48 % 36 % China 20 % 14 % 17 % Malaysia 12 % 6 % 7 % Taiwan 8 % 5 % 14 % Other 3 % 6 % 6 % Total Asia 43 % 31 % 44 % Czech Republic 3 % 5 % — % Austria 1 % 4 % 10 % Germany 6 % 2 % 4 % Other 6 % 10 % 6 % Total Europe 16 % 21 % 20 % 100 % 100 % 100 % 82 18.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 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.
Biggest changeEach 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.
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.
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 20 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.
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.
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.
The following is a description of important factors that may cause our actual results of operations in future periods to differ materially from those currently expected or discussed in forward-looking statements set forth in this Report. The risks and uncertainties described below are not the only risks we face. We operate in a continually changing business environment.
The following is a description of important factors that may cause our actual results of operations in future periods to differ materially from those currently expected or discussed in forward-looking statements set forth in this Annual Report. The risks and uncertainties described below are not the only risks we face. We operate in a continually changing business environment.
We may not be able to accurately predict market demand to avoid inventory shortages or build inventories and issue purchase commitments in excess of our current requirements. Supplier capacity constraints, supplier production disruptions, supplier quality issues or price increases could increase our operating costs and adversely impact the competitive positions of our products.
We may not be able to accurately predict market demand to avoid inventory shortages or build inventories and issue purchase commitments in excess of our current requirements. 21 Supplier capacity constraints, supplier production disruptions, supplier quality issues or price increases could increase our operating costs and adversely impact the competitive positions of our products.
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.
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. 19 Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs.
Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. The failure of a bank, or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, could adversely impact our liquidity and financial performance.
Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. The failure of a bank, or other adverse conditions in the financial 22 or credit markets impacting financial institutions at which we maintain balances, could adversely impact our liquidity and financial performance.
Any of these factors, or any changes to U.S. corporate tax policies related to international commerce, could depress economic activity and have a material adverse effect on our business, financial condition and results of operations. We are subject to expanded export control restrictions recently adopted by the U.S.
Any of these factors, or any changes to U.S. corporate tax policies related to international commerce, could depress economic activity and have a material adverse effect on our business, financial condition and results of operations. We are subject to expanded export control restrictions adopted by the U.S.
Our 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.
Our business depends on timely supply of parts, 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.
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, 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.
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.
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 will experience a significant reduction in our revenue.
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.
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.
Other companies and individuals, including our larger competitors, may develop technologies that are similar or superior to our technology or design around the patents we own or license.
Other companies and individuals, including our larger competitors, may develop 27 technologies that are similar or superior to our technology or design around the patents we own or license.
During peak years of our business, increases in demand for capital equipment result in longer lead times for many important system components. Future increases in demand could cause delays in meeting the shipment requirements or expectations of our customers. Because of the variability and uniqueness of customer orders, we try to avoid maintaining an extensive inventory of materials for manufacturing.
During peak years of our business, increases in demand for capital equipment result in longer lead times for many important system components. Future increases in demand could cause delays in meeting the shipment requirements or expectations of our customers. Because of the variability and uniqueness of customer orders, we seek to avoid maintaining an extensive inventory of materials for manufacturing.
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.
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. 26 Where appropriate, we intend to vigorously defend all claims.
Recent Pronouncements - Recent pronouncements by the SEC, Federal Trade Commission, Department of Justice, and from the state of California, among others, related to antitrust, climate related disclosures, cybersecurity and privacy could have the impact of increasing Company compliance costs, increasing potential liability to the Company as a result of frivolous lawsuits, or place the Company in a position of not knowing when or if the laws are settled in a particular area in order for the Company to effectively comply.
Climate Disclosure, Cybersecurity and Other Pronouncements - Pronouncements by the SEC, Federal Trade Commission, Department of Justice, and from the state of California, among others, related to antitrust, climate related disclosures, cybersecurity and privacy could have the impact of increasing Company compliance costs, increasing potential liability to the Company as a result of frivolous lawsuits, or place the Company in a position of not knowing when or if the laws are settled in a particular area in order for the Company to effectively comply.
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 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 25 increase in the cost of our products, which may result in our products becoming less attractive relative to products offered by our competitors.
Competition in some of the markets we address such as the SiC industry, and the effect of tariffs or COVID-19 on our business, may have a dramatic effect on our stock price.
Competition in some of the markets we address such as the SiC industry, and the effect of tariffs or COVID-19 or other pandemics on our business, may have a dramatic effect on our stock price.
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.
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) manage our existing contract manufacturers and those we engage in the future, (f) implement and improve existing and new administrative, financial and operations systems, procedures and controls; (g) expand and upgrade our technological capabilities; and (h) manage multiple relationships with our customers, suppliers and other third parties.
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.
Risks Related to Our Business 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.
In the ordinary 26 course of business, we use and generate substances that are regulated or may be hazardous under environmental laws.
In the ordinary 24 course of business, we use and generate substances that are regulated or may be hazardous under environmental laws.
In addition, during periods of rapid growth, our operating results may be adversely affected if we are unable to increase manufacturing capacity and personnel to meet customer demand, which may require additional liquidity.
In addition, during periods of rapid growth, our operating results may be adversely affected if we are unable to increase manufacturing capacity and personnel and effectively manage our supply chain to meet customer demand, which may require additional liquidity.
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.
The following risk factors should be read in conjunction with all the other information in this Annual Report, 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 16 There is ongoing volatility in the semiconductor equipment industry.
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.
There is no assurance that we will be able to replace such facility or that any additional financing will be available if required, or, even if available, that it would not materially dilute the ownership 17 percentage of our then existing shareholders, result in increased expenses or result in covenants or special rights that would restrict our operations.
We can provide no assurance that we can timely and effectively respond to the industry cycles, and our failure to do so could have a material adverse effect on our business.
