(in thousands, except share data)

	June 30, 2020			September 30, 2019
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	46,436		$	52,982
Restricted cash		—			101
Accounts receivable (less allowance for doubtful accounts of $138 and $172 at June 30, 2020, and September 30, 2019, respectively)		10,297			12,873
Inventories		19,385			17,532
Notes and other receivables		1,250			—
Income taxes receivable		150			—
Held-for-sale assets		—			22,755
Other current assets		3,066			2,027
Total current assets		80,584			108,270
Property, Plant and Equipment - Net		10,438			10,217
Right-of-Use Assets - Net		5,162			—
Intangible Assets - Net		674			870
Goodwill - Net		6,633			6,633
Other Assets		565			487
Total Assets	$	104,056		$	126,477

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	3,933		$	4,371
Accrued compensation and related taxes		1,983			2,717
Accrued warranty expense		401			556
Other accrued liabilities		1,478			1,274
Current maturities of long-term debt		376			371
Contract liabilities		1,645			1,378
Income taxes payable		—			1,434
Held-for-sale liabilities		—			18,547
Total current liabilities		9,816			30,648
Long-Term Debt		4,894			5,178
Long-Term Lease Liability		5,088			—
Income Taxes Payable		2,007			3,199
Total Liabilities		21,805			39,025
Commitments and Contingencies
Shareholders’ Equity
Preferred stock; 100,000,000 shares authorized; NaN issued		—			—
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,048,172 and 14,268,797 at June 30, 2020 and September 30, 2019, respectively		140			143
Additional paid-in capital		124,289			125,098
Accumulated other comprehensive loss		(1,792	)		(11,233	)
Retained deficit		(40,386	)		(26,556	)
Total shareholders’ equity		82,251			87,452
Total Liabilities and Shareholders’ Equity	$	104,056		$	126,477

December 31,
2017 September 30,
2017
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 52,696
$ 51,121
Restricted cash 9,913
24,640
Accounts receivable
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively) 24,365
22,519
Unbilled and other 21,620
14,275
Inventories 22,762
30,210
Vendor deposits 5,180
11,806
Other 2,310
2,542
Total current assets 138,846
157,113
Property, Plant and Equipment - Net 15,637
15,792
Intangible Assets - Net 3,378
3,495
Goodwill - Net 11,484
11,405
Investments 2,588
2,615
Deferred Income Taxes - Long-Term 200
200
Other Assets - Long-Term 980
1,003
Total Assets $ 173,113
$ 191,623
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable $ 20,483
$ 21,555
Accrued compensation and related taxes 7,422
7,592
Accrued warranty expense 1,401
1,254
Other accrued liabilities 2,918
2,056
Customer deposits 19,328
48,784
Current maturities of long-term debt 365
361
Deferred profit 5,632
4,081
Income taxes payable 1,608
286
Total current liabilities 59,157
85,969
Long-Term Debt 8,225
8,134
Income Taxes Payable - Long-Term 6,802
7,037
Total Liabilities 74,184
101,140
Commitments and Contingencies

Stockholders’ Equity
Preferred stock; 100,000,000 shares authorized; none issued —
—
Common stock; $0.01 par value; 100,000,000 shares authorized;
shares issued and outstanding: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively 149
147
Additional paid-in capital 127,015
125,564
Accumulated other comprehensive loss (7,988 ) (8,529 )
Retained deficit (20,247 ) (26,699 )
Total stockholders’ equity 98,929
90,483
Total Liabilities and Stockholders’ Equity $ 173,113
$ 191,623

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

	Three Months Ended June 30,					Nine Months Ended June 30,
	2020			2019		2020			2019
Revenues, net of returns and allowances	$	15,227		$	21,003	$	50,379		$	64,861
Cost of sales		9,276			13,153		30,896			40,064
Gross profit		5,951			7,850		19,483			24,797

Selling, general and administrative		4,804			5,718		16,134			18,137
Research, development and engineering		899			746		2,436			2,325
Restructuring charges		217			35		217			1,072
Operating income		31			1,351		696			3,263
Loss on sale of subsidiary		—			—		(2,793	)		—
Interest (expense) income and other, net		(13	)		249		512			511
Income (loss) from continuing operations before income taxes		18			1,600		(1,585	)		3,774
Income tax provision		90			707		297			1,621
(Loss) income from continuing operations, net of tax		(72	)		893		(1,882	)		2,153
Income (loss) from discontinued operations, net of tax		—			1,154		(11,816	)		(8,113	)
Net (loss) income	$	(72	)	$	2,047	$	(13,698	)	$	(5,960	)

(Loss) Income Per Basic Share:
Basic (loss) income per share from continuing operations	$	(0.01	)	$	0.06	$	(0.13	)	$	0.15
Basic income (loss) per share from discontinued operations	$	—		$	0.08	$	(0.83	)	$	(0.57	)
Net (loss) income per basic share	$	(0.01	)	$	0.14	$	(0.96	)	$	(0.42	)

(Loss) Income Per Diluted Share:
Diluted (loss) income per share from continuing operations	$	(0.01	)	$	0.06	$	(0.13	)	$	0.15
Diluted income (loss) per share from discontinued operations	$	—		$	0.08	$	(0.83	)	$	(0.57	)
Net (loss) income per diluted share	$	(0.01	)	$	0.14	$	(0.96	)	$	(0.42	)

Weighted average shares outstanding - basic		14,155			14,245		14,195			14,231
Weighted average shares outstanding - diluted		14,155			14,316		14,195			14,267

Three Months Ended December 31,
2017 2016
Revenues, net of returns and allowances $ 73,611
$ 29,135

Cost of sales 53,274
20,692

Gross profit 20,337
8,443

Selling, general and administrative 10,580
6,996

Research, development and engineering 1,991
1,627

Operating income (loss) 7,766
(180 )
Loss from equity method investment (26 ) (143 )
Interest expense and other income, net (48 ) 81

Income (loss) before income taxes 7,692
(242 )
Income tax provision 1,240
90

Net income (loss) 6,452
(332 )

Add: net loss attributable to noncontrolling interest —
279

Net income (loss) attributable to Amtech Systems, Inc. $ 6,452
$ (53 )

Income (Loss) Per Share:

Basic income (loss) per share attributable to Amtech shareholders $ 0.44
$(0.00)
Weighted average shares outstanding 14,781
13,179

Diluted income (loss) per share attributable to Amtech shareholders $ 0.42
$(0.00)
Weighted average shares outstanding 15,298
13,179

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Net (loss) income	$	(72	)	$	2,047		$	(13,698	)	$	(5,960	)
Foreign currency translation adjustment		22			(904	)		644			(1,690	)
Reclassification adjustment for net foreign currency translation losses included in net (loss) income		—			487			8,797			487
Comprehensive (loss) income	$	(50	)	$	1,630		$	(4,257	)	$	(7,163	)

Three Months Ended December 31,
2017 2016
Net income (loss) $ 6,452
$ (332 )
Foreign currency translation adjustment 541
(941 )
Comprehensive income (loss) 6,993
(1,273 )

Comprehensive loss attributable to noncontrolling interest —
375

Comprehensive income (loss) attributable to Amtech Systems, Inc. $ 6,993
$ (898 )

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Cash Flows~~

Shareholders’ Equity

(Unaudited)

(in thousands)

	Common Stock						Treasury Stock									Accumulated Other			Retained Earnings			Total
	Shares			Par Value			Shares			Par Value			Additional Paid- In Capital			Comprehensive Income (Loss)			(Accumulated Deficit)			Shareholders' Equity
Balance at September 30, 2018		14,217		$	142			—		$	—		$	124,316		$	(9,974	)	$	(21,394	)	$	93,090
Net loss		—			—			—			—			—			—			(2,372	)		(2,372	)
Translation adjustment		—			—			—			—			—			(576	)		—			(576	)
Stock compensation expense		—			—			—			—			169			—			—			169
Stock options exercised		11			—			—			—			37			—			—			37
Balance at December 31, 2018		14,228			142			—			—			124,522			(10,550	)		(23,766	)		90,348
Net loss		—			—			—			—			—			—			(5,635	)		(5,635	)
Translation adjustment		—			—			—			—			—			(210	)		—			(210	)
Stock compensation expense		—			—			—			—			194			—			—			194
Stock options exercised		—			—			—			—			—			—			—			—
Balance at March 31, 2019		14,228			142			—			—			124,716			(10,760	)		(29,401	)		84,697
Net income		—			—			—			—			—			—			2,047			2,047
Translation adjustment		—			—			—			—			—			(417	)		—			(417	)
Stock compensation expense		—			—			—			—			111			—			—			111
Stock options exercised		30			1			—			—			137			—			—			138
Balance at June 30, 2019		14,258		$	143			—		$	—		$	124,964		$	(11,177	)	$	(27,354	)	$	86,576


Balance at September 30, 2019		14,269		$	143			—		$	—		$	125,098		$	(11,233	)	$	(26,556	)	$	87,452
Net loss		—			—			—			—			—			—			(1,932	)		(1,932	)
Translation adjustment		—			—			—			—			—			2,673			—			2,673
Stock compensation expense		—			—			—			—			68			—			—			68
Stock options exercised		117			1			—			—			700			—			—			701
Balance at December 31, 2019		14,386			144			—			—			125,866			(8,560	)		(28,488	)		88,962
Net loss		—			—			—			—			—			—			(11,694	)		(11,694	)
Translation adjustment		—			—			—			—			—			6,746			—			6,746
Stock compensation expense		—			—			—			—			65			—			—			65
Stock repurchases		—			—			(366	)		(2,000	)		—			—			—			(2,000	)
Retirement of stock repurchases		(366	)		(4	)		366			2,000			(1,864	)		—			(132	)		—
Stock options exercised		21			—			—			—			78			—			—			78
Balance at March 31, 2020		14,041			140			—			—			124,145			(1,814	)		(40,314	)		82,157
Net loss		—			—			—			—			—			—			(72	)		(72	)
Translation adjustment		—			—			—			—			—			22			—			22
Stock compensation expense		—			—			—			—			124			—			—			124
Stock options exercised		7			—			—			—		��	20			—			—			20
Balance at June 30, 2020		14,048		$	140			—		$	—		$	124,289		$	(1,792	)	$	(40,386	)	$	82,251

Three Months Ended December 31,
2017 2016
Operating Activities
Net income (loss) $ 6,452
$ (332 )
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:

Depreciation and amortization 471
654
Write-down of inventory 41
33
Capitalized interest 143
190
Deferred income taxes (7 ) 31
Non-cash share based compensation expense 253
319
Loss from equity method investment 26
143
Provision for (reversal of) allowance for doubtful accounts, net 48
(1,178 )
Changes in operating assets and liabilities:
Restricted cash 14,885
(2,425 )
Accounts receivable (8,869 ) (3,600 )
Inventories 7,558
1,621
Accrued income taxes 1,087
239
Vendor deposits and other assets 6,974
725
Accounts payable (1,255 ) 78
Customer deposits and accrued liabilities (29,023 ) 584
Deferred profit 1,479
(619 )
Net cash provided by (used in) operating activities 263
(3,537 )
Investing Activities
Purchases of property, plant and equipment (93 ) (86 )
Proceeds from sale of property, plant and equipment —
1
Net cash used in investing activities (93 ) (85 )
Financing Activities
Proceeds from the exercise of stock options 1,199
1
Payments on long-term debt (89 ) (160 )
Borrowings on long-term debt —
21
Net cash provided by (used in) financing activities 1,110
(138 )
Effect of Exchange Rate Changes on Cash and Cash Equivalents 295
(257 )
Net Increase (Decrease) in Cash and Cash Equivalents 1,575
(4,017 )
Cash and Cash Equivalents, Beginning of Period 51,121
27,655
Cash and Cash Equivalents, End of Period $ 52,696
$ 23,638

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Nine Months Ended June 30,
	2020			2019
Operating Activities
Net loss	$	(13,698	)	$	(5,960	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		932			1,280
Write-down of inventory		540			2,991
Deferred income taxes		784			192
Non-cash share-based compensation expense		257			474
Loss (gain) on sales of subsidiaries		13,708			(1,614	)
(Reversal of) provision for allowance for doubtful accounts, net		(26	)		1,104
Other, net		13			107
Changes in operating assets and liabilities:
Accounts receivable		2,356			630
Inventories		(2,791	)		284
Other assets		(2,376	)		12,675
Accounts payable		(2,363	)		(3,843	)
Accrued income taxes		(2,722	)		(1,359	)
Accrued and other liabilities		5,346			(5,726	)
Contract liabilities		(950	)		(814	)
Net cash (used in) provided by operating activities		(990	)		421
Investing Activities
Purchases of property, plant and equipment		(860	)		(552	)
Net cash disposed of in sales of subsidiaries		(9,940	)		(1,112	)
Net cash used in investing activities		(10,800	)		(1,664	)
Financing Activities
Proceeds from the exercise of stock options		799			175
Repurchase of common stock		(2,000	)		—
Payments on long-term debt		(285	)		(280	)
Borrowings on long-term debt		—			9
Net cash used in financing activities		(1,486	)		(96	)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash		578			(1,450	)
Net Decrease in Cash, Cash Equivalents and Restricted Cash		(12,698	)		(2,789	)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period*		59,134			62,496
Cash, Cash Equivalents and Restricted Cash, End of Period*	$	46,436		$	59,707

*	Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020.

