Asyst 10Q 2007 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended December 31, 2006


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

For the transition period from to

Commission File number: 000-22430

ASYST TECHNOLOGIES, INC.

(Exact name of Registrant, as specified in its charter)


California		94-2942251
(State or other jurisdiction		(IRS Employer identification Number)
of incorporation or organization)

46897 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices, including zip code)

(510) 661-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESþ NOo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filerþ Non-accelerated filer filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YESo NOþ

The number of shares of the Registrant’s Common Stock, no par value, outstanding as of February 1, 2007 was 49,130,811.

ASYST TECHNOLOGIES, INC.

TABLE OF CONTENTS


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets — December 31, 2006 and March 31, 2006		3
Condensed Consolidated Statements of Operations — Three and Nine-Month Periods Ended December 31, 2006 and December 31, 2005		4
Condensed Consolidated Statements of Cash Flows — Nine-Month Periods Ended December 31, 2006 and December 31, 2005		5
Notes to Condensed Consolidated Financial Statements		6
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3.Quantitative and Qualitative Disclosures About Market Risk		43
Item 4.Controls and Procedures		44
PART II. OTHER INFORMATION
Item 1.Legal Proceedings		45
Item 1A.Risk Factors		45
Item 4.Submission of Matters to a Vote of Security Holders		56
Item 6.Exhibits		58
Signatures		60
Exhibit Index		61
EXHIBIT 10.43
EXHIBIT 10.44
EXHIBIT 10.45
EXHIBIT 10.46
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

Part I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except share data)


	December 31,			March 31,
	2006			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	98,284		$	94,622
Short-term investments		—			15,304
Accounts receivable, net		128,933			141,453
Inventories		60,528			33,219
Prepaid expenses and other current assets		29,234			26,831

Total current assets		316,979			311,429
Property and equipment, net		23,839			23,108
Goodwill		82,925			58,840
Intangible assets, net		47,519			19,334
Other assets		6,317			2,583

Total assets	$	477,579		$	415,294


LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Short-term loans and notes payable	$	1,540		$	1,443
Current portion of long-term debt and capital leases		8,232			1,368
Accounts payable		83,364			75,376
Accounts payable-related parties		28,565			13,409
Accrued and other liabilities		94,316			62,902
Deferred margin		8,403			5,335

Total current liabilities		224,420			159,833

LONG-TERM LIABILITIES
Long-term debt and capital leases, net of current portion		138,114			87,168
Deferred tax liability		15,266			3,119
Other long-term liabilities		9,462			10,974

Total long-term liabilities		162,842			101,261

COMMITMENTS AND CONTINGENCIES (see Note 13)
MINORITY INTEREST		130			66,521

SHAREHOLDERS’ EQUITY
Common stock, no par value:
Authorized shares — 300,000,000 Outstanding shares — 49,063,057 and 48,462,235 shares at December 31, 2006 and March 31, 2006, respectively		479,127			473,422
Deferred stock-based compensation		—			(1,319	)
Accumulated deficit		(388,606	)		(385,178	)
Accumulated other comprehensive income (loss)		(334	)		754

Total shareholders’ equity		90,187			87,679

Total liabilities, minority interest and shareholders’ equity	$	477,579		$	415,294

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

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
				(as restated)						(as restated)
NET SALES	$	126,135		$	106,824		$	365,765		$	348,870
COST OF SALES		88,019			64,848			252,082			229,736

Gross profit		38,116			41,976			113,683			119,134


OPERATING EXPENSES:
Research and development		7,690			6,342			25,679			20,562
Selling, general and administrative		21,831			21,295			63,669			62,746
Amortization of acquired intangible assets		5,912			3,494			14,461			13,126
Restructuring charges (credits)		—			(138	)		1,784			(45	)

Total operating expenses		35,433			30,993			105,593			96,389

Income from operations		2,683			10,983			8,090			22,745


INTEREST AND OTHER INCOME (EXPENSE) NET:
Interest income		552			706			1,828			1,798
Interest expense		(2,678	)		(1,714	)		(6,624	)		(5,126	)
Other income, net		800			3,417			2,596			4,267

Interest and other income (expense), net		(1,326	)		2,409			(2,200	)		939

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST		1,357			13,392			5,890			23,684

PROVISION FOR INCOME TAXES		(1,569	)		(6,426	)		(7,661	)		(16,110	)
MINORITY INTEREST		(11	)		(4,178	)		(1,760	)		(10,115	)

NET INCOME (LOSS) PRIOR TO CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		(223	)		2,788			(3,531	)		(2,541	)
Cumulative effect of change in accounting principle		��			—			103			—

NET INCOME (LOSS)	$	(223	)	$	2,788		$	(3,428	)	$	(2,541	)


BASIC NET INCOME (LOSS) PER SHARE PRIOR TO CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE	$	(0.00	)	$	0.06		$	(0.07	)	$	(0.05	)
Cumulative effect of change in accounting principle		—			—			—			—

BASIC NET INCOME (LOSS) PER SHARE	$	(0.00	)	$	0.06		$	(0.07	)	$	(0.05	)

DILUTED NET INCOME (LOSS) PER SHARE PRIOR TO CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE	$	(0.00	)	$	0.06		$	(0.07	)	$	(0.05	)
Cumulative effect of change in accounting principle		—			—			—			—

DILUTED NET INCOME (LOSS) PER SHARE	$	(0.00	)	$	0.06		$	(0.07	)	$	(0.05	)

SHARES USED IN THE PER SHARE CALCULATION
- Basic		49,028			48,019			48,829			47,918

- Diluted		49,028			48,789			48,829			47,918

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

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Nine Months Ended
	December 31,
	2006			2005
				(as restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS	$	(3,428	)	$	(2,541	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		21,011			18,189
Allowance for doubtful accounts		(7,638	)		5,003
Minority interest in net income in consolidated subsidiary		1,760			10,115
Loss on disposal of fixed assets		366			464
Stock-based compensation expense		4,688			1,475
Non-cash restructuring charges		188			—
In-process research and development		1,519			—
Cumulative effect of change in accounting principle		(103	)		—

Amortization of lease incentive payments		(468	)		(52	)
Asset impairment charges		—			197
Deferred taxes, net		(6,718	)		(1,701	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		19,163			25,742
Inventories, net		(24,781	)		(7,517	)
Prepaid expenses and other assets		(8,597	)		10,428
Accounts payable, accrued and other liabilities and deferred margin		47,576			(16,803	)

Net cash provided by operating activities		44,538			42,999

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		(10,000	)		(184,638	)
Sales or maturity of investments		25,290			203,375
Purchase of additional investment in subsidiary		(105,295	)		—
Purchases of property and equipment, net		(6,392	)		(5,306	)

Net cash provided by (used in) investing activities		(96,397	)		13,431

CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) lines of credit		(588	)		1,794
Dividends paid to minority shareholder of Asyst Shinko, Inc.		(6,317	)		(5,939	)
Proceeds from long-term debt		82,340			—
Principal payments on long-term debt and capital leases		(21,786	)		(2,994	)
Proceeds from issuance of common stock		2,392			694

Net cash provided by financing activities		56,041			(6,445	)

Effect of exchange rate changes on cash and cash equivalents		(520	)		(3,889	)

INCREASE IN CASH AND CASH EQUIVALENTS		3,662			46,096
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		94,622			55,094

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	98,284		$	101,190

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

ASYST TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Asyst Technologies, Inc. and its subsidiaries (“Asyst” or the “Company”) have been prepared in accordance with United States generally accepted accounting principles, consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K/A for the year ended March 31, 2006. All significant inter-company accounts and transactions have been eliminated. Minority interest represents the minority shareholders’ proportionate share of the net assets and results of operations of our majority-owned subsidiaries, Asyst Japan, Inc. (“AJI”) and Asyst Shinko, Inc (“ASI”).

The unaudited condensed consolidated financial statements should be read in connection with the Company’s Annual Report on Form 10-K for the year ended March 31, 2006, as amended on Form 10-K/A on October 27, 2006 and November 28, 2006. Certain amounts reported in previous periods have been reclassified to conform to the current presentation.

In October 2002, we purchased a 51.0% interest in ASI with Shinko Electric, Co. Ltd. (“Shinko”) of Japan. On July 14, 2006, we purchased an additional 44.1% of the outstanding capital stock of ASI, and as a result, now own 95.1% of ASI at December 31, 2006. The Company has an option to purchase, or could be required to purchase, the remaining 4.9% of ASI from the one year anniversary date of this recent acquisition, i.e. July 14, 2007 (for additional information on the acquisition, see Note 6).

2. RESULTS OF INDEPENDENT DIRECTORS’ STOCK OPTION INVESTIGATION

In May 2006, certain analysts published reports suggesting that Asyst may have granted stock options in the past with favorable exercise prices in certain periods compared to stock prices before or after grant date. In response to such reports, management began an informal review of the Company’s past stock option grant practices. On June 7, 2006, the SEC sent a letter to the Company requesting a voluntary production of documents relating to past option grants. On June 9, 2006, the Company’s Board of Directors appointed a special committee of three independent directors to conduct a formal investigation into past stock option grants and practices. The Special Committee retained independent legal counsel and independent forensic and technical specialists to assist in the investigation.

The Special Committee’s investigation was completed on September 28, 2006, with the delivery of the Committee’s final report on that date. The investigation covered option grants made to all employees, directors and consultants during the period from January 1995 through June 2006. The Special Committee found instances wherein incorrect measurement dates were used to account for certain option grants. The Special Committee concluded that none of the incorrect measurement dates was the result of fraud. The last stock option for which the measurement date was found to be in error was granted in February 2004.

Specifically, the Special Committee determined that (1) there was an insufficient basis to rely on the Company’s process and relating documentation to support recorded measurement dates used to account for most stock options granted primarily during calendar years 1998 through 2003, (2) the Company had numerous grants made by means of unanimous written consents signed by Board or Compensation Committee members wherein all the signatures of the members were not received on the grant date specified in the consents; (3) the Company made several company-wide grants pursuant to an approval of the Board or Compensation Committee, but the list of grantees and number of options allocated to each grantee was not finalized as of the stated grant date.

The Special Committee also found that, during the period from April 2002 through February 2004, the Company set the grant date and exercise price of rank and file employee option grants for new hires and promotions at the lowest price of the first five business days of the month following the month of their hire or promotion. However, the net impact of this practice was an aggregate charge of less than $400,000.

The Special Committee identified isolated instances where stock option grants did not comply with applicable terms and conditions of the stock plans from which the grants were issued. For example, the Committee determined that on two occasions, the Company granted options to directors that exceeded the annual “automatic” grant amount specified in the applicable plan. On another occasion, a grant to a director was approved one day before the individual became a director. In addition, one grant was made to an officer of the Company by the chief executive officer under delegated authority; however, under the terms of the applicable plan, the option grant should have been made by the Company’s Board or its Compensation Committee. There were also isolated instances where option grants were made below fair market value. The applicable stock option plans require that option grants must be made at

fair market value on the date of grant. However, the Committee did not find any evidence that these violations were fraudulent or committed for improper purposes.

The Special Committee’s investigation also identified less frequent errors in other categories, such as grants made to a small number of employees who had not formally commenced their employment as of the grant approval date.

The Special Committee concluded that the errors in measurement dates it reviewed resulted primarily from a combination of unintentional errors, lack of attention to timely paperwork, and insufficient internal control over aspects of equity plan administration (including lack of oversight in applying the accounting rule described below in connection with determining measurement dates) during the period in which the errors occurred. The Special Committee found no evidence that any incorrect measurement dates was the result of fraud.

To determine the correct measurement dates under applicable accounting principles for these options, the Committee followed the guidance in Accounting Principles Board Opinion No. 25 (“APB No. 25”), which deems the “measurement date” as the first date on which all of the following are known: (1) the individual employee who is entitled to receive the option grant, (2) the number of options that an individual employee is entitled to receive, and (3) the option’s purchase price. In instances where the Special Committee determined it could not rely on the original stock option grant date, the Special Committee determined corrected measurement dates based on its ability to establish or confirm, whether through other documentation, consistent or established Company practice or processes, or credible circumstantial information, that all requirements for the proper granting of an option had been satisfied under applicable accounting principles.

Based on the results of the Special Committee’s investigation, the Company recorded stock-based compensation charges and additional payroll taxes with respect to its employee stock option grants for which the measurement dates were found to be in error. While the impact of recording these charges was not material to the fiscal years ended March 31, 2005 and 2004, the Company deemed it appropriate to record the charges in the relevant periods, since recording the cumulative out of period charges in fiscal 2006 would be material to that period. Accordingly, the Company restated the results of fiscal years 2005 and 2004, to record a net charge of approximately $0.2 million, or $0.00 per share, in fiscal 2005 and a net benefit of $0.8 million, or $(0.02) per share, in fiscal 2004. Additionally, the Company recorded a net charge of $19.5 million to its accumulated deficit as of April 1, 2003 for cumulative charges relating to fiscal years prior to fiscal 2004. At March 31, 2006, the remaining unamortized deferred stock-based compensation charge resulting from the investigation was approximately $82,000.

In view of its history of operating losses, the Company has maintained a full valuation allowance on its U.S. deferred tax assets since fiscal year 2003. As a result, there is no material income tax impact relating to the stock-based compensation and payroll tax expenses recorded by the Company resulting from the investigation of the Special Committee during the nine month period ended December 31, 2006 and 2005, respectively. Additionally, there was no material impact of Section 409A and Section 162(m) limitations on deduction of executive stock compensation for the three and nine month periods ended December 31, 2006 and 2005, respectively.

The adjustments as a result of the restatement referenced above, for the three and nine months ended December 31, 2005 were as follows (in thousands, except for per share data) :

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS


	Three Months Ended
	December 31, 2005
	(as reported)			(adjustments)			(as restated)
NET SALES	$	106,824		$	—		$	106,824
COST OF SALES		64,828			20			64,848

Gross profit		41,996			(20	)		41,976

OPERATING EXPENSES:
Research and development		6,310			32			6,342
Selling, general and administrative		21,075			220			21,295
Amortization of acquired intangible assets		3,494			—			3,494
Restructuring credits		(138	)		—			(138	)

Total operating expenses		30,741			252			30,993

INCOME FROM OPERATIONS		11,255			(272	)		10,983
INTEREST AND OTHER INCOME, NET
Interest income		706			—			706
Interest expense		(1,714	)		—			(1,714	)
Other income, net		3,417			—			3,417

INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST		13,664			(272	)		13,392
PROVISION FOR INCOME TAXES		(6,507	)		81			(6,426	)
MINORITY INTEREST		(4,178	)		—			(4,178	)

NET INCOME (LOSS)	$	2,979		$	(191	)	$	2,788


NET INCOME (LOSS) PER SHARE
– Basic	$	0.06		$	(0.00	)	$	0.06

– Diluted	$	0.06		$	(0.00	)	$	0.06


SHARES USED IN THE PER SHARE CALCULATION
– Basic		48,019			48,019			48,019

– Diluted		48,789			48,789			48,789

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS


	Nine Months Ended
	December 31, 2005
	(as reported)			(adjustments)			(as restated)
NET SALES	$	348,870		$	—		$	348,870
COST OF SALES		229,664			72			229,736

Gross profit		119,206			(72	)		119,134

OPERATING EXPENSES:
Research and development		20,461			101			20,562
Selling, general and administrative		62,450			296			62,746
Amortization of acquired intangible assets		13,126			—			13,126
Restructuring credits		(45	)		—			(45	)

Total operating expenses		95,992			397			96,389

INCOME FROM OPERATIONS		23,214			(469	)		22,745
INTEREST AND OTHER INCOME, NET
Interest income		1,798			—			1,798
Interest expense		(5,126	)		—			(5,126	)
Other income, net		4,267			—			4,267

INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST		24,153			(469	)		23,684
PROVISION FOR INCOME TAXES		(16,191	)		81			(16,110	)
MINORITY INTEREST		(10,115	)		—			(10,115	)

NET LOSS	$	(2,153	)	$	(388	)	$	(2,541	)

BASIC AND DILUTED NET LOSS PER SHARE	$	(0.04	)	$	(0.01	)	$	(0.05	)

SHARES USED IN THE PER SHARE CALCULATION — Basic and Diluted		47,918			47,918			47,918

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


	Nine Months Ended
	December 31, 2005
	as reported			adjustments			as restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,153	)	$	(388	)	$	(2,541	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		18,189			—			18,189
Allowance for doubtful accounts		5,003			—			5,003
Minority interest in net income in consolidated subsidiary		10,115			—			10,115
Loss on disposal of fixed assets		464			—			464
Stock-based compensation expense		1,095			380			1,475
Amortization of lease incentive payments		(52	)					(52	)
Asset impairment charges		—			197			197
Deferred taxes, net		(1,620	)		(81	)		(1,701	)
Changes in assets and liabilities:
Accounts receivable		25,742			—			25,742
Inventories, net		(7,517	)		—			(7,517	)
Prepaid expenses and other assets		10,428			—			10,428
Accounts payable, accrued liabilities and deferred margin		(16,695	)		(108	)		(16,803	)

Net cash provided by operating activities		42,999			—			42,999

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments		(184,638	)		—			(184,638	)
Sales or maturity of investments		203,375			—			203,375
Purchase of property and equipment, net		(5,306	)		—			(5,306	)

Net cash provided by investing activities		13,431			—			13,431

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit		1,794						1,794
Principal payments on long-term debt and capital leases		(2,994	)		—			(2,994	)
Dividends paid to a minority shareholder		(5,939	)		—			(5,939	)
Proceeds from issuance of common stock		694			—			694

Net cash used in financing activities		(6,445	)		—			(6,445	)

Effect of exchange rate changes on cash and cash equivalents		(3,889	)		—			(3,889	)

INCREASE IN CASH AND CASH EQUIVALENTS		46,096			—			46,096
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		55,094			—			55,094

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	101,190		$	—		$	101,190

3. LIQUIDITY

Since inception, we have incurred aggregate consolidated net losses of approximately $389 million, and have incurred net losses during each of the last 5 years. In recent years, we have funded our operations primarily from cash generated from the issuance of debt or equity securities. Cash and cash equivalents aggregated a total of $98 million at December 31, 2006. We believe that our current cash and the availability of additional financing via existing lines of credit will be sufficient to meet our expected cash requirements through at least December 31, 2007. However, we also expect that ASI will continue to require additional funding to support its working capital requirements over the next several quarters, which may be financed through short-term borrowings or inter-company cash transfers.

In a letter delivered to us on August 16, 2006, U.S. Bank National Association, as the trustee under the indenture relating to our convertible notes, asserted that Asyst was in default under the notes’ indenture because of the previously announced delays in filing with the SEC and the trustee our report on Form 10-K for the year ended March 31, 2006 and our Form 10-Q for the fiscal quarter ended June 30, 2006. The letter stated that this asserted default was not an “Event of Default” under the indenture if the Company cured the default within 60 days after receipt of the notice.

On October 13, 2006, as amended on October 27, 2006 and November 28, 2006, we filed with the SEC our Form 10-K for the fiscal year ended March 31, 2006, and Form 10-Q for the quarter ended June 30, 2006. We also delivered on October 13, 2006 copies of those reports to the trustee, and that delivery cured any purported defaults under the indenture and asserted by the trustee in its letter referenced above. Asyst does not agree with the trustee’s assertion that the delayed filing of the annual and quarterly reports constituted a default under the indenture.

As a result of the delay in filing of the Form 10-K, as amended on October 27, 2006 and November 28, 2006, for our fiscal year ended March 31, 2006 and the Form 10-Q for our first quarter ended June 30, 2006, we are not eligible to register any of our securities on Form S-3 for sale by us or resale by others until we have timely filed all reports required to be filed under the Securities Exchange Act of 1934 during the 12 months, and any portion of a month, immediately preceding the filing of a registration statement on Form S-3. This condition may adversely affect our ability to restructure outstanding indebtedness, to raise capital by other means, or to acquire other companies by using our securities to pay the acquisition price.

We have a significant amount of outstanding indebtedness that has increased substantially since the beginning of fiscal year 2007:

	•		Under a senior secured credit agreement (“Credit Facility”) entered into in June 2006 with Bank of America, N.A., as lender and administrative agent and other lenders, we borrowed an aggregate amount of approximately $82 million to fund the purchase of ASI shares from Shinko on July 14, 2006, and a letter of credit in favor of Shinko for approximately $11 million related to the equity option on Shinko’s remaining 4.9% ASI share ownership as discussed below. This credit agreement provides a $115 million senior secured credit facility consisting of a $90 million revolving credit facility, including a $20 million sub-limit for letters of credit and $10 million sub-limit for swing-line loans, and a $25 million term loan facility. The credit agreement will terminate and all amounts outstanding will be due July 13, 2009, provided that Asyst’s outstanding 5³/4% convertible subordinated notes due July 3, 2008, are redeemed or repurchased, or the maturity of the notes extended, on terms reasonably satisfactory to the administrative agent on or before March 31, 2008; otherwise, amounts outstanding under the credit agreement will be due on March 31, 2008.