We can provide no assurance that we can timely and effectively respond to the industry cycles, and our failure to do so could have a material adverse effect on our business, financial position and results of operations.
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.
Our directors, executive officers and holders of ten percent or more of our outstanding common stock and their affiliates represent a significant portion of our common stock held as of September 30, 2024, and, therefore, could 28 have significant influence over our management and corporate policies.
Our success is dependent in part on our technology and other proprietary rights. We own various U.S. and international patents and have additional pending patent applications relating to some of our products and technologies. Protecting and defending our patents domestically, and especially internationally, is costly. In addition, the process of seeking patent protection is lengthy and expensive.
We own various U.S. and international patents and have additional pending patent applications relating to some of our products and technologies. Protecting and defending our patents domestically, and especially internationally, is costly. In addition, the process of seeking patent protection is lengthy and expensive.
Moreover, we cannot assure you that we will not identify additional material weaknesses in our internal control over financial reporting in the future.
Notwithstanding the remediation of the control deficiencies, we cannot assure you that we will not identify additional material weaknesses in our internal control over financial reporting in the future.
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, 2024 and 2023, our accrued warranty costs amounted to $0.6 million and $1.0 million, respectively.
For example, during the two-year period ended September 30, 2023, the price of our common stock has ranged from $15.78 to $6.66. If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.
For example, during the two-year period ended September 30, 2024, the price of our common stock has ranged from $11.98 to $3.37. If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.
For example, the U.S. Department of Commerce has added numerous China-based entities to the U.S. Entity List, including many entities active in the semiconductor industry in China, restricting our ability to provide products and services to such entities without an export license. Even if we apply for licenses to sell our products or provide services to companies on the U.S.
For example, the U.S. Department of Commerce has added and continues to add numerous China-based entities to the U.S. Entity List, including many entities active in the semiconductor industry in China, restricting our ability to provide products and services to such entities without an export license.
In the past, we have made acquisitions of, or significant investments in, other businesses with synergistic products, services and technologies and plan to continue to do so in the future.
We continually evaluate potential acquisitions and consider acquisitions an important part of our future growth strategy. In the past, we have made acquisitions of, or significant investments in, other businesses with synergistic products, services and technologies and plan to continue to do so in the future.
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.
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.
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.
However, these employees, consultants and third parties may breach these agreements, and we may not have adequate remedies for wrongdoing. 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.
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.
As of September 30, 2024, one Thermal Processing Solutions customer represented 12% of our accounts receivable. A concentration of our receivables from one or a small number of customers places us at risk.
This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties and generally materially and adversely impact our business and financial condition. 25 Risks Related to Regulations and Litigation We are subject to various laws and regulations, including recent pronouncements related to laws and regulations governing climate related disclosures, cybersecurity, privacy, anti-corruption and the environment.
This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties and generally materially and adversely impact our business and financial condition. Continued changes in corporate governance requirements, policies and practices may impact our business .
Entity List, there can be no assurance that licenses will be granted. In addition, the U.S.
Even if we apply for licenses to sell our products or provide services to companies on the U.S. Entity List, there can be no assurance that licenses will be granted. In addition, the U.S.
If we do not successfully manage our investments in research and development, our business, financial condition and results of operations could be materially and adversely affected. Third parties may violate our proprietary rights, in which we have made significant investments, resulting in a loss of value of some of our intellectual property or costly litigation.
Third parties may violate our proprietary rights, in which we have made significant investments, resulting in a loss of value of some of our intellectual property or costly litigation. Our success is dependent in part on our technology and other proprietary rights.
We also maintain trademarks on certain of our products and claim copyright protection for certain proprietary software and documentation.
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.
Our management, under the oversight of our Audit Committee, has begun evaluating and implementing measures designed to remediate the control deficiencies contributing to these material weaknesses. The material weaknesses will not be remediated until all necessary internal controls have been implemented, tested and determined to be operating effectively.
In fiscal 2024, our management, under the oversight of our Audit Committee, began designing and implementing measures designed to remediate the control deficiencies contributing to these material weaknesses.
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.
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 may be unable to successfully acquire and integrate new operations, which could cause our business to suffer. We continually evaluate potential acquisitions and consider acquisitions an important part of our future growth strategy.
To the extent that we do not achieve the profitability enhancement or other anticipated benefits of strategy or restructuring initiatives, our results of operations may be materially adversely affected. We may be unable to successfully acquire and integrate new operations, which could cause our business to suffer.
Removed
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”).
Added
We paid off and terminated our existing credit facility with UMB Bank in September 2024.
Removed
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.
Added
We may be unable to implement certain business strategies and any issue with the pursuit of such business strategies could materially adversely affect our business and results of operations. We may from time to time determine to implement business strategies and restructuring initiatives in order to remain competitive.
Removed
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.
Added
Because our strategies and restructuring activities may involve changes to many aspects of our business, including the location of our production facilities, the use of contract manufactures, and the potential exit of certain product lines and businesses, our ability to successfully do so depends on a number of factors, many of which are outside of our control.
Removed
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.
Added
If we are not able to effectively manage or efficiently implement these strategies and/or restructuring initiatives for reasons within or outside of our control, then our business operations could be materially adversely affected. In addition, implementation of a business strategy may lead to the disruption of our existing business operations.
Removed
We will be operating under the terms of such Forbearance Agreement through January 17, 2025 (the “Forbearance Period”).
Added
For example, the contingent risks associated with outsourcing certain of our existing manufacturing operations to third parties, as is the case with our use of third party manufacturers, primarily in Canada and Mexico, could materially impact our financial condition or results of operations and/or could disrupt our existing operations, especially if a contract manufacturer is unable to meet its commitments under any agreements or encounters financial difficulty.
