ASYS 10-K & 10-Q changes, risk factors and insider trading

Our cash flows may be insufficient to provide adequate working capital in the future and we may require additional financing to fund existing operations as well as ourany growth plan.plans. We paid off and terminated our existing credit facility with UMB Bank in September 2024. There is no assurance that we will be able to replace such facility or that any additional financing will be available if required, or, even if available, that it would not materially dilute the ownership percentage of our then existing shareholders, result in increased expenses or result in covenants or special rights that would restrict our operations.

Our success depends upon the continued contributions of our executive officersofficers, general managers, business unit directors and certain other employees, many of whom have many years of experience with us and would be extremely difficult to replace. We must also attract and retain experienced and highly skilled engineering, sales and marketing and managerial personnel. Competition for qualified personnel is intense in our industry, and we may not be successful in hiring and retaining these people. If we lost the services of our executive officers or our other highly qualified and experienced employees or cannot attract and retain other qualified personnel, our business could suffer as a result of less effective management due to loss of accumulated knowledge of our business or through less successful products due to a reduced ability to design, manufacture and market our products.

In addition, implementation of a new business strategy may lead to the disruption of our existing business operations. For example, the contingent risks associated with outsourcing certain of our existing manufacturing operations to third parties, as is the case with our use of third party manufacturers, primarily in Canada and Mexico, could materially impact our financial condition or results of operations and/or could disrupt our existing operations, especially if a contract manufacturer is unable to meet its commitments under any agreements or encounters financial difficulty. Furthermore, our efforts to outsource certain of our manufacturing operations may require additional management time and effort to implement successfully, and lead to higher than anticipated capital expenditures.

We continuallyperiodically evaluate potential acquisitions and consider acquisitions an important part of our future growth strategy. In the past, we have made acquisitions of, or significant investments in, other businesses with synergistic products, services and technologies and plan to continue to do so in the future. There can be no assurance that we will be able to identify suitable acquisition opportunities in the future or that we will be able to consummate any such transactions on terms and conditions acceptable to us.

Additionally, we cannot predict if or when acquisitions will be completed, and we may face significant competition for acquisition targets. Acquisitions involve numerous risks, including: (a) difficulties in integrating the operations, technologies, management information systems, products and personnel of the acquired companies; (b) diversion of management’s time and attention from normal daily operations of the business; (c) loss of key employees of an acquired business; (d) difficulties in entering markets in which we have no or limited prior experience and where our competitors in such markets have stronger market positions; (e) difficulties in complying with regulations, such as antitrust and environmental regulations, and managing risks related to an acquired business; (f) an inability to timely obtain financing, including any amendments required to our existing financing agreement; (g) an inability to implement uniform standards, controls, procedures and policies; (h) undiscovered and unknown problems, defects, liabilities or other issues related to any acquisition that become known to us only after the acquisition; and (i) loss of key customers or suppliers. Any of these risks could have a material adverse effect on our business, results of operations, financial condition, or cash flows, particularly in the case of a large acquisition.

As of September 30, 2024,2025, onetwo Thermal Processing Solutions customer represented 12%15% and 13% of our accounts receivable. A concentration of our receivables from one or a small number of customers places us at risk. A significant change in the liquidity or financial position of any of our customers that purchase large systems could have a material impact on the collectability of our accounts receivable and our future operating results. We attempt to manage this credit risk by requiring significant partial payments prior to shipment, where appropriate, and by actively monitoring collections. We also require letters of credit from certain customers depending on the size of the order, type of customer or its creditworthiness and its country of domicile. Our major customers may seek and, on occasion, may receive pricing, payment or other commercial terms that are less favorable to us than the current terms we customarily obtain. If any one or more of our major customers were to seek to re-negotiate their agreements on more favorable terms, or not pay us or continue business with us, it could adversely affect our business, financial position and results of operations.

