UNITED STATES SECURITIES AND EXCHANGE
COMMISSIONWASHINGTON, D.C. 20549 ___________FORM 10-K___________

|(Mark One) |  |                                                                                                   
|---------- |  | --------------------------------------------------------------------------------------------------
|[X]        |  | ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934    
|           |  | For the fiscal year ended:
      September 30, 2009                                               
|           |  | OR                                                                                                
|[  
    ]  |  | 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 ofincorporation or organization)
    (I.R.S.
      EmployerIdentification No.)131 South Clark Drive, Tempe,
      Arizona
    85281(Address of
      principal executive offices)
    (Zip
      Code)


|Registrants telephone number,
      including area code:480-967-5146
|---------------------------------------------------------------------
|                                                                     
|Securities registered pursuant to
      Section 12(b) of the Act:None
|                                                                     
|Securities registered pursuant to
      Section 12(g) of the Act:    
|                                                                     
|Common Stock, $0.01 Par
      Value                                  
|(Title of
    Class)                                                 

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [   ] No [X]

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Act. Yes [   ] No [X]

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. [X] Yes
[   ] No

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Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [   ] No
[   ]

Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not
contained herein, and will not be contained, to the best of registrants
knowledge in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X ]

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, non-accelerated filer, or a smaller reporting company. See
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  
      ]
    Accelerated filer [  
      ]Non-accelerated filer [   ] (do not
      check if a smaller reporting company)
    Smaller Reporting Company
      [X]


Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ] No [X]

As of March 31, 2009, the aggregate
market value of the voting and non-voting stock held by non-affiliates of the
registrant was approximately $28,722,000, based upon the closing sales price
reported by the NASDAQ Global Market on that date.

As of November 18, 2009, the
registrant had outstanding 8,964,244 shares of Common Stock, $0.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the Definitive Proxy Statement related to the registrants 2009 Annual Meeting
of Shareholders, which Proxy Statement will be filed under the Securities
Exchange Act of 1934, as amended, within 120 days of the end of the registrants
fiscal year ended September 30, 2009, are incorporated by reference into Items
10-14 of Part III of this Form 10-K.

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AMTECH SYSTEMS, INC. AND
SUBSIDIARIESTable of Contents

|Part
      I  
|--------------
|Item
      1. 
|Item 1A.      
|Item 1B.      
|Item 2.       
|Item 3.       
|Item 4.       
|              
|Part
      II 
|Item 5.       
|              
|Item 6.       
|Item 7.       
|              
|Item 7A.      
|Item 8.       
|Item 9.       
|              
|Item 9A.      
|Item 9B.      
|              
|Part
      III
|Item 10.      
|Item 11.      
|Item 12.      
|              
|Item 13.      
|              
|Item 14.      
|              
|Part
      IV 
|Item 15.      
|Signatures    

2

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FORWARD-LOOKING STATEMENTS

Certain information contained or
incorporated by reference in this Annual Report on Form 10-K is forward-looking
in nature. All statements included or incorporated by reference in this Annual
Report on Form 10-K, or made by management of Amtech Systems, Inc. and its
subsidiaries (the Company or Amtech), other than statements of historical
fact, are hereby identified as forward-looking statements (as such term is
defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended). Examples of
forward-looking statements include statements regarding Amtechs future
financial results, operating results, business strategies, projected costs,
products under development, competitive positions and plans and objectives of
the Company and its management for future operations. In some cases,
forward-looking statements can be identified by terminology such as may,
will, should, would, expects, plans, anticipates, intends,
believes, estimates, predicts, potential, continue, or the negative of
these terms or other comparable terminology. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in the section entitled ITEM 1A.
RISK FACTORS. These and many other factors could affect Amtechs future
operating results and financial condition, and could cause actual results to
differ materially from expectations based on forward-looking statements made in
this document or elsewhere by Amtech or on its behalf.

All references to we, our, us, or
Amtech refer to Amtech Systems, Inc. and its subsidiaries.

PART I

ITEM 1. BUSINESS

Amtech was incorporated in Arizona in
October 1981, under the name Quartz Engineering & Materials, Inc. We changed
to our present name in 1987. We conduct operations through four wholly-owned
subsidiaries: Tempress Systems, Inc., a Texas corporation with all of its
operations in The Netherlands, acquired in 1994, also referred to herein as
Tempress Systems or Tempress®; P.R. Hoffman Machine Products, Inc. (PR Hoffman),
an Arizona corporation based in Carlisle, Pennsylvania, acquired in July 1997;
Bruce Technologies, Inc. (Bruce Technologies®), a Massachusetts corporation
based in Billerica, Massachusetts, acquired in July 2004, or Bruce Technologies;
and R2D Automation SAS (R2D), a French corporation located near Montpellier,
France, acquired in October 2007. See Exhibit 21.1 Subsidiaries for a complete
list of our subsidiaries.

We are a leading supplier of horizontal
diffusion furnace systems used for solar (photovoltaic) cell and semiconductor
manufacturing, and are recognized in the markets we serve for our technology and
our brands. We operate in two business segments: (i) solar and semiconductor
equipment and (ii) polishing supplies. Our solar and semiconductor equipment is
sold under the well-known and respected brand names of Tempress Systems and
Bruce Technologies, which have customers in both the solar industry and the
semiconductor industry. Within the solar industry, we provide diffusion and
automation equipment to solar cell manufacturers. Within the semiconductor
industry, we provide equipment to manufacturers of analog, power, automotive and
microcontroller chips with geometries greater than 0.3 micron, a strategy we
believe minimizes direct competition with significantly larger suppliers of
semiconductor equipment. Under the PR Hoffman brand, we believe we are also a
leading supplier of insert carriers to manufacturers of silicon wafers, and we
provide lapping and polishing consumable products as well as equipment used in
various industries.

We have been providing manufacturing
solutions to the semiconductor industry for over 30 years and are leveraging our
semiconductor technology and industry presence in an effort to capitalize on
growth opportunities in the solar industry. Our customers use our furnaces to
manufacture solar cells, semiconductors, silicon wafers and
microelectromechanical systems (MEMS), which are used in end markets such as
solar power, telecommunications, consumer electronics, computers, automotive and
hand-held devices. To complement our research and development efforts, we also
sell our furnaces to research institutes and universities.

For fiscal 2009, we recognized net
revenue of $53.0 million, which included $34.8 million of solar revenue or
approximately 66% of our total revenue. These results compare to $80.3 million
of net revenue for fiscal 2008, which included $50.1 million of solar revenue or
approximately 62% of our total revenue. Our order backlog as of September 30,
2009 and 2008 was $32.4 million and $46.7 million, respectively, a 31% decrease.
Our backlog as ofSeptember 30, 2009 included
approximately $27.9 million of orders from our solar industry customers compared
to $36.7 million of orders from our solar industry customers as of September 30,
2008. Because our orders are typically subject to cancellation or delay by the
customer, our backlog at any particular point in time is not necessarily
representative of actual sales in subsequent periods, nor is backlog any
assurance that we will realize revenue or profit from completing these orders.

3

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Orders from the solar industry totaled
$21.8 million during fiscal 2009, compared to $73.3 million and $20.5 million in
fiscal 2008 and 2007, respectively.

For information regarding net revenue,
operating income and identifiable assets attributable to each of our two
business segments, see Note 9 of the Notes to Consolidated Financial Statements
included herein and ITEM 7, MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS of this Annual Report. For information on
the products of each segment, see Solar and Semiconductor Equipment Segment
Products and Polishing Supplies Segment Products within this ITEM 1.
BUSINESS section. For information regarding the impact of the worldwide
economic downturn and other risks to our business, see ITEM 1A. RISK
FACTORS.

COMPETITIVE STRENGTHS

We believe that we are a leader in the
markets we serve as a result of the following competitive strengths:

Leading Market Share and
Recognized Brand Names.The Tempress, Bruce Technologies and PR
Hoffman brands have long been recognized in our industry and identified with
high-quality products, innovative solutions and dependable service. We believe
that our brand recognition and experience will continue to allow us to
capitalize on current and future market opportunities in the solar
industry.

We have been providing horizontal
diffusion furnaces and polishing supplies and equipment to our customers for
over 30 years. We have sold and installed over 900 horizontal furnaces worldwide
and benefit from what we believe to be the largest installed customer base in
the semiconductor industry, which we believe offers an opportunity for
replacement and expansion demand. We also have a retrofit, parts and service
business, which typically generates higher margins than our equipment business.

Experienced Management
Team.We are led by a highly experienced management team. Our chief executive
officer (CEO) has over 36 years of industry experience, including 28 years with
our company. Our four general managers have an average of nearly 21 years of
solar and semiconductor industry experience and an average of 20 years with our
company (including our predecessor companies).

Established, Diversified Customer
Base.We have long-standing relationships with many of our top customers, which
we believe remain strong. We maintain a broad base of customers, including
leading solar cell manufacturing companies, as well as semiconductor and wafer
manufacturing companies. During fiscal 2009, our largest customer accounted for
approximately 16% of our net revenue and our top 10 customers collectively
represented approximately 62% of our net revenue. In fiscal 2008, our largest
customer accounted for approximately 20% of our net revenue, and our top 10
customers collectively represented approximately 62% of our net revenue. In
fiscal 2007, our largest customer accounted for approximately 13% of our net
revenue, and our top 10 customers collectively represented approximately 52% of
our net revenue. E-Ton Solar Tech accounted for 16%, 4% and 13% of our net
revenue in fiscal 2009, 2008 and 2007, respectively. At the end of fiscal 2009
and 2008, 31% and 40% of our total backlog consisted of orders and deferred
revenue from E-Ton Solar Tech, respectively. The customer-supplier relationship
is our sole relationship with E-Ton Solar Tech.

Proven Acquisition Track
Record.Over the last fifteen years we have developed an acquisition program that
has resulted in the acquisition of four significant businesses. In October 2007,
we acquired R2D, a solar and semiconductor automation company located near
Montpellier, France. We believe the acquisition of the technology and business
of R2D enhances our growth strategy by allowing us to increase our sales by
offering an integrated system under the Tempress brand to the solar industry. In
July 2004, we acquired the Bruce Technologies line of semiconductor horizontal
furnace operations, product lines and other assets from Hitachi-Kokusai, a
wholly-ownedsubsidiary of Hitachi, Japan and its
affiliate, Kokusai Electric Europe, GmbH. Bruce Technologies has a large
installed base, including several large semiconductor manufacturers. In July
1997, we acquired substantially all of the assets of PR Hoffman. This
acquisition enabled us to offer new consumable products, including lapping and
polishing carriers, polishing templates, lapping and polishing machines and
related consumable and spare parts to our existing customer base as well as to
target new customers. In 1994, we acquired certain assets of Tempress and hired
Tempresss engineers to develop our first models of the Tempress horizontal
diffusion furnaces for production in The Netherlands.

Technical
Expertise.We have highly trained and experienced mechanical, chemical,
environmental, electronic, hardware and software engineers and support
personnel. Our engineering group possesses core competencies in product
applications and support systems, automation, sophisticated controls, chemical
vapor deposition, diffusion and pyrogenic processes, robotics, vacuum systems,
ultra clean applications and software driven control packages. We believe this
expertise enables us to design, develop and deliver high-quality,
technically-advanced integrated product solutions for solar cell and
semiconductor manufacturing customers.

4

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Leading Technology Solutions and
New Product Development.We pursue a partnering-based approach, in
which our engineering and development teams work closely with our customers to
ensure our products are tailored to meet our customers specific requirements.
We believe this approach enables us to more closely align ourselves with our
customers and provide them with superior systems. We believe our line of
horizontal diffusion furnaces, which allow high wafer-per-hour throughput, is
more technologically advanced and reliable than most of our competitors
equipment. In addition, the processing and temperature control systems within
the furnace provide diverse and proven process capabilities, which enable the
application of high-quality films onto silicon wafers. We believe our recently
acquired R2D solar automation technology will provide efficiencies in the
manufacturing process that will allow our customers to be more competitive in
their respective markets. Additionally, our license agreements in the areas of
PSG dry-etch and PECVD anti-reflective coatings allows us to expand our solar
product offering. We developed a small batch vertical furnace jointly with a
major European semiconductor customer and are currently developing multiple thin
film processes for use with this furnace. We retain full ownership of this
technology. In 2007, we also began selling precision thickness wafer carriers.
This is an internally developed product that we expect will increase our sales
to the wafer carrier market.

GROWTH STRATEGY

Capitalizing on Growth
Opportunities in the Solar Industry.We have had success in penetrating the solar
market. Our orders for solar diffusion and automation systems in fiscal 2009
totaled $21.8 million despite the severe worldwide economic downturn. Our fiscal
2008 solar orders totaled $73.3 million compared to $20.5 million in fiscal
2007. We believe that our success with solar cell manufacturers is due to our
focused process and product development and marketing efforts, as well as the
growing overall demand from the solar industry. We believe that long-term growth
in the solar industry will be driven by rising energy demand, the increasing
scarcity of traditional energy resources coupled with rising prices, the growing
adoption of government incentives for solar energy due to increasing
environmental awareness and concern about energy independence, the gradually
decreasing cost of solar energy and the changing consumer preferences toward
renewable energy sources.

Accelerating New Product and
Technology Development.We are focused on acquiring, developing and
licensing new products across our business in response to customer needs in
various markets.

Leveraging our Installed
Base.We intend to continue leveraging our relationships with our customers to
maximize parts, system, service and retrofit revenue from the large installed
base of Bruce Technologies and Tempress brand horizontal diffusion furnaces. We
intend to accomplish this by meeting these customers needs for replacement
systems and additional capacity, including equipment and services in connection
with any of our customers relocation to, or expansion efforts in, Asia.

Pursuing Strategic Acquisitions
that Complement our Strong Platform.Over the last twelve years, we have developed
an acquisition program and have completed the acquisition of three significant
businesses. Based on a disciplined acquisition strategy, we continue to evaluate
potential technology, product and business acquisitions or joint ventures that
are intended to increase our existing market share in the solar industry and
expand the number of front-end semiconductor processes addressed by our
products. In evaluating these opportunities, our objectives include: enhancing
our earnings and cash flows, adding complementary product offerings, expanding
our geographic footprint, improving our production efficiency and growing our
customer base.

SOLAR AND SEMICONDUCTOR INDUSTRIES

We provide products and services
primarily to two industries: the solar industry and the semiconductor industry.

Solar Industry.Solar power has emerged as one of the
most rapidly growing renewable energy sources. To date, various technologies
have been developed to harness solar energy. The most significant technology is
the use of interconnected photovoltaic, or PV, cells to generate electricity
directly from sunlight. Most PV cells are constructed using specially processed
silicon, which, when exposed to sunlight, generates direct current electricity.
Solar energy has many advantages over other existing renewable energy sources
and traditional non-renewable energy sources in the areas of environmental
impact, delivery risk, distributed nature of generation and matching of peak
generation with demand.

Semiconductor Industry.Semiconductors control and amplify
electrical signals and are used in a broad range of electronic products,
including: consumer electronic products, computers, wireless telecommunication
devices, communications equipment, automotive electronic products, major home
appliances, industrial automation and control systems, robotics, aircraft, space
vehicles, automatic controls and high-speed switches for broadband fiber optic
telecommunication networks. Semiconductors, or semiconductor chips and optical
components are manufactured primarily on a silicon wafer and are part of the
circuitry or electronic components of many of the products listed above.

5

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The semiconductor industry has
experienced significant growth since the early 1990s. This growth has been
primarily attributable to an increase in demand for personal computers, the
growth of the Internet, the expansion of the telecommunications industry,
especially wireless communications, and the emergence of new applications in
consumer electronics. Further fueling this growth is the rapidly expanding
end-user demand for smaller, less-expensive and better-performing electronic
products as well as for traditional products with more intelligence. This
growing demand has led to an increased number of semiconductor devices in
electronic and other consumer products, including automobiles.

Although the semiconductor market has
experienced significant growth over the past fifteen years, it remains cyclical
by nature. The market is characterized by short-term periods of under or over
supply for most semiconductors, including microprocessors, memory, power
management chips and other logic devices. When demand decreases, semiconductor
manufacturers typically slow their purchasing of capital equipment. Conversely,
when demand increases, so does capital spending.

Industry Manufacturing Processes

Solar Cell Manufacturing Process
Flow Chart



|(*) |  | Manufacturing process step
      which involves the use of our products.
|--- |  | ------------------------------------------------------------------------

6

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A part of our growth strategy involves
evaluating opportunities to increase the number of process steps we serve in
both the solar cell and semiconductor manufacturing processes by acquiring
additional product lines. The solar industry uses many similar process steps
used in semiconductor manufacturing in the high-volume production of solar cells
including:

| | (1)  |  | inspecting for
      resistivity and mechanical integrity and splitting wafers;                                                    
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------
| |     
| | (2)  |  | etching away saw
      damage with sodium hydroxide and rinsing the wafer with water and
      concentrated sulphuric acid;        
| |     
| | (3)  |  | diffusing phosphorous
      oxychloride on the wafer;                                                                              
| |     
| | (4)  |  | etching the wafer with
      hydrofluoric acid to remove the undiffused, phosphorus-silica-glass
      layer;                      
| |     
| | (5)  |  | coating an
      antireflective layer through a chemical vapor deposition (CVD) or plasma
      enhanced CVD process;              
| |     
| | (6)  |  | printing rear side
      contacts;                                                                                                 
| |     
| | (7)  |  | drying to prevent
      condensation in the wafer area;                                                                            
| |     
| | (8)  |  | printing aluminum and
      silver paste on the back surface field to prevent recombination of
      generated electrons and holes;
| |     
| | (9)  |  | drying;                                                                                                                            
| |     
| | (10) |  | printing front side
      contacts;                                                                                                
| |     
| | (11) |  | drying and then sintering the
      contact to form electrical conductive contacts; and                                            
| |     
| | (12) |  | testing and sorting the solar
      cells into electrical efficiency categories.                                                   

Most solar cell manufacturers sell
their products to manufacturers of solar modules or solar panels. Others are
vertically integrated and use their cells in the production of solar modules and
panels. Solar cells are the critical component of solar modules and solar
panels, which are sold to the end user and used in residential homes, industrial
applications, remote pumping, lighting and heating uses and central power
stations.

7

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Semiconductor Front End Manufacturing
Process Flow Chart



|* |  | Manufacturing process steps which
      are performed using our products.
|- |  | -------------------------------------------------------------------------

Most semiconductor chips are built on a
base of silicon, called a wafer, and include multiple layers of circuitry that
connect a variety of circuit components, such as transistors, capacitors and
other components. To build a chip, the transistors, capacitors and other circuit
components are first created on the surface of the wafer by performing a series
of processes to deposit and remove selected film layers, including insulators.
Similar processes are then used to build the layers of wiring structures on the
wafer. These are all referred to as front-end processes. A simplified sequence
of front-end processes for fabricating typical chips involves:

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| | (1)  |  | forming an ingot by
      pulling molten silicon;                                                                                                                                                                                               
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     
| | (2)  |  | slicing the silicon
      ingot into wafers of uniform thickness with a wire saw;                                                                                                                                                               
| |     
| | (3)  |  | lapping and polishing
      the silicon wafer to a mirror-like finish;                                                                                                                                                                          
| |     
| | (4)  |  | cleaning the
      wafer;                                                                                                                                                                                                                       
| |     
| | (5)  |  | forming a thin
      film-layer of silicon dioxide on the wafer in a diffusion furnace where
      oxygen, hydrogen or a combination of the two is introduced to cause a
      chemical reaction (oxidation) with the silicon wafers
  surface;
| |      |  |                                                                                                                                                                                                                                                 
| | (6)  |  | diffusing impurities
      (doping) in order to change the wafers electrical
properties.                                                                                                                                                       
| |     
| | (7)  |  | depositing insulating
      or conducting layers on the wafer surface, which sometimes is accomplished
      in a diffusion furnace via a chemical reaction called chemical vapor
      deposition;                                             
| |     
| | (8)  |  | coating and baking a
      photosensitive material, called photoresist, on the wafer;                                                                                                                                                           
| |     
| | (9)  |  | creating circuit
      patterns by exposing the wafer to light directed through a mask with
      circuit patterns;                                                                                                                             
| |     
| | (10) |  | removing the soluble
      portion of the photoresist by placing the wafer in a chemical solution,
      leaving only the desired pattern;                                                                                                      
| |     
| | (11) |  | etching away the
      exposed areas to create a dimensional pattern on the wafer
    surface;                                                                                                                                                  
| |     
| | (12) |  | creating electrically
      charged conductive regions by driving ions into the exposed areas of the
      patterned wafer; and                                                                                                                 
| |     
| | (13) |  | annealing the wafer
      through a high temperature process to relieve stress and drive the
      implanted ions deeper into the wafer.                                                                                                        

The silicon wafer may be cycled ten to
twenty-five times through these wafer-processing steps, starting each time at
step (5) or (7) to form a number of chips on the wafer. The front-end process
steps are followed by a number of back-end steps in which the wafers are sliced
into individual chips that are then packaged to add connectors that are
compatible with the end product in which the chip will be used.

Depending on the device, our polishing
supplies segments products may be used in lapping and polishing (step 3) and
our solar and semiconductor equipment segments products may be used in forming
silicon dioxide films (step 5), doping (step 6), depositing insulating and
conducting layers (step 7) and the annealing processes (step 13).

SOLAR AND SEMICONDUCTOR EQUIPMENT
SEGMENT PRODUCTS

Our furnace and automation equipment is
manufactured in our facilities in The Netherlands, France, and Massachusetts.
The following paragraphs describe the products that comprise our solar and
semiconductor equipment segment:

Horizontal Diffusion Furnaces.Through our subsidiaries, Tempress and
Bruce Technologies, we produce and sell horizontal diffusion furnaces. Our
horizontal furnaces currently address several steps in the semiconductor
manufacturing process, including diffusion (step 5 in the semiconductor
manufacturing process previously described), phosphorus tetrachloride doping, or
POCl3(step 6),
low-pressure chemical vapor deposition, or LPCVD, (step 7), and annealing (step
13). Our horizontal furnaces also currently address diffusion and applying
antireflective coating in the solar cell manufacturing process (steps 3 and 5).

Our horizontal furnaces generally
consist of three large modules: the load station where the loading of the wafers
occurs; the furnace section, which is comprised of one to four reactor chambers;
and the gas distribution cabinet where the flow of gases into the reactor
chambers is controlled, and often customized to meet the requirements of a
customers particular processes. The horizontal furnaces utilize existing
industry technology and are sold primarily to customers who do not require the
advanced automation of, or cannot justify the higher expense of, vertical
furnaces for some or all of their diffusion processes. Our models are capable of
processing all currently existing wafer sizes.

9

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PSG Dry Etch.The PSG dry etch process step in the
manufacturing of solar cells removes phosphorus silicate glass (PSG) that
naturally occurs during the diffusion process. We will use our license of this
unique PSG technology, which will be manufactured by PST, to expand our presence
in the growing solar market.

Plasma-Enhanced Chemical Vapor
Deposition (PECVD).Our new solar PECVD
product applies an anti-reflective coating to solar wafers; a coating critical
to the efficiency of solar cells. This solar product adds another solar cell
processing step to Amtech's offerings.

Automation Products  Solar.Our automation technology products are
used in several of the semiconductor manufacturing steps and the diffusion
processing step in solar cell manufacturing. Our automation equipment includes
mass wafer transfer systems, sorters, long-boat transfer systems, load station
elevators, buffers and conveyers. We use a vacuum technology for our solar wafer
transfer systems designed to ensure high throughput.

Automation Products 
Semiconductor.Use of our automation
products reduces human handling and, therefore, reduces exposure of wafers to
particle sources during the loading and unloading of the process tubes and
protects operators from heat and chemical fumes. The top reactor chamber of a
horizontal furnace can be as much as eight feet from the floor on which the
operator stands when manually loading wafer boats. Typical boats of 150mm to
300mm wafers weigh three to six pounds. Given these two factors, automating the
wafer loading and unloading of a diffusion furnace improves employee safety and
ergonomics in silicon wafer, solar cell and semiconductor manufacturing
facilities.

S-300.Our patented S-300 model provides a very efficient method of
automatically transporting a full batch of up to 300 wafers to the designated
tube level and automatically placing them directly onto the cantilever loader of
a diffusion furnace at one time. This product is suitable for the production of
nearly all semiconductors manufactured using a horizontal furnace. The S-300 can
be used in conjunction with all current wafer sizes and is particularly well
suited for manufacturers of 300mm wafers.

Comet.Our Comet and Gemini series of wafer transfer systems include a wide
range of throughputs and footprints to meet the needs of our customers who serve
the semiconductor industry. Comet Sorter with Optical Character Recognition
(OCR) is used in sorting, randomizing or compacting. The Comet Sorter is a
cassette to cassette with OCR front and back scribe functions, notch alignment
and SECSII communication. Comet ID Reader checks tag carriers then reads each
wafer scribe. The Comet ID Reader sends the information to the host with SECSII
Gem commands.