	•		We have approximately $86 million outstanding under our 5³/4% convertible subordinated notes privately issued in July 2001. These notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of our common stock at a conversion price of $15.18 per share. We are required to pay interest on these convertible notes on January 3 and July 3 of each year. These notes mature July 3, 2008 and are currently redeemable at our option.

Under certain circumstances, Shinko can accelerate upon thirty (30) days written notice our obligation to purchase the remaining 4.9% equity it holds in ASI. These circumstances include (a) when the equity ownership of Asyst Japan, Inc. (“AJI”) in ASI falls below 50%; (b) when bankruptcy or corporate reorganization proceedings are filed against the Company or AJI; (c) when a merger or corporate reorganization has been approved involving all or substantially all of the Company’s assets; (d) when Shinko’s equity ownership in ASI falls below 4.9%; or (e) when the Company has failed to make any payment when due in respect of any loan secured by a pledge of the Company’s right, title and interest in and to the shares of ASI (and the holder of such security interest elects to exercise its rights against AJI in respect of such shares). In any such event, an acceleration could impose on us an unforeseen payment obligation, which could impact our liquidity or which payment could be subject to restrictions or covenants, or be subject to third party approvals under our debt facilities. Our inability to purchase the remaining ASI equity held by Shinko, when and as

required, could significantly impact our continued control and ownership of ASI. Due to the cyclical and uncertain nature of cash flows and collections from our customers, the Company (or its subsidiaries) may from time to time incur borrowings which could cause the Company to exceed the permitted total leverage ratios under the credit agreement. Under any such scenario, the Company may pay down the outstanding borrowings from cash to maintain compliance with its financial covenants.

The cyclical nature of the semiconductor industry makes it very difficult for us to predict future liquidity requirements with certainty. Any upturn in the semiconductor industry may result in short-term uses of cash in operations as cash may be used to finance additional working capital requirements such as accounts receivable and inventories. Alternatively, continuation or further softening of demand for our products may cause us to fund additional losses in the future. At some point in the future we may require additional funds to support our working capital and operating expense requirements or for other purposes. We may seek to raise these additional funds through public or private debt or equity financings, or the sale of assets. These financings may not be available to us on a timely basis, if at all, or, if available, on terms acceptable to us or not dilutive to our shareholders. If we fail to obtain acceptable additional financing, we may be required to reduce planned expenditures or forego investments, which could reduce our revenues, increase our losses, and harm our business.

If a holder of our long term or short term indebtedness were in the near future to demand accelerated repayment of all or a substantial portion of our outstanding indebtedness that exceeds the amount of our available liquid assets that could be disbursed without triggering further defaults under other outstanding indebtedness, we would not likely have the resources to pay such accelerated amounts, would be required to seek funds from re-financing or re-structuring transactions for which we have no current basis to believe we would be able to obtain on desired terms or at all, and would face the risk of a bankruptcy filing by us or our creditors. Any accelerated repayment demands that we are able to honor would reduce our available cash balances and likely have a material adverse impact on our operating and financial performance and ability to comply with remaining obligations. If we are able to maintain our current indebtedness as outstanding, the restrictive covenants could impair our ability to expand or pursue our business strategies or obtain additional funding.

NASDAQ Delisting Proceedings

We previously reported that our stock was subject to de-listing from the NASDAQ Global Market due to our late filing of certain reports with the SEC. We have filed those reports and met other conditions within the time required by the previously reported NASDAQ Listing Qualifications Panel decision. We received a letter dated October 18, 2006 from the NASDAQ Listing Qualifications Panel indicating that we have demonstrated compliance with all NASDAQ Marketplace Rules necessary for the continued listing of our common stock.

As a result of the late filing on October 13, 2006, as amended on October 27, 2006 and November 28, 2006, of the Form 10-K for the fiscal year 2006 and the Form 10-Q for our first quarter ended June 30, 2006, we will be ineligible to register our securities on Form S-3 for sale by us or resale by others for one year. The inability to use Form S-3 could adversely affect our ability to raise capital during this period. If we fail to timely file a future periodic report with the SEC and were delisted, it could severely impact our ability to raise future capital and could have an adverse impact on our overall future liquidity. However, we are still eligible to register our securities on Form S-1.

In addition, the material weaknesses and related matters we discuss in Item 4 of Part I of this report may also have an adverse impact on our ability to obtain future capital from equity or debt.

4. SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, product delivery has occurred or service has been rendered, the seller’s price is fixed or determinable, and collectibility is reasonably assured. Some of our products are large volume consumables that are tested to industry and/or customer acceptance criteria prior to shipment and delivery. Our primary shipping terms are FOB shipping point. Therefore, revenue for these types of products is recognized when title transfers. Certain of our product sales are accounted for as multiple-element arrangements. We allocate consideration to multiple element transactions based on relative objective evidence of fair values, which we determine based on prices charged for such items when sold on a stand alone basis. If we have met defined customer acceptance experience levels with both the customer and the specific type of equipment, we recognize the product revenue at the time of shipment and transfer of title, with the remainder when the other elements, primarily installation, have been completed. Some of our other products are highly customized systems and cannot be completed or adequately tested to customer specifications prior to shipment from the factory. We do not recognize revenue for these products until formal acceptance by the customer. Revenue for spare parts sales is recognized at the time of shipment and the transfer of title. Deferred revenue consists primarily of product shipments creating legally enforceable receivables that did not meet our revenue recognition policy. Revenue related to maintenance and service contracts is recognized ratably over the duration of the contracts. Unearned maintenance and service contract revenue is not significant and is included in accrued liabilities and other.

We recognize revenue for long-term contracts at ASI in accordance with the American Institute of Certified Public Accountants’ (“AICPA”) Statement of Position (“SOP”) 81-1,Accounting for Performance of Construction-Type and Certain Production-Type Contracts.We use the percentage of completion method to calculate revenue and related costs of these contracts because they are long-term in nature and estimates of cost to complete and extent of progress toward completion of long-term contracts are available and reasonably dependable. We record revenue and unbilled receivables each period based on the percentage of completion to date on each contract, measured by costs incurred to date relative to the total estimated costs of each contract. Unbilled receivables amount is reclassified to trade receivables once invoice is issued. We disclose material changes in our financial results that result from changes in estimates.

We account for software revenue in accordance with the AICPA SOP 97-2,Software Revenue Recognition.Revenue for integration software work is recognized on a percentage-of-completion basis. Software license revenue, which is not material to the consolidated financial statements, is recognized when persuasive evidence of an arrangement exists, delivery has occurred or, the selling price is fixed or determinable and collectibility is probable.

In June 2006, the FASB issued Interpretation No. 48,Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109(“FIN No. 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006 and as such, the Company will adopt FIN No. 48 in its quarter ending June 30, 2007. We are currently assessing the impact the adoption of FIN No. 48 will have on our consolidated financial position and results of operations.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners, and is to include unrealized gains and losses that have historically been excluded from net income and loss and reflected instead in equity. The following table presents our comprehensive income (loss) items (in thousands):


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
				(as restated)						(as restated)
Net income (loss), as reported	$	(223	)	$	2,788		$	(3,428	)	$	(2,541	)
Foreign currency translation adjustments		237			(3,461	)		(1,070	)		(7,188	)
Change in unrealized gains (losses) on investments		(7	)		27			(18	)		105

Comprehensive income (loss)	$	7		$	(646	)	$	(4,516	)	$	(9,624	)

Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding, while diluted net income (loss) per share is computed using the sum of the weighted average number of common and common equivalent shares outstanding. Common equivalent shares used in the computation of diluted earnings per share result from the assumed exercise of stock options and restricted stock awards, using the treasury stock method. For periods for which there is a net loss, the numbers of shares used in the computation of diluted net income (loss) per share are the same as those used for the computation of basic net income (loss) per share as the inclusion of dilutive securities would be anti-dilutive. The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):


	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2006			2005		2006			2005
				(as restated)					(as restated)
Numerator:
Net income (loss)	$	(223	)	$	2,788	$	(3,428	)	$	(2,541	)

Denominator:
Weighted average common shares outstanding, excluding unvested restricted stock units		49,028			48,019		48,829			47,918

Denominator for basic calculation		49,028			48,019		48,829			47,918


Effect of dilutive employee stock options and restricted stock units		—			770		��			—

Denominator for diluted calculation		49,028			48,789		48,829			47,918


Net income (loss) per share — basic	$	(0.00	)	$	0.06	$	(0.07	)	$	(0.05	)

Net income (loss) per share — diluted	$	(0.00	)	$	0.06	$	(0.07	)	$	(0.05	)

The following table summarizes securities outstanding which were not included in the calculation of diluted net loss per share as to do so would be anti-dilutive (in thousands):


	As of December 31,
	2006		2005
Restricted stock awards and stock units		843		485
Stock options		5,801		7,148
Convertible notes		5,682		5,682

		12,362		13,315

Recent Accounting Pronouncements

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on EITF Issue No. 06-2,Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43(“EITF 06-2”). EITF 06-2 requires companies to accrue the cost of such compensated absences over the requisite service period. The Company currently accounts for the cost of compensated absences for sabbatical programs when the eligible employee completes the requisite service period, which is 10 to 20 years of service. The Company is required to apply the provisions of EITF 06-2 at the beginning of fiscal year 2008. EITF 06-02 allows for adoption through retrospective application to all prior periods or through a cumulative effect adjustment to retained earnings if it is impracticable to determine the period-specific effects of the change on prior periods presented. The Company is currently evaluating the financial impact of this guidance and the method of adoption which will be used.

In September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. SAB No. 108 requires registrants to quantify the impact of correcting all misstatements using both the “rollover” method, which focuses primarily on the impact of a misstatement on the income statement and is the method we currently use, and the “iron curtain” method, which focuses primarily on the effect of correcting the period-end balance sheet. The use of both of these methods is referred to as the “dual approach” and should be combined with the evaluation of qualitative elements surrounding the errors in accordance with SAB No. 99, “Materiality.” The provisions of SAB No. 108 are effective for the Company for the annual financial statements for the first fiscal year ending after November 15, 2006. The adoption of SAB No. 108 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements, (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. The Statement is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We do not believe that the adoption of the provisions of SFAS No. 157 will materially impact our financial position and results of operations.

In September 2006, the FASB issued SFAS No. 158, EmployersAccounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No.87, 88, 106, and 132(R), (“SFAS No. 158”). SFAS No. 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position. To recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. The provisions of this Statement are effective for an employer with publicly traded equity securities are required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. We are evaluating the impact on our consolidated financial statements of the provisions of SFAS No. 158.

5. BALANCE SHEET COMPONENTS

Short-term Investments

There were no short-term investments at December 31, 2006.

Short-term investments by security type are as follows (in thousands):


	Cost		Unrealized Losses			Fair Value
March 31, 2006
Auction rate securities	$	8,300	$	—		$	8,300
Corporate debt securities		6,014		(9	)		6,005
Federal agency notes		1,000		(1	)		999

	$	15,314	$	(10	)	$	15,304

Accounts Receivable, net of allowance for doubtful accounts

Accounts receivable, net of allowance for doubtful accounts were as follows (in thousands):


	December 31,			March 31,
	2006			2006
Trade receivables	$	75,174		$	83,008
Trade receivables-related party		34			90
Unbilled receivables		52,165			63,435
Other receivables		5,602			6,788
Less: Allowance for doubtful accounts		(4,042	)		(11,868	)

Total	$	128,933		$	141,453

We estimate our allowance for doubtful accounts based on a combination of specifically identified amounts and an additional reserve calculated based on the aging of receivables. The additional reserve is provided for the remaining accounts receivable after specific allowances at a range of percentages from 1.25 percent to 100.0 percent based on the aging of receivables. If circumstances change (such as an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us or its payment trends), we may adjust our estimates of the recoverability of amounts due to us.

During management’s review of our accounts receivable, based on additional collection of those accounts receivables and applying our calculated base of aging of accounts receivable, as noted above, during the three months ended December 31, 2006, our subsidiary ASI was able to reduce its allowance by $1.9 million. During the three and nine-month periods ended December 31, 2006, there were no and $0.2 million, respectively, write-offs of accounts receivable balances which we determined to be uncollectible and for which we had recorded specific reserves in previous periods. We do not record interest on outstanding and overdue accounts receivable.

All of our unbilled receivables are from ASI. Payments related to these unbilled receivables are expected to be received within one year from December 31, 2006 and as such the balances are classified within current assets on our consolidated balance sheet.

Other receivables include notes receivable from customers in Japan and Korea in settlement of trade accounts receivable balances.

We offer both open accounts and letters of credit to our customer base. Our standard open account terms range from net 30 days to net 90 days; however, the customary local industry practices may differ and prevail in certain counties.

Our subsidiaries in Japan, AJI and ASI, have agreements with certain Japanese financial institutions to sell certain trade receivables. For the three-month periods ended December 31, 2006 and 2005, they sold approximately $48 million and $60 million, respectively, of accounts receivable without recourse. For the nine-month periods ended December 31, 2006 and 2005, they sold approximately $93 million and $69 million, respectively, of accounts receivable without recourse. For the nine-month period ended December 31, 2006, AJI had sold certain trade receivables to these same Japanese banks amounting to approximately $5 million, with recourse.

Inventories

Inventories consisted of the following (in thousands):


	December 31,		March 31,
	2006		2006
Raw materials	$	18,461	$	9,882
Work-in-process		40,668		22,180
Finished goods		1,399		1,157

Total	$	60,528	$	33,219

At December 31, 2006 and March 31, 2006, we had a reserve of $12.5 million and $13.3 million, respectively, for estimated excess and obsolete inventory.

We outsource a majority of our fab automation product manufacturing to Solectron Corporation, (“Solectron”). As part of the arrangement, Solectron purchases inventory on our behalf and we may be obligated to reacquire inventory purchased by Solectron if the inventory is not used over a certain specified period of time per the terms of our agreement. Any inventory buyback obligation in excess of our demand forecast is fully accrued, resulting in accruals of $1.0 million and $0.6 million at December 31, 2006 and March 31, 2006, respectively. At December 31, 2006 and March 31, 2006, total inventory held by Solectron was $16.9 million and $13.0 million, respectively. During the three month periods ended December 31, 2006 and 2005, we repurchased $1.2 million and $3.7 million of this inventory, respectively, that was not used by Solectron in manufacturing our products. During the nine month periods

ended December 31, 2006 and 2005, we repurchased $3.8 million and $12.3 million, respectively, of this inventory, that was not used by Solectron in manufacturing our products.

Goodwill and Intangible Assets

Goodwill

Goodwill balances and the changes in the carrying amount of goodwill during the nine-month period ended December 31, 2006 were as follows (in thousands):


	Fab Automation		AMHS			Total
Balances at March 31, 2006	$	3,398	$	55,442		$	58,840
Acquisitions		—		25,752			25,752
Foreign currency translation		—		(1,667	)		(1,667	)

Balances at December 31, 2006	$	3,398	$	79,527		$	82,925

The net goodwill movement includes an additional $26 million of goodwill from the acquisition of the 44.1% ownership interest of ASI in July 2006.

Intangible assets

Intangible assets, net were as follows (in thousands):


	December 31, 2006						March 31, 2006
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
Amortizable intangible assets:
Developed technology	$	80,484	$	52,937	$	27,547	$	58,289	$	44,275	$	14,014
Customer base and other intangible assets		52,654		34,221		18,433		31,935		29,419		2,516
Licenses and patents		5,300		3,761		1,539		6,316		3,512		2,804

Total	$	138,438	$	90,919	$	47,519	$	96,540	$	77,206	$	19,334

Amortization expense was $6.0 million and $3.5 million for the three-month periods ended December 31, 2006 and 2005, respectively. Amortization expense was $14.7 million and $13.1 million for the nine-month periods ended December 31, 2006 and 2005, respectively.

Expected future intangible amortization expense, based on current balances, for the remainder of fiscal year 2007 and subsequent fiscal years, is as follows (in thousands):


Fiscal Year ending March 31,
Remaining portion of 2007	$	5,918
2008		16,978
2009		11,172
2010		6,891
2011		4,874
2012 and thereafter		1,686

Total	$	47,519

Warranty Accrual

We provide for the estimated cost of product warranties at the time revenue is recognized. The following table summarizes the activity in our warranty accrual (in thousands):


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Beginning Balance	$	7,761		$	11,374		$	7,967		$	13,509
Accruals		4,732			877			10,636			5,832
Settlements		(2,634	)		(2,529	)		(8,866	)		(9,064	)
Foreign Currency Translation		(43	)		(392	)		79			(947	)

Ending Balance	$	9,816		$	9,330		$	9,816		$	9,330

The warranty accrual balance at the end of the period is reflected in accrued and other liabilities.

6. ACQUISITION

On July 14, 2006, the Company purchased from Shinko shares representing an additional 44.1% of the outstanding capital stock of ASI for a cash purchase price of JPY 11.7 billion (approximately US$102 million at the July 14 exchange rate). This purchase increased Asyst’s consolidated ownership of ASI to 95.1%. The Company consummated the acquisition to further integrate its Fab Automation and Automated Material Handling Systems (“AMHS”) businesses, allowing it to provide its customers a full range of product offerings.

The fair value of assets acquired and liabilities assumed were recorded in Asyst Technologies, Inc’s condensed consolidated balance sheet as of July 14, 2006, the effective date of the acquisition, and the results of operations were included in Asyst Technologies, Inc’s condensed consolidated results of operations subsequent to July 14, 2006. We believe the purchase price reasonably reflects the fair value of the business based on estimates of future revenues and earnings.

At any time as of or after the first anniversary of the closing, and subject to the other provisions of the agreement, either Shinko or AJI may give notice to the other, calling for AJI to purchase from Shinko shares representing the remaining 4.9% of outstanding capital stock of ASI for a fixed payment of JPY 1.3 billion (approximately US$10.9 million at the December 31, 2006 exchange rate).

In accordance with EITF 00-4, AJI has accounted for the purchase options on a combined basis with the minority interest as a financing of the purchase of the remaining 4.9% minority interest, and as a result has accounted for the transaction as an acquisition of Shinko’s entire 49% interest of ASI on July 14, 2006. Accordingly, AJI has recorded a liability, equivalent to the net present value of the JPY 1.3 billion fixed payment for the 4.9% remaining interest and the fixed annual dividend payment of JPY 65 million and will accrete the resulting discount to interest expense over the twelve month period ending on the first potential exercise date. The liability has been classified within “accrued and other liabilities” on the condensed consolidated balance sheet.

Under business combination accounting, the total purchase price was allocated to the 49% share of ASI’s net tangible and identifiable intangible assets acquired, based on their estimated fair values as of July 14, 2006. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. A summary of the transaction is as follows (in thousands):


Purchase Price:
Total Cash Consideration	$	102,043
Liability to purchase remaining 4.9% interest plus future fixed dividends		11,480
Transaction costs		5,666

Total Purchase Price	$	119,189

Allocation of purchase price to assets acquired and liabilities assumed:
Net tangible assets	$	32,560
In-Process Research & Development		1,519
Acquired identifiable intangible assets:
Developed technology		29,008
Backlog		2,940
Customer relationships		16,464
Trademark		2,499
Deferred tax liabilities		(19,414	)
Goodwill		53,613

Total Purchase Price	$	119,189

Intangible Assets

In performing our purchase price allocation, we considered, among other factors, our intention for future use of acquired assets, analyses of historical financial performance and estimates of future performance of ASI. A portion of the excess of purchase price over fair value of net assets acquired was allocated to identifiable intangible assets. The fair value of intangible assets was based, in part, on a valuation completed by an independent appraiser using an income approach and estimates and assumptions provided by management. The rates utilized to discount net cash flows to their present values were based on discount rates of 20% and 24%. We

amortize developed technology and trademarks over a period of five years, the customer base over a period of three years, and the backlog over one year, using the straight-line method, with a weighted-average life of 4.4 years.

The fair values of identifiable intangible assets are based on estimates of future revenues and earnings to determine a discounted cash flow valuation of identifiable intangible assets that meet the separate recognition criteria of SFAS No. 141. Goodwill of approximately $54 million arising from the acquisition was recorded in our AMHS segment and is not deductible for tax purposes.