There are also inherent execution risks in starting up a new factory or expanding production capacity, whether one of our own factories or that of our contract manufacturers, as well as risks to moving production to different contract manufacturers, which could increase costs and reduce our operating results. In the fourth quarter of fiscal 2023, we opened a new SiC consumables facility in Spartanburg, South Carolina to complement our manufacturing facility in Carlisle, Pennsylvania. We are alsocurrently working with contract manufacturingmanufacturer facilities in Canada and Mexico.Canada. The establishment and operation of new manufacturing facilities or contract manufacturing involves significant risks and challenges, some of which we have experienced and may experience in the future, including, but not limited to, the following: (a) design and construction delays and cost overruns; (b) issues in installing and qualifying new equipment and ramping production; (c) poor production process yields and reduced quality control; and (d) insufficient personnel with requisite expertise and experience to operate a manufacturing facility for the products we manufacture.

In 2024,2025, 59%71% of our net revenue came from customers outside of North America as follows: Asia - 43%55% (including China - 20%,22%, Taiwan - 19%, Malaysia - 12%7% and TaiwanSingapore - 8%2%); and Europe - 16%15% (including Germany - 6%2%, United Kingdom - 2%, Hungary - 2% and Czech Republic - 3%2%).

WeIn the past we have identified material weaknesses in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements.

DuringIn the fourth quarter ended September 30,fiscal 2023, we identified a material weakness in internal control related to ineffective information technology general controls in the areas of user access, segregation of duties, and program change-management over information technology systems that support substantially all of the Company’s financial reporting processes. This resulted in our inability to segregate user duties within the Company’s business processes. A substantial portion of the Company's controls are dependent upon the information derived from the information technology systems and therefore the dependent controls were concluded to be ineffective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual consolidated financial statements will not be prevented or detected on a timely basis.

Additionally, in the fourth quarter ended September 30,fiscal 2023, we identified a material weakness because we did not design and maintain adequate internal controls over non-routine and complex transactions, including the preparation and review of the third-party service provider valuation reports in the areas of goodwill and intangible assets.

We provide equipment, consumables and services for semiconductor device packaging, wafer fabricationproduction and device packaging.fabrication. Our products are used into fabricatingfabricate and package semiconductor devices, such as graphic processing units (GPU’s) used in AI applications, silicon carbide (SiC) and silicon (Si) power devices,devices and other optical, analog and digital and analog devices, power electronic packages, advanced semiconductor packages and electronic assemblies.devices. We sell these products to semiconductor device andpackaging, moduleelectronic manufacturers worldwide, particularly in Asia, North Americaassembly and Europe.device fabrication companies worldwide.

We operate in two reportable segments, based primarily on the industries they serve: (i) Thermal Processing Solutions (formerly called Semiconductor) and (ii) Semiconductor Fabrication Solutions (formerly called Material and Substrate).Solutions. Our thermal processing solutions include reflow equipment for chip packaging and electronic assembly, diffusion furnaces and furnaces used to produce ceramic based power semiconductor packages and passive electronic components. Our semiconductor fabrication solutions include consumables, equipment and services for wafer polishing, cleaning, slicing and dicing.

Artificial Intelligence - With Artificial Intelligence (AI), we believe our reflow oven systems arehave theleading favoredmarket choiceshare forwith Outsourced Semiconductor Assembly and Test Services (OSATS) providers who perform advanced packaging of the AI chips.

In June 2022, we completed the sale of the real property where our manufacturing facility in Massachusetts is located.located In connection with this sale, weand entered into a two-year leaseback of the facility. This sale-leaseback transaction resulted in a net cash inflow of approximately $14.9 million, after repayment of the existing mortgage and settlement of related sale expenses. In September 2023, we signed a lease for a new location with less square footage and completed the move to this new location in June 2024. As we expand our use of contract manufacturers, we will continue to look for ways to reduce our real estate footprint. In March 2024, we completed the sale of our corporate headquarters real property in Arizona. The sale resulted in a net cash inflow of approximately $2.5 million, after settlement of related sale expenses. Following the closing of this transaction, we entered into a lease agreement for a new office for our corporate headquarters, which commenced during the third quarter of fiscal year 2024. In addition, we are evaluating business continuity and resiliency within our operations, our management information systems, and our needs to allow for greater efficiencies and to ensure our infrastructure can support our future growth plans. As a capital equipment manufacturer, we will continue to invest in our business to drive future growth.

We evaluated our organizational structure and concluded that we have two reportable segments; Thermal Processing Solutions (formerly called Semiconductor) and Semiconductor Fabrication Solutions (formerly called Material & Substrate). Our Semiconductor Fabrication Solutions segment includes Entrepix beginning at the date of acquisition.Solutions.