Small Batch Vertical Furnace.Our small batch, two-tube vertical
furnace was developed internally with the active support from a large
semiconductor manufacturer and long-term customer. The specifications for this
furnace include a two-tube vertical furnace for wafer sizes of up to 200mm, with
each tube having a small flat zone capable of processing 25-50 wafers per run.
The market for vertical furnaces is much larger than the total of all the other
markets we currently serve. We are initially targeting niche applications,
including research and development, while we continue to develop additional
processes, since the competition in the large batch vertical furnace market is
intense and our competitors are much larger and have substantially greater
financial resources, processing knowledge and advanced technology.

Conveyor Furnace.We produce conveyor furnaces used to
manufacture thick films for the electronics industry. Conveyor furnaces provide
for precision thermal processing of electronic parts for thick film
applications, including annealing, sealing, soldering, silvering, curling,
brazing, alloying, glass-metal sealing and component packaging.

POLISHING SUPPLIES SEGMENT
PRODUCTS

The products of our polishing supplies
segment are used primarily for lapping and polishing raw silicon wafers to a
mirror-like finish. Depending on the cycle of the semiconductor industry,
approximately two-thirds of this segments products are sold to either
semiconductor wafer manufacturers or specialty semiconductor fabricators. The
products of our polishing supplies segment are also sold to fabricators of
optics, quartz, ceramics and metal parts, and to manufacturers of medical
equipment components and computer disks. We manufacture the products described
below in Pennsylvania and sell them under our PR Hoffman brand name.

10

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Wafer
Carriers.Carriers are work holders into which silicon wafers or other materials
are inserted for the purpose of holding them securely in place during the
lapping and polishing processes. We produce carriers for our line of lapping and
polishing machines, as well as for those machines sold by our competitors.
Substantially all of the carriers we produce are customized for specific
applications. Insert carriers, our most significant category of carriers,
contain plastic inserts molded onto the inside edge of the work-holes of the
carrier, which hold the wafers in place during processing. Although our standard
steel carriers are preferred in many applications because of their durability,
rigidity and precise dimensions, they are typically not suited for applications
involving softer materials or when metal contamination is an issue. Insert
carriers, however, are well suited for processing large semiconductor wafers, up
to 300mm in diameter, and other fragile materials or where contamination is an
issue, because they provide the advantages of steel carriers while reducing the
potential for damage to the edges of such sensitive materials. Our insert
carriers are used for double-sided lapping or polishing of semiconductor wafers
up to 300mm in diameter. We internally developed and began selling precision
thickness wafer carriers in 2007.

Semiconductor Polishing
Templates.Our polishing templates are used to securely hold silicon wafers in place
during single-sided polishing processes. Polishing templates are customized for
specific applications and are manufactured to exacting tolerances. We
manufacture polishing templates for most brands of tools and various processes.
In addition to silicon wafers, these products are used in polishing silicon
carbide wafers and sapphire crystals used in LEDs.

Double-Sided Planetary Lapping
and Polishing Machines.Double-sided lapping and polishing machines
are designed to process thin and fragile materials, such as semiconductor
silicon wafers, precision optics, computer disk media and ceramic components for
wireless communication devices, to exact tolerances of thickness, flatness,
parallelism and surface finish. On average, we believe that we offer our surface
processing systems at a lower price than systems offered by our competitors and
target the semiconductor, optics, quartz, ceramics, medical, computer disk and
metal working markets. During fiscal 2004, we introduced and delivered our first
Model 5400 lapping and polishing machine, capable of processing parts up to 19.5
inches in diameter, including 300mm wafers and higher capacities of smaller
parts. This machine is our largest and is superior to our previous model,
because it uses servo motors rather than hydraulics and is equipped with a
Windows touch-screen interface, for better control of speeds and pressure,
optional thickness control, and crash protection. We believe our 5400 model is
especially well-suited for thin and fragile materials. We also produce and sell
a wide assortment of plates, gears, parts and wear items for our own machines
and those sold by many of our competitors.

MANUFACTURING, RAW MATERIALS AND
SUPPLIES

Our solar and semiconductor equipment
manufacturing activities consist primarily of engineering design, procurement
and assembly of various commercial and proprietary components into finished
diffusion furnace systems in Vaassen, The Netherlands, France, and Billerica,
Massachusetts.

Nearly all of our fabricated parts for
the solar and semiconductor equipment segment are purchased from local
suppliers. Our manufacturing activities in the polishing supplies and equipment
segment include laser-cutting and other fabrication steps in producing lapping
and polishing consumables, including carriers, templates, gears, wear items and
spare parts in Carlisle, Pennsylvania, from raw materials manufactured to our
specifications by our suppliers. Many items, such as proprietary components for
our solar and semiconductor equipment and lapping plates, are also purchased
from suppliers who manufacture these items to our specifications.

All final assembly and tests of our
equipment and machines are performed within our manufacturing facilities.
Quality control is maintained through inspection of incoming materials and
components, in-process inspection during equipment assembly, testing of
assemblies and final inspection and, when practical, operation of manufactured
equipment prior to shipment.

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Since much of our polishing supplies
segments know-how relates to the manufacture of its products, this segments
facility is equipped to perform a significantly higher percentage of the
fabrication steps required in the production of its products. However, injection
molding for our insert carriers and the manufacture of raw cast iron plates are
subcontracted out to various third parties. Our polishing supplies segment
relies on key suppliers for certain materials, including two steel mills in
Germany and Japan, an injection molder, a single-sourced pad supplier from Japan
and an adhesive manufacturer. Prior to the fourth quarter of fiscal 2004, we
subcontracted the laser-cutting of carriers to third parties. Since then we have
purchased an advanced laser-cutting tool which has increased our ability to
compete based upon price, delivery lead-times and quality. To minimize the risk
of production and service interruptions and/or shortages of key parts, we
maintain appropriate inventories of key raw materials and parts. If for any
reason we were unable to obtain a sufficient quantity of parts in a timely and
cost-effective manner to meet our production requirements, our results of
operations would be materially and adversely affected.

RESEARCH, DEVELOPMENT AND
ENGINEERING

The markets we serve are characterized
by evolving industry standards and rapid technological change. To compete
effectively in our markets, we must continually keep up with the pace of such
change by improving our products and our process technologies and developing new
technologies and products that compete effectively on the basis of price and
performance and that adequately address current and future customer
requirements. We continue to obtain as much customer cooperation and input as
possible to increase the efficiency and effectiveness of our research and
development efforts. While there can be no assurance that such relationships
will continue or that others will be developed, such cooperative efforts are
expected to remain a significant element in our future product and technology
development projects.

In April 2007, we entered into a
licensing and manufacturing agreement to develop and market an antireflective
coating system for solar cells with PST Co., LTD. (PST). PST is a producer of
vertical thermal processing systems for high-end semiconductor applications.
This plasma-enhanced chemical vapor deposition (PECVD) system is used in
high-volume, solar cell manufacturing and is an important step in the solar cell
manufacturing process. The licensing agreement allows us to market PSTs
existing PECVD system, and for PST to develop and manufacture a new PECVD model
for us to market to high-volume solar cell manufacturers. In June 2008, we
introduced the new PECVD system into the market.

In November 2008, the Company entered
into a license agreement with PST to market PSTs existing and future
proprietary PSG (phosphorus silicate glass) dry etch systems for the manufacture
of photovoltaic cells. We introduced the PSG system into the market in July
2009.

On April 9, 2009, the Company entered
into amendments with PST to both the PSG license and the PECVD license to expand
the licenses to include one future model of the PSG dry etch systems and three
future models of the PECVD system.

These 10-year licensing agreements will
enable us to sell this product to our solar customer base through our extensive
global sales and marketing network on an exclusive basis, with the exception of
sales in Korea and to one existing customer of PST, for which PST retains
exclusive rights. Additionally, we believe this product will enable us develop
new customer relationships.

From time to time we add functionality
to our products or develop new products during engineering and manufacturing to
fulfill specifications in a customers order, in which case the cost of
development, along with other costs of the order, are charged to cost of sales.
We periodically receive small research grants for research and development of
products in The Netherlands, which are netted against our research and
development costs. Our approach to such expenditures has allowed us to produce a
number of new products while spending amounts that we believe are generally
modest in relation to most semiconductor equipment manufacturers. Our
expenditures that have been accounted for as research and development were $0.5
million (1.0% of net revenue) for fiscal 2009, $1.1 million (1.4% of net
revenue) for fiscal 2008 and $0.6 million (1.2% of net revenue) for fiscal 2007.
These amounts exclude expenses supported by government grants.

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PATENTS

The following table shows our material
patents, the patents licensed by us, and the expiration date of each patent and
license:

|                                                       |  |                     |  |                                          
|------------------------------------------------------ |  | ------------------- |  | -----------------------------------------
|Product                                                |  | Country             |  | Expiration Date or Pending
      Approval
|IBAL Model S-300                                       |  | France,             |  | March 21, 2021                           
|                                                       |  | Germany,            |  | Pending                                  
|                                                       |  | Italy,              |  | Pending                                  
|                                                       |  | The Netherlands,    |  | Pending                                  
|                                                       |  | United Kingdom      |  | Pending                                  
|Heating Element
      Wire Spacer                      |  | Europe              |  | Pending                                  
|Photo CVD                                              |  | United States       |  | November
      15, 2011                  
|Potential
      Damage-free Asher                      |  | United
      States |  | September 8,
      2018                  
|IBAL Model S-300                                       |  | United States       |  | July 7,
      2019                       
|IBAL Model
      S-300                                 |  | United
      States |  | July 26, 2019                            
|IBAL Model E-300                                       |  | United States       |  | July 13,
      2021                      
|Fast, Safe,
      Pyrogenic External TorchAssembly (*) |  | United
      States |  | December 17,
      2011                  
|Lapping Machine adjustable mechanism                   |  | United States       |  | February
      15, 2027                  

|(*) |  | Patent is licensed from the
      patent holder or co-owner on a non-exclusive
  basis.
|--- |  | ---------------------------------------------------------------------------------------

To the best of our knowledge, there are
no pending lawsuits against us regarding infringement of any existing patents or
other intellectual property rights or any material unresolved claims made by
third parties that we are infringing the intellectual property rights of such
third parties.

SALES AND MARKETING

Because of the highly technical nature
of our products, we market our products primarily by direct customer contact
through our sales personnel and through a network of domestic and international
independent sales representatives and distributors that specialize in
semiconductor equipment and supplies. Our promotional activities include direct
sales contacts, participation in trade shows, an Internet website, advertising
in trade magazines and the distribution of product brochures.

Sales to distributors of both segments
are generally on terms comparable to sales to end user customers, as our
distributors generally quote their customers after first obtaining a quote from
us and have an order from the end-user before placing an order with us. Our
sales to distributors are not contingent on their future sales and do not
include a general right of return. Historically, returns have been rare.
Distributors of our solar and semiconductor equipment segment products do not
stock a significant amount of our products, as the inventory they do hold is
primarily limited to parts needed to provide timely repairs to the customer.

Payment terms of our parts, service and
retrofit sales, which usually comprise approximately 50-60% of consolidated net
revenue, are generally net 30 days, F.O.B. shipping point or equivalent terms.
The payment terms of equipment or systems sales vary depending on the size of
the order and the size, reputation and creditworthiness of the customer. As a
result, the financial terms of equipment sales can range from 80% due 30 days
after shipment and 20% due 30 days after acceptance, to requiring a 30% customer
deposit 30 days after order placement, 60% due 30 days after shipment and 10%
net due 30 days after acceptance. Letters of credit are required of certain
customers depending on the size of the order, creditworthiness of the customer
and the customers country of domicile.

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During fiscal 2009, 82% of our net
revenue came from customers outside of North America. This group represented 84%
of revenues in fiscal 2008. In fiscal 2009, net revenue was distributed among
customers in different geographic regions as follows: North America 18% (all of
which is in the United States), Asia 68% (including 39%to China and 22% to Taiwan) and Europe 14%. During fiscal 2009, 2008 and
2007, one customer accounted for approximately 16%, 20%, and 13% of our net
revenue, respectively. E-Ton Solar Tech accounted for 16%, 4% and 13% of our net
revenue in fiscal 2009, 2008 and 2007, respectively. At the end of fiscal 2009
and 2008, 31% and 40% of our total backlog consisted of orders and deferred
revenue from E-Ton Solar Tech, respectively. Our business is not seasonal in
nature, but is cyclical based on the capital equipment investment patterns of
solar cell and semiconductor manufacturers. These expenditure patterns are based
on many factors, including anticipated demand for integrated circuits, the
development of new technologies and global and regional economic conditions.

COMPETITION

We compete in several distinct markets
including semiconductor devices, semiconductor wafer, solar cell, MEMS and the
market for general industrial lapping and polishing machines and supplies. Each
of these markets is highly competitive. Our ability to compete depends on our
ability to continually improve our products, processes and services, as well as
our ability to develop new products that meet constantly evolving customer
requirements. Significant competitive factors for succeeding in the
semiconductor manufacturing equipment market include the equipments technical
capability, productivity and cost-effectiveness, overall reliability, ease of
use and maintenance, contamination and defect control and the level of technical
service and support provided by the vendor. The importance of each of these
factors varies depending on the specific customers needs and criteria,
including considerations such as the customers process application, product
requirements, timing of the purchase and particular circumstances of the
purchasing decision.

The Solar Cell Semiconductor
Devices, Semiconductor Wafer, and MEMS Markets.Our diffusion furnaces and
automation processing equipment primarily compete with those produced by other
domestic and foreign original equipment manufacturers, some of which are
well-established firms that are much larger and have substantially greater
financial resources than us. Some of our competitors have a diversified product
line, making it difficult to quantify their sales of products that compete
directly with our products. Competitors of our horizontal diffusion furnaces
include Centrotherm GmbH, Koyo Systems Co. Ltd., MRL Industries, Inc., a
subsidiary of Sandvik AB, CVD Equipment, Inc., Semco Engineering S.A.,
Expertech, Inc. and Tystar Corporation. Competitors of our lapping and polishing
machines and supplies include Lapmaster International, LLC, Hamai Co., Ltd.,
Speedfam Co., Ltd., Onse, Inc. and Eminess Technologies, Inc. Such competition
could intensify in the future if the industry trend to produce smaller chips on
larger wafers accelerates, or the newer technology represented by vertical
furnaces results in a material shift in the purchasing habits of our targeted
customers. Our furnaces and lapping and polishing machines also face, to a
limited, but increasing extent, competition from used equipment on the low-end
of the price spectrum.

General Industrial Lapping and
Polishing Machines and Supplies Market.We experience price competition for
wafer carriers produced by foreign manufacturers for which there is very little
publicly available information. As a result, we are intensifying our efforts to
reduce the cost of our carriers and will continue to compete with other
manufacturers of carriers by continuing to update our product line to keep pace
with the rapid changes in our customers requirements and by providing a high
level of quality and customer service. During September 2004, we completed the
installation and began producing steel carriers, including insert carriers, on
an advanced laser-cutting tool, which has reduced the costs and lead times of
these products and increased our control over quality. Competitors of our
lapping and polishing machines and carriers, other than insert carriers, include
Speedfam-PW, a division of Novellus, among others. We have been able to capture
a small share of the semiconductor polishing template market, which we believe
to be dominated by Rodel, a division of Rohm and Haas. Our strategy to enhance
our sales of wafer carriers includes developing additional niche markets for
templates and providing a high level of customer support and products at a lower
cost than our competitors.

EMPLOYEES

As of September 30, 2009, we employed
approximately 190 people. Of these employees, approximately 10 were based at our
corporate offices in Tempe, Arizona, 30 at our manufacturing plant in Carlisle,
Pennsylvania, 10 at our manufacturing plant in Billerica, Massachusetts, 85 at
our facilities in The Netherlands, 35 at our facilities in France and 20 in our
contract semiconductor manufacturing support services business located in
Austin, Texas. Of the approximately 30 people employed at our Carlisle,
Pennsylvania facility, about 19 were represented by the UnitedAuto Workers Union - Local 1443. We have never experienced a
work stoppage or strike. We consider our employee relations to be good.

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AVAILABLE INFORMATION

Our annual, quarterly and current
reports, proxy statements and other information, including the amendments to
those reports, are available, without charge, on our website,
www.amtechsystems.com, as soon as reasonably practicable after they are filed
electronically with the Securities and Exchange Commission (SEC). In addition,
our SEC filings are available over the internet at the SECs website at
http://www.sec.gov.

You may also read and copy any document
that we file at the SECs public reference room at:

Public Reference Room100 F Street,
N.E.Washington, D.C. 205491-800-SEC-0330

Please call the SEC at 1-800-SEC-0330
for more information on the public reference room and their copy charges. Copies
of our key governance documents, code of ethics, and charters of our audit,
compensation and corporate governance committees are also available on our
website.

Information contained on our website is
not part of this Annual Report and is not incorporated in this Annual Report by
reference.

ITEM 1A. RISK FACTORS

Because of the following factors, as
well as other variables affecting our operating results and financial condition,
past performance may not be a reliable indicator of future performance, and
historical trends should not be used to anticipate results or trends in future
periods.

Risks Related to our Business and
Industry.

Recent deterioration in the
global economy and credit markets may materially and adversely affect our future
results of operations.

Our operations may be adversely
affected by the recent deterioration in the global economy causing our customers
to delay or cease spending on our products. The recent tightening of the credit
markets may negatively impact our operations by affecting the liquidity and/or
solvency of our customers and key suppliers and the ability of our customers to
obtain credit to finance purchases of our products. If the global economy and
credit markets continue to deteriorate, our financial condition and results of
operations will likely be adversely impacted. We have no way of determining how
long the global economic crisis, including the tightening of credit markets,
will last.

If demand declines for horizontal
diffusion furnaces and related equipment, or for solar industry products, our
financial position and results of operations could be materially and adversely
affected.

The revenue of our solar and
semiconductor equipment segment, which accounted for approximately 89% of our
consolidated net revenue as of September 30, 2009, is comprised primarily of
sales of horizontal diffusion furnaces and our automation products. Our
automation products are useable only with horizontal diffusion furnaces. There
is a trend in the semiconductor industry, related to the trend to produce
smaller chips on larger wafers, towards the use in semiconductor manufacturing
facilities of newer technology, such as vertical diffusion furnaces. Vertical
diffusion furnaces are more efficient than the horizontal diffusion furnaces in
certain manufacturing processes for smaller chips on larger wafers. As early as
1994, we had expected that demand for our horizontal diffusion furnaces would
decline as a result of this trend. We believe this trend has not yet adversely
affected us to the extent originally expected. However, to the extent that the
trend to use vertical diffusion furnaces over horizontal diffusion furnaces
continues, our revenue may decline and our corresponding ability to generate
income may be adversely affected. A significant part of our growth strategy
involves expanding our sales to the solar industry. The solar industry is
subject to risks relating to industry shortages of polysilicon, (which we
discuss further below), the continuation of government incentives, the
availability of specialized capital equipment, global energy prices and rapidly
changing technologies offering alternative energy sources. If the demand for
solar industry products declines, the demand by the solar industry for our
products would also decline and our financial position and results of operations
would be harmed.

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We may not be able to increase or
sustain our recent growth rate, and we may not be able to manage our future
growth effectively.

We may be unable to continue to expand
our business or manage future growth. Our recent expansion has placed, and our
planned expansion and any other future expansion will continue to place, a
significant strain on our management, personnel, systems and resources. In the
past two years, we purchased additional equipment and real estate to
significantly expand our manufacturing capacity and expect to hire additional
employees to support an increase in manufacturing, research and development and
sales and marketing efforts. To successfully manage our growth, we believe we
must effectively:

- hire, train, integrate and manage
  additional process engineers, field service engineers, sales and marketing
  personnel, and financial and information technology personnel;
- retain key management and augment our
  management team, particularly if we lose key members;
- continue to enhance our customer
  resource management and manufacturing management systems;
- implement and improve additional and
  existing administrative, financial and operations systems, procedures and controls;
- expand and upgrade our technological
  capabilities; and
- manage multiple relationships with
  our customers, suppliers and other third parties.

We may encounter difficulties in
effectively managing the budgeting, forecasting and other process control issues
presented by rapid growth. If we are unable to manage our growth effectively, we
may not be able to take advantage of market opportunities, develop new solar
cells and other products, satisfy customer requirements, execute our business
plan or respond to competitive pressures.

The ongoing volatility of the
solar and semiconductor equipment industry may negatively impact our business
and results of operations and our corresponding ability to efficiently budget
our expenses.

The solar and semiconductor equipment
industries are highly cyclical. As such, demand for and the profitability of our
products can change significantly from period to period as a result of numerous
factors, including, but not limited to, changes in:

- global and regional economic
  conditions;
- changes in capacity utilization and
  production volume of manufacturers of semiconductors, silicon wafers, solar cells and MEMS;
- the shift of semiconductor production
  to Asia, where there often is increased price competition; and
- the profitability and capital
  resources of those manufacturers.

For these and other reasons, our
results of operations for past periods may not necessarily be indicative of
future operating results.

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Since our business has historically
been subject to cyclical industry conditions, we have experienced significant
fluctuations in our quarterly new orders and net revenue, both within and across
years. Demand for solar semiconductor and silicon wafer manufacturing equipment
and related consumable products has also been volatile as a result of sudden
changes in solar and semiconductor supply and demand and other factors in both
semiconductor devices and wafer fabrication processes. Our orders tend to be
more volatile than our revenue, as any change in demand is reflected immediately
in orders booked, which are net of cancellations, while revenue tends to be
recognized over multiple quarters as a result of procurement and production lead
times and the deferral of certain revenue under our revenue recognition
policies. Customer delivery schedules on large system orders can also add to
this volatility since we generally recognize revenue for new product sales on
the date of customer acceptance or the date the contractual customer acceptance
provisions lapse. As a result, the fiscal period in which we are able to
recognize new products revenue is typically subject to the length of time that
our customers require to evaluate the performance of our equipment after
shipment and installation, which could cause our quarterly operating results to
fluctuate.

The purchasing decisions of our
customers are highly dependent on the economies of both their domestic markets
and the worldwide semiconductor industry. The timing, length and severity of the
up-and-down cycles in the semiconductor equipment industry are difficult to
predict. The cyclical nature of our marketplace affects our ability to
accurately budget our expense levels, which are based in part on our projections
of future revenue.

When cyclical fluctuations result in
lower than expected revenue levels, operating results may be adversely affected
and cost reduction measures may be necessary in order for us to remain
competitive and financially sound. During a down cycle, we must be able to make
timely adjustments to our cost and expense structure to correspond to the
prevailing market conditions. In addition, during periods of rapid growth, we
must be able to increase manufacturing capacity and personnel to meet customer
demand, which may require additional liquidity. We can provide no assurance that
these objectives can be met in a timely manner in response to changes within the
industry cycles. Our failure to respond to these cyclical changes could have a
material adverse affect on our business.

During the most recent down cycle,
beginning in the first half of 2001, the semiconductor industry experienced
excess production capacity that caused semiconductor manufacturers to decrease
capital spending. We do not have long-term volume production contracts with our
customers and we do not control the timing or volume of orders placed by our
customers. Whether and to what extent our customers place orders for any
specific products and the mix and quantities of products included in those
orders are factors beyond our control. Insufficient orders would result in
under-utilization of our manufacturing facilities and infrastructure and will
negatively affect our financial position and results of operations.

The Company has made substantial
investments in its organization to develop new products for the solar industry.
Sales of our products to the solar industry are subject to substantial
risks.

The solar energy sector is partially
dependent upon governmental subsidies that are not guaranteed to continue. A
decline in these subsidies would reduce our ability to grow our business in this
market.

The semiconductor equipment
industry is competitive and we are relatively small in size and have fewer
resources in comparison with our competitors.

Our industry includes large
manufacturers with substantial resources to support customers worldwide. Our
future performance depends, in part, upon our ability to continue to compete
successfully worldwide. Some of our competitors are diversified companies having
substantially greater financial resources and more extensive research,
engineering, manufacturing, marketing and customer service and support
capabilities than we can provide. We face competition from companies whose
strategy is to provide a broad array of products, some of which compete with the
products and services that we offer. These competitors may bundle their products
in a manner that may discourage customers from purchasing our products. In
addition, we face competition from smaller emerging semiconductor equipment
companies whose strategy is to provide a portion of the products and services
that we offer at often a lower price than ours, using innovative technology to
sell products into specialized markets. Loss of competitive position could
impair our prices, customer orders, revenue, gross margin and market share, any
of which would negatively affect our financial position and results of
operations. Our failure to compete successfully with these other companies would
seriously harm our business. There is a risk that larger, better-financed
competitors will develop and market more advanced products than those that we
currently offer, or that competitors with greater financial resources may
decrease prices thereby putting us under financial pressure. The occurrence of
any of these events could have a negative impact on our revenue.