Removed
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.
Added
Furthermore, our efforts to outsource certain of our manufacturing operations may require additional management time and effort to implement successfully, and lead to higher than anticipated capital expenditures. The failure to successfully and timely realize the anticipated benefits of these transactions or strategies could have a material adverse effect on our profitability, financial condition or results of operations.
Removed
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.
Added
In addition, even if we fully execute and implement these activities, there may be other unforeseeable and unintended consequences that could 18 materially adversely impact our profitability and business, including unintended employee attrition or harm to our competitive position.
Removed
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.
Added
In 2024, 59% of our net revenue came from customers outside of North America as follows: Asia - 43% (including China - 20%, Malaysia - 12% and Taiwan - 8%); and Europe - 16% (including Germany - 6% and Czech Republic - 3%).
Removed
The terms of our existing or future debt instruments may limit or prevent us from taking any of these actions.
Added
The material weaknesses are considered remediated once all necessary internal controls have been implemented, tested and determined to be operating effectively for a sufficient period of time, which we concluded occurred as of September 30, 2024.
Removed
If we are unable to comply with the terms of the Forbearance Agreement or otherwise default on the payments required under the terms of certain of our indebtedness, that indebtedness, together with debt incurred pursuant to other debt agreements or instruments that contain cross-default or cross-acceleration provisions, may become payable on demand, and we may not have sufficient funds to repay all our debts.
Added
Corporate governance, public disclosure and compliance practices continue to evolve based upon continuing legislative action, SEC rulemaking and policy positions taken by large institutional stockholders and proxy advisors.
Removed
As a result, our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our debt obligations.
Added
As a result, the number of rules, regulations and standards applicable to us may become more burdensome to comply with, could increase scrutiny of our practices and policies by these or other groups and increase our legal and financial compliance costs and the amount of time management must devote to governance and compliance activities.
Removed
We are subject to and may, in the future become subject to, covenants that limit our operating and financial flexibility and, if we default under our debt covenants, we may not be able to meet our payment obligations.
Added
For example, the SEC has recently adopted rules requiring that issuers provide significantly increased disclosures concerning cybersecurity risk management, strategy, governance and incident reporting and adopt more stringent executive compensation clawback policies.
Removed
Our Loan Agreement, as well as any instruments that govern any future debt obligations, contains covenants that impose significant restrictions on our and our restricted subsidiaries’ ability to operate, including restrictions on the ability to: (a) incur or guarantee additional indebtedness; (b) create or incur liens; (c) make loans, acquisitions or other investments; (d) engage in mergers or consolidations; (e) transfer or dispose of assets; (f) make certain payments, including dividends or other distributions, with respect to our equity securities; (g) engage in transactions with affiliates; (h) enter into any unconditional obligation for the purchase of materials, supplies or other property; (i) cancel any material claim or debt owing to us; (j) enter into any agreement containing any provision inconsistent with the covenants contained in the Loan Agreement; (k) establish any new deposit accounts or other bank accounts; (l) engage in business activities that are materially different from existing business activities; and (m) amend our organizational documents.
Added
Increasing regulatory burdens and corporate governance requirements could make it more difficult for us to attract and retain qualified members of our Board and qualified executive officers. 23 Risks Related to Regulations and Litigation We are subject to various laws and regulations, including recent pronouncements related to laws and regulations governing climate related disclosures, cybersecurity, privacy, anti-corruption and the environment.
Removed
Although these limitations are subject to exceptions and qualifications, these covenants could limit our ability to finance future operations and capital needs and our ability to pursue acquisitions and other business activities that may be in our interest.
Added
Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors.
Removed
At September 30, 2023, we were also required to comply with certain financial covenants such that, as of the end of each fiscal quarter, beginning March 31, 2023, we must maintain (i) a ratio of consolidated debt to consolidated EBITDA (as defined in the Loan Agreement) for such fiscal quarter, of not greater than 1.50 to 1.00, through December 31, 2024, based on a building four quarters (as described in the Loan Agreement), and then 1.00 to 1.00 each fiscal quarter thereafter (the "Debt to EBITDA Ratio"), (ii) a ratio of (a) the total for such fiscal quarter of 19 EBITDAR (as defined in the Loan Agreement) minus the sum of all income taxes paid in cash plus cash dividends/distributions plus maintenance Capital Expenditures (as defined in the Loan Agreement) plus management fees paid in cash, to (b) the sum for such fiscal quarter of (1) Interest Charges (as defined in the Loan Agreement) plus (2) required payments of principal on Debt (as defined in the Loan Agreement) (including the Term Loan, but excluding the Revolver) plus (3) operating lease/rent expense, of not less than 1.30 to 1.00 based on a building four quarters (as described in the Loan Agreement) (the “Fixed Charge Coverage Ratio Covenant”), and (iii) a consolidated working capital of current assets (excluding related party receivables and prepaid expenses) minus current liabilities of at least $35.0 million.
Added
With the increasing focus on corporate social and environmental responsibility in the semiconductor industry, a number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions or requirements that their suppliers should comply with, or they may seek to include such provisions or requirements in their procurement terms and conditions.
Removed
See Note 20 to our Consolidated Financial Statements included elsewhere herein for a discussion of our failure to be in compliance with the Debt to EBITDA and Fixed Charge Coverage Ratio covenants at September 30, 2023, amendments to the Loan Agreement entered into in December 2023 pursuant to the Forbearance Agreement (discussed below), and related changes to the above financial covenants.
Added
We may face difficulties in satisfying these customers’ demands, which may harm our sales and operating results. Many investors also expect companies to disclose corporate social and environmental policies, practices and metrics under voluntary disclosure standards and frameworks. We periodically communicate our strategies, goals and targets related to our corporate social and environmental policies and programs.