Our fiscal year is from October 1 to September 30. Unless otherwise stated, references to the years 2024, 20232025 and 20222024 relate to the fiscal years ended September 30, 2024, 20232025 and 2022,2024, respectively.

Net revenue for the years ended September 30, 20242025 and 20232024 were $101.2$79.4 million and $113.3$101.2 million, respectively, a decrease of $12.1$21.9 million or 11%.22%. Revenue from the Thermal Processing Solutions segment decreased $8.4$11.1 million, or 11%,16%, over the prior year period. Our Thermal Processing Solution results for 20242025 reflect decreases in belt furnace shipments and horizontal diffusion furnaces shipments, partially offset by increases in shipments of our horizontalparts diffusionand furnaces.service business. We continueare toalso experienceseeing softnessyear-over-year growth in shipments of our advanced packaging andSPG SMTreflow equipment,oven primarilybusiness relateddue to aAI slowdownchip in global demand in the consumer markets.demand. Revenue from our Semiconductor Fabrication Solutions segment decreased $3.7$10.7 million, or 10%,34%, due to decreases in shipments of our polishing equipment, which was eliminated at the end of 2023, with final shipments in 2024.equipment. Additionally, we experienced declines in our wafer cleaning equipment, partially offset by increases in shipments of our consumablesconsumables. shipments.Our chemical consumable business, which produces solutions for the semiconductor and medical industries experienced year-over-year growth.

At the end of 2024,2025, two customers individually accounted for 25%29% and 20%11% of our total backlog. No other customer accounted for more than 10% of our backlog as of September 30, 2024.2025. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. During the three months ended June 30, 2024, a horizontal diffusion customer notified us of the cancelation of a furnace project for $4.5 million, which we believe is due to the slow-down in electric vehicle adoption. Also during this period,2025, the improvement in lead times across all of our product lines favorably contributed to the decline in our backlog.

Gross profit for the years ended September 30, 20242025 and 20232024 was $36.2$27.0 million and $35.6$36.2 million, respectively, representing ana increasedecrease of $0.7$9.2 million, or 2%.26%. Gross margin for 20242025 and 20232024 was 36%34% and 31%,36%, respectively. Gross margin for the Thermal Processing Solutions segment decreasedstayed toconsistent at 35% in 2025 and 2024, compared to 38% in 2023, due primarily fromto inventory obsolescence expense and unfavorable product mix with decreases in shipments of our lower margin profile high-temperature furnaces, surface-mount technology (“SMT”)furnaces and packagingBDF equipment,equipment partially offset by increasesthe employee retention credit (ERC) which reduced expenses. In addition, we had an increase in shipments of our horizontalhigher diffusionmargin furnaces.profile advanced packaging SPG equipment. Gross margin for the Semiconductor Fabrication Solutions segment, increaseddecreased to 30% in 2025, compared to 37% in 2024, compared to 18% in 20232024 due primarily to theinventory 2023obsolescence impairmentexpense chargecaused of $4.6 million for intangible assets andby a chargedecline in the amountmature ofnode $1.5semiconductor millionmarket related to the write-off of inventory for our polishing machine products, partiallyslightly offset by anthe additionalERC intangiblewhich assetreduced impairment charge in 2024 of $0.8 million.expenses. We are experiencingexperienced moderate material costs increases across all our segments. In response to such increased costs, we continually reviewreviewed our pricing plans and supplier agreements, with the objective of passing along these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. We are also continuing to explore additional partnerships with contract manufacturers, who can leverage their buying power on a larger scale. Throughout fiscal 2024,2025, we made targeted labor reductions as a result of the shift to contract manufacturing and the continuing slowdown in the broader semiconductor industry.

Total SG&A expenses for the years ended September 30, 20242025 and 20232024 were $33.8$29.0 million and $42.0$33.8 million, respectively, representing a decrease of $8.2$4.9 million or 19.4%.14%. This decrease was primarily due to planned cost reduction efforts around overhead expenses and staff reductions across all of our locations during 2024,2025, resulting in lower employeeinsurance expensesexpenses, professional fees, salaries and employee-related expenses, such as travel, commissions and bonuses. In addition, the ERC reduced expenses contributing to the lower SG&A. Non-segment related SG&A expense includes $1.5$1.2 million and $1.3$1.5 million of non-cash stock-based compensation expense for 20242025 and 2023,2024, respectively.

