FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended: JUNE 30, 1997 --------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ___________ Commission File Number: 0-11412 --------- AMTECH SYSTEMS, INC. (Exact name of Registrant as specified in its charter) Arizona 86-0411215 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 131 South Clark Drive, Tempe, Arizona 85281 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (602) 967-5146 - -------------------------------------------------------------------------------- Indicate by check mark whether the Registrant (i) has filed all reports required 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 (ii) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the close of the period covered by this report. Common Stock, $.01 Par Value - -------------------------------------------------------------------------------- (Title of Class) 4,154,718 Shares - -------------------------------------------------------------------------------- Outstanding as of June 30, 1997 PART I. FINANCIAL INFORMATION AMTECH SYSTEMS, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS - ASSETS - -------------------------------------------------------------------------------- JUNE 30, SEPTEMBER 30, 1997 1996 ----------- ------------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 2,299,906 $ 1,994,217 Short-term investments 1,179,489 2,464,120 Accounts receivable - net 3,503,444 1,581,973 Inventories - net 925,758 739,201 Deferred income taxes 356,000 223,000 Prepaid expenses 46,438 46,935 ----------- ----------- Total current assets 8,311,035 7,049,446 ----------- ----------- PROPERTY AND EQUIPMENT, AT COST: Land and Building 408,623 373,380 Leasehold improvements 162,402 161,724 Machinery and equipment 452,835 432,435 Furniture and fixtures 649,983 608,972 ----------- ----------- 1,673,843 1,576,511 Less: accumulated depreciation and amortization (723,071) (600,180) ----------- ----------- Property and equipment - net 950,772 976,331 ----------- ----------- OTHER ASSETS 185,844 432,837 ----------- ----------- $ 9,447,651 $ 8,458,614 =========== =========== See accompanying Notes to Condensed Financial Statements. 2 AMTECH SYSTEMS, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' INVESTMENT - -------------------------------------------------------------------------------- JUNE 30, SEPTEMBER 30, 1997 1996 ----------- ------------- (Unaudited) CURRENT LIABILITIES: Accounts payable $ 1,236,965 $ 652,771 Accrued liabilities: Compensation and related taxes 466,967 442,785 Warranty and installation expenses 377,495 185,450 Other accrued liabilities 212,280 143,988 Income taxes payable 291,000 144,000 ----------- ----------- Total current liabilities 2,584,707 1,568,994 ----------- ----------- LONG-TERM DEBT 222,364 265,355 ----------- ----------- STOCKHOLDERS' INVESTMENT: Preferred stock, no specified terms; 100,000,000 shares authorized; none issued -- -- Common stock, $.01 par value; 100,000,000 shares authorized; 4,154,718 shares outstanding at June 30, 1997 and 4,109,668 shares at September 30, 1996 41,547 41,097 Additional paid-in capital 7,120,978 7,043,803 Cumulative foreign currency translation adjustment (276,310) (48,548) Accumulated deficit (245,635) (412,087) ----------- ----------- Total stockholders' investment 6,640,580 6,624,265 ----------- ----------- $ 9,447,651 $ 8,458,614 =========== =========== See accompanying Notes to Condensed Financial Statements. 3 AMTECH SYSTEMS, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996 - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net product sales $ 2,805,830 $ 3,232,173 $ 7,396,157 $ 6,311,328 Cost of product sales 1,851,029 2,023,705 5,071,545 4,191,125 ----------- ----------- ----------- ----------- Gross margin 954,801 1,208,468 2,324,612 2,120,203 Selling and general 932,831 723,264 2,140,633 1,827,112 Research & development 60,517 96,769 191,411 214,042 Gain on asset disposal -- -- (115,487) -- ----------- ----------- ----------- ----------- Operating profit (loss) (38,547) 388,435 108,055 79,049 ----------- ----------- ----------- ----------- Interest income - net 39,248 39,558 133,397 167,967 ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 701 427,993 241,452 247,016 Income tax provision -- 150,000 75,000 100,000 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS 701 277,993 166,452 147,016 ----------- ----------- ----------- ----------- DISCONTINUED OPERATIONS: - ------------------------ Income from discontinued operations -- -- -- 21,757 Gain on disposal of discontinued segment -- 23,834 -- 284,335 ----------- ----------- ----------- ----------- -- 23,834 -- 306,092 ----------- ----------- ----------- ----------- NET INCOME $ 701 $ 301,827 $ 166,452 $ 453,108 =========== =========== =========== =========== PRIMARY EARNINGS PER SHARE (Note 5): Continuing Operations $ -- $ .05 $ .04 $ .04 Net Income $ -- $ .05 $ .04 $ .09 WEIGHTED AVERAGE OUTSTANDING SHARES 4,153,103 6,315,734 4,145,255 6,381,556
