##### Table of Contents



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2003

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 000-22430

ASYST TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


|                                  |  |                                  
|--------------------------------- |  | ---------------------------------
|California                        |  | 94-2942251                       
|(State or other jurisdiction      |  | (IRS Employer identification No.)
|of incorporation or organization) |  |                                  

48761 Kato Road, Fremont, California 94538
(Address of principal executive offices, including zip code)

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

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

Yes [X]   No [   ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [X]   No [   ]

The number of shares of the registrants Common Stock, no par value,
outstanding as of July 31, 2003 was 39,245,636.



---

---





---

TABLE OF CONTENTS



|                               |                                                                                                |                                                      |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part I  FINANCIAL INFORMATION
|                               | Item 1  Financial Statements                                                                 
|                               |                                                                                                | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                               |                                                                                                | CONSOLIDATED STATEMENTS OF OPERATIONS               
|                               |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                               |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                               | Item 2  Managements Discussion and Analysis of Results of Operations and Financial Condition
|                               | Item 3  Quantitative and Qualitative Disclosures About Market Risk                           
|                               | Item 4  Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|                               | Item 1  Legal Proceedings                                                                    
|                               | Item 6  Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                    
|EXHIBIT INDEX                 
|EXHIBIT 31.1                  
|EXHIBIT 31.2                  
|EXHIBIT 32.1                  



---



##### Table of Contents



ASYST TECHNOLOGIES, INC.
TABLE OF CONTENTS

|                              |                                                                                               |                                                                                                      |    |          |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | -- | -------- | - | 
|                              |                                                                                               |                                                                                                      |    | Page No.
|                              |                                                                                               |                                                                                                      |    |         
|Part I. Financial Information |                                                                                               |                                                                                                      |    |         
|                              | Item 1. Condensed Consolidated Financial Statements                                           |                                                                                                      |    |          |  
|                              |                                                                                               | Condensed Consolidated Balance Sheets  June 30, 2003 and March 31, 2003                             |    |          | 3 | 
|                              |                                                                                               | Condensed Consolidated Statements of Operations  Three Months Ended June 30,
2003 and June 30, 2002 |    |          | 4 | 
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows  Three Months Ended June 30,
2003 and June 30, 2002 |    |          | 5 | 
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                 |    |          | 6 | 
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations |                                                                                                      |    | 16       |  
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                      |    | 33       |  
|                              | Item 4. Controls and Procedures                                                               |                                                                                                      |    | 34       |  
|Part II. Other Information    |                                                                                               |                                                                                                      |    |         
|                              | Item 1. Legal Proceedings                                                                     |                                                                                                      |    | 35       |  
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                      |    | 35       |  
|Signatures                    |                                                                                               |                                                                                                      | 37 |         
|Exhibit 31.1                  |                                                                                               |                                                                                                      |    |         
|Exhibit 31.2                  |                                                                                               |                                                                                                      |    |         
|Exhibit 32.1                  |                                                                                               |                                                                                                      |    |         
|Exhibit Index                 |                                                                                               |                                                                                                      |    |         

2



---



##### Table of Contents






Part I  FINANCIAL INFORMATION




Item 1  Financial Statements




ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)

|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |         |  | 
|---------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------------------- | -------- | -------- |  | --------- | -------- | ------- |  | 
|                       |                                                                                                                                    |                                                               |                                                         |          | June 30, |  | March 31,
|                       |                                                                                                                                    |                                                               |                                                         |          | 2003     |  | 2003     
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |          
|                       |                                                                                                                                    |                                                               | ASSETS                                                  |          |          |  |           |          |         |  | 
|CURRENT ASSETS:        |                                                                                                                                    |                                                               |                                                         |          |          |  |           |         
|                       | Cash and cash equivalents                                                                                                          |                                                               | $                                                       | 73,116   |          |  | $         | 96,214   |        
|                       | Restricted cash                                                                                                                    |                                                               |                                                         | 3,178    |          |  |           | 3,088    |        
|                       | Accounts receivable, net of allowance for doubtful accounts of $4,976
and $4,880 at June 30, 2003 and March 31, 2003, respectively |                                                               |                                                         | 69,729   |          |  |           | 74,878   |        
|                       | Inventories                                                                                                                        |                                                               |                                                         | 17,671   |          |  |           | 22,204   |        
|                       | Prepaid expenses and other                                                                                                         |                                                               |                                                         | 12,367   |          |  |           | 10,317   |        
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    | Total current assets                                          |                                                         |          | 176,061  |  |           |          | 206,701 | 
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       | Property and equipment, net                                                                                                        |                                                               |                                                         | 23,381   |          |  |           | 24,295   |        
|                       | Goodwill                                                                                                                           |                                                               |                                                         | 65,876   |          |  |           | 65,505   |        
|                       | Intangible assets, net                                                                                                             |                                                               |                                                         | 71,859   |          |  |           | 76,862   |        
|                       | Other assets                                                                                                                       |                                                               |                                                         | 17,111   |          |  |           | 21,862   |        
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    | Total assets                                                  |                                                         | $        | 354,288  |  |           | $        | 395,225 | 
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    |                                                               | LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITY |          |          |  |           |          |         |  | 
|CURRENT LIABILITIES:   |                                                                                                                                    |                                                               |                                                         |          |          |  |           |         
|                       | Short-term loans and notes payable                                                                                                 |                                                               | $                                                       | 20,183   |          |  | $         | 17,976   |        
|                       | Current portion of long-term debt and finance leases                                                                               |                                                               |                                                         | 1,251    |          |  |           | 1,273    |        
|                       | Accounts payable                                                                                                                   |                                                               |                                                         | 29,877   |          |  |           | 36,527   |        
|                       | Accounts payable-related party                                                                                                     |                                                               |                                                         | 5,115    |          |  |           | 8,500    |        
|                       | Accrued liabilities and other                                                                                                      |                                                               |                                                         | 59,514   |          |  |           | 50,572   |        
|                       | Deferred revenue                                                                                                                   |                                                               |                                                         | 1,595    |          |  |           | 2,130    |        
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    | Total current liabilities                                     |                                                         |          | 117,535  |  |           |          | 116,978 | 
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|LONG-TERM LIABILITIES: |                                                                                                                                    |                                                               |                                                         |          |          |  |           |         
|                       | Long-term debt and finance leases, net of current portion                                                                          |                                                               |                                                         | 114,640  |          |  |           | 114,812  |        
|                       | Deferred tax liability                                                                                                             |                                                               |                                                         | 22,080   |          |  |           | 23,754   |        
|                       | Other long-term liabilities                                                                                                        |                                                               |                                                         | 12,257   |          |  |           | 12,754   |        
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    | Total long-term liabilities                                   |                                                         |          | 148,977  |  |           |          | 151,320 | 
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|MINORITY INTEREST      |                                                                                                                                    |                                                               | 56,707                                                  |          |          |  | 58,893    |         
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|SHAREHOLDERS EQUITY   |                                                                                                                                    |                                                               |                                                         |          |          |  |           |         
|                       | Common stock                                                                                                                       |                                                               |                                                         | 334,027  |          |  |           | 332,569  |        
|                       | Deferred stock-based compensation                                                                                                  |                                                               |                                                         | (3,998   | )        |  |           | (3,992   | )      
|                       | Accumulated deficit                                                                                                                |                                                               |                                                         | (302,624 | )        |  |           | (265,248 | )      
|                       | Accumulated other comprehensive income                                                                                             |                                                               |                                                         | 3,664    |          |  |           | 4,705    |        
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    | Total shareholders equity                                    |                                                         |          | 31,069   |  |           |          | 68,034  | 
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        
|                       |                                                                                                                                    | Total liabilities, minority interest and shareholders equity |                                                         | $        | 354,288  |  |           | $        | 395,225 | 
|                       |                                                                                                                                    |                                                               |                                                         |          |          |  |           |          |        

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

3



---



##### Table of Contents






ASYST TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)