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

AMTECH SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED ~~DECEMBER 31, 2017~~JUNE 30, 2020 AND ~~2016~~

2019

(UNAUDITED)

1. Basis of Presentation and Significant Accounting Policies

Nature of Operations and Basis of Presentation – Amtech Systems, Inc. (the ~~“Company”, “Amtech”, “we”,~~“Company,” “Amtech,” “we,” “our” or “us”) is a leading, global manufacturer of capital equipment, including thermal processing ~~silicon~~and wafer ~~handling automation,~~polishing, and related consumables used in fabricating ~~solar cells, LED~~semiconductor devices, such as silicon carbide (SiC) and ~~semiconductor devices.~~silicon power chips, electronic assemblies and light-emitting diodes (LEDs). We sell these products to ~~solar cell~~semiconductor and ~~semiconductor~~automotive component manufacturers worldwide, particularly in Asia, ~~the United States~~North America and Europe.

We serve niche markets in industries that are experiencing ~~rapid~~ technological advances and which historically have been very cyclical. Therefore, our future profitability and growth depend on our ability to develop or acquire and market profitable new products and on our ability to adapt to cyclical trends.

In the second quarter of fiscal 2019, we began the process to divest our solar business. As such, we have classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations. These divestitures were completed in the second quarter of fiscal 2020. For additional information on the divestitures, see Note 4. For additional information on our segments, see Note 10.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and consequently do not include all disclosures normally required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly our financial position, results of operations and cash flows. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. The condensed balance sheet at September 30, 2019, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K ~~as amended,~~ for the fiscal year ended September 30, ~~2017.~~

2019.

Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2020 and 2019 relate to the fiscal years ended September 30, 2020 and 2019, respectively.

The consolidated results of operations for the three and nine months ended ~~December 31, 2017,~~June 30, 2020, are not necessarily indicative of the results to be expected for the full fiscal year.

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest. We report non-controlling interests in consolidated entities as a component of equity separate from our equity. The equity method of accounting is used for investments over which we have asubsidiaries. All significant ~~influence but not a controlling financial interest. All material~~ intercompany ~~accounts~~balances and transactions have been eliminated in consolidation. Effective July 1, 2017, we purchased the non-controlling interest in SoLayTec B.V. (“SoLayTec”), pursuant to which SoLayTec became a wholly-owned subsidiary of Amtech. Beginning July 1, 2017, the non-controlling interest will no longer be reported. Prior amounts have not been restated.

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

~~Revenue Recognition~~

Reclassifications – ~~We review product~~Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Results for all periods presented in this report have been reclassified for changes to our reportable segments (Note 10). These reclassifications had no effect on the previously reported consolidated financial statements for any period.

Divestitures – Significant accounting policies associated with a decision to dispose of a business are discussed below:

Discontinued Operations– A business is classified as discontinued operations if the disposal represents a strategic shift that will have a major effect on operations or financial results and ~~service sales contracts with multiple deliverables~~meets the criteria to ~~determine if~~be classified as held for sale or is disposed of by sale or otherwise. Significant judgments are involved in determining whether a business meets the criteria for discontinued operations reporting and the period in which these criteria are met. If a business is reported as a discontinued operation, the results of operations through the date of sale, including any gain or loss recognized on the disposition, are presented on a separate ~~units~~line of ~~accounting are present. Where separate units~~the Condensed Consolidated Statements of ~~accounting exist, revenue~~Operations. Interest on debt directly attributable to the discontinued operation is allocated to ~~delivered items~~discontinued operations.

Assets Held for Sale– An asset or business is classified as held for sale when (i) management commits to a plan to sell and it is actively marketed; (ii) it is available for immediate sale and the ~~lower~~sale is expected to be completed within one year; and (iii) it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. In isolated instances, assets held for sale may exceed one year due to events or circumstances beyond our control. The assets and related liabilities are aggregated and reported on separate lines of the ~~relative selling price of the delivered items in the sales arrangement or the portion of the selling price that is not contingent upon performance of the service.~~

We recognize revenue when persuasive evidence of an arrangement exists; the product has been delivered and title has transferred, or services have been rendered; and the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. For us, this policy generally results in revenue recognition at the following points:

For our equipment business, transactions where legal title passes to the customer upon shipment, we recognize revenue upon shipment for those products where the customer’s defined specifications have been met with at least two similarly configured systems and processes for a comparably situated customer. Our selling prices may include both equipment and services, i.e., installation and start-up services performed by our service technicians. The equipment and services are multiple deliverables. Certain equipment that has a positive track record of successful installation and customer acceptance are considered to be routine systems. Our recognition of revenue upon delivery of such equipment that has been routinely installed and accepted is equal to the total selling price minus the relative selling price of the undelivered services.

Where the installation and acceptance of more than two similarly configured items of equipment have not become routine, recognition of revenue upon delivery of equipment is limited to the lesser of (i) the total selling price minus the relative selling price of the undelivered services or (ii) the non-contingent amount. Since we defer only those costs directly related to installation, or another unit of accounting not yet delivered, and the portion of the contract price is often considerably greater than the relative selling price of those items, our policy at times will result in deferral of profit that is disproportionate in relation to the deferred revenue. When this is the case, the gross margin recognized in one period will be lower and the gross margin reported in a subsequent period will improve.

For products where the customer’s defined specifications have not been met with at least two similarly configured systems and processes, the revenue and directly related costs are deferred at the time of shipment and later recognized at the time of customer acceptance or when this criterion has been met. We have, on occasion, experienced longer than expected delays in receiving cash from certain customers pending final installation or system acceptance. If some customers refuse to pay the final payment, or otherwise delay final acceptance or installation, the deferred revenue would not be recognized, adversely affecting future cash flows and operating results.


3.	~~Sales of certain equipment, spare parts and consumables are recognized upon shipment, as there are no post shipment obligations other than standard warranties.~~


4.	Service revenue is recognized upon performance of the services requested by the customer. Service contract revenue is recognized as services are performed over the term of the contract, which generally results in ratable recognition over the period of the contract.

~~Deferred Profit~~ – Revenue deferred pursuant to our revenue policy, net of the related deferred costs, if any, is recorded as deferred profit in current liabilities. The components of deferred profit are as follows, in thousands:

December 31,
2017 September 30,
2017
Deferred revenues $ 8,370
$ 6,822
Deferred costs 2,738
2,741
Deferred profit $ 5,632
$ 4,081

Condensed Consolidated Balance Sheets.

Shipping Expense – Shipping expenses of ~~$1.2~~$0.1 million and ~~$0.4~~$0.2 million for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively, and $0.4 million and $0.6 million for the nine months ended June 30, 2020 and 2019, respectively, are included in selling, general and administrative expenses.

Research, Development and Engineering Expense – The table below shows gross research and development expenses and grants earned, in thousands:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Research, development and engineering	$	982		$	790		$	2,762		$	2,369
Grants earned		(83	)		(44	)		(326	)		(44	)
Net research, development and engineering	$	899		$	746		$	2,436		$	2,325

Three Months Ended
December 31,
2017 December 31,
2016
Research, development and engineering $ 2,290
$ 1,830

Grants earned (299 ) (203 )
Net research, development and engineering $ 1,991
$ 1,627

~~Foreign Currency Transactions and Translation~~ – We use the U.S. dollar as our reporting currency. Our operations in Europe, China and other countries are primarily conducted in their functional currencies, the Euro, Renminbi, or the local country currency, respectively. Accordingly, assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the balance sheet dates. Income and expense items are translated at the average exchange rate for each month within the year. The resulting translation adjustments are recorded directly in accumulated other comprehensive income (loss), net of tax - foreign currency translation adjustments as a separate component of stockholders’ equity. Net foreign currency transaction gains/losses, including transaction gains/losses on intercompany balances that are not of a long-term investment nature and non-functional currency cash balances, are reported as a separate component of non-operating (income) expense in our consolidated statements of operations.

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

As of ~~December 31, 2017, two customers~~June 30, 2020, one Semiconductor segment customer individually represented ~~36% and~~ 12% of accounts receivable. As of September 30, ~~2017, two customers~~2019, one Semiconductor customer individually represented ~~24% and 11%~~15% of accounts receivable.

We maintain our cash, cash equivalents and restricted cash in multiple financial institutions. Balances in the United States, which account for approximately ~~56%~~89% and ~~45%~~79% of total cash balances at our continuing operations as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017,~~2019, respectively, are primarily invested in U.S. Treasuries or are in financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). The remainder of our cash is maintained with financial institutions with reputable credit ratings in ~~The Netherlands, France,~~ China, the United Kingdom, Singapore and Malaysia.

We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. We have not experienced any losses on such accounts.

Refer to Note 911 to Condensed Consolidated Financial Statements for information regarding major customers, foreign sales and revenue in other countries subject to fluctuation in foreign currency exchange rates.

Impact of Recently Issued Accounting Pronouncements

~~In March 2016,~~

Effective October 1, 2019, we adopted the Financial Accounting Standards ~~Board (the “FASB”~~Board’s (“FASB”) ~~issued~~ Accounting ~~Standards~~Standard Update (“ASU”) ~~2016-09, “Compensation - Stock Compensation~~No. 2016-02—Leases (Topic ~~718).” ASU 2016-09 identifies areas for simplification involving several aspects~~842), using the retrospective cumulative effect adjustment transition method. We elected the package of ~~accounting for share-based payment transactions, including~~practical expedients permitted under the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016 and for the interim periods therein. This new standard increases volatility in the statement of operations by requiring all excess tax benefits and deficiencies to be recognized as discrete income tax benefits or expenses in the statement of operations in the period in which they occur. We adoptedtransition guidance within the new standard, ~~as of October 1, 2017, and prospectively applied~~which among other things, allowed us to carry forward the ~~provisions in this guidance requiring recognition of excess tax benefits and deficits in the statement of operations. Also, as a result of the adoption of the new standard,~~historical lease classification. In addition, we made an accounting policy election not to ~~recognize forfeitures as they occur~~separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and ~~no longer estimate expected forfeitures. The provisions~~buildings. We also made an accounting policy election to not record right of use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on our condensed consolidated balance sheet.

Adoption of the new standard resulted in ~~this guidance requiring~~ the ~~use~~recording of ~~a modified retrospective transition method would have required us to record a cumulative-effect adjustment in retained earnings~~lease ROU assets and lease liabilities of approximately $195,000 and $163,000, respectively, as of October 1, 2017. On the basis of immateriality, we recorded such cumulative-effect adjustment as stock-based compensation in the first quarter of 2018 rather than adjusting retained earnings. Lastly, we applied the provisions of this guidance relating to classification on the statement of cash flows retrospectively with2019. The standard did not materially impact our consolidated results from operations and had no ~~material effect~~impact on our cash ~~flows.~~

flows upon adoption. However, during the third quarter of fiscal 2020, we recorded an additional $5.0 million of ROU assets and lease liabilities upon the commencement of our new SiC/LED building lease. Refer to Note 3 to the Condensed Consolidated Financial Statements for further information regarding Topic 842.

There have been no other material changes or additions to the recently issued accounting standards asother than those previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K ~~as amended,~~ for the year ended September 30, ~~2017~~2019 that affect or may affect our consolidated financial statements.

2. Contracts with Customers

The components of contract assets, which are included in other current assets in our condensed consolidated balance sheets, are as follows, in thousands:

June 30,

2020

September 30,

2019

Unbilled accounts receivable

—

Contract assets

—

The components of contract liabilities are as follows, in thousands:

June 30,

2020

September 30,

2019

Customer deposits

1,645

1,378

Contract liabilities

1,645

1,378

3. Leases

We lease office space, buildings, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet. Instead, we recognize the lease expense as incurred over the lease term.

Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Significant Accounting Policy

We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in Right-of-Use assets in our condensed consolidated balance sheet. Balances related to financing leases are immaterial and are included in property and equipment, other current liabilities, and long-term lease liability in our condensed consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As none of our leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The following table provides information about the financial statement classification of our lease balances reported within the condensed consolidated balance sheets as of June 30, 2020 and October 1, 2019, in thousands:

	June 30, 2020		October 1, 2019
Assets
Operating lease assets	$	5,162	$	146
Finance lease assets		29		49
Total lease assets	$	5,191	$	195
Liabilities
Current
Operating lease liabilities	$	115	$	99
Finance lease liabilities		12		22
Non-current
Operating lease liabilities		5,069		15
Finance lease liabilities		19		27
Total lease liabilities	$	5,215	$	163

The following table provides information about the financial statement classification of our lease expenses reported in the condensed consolidated statements of operations for the three and nine months ended June 30, 2020, in thousands:

Lease cost	Classification	Three Months Ended June 30, 2020		Nine Months Ended June 30, 2020
Operating lease cost	Selling, general and administrative expenses	$	72	$	187
Finance lease cost	Selling, general and administrative expenses		5		20
Total lease cost		$	77	$	207

Future minimum lease payments under non-cancelable leases as of June 30, 2020 are as follows, in thousands:

	Operating leases		Finance Leases		Total
Remainder of 2020	$	85	$	4	$	89
2021		323		12		335
2022		317		8		325
2023		312		7		319
2024		311		2		313
2025		297		—		297
Thereafter		6,944		—		6,944
Total lease payments		8,589		33		8,622
Less: Interest		3,405		2		3,407
Present value of lease liabilities		5,184		31	$	5,215

Operating lease payments include $3.9 million related to options to extend lease terms that are reasonably certain of being exercised.

The following table provides information about the remaining lease terms and discount rates applied as of June 30, 2020:

	June 30, 2020
Weighted average remaining lease term
Operating leases	24.33 years
Finance leases	2.89 years
Weighted average discount rate
Operating leases		4.17	%
Finance leases		4.17	%

4. Assets Held for Sale, Discontinued Operations and Disposals

In April 2019, we announced that our Board of Directors (the “Board”) determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. The divestitures of our solar business included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. We classified substantially all of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations for periods reported subsequent to the announcement.

On June 7, 2019 (“SoLayTec Sale Date”), we completed the sale of our subsidiary, SoLayTec, to a third party located in the Netherlands. Upon the sale, we recognized a gain of approximately $1.6 million, which we reported as gain on sale of subsidiary in our Consolidated Statements of Operations for the three months ended June 30, 2019. Effective on the SoLayTec Sale Date, SoLayTec is no longer included in our consolidated financial statements. SoLayTec was not material to Amtech’s results of operations or financial position.

On December 13, 2019 (“R2D Sale Date”), we finalized the sale of our subsidiary, R2D Automation SAS (“R2D”), to certain members of R2D’s management team. Upon the sale, we recognized a loss of approximately $2.8 million, which we reported as loss on sale of subsidiary in our Condensed Consolidated Statements of Operations for the nine months ended June 30, 2020. Effective on the R2D Sale Date, R2D is no longer included in our consolidated financial statements. R2D does not meet the discontinued operations or held-for-sale criteria and is not material to Amtech’s results of operations or financial position.

Effective January 22, 2020 (“Tempress Sale Date”), we completed the sale of our subsidiary, Tempress Group Holding B.V. (“Tempress”) for nominal consideration to a third party located in the Netherlands. In connection with this sale transaction, we provided an unsecured term loan to Tempress in the principal sum of $2.25 million, to be used to fund Tempress’ working capital requirements and to facilitate the restructuring of Tempress’ operations. In July 2020, we received the final loan payment of $1.25 million. We forgave $0.5 million of the loan in accordance with the terms of the loan agreement. We recorded a pre-tax loss on deconsolidation of approximately $10.9 million, of which approximately $7.2 million was the recognition of previously recorded accumulated foreign currency translation losses. The total pre-tax loss does not have a material effect on our cash balances at our continuing operations. We also recognized a significant tax benefit relating to this loss, which can be carried over to future years. Effective on the Tempress Sale Date, Tempress is no longer included in our consolidated financial statements.

Operating results of our discontinued solar operations were as follows, in thousands:

	Three Months Ended June 30,					Nine Months Ended June 30,
	2020		2019			2020			2019
Revenues, net of returns and allowances	$	—	$	5,268		$	7,442		$	19,649
Cost of sales		—		4,374			5,969			19,726
Gross profit (loss)		—		894			1,473			(77	)
Selling, general and administrative		—		1,735			1,814			7,412
Research, development and engineering		—		736			540			2,647
Restructuring charges		—		(3	)		37			598
Operating loss		—		(1,574	)		(918	)		(10,734	)
Gain (loss) on sale of subsidiary		—		1,614			(10,916	)		1,614
Interest expense and other, net		—		(143	)		(29	)		(213	)
Loss from discontinued operations before income taxes		—		(103	)		(11,863	)		(9,333	)
Income tax benefit		—		(1,257	)		(47	)		(1,220	)
Net income (loss) from discontinued operations, net of tax	$	—	$	1,154		$	(11,816	)	$	(8,113	)

The following table presents a summary of the solar assets and liabilities held for sale included in our Condensed Consolidated Balance Sheets, in thousands:

Assets	September 30, 2019
Total current assets	$	17,591
Property, plant and equipment - net		5,164
Total assets included in the disposal group		22,755
Total current liabilities		18,272
Long-term debt		275
Total liabilities included in the disposal group		18,547
Net assets included in the disposal group	$	4,208

Amtech’s Condensed Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement category. The following table summarizes selected cash flow information for discontinued operations, in thousands:

	Nine Months Ended June 30,
	2020			2019
Loss from discontinued operations, net of tax	$	(11,816	)	$	(8,113	)
Depreciation and amortization	$	180		$	426
(Reversal of) provision for allowance for doubtful accounts, net	$	(66	)	$	887
(Loss) gain on sale of subsidiary	$	(10,916	)	$	1,614
Purchases of property, plant and equipment	$	1		$	118

5. Earnings Per Share

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

For the three and nine months ended ~~December 31, 2017~~,June 30, 2020, options for ~~120,000~~695,000 and 652,000 weighted average shares, ~~are~~respectively, were excluded from the diluted EPS calculations because they ~~are~~were anti-dilutive. For the three and nine months ended ~~December 31, 2016~~,June 30, 2019, options for ~~1,886,000~~819,000 and 1,062,000 weighted average shares, respectively, were excluded from the diluted EPS calculations because they were anti-dilutive. These shares could bebecome dilutive in the future.

~~The following table outlines~~

A reconciliation of the denominators of the basic and diluted EPS incalculations follows (in thousands, except per share ~~amounts:~~amounts):

	Three Months Ended June 30,					Nine Months Ended June 30,
	2020			2019		2020			2019
Numerator:
Net (loss) income from continuing operations	$	(72	)	$	893	$	(1,882	)	$	2,153
Net income (loss) from discontinued operations	$	—		$	1,154	$	(11,816	)	$	(8,113	)
Net (loss) income	$	(72	)	$	2,047	$	(13,698	)	$	(5,960	)

Denominator:
Weighted-average shares used to compute basic EPS		14,155			14,245		14,195			14,231
Common stock equivalents (1)		—			71		—			36
Weighted-average shares used to compute diluted EPS		14,155			14,316		14,195			14,267

Basic (loss) income per share from continuing operations	$	(0.01	)	$	0.06	$	(0.13	)	$	0.15
Basic income (loss) per share from discontinued operations	$	—		$	0.08	$	(0.83	)	$	(0.57	)
Net (loss) income per basic share	$	(0.01	)	$	0.14	$	(0.96	)	$	(0.42	)

Diluted (loss) income per share from continuing operations	$	(0.01	)	$	0.06	$	(0.13	)	$	0.15
Diluted income (loss) per share from discontinued operations	$	—		$	0.08	$	(0.83	)	$	(0.57	)
Net (loss) income per diluted share	$	(0.01	)	$	0.14	$	(0.96	)	$	(0.42	)

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

Three Months Ended December 31,
2017 2016
Basic Income (Loss) Per Share Computation
Net income (loss) attributable to Amtech Systems, Inc. $ 6,452
$ (53 )
Weighted Average Shares Outstanding:
Common stock 14,781
13,179

Basic income (loss) per share attributable to Amtech shareholders $ 0.44
$(0.00)
Diluted Income (Loss) Per Share Computation
Net income (loss) attributable to Amtech Systems, Inc. $ 6,452
$ (53 )
Weighted Average Shares Outstanding:
Common stock 14,781
13,179

Common stock equivalents (1) 517
—

Diluted shares 15,298
13,179

Diluted income (loss) per share attributable to Amtech shareholders $ 0.42
$(0.00)

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

6. Inventory

The components of inventories are as follows, in thousands:

	June 30, 2020			September 30, 2019
Purchased parts and raw materials	$	15,908		$	15,192
Work-in-process		4,004			4,215
Finished goods		4,107			3,183
		24,019			22,590
Excess and obsolete reserves		(4,634	)		(5,058	)
	$	19,385		$	17,532

December 31,
2017 September 30,
2017
Purchased parts and raw materials $ 13,628
$ 14,789
Work-in-process 5,806
11,078
Finished goods 3,328
4,343
$ 22,762
$ 30,210

7. Equity and Stock-Based Compensation

Stock-based compensation expense was ~~$0.3~~$0.1 million in ~~both~~each of the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, and was $0.3 million and $0.5 million in the nine months ended June 30, 2020 and 2019, respectively. Stock-based compensation expense is included in selling, general and administrative expenses.

The following table summarizes our stock option activity during the nine months ended June 30, 2020:

	Options			Weighted Average Exercise Price
Outstanding at beginning of period		1,068,665		$	7.04
Granted		32,500			5.34
Exercised		(145,375	)		5.50
Forfeited		(215,894	)		7.65
Outstanding at end of period		739,896		$	7.08
Exercisable at end of period		630,773		$	7.36
Weighted average fair value of options granted during the period	$	2.89

The fair value of options was estimated at the applicable grant date using the Black-Scholes option pricing model with the following assumptions:

	Nine Months Ended June 30, 2020
Risk free interest rate		1	%
Expected life	6 years
Dividend rate		—	%
Volatility		58	%

On November 29, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding common stock, par value $0.01 per share (“Common Stock”), over a one-year period. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased was subject to management’s discretion and depended on the Company’s stock price and other market conditions. Our Board could have terminated the repurchase program at any time while it was in effect. We intended to retire any repurchased shares. The term of our repurchase program expired as of the quarter ended December 31, 2019. There were 0 shares repurchased under this plan.

On February 4, 2020, the Board approved a new stock repurchase program, pursuant to which the Company may repurchase up to $4 million of its outstanding Common Stock over a one-year period, commencing on February 10, 2020. Repurchases under the program will be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, the Company has no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased is subject to management’s discretion and will depend on the Company’s stock price and other market conditions. The Company may, in the sole discretion of the Board, terminate the repurchase program at any time while it is in effect. During the quarter ended March 31, 2020, we repurchased 366,000 shares of our Common Stock on the open market at a total cost of approximately $2.0 million (an average price of $5.46 per share).

8. Income Taxes

For the three months ended ~~December 31, 2017:~~

Options
Weighted
Average
Exercise
Price
Outstanding at beginning of period 1,560,441
$ 7.95
Granted —
—
Exercised (165,839 ) 7.03
Forfeited (27,299 ) 20.04
Outstanding at end of period 1,367,303
$ 7.82

Exercisable at end of period 1,142,012
$ 8.06
Weighted average fair value of options
granted during the period
$ —

~~5. Income Taxes~~

June 30, 2020 and 2019, we recorded income tax expense at our continuing operations of $0.1 million and $0.7 million, respectively. For the nine months ended June 30, 2020 and 2019, we recorded income tax expense of $0.3 million and $1.6 million, respectively. In the three months ended June 30, 2019, we recorded income tax benefit of $1.3 million in our discontinued operations. In the nine months ended June 30, 2020 and 2019, we recorded income tax benefit of $47,000 and $1.2 million, respectively, in our discontinued operations. The tax benefit in the prior year is due to the tax treatment relating to the sale of SoLayTec.The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, losses in certain jurisdictions and discrete items are treated separately.