See accompanying Notes to Condensed Financial Statements. 4 AMTECH SYSTEMS, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996 - -------------------------------------------------------------------------------- NINE MONTHS ENDED JUNE 30, -------------------------- 1997 1996 ----------- ----------- (Unaudited) (Unaudited) OPERATING ACTIVITIES: - --------------------- Net income $ 166,452 $ 453,108 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 159,725 131,251 Inventory and receivable write-downs 46,123 81,553 Less gain on disposal of assets (115,487) (251,470) Deferred tax benefit (133,000) (60,000) Changes in operating assets and liabilities: Increase in accounts receivable (2,202,755) (1,138,776) Increase in inventories and prepaid expenses (316,474) (194,675) Increase in other assets (136,678) (8,429) Increase in accounts payable 670,384 351,439 Increase in income taxes payable) 147,000 58,000 Increase in accrued liabilities 412,820 175,869 ----------- ----------- Net cash used by operating activities (1,301,890) (402,130) INVESTING ACTIVITIES: - --------------------- Maturities of short-term investments, net of purchases 1,284,631 1,045,035 Investment in unconsolidated subsidiary -- (425,000) Proceeds from disposition of assets 475,047 28,383 Purchase of property and equipment (186,170) (487,121) Cash distributed in disposal of Echelon -- (109,698) ----------- ----------- Net cash provided by investing activities 1,573,508 51,599 ----------- ----------- FINANCING ACTIVITIES: - --------------------- Principal payments on mortgage loan (10,169) 232,474 Net proceeds from exercise of stock options 35,201 -- ----------- ----------- Net cash provided by financing activities 25,032 232,474 ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES 9,039 (11,175) ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 305,689 (129,232) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,994,217 833,820 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,299,906 $ 704,588 =========== =========== See accompanying Notes to Condensed Financial Statements. 5 AMTECH SYSTEMS, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996 - -------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 1997 1996 --------- --------- Cash paid during the period for: Interest expense $ 12,347 $ -- Income taxes $ 60,000 $132,000 SUPPLEMENTAL INFORMATION OF NONCASH INVESTING AND FINANCING ACTIVITIES: Value of stock bonuses issued in exchange for services rendered in a prior period $ 42,424 $ -- Value received in the form of the Company's stock in exchange for the net assets of Echelon Service Co. $ -- $808,638 See accompanying Notes to Condensed Financial Statements. 6 AMTECH SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS --------------------------------------- THREE AND NINE MONTHS ENDED JUNE 30, 1997 (1) BASIS OF PRESENTATION --------------------- The accompanying consolidated financial statements include the accounts of Amtech Systems, Inc. and its wholly-owned subsidiary, Tempress Systems, Inc., based in Heerde, The Netherlands, hereinafter referred to as the Company. Echelon Service Company, which comprised the discontinued operations, is included in these financial statements through the date of disposition. See Note 4 regarding discontinued operations. All significant intercompany accounts and transactions have been eliminated in consolidation. (2) INTERIM REPORTING ----------------- The accompanying consolidated financial statements are unaudited; however, these financial statements contain all adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position of the Company as of June 30, 1997 and September 30, 1996 and the consolidated results of its operations for the three and nine months ended June 30, 1997 and 1996, and its consolidated cash flows for the nine months ended June 30, 1997 and 1996. The accounting policies followed by the Company are set forth in Note 2 to the consolidated financial statements in the Company's 1996 Annual Report on Form 10-K for the year ended September 30, 1996, which is incorporated herein by reference. Inventories as of June 30, 1997 and September 30, 1996 included work-in-process of $228,048 and $211,880, respectively. The remaining inventory primarily consists of purchased parts and completed sub-assemblies. The consolidated results of operations for the three and nine months ended June 30, 1997 and 1996, are not necessarily indicative of the results to be expected for the full year. (3) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY --------------------------------------- During the first quarter of fiscal 1996, the Company entered into a joint venture agreement pursuant to which it would have a 45% ownership interest and a 50% voting interest in Seil Semicon, Inc. in return for a commitment to invest $500,000 in cash. The joint venturers' plan was to operate a silicon test wafer reclaiming business through Seil Semicon, Inc. During the fourth quarter of fiscal 1996, it was determined that the joint venture Continued on next page..... 7 NOTES TO CONDENSED FINANCIAL STATEMENTS - continued (3) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY - Continued --------------------------------------- required significantly more capital than originally anticipated. In the first quarter of fiscal 1997, the Company disposed of its interest in the joint venture because management believed that raising the Company's commitment to $3 