In-Process Research and Development

We expense in-process research and development (IPR&D) upon acquisition to research and development as it represents incomplete research and development projects that had not reached technological feasibility and had no alternative future use as of the acquisition date. The value assigned to IPR&D of $1.5 million was determined by considering the importance of each project to our overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value based on the percentage of completion of the IPR&D projects.

A portion of the purchase price was allocated to developed product technology and in-process research and development (“IPR&D”). They were identified and valued through an independent analysis of data by a third party appraiser concerning the developmental products, their stage of development, the time and resources needed to complete them, target markets, their expected income generating ability and associated risks. The Income Approach, which is based on the premise that the value of an asset is the present value of its future earning capacity, was the primary valuation technique employed. Discount rates of 20% and 24% were applied to developed product technology and IPR&D, respectively.

Minority interest was approximately $66 million at March 31, 2006, representing the 49.0% minority interest in the fair value of the net assets of ASI at the time of acquisition and proportionate share of net income (loss) and cumulative translation adjustment for the periods subsequent to the acquisition.

As a result of the acquisition on July 14, 2006, there is no remaining minority interest balance relating to ASI.

The following table summarizes the estimated fair values of the net tangible assets acquired and liabilities assumed at the date of acquisition (in thousands):


Cash	$	13,169
Accounts receivable		56,319
Inventories		21,462
Property plant and equipment		4,706
Other assets		1,935
Deferred tax assets, net		4,414
Accounts payable and other current liabilities		(59,587	)
Long-term debt		(6,607	)
Pension and other long-term liabilities		(3,251	)


Net tangible assets acquired	$	32,560

The following unaudited pro forma financial information presents the combined results of operations of Asyst Technologies, Inc. and ASI as if the acquisition had occurred as of the beginning of the periods presented. The unaudited pro forma financial information is not intended to represent or be indicative of the consolidated results of operations or financial condition of Asyst Technologies, Inc. that would have been reported had the acquisition been completed as of the beginning of the periods presented, and should not be taken as representative of the future consolidated results of operations or financial condition of Asyst Technologies, Inc. Unaudited pro forma results were as follows (in thousands):


	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2006			2005		2006			2005
Net sales	$	126,135		$	106,824	$	365,765		$	348,870
Pro forma net income (loss) prior to cumulative effect of change in accounting principle		(223	)		4,318		(5,302	)		(3,911	)
Cumulative effect of change in accounting principle		—			—		103			—


Pro forma net income (loss)	$	(223	)	$	4,318	$	(5,199	)	$	(3,911	)


Pro forma basic and diluted net income (loss) per share prior to cumulative effect of change in accounting principle	$	(0.00	)	$	0.09	$	(0.11	)	$	(0.08	)
Cumulative effect of change in accounting principle		—			—		0.00			—


Pro forma basic and diluted net income (loss) per share	$	(0.00	)	$	0.09	$	(0.11	)	$	(0.08	)

Shares used in the per share calculation — Basic		49,028			48,019		48,829			47,918
— Diluted		49,028			48,789		48,829			47,918

7. STOCK-BASED COMPENSATION

Effective April 1, 2006, Asyst adopted the provisions of SFAS No. 123(R) —Share-Based Payment. SFAS No. 123(R) establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee requisite service period. For all grants, the amount of compensation expense to be recognized is adjusted for an estimated forfeiture rate, which is based on the historical data. Under this transition method, stock-based compensation expense for the three and nine months ended December 31, 2006 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of April 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123. Stock-based compensation expense for all stock-based compensation awards granted subsequent to April 1, 2006 was based on the grant-date fair value estimate in accordance with the provisions of SFAS No. 123R.

The Company previously accounted for employee stock-based compensation arrangements in accordance with the provisions of APB No. 25,Accounting for Stock Issued to Employees, FIN No. 44,Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25and FIN No. 28,Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans, and comply with the disclosure provisions of SFAS No. 123,Accounting for Stock-Based Compensation, and SFAS No. 148,Accounting for Stock Based Compensation — Transition and Disclosure — an amendment of FAS No. 123. Under APB No. 25, compensation expense is based on the difference, if any, on the date of grant, between the estimated fair value of our common stock and the exercise price. SFAS No. 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument. We amortize stock-based compensation using the straight-line method over the remaining vesting periods of the related options, which is generally four years.

We account for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and EITF 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Servicesand value awards using the Black-Scholes option pricing model as of the date at which the non-employees performance is complete. We recognize the fair value of the award as a compensation expense as the non-employees interest in the instrument vests.

Prior to the adoption of SFAS No. 123(R)

Prior to the adoption of SFAS No. 123(R), the Company provided the disclosures required under SFAS No 123, as amended by SFAS No. 148 —Accounting for Stock-Based Compensation – Transition and Disclosures.

The pro-forma information for the three and nine months ended December 31, 2005 was as follows (in thousands, except per share amounts):


	Three Months			Nine Months
	Ended			Ended
	December 31, 2005			December 31, 2005
	(as restated)			(as restated)
Net income (loss) — as reported	$	2,788		$	(2,541	)
Add: employee stock-based compensation expense included in reported net loss, net of tax		382			1,475
Less: total employee stock-based compensation expense determined under fair value, net of tax		(1,681	)		(5,282	)

As adjusted net income (loss)	$	1,489		$	(6,348	)


Basic net loss per share — as reported	$	0.06		$	(0.05	)
Diluted net loss per share — as reported	$	0.06		$	(0.05	)

Basic net income (loss) per share — pro forma	$	0.03		$	(0.13	)
Diluted net income (loss) per share — pro forma	$	0.03		$	(0.13	)

Shares used in the per share calculation — basic		48,019			47,918
Shares used in the per share calculation — diluted		48,789			47,918

Pro forma compensation expense under SFAS No. 123 does not include an upfront estimate of potential forfeitures, but rather recognizes them as they occur and amortizes the compensation expense over the vesting period. As stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. These computational differences create incomparability between the pro forma stock compensation presented above and stock compensation expense recognized during the period.

Impact of the adoption of SFAS No. 123(R)

The Company elected to adopt the modified prospective application (“MPA”) method as provided by SFAS No. 123(R). By using the MPA, the Company did not restate its prior period financial statements. Instead, the Company is applying SFAS No. 123(R) for new options granted after the adoption of SFAS123(R), i.e. April 1, 2006, and any portion of options that were granted after April 1, 1996 and have not vested by April 1, 2006. The effect of recording stock-based compensation for the three and six months ended December 31, 2006 was as follows (in thousands, except per share amount):


	Three Months		Nine Months
	Ended		Ended
	December 31, 2006		December 31, 2006
Stock-based compensation expense by category:
Cost of Sales	$	221	$	454
Research and Development		255		750
Selling , General and Administrative		1,059		3,484

Total stock-based compensation expense	$	1,535	$	4,688

Stock-based compensation expense by type of award:
Employee stock options	$	897	$	2,883
Employee stock purchase plan		122		357
Restricted stock and restricted stock units		516		1,448

Total stock-based compensation expense		1,535		4,688
Tax effect on stock-based compensation		—		—

Net stock-based compensation expense	$	1,535	$	4,688

Effect on earnings per share
Basic and diluted	$	0.03	$	0.10
Shares used in per share calculation
Basic and diluted		49,028		48,829

The adoption of SFAS No. 123(R) resulted in a cumulative benefit from an accounting change of $103,000 relating to unvested awards for which an expense had already been recorded, but are not expected to vest, based on an estimated forfeiture rate.

Valuation Assumptions

In connection with the adoption of SFAS No. 123(R), the Company reassessed its valuation technique and related assumptions. The Company estimates the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS No. 123(R), SAB No. 107 and the Company’s prior period pro forma disclosures of net earnings, including stock-based compensation (determined under a fair value method as prescribed by SFAS No. 123). SFAS No. 123(R) requires the use of option pricing models that were not developed for use in valuing employee stock options. The Black-Scholes option-pricing model was developed for use in estimating the fair value of short-lived exchange traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility assumption was determined using the implied volatility of the Company’s stock. The Company determined that implied volatility is more reflective of market conditions and a better indicator of expected volatility than a blended volatility. Prior to the adoption of SFAS No. 123(R), the Company used a combination of historical and implied volatility in deriving its expected volatility assumption. The fair value of each option grant is estimated on the date of grant

using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions noted in the table. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date.

Stock Options Plans

We have four stock option plans, the 1993 Employee Stock Option Plan (“93 Plan”), the 1993 Non-Employee Directors’ Stock Plan (“93 Directors’ Plan”), the 2001 Non-Officer Equity Plan (“2001 Plan”) and the 2003 Equity Incentive Plan (“2003 Plan”). Under all of our stock option plans, options are granted for either six year or ten year periods and become exercisable ratably typically over a vesting period of either three or four years or as determined by the Board of Directors.

The 93 Plan terminated in 2003, and there are no further stock options available for issuance.

The 93 Directors’ Plan was terminated in 1999, and there are no further stock options available for issuance.

Under the 2001 Plan, adopted in January 2001, there were 2,100,000 shares of common stock which were reserved for issuance. The 2001 Plan provides for the grant of only non-qualified stock options to employees (other than officers or directors) and consultants (not including directors). Under the 2001 Plan, options may be granted at prices not less than the fair market value of our common stock at grant date.

Under the 2003 Plan, as most recently amended by our shareholders in December 2006, there are 4,900,000 shares of common stock reserved for issuance. The 2003 Plan provides for the grant of non-qualified stock options, incentive stock options and the issuance of restricted stock to employees and certain non-employees. Under the 2003 Plan, options may be granted at prices not less than the fair market value of our common stock at grant date.

The Company has 260,314 shares available for grant as of December 31, 2006 under the 2001 Plan, and 2,423,512 shares available for grant under the 2003 Plan.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”), last amended in December 2006, allows eligible employees of the Company to purchase shares of common stock through payroll deductions. The term of the ESPP contains consecutive 6-month offering and exercise periods. The shares can be purchased at the lower of 85% of the fair market value of the common stock at the date of commencement of the offering period or at the last day of each six-month exercise period. Purchases are limited to 15% of an employee’s eligible compensation, subject to a maximum annual employee contribution limit of $25,000. We issued 107,656 shares and 126,622 shares during the nine month period ended December 31, 2006 and 2005, respectively. As of December 31, 2006, approximately 558,829 shares were available for future issuance under the ESPP.

Assumptions used in the Black-Scholes valuation model were as follows:


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Stock option plans:
Risk-free interest rate		4.70	%		4.38	%		4.70	%		3.81	%
Expected term of options (in years)		3.3			4.7			3.3			4.7
Expected volatility		67.0	%		88.1	%		67.0	%		88.3	%
Expected dividend yield		0	%		0	%		0	%		0	%


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Employees Stock purchase plan:
Risk-free interest rate		4.92	%		4.291	%		4.92	%		3.81	%
Expected term of options (in years)		0.5			0.5			0.5			0.5
Expected volatility		51.9	%		52.3	%		63.4	%		48.6	%
Expected dividend yield		0	%		0	%		0	%		0	%

Stock Option Plans

A summary of stock option activity in our stock option plans as of December 31, 2006 and changes during the nine month period then ended is presented below:


						Weighted-Average
	Total Number			Weighted-Average		Remaining		Aggregate
	of Shares			Exercise Price		Contractual Term		Intrinsic Value
Options outstanding as of March 31, 2006		6,876,412		$	9.19
Granted		236,000			12.17
Exercised		(380,227	)		5.00
Cancelled		(930,820	)		9.22

Options outstanding as of December 31, 2006		5,801,365		$	9.60		4.98	$	7,142,993

Exercisable as of December 31, 2006		4,429,492		$	10.63		4.95	$	4,580,820

The weighted-average grant date fair value of options granted during the three month periods ended December 31, 2006 and 2005 was $2.07 and $3.47, respectively. The weighted-average grant date fair value of options granted during the nine-month periods ended December 31, 2006 and 2005 was $2.40 and $2.97, respectively. The total intrinsic value of options exercised during the three month period ended December 31, 2006 and 2005 was $0.3 million and $0.0 million, respectively. The total intrinsic value of options exercised during the nine month period ended December 31, 2006 and 2005 was $0.9 million and $0.1 million, respectively. As of December 31, 2006, there was $4.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our Stock Option Plans. The cost is expected to be recognized over a weighted-average period of 1.59 years.

For the nine months ended December 31, 2006 and 2005, cash received from option exercises under all share-based payment arrangements, including ESPP’s, was $2.4 million and $0.7 million, respectively. There was no tax benefit realized from stock option exercises. The related cash receipts are included in financing activities in the accompanying Condensed Consolidated Statements of Cash Flows.

A summary of our restricted stock awards and restricted stock units as of December 31, 2006 and changes during the nine month period then ended, is presented below:

Restricted Stock Awards and Restricted Stock Units

The following table summarizes the Company’s non-vested restricted stock awards and restricted stock units activity:


	Total Number			Weighted-Average
	of Shares			Grant Date Fair Value
Non-vested as of March 31, 2006		402,874		$	4.17
Granted		626,930			7.78
Vested		(98,740	)		11.08
Forfeited or Expired		(88,214	)		3.95

Non-vested as of December 31, 2006		842,850		$	4.17

As of December 31, 2006, there was approximately $2.5 million of unrecognized compensation cost relating to restricted stock units granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.05 years.

Defined Benefit Pension Plans

ASI and AJI provides a defined benefit pension plan for its employees. We deposit funds for this plan with insurance companies, third-party trustees, or into government-managed accounts. We record an accrual for the unfunded portion of this obligation which is

included in other long term liabilities. As of December 31, 2006, the Company had an accrued pension liability of approximately $6.8 million.

The Company made benefit payments of $0.2 million and $0.6 million, in the three-month and nine-month periods ended December 31, 2006, respectively.

8. RESTRUCTURING CHARGES

The restructuring accrual and related utilization for the three-month periods ended June 30, September 30 and December 31, 2006, respectively, were as follows (in thousands):


	Excess Facilities
Balance, March 31, 2006	$	105
Additional accruals		1,812
Non-cash utilization		(188	)
Amounts paid in cash		(533	)

Balance, June 30, 2006		1,196
Reduction in accruals		(26	)
Amounts paid in cash		(186	)

Balance, September 30, 2006		984
Amounts paid in cash		(186	)

Balance, December 31, 2006	$	798

We incurred restructuring charges (“FY07 Plan”) of $1.8 million for the nine-month period ended December 31, 2006 consisting of charges in the amount of $1.4 million for future lease commitments for excess facilities, net of expected sublease income, moving costs of $0.2 million and impairment of leasehold improvements in the vacated property of $0.2 million. We do not expect to receive a benefit to future earnings from the FY07 Plan.

The outstanding accrual balance of $0.8 million at December 31, 2006 consists of future lease obligations on vacated facilities, in excess of estimated future sublease proceeds of approximately $0.2 million, which will be paid over the next four quarters. All remaining accrual balances are expected to be settled in cash.

The restructuring accrual and related utilization for the three-month periods ended June 30, September 30, and December 31, 2005, respectively, were as follows (in thousands):


	Severance and
	Benefits			Excess Facilities			Total
Balance, March 31, 2005	$	67		$	816		$	883
Additional accruals		0			93			93
Non-cash utilization		27			(16	)		11
Amounts paid in cash		0			(370	)		(370	)
Foreign currency translation adjustment		(1	)		(1	)		(2	)

Balance, June 30, 2005		93			522			615
Non-cash utilization		(92	)		15			(77	)
Amounts paid in cash		0			(122	)		(122	)
Foreign currency translation adjustment		(1	)		0			(1	)

Balance, September 30, 2005	$	—		$	415		$	415
Reduction in accruals		—			(138	)		(138	)
Amounts paid in cash		—			44			44
Foreign currency translation adjustment		—			(78	)		(78	)

Balance, December 31, 2005	$	—		$	243		$	243

We incurred restructuring charges (credits) of $(0.1) million and zero for the three and nine month periods ended December 31, 2005, respectively, consisting changes in estimates of future lease commitments.

The outstanding accrual balance of $0.2 million at December 31, 2005 consisted of future lease obligations on vacated facilities which was paid over the subsequent two quarters. All remaining accrual balances were settled in cash.

9. INCOME TAXES


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2006		2005		2006		2005
			(as restated)				(as restated)
Provision for income taxes	$	1,569	$	6,426	$	7,661	$	16,110

The provision for income taxes for the three-month period ended December 31, 2006 was $1.6 million, which included a tax benefit of $2.3 million from the amortization of deferred tax liabilities recorded in connection with the ASI acquisition, offset by a $4.0 million tax provision recorded by ASI and a tax benefit of $0.1 million recorded primarily by other international subsidiaries. The Company’s effective tax rate differs from the U.S. statutory rate primarily due to tax provisions recorded in ASI and other foreign subsidiaries in excess of the U.S. statutory rate, and U.S. losses not providing current tax benefits.

The provision for income taxes for the three-month period ended December 31, 2005 was $6.4 million, which included a tax benefit of $1.0 million from the amortization of deferred tax liabilities recorded in connection with the ASI acquisition, offset by a $7.4 million tax provision recorded by ASI and a tax provision of $0.2 million recorded primarily by other international subsidiaries.

The provision for income taxes for the nine-month period ended December 31, 2006 was $7.7 million, which included a tax benefit of $6.7 million from the amortization of deferred tax liabilities recorded in connection with the ASI acquisition, offset by a $13.3 million tax provision recorded by ASI and a tax expense of $1.1 million recorded primarily by other international subsidiaries. The Company’s effective tax rate differs from the U.S. statutory rate primarily due to tax provisions recorded in ASI and other foreign subsidiaries in excess of the U.S. statutory rate, and U.S. losses not providing current tax benefits.

The provision for income taxes for the nine-month period ended December 31, 2005 was $16.1 million, which included a tax benefit of $4.3 million from the amortization of deferred tax liabilities recorded in connection with the ASI acquisition, offset by a $18.9 million tax provision recorded by ASI and a tax provision of $1.5 million recorded primarily by other international subsidiaries.

In November 2005, FASB issued Financial Statement Position (“FSP”) on FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” Effective upon issuance, this FSP describes an alternative transition method for calculating the tax effects of stock based compensation pursuant to FAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in-capital pool (APIC pool) related to the tax effects of stock based compensation, and to determine the subsequent impact on the APIC pool and the statement of cash flows of the tax effects of employee stock based compensation awards that are outstanding upon adoption of SFAS 123(R), Companies have one year from the later of the adoption of SFAS 123(R) or the effective date of the FSP to evaluate their transition alternatives and make a one-time election. We are in the process of evaluating which transition method to adopt and the potential impact of this new guidance on its results of operation and financial position. Due to the large net operating loss carry-forward from the prior years which has a full valuation allowance, we expect the tax impact from the newly enacted FAS 123(R) rule to be immaterial.

10. REPORTABLE SEGMENTS

We have two reportable product segments: Fab Automation and AMHS. The Fab Automation segment includes interface products, substrate-handling robotics, wafer and reticle carriers, auto-ID systems, sorters and connectivity software and services products. The AMHS segment, which consists principally of the entire ASI operations, includes automated transport and loading systems for semiconductor fabs and flat panel display manufacturers.

We evaluate performance and allocate resources based on revenues and income (loss) from operations. Income (loss) from operations for each segment includes selling, general and administrative expenses directly attributable to the segment.

Segment information is summarized as follows (in thousands):


	December 31,		March 31,
	2006		2006
AMHS:
Total Assets	$	282,391	$	251,477
Fab Automation Products:
Total Assets	$	195,188	$	163,817
Consolidated:
Total Assets	$	477,579	$	415,294


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
				(as restated)						(as restated)
AMHS:
Net sales	$	77,847		$	67,337		$	216,548		$	230,135
Cost of Sales		58,620			41,775			161,703			155,837

Gross Profit	$	19,227		$	25,562		$	54,845		$	74,298

Income from operations	$	4,410		$	14,520		$	21,012		$	36,013

Fixed assets additions	$	773		$	1,500		$	4,442		$	2,949

Amortization and Depreciation	$	2,813		$	3,089		$	9,216		$	11,939

Fab Automation Products:
Net sales	$	48,288		$	39,487		$	149,217		$	118,735
Cost of Sales		29,399			23,073			90,379			73,899

Gross Profit	$	18,889		$	16,414		$	58,838		$	44,836

Loss from operations	$	(1,727	)	$	(3,537	)	$	(12,922	)	$	(13,268	)

Fixed assets additions	$	142		$	3,395		$	2,027		$	4,932

Amortization and Depreciation	$	4,589		$	2,178		$	9,939		$	6,429

Consolidated:
Net sales	$	126,135		$	106,824		$	365,765		$	348,870
Cost of Sales		88,019			64,848			252,082			229,736

Gross Profit	$	38,116		$	41,976		$	113,683		$	119,134

Income from operations	$	2,683		$	10,983		$	8,090		$	22,745

Fixed assets additions	$	915		$	4,895		$	6,469		$	7,881

Amortization and Depreciation	$	7,402		$	5,267		$	19,155		$	18,368

Total operating income is equal to consolidated income from operations for the periods presented. We do not allocate other income (expense), net to individual segments.