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We are dependent on key personnel
for our business and product development and sales, and any loss of our key
personnel to competitors or other industries could dramatically impact our
ability to continue operations.

Historically, our product development
has been accomplished through cooperative efforts with key customers. Our
relationship with some customers is substantially dependent on personal
relations established by our President and Chief Executive Officer. Furthermore,
our relationship with a major European customer that has been instrumental in
the development of our small batch vertical furnace is substantially dependent
upon our European General Manager. We are also dependent upon our Technical
Director of R2D for the development of our automation technology. While there
can be no assurance that such relationships will continue, such cooperation is
expected to continue to be a significant element in our future development
efforts thereby continuing our reliance on certain of our key
personnel.

We are the beneficiary of life
insurance policies on the life of our President and Chief Executive Officer, Mr.
J. S. Whang, in the amount of $2.0 million, but there is no assurance that such
amount will be sufficient to cover the cost of finding and hiring a suitable
replacement for Mr. Whang. It may not be feasible for any successor to maintain
the same business relationships that Mr. Whang has established. If we were to
lose the services of Mr. Whang for any reason, it could have a material adverse
affect on our business.

We also depend on the management
efforts of our officers and other key personnel and on our ability to attract
and retain key personnel. During times of strong economic growth, competition is
intense for highly skilled employees. There can be no assurance that we will be
successful in attracting and retaining such personnel or that we can avoid
increased costs in order to do so. There can be no assurance that employees will
not leave Amtech or compete against us. Our failure to attract additional
qualified employees, or to retain the services of key personnel, could
negatively impact our financial position and results of operations.

We may not be able to keep pace
with the rapid change in the technology we use in our
products.

Success in the solar and semiconductor
equipment industries depends, in part, on continual improvement of existing
technologies and rapid innovation of new solutions. For example, the
semiconductor industry continues to shrink the size of semiconductor devices.
These and other evolving customer needs require us to respond with continued
development programs.

Technical innovations are inherently
complex and require long development cycles and appropriate professional
staffing. Our future business success depends on our ability to develop and
introduce new products, or new uses for existing products, that successfully
address changing customer needs, win market acceptance of these new products or
uses and manufacture any new products in a timely and cost-effective manner. To
realize future growth through technical innovations in the solar and
semiconductor industries, we must either acquire the technology through merger
and acquisition activity or through the licensing of products from our
technology partners. Our failure to develop and introduce new products,
technologies or uses for existing products in a timely manner and continually
find ways of reducing the cost to produce them in response to changing market
conditions or customer requirements, could have a material adverse affect on our
business.

Acquisitions can result in an
increase in our operating costs, divert managements attention away from other
operational matters and expose us to other risks associated with
acquisitions.

We continually evaluate potential
acquisitions and consider acquisitions an important part of our future growth
strategy. In the past, we have made acquisitions of, or significant investments
in, other businesses with synergistic products, services and technologies and
plan to continue to do so in the future. Acquisitions, including our recent
acquisition of R2D, involve numerous risks, including, but not limited
to:

- difficulties and increased costs in
  connection with integration of geographically diverse personnel, operations, technologies and products of acquired
  companies;

18

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- diversion of managements attention
  from other operational matters;
- the potential loss of key employees
  of acquired companies;
- lack of synergy, or inability to
  realize expected synergies, resulting from the acquisition;
- the risk that the issuance of our
  common stock, if any, in an acquisition or merger could be dilutive to
  our shareholders, if anticipated synergies are
  not realized; and
- acquired assets becoming impaired as
  a result of technological advancements or worse-than-expected performance of the acquired company.

Our financial position and
results of operations may be materially harmed if we are unable to recoup our
investment in research and development.

The rapid change in technology in our
industry requires that we continue to make investments in research and
development in order to enhance the performance and functionality of our
products, to keep pace with competitive products and to satisfy customer demands
for improved performance, features and functionality. There can be no assurance
that revenue from future products or enhancements will be sufficient to recover
the development costs associated with such products or enhancements, or that we
will be able to secure the financial resources necessary to fund future
development. Research and development costs are typically incurred before we
confirm the technical feasibility and commercial viability of a product, and not
all development activities result in commercially viable products. In addition,
we cannot ensure that products or enhancements will receive market acceptance,
or that we will be able to sell these products at prices that are favorable to
us. If we are unable to sell our products at favorable prices, or if our
products are not accepted by the markets in which we operate, it could have a
material adverse affect on our business.

If third parties violate our
proprietary rights, in which we have made significant investments, such events
could result in a loss of value of some of our intellectual property or costly
litigation.

Our success is dependent in part on our
technology and other proprietary rights. We own various United States and
international patents and have additional pending patent applications relating
to some of our products and technologies. The process of seeking patent
protection is lengthy and expensive, and we cannot be certain that pending or
future applications will actually result in issued patents, or that issued
patents will be of sufficient scope or strength to provide meaningful protection
or commercial advantage to us. Other companies and individuals, including our
larger competitors, may develop technologies that are similar or superior to our
technology or design around the patents we own or license. We also maintain
trademarks on certain of our products and claim copyright protection for certain
proprietary software and documentation. However, we can give no assurance that
our trademarks and copyrights will be upheld or successfully deter infringement
by third parties. Recently, the patent covering technology that we license and
use in our manufacture of insert carriers has expired, which may have the effect
of diminishing or eliminating any competitive advantage we may have with respect
to this manufacturing process.

While patent, copyright and trademark
protection for our intellectual property is important, we believe our future
success in highly dynamic markets is most dependent upon the technical
competence and creative skills of our personnel. We attempt to protect our trade
secrets and other proprietary information through confidentiality agreements
with our customers, suppliers, employees and consultants and through other
security measures. We also maintain exclusive and non-exclusive licenses with
third parties for the technology used in certain products. However, these
employees, consultants and third parties may breach these agreements, and we may
not have adequate remedies for wrongdoing. In addition, the laws of certain
territories in which we develop, manufacture or sell our products may not
protect our intellectual property rights to the same extent as do the laws of
the United States.

We may face intellectual property
infringement claims that could be time-consuming and costly to defend and could
result in our loss of significant rights and the assessment of treble
damages.

19

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From time to time, we have received
communications from other parties asserting the existence of patent rights or
other intellectual property rights that they believe cover certain of our
products, processes, technologies or information. In such cases, we evaluate our
position and consider the available alternatives, which may include seeking
licenses to use the technology in question on commercially reasonable terms or
defending our position. We cannot ensure that licenses can be obtained, or if
obtained will be on acceptable terms, or that litigation or other administrative
proceedings will not occur.

Some of these claims may lead to
litigation. We cannot assure you that we will prevail in these actions, or that
other actions alleging misappropriation or misuse by us of third-party trade
secrets, infringement by us of third-party patents and trademarks or the
validity of our patents, will not be asserted or prosecuted against us.
Intellectual property litigation, regardless of outcome, is expensive and
time-consuming, could divert managements attention from our business and have a
material negative effect on our business, operating results or financial
condition. If there is a successful claim of infringement against us, we may be
required to pay substantial damages (including treble damages if we were to be
found to have willfully infringed a third partys patent) to the party claiming
infringement, develop non-infringing technology, stop selling or using
technology that contains the allegedly infringing intellectual property or enter
into royalty or license agreements that may not be available on acceptable or
commercially practical terms, if at all. Our failure to develop non-infringing
technologies or license the proprietary rights on a timely basis could harm our
business. Parties making infringement claims on future issued patents may be
able to obtain an injunction that would prevent us from selling or using our
technology that contains the allegedly infringing intellectual property, which
could harm our business.

Our reliance on sales to a few
major customers and granting credit to those customers places us at financial
risk.

We currently sell to a relatively small
number of customers, and we expect our operating results will likely continue to
depend on sales to a relatively small number of customers for the foreseeable
future, as well as the ability of these customers to sell products that require
our products in their manufacture. During fiscal 2009 16% of net revenue was
generated by one customer, E-Ton Solar Tech. E-Ton Solar Tech was also our
largest customer in fiscal 2007. At the end of fiscal 2009 and 2008, 31% and 40%
of our backlog consists of open sales orders and deferred revenue from E-Ton
Solar Tech, respectively. Many of our customer relationships have been developed
over a short period of time and certain customers are in their preliminary
stages of development. The loss of sales to any of these customers would have a
significant negative impact on our business. Our agreements with these customers
may be cancelled if we fail to meet certain product specifications, materially
breach the agreement or in the event of bankruptcy, and our customers may seek
to renegotiate the terms of current agreements or renewals. We cannot be certain
that these customers will generate significant revenue for us in the future nor
that these customer relationships will continue to develop. If our relationships
with our other customers do not continue to develop, we may not be able to
expand our customer base or maintain or increase our revenue.

As of September 30, 2009, accounts
receivable from three customers each exceeded 10% of accounts receivable; these
three customers accounted for 19%, 11% and 10% of total accounts receivable,
respectively. A concentration of our receivables from one or a small number of
customers places us at risk. If any one or more of our major customers does not
pay us it could adversely affect our financial position and results of
operations. We attempt to manage this credit risk by performing credit checks,
by requiring significant partial payments prior to shipment where appropriate
and by actively monitoring collections. We also require letters of credit of
certain customers depending on the size of the order, type of customer or its
creditworthiness and its country of domicile.

If any of our customers cancels
or fails to accept a large system order, our financial position and results of
operations could be materially and adversely affected.

Our backlog includes orders for large
systems, such as our diffusion furnaces, with system prices of up to and in
excess of $1.0 million depending on the system configuration, options included
and any special requirements of the customer. Because our orders are typically
subject to cancellation or delay by the customer, our backlog at any particular
point in time is not necessarily representative of actual sales for succeeding
periods, nor is backlog any assurance that we will realize revenue or profit
from completing these orders. Our financial position and results of operations
could be materially and adversely affected should any large systems order be
cancelled prior to shipment, or not be accepted by the customer. We have
experienced significant cancellations in the past, including $1.2 million in
fiscal 1999, $3.5 million in 2001, and $1.2 million in 2002. We have not
experienced any significant cancellations since 2002. Likewise, 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. Our backlog does not
provide any assurance that we will realize revenue or profit from those orders
or indicate in which period net revenue will be recognized, if ever.

20

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Our business might be adversely
affected by a decline in our sales to foreign customers, significant exchange
rate fluctuations and foreign laws.

During fiscal 2008, 84% of our net
revenue came from customers outside of North America. During fiscal 2009, 82% of
our net revenue came from customers outside of North America as
follows:

- Asia  68% (includes 39% to China and
  22% to Taiwan); and
- Europe  14%.

Because of our significant dependence
on revenue from international customers, our operating results could be
negatively affected by a decline in the economies of any of the countries or
regions in which we do business. Each region in the global semiconductor
equipment market exhibits unique characteristics that can cause capital
equipment investment patterns to vary significantly from period to period.
Periodic local or international economic downturns, trade balance issues,
political instability and fluctuations in interest and currency exchange rates
could negatively affect our business and results of operations. In addition, we
face competition from a number of suppliers based in Asia that have certain
advantages over suppliers from outside of Asia. These advantages include lower
operating and regulatory costs, proximity to customers and favorable
tariffs.

We recorded foreign currency
transaction losses of $0.01 million during fiscal 2009, 2008 and 2007. While our
business has not been materially affected in the past by currency fluctuations,
there is a risk that it may be materially adversely affected in the future. Such
risk includes possible losses due to currency exchange rate fluctuations,
possible future prohibitions against repatriation of earnings, or proceeds from
disposition of investments, and from possible social and military instability in
the case of India, South Korea, Taiwan and possibly elsewhere. Our wholly-owned
subsidiary, Tempress Systems, has conducted its operations in The Netherlands
since 1995 and during 2005 we established a subsidiary in Germany to conduct the
European sales of our Bruce Technologies product line. In October 2007 we
completed our acquisition of R2D, a French company. As a result, such operations
are subject to the taxation policies, employment and labor laws, transportation
regulations, import and export regulations and tariffs, possible foreign
exchange restrictions, international monetary fluctuations, and other political,
economic and legal policies of that nation, the European Economic Union and the
other European nations in which it conducts business. Consequently, we might
encounter unforeseen or unfamiliar difficulties in conducting our European
operations. Changes in such laws and regulations may have a material adverse
effect on our revenue and costs. We are subject to the Foreign Corrupt Practices
Act, which may place us at a competitive disadvantage to foreign companies that
are not subject to similar regulations.

If our critical suppliers fail to
deliver sufficient quantities of quality product in a timely and cost-effective
manner, it could negatively affect our business.

We use a wide range of materials and
services in the production of our products including custom electronic and
mechanical components, and we use numerous suppliers of materials. We generally
do not have guaranteed supply arrangements with our suppliers. Because of the
variability and uniqueness of customer orders, we try to avoid maintaining an
extensive inventory of materials for manufacturing. Key suppliers include two
steel mills capable of producing the types of steel to the tolerances needed for
our wafer carriers, an injection molder that molds plastic inserts into our
steel carriers, an adhesive manufacturer that supplies the critical glue used in
the production of the semiconductor polishing templates and a pad supplier that
produces a unique material used to attach semiconductor wafers to the polishing
template. We also rely on third parties for certain machined parts, steel frames
and metal panels and other components used particularly in the assembly of
semiconductor production equipment.

21

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Although we make what we believe are
reasonable efforts to ensure that parts are available from multiple suppliers,
this is not always practical or even possible; accordingly, some key parts are
being procured from a single supplier or a limited group of suppliers. During
the semiconductor industry peak years, increases in demand for capital equipment
resulted in longer lead-times for many important system components. Future
increases in demand could cause delays in meeting shipments to our customers.
Because the selling price of some of our systems exceeds $1.0 million, the delay
in the shipment of even a single system could cause significant variations in
our quarterly revenue. There can be no assurance that our financial position and
results of operations will not be materially and adversely affected if, in the
future, we do not receive in a timely and cost-effective manner a sufficient
quantity and quality of parts to meet our production requirements.

We may not be able to generate
sufficient cash flows or obtain access to external financing necessary to fund
and expand our operations as planned.

We believe that current cash balances,
our existing line of credit, cash flows generated from our operations and
additional available financing will provide adequate working capital for at
least the next twelve months. However, cash flows may be insufficient for such
purposes in the future and we may require additional financing for further
implementation of our growth plans. There is no assurance that any additional
financing will be available if and when required, or, even if available, that it
would not materially dilute the ownership percentage of the then existing
shareholders, result in increased expenses or result in covenants or special
rights that would restrict our operations.

We are exposed to risks from
legislation requiring companies to evaluate their internal control over
financial reporting.

Section 404 of the Sarbanes-Oxley Act
of 2002 requires our management to report on the effectiveness of our internal
control over financial reporting. Our independent registered public accounting
firm is required to attest to the effectiveness of our internal control over
financial reporting beginning in fiscal 2010. We have an ongoing program to
perform the system and process evaluation and testing necessary to comply with
these requirements. We have incurred increased expense and have devoted
additional management resources to Section 404 compliance and we expect that
some increased expense and use of management resources will continue in the
future. If, in the future, our CEO, chief financial officer or independent
registered public accounting firm determine that our internal control over
financial reporting is not effective as defined under Section 404, investor
perceptions of our company may be adversely affected and could cause a decline
in the market price of our stock.

Terrorist attacks and threats or
actual war may negatively impact all aspects of our operations, revenue, costs
and stock price.

The 2001 terrorist attacks in the
United States, as well as events occurring in response or connection to them,
including future terrorist attacks against United States targets, rumors or
threats of war, actual conflicts involving the United States or its allies or
military or trade disruptions impacting our domestic or foreign suppliers of
parts, components and subassemblies, may impact our operations, including, among
other things, by causing delays or losses in the delivery of supplies or
finished goods and decreased sales of our products. More generally, any of these
events could cause consumer confidence and spending to decrease or result in
increased volatility in the United States and worldwide financial markets and
economy. They could also result in economic recession in the United States or
abroad. Any of these occurrences could have a significant adverse impact on our
financial position and results of operations.

We may experience higher than
expected warranty claims and we face the risk of product liability claims or
other litigation, which could be expensive and divert management from running
our business.

The manufacture and sale of our
products, which in operation involve toxic materials, involve the risk of
product liability claims. In addition, a failure of one of our products at a
customer site could interrupt the business operations of our customer. Our
existing insurance coverage limits may not be adequate to protect us from all
liabilities that we might incur in connection with the manufacture and sale of
our products if a successful product liability claim or series of product
liability claims were brought against us. We may also be involved in other legal
proceedings or claims and experience threats of legal action from time to time
in the ordinary course of our business.

22

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Where appropriate, we intend to
vigorously defend all claims. However, any actual or threatened claims, even if
not meritorious or material, could result in the expenditure of significant
financial and managerial resources. The continued defense of these claims and
other types of lawsuits could divert managements attention away from running
our business. In addition, required amounts to be paid in settlement of any
claims, and the legal fees and other costs associated with such settlement,
cannot be estimated and could, individually or in the aggregate, materially harm
our financial condition.

We provide a limited warranty to our customers as
described in more detail under Item 7 Managements Discussion and Analysis of
Financial Condition and Results of Operations. We may experience higher than
expected warranty claims, which could materially harm our financial condition.

We are subject to environmental
regulations, and our inability or failure to comply with these regulations could
result in significant costs or the suspension of our ability to operate segments
of our business.

We are subject to environmental
regulations in connection with our business operations, including regulations
related to manufacturing and our customers use of our products. From time to
time, we receive notices regarding these regulations. It is our policy to
respond promptly to these notices and to take any necessary corrective action.
Our failure or inability to comply with existing or future environmental
regulations could result in significant remediation liabilities, the imposition
of fines and/or the suspension or termination of development, manufacturing or
use of certain of our products, each of which could damage our financial
position and results of operations.

The Companys income taxes are
subject to variables beyond our control.

The Companys net income and cash flow
may be adversely affected by conditions affecting income taxes which are outside
the Companys control. Examples of the potential uncontrollable circumstances
that could affect our tax rate:

- The Company sells and operates
  globally in the United States, Europe and Asia. Disagreement could occur on
  the jurisdiction of income and taxation among different governmental tax
  authorities. Potential areas of dispute may include transfer pricing,
  intercompany charges and intercompany balances.
- Tax rates may increase and,
  therefore, have a material adverse affect on our earnings and cash
  flows.
- Sustained operating losses resulting from the
  occurrence of any of the risk factors could result in the write-off of
  deferred tax assets.

ITEM 1B. UNRESOLVED STAFF
COMMENTS

None.

23

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ITEM 2. PROPERTIES

We believe that our properties are
adequate for our current needs. In addition, we believe that adequate space can
be obtained to meet our foreseeable business needs. The following chart
identifies the principal properties which we own or lease.

|Location                                        |  | Use                            |  | Size          |  | Monthly Rent |  | Lease Expiration
|----------------------------------------------- |  | ------------------------------ |  | ------------- |  | ------------ |  | ----------------
|Solar and
      semiconductor Equipment Segment |  |                                |  |               |  |              |  |                 
|Tempe, AZ                                       |  | Corporate                      |  | 15,000
    sf |  | $12,000      |  | (1)             
|                                               
|Austin, TX                                      |  | Mfg Support                    |  | (2)           |  | (2)          |  | (2)             
|                                               
|Billerica, MA                                   |  | Office, Mfg. &Warehouse        |  | 30,000 sf     |  | $18,000      |  | 8/31/2011       
|                                               
|Heerde, The
    Netherlands                     |  | Office & Mfg.                  |  | 10,000 sf     |  | Owned        |  | N/A             
|Vaassen, The
    Netherlands                    |  | Office, Warehouse
      & Mfg. |  | 54,000
    sf |  | Owned        |  | N/A             
|Vaassen, The
    Netherlands                    |  | Warehouse                      |  | 11,000 sf     |  | $5,000       |  | 10/31/2011      
|                                               
|Clapiers, France                                |  | Office, Mfg. &Warehouse        |  | 12,000 sf     |  | $9,000       |  | 9/30/2016 (3)   
|Clapiers, France                                |  | Manufacturing                  |  | 3,000
    sf  |  | $3,000       |  | 3/30/2016       
|Le Cres, France                                 |  | Warehouse                      |  | 3,000 sf      |  | $2,000       |  | (4)             
|                                               
|Polishing
      Supplies Segment                |  |                                |  |               |  |              |  |                 
|Carlisle, PA                                    |  | Office &
      Mfg.            |  | 22,000
    sf |  | $11,000      |  | 6/30/2019       

| | (1) |  | We are currently leasing this
      property on a month to month basis.                                                                 
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------
| |    
| | (2) |  | Services are performed in
      customer's facilities.                                                                                  
| |    
| | (3) |  | This lease can be cancelled by
      the company with six months notice beginning October 1,
  2010.                                    
| |    
| | (4) |  | We are currently leasing this
      property on a month to month basis. We are required to give six months
      notice of cancellation.

ITEM 3. LEGAL
PROCEEDINGS

None.

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

None.

24

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PART II

ITEM 5. MARKET FOR REGISTRANTS
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

MARKET INFORMATION

Our common stock, par value $0.01 per
share (Common Stock), began trading on the NASDAQ Global Market (formerly the
NASDAQ National Market), under the symbol ASYS, on April 18, 2001. From 1983
to 2001, our Common Stock was traded on the NASDAQ SmallCap Market. On November
18, 2009, the closing price of our Common Stock as reported on the NASDAQ Global
Market was $6.50 per share. The following table sets forth the high and low bid
price at which the shares of our Common Stock traded for each quarter of fiscal
2009 and 2008, as reported by the NASDAQ Global Market.

|                     |  | Fiscal 2009 |      | Fiscal 2008
|-------------------- |  | ----------- | ---- | -----------
|                     |  | High        |      | Low        
|First quarter        |  | $           | 9.64 |            
|Second
      quarter |  | $           | 4.60 |            
|Third quarter        |  | $           | 5.97 |            
|Fourth
      quarter |  | $           | 6.11 |            

COMPARISON OF STOCK
PERFORMANCE

The following line graph compares
cumulative total shareholder return, assuming reinvestment of dividends, for:
the Companys Common Stock, the NASDAQ Composite Index and the NASDAQ Industrial
Index. Because the Company did not pay dividends on its Common Stock during the
measurement period, the calculation of the cumulative total shareholder return
on the Companys Common Stock did not include dividends. The following graph
assumes that $100 was invested on October 1, 2004.

---

**HOLDERS**

As of November 18, 2009, there were 149
shareholders of record of our Common Stock. Based upon a recent survey of
brokers, we estimate there were approximately an additional 1,784
beneficial shareholders who held shares in brokerage or other investment
accounts as of that date.

**DIVIDENDS**

We have never paid dividends on our
Common Stock. Our present policy is to apply cash to investment in product
development, acquisition or expansion; consequently, we do not expect to pay
dividends on Common Stock in the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE
UNDER EQUITY COMPENSATION PLANS

The following table sets forth certain
information, as of September 30, 2009, concerning outstanding options and rights
to purchase Common Stock granted to participants in all of the Companys equity
compensation plans and the number of shares of Common Stock remaining available
for issuance under such equity compensation plans.

|                          |                                  |  |                             |  | Number of
      securities     
|------------------------- | -------------------------------- |  | --------------------------- |  | -------------------------------
|                          |                                  |  |                             |  | remaining
      available for  
|                          | Number of
      securities to be |  |                             |  | future
      issuance under    
|                          | issued upon
      exercise of    |  | Weighted-average exercise   |  | equity
      compensation plans
|                          | outstanding
      options,       |  | price of
      outstanding  |  | (excluding
      securities    
|                          | warrants and
      rights        |  | options,
      warrants and |  | reflected in
      column (a)) 
|                          | (a)                              |  | rights   (b)                |  | (c)                            
|Plan
      Category       |                                  |  |                             |  |                                
|Equity
      compensation |                                  |  |                             |  |                                
|plans approved by         |                                  |  |                             |  |                                
|security holders (1)      | 691,403                          |  | 7.03                        |  | 124,187                        
|                          |                                  |  |                             |  |                                
|Equity compensation       |                                  |  |                             |  |                                
|plans not approved
by     |                                  |  |                             |  |                                
|security holders          | -                                |  |                             |  | -                              
|                         
|Total                     | 691,403                          |  |                             |  | 124,187                        

| | (1) |  | Represents the 1998 Employee
      Stock Option Plan, the 2007 Employee Stock Incentive Plan and the
      Non-Employee Director Stock Option Plan and any respective amendments
      thereto.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

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ITEM 6. SELECTED FINANCIAL
DATA

This selected financial data should be
read in conjunction with Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations, and our consolidated financial
statements (including the related notes thereto) contained elsewhere in this
report.

|                                               | Years Ended September
    30,
|---------------------------------------------- | -----------------------------
|                                               | 2009                         
|Operating Data:                                |                              
|Net revenue                                    | $                            
|Gross profit                                   | $                            
|Gross profit %                                 |                              
|Operating income
    (loss)                    | $                            
|Net income (loss)                              | $                            
|Dividends on convertible
      preferred stock | $                            
|Net income (loss) attributable
      to common | $                            
|Earnings (loss) per share:                     |                              
|Basic earnings (loss) per
      share          | $                            
|Diluted earnings (loss) per
      share        | $                            
|**Order
      backlog**(2)                     | $                            
|Balance Sheet Data:                            |                              
|Cash and cash
      equivalents                | $                            
|Working capital                                | $                            
|Current ratio                                  |                              
|Total assets                                   | $                            
|Total current
      liabilities                | $                            
|Long-term
obligations                          | $                            
|Convertible preferred
      stock              | $                            
|Total stockholders'
      equity               | $                            

| | (1) |  | Effective October 1, 2007, the
      Company acquired 100% of the equity of R2D Automation.                                                                                                                                                  
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    
| | (2) |  | The backlog as of September 30,
      2009, 2008, 2007, 2006 and 2005 includes $1.2 million, $1.3 million, $0.9
      million, $0.9 million and $1.0 million, respectively, of deferred revenue
      on which we anticipate no gross margin.