|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                    |         |        |        |  
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------ | --------------------------- | ------------------------------------------ | ------- | ------------------ | ------- | ------------------ | ------- | ------ | ------ | -
|                                                             |  |                                                                                      |                             |                                            |         | Three Months Ended |         | Three Months Ended
|                                                             |  |                                                                                      |                             |                                            |         | June 30,           |         | June 30,          
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  |                                                                                      |                             |                                            |         | 2003               |         | 2002              
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|NET SALES                                                    |  | $                                                                                    | 45,268                      |                                            |         | $                  | 51,865  |                   
|COST OF SALES                                                |  |                                                                                      | 40,824                      |                                            |         |                    | 35,310  |                   
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  | Gross profit                                                                         |                             |                                            | 4,444   |                    |         |                    | 16,555  |       
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|OPERATING EXPENSES:                                          |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  | Research and development                                                             |                             |                                            | 9,624   |                    |         |                    | 10,292  |       
|                                                             |  | Selling, general and administrative                                                  |                             |                                            | 17,605  |                    |         |                    | 16,539  |       
|                                                             |  | Amortization of acquired intangible assets                                           |                             |                                            | 4,785   |                    |         |                    | 1,650   |       
|                                                             |  | Restructuring charges                                                                |                             |                                            | 4,363   |                    |         |                    |        |       
|                                                             |  | Asset impairment charges                                                             |                             |                                            | 6,853   |                    |         |                    |        |       
|                                                             |  | In-process research and development of acquired business                             |                             |                                            |        |                    |         |                    | 2,500   |       
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  |                                                                                      |                             | Total operating expenses                   |         |                    | 43,230  |                    |         |        | 30,981 |  
|                                                             |  | Operating loss                                                                       |                             |                                            | (38,786 | )                  |         |                    | (14,426 | )     
|OTHER INCOME (EXPENSE):                                      |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  | Interest income and other income (expense)                                           |                             |                                            | 749     |                    |         |                    | (408    | )     
|                                                             |  | Interest expense                                                                     |                             |                                            | (1,674  | )                  |         |                    | (1,297  | )     
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  |                                                                                      | Other income (expense), net |                                            |         | (925               | )       |                    |         | (1,705 | )     
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  | Loss before benefit from income taxes,
minority interest and discontinued operations |                             |                                            | (39,711 | )                  |         |                    | (16,131 | )     
|BENEFIT FROM INCOME TAXES                                    |  |                                                                                      | (1,380                      | )                                          |         |                    | (4,033  | )                 
|MINORITY INTEREST                                            |  |                                                                                      | (955                        | )                                          |         |                    |        |                   
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|LOSS FROM CONTINUING OPERATIONS                              |  |                                                                                      | (37,376                     | )                                          |         |                    | (12,098 | )                 
|DISCONTINUED OPERATIONS, net of income tax                   |  |                                                                                      |                            |                                            |         |                    | (1,360  | )                 
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|NET LOSS                                                     |  | $                                                                                    | (37,376                     | )                                          |         | $                  | (13,458 | )                 
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|BASIC AND DILUTED LOSS PER SHARE:                            |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  |                                                                                      |                             | Continuing operations                      |         | $                  | (0.97   | )                  |         | $      | (0.33  | )
|                                                             |  |                                                                                      |                             | Discontinued operations, net of income tax |         |                    |        |                    |         |        | (0.04  | )
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|                                                             |  |                                                                                      |                             | Net loss                                   |         | $                  | (0.97   | )                  |         | $      | (0.37  | )
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   
|SHARES USED IN THE PER SHARE CALCULATION  basic and diluted |  |                                                                                      | 38,475                      |                                            |         |                    | 36,565  |                   
|                                                             |  |                                                                                      |                             |                                            |         |                    |         |                   

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

4



---



##### Table of Contents






ASYST TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |         |   |        |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------- | ------------------------------------- | ------ | ------------------ | ------- | -------- | ------- | - | ------ | -
|                                                             |                                                                                           |                                                            |         |                                       |        | Three Months Ended
|                                                             |                                                                                           |                                                            |         |                                       |        | June 30,           |         | June 30,
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |         
|                                                             |                                                                                           |                                                            |         |                                       |        | 2003               |         | 2002    
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                                           |                                                            |         |                                       |        |                    |         |         
|                                                             | Net loss                                                                                  |                                                            | $       | (37,376                               | )      |                    | $       | (13,458  | )      
|                                                             |                                                                                           | Less: Loss from discontinued operations                    |         |                                       |       |                    |         |          | 1,360   |  
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|                                                             | Net loss from continuing operations                                                       |                                                            |         | (37,376                               | )      |                    |         | (12,098  | )      
|                                                             | Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |                                                            |         |                                       |        |                    |         |          |        
|                                                             |                                                                                           | Depreciation and amortization                              |         |                                       | 7,441  |                    |         |          | 5,077   |  
|                                                             |                                                                                           | Asset impairment charges                                   |         |                                       | 6,853  |                    |         |          |        |  
|                                                             |                                                                                           | Minority interest in net loss in consolidated subsidiary   |         |                                       | (955   | )                  |         |          |        |  
|                                                             |                                                                                           | Stock-based compensation                                   |         |                                       | 595    |                    |         |          | 383     |  
|                                                             |                                                                                           | Provision for doubtful accounts                            |         |                                       |       |                    |         |          | (276    | )
|                                                             |                                                                                           | Provision for excess inventories                           |         |                                       | 2,098  |                    |         |          |        |  
|                                                             |                                                                                           | In-process research and development of acquired business   |         |                                       |       |                    |         |          | 2,500   |  
|                                                             | Changes in assets and liabilities, net of acquisitions:                                   |                                                            |         |                                       |        |                    |         |          |        
|                                                             |                                                                                           | Accounts receivable                                        |         |                                       | 5,969  |                    |         |          | (9,637  | )
|                                                             |                                                                                           | Inventories                                                |         |                                       | 2,750  |                    |         |          | 4,912   |  
|                                                             |                                                                                           | Prepaid expenses and other assets                          |         |                                       | (3,297 | )                  |         |          | (5,006  | )
|                                                             |                                                                                           | Accounts payable, accrued liabilities and deferred revenue |         |                                       | (5,281 | )                  |         |          | 9,536   |  
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|                                                             |                                                                                           |                                                            |         | Net cash used in operating activities |        |                    | (21,203 | )        |         |   | (4,609 | )
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                           |                                                            |         |                                       |        |                    |         |         
|                                                             | Purchase of short-term investments                                                        |                                                            |         |                                      |        |                    |         | (9,000   | )      
|                                                             | Sale or maturity of short-term investments                                                |                                                            |         |                                      |        |                    |         |         |        
|                                                             | Purchase of restricted cash and cash equivalents and short-term investments               |                                                            |         | (90                                   | )      |                    |         | (12,500  | )      
|                                                             | Sale or maturity of restricted cash and cash equivalents and short-term investments       |                                                            |         |                                      |        |                    |         | 13,394   |        
|                                                             | Purchase of property and equipment                                                        |                                                            |         | (1,239                                | )      |                    |         | (3,627   | )      
|                                                             | Net cash used in acquisitions                                                             |                                                            |         | (1,165                                | )      |                    |         |         |        
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|                                                             |                                                                                           | Net cash used in investing activities                      |         |                                       | (2,494 | )                  |         |          | (11,733 | )
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|CASH FLOW FROM FINANCING ACTIVITIES:                         |                                                                                           |                                                            |         |                                       |        |                    |         |         
|                                                             | Proceeds from line of credit                                                              |                                                            |         |                                      |        |                    |         | 1,890    |        
|                                                             | Net proceeds from short-term loans                                                        |                                                            |         | 2,013                                 |        |                    |         |         |        
|                                                             | Net proceeds from long-term debt and finance leases                                       |                                                            |         |                                      |        |                    |         | 106      |        
|                                                             | Issuance of common stock                                                                  |                                                            |         | 857                                   |        |                    |         | 3,303    |        
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|                                                             |                                                                                           | Net cash provided by financing activities                  |         |                                       | 2,870  |                    |         |          | 5,299   |  
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                           |                                                            | (2,271  | )                                     |        |                    | 456     |         
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|Net cash used in continuing operations                       |                                                                                           |                                                            | (23,098 | )                                     |        |                    | (10,587 | )       
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|Net cash provided by discontinued operations                 |                                                                                           |                                                            |        |                                       |        |                    | 698     |         
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|DECREASE IN CASH AND CASH EQUIVALENTS                        |                                                                                           |                                                            | (23,098 | )                                     |        |                    | (9,889  | )       
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               |                                                                                           |                                                            | 96,214  |                                       |        |                    | 74,577  |         
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                     |                                                                                           | $                                                          | 73,116  |                                       |        | $                  | 64,688  |         
|                                                             |                                                                                           |                                                            |         |                                       |        |                    |         |          |        

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

5



---



##### Table of Contents






ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. ORGANIZATION OF THE COMPANY:

The accompanying condensed consolidated financial statements include the
accounts of Asyst Technologies, Inc., Asyst, which was incorporated in
California on May 31, 1984, our subsidiaries and our majority-owned joint
venture. We develop, manufacture, sell and support integrated automation
systems, primarily for the semiconductor and secondarily for the flat panel
display, or FPD, manufacturing industries. Our systems are designed to enable
semiconductor and FPD manufacturers to increase their manufacturing
productivity and protect their investment in fragile materials and
work-in-process.

In April 2003, our majority-owned joint venture, Asyst Shinko, Inc., or
ASI, acquired the portion of Shinko Technologies, Inc. that provides ongoing
support to ASIs North American Automated Material Handling Systems, or AMHS,
customers from Shinko Electric, Inc. ASI renamed this subsidiary Asyst Shinko
America, or ASAM.

In October 2002, we purchased a 51 percent interest in ASI, a Japanese
corporation.

In May 2002, Asyst Connectivity Technologies, Inc., or ACT, our
wholly-owned subsidiary, purchased substantially all of the assets of
domainLogix Corporation, or DLC, a Delaware corporation.

The above transactions were accounted for using the purchase method of
accounting. Accordingly, our Condensed Consolidated Statements of Operations
and of Cash Flows for the periods ended June 30, 2003 and June 30, 2002 include
the results of these acquired entities for the periods subsequent to their
respective acquisitions, as applicable. We consolidate fully the financial
position and results of operations of ASI and account for the minority interest
in the condensed consolidated financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES:

Basis of Preparation

While the financial information furnished is unaudited, the condensed
consolidated financial statements included in this report reflect all
adjustments (consisting of normal recurring accruals) which we consider
necessary for the fair presentation of the results of operations for the
interim periods covered and of our financial condition at the date of the
interim balance sheet. All significant intercompany accounts and transactions
have been eliminated. Minority shareholders interest represents the minority
shareholders proportionate share of the net assets and results of operations
of our majority-owned joint venture, ASI. Certain prior year amounts in the
condensed consolidated financial statements and the notes thereto have been
reclassified where necessary to conform to the quarter ended June 30, 2003. We
close our books on the last Saturday of each quarter and thus the actual date
of the quarter-end, June 28, 2003, is different from the month-end dates used
throughout this Form 10-Q report. The results for interim periods are not
necessarily indicative of the results for the entire year. The condensed
consolidated financial statements should be read in connection with our
consolidated financial statements for the year ended March 31, 2003 included in
our Annual Report on Form 10-K. The Advanced Machine Programming, Inc., or
AMP, and SemiFab, Inc., or SemiFab, businesses were sold in March 2003 and were
accounted for as discontinued operations and therefore, the results of
operations and cash flows have been removed from our results of continuing
operations for all periods presented.