One customer accounted for 22.0 percent and 19.8 percent, a second customer accounted for 13.1 percent and 8.4 percent, and a third customer accounted for 9.2 percent and 11.9 percent of our net sales for the three and nine month period ended December 31, 2006, respectively. No other customer accounted for more than 10.0 percent of our net sales for the three and nine month period ended December 31, 2006.

11. DEBT

At December 31, 2006, we had $146 million of long-term debt, of which $8.2 million is the current portion.

We had an additional $1.5 million and $1.4 million of short-term debt issued by banks in Japan at December 31, 2006 and March 31, 2006, respectively. Approximately $1.5 million and $1.4 million at December 31, 2006 and March 31, 2006, respectively, is owed by our Japanese subsidiary, AJI. There were no loans outstanding at December 31, 2006, at ASI. Substantially all of the debt is guaranteed by Asyst in the United States.

Long-term debt and capital leases consisted of the following (in thousands):


	December 31,			March 31,
	2006			2006
Convertible subordinated notes	$	86,250		$	86,250
Long-term loans		59,720			1,762
Capital leases		376			524

Total long-term debt		146,346			88,536
Less: Current portion of long-term debt and capital leases		(8,232	)		(1,368	)

Long-term debt and capital leases net of current portion	$	138,114		$	87,168

At December 31, 2006, maturities of all long-term debt and capital leases were as follows (in thousands):


Fiscal Year Ending March 31,	Amount
Remaining portion of 2007	$	1,580
2008		9,380
2009		93,095
2010		10
2011		10
2012 and thereafter		42,271

	$	146,346

Credit Facility

In June 2006, Asyst entered into a Credit Agreement with Bank of America, N.A., as Administrative Agent, and Banc of America Securities LLC, as Lead Arranger and Book Manager, and the other parties to the agreement. The $115 million senior secured credit facility under this agreement consists of a $90 million revolving credit facility, including a $20 million sub-limit for letters of credit and $10 million sub-limit for swing-line loans, and a $25 million term loan facility. The credit agreement will terminate and all amounts outstanding will be due 3 years after the credit agreement closing date (provided that Asyst’s outstanding 5 3/4% convertible subordinated notes due July 3, 2008, are redeemed or repurchased, or the maturity of the notes extended, on terms reasonably satisfactory to the administrative agent on or before March 31, 2008; otherwise, amounts outstanding under the credit agreement will be due on March 31, 2008). Asyst has the ability to borrow US Dollars or Japanese Yen under the facility. The Company has also capitalized approximately $3.5 million of financing costs and will amortize this balance over the life of the facility. The Company amortized approximately $0.3 million and $0.6 million during the three and nine months ended December 31, 2006, respectively. On July 14, 2006, $81.5 million of this credit facility, plus an additional $20.0 million from AJI, were used to finance the purchase of an additional 44.1% of the ASI shares. At December 31, 2006, the outstanding balance under this credit facility was $59 million, and the amount available to borrow under the facility was $45 million. However, as a result of compliance with the covenants in the BoA facility, the net available borrowing capacity at December 31, 2006 under all of the Company’s credit facilities was approximately $37 million.

Interest on the credit facility is based on the applicable margin plus either (i) LIBOR (or such other indices as may be agreed upon), or (ii) for dollar-denominated loans only, the higher of (a) the Bank of America prime rate, or (b) the Federal Funds rate plus 0.50%. The applicable margin ranges from 1% to 2.75%, depending on various factors set forth in the credit agreement. The agreement also requires a range of commitment, letter of credit and other fees. The interest rate on balances outstanding at December 31, 2006 was 2.9% to 3.0%.

from ASI to Shinko provided under the Share Purchase Agreement described in Item 1 in this report). Nonpayment of amounts due, a violation of these covenants or the occurrence of other events of default set forth in the credit agreement including a cross-default under the indenture could result in a default permitting the termination of the lenders’ commitments under the credit agreement and/or the acceleration of any loan amounts then outstanding. At December 31, 2006, the Company was in compliance with these debt covenants. In conjunction with executing this senior secured credit facility, Asyst terminated the $40 million revolving bank line of credit that was originally scheduled to expire on July 31, 2007.

Under the terms of its bank facilities in Japan, ASI must generate operating profits on a statutory basis and must maintain a minimum level of equity. Additionally, under the terms of its bank facilities, AJI’s loans may be called upon, in an “event of default”, in which case the Japanese banks may call the loans outstanding at AJI, requiring immediate repayment, which we have guaranteed.

Convertible Subordinated Notes

On July 3, 2001, we completed the sale of $86.3 million of 5 3/4 percent convertible subordinated notes that resulted in aggregate proceeds of $82.9 million to us, net of issuance costs. The notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of our common stock at a conversion price of $15.18 per share, which is equal to a conversion rate of 65.8718 shares per $1,000 principal amount of notes. The notes mature on July 3, 2008, pay interest on January 3 and July 3 of each year and are redeemable at our option. Debt issuance costs of $3.2 million are being amortized over 84 months and are being recorded as other income (expense), net. Debt amortization costs totaled $0.1 million during each of the three-month periods ended December 30, 2006 and 2005. Debt amortization costs totaled $0.3 million during each of the nine-month periods ended December 31, 2006 and 2005.

On October 13, 2006, as amended on October 27, 2006 and November 28, 2006, we filed with the SEC our Form 10-K for the fiscal year ended March 31, 2006, and Form 10-Q for the quarter ended June 30, 2006, and delivered copies of those reports to the trustee, and that delivery cured any purported defaults under the indenture and asserted by the trustee in its letter referenced above. Asyst does not agree with the trustee’s assertion that the delayed filing of the annual and quarterly reports constituted a default under the indenture.

Lines of Credit

At December 31, 2006, ASI had revolving lines of credit with four Japanese banks. These lines allow aggregate borrowing of up to 6 billion Japanese Yen, or approximately $50 million at the exchange rate as of December 31, 2006. As of December 31, 2006, ASI had no outstanding borrowings, and a total of 6 billion Japanese Yen available under these lines of credit.

ASI’s lines of credit carry original terms of six months to one year, at variable interest rates based on the Tokyo Interbank Offered Rate (“TIBOR”) which was 0.42 percent at December 31, 2006 plus margins of 0.70 to 0.80 percent. Under the terms of certain of these lines of credit, ASI generally is required to maintain compliance with certain financial covenants, including requirements to report an annual net profit on a statutory basis and to maintain at least 80.0 percent of the equity reported as of its prior fiscal year-end.

ASI was in compliance with these covenants at December 31, 2006. None of these lines requires collateral and none of these lines requires guarantees from us or our subsidiaries in the event of default by ASI. In June 2006, we amended two of these lines of credit representing 4.0 billion Yen, or approximately $34 million, of borrowing capacity to extend the expiry dates to June 30, 2007, at which time all amounts outstanding under these lines of credit will be due and payable, unless the lines of credit are extended.

Our Japanese subsidiary, AJI, has terms loans outstanding with one Japanese bank. These loans are repayable monthly or quarterly through various dates ranging from March 2007 through May 2008. The loans carry annual interest rates between 1.4 to 2.3 percent and substantially all of these loans are guaranteed by Asyst Technologies, Inc. As of December 31, 2006, AJI had outstanding borrowings of 7.1 billion Japanese Yen or approximately $59.7 million, at exchange rates as of December 31, 2006. Of this total, approximately 1 billion Japanese Yen, or approximately $8.1 million was recorded within “current portion of long-term debt and capital leases” and 6.1 billion Japanese Yen, or approximately $51.6 million was recorded within “long-term debt and capital leases, net of current portion”. AJI had approximately $1.5 million of other borrowings, secured by accounts receivable balances, that are recorded as short-term debt.

12. RELATED PARTY TRANSACTIONS

ASI has certain transactions with its minority shareholder, Shinko. Our subsidiary, AJI, has certain transactions with MECS Korea, in which AJI is a minority shareholder. At December 31, 2006 and March 31, 2006, respectively, significant balances with Shinko and MECS Korea were (in thousands):


	December 31,		March 31,
	2006		2006
Accounts payable and notes payable due to Shinko	$	28,394	$	13,406
Accrued liabilities due to Shinko	$	139	$	59
Accounts receivable from MECS Korea	$	34	$	90
Accounts payable due to MECS Korea	$	171	$	3
Accrued liabilities due to MECS Korea	$	51	$	81

In addition, the consolidated financial statements reflect that ASI purchased various products, administrative and IT services from Shinko. AJI also purchased IT services from MECS Korea. During the three and nine months ended December 31, 2006 and 2005, sales to and purchases from Shinko and MECS Korea were (in thousands):


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2006		2005		2006		2005
Material and service purchases from Shinko	$	19,958	$	15,800	$	38,620	$	44,400
Sales to MECS Korea	$	35	$	65	$	39	$	293
Purchases from MECS Korea	$	250	$	5	$	274	$	5

13. COMMITMENTS AND CONTINGENCIES

Lease Commitments

We lease various facilities under non-cancelable capital and operating leases. At December 31, 2006, the future minimum commitments under these leases are as follows (in thousands):


Fiscal Year Ending March 31,	Capital Lease			Operating Lease
Remaining portion of 2007	$	58		$	1,103
2008		166			3,714
2009		151			1,883
2010		6			1,440
2011 and thereafter		6			4,188

Total	$	387		$	12,328

Less: interest		(11	)


Present value of minimum lease payments		376
Less: current portion of capital leases		(175	)

Capital leases, net of current portion	$	201

Rent expense under our operating leases was approximately $1.0 million and $1.6 million for the three-month periods ended December 31, 2006 and 2005, respectively; and $3.2 million and $4.5 million for the nine-month periods ended December 31, 2006 and 2005, respectively.

Legal Contingencies

On October 28, 1996, we filed suit in the United States District Court for the Northern District of California against Empak, Inc., Emtrak, Inc., Jenoptik AG, and Jenoptik Infab, Inc., alleging, among other things, that certain products of these defendants infringe our United States Patents Nos. 5,097,421 (“the ‘421 patent”) and 4,974,166 (“the ‘166 patent”). Defendants filed answers and

counterclaims asserting various defenses, and the issues subsequently were narrowed by the parties’ respective dismissals of various claims, and the dismissal of defendant Empak pursuant to a settlement agreement. The remaining patent infringement claims against the remaining parties proceeded to summary judgment, which was entered against us on June 8, 1999. We thereafter took an appeal to the United States Court of Appeals for the Federal Circuit. On October 10, 2001, the Federal Circuit issued a written opinion, Asyst Technologies, Inc. v. Empak, 268 F.3d 1365 (Fed. Cir. 2001), reversing in part and affirming in part the decision of the trial court to narrow the factual basis for a potential finding of infringement, and remanding the matter to the trial court for further proceedings. The case was subsequently narrowed to the ‘421 patent, and we sought monetary damages for defendants’ infringement, equitable relief, and an award of attorneys’ fees. On October 9, 2003, the court: (i) granted defendants’ motion for summary judgment to the effect that the defendants had not infringed our patent claims at issue and (ii) directed that judgment be entered for defendants. We thereafter took a second appeal to the United States Court of Appeals for the Federal Circuit. On March 22, 2005, the Federal Circuit issued a second written opinion, Asyst Technologies, Inc. v. Empak, 402 F.3d 1188 (Fed. Cir. 2005), reversing in part and affirming in part the decision of the trial court to narrow the factual basis for a potential finding of infringement, and remanding the matter to the trial court for further proceedings.

Following remand, the Company filed a motion for summary judgment that defendants infringe several claims of the ‘421 patent, and defendants filed a cross-motion seeking a determination of non-infringement. On March 31, 2006, the Court entered an order granting in part, and denying in part, the Company’s motion for summary judgment and at the same time denied defendants’ cross motion for summary judgment. The Court found as a matter of law that defendants’ IridNet system infringed the ‘421 Patent under 35 U.S.C. § 271(a), but denied without prejudice that portion of the motion regarding whether defendants’ foreign sales infringed under 35 U.S.C. §271(f). At a case management conference held June 23, 2006, the Court set a trial date of December 1, 2006, (which was rescheduled to January 31, 2007) On January 31, 2007, a federal jury in the United States District Court for the Northern District of California returned a unamimous verdict in our favor., validating our patent in suit and awarding damages of approximately $75 million, The verdict is subject to several post trial motions which could take several months to resolve.Those motions and other factors, including legal fees, could significantly reduce our eventual recovery in the lawsuit, (if any). In parallel to this action,the defendants are seeking a reexamination by the Patent and Trademark Office of the claims in suit. A reexamination could significantly narrow or invalidate our patents in suit, or reduce or preclude damages recoverable by us in this action. We intend to continue to prosecute the matter before the trial court, seeking monetary damages for defendants’ infringement, equitable relief, and an award of attorneys’ fees.

On August 29, 2005, a suit was filed in the Osaka District Court, Japan, against Shinko and ASI. The suit, filed by Auckland UniServices Limited and Daifuku Corporation (“Plaintiffs”), alleges, among other things, that certain Shinko and ASI products infringe Japanese Patent No. 3304677 (the “‘677 Patent”). Specifically the suit alleges infringement of the ‘677 Patent by elements of identifiable Shinko products and of ASI’s Over-head Shuttle and Over-head Hoist Transport products, and seeks monetary damages against both Shinko and ASI in an amount to be determined. The suit also seeks to enjoin future sales and shipments of such products. ASI has asserted various defenses, including non-infringement of the asserted claims under the ‘677 Patent, and intends to continue to defend the matter vigorously. ASI is also consulting with Shinko concerning issues relating to a mutual defense of the claims. However, we cannot predict the outcome of this proceeding and an adverse ruling, including a judgment awarding significant damages and enjoining sales and shipments of ASI’s Over-head Shuttle and Over-head Hoist Transport products, could have a material adverse effect on our operations and profitability and could result in a royalty payment or other obligations in the future that could adversely impact our gross margins.

As discussed in Note 2, the Company received a letter dated June 7, 2006, from the SEC requesting that Asyst voluntarily produce documents relating to stock options granted from January 1, 1997 to the present. On June 26, 2006, the Company also received a grand jury subpoena of the same date from the United States District Court for the Northern District of California, requesting the production of documents relating to the Company’s past stock option grants and practices for the period from 1995 to the present. We recently received a letter from the SEC notifying us that its inquiry has been terminated with a recommendation that no enforcement action be taken. The U.S. Attorney’s office also recently informed us that the compliance date for its subpoena has been suspended until further notice.

In addition, certain of the current and former directors and officers of the Company have been named as defendants in two consolidated shareholder derivative actions filed in the United States District Court of California, captionedIn re Asyst Technologies, Inc. Derivative Litigation(N.D. Cal.) (the “Federal Action”), and one similar shareholder derivative action filed in California state court, captionedForlenzo v. Schwartz, et al. (Alameda County Superior Court) (the “State Action”). Plaintiffs in the Federal and State Actions allege that certain of the current and former defendant directors and officers backdated stock option grants beginning in 1995. Both Actions assert causes of action for breach of fiduciary duty, unjust enrichment, corporate waste, abuse of control, gross mismanagement, accounting, rescission and violations of Section 25402et. seq. of the California Corporations Code. The Federal Action also alleges that certain of the current and former defendant directors and officers breached their fiduciary duty by allegedly violating Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated there under, Section 14(a) of the Exchange Act and Rule 14a-9 promulgated there under, and Section 20(a) of the Exchange Act. Both Actions

seek to recover unspecified monetary damages, disgorgement of profits and benefits, equitable and injunctive relief, and attorneys’ fees and costs. The State Action also seeks the imposition of a constructive trust on all proceeds derived from the exercise of allegedly improper stock option grants. The Company is named as a nominal defendant in both the Federal and State Actions, thus no recovery against the Company is sought. The State Action is currently stayed in favor of the Federal Action. The Company engaged outside counsel to represent it in the government inquiries and pending lawsuits.

From time to time, we are also involved in other legal actions arising in the ordinary course of business. We have incurred certain costs while defending these matters. There can be no assurance that third party assertions will be resolved without costly litigation, in a manner that is not adverse to our financial position, results of operations or cash flows or without requiring royalty or other payments in the future which may adversely impact gross margins. Litigation is inherently unpredictable, and we cannot predict the outcome of the legal proceedings described above with any certainty. Because of uncertainties related to both the amount and range of losses in the event of an unfavorable outcome in the lawsuit listed above or in certain other pending proceedings for which loss estimates have not been recorded, we are unable to make a reasonable estimate of the losses that could result from these matters. As a result, no losses have been accrued for the legal proceedings described above in our financial statements as of December 31, 2006.

Indemnifications

We, as permitted under California law and in accordance with our Bylaws, indemnify our officers, directors and members of our senior management for certain events or occurrences, subject to certain limits, while they were serving at its request in such capacity. In this regard, we have received numerous requests for indemnification by current and former officers and directors, with respect to asserted liability under the governmental inquiries and shareholder derivative actions described in the immediately preceding Legal Commitments section. The maximum amount of potential future indemnification is unlimited; however, we have a Director and Officer Insurance Policy that we believe enables us to recover a portion of future amounts paid, subject to conditions and limitations of the polices. As a result of the insurance policy coverage, we believe the fair value of these indemnification agreements is not material.

Our sales agreements indemnify our customers for any expenses or liability resulting from claimed infringements of patents, trademarks or copyrights of third parties. The terms of these indemnification agreements are generally perpetual any time after execution of the agreement. The maximum amount of potential future indemnification is unlimited. However, to date, we have not paid any claims or been required to defend any lawsuits with respect to any claim of an amount we deem to be material.

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

Forward Looking Statements

Except for the historical information contained herein, the following discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe harbor provisions. We have based these forward-looking statements on our current expectations and projections about future events. Our actual results could differ materially. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, including those set forth in this section as well as those under the caption, “Risk Factors.” Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” and variations of such words and similar expressions are intended to identify such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document and in our Annual Report onForm 10-K might not occur. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report and our audited consolidated financial statements and related notes as filed in our Annual ReportForm 10-K, as amended on October 27, 2006 for the year ended March 31, 2006. Certain prior period amounts have been reclassified to conform to current period presentation.

Unless expressly stated or the context otherwise requires, the terms “we”, “our”, “us”, “ATI” and “Asyst” refer to Asyst Technologies, Inc. and its subsidiaries.

We reported in our Form 10-K for the fiscal year ended March 31, 2006, and filed on October 13, 2006, as amended on October 27, 2006 and November 28, 2006, information relating to the conclusion of our previously announced investigation of past stock option grants and practices by a Special Committee of our Board of Directors, which information is discussed in various sections of the Form 10-K, as amended on October 27, 2006 and November 28, 2006 that are summarized in the Explanatory Note on pages 1 and 2 of that report. As a result of the investigation, the Company restated the results of fiscal years 2005 and 2004, as summarized in Note 2 to the condensed consolidated financial statements. In addition, the financial statements for the three and nine months ended December 31, 2005 were also restated as a result of the above investigation. This is also described further in Note 2 to the consolidated condensed financial statements.

Overview

We develop, manufacture, sell and support integrated automation systems and software primarily for the worldwide semiconductor and the flat panel display (“FPD”) industries.

We principally sell directly to the semiconductor and FPD manufacturing industries and to other original equipment manufacturers (“OEMs”) that make production equipment for sale to semiconductor manufacturers. Our strategy is to offer integrated automation systems that enable semiconductor and FPD manufacturers to increase their manufacturing productivity and yield and to protect their investment in fragile materials during the manufacturing process.

Our functional currency is the U.S. dollar, except for our Japanese operations and their subsidiaries where our functional currency is the Japanese Yen. The assets and liabilities of these Japanese operations and their subsidiaries are generally translated using period-end exchange rates. Translation adjustments are reflected as a component of “Accumulated other comprehensive income” in our condensed consolidated balance sheets.

On October 16, 2002, we established Asyst Shinko, Inc (“ASI”) with Shinko Electric Co. Ltd (“Shinko”). ASI develops, manufactures, sells and supports AMHS with principal operations in Tokyo and Ise, Japan. Under terms of the agreement, we acquired 51% interest, for approximately $67.5 million of cash and transaction costs. Shinko contributed its entire Automated Material Handling Systems (“AMHS”) business, including intellectual property and other assets and its installed customer base and approximately 250 employees, and acquired the remaining 49% interest. We established our majority ownership in ASI to enhance our presence in the 300mm AMHS and flat panel display markets.