RD&E expenses for the years ended September 30, 20242025 and 20232024 were $4.2$2.6 million and $7.3$4.2 million, respectively, a decrease of $3.1$1.5 million. The decrease in RD&E expense is due to the timing of purchases related to specific strategic-development projects at our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments. Additionally,In addition we had lower overhead expenses due to cost saving initiatives and the prior year period included expenditures related to new product development projects at our Semiconductor Fabrication Solutions segment,ERC which werereduced terminated in the fourth quarter of 2023.expenses.

Gain on sale of fixed assets consists of the gain on the sale of our corporate headquarters in Arizona in March 2024. This sale resulted in a net gain of approximately $2.2 million, after settlement of related sale expenses and disposal of assets. The sale price for our BTU building in Massachusetts was $20.6 million, of which $0.7 million was deducted at closing for commission and other closing expenses. In connection with the sale, we recognized a pre-tax gain on sale of $12.5 million in the year ended 2022.

In the firstsecond quarter of fiscal year 2024,2025, we recognized impairment of our definite lived intangible assets of $1.3$2.6 million at our Semiconductor Fabrication Solutions segment. OfAs thedisclosed $1.3 million, $0.8 million ofabove, this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in our Consolidated Statement of Operations. Additionally, during the year ended September 30, 2023, we recognized impairment of our definite lived intangible assets of $5.2 million at our Semiconductor Fabrication Solutions segment. Of the $5.2 million, $4.6 million of this impairment was recorded in cost of goods sold, and the remainder was recorded within operating expenses in ourCondensed Consolidated Statement of Operations. See Note 98 for a description of the facts and circumstances leading to the intangible asset impairment events.impairments.

In the firstsecond quarter of fiscal year 2024,2025, we recognized impairment of our goodwill of $6.4$15.4 million at our Semiconductor Fabrication Solutions segment asand $5.0 million at our Thermal Processing Solutions segment. See Note 9 for a result of a triggering event identified at the enddescription of the firstfacts quarter.and circumstances leading to the goodwill impairment.

Severance expense was $0.4$0.7 million and $0.7$0.4 million in 20242025 and 2023,2024, respectively. SeveranceThis expenserelated for the year ended September 30, 2024 relatesprimarily to staff reductions across all of our divisions.locations Severanceas expensewe forshifted yearmore ended September 30, 2023 relates primarilywork to thecontract retirementmanufacturers ofand ourdealt founder.with decreasing demand.

Our effective tax rate was (13.08.3)% and 17.1%(13.0)% in 20242025 and 2023,2024, respectively. The effective tax rate is the ratio of total income tax expense to pre-tax income. The effective tax rates for 20242025 and 20232024 were lower than the U.S. statutory rate of 21%. The 20242025 effective tax rate was negatively impacted by non-deductible expenses, including goodwill impairment, includible foreign income,income taxed at different rates, foreign withholding tax and losses for which no tax benefit can be recognized. The 2023 effective tax rate was negatively impacted by non-deductible expenses, includible foreign income, foreign withholding tax and losses for which no tax benefit can be recognized. The 2023 effective tax rate was favorably impacted by the recognition of previously unrecognized tax benefits and the release of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition.

In 20242025 and 2023,2024, we recorded income tax expense and (benefit) of $1.0$2.3 million and $(2.6)$1.0 million, respectively. The income tax provisions are based upon estimates of annual income, annual permanent differences, statutory tax rates and credits in the various jurisdictions in which we operate. Significant judgments and estimates are required in the determination of the consolidated income tax expense.

Generally accepted accounting principles of the United States (“GAAP”) require that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the objective negative evidence includes cumulative losses in recent years. Such objective negative evidence limits the ability to consider other subjective evidence, such as future projections. Based on the consideration of all available evidence, we have concluded that we will maintain a full valuation allowance for allthe net deferred tax assets related toin the carryforwards of U.S. net operating losses and tax credits. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full valuation allowances on U.S. net deferred tax assets are appropriate.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740, "Income Taxes", states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. In 2023, we recognized $1.0 million of previously unrecognized tax benefits, and asAs of September 30, 2024,2025, we have no unrecognized tax benefits recorded within our financial statements. We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available.