New Accounting Standards

In November 2002 the Emerging Issues Task Force, or EITF, reached a
consensus on EITF Issue No. 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables (EITF Issue No. 00-21). EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. We are currently
assessing the impact of

6



---



##### Table of Contents



EITF Issue No. 00-21 on our consolidated financial statements.

In January 2003 the Financial Accounting Standards Board, or FASB, issued
FIN No. 46, Consolidation of Variable Interest Entities, an Interpretation of
ARB No. 51, or FIN No. 46. FIN No. 46 requires certain variable interest
entities to be consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 is effective immediately for all new variable
interest entities created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1, 2003, the provisions
of FIN No. 46 must be applied for the first interim or annual period beginning
after June 15, 2003. The adoption of FIN No. 46 to date has not had a
significant impact on our consolidated financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity, or SFAS No. 150. SFAS No. 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those instruments were
previously classified as equity. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first fiscal period beginning after June 15,
2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of
a change in an accounting principle for financial instruments created before
the issuance date of SFAS No. 150 and still existing at the beginning of the
interim period of adoption. Restatement is not permitted. We believe that the
adoption of this standard will have no material impact on our consolidated
financial statements.

Restricted Cash

Restricted
cash represents amounts that are restricted
as to its use in accordance with Japanese debt agreements.

Inventories

Inventories consist of the following (in thousands):

|                                   |       |   |          |        |           |   |        |        | 
|---------------------------------- | ----- | - | -------- | ------ | --------- | - | ------ | ------ | 
|                                   |       |   | June 30, |        | March 31,
|                                   |       |   | 2003     |        | 2003     
|                                   |       |   |          |        |          
|Raw materials                      |       | $ | 12,129   |        |           | $ | 8,448  |       
|Work-in-process and finished goods |       |   | 5,542    |        |           |   | 13,756 |       
|                                   |       |   |          |        |           |   |        |       
|                                   | Total |   | $        | 17,671 |           |   | $      | 22,204 | 
|                                   |       |   |          |        |           |   |        |       

During the year ended March 31, 2003, we outsourced the majority of our
remaining manufacturing to Solectron Corporation, or Solectron. As part of the
arrangement, Solectron purchased $20 million of inventory from us. No revenue
was recorded for the sale of this inventory to Solectron. In October 2003, we
may be obligated to repurchase any of this inventory that is not used by
Solectron in manufacturing our products. On an on-going basis, we may be
obligated to acquire inventory purchased by Solectron based on our forecasts
and not used timely under terms of the outsourcing agreement. As of June 30,
2003, our best estimate of the inventory expenses for our obligation to
repurchase inventory at Solectron has been accrued.

7



---



##### Table of Contents



Goodwill and Intangible Assets, net

Intangible assets subject to amortization are being amortized over the
following estimated useful lives using the straight-line method: purchased
technology, four to eight years; customer lists and other intangible assets,
five to ten years; and licenses and patents, ten years. No changes were made to
the useful lives of amortizable intangible assets in connection with the
adoption of SFAS No. 142. For the ASI acquisition in October 2002, a goodwill
of $62.6 million was recorded. In connection with the ASAM acquisition in
April 2003, ASI recorded goodwill of $0.4 million.

We completed an annual goodwill impairment test in third quarter of fiscal
2003. The first step of the test identifies when impairment may have occurred,
while the second step of the test measures the amount of the impairment, if
any. As a result of the test, a goodwill impairment expense of $2.1 million
was recognized. To determine the amount of the impairment, we estimated the
fair value of our reporting segments that contained goodwill (based primarily
on expected future cash flows), reduced the amount by the fair value of
identifiable intangible assets other than goodwill (also based primarily on
expected future cash flows), and then compared the unallocated fair value of
the business to the carrying value of goodwill. To the extent goodwill
exceeded the unallocated fair value of the business, an impairment expense was
recognized. In connection with the annual impairment analysis for goodwill, we
assessed the recoverability of the intangible assets subject to amortization in
accordance with SFAS No. 144. During fiscal 2003, an impairment expense of
$6.2 million was recognized for acquired technology and $0.1 million was
recognized for customer base, based upon our projection of significantly
reduced future cash flows of ACT.

Goodwill and intangible assets were as follows (in thousands):

|                               |                                            |       |   |               |        |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |        |        | 
|------------------------------ | ------------------------------------------ | ----- | - | ------------- | ------ | -------------- | - | ------ | ------ | ------ | - | ------------ | ------ | ----------- | - | ------ | ------ |  | - | ----- | ------ |  | - | ------ | ------ | 
|                               |                                            |       |   | June 30, 2003 |        | March 31, 2003
|                               |                                            |       |   |               |        |               
|                               |                                            |       |   | Gross         |        |                |   |        |        |        |   |              |        | Gross       |   |        |        |  |   |       |        | 
|                               |                                            |       |   | Carrying      |        | Accumulated    |   |        |        |        |   | Carrying     |        | Accumulated |   |        |        | 
|                               |                                            |       |   | Amount        |        | Amortization   |   | Net    |        | Amount |   | Amortization |        | Net        
|                               |                                            |       |   |               |        |                |   |        |        |        |   |              |        |            
|Amortizable intangible assets: |                                            |       |   |               |        |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |       
|                               | Developed technology                       |       | $ | 57,294        |        |                | $ | 12,740 |        |        | $ | 44,554       |        |             | $ | 57,294 |        |  | $ | 9,963 |        |  | $ | 47,331 |       
|                               | Customer lists and other
intangible assets |       |   | 32,691        |        |                |   | 10,914 |        |        |   | 21,777       |        |             |   | 32,691 |        |  |   | 8,920 |        |  |   | 23,771 |       
|                               | Licenses and patents                       |       |   | 7,654         |        |                |   | 2,126  |        |        |   | 5,528        |        |             |   | 7,770  |        |  |   | 2,010 |        |  |   | 5,760  |       
|                               |                                            |       |   |               |        |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |        |       
|                               |                                            | Total |   | $             | 97,639 |                |   | $      | 25,780 |        |   | $            | 71,859 |             |   | $      | 97,755 |  |   | $     | 20,893 |  |   | $      | 76,862 | 
|Unamortized intangible assets: |                                            |       |   |               |        |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |       
|                               | Goodwill                                   |       | $ | 65,876        |        |                | $ |       |        |        | $ | 65,876       |        |             | $ | 65,505 |        |  | $ |      |        |  | $ | 65,505 |       

Amortization expense was $4.8 million for the quarter ended June 30, 2003
and $1.7 million for the quarter ended June 30, 2002.

Expected future intangible amortization expense, based on current
balances, for the remainder of fiscal 2004 and for the following fiscal years
is as follows (in thousands):

|              |                   |  |   |        | 
|------------- | ----------------- |  | - | ------ | 
|Fiscal Years: |                   |  |   |       
|              | Remainder of 2004 |  | $ | 14,961 | 
|              | 2005              |  |   | 19,746 | 
|              | 2006              |  |   | 18,746 | 
|              | 2007              |  |   | 14,325 | 
|              | 2008 and beyond   |  |   | 4,081  | 

8



---



##### Table of Contents



The changes in the carrying amount of goodwill for the quarter ended June
30, 2003 are as follows (in thousands):

|                             |  |                |       |      |  |       |        |   |  |   |        |  
|---------------------------- |  | -------------- | ----- | ---- |  | ----- | ------ | - |  | - | ------ | -
|                             |  | Fab Automation |       | AMHS |  | Total
|                             |  |                |       |      |  |      
|Balance at March 31, 2003    |  | $              | 2,954 |      |  | $     | 62,551 |   |  | $ | 65,505 |  
|Acquisitions                 |  |                |      |      |  |       | 376    |   |  |   | 376    |  
|Foreign currency translation |  |                |      |      |  |       | (5     | ) |  |   | (5     | )
|                             |  |                |       |      |  |       |        |   |  |   |        |  
|Balance at June 30, 2003     |  | $              | 2,954 |      |  | $     | 62,922 |   |  | $ | 65,876 |  
|                             |  |                |       |      |  |       |        |   |  |   |        |  

Warranty Reserve

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

|                                                 |  |        |        |  
|------------------------------------------------ |  | ------ | ------ | -
|                                                 |  | Amount
|                                                 |  |       
|Balance at March 31, 2003                        |  | $      | (7,561 | )
|Accruals for warranties issued during the period |  |        | 406    |  
|Settlements made (in cash or in kind)            |  |        | (1,148 | )
|                                                 |  |        |        |  
|Balance, June 30, 2003                           |  | $      | (6,819 | )
|                                                 |  |        |        |  

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists,
delivery has occurred or service has been rendered, the sellers price is fixed
or determinable and collectibility is reasonably assured. Some of our products
are large volume consumables that are tested to industry and/or customer
acceptance criteria prior to shipment. Our primary shipping terms are FOB
shipping point. Therefore, revenue for these types of products is recognized
when title transfers. Certain of our product sales are accounted for as
multiple-element arrangements. If we have met defined customer acceptance
experience levels with both the customer and the specific type of equipment, we
recognize the product revenue at the time of shipment and transfer of title,
with the remainder when the other elements, primarily installation, have been
completed. Some of our other products are highly customized systems and cannot
be completed or adequately tested to customer specifications prior to shipment
from the factory. We do not recognize revenue for these products until formal
acceptance by the customer. Revenue for spare parts sales is recognized on
shipment. Deferred revenue consists primarily of product shipments creating
legally enforceable receivables that did not meet our revenue recognition
policy in compliance with SAB 101. Revenue related to maintenance and service
contracts is recognized ratably over the duration of the contracts. Unearned
maintenance and service contract revenue is not significant and is included in
accrued liabilities and other.