ITEM 7. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our
financial condition and results of operations should be read in conjunction with
our Consolidated Financial Statements and the related notes included in Item 8,
Financial Statements and Supplementary Data in this Annual Report on Form
10-K. This discussion contains forward-looking statements, which involve risk
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors
including, but not limited to, those discussed in Risk Factors and elsewhere
in this Annual Report on Form 10-K.

27

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**Introduction**

Managements Discussion and Analysis
(MD&A) is intended to facilitate an understanding of our business and
results of operations. MD&A consists of the following sections:

- Overview: a summary of our
  business.
- Results of Operations: a discussion
  of operating results.
- Liquidity and Capital Resources: an
  analysis of cash flows, sources and uses of cash and financial
  position.
- Contractual Obligations and Commercial
  Commitments
- Critical Accounting Policies: a discussion of critical accounting
  policies that require the exercise of judgments and estimates.
- Impact of Recently Issued Accounting Pronouncements: a discussion of
  how we are affected by recent pronouncements.

Overview

We operate in two segments: the solar
and semiconductor equipment segment and the polishing supplies segment. Our
solar and semiconductor equipment segment is a leading supplier of thermal
processing systems, including related automation, parts and services, to the
solar/photovoltaic, semiconductor, silicon wafer and MEMS industries.

Our polishing supplies segment is a
leading supplier of wafer carriers to manufacturers of silicon wafers. The
polishing segment also manufacturers polishing templates, steel carriers and
double-sided polishing and lapping machines to fabricators of optics, quartz,
ceramics and metal parts, and to manufacturers of medical equipment
components.

Our customers are primarily
manufacturers of solar cells and integrated circuits. The solar cell and
semiconductor industries are cyclical and historically have experienced
significant fluctuations. Our revenue is impacted by these broad industry
trends.

In October 2007, we acquired 100% of
the equity of R2D Automation (R2D), a solar cell and semiconductor automation
equipment manufacturing company. The purpose of the acquisition was to expand
our automation products which are used in solar diffusion and semiconductor
manufacturing processes. The acquisition of the technology and business of R2D
enhances the growth strategy by allowing us to increase revenue by offering to
the solar industry an integrated system under the Tempress® brand.

In the third quarter of fiscal 2008, we
reorganized the Bruce Technologies® operations to better position the company
for profitability in light of lower plant utilization resulting from a slowdown
in the semiconductor industry. As a result of this reorganization, we reduced
the number of personnel and recorded a charge of $0.4 million in the third
quarter of fiscal 2008.

In the second quarter of fiscal 2009,
the Bruce Technologies® operations were further restructured to focus on the
parts supply business. The restructuring included a reduction in the number of
employees and a reduction in the amount of space required to operate the
business. The restructuring resulted in a charge of $0.6 million. Also, due to
the downturn in the semiconductor industry and deterioration in forecasted
revenue and earnings at Bruce Technologies®, an impairment charge of $1.1
million was recorded in the second quarter of fiscal 2009.

Results of Operations

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

28

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|                                          | Years Ended September
    30,
|----------------------------------------- | -----------------------------
|                                          | 2009                         
|Net revenue                               | 100.0                        
|Cost of
      sales                       | 71.6                         
|Gross margin                              | 28.4                         
|Selling, general
      and administrative | 27.9                         
|Restructuring charge                      | 3.2                          
|Research and
      development            | 1.0                          
|Operating income
    (loss)               | (3.7                         
|                                         
|Interest and other income (expense), net  | (0.1                         
|Income before
      income (loss) taxes   | (3.8                         
|Income tax provision (benefit)            | (0.8                         
|Net income
      (loss)                   | (3.0                         

Fiscal 2009 compared to Fiscal
2008

Net Revenue

Net revenue consists of revenue
recognized upon shipment or installation of products using proven technology and
upon acceptance of products using new technology. In addition, spare parts sales
are recognized upon shipment. Service revenue is recognized upon completion of
the service activity or ratably over the term of the service contract. The
majority of our revenue is generated from large furnace systems sales which,
depending on the timing of shipment and installation, can have a significant
impact on our revenue, gross margins and earnings in any given period.
See Critical
Accounting Policies  Revenue Recognition.

|                                          |  | Years Ended September
    30, |        |      |       |           |  |       |        
|----------------------------------------- |  | ----------------------------- | ------ | ---- | ----- | --------- |  | ----- | -------
|Segment                                   |  | 2009                          |        | 2008 |       | Inc (Dec) |  | %    
|                                          |  | (dollars in thousands)       
|Solar and Semiconductor Equipment Segment |  | $****                         | 47,307 |      |       | 72,029    |  |       | (24,722
|Polishing
      Supplies Segment          |  |                               | 5,666  |      |       | 8,267     |  |       | (2,601 
|**Total Net
      Revenue**               |  | $                             | 52,973 |      | $**** | 80,296    |  | $**** | (27,323

Net revenue for the year ended
September 30, 2009 decreased $27.3 million or 34% compared to the year ended
September 30, 2008. Revenue from the Solar and Semiconductor Equipment Segment
decreased $24.7 million or 34% due to significantly lower shipments to both the
solar and the semiconductor industries, partially offset by a decrease in the
amount of revenue deferred. The decrease in shipments was caused by lower sales
volumes driven primarily by over-supply in the solar market and the global
economic downturn and credit crisis. Within the solar and semiconductor
equipment segment, net revenue from the solar market was $34.8 million and $50.1
million in fiscal 2009 and 2008, respectively. Net revenue from the
semiconductor market was $12.5 million in fiscal 2009 compared to $21.9 million
in fiscal 2008, a decrease of 43% due primarily to the downturn in the
semiconductor industry. Revenue in the polishing supplies segment was $5.7
million and $8.3 million for the fiscal years ended September 30, 2009 and 2008,
respectively. The decrease of $2.6 million, or 31%, in net revenue from the
Polishing Supplies Segment is also due to the economic downturn and the downturn
in the semiconductor industry as described above.

The supply-demand imbalance within the
solar market, the downturn in the global economy, and the related credit crisis
have caused some of our customers to delay or suspend their capacity expansion
plans, which has resulted in lower orders. In addition, some of our customers
have, and others may, request delays or cancellations in the shipment of their
orders. A continuation of the global credit crisis and related downturn in the
global economy is likely to negatively impact future revenues from both solar
and semiconductor markets and could have a significant adverse affect on our
results of operations and financial condition.

29

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Backlog

Our backlog as of September 30, 2009
and 2008 was $32.4 million and $46.7 million, respectively, a 31% decrease. Our
backlog as of September 30, 2009 included approximately $27.9 million of orders
from our solar industry customers compared to $36.7 million of orders from solar
industry customers as of September 30, 2008. The orders included in our backlog
are generally credit approved customer purchase orders expected to ship within
the next twelve months. Because our orders are typically subject to cancellation
or delay by the customer, our backlog at any particular point in time is not
necessarily representative of actual sales for succeeding periods, nor is
backlog any assurance that we will realize revenue or profit from completing
these orders. The recent global credit crisis and related downturn in the global
economy has caused many of our customers to delay or suspend their capacity
expansion plans. As a result, the delivery times of many of the orders in our
backlog may be delayed or even cancelled by our customers. Our backlog also
includes revenue deferred pursuant to our revenue recognition policy, derived
from orders that have already been shipped but which have not met the criteria
for revenue recognition. The backlog as of September 30, 2009 and 2008 includes
$1.2 million and $1.3 million, respectively, of open orders or deferred revenue
on which we anticipate no gross margin. At the end of fiscal 2009 and 2008, 31%
and 40% of our backlog consisted of open sales orders and deferred revenue from
one customer, E-Ton Solar Tech, respectively.

Gross Profit

Gross profit is the difference between
net revenue and cost of goods sold. Cost of goods sold consists of purchased
material, labor and overhead to manufacture equipment or spare parts and the
cost of service and support to customers for warranty, installation and paid
service calls. Gross margin is gross profit as a percentage of net
revenue.

The timing of revenue recognition can
have a particularly significant effect on gross margin when the equipment
revenue of an order is recognized in one period and the remainder of the revenue
attributed to holdbacks is recognized in a later period. The portion of revenue
attributed to the holdbacks generally comprises 10-20% of an order and has a
significantly higher gross margin percentage.

|                                          |      | Years Ended September
    30, |        |      |      |           |        |   | 
|----------------------------------------- | ---- | ----------------------------- | ------ | ---- | ---- | --------- | ------ | - | 
|**Segment**                               | **** | 2009                          | ****   | 2008 | **** | Inc (Dec) | ****   | %
|                                          |      | (dollars in thousands)       
|Solar and Semiconductor Equipment Segment |      | $****                         | 13,748 |      |      |           | 20,500 |   | 
|Polishing
      Supplies Segment          |      |                               | 1,271  |      |      |           | 2,461  |   | 
|Total Gross
    Profit                    |      | $****                         | 15,019 |      |      | $****     | 22,961 |   | 
|                                         
|**** Gross
      Margin                   |      |                               | 28     | %    |      |           | 29     | % | 

Gross profit for fiscal 2009 decreased
$7.9 million, or 35%, to $15.0 million in fiscal 2009 from $23.0 million in
fiscal 2008. Gross margin decreased slightly to 28% in fiscal 2009 from 29% in
fiscal 2008. We recognized $0.6 million of previously deferred profit in fiscal
2009, net of deferrals, compared to a net deferral of $2.9 million of profit in
fiscal 2008. Excluding the impact of the change in deferred profit, gross margin
in the solar and semiconductor equipment segment decreased due primarily to
lower sales volumes resulting in underutilization of existing plant capacity.
Gross profit and gross margin in the polishing supplies segment were lower in
fiscal 2009 as compared to fiscal 2008 due to lower sales volumes of polishing
machines, carriers and templates.

Selling, General and
Administrative Expenses

Selling, general and administrative
expenses consist of the cost of employees, consultants and contractors, as well
as facility costs, sales commissions, legal and accounting fees and promotional
marketing expenses.

30

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|                                          |      | Years Ended September
    30, |        |      |      |           |        |   | 
|----------------------------------------- | ---- | ----------------------------- | ------ | ---- | ---- | --------- | ------ | - | 
|**Segment**                               | **** | 2009                          | ****   | 2008 | **** | Inc (Dec) | ****   | %
|                                          |      | (dollars in thousands)       
|Solar and Semiconductor Equipment Segment |      | $****                         | 13,523 |      |      | $****     | 16,267 |   | 
|Polishing
      Supplies Segment          |      |                               | 1,243  |      |      |           | 1,442  |   | 
|Total SG&A                                |      | $                             | 14,766 |      |      | $         | 17,709 |   | 
|                                         
|**** Percent of
      net revenue         |      |                               | 28     | %    |      |           | 22     | % | 

Total selling, general and
administrative (SG&A) expenses decreased $2.9 million or 17% in fiscal 2009
from fiscal 2008. SG&A expenses include $0.7 million and $0.5 million of
stock-based compensation expense for fiscal 2009 and 2008, respectively.
SG&A expenses for fiscal 2009 and 2008 include $0.2 million and $0.3
million, respectively, of costs related to compliance with the provisions of the
Sarbanes-Oxley Act. The decrease in SG&A expenses was primarily due to
decreased commissions on sales due to lower revenue generated in geographic
regions where third-party sales representatives are utilized; primarily Asia.
Additionally, other SG&A costs decreased in fiscal 2009 due to decreased
shipping volumes and reduced costs related to reductions in workforce, mainly at
our Bruce Technologies operation. Also, a $0.5 million provision was recorded in
fiscal 2008 as an allowance for doubtful accounts for which there were no
comparable expenses in fiscal 2009.

Impairment and Restructuring
Charges

|                                                |      | Years Ended September
    30, |       |      |       |           |      |      
|----------------------------------------------- | ---- | ----------------------------- | ----- | ---- | ----- | --------- | ---- | -----
|**Segment**                                     | **** | 2009                          | ****  | 2008 | ****  | Inc (Dec) | **** | %    
|                                                |      | (dollars in thousands)       
|Solar and Semiconductor Equipment Segment       |      | $****                         | 1,682 |      | $**** | 356       |      | $****
|Polishing
      Supplies Segment                |      |                               | -     |      |       | -         |      |      
|Total Impairment and
      Restructuring Charge |      | $                             | 1,682 |      | $     | 356       |      | $    

The Bruce Technologies operations are
primarily dependent upon a mature segment of the semiconductor industry which is
experiencing a significant downturn. The industry downturn resulted in recent
operating losses and deterioration in forecasted revenue and earnings at Bruce
Technologies. It is uncertain when, and to what extent, the markets served by
Bruce Technologies will recover. Therefore, the Bruce Technologies operations
were restructured in the second quarter of fiscal 2009 to focus on the parts
supply business. The restructuring included a reduction in the number of
employees and a reduction in the amount of space required to operate the
business. The restructuring resulted in a charge of $0.6 million in the second
quarter of fiscal 2009, which includes a $0.3 million charge for unutilized
leased space, a $0.2 million write-off of furnace-related inventory parts that
are not expected to be utilized in the future and $0.1 million of severance and
outplacement costs. Our Bruce Technologies operations were also reorganized in
the third quarter of fiscal 2008, which resulted in a restructuring charge of
$0.4 million, consisting mainly of severance and outplacement costs for affected
personnel.

Due to the circumstances related to the
Bruce Technologies operations discussed above, the Company determined it was
necessary to conduct an assessment of the ability to recover the carrying amount
of long-lived assets of the Bruce Technologies operations. The amount estimated
to be recoverable is based upon the Companys judgments and estimates of
undiscounted cash flows during the estimated remaining useful life of the
assets. It was determined that the carrying value of the net assets was not
fully recoverable; therefore, an impairment charge of $0.4 million was recorded
in the second quarter of fiscal 2009 for the excess of carrying value over the
fair value of the customer list and non-compete agreement. Future adverse
changes could be caused by, among other factors, a downturn in the industries
served, a general economic slowdown, reduced demand for our products in the
marketplace, poor operating results, the inability to protect intellectual
property or changing technologies and product obsolescence.

31

---

As a result of the impairment of
long-lived assets described above, it was necessary to conduct an interim review
of the goodwill and Bruce Technologies trademark for impairment. The fair value
of the assets group was determined through estimates of the present value of
future cash flows based upon the anticipated future use of the assets. As the
carrying value of the Bruce Technologies assets exceeded their estimated fair
value, the carrying values of goodwill ($0.1 million) and the Bruce Technologies
trademark ($0.6 million) were also recorded as an impairment charge in the
second quarter of fiscal 2009.

The total amount of the impairment
charge was $1.1 million. Details of the impairment charge are as follows:



|                      | **** | **Gross**         |     | ****             |   | **Net**     
|--------------------- | ---- | ----------------- | --- | ---------------- | - | ------------
|                      | **** | **Carrying** **** |     | **Accumulated**  |   | **Carrying**
|                      | **** | **Amount** ****   |     | **Amortization** |   | **Amount**  
|Goodwill              |      | $                 | 89  |                  | $ | -           
|Trademark             |      |                   | 592 |                  | $ | -           
|Customer
List         |      |                   | 276 |                  |   | 87          
|Non-compete agreement |      |                   | 350 |                  |   | 166         
|Impairment
    Charge |      |                   |     |                  |   |             

Research and Development

Research and development expenses
consist of the cost of employees, consultants and contractors who design,
engineer and develop new products and processes and the materials used in those
processes and producing prototypes. Reimbursements of research and development
costs in the form of governmental research and development grants are netted
against these expenses.

|                                          |  | Years Ended September
      30, |     |      |  |                 |       |       | 
|----------------------------------------- |  | ------------------------------- | --- | ---- |  | --------------- | ----- | ----- | 
|**Segment**                               |  | 2009                            |     | 2008 |  | Inc
      (Dec) |       | **%**
|                                          |  | (dollars in thousands)          |     |      | 
|Semiconductor and Solar Equipment Segment |  | $                               | 509 |      |  | $               | 1,094 |       | 
|Polishing
      Supplies Segment          |  |                                 | -   |      |  |                 | -     |       | 
|**Total Research
      and Development**  |  | $                               | 509 |      |  | $               | 1,094 |       | 
|                                          |  |                                 |     |      |  |                 |       |       | 
|Percent of net
      revenue              |  |                                 | 1   | %    |  |                 | 1     | %     | 

Research and development expenses
decreased primarily due to increases in the amount of reimbursement of research
and development costs. In fiscal 2009 and 2008, we recognized $0.5 million and
$0.1 million of reimbursements of our research and development costs from
governmental grants. The remainder of the decrease in research and development
expenses relate to a specific customer development program in fiscal 2008 that
did not repeat in fiscal 2009.

Income Tax Provision

Our effective tax rate was 20.9% in
fiscal 2009 and 37.1% in 2008. In fiscal 2009, we incurred operating losses
which resulted in the recording of a tax benefit equal to 20.9% of our pretax
loss. The effective tax rate was negatively impacted by higher permanent
book-to-tax differences as a percentage of our pretax loss and recording of
additional valuation allowance on certain state deferred tax assets, including
state net operating losses.

32

---

Our future effective income tax rate
depends on various factors, such as the geographic composition of worldwide
earnings, tax regulations governing each region, non-tax deductible expenses
incurred and the effectiveness of our tax planning strategies.

Fiscal 2008 compared to Fiscal 2007

Net Revenue

Net revenue consists of revenue
recognized upon shipment or installation of products using proven technology and
upon acceptance of products using new technology. In addition, spare parts sales
are recognized upon shipment. Service revenue is recognized upon completion of
the service activity or ratably over the term of the service contract. The
majority of our revenue is generated from large furnace systems sales which,
depending on the timing of shipment and installation, can have a significant
impact on our revenue, gross margins and earnings in any given period.SeeCritical Accounting Policies  Revenue Recognition.

|                                          |  | Years Ended September
    30, |        |      |   |           |  |       |       
|----------------------------------------- |  | ----------------------------- | ------ | ---- | - | --------- |  | ----- | ------
|**Segment**                               |  | 2008                          |        | 2007 |   | Inc (Dec) |  | **%**
|                                          |  | (dollars in thousands)        |        |      |  
|Solar and Semiconductor Equipment Segment |  |                               | 72,029 |      |   | 37,657    |  |       | 34,372
|Polishing
      Supplies Segment          |  |                               | 8,267  |      |   | 8,327     |  |       | (60   
|**Total Net
      Revenue**               |  | $                             | 80,296 |      | $ | 45,984    |  | $     | 34,312

Net revenue for the year ended
September 30, 2008 increased $34.3 million or 75% compared to the year ended
September 30, 2007. Overall growth in net revenue in fiscal 2008 was driven
primarily by our continued penetration of the solar market where revenue
increased $37.6 million or more than 300% compared to fiscal 2007. Within the
solar and semiconductor equipment segment, net revenue from the solar market was
$50.1 million and $12.5 million in fiscal 2008 and 2007, respectively, while net
revenue from the semiconductor market was $21.9 million in fiscal 2008 compared
to $25.2 million in fiscal 2007 a decrease of 13% due primarily to the downturn
in the semiconductor industry. R2D generated $3.2 million of semiconductor
equipment revenue in fiscal 2008 for which there were no comparable revenues in
fiscal 2007. Revenue in the polishing supplies segment was $8.3 million for the
fiscal years ended September 30, 2008 and 2007. Increased demand for our
polishing machines was offset by lower shipments of insert carriers caused by
increased competition in the insert carrier market as well as the downturn in
the semiconductor industry. The recent global credit crisis and related downturn
in the global economy have caused many of our customers to delay or suspend
their capacity expansion plans. Some customers have and other may request delays
in the shipment of their orders. As a result, future revenues from both the
solar and semiconductor markets are likely to be negatively impacted by these
recent events.

Backlog

Our backlog as of September 30, 2008
and 2007 was $46.7 million and $22.9 million, respectively, a 104% increase. Our
backlog as of September 30, 2008 included approximately $36.7 million of orders
from our solar industry customers compared to $17.4 million of orders from solar
industry customers as of September 30, 2007. The orders included in our backlog
are generally credit approved customer purchase orders expected to ship within
the next twelve months. Because our orders are typically subject to cancellation
or delay by the customer, our backlog at any particular point in time is not
necessarily representative of actual sales for succeeding periods, nor is
backlog any assurance that we will realize revenue or profit from completing
these orders. The recent global credit crisis and related downturn in the global
economy has caused many of our customers to delay or suspend their capacity
expansion plans. As a result, the delivery times of many of the orders in our
backlog may be delayed or even cancelled by our customers. Our backlog also
includes revenue deferred pursuant to our revenue recognition policy, derived
from orders that have already been shipped but which have not met the criteria
for revenue recognition. The backlog as of September 30, 2008 and 2007 includes
$1.3 million and $0.9 million, respectively, of open orders or deferred revenue
on which we anticipate no gross margin.

33

---

Gross Profit

Gross profit is the difference between
net revenue and cost of goods sold. Cost of goods sold consists of purchased
material, labor and overhead to manufacture equipment or spare parts and the
cost of service and support to customers for warranty, installation and paid
service calls. Gross margin is gross profit as a percentage of net revenue.

|                                          |  | Years Ended September
    30, |        |      |  |           |        |       | 
|----------------------------------------- |  | ----------------------------- | ------ | ---- |  | --------- | ------ | ----- | 
|**Segment**                               |  | 2008                          |        | 2007 |  | Inc (Dec) |        | **%**
|****                                      |  | (dollars in thousands)        |        |      | 
|Solar and Semiconductor Equipment Segment |  |                               | 20,500 |      |  |           | 9,995  |       | 
|Polishing
      Supplies Segment          |  |                               | 2,461  |      |  |           | 2,815  |       | 
|Total Gross
      Profit                  |  | $                             | 22,961 |      |  | $         | 12,810 |       | 
|                                         
|****Gross
      Margin                    |  |                               | 29     | %    |  |           | 28     | %     | 

Gross profit increased in fiscal 2008
by $10.2 million, or 79%, over fiscal 2007. The increase was driven by higher
shipments during the year as well as improved margin percentage. Gross margin
improved to 29% in fiscal 2008 from 28% in fiscal 2007. Gross margin in the
solar and semiconductor equipment segment improved primarily due to realizing
economies of scale. Increased volume resulted in improved capacity utilization,
increased purchasing power and improved labor efficiencies in the solar and
semiconductor equipment segment. Increases in gross margin were partially offset
by higher warranty costs and higher deferred profit. We deferred $2.9 million of
profit in fiscal 2008, net of acceptances, compared to a net deferral of $1.0
million in fiscal 2007. Gross profit and gross margin in the polishing supplies
segment were lower in fiscal 2008 as compared to fiscal 2007 due mainly to
changes in product mix. We sold higher volumes of polishing machines at a
relatively low margin as compared to margins on insert carriers. Increased
competition in the insert carrier market resulted in lower volumes in this
market.

The timing of revenue recognition can
have a particularly significant effect on gross margin when the equipment
revenue of an order is recognized in one period and the remainder of the revenue
attributed to holdbacks is recognized in a later period. The portion of revenue
attributed to the holdbacks generally comprises 10-20% of an order and has a
significantly higher gross margin percentage.