In July 2006, we acquired, through a share purchase agreement,, an additional 44.1% of ASI from the minority shareholder Shinko for approximately $102 million plus transaction costs of approximately $5.7 million. With this transaction we have increased our holdings to 95.1%.

We have two reportable segments:

The AMHS segment, which consists principally of the entire ASI operations, includes automated transport and loading systems for semiconductor and flat panel display manufacturers.

The Fab Automation segment includes interface products, substrate-handling robotics, auto-ID systems, sorters and connectivity software and service products.

For the remainder of fiscal year 2007, we believe critical success factors include product quality and performance, customer relationships, and demand. Demand for our products can change significantly from period to period as a result of numerous factors, including but not limited to, changes in: (1) global economic conditions; (2) fluctuations in the semiconductor equipment market; (3) changes in customer buying patterns due to technological advancement and/or capacity requirements; (4) the relative competitiveness of our products; and (5) our ability to manage successfully the outsourcing of our manufacturing activities to meet our customers’ demands for our products and services. For this and other reasons, our results of operations for three and nine month periods ended December 31, 2006 may not be indicative of future operating results.

The discussion of our financial condition and results of operations that follows is intended to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements.

Status of Material Weaknesses

We concluded in Item 9A of our Form 10-K for fiscal year 2006 filed on October 13, 2006, as amended on October 27, 2006 and November 28, 2006 that our disclosure controls and procedures and internal control over financial reporting were not effective as of March 31, 2006. Item 9A provided a summary of material weaknesses outstanding as of that date that we identified in management’s assessment of internal control as of March 31, 2006, and other related information. Because these material weaknesses remained outstanding as of the end of the fiscal quarter reported in this Form 10-Q, we have reported in Item 4 of Part I that our disclosure controls and procedures were not effective as of December 31, 2006, together with a summary of these material weaknesses and the status of our remediation efforts.

Critical Accounting Policies and Estimates

Our discussion and analysis the of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect our consolidated financial statements. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of long-lived assets, asset impairments, restructuring charges, goodwill and intangible assets, income taxes, and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes there have been no significant changes during the nine month period ended December 31, 2006 to the items that we disclosed as our critical accounting policies and estimates in Management Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K/A for the fiscal year ended March 31, 2006.

Stock-Based CompensationEffective April 1, 2006, we adopted the provisions of SFAS No. 123(R) —Share-Based Payment. SFAS No. 123(R) establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee requisite service period. For all grants, the amount of compensation expense to be recognized is adjusted for an estimated forfeiture rate, which is based on historical data.

Prior to April 1, 2006, we accounted for employee stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion (“APB”) No. 25,Accounting for Stock Issued to Employees. Under APB No. 25, compensation expense is based on the difference, if any, on the date of grant, between the estimated fair value of our common stock and the exercise price. SFAS No. 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument. We amortize stock-based compensation using the straight-line method over the remaining vesting periods of the related options, which is generally three or four years.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. See Note 7 to the Condensed Consolidated Financial Statements for a further discussion on stock-based compensation.

Results of Operations

The following is a summary of our net sales and income (loss) from operations by segment and consolidated total for the periods presented below (in thousands):


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
				(as restated)						(as restated)
AMHS:
Net sales	$	77,847		$	67,337		$	216,548		$	230,135
Cost of sales		58,620			41,775			161,703			155,837

Gross profit	$	19,227		$	25,562		$	54,845		$	74,298

Income from operations	$	4,410		$	14,520		$	21,012		$	36,013

Fab Automation Products:
Net sales	$	48,288		$	39,487		$	149,217		$	118,735
Cost of sales		29,399			23,073			90,379			73,899

Gross profit	$	18,889		$	16,414		$	58,838		$	44,836

Loss from operations	$	(1,727	)	$	(3,537	)	$	(12,922	)	$	(13,268	)

Consolidated:
Net sales	$	126,135		$	106,824		$	365,765		$	348,870
Cost of sales		88,019			64,848			252,082			229,736

Gross profit	$	38,116		$	41,976		$	113,683		$	119,134

Income from operations	$	2,683		$	10,983		$	8,090		$	22,745

The following is a summary of our net sales and income (loss) from operations by segment as a percentage of consolidated net sales for the periods presented below:


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
				(as restated)						(as restated)
AMHS:
Net sales		61.7	%		63.0	%		59.2	%		66.0	%
Cost of sales		46.5	%		39.1	%		44.2	%		44.7	%

Gross profit		15.2	%		23.9	%		15.0	%		21.3	%

Income from operations		3.5	%		13.6	%		6.7	%		10.3	%

Fab Automation Products:
Net sales		38.3	%		37.0	%		40.8	%		34.0	%
Cost of sales		23.3	%		21.6	%		24.7	%		21.2	%

Gross profit		15.0	%		15.4	%		16.1	%		12.9	%

Loss from operations		(1.4	)%		(3.3	)%		(4.5	)%		(3.8	)%

Consolidated:
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		69.8	%		60.7	%		68.9	%		65.9	%

Gross profit		30.2	%		39.3	%		31.1	%		34.1	%

Income from operations		2.1	%		10.3	%		2.2	%		6.5	%

Third Quarter of 2007 Compared to Third Quarter of 2006

Net Sales

Consolidated

Net sales for the three months ended December 31, 2006 was $126 million, an increase of 18.1% compared to the corresponding period in the prior year. Substantially all of the increase was due to increased shipments of our 300mm semiconductor AMHS and Spartan equipment due to an increased demand for semiconductor equipment. Our service volume was relatively flat from the previous year.

AMHS

Net sales for the three months ended December 31, 2006 was $78 million, an increase of 15.6% compared to the corresponding period in the prior year. The increase was primarily attributable to an increase in the shipments of our 300mm semiconductor equipment. This increase in net sales was partially offset by a decrease in our service sales of approximately $2 million for the period. The decline in service sales was primarily attributable to lower volume of spare parts and billable service contracts.

Fab Automation

Net sales for the three months ended December 31, 2006 was $48 million, an increase of 22.3% compared to the corresponding period in the prior year. The increase was primarily attributable to an increase in the shipments of our Spartan systems and an increase in service sales. The increase in service sales was attributable to increased spare parts and billable repair volume.

First Nine Months of 2007 Compared to First Nine Months of 2006

Consolidated

Net sales for the nine months ended December 31, 2006 were $366 million, an increase of 4.8% compared to the corresponding period in the prior year. Substantially, all of the increase was due to an increase in the shipments of our 300mm and Spartan equipment. This increase was significantly offset by a decrease in equipment sales to the Flat Panel Display manufacturers. To a lesser extent, there was also a decrease in service sales compared to the prior year.

AMHS

Net sales for the nine months ended December 31, 2006 were $217 million, a decrease of 5.9% compared to the corresponding period in the prior year. The decrease was primarily attributable to a decrease in the shipments of our equipment to Flat Panel Display manufacturers. This decrease was partially offset by an increase in our shipments of 300mm semiconductor equipment. Service sales also decreased compared to the prior year. The decline in service sales was primarily attributable to lower volume of spare parts and billable service contracts.

Fab Automation

Net sales for the nine months ended December 31, 2006 were $149 million, an increase of 25.6% compared to the corresponding period in the prior year. The increase was primarily attributable to an increase in the shipments of our 200mm and 300mm loadports, Spartan systems, and an increase in service sales. The increase in service sales was attributable to increased service volume of spare parts and billable repair..

Comparison of Expenses, Gross Margin, Interest & Other, and Income Taxes

The following table sets forth the percentage of net sales represented by condensed consolidated statements of operations for the periods indicated (unaudited):


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
				(as restated)						(as restated)
CONSOLIDATED:
NET SALES		100.0	%		100.0	%		100.0	%		100.0	%

COST OF SALES		69.8	%		60.7	%		68.9	%		65.9	%

Gross profit		30.2	%		39.3	%		31.1	%		34.1	%

OPERATING EXPENSES:
Research and development		6.1	%		5.9	%		7.0	%		5.9	%
Selling, general and administrative		17.3	%		19.9	%		17.4	%		17.9	%
Amortization of acquired intangible assets		4.7	%		3.3	%		4.0	%		3.8	%
Restructuring charges (credits)		—			(0.1	)%		0.5	%		—

Total operating expenses		28.1	%		29.0	%		28.9	%		27.6	%

Income from operations		2.1	%		10.3	%		2.2	%		6.5	%

INTEREST AND OTHER EXPENSE, NET:
Interest income		0.4	%		0.7	%		0.5	%		0.5	%
Interest expense		(2.1	)%		(1.6	)%		(1.8	)%		(1.4	)%
Other income, net		0.6	%		3.2	%		0.7	%		1.2	%

Interest and other expense, net		(1.1	)%		2.3	%		(0.6	)%		0.3	%

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST		1.0	%		12.5	%		1.6	%		6.8	%
PROVISION FOR INCOME TAXES		(1.2	)%		(6.0	)%		(2.1	)%		(4.6	)%
MINORITY INTEREST		(0.0	)%		(3.9	)%		(0.5	)%		(2.9	)%

NET INCOME (LOSS)		(0.2	)%		2.6	%		(1.0	)%		(0.7	)%

Gross Margin

Consolidated

Gross profit for the three-month period ended December 31, 2006 was $38 million and was $4 million lower than the corresponding period for the prior year. The gross margin percentage for the three-month period ended December 31, 2006 was 30 percent and decreased by 9 percent from the corresponding period of the prior year.

Gross profit for the nine-month period ended December 31, 2006 was $114 million and decreased by $5 million compared with the corresponding period for the prior year. The gross margin percentage for the nine-month period ended December 31, 2006 was 31 percent and decreased by 3 percent from the corresponding period of the prior year.

AMHS

The AMHS gross profit for the three-month period ended December 31, 2006 was $19 million with a gross margin of 25%, compared to $25 million gross profit or 38% gross margin for the three month period ended December 31, 2005. The decrease of $6 million or 13% is due to multiple projects which were completed with favorable cost variances in the prior year, and lower selling prices in the current year for new 300mm semiconductor projects.

The gross profit for the nine-month period ended December 31, 2006 was $55 million with a gross margin of 25%, compared to $74 million gross profit or 32% gross margin for the same period ending December 31, 2005. The decrease of $19 million or 7% was primarily due to multiple projects which were completed with favorable cost variances in the prior year, lower 300mm semiconductor volume as well as selling prices, lower FPD and service volume, and a one-time charge of $3.4 million associated with the write-up of inventory to fair value in connection with the ASI purchase transaction that was concluded during the second quarter of fiscal year 2007 and its subsequent sale.

Fab Automation

The Fab Automation gross profit was $19 million for the three-month period ended December 31, 2006 and increased by $2 million compared with the same period of the prior year due to higher Spartan and service volume. The Fab Automation gross margin was 39 percent for the three-month period ended December 31, 2006 and decreased by 3 percent as compared with the same period of the prior year. The primary reason for the gross margin decrease was attributed to a change in product mix, with a larger number of higher margin products such as the 200mm and Auto –ID products being sold in the prior year than in the current year.

The gross profit for the nine-month period ended December 31, 2006 was $59 million and increased by $14 million compared with the same period of the prior year due to the increase in volume for 200mm and 300mm loadports, Spartan, and service. The Fab Automation gross margin was 39 percent for the nine-month period ended December 31, 2006 and increased by 2 percent as compared with the same period of the prior year primarily due to product cost reductions and a favorablechange in product mix, with the current year including more of the 200mm products than the prior year.

Research and Development


	Three Months Ended								Nine Months Ended
	December 31,								December 31,
(in thousands, except percentage)	2006			2005			Change		2006			2005			Change
				(as restated)								(as restated)
Research and development	$	7,690		$	6,342		$	1,348	$	25,679		$	20,562		$	5,117

Percentage of total net sales		6.1	%		5.9	%				7.0.	%		5.9	%

The research and development expense was $7.7 million for the three-month period ended December 31, 2006, which increased by $1.3 million compared to the same period in fiscal 2006. The increase was primarily due to a $1.3 million increase in payroll related expenses, a $0.2 increase in stock compensation expense, partially offset by decrease in facilities and outside services expenses of $0.2 million.

The research and development expenses were $26 million for the nine-month period ended December 31, 2006, and increased by $5.1 million compared to the same period in fiscal 2006. The increase was due to a $1.5 million non-cash charge for in-process

research and development as part of the ASI purchase transaction completed during the second quarter of fiscal year 2007, a $5.9 million increase in payroll and stock compensation expenses, partially offset by a decrease of $2.3 million decrease in prototype material, facilities, and other expenses.

The research and development expenses may vary as a percentage of net sales because we do not manage these expenditures strictly to variations in our level of net sales. Rather, we establish annual budgets that management believes are necessary for enhancements to our current products and for developing new products and product lines.

Selling, General and Administrative


	Three Months Ended								Nine Months Ended
	December 31,								December 31,
(in thousands, except percentage)	2006			2005			Change		2006			2005			Change
				(as restated)								(as restated)
Selling, general and administrative	$	21,831		$	21,295		$	536	$	63,669		$	62,746		$	923

Percentage of total net sales		17.3	%		19.1	%				17.4	%		18.0	%

The selling, general and administrative expenses were $22 million for the period ended December 31, 2006, and basically consistent as compared with the same period of fiscal 2006. Primary changes were a $2.1 million decrease in the allowance for doubtful accounts, offset by a $2.6 million increase in payroll related expenses, travel, stock compensation, and supplies and other miscellaneous.

The selling, general and administrative expenses were $64 million for the nine-month period ended December 31, 2006, and increased by $0.9 million as compared with the same period of fiscal 2006. The increase was primarily due to a $8.1 million increase in payroll related expenses, travel, stock compensation, and a $4.2 million increase in legal and accounting fees related to our investigation, assessment, and reviews related to prior period stock option grants. The increases in selling, general and administrative expenses were offset by a $7.7 million decrease in the allowance for doubtful accounts in accordance with our policies and a decrease of $3.7 million in facilities and other expenses.

Amortization of Acquired Intangible Assets


	Three Months Ended								Nine Months Ended
	December 31,								December 31,
(in thousands, except percentage)	2006			2005			Change		2006			2005			Change
Amortization of acquired intangible assets	$	5,912		$	3,494		$	2,418	$	14,461		$	13,126		$	1,355

Percentage of total net sales		4.7	%		3.3	%				4.0	%		3.8	%

The increase in amortization expense for the three month period ended December 31, 2006 compared with the corresponding period in the prior fiscal year was due to the additional intangibles as part of our acquisition of an additional 44.1% interest in ASI in July 2006 as well as to exchange rate fluctuations as the majority of our intangible assets are denominated in Japanese Yen. The increase in the amortization expense for the nine month period ended December 31, 2006 compared with the corresponding period in the prior fiscal period was attributable to the additional acquired intangibles.

Restructuring Charges (credits)

The following table summarizes the activities in our restructuring accrual during the three and nine-month periods ended December 31, 2006 and 2005:


	Three Months Ended								Nine Months Ended
	December 31,								December 31,
(in thousands, except percentage)	2006			2005			Change		2006			2005			Change
Restructuring charges (credits)	$	—		$	(138	)	$	138	$	1,784		$	(45	)	$	1,829

Percentage of total net sales		0.0	%		(0.1	)%				0.5	%		(0.0	)%

We incurred restructuring charges of $1.8 million during the nine-month period ended December 31, 2006 related to excess facility charges in connection with our corporate office relocation. We do not expect to receive a benefit to future earnings from the FY07 Plan.

The outstanding accrual amount at December 31, 2006, as noted in the table below consists of future lease obligations on vacated facilities in excess of estimated future sublease proceeds which will be paid over the next five quarters. All remaining accrual balances are expected to be settled in cash.


(in thousands):	Excess Facilities
Balance, March 31, 2006	$	105
Additional accruals		1,812
Non-cash utilization		(188	)
Amounts paid in cash		(533	)

Balance, June 30, 2006		1,196
Reduction in accruals		(26	)
Amounts paid in cash		(186	)

Balance, September 30, 2006	$	984
Amounts paid in cash		(186	)

Balance, December 31, 2006	$	798

Interest Income, Interest Expense and Other Income, Net


	Three Months Ended							Nine Months Ended
	December 31,							December 31,
(in thousands)	2006		2005		Change			2006		2005		Change
Interest income	$	552	$	706	$	(154	)	$	1,828	$	1,798	$	30

Interest expense	$	2,678	$	1,714	$	964		$	6,624	$	5,126	$	1,498

Other income, net	$	800	$	3,417	$	(2,617	)	$	2,596	$	4,267	$	(1,671	)

Interest income for the three and nine-month periods ended December 31, 2006 was flat with comparable periods in fiscal year 2006 due to slightly higher average interest rates on lower cash and investment balances.

Interest expense was higher primarily due to a higher loan balances on our outstanding debt balances for the three and nine-month periods ended December 31, 2006, as compared to the same periods of fiscal 2006, related to the additional ownership of ASI.

Other income, net was lower due to a decrease in royalty income related to the achievement of certain milestones in FY06 from our royalty partner on our licensed products for the three and nine month periods ended December 31, 2006.

Income Taxes


	Three Months Ended									Nine Months Ended
	December 31,									December 31,
(in thousands, except percentage)	2006			2005			Change			2006			2005			Change
				(as restated)									(as restated)
Provision for income taxes	$	1,569		$	6,426		$	(4,857	)	$	7,661		$	16,110		$	(8,449	)

Percentage of total net sales		1.2	%		6.0	%					2.1	%		4.6	%

The Company’s effective tax rate differs from the U.S. statutory rate primarily due to tax provisions recorded in ASI and other foreign subsidiaries in excess of the U.S. statutory rate, and U.S. losses not providing current tax benefits.

In November 2005, FASB issued Financial Statement Position (“FSP”) on FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” Effective upon issuance, this FSP describes an alternative transition method for calculating the tax effects of stock based compensation pursuant to FAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in-capital pool (APIC pool) related to the tax effects of stock based compensation, and to determine the subsequent impact on the APIC pool and the statement of cash flows of the tax effects of employee stock based compensation awards that are outstanding upon adoption of SFAS 123(R), Companies have one year from the later of the adoption of SFAS 123(R) or the effective date of the FSP to evaluate their transition alternatives and make a one-time election. We are in the process of evaluating which transition method to adopt and the potential impact of this new guidance on its results of operation and financial position. Due to the large net operating loss carry-forward from the prior years which has a full valuation allowance, we do not expect the tax impact from the newly enacted FAS 123(R) rule to be significant.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily through the private sale of equity securities and public stock offerings, customer pre-payments, bank borrowings, long-term debt and cash generated from operations. See also Risk Factor — “We face additional risks and costs as a result of the delayed filing of our SEC reports described below and the time, cost and outcome of our Special Committee investigation into past stock option grants and practices” — for additional information on our ability to raise funds, in Part II, Item 1A of this report.

The tables below, for the periods indicated, provides selected condensed consolidated cash flow information (in millions):


	Nine Months Ended
	December 31,
	2006			2005
				(as restated)
Net cash provided by operating activities	$	44.5		$	43.0
Net cash provided by (used in) investing activities	$	(96.4	)	$	13.4
Net cash provided by (used in) financing activities	$	56.0		$	(6.4	)

Cash Flows from Operating Activities

Net loss				$	(3.4	)
Depreciation and amortization					21.0
Minority interest in net income of consolidated subsidiary					1.8
Stock-based compensation expense					4.7
Deferred taxes, net					(6.7	)
Other non-cash charges					(6.3	)
Decrease in accounts receivable					19.2
Increase in inventories					(24.8	)
Decrease in prepaid expenses and other assets					(8.6	)
Increase in accounts payable, accrued liabilities and deferred margin					47.6

Net cash provided by operating activities				$	44.5

During the nine-month period ended December 31, 2006, the majority of the increases in inventory and corresponding changes in accounts payable and accrued liabilities are the result of an increase in work in progress on non-percentage of completion contracts at ASI. These contracts require 100% completion before customer acceptance. Upon acceptance these projects will be relieved from inventory.

Net cash of $43.0 million was used in funding our operating activities for the nine-month period ended December 31, 2005, primarily due to a net loss of $2.5 million and $11.8 million increase in working capital, which comprises a $25.7 million decrease in accounts receivable, an increase of $7.5 million in inventories, a decrease of $16.8 million in accounts payable, accrued and other liabilities and deferred margin, a decrease $10.4 million in prepaid and other assets and various non-cash charges of $33.7 million, including depreciation and amortization and minority interest.