We recognize revenue for long-term contracts at ASI in accordance with the
American Institute of Certified Public Accountants Statement of Position 81-1,
Accounting for Performance of Construction-Type and Certain Production-Type
Contracts. We use the percentage of completion method to calculate revenue
and related costs of these contracts because they are long-term in nature and
estimates of cost to complete and extent of progress toward completion of
long-term contracts are available and reasonably dependable. We record revenue
each period based on the percentage of completion to date on each contract,
measured by costs incurred to date relative to the total estimated costs of
each contract. We treat contracts as substantially complete when we receive
technical acceptance of our work by the customer. We intend to disclose
material changes in our financial results that result from changes in
estimates. Under this accounting policy, we are obligated to recognize
revenues on work-in-process inventory prior to invoicing, and in some instances
prior to shipment to the customer. Receivable balances that have not yet been
invoiced to the customer, but where revenue has been recognized, were $25.6
million and $17.4 million at June 30, 2003 and March 31, 2003, respectively,
and are included in accounts receivable on the condensed consolidated balance
sheets.

We account for software revenue in accordance with the American Institute
of Certified Public Accountants Statement of Position 97-2, Software Revenue
Recognition. Revenue for integration software work is recognized on a
percentage of completion basis. Software license revenue, which is not
material to the consolidated financial

9



---



##### Table of Contents



statements, is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the selling price is fixed or determinable and
collectibility is reasonably assured.

Contract Loss Reserve

We routinely evaluate the contractual commitments with our customers and
suppliers to determine if it is probable that a loss exists that can be
estimated in fulfillment of the contractual commitment. If so, a loss reserve
is recorded and included in accrued liabilities and other. We recorded loss
reserves from ASI totaling approximately $2.0 million for contracts entered
into prior to the acquisition date. These loss reserves are included in the
purchase accounting for ASI. We had a loss reserve of approximately $2.0
million both at June 30, 2003 and March 31, 2003.

Loss Per Share

Basic earnings per share is computed using the weighted average number of
common shares outstanding, while diluted earnings per share is computed using
the sum of the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares used in the computation of diluted
earnings per share result from the assumed exercise of stock options and
warrants, using the treasury stock method and the conversion of the redeemable
convertible preferred stock. For periods for which there is a net loss, the
number of shares used in the computation of diluted earnings (loss) per share
are the same as those used for the computation of basic earnings (loss) per
share as the inclusion of dilutive securities would be anti-dilutive.

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

|                  |       |  |                    |       |      |  |       |       | 
|----------------- | ----- |  | ------------------ | ----- | ---- |  | ----- | ----- | 
|                  |       |  | Three Months Ended
|                  |       |  | June 30,          
|                  |       |  |                   
|                  |       |  | 2003               |       | 2002
|                  |       |  |                    |       |     
|Restricted stock  |       |  | 53                 |       |      |  | 43    |      
|Stock options     |       |  | 694                |       |      |  | 1,881 |      
|Convertible notes |       |  | 5,682              |       |      |  | 5,682 |      
|                  |       |  |                    |       |      |  |       |      
|                  | Total |  |                    | 6,429 |      |  |       | 7,606 | 
|                  |       |  |                    |       |      |  |       |      

Comprehensive Loss

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

|                                         |  |                    |         |      |  |   |         |  
|---------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | -
|                                         |  | Three Months Ended
|                                         |  | June 30,          
|                                         |  | 2003               |         | 2002
|                                         |  |                    |         |     
|Net loss, as reported                    |  | $                  | (37,376 | )    |  | $ | (13,458 | )
|Foreign currency translation adjustments |  |                    | (1,041  | )    |  |   | (6,391  | )
|                                         |  |                    |         |      |  |   |         |  
|Comprehensive loss                       |  | $                  | (38,417 | )    |  | $ | (19,849 | )
|                                         |  |                    |         |      |  |   |         |  

Stock-Based Compensation

We account for employee stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion, or APB,
No. 25, Accounting for Stock Issued to Employees, and Financial Accounting
Standards Board Interpretation, or FIN, No. 44, Accounting for Certain
Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25, and comply with the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
and SFAS No. 148, Accounting for Stock Based Compensation  Transition and
Disclosure  an amendment of FAS No. 123. Under APB No. 25, compensation
expense is based on

10



---



##### Table of Contents



the difference, if any, on the date of grant, between the
estimated fair value of our common stock and the exercise price. SFAS No. 123
defines a fair value based method of accounting for an employee stock option or
similar equity instrument.

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

Had compensation expense for our stock options, employee stock purchase
plan and the restricted stock issuances to employees been determined based on
the fair value at the grant date for the awards, our net loss for the three
months ended June 30, 2003 and 2002 would have increased as indicated below (in
thousands, except per share amounts):

|                                                                                                |  |                             |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ---- |  | - | ------- | -
|                                                                                                |  | Three Months Ended June 30,
|                                                                                                |  |                            
|                                                                                                |  | 2003                        |         | 2002
|                                                                                                |  |                             |         |     
|Net loss  as reported                                                                          |  | $                           | (37,376 | )    |  | $ | (13,458 | )
|Add: stock-based compensation expense included in reported
net loss                             |  |                             | 595     |      |  |   | 383     |  
|Less: stock-based compensation expenses determined under
fair value based method for all awards |  |                             | (3,705  | )    |  |   | (4,774  | )
|                                                                                                |  |                             |         |      |  |   |         |  
|Net loss  pro forma                                                                            |  | $                           | (40,486 | )    |  | $ | (17,849 | )
|                                                                                                |  |                             |         |      |  |   |         |  
|Basic and diluted net loss per share  as reported                                              |  | $                           | (0.97   | )    |  | $ | (0.37   | )
|                                                                                                |  |                             |         |      |  |   |         |  
|Basic and diluted net loss per share  pro forma                                                |  | $                           | (1.05   | )    |  | $ | (0.49   | )
|                                                                                                |  |                             |         |      |  |   |         |  

3. RESTRUCTURING CHARGES:

Restructuring charges and related utilization for the quarter ended June
30, 2003 were (in thousands):

|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|---------------------------- |  | --------- | ------ | ---------- |  | ----------- | ----- | ----- |  | - | ---- | - |  | - | ------ | -
|                             |  | Severance |        |            |  |             |       |       |  |   |      |   |  |  
|                             |  | and       |        | Excess     |  | Fixed Asset |       |       |  |  
|                             |  | Benefits  |        | Facilities |  | Impairment  |       | Total
|                             |  |           |        |            |  |             |       |      
|Balance, March 31, 2003      |  | $         | 291    |            |  | $           | 3,617 |       |  | $ | 192  |   |  | $ | 4,100  |  
|Additional accruals          |  |           | 3,448  |            |  |             | 869   |       |  |   | 46   |   |  |   | 4,363  |  
|Non-cash related utilization |  |           |       |            |  |             | (29   | )     |  |   | (205 | ) |  |   | (234   | )
|Amounts paid in cash         |  |           | (3,269 | )          |  |             | (250  | )     |  |   | (33  | ) |  |   | (3,552 | )
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|Balance, June 30, 2003       |  | $         | 470    |            |  | $           | 4,207 |       |  | $ |     |   |  | $ | 4,677  |  
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  

We incurred restructuring charges of $4.4 million during the quarter ended
June 30, 2003, consisting primarily of severance costs from a reduction in
workforce in April 2003. As a result of these restructuring activities, we
terminated the employment of approximately 196 employees, including 80 in
manufacturing, 34 in research and development and 82 in selling, general and
administration, from our domestic operations as well as international
operations. Additionally, we incurred a charge for future lease obligations on
a vacated facility in excess of estimated future sublease proceeds. We
anticipate additional restructuring charges during the second and third
quarters of fiscal 2004 as we complete the workforce reductions and outsourcing
of manufacturing in Japan.

We expect to utilize the remaining balance, primarily unused leased
facilities, over the following three fiscal years. All remaining accrual
balances are expected to be settled in cash.

11



---



##### Table of Contents



4. ASSET IMPAIRMENT CHARGES:

We own land in Fremont, California, which we are currently marketing for
sale. We had intended to construct corporate headquarters facilities on the
land and subsequently decided not to build these facilities. In the first
quarter of fiscal 2004 we recorded a $6.9 million write-down based on our
latest estimate of market value as supported by a pending sale agreement. The
prospective buyer deposited $1.0 million of the purchase price in July 2003,
and these proceeds will be forfeited to us if the purchase is not completed.