We are assessing the impact of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which was signed into law on March 27, 2020, on our income tax positions. As the Company is still gathering information necessary to make decisions to apply the provisions in the CARES Act, including five-year carryback of net operating losses, the income tax provision as of and for the three months and nine months ended June 30, 2020, does not reflect such impact.

Deferred tax assets and liabilities reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We record a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Our expectations regarding realization of our deferred tax assets is based upon the weight of all available evidence, including such factors as our recent earnings history, expected future taxable income and available tax planning strategies. ~~In prior periods, we~~We established valuation allowances on substantially all net deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized.

~~The Tax Cuts~~ We will continue to monitor our cumulative income and ~~Jobs Act (the “Act”) was enacted on December 22, 2017, and permanently reduces~~loss positions in the U.S. ~~federal corporate tax rate from 35%~~and foreign jurisdictions to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limits the deduction of interest expense for certain companies. The Act is a fundamental change to the taxation of multinational companies, including a shift from a system of worldwide taxation with some deferral elements to a territorial system, current taxation of certain foreign income, a minimum tax on low-tax foreign earnings, and new measures to curtail base erosion and promote U.S. production.

As a result of the Act, the statutory rate applicable to our fiscal year ending September 30, 2018 will be 24.5%, based on a fiscal year blended rate calculation. Accounting Standard Codification (“ASC”) 740 requires filers to record the effect of tax law changes in the period enacted. However, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), that permits filers to record provisional amounts during a measurement period ending no later than one year from the date of enactment. In the first quarter of fiscal 2018, we re-measured the applicable deferred tax assets based on the rates at which they are expected to reverse. We adjusted our gross deferred tax assets and liabilities and recorded a corresponding offset to ourdetermine whether full valuation ~~allowance against our~~allowances on net deferred tax assets ~~which resulted in minimal net effect to our provision for income taxes and effective tax rate. We have not made any other provisional adjustments as a result of the Act.~~

~~The Act includes a one-time mandatory repatriation transition tax on certain net accumulated earnings and profits of our foreign subsidiaries. We~~ are still in the process of analyzing the earnings and profits and tax pools of our foreign subsidiaries to reasonably estimate the effects of the one-time transition tax and, therefore, have not recorded a provisional impact. The tax expense impact of the one-time transition tax to be determined may be partially or fully offset by a release of valuation allowance for the utilization of existing net operating losses and tax credits that may reduce the amount of related taxes payable. We expect the accounting for this aspect of the Act to be complete by the end of fiscal 2018. As of December 31, 2017, consistent with historical conclusions, our cash balances held in foreign locations are expected to be permanently reinvested outside the United States as the impact of the Act on our current position is not yet fully understood and is still under evaluation.

~~We are assessing the applicability of the other provisions in the Act and expect to complete this analysis by the end of fiscal 2018.~~

For the quarter ended December 31, 2017, we recorded income tax expense of $1.2 million. The difference in our effective tax rate from the U.S. statutory rate primarily reflects the impact of the mix of domestic and international pre-tax income and valuation allowance. In 2017 and the first quarter of 2018, we reversed a portion of the valuation allowance related to net operating loss carryforwards which we have determined will be utilized against net operating income in the current year.

appropriate.

We classify all of our uncertain tax positions as income taxes payable long-term. At ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017,~~2019, the total amount of unrecognized tax benefits was approximately ~~$4.3~~$1.2 million and ~~$4.2~~$1.3 million, respectively. Income taxes payable long-term includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid.

We classify interest and penalties related to unrecognized tax benefits as income tax expense. As of ~~December 31, 2017~~both June 30, 2020 and September 30, ~~2017,~~2019, we had an accrual for potential interest and penalties of approximately ~~$2.7~~$0.8 million ~~and $2.6 million, respectively,~~ classified with income taxes payable long-term.

Amtech and one or more of our subsidiaries file income tax returns in ~~The Netherlands, Germany, France,~~ China and other foreign jurisdictions, as well as in the U.S. and various states in the U.S. We have not signed any agreements with the Internal Revenue Service, any state or foreign jurisdiction to ~~the~~ extend the statute of limitations for any fiscal year. As such, the number of open years is the number of years dictated by statute in each of the respective taxing jurisdictions, which generally is from 3 to 5 years.

9. Commitments and Contingencies

Purchase Obligations – As of ~~December 31, 2017~~,June 30, 2020, we had unrecorded purchase obligations at our continuing operations in the amount of ~~$26.4~~$4.8 million compared to ~~$34.4~~$4.4 million as of September 30, ~~2017.~~ 2019. These purchase obligations consist of outstanding purchase orders for goods and services. While the amount represents purchase agreements, the actual amounts to be paid may be less in the event that any agreements are renegotiated, canceled or terminated.

~~Development Projects~~

Legal Proceedings and Other Claims – In fiscal 2014, our wholly owned subsidiary, Tempress Systems, Inc. (“Tempress”), entered into an agreement with the Energy Research Centre of the Netherlands (“ECN”), a Netherlands government-sponsored research institute, for a joint research and development project. Under the terms of the agreement, Tempress sold an ion implanter (“Equipment”) to ECN for $1.4 million. Both Tempress and ECN are performing research and development projects utilizing the Equipment at the ECN facilities. Each party to the agreement will have 100% rights to the results of the projects developed separately by the individual parties. Any results co-developed will be jointly owned. Tempress met its requirement to contribute $1.4 million to the project in the form of installation of the Equipment, acceptance testing, project meeting attendance, training, parts, and service, including keeping the Equipment in good condition and repair for the first two years of the agreement prior to fiscal 2017.

~~EPA Accrual~~ – As a result of the BTU International, Inc. (“BTU”) acquisition, we assumed BTU’s proportional responsibility for clean-up costs at a Superfund site. As an equipment manufacturer, BTU generated and disposed of small quantities of solid waste that were considered hazardous under Environment Protection Agency (“EPA”) regulations. Because BTU historically used a waste disposal firm that disposed of the solid waste at a site that the EPA designated as a Superfund site, BTU was named by the EPA as one of the entities responsible for a portion of the expected clean-up costs. Based on our proportional responsibility, as negotiated with and agreed to by the EPA, our liability related to this matter is less than $0.1 million, which is included in Other Accrued Liabilities in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017. In accordance with the agreement, BTU established a letter of credit for $0.2 million to the benefit of the EPA for potential cash payments as settlements for our proportional liability, which is included in Restricted Cash in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.

~~Legal Proceedings~~ ~~– We are defendants from~~From time to time, inwe are a party to claims and actions for matters arising out of our business operations. We regularly evaluate the status of the legal proceedings and other claims in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

Employment Contracts and Change in Control Agreements – We have employment contracts and change in control agreements with, and severance plans covering, certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If severance payments under the current employment ~~agreements~~contracts or ~~plan payments~~severance plans were to become payable, the severance payments would generally range from twelve to thirty-six months of salary.

~~7. Shareholder Rights Plan~~

In December 2008, Amtech and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”), entered into an Amended and Restated Rights Agreement (the “Restated Rights Agreement”) which amended and restated

10. Business Segment Information

After announcing the ~~terms governing the previously authorized shareholder rights (each a “Right”) to purchase fractional shares~~planned divestiture of our ~~Series A Participating Preferred Stock (“Series A Preferred”) currently attached to each~~Solar segment (see Note 4), we conducted an evaluation of our ~~outstanding shares~~organizational structure. Beginning with the second quarter of ~~common stock, par value $0.01 per share. As amended, each Right entitles~~fiscal 2019, we made changes to our reportable segments. With the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $51.60 (the “Exercise Price”), subject to adjustment. The Rights will expire 10 years after issuance and will be exercisable if (a) a person or group becomes the beneficial owner of 15% or moredivesture of our ~~common stock or (b) a person or group commences a tender or exchange offer that would result~~Automation segment in the ~~offeror beneficially owning 15% or more~~first quarter of fiscal 2020, we further evaluated our ~~common stock. The Final Expiration Date (as defined in~~organizational structure and concluded that we have two reportable business segments following the ~~Restated Rights Agreement) is December 14, 2018.~~

In October 2015, we entered into a Second Amended and Restated Rights Agreement (the “Second Restated Rights Agreement”) with the Rights Agent, which expands the definition of Exempted Person in the Restated Rights Agreementdivestiture. Prior period amounts have been revised to include any person that our Board of Directors (the “Board”), in its sole and absolute discretion, exempts from becoming an Acquiring Person (as defined in the Restated Rights Agreement) under the Second Restated Rights Agreement. A person deemed an Exempted Person under the Second Restated Rights Agreement cannot trigger any of the Rights provided therein so long as such Exempted Person complies with the terms and conditions by which the Board approved such exemption from the Restated Rights Agreement.

As previously disclosed, in October 2015, we entered into a Letter Agreement (the “Agreement”) by and between Amtech and certain shareholders of Amtech who jointly file (the “Joint Filers”) under Section 13 of the Securities Exchange Act of 1934, as amended. One of the Joint Filers became a member of our Board after the Agreement was approved by the Board. The Agreement permits the Joint Filers, pursuantconform to the Second Restated Rights Agreement, to individually acquire shares of common stock of Amtech that would, in the aggregate, bring the Joint Filers’ collective ownership to no more than 19.9% of our issued and outstanding common stock at any time. In the event the Joint Filers’ collective ownership at any time exceeds 19.9% of our issued and outstanding shares of common stock, we are entitled to specific performance and all other remedies entitled to us at law or equity, among others.current period segment reporting structure. Our ~~Board approved the Agreement and transactions contemplated thereunder, and has the sole authority to terminate the Agreement at any time.~~


8.	~~Business Segment Information~~

~~Our three~~2 reportable segments are as follows:

~~Solar~~ –We are a leading supplier of thermal processing systems, including related automation, parts and services, to the solar/photovoltaic industry and also offer PECVD (plasma-enhanced chemical vapor deposition) equipment to the global solar market.

Semiconductor –We design, manufacture, sell and service thermal processing equipment and related controls for use by leading semiconductor manufacturers, and in electronics, automotive and other industries.

~~Polishing~~

SiC/LED –We produce consumables and machinery for lapping (fine abrading) and polishing of materials, such as silicon and silicon carbide substrates, sapphire substrates, optical components, ~~silicon wafers,~~ numerous types of ~~crystal~~crystalline materials, ceramics and metal components.

We formerly referred to our SiC/LED segment as “Polishing.”

Information concerning our business segments is as follows, in thousands:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Net Revenues:
Semiconductor	$	12,357		$	16,254		$	41,581		$	51,267
SiC/LED		2,870			3,074			8,155			9,330
Non-segment related		—			1,675			643			4,264
	$	15,227		$	21,003		$	50,379		$	64,861
Operating income (loss):
Semiconductor	$	1,058		$	1,951		$	3,762		$	6,428
SiC/LED		241			607			1,196			2,253
Non-segment related		(1,268	)		(1,207	)		(4,262	)		(5,418	)
	$	31		$	1,351		$	696		$	3,263

	June 30, 2020		September 30, 2019
Identifiable Assets:
Semiconductor	$	55,374	$	56,855
SiC/LED		13,337		7,779
Non-segment related*		35,345		39,088
Held-for-sale assets**		—		22,755
	$	104,056	$	126,477

*	Non-segment related assets include cash, property and other assets.

Three Months Ended December 31,
2017 2016
Net Revenues:
Solar * $ 49,197
$ 11,424

Semiconductor 20,891
15,703

Polishing 3,523
2,008

$ 73,611
$ 29,135

Operating income (loss):
Solar * $ 5,352
$ (1,023 )
Semiconductor 3,004
2,361

Polishing 1,104
464

Non-segment related (1,694 ) (1,982 )
$ 7,766
$ (180 )

**	See Note 4 for additional information on held-for-sale assets.

* The financial statement of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment revenue.

December 31,
2017 September 30,
2017
Identifiable Assets:
Solar $ 76,794
$ 97,999
Semiconductor 58,706
57,177
Polishing 5,912
5,078
Non-segment related 31,701
31,369
$ 173,113
$ 191,623

~~Non-segment related assets include cash, property~~

Goodwill and other ~~assets.~~ long-lived assets

We review our long-lived assets, including goodwill, for impairment at least annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additional information on impairment testing of long-lived assets, intangible assets and goodwill can be found in ~~Note~~Notes 1 and 10 of our Annual Report on Form 10-K ~~as amended,~~ for the year ended September 30, ~~2017.~~

9.2019.