As sales volume has increased at ASI for both the three and nine month periods ended December 31, 2006, our overall days sales outstanding (“DSO”) has decreased to 92 days at December 31, 2006 from 110 days at March 31, 2006, and 124 days at December 31, 2005. This decrease is due in large part to large collection of A/R at ASI. Unbilled receivables also decreased due to the increase in revenues recognized by ASI under the percentage-of-completion method. The Company periodically engages in factoring programs for receivables as a method of effectively collecting cash on these assets.

Our inventory turns were 7.2 times on an annualized basis for the nine-month period ended December 31, 2006, compared to 6.0 times for the same period of fiscal 2006, due to build up inventory for future AMHS projects at ASI and Spartan inventory at ATI.

We expect that cash used in or provided by operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our operating results, collections of accounts receivable, timing of payments, and inventory levels.

Cash Flows from Investing Activities

Net cash used in investing activities was $96.4 million for the nine-month period ended December 31, 2006, due to $105.3 million for additional investment in subsidiary, $15.3 million in net sales of short-term investments and $6.4 million in purchases of property and equipment, primarily fixed assets for research and development and customer demonstration units.

Net cash provided by investing activities was $13.4 million for the nine month period ended December 31, 2005, due to $18.7 million in net sales of short-term investments, partially offset with $5.3 million in purchases of property and equipment, primarily fixed assets for research and development and computer hardware and software.

Cash Flows from Financing Activities

Net cash provided by financing activities was $56.0 million for the nine-month period ended December 31, 2006, due to $212.2 million in proceeds from the ASI line of credit, partially offset by $212.8 million in payments to the line of credit and $2.4 million in proceeds from the issuance of common stock under our employee stock programs, net proceeds from borrowings of $60.5 million and dividends of $6.3 million.

Net cash used in financing activities was $6.4 million for the nine month period ended December 31, 2005, due to a dividend payment to ASI’s minority shareholder of $5.9 million, plus principal reductions on long-term debt of $3.0 million, partially offset with $1.8 million in proceeds from our line of credit and $0.7 million in proceeds from the issuance of common stock under our employee stock programs.

On July 3, 2001, we completed the sale of $86.3 million of 5 3/4 percent convertible subordinated notes that resulted in aggregate proceeds of $82.9 million to us, net of issuance costs. The notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of our common stock at a conversion price of $15.18 per share, which is equal to a conversion rate of 65.8718 shares per $1,000 principal amount of notes. The notes mature on July 3, 2008, pay interest on January 3 and July 3 of each year, and are redeemable at our option. Debt issuance costs of $3.2 million are being amortized over 84 months and are being recorded as other income (expense), net. Debt amortization costs totaled $0.1 million during each of the three-month periods ended December 31, 2006 and 2005, respectively, and $0.3 million during each of the nine-month periods ended December 30, 2006 and 2005, respectively.

Other Debt Financing Arrangements

At December 31, 2006, Asyst had revolving line of credit agreements in place for approximately $140 million, with $90 million through a credit facility with Bank of America, N.A. (See Note 12) and $50 million through agreements between ASI and various banks. Approximately $56 million of credit was available to the Company before restrictions at December 31, 2006. $12 million is restricted primarily under the terms of the purchase agreement for ASI (See Note 6), with an additional $4 million in debt covenant ratio restrictions, bringing the net available credit under all of the Company’s credit facilities to $37 million at December 31, 2006.

The credit arrangement providing ASI with $50 million of revolving credit is with four Japanese banks. These lines allow aggregate borrowing of up to 6 billion Japanese Yen, or approximately $50.0 million at the exchange rate as of December 31, 2006. As of December 31, 2006, ASI had no outstanding borrowings, and a total of 6 billion Japanese Yen available under these lines of credit.

ASI’s lines of credit carry original terms of six months to one year, at variable interest rates based on the Tokyo Interbank Offered Rate (“TIBOR”) which was 0.40 percent at December 31, 2006 plus margins of 0.70 to 1.00 percent. Under the terms of certain of these lines of credit, ASI generally is required to maintain compliance with certain financial covenants, including requirements to report an annual net profit on a statutory basis and to maintain at least 80.0 percent of the equity reported as of its prior fiscal year-end.

ASI was in compliance with these covenants at December 31, 2006. None of these lines requires collateral and none of these lines requires guarantees from us or our subsidiaries in the event of default by ASI. In June 2006, we amended two of these lines of credit representing 4.0 billion Yen, or approximately $34 million, of borrowing capacity to extend the expiration dates to June 30, 2007, at which time all amounts outstanding under these lines of credit will be due and payable, unless the lines of credit are extended.

Our Japanese subsidiary, AJI, has terms loans outstanding with one Japanese bank. These loans are repayable monthly or quarterly through various dates ranging from March 2007 through May 2008. The loans carry annual interest rates between 1.4 to 2.3 percent and substantially all of these loans are guaranteed by Asyst Technologies, Inc. As of December 31, 2006, AJI had outstanding borrowings of 7.1 billion Japanese Yen or approximately $59.7 million, at exchange rates as of December 31, 2006. Of this total, approximately 1 billion Japanese Yen, or approximately $8.1 million was recorded within “current portion of long-term debt and capital leases” and 6.1 billion Japanese Yen, or approximately $51.6 million was recorded within “long-term debt and capital leases, net of current portion”. AJI had approximately $1.5 million of borrowings, secured by accounts receivable balances, that are recorded as short-term debt.

Acquisition and Related Debt Financing Facility

On June 22, 2006, Asyst established a $115 million, three-year, senior secured revolving credit and term loan facility. The credit facility was arranged by Banc of America Securities LLC. Bank of America, N.A. will serve as administrative agent. A syndicate of lenders and financial institutions, including Comerica, Development Bank of Japan, Key Bank, and Union Bank of California, is participating in the facility with Bank of America. Asyst has the ability to borrow US Dollars or Japanese Yen under the facility. The facility carries a variable interest rate that is currently approximately 3.0% on Yen-based balances. The Company has also capitalized approximately $3.5 million of financing costs and will amortize this balance over the life of the facility. The Company amortized approximately $0.3 million during the three months ended December 31, 2006. On July 14, 2006, $81.5 million of this credit facility, plus an additional $20.0 million from AJI, were used to finance the purchase of an additional 44.1% of the ASI shares. At December 31, 2006, the outstanding balance under this credit facility was $59 million, and the amount available to borrow under the facility was $45 million.

On July 14, 2006, Asyst and AJI purchased from Shinko shares of ASI representing an additional 44.1% of outstanding capital stock of ASI for a cash purchase price of JPY 11.7 billion (approximately US$102 million at the July 14 exchange rate). This purchase increased Asyst’s consolidated ownership of ASI to 95.1%. As of the that date, we borrowed an aggregate amount of approximately $81.5 million under the senior credit facility to fund the purchase of shares reported above and for general working capital purposes, and issued a letter of credit in favor of Shinko for approximately $10.9 million related to the equity option on Shinko’s remaining 4.9% ASI share ownership.

At any time as of or after the first anniversary of the closing, and subject to the other provisions of the agreement, either Shinko or AJI may give notice to the other, calling for AJI to purchase from Shinko shares representing the remaining 4.9% of outstanding capital stock of ASI for a fixed payment of JPY 1.3 billion (approximately US $10.9 million at the December 31, 2006 exchange rate).

The $115 million senior secured credit agreement contains financial and other covenants, including, but not limited to, limitations on liens, mergers, sales of assets, capital expenditures, and indebtedness as well as the maintenance of a maximum total leverage ratio, maximum senior leverage ratio, and minimum fixed charge coverage ratio, as defined in the agreement. Additionally, although Asyst has not paid any cash dividends on its common stock in the past and does not anticipate paying any such cash dividends in the foreseeable future, the facility restricts its ability to pay such dividends (subject to certain exceptions, including the dividend payments from ASI to Shinko provided under the Share Purchase Agreement described in Item 1 in this report). Nonpayment of amounts due, a

violation of these covenants or the occurrence of other events of default set forth in the credit agreement including a cross-default under the indenture could result in a default permitting the termination of the lenders’ commitments under the credit agreement and/or the acceleration of any loan amounts then outstanding

While we expect to meet the financial covenants under our various borrowing arrangements in the future, we cannot give absolute assurance that we will meet these financial covenants, including those contained in the senior secured credit facility. Specifically, we are required to maintain compliance with covenants establishing minimum EBITDA operating performance by the Company as a ratio of our total borrowing available under the senior secured credit facility. Our failure in any fiscal quarter to meet those and other covenant requirements could result in a reduction of our permitted borrowing under the facility, an acceleration of certain repayment obligations, and/or an Event of Default (which, if uncured by us or not waived by the lenders under the terms of the facility, would require the acceleration of all re-payment obligations under the facility

In accordance with EITF 00-4, on July 14, 2006, AJI has accounted for the purchase options on a combined basis with the minority interest as a financing of the purchase of the minority interest, and as a result has treated the transaction as an acquisition of the full remaining 49% interest of ASI. Accordingly, AJI has recorded a liability, equivalent to the net present value of both the JPY 1.3 billion fixed payment for the 4.9% remaining interest and a fixed annual dividend payment of JPY 65 million and will accrete the discount recorded to interest expense over the next twelve months until the first potential exercise date. The liability has been classified within “accrued and other liabilities” on the condensed consolidated balance sheet.

Other Liquidity Considerations

Since inception, we have incurred aggregate consolidated net losses of approximately $389 million and have incurred losses during the last five fiscal years. In recent years, we have funded our operations primarily from cash generated from the issuance of debt or equity securities. Cash and cash equivalents aggregated $98 million at December 31, 2006. We believe that our current cash position and the availability of additional financing via existing lines of credit will be sufficient to meet our expected cash requirements for at least the next twelve months.

The cyclical nature of the semiconductor industry makes it very difficult for us to predict future liquidity requirements with certainty. Any upturn in the semiconductor industry may result in short-term uses of cash in operations as cash may be used to finance additional working capital requirements such as accounts receivable and inventories. Alternatively, further softening of demand for our products may cause us to fund additional operational losses. At some point in the future we may require additional funds to support our working capital and operating expense requirements or for other purposes. We may seek to raise these additional funds through public or private debt or equity financings, or the sale of assets. These financings may not be available to us on a timely basis if at all, or, if available, on terms acceptable to us or not dilutive to our shareholders. If we fail to obtain acceptable additional financing, we may be required to reduce planned expenditures or forego investments, which could reduce our revenues, increase our losses, and harm our business.

We may not be able to negotiate by March 31, 2008, an extension of the maturity of all of the convertible notes in a manner satisfactory to the senior lenders under the secured credit facility, or on economic terms acceptable to us. If we fail to re-negotiate that maturity, then the existing terms of the senior credit facility call for full repayment of that obligation on March 31, 2008, and it is not likely that we would have the resources to repay such indebtedness on that date (in the absence of new proceeds from other sources or financings, which we have no assurance we can obtain or would be available to us on economic terms acceptable to us).

NASDAQ Delisting Proceedings

As a result of the late filing on October 13, 2006, as amended on October 27, 2006 and November 28, 2006 of the Form 10-K for the fiscal year 2006 and the Form 10-Q for our first quarter ended June 30, 2006, we will be ineligible to register our securities on Form S-3 for sale by us or resale by others for one year. The inability to use Form S-3 could adversely affect our ability to raise capital during this period. If we fail to timely file a future periodic report with the SEC and were delisted, it could severely impact our ability to raise future capital and could have an adverse impact on our overall future liquidity. However, we are still eligible to register our securities on Form S-1.

In addition, the material weaknesses and related matters we discuss in Item 4 of Part I of this report may also have an adverse impact on our ability to obtain future capital from equity or debt.

Recent Accounting Pronouncements

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on EITF Issue No. 06-2, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43” (EITF 06-2). EITF 06-2 requires companies to accrue the cost of such compensated absences over the requisite service period. The Company currently accounts for the cost of compensated absences for sabbatical programs when the eligible employee completes the requisite service period, which is 10 to 20 years of service. The Company is required to apply the provisions of EITF 06-2 at the beginning of fiscal year 2008. EITF 06-02 allows for adoption through retrospective application to all prior periods or through a cumulative effect adjustment to retained earnings if it is impracticable to determine the period-specific effects of the change on prior periods presented. The Company is currently evaluating the financial impact of this guidance and the method of adoption which will be used.

disclosures about fair value measurements. The Statement is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We do not believe that the adoption of the provisions of SFAS No. 157 will materially impact our financial position and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been a material change in our exposure to foreign currency risks since March 31, 2006, the end of our preceding fiscal year. Our exposure to interest rate risk has been reduced to zero, as we do not have short term investments for the three month period ended December 31, 2006.

Interest Rate Risk.Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio, credit facility and lines of credit.

We do not use derivative financial instruments in our investment portfolio. Our investment portfolio consists of short-term fixed income securities and by policy we limit the amount of credit exposure to any one issuer. As stated in our investment policy, we ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in safe and high-credit quality securities and by constantly positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer, guarantor or depository.

Our credit facility and lines of credit bear interest at variable rates. We manage interest rate risk by limiting the variable rate exposure and continually monitoring the effects of market changes on interest rates.

Foreign Currency Exchange Risk. We engage in international operations and transact business in various foreign countries. The primary source of foreign currency cash flows is Japan and to a lesser extent China, Taiwan, Singapore and Europe. Although we operate and sell products in various global markets, substantially all sales are denominated in U.S. dollars, except in Japan, thereby reducing our foreign currency risk. To date, the foreign currency transactions and exposure to exchange rate volatility have not been significant. If the Japanese Yen were to fluctuate from the level at December 31, 2006, our operating income may improve or deteriorate as noted in the table below (in thousands).


	Strengthening in						No change in			Weakening in
	Japanese Yen of						Japanese Yen			Japanese Yen of
	X percent						exchange rate			X percent
	10%			5%						5%			10%
Net loss for the nine months ended December 31, 2006	$	(529	)	$	(2,054	)	$	(3,428	)	$	(4,669	)	$	(5,798	)

Although we do not anticipate any significant fluctuations, there can be no assurance that foreign currency exchange risk will not have a material impact on our financial position, results of operations or cash flow in the future.

The Company adopted a Foreign Exchange Policy that documented how we intend to comply with the accounting guidance under SFAS No. 133. Under the policy there are guidelines that permit the Company to have hedge accounting treatment under both Fair

Value and Cash Flow hedges.The policy approval limits are up to $10 million with the CFO’s approval and over $10 million with the additional approval of the CEO.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and we cannot be certain that any design will succeed in achieving its stated goals under all potential future conditions.

Our management is responsible for establishing and maintaining our disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer participated with our management in evaluating the effectiveness of our disclosure controls and procedures as of December 31, 2006. In light of the material weaknesses set forth below, these officers have concluded that our disclosure controls and procedures were not effective as of that date to provide reasonable assurance that they will meet their defined objectives. Notwithstanding the material weaknesses described below, we performed additional analyses and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Based in part on these additional efforts, our Chief Executive Officer and Chief Financial Officer have included their certifications as exhibits to this Form 10-Q to the effect that, among other statements made in the certifications and based on their knowledge, the consolidated financial statements included in this Form 10-Q fairly present in all material respects Asyst’s financial condition, results of operations and cash flows for the periods presented and this Form 10-Q does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management’s assessment identified the following material weaknesses in our internal control over financial reporting as of March 31, 2006, which remained outstanding as of December 31, 2006:

1. We did not maintain effective controls over the completeness and accuracy of revenue and deferred revenue. Specifically, effective controls were not designed and in place to prevent or detect our (a) failure to properly defer revenue for post-delivery installation obligations at our wholly-owned subsidiary in Japan, Asyst Japan, Inc. (“AJI”), (b) failure to recognize installation revenue on a timely basis at Asyst Shinko, Inc. (“ASI”), and (c) failure to properly defer revenue on one contract until the contract was signed. This control deficiency resulted in audit adjustments to the interim consolidated financial statements for the second and third quarters of fiscal 2006 and audit adjustments to our fiscal 2006 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and deferred revenue that would result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness.

2. We did not maintain effective controls over the completeness, accuracy and timeliness of recognition of accrued liabilities and deferred costs. Specifically, effective controls were not designed and in place to prevent or detect our (a) capitalization of certain operating expenses that should have been expensed, (b) failure to accrue certain freight charges on a timely basis and (c) failure to accurately and timely accrue certain cost of sales at ASI. This control deficiency resulted in audit adjustments to the interim consolidated financial statements for all quarters of fiscal 2006 and audit adjustments to our fiscal 2006 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of prepaid costs, accrued liabilities, cost of sales and operating expenses that would result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness.

Management’s Remediation Initiatives

The material weaknesses described above also existed at December 31, 2006. In response to the material weaknesses discussed above, we plan to continue to review and make necessary changes to improve our internal control over financial reporting. We plan to further strengthen our controls over revenue recognition and accrued liabilities and deferred costs with additional hiring and continuous improvements in our training in the application of U.S. generally accepted accounting principles for revenue recognition, accrued liabilities and deferred costs. We plan to further improve the discipline throughout the organization to achieve greater compliance with policies, procedures and controls that have already been introduced by us.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2006 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Discussion of legal matters is incorporated by reference from Part I, Item 1, Note 13, “Commitments and Contingencies”, of this document, and should be considered an integral part of Part II, Item 1, “Legal Proceedings”.

ITEM 1A. RISK FACTORS

We have a history of significant losses.

We have a history of significant losses. For the nine month period ended December 31, 2006, our net loss was $3.4 million and accumulated deficit at December 31, 2006 was $389 million, compared to a net loss of $0.1 million for the fiscal year ended March 31, 2006 and accumulated deficit of $385 million at March 31, 2006. We may also continue to experience significant losses in the future.

We face significant pending and potential risks in connection with our outstanding indebtedness; if we are not able to resolve existing uncertainties and restructure portions of this debt on a timely basis on desired terms in the future, our ability to discharge our obligations under this indebtedness, liquidity and business may be materially harmed.

We have a significant amount of outstanding indebtedness that has increased substantially since the end of fiscal year 2006:

	•		Under a senior secured credit agreement entered into in June 2006 with Bank of America, N.A., as lender and administrative agent and other lenders, we borrowed an aggregate amount of approximately $81.5 million to fund the purchase of ASI shares from Shinko on July 14, 2006, and issued a letter of credit in favor of Shinko for approximately $11 million related to the equity option on Shinko’s remaining 4.9% ASI share ownership. This credit agreement provides a $115 million senior secured credit facility consisting of a $90 million revolving credit facility, including a $20 million sub-limit for letters of credit and $10 million sub-limit for swing-line loans, and a $25 million term loan facility. The credit agreement will terminate and all amounts outstanding will be due in three years after July 14, 2006, provided that Asyst’s outstanding 5 3/4% convertible subordinated notes due July 3, 2008, are redeemed or repurchased, or the maturity of the notes extended, on terms reasonably satisfactory to the administrative agent on or before March 31, 2008; otherwise, amounts outstanding under the credit agreement will be due on March 31, 2008. At December 31, 2006, the outstanding balance under this credit facility was approximately $59 million.

	•		We have approximately $86 million outstanding under our 5 3/4% convertible subordinated notes privately issued in July 2001. These notes are convertible, at the option of the holder, at any time on or prior to maturity into shares of our common stock at a conversion price of $15.18 per share. We are required to pay interest on these convertible notes on January 3 and July 3 of each year. These notes mature July 3, 2008 and are redeemable at our option.

	•		In a letter delivered to us and dated August 16, 2006, U.S. Bank National Association, as the trustee under the indenture relating to these notes, asserted that Asyst was in default under the notes’ indenture because of the previously announced delays in filing with the SEC and the trustee the report on Form 10-K for the year ended March 31, 2006 and in filing with the SEC our Form 10-Q for the fiscal quarter ended June 30, 2006. The letter stated that this asserted default was not an “Event of

			Default” under the indenture if the Company cured the default within 60 days after receipt of the notice, or if the default is waived by the holders of a majority in aggregate principal amount of the notes outstanding.

	•		If an Event of Default were to occur, and is continuing under the indenture, the trustee or the holders of at least 25% in aggregate principal amount of the notes at the time outstanding may accelerate maturity of the notes.

	•		Asyst does not agree with the trustee’s assertion that the delays in filing of the annual and quarterly reports constituted a default under its indenture. However, on October 13, 2006, as amended on October 27, 2006, we filed with the SEC our reports on Form 10-K for the year ended March 31, 2006 and Form 10-Q for the fiscal quarter ended June 30, 2006, and delivered copies of those reports to the trustee. That delivery cured any purported defaults under the indenture and asserted by the trustee in its letter referenced above.