Removed
Our ability to comply with these covenants and restrictions may be affected by events beyond our control. These include prevailing economic, financial and industry conditions.
Added
These strategies, goals and targets, and their underlying assumptions and projections, reflect our current plans and aspirations, but we may be unable to achieve them.
Removed
If we default on our obligations under our Loan Agreement, then the lender could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt. If such debt were accelerated, our assets may be insufficient to repay in full such indebtedness.
Added
It is also possible that our investors might not be satisfied with our policies, programs, goals, performance and related disclosures, or the speed of their adoption, implementation and measurable success, or that we have adopted such policies, programs and commitments at all.
Removed
Any of the foregoing could have serious consequences to our financial position, results of operations or cash flows and could cause us to become bankrupt or insolvent.
Added
In addition, unfavorable ratings or assessment of our corporate social and environmental policies and programs, including our compliance with certain voluntary disclosure standards and frameworks, may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and cost of capital.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation 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.
Biggest changeLocation Use Own or Lease Size Corporate Tempe, Arizona Corporate Headquarters Lease 6,388 sf Thermal Processing Solutions Segment 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 Semiconductor Fabrication Solutions Segment Phoenix, Arizona Office & Mfg.
Lease 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
Lease 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 31

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed9 unchanged
Biggest changeDuring 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.
Biggest changeDuring the three months ended September 30, 2024, 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, 2024, there are no amounts authorized for repurchase.
UNREGISTERED SALES OF EQUITY SECURITIES There were no unregistered sales of equity securities in fiscal 2023. 33 ITEM 6. R ESERVED 34
UNREGISTERED SALES OF EQUITY SECURITIES There were no unregistered sales of equity securities in fiscal 2024. 33 ITEM 6. R ESERVED
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.
HOLDERS As of November 29, 2024, there were 279 shareholders of record of our Common Stock. Based upon a recent survey of brokers, we estimate there were approximately an additional 911 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.

Item 7. Management's Discussion & Analysis

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

61 edited+28 added−36 removed43 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, 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.
Biggest changeSelected Quarterly Data (Unaudited) The following table sets forth selected unaudited consolidated quarterly financial information, in thousands, except percentages and per share amounts: Fiscal Year 2024 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 24,920 $ 25,433 $ 26,749 $ 24,112 Cost of sales 15,852 16,982 16,991 14,309 Intangible asset impairment 849 — — — Gross profit 8,219 8,451 9,758 9,803 Selling, general and administrative 8,567 8,252 8,209 8,786 Research, development and engineering 1,588 921 693 991 Gain on sale of fixed assets — (2,197 ) — — Goodwill impairment 6,370 — — — Intangible asset impairment 430 — — — Severance expense 198 112 40 — Operating (loss) income (8,934 ) 1,363 816 26 Interest income 19 14 2 22 Interest expense (198 ) (193 ) (107 ) (59 ) Foreign currency (loss) gain (187 ) — 182 (340 ) Other — 9 2 52 (Loss) income before income taxes (9,300 ) 1,193 895 (299 ) Income tax provision 58 223 457 237 Net (loss) income $ (9,358 ) $ 970 $ 438 $ (536 ) Gross margin 33.0 % 33.2 % 36.5 % 40.7 % Operating margin (35.9 )% 5.4 % 3.1 % 0.1 % (Loss) income Per Share: Net (loss) income per basic share $ (0.66 ) $ 0.07 $ 0.03 $ (0.04 ) Weighted average shares outstanding - basic 14,188 14,197 14,209 14,239 Net (loss) income per diluted share $ (0.66 ) $ 0.07 $ 0.03 $ (0.04 ) Weighted average shares outstanding - diluted 14,188 14,209 14,254 14,239 40 Fiscal Year 2023 First Quarter Second Quarter Third Quarter Fourth Quarter Revenue, net $ 21,558 $ 33,310 $ 30,740 $ 27,707 Cost of sales 13,255 19,840 19,755 20,268 Intangible asset impairment — — — 4,645 Gross profit 8,303 13,470 10,985 2,794 Selling, general and administrative 9,190 11,434 10,300 11,078 Research, development and engineering 1,393 1,517 1,804 2,597 Intangible asset impairment — — — 544 Severance expense 400 — — 265 Operating (loss) income (2,680 ) 519 (1,119 ) (11,690 ) Interest income 290 49 17 10 Interest expense (2 ) (155 ) (185 ) (178 ) Foreign currency (loss) gain (347 ) (168 ) 456 (30 ) Other (9 ) 13 15 12 (Loss) income before income taxes (2,748 ) 258 (816 ) (11,876 ) Income tax (benefit) provision (4 ) (2,946 ) 211 139 Net (loss) income $ (2,744 ) $ 3,204 $ (1,027 ) $ (12,015 ) Gross margin 38.5 % 40.4 % 35.7 % 10.1 % Operating margin (12.4 )% 1.6 % (3.6 )% (42.2 )% (Loss) income Per Share: Net (loss) income per basic share $ (0.20 ) $ 0.23 $ (0.07 ) $ (0.85 ) Weighted average shares outstanding - basic 14,008 14,028 14,058 14,166 Net (loss) income per diluted share $ (0.20 ) $ 0.23 $ (0.07 ) $ (0.85 ) Weighted average shares outstanding - diluted 14,008 14,157 14,058 14,166 Liquidity and Capital Resources Liquidity We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations through our industry cycles, under both normal and stressed conditions.
If the estimated undiscounted cash flows are not sufficient to recover the carrying value of the asset group, the Company then compares the carrying value of the individual long-lived assets with the their estimated fair values. An impairment would be recorded for the excess of the carrying value over the fair value.