Selling, General and
Administrative Expenses

Selling, general and administrative
expenses consist of the cost of employees, consultants and contractors, as well
as facility costs, sales commissions, legal and accounting fees and promotional
marketing expenses.

|                                          |  | Years Ended September
    30, |        |      |  |           |        |      
|----------------------------------------- |  | ----------------------------- | ------ | ---- |  | --------- | ------ | -----
|**Segment**                               |  | 2008                          |        | 2007 |  | Inc (Dec) |        | **%**
|                                          |  | (dollars in thousands)        |        |      | 
|Solar and Semiconductor Equipment Segment |  | $                             | 16,267 |      |  | $         | 9,091  |      
|Polishing
      Supplies Segment          |  |                               | 1,442  |      |  |           | 1,414  |      
|**Total
      SG&A**                      |  | $                             | 17,709 |      |  | $         | 10,505 |      
|                                         
|Percent of net
      revenue              |  |                               | 22     | %    |  |           | 23     | %    

34

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Total selling, general and
administrative (SG&A) expenses increased $7.2 million or 69% in fiscal 2008
from fiscal 2007. SG&A expenses include $0.5 million and $0.3 million of
stock-based compensation expense for fiscal 2008 and 2007, respectively.
SG&A expenses for fiscal 2008 include $0.3 million of costs related to
compliance with the provisions of the Sarbanes-Oxley Act and a $0.5 million
provision was recorded in fiscal 2008 as an allowance for doubtful accounts for
which there were no comparable expenses in fiscal 2007. The increased SG&A
also reflects $1.4 million of costs incurred by R2D in fiscal 2008 for which
there were no comparable expenses in fiscal 2007. Commissions on sales increased
approximately $2.0 million due to increased revenue generated in geographic
regions, primarily Asia, where third-party sales representatives are utilized.
Other selling costs increased $1.2 million in fiscal 2008 due to increased
shipping volumes and increased marketing activities. The remainder of the
increase in SG&A expenses resulted from increased depreciation and operating
costs for the new building in The Netherlands and increased personnel, travel
and consulting costs. The increased personnel and consulting costs include
increased incentive compensation costs and administrative costs incurred to
improve internal financial and operational reporting and implement improvements
in operational efficiencies.

Restructuring
Charges

In June 2008, we recorded a charge of
$0.4 million resulting from the reorganization of the Bruce Technologies
operations. The charge consisted mainly of severance and placement costs for
personnel affected by the reduction in workforce. We incurred no comparable
costs in fiscal 2007.

Research and Development

Research and development expenses
consist of the cost of employees, consultants and contractors who design,
engineer and develop new products and processes and the materials used in those
processes and producing prototypes.

|                                          |  | Years Ended September
    30, |       |      |  |           |     |      
|----------------------------------------- |  | ----------------------------- | ----- | ---- |  | --------- | --- | -----
|**Segment**                               |  | 2008                          |       | 2007 |  | Inc (Dec) |     | **%**
|                                          |  | (dollars in thousands)        |       |      | 
|Semiconductor and Solar Equipment Segment |  | $                             | 1,094 |      |  | $         | 564 |      
|Polishing
      Supplies Segment          |  |                               | -     |      |  |           | -   |      
|**Total Research
      and Development**  |  | $                             | 1,094 |      |  | $         | 564 |      
|                                         
|Percent of net
      revenue              |  |                               | 1     | %    |  |           | 1   | %    

Increased investment in research and
development resulted mainly from activity in the development of products and
processes to meet the needs of the solar market. Reimbursements of research and
development costs in the form of governmental research and development grants
amounted to $0.1 million in fiscal 2008 and 2007, respectively, and are netted
against these expenses.

Income Tax Provision

Our effective tax rate was 37.1% in
fiscal 2008 and 17.5% in 2007. Between September 30, 2004 and September 30,
2006, we maintained a valuation allowance equal to the total of our deferred tax
assets. Our effective tax rate was reduced by sixteen percentage points in
fiscal 2007, as a result of the reduction in our valuation allowance. During
fiscal year 2008, 2007 and 2006, we recorded reductions in the valuation
allowance on deferred tax assets of $0.2 million, $1.2 million, and $0.2
million, respectively. The reduction in fiscal years 2008 and 2007 were based
upon the profitability in the three most recent fiscal years, as well as our
projected future profitability, strong cash position and strong order backlog.
Because of this, we determined that it is more likely than not that we would
realize the future tax benefit of a significant portion of our deferred tax
assets. In fiscal 2006, the reduction in our valuation allowance resulted from a
decline in our deferred tax assets. These changes in our valuation allowance had
a favorable effect on our effective tax rates.

35

---

Our future effective income tax rate
depends on various factors, such as the geographic composition of worldwide
earnings, tax regulations governing each region, non-tax deductible expenses
incurred and the effectiveness of our tax planning strategies.

Liquidity and Capital Resources

In November 2007 (fiscal 2008), we
completed the sale of 2.5 million shares of Common Stock in a public offering
for $14.41 per share. The net proceeds of the sale of Common Stock after
offering expenses and underwriting fees was approximately $33.6 million. In
February 2007 (fiscal 2007), we completed the sale of approximately 3 million
shares of Common Stock in a public offering for $7.05 per share. The net
proceeds of the sale of Common Stock after offering expenses and underwriting
fees was approximately $19.4 million.

As of September 30, 2009, and 2008,
cash, cash equivalents and current restricted cash were $43.8 million and $39.5
million, respectively. Our working capital decreased $2.4 million to $55.9
million as of September 30, 2009, compared to $58.3 million as of September 30,
2008. Our ratio of current assets to current liabilities increased to 4.1:1 as
of September 30, 2009 from 3.2:1 as of September 30, 2008. The increase in cash
during fiscal 2009 resulted primarily from significant collections of accounts
receivable during fiscal 2009. Decreased working capital resulted primarily from
fiscal 2009 operational losses.

As of September 30, 2009, our principal
sources of liquidity consisted of $42.3 million of cash and cash equivalents and
$1.5 million of restricted cash. Restricted cash consists of $1.0 million of
bank guarantees in excess of our European overdraft facility and $0.5 million of
cash in escrow to be paid to the sellers of R2D based upon fulfillment of their
remaining contractual requirements. Bank guarantees are required by certain
customers from whom deposits have been received in advance of shipment. The
table below provides selected consolidated cash flow information for the periods
indicated:

|                                                    | Fiscal Years Ended September 30,
|--------------------------------------------------- | --------------------------------
|                                                    | 2009                            
|                                                    | (dollars in thousands)          
|Net cash provided by (used in) operating activities | $                               
|Net cash used in
      investing activities         | $                               
|Net cash provided by (used in) financing activities | $                               

Cash Flows from Operating
Activities

Cash provided by our operating
activities was $7.6 million in fiscal 2009 compared to cash used in operating
activities of $2.6 million and $2.7 million in fiscal 2008 and 2007
respectively. During fiscal 2009, cash was generated primarily from collection
of accounts receivable and reductions in inventory. This generation of cash was
partially offset by decreases in accrued liabilities and customer deposits,
accounts payable and deferred profit. During fiscal 2008 and 2007, cash was
primarily used to finance business growth, including increases in accounts
receivable and inventory. This use of cash was partially offset each fiscal year
by increases in accrued liabilities and customer deposits, deferred profit and
accounts payable.

Cash Flows from Investing
Activities

Our investing activities for fiscal
2009, 2008 and 2007 used cash of $1.9 million, $11.7 million and $4.4 million,
respectively. During fiscal 2009, we invested primarily in manufacturing
equipment, research and development equipment and building improvements ($1.1
million). In addition, we invested $0.5 million for a license to certain solar
etching technology for the removal of PSG or phosphorus silica glass and $0.3
million, the remaining installment for the license of certain solar PECVD
technology. During fiscal 2008 and 2007, the most significant investments were
the fiscal 2008 acquisition of R2D ($7.4 million), approximately $3.7 million in
fiscal 2007 for the purchase of and improvements to a 54,000 sq. ft.
manufacturing facility located in Vaassen, The Netherlands and $1.5 million for
additional improvements in fiscal 2008 to the manufacturing facility in The
Netherlands. Another significant investment in fiscal 2007 and 2008 was $0.3
million and $0.4 million, respectively, paid for a license to the
above-mentioned solar PECVD technology. Other investments in fiscal 2008 and
2007 consisted primarily of purchases of manufacturing equipment and research
and development equipment and upgrades to information systems.

36

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Cash Flows from Financing
Activities

Cash used in financing activities was
$0.6 million in fiscal 2009, which primarily consists of $0.5 million to
purchase our common stock under the fiscal 2009 repurchase program and $0.1
million in payments on long-term debt. Cash provided by our financing activities
for fiscal 2008 and 2007 was $33.3 million and $19.6 million, respectively,
which primarily consists of the $33.6 million and $19.4 million raised in our
Common Stock offerings, net of expenses. Other financing activities during
fiscal 2008 and 2007 were mainly payments on debt of $0.8 million and $0.3
million, respectively.

We currently anticipate that our
existing cash balances will be sufficient to meet our anticipated cash needs for
current operations for at least the next 12 months.

Off-Balance Sheet
Arrangements

As of September 30, 2009, we had no
off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K
promulgated by the Securities and Exchange Commission.

Contractual Obligations and
Commercial Commitments

We had the following contractual
obligations and commercial commitments as of September 30, 2009:

|                                        |  |                        |       |      | Less than 1 |                 |  |                 |       |       |   |     | More than 5
|--------------------------------------- |  | ---------------------- | ----- | ---- | ----------- | --------------- |  | --------------- | ----- | ----- | - | --- | -----------
|Contractual
      obligations           |  | Total                  |       | year |             | 1-3
      years |  | 3-5
      years |       | years
|                                        |  | (dollars in thousands) |       |      |            
|Debt obligations                        |  | $                      | 284   |      | $           | 120             |  | $               | 164   |       | $ | -   |            
|Operating lease
      obligations:      |  |                        |       |      |             |                 |  |                 |       |       |   |     |            
|Buildings                               |  |                        | 2,857 |      |             | 549             |  |                 | 866   |       |   | 544 |            
|Office
equipment                        |  |                        | 352   |      |             | 126             |  |                 | 207   |       |   | 19  |            
|Vehicles                                |  |                        | 233   |      |             | 52              |  |                 | 90    |       |   | 29  |            
|Total operating
      lease obligations |  |                        | 3,442 |      |             | 727             |  |                 | 1,163 |       |   | 592 |            
|Purchase obligations                    |  |                        | 4,654 |      |             | 4,654           |  |                 | -     |       |   | -   |            
|Earned
      contingent payments        |  |                        | 511   |      |             | 511             |  |                 | -     |       |   | -   |            
|Total                                   |  | $                      | 8,891 |      | $           | 6,012           |  | $               | 1,327 |       | $ | 592 |            
|                                       
|Other commercial obligations:           |  |                        |       |      |             |                 |  |                 |       |       |   |     |            
|Bank guarantees                         |  | $                      | 985   |      | $           | 985             |  | $               | -     |       |   | -   |            

As of September 30, 2009, we had $4.7
million in purchase obligations compared to $8.5 million and $7.2 million as of
September 30, 2008 and 2007, respectively. The decrease in purchase obligations
is mainly a result of lower business volume which requires lower inventories and
fewer purchase commitments.

Critical Accounting Policies

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

37

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

A critical accounting policy is one
that is both important to the presentation of our financial position and results
of operations, and requires managements most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. These uncertainties are discussed in
ITEM 1A. RISK FACTORS. We believe the following critical accounting policies
affect the more significant judgments and estimates used in the preparation of
our consolidated financial statements.

Revenue
Recognition.We review product and
service sales contracts with multiple deliverables to determine if separate
units of accounting are present in the arrangements. Where separate units of
accounting exist, revenue is allocated to delivered items equal to the total
sales price less the greater of (1) the relative fair value of the undelivered
items, and (2) all contingent portions of the sales arrangement.

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

|(1) | For the solar and semiconductor
      equipment segment, transactions where legal title passes to the customer
      upon shipment, we recognize revenue upon shipment for those products where
      the customers defined specifications have been met with at least two
      similarly configured systems and processes for a comparably situated
      customer. However, a portion of the revenue associated with certain
      installation-related tasks, equal to the greater of the relative fair
      value of those tasks or the portion of the contract price contingent upon
      their completion, generally 10%-20% of the systems selling price (the
      holdback), and directly related costs, if any, are deferred and
      recognized into income when the tasks are completed. Since we defer only
      those costs directly related to installation or other unit of accounting
      not yet delivered and the portion of the contract price is often
      considerably greater than the fair market value of those items, our policy
      at times will result in deferral of profit that is disproportionate in
      relation to the deferred revenue. When this is the case, the gross margin
      recognized in one period will be lower and the gross margin reported in a
      subsequent period will improve.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | For products where the customers
      defined specifications have not been met with at least two similarly
      configured systems and processes, the revenue and directly related costs
      are deferred at the time of shipment and later recognized at the time of
      customer acceptance or when this criterion has been met. We have, on
      occasion, experienced longer than expected delays in receiving cash from
      certain customers pending final installation or system acceptance. If some
      of our customers refuse to pay the final payment, or otherwise delay final
      acceptance or installation, the deferred revenue would not be recognized,
      adversely affecting our future operating results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) | Equipment sold by the polishing
      supplies segment generally does not include process guarantees, acceptance
      criteria or holdbacks; therefore, the related revenue is generally
      recorded upon transfer of title which is generally at time of
      shipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(4) | For all segments, sales of spare
      parts and consumables are recognized upon shipment, as there are no post
      shipment obligations other than standard warranties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(5) | Service revenue is recognized
      upon performance of the services requested by the customer. Revenue
      related to service contracts is recognized ratably over the period of the
      contract or in accordance with the terms of the contract, which generally
      coincides with the performance of the services requested by the
      customer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Income taxes.We estimate our liability for income
taxes based on the various jurisdictions where we conduct business. This
requires us to estimate our (i) current tax exposure; (ii) temporary differences
that result from differing treatment of certain items for tax and accounting
purposes and (iii) unrecognized tax benefits. Temporary differences result in
deferred tax assets and liabilities that are reflected in the consolidated
balance sheet. The net deferred tax assets are reduced by a valuation allowance
if, based upon all available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized. Establishing, reducing or
increasing a valuation allowance in an accounting period results in an increase
or decrease in tax expense in the statement of operations. We must make
significant judgments to determine the provision for income taxes, deferred tax
assets and liabilities, unrecognized tax benefits and any valuation allowance to
be recorded against net deferred tax assets.

38

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We are required to apply a more likely
than not threshold to the recognition and derecognition of uncertain tax
positions. We are required to recognize the amount of tax benefit that has a
greater than 50 percent likelihood of being ultimately realized upon settlement.
It further requires that a change in judgment related to the expected ultimate
resolution of uncertain tax positions be recognized in earnings in the quarter
of such change. Prior to adoption, our policy was to establish reserves that
reflected the probable outcome of known tax contingencies.

Inventory Valuation.We value our inventory at the lower of
cost or net realizable value. Costs for approximately 85% of inventory are
determined on an average cost basis with the remainder determined on a first-in,
first-out (FIFO) basis. We regularly review inventory quantities and record a
write-down for excess and obsolete inventory. The write-down is primarily based
on historical inventory usage adjusted for expected changes in product demand
and production requirements. However, our industry is characterized by customers
in highly cyclical industries, rapid technological changes, frequent new product
developments and rapid product obsolescence. Changes in demand for our products
and product mix could result in further write-downs.

Allowance for Doubtful Accounts.We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability or unwillingness of
our customers to make required payments. This allowance is based on historical
experience, credit evaluations, specific customer collection history and any
customer-specific issues we have identified. Since a significant portion of our
revenue is derived from the sale of high-value systems, our accounts receivable
are often concentrated in a relatively few number of customers. A significant
change in the liquidity or financial position of any one of these customers
could have a material adverse impact on the collectability of our accounts
receivable and our future operating results.

Warranty.We provide a limited warranty, generally for 12 to 24 months,
to our customers. A provision for the estimated cost of providing warranty
coverage is recorded upon acceptance of all systems. On occasion, we have been
required and may be required in the future to provide additional warranty
coverage to ensure that the systems are ultimately accepted or to maintain
customer goodwill. While our warranty costs have historically been within our
expectations and we believe that the amounts accrued for warranty expenditures
are sufficient for all systems sold through September 30, 2009, we cannot
guarantee that we will continue to experience a similar level of predictability
with regard to warranty costs. In addition, technological changes or previously
unknown defects in raw materials or components may result in more extensive and
frequent warranty service than anticipated, which could result in an increase in
our warranty expense.

Impairment of Long-lived Assets.We periodically evaluate whether events
and circumstances have occurred that indicate the estimated useful lives of
long-lived assets or intangible assets may warrant revision or that the
remaining balance may not be recoverable. Goodwill and indefinite-lived
intangibles are also tested for impairment at least annually. When factors
indicate that an asset should be evaluated for possible impairment, we use an
estimate of the related undiscounted net cash flows generated by the asset over
the remaining estimated life of the asset in measuring whether the asset is
recoverable. We make judgments and estimates used in establishing the carrying
value of long-lived or intangible assets. Those judgments and estimates could be
modified if adverse changes occurred in the future resulting in an inability to
recover the carrying value of these assets. Below is a more detailed explanation
of the procedures we perform.

We perform a two-step impairment test.
In the first step, we estimate the fair value of the reporting unit and compare
it to the carrying value of the reporting unit. Most of our reporting units are
operating segments that are one level below the reportable segment into which
they are aggregated. The one exception is P.R. Hoffman Machine Products, Inc.
which is a reportable segment. When the carrying value exceeds the fair value of
the reporting unit, the second step is performed to measure the amount of the
impairment loss, if any. In the second step, the amount of the impairment loss
is the excess of the carrying amount of the goodwill and other intangibles not
subject to amortization over their implied fair value.

The methods used to estimate fair value
of the reporting unit for the purpose of determining the implied fair value of
goodwill include the market approach and discounted cash flows, as follows:

|i. | One valuation methodology used is
      to determine the multiples of market value of invested capital (MVIC) of
      similar public companies to their revenue for the last twelve months
      (LTM) and next twelve months (NTM), and apply those multiples to the
      revenue for the comparable periods of the reporting unit being tested for
      impairment. One benefit of this approach is it is the closest to quoted
      market prices that are readily available. However, we generally give less
      weight to this method, because the market value of the minority interest
      of public companies may not be that relevant to the fair value of our
      wholly-owned reporting units, which are not public companies. Also, MVIC
      to revenue for the LTM uses a historical value in the denominator, while
      the market values tend to be forward looking; and MVIC of revenue for the
      NTM involves the use of projections for both the comparable companies and
      the reporting unit.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39

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|ii.  | Another market approach that we
      sometimes use is based upon prices paid in merger and acquisition
      transactions for other companies in the same industry, again applying the
      MVIC to revenue of those companies to the historical and projected revenue
      of the reporting unit. When we use both market prices determined as
      described in (i), above, and prices paid in merger and acquisition
      transactions, we weight them to determine an indicated value under the
      market approach.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|iii. | As stated, we also use discounted
      cash flows as an indication of what a third-party would pay for the
      reporting unit in an arms-length transaction. This method requires
      projections of EBITDA (earnings before interest, taxes, depreciation and
      amortization) and applying an appropriate discount rate based on the
      weighted average cost of capital for the reporting
  unit.                                                                                                                

We generally give the greatest weight,
often 75% or more, to the discounted cash flow method, due to difficulty in
identifying a sufficient number of companies that are truly comparable to a
given reporting unit. This is because two of our three reporting units are
relatively small businesses serving niche markets.

The material estimates and assumptions
used in the discounted cash flows method of determining fair value include (i)
the appropriate discount rate, given the risk-free rate of return and various
risk premiums, (ii) projected revenues, (iii) projected material cost as a
percentage of revenue, and (iv) the rate of increase in payroll and other
expense. Quantitatively, the discount rate is the assumption that has the most
pervasive effect on the discounted cash flows. We determine the discount rate
used based on input from a valuation firm, which applies various approaches
taking into account the particular circumstances of the reporting unit in
arriving at a recommendation. For annual valuations, we test the sensitivity of
the assumptions used in our discounted cash flow projection with the aid of a
valuation firm, which utilizes a Monte Carlo simulation model, wherein various
probabilities are assigned to the key assumptions.

In the current year, we performed a
mid-year test of the impairment of the goodwill and other intangibles due to
changing circumstances regarding the Bruce Technologies reporting unit. This
test required us to use judgments and estimates that could be materially
different than actual results. Bruce Technologies continued to incur losses
after a restructuring and cost reductions put into place during the prior fiscal
year and expectations that semiconductor customers served by this reporting unit
would not in the future achieve the kinds of growth rates they had in the past
due to increased maturity of that industry. We used the same discount rate as
used in the prior annual impairment test of this reporting unit, but the other
assumptions became more conservative due to the changing circumstances. It was
primarily the lowered projections of future revenue that resulted in a lower
estimate of fair value and the impairment loss. The payroll and certain expense
assumptions, however, were lowered to take into account a second restructuring
of the reporting unit, which involved a significant reduction in the number of
employees. The material cost assumption was also lowered to take into account a
change in product mix.

Stock-Based
Compensation.The Company measures
compensation costs relating to share-based payment transactions based upon the
grant-date fair value of the award. Those costs are recognized as expense over
the requisite service period, which is generally the vesting period. The
benefits of tax deductions in excess of recognized compensation cost are
reported as cash flow from financing activities rather than as cash flow from
operating activities.

Impact of Recently Issued Accounting
Pronouncements

For discussion of the impact of
recently issued accounting pronouncements, see Item 8: Financial Statements and
Supplementary Data under Footnote 1 Summary of Significant Accounting
Policies under Impact of Recently Issued Accounting Pronouncements.

40

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ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We are exposed to foreign currency
exchange rates to the extent sales contracts, purchase contracts, assets or
liabilities of our European operations are denominated in currencies other than
their functional currency, Our operations in Europe, a component of the solar
and semiconductor equipment segment, conduct business primarily in their
functional currency, the Euro, and the U.S. dollar. Nearly all of the
transactions, assets and liabilities of all other operating units are
denominated in the U.S. dollar, their functional currency. In fiscal 2009, the
U.S. dollar, on average, strengthened relative to the Euro by 10% and, in fiscal
2008, weakened relative to the Euro by 13%. It is highly uncertain how currency
exchange rates will fluctuate in the future. Actual changes in foreign exchange
rates could adversely affect our operating results or financial
condition.

As of September 30, 2009, we did not
hold any stand-alone or separate derivative instruments. We incurred net foreign
currency transaction losses of less than $0.1 million in fiscal 2009 and fiscal
2008. As of September 30, 2009, our foreign subsidiaries had $0.4 million of
assets (cash and receivables) denominated in U.S. dollars, rather than Euros,
which is their functional currency. A 10% change in the value of the functional
currency relative to the non-functional currency would result in a gain or loss
of less than $0.1 million. As of the end of fiscal 2009, we had $1.3 million of
accounts payable, consisting primarily of amounts owed by foreign subsidiaries
to our U.S. companies, denominated in U.S. dollars. Even though the intercompany
accounts are eliminated in consolidation, a 10% change in the value of the Euro
relative to the U.S. dollar would result in a gain or loss of $0.1 million. Our
net investment in and long-term advances to our foreign operations totaled $44.4
million as of September 30, 2009. A 10% change in the value of the Euro relative
to the U.S. dollar would cause an approximately $4.4 million foreign currency
translation adjustment, a type of other comprehensive income (loss), which would
be a direct adjustment to our stockholders equity. In fiscal 2009, we
recognized net other comprehensive income of $0.6 million from translation
adjustments.

During fiscal 2009 and 2008, U.S.
dollar denominated sales of our European operations were $4.0 million and $4.1
million, respectively. As of September 30, 2009, sales commitments denominated
in a currency other than the functional currency of our transacting operation
were less than $0.1 million.

All operations become less competitive
relative to foreign suppliers when their functional currency strengthens
relative to that of the foreign supplier. Our European operations are
particularly affected when selling to customers in Asia when such customers
require a purchase price in U.S. dollars. If the value of the U.S. dollar has
strengthened or weakened relative to the Euro our gross margin will be reduced
or increased, respectively, relative to prior transactions unless we and our
customers agree to a commensurate increase or decrease, respectively, in our
selling price.

41

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ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

The following documents are filed as
part of this Annual Report on Form 10-K:

|Financial Statements                                                                            
|------------------------------------------------------------------------------------------------
|Report of
      Independent Registered Public Accounting Firm                                   
|Consolidated
      Balance Sheets: September 30, 2009 and 2008                                  
|Consolidated
      Statements of Operations: Years ended September 30, 2009, 2008 and
      2007
|Consolidated
      Statements of Stockholders Equity and Comprehensive Income                  
|(Loss): Years
      ended September 30, 2009, 2008 and 2007                                     
|Consolidated
      Statements of Cash Flows: Years ended September 30, 2009, 2008 and
      2007
|Notes to
      Consolidated Financial Statements                                                

42

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Report of Independent Registered
Public Accounting Firm

To the Stockholders ofAmtech
Systems, Inc.:

We have audited the accompanying
consolidated balance sheets of Amtech Systems, Inc. as of September 30, 2009 and
2008, and the related consolidated statements of operations, stockholders
equity and comprehensive income and cash flows for each of the years in the
three year period ended September 30, 2009. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Amtech Systems, Inc. as of September 30,
2009 and 2008, and the results of their operations and their cash flows for each
of the years in the three years ended September 30, 2009, in conformity with
accounting principles generally accepted in the United States of
America.