	•		At December 31, 2006, ASI had four revolving lines of credit with Japanese banks. These lines allow aggregate borrowing of up to 6 billion Japanese Yen, or approximately $50 million at the exchange rate as of March 31, 2006. As of December 31, 2006, the amount available under these lines of credit was 6 billion Japanese Yen or approximately $50 million at the exchange rate as of December 31, 2006.

	•		Comerica Bank has agreed to continue to maintain a letter of credit in the amount of $750,000 in favor of the landlord under our current headquarters lease in Fremont, California, on an unsecured basis, notwithstanding the previously reported termination of the Amended and Restated Loan and Security Agreement dated as of May 15, 2004, between Asyst and Comerica Bank (which termination became effective with the borrowing described above under the senior secured credit facility). There were no amounts outstanding for borrowed money under the Comerica Bank line of credit that otherwise was scheduled to expire on July 30, 2007.

	•		As a result of compliance with the covenants in the Bank of America facility, the net available borrowing capacity at December 31, 2006 under all of the Company’s credit facilities is restricted to approximately $37 million.

Alternatively, due to the cyclical and uncertain nature of cash flows and collections from our customers, our borrowing to fund operations or working capital could exceed the permitted total leverage ratios under the credit agreement. Under any such scenario, the Company may be required to pay down the outstanding borrowings from available cash to maintain compliance with our financial covenants. If we are unable to meet any such covenants, we cannot assure the requisite lenders will grant waivers and/or amend the covenants, or that the requisite lenders will not terminate the credit agreement, preclude further borrowings or require us to repay immediately in full any outstanding borrowings.

basis to believe we would be able to obtain on desired terms or at all, and would face the risk of a bankruptcy filing by us or our creditors. Any accelerated repayment demands that we are able to honor would reduce our available cash balances and likely have a material adverse impact on our operating and financial performance and ability to comply with remaining obligations. If we are able to maintain our current indebtedness as outstanding, the restrictive covenants could impair our ability to expand or pursue our business strategies or obtain additional funding.

Under certain circumstances, Shinko can accelerate upon thirty (30) days written notice our obligation to purchase the remaining 4.9% equity it holds in ASI (for a purchase price of approximately US $11 million at the June 2006 exchange rates when the agreement was signed). These circumstances include (a) when AJI’s equity ownership in ASI falls below 50%, (b) when bankruptcy or corporate reorganization proceedings are filed against the Company or AJI; (c) when a merger or corporate reorganization has been approved involving all or substantially all of the Company’s assets; (d) when Shinko’s equity ownership in ASI falls below 4.9%; or (e) when the Company has failed to make any payment when due in respect of any loan secured by a pledge of the Company’s right, title and interest in and to the shares of ASI (and the holder of such security interest elects to exercise its rights against AJI in respect of such shares). In any such event, an acceleration could impose on us an unforeseen payment obligation, which could impact our liquidity or which payment could be subject to restrictions or covenants, or be subject to third party approvals under our debt facilities. Our inability to purchase the remaining ASI equity held by Shinko, when and as required, could significantly impact our continued control and ownership of ASI.

As a general matter, our operations have, in the past, consumed cash and may do so in the future. We have in the past obtained additional financing to meet our working capital needs or to finance capital expenditures, as well as to fund operations. We may be unable to obtain any required additional financing on terms favorable to us, if at all, or which is not dilutive to our shareholders. If adequate funds are not available on acceptable terms, we may be unable to meet our current or future obligations on a timely basis, fund any desired expansion, successfully develop or enhance products, respond to competitive pressures or take advantage of acquisition opportunities, any of which could have a material adverse effect on our business. If we raise additional funds through the issuance of equity or convertible securities, our shareholders may experience dilution of their ownership interest, and the newly-issued securities may have rights superior to those of our common stock. If we raise additional funds by issuing new or restructured debt, we may be subject to further limitations on our operations. Any of the foregoing circumstances could adversely affect our business.

We face additional risks and costs as a result of the delayed filing of our SEC reports described below and the time, cost and outcome of our Special Committee investigation into past stock option grants and practices.

We delayed the filing of the Form 10-K, and our Form 10-Q for the fiscal quarter ended June 30, 2006, pending completion of a previously announced independent investigation into our past stock option grant practices, being conducted by a Special Committee of our Board of Directors. Due to this delay and review, we have experienced substantial additional risks and costs. However, on October 13, 2006, as amended on October 27, 2006 and November 28, 2006, we filed with the SEC our Annual Report on Form 10-K for the year ended March 31, 2006 and Form 10-Q for the quarter ended June 30, 2006.

In May 2006, certain analysts published reports suggesting that Asyst may have granted stock options in the past with favorable exercise prices in certain periods compared to stock prices before or after the grant dates. In response to such reports, management began an informal review of the Company’s past stock option grant practices. On June 7, 2006, the SEC sent a letter to the Company requesting a voluntary production of documents relating to past option grants (1997 to the present). On June 9, 2006, the Company’s Board of Directors appointed a Special Committee of three independent directors to conduct a formal investigation into past stock option grants and practices. The Special Committee retained independent legal counsel and independent forensic and technical specialists to assist in the investigation. We subsequently received on June 26, 2006; a federal court grand jury subpoena initiated by the U.S. Attorney’s Office requesting production of documents relating to our past stock option grants and practices (1995 to the present).

The Special Committee’s investigation was completed on September 28, 2006, with the delivery of the Committee’s final report on that date. The investigation covered options grants made to all employees, directors and consultants during the period from January 1995 through June 2006. The Special Committee determined that the last option grant for which the measurement date was found to be in error was made in February 2004.

Specifically, the Special Committee determined that (1) there was an insufficient basis to rely on the Company’s process and relating documentation to support recorded measurement dates used to account for most stock options granted primarily during calendar years 1998 through 2003; (2) the Company had numerous grants made by means of unanimous written consents signed by Board or Compensation Committee members wherein all the signatures of the members were not received on the grant date specified in the consents; and (3) the Company made several company-wide grants pursuant to an approval of the Board or Compensation Committee, but the list of grantees and number of options allocated to each grantee was not finalized as of the stated grant date.

The Special Committee also found that, during the period from April 2002 through February 2004, the Company followed a practice to set the grant date and exercise price for option grants for new hires and promotions of rank and file employees (non-officer employees) at the lowest price of the first five business days of the month following the month of their hire or promotion. The net impact of this practice was an aggregate charge of less than $400,000.

The Special Committee’s inquiry also identified less frequent errors in other categories that the Company believes were not material, such as grants made to a small number of employees who had not formally commenced their employment as of the grant approval date. The Special Committee also identified isolated instances where stock option grants did not comply with applicable terms and conditions of the stock plans from which the grants were issued.

The Special Committee received the Company’s full cooperation, and appropriate cooperation from our former officers and directors. As part of its investigation, the Committee, through the assistance of independent counsel and independent forensic and technical advisors, interviewed numerous current and former Company employees, officers and directors associated with our current and past stock option grant practices and processes, and reviewed more than 100,000 pages of hard copy, electronic communications and files, and SEC filings, as well as stock option plans, policies and practices relating to our approval, recording and accounting of stock option grants. The Special Committee completed its investigation consistent with its original scope and work plan, and found no evidence of any intention to deceive or impede the Committee’s investigation or to destroy or alter documents.

The Special Committee found no evidence that any incorrect measurement dates was the result of fraudulent conduct, and concluded that the errors in measurement dates it reviewed resulted primarily from a combination of unintentional errors, lack of attention to timely paperwork, and lack of internal control over aspects of equity plan administration (including lack of oversight in applying the applicable accounting rule in connection with determining measurement dates) during the period in which the errors occurred.

Based on results of the Special Committee’s investigation, the Company recorded stock-based compensation charges, and additional payroll taxes with respect to its employee stock option grants for which the measurement dates were found to be in error. While the impact of recording these charges was not material to any of the fiscal years ended March 31, 2002 through 2006, the Company deemed it appropriate to record the charges in the relevant periods. Accordingly, the Company restated the results of fiscal years 2005 and 2004, to record a net charge of approximately $0.2 million or $0.00 per share in fiscal 2005 and a net benefit of $0.8 million or $0.02 per share in fiscal 2004. Additionally, the Company recorded a net charge of $19.5 million to its accumulated deficit as of April 1, 2003 for cumulative charges relating to fiscal years prior to fiscal 2004.

The option grant investigation was time-consuming, required Asyst to incur significant additional expenses, in excess of $5 million over the first three quarters of our fiscal year 2007, and required significant management attention and resources during this period.

As a result of the delay in filing of our Form 10-K for fiscal year 2006 and the Form 10-Q for our fiscal quarter ended June 30, 2006, we received notices from the NASDAQ Global Market to the effect that our common stock would be de-listed unless prior to November 30, 2006, we file the Form 10-K for fiscal year 2006 and the Form 10-Q for the fiscal quarter ended June 30, 2006, with any required restatements. We filed on October 13, 2006, and as amended on October 27, 2006 and November 28,2006 with the SEC our Annual Report on Form 10-K for the year ended March 31, 2006 and Form 10-Q for the quarter ended June 30, 2006.

In addition, certain of the Company’s current and former directors and officers of the Company have been named as defendants in two consolidated shareholder derivative actions filed in the United States District Court of California, captionedIn re Asyst Technologies, Inc. Derivative Litigation(N.D. Cal.) (the “Federal Action”), and one similar shareholder derivative action filed in California state court, captionedForlenzo v. Schwartz, et al. (Alameda County Superior Court) (the “State Action”). Both Actions seek to recover unspecified monetary damages, disgorgement of profits and benefits, equitable and injunctive relief, and attorneys’

fees and costs. The State Action also seeks the imposition of a constructive trust on all proceeds derived from the exercise of allegedly improper stock option grants. The Company is named as a nominal defendant in both the Federal and State Actions; thus, no recovery against the Company is sought.

We are not able to predict the future outcome of these legal actions. These matters could result in significant legal expenses, diversion of management’s attention from our business, commencement of formal civil or criminal administrative or litigation actions against Asyst or our current or former employees or directors, significant fines or penalties, indemnity commitments to current and former officers and directors and other material harm to our business. The SEC may also disagree with the manner in which we have accounted for and reported (or not reported) the financial impact of past option grant measurement date errors or other potential accounting errors, and there is a risk that its inquiry could lead to circumstances in which we may have to further restate our prior financial statements, amend prior SEC filings, or otherwise take other actions not currently contemplated. Any such circumstance could also lead to future delays in filing of our subsequent SEC reports, and consequent risks of defaults under debt obligations and de-listing of our common stock.

As a result of the delay in filing the Annual Report on Form 10-K for the year ended March 31, 2006 and the Form 10-Q for our fiscal quarter ended June 30, 2006, we are not eligible to register any of our securities on Form S-3 for sale by us or resale by others until we have timely filed all reports required to be filed under the Securities Exchange Act of 1934 during the 12 months, and any portion of a month, immediately preceding the filing of a registration statement on Form S-3. This condition may adversely affect our ability to restructure outstanding indebtedness, to raise capital by other means, or to acquire other companies by using our securities to pay the acquisition price.

If we continue to fail to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting on a consolidated basis, our stock price and investor confidence in our Company could be materially and adversely affected.

We are required to maintain both disclosure controls and procedures and internal control over financial reporting that are effective for the purposes described in Item 9A of Part II of the Annual report on Form 10-K for the fiscal year ended March 31, 2006. If we fail to do so, our business, results of operations or financial condition and the value of our stock could be materially harmed.

Item 9A of Part II of the Annual Report on Form 10-K for the fiscal year ended March 31, 2006 reports our conclusion that our disclosure controls and procedures and internal control over financial reporting were not effective as of March 31, 2006, due to material weaknesses in internal control over financial reporting that remained outstanding at that date and that are subject to our continuing remediation efforts. The information below should be read in conjunction with Item 9A and the report of our independent registered public accounting firm appearing at the end of our financial statements included in Item 8 of Part II of the Annual Report on Form 10-K for the fiscal year ended March 31, 2006.

In our Form 10-K filed June 29, 2005, the first year we included an internal control report, we also reported that our disclosure controls and procedures and internal control were not effective. However, last year we reported eleven separately described material weaknesses. We describe in Item 9A of the Annual Report on Form 10-K for the fiscal year ended March 31, 2006 filed October 13, 2006, as amended on October 27, 2006 and November 28, 2006 two material weaknesses. We are in the process of remediating previously reported material weaknesses.

We are devoting now, and will likely need to continue to devote in the near future, significant resources in our efforts to achieve effective internal control. These efforts have been and may continue to be costly. We cannot assure that these efforts will be successful. Until we have fully remediated the material weaknesses referred to in Item 9A, we may face additional risks of errors or delays in preparing our consolidated financial statements and associated risks of potential late filings of periodic reports, NASDAQ listing standard violations, risks of correcting previously filed financial statements, increased expenses, and possible private litigation or governmental proceedings arising from such matters.

If we fail to manage effectively our ASI subsidiary, our sales and profitability of AMHS could be adversely affected and the sales mix between AMHS and our other products could affect our overall financial performance.

Net sales of AMHS accounted for approximately 64 percent and 62 percent of our net sales for the years ended March 31, 2006 and 2005, respectively, and is expected to be an important component of our future sales. Substantially all of our AMHS sales are through our subsidiary, ASI, of which we acquired 51 percent in the third quarter of fiscal year 2003 and increased our holdings to 95.1% during the second quarter of fiscal year 2007.

Orders for AMHS are relatively large, often exceeding $20 million for a given project or for an extension of a project. Because of the size of these orders, our revenues are often concentrated among a small number of customers in any fiscal period. Additionally, the manufacturing and the installation of these systems at our customers’ facilities can take up to six months or longer.

Accordingly, we recognize revenue and costs for AMHS based on percentage-of-completion analysis because the contracts are long-term in nature. Payments under these contracts often occur well after we incur our manufacturing costs. For example, terms for some of our Japanese AMHS customers typically require payment to be made six months after customer acceptance and in some cases longer. The consequence of the AMHS payment cycle is that significant demands can be placed on our working capital, prior to our receipt of customer payments. Our ability to fund working capital requirements at ASI through available cash may be dependent on the timing of customer payments and our ability to collect outstanding receivables. In addition, our ability to raise working capital at ASI, through short-term borrowing, inter-company transfers or other means, may be limited by covenants and other restrictions under our various credit facilities. Accordingly, our overall financial performance will therefore be affected by the sales mix between AMHS and other products and our ability to effectively manage AMHS projects and working capital requirements and means in a given period.

We conduct our business under various types of contractual arrangements. These include fixed-price contracts, in which contract prices are established in part on cost and scheduling estimates. These estimates are based on a number of assumptions, including assumptions about future economic conditions, prices and availability of labor, equipment and materials, and other cost factors. These estimates are inherently difficult to make accurately and while we use our best judgment to estimate total costs, such estimates could be higher or lower than actual project costs, and could result in gross margins and profitability that are higher or lower than we estimate. If an estimate for a project proves inaccurate, or if circumstances change, cost overruns may occur, and we could experience reduced gross margins and profits for that project. Similarly, actual costs may be less than estimated, which could result in increased gross margins and profits for that project. Favorable or unfavorable changes to gross margins and profits in one quarter as a result of our inability to estimate our costs accurately are not necessarily indicative of future trends with respect to our gross margins or profits.

If we are unable to increase our sales of AMHS to FPD manufacturers, or if the FPD industry enters a cyclical downturn, our growth prospects could be negatively affected.

ASI sells AMHS to FPD manufacturers.While we believe sales to the FPD industry represents a significant opportunity for growth, the size of this market opportunity depends in large part on capital expenditures by FPD manufacturers. The market for FPD products is highly cyclical and has experienced periods of oversupply, resulting in unpredictable demand for manufacturing and automation equipment. If the FPD market enters into a cyclical downturn, demand for AMHS by the FPD market may be significantly reduced, impacting our growth prospects, sales and gross margins in this market. In addition, competition may limit our ability to achieve and maintain relative pricing and gross margin performance consistent with our objectives or past performance, and this could affect our ability to remain profitable.

As a relatively new entrant to the FPD equipment market, we do not have the customer relationships some of our competitors have. Similarly, our relative inexperience in the FPD industry may cause us to misjudge important trends and dynamics in this market. If we are unable to anticipate future customer needs in the FPD market, our growth prospects may be adversely affected.

Most of our Fab Automation Product manufacturing is outsourced and we rely on a single contract manufacturer for much of this manufacturing, which could disrupt the availability of our Fab Automation Products and adversely affect our gross margins.

We have outsourced the manufacturing of nearly all of our Fab Automation Products. Solectron currently manufactures, under a long-term contract, our products, other than AMHS and our robotics products. ASI also subcontracts a significant portion of its AMHS manufacturing to third parties. In the future, we may increase our dependence on contract manufacturers. Outsourcing may not continue to yield the benefits we expect, and instead could result in increased product costs, inability to meet customer demand or product delivery delays.

Outsourced manufacturing could create disruptions in the availability of our products if the timeliness or quality of products delivered does not meet our requirements or our customers’ expectations. From time to time, we have experienced delays in receiving products from Solectron. Problems with quality or timeliness could be caused by a number of factors including, but not limited to: manufacturing process flow issues, financial viability of an outsourced vendor or its supplier, availability of raw materials or components to the outsourced vendor, improper product specifications, or the learning curve to commence manufacturing at a new outsourced site. Our contract with Solectron contains minimum purchase commitments which, if not met, could result in increased

costs, which would adversely affect our gross margins. We must also provide Solectron with forecasts and targets based on actual and anticipated demand, which we may not be able to do effectively or efficiently. If Solectron purchases inventory based on our forecasts, and that inventory is not used, we must repurchase the unused inventory, which would adversely affect both our cash flows and gross margins. If product supply is adversely affected because of problems in outsourcing, we may lose sales and profits.

Our outsourcing agreement with Solectron includes commitments from Solectron to adjust, up or down, manufacturing volume based on updates to our forecast demand. Solectron may be unable to meet these commitments however and, even if it can, may be unable to react efficiently to rapid fluctuations in demand. If our agreement with Solectron terminates, or if Solectron does not perform its obligations under our agreement, it could take several months to establish alternative manufacturing for these products and we may not be able to fulfill our customers’ orders for some or most of our products in a timely manner. If our agreement with Solectron terminates, we may be unable to find another suitable outsource manufacturer and may be unable to perform the manufacturing of these products ourselves.

Any delays in meeting customer demand or quality problems resulting from product manufactured at an outsourced location such as Solectron could result in lost or reduced future sales to customers and could have a material negative impact on our net sales, gross profits and results of operations.

Shortages of components necessary for product assembly by Solectron or us can delay shipments to our customers and can lead to increased costs, which may negatively impact our financial results.

When demand for semiconductor manufacturing equipment is strong, suppliers, both U.S. and international, strain to provide components on a timely basis. We have outsourced the manufacturing of many of our products, and disruption or termination of supply sources to our contract manufacturers could have a serious adverse effect on our operations. Many of the components and subassemblies used in our products are obtained from a limited group of suppliers, or in some cases may come from a single supplier. A prolonged inability to obtain some components could have an adverse effect on our operating results and could result in damage to our customer relationships. Shortages of components may also result in price increases for components and, as a result, could decrease our margins and negatively impact our financial results.

We may have additional tax liabilities that could be materially higher than we expect.

The calculation of tax liabilities involves uncertainties in the application of complex global tax regulations. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. In the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.

We recognize potential liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on estimates of whether, and the extent to which, additional taxes will be due. We may be audited in the future by tax authorities in the United States and foreign jurisdictions to determine whether or not we owe additional taxes. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from what is reflected in our historical tax provision and accruals. The actual outcome of audits of our tax returns and related litigation, if any, could have a material adverse effect on our financial condition and results of operations. If our previous estimate of tax liabilities proves to be less than the ultimate assessment, a charge to expense would result.

Because we do not have long-term contracts with our customers, our customers may cease purchasing our products at any time.

We do not have long-term contracts with our customers, and our sales are typically made pursuant to individual purchase orders. Accordingly:

	•		our customers can cease purchasing our products at any time, without penalty;

	•		our customers are free to purchase products from our competitors;

	•		we are exposed to competitive price pressure on each order;

	•		our customers are not required to make minimum purchases; and

	•		our customers may reschedule or cancel existing orders, and we may not be able to recover the costs we have incurred to manufacture that product from the customer.

Customer orders are often received with extremely short lead times. If we are unable to fulfill these orders in a timely manner, we could lose sales and customers.