If the estimated undiscounted cash flows are not sufficient to recover the carrying value of the asset group, the Company then compares the carrying value of the individual long-lived assets with their estimated fair values. An impairment would be recorded for the excess of the carrying value over the fair value.
Multiples are then selected based on a comparison of the reviewed data to that of the reporting unit and applied to relevant historical and forecasted financial parameters such as levels of revenues, EBITDA, EBIT or other metrics. If actual results differ significantly from our projections, we may be required to record a material impairment charge.
Multiples are then selected based on a comparison of the reviewed data to that of the reporting unit and applied to relevant historical and 45 forecasted financial parameters such as levels of revenues, EBITDA, EBIT or other metrics. If actual results differ significantly from our projections, we may be required to record a material impairment charge.
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.
In 2023, we recognized $1.0 million of previously unrecognized tax benefits, and as of September 30, 2024, we have no unrecognized tax benefits recorded within our financial statements. We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available.
Risk Factors.” We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the estimates we believe 45 are the most critical to understanding and evaluating our consolidated financial condition and results of operations.
Risk Factors.” We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the estimates we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.
We also take into consideration our capital allocation and growth objectives, including investing in research and development and capital expenditures (including capacity assessments and IT systems). The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management.
We also take into consideration our capital allocation and growth objectives, including investing in research and development and capital expenditures (including capacity assessments and IT systems). The success of our investment and growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management.
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.
In 2023, cash provided by financing activities was $11.7 million, comprised of $12.0 million in borrowings on our term loan and $1.2 million of proceeds received from the exercise of stock options partially offset by $1.5 million in payments on long-term debt.
In 2022, cash used 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.
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.
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.
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.
Long-lived assets, including tangible and intangible assets with finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment whenever certain triggering events may indicate impairment.
Long-Lived Asset Impairment. Long-lived assets, including tangible and intangible assets with finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment whenever certain triggering events may indicate impairment.
The fair value of identifiable intangible assets acquired in connection with our acquisition of Entrepix was $13.6 million. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. 46 Goodwill .
The fair value of identifiable intangible assets acquired in connection with our acquisition of Entrepix was $13.6 million. Goodwill represents the excess of the fair value of the consideration conveyed in an acquisition over the fair value of net assets acquired. Goodwill .
We 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.
We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. 41 Capital Allocation Our capital allocation strategy focuses on building shareholder value. We do this by first investing in ourselves and growing our capabilities. We then look to supplement and strengthen our capabilities through acquisitions and strategic investments.
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.
Off-Balance Sheet Arrangements As of September 30, 2024, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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.
No other customer accounted for more than 10% of our backlog as of September 30, 2024. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months.
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.
These new facilities will create demand for new equipment and services in growing regions like Mexico and Southeast Asia. • Artificial Intelligence - With Artificial Intelligence (AI), our reflow oven systems are the favored choice for Outsourced Semiconductor Assembly and Test Services (OSATS) providers who perform advanced packaging of the AI chips.
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.
ASC 740, "Income Taxes", states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be 39 sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
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.
Our sources of capital in the past have included a loan and security agreement with UMB Bank, the sale of equity securities, which includes common stock sold in private transactions and public offerings, and cash generated from operations. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms.
As of September 30, 2023, we identified a triggering event in our Material and Substrate segment primarily related to the prolonged downturn and general economic conditions in the semiconductor market, in addition to delays in the adoption of next-gen polishing tools, which reduced our cash flow projections. As a result, we recorded intangible asset impairment of $5.2 million.
As of September 30, 2023, we identified a triggering event in our Semiconductor Fabrication Solutions segment primarily related to the prolonged downturn and general economic conditions in the semiconductor market, in addition to delays in the adoption of next-gen polishing tools, which reduced our cash flow projections. As a result, we recorded intangible asset impairment of $5.2 million.
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.
As of September 30, 2024, we have significant U.S. deferred tax assets that have a full valuation allowance and foreign deferred tax assets that have a partial valuation allowance. Any changes to the judgments related 44 to our valuation allowance could have a material impact on our results of operations.
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 liquidity plans are established within the context of our financial and strategic planning processes and consider the liquidity necessary to fund our operating commitments, which include purchase obligations for inventory and equipment, rent, payroll and general expenses.
Selling, General and Administrative Expenses Selling, general and administrative expenses (“SG&A”) consists of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal and accounting expenses and bad debt expense.
Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses consist primarily of the cost of employees, consultants and contractors, facility costs, sales commissions, shipping costs, promotional marketing expenses, legal and accounting expenses and bad debt expense.
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.
Unless otherwise stated, references to the years 2024, 2023 and 2022 relate to the fiscal years ended September 30, 2024, 2023 and 2022, respectively. 35 Results of Operations The following table sets forth certain financial data as a percentage of net revenue for the periods indicated: Years Ended September 30, 2024 2023 Net revenue 100 % 100 % Cost of sales 63 % 65 % Intangible asset impairment 1 % 4 % Gross margin 36 % 31 % Selling, general and administrative 33 % 37 % Research, development and engineering 4 % 6 % Gain on sale of fixed assets (2 )% — % Goodwill impairment 6 % — % Intangible asset impairment 1 % — % Severance 1 % 1 % Operating loss (7 )% (13 )% Interest income — % — % Interest expense — % — % Foreign currency (loss) gain — % — % Other — % — % (Loss) income before income taxes (7 )% (13 )% Income tax provision (benefit) 1 % (2 )% Net loss (8 )% (11 )% Fiscal 2024 compared to Fiscal 2023 Net Revenue Net revenue consists of revenue recognized upon shipment or delivery of equipment.
The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions.
The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable acquisition candidates, the negotiation of acceptable terms, our financial capabilities and access to capital, and general economic and business conditions.