million, without obtaining majority control, was more risk than was appropriate for the Company. The Company received $475,000 during December 1996, in exchange for its interest in the joint venture, thereby recovering its investment and related expenses. Because the Company disposed of its interest in the joint venture and recovered its equity in the first year start-up losses and certain expenses related to that venture incurred last year, a $115,000 gain was recorded in the first quarter of fiscal 1997. (4) DISCONTINUED OPERATIONS ----------------------- Effective December 29, 1995, the Company exchanged all of its ownership in the technical contract personnel business, represented by all of the stock of Echelon Service Company, for 196,034 shares of the Company's outstanding $.01 par value Common Stock previously owned by Eugene R. Hartman, then an officer and director of the Company. The transaction was preceded by a dividend from Echelon to the Company in order to equalize the values. The transaction was structured to be a tax-free reorganization and, as such, no provision was made for income taxes. The fiscal 1996 income from discontinued operations are those of Echelon Service Company through the date of disposal and is net of applicable income taxes of $30,000. Revenues of discontinued operations during that period were $1,235,000. (5) EARNINGS PER SHARE ------------------ Fully diluted earnings per share (EPS) for the periods covered by these financial statements are the same as primary EPS. The Financial Accounting Standards Board ("FASB") has released FASB Statement 128, Earnings Per Share ("FASB 128"), which will become effective for fiscal years ending after December 15, 1997. Pro forma diluted EPS calculated in accordance with FASB 128 are as follows: 8 NOTES TO CONDENSED FINANCIAL STATEMENTS - continued Three Months Nine Months Ended June 30, Ended June 30, --------------- --------------- 1997 1996 1997 1996 ------- ------- ------- ------- BASIC EARNINGS PER SHARE: Continuing Operations $ -- $ .07 $ .04 $ .03 Net Income $ -- $ .07 $ .04 $ .11 DILUTED EARNINGS PER SHARE: Continuing Operations $ -- $ .05 $ .04 $ .03 Net Income $ -- $ .06 $ .04 $ .08 (6) SUBSEQUENT EVENT ---------------- On July 1, 1997, the Company purchased substantially all of the assets of P.R. Hoffman Machine Products Corporation , an "S" corporation ("P.R. Hoffman") based in Carlisle, Pennsylvania. P.R. Hoffman develops, manufactures, and markets double sided precision lapping and polishing machines for semiconductor silicon wafers and related products, including carriers, templates, and replacement parts. For the years ended December 31, 1996 and 1995, P.R. Hoffman had sales of $6.6 million and $4.9 million, respectively. Net income generated during the years ended December 31, 1996 and 1995 was $458,215 and $160,938, respectively. After making unaudited pro forma adjustments for income taxes, net income generated during the years ended December 31, 1996 and 1995 was $338,215 and $161,938, respectively. At closing the Company paid the seller $2.2 million in cash and $65,000 in the Company's common stock and assumed the operating liabilities of P.R. Hoffman. The purchase price is to be adjusted based upon the book value of the net assets as of June 30, 1997, which is expected to raise the purchase price by approximately $227,000, resulting in an initial purchase price of $2,900,000, including the assumed liabilities. The Company will also pay in either cash or stock an earn-out equal to 50% of the pre-tax income of the P.R. Hoffman in excess of $800,000 per year, for the next five (5) years. The maximum earn-out payable under the purchase agreement is $2 million. This additional purchase price will be treated as part of the purchase price to the extent earned. 9 AMTECH SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition and Working Capital. - ---------------------------------------- As of June 30, 1997, the Company has $3,479,000 of readily available liquidity in the form of cash and cash equivalents and short-term investments, a decrease of $979,000 since September 30, 1996. During the nine months ended June 30, 1997, working capital increased by $246,000 to $5,726,000, primarily as the result of the proceeds received upon disposition of the Company's interest in Seil Semicon, Inc., an unconsolidated joint venture, which was owned until December 1996. Cash and short-term investments comprise 37% of total assets and stockholders' investment is 52% of total capitalization. The current ratio was 3.2:1 as of June 30, 1997, compared to 4.5:1 as of September 30, 1996. While there has been a decline in the current ratio since the beginning of the year, management believes that the ratio and the continued liquidity are a reflection of the Company's strong financial condition. Liquidity and Capital Resources. - -------------------------------- Management believes the Company's liquidity is sufficient for its current operations. The Company is continuing to perform research on high intensity lamps to be used in conjunction with its patented photo-assisted chemical vapor deposition ("CVD") technology prior to making a decision regarding development of a commercial