5. INCOME TAXES:

Statement of Financial Accounting Standards No. 109 Accounting for Income
Taxes, or SFAS No. 109, requires that a valuation allowance be established when it
is more likely than not that all or a portion of deferred tax assets will not
be realized. A review of all available positive and negative evidence needs to
be considered, including the companys performance, the market environment in
which the company operates, the utilization of past tax credits, length of
carryback and carryforward periods and existing contracts or sales backlog that
will result in future profits. It further states that forming a conclusion
that a valuation allowance is not needed is difficult when there is negative
evidence such as cumulative losses in recent years. Therefore, cumulative
losses weigh heavily in the overall assessment. As a result of current losses,
difficult industry conditions and revised downward future projections a review
was undertaken at September 30, 2002, and we concluded that it was appropriate
to establish a full valuation allowance for our domestic net deferred tax
assets. In addition, we expect to continue to provide a full valuation
allowance on future domestic tax benefits until we can sustain a level of
profitability that demonstrates our ability to utilize the assets. Deferred
tax assets are recognized to the extent realizable related to our Japanese
operations. A tax benefit has been recognized in the three months ended June
30, 2003 as we expect to have net income in Japan for the 12-month period ended
March 31, 2004.

6. REPORTABLE SEGMENTS:

We have two reportable segments: Fab Automation and AMHS. Fab Automation products include interface products,
substrate-handling robotics, wafer and reticle carriers, auto-ID systems,
sorters and connectivity software. AMHS products include automated transport
and loading systems for semiconductor fabs and flat panel display
manufacturers. We began tracking AMHS as a reportable segment with the
acquisition of ASI in the third quarter of fiscal 2003.

Segment information is summarized as follows (in millions):

|                         |  |                             |       |      |  |   |       |  
|------------------------ |  | --------------------------- | ----- | ---- |  | - | ----- | -
|                         |  | Three Months Ended June 30,
|                         |  |                            
|                         |  | 2003                        |       | 2002
|                         |  |                             |       |     
|Fab Automation Products: |  |                             |       |      |  |   |       |  
|Net
Sales                |  | $                           | 23.6  |      |  | $ | 51.9  |  
|                         |  |                             |       |      |  |   |       |  
|Operating loss           |  | $                           | (35.5 | )    |  | $ | (14.4 | )
|                         |  |                             |       |      |  |   |       |  
|AMHS:                    |  |                             |       |      |  |   |       |  
|Net
Sales                |  | $                           | 21.7  |      |  | $ |      |  
|                         |  |                             |       |      |  |   |       |  
|Operating loss           |  | $                           | (3.3  | )    |  | $ |      |  
|                         |  |                             |       |      |  |   |       |  
|Total:                   |  |                             |       |      |  |   |       |  
|Net
Sales                |  | $                           | 45.3  |      |  | $ | 51.9  |  
|                         |  |                             |       |      |  |   |       |  
|Operating loss           |  | $                           | (38.8 | )    |  | $ | (14.4 | )
|                         |  |                             |       |      |  |   |       |  

Our net sales by geography, including local revenues recorded at our
foreign locations, were as follows (in millions):

12



---



##### Table of Contents



|                   |       |      |                             |      |  |   |      |      | 
|------------------ | ----- | ---- | --------------------------- | ---- |  | - | ---- | ---- | 
|                   |       |      | Three Months Ended June 30,
|Geographic Region  |       | 2003 |                             | 2002
|                   |       |      |                             |     
|North America      |       | $    | 10.4                        |      |  | $ | 22.2 |     
|Taiwan             |       |      | 6.3                         |      |  |   | 11.0 |     
|Japan              |       |      | 15.6                        |      |  |   | 7.7  |     
|Other Asia/Pacific |       |      | 7.6                         |      |  |   | 6.2  |     
|Europe             |       |      | 5.4                         |      |  |   | 4.8  |     
|                   |       |      |                             |      |  |   |      |     
|                   | Total |      | $                           | 45.3 |  |   | $    | 51.9 | 
|                   |       |      |                             |      |  |   |      |     

7. DISCONTINUED OPERATIONS:

In August 2002, our Board of Directors approved a plan to discontinue
operations of our AMP and SemiFab subsidiaries. Accordingly, these businesses
were accounted for as discontinued operations and, therefore, the results of
operations and cash flows were reclassified from our results of continuing
operations to discontinued operations for all periods presented. We based the
decision to discontinue these operations on an evaluation of, and decision to
focus on our core business, concluding AMP and SemiFab were not critical to our
long-term strategy. We completed the sale of each business in March 2003.

Summarized selected financial information for discontinued operations in
the quarter ended June 30, 2002 is as follows (in thousands):

|                         |          |   |              |        |  
|------------------------ | -------- | - | ------------ | ------ | -
|                         |          |   | Three Months
|                         |          |   | Ended       
|                         |          |   | June 30,    
|                         |          |   |             
|                         |          |   | 2002        
|                         |          |   |             
|Net sales                |          | $ | 4,038        |       
|Loss before income taxes |          |   | (1,360       | )     
|Income taxes (benefit)   |          |   |             |       
|                         |          |   |              |       
|                         | Net loss |   | $            | (1,360 | )
|                         |          |   |              |       

8. ACQUISITIONS

ASYST SHINKO AMERICA (ASAM)

In April 2003, ASI acquired the portion of Shinko Technologies, Inc., a
subsidiary of Shinko Electric, Inc., that provided ongoing support to ASIs
North American AMHS customers. Shinko Electric owns 49 percent of ASI. ASI
renamed this subsidiary Asyst Shinko America (ASAM). The total purchase price,
net of cash acquired, was approximately $1.2 million. A summary of assets
acquired and liabilities assumed follows (in thousands):

|                            |  |   |       |  
|--------------------------- |  | - | ----- | -
|Accounts receivable, net    |  | $ | 820   |  
|Inventories                 |  |   | 315   |  
|Property and equipment, net |  |   | 286   |  
|Other assets                |  |   | 30    |  
|Current liabilities         |  |   | (662  | )
|                            |  |   |       |  
|Net assets acquired         |  |   | 789   |  
|Goodwill                    |  |   | 376   |  
|                            |  |   |       |  
|Net cash paid               |  | $ | 1,165 |  
|                            |  |   |       |  

ASAM provides ongoing service to customers who installed ASIs AMHS
solution. As such, there is no in-process research and development activity at
ASAM. The acquisition was made to provide better support to North American
AMHS customers. We believe the purchase price reasonably reflects the fair
value of the business based on estimates of future revenues and earnings.

Comparative pro forma information reflecting the acquisition of ASAM has
not been presented because the operations of ASAM were not material to our
financial statements.

13



---



##### Table of Contents



ASYST-SHINKO INC. (ASI)

On October 16, 2002, we established a joint venture with Shinko Electric
Co., Ltd., or Shinko, called ASI. The joint venture
develops, manufactures and markets Shinkos market-leading AMHS with principal operations in Tokyo and Ise, Japan.
Under terms of the agreement, Asyst acquired 51 percent of the joint venture
for approximately $67.5 million of cash and transaction costs. Shinko
contributed its entire AMHS business, including intellectual property and other
assets, installed customer base and approximately 250 employees. The
consolidated financial statements for the period ended June 30, 2003 include
the results of ASI for the quarter. We believe that ASI has a strong presence
in the 300mm AMHS and flat panel display markets. We believe that ASI, in
addition to Asysts FasTrack AMHS solution, provides us an opportunity to
benefit from growth opportunities in the 300mm generation of the AMHS business.
The acquisition has been accounted for as a purchase transaction in accordance
with SFAS No. 141.

A portion of the excess of purchase price over fair value of net assets
acquired was allocated to identifiable intangible assets. We amortize
developed technology over a period of five years and the customer base and
trademarks over a period of three years, using the straight-line method, with a
weighted-average life of 4.4 years. The balance of the excess purchase price
was recorded as goodwill. We are completing our final analysis of the
acquisition and will record any remaining adjustments in the second quarter of
fiscal year 2004. A summary of the transaction is as follows (in thousands):

|                                                                                   |  |   |         | 
|---------------------------------------------------------------------------------- |  | - | ------- | 
|Consideration:                                                                     |  |   |         | 
|Cash paid                                                                          |  | $ | 65,700  | 
|Transaction costs                                                                  |  |   | 1,796   | 
|                                                                                   |  |   |         | 
|Total consideration                                                                |  |   | 67,496  | 
|Total Enterprise Value                                                             |  |   | 132,345 | 
|                                                                                   |  |   |         | 
|Fair value of net assets acquired                                                  |  |   | 744     | 
|                                                                                   |  |   |         | 
|Excess of consideration over fair value of net assets acquired                     |  | $ | 131,601 | 
|                                                                                   |  |   |         | 
|Allocation of excess consideration to identifiable intangible
assets and goodwill: |  |   |         | 
|Developed technology                                                               |  |   | 44,500  | 
|Customer lists                                                                     |  |   | 18,800  | 
|In-process research and development                                                |  |   | 5,750   | 
|Goodwill                                                                           |  |   | 62,551  | 
|                                                                                   |  |   |         | 
|Total intangible assets and goodwill                                               |  | $ | 131,601 | 
|                                                                                   |  |   |         | 

The fair values of identifiable intangible assets are based on estimates
of future revenues and earnings to determine a discounted cash flow valuation
of identifiable intangible assets that meet the separate recognition criteria
of SFAS No. 141. The $62.6 million of goodwill arising from the acquisition is
not deductible for tax purposes. We expensed $5.8 million of in-process
research and development as part of the acquisition in the third
quarter of fiscal 2003.

Minority interest of $56.7 million was recorded at June 30, 2003
representing the minority interest of 49 percent of the fair value of ASI at
the time of acquisition and the proportionate share of net income (loss) and
cumulative translation adjustment for the periods since acquisition.