We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses and tax credits that are carried forward.

The success of our investment and growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included a loancredit and security agreementfacility with UMBa Bank,regional bank, the sale of equity securities, which includes common stock sold in private transactions and public offerings, and cash generated from operations. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months.

Our capital allocation strategy focuses on building shareholder value. We do this by first investing in ourselves and growing our capabilities. We then look to supplement and strengthen our capabilities through acquisitions and strategic investments. And finally, we provide the return realized by theour investments to our stockholders. These three priorities are detailed as follows:

Once the above priorities have been met, we evaluate the return of capital to shareholders, as we have done in the past. We have never paid dividends on our common stock, and we do not expect to pay dividends on common stock in the foreseeable future. However, our Board has from time to time has authorized annual stock repurchase plans.

The decreaseincrease in cash and cash equivalents from September 30, 20232024 of $2.0$6.8 million was primarily due to the full repayment of our term loan and revolving credit agreement with UMB Bank, which was funded with cash generated in operations.operations slightly offset by investing activities and the effect of exchange rates on cash. We maintain a portion of our cash and cash equivalents in Renminbis, a Chinese currency, at our operations in China;China. therefore,As a result, changes in the exchange rates have an impact on our cash balances.

Cash provided by operating activities was $9.8$7.9 million in 20242025 compared to cash used in operating activities of $7.7 million in 2023 and cash provided by operating activities of $5.2$9.8 million in 2022.2024. DuringIn 2024,2025, we decreased our accounts receivable, inventory, and contract asset balances as we completed shipments throughout the year, reducing our backlog. These cash inflows were partially offset by decreases in accrued liabilities and contract liabilities as our purchasing activity decreased and the related liabilities were paid. During 2024, we decreased our accounts receivable, inventory, and contract asset balances as we completed shipments throughout the year, also reducing our backlog. These cash inflows were partially offset by decreases in accounts payable and accrued liabilities as our purchasing activity decreased and the related liabilities were paid. During 2023, we used cash to increase our inventory balances in preparation for shipments scheduled over the next four quarters and to pay the related accounts payable. During 2022, we received several large customer deposits, primarily related to orders of our horizontal diffusion and high temp furnaces, which were expected to ship over the next four quarters.

Cash used in investing activities was $0.9 million in 2025, primarily consisting of $1.0 million in capital expenditures made to improve operations and systems. Cash used in investing activities was $2.2 million in 2024, primarily consisting of $4.9 million in capital expenditures, partially offset by $2.7 million of proceeds from the sale of our real property in Arizona. Cash used in investing activities was $37.8 million in 2023, primarily consisting of $34.9 million in cash paid for the acquisition of Entrepix. Cash provided by investing activities was $18.8 million in 2022, primarily consisting of $19.9 million in proceeds from the sale of our real property in Massachusetts. Investing activities in 2024, 2023 and 2022 included capital expenditures of $4.9 million, $2.9 million and $1.1 million, respectively. We expect capital expenditures to decrease slightly in 2025,2026, as we have completed our relocation projects butand begaincontinue to pursue optimization projects to implement new technology across our divisions.divisions to improve our business.

Our business strategy includes the possible acquisition of or investments in other businesses to expand or complement our operations. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including the availability of suitable acquisition candidates, the negotiation of acceptable terms, our financial capabilities and access to capital, and general economic and business conditions. Financing for future transactions would result in the utilization of cash, incurrence of additional debt, issuance of stockequity securities or some combination of the foregoing.

Income Taxes. We file consolidated federal income tax returns in the United States for all subsidiaries except those in China, SingaporeSingapore, Malaysia and the UK, where separate returns are filed. The calculation of tax liabilities for all jurisdictions involves significant judgment in identifying uncertain tax positions, estimating the amount of deferred tax assets that will be realized in the future and the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our operations and financial condition. For the years ended September 30, 20242025 and 2023,2024, we had no unrecognized tax benefit.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. It is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. If we were to determine that it is more likely than not that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that all or part of the net deferred tax assets would be realized, a tax benefit would be realized when all or part of the previously provided valuation allowance would be reversed. As of September 30, 2024,2025, we have significant U.S. deferred tax assets that have a full valuation allowance and foreign deferred tax assets that have a partial valuation allowance. Any changes to the judgments related to our valuation allowance could have a material impact on our results of operations. For the years ended September 30, 20242025 and 2023,2024, we had net deferred tax assets of $0.2$1.0 million and $0.1$0.2 million.