product incorporating that technology. Also, on July 1, 1997, the Company acquired the assets of P.R. Hoffman for an initial purchase price of $2.9 million paid mostly in cash. See Note 6, Subsequent Event, to the financial statements as of June 30, 1997 and the nine months then ended, for further information regarding that acquisition. See the management's discussion and analysis included in the Company's 1996 annual report on Form 10-K for further information regarding the Company's strategy for acquisitions and development of a product based upon the Company's CVD technology. In addition, the Company continues to evaluate potential product or business acquisitions that may complement its business. There can be no assurance of the sufficiency of existing working capital or the availability of any other source of financing necessary to permit the Company to pursue simultaneously both its acquisition strategy and to complete development of a photo-assisted CVD product. The semiconductor equipment order backlog was approximately $3,800,000, as of June 30, 1997, as compared to $4,600,000 as of June 30, 1996. The decline in the order backlog reflects shipments of a multi-year order and an increase in 10 shipments due to an expansion of the production capacity of the Netherlands operation. While orders are ordinarily filled within three to nine months of receipt, the current backlog includes approximately [$1,000,000] of orders to one customer that will not be shipped until fiscal 1998. THREE MONTHS ENDED JUNE 30, 1997 vs. 1996 Continuing Operations. - ---------------------- Revenues declined $426,000, or 13%, to $2,806,000 in the third quarter of fiscal 1997, from $3,232,000 of product sales reported in the second quarter of the fiscal 1996 year. Revenue for the third quarter of fiscal 1996 was significantly higher than the most recently completed quarter due to the Company's ability to ship items in the third quarter of fiscal 1996 previously delayed due to long lead-times of important quartz parts. While there may be similar delays in the future, none were incurred in the quarter ended June 30, 1997. The allocation of greater resources to merger and acquisition activities during the most recent quarter also contributed to the decrease in consolidated revenue. Gross margin decreased $253,000, or 21%, to $955,000, and amounted to 34% of sales, in the third quarter of fiscal 1997, compared to $1,208,000, or 37% of sales, in the third quarter of fiscal 1996. The decline in revenues accounted for 62% of the reduction in gross margin. Furnace sales, which have a lower gross profit margin, comprised a larger percentage of the total revenue. This less profitable product mix and the spreading of the fixed portion of manufacturing costs over the reduced sales volume accounted for the remaining 38% of the decline in gross margin. The selling, general and administrative expenses for the third quarter of fiscal 1997 were $210,000 higher than in comparable period of last fiscal year. The increased expenses primarily from expanded overhead costs related to the larger office and manufacturing facilities in The Netherlands and increased selling, marketing and installation activities on a world-wide basis. Research and development costs were $36,000 lower than in the three months ended June 30, 1996, as the Company's photo-CVD research has slowed pending the delivery of higher intensity lamps that are required for that research. Income (Loss) From Continuing Operations. - ----------------------------------------- As a result of the above, for the three months ended June 30, 1997, the Company had an operating loss of $39,000 as compared to 11 operating income of $388,000 for the third quarter of fiscal 1996. The income from continuing operations includes the operating profit (loss) from continuing operations discussed above, net interest income, and the provision for income taxes. During the third quarter of the current fiscal year, net interest income was $39,000, just $310 less than in the corresponding quarter of the preceding year. Income tax expense decreased $150,000, because income for the three months ended June 30, 1997 was break-even. The $150,000 provision for income tax for the third quarter of fiscal 1996 is approximately $5,000 more than would result from applying the statutory rates to the before tax loss, because of the effects of the permanent differences between financial and taxable income. As a result of the above, continuing operations produced income of $701 for the 1997 period, compared to $278,000, or $.05 per share, recognized during the corresponding quarter of fiscal 1996. Discontinued Operations. - ------------------------ As a result of the December 1995 sale of the technical contract personnel segment, there was no income from discontinued operations in the second quarter of fiscal 1997 or 1996. However, during the third quarter of fiscal 1996, there was an adjustment increasing the gain on disposition of that segment of the business by $23,834. Total Company. - -------------- The three months ended June 30, 1997, resulted in a net income of $701, compared to a net income of $302,000, or $.05 per share, in the second quarter of fiscal 1996. The most significant factors contributing to the reduction in earnings was the $426,000 decrease in sales and the less favorable product mix discussed above and the resulting decline in gross margins. NINE MONTHS ENDED JUNE 30, 1997 vs. 1996 Continuing Operations. - ---------------------- Revenues increased 17% to $7,396,000 during the first nine months of fiscal 1997, from $6,311,000 for the first nine months of fiscal 1996. The higher revenues were made possible by the expanded production capacity of The Netherlands operations resulting from larger facilities and the hiring of new employees. This increase also results from the Company's success in further penetrating the horizontal diffusion furnace market. 