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

|                                |  |   |         |  
|------------------------------- |  | - | ------- | -
|Cash and short-term investments |  | $ | 15,200  |  
|Other current assets            |  |   | 54,537  |  
|Property plant and equipment    |  |   | 3,332   |  
|Other assets                    |  |   | 782     |  
|Current liabilities             |  |   | (32,797 | )

14



---



##### Table of Contents



|                                        |  |   |         |  
|--------------------------------------- |  | - | ------- | -
|Deferred tax liabilities                |  |   | (26,586 | )
|Pension and other long-term liabilities |  |   | (13,724 | )
|                                        |  |   |         |  
|Net assets acquired                     |  | $ | 744     |  
|                                        |  |   |         |  

As part of the acquisition, we assumed pension related obligations. In
addition, as certain pension obligations are included in the former owner of
ASIs pension plan, under certain remote circumstances including bankruptcy and
inability to pay by Shinko, we may have to assume up to $200 million of pension
obligations. No recognition of this amount has been recorded to date as it is
considered remote.

9. DEBT

On July 3, 2001, we completed the sale of $86.3 million of 5-3/4 percent
convertible subordinated notes which provided us with aggregate proceeds of
$82.9 million net of issuance costs. The notes are convertible, at the option
of the holder, at any time on or prior to maturity into shares of our common
stock at a conversion price of $15.18 per share, which is equal to a conversion
rate of 65.8718 shares per $1,000 principal amount of notes. The notes mature
July 3, 2008, pay interest on January 3 and July 3 of each year and are
redeemable at our option after July 3, 2004.

Asyst Japan Inc., or AJI, our Japanese subsidiary, had $20.2 and $18.0
million of short-term debt from banks in Japan at June 30, 2003 and March 31,
2003, respectively. The interest rate ranged from 1.4 percent to 2.4 percent
as of June 30, 2003. AJI had secured straight bonds from a bank in Japan of
$4.0 million at June 30, 2003. The bonds bore interest at rates ranging from
1.5 percent to 2.9 percent as of June 30, 2003 and mature in fiscal year 2008.
Certain of AJIs assets have been pledged as security for these secured
straight bonds as well as for short-term debt. As of June 30, 2003, pledged
assets consist of land and other property and equipment, net of accumulated
depreciation, time deposits and accounts receivable totaling approximately
$14.0 million. Additionally Asyst U.S. has provided letters of guarantee to
financial institutions in Japan covering substantially all of AJIs debts.

We have, and have fully drawn down, a $25 million 2-year revolving credit
agreement with a commercial bank and are required under the agreement to
maintain compliance with financial covenants, including total liabilities to
tangible net worth ratio, tangible net worth and minimum liquidity covenants.
We were not in compliance with the minimum consolidated tangible net
worth and the total liabilities to tangible net worth
covenants at June 30, 2003 as defined in the revolving credit agreement. We
received a waiver of default from the lender with respect to compliance with
these covenants at June 30, 2003. We are in the process of
amending the financial covenants contained in the credit agreement. The amount of the credit line available may
change based on the amount of receivables held and changes in the non-formulary
piece of the credit line which is subject to periodic review and amendment.
Based upon original maturities, this debt will be classified as short-term in
October 2003.

10. RELATED PARTY TRANSACTIONS:

At June 30, 2003, we held notes from two former employees and two current
employees totaling $0.5 million. These notes receivable are secured by deeds
of trust on certain real property and/or pledged securities of the Company
owned by the employees and are included in other assets at June 30, 2003.

Our majority owned subsidiary, ASI, has certain transactions with the
minority shareholder, Shinko. ASI purchased various administrative and IT
services from Shinko. At June 30, 2003, significant balances owed (to) from
Shinko were (in thousands):

|                                          |  |   |        |  
|----------------------------------------- |  | - | ------ | -
|Accounts and notes receivable from Shinko |  | $ | 1,265  |  
|Accounts payable due to Shinko            |  | $ | (5,115 | )
|Accrued liabilities due to Shinko         |  | $ | (578   | )

11. LEGAL PROCEEDINGS:

On October 28, 1996 we filed suit in the United States District Court for
the Northern District of California against Empak, Inc., Emtrak, Inc., Jenoptik
AG, and Jenoptik Infab, Inc., alleging, among other things, that
certain products of these defendants infringe our United States

15



---



##### Table of Contents



Patents Nos. 5,097,421
(the 421 patent) and 4,974,166 (the 166 patent). Defendants filed
answers and counterclaims asserting various defenses, and the issues
subsequently were narrowed by the parties respective dismissals of various
claims, and the dismissal of defendant Empak pursuant to a settlement
agreement. The remaining patent infringement claims against the remaining
parties proceeded to summary judgment, which was entered against us on June 8,
1999. We thereafter took an appeal to the United States Court of Appeals for
the Federal Circuit. On October 10, 2001, the Federal Circuit issued a written
opinion, Asyst Technologies, Inc. v. Empak, 268 F.3d 1365 (Fed. Cir. 2001),
reversing the decision of the trial court, and remanding the matter to the
trial court for further proceedings. We have since narrowed our case to the
421 patent, and we continue to seek monetary damages for defendants
infringement, equitable relief, and an award of attorneys fees. Defendants
related declaratory judgment claims are also pending. The trial court held a
claims construction hearing on September 30, 2002, and issued its claims
construction ruling on February 28, 2003. We have filed motions seeking
summary judgment of infringement and summary judgment against certain claims of
invalidity and unenforceability brought by defendants. Defendants have filed
motions seeking summary judgment of non-infringement and patent invalidity.
The trial court is scheduled to hear these motions on September 22, 2003. The
Court has set a trial date of November 3, 2003 for any matters not resolved by
summary judgment. We believe the remaining claims are meritorious and intend
to vigorously pursue this matter.

On February 25, 2003, Mihir Parikh, our former Chief Executive Officer and
Chairman of the Board, filed a demand for arbitration with the American
Arbitration Association against us, alleging breach of his employment
agreement, wrongful termination in violation of public policy, discrimination
based on age, race and national origin, fraud and deceit, defamation and
violation of the California Labor Code. On March 4, 2003, Dr. Parikh resigned
as a member of our Board of Directors. On June 17, 2003, Dr. Parikh filed an
amended demand for arbitration adding as respondents our Chief Executive
Officer and Chairman of the Board, Stephen S. Schwartz, and three outside
directors, Walter W. Wilson, Stanley J. Grubel and Anthony E. Santelli to all
claims other than the breach of contract claim. Dr. Parikh seeks compensatory
damages in excess of $5 million plus punitive damages and attorneys fees. We
deny Dr. Parikhs allegations and intend to defend the action vigorously. The
arbitration hearing has not been scheduled but we believe it will be held in
the first half of 2004.

From time to time, we are also involved in other legal actions arising in
the ordinary course of business. We have incurred certain costs while
defending these matters. There can be no assurance third party assertions will
be resolved without costly litigation, in a manner that is not adverse to our
financial position, results of operations or cash flows or without requiring
royalty payments in the future which may adversely impact gross margins. No
estimate can be made of the possible loss or possible range of loss associated
with the resolution of these contingencies. As a result, no losses have been
accrued in our financial statements as of June 2003.




Item 2  Managements Discussion and Analysis of Results of Operations and Financial Condition

Forward Looking Statements

Except for the historical information contained herein, the following
discussion includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934 that involve risks and uncertainties. We intend such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995, and we are including this statement for purposes of
complying with these safe harbor provisions. We have based these
forward-looking statements on our current expectations and projections about
future events. Our actual results could differ materially. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties and assumptions, including those set forth in
this section as well as those under the caption, Risk Factors.

Words such as expect, anticipate, intend, plan, believe,
estimate and variations of such words and similar expressions are intended to
identify such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this document and in our Annual Report on Form 10-K might
not occur. The following discussion of our financial condition and results

16



---



##### Table of Contents



of operations should be read in conjunction with our condensed consolidated
financial statements and the related notes included elsewhere in this report.

Overview

We develop, manufacture, sell and support integrated automation systems
primarily for the semiconductor, and secondarily for the flat panel display, or
FPD, manufacturing industries. Our systems are designed to enable semiconductor
and FPD manufacturers to increase their manufacturing productivity and yield
and to protect their investment in fragile materials and work-in-process.

We sell our systems directly to semiconductor and FPD manufacturers, as
well as to original equipment manufacturers, or OEMs, that integrate our
systems with their equipment for sale to semiconductor manufacturers.

In response to the industry downturn, we have reduced costs in several
areas. We reduced approximately 35 percent of our headcount in April 2003 due
to ongoing weakness in our business, our outsourcing of manufacturing, and the
sale of two discontinued operations and the wafer carrier business. We also
announced plans to outsource our Japanese manufacturing operations. In October
2002, we began transitioning substantially all of our U.S. manufacturing to
Solectron Corporation, which we believe will reduce our fixed manufacturing
costs and improve our ability to respond to sales fluctuations. The transition
was substantially completed in June 2003. Over the past two years, we have
reduced our workforce from a peak of approximately 1,800 employees to
approximately 550 employees.

We sell our products principally through a direct sales force worldwide.
Our functional currency is the U.S. dollar, except in Japan where our
functional currency is the Japanese yen. The costs and expenses of our
international subsidiaries are recorded in local currency, and foreign currency
translation adjustments are reflected as a component of Accumulated other
comprehensive income in our Condensed Consolidated Balance Sheets.

Critical Accounting Policies and Estimates

Information with respect to our critical accounting policies and estimates
may be found in our Annual Report on Form 10-K filed for the fiscal year ended
March 31, 2003.