We have never paid dividends on our common stock, and we do not expect to pay dividends on common stock in the foreseeable future. However, our Board has authorized annual stock repurchase plans since 2018.
We have never paid dividends on our common stock, and we do not expect to pay dividends on common stock in the foreseeable future. However, our Board has from time to time authorized annual stock repurchase plans.
During the year ended September 30, 2023, we recorded provisions to reduce inventories to their lower of cost and net realizable value of approximately $2.6 million compared to $0.1 million during the year ended September 30, 2022. Business Combination.
During the year ended September 30, 2024, we recorded provisions to reduce inventories to their lower of cost and net realizable value of approximately $2.8 million compared to $2.6 million during the year ended September 30, 2023. Business Combination.
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.
There were no impairments on long-lived assets during the year ended September 30, 2022. See Note 9 for additional information on intangible assets. Impact of Recently Issued Accounting Pronouncements For discussion of recently issued accounting pronouncements, see “Recently Issued Accounting Pronouncements” within “Note 1. Summary of Operations and Significant Accounting Policies” in “Item 8. Financial Statements and Supplementary Data.”
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.
Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our operations and financial condition. For the years ended September 30, 2024 and 2023, we had no unrecognized tax benefit.
Intangible Asset Impairment During the year ended September 30, 2023, we recognized impairment of our definite lived intangible assets of $5.2 million at our Material and Substrate segment. As stated above, $4.6 million of this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in the Consolidated Statement of Operations.
Additionally, during the year ended September 30, 2023, we recognized impairment of our definite lived intangible assets of $5.2 million at our Semiconductor Fabrication Solutions segment. Of the $5.2 million, $4.6 million of this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in our Consolidated Statement of Operations.
Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue.
Gross Profit and Gross Margin Gross profit is the difference between net revenue and cost of goods sold and intangible asset impairment. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls.
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.
Our products intersect these markets in multiple ways: CMP consumables and wafer cleaning systems for the SiC substrates used in the EV power invertors; thermal processing systems for producing EV battery cooling systems and ceramic substrates for HEV power semiconductor packaging; and reflow ovens for ADAS, infotainment and telematics component assemblies. • Supply Chain Resiliency - There is a global trend of creating supply chain resiliency by expanding and/or relocating operations outside of mainland China.
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.
The sale price for our BTU building in Massachusetts was $20.6 million, of which $0.7 million was deducted 38 at closing for commission and other closing expenses. In connection with the sale, we recognized a pre-tax gain on sale of $12.5 million in the year ended 2022.
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 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.
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.
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.
The 2023 effective tax rate was favorably impacted by the recognition of previously unrecognized tax benefits and the release of a portion of our valuation allowance in 39 connection with a deferred tax liability related to the Entrepix acquisition.
The 2023 effective tax rate was favorably impacted by the recognition of previously unrecognized tax benefits and the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition. In 2024 and 2023, we recorded income tax expense and (benefit) of $1.0 million and $(2.6) million, respectively.
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.
Expenses related to engineers working on strategic projects or sustaining engineering projects are recorded in RD&E.
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).
Cash and Cash Flow The following table sets forth for the periods presented certain consolidated cash flow information, in thousands: Years Ended September 30, 2024 2023 2022 Net cash provided by (used in) operating activities $ 9,842 $ (7,701 ) $ 5,204 Net cash (used in) provided by investing activities $ (2,178 ) $ (37,830 ) $ 18,773 Net cash (used in) provided by financing activities $ (10,633 ) $ 11,738 $ (8,267 ) Effect of exchange rate changes on cash $ 922 $ 52 $ (1,672 ) Net (decrease) increase in cash and cash equivalents $ (2,047 ) $ (33,741 ) $ 14,038 Cash and cash equivalents, beginning of year $ 13,133 $ 46,874 $ 32,836 Cash and cash equivalents, end of year $ 11,086 $ 13,133 $ 46,874 A summary of our cash position, is as follows, in thousands, except working capital ratio: September 30, 2024 2023 Cash and cash equivalents $ 11,086 $ 13,133 Restricted cash $ — $ — Working capital $ 44,777 $ 51,471 Current ratio (current assets to current liabilities) 3.3:1 2.7:1 The decrease in cash and cash equivalents from September 30, 2023 of $2.0 million was primarily due to the full repayment of our term loan and revolving credit agreement with UMB Bank, which was funded with cash generated in operations.
Please refer to page 5 for further information regarding forward-looking statements and “Item 1A. Risk Factors” for a description of our risk factors.
Please refer to page 5 for further information regarding forward-looking statements and “Item 1A. Risk Factors” for a description of our risk factors. Overview We provide equipment, consumables and services for semiconductor wafer fabrication and device packaging.
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.
Gross margin for the Semiconductor Fabrication Solutions segment, increased to 37% in 2024, compared to 18% in 2023 due primarily to the 2023 impairment charge of $4.6 million for intangible assets and a charge in the amount of $1.5 million related to the write-off of inventory for our polishing machine products, partially offset by an additional intangible asset impairment charge in 2024 of $0.8 million.
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.
Growth and Investment Strategy We believe there are three key secular trends that are key to our future growth: • Advanced Mobility - Advanced Mobility encompasses both the development and adoption of electric vehicles and charging infrastructure, including both EV and HEV, as well as advanced automotive electronics including Advanced Driver Assistance Systems (ADAS), infotainment and telematics.
Our 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.
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.
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.
Revenue from the Thermal Processing Solutions segment decreased $8.4 million, or 11%, over the prior year period. Our Thermal Processing Solution results for 2024 reflect decreases in belt furnace shipments partially offset by increases in shipments of our horizontal diffusion furnaces.
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.
For the years ended September 30, 2024 and 2023, we had net deferred tax assets of $0.2 and $0.1 million. Inventory Valuation. We value our inventory at the lower of cost or net realizable value.