11. Major Customers and Foreign Sales

During the ~~three~~nine months ended ~~December 31, 2017, one customer individually represented 50% of our net revenues. No other~~June 30, 2020, no customer represented greater than 10% of net revenues. During the ~~three~~nine months ended ~~December 31, 2016, there were no customers who~~June 30, 2019, one Semiconductor segment customer individually represented ~~greater than 10%~~11% of our net revenues.

Our net revenues were tofrom customers in the following geographic regions:

	Nine Months Ended June 30,
	2020			2019
United States		31	%		36	%
Other		6	%		5	%
Total North America		37	%		41	%
China		25	%		18	%
Malaysia		4	%		5	%
Taiwan		15	%		10	%
Other		7	%		6	%
Total Asia		51	%		39	%
Germany		3	%		9	%
Other		9	%		11	%
Total Europe		12	%		20	%
		100	%		100	%

Three Months Ended December 31,
2017 2016
United States 7 % 18 %
Other 2 % 2 %
Total North America 9 % 20 %
China 71 % 26 %
Malaysia 3 % 17 %
Taiwan 2 % 12 %
Other 3 % 6 %
Total Asia 79 % 61 %
Germany 6 % 5 %
Other 6 % 14 %
Total Europe 12 % 19 %
100 % 100 %


Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our ~~condensed consolidated financial statements and the related notes included in Item 1,~~ “Condensed Consolidated Financial Statements” in Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” in our Annual Report on Form 10-K ~~as amended,~~ for the fiscal year ended September 30, ~~2017.~~

~~Cautionary Statement Regarding Forward-Looking Statements~~

Certain information contained or incorporated by reference in this Quarterly Report is forward-looking in nature. All statements included or incorporated by reference in this Quarterly Report or made by management of Amtech Systems, Inc. and its subsidiaries (the “Company” or “Amtech”), other than statements of historical fact, are hereby identified as “forward-looking statements” (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). The forward-looking statements in this Quarterly Report relate only to events or information as of the date on which the statements are made in this Quarterly Report. Examples of forward-looking statements include statements regarding Amtech’s future financial results, operating results, business strategies, projected costs, products under development, competitive positions and plans and objectives of the Company and its management for future operations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “would,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Some factors that could cause actual results to differ materially from those anticipated include, among others, future economic conditions, including changes in the markets in which we operate; changes in demand for our services and products; our ability to successfully complete the turnkey orders and the associated costs and risks related thereto; difficulties in successfully executing our growth initiatives; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; control of costs and expenses; risks associated with new technologies and the impact on our business; legislative, regulatory, and competitive developments in markets in which we operate; possible future claims, litigation or enforcement actions and the results of any such claim, litigation proceeding, or enforcement action; and other circumstances and risks identified in this Quarterly Report or referenced from time to time in our filings with the United States Securities and Exchange Commission. These and many other factors could affect Amtech’s future operating results and financial condition, and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf.

~~You should not place undue reliance on these forward-looking statements.~~ 2019.

Overview

We cannot guarantee that any forward-looking statement will be realized, although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report. Achievement of future results is subject to events out of our control, risks, uncertainties and potentially inaccurate assumptions. The Annual Report on Form 10-K, as amended, that we filed with the Securities and Exchange Commission for the year-ended September 30, 2017 listed various important factors that could affect Amtech’s future operating results and financial condition and could cause actual results to differ materially from historical results and expectations based on forward-looking statements made in this document or elsewhere by Amtech or on its behalf. These factors can be found under the heading “Item 1A. Risk Factors” in the Annual Report on Form 10-K, as amended, and investors should refer to them as well as the additional risk factors identified in this Quarterly Report. Because it is not possible to predict or identify all such factors, any such list cannot be considered a complete set of all potential risks or uncertainties. Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

~~Introduction~~

~~Management’s Discussion and Analysis (“MD&A”) is intended to facilitate an understanding of our business and results of operations. MD&A consists of the following sections:~~

~~Overview~~

~~Results of Operations~~

~~Liquidity and Capital Resources~~

~~Off-Balance Sheet Arrangements~~

~~Contractual Obligations~~

~~Critical Accounting Policies~~

~~Impact of Recently Issued Accounting Pronouncements~~

~~Overview~~

~~We operate in three reportable business segments: (i) Solar, (ii) Semiconductor and (iii) Polishing. In our Solar segment, we~~ are a leading, global ~~supplier~~manufacturer of capital equipment, including thermal processing ~~systems, including diffusion, plasma-enhanced chemical vapor deposition (“PECVD”), atomic layer deposition (“ALD”),~~and wafer polishing and related ~~automation, parts~~consumables used in fabricating semiconductor devices, such as silicon carbide (SiC) and ~~services,~~silicon power chips, electronic assemblies and light-emitting diodes (LEDs). We sell these products to semiconductor and automotive component manufacturers worldwide, particularly in Asia, North America and Europe.

We operate in two reportable business segments, based primarily on the ~~solar photovoltaic industry.~~industry they serve: (i) Semiconductor, and (ii) SiC/LED. In our Semiconductor segment, we supply thermal processing equipment, including solder reflow ~~equipment~~ovens, diffusion furnaces, and ~~related controls and diffusion~~custom high-temp belt furnaces for use by ~~leading~~ semiconductor ~~manufacturers,~~ and in electronics assembly ~~for automotive and other industries.~~manufacturers. In our ~~Polishing~~SiC/LED segment, we produce substrate consumables and machinery for lapping (fine abrading) and polishing of materials, such as ~~sapphire substrates, optical components,~~ silicon wafers ~~numerous types of crystalline materials, ceramics~~for semiconductor products, sapphire wafers for LED applications, and ~~metal components.~~

compound substrates, like silicon carbide wafers, for power device applications.

Our semiconductor customers are primarily manufacturers of integrated circuits, optoelectronics, sensors and discrete (O-S-D) components used in analog, power and radio frequency (RF) devices and photovoltaic solar ~~cells and integrated circuits.~~cells. The ~~solar cell and~~ semiconductor ~~industries are~~industry is cyclical and historically ~~have~~has experienced ~~significant~~ fluctuations. Our revenue is impacted by these broad industry trends. Although semiconductor demand for our products may have reached its cyclical peak in our fiscal year ended September 30, 2018, we believe that continued technological advances and emerging industries, such as silicon carbide power devices, will sustain our long-term performance.

COVID-19

On January 30, 2020, the World Health Organization declared an outbreak of a highly contagious form of an upper respiratory infection caused by COVID-19, a novel coronavirus strain commonly referred to as “coronavirus”. In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread, including in all of the markets in which we operate. The ~~solar cell industry~~COVID-19 outbreak has ~~experienced~~had a ~~structural imbalance between~~notable impact on general economic conditions, including but not limited to the temporary closures of many businesses; "shelter in place" and other governmental regulations; and reduced spending due to both job losses and other effects attributable to COVID-19. As noted below, as a key supplier to essential businesses, we have continued to supply our products and ~~demand.~~services to those businesses deemed essential businesses in the states in which we operate. However, our business is subject to the general health of the economy and federal and local guidelines and restrictions have significantly curtailed the level of economic activity in affected areas, which include the areas in which we conduct our business.

As we navigate the challenges presented by COVID-19, our first priority is the safety and well-being of our employees. We began experiencing challenges relating to the COVID-19 virus early-on in calendar year 2020, when our Shanghai facility remained closed beyond the normal Chinese New Year holiday. This ~~imbalance has~~facility reopened in early March and, in a safe and phased approach, we ramped up production while following the Chinese government’s requirements for personal protective equipment (PPE), cleaning of the facility, and social distancing, among other measures. As of the date of this Quarterly Report, our Shanghai production levels have returned to near-capacity. Additionally, we continue to closely monitor our supply chain and have increased ~~competitive pressure~~our safety stock for certain key parts.

Our domestic manufacturing facilities are located in Billerica, Massachusetts and Carlisle, Pennsylvania. In early March, we began implementing work-from-home options for all of our U.S. office personnel, including our corporate staff in Tempe, Arizona. Later in March, the governors of Massachusetts, Pennsylvania and Arizona issued stay-at-home orders for employers that do not provide essential services. With the assistance of legal counsel, we determined that as key suppliers to essential businesses, we could stay open, however we balanced this result with the health and safety of our employees. In Massachusetts, which had a high number of COVID-19 infections, we continued to work on ~~selling prices~~a very limited basis and ~~negatively impacted~~have gradually increased factory personnel in a safe and phased approach. In Pennsylvania, our direct laborers are working in multiple shifts to decrease the number of employees in the building at any given time. In both facilities, we are providing masks, extra facility cleanings and practicing social distancing. We continue to closely monitor our supply chain for our U.S. operations.

Although we do not yet know the full duration and extent the impact of COVID-19 will have on our operations, we currently expect the negative impact to be a temporary trend. We have implemented procedures to maximize our ability to continue to provide products and services to our customers and to mitigate the effect of the downturn on our results of ~~operations. Our high throughput equipment platforms, technologies~~operations, including minimizing costs where appropriate. There remain many unknowns and we continue to monitor the expected trends and related demand for ~~higher cell efficiency, greater knowledge of the complete cell manufacturing process~~our products and ~~advanced automation~~services and have ~~contributed significantly to our success in securing the large orders for the first two phases of a multi-phase turnkey project announced in January~~ and April of 2017 from a new solar cell manufacturer in China. For equipment orders that are not part of turnkey projects, we compete with Chinese equipment manufacturers that offer lower prices coupled with liberal payment terms. We are finding it more difficult to participate in the capacity expansions of those Chinese companies that already have significant experience with all facets of producing solar cells and at least some prior experience working with the local equipment vendors. While we will continue to adjust our operations accordingly. Please see additional information in “Item 1a. Risk Factors”.

Amtech has a strong financial position with $46.4 million in cash and cash equivalents as of June 30, 2020 and $5.3 million of mortgage-related debt. In addition, while we did not utilize the Paycheck Protection Program (PPP) loan provision of the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act, we are pursuing other relief options available to us, such as deferring social security tax payments, payroll tax credits, and utilizing certain changes in tax loss carryback rules to receive refunds for prior tax years. We are reviewing and implementing actions to reduce cash outlays and expenses. As a result of these efforts and our strong balance sheet, we believe we have enough cash to sustain us for at least the next twelve months. However, if the recovery takes longer than expected, we believe we have the ability to make additional adjustments as needed.

Solar and Automation Divestitures

On April 3, 2019, we announced that our Board of Directors (the “Board”) determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on ~~developing advanced products~~our semiconductor and ~~technologies,~~silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. We completed the sale of our solar subsidiaries, SoLayTec and Tempress, on June 7, 2019, and January 22, 2020, respectively. Additionally, on December 13, 2019, we completed the sale of our automation division, R2D, to certain members of R2D’s management team.

Strategy

As we pivot from our solar business and refocus on our Semiconductor and SiC/LED businesses, we have focused 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. Our strategic growth plan calls for profitable growth as the semi industry recovers, with the following areas of focus:

•

Emerging opportunities in the SiC industry – We believe we are well-positioned to take part in this significant growth area. We are working closely with our customers to understand their SiC growth plans and opportunities. We are investing in our capacity, next generation product development, and investing in our people. We believe these investments will help fuel our growth in the SiC industry.

•

300 mm Silicon Horizontal Thermal Reactor – We have a highly successful and proven 300 mm solution for growing power semiconductor applications. Moreover, we have a strong foundation with a key customer, and, in the second half of fiscal 2019, we announced an order to another industry-leading manufacturer. In February 2020, we announced an order for our fully automated SEMI compliant 300mm clustered HTR diffusion furnace from top-tier global power semiconductor customer in Asia. We believe we have a strong opportunity to expand our customer base and future revenue growth.

•

As a major revenue contributor, our subsidiary, BTU International, Inc. (BTU), tracks semi industry growth for our semi-packaging and SMT products, and we expect this trend to continue. We believe that through investments in product innovation, BTU is also positioned for future growth.

We project that the required investments to achieve our revenue growth targets will be in the range of $6.0 - $8.0 million in research and development and capital expenditures. We may also need to make investments in other areas of our business, such as IT systems and capacity expansions at our existing facilities. Additionally, as a capital equipment manufacturer, we will need working capital to support and fuel our future growth. We are and will continue to closely scrutinize these planned investments, in light of the COVID-19 challenges, and we may defer some of our projects. However, we intend to continue to invest in our business to support and fuel our future growth.