Acquisitions

In April 2003, our 51 percent owned subsidiary, Asyst-Shinko, Inc., or
ASI, acquired the portion of Shinko Technologies, Inc. that provides ongoing
support to ASIs North American AMHS customers from Shinko Electric, Inc. ASI
renamed this subsidiary Asyst Shinko America (ASAM).

In
October 2002, Asyst Japan, Inc., or AJI, our Japanese subsidiary, purchased a 51 percent interest in ASI, a Japanese corporation.

In May 2002, Asyst Connectivity Technologies, Inc., or ACT, our
wholly-owned subsidiary, purchased substantially all of the assets of
domainLogix Corporation, or DLC, a Delaware corporation. The results of
operations for the first quarter of fiscal 2003 include the revenues and
expenses of ACT from the date of acquisition.

The above transactions were accounted for using the purchase method of
accounting. Accordingly, our Condensed Consolidated Statements of Operations
and of Cash Flows for the periods ended June 30, 2003 and June 30, 2002 include
the results of these acquired entities for the periods subsequent to their
respective acquisitions, as applicable. We consolidate fully the financial
position and results of operations of ASI and account for the minority interest
in the condensed consolidated financial statements.

Three Months Ended June 30, 2003 and 2002

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

17



---



##### Table of Contents



|                                                                                     |                                                          |                          |       |                    |      |      |       |      |      | 
|------------------------------------------------------------------------------------ | -------------------------------------------------------- | ------------------------ | ----- | ------------------ | ---- | ---- | ----- | ---- | ---- | 
|                                                                                     |                                                          |                          |       | Three Months Ended
|                                                                                     |                                                          |                          |       | June 30,          
|                                                                                     |                                                          |                          |       |                   
|                                                                                     |                                                          |                          |       | 2003               |      | 2002
|                                                                                     |                                                          |                          |       |                    |      |     
|Net sales                                                                            |                                                          |                          | 100.0 | %                  |      |      | 100.0 | %   
|Cost of sales                                                                        |                                                          |                          | 90.2  |                    |      |      | 68.1  |     
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Gross profit                                                                         |                                                          |                          | 9.8   |                    |      |      | 31.9  |     
|Operating expenses:                                                                  |                                                          |                          |       |                    |      |      |       |     
|                                                                                     | Research and development                                 |                          |       | 21.3               |      |      |       | 19.8 |     
|                                                                                     | Selling, general and administration                      |                          |       | 38.9               |      |      |       | 31.9 |     
|                                                                                     | Amortization of acquired intangible assets               |                          |       | 10.6               |      |      |       | 3.2  |     
|                                                                                     | Restructuring charges                                    |                          |       | 9.6                |      |      |       |     |     
|                                                                                     | Asset impairment charges                                 |                          |       | 15.1               |      |      |       |     |     
|                                                                                     | In-process research and development of acquired business |                          |       |                   |      |      |       | 4.8  |     
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|                                                                                     |                                                          | Total operating expenses |       |                    | 95.5 |      |       |      | 59.7 | 
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Operating loss                                                                       |                                                          |                          | (85.7 | )                  |      |      | (27.8 | )   
|Other income (expense), net                                                          |                                                          |                          | (2.0  | )                  |      |      | (3.3  | )   
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Loss before benefit from income taxes, minority interest and
discontinued operations |                                                          |                          | (87.7 | )                  |      |      | (31.1 | )   
|Benefit from income taxes                                                            |                                                          |                          | (3.0  | )                  |      |      | (7.8  | )   
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Minority interest                                                                    |                                                          |                          | (2.1  | )                  |      |      |      |     
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Loss from continuing operations                                                      |                                                          |                          | (82.6 | )                  |      |      | (23.3 | )   
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Discontinued operations, net of income tax                                           |                                                          |                          |      |                    |      |      | (2.6  | )   
|                                                                                     |                                                          |                          |       |                    |      |      |       |     
|Net loss                                                                             |                                                          |                          | (82.6 | )%                 |      |      | (25.9 | )%  
|                                                                                     |                                                          |                          |       |                    |      |      |       |     

Results of Operations

Net Sales.Net sales for the first quarter of fiscal 2004 were $45.3
million, a decrease of $6.6 million or 12.7 percent from net sales of $51.9
million in the first quarter of fiscal 2003. Excluding the impact of
ASI, net sales were $23.5 million in the first quarter of fiscal 2004,
a decline of $28.4 million or 54.7 percent from the first quarter of fiscal
2003. This decline reflects reduced sales from our traditional business across
substantially all products and geographic regions and is reflective of the
general downturn in the semiconductor equipment sector. We sold our wafer and
reticle carrier product lines during fiscal 2003. These products generated
$10.1 million of revenue in the first quarter of fiscal 2003.

We have two reportable segments: Fab Automation and  AMHS. Fab Automation products include interface products,
substrate-handling robotics, wafer and reticle carriers, auto-ID systems,
sorters and connectivity software. AMHS products include automated transport
and loading systems for semiconductor fabs and flat panel display
manufacturers. We began tracking AMHS as a reportable segment with the
acquisition of ASI in the third quarter of fiscal 2003.

Segment information is summarized as follows (in millions):

|               |  |                             |      |      |  |   |      | 
|-------------- |  | --------------------------- | ---- | ---- |  | - | ---- | 
|               |  | Three Months Ended June 30,
|               |  |                            
|               |  | 2003                        |      | 2002
|               |  |                             |      |     
|Fab Automation |  |                             |      |      |  |   |      | 
|Net Sales      |  | $                           | 23.6 |      |  | $ | 51.9 | 
|AMHS:          |  |                             |      |      |  |   |      | 
|Net Sales      |  | $                           | 21.7 |      |  | $ |     | 
|               |  |                             |      |      |  |   |      | 
|Total:         |  |                             |      |      |  |   |      | 
|Net Sales      |  | $                           | 45.3 |      |  | $ | 51.9 | 
|               |  |                             |      |      |  |   |      | 

18



---



##### Table of Contents



Our net sales by geography were as follows (in millions):

|                   |       |      |                             |      |  |   |      |      | 
|------------------ | ----- | ---- | --------------------------- | ---- |  | - | ---- | ---- | 
|                   |       |      | Three Months Ended June 30,
|Geographic Region  |       | 2003 |                             | 2002
|                   |       |      |                             |     
|North America      |       | $    | 10.4                        |      |  | $ | 22.2 |     
|Taiwan             |       |      | 6.3                         |      |  |   | 11.0 |     
|Japan              |       |      | 15.6                        |      |  |   | 7.7  |     
|Other Asia/Pacific |       |      | 7.6                         |      |  |   | 6.2  |     
|Europe             |       |      | 5.4                         |      |  |   | 4.8  |     
|                   |       |      |                             |      |  |   |      |     
|                   | Total |      | $                           | 45.3 |  |   | $    | 51.9 | 
|                   |       |      |                             |      |  |   |      |     

The increase in Japan is primarily due to AMHS sales, with modest
increases in our traditional business as well. Other Asia/Pacific increases
are also due to AMHS sales, with our traditional business down on weak sales
activity in the region.

Gross Profit. Gross profit decreased to $4.4 million or 9.8 percent of
net sales for the quarter ended June 30, 2003, compared to $16.6 million or
31.9 percent of net sales for the quarter ended June 30, 2002. The decrease is
the result of charges incurred during the first quarter of fiscal 2004 in
connection with our outsourcing of manufacturing to Solectron Corporation, as
well as lower sales volumes to absorb our remaining fixed manufacturing costs.
The expected gross margin benefits from outsourcing our manufacturing have been
negatively impacted by our lower revenue levels. Solectron continues to
utilize inventory they purchased from Asyst that was purchased at Asysts
historical costs, which are higher than we expect in the future when Solectron
uses its vendor network and purchasing leverage. Further, manufacturing
overhead costs at Asyst remain above planned long-term levels to ensure a
smooth transition of manufacturing activities to Solectron. During fiscal
2002, we took aggressive actions to eliminate fixed costs by consolidating
manufacturing facilities and adjusting variable costs to meet current
manufacturing volumes. We substantially reduced manufacturing headcount during
fiscal 2002. These efforts resulted in improved gross margins in the first
quarter of fiscal 2003.

In the quarter ended June 30, 2003, 300mm products contributed
approximately 36.6 percent of our net sales, comparable with the quarter ended
June 30, 2002. Net sales of 300mm products decreased by $2.2 million. We
expect 300mm product sales to trend upward, particularly as new 300mm AMHS
product installations commence in fiscal 2004 , although quarterly fluctuations
are possible. Additionally, 200mm SMIF upgrades or new 200mm fabs may result
in significant mix changes. Our 300mm products are very early in their product
life cycle and currently have low margins in comparison to our 200mm products.
Swings in product mix may impact our gross margins on a quarter over quarter
basis. Through cost reduction initiatives and our outsourcing strategy, we
expect 300mm gross margins to improve. However, because of the anticipated
size of the emerging 300mm product market, we face strong competition on price
and features for these products from existing and new competitors.

We believe that gross margin will increase several percentage points in
the quarter ending September 30, 2003 from the gross margin in the quarter
ended June 30, 2003. This anticipated increase is due to the non-recurring
charges which negatively impacted fiscal first quarter margins, expected sales
increases of approximately 10 percent as well as continued progress in our
outsourcing strategy. Our gross margin will continue to be impacted by future
changes in product mix and net sales volumes, as well as market competition.