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%.
Our gross profit and gross margin by reportable segment were as follows, dollars in thousands: Years Ended September 30, Segment 2024 Gross Margin 2023 Gross Margin Increase (Decrease) % Change Thermal Processing Solutions $ 24,269 35 % $ 29,184 38 % $ (4,915 ) (17 )% Semiconductor Fabrication Solutions 11,962 37 % 6,368 18 % 5,594 88 % Total gross profit $ 36,231 36 % $ 35,552 31 % $ 679 2 % Gross profit for the years ended September 30, 2024 and 2023 was $36.2 million and $35.6 million, respectively, representing an increase of $0.7 million, or 2%.
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.
We are experiencing moderate material costs increases across all our segments. In response to such increased costs, we continually review our pricing plans and supplier agreements, with the objective of passing these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers.
The effective tax rate is the ratio of total income tax expense to pre-tax income. The effective tax rates for 2023 and 2022 were lower than the U.S. statutory rate of 21%. The 2023 effective tax rate was negatively impacted by non-deductible expenses, includible foreign income and losses for which no tax benefit can be recognized.
The 2024 effective tax rate was negatively impacted by non-deductible expenses, including goodwill impairment, includible foreign income, foreign withholding tax and losses for which no tax benefit can be recognized. The 2023 effective tax rate was negatively impacted by non-deductible expenses, includible foreign income, foreign withholding tax and losses for which no tax benefit can be recognized.
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%.
Our net revenue by reportable segment was as follows, dollars in thousands: Years Ended September 30, Increase Segment 2024 2023 (Decrease) % Change Thermal Processing Solutions $ 69,161 $ 77,595 $ (8,434 ) (11 )% Semiconductor Fabrication Solutions 32,053 35,720 (3,667 ) (10 )% Total net revenue $ 101,214 $ 113,315 $ (12,101 ) (11 )% Net revenue for the years ended September 30, 2024 and 2023 were $101.2 million and $113.3 million, respectively, a decrease of $12.1 million or 11%.
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 sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, the incurrence of long-term debt and customer deposits. 42 Cash Flows from Operating Activities Cash provided by operating activities was $9.8 million in 2024 compared to cash used in operating activities of $7.7 million in 2023 and cash provided by operating activities of $5.2 million in 2022.
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.
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.
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.
This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. In September 2023, we signed a lease for a new location with less square footage and completed the move to this location in June 2024.
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.
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.
Contractual Obligations and Commercial Commitments We had the following contractual obligations and commercial commitments as of September 30, 2023, in thousands: Contractual obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations $ 10,687 $ 2,265 $ 4,893 $ 3,529 $ — Lease obligations: Buildings 24,140 3,317 5,478 4,095 11,250 Office equipment 3 3 — — — Vehicles 31 18 13 — — Total operating lease obligations 24,174 3,338 5,491 4,095 11,250 Purchase obligations 24,287 24,232 55 — — Total $ 59,148 $ 29,835 $ 10,439 $ 7,624 $ 11,250 Acquisitions Our business strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations.
Contractual Obligations We had the following contractual obligations as of September 30, 2024, in thousands: Contractual obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years Debt obligations $ 290 $ 101 $ 184 $ 5 $ — Lease obligations: Buildings 22,967 3,057 5,168 4,720 10,022 Office equipment — — — — — Vehicles 31 20 11 — — Total operating lease obligations 22,998 3,077 5,179 4,720 10,022 Purchase obligations 12,148 12,148 — — — Total $ 35,436 $ 15,326 $ 5,363 $ 4,725 $ 10,022 43 Acquisitions Our business strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations.
In the first quarter of fiscal 2024, we began 38 making targeted labor reductions as a result of the shift to contract manufacturing and the continuing slowdown in the broader semiconductor industry.
We are also continuing to explore additional 37 partnerships with contract manufacturers, who can leverage their buying power on a larger scale. Throughout fiscal 2024, we made targeted labor reductions as a result of the shift to contract manufacturing and the continuing slowdown in the broader semiconductor industry.
Payments in long-term debt include the full repayment of the $4.5 million mortgage balance on the real property in Massachusetts. In 2021, cash provided by financing activities was $1.2 million, consisting of approximately $1.5 million of proceeds received from the exercise of stock options, partially offset by payments on long-term debt of $0.4 million.
Payments in long-term debt in 2022 include the full repayment of the $4.5 million mortgage balance on the real property in Massachusetts.
If actual results differ significantly from our projections, we may be required to record a material impairment charge.
If actual results differ significantly from our projections, we may be required to record a material impairment charge. As of September 30, 2024, the Company performed a qualitative impairment test on intangible assets and goodwill and concluded there was no further impairment.
We regularly review inventory quantities and record a write-down to net realizable value for excess and obsolete inventory. The write-down is primarily based on purchase history, historical inventory usage adjusted for expected changes in product demand, product offerings and production requirements.
The write-down is primarily based on purchase history, historical inventory usage adjusted for expected changes in product demand, product offerings and production requirements. Our industry is characterized by customers in highly-cyclical industries, rapid technological changes, frequent new product developments and rapid product obsolescence.
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.
Segment Reporting Changes We evaluated our organizational structure and concluded that we have two reportable segments; Thermal Processing Solutions (formerly called Semiconductor) and Semiconductor Fabrication Solutions (formerly called Material & Substrate). Our Semiconductor Fabrication Solutions segment includes Entrepix beginning at the date of acquisition.
In 2023, the fair value of our Semiconductor segment was in excess of its carrying value by approximately 45%, and the fair value of our Material and Substrate segment was in excess of its carrying value by approximately 1%, resulting in no goodwill impairment during the year ended September 30, 2023.