Goodwill. We perform an annual impairment test as of September 30, or more frequently if indicators of potential impairment exist, to determine whether the fair value of a reporting unit in which goodwill resides is less than its carrying value. WeIf, performbased on the first stepreview of the goodwillqualitative impairmentfactors, test,we whichdetermine comparesit is not more likely than not that the fair value of thea reporting unit tois less than its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired, and we are not required to perform additional analysis. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit,value, we would recognizebypass anthe quantitative impairment chargetest. forWe have determined that our reporting units are the amountsame byas which the carrying amount exceeds theour reporting unit’s fair value (although the loss would not exceed the total amount of goodwill allocated to the reporting unit).segments.

As of March 31, 2025, the Company lowered its guidance for the second quarter of fiscal year 2025 and reset projections for future periods due to prolonged weakness in the mature node semiconductor market driven by high inventory, tepid demand, and geopolitical tensions. As a result, we recognized impairment of our goodwill of $15.4 million at our Semiconductor Fabrication Solutions segment and $5.0 million at our Thermal Processing Solutions segment. At the end of December 2023, we identified a triggering event. As a result of the decline in our stock price as of December 31, 2023, our book value materially exceeded our market value leading to a $6.4 million impairment charge in fiscal 2024. The impairment testing as of September 30, 2024, resulted in the fair value of our Thermal Processing Solutions segment exceeding its carrying value by approximately 44%, and the fair value of our Semiconductor Fabrication Solutions segment exceeding its carrying value by approximately 18%, resulting in no additional goodwill impairment. See Note 109 for additional information on goodwill by segment.

As of September 30, 2025 and 2024, the Company performed a qualitative impairment test on intangible assets and goodwill and concluded there was no further impairment. As of March 31, 2025, the Company lowered its guidance for the second quarter of fiscal year 2025 and reset projections for future periods due to prolonged weakness in the mature node semiconductor market driven by high inventory, tepid demand, and geopolitical tensions. As a result, we recorded intangible asset impairment of $2.6 million in our Semiconductor Fabrication Solutions segment. As of December 31, 2023, we identified a triggering event due to the decline in our stock price driving our market value materially below our book value. As a result, we recorded a $1.3 million impairment charge in fiscal 2024 to the intangible assets in our Semiconductor Fabrication Solutions segment. As of September 30, 2023, we identified a triggering event in our Semiconductor Fabrication Solutions segment primarily related to the prolonged downturn and general economic conditions in the semiconductor market, in addition to delays in the adoption of next-gen polishing tools, which reduced our cash flow projections. As a result, we recorded intangible asset impairment of $5.2 million. There were no impairments on long-lived assets during the year ended September 30, 2022. See Note 98 for additional information on intangible assets.

We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” in our 2025 Form 10-K, which identifies important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary StatementsNote Regarding Forward-Looking Statements” immediately preceding “Item 1. Financial Statements” of this Quarterly Report. This Quarterly Report, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our 2025 Form 10-K and any described herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. Except as set forth below,in our Form 10-Q for the quarterly period ended March 31, 2026, there have been no material changes to the risk factors previously disclosed in our 2025 Form 10-K.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “Condensed Consolidated Financial Statements” in Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”) and our consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 Form 10-K”).10-K.

Artificial Intelligence - With Artificial Intelligence (AI),AI, we believe our reflow oven systems are the favored choice for Outsourced Semiconductor Assembly and Test Services (OSATS) providers who perform advanced packaging of the AI chips.

We continue to invest in research and development to expand our Thermal Processing Solutions reflow equipment product line for AI applications. Our goal is to expand our addressable market by enabling mass production of higher density packages. We are also investing in application development and R&D resources to accelerate growth of our Semiconductor FabricationsFabrication Solutions business by expanding our consumables product portfolio and providing exceptional technical support and service to customers. Historically, we have grown our business primarily through acquisitions, including the businesses that currently comprise our two reportable segments in the Thermal Processing Solutions and Semiconductor Fabrication Solutions industries: BTU, PR Hoffman, Intersurface Dynamics and Entrepix. We also have a complementary strategy of pursuing organic growth, particularly during times when we lack sufficient capital resources to pursue growth through acquisitions. We intend to continue to pursue acquisitions to supplement organic growth and have added market development resources globally to accelerate organic growth.