We depend on large purchases from a few significant customers, and any loss, cancellation, reduction or delay in purchases by, or failure to collect receivables from these customers could harm our business.

The markets in which we sell our products comprise a relatively small number of OEMs, semiconductor manufacturers and FPD manufacturers. Large orders from a relatively small number of customers account for a significant portion of our revenue and make our relationship with each customer critical to our business. The sales cycle to a new customer can last up to twelve months or more from initial inquiry to placement of an order, depending on the complexity of the project. These extended sales cycles make the timing of customer orders uneven and difficult to predict. With reference to sales to fab customers, a significant portion of the net sales in any quarter is typically derived from a small number of long-term, multi-million dollar customer projects involving upgrades of existing facilities or the construction of new facilities. In the case of sales to OEMs, these orders, either large or small in size are typically received with very short lead times. If we are not able to meet these short customer delivery requirements, we could potentially lose the order. Our customers normally provide forecasts of their demand and in many cases, the Company will incur costs to be able to fulfill customers’ forecasted demand, however there can be no assurances that the customers’ forecast will be accurate and it may not lead to a subsequent order. Generally, our customers may cancel or reschedule shipments with limited or no penalty.

If we are unable to develop and introduce new products and technologies in a timely manner, our business could be negatively affected.

Semiconductor equipment and processes are subject to rapid technological changes. The development of more complex semiconductors has driven the need for new facilities, equipment and processes to produce these devices at an acceptable cost. We believe that our future success will depend in part upon our ability to continue to enhance our existing products to meet customer needs and to develop and introduce new products in a timely manner. We often require long lead times for development of our products, which requires us to expend significant management effort and to incur material development costs and other expenses. During development periods we may not realize corresponding revenue in the same period, or at all. We may not succeed with our product development efforts and we may not respond effectively to technological change, which could have a negative impact on our financial condition and results of operations. The impact could include charges to operating expense, cost overruns on large projects or the loss of future revenue opportunities.

We may be unable to protect our intellectual property rights and we may become involved in litigation concerning the intellectual property rights of others.

We rely on a combination of patent, trade secret and copyright protection to establish and protect our intellectual property. While we intend to take reasonable steps to protect our patent rights, the filing process is time-consuming and we cannot assure you that we will be able to file timely our patents and other intellectual property rights. In addition, we cannot assure you our patents and other intellectual property rights will not be challenged, invalidated or voided, or that the rights granted there under will provide us with competitive advantages. We also rely on trade secrets that we seek to protect, in part, through confidentiality agreements with employees, consultants and other parties. These agreements may be breached, we may not have adequate remedies for any breach, or our trade secrets may otherwise become known to, or independently developed by, others. In addition, enforcement of our rights could impose significant expense and result in an uncertain or non-cost-effective determination or confirmation of our rights.

Intellectual property rights are uncertain and involve complex legal and factual questions. We may infringe the intellectual property rights of others, which could result in significant liability for us. If we do infringe the intellectual property rights of others, we could be forced to either seek a license to intellectual property rights of others or to alter our products so that they no longer infringe the intellectual property rights of others. A license could be very expensive to obtain or may not be available at all. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical, could detract from the value of our products, or could delay our ability to meet customer demands or opportunities.

There has been substantial litigation regarding patent and other intellectual property rights in semiconductor-related industries. Litigation may be necessary to enforce our patents, to protect our trade secrets or know-how, to defend us against claimed infringement of the rights of others, or to determine the scope and validity of the patents or intellectual property rights of others. Any

litigation could result in substantial cost to us and divert the attention of our management, which by itself could have an adverse material effect on our financial condition and operating results. Further, adverse determinations in any litigation could result in our loss of intellectual property rights, subject us to significant liabilities to third parties, and require us to seek licenses from third parties, or prevent us from manufacturing or selling our products. Any of these effects could have a negative impact on our financial condition and results of operations.

The intellectual property laws in Asia do not protect our intellectual property rights to the same extent as do the laws of the United States. It may be necessary for us to participate in proceedings to determine the validity of our or our competitors’, intellectual property rights in Asia, which could result in substantial cost and divert our efforts and attention from other aspects of our business. If we are unable to defend our intellectual property rights in Asia, our future business, operating results and financial condition could be adversely affected.

We may not be able to integrate efficiently the operations of our acquisitions, and may incur substantial losses in the divestiture of assets or operations.

We have made and may continue to make additional acquisitions of or significant investments in, businesses that offer complementary products, services, technologies or market access. If we are to realize the anticipated benefits of past and future acquisitions or investments, the operations of these companies must be integrated and combined efficiently with our own. The process of integrating supply and distribution channels, computer and accounting systems, and other aspects of operations, while managing a larger entity, will continue to present a significant challenge to our management. In addition, it is not certain that we will be able to incorporate different financial and reporting controls, processes, systems and technologies into our existing business environment. The difficulties of integration may increase because of the necessity of combining personnel with varied business backgrounds and combining different corporate cultures and objectives. We may incur substantial costs associated with these activities and we may suffer other material adverse effects from these integration efforts which could materially reduce our earnings, even over the long-term. We may not succeed with the integration process and we may not fully realize the anticipated benefits of the business combinations, or we could decide to divest or discontinue existing or recently acquired assets or operations.

As our quarterly and yearly operating results are subject to variability, comparisons between periods may not be meaningful; this variability in our results could cause our stock price to decline.

Our revenues and operating results can fluctuate substantially from quarter to quarter and year to year, depending on factors such as:

	•		general trends in the overall economy, electronics industry and semiconductor and FPD manufacturing industries;

	•		fluctuations in the semiconductor and FPD equipment markets;

	•		changes in customer buying patterns;

	•		the degree of competition we face;

	•		pricing pressures causing lower gross margins or lost orders;

	•		the size, timing and product mix of customer orders;

	•		lost sales due to any failure in the outsourcing of our manufacturing;

	•		the availability of key components;

	•		the timing of product shipment and acceptance, which are factors in determining when we recognize revenue; and

	•		the timely introduction and acceptance of new products.

These and other factors increase the risk of unplanned fluctuations in our net sales. A shortfall in net sales in a quarter or a fiscal year as a result of these and other factors could negatively impact our operating results for that period. Given these factors, we expect quarter-to-quarter and year-to-year performance to fluctuate for the foreseeable future. As a result, period-to-period comparisons of

our performance may not be meaningful, and you should not rely on them as an indication of our future performance. In one or more future periods, our operating results may be below the expectations of public market analysts and investors, which may cause our stock price to decline.

We face significant economic and regulatory risks because a majority of our net sales are derived from outside the United States.

A significant portion of our net sales is attributable to sales outside the United States, primarily in Taiwan, Japan, China, Korea, Singapore and Europe. International sales were approximately 81 percent, 82 percent and 79 percent for fiscal years 2006, 2005 and 2004, respectively. We expect that international sales, particularly to Asia, will continue to represent a significant portion of our total revenue in the future. Concentration in sales to customers outside the United States increases our exposure to various risks, including:

	•		exposure to currency fluctuations;

	•		the imposition of governmental controls;

	•		the laws of certain foreign countries may not protect our intellectual property to the same extent as do the laws of the United States;

	•		the need to comply with a wide variety of foreign and U.S. export laws;

	•		political and economic instability;

	•		terrorism and anti-American sentiment;

	•		trade restrictions;

	•		slowing economic growth and availability of investment capital and credit;

	•		changes in tariffs and taxes;

	•		longer product acceptance and payment cycles;

	•		the greater difficulty in administering business overseas; and

	•		inability to enforce payment obligations or recourse to legal protections accorded creditors to the same extent within the U.S.

Any type of economic instability in parts of Asia where we do business, can have a severe negative impact on our operating results, due to the large concentration of our sales activities in this region.

Although we invoice a significant portion of our international sales in United States dollars, we invoice our sales in Japan in Japanese yen. Future changes in the exchange rate of the U.S. dollar to the Japanese yen may adversely affect our future results of operations. We have not engaged in active currency hedging transactions; however, we commenced a limited hedging program in the first quarter of fiscal year 2007. Nonetheless, as we expand our international operations, we may allow payment in additional foreign currencies and our exposure to losses due to foreign currency transactions may increase. Moreover, the costs of doing business abroad may increase as a result of adverse exchange rate fluctuations. For example, if the United States dollar declined in value relative to a local currency, we could be required to pay more for our expenditures in that market, including salaries, commissions, local operations and marketing expenses, each of which is paid in local currency. In addition, we may lose customers if exchange rate fluctuations, currency devaluations or economic crises increase the local currency price of our products and manufacturing costs or reduce our customers’ ability to purchase our products

Asian and European courts might not enforce judgments rendered in the United States. There is doubt as to the enforceability in Asia and Europe of judgments obtained in any federal or state court in the United States in civil and commercial matters. The United States does not currently have a treaty with many Asian and European countries providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of a fixed debt or sum of money rendered by any federal or state court in the United States would not automatically be enforceable in many European and Asian countries.

Our current and planned operations may strain our resources and increase our operating expenses.

We may expand our operations through both internal growth and acquisitions. We expect this expansion will strain our systems and operational and financial controls. In addition, we may incur higher operating costs and be required to increase substantially our working capital to fund operations as a result of such an expansion. In addition, during an expansion, we may incur significantly increased up-front costs of sale and product development well in advance of receiving revenue for such product sales. To manage our growth effectively, we must continue to improve and expand our systems and controls. If we fail to do so, our growth will be limited and our liquidity and ability to fund our operations could be significantly strained.

Further, consideration for future acquisitions could be in the form of cash, common stock, rights to purchase stock, debt or a combination thereof. Dilution to existing shareholders, and to earnings per share, may result if shares of our common stock, other rights to purchase common stock or debt are issued in connection with any future acquisitions.

We have continued to experience unexpected turnover in our finance department, and this has had an adverse impact on our business; if we lose any of our key personnel or are unable to attract, train or retain qualified personnel, our business would be further harmed.

In the past 5 years, we have had significant turnover in the chief financial officer, controller and other key positions in our headquarters finance department, and in certain key finance positions at ASI in Japan. If we are not able to attract and retain qualified finance executives and employees at appropriate positions in our consolidated operations, we face a significant risk of further material weaknesses in internal control over financial reporting, and direct and indirect consequences of these weaknesses, including but not limited to delayed filings of our SEC reports, potential defaults under our debt obligations, risk of de-listing from the NASDAQ Global Market, significant operating expenses incurred to hire outside assistance to compensate for the lack of qualified personnel, and litigation and governmental investigations.

As a general matter, our future success depends, in large part, on the continued contributions of our senior management and other key personnel, many of whom are highly skilled and would be difficult to replace. None of our senior management, key technical personnel or key sales personnel is bound by written employment contracts to remain with us for a specified period. In addition, we do not currently maintain key person life insurance covering our key personnel. The loss of any of our senior management or key personnel could harm our business.

Our future success also depends on our ability to attract, train and retain highly skilled managerial, engineering, sales, marketing, legal and finance personnel, and on the abilities of new personnel to function effectively, both individually and as a group. Competition for qualified senior employees can be intense. If we fail to do this, our business could be harmed.

Risks Related to our Industry

The semiconductor manufacturing equipment industry is highly cyclical and is affected by recurring downturns in the semiconductor industry, and these cycles can harm our operating results.

Our business largely depends upon the capital expenditures of semiconductor manufacturers. Semiconductor manufacturers are dependent on the then-current and anticipated market demand for semiconductors. The semiconductor industry is cyclical and has historically experienced periodic downturns. These periodic downturns, whether the result of general economic changes or decreases in demand for semiconductors, are difficult to predict and often have a severe adverse effect on the semiconductor industry’s demand for semiconductor manufacturing equipment. Sales of equipment to semiconductor manufacturers may be significantly more cyclical than sales of semiconductors, as the large capital expenditures required for building new fabs or facilitating existing fabs is often delayed until semiconductor manufacturers are confident about increases in future demand. If demand for semiconductor equipment remains depressed for an extended period, it will seriously harm our business.

As a result of substantial cost reductions in response to the decrease in net sales and uncertainty over the timing and extent of any industry recovery, we may be unable to make the investments in marketing, research and development, and engineering that are necessary to maintain our competitive position, which could seriously harm our long-term business prospects.

We believe that the cyclical nature of the semiconductor and semiconductor manufacturing equipment industries will continue, leading to periodic industry downturns, which may seriously harm our business and financial position.

We may not effectively compete in a highly competitive semiconductor manufacturing equipment industry.

The markets for our products are highly competitive and subject to rapid technological change. We currently face direct competition with respect to all of our products. A number of competitors may have greater name recognition, more extensive engineering, research & development, manufacturing, and marketing capabilities, access to lower cost components or manufacturing, and substantially greater financial, technical and personnel resources than those available to us.

Brooks and TDK are our primary competitors in the area of loadports. Our SMART-Traveler System products face competition from Brooks and Omron. We also compete with several companies in the robotics area, including, but not limited to, Brooks, Rorze and Yasukawa-Super Mecatronics Division. In the area of AMHS, we face competition primarily from Daifuku Co., Ltd. and Murata Co., Ltd. Our wafer sorters compete primarily with products from Recif, Inc. and Rorze. We also face competition for our software products from Cimetrix and Brooks. In addition, the industry transition to 300mm wafers is likely to draw new competitors to the fab automation and AMHS markets. In the 300mm wafer market, we expect to face intense competition from a number of established automation companies, as well as new competition from semiconductor equipment companies.

We expect that our competitors will continue to develop new products in direct competition with our systems, improve the design and performance of their products and introduce new products with enhanced performance characteristics, and existing products at lower costs. To remain competitive, we need to continue to improve and expand our product line, which will require us to maintain a high level of investment in research and development. Ultimately, we may not be able to make the technological advances and investments necessary to remain competitive.

Companies in the semiconductor capital equipment industry face continued pressure to reduce costs. Pricing actions by our competitors may require us to make significant price reductions to avoid losing orders.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of shareholders was held on December 14, 2006.

1. At the meeting, the following individuals were elected to serve as members of the Company’s Board of Directors until the next Annual Meeting of Shareholders and until their successors are elected and have qualified:

Nominees:


	FOR		WITHHELD
Stephen S. Schwartz, Ph.D.		40,585,857		2,931,590
Stanley Grubel		40,864,531		2,652,916
Tsuyoshi E. Kawanishi		23,793,344		19,724,103
Robert A. McNamara		24,642,150		18,875,297
Anthony E. Santelli		40,851,671		3,665,776
William Simon		40,854,194		2,663,253
Walter W. Wilson		39,595,600		3,921,847

Each of the other proposals presented at the meeting was approved as follows:

To approve amendments to our 2003 Equity Incentive Plan:


FOR	AGAINST	ABSTAIN	NO-VOTE
23,967,548	8,535,766	50,939	10,963,194

3. To approve an amendment to our 1993 Employee Stock Purchase Plan:


FOR	AGAINST	ABSTAIN	NO-VOTE
28,630,039	3,865,710	5,850	1,093,194

4. To ratify the selection of PricewaterhouseCoopers, LLP as our independent registered public accounting firm for the fiscal year 2007:


FOR	AGAINST	ABSTAIN	NO-VOTE
43,197,663	144,074	175,710	—

ITEM 6. EXHIBITS

Exhibit

Incorporated by Reference

Filed

Number

Exhibit Description

Form

Ex. No.

File No.

Filing Date

Herewith

3.1

Amended and Restated Articles of Incorporation of the Company.

S-1

3.1

333-66184

7/19/1993

3.2

Bylaws of the Company.

S-1

3.2

333-66184

7/19/1993

3.3

Certificate of Amendment of the Amended and Restated Articles of Incorporation, filed September 24, 1999.

10-Q

3.2

000-22430

10/21/1999

3.4

Certificate of Amendment of the Amended and Restated Articles of Incorporation, filed October 5, 2000.

DEF 14A

App.

000-22430

7/31/2000

4.1

Rights Agreement among the Company and Bank of Boston, N.A., as Rights Agent, dated June 25, 1998.

8-K

99.2

000-22430

6/29/1998

4.2

Common Stock Purchase Agreement between the Company and various purchasers, dated as of May 26, 1999.

8-K

4.2

000-22430

6/18/1999.

4.3

Indenture dated as of July 3, 2001 between the Company, State Street Bank and Trust Company of California, N.A., as trustee, including therein the forms of the notes.

10-Q

4.3

000-22430

8/14/2001

4.4

Registration Rights Agreement dated as of July 3, 2001 between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated, and ABN Amro Rothschild LLC.

10-Q

4.4

000-22430

8/14/2001

10.3*

Company’s 1993 Employee Stock Purchase Plan as amended and approved by the Registrant’s shareholders through December 14, 2006

14A

App. B

000-22430

11/03/06

10.32*

2003 Equity Incentive Plan as amended and approved by the Registrant’s shareholders through December 14, 2006

14A

App. A

000-22430

11/03/06

10.43

First Amendment to Credit Agreement among Asyst Technologies, Inc., Asyst Japan, Inc., Bank of America, N.A., Comerica Bank, Keybank National Association, Union Bank of California, N.A., and Development Bank of Japan dated as of October 13, 2006.

10.44

Second Amendment and Waiver to Credit Agreement among Asyst Technologies, Inc., Asyst Japan, Inc., Bank of America, N.A., Comerica Bank, Keybank National Association, Union Bank of California, N.A., and Development Bank of Japan dated as of November 13, 2006.

Exhibit

Incorporated by Reference

Filed

Number

Exhibit Description

Form

Ex. No.

File No.

Filing Date

Herewith

10.45

Third Amendment and Waiver to Credit Agreement among Asyst Technologies, Inc., Asyst Japan, Inc., Bank of America, N.A., Comerica Bank, Keybank National Association, Union Bank of California, N.A., and Development Bank of Japan dated as of December 29, 2006.

10.46*

Form of Change–in-Control Agreement entered into between the Company and certain executive officers.

31.1

Certification of the Chief Executive Officer required by Rule 13a-14(a). (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).

31.2

Certification of the Chief Financial Officer required by Rule 13a-14(a). (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).

32.1

Combined Certifications of the Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b). (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).


*		Indicates a management contract or compensatory plan or arrangement

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.


	ASYST TECHNOLOGIES, INC.
Date: February 9, 2007	By:	/s/MICHAEL A. SICURO
		Michael A. Sicuro
		Chief Financial Officer

Signing on behalf of the Registrant as a duly authorized officer and as the principal accounting and financial officer.

EXHIBIT INDEX

Exhibit

Incorporated by Reference

Filed

Number

Exhibit Description

Form

Ex. No.

File No.

Filing Date

Herewith

3.1

Amended and Restated Articles of Incorporation of the Company.

S-1

3.1

333-66184

7/19/1993

3.2

Bylaws of the Company.

S-1

3.2

333-66184

7/19/1993

3.3

Certificate of Amendment of the Amended and Restated Articles of Incorporation, filed September 24, 1999.

10-Q

3.2

000-22430

10/21/1999

3.4

Certificate of Amendment of the Amended and Restated Articles of Incorporation, filed October 5, 2000.

DEF 14A

App.

000-22430

7/31/2000

4.1

Rights Agreement among the Company and Bank of Boston, N.A., as Rights Agent, dated June 25, 1998.

8-K

99.2

000-22430

6/29/1998

4.2

Common Stock Purchase Agreement between the Company and various purchasers, dated as of May 26, 1999.

8-K

4.2

000-22430

6/18/1999

4.3

Indenture dated as of July 3, 2001 between the Company, State Street Bank and Trust Company of California, N.A., as trustee, including therein the forms of the notes.

10-Q

4.3

000-22430

8/14/2001

��

4.4

Registration Rights Agreement dated as of July 3, 2001 between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated, and ABN Amro Rothschild LLC.

10-Q

4.4

000-22430

8/14/2001

10.3*

Company’s 1993 Employee Stock Purchase Plan as amended and approved by the Registrant’s shareholders through December 14, 2006

14A

App. B

000-22430

11/03/06

10.32*

2003 Equity Incentive Plan as amended and approved by the Registrant’s shareholders through December 14, 2006

14A

App. A

000-22430

11/03/06

10.43

10.44

Exhibit

Incorporated by Reference

Filed

Number

Exhibit Description

Form

Ex. No.

File No.

Filing Date

Herewith

10.45

10.46*

Form of Change-in-Control Agreement entered into between the Company and certain executive officers.

31.1

Certification of the Chief Executive Officer required by Rule 13a-14(a) (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).

31.2

Certification of the Chief Financial Officer required by Rule 13a-14(a) (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).

32.1

Combined Certifications of the Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).


*		Indicates a management contract or compensatory plan or arrangement

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

Asyst (ASYT) Inactive 10-Q2007 Q3 Quarterly report

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