The impairment testing as of September 30, 2024, resulted in the fair value of our Thermal Processing Solutions segment exceeding its carrying value by approximately 44%, and the fair value of our Semiconductor Fabrication Solutions segment exceeding its carrying value by approximately 18%, resulting in no additional goodwill impairment. See Note 10 for additional information on goodwill by segment.
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.
We continue to experience softness in shipments of our advanced packaging and SMT equipment, primarily related to a slowdown in global demand in the consumer markets. Revenue from our Semiconductor Fabrication Solutions segment decreased $3.7 million, or 10%, due to decreases in shipments of our polishing equipment, which was eliminated at the end of 2023, with final shipments in 2024.
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.
Income Taxes Our effective tax rate was (13.0)% and 17.1% in 2024 and 2023, respectively. The effective tax rate is the ratio of total income tax expense to pre-tax income. The effective tax rates for 2024 and 2023 were lower than the U.S. statutory rate of 21%.
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.
Additionally, we experienced declines in our wafer cleaning equipment, partially offset by increases in our consumables shipments. 36 Orders and Backlog New orders booked by reportable segment were as follows, dollars in thousands: Years Ended September 30, Segment 2024 2023 Increase (Decrease) % Change Thermal Processing Solutions $ 49,318 $ 74,817 $ (25,499 ) (34 )% Semiconductor Fabrication Solutions 29,959 29,080 879 3 % Total new orders $ 79,277 $ 103,897 $ (24,620 ) (24 )% Our backlog by reportable segment was as follows, dollars in thousands: September 30, Segment 2024 2023 Increase (Decrease) % Change Thermal Processing Solutions $ 20,845 $ 45,233 $ (24,388 ) (54 )% Semiconductor Fabrication Solutions 4,467 6,561 (2,094 ) (32 )% Total backlog $ 25,312 $ 51,794 $ (26,482 ) (51 )% At the end of 2024, two customers individually accounted for 25% and 20% of our total backlog.
We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe. We operate in two reportable segments, based primarily on the industries they serve: (i) Semiconductor and (ii) Material and Substrate.
We operate in two reportable segments, based primarily on the industries they serve: (i) Thermal Processing Solutions (formerly called Semiconductor) and (ii) Semiconductor Fabrication Solutions (formerly called Material and Substrate). Our thermal processing solutions include reflow equipment for chip packaging and electronic assembly, diffusion furnaces and furnaces used to produce ceramic based power semiconductor packages and passive electronic components.
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Overview We are 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").
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Our products are used in fabricating semiconductor devices, such as silicon carbide (SiC) and silicon (Si) power devices, digital and analog devices, power electronic packages, advanced semiconductor packages and electronic assemblies. We sell these products to semiconductor device and module manufacturers worldwide, particularly in Asia, North America and Europe.
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In our Semiconductor segment, we supply thermal processing equipment, including solder reflow ovens, horizontal diffusion furnaces, and custom high-temp belt furnaces for use by semiconductor, electronics and electro/mechanical assembly manufacturers. Our semiconductor customers are primarily manufacturers of integrated circuits and optoelectronic sensors and discrete ("O-S-D") components used in analog, power and radio frequency ("RF").
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Our semiconductor fabrication solutions include consumables, equipment and services for wafer polishing, cleaning, slicing and dicing. The markets we serve are historically cyclical, but not seasonal, with constantly evolving technical requirements and can be subject to tariffs and sourcing restrictions driven by geopolitical tensions. Our revenue is impacted by these broad industry trends.
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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.
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We continue to invest in research and development, including the introduction of our next-generation reflow platform, Aurora, in 2023. Historically, we have grown our business primarily through acquisitions, including the businesses that currently comprise our two reportable segments in the Thermal Processing Solutions and Semiconductor Fabrication Solutions industries: BTU, PR Hoffman, Intersurface Dynamics and Entrepix.
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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.
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Our 2023 acquisition of Entrepix bolstered our offerings in the CMP technology space and incorporated wafer cleaning into our existing capital 34 equipment product lines.
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Our Power Semiconductor strategic growth plan leverages our experience, products and capabilities in pursuit of growth, profitability and sustainability.
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We continue to believe this inorganic growth strategy is the backbone of who Amtech is as a company, we also have a complimentary strategy of pursuing organic growth, particularly during times when we lacked sufficient capital resources to pursue growth through acquisitions.
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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.
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We will continue to pursue acquisitions to supplement organic growth and have added market development resources globally to accelerate organic growth. In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located. In connection with this sale, we entered into a two-year leaseback of the facility.
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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.
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As we expand our use of contract manufacturers, we will continue to look for ways to reduce our real estate footprint. In March 2024, we completed the sale of our corporate headquarters real property in Arizona. The sale resulted in a net cash inflow of approximately $2.5 million, after settlement of related sale expenses.
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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.
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Following the closing of this transaction, we entered into a lease agreement for a new office for our corporate headquarters, which commenced during the third quarter of fiscal year 2024.
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We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with foreign government, state and local orders to date, we have continued to operate across our footprint throughout the COVID-19 pandemic.
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During the three months ended June 30, 2024, a horizontal diffusion customer notified us of the cancelation of a furnace project for $4.5 million, which we believe is due to the slow-down in electric vehicle adoption. Also during this period, the improvement in lead times across all of our product lines favorably contributed to the decline in our backlog.
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There remain many unknowns and we continue to monitor the expected trends and related demand for our products and services and have and will continue to adjust our operations accordingly. Please see additional information in “Item 1A. Risk Factors.” On March 28, 2022, the Chinese government issued a mandatory shutdown in Shanghai, the location of one of our manufacturing facilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, therefore, are not required to provide the information requested by this Item.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, therefore, are not required to provide the information requested by this Item. 46

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