In addition to these investments in our organic growth, another key aspect of our capital allocation policy is our plan to ~~seek further cost reductions~~grow through acquisitions. We have the skillset and track record to ~~address~~identify strong acquisition targets in the ~~competition from Chinese equipment vendors.~~

~~The equipment~~semi and SiC growth environment and to execute transactions and effectively integrate acquired businesses to provide for accretive, profitable growth in both the ~~large follow-on turnkey order announced in April 2017 (“Phase II”) shipped~~short-term and long-term. As of the date of the filing of this Quarterly Report on Form 10-Q, we do not have an agreement to acquire any acquisition target.

Segment Reporting Changes

After announcing the planned divestiture of our Solar segment, we conducted an evaluation of our organizational structure. Beginning with the second quarter of fiscal 2019, we made changes to our reportable segments. With the divestiture of our Automation segment in the first quarter of fiscal ~~2018. Our quarterly~~2020, we further evaluated our organization structure and ~~annual operating results~~concluded that we have two reportable business segments following the divestiture. Prior period amounts have been ~~and will continue~~revised to ~~be impacted by~~conform to the timing of large system orders. Further, the solar and semiconductor equipment industries are highly cyclical and the conditions of the industries we operate in are volatile. Therefore, our order flow fluctuates quarter to quarter. For additional information regarding the risks related to our business and industry, please refer to Item 1A. Risk Factors in our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2017.

current period segment reporting structure.

Results of Operations

The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Net revenue		100	%		100	%		100	%		100	%
Cost of sales		61	%		63	%		61	%		62	%
Gross margin		39	%		37	%		39	%		38	%
Selling, general and administrative		32	%		27	%		32	%		28	%
Research, development and engineering		6	%		4	%		5	%		4	%
Restructuring charges		1	%		—	%		1	%		1	%
Operating income		—	%		6	%		1	%		5	%
Loss on sale of subsidiary		—	%		—	%		(5	)%		—	%
Interest income and other, net		—	%		2	%		1	%		1	%
Income (loss) from continuing operations before income taxes		—	%		8	%		(3	)%		6	%
Income tax provision		1	%		4	%		1	%		3	%
(Loss) income from continuing operations, net of tax		(1	)%		4	%		(4	)%		3	%
Income (loss) from discontinued operations, net of tax		—	%		6	%		(23	)%		(12	)%
Net (loss) income		(1	)%		10	%		(27	)%		(9	)%

Three Months Ended
December 31,
2017
December 31,
2016
Net revenue 100 % 100 %
Cost of sales 72 % 71 %
Gross margin 28 % 29 %
Selling, general and administrative 14 % 24 %
Research, development and engineering 3 % 6 %
Operating income (loss) 11 % (1 )%
Gain on sale of other assets 0 % 0 %
Income (loss) from equity method investment 0 % 0 %
Interest expense and other income, net 0 % 0 %
Income (loss) before income taxes 11 % (1 )%
Income taxes provision 2 % 0 %
Net income (loss) 9 % (1 )%
Add: net loss attributable to noncontrolling interest 0 % 1 %
Net income (loss) attributable to Amtech Systems, Inc. 9 % 0 %

In the second quarter of 2019, we began the process to divest our solar business. As such, we have classified portions of the Solar segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations for all periods presented.

Net Revenue

Net revenue consists of revenue recognized upon shipment or installation of equipment, with the exception of products using new technology, for which revenue is recognized upon customer acceptance. Spare parts sales are recognized upon shipment and service revenue is recognized upon completion of the service activity, which is generally ratable over the term of the service contract. Since the majority of our revenue is generated from large system sales, revenue and operating income can be significantly impacted by the timing of system shipments and ~~recognition of revenue based on customer~~system acceptances. The revenue of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and microelectromechanical (“MEMS”) industries, comprising less than 25% of the Solar segment revenue.

Our net revenue by operating segment was as follows (dollars in thousands):

	Three Months Ended June 30,										Nine Months Ended June 30,
Segment	2020		2019		Incr (Decr)			% Change			2020		2019		Incr (Decr)			% Change
Semiconductor	$	12,357	$	16,254	$	(3,897	)		(24	)%	$	41,581	$	51,267	$	(9,686	)		(19	)%
SiC/LED		2,870		3,074	$	(204	)		(7	)%		8,155		9,330		(1,175	)		(13	)%
Non-segment related		—		1,675		(1,675	)		(100	)%		643		4,264		(3,621	)		(85	)%
Total net revenue	$	15,227	$	21,003	$	(5,776	)		(28	)%	$	50,379	$	64,861	$	(14,482	)		(22	)%

Three Months Ended December 31,
Segment 2017 2016 Incr (Decr) % Change
Solar $ 49,197
$ 11,424
$ 37,773
331%
Semiconductor 20,891
15,703
5,188
33%
Polishing 3,523
2,008
1,515
75%
Total net revenue $ 73,611
$ 29,135
$ 44,476
153%

~~Net~~

Total net revenue for the quarters ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 was ~~$73.6~~$15.2 million and ~~$29.1~~$21.0 million, respectively, ~~an increase~~a decrease of ~~$44.5~~approximately $5.8 million or ~~153%~~28%. ~~Revenue from~~Our semiconductor segment revenues are dependent on our customers’ expansions, and our results have been negatively impacted by the ~~Solar segment increased 331%~~uncertainty in the global economy due primarily to the impact of the COVID-19 virus, as well as lingering trade tensions between the U.S. and China. Our SiC/LED revenues were less impacted in this fiscal quarter compared to the prior year quarter, ~~due primarily~~as our consumable sales remained stable. We believe the impact from the COVID-19 virus in both our China and U.S. locations are temporary trends, as we have experienced a return to near-capacity in our China factory during the third fiscal quarter of 2020, however we also believe that we will continue to experience some level of volatility in our bookings and shipments ~~relating to Phase II~~as various states and countries experience resurgences of the ~~turnkey order, previously announced~~virus. We also believe that there remains significant potential in ~~April 2017.~~the SiC industry and long-term growth in power semiconductor. Non-segment related revenues relate to R2D, the automation division that we divested in December 2019.

Total net revenue for the nine months ended June 30, 2020 and 2019 was $50.4 million and $64.9 million, respectively, a decrease of approximately $14.5 million or 22%. Revenue from the Semiconductor segment ~~increased 33%~~decreased $9.7 million compared to the prior year ~~quarter~~period. This change is primarily due ~~primarily~~ to ~~strong customer demand for~~COVID-19 effects on our ~~thermal processing systems~~customers and ~~diffusion furnaces.~~the global economy, as discussed above. Revenue from ~~the Polishing~~our SiC/LED segment ~~increased 75%~~decreased $1.2 million compared to the prior year ~~quarter~~period due primarily to ~~strong customer demand leading to increased sales of polishing templates~~lower machine shipments resulting from COVID-19 effects discussed above and ~~equipment.~~

lingering trade tensions between the U.S. and China causing uncertainty in the market.

Backlog and Orders

For comparison purposes, we have removed the Automation segment, which was sold effective December 13, 2019, from the tables below.

Our backlog as of ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 was ~~$65.9 million and $51.5 million, respectively, an increase of $14.4 million or 28%. Our backlog~~ as ~~of December 31, 2017 includes approximately $39.3 million of orders and deferred revenue from our Solar segment customers compared to $35.8 million at December 31, 2016.~~ follows (dollars in thousands):

	June 30,
Segment	2020		2019		Incr (Decr)			% Change
Semiconductor	$	13,798	$	13,931	$	(133	)		(1	)%
SiC/LED		1,423		2,934		(1,511	)		(51	)%
Total backlog	$	15,221	$	16,865	$	(1,644	)		(10	)%

New orders booked in the ~~quarter~~three and nine months ended ~~December 31, 2017~~June 30, 2020 and 2019 were ~~$37.3 million ($7.3 million Solar) compared to $34.7 million ($15.9 million Solar) of customer orders~~as follows (dollars in the quarter ended December 31, 2016. The backlog of business units included in the Solar segment include some sales of equipment and parts to the semiconductor, silicon wafer and MEMS industries, comprising less than 25% of the Solar segment backlog.thousands):

	Three Months Ended June 30,										Nine Months Ended June 30,
Segment	2020		2019		Incr (Decr)			% Change			2020		2019		Incr (Decr)			% Change
Semiconductor	$	8,356	$	12,899	$	(4,543	)		(35	)%	$	40,469	$	44,462	$	(3,993	)		(9	)%
SiC/LED		2,474		2,697		(223	)		(8	)%		8,612		9,574		(962	)		(10	)%
Total new orders	$	10,830	$	15,596	$	(4,766	)		(31	)%	$	49,081	$	54,036	$	(4,955	)		(9	)%

As of ~~December 31, 2017, two customers~~June 30, 2020, one Semiconductor customer individually accounted for 19% ~~and~~of our backlog. No other customer accounted for more than 10% of our ~~backlog.~~backlog as of June 30, 2020. 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. Because our orders are typically subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. ~~Our backlog also includes revenue deferred pursuant to our revenue recognition policy, derived from orders that have already been shipped, but which have not met the criteria for revenue recognition.~~

Gross Profit and Gross Margin

Gross profit is the difference between net revenue and cost of goods sold. 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. Our gross profit and gross margin by operating segment were as follows (dollars in thousands):

	Three Months Ended June 30,													Nine Months Ended June 30,
Segment	2020		Gross Margin			2019		Gross Margin			Incr (Decr)			2020		Gross Margin			2019		Gross Margin			Incr (Decr)
Semiconductor	$	4,953		40	%	$	6,566		40	%	$	(1,613	)	$	16,552		40	%	$	20,499		40	%	$	(3,947	)
SiC/LED		998		35	%		1,038		34	%		(40	)		2,922		36	%		3,524		38	%		(602	)
Non-segment related		—		—	%		246		15	%		(246	)		9		1	%		774		18	%		(765	)
Total gross profit	$	5,951		39	%	$	7,850		37	%	$	(1,899	)	$	19,483		39	%	$	24,797		38	%	$	(5,314	)

Three Months Ended December 31,
Segment 2017 Gross Margin 2016 Gross Margin Incr (Decr)
Solar $ 11,313
23% $ 1,611
14% $ 9,702

Semiconductor 7,488
36% 6,095
39% 1,393

Polishing 1,536
44% 737
37% 799

Total gross profit $ 20,337
28% $ 8,443
29% $ 11,894

Gross profit for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 was ~~$20.3~~$6.0 million ~~(28%~~(39% of net revenue) and ~~$8.4~~$7.9 million ~~(29%~~(37% of net revenue), respectively, ~~an increase~~a decrease of ~~$11.9~~$1.9 million. Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross margin on products from our Semiconductor segment was flat on lower revenues compared to the three months ended June 30, 2019, due primarily to favorable product mix. Gross margin on products from our SiC/LED segment increased slightly on less revenue compared to the three months ended June 30, 2019, due primarily to a mix of higher margin consumable sales and less machine sales.

Gross profit for the nine months ended June 30, 2020 and 2019 was $19.5 million (39% of net revenue) and $24.8 million (38% of net revenue), respectively, a decrease of $5.3 million. Gross margin on products from our ~~Solar~~Semiconductor segment ~~increased~~was flat on lower revenue compared to the ~~three~~nine months ended ~~December 31, 2016,~~June 30, 2019, due primarily to ~~higher sales volumes of higher-margin products compared to the first quarter of fiscal 2017. Gross profit on products from our Semiconductor segment increased due to~~ increased sales ~~volume in the first quarter~~ of ~~2018, with gross~~our higher margin ~~decreasing due to product mix.~~products. Gross ~~profit and gross~~ margin on products from our ~~Polishing~~SiC/LED segment ~~increased from~~decreased slightly compared to the ~~prior year period, primarily due to higher sales of new products with higher margins. For the three~~nine months ended ~~December 31, 2017, we deferred gross profit of $2.1 million. For the three months ended December 31, 2016, we recognized previously-deferred gross profit of $0.3 million.~~

June 30, 2019, due primarily to lower capacity utilization resulting from lower machine sales.

Selling, General and Administrative

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.

SG&A expenses for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 were ~~$10.6~~$4.8 million and ~~$7.0~~$5.7 million, respectively. SG&A ~~increased~~decreased compared to the prior year quarter due primarily to ~~$1.8~~payroll tax credits that were part of the CARES Act, no longer having R2D SG&A included in our results, and lower travel due to the COVID-19 pandemic.