/s/ Mayer Hoffman McCann P.C.

Phoenix, ArizonaNovember 24,
2009

43

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AMTECH SYSTEMS, INC. AND
SUBSIDIARIESConsolidated Balance Sheets(in thousands except share
data)

|                                                                      |  | September 30, |        | September 30,
|--------------------------------------------------------------------- |  | ------------- | ------ | -------------
|**Assets**                                                            |  | 2009          |        | 2008         
|Current Assets                                                        |  |               |        |              
|Cash and cash
      equivalents                                       |  | $             | 42,298 |              
|Restricted cash                                                       |  |               | 1,496  |              
|Accounts
    receivable                                               |  |               |        |              
|Trade
      (less allowance for doubtful accounts of $465 and $588 at |  |               |        |              
|September
      30, 2009 and September 30, 2008, respectively)        |  |               | 8,409  |              
|Unbilled
      and other                                              |  |               | 5,156  |              
|Inventories                                                           |  |               | 13,455 |              
|Deferred income
      taxes                                           |  |               | 2,290  |              
|Other                                                                 |  |               | 841    |              
|Total
      current assets                                            |  |               | 73,945 |              
|                                                                     
|Property, Plant and Equipment - Net                                   |  |               | 8,477  |              
|Deferred
      Income Taxes - Long Term                               |  |               | 1,140  |              
|Intangible Assets - Net                                               |  |               | 3,828  |              
|Goodwill                                                              |  |               | 5,136  |              
|Restricted cash - non-current                                         |  |               | -      |              
|**Total
      Assets**                                                |  | $             | 92,526 |              

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

44

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|                                                                    |  | September 30, |        | September 30,
|------------------------------------------------------------------- |  | ------------- | ------ | -------------
|**Liabilities and Stockholders'
      Equity**                      |  | 2009          |        | 2008         
|Current Liabilities                                                 |  |               |        |              
|Accounts
payable                                                    |  | $             | 4,181  |              
|Current maturities of
      long-term debt                          |  |               | 121    |              
|Accrued compensation and
      related taxes                        |  |               | 2,877  |              
|Accrued warranty
      expense                                      |  |               | 1,429  |              
|Deferred profit                                                     |  |               | 4,727  |              
|Customer
    deposits                                               |  |               | 2,861  |              
|Other accrued
      liabilities                                     |  |               | 1,721  |              
|Income taxes
      payable                                          |  |               | 160    |              
|Total
      current liabilities                                     |  |               | 18,077 |              
|                                                                   
|Income Taxes Payable Long-term                                      |  |               | 480    |              
|Deferred
      Income Taxes Long-term                               |  |               | -      |              
|Other Long-Term Obligations                                         |  |               | 164    |              
|**Total
      liabilities**                                         |  |               | 18,721 |              
|                                                                   
|Commitments and Contingencies                                       |  |               |        |              
|                                                                   
|Stockholders' Equity                                                |  |               |        |              
|Preferred stock;
      100,000,000 shares authorized; none issued   |  |               | -      |              
|Common stock; $0.01 par
      value; 100,000,000 shares authorized; |  |               |        |              
|shares
      issued and outstanding: 8,961,494 and 9,096,048        |  |               |        |              
|at
      September 30, 2009 and September 30, 2008, respectively    |  |               | 90     |              
|Additional paid-in
      capital                                    |  |               | 70,403 |              
|Accumulated other
      comprehensive income                        |  |               | 661    |              
|Retained
    earnings                                               |  |               | 2,651  |              
|Total
      stockholders' equity                                    |  |               | 73,805 |              
|**Total Liabilities
      and Stockholders' Equity**                |  | $             | 92,526 |              

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

45

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AMTECH SYSTEMS, INC. AND
SUBSIDIARIESConsolidated Statements of Operations(in thousands, except
per share data)

|                                               |  | Years Ended September
    30,
|---------------------------------------------- |  | -----------------------------
|                                               |  | **2009**                     
|Revenues, net of returns and allowances        |  | $                            
|Cost of
      sales                            |  |                              
|Gross profit                                   |  |                              
|Selling, general
      and administrative      |  |                              
|Impairment and restructuring charges           |  |                              
|Research and
      development                 |  |                              
|Operating income
      (loss)                  |  |                              
|Interest and
      other income (expense), net |  |                              
|Income (loss) before income taxes              |  |                              
|Income tax
      provision (benefit)           |  |                              
|**Net income
      (loss)**                    |  | $                            
|                                              
|Income (Loss) Per Share:                       |  |                              
|Basic income
      (loss) per share            |  | $                            
|Weighted average shares outstanding            |  |                              
|                                              
|Diluted income (loss) per share                |  | $                            
|Weighted average
      shares outstanding      |  |                              

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

46

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AMTECH SYSTEMS, INC. AND
SUBSIDIARIESConsolidated Statements Of Stockholders' EquityAnd
Comprehensive Income (Loss)

|                                           |                  |   |            |   |           |   |                   |   |               |   |              | Accumulated |               | Retained |  |   |        |  
|------------------------------------------ | ---------------- | - | ---------- | - | --------- | - | ----------------- | - | ------------- | - | ------------ | ----------- | ------------- | -------- |  | - | ------ | -
|                                           | **Common Stock** |   | Additional |   | **Other** |   | **Earnings**      |   | **Total**    
|                                           | Number of        |   |            |   |           |   | Paid-In           |   | Comprehensive |   | (Accumulated |             | Stockholders'
|**(in
      thousands)**                   | Shares           |   | **Amount** |   | Capital   |   | **Income (Loss)** |   | **Deficit)**  |   | **Equity**  
|Balance at September 30, 2006              | 3,476            |   |            | $ | 35        |   |                   | $ | 15,774        |   |              | $           | 501           |          |  | $ | (701   | )
|Net income                                 |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   | 2,417  |  
|****Translation
      adjustment           |                  |   |            |   |           |   |                   |   |               |   |              |             | 312           |          |  |   |        |  
|****Comprehensive
      income             |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   |        |  
|****Issuance
      of common stock         | 3,019            |   |            |   | 30        |   |                   |   | 19,380        |   |              |             |               |          |  |   |        |  
|****Stock
      options expense            |                  |   |            |   |           |   |                   |   | 347           |   |              |             |               |          |  |   |        |  
|****Stock
      options exercised          | 23               |   |            |   | -         |   |                   |   | 109           |   |              |             |               |          |  |   |        |  
|Balance at
      September 30, 2007        | 6,518            |   |            | $ | 65        |   |                   | $ | 35,610        |   |              | $           | 813           |          |  | $ | 1,716  |  
|****Net
      income                       |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   | 2,857  |  
|****Effect
      of the adoption of FIN 48 |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   | (333   | )
|****Translation
      adjustment           |                  |   |            |   |           |   |                   |   |               |   |              |             | (746          | )        |  |   |        |  
|****Comprehensive
      income             |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   |        |  
|****Issuance
      of common stock         | 2,500            |   |            |   | 25        |   |                   |   | 33,549        |   |              |             |               |          |  |   |        |  
|****Tax
      benefit of stock options     |                  |   |            |   |           |   |                   |   | 84            |   |              |             |               |          |  |   |        |  
|****Stock
      compensation expense       |                  |   |            |   |           |   |                   |   | 473           |   |              |             |               |          |  |   |        |  
|****Stock
      options exercised          | 78               |   |            |   | 1         |   |                   |   | 419           |   |              |             |               |          |  |   |        |  
|Balance at September 30, 2008              | 9,096            |   |            | $ | 91        |   |                   | $ | 70,135        |   |              | $           | 67            |          |  | $ | 4,240  |  
|****Net
      loss                         |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   | (1,589 | )
|****Translation
      adjustment           |                  |   |            |   |           |   |                   |   |               |   |              |             | 594           |          |  |   |        |  
|****Comprehensive
      loss               |                  |   |            |   |           |   |                   |   |               |   |              |             |               |          |  |   |        |  
|****Share
      repurchase                 | (144             | ) |            |   | (1        | ) |                   |   | (446          | ) |              |             |               |          |  |   |        |  
|****Stock
      compensation expense       |                  |   |            |   |           |   |                   |   | 711           |   |              |             |               |          |  |   |        |  
|****Restricted
      shares released       | 8                |   |            |   | -         |   |                   |   |               |   |              |             |               |          |  |   |        |  
|****Stock
      options exercised          | 2                |   |            |   | -         |   |                   |   | 3             |   |              |             |               |          |  |   |        |  
|Balance at September 30, 2009              | 8,962            |   |            | $ | 90        |   |                   | $ | 70,403        |   |              | $           | 661           |          |  | $ | 2,651  |  

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

47

---

AMTECH SYSTEMS, INC. AND
SUBSIDIARIES Consolidated Statements Of Cash Flows (in
thousands)

|                                                                  | Year Ended September
    30,
|----------------------------------------------------------------- | ----------------------------
|                                                                  | 2009                        
|Operating Activities                                              |                             
|Net income (loss)                                                 | $                           
|Adjustments
      to reconcile net income (loss) to net           |                             
|cash provided by (used in) operating
      activities:            |                             
|Depreciation and amortization                                     |                             
|Write-down of inventory                                           |                             
|Provision for (reversal of) allowance for doubtful
      accounts |                             
|Deferred income taxes                                             |                             
|Impairment of long-lived assets                                   |                             
|Non-cash share based compensation
expense                         |                             
|Other                                                             |                             
|Changes in
      operating assets and liabilities:                |                             
|Change in restricted cash                                         |                             
|Accounts receivable                                               |                             
|Inventories                                                       |                             
|Accrued income taxes                                              |                             
|Prepaid expenses and other assets                                 |                             
|Accounts payable                                                  |                             
|Accrued liabilities and customer
deposits                         |                             
|Deferred profit                                                   |                             
|Net cash
      provided by (used in) operating activities         |                             
|Investing Activities                                              |                             
|Purchases of
      property, plant and equipment                  |                             
|Proceeds from
      the sale of property, plant and equipment     |                             
|Increase in
      restricted cash - non-current                   |                             
|Investment in
      R2D                                           |                             
|Payment for
      licensing agreement                             |                             
|Net cash used
      in investing activities                       |                             
|Financing
      Activities                                        |                             
|Proceeds from
      issuance of common stock, net                 |                             
|Purchase of
      common stock under repurchase program           |                             
|Payments on
      long-term obligations                           |                             
|Borrowings on
      long-term obligations                         |                             
|Net
      short-term borrowings (payments)                        |                             
|Excess tax
      benefit of stock options                         |                             
|Net cash
      provided by (used in) financing activities         |                             
|Effect of
      Exchange Rate Changes on Cash                     |                             
|Net Increase in Cash and Cash Equivalents                         |                             
|Cash and Cash
      Equivalents, Beginning of Year                |                             
|Cash and Cash Equivalents, End of Year                            | $                           
|Supplemental
      Cash Flow Information:                         |                             
|Interest
      paid                                               | $                           
|Income tax
      refunds                                          |                             
|Income tax
      payments                                         |                             
|Supplemental
      Non-cash Financing Activities:                 |                             
|Transfer
      inventory to capital equipment                     |                             

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

48

---

Notes to Consolidated Financial
StatementsFor the Years Ended
September 30, 2009, 2008 and 2007

1.Summary of Significant Accounting
Policies

Nature of Operations and Basis of
Presentation Amtech Systems, Inc. (the
Company) designs, assembles, sells and installs capital equipment and related
consumables used in the manufacture of wafers, primarily for the solar and
semiconductor industries. The Company sells these products to manufacturers of
solar cells, silicon wafers, and semiconductors worldwide, particularly in the
Asia, United States and northern Europe. In addition, the Company provided
semiconductor manufacturing support services through fiscal 2009.

The Company serves niche markets in
industries that are experiencing rapid technological advances, and which
historically have been very cyclical. Therefore, future profitability and growth
depend on the Companys ability to develop or acquire and market profitable new
products, and on its ability to adapt to cyclical trends.

Principles of Consolidation The consolidated financial statements include
the accounts of Amtech and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.

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

Revenue RecognitionRevenue is recognized upon shipment of the Companys proven
technology equal to the sales price less the greater of (i) the fair value of
undelivered services or (ii) the contingent portion of the sales price, which is
generally 10-20% of the total contract price. The entire cost of the equipment
relating to proven technology is recorded upon shipment. The remaining
contractual revenue, deferred costs, and installation costs are recorded upon
successful installation of the product.

For purposes of revenue recognition,
proven technology means that the Company has a history of at least two
successful installations. New technology systems are those systems with respect
to which the Company cannot demonstrate that it can meet the provisions of
customer acceptance at the time of shipment.

Revenue on new technology is deferred
until installation and acceptance at the customers premises is completed, as
these sales do not meet the provisions of customer acceptance at the time of
shipment. Cost of the equipment relating to new technology is recorded against
deferred profit and then recorded in cost of sales upon customer
acceptance.

Revenue from services is recognized as
the services are performed. Revenue from prepaid service contracts is recognized
ratably over the life of the contract. Revenue from spare parts is recorded upon
shipment.

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

|                     | September 30,         
|-------------------- | ----------------------
|                     | 2009                  
|                     | (dollars in thousands)
|Deferred revenues    | $                     
|Deferred
      costs |                       
|Deferred profit      | $                     

Cash Equivalents Cash equivalents consist of mutual funds invested in
securities issued by the U.S. Government and its agencies and time certificates
of deposit.

49

---

Restricted Cash Current restricted cash of $1.5 million as of September 30,
2009 consists of bank guarantees of $1.0 million required by certain customers
from whom deposits have been received in advance of shipment and cash in an
escrow account related to contingent payments of $0.5 million to be paid to the
sellers of R2D due to the fulfillment of certain requirements. Restricted cash -
current of $2.0 million as of September 30, 2008 consisted of bank guarantees of
$1.0 million in excess of our European overdraft facility that was terminated in
the first quarter of fiscal 2009 and cash in an escrow account related to
contingent payments paid in the first quarter of fiscal 2009 to the sellers of
R2D due to the fulfillment of certain requirements.

Accounts receivable and allowance
for doubtful accounts Accounts receivable
are recorded at the gross sales price of products sold to customers on trade
credit terms. Accounts receivable are considered past due when payment has not
been received from the customer within the normal credit terms extended to that
customer. A valuation allowance is established for accounts when collection is
no longer probable. Accounts are written off against the allowance when the
probability of collection is remote.

The following is a summary of the
activity in the Companys allowance for doubtful accounts:

|                                             | Years Ended September
      30,
|-------------------------------------------- | -------------------------------
|                                             | 2009                           
|                                             | (dollars
      in thousands)   
|Balance at beginning of year                 | $                              
|Provision /
      (adjustment)               |                                
|Write offs                                   |                                
|Acquired through
      business acquisitions |                                
|Balance at end of year                       | $                              

Accounts Receivable - Unbilled and
Other Unbilled and other accounts
receivable consist mainly of the contingent portion of the sales price that is
not collectible until successful installation of the product. These amounts are
generally billed upon final acceptance by our customers. The majority of these
amounts are offset by balances included in deferred profit.

Concentrations of Credit Risk Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of trade accounts receivable. The Companys customers consist of
manufacturers of solar cells, semiconductors, semiconductor wafers, and MEMS
located throughout the world. Credit risk is managed by performing ongoing
credit evaluations of the customers financial condition, by requiring
significant deposits where appropriate, and by actively monitoring collections.
Letters of credit are required of certain customers depending on the size of the
order, type of customer or its creditworthiness, and its country of domicile.
Reserves for potentially uncollectible receivables are maintained based on an
assessment of collectability.

As of September 30, 2009, receivables
from three customers individually represented 19%, 11%, and 10% of accounts
receivable, respectively. As of September 30, 2008, receivables from two
customers individually represented 22% and 20% of accounts
receivable.

Refer to Note 9, Business Segment
Information, for information regarding revenue and assets in other countries
subject to fluctuation in foreign currency exchange rates.

50

---

Inventories  We value our inventory at the lower of cost or net realizable
value. Costs for approximately 85% of inventory are determined on an average
cost basis with the remainder determined on a first-in, first-out (FIFO) basis.
The components of inventories are as follows:

|                                  | September 30,          |        | September 30,
|--------------------------------- | ---------------------- | ------ | -------------
|                                  | 2009                   |        | 2008         
|                                  | (dollars in thousands)
|Purchased parts and raw materials | $                      | 7,550  |              
|Work-in-process                   |                        | 3,277  |              
|Finished goods                    |                        | 2,628  |              
|                                  | $                      | 13,455 |              

Property, Plant and Equipment
- Property plant, and equipment are recorded
at cost. Maintenance and repairs are charged to expense as incurred. The cost of
property retired or sold and the related accumulated depreciation are removed
from the applicable accounts when disposition occurs and any gain or loss is
recognized. Depreciation is computed using the straight-line method.
Depreciation expense was $1.1 million, $1.0 million and $0.6 million in fiscal
2009, 2008 and 2007, respectively. Useful lives for equipment, machinery and
leasehold improvements range from three to seven years; for furniture and
fixtures from five to ten years; and for buildings twenty years.

The following is a summary of property,
plant and equipment:

|                                          | September 30,          |        | September 30,
|----------------------------------------- | ---------------------- | ------ | -------------
|                                          | 2009                   |        | 2008         
|                                          | (dollars in thousands)
|Land, building and leasehold improvements | $                      | 7,124  |              
|Equipment and
      machinery             |                        | 4,295  |              
|Furniture and fixtures                    |                        | 3,404  |              
|                                          |                        | 14,823 |              
|Accumulated depreciation and amortization |                        | (6,346 | )            
|                                          | $                      | 8,477  |              

Goodwill - Goodwill and intangible assets with indefinite lives are not
subject to amortization, but are tested for impairment at least annually.
Goodwill is reviewed for impairment on an annual basis, typically at the end of
the fiscal year, or more frequently if circumstances dictate. Circumstances in
the quarter ended March 31, 2009 required the Company to test long-lived assets
for recoverability and impairment. See Note 11, Impairment and Restructuring
Charge for a description of the facts and circumstances leading to the interim
impairment test and the amount and method of calculating the impairment
charge.

In October 2007, the Company acquired
the R2D Automation business (R2D), a solar cell and semiconductor automation
equipment manufacturing company located near Montpellier, France. Cash
contingent payments of approximately $1.6 million were deposited in an escrow
account with the agreement to pay the sellers upon fulfillment of certain
requirements. As of September 30, 2009, approximately $1.1 million of the $1.6
million has been paid to the sellers and $0.5 million was accrued for payment in
recognition of fulfilling certain requirements. The amount of contingent
payments earned was allocated to goodwill in fiscal 2009.

Intangibles - Intangible assets are capitalized and amortized over their
useful life if the life is determinable. If the life is not determinable,
amortization is not recorded. Amortization expense related to intangible assets
was $0.5 million, $0.4 million and $0.1 million in fiscal 2009, 2008 and 2007,
respectively. The aggregate amortization expense for the intangible assets for
each of the five succeeding fiscal years is estimated to be $0.5 million in
2010, 2011, 2012, 2013 and 2014 and $1.4 million, thereafter.

Long-lived assets are reviewed for
impairment when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Circumstances in the quarter ended
March 31, 2009 required the Company to test long-lived assets for recoverability
and impairment. See Note 11, Impairment and Restructuring Charge for a
description of the facts and circumstances leading to the interim impairment
test and the amount and method of calculating the impairment charge.

51

---

In April 2007, the Company entered into
a license agreement with PST Co., LTD (PST) to market, sell, install, service
and manufacture machinery and equipment for the manufacturing of photovoltaic
cells that employs PECVD Technology (Licensed Product) developed by PST. Under
the terms of this agreement the Company paid $1.0 million to PST. The license
agreement expires in April 2017. These payments are being amortized over the
life of the agreement beginning in the first quarter of Fiscal 2009. The Company
may be required to pay additional license fees in the future if the
profitability of the Licensed Product surpasses certain thresholds.

In November 2008, the Company entered
into a license agreement with PST to market PSTs existing and future
proprietary PSG (phosphorus silicate glass) dry etch systems for the manufacture
of photovoltaic cells. The royalty-free, 10-year license agreement grants Amtech
exclusive marketing rights throughout the world, with the exception of Korea and
one Japanese customer with respect to which PST retains marketing rights. In
consideration for the licensed rights, the Company paid $0.5 million.

On April 9, 2009, the Company entered
into amendments with PST to both the PSG license and the PECVD license to expand
the licenses to include one future model of the PSG dry etch systems and three
future models of the PECVD system. These amendments to the licenses require the
Company to pay additional license fees upon successful achievement of the agreed
upon specifications of each of the four new models. The four payments range from
three hundred million South Korean Won (KRW), approximately $0.2 million, to one
billion KRW, approximately $0.8 million, for maximum total payments of
approximately $1.4 million. Such payments will be recorded as additional
intangibles, the cost of which will be amortized over the life of the license.
As of September 30, 2009, the Company has not made any payments related to the
amendments of these license agreements.

In October 2007, the Company acquired
the operations of R2D. The intangible assets of R2D consist principally of
intellectual property and technology, customer lists, customer contracts,
trademarks and non-compete agreements totaling $3.0 million. The fair value of
intangible assets was determined by a valuation approach that estimates the
future economic benefit stream of the asset determined with the assistance of an
independent third-party consultant. This benefit stream was then discounted to
present value with an appropriate risk-adjusted discount rate. See Note 12,
Acquisition, for detail of the intangible assets acquired.

The following is a summary of
intangibles:

|                               |                  |  | September 30,          |       | September 30,
|------------------------------ | ---------------- |  | ---------------------- | ----- | -------------
|                               | Useful Life      |  | 2009                   |       | 2008         
|                               |                  |  | (dollars in thousands)
|Trademarks                     | Indefinite       |  | $                      | -     |              
|Non-compete
      agreements   | 8
    years      |  |                        | 178   |              
|Customer lists                 | 10 years         |  |                        | 940   |              
|Technology                     | 10
    years     |  |                        | 1,863 |              
|Licenses                       | 10 years         |  |                        | 1,500 |              
|Other                          | 2-10
      years |  |                        | 96    |              
|                               |                  |  |                        | 4,577 |              
|Accumulated
      amortization |                  |  |                        | (749  | )            
|                               |                  |  | $                      | 3,828 |              

Restricted Cash  Non-current
Restricted cash  non-current as of
September 30, 2008, consisted of cash in an escrow account related to contingent
payments to be paid to the sellers of R2D upon fulfillment of certain
requirements. As of September 30, 2009 all requirements had been fulfilled and
the Company paid $1.1 million to the sellers and accrued the final payment of
$0.5 million. These amounts were allocated to goodwill in fiscal
2009.

52

---

Warranty A limited warranty is provided free of charge, generally for
periods of 12 to 24 months to all purchasers of the Companys new products and
systems. Accruals are recorded for estimated warranty costs at the time revenue
is recognized. The following is a summary of activity in accrued warranty
expense:

|                                   | Years Ended September 30,
|---------------------------------- | -------------------------
|                                   | **2009**                 
|                                   | (dollars in thousands)   
|Beginning balance                  | $                        
|Warranty
      expenditures        |                          
|Assumed liability from acquisition |                          
|Reserve
      Adjustment           |                          
|Ending balance                     | $                        

Research and Development
Expenses- Product development costs are
expensed as incurred.

Shipping expense Shipping expenses of $0.7 million, $1.0 million and $0.3
million for fiscal 2009, 2008 and 2007 are included in selling, general and
administrative expenses.

Foreign Currency Transactions and
Translation The functional currency of the
Companys European operations is the Euro. Net income includes pretax net losses
from foreign currency transactions of $0.1 million in fiscal 2009, 2008 and
2007, respectively. The gains or losses resulting from the translation of
foreign financial statements have been included in other comprehensive income
(loss).

Income Taxes The Company files consolidated federal income tax returns
and computes deferred income tax assets and liabilities based upon cumulative
temporary differences between financial reporting and taxable income,
carryforwards available and enacted tax laws.

Deferred tax assets reflect the tax
effects of temporary differences between the carrying value of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management and based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. Each quarter the valuation allowance is re-evaluated.