Total net revenue for the three months ended MarchJune 31,30, 2026 and 2025 was $20.5$22.4 million and $15.6$19.6 million, respectively, an increase of approximately $4.9$2.8 million or 31%.14%. Total net revenue for the sixnine months ended MarchJune 31,30, 2026 and 2025 was $39.4$61.8 million and $40.0$59.5 million, respectively, aan decreaseincrease of approximately $0.5$2.3 million or 1%.4%. Our Thermal Processing Solutions results for the secondthird quarter increased primarily due to higher belt furnace, reflow oven and diffusion furnace,furnace and part shipments as well as an increase in our service business.revenue. Our Thermal Processing Solutions results for the sixnine months ended decreasedincreased primarily due to lower belt furnace and horizontal diffusion furnace shipments, partially offset by higher shipments of reflow ovens and parts in addition to an increase in our service business. We are seeing year-over-year growth in our advanced packaging SPGsemiconductor packaging group reflow oven business duedriven toby AI chip demand. Our Semiconductor Fabrication Solutions results for the secondthird quarter increasedand for the nine months ended June 30, 2026 decreased primarily due to increasedlower shipments of our polishing and wafer cleaning equipment, and increasedlower demand for our consumables.

As of MarchJune 31,30, 2026, one of our Thermal Processing Solutions segment customers individually accounted for 28% of our backlog. Additionally, one customer of both our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments accounted for 23%17% of our backlog. No other customer accounted for more than 10% of our backlog as of MarchJune 31,30, 2026. The orders included in our backlog are generally credit approved customer purchase orders believed to be firm and are generally expected to ship within the next twelve months. Our backlog at any point in time is not necessarily representative of actual sales for succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders. During the sixnine months ended MarchJune 31,30, 2026, the increase in Thermal Processing Solutions new order bookings was primarily driven by strong demand in Asia for AI application products.

Gross profit is the difference between net revenue and cost of goods sold, amortization of intangibles and intangible asset impairment.sold. Cost of goods sold consists of purchased material, labor and overhead to manufacture equipment and spare parts and the cost of service and support to customers for installation, warranty and paid service calls. Gross margin is gross profit as a percent of net revenue. Our gross profit and gross margin by business segment were as follows, dollars in thousands:

Our gross margins can be affected by capacity utilization, material costs, and the type and volume of machines and consumables sold each quarter. Gross margin for the three months ended MarchJune 31,30, 2026 and 2025 was $9.8$11.2 million, 48%50% of net revenue, and $(0.3)$9.1 million, (2)%47% of net revenue, respectively, an increase of $10.1$2.1 million. Gross margin for the sixnine months ended MarchJune 31,30, 2026 and 2025 was $18.3$29.5 million, 46%48% of net revenue, and $9.0$18.2 million, 23%31% of net revenue, respectively, an increase of $9.2$11.3 million.

Gross margin on products from both our Thermal Processing Solutions segment and our Semiconductor Fabrication Solutions segment increased infor the currentthree periodand nine months ended MarchJune 31,30, 2026 compared to the three and sixnine months ended MarchJune 31,30, 2025, due to leverage from higher revenue, favorable product mix and the inventory write down associated with the discontinuation of low margin product lines in the prior year periods. Gross margin from our Semiconductor Fabrication Solutions segment decreased for the three-month period ended June 30, 2026 compared to the same period in 2025 due to lower revenue while they increased for the nine-month period ended June 30, 2026 due to the inventory write down associated with the discontinuation of low margin product lines in the prior year periods. We experienced moderate increases in material costs across all our segments during both periods. In response, we reviewed our pricing plans and supplier agreements, sharing cost increases with our customers where possible; however, we continue to experience pricing pressure from our customers. We are also continuing to explore additional partnerships with contract manufacturers, who can leverage their buying power on a larger scale.