12 Gross margin increased $205,000, or 10%, to $2,325,000, during the first nine months of fiscal 1997, from $2,120,000 in the comparable period in fiscal 1996. The increase in gross margin related to the higher volume of shipments was partially offset by the lower gross margin as a percentage of sales resulting from a less favorable product mix. While spreading the fixed portion of manufacturing costs over the higher sales volume caused such costs to decrease as a percentage of sales, this benefit was offset by a product mix with a higher material cost content than in the prior year. As a result, gross margins as a percentage of revenue were 31% during the first nine months of fiscal 1997, compared to 34% during the comparable period in fiscal 1996. The selling and general expenses of the semiconductor segment for the first nine months of fiscal 1997 were $314,000 higher than in the comparable period of last fiscal year. The increased expenses primarily resulted from expanded sales, marketing and field service activities on a world-wide basis in order to promote the entire product line, with the greatest emphasis on the horizontal diffusion furnace developed in The Netherlands. The costs associated with the larger facilities in The Netherlands, including the costs of re-locating the operations to Heerde, contributed to the increase. These increases were partially offset by reductions in the sales and marketing costs of the U.S. based operations associated with the decision to defer the introduction of low-cost furnaces. Research and development costs were $23,000 lower than in the three quarters ended June 30, 1996, as the Company's photo-CVD ("chemical vapor deposition") research has slowed pending the delivery of higher intensity lamps that are required for that research. Because the Company disposed of its interest in the Korean joint venture, Seil Semicon, Inc., and recovered its equity in the first year start-up losses and certain expenses related to that venture incurred last year, a $115,000 gain was recorded in the first quarter of fiscal 1997. This gain offset much of the increase in expenses discussed above. Income From Continuing Operations. - ---------------------------------- For the first nine months of fiscal 1997, the operating profit from continuing operations was $108,000 as compared to $79,000 for the first three quarters of fiscal 1996. This improvement results from the gain on the disposition of the Company's interest in Seil Semicon, Inc. The income from continuing operations includes the operating profit, discussed above, net interest income, and the provision for income taxes. Net interest income declined by $35,000 during the first nine months of fiscal 1997, as interest bearing investments were 13 liquidated to finance the growth in accounts receivable associated with the higher sales volume. During the first nine months of fiscal 1997 there was income tax expense of $75,000, compared to an income tax expense of $100,000 reported for the corresponding period of fiscal 1996. The $100,000 income tax expense for the first three quarters of fiscal 1996 is approximately $16,000 greater than would result from applying the statutory rates to the before tax loss, because of the effects of the permanent differences between financial and taxable income. The income tax expense in the first three quarters of fiscal 1997 is approximately $7,000 less than what would result by applying the statutory rates to the before tax income, as the disposition of the Korean joint venture allowed the Company realized in the current year a tax benefit from the equity in losses recognized for financial statement purposes in fiscal 1996. This benefit was partially offset by differences between financial and taxable income as reflected in the Company's estimated effective tax rate which was applied to pre-tax book income for the fiscal year. As a result of the above, continuing operations produced net income of $166,000, or $.04 per share, in the first nine months of fiscal 1997, representing an improvement of $19,000, from the net loss of $147,000, or $.04 per share, reported in the first nine months of fiscal 1996. Discontinued Operations. - ------------------------ Operating profits of the technical contract personnel business were $22,000 in the first nine months of fiscal 1996. There was no comparable income in the current year because of the sale of this discontinued operation during December 1995. During December 1995, the