Stock-Based Compensation -The Company measures compensation costs
relating to share-based payment transactions based upon the grant-date fair
value of the award. Those costs are recognized as expense over the requisite
service period, which is generally the vesting period. The benefits of tax
deductions in excess of recognized compensation cost are reported as cash flow
from financing activities rather than as cash flow from operating
activities.

Stock-based compensation expense for
the fiscal years ended September 30, 2009, 2008 and 2007 reduced the Companys
results of operations as follows:

|                                         | Years Ended September 30,
|---------------------------------------- | -------------------------
|                                         | 2009                     
|                                         |                          
|Effect on income before income taxes     | $                        
|Effect on net
      income               | $                        
|Effect on basic income per share         | $                        
|Effect on
      diluted income per share | $                        

53

---

Qualified stock options issued under
the terms of the plans have, or will have, an exercise price equal to, or
greater than, the fair market value of the common stock at the date of the
option grant, and expire no later than ten years from the date of grant, with
the most recent grant expiring in 2019. Options vest over 1 to 5 years. The
Company estimates the fair value of awards on the date of grant using the
Black-Scholes option pricing model using the following assumptions:

|                        | Years Ended September 30,
|----------------------- | -------------------------
|                        | 2009                     
|Risk free interest rate | 1.9%                     
|Expected
      life     | 6
    years              
|Dividend rate           | 0%                       
|Volatility              | 66%                      
|Forfeiture rate         | 6%                       

To estimate expected lives for this
valuation, it was assumed that options will be exercised at varying schedules
after becoming fully vested. Forfeitures have been estimated at the time of
grant and will be revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Forfeitures were estimated based upon
historical experience. Fair value computations are highly sensitive to the
volatility factor assumed; the greater the volatility, the higher the computed
fair value of the options granted. The Company uses historical stock prices to
determine the volatility factor.

Fair Value of Financial
Instruments The carrying values of the
Companys current financial instruments approximate fair value due to the short
term in which these instruments mature. The carrying values of the Companys
long-term debt (see Note 5) approximate fair value because their variable
interest rates approximate the prevailing interest rates for similar debt
instruments.

Impact of Recently Issued Accounting
Pronouncements

In October 2009, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2009-13,Revenue RecognitionMultiple
Deliverable Revenue Arrangements. This
guidance updates the existing multiple-element revenue arrangements guidance
currently included in FASB ASC 605-25,Revenue
RecognitionMultipleElement Arrangements.
The revised guidance provides for two significant changes to the existing
multiple element revenue arrangements guidance. The first change relates to the
determination of when the individual deliverables included in a multiple-element
arrangement may be treated as separate units of accounting. The second change
modifies the manner in which the transaction consideration is allocated across
the separately identified deliverables. This guidance also significantly expands
the disclosures required for multiple-element revenue arrangements. The revised
multiple-element revenue arrangements guidance will be effective the fiscal year
ending September 30, 2011, however, early adoption is permitted, provided that
the revised guidance is retroactively applied to the beginning of the year of
adoption. The Company is not planning to adopt this guidance early and the
Company has not yet determined the impact, if any, the adoption of this guidance
will have on its consolidated financial statements.

In August 2009, the FASB issued ASU No.
2009-5Fair Values Measurements and
Disclosures, Measuring Liabilities at Fair Value. The revised authoritative guidance provides clarification for the
valuation of certain liabilities at fair value. This statement becomes effective
for the first reporting period (including interim periods) beginning after
issuance, which is the first quarter of fiscal 2010 for the Company. The Company
does not believe that this guidance will have a material impact on its
consolidated financial statements.

In May 2009, the FASB issued
authoritative guidance included in FASB ASC 855-10Subsequent EventsOverall. The
guidance redefines the types of subsequent events and requires the Company to
disclose the date through which subsequent events have been evaluated. The
requirements are effective for interim or annual financial periods ending after
June 15, 2009. The Company adopted this statement and has included the required
disclosures in Note 14.

In October 2008, the FASB revised the
authoritative guidance for determining the fair value of a financial asset in a
market that is not active. The revisions are included in FASB ASC 320-10-35-55A,Fair Value Measurement and
DisclosuresOverallSubsequent MeasurementFinancial Assets in a Market That is
Not Active. This guidance is effective
immediately and management notes that there is no impact on the Companys
consolidated financial statements.

54

---

In February 2008, the FASB issued
revised authoritative guidance for nonfinancial assets and nonfinancial
liabilities, which defines fair value, establishes a framework for measuring
fair value under GAAP and expands disclosures about fair value measurements. The
guidance is included in FASB ASC 820-10-65,
Fair Value Measurements and DisclosuresOverall-Transition and Open Effective
Date Information. This revised guidance is
effective for fiscal years beginning after December 15, 2008 and interim periods
within those fiscal years, which would be the quarter ending December 31, 2009
for the Company. The Company does not believe that this revised guidance will
have a material impact on its consolidated financial statements.

In December 2007, the FASB revised the
authoritative guidance for business combinations, which establishes principles
and requirements for how the acquirer of a business recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree. This guidance is
included in FASB ASC 805,Business
Combinations. It also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This guidance applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning December 15, 2008, which is October 1, 2009 for the
Company. The Company does not believe that this guidance will have a material
impact on its consolidated financial statements.

2.Stock-Based Compensation

Stock Option PlansThe 2007 Employee Stock Option Plan (the 2007 Plan), under
which 500,000shares could be granted, was adopted by the Board of Directors in April
2007, and approved by the shareholders in May 2007.The 1998 Employee Stock Option Plan (the
1998 Plan), under which 50,000 shares could be granted, was adopted by the
Board of Directors in January 1998, and approved by shareholders in March 1998.
The number of shares available for options under the 1998 Plan has since been
increased to 500,000 shares through authorization by the Board of Directors and
approval of shareholders. The 1998 Plan expired in January 2008. The
Non-Employee Directors Stock Option Plan was approved by the shareholders in
1996 for issuance of up to 100,000 shares of Common Stock to directors. In July
2005, the Board of Directors authorized, and shareholders approved, an increase
in the number of shares available for options under the Non-Employee Directors
Stock Option Plan to 200,000 shares.

Stock options issued under the terms of
the plans have, or will have, an exercise price equal to or greater than the
fair market value of the Common Stock at the date of the option grant and expire
no later than 10 years from the date of grant, with the most recent grant
expiring in 2019. Options issued by the Company vest over one to five years. The
Company may also grant restricted stock awards under the 2007 Plan.

In December 2007, the Company awarded
restricted shares under the existing share-based compensation plans, which vest
in equal annual installments over a four-year period. The total value of these
awards is expensed on a ratable basis over the service period of the employees
receiving the grants. The service period is the time during which the
employees receiving grants must remain employees for the shares granted to fully
vest. As of September 30, 2009, the unamortized expense related to restricted
shares was $0.4 million and it is expected to be recognized over three
years.

55

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Restricted stock transactions and
outstanding are summarized as follows:

|                      | Years Ended September
    30,
|--------------------- | -----------------------------
|                      | 2009                         
|                     
|                      |                              
|                      |                              
|                      |                              
|                      | Awards                       
|Beginning Outstanding | 30,500                       
|Awarded               | 100,000                      
|Released              | (7,625                       
|Forfeited             | -                            
|Ending Outstanding    | 122,875                      

In Fiscal 2009, the Company awarded
30,000 stock options at a price of $5.20 with vesting subject to performance
conditions. Vesting of these options is dependent upon the employee fulfilling
the service period requirements as well as the meeting the performance criteria
within one year from the date of grant and two years from the date of the grant.
The Company is required to assess the probability that the performance
conditions will be met. As of September 30, 2009 the Company expects that it is
probable that the performance conditions will be met and these options are being
expensed over the period from the date of grant through the expected date of the
performance criteria being met. Currently, the Company expects performance
criteria to me met within six months of the grant date and eighteen months of
the grant date. Each quarter, the Company will reassess the probability of
meeting the performance conditions and the period in which they will be met.
Stock compensation expense related to the performance conditions will be
adjusted if necessary.

Stock-based compensation plans are
summarized in the table below:

|                                         |  | Shares     |  | Shares    |  | Options     |  | Plan         
|---------------------------------------- |  | ---------- |  | --------- |  | ----------- |  | -------------
|Name of Plan                             |  | Authorized |  | Available |  | Outstanding |  | Expiration   
|2007 Employee Stock Incentive Plan       |  | 500,000    |  | 91,587    |  | 277,913     |  | Apr. 2017    
|1998 Employee
      Stock Option Plan    |  | 500,000    |  | -         |  | 323,490     |  | Jan.
    2008
|Non-Employee Directors Stock Option Plan |  | 200,000    |  | 32,600    |  | 90,000      |  | Jul. 2015    
|                                         |  |            |  | 124,187   |  | 691,403     |  |              

56

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Stock options were valued using the
Black-Scholes option pricing model. See Note 1 for further discussion. Stock
option transactions and the options outstanding are summarized as follows:

|                                       | Years Ended September
    30,
|-------------------------------------- | -----------------------------
|                                       | 2009                         
|                                       |                              
|                                       |                              
|                                       |                              
|                                       | Options                      
|Outstanding at beginning of period     |                              
|Granted                                |                              
|Exercised                              |                              
|Forfeited/cancelled                    |                              
|Outstanding at end of period           |                              
|                                      
|Exercisable at end of period           |                              
|                                      
|Weighted average grant-date fair value |                              
|of options granted during the period   | $                            

57

---

The following tables summarize
information for stock options outstanding and exercisable as of September 30,
2009:

|                        |  | Options Outstanding
|----------------------- |  | -------------------
|                        |  |                    
|Range of
      Exercise |  | Number             
|Prices                  |  | Outstanding        
|                        |  |                    
|3.01 - 4.00             |  | 188,635            
|4.01 -
      5.00       |  | 15,500             
|5.01 - 6.00             |  | 67,218             
|6.01 -
      7.00       |  | 239,250            
|7.01 - 8.00             |  | 32,000             
|8.01 -
      9.00       |  | 21,000             
|9.01 - 10.00            |  | 10,000             
|10.01 -
      11.00     |  | 12,800             
|11.01 - 15.00           |  | 105,000            
|                        |  | 691,403            
|                       
|Vested and expected     |  |                    
|to vest as of           |  |                    
|September 30, 2009      |  | 635,733            

|                        |  | Options Exercisable |  |                  | 
|----------------------- |  | ------------------- |  | ---------------- | 
|                        |  |                     |  | Remaining        | 
|Range of
      Exercise |  | Number              |  | Contractual      | 
|Prices                  |  | Exercisable         |  | Life             | 
|                        |  |                     |  | (in
      years) | 
|3.01 - 4.00             |  | 3,558               |  | 9.04             | 
|4.01 -
      5.00       |  | 15,500              |  | 3.34             | 
|5.01 - 6.00             |  | 29,610              |  | 6.48             | 
|6.01 -
      7.00       |  | 196,750             |  | 3.89             | 
|7.01 - 8.00             |  | 18,000              |  | 7.39             | 
|8.01 -
      9.00       |  | 13,334              |  | 7.09             | 
|9.01 - 10.00            |  | 10,000              |  | 6.42             | 
|10.01 -
      11.00     |  | 3,206               |  | 8.62             | 
|11.01 - 15.00           |  | 27,919              |  | 8.23             | 
|                        |  | 317,877             |  | 6.58             | 

The aggregate intrinsic value in the
tables above represents the total pretax intrinsic value, based on the Companys
closing stock price of $5.30 per share as of September 30, 2009, which would
have been received by the option holders had all option holders exercised their
options as of that date. The total intrinsic value of stock options exercised
during the fiscal years ended September 30, 2008 and 2007 was $0.6 million and
$0.1 million, respectively. The total intrinsic value of stock options exercised
during the fiscal year ended September 30, 2009 was less than ten thousand
dollars.

58

---

3. Earnings Per Share

Basic earnings per share is computed by
dividing net income (loss) available to common stockholders (net income less
accrued preferred stock dividends) by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share is computed
similarly to basic earnings per share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potentially dilutive common shares had been issued, and the
numerator is based on net income (loss). In the case of a net loss, diluted
earnings per share is calculated in the same manner as basic earnings per share.
Options and restricted stock of approximately 721,500, 160,500 and 196,000
shares are excluded from the fiscal 2009, 2008 and 2007 earnings per share
calculations as they are anti-dilutive.

|                                            | 2009                                                   |        | 2008 |  | 2007
|------------------------------------------- | ------------------------------------------------------ | ------ | ---- |  | ----
|                                            | (dollars in
      thousands, except per share amounts)
|Basic Income (Loss) Per Share Computation   |                                                       
|Net income
      (loss)                     | $                                                      | (1,589 | )    |  | $   
|Weighted Average Shares Outstanding:        |                                                        |        |      |  |     
|Common stock                                |                                                        | 9,019  |      |  |     
|Basic income (loss) per share               | $                                                      | (0.18  | )    |  | $   
|Diluted Income (Loss) Per Share Computation |                                                        |        |      |  |     
|Net income (loss)                           | $                                                      | (1,589 | )    |  | $   
|Weighted Average Shares Outstanding:        |                                                        |        |      |  |     
|Common
      stock                          |                                                        | 9,019  |      |  |     
|Common stock
      equivalents              |                                                        | -      |      |  |     
|Diluted
      shares                        |                                                        | 9,019  |      |  |     
|Diluted income (loss) per share             | $                                                      | (0.18  | )    |  | $   

**4.**Line of
Credit

In the first quarter of fiscal 2009 we
terminated our line of credit in the amount of Euro 1.0 million (approximately
$1.3 million). The line of credit was secured by a lien on the Companys land
and buildings and on trade accounts receivable in The Netherlands. As of
September 30, 2008, there were no borrowingson the line of credit.

5.Other Long-Term Obligations

In December 2004, the Company financed
a laser cutting tool purchased in the fourth quarter of fiscal 2004. The Company
financed $0.5 million at an interest rate of 6.55% with 48 equal monthly
payments of $12,000, including principal and interest. The outstanding principal
balance of this loan was less than $0.1 million as of September 30, 2008. This
loan was paid off in fiscal 2009.

In October 2006, the Company financed a
de-burring machine purchased in the fourth quarter of fiscal 2006. The Company
financed $0.4 million at an interest rate of 7.43% with 60 equal monthly
payments of $7,000, including principal and interest. The outstanding principal
balance of this loan was $0.2 million as of September 30, 2009 and 2008,
respectively.

In October 2007, the Company acquired,
through the acquisition of R2D, a CNC machine purchased in the 3rd quarter of
fiscal 2007. The amount originally financed was $0.1 million at an interest rate
of 5.1% with 60 equal monthly payments of $2,000, including principal and
interest. The outstanding balance at the time of the acquisition was $0.1
million. The outstanding principal balance of this loan was $0.1 million as of
September 30, 2009 and 2008, respectively.

In October 2007, the Company acquired,
through the acquisition of R2D, a CNC machine purchased in the 4th quarter of
fiscal 2007. The amount originally financed was $0.1 million at an interest rate
of 5.2% with 60 equal monthly payments of $2,000, including principal and
interest. The outstanding balance at the time of the acquisition was $0.1
million. The outstanding principal balance of this loan was $0.1 million as of
September 30, 2009 and 2008, respectively.

59

---

Total maturities of long term debt are
$0.1 million in 2010, $0.1 million in 2011, less than $0.1 million in 2012 and
zero, thereafter. Interest expense was $0.1 million, $0.2 million, and $0.3
million for fiscal 2009, 2008, and 2007, respectively.

6.Stockholders Equity

Stock Repurchase
Program In December 2008, the Board of
Directors approved a stock repurchase program authorizing the repurchase of up
to $4 million of its common stock. Under the program, shares may be repurchased
from time to time in open market transactions at prevailing market prices or in
privately negotiated purchases. The timing and actual number of shares purchased
will depend on a variety of factors, such as price, corporate and regulatory
requirements, alternative investment opportunities, and other market and
economic conditions. The program may be commenced, suspended or terminated at
any time, or from time-to-time at managements discretion without prior notice.
During fiscal 2009, the Company repurchased 144,000 shares for $0.4 million in
cash at an average cost of $3.09 per share. The repurchased shares were retired
immediately after the repurchases were complete. Retirement of the repurchased
shares is recorded as a reduction of common stock and additional
paid-in-capital.

Shareholder Rights
Plan On December 15, 2008, the Company and
Computershare Trust Company, N.A., as Rights Agent (the Rights Agent), entered
into an Amended and Restated Rights Agreement (the Restated Rights Agreement)
which amends and restates the terms governing the previously authorized
shareholder rights (each a Right) to purchase fractional shares of the
Companys Series A Participating Preferred Stock (Series A Preferred)
currently attached to each of the Companys outstanding Common Shares, par value
$0.01 per share (Common Shares). As amended, each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series A Preferred at an exercise price of $51.60 (the Exercise Price),
subject to adjustment. The Final Expiration Date (as defined in the Restated
Rights Agreement) is December 14, 2018.

Other than extending the Final
Expiration Date (as defined in the Restated Rights Agreement) of the Rights to
December 14, 2018 and adjusting the Exercise Price, there were no material
changes to the principal terms of the Rights. The Restated Rights Agreement also
contains certain other changes in order to address current law and practice with
respect to shareholder rights plans.

Public Offerings -In November 2007, the Company completed an underwritten public
offering of 2,500,000 shares of its common stock in an underwritten public
offering at a price to the public of $14.41 per share. Net proceeds to the
Company were approximately $33.6 million, net of approximately $0.3 million of
offering expenses and $2.2 million of underwriting commissions. The Company
intends to use the net proceeds from this offering for working capital and other
general corporate purposes. Pending application of these proceeds, the Company
will invest the net proceeds in short-term, interest bearing investment grade
securities.

In February 2007, the Company filed
registration statements on Form S-1 with the Securities and Exchange Commission
for the sale of 2,625,000 shares of its common stock in an underwritten public
offering at a price to the public of $7.05 per share. The Company also granted
the underwriters a 30-day option to purchase up to 393,750 additional shares of
common stock to cover over-allotments. Net proceeds to the Company were
approximately $19.4 million including the exercise of the over-allotment, net of
$0.4 million of offering expenses and $1.5 million of underwriting commissions.

7.Commitments and Contingencies

Purchase Obligations As of September 30, 2009, we had unrecorded purchase
obligations in the amount of $4.7 million. These purchase obligations consist of
outstanding purchase orders for goods and services. While the amount represents
purchase agreements, the actual amounts to be paid may be less in the event that
any agreements are renegotiated, cancelled or terminated.

Legal Proceedings The Company and its subsidiaries are defendants from time to
time in actions for matters arising out of their business operations. The
Company does not believe that any matters or proceedings presently pending will
have a material adverse effect on its consolidated financial position, results
of operations or liquidity.

60

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Operating Leases- The Company leases buildings, vehicles and equipment under
operating leases. Rental expense under such operating leases was $0.9 million in
fiscal 2009, 2008 and 2007, respectively. As of September 30, 2009, future
minimum rental commitments under non-cancelable operating leases with initial or
remaining terms of one year or more totaled $3.4 million, of which $0.7 million,
$0.7 million, $0.4 million, $0.3 million and $0.3 million is payable in fiscal
2010, 2011, 2012, 2013 and 2014, respectively, and $1.0 million, thereafter.

8.Major Customers and Foreign Sales

One customer individually accounted for
16%, 20% and 13% of net revenue during fiscal 2009, 2008 and 2007, respectively.
E-Ton Solar Tech accounted for 16%, 4% and 13% in fiscal 2009, 2008 and 2007. At
the end of fiscal 2009 and 2008, 31% and 40%, respectively, of our backlog
consists of open sales orders and deferred revenue from E-Ton Solar Tech.

Our net revenues for fiscal 2009, 2008
and 2007 were to customers in the following geographic regions:

|                          | Years Ended September
    30,
|------------------------- | -----------------------------
|                          | 2009                         
|United States             | 18                           
|Other                     | 0                            
|Total North
      America | 18                           
|Taiwan                    | 22                           
|China                     | 39                           
|Other                     | 7                            
|**Total
      Asia**      | 68                           
|Germany                   | 5                            
|Other                     | 9                            
|**Total
      Europe**    | 14                           
|                          | 100                          

9.Business Segment Information

The Companys products are classified
into two core business segments. The solar and semiconductor equipment segment
designs, manufactures and markets semiconductor wafer processing and handling
equipment used in the fabrication of integrated circuits, solar cells and MEMS.
Also included in the solar and semiconductor equipment segment are the
manufacturing support service operations and corporate expenses, except for a
small portion that is allocated to the polishing supplies segment. The polishing
supplies segment designs, manufactures and markets carriers, templates and
equipment used in the lapping and polishing of wafer-thin materials, including
silicon wafers used in the production of semiconductors.

61

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Information concerning our business
segments is as follows:

|                                         | Years Ended September
    30,
|---------------------------------------- | -----------------------------
|                                         | 2009                         
|                                         | (dollars in
      thousands) 
|Net revenue:                             |                              
|Solar and semiconductor
      equipment  | $                            
|Polishing
      supplies                 |                              
|                                         | $                            
|                                        
|Operating income (loss):                 |                              
|Solar and
      semiconductor equipment  | $                            
|Polishing
      supplies                 |                              
|                                         |                              
|Interest and other income (expense), net |                              
|Income (loss)
      before income taxes  | $                            
|                                        
|Capital expenditures:                    |                              
|Solar and
      semiconductor equipment  | $                            
|Polishing
      supplies                 |                              
|                                         | $                            
|                                        
|Depreciation and amortization expense:   |                              
|Solar and
      semiconductor equipment  | $                            
|Polishing
      supplies                 |                              
|                                         | $                            

|                                        | As of September
      30,
|--------------------------------------- | -------------------------
|                                        | 2009                     
|Indentifiable assets:                   |                          
|Solar and
      semiconductor equipment | $                        
|Polishing
      supplies                |                          
|                                        | $                        
|                                       
|Goodwill:                               |                          
|Solar and
      semiconductor equipment | $                        
|Polishing
      supplies                |                          
|                                        | $                        

62

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The Company has manufacturing
operations in The Netherlands, United States and France. Revenues, operating
income (loss) and identifiable assets by geographic region are as follows:

|                         | Years Ended September
    30,
|------------------------ | -----------------------------
|                         | 2009                         
|                         | (dollars in
      thousands) 
|Net revenue:             |                              
|The Netherlands          | $                            
|United
      States      |                              
|France                   |                              
|                         | $                            
|                        
|Operating income (loss): |                              
|The
      Netherlands    | $                            
|United
      States      |                              
|France                   |                              
|                         | $                            

|                                     |                           |      
|------------------------------------ | ------------------------- | -----
|                                     | As
      of September 30,
|                                     | 2009                      |      
|Net Long-lived Assets                |                           |      
|(excluding intangibles and goodwill) |                           |      
|The
      Netherlands                | $                         | 6,902
|United
      States                  |                           | 2,182
|France                               |                           | 533  
|                                     | $                         | 9,617

10.Income Taxes

The components of the provision
(benefit) for income taxes are as follows:

63

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|                 |  | Years Ended September
    30
|---------------- |  | ----------------------------
|                 |  | 2009                        
|                 |  | (dollars in thousands)      
|Current:         |  |                             
|Domestic federal |  | $                           
|Foreign          |  |                             
|Domestic state   |  |                             
|                 |  |                             
|                
|Deferred:        |  |                             
|Domestic federal |  |                             
|Foreign          |  |                             
|Domestic state   |  |                             
|                 |  |                             
|                 |  | $                           

A reconciliation of actual income taxes
to income taxes at the expected United States federal corporate income tax rate
of 34 percent is as follows:

|                                                      |  | Years Ended September
    30
|----------------------------------------------------- |  | ----------------------------
|                                                      |  | 2009                        
|                                                      |  | (dollars in thousands)      
|Tax provision (benefit) at the statutory federal rate |  | $                           
|Effect of
      permanent book-tax differences        |  |                             
|State tax provision                                   |  |                             
|Valuation
      allowance for net deferred tax assets |  |                             
|Expiration of foreign net operating loss              |  |                             
|Other
      items                                     |  |                             
|                                                      |  | $                           

Deferred income taxes reflect the tax
effects of temporary differences between the carrying value of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The tax effects of temporary book-tax differences that give rise to
significant portions of the deferred tax assets and deferred tax liability are
as follows:

64

---

|                                                                   |  | Years Ended September 30
|------------------------------------------------------------------ |  | ------------------------
|                                                                   |  | 2009                    
|                                                                   |  | (dollars in thousands)  
|Deferred tax assets - current:                                     |  |                         
|Capitalized inventory
      costs                                  |  | $                       
|Inventory
      write-downs                                        |  |                         
|Accrued Warranty
      Costs                                       |  |                         
|Deferred profit                                                    |  |                         
|Accruals and reserves not
      currently deductible               |  |                         
|                                                                   |  |                         
|Valuation
      allowance                                          |  |                         
|Deferred tax assets - current net of
      valuation allowance     |  | $                       
|                                                                  
|Deferred tax assets (liabilities) - non-current:                   |  |                         
|Stock options
      expense                                        |  | $                       
|Book vs. tax basis of
      acquired assets                        |  |                         
|State net operating
      losses and other deferred tax items      |  |                         
|Book vs. tax depreciation
      and amortization                   |  |                         
|Foreign tax
      credits                                          |  |                         
|Other deferred tax
      assets                                    |  |                         
|                                                                   |  |                         
|Valuation
      allowance                                          |  |                         
|Deferred tax assets - non-current net of
      valuation allowance |  | $                       

Changes in the deferred tax valuation
allowance are as follows:

|                                                      |  | Years Ended September
    30
|----------------------------------------------------- |  | ----------------------------
|                                                      |  | 2009                        
|                                                      |  | (dollars in thousands)      
|Balance at the beginning of the year                  |  | $                           
|Additions
      (subtractions) to valuation allowance |  |                             
|Balance at the end of the year                        |  | $                           

The Company has net operating losses in
some states at September 30, 2009 which expire in varying amounts between 2010
and 2014. These operating losses have been fully reserved in those states where
we determined that we will not be able to utilize those net operating
losses.