SG&A expenses for the three months ended MarchJune 31,30, 2026 and 2025 were $7.2$8.0 million and $7.1$7.4 million, respectively. SG&A expenses for the sixnine months ended MarchJune 31,30, 2026 decreased to $14.0$22.1 million from $15.2$22.6 million for the sixnine months ended MarchJune 31,30, 2025. This decrease was primarily due to lower personnel costs and variable costs partially offset by higher incentive compensation in the sixnine months ended MarchJune 31,30, 2026 due to improved financial performance.

RD&E expense, net of grants earned, for the three months ended MarchJune 31,30, 2026 and 2025 was $0.8$0.9 million and $0.4 million, respectively, and $1.7$2.5 million and $2.1 million in the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. The increase in RD&E expenses,is netrelated ofto grantspecific earned,strategic-development projects at our Thermal Processing Solutions segment. Grants earned are consistentimmaterial yearin overall year.periods presented.

During the sixnine months ended MarchJune 31,30, 2026, we recognized no impairment of our goodwill as no triggering event was identified.

During the sixnine months ended MarchJune 31,30, 2026, we recognized no impairment of our definite lived intangible assets.assets as no triggering event was identified.

Severance expense was $0$0.1 million and $0.2$0.4 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Severance expense was $0$0.1 million and $0.3$0.7 million for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. For the three and sixnine months ended MarchJune 31,30, 2026 and 2025, the amounts relateprimarily related to staff reductions at our Thermal Processing Solutions and Semiconductor Fabrication Solutions segments.

Our effective tax rate was 46.0%36.7% and (2.3%5.1%) for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. The effective tax rate for the sixnine months ended MarchJune 31,30, 2026 differs from the U.S. statutory tax rate of 21% primarily due to foreign income taxed at a foreign rate different than 21%, for permanent items and changes in valuation allowances. For the three months ended MarchJune 31,30, 2026 and 2025, we recorded income tax expense of $0.5$0.6 million and $0.3$0.8 million, respectively. For the sixnine months ended MarchJune 31,30, 2026 and 2025, we recorded income tax expense of $1.1$1.7 million and $0.7$1.5 million, respectively. The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, losses in certain jurisdictions and discrete items are excluded from the determination of the estimated annual effective tax rate.

A summary of our cash position as of MarchJune 31,30, 2026 and September 30, 2025, is as follows, in thousands, except the current ratio:

The increase in cash and cash equivalents from September 30, 2025 of $6.5$65.2 million was primarily due to the $56.5 million of net proceeds received from our underwritten public offering of common stock completed on June 3, 2026 along with an increase in accounts payable and increased collections from customers, partially offset by higher inventory. We maintain a portion of our cash and cash equivalents in Renminbis, a Chinese currency, at our operations in China; therefore, changes in the exchange rates have an impact on our cash balances. The $3.6$64.3 million increase in working capital from September 30, 2025, was primarily due to increases in cash and cash equivalents.equivalents from the proceeds from our public offering of common stock.

Cash provided by our operating activities was $6.2$7.3 million for the sixnine months ended MarchJune 31,30, 2026, compared to $3.1$5.6 million provided by operating activities for the sixnine months ended MarchJune 31,30, 2025. We increasedhad increases in our accounts payable, accrued liabilities, and contract liabilities, offset by a decrease in our accounts receivable, for the sixnine months ended MarchJune 31,30, 2026.

Cash used in investing activities was $0.5$0.6 million for the sixnine months ended MarchJune 31,30, 2026, compared to $0.2$0.7 million used in investing activities in the sixnine months ended MarchJune 31,30, 2025. Both periods consist solelyprimarily of capital expenditures.

For the sixnine months ended MarchJune 31,30, 2026 and 2025, cash provided by financing activities was $0.3$57.5 million and $0.1 million, respectively, primarily due to the exercisenet proceeds from the issuance of stockcommon options.stock.

As of MarchJune 31,30, 2026, we had no off-balance sheet arrangements as defined in Item 303(a)(4b) of Regulation S-K promulgated by the SEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Unrecorded purchase obligations were $4.5$7.8 million as of MarchJune 31,30, 2026, compared to $4.0 million as of September 30, 2025, an increase of $0.5$3.8 million.

We believe the critical accounting estimates discussed in the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting PoliciesEstimates” in our 2025 Form 10-K represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no material changes in our critical accounting estimates during the sixnine months ended MarchJune 31,30, 2026.