SG&A expenses for the nine months ended June 30, 2020 and 2019 were $16.1 million and $18.1 million, respectively. SG&A decreased compared to the prior year period due primarily to lower commissions and freight on lower sales, no longer having R2D SG&A included in our results, lower commissions and freight on lower sales, payroll tax credits that were part of ~~higher commissions, freight~~the CARES Act, and ~~other selling expenses related~~lower travel due to ~~increased revenue. Also, for~~the COVID-19 pandemic.

Restructuring Charges

We recorded restructuring charges of $217,000 in the three months ended ~~December 31, 2016, SG&A expenses~~June 30, 2020. These one-time charges were ~~reduced by~~ the ~~collections~~result of ~~previously reserved accounts receivable~~staff reductions at our Massachusetts operations as we evaluated staffing across our Semiconductor operations. We recorded restructuring charges of ~~approximately $1.0 million.~~

$35,000 and $1.1 million in the three and nine months ended June 30, 2019, respectively. The amount in the third quarter of 2019 relates to the consolidation of satellite offices in Asia. For the nine months ended June 30, 2019, the amount is primarily severance expense related to the departure of our former Chief Executive Officer.

Research, Development and Engineering

Research, development and engineering (“RD&E”) expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. We receive ~~reimbursements through~~ governmental research and development grants which are netted against these expenses when certain conditions have been met.

RD&E expense, net of grants earned, for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 were ~~$2.0~~$0.9 million and ~~$1.6~~$0.7 million, respectively, ~~an increase of $0.4~~and $2.4 million and $2.3 million in the nine months ended June 30, 2020 and 2019, respectively. These increases are due ~~primarily~~ to increased ~~R&D~~ spending in fiscal 2020 related to the development of new products at our ~~Solar~~SiC/LED segment and product improvement projects at our Semiconductor segment.

Income Taxes

For the three months ended ~~December 31, 2017~~June 30, 2020 and 2019, we recorded income tax expense at our continuing operations of $0.1 million and $0.7 million, respectively. For the nine months ended June 30, 2020 and 2019, we recorded income tax expense of ~~$1.2~~$0.3 million ~~resulting in an effective tax rate of 16.1%. For~~and $1.6 million, respectively. In the three months ended ~~December 31, 2016~~June 30, 2019, we recorded an income tax ~~expense~~benefit of ~~$0.1~~$1.3 million ~~a 37.5% effective~~in our discontinued operations. In the nine months ended June 30, 2020 and 2019, we recorded an income tax ~~rate.~~benefit of $47,000 and $1.2 million, respectively, in our discontinued operations. The tax benefit in the prior year is due to the tax treatment relating to the sale of SoLayTec. The income tax provisions are based upon estimates of annual income, annual permanent differences and statutory tax rates in the various jurisdictions in which we operate, except that certain loss jurisdictions and discrete items are treated separately.

Generally accepted accounting principles require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. ~~Therefore, in fiscal 2017, cumulative losses weighed heavily in~~

~~the overall assessment. As a result of the review, where cumulative losses had been incurred,~~We have concluded that we ~~continue to~~will maintain a full valuation allowance for ~~substantially~~ all net deferred tax assets in the ~~U.S. and~~ foreign jurisdictions ~~including~~in which we operate and for the carryforwards of U.S. net operating losses and foreign tax credits, ~~which were~~ acquired in the merger with BTU International, ~~Inc.~~for which there are limitations on their utilization. We will continue to monitor our cumulative income and ~~net operating losses in Europe.~~

~~For the quarter ending December 31, 2017, we determined that a portion of the deferred tax asset previously covered by the valuation allowance would be realized~~loss positions in the ~~current tax period. We realized $1.4 million of~~U.S. and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate.

Our 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-tax deductible expenses incurred as a ~~discrete item~~percent of pre-tax income and the effectiveness of our tax planning strategies.

Discontinued Operations

As disclosed previously in the ~~quarter.~~

~~Liquidity~~“Solar and ~~Capital Resources~~

~~At December 31, 2017~~Automation Divestitures” section, we announced that our Board determined that it was in the long-term best interest of the Company to exit the solar business segment and ~~September 30, 2017, cash~~focus our strategic efforts on our semiconductor and ~~cash equivalents were $52.7 million~~silicon carbide/polishing business segments in order to more fully realize the opportunities we believe are presented in those areas. The divestitures included our Tempress and ~~$51.1 million, respectively, an increase~~SoLayTec subsidiaries, which comprised substantially all of ~~$1.6 million. Restricted cash decreased by $14.7 million to $9.9 million at December 31, 2017 from $24.6 million at September 30, 2017. Our working capital was $79.7 million~~our Solar segment. As such, we classified portions of the Solar segment as ~~of December 31, 2017 and $71.1 million~~held for sale in our Condensed Consolidated Balance Sheet as of September 30, ~~2017.~~

2019 and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations. SoLayTec was sold effective June 7, 2019, and Tempress was sold effective January 22, 2020 (see Note 4 for additional information).

Liquidity and Capital Resources

The ~~increase~~following table sets forth for the periods presented certain consolidated cash flow information (in thousands):

	Nine Months Ended June 30,
	2020			2019
Net cash (used in) provided by operating activities	$	(990	)	$	421
Net cash used in investing activities		(10,800	)		(1,664	)
Net cash used in financing activities		(1,486	)		(96	)
Effect of exchange rate changes on cash		578			(1,450	)
Net decrease in cash, cash equivalents and restricted cash		(12,698	)		(2,789	)
Cash, cash equivalents and restricted cash, beginning of period*		59,134			62,496
Cash, cash equivalents and restricted cash, end of period*	$	46,436		$	59,707

*	Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior to January 22, 2020.

Cash and Cash Flow

The decrease in cash, cash equivalents and restricted cash during the first ~~three~~nine months of fiscal ~~2018~~2020 of ~~$1.6~~$12.7 million was primarily due to ~~proceeds from the exercise~~net cash disposed of in divestitures and cash used for stock ~~options.~~repurchases. We maintain a portion of our cash, ~~and~~ cash equivalents ~~in Euros at our Dutch~~ and ~~French operations and~~restricted cash in RMB inat our Chinese operations; therefore, changes in the exchange ~~rate~~rates have an impact on our cash balances. ~~Restricted cash decreased~~Our working capital was $70.8 million as of June 30, 2020 and $77.6 million as of September 30, 2019. The decrease in our working capital occurred primarily due to the ~~shipments~~divesture of ~~Phase II of the Solar turnkey order, which released the restrictions on the downpayment.~~our held-for-sale assets and liabilities. Our ratio of current assets to current liabilities was ~~2.3:~~8.2:1 as of ~~December 31, 2017,~~June 30, 2020, and ~~1.8:~~3.5:1 as of September 30, ~~2017.~~

2019. Excluding our held-for-sale assets and liabilities, our ratio of current assets to current liabilities was 7.1:1 as of September 30, 2019.

The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. 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, long-term debt and customer deposits. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.

Cash Flows from Operating Activities

Cash ~~provided by~~used in our operating activities was ~~$0.3~~approximately $1.0 million for the ~~three~~nine months ended ~~December 31, 2017,~~June 30, 2020, compared to ~~$3.5~~cash provided by operating activities of $0.4 million ~~used in operations~~ for the ~~three~~nine months ended ~~December 31, 2016, an improvement~~June 30, 2019, a decline of ~~$3.8~~approximately $1.4 million. During the ~~three~~nine months ended ~~December 31, 2017, cash was primarily generated through~~June 30, 2020, net ~~income~~loss adjusted for non-cash items of ~~$7.4~~$2.5 million ~~which~~ was offset by ~~other increases and decreases~~$3.5 million of cash used in operations as a result of changes in operating assets ~~primarily related to the turnkey project. A significant portion of the revenue~~ and ~~related cash payments related to the turnkey project are deferred and restricted, respectively, until completion of the integration of the equipment and transfer of the technology.~~liabilities. During the ~~three~~nine months ended ~~December 31, 2016, cash was reduced by increases~~June 30, 2020, we increased our inventory balances to mitigate risks in ~~accounts receivable and restricted cash, offset by decreases~~our supply chain resulting from the COVID-19 pandemic, as well as in ~~inventory.~~

~~Cash Flows from Financing Activities~~

~~For~~preparation for a large shipment expected in the ~~three~~first quarter of fiscal year 2021. During the nine months ended ~~December 31, 2017, $1.1~~June 30, 2019, $1.4 million was used in losses from operations adjusted for non-cash items, with an additional $1.8 million of cash provided by operations as a result of changes in operating assets and liabilities.

Cash Flows from Investing Activities

For the nine months ended June 30, 2020 and 2019, cash used in investing activities was $10.8 million compared to $1.7 million in the prior year period. The fiscal 2020 amount reflects the divestiture of our solar business as well as approximately $0.9 million of capital expenditures. We expect capital expenditures to increase in the fourth quarter of fiscal 2020 as we complete the relocation of our SiC/LED business.

Cash Flows from Financing Activities

For the nine months ended June 30, 2020, $1.5 million of cash used in financing activities was comprised of ~~$1.2~~approximately $0.8 million of proceeds received from the exercise of stock options, ~~partially~~which was fully offset by $2.0 million used for stock repurchases and payments on long-term debt of ~~$0.1~~$0.3 million. For the ~~three~~nine months ended ~~December 31, 2016,~~June 30, 2019, $0.1 million of cash used in financing activities was ~~primarily related to~~comprised of $0.2 of proceeds received from the exercise of stock options, which was fully offset by payments on long-term debt of ~~$0.2 million net of borrowings of less than $0.1~~$0.3 million.

Off-Balance Sheet Arrangements

As of ~~December 31, 2017,~~June 30, 2020, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the ~~Securities and Exchange Commission~~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.

Contractual Obligations

Unrecorded purchase obligations at our continuing operations were ~~$26.4~~$4.8 million as of ~~December 31, 2017,~~June 30, 2020, compared to ~~$34.4~~$4.4 million as of September 30, ~~2017, a decrease~~2019, an increase of ~~$8.0 million due primarily~~$0.4 million.

There were no other material changes to ~~reduced vendor commitments as we complete~~ the ~~first two phases of the large solar project. Approximately $5.2 million of the December 31, 2017 and $11.8 million of the September 30, 2017~~ contractual obligations ~~were prepaid as of those dates~~included in ~~the form of advances to vendors.~~

~~Refer to Amtech’s Annual Report on Form 10-K, as amended, for the year ended September 30, 2017 for additional information on our other contractual obligations.~~

~~Critical Accounting Policies~~

~~“Management’s~~Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2019.

Critical Accounting Policies

Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, accounts and notes receivable collectability, warranty and impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A critical accounting policy is one that is both important to the presentation of our financial position and results of operations, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our Annual Report on Form 10-K ~~as amended,~~ for the year ended September 30, ~~2017.~~2019. We believe our critical accounting policies relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements.

We believe the critical accounting policies discussed in the section entitled “Item 7:7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K ~~as amended,~~ for the fiscal year ended September 30, ~~2017~~2019 represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. ~~There~~Other than the Leases policy change disclosed in Note 3 hereto, there have been no significant changes in our critical accounting policies during the ~~three~~nine months ended ~~December 31, 2017.~~

June 30, 2020.

Impact of Recently Issued Accounting Pronouncements

For discussion of the impact of recently issued accounting pronouncements, see “Part I, Item 1:1. Financial Information” under “Impact of Recently Issued Accounting Pronouncements.”


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There have been no material changes~~

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in ~~our reported market risks, as described in “Quantitative~~Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, ~~Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K, as amended, for~~therefore, are not required to provide the ~~year ended September 30, 2017.~~

information requested by this Item.


Item 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including ~~the~~our Chief Executive Officer (“CEO”) and ~~the~~our Chief Financial Officer (“CFO”), has carried out an evaluation of the effectiveness of our disclosure controls and procedures as of ~~December 31, 2017,~~June 30, 2020, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures in place were effective.

Changes in Internal Control Over Financial Reporting

There ~~were no~~have not been any changes in ~~Amtech’s~~the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~three months ended December 31, 2017~~third fiscal quarter to which this report relates that ~~has~~ materially affected, or isare reasonably likely to materially affect, ~~its~~the internal control over financial ~~reporting.~~

reporting of the Company.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

For discussion of legal proceedings, see Note 9 to our condensed consolidated financial statements under “Part I, Item 1:1. Financial Information” under “Commitments and ~~Contingencies.”~~

Contingencies” of this Quarterly Report.