The Company has foreign tax credit carryforwards
that expire in varying amounts in 2018 and 2019.

Proper accounting for income taxes
requires that a valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized. Each quarter the valuation allowance is
re-evaluated. Tax payments of $1.7 million were made and tax refunds of $1.5
million were received during fiscal 2009.

65

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We adopted, as of the beginning of
fiscal 2008, the standards required for accounting for uncertainty in income
taxes. Prior to the adoption of these standards, our policy was to establish
reserves that reflected the probable outcome of known tax contingencies. The
effects of final resolution, if any, were recognized as changes to the effective
income tax rate in the period of resolution. The standards adopted at the
beginning of fiscal 2008 require application of a more likely than not
threshold to the recognition and derecognition of uncertain tax positions. We
currently recognize the amount of tax benefit that has a greater than 50 percent
likelihood of being ultimately realized upon settlement. The standards further
require that a change in judgment related to the expected ultimate resolution of
uncertain tax positions be recognized in earnings in the quarter of such
change.

As a result of adoption, we recorded a
$0.3 million increase to tax liabilities, and a $0.3 million decrease to
retained earnings at the beginning of fiscal 2008.

The following table sets forth changes
in our total gross unrecognized tax benefit liabilities for fiscal 2009.
Approximately $0.5 million of this total represents the amount that, if
recognized would favorably affect our effective income tax rate in future
periods.

(dollars inthousands)Balance as of September 30, 2008
    
    $
    440Tax positions related to current year:Additions
    
    
    70Reductions
    
    
    -Tax positions related to prior years:Additions
    
    
    -Reductions
    
    
    -Settlements
    
    
    -Lapses in statues of limitations
    
    
    (30
    )Balance as of
      September 30, 2009
    
    $
    480


We have classified all of our
liabilities for uncertain tax positions as income taxes payable long-term.

We report accrued interest and
penalties related to unrecognized tax benefits in income tax expense. For fiscal
2009, we recognized a net expense for interest and penalties of $0.1 million
resulting in an accrual of $0.1 million for potential accrued interest and
penalties as of September 30, 2009.

We do not expect that the amount of our
tax reserves will materially change in the next 12 months other than the
continued accrual of interest and penalties.

We have not signed any agreements with
the Internal Revenue Service, any state or foreign jurisdiction to extend the
statute of limitations for any fiscal year. As such, the number of open years is
the number of years dictated by statute in each of the respective taxing
jurisdictions, but generally is from 3 to 5 years.

During the current fiscal year, we
recorded a benefit of less than $0.1 million, resulting from the reversal of
liabilities in taxing jurisdictions where the statute of limitations had
expired.

Various examinations by United States,
state or foreign tax authorities could be conducted for any open tax
year.

66

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11.Impairment and
Restructuring Charge

The Bruce Technologies operations are
primarily dependent upon a mature segment of the semiconductor industry which
has been experiencing a significant downturn. The industry downturn resulted in
recent operating losses and deterioration in forecasted revenue and earnings at
Bruce Technologies. It is uncertain when, and to what extent, the markets served
by Bruce Technologies will recover. Therefore, the Bruce Technologies operations
were restructured in the second quarter of fiscal 2009 to focus on the parts
supply business. The restructuring included a reduction in the number of
employees and a reduction in the amount of space required to operate the
business. The restructuring resulted in a charge of $0.6 million, which includes
a $0.3 million charge for unutilized leased space, a $0.2 million write-off of
furnace-related inventory parts that are not expected to be utilized in the
future and $0.1 million of severance and outplacement costs.

Due to the circumstances related to the
Bruce Technologies operations discussed above, the Company determined it was
necessary to conduct an assessment of the ability to recover the carrying amount
of long-lived assets of the Bruce Technologies operations. Recoverability is
based upon the Companys judgments and estimates of undiscounted cash flows
during the estimated remaining useful life of the assets. It was determined that
the carrying value of the net assets subject to amortization or depreciation was
not fully recoverable; therefore, an impairment charge of $0.4 million was
recorded for the excess of carrying value over the fair value of the customer
list and non-compete agreement.

As a result of the impairment of
long-lived assets described above, it was necessary to conduct an interim review
of the goodwill and Bruce Technologies trademark for impairment. The fair value
of the assets group was determined through estimates of the present value of
future cash flows based upon the anticipated future use of the assets. As the
carrying value of the Bruce Technologies assets exceeded their estimated fair
value, the carrying values of goodwill ($0.1 million) and the Bruce Technologies
trademark ($0.6 million) were also recorded as an impairment charge in the
second quarter of fiscal 2009.

The total amount of the impairment
charge was $1.1 million. Details of the impairment charge are as
follows:

Gross
    
    
    
    
    NetCarrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount(dollars in
      thousands)Goodwill
    
    $
    89
    
    $
    -
    
    $
    89Trademark
    
    
    592
    
    
    -
    
    
    592Customer list
    
    
    276
    
    
    87
    
    
    189Non-compete
      agreement
    
    
    350
    
    
    166
    
    
    184Impairment
    Charge
    
    
    
    
    
    
    
    $
    1,054


In the third quarter of fiscal 2008,
Bruce Technologies operations were reorganized to better position the Company
for profitability in light of lower plant utilization resulting from a slowdown
in the semiconductor industry. As a result of this reorganization, the Company
notified certain personnel of their termination date and severance and recorded
a restructuring charge of $0.4 million. All amounts had been paid as of
September 30, 2008. These charges are presented as a separate line item on the
Consolidated Statements of Operations.

12.Acquisition

On October 8, 2007, the Company
acquired, through its wholly-owned subsidiary, Tempress Holding B.V., 100% of
the equity of R2D, a solar cell and semiconductor automation equipment
manufacturing company, located near Montpellier, France. R2D provides solutions
to the solar and semiconductor industries. The purpose of the acquisition was to
expand the Companys automation products which are used in the semiconductor
manufacturing and solar diffusion processes. The acquisition of the technology
and business of R2D enhances the growth strategy by allowing the Company to
increase sales by offering an integrated system under the Tempress brand to the
solar industry.

67

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The aggregate purchase price is based
on the cash consideration paid at closing of $5.5 million plus acquisition costs
of $1.0 million, including cost of legal representation and due diligence.
Contingent payments of $1.6 million to be paid to sellers upon fulfillment of
certain requirements were deposited in an escrow account. Milestone payments of
$1.6 million have been paid or accrued as of September 30, 2009. These payments
were allocated to goodwill. Goodwill increased $0.7 million in fiscal 2009
related to these contingent payments. The assets of R2D principally consist of
intellectual property and technology, reseller relationships, customer
contracts, trademarks, non-compete agreements, inventories and other tangible
property used in connection with the acquired business. Liabilities assumed
include current liabilities, loans, obligations under certain contracts, leases,
purchase orders and warranty claims for certain products and services under
warranty as of the date of the acquisition.

The valuation of acquired assets was
determined with the assistance of an independent third-party consultant. The
fair value of intangible assets was determined by a valuation approach that
estimates the future economic benefit stream of the asset. This benefit stream
was then discounted to present value with an appropriate risk-adjusted discount
rate.

The allocation of the purchase price to
the fair value of the assets acquired and liabilities assumed at the date of
acquisition is as follows (dollars in thousands):

Useful LifeAssets Acquired:Current Assets
    
    $
    4,804Property, plant &
      equipment
    
    
    234Intangible assets:Non-compete
      agreements
    
    
    174
    
    8 yearsCustomer
      lists
    
    
    919
    
    10
    yearsTechnology
    
    
    1,822
    
    10 yearsOther
    
    
    94
    
    2-10
    yearsGoodwill
    
    
    4,311Total
      assets acquired
    
    
    12,358Liabilities Assumed:Current
      Liabilities
    
    
    4,039Long-term
      liabilities
    
    
    204Total
      liabilities assumed
    
    
    4,243Net
      assets acquired
    
    $
    8,115


The following consolidated pro forma
financial information was prepared assuming that the acquisition had occurred at
the beginning of the fiscal 2007. This pro forma information does not
necessarily reflect the results of operations that would have occurred had the
acquisition taken place at the beginning of the period and is not necessarily
indicative of results that may be obtained in the future (unaudited):

For the Year EndedSeptember 30, 2007(dollars in thousands,except per share amounts)Revenues
    
    $
    50,393Net
    income
    
    $
    2,177Net income per share:Basic
    
    $
    0.40Diluted
    
    $
    0.40


68

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For purposes of the above pro forma
presentation, the historical revenues and earnings of R2D for fiscal 2007 have
been combined with the revenues and earnings of Amtech for fiscal
2007.

13. Selected Quarterly Data
(Unaudited)

|                                   |  | First Quarter                            |        | Second Quarter |   | Third Quarter |   | Fourth Quarter
|---------------------------------- |  | ---------------------------------------- | ------ | -------------- | - | ------------- | - | --------------
|Fiscal Year 2009:                  |  | (in thousands, except per share amounts)
|Revenue                            |  | $                                        | 17,872 |                | $ | 10,904        |   |               
|Gross margin                       |  | $                                        | 6,086  |                | $ | 2,357         |   |               
|Net income (loss)                  |  | $                                        | 860    |                | $ | (2,012        | ) |               
|Net income (loss) per
      share: |  |                                          |        |                |   |               |   |               
|Basic                              |  | $                                        | 0.09   |                | $ | (0.22         | ) |               
|Shares
      used in calculation   |  |                                          | 9,098  |                |   | 9,057         |   |               
|Diluted                            |  | $                                        | 0.09   |                | $ | (0.22         | ) |               
|Shares
      used in calculation   |  |                                          | 9,109  |                |   | 9,057         |   |               
|                                  
|Fiscal Year 2008:                  |  | (in thousands, except per share amounts)
|Revenue                            |  | $                                        | 11,741 |                | $ | 17,591        |   |               
|Gross margin                       |  | $                                        | 3,560  |                | $ | 4,127         |   |               
|Net income                         |  | $                                        | 108    |                | $ | 161           |   |               
|Net income per
      share:        |  |                                          |        |                |   |               |   |               
|Basic                              |  | $                                        | 0.01   |                | $ | 0.02          |   |               
|Shares
      used in calculation   |  |                                          | 7,636  |                |   | 9,072         |   |               
|Diluted                            |  | $                                        | 0.01   |                | $ | 0.02          |   |               
|Shares
      used in calculation   |  |                                          | 7,818  |                |   | 9,185         |   |               

14. Subsequent Events

The Company has evaluated subsequent
events for recognition and disclosure through November 24, 2009, the date these
consolidated financial statements on this Form 10-K were filed with the
Securities and Exchange Commission. Through that date, there were no events
requiring adjustment to or disclosure in these consolidated financial
statements.

69

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ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the
Effectiveness of Disclosure Controls and Procedures

Our management, including our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), has carried out
an evaluation of the effectiveness of our disclosure controls and procedures as
defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e). Based upon that
evaluation, our CEO and CFO have concluded that our disclosure controls and
procedures in place were effective as of September 30, 2009.

Managements Report on Internal
Control Over Financial Reporting

To the Shareholders of Amtech Systems,
Inc.,

The management of Amtech Systems, Inc.
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and
15d-15(f). Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.

Because of its inherent limitations,
our controls and procedures may not prevent or detect misstatements. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the controls system are met.
Because of the inherent limitations in all controls systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected.

The management assessed the
effectiveness of our internal control over financial reporting based on the
criteria inInternal Control  Integrated
Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on its evaluation
under the criteria inInternal Control 
Integrated Framework, the management
concluded that our internal control over financial reporting was effective as of
September 30, 2009.

This Annual Report does not include an
attestation report of the Companys registered public accounting firm regarding
internal control over financial reporting. Managements report was not subject
to attestation by the Companys registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only Managements report in this Annual Report.

There were no changes in our internal
controls over financial reporting that occurred during the year ended September
30, 2009, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

70

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PART III

Pursuant to Paragraph G(3) of the
General Instructions to Form 10-K, the information required by Part III of Form
10-K are incorporated by reference to Amtechs Definitive Proxy Statement to be
filed with the Securities and Exchange Commission in connection with its 2010
Annual Meeting of Stockholders (the Proxy Statement).

ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND GOVERNANCE

The information required by this item
is incorporated herein by reference the Proxy Statement, which will be filed
with the Securities and Exchange Commission within 120 days of the end of our
fiscal year.

ITEM 11. EXECUTIVE
COMPENSATION

The information required by this item
is incorporated herein by reference the Proxy Statement, which will be filed
with the Securities and Exchange Commission within 120 days of the end of our
fiscal year.

ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item
is incorporated herein by reference the Proxy Statement, which will be filed
with the Securities and Exchange Commission within 120 days of the end of our
fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item
is incorporated herein by reference the Proxy Statement, which will be filed
with the Securities and Exchange Commission within 120 days of the end of our
fiscal year.

ITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICES

The information required by this item
is incorporated herein by reference the Proxy Statement, which will be filed
with the Securities and Exchange Commission within 120 days of the end of our
fiscal year.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES

|(a)(1) |  | The
      consolidated financial statements required by this item are set forth on
      the pages indicated at Item 8.                                                                                        
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                
|(2)    |  | All financial statement
      schedules are omitted because they are either not applicable, or because
      the required information is shown in the consolidated financial statements
      or notes thereto.
|       |  |                                                                                                                                                                                                                
|(3)    |  | Exhibits: The response
      to this section of Item 15 is included in the Exhibit Index of this Annual
      Report on Form 10-K and is incorporated herein by
  reference.                                   

71

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SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                  | AMTECH SYSTEMS,
  INC.
|----------------- | ----------------------
|                  |                       
|November 24, 2009 | By:                   
|                  |                       
|                  |                       

Pursuant to the requirements of
the Securities Exchange Act of 1934, this report on Form 10-K has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated:

|SIGNATURE                                                                |  | TITLE                                    |  | DATE             
|------------------------------------------------------------------------ |  | ---------------------------------------- |  | -----------------
|*                                                                        |  | Chairman of the
      Board, President   |  | November 24, 2009
|Jong S.
      Whang                                                      |  | and Chief
      Executive Officer        |  |                  
|                                                                         |  | (Principal
      Executive Officer)      |  |                  
|                                                                         |  |                                          |  |                  
|/s/ Bradley C. Anderson                                                  |  | Vice President 
      Finance and Chief |  | November 24, 2009
|Bradley C.
      Anderson                                                |  | Financial
      Officer                  |  |                  
|                                                                         |  | (Principal
      Financial Officer)      |  |                  
|                                                                         |  |                                          |  |                  
|*                                                                        |  | Chief Accounting
      Officer           |  | November 24, 2009
|Robert T.
      Hass                                                     |  | (Principal
      Accounting Officer)     |  |                  
|                                                                         |  |                                          |  |                  
|*                                                                        |  | Director                                 |  | November 24, 2009
|Michael
      Garnreiter                                                 |  |                                          |  |                  
|                                                                         |  |                                          |  |                  
|                                                                        
|*                                                                        |  | Director                                 |  | November 24, 2009
|Robert F.
      King                                                     |  |                                          |  |                  
|                                                                         |  |                                          |  |                  
|                                                                        
|*                                                                        |  | Director                                 |  | November 24, 2009
|Brian L.
      Hoekstra                                                  |  |                                          |  |                  
|                                                                         |  |                                          |  |                  
|                                                                        
|*                                                                        |  | Director                                 |  | November 24, 2009
|Alfred W.
      Giese                                                    |  |                                          |  |                  
|                                                                         |  |                                          |  |                  
|                                                                        
|*                                                                        |  | Director                                 |  | November 24, 2009
|Dr. Jeong Mo
      Hwang                                                 |  |                                          | 
|                                                                         |  |                                          |  |                  
|*By: /s/ Bradley C.
      Anderson                                       |  |                                          |  |                  
|Bradley C. Anderson,
      Attorney-In-Fact**                            |  |                                          |  |                  
|                                                                         |  |                                          |  |                  
|**By authority of the power ofattorney filed as Exhibit 24
      hereto.

72


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EXHIBIT INDEX

|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                 |  | METHOD   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------
|NO.     |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                     |  | OF FILING
|3.1     |  | Articles of Incorporation                                                                                                                                                                                                                                                                                                       |  | A        
|3.2     |  | Articles of Amendment
      to Articles of Incorporation, dated April 27, 1983                                                                                                                                                                                                                                                  |  | A        
|3.3     |  | Articles of Amendment to Articles of Incorporation, dated May 19,
      1987                                                                                                                                                                                                                                                    |  | B        
|3.4     |  | Articles of Amendment
      to Articles of Incorporation, dated May 2, 1988                                                                                                                                                                                                                                                     |  | C        
|3.5     |  | Articles of Amendment to Articles of Incorporation, dated May 28,
      1993                                                                                                                                                                                                                                                    |  | D        
|3.6     |  | Articles of Amendment
      to Articles of Incorporation, dated March 14, 1999                                                                                                                                                                                                                                                  |  | E        
|3.7     |  | Certificate of Designations, Preferences and Privileges of the
      Series A Convertible Preferred Stock, dated April 21, 2005                                                                                                                                                                                                 |  | K        
|3.8     |  | Amended and Restated
      Bylaws                                                                                                                                                                                                                                                                                               |  | F        
|4.1     |  | Amended
      and Restated Rights Agreement as of December 15, 2008, by between Amtech
      systems, Inc. and Computershare Trust Company, N.A., including the form of
      Certificate of Designation, the form of Rights Certificate and the Summary
      of Rights attached thereto as Exhibits A, B and C, respectively. |  | G        
|4.2     |  | Form of Subscription
      Agreement for the Series A Convertible Preferred Stock                                                                                                                                                                                                                                               |  | K        
|+10.1   |  | Amended
      and Restated 1995 Stock Option Plan                                                                                                                                                                                                                                                                               |  | H        
|+10.2   |  | Non-Employee Directors
      Stock Option Plan                                                                                                                                                                                                                                                                                  |  | I        
|+10.3   |  | Amendment to Non-Employee Directors Stock Option Plan effective
      July 8, 2005                                                                                                                                                                                                                                              |  | L        
|+10.4   |  | Employment Agreement
      with Robert T. Hass, dated May 19, 1992                                                                                                                                                                                                                                                              |  | J        
|10.5    |  | Warrant
      to Purchase Common Stock, dated April 22, 2005                                                                                                                                                                                                                                                                    |  | L        
|10.6    |  | Loan and Security
      Agreement (Domestic), dated April 7, 2006, between Silicon Valley Bank and
      the Company.                                                                                                                                                                                                           |  | M        
|10.7    |  | Loan
      and Security Agreement (EXIM), dated April 7, 2006, between Silicon Valley
      Bank and the Company.                                                                                                                                                                                                               |  | M        
|10.8    |  | Export-Import Bank of
      the United States Working Capital Guarantee Program Borrower Agreement,
      dated April 7, 2006.                                                                                                                                                                                                  |  | M        
|10.9    |  | Third
      Amendment to Lease, dated as of August 11, 2006, between Wakefield
      Investments, Inc. and Bruce Technologies, Inc.                                                                                                                                                                                             |  | N        
|+10.10  |  | 2007 Employee Stock
      Incentive Plan                                                                                                                                                                                                                                                                                        |  | O        
|10.11   |  | Sale
      Agreement, dated March 15, 2007, for purchase of manufacturing facility
      Located in Vassen, The Netherlands by Tempress Holdings B.V. from Mr. F.
      H. Van Berlo.                                                                                                                                           |  | P        
|+10.12  |  | Employment Agreement
      with J.S. Whang dated April 13, 2007                                                                                                                                                                                                                                                                 |  | P        
|10.13   |  | Stock
      Purchase and Sale Agreement, by and among Tempress Holdings, B.V., R2D
      Ingenierie SAS and the Shareholders of R2D Ingenierie SAS, dated as of
      October 8, 2007.                                                                                                                                          |  | O        
|+10.24  |  | Change of Control
      Severance Agreement, dated as of March 10, 2008 between Amtech and Bradley
      Anderson.                                                                                                                                                                                                              |  | R        
|21.1    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                  |  | *        
|23.1    |  | Consent of Independent
      Registered Public Accounting Firm - Mayer Hoffman McCann P.C.                                                                                                                                                                                                                                      |  | *        
|24.1    |  | Powers
      of Attorney                                                                                                                                                                                                                                                                                                        |  | *        
|31.1    |  | Certification Pursuant
      to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
      Amended                                                                                                                                                                                                               |  | *        
|31.2    |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934, as Amended                                                                                                                                                                                                                     |  | *        
|32.1    |  | Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002                                                                                                                                                                                              |  | *        
|32.2    |  | Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002                                                                                                                                                                                              |  | *        

73

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| | * |  | Filed herewith.                                                                                                                                                                                                           
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | + |  | Indicates management contract or
      compensatory plan or arrangement.                                                                                                                                                  
| | A |  | Incorporated by reference to
      Amtechs Form S-1 Registration Statement No. 2-83934-LA.                                                                                                                               
| | B |  | Incorporated by reference to
      Amtechs Annual Report on Form 10-K for the year ended September 30, 1987.                                                                                                             
| | C |  | Incorporated by reference to
      Amtechs Annual Report on Form 10-K for the year ended September 30, 1988.                                                                                                             
| | D |  | Incorporated by reference to
      Amtechs Form S-1 Registration Statement (File No. 33-77368).                                                                                                                          
| | E |  | Incorporated by reference to
      Amtechs Annual Report on Form 10-K for the year ended September 30,
      1999.                                                                                                       
| | F |  | Incorporated by reference to
      Amtechs Current Report on Form 8-K filed with the Securities and ExchangeCommission on January 8, 2008.                                                                               
| | G |  | Incorporated by reference to
      Amtechs Current Report on Form 8-K, filed with the Securities and
      Exchange Commission on December 15, 2008.                                                                     
| | H |  | Incorporated by reference to
      Amtechs Form S-8 Registration Statement (related to the Amended and
      Restated 1995 Stock Option Plan), filed with the Securities and Exchange
      Commission on August 9, 1996.
| | I |  | Incorporated by reference to
      Amtechs Form S-8 Registration Statement (related to the Non-Employee
      Director Stock Option Plan), filed with the Securities and Exchange
      Commission on August 9, 1996.    
| | J |  | Incorporated by reference to
      Amtechs Annual Report on Form 10-K for the year ended September 30, 1993.                                                                                                             
| | K |  | Incorporated by reference to
      Amtechs Current Report on Form 8-K filed with the Securities and ExchangeCommission on April 28, 2005.                                                                                
| | L |  | Incorporated by reference to
      Amtechs Annual Report on Form 10-K for the year ended September 30, 2005.                                                                                                             
| | M |  | Incorporated by reference to
      Amtechs Current Report on Form 8-K, filed with the Securities and
      ExchangeCommission on April 12, 2006.                                                                         
| | N |  | Incorporated by reference to
      Amtechs Quarterly Report on Form 10-Q for the quarterly period ended June
      30, 2006.                                                                                             
| | O |  | Incorporated by reference to
      Amtechs Proxy Statement for its 2007 Annual Shareholders Meeting, filed
      with theSecurities and Exchange Commission
      on April 24, 2007.                                    
| | P |  | Incorporated by reference to
      Amtechs Quarterly Report on Form 10-Q for the quarterly period ended
      March 31, 2007.                                                                                            
| | Q |  | Incorporated by reference to
      Amtechs Current Report on Form 8-K filed with the Securities and ExchangeCommission on October 11, 2007.                                                                              
| | R |  | Incorporated by reference to
      Amtechs Current Report on Form 8-K filed with the Securities and Exchange
      Commission on March 11, 2008.                                                                         

74

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