Company exchanged all of its ownership in the technical contract personnel business represented by the stock of Echelon Service Company for 196,034 shares of the Company's outstanding Common Stock previously owned by Eugene R. Hartman, then an officer and director of the Company. The transaction was preceded by a dividend from Echelon to the Company in order to equalize the values. The transaction was structured to be a tax-free reorganization and, as such, no provision was made for income taxes. As a result of the transaction, the Company recognized a gain of $284,000. Total Company - ------------- For the nine months ended June 30, 1997 there was net income of $166,000, or $.04 per share, as compared to net income of $453,000, or $.09 per share, for the comparable period of fiscal 1996. The net income for the first nine months of last fiscal year was generated entirely by the sale of the discontinued operations. 14 FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements. The forward-looking statements contained herein are based upon current expectations that involve a number of risks and uncertainties. The forward-looking statements are based upon a number of assumptions, including without limitation those enumerated in the related section of the Management's Discussion and Analysis included in the Company's 1996 annual report on Form 10-K, which are hereby incorporated by reference. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in such forward-looking statements. In light of the significant uncertainties inherent in such forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives or plans for the Company will be achieved. 15 PART II Item 1. Legal Proceedings. ----------------- None. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None. Item 5. Other Matters ------------- On July 1, 1997, the Company acquired substantially all of the assets and related operating liabilities of P.R. Hoffman Machine Products Corporation, a Carlisle, Pennsylvania-based corporation ("P.R. Hoffman") (the "Acquisition"). P.R. Hoffman will be operated through the Company's wholly owned subsidiary, P.R. Hoffman Machine Products, Inc. and is expected to remain headquartered in Carlisle. P.R. Hoffman specializes in developing, manufacturing and marketing double sided precision lapping and polishing machines and related products including carriers and semiconductor polishing templates. Double sided lapping and polishing machines are designed to process wafer type products such as semiconductor silicon wafers, computer disk media, and ceramic components for wireless communication devises to exact tolerances of thickness, flatness, parallelism and surface finish. Carriers, which are produced by P.R. Hoffman for its own machines as well as for competitors' systems, consist of holders where silicon wafers are nested during the lapping and polishing process. P.R. Hoffman also produces an assortment of plates, gears, parts and wear items for its machines as well as for the machines of competitors. Management believes that the addition of P.R. Hoffman's product line to the Company's existing products (used primarily by customers in the manufacture of semiconductors) will enable the Company to offer a more diversified product line, provide a variety of possible solutions for new and existing customers, enhance the Company's ability to serve its customers and markets, and enable the Company to access markets currently served by P.R. Hoffman with the Company's technology and product line. In addition, management believes that the Company's larger and more established international operations will enhance and accelerate P.R. Hoffman's ability to distribute its products internationally. 16 The aggregate consideration paid by the Company in connection with the Acquisition was approximately $2,900,000, comprised of $2,435,000 cash, 32,338 unregistered shares of Common Stock, and the assumption of liabilities (approximately $400,000). The cash portion of the purchase price includes an estimate for a post-closing adjustment based upon P.R. Hoffman's June 30, 1997, balance sheet. The acquisition also provided for an earnout formula which, in the aggregate, could result in up to an additional $2 million payment to the seller. Under the terms of the earnout formula, P.R. Hoffman is entitled to fifty (50%) of P.R. Hoffman's pre-tax profits in excess of $800,000 per year for a period of five (5) years up to a cumulative maximum of $2 million. This additional purchase price will be treated as part of the purchase price to the extent earned. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- a) EXHIBITS - Exhibit 10, Employment Agreement between Company and Jong S. Whang, President and Chief Executive Officer, dated 28th day of February, 1997. The Company also incorporates by this reference the exhibits filed with the Company's Form 8-K dated July 8, 1997 b) Reports of Form 8-K The Company did not file any reports on Form 8-K during three months ended June 30, 1997 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMTECH SYSTEMS INC. by /s/ Robert T. Hass ----------------------------------- Robert T. Hass, Vice-President and Chief Financial Officer DATED: August 19, 1997 17