Item 1A.	Risk Factors

~~In addition~~

We refer you to documents filed by us with the ~~other information set forth~~SEC, specifically “Item 1A. Risk Factors” in ~~this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of~~ our Annual Report on Form 10-K ~~as amended,~~ for the fiscal year ended September 30, ~~2017. There~~2019 (the “2019 Form 10-K”), as updated by the information disclosed in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Second Quarter Form 10-Q”), each of which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” immediately preceding “Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our 2019 Form 10-K, the Second Quarter Form 10-Q and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

We have updated our existing risk factors to add the following risk factors related to recent developments. Except for the update set forth below, there have been no material changes ~~to the~~in our risk factors ~~previously~~from those disclosed in our 2019 Form 10-K, as ~~amended,~~updated in our Second Quarter Form 10-Q.

Business interruptions, including those related to the novel strain of coronavirus (COVID-19), have had and continue to have an adverse impact on our operations, including among others, our manufacturing and supply chain, sales and product development and could have an adverse impact on our business, financial condition and results of operations in future quarterly periods.

In our Form 10-Q for the ~~fiscal year~~quarterly period ended ~~September 30, 2017,~~December 31, 2019, we included a risk factor discussing the advent of the novel strain of coronavirus, COVID-19, identified in Wuhan, China in December 2019. This discussion focused primarily on the possible impact of COVID-19 on our operations in China, where this outbreak was initially centered. The spread of COVID-19 from China to other ~~than as described~~countries has resulted in the ~~Overview above, and~~World Health Organization declaring the ~~supplemental risk factor set forth below:~~

~~Recent changes to U.S. tax laws may adversely affect our financial condition or results~~outbreak of ~~operation and create the risk that we may need to adjust our accounting for these changes.~~

The Tax Cuts and Jobs Act (the “Act”), enacted on December 22, 2017, makes significant changes to U.S. tax laws and includes numerous provisions that affect businesses, including ours. For instance,COVID-19 as a ~~result~~“pandemic,” or a worldwide spread of lower corporate tax rates, the Act tends to reduce both the value of deferred tax assets and the amount of deferred tax liabilities. It also limits interest rate deductions and the amount of net operating losses that can be used each year and alters the expensing of capital expenditures. Other provisions have international tax consequences for businesses like ours that operate internationally.a new disease, on March 11, 2020. The ~~Act is unclear~~outbreak has resulted in ~~certain respects and will require interpretations and implementing regulations by the Internal Revenue Service, as well as state tax~~government authorities and businesses throughout the ~~Act could be subject~~world implementing numerous measures intended to ~~amendments~~contain and ~~technical corrections, any~~limit the spread of ~~which could lessen or increase~~COVID-19, including travel bans and restrictions, quarantines, “shelter-in-place” and lock-down orders, and business limitations and shutdowns. These measures have negatively impacted consumer and business spending generally and have significantly contributed to deteriorating macroeconomic conditions. While governments around the ~~adverse (and positive) impacts of the Act. The accounting treatment of these tax law changes is complex, and~~world have taken steps to attempt to mitigate some of the ~~changes may affect both current~~more severe anticipated economic effects of COVID-19, there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

While we continue to monitor and assess the impact on our business from the spread of COVID-19 and the ever evolving actions implemented by the governments across the globe, our operations in China have returned to near-capacity and we continue to experience an adverse impact of COVID-19 on our operations in the United States. The extent to which the coronavirus continues to impact our operations will depend on future ~~periods. Others will primarily affect future periods. As discussed elsewhere in this Quarterly Report on Form 10-Q, we believe our analysis~~developments, which are highly uncertain and ~~computations~~cannot be predicted with confidence, including the duration of the ~~tax effects~~outbreak, new information which may emerge concerning the severity of the ~~Act~~coronavirus and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread and/or resurgence of the coronavirus globally could result in a widespread health crisis and/or change in consumer behavior that could adversely affect the global economy and financial markets, resulting in an economic downturn, and could also adversely impact our operations, including, without limitation, our manufacturing and supply chain, sales and product development operations, particularly our prospective sales if the Semiconductor and SiC/LED business segments we seek to serve suffer long-term damage. Such an economic downturn could have an adverse impact on ~~us is partially, but not entirely, complete. For instance, we are still in~~ the ~~process of analyzing the earnings and profits and tax pools~~successful implementation of our ~~foreign subsidiaries to estimate the effects~~strategic growth plan and on our business, financial condition results of the one-time repatriation transaction tax on certain net accumulated earnings and profits of our foreign subsidiaries. Consistent with guidance from the Securities and Exchange Commission, our financial statements reflect our estimates of the tax effects of the Act on us as of December 31, 2017, to the extent we have been able to make such preliminary determinations. Although we believe these estimates are reasonable, they are provisional and may be adjusted prior to the end of fiscal 2018. We intend to complete accounting for the Act by the end of fiscal 2018. Any adjustments to our provisional estimates or the effects of currently unknown impacts of the Act on us could affect our current or future financial statements, or both.operations.

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

Issuer Purchases of Equity Securities

On November 29, 2018, we announced that our Board approved a stock repurchase program, pursuant to which we may repurchase up to $4 million of our outstanding common stock, par value $0.01 per share (“Common Stock”), over a one-year period, commencing immediately. Repurchases under the program were to be made in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in compliance with the rules and regulations of the SEC; however, we had no obligation to repurchase shares and the timing, actual number, and value of shares to be repurchased were subject to management’s discretion and depended on the Company’s stock price and other market conditions. We could have, in the sole discretion of the Board, terminated the repurchase program at any time while it was in effect. We intended to retire any repurchased shares. The term of our repurchase program expired as of the quarter ended December 31, 2019. There were no shares repurchased under this program.

During the three months ended June 30, 2020, 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.

~~None.~~


Item 3.	Defaults Upon Senior Securities

None.

~~None.~~


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.

~~Item 6.~~

Item 6.

Exhibits

EXHIBIT

~~EXHIBIT~~

INCORPORATED BY REFERENCE

FILED

NO.

EXHIBIT DESCRIPTION

~~FORM~~

FORM

FILE NO.

EXHIBIT NO.

FILING DATE

HEREWITH

~~31.1~~

31.1

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended

~~31.2~~

31.2

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended

~~32.1~~

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2~~

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH~~

101.SCH

Inline XBRL Taxonomy Extension Schema Document

~~101.PRE~~

101.PRE

Inline Taxonomy Presentation Linkbase Document

~~101.CAL~~

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document

~~101.LAB~~

101.LAB

Inline XBRL Taxonomy Label Linkbase Document

~~101.DEF~~

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMTECH SYSTEMS, INC.

Arizona		86-0411215

~~AMTECH SYSTEMS, INC.~~
~~(Exact name of registrant as specified in its charter)~~



~~Arizona~~	~~86-0411215~~
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

131 South Clark Drive, Tempe, Arizona		85281
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		ASYS		NASDAQ.Global Select Market

Large Accelerated Filer	☐			Accelerated Filer	☒
Non-Accelerated Filer
~~Large accelerated filer [ ]~~ ☐	~~Accelerated filer [X]~~
~~Non-accelerated filer [ ] (Do not check if a smaller reporting company)~~		Smaller Reporting Company ~~[ ]~~	☒
				Emerging Growth Company ~~[ ]~~	☐

	Page
Cautionary Statement Regarding Forward-Looking Statements	3
	~~Page~~
PART I. FINANCIAL INFORMATION	4
Item 1. Condensed Consolidated Financial Statements	4
Condensed Consolidated Balance Sheets ~~December 31, 2017~~ June 30, 2020 (Unaudited) and September 30, ~~2017~~2019	3 4
Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019	4 5
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three and Nine Months Ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019	5 6
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three and Nine Months Ended June 30, 2020 and 2019	7
Condensed Consolidated Statements of Cash Flows (Unaudited) ~~Three~~ Nine Months Ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019	6 8
Notes to Condensed Consolidated Financial Statements (Unaudited)	7 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
~~Cautionary Statement Regarding Forward-Looking Statements~~Overview	13 21
~~Overview~~	14
Results of Operations	14 23
Liquidity and Capital Resources	17 27
Off-Balance Sheet Arrangements	17 28
Contractual Obligations	17 28
Critical Accounting Policies	18 28
Impact of Recently Issued Accounting Pronouncements	18 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18 29
Item 4. Controls and Procedures	18 29
PART II. OTHER INFORMATION	30
Item 1. Legal Proceedings	19 30
Item 1A. Risk Factors	19 30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19 31
Item 3. Defaults Upon Senior Securities	19 31
Item 4. Mine Safety Disclosures	19 31
Item 5. Other Information	19 31
Item 6. Exhibits	20 32
SIGNATURES	21 33


☒
~~[X]~~	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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



	December 31, 2017			September 30, 2017
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	52,696		$	51,121
Restricted cash	9,913			24,640
Accounts receivable
Trade (less allowance for doubtful accounts of $1,473 and $866 at December 31, 2017, and September 30, 2017, respectively)	24,365			22,519
Unbilled and other	21,620			14,275
Inventories	22,762			30,210
Vendor deposits	5,180			11,806
Other	2,310			2,542
Total current assets	138,846			157,113
Property, Plant and Equipment - Net	15,637			15,792
Intangible Assets - Net	3,378			3,495
Goodwill - Net	11,484			11,405
Investments	2,588			2,615
Deferred Income Taxes - Long-Term	200			200
Other Assets - Long-Term	980			1,003
Total Assets	$	173,113		$	191,623
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	20,483		$	21,555
Accrued compensation and related taxes	7,422			7,592
Accrued warranty expense	1,401			1,254
Other accrued liabilities	2,918			2,056
Customer deposits	19,328			48,784
Current maturities of long-term debt	365			361
Deferred profit	5,632			4,081
Income taxes payable	1,608			286
Total current liabilities	59,157			85,969
Long-Term Debt	8,225			8,134
Income Taxes Payable - Long-Term	6,802			7,037
Total Liabilities	74,184			101,140
Commitments and Contingencies
Stockholders’ Equity
Preferred stock; 100,000,000 shares authorized; none issued	—			—
Common stock; $0.01 par value; 100,000,000 shares authorized; shares issued and outstanding: 14,876,430 and 14,710,591 at December 31, 2017 and September 30, 2017, respectively	149			147
Additional paid-in capital	127,015			125,564
Accumulated other comprehensive loss	(7,988		)	(8,529		)
Retained deficit	(20,247		)	(26,699		)
Total stockholders’ equity	98,929			90,483
Total Liabilities and Stockholders’ Equity	$	173,113		$	191,623



	Three Months Ended December 31,
	2017			2016
Revenues, net of returns and allowances	$	73,611		$	29,135
Cost of sales	53,274			20,692
Gross profit	20,337			8,443

Selling, general and administrative	10,580			6,996
Research, development and engineering	1,991			1,627
Operating income (loss)	7,766			(180		)
Loss from equity method investment	(26		)	(143		)
Interest expense and other income, net	(48		)	81
Income (loss) before income taxes	7,692			(242		)
Income tax provision	1,240			90
Net income (loss)	6,452			(332		)

Add: net loss attributable to noncontrolling interest	—			279
Net income (loss) attributable to Amtech Systems, Inc.	$	6,452		$	(53	)

Income (Loss) Per Share:

Basic income (loss) per share attributable to Amtech shareholders	$	0.44		$(0.00)
Weighted average shares outstanding	14,781			13,179
Diluted income (loss) per share attributable to Amtech shareholders	$	0.42		$(0.00)
Weighted average shares outstanding	15,298			13,179



	December 31, 2017		September 30, 2017
Deferred revenues	$	8,370	$	6,822
Deferred costs	2,738		2,741
Deferred profit	$	5,632	$	4,081



	Three Months Ended
	December 31, 2017			December 31, 2016
Research, development and engineering	$	2,290		$	1,830
Grants earned	(299		)	(203		)
Net research, development and engineering	$	1,991		$	1,627



	Options			Weighted Average Exercise Price
Outstanding at beginning of period	1,560,441			$	7.95
Granted	—			—
Exercised	(165,839		)	7.03
Forfeited	(27,299		)	20.04
Outstanding at end of period	1,367,303			$	7.82

Exercisable at end of period	1,142,012			$	8.06
Weighted average fair value of options granted during the period	$	—

/s/ Lisa D. Gibbs

~~February 8, 2018~~

August 6, 2020

Lisa D. Gibbs

Vice President –and Chief ~~Accounting~~Financial Officer

(Principal ~~Accounting~~Financial Officer and Duly Authorized Officer)