Research and Development.Research and development expenses decreased 6.5
percent to $9.6 million for the quarter ended June 30, 2003, compared with
$10.3 million for the quarter ended June 30, 2002. As a percentage of sales,
research and development increased to 21.3 percent of sales in the quarter
ended June 30, 2003, compared to 19.8 percent in the quarter ended June 30,
2002. The decrease in spending is due to headcount reductions and other
spending cuts during the past year to reduce research and development expenses
in response to declines in our net sales. Our first quarter fiscal 2004
results include approximately $2.0 million of research and development spending
at ASI. Excluding ASI, research and development expenses were approximately
$7.6 million, a decline of $2.7 million or 26.2 percent, from the first quarter
of fiscal 2003. Our research and development expenses vary as a percentage of
net sales because we do not manage these expenditures strictly to variations in
our level of net sales. We expect our research and development expenses will
decrease in the next quarter, reflecting the headcount

19



---



##### Table of Contents



reductions taken in the first quarter of fiscal 2004 as well as lower spending
at ASI as key development projects reach completion.

Selling, General and Administrative.Selling, general and administrative,
or SG&A, expenses increased 6.5 percent to $17.6 million for the quarter ended
June 30, 2003, compared to $16.5 million for the quarter ended June 30, 2002.
As a percent of net sales, SG&A expenses increased to 38.9 percent for the
quarter ended June 30, 2003 compared to 31.9 percent for the quarter ended June
30, 2002. The increase includes approximately $3.3 million of SG&A spending at
ASI. Excluding the impact of additional costs assumed from ASI, our SG&A
costs declined by $2.2 million or approximately 13 percent from the first
quarter of fiscal 2003. This decrease was a result of SG&A
headcount reductions in our traditional business throughout fiscal 2003 in response to
lower net sales, and a further substantial headcount reduction in April
2003. We expect SG&A expenses will decline in the second quarter of fiscal
2004 as we realize the full
impact of the April headcount reductions and other targeted cost reductions.

Amortization of Acquired Intangible Assets.Amortization expenses relating
to acquired intangible assets were $4.8 million or 10.6 percent of net sales
for the quarter ended June 30, 2003 and $1.7 million or 3.2 percent of net
sales for the quarter ended June 30, 2002. The increase in amortization
expense in the first quarter of fiscal 2004 is primarily due to the acquisition
of the ASI joint venture interest in the third quarter of fiscal 2003. We
amortize acquired intangible assets over periods ranging from three to ten
years.

Restructuring Charges. The following table summarizes the activities in
our restructuring accrual during the quarter ended June 30, 2003 (in
thousands):

|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|---------------------------- |  | --------- | ------ | ---------- |  | ----------- | ----- | ----- |  | - | ---- | - |  | - | ------ | -
|                             |  | Severance |        |            |  |             |       |       |  |   |      |   |  |  
|                             |  | and       |        | Excess     |  | Fixed Asset |       |       |  |  
|                             |  | Benefits  |        | Facilities |  | Impairment  |       | Total
|                             |  |           |        |            |  |             |       |      
|Balance, March 31, 2003      |  | $         | 291    |            |  | $           | 3,617 |       |  | $ | 192  |   |  | $ | 4,100  |  
|Additional accruals          |  |           | 3,448  |            |  |             | 869   |       |  |   | 46   |   |  |   | 4,363  |  
|Non-cash related utilization |  |           |       |            |  |             | (29   | )     |  |   | (205 | ) |  |   | (234   | )
|Amounts paid in cash         |  |           | (3,269 | )          |  |             | (250  | )     |  |   | (33  | ) |  |   | (3,552 | )
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|Balance, June 30, 2003       |  | $         | 470    |            |  | $           | 4,207 |       |  | $ |     |   |  | $ | 4,677  |  
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  

We incurred restructuring charges of $4.4 million during the quarter ended
June 30, 2003, consisting primarily of severance costs from a reduction in
workforce in April 2003. Additionally, we incurred a charge for future lease
obligations on a vacated facility in excess of estimated future sublease
proceeds. We anticipate additional restructuring charges during the second and
third quarter of fiscal 2004 as we complete the workforce reductions and
outsourcing of manufacturing in Japan.

We expect to utilize the remaining balance, primarily unused leased
facilities, over the following three fiscal years. All remaining accrual
balances are expected to be settled in cash.

Asset Impairment Charges.We own land in Fremont, California, which we
are currently marketing for sale. We had intended to construct corporate
headquarters facilities on the land and subsequently decided not to build these
facilities. In the first quarter of fiscal 2004 we recorded a $6.9 million
write-down based on our latest estimate of market value as supported by a
pending sale agreement. The prospective buyer deposited $1.0 million of the
purchase price in July 2003, and these proceeds will be forfeited to us if the
purchase is not completed.

In-process Research and Development Costs of Acquired Business.On May 29,
2002, ACT purchased substantially all of
the assets of DLC. In connection with the estimated purchase price allocation,
$2.5 million was assigned to in-process research and development costs of
acquired business, or IPR&D. IPR&D was subsequently adjusted to approximately
$2.1 million as we completed our analysis of the fair value of intangible
assets in the second quarter of fiscal 2003. The amount allocated to IPR&D was
estimated through established valuation techniques in the high-technology
industry and was expensed upon acquisition as it was determined that the
projects had not reached technological feasibility at the time of our
acquisition.

20



---



##### Table of Contents



Interest Income and Other Income (Expense).Interest income and other
income (expense), was $0.7 million for the quarter ended June 30, 2003,
compared to $(0.4) million for the quarter ended June 30, 2002. The increase
was primarily due to royalty income of approximately $0.5 million received in
the first quarter of fiscal 2004.

Interest
Expense. Interest expense was $(1.7) million for the quarter
ended June 30, 2003, compared to $(1.3) million for the quarter ended June 30,
2002.

Benefit
from Income Taxes. We recorded a benefit from income taxes of $1.4
million for the quarter ended June 30, 2003, or approximately 3.0 percent of
our loss before income taxes. The benefit is primarily due to $1.6 million
amortization of deferred tax liabilities recorded in connection with the ASI
acquisition, offset by $0.2 million of tax provisions in international subsidiaries, primarily
Japan. We recorded a benefit for income taxes of $4.0 million for the quarter
ended June 30, 2002, representing an annual effective income tax rate of 25
percent. In fiscal 2003 we established a full valuation allowance for our
domestic net deferred tax assets. Deferred tax assets are recognized to the
extent realizable related to our Japanese operations. A tax benefit has been
recognized in the three months ended June 30, 2003 as we expect to have net
income in Japan for the 12-month period ended March 31, 2004.

Minority Interest. Minority interest for the first quarter of fiscal 2003
was $1.0 million. No minority interest was recorded in the quarter ended June
30, 2002. The amount for minority interest represents 49 percent of our joint
venture partner, Shinko, in the operations of ASI.

Discontinued Operations, net of income tax.There were no losses from
discontinued operations for the first quarter of fiscal 2004 and the loss from
discontinued operations was $1.4 million for the quarter ended June 30, 2002.
We divested two of our subsidiaries, AMP and SemiFab, in March 2003 to allow us
to better focus on our core business.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily through the
private sale of equity securities and public stock offerings, customer
pre-payments, bank borrowings, long-term debt and cash generated from
operations. As of June 30, 2003, we had approximately $73.1 million in cash
and cash equivalents, $3.2 million in restricted cash, $58.5 million in working capital and $114.6 million in long-term debt and
finance leases.

Operating activities.Net cash used in operating activities was $21.2
million in the quarter ended June 30, 2003, primarily consisting of our $37.4
million net loss and reductions in payables, accrued liabilities and deferred
revenue of $5.3 million. These uses of cash were partially offset by non-cash
charges of $7.4 million for depreciation and amortization, $6.9 million for
impairment in our land held for sale and $2.1 million for inventory reserves,
as well as reductions in receivables of $6.0 million and inventory of $2.8
million. The reductions in the current asset and liability accounts reflect
our lower sales volume compared with the immediately preceding quarter.

Net cash used in operating activities was $4.6 million in the quarter
ended June 30, 2002, primarily consisting of a $13.5 million loss, increases in
accounts receivable of $9.6 million and increase in prepaid expenses and other
assets of $5.0 million. These uses of cash were partially offset by non-cash
charges of $5.1 million for depreciation and amortization and $2.5 million for
in-process research and development, an increase in accounts payable, accrued
liabilities and deferred revenue of $9.5 million and a decrease in inventory of
$4.9 million. The increases in receivables, accounts payable, accrued
liabilities and deferred revenue reflected substantial sales growth during the
quarter. The decrease in inventory resulted from ongoing efforts to improve
inventory turns as well as increased sales.

Investing activities.Net cash used in investing activities was $2.5
million in the quarter ended June 30, 2003, due to purchases of property and
equipment of $1.2 million and net cash of $1.2 million used in ASIs
acquisition of Shinko Technologies, Inc., the American subsidiary of Shinko
Electric, Inc.

Net cash used in investing activities was $11.7 million in the quarter
ended June 30, 2002, due to net purchases of short-term investments of $8.1
million and purchases of property and equipment of $3.6 million.

21



---



##### Table of Contents



Financing activities. Net cash provided by financing activities was $2.9
million for the quarter ended June 30, 2003, due to loan proceeds net of loan
payments of approximately $2.0 million for borrowings in Asyst Japan, Inc. and
$0.9 million from issuance of common stock under our employee stock programs.

Net cash provided by financing activities was $5.3 million for the quarter
ended June 30, 2002, due to net proceeds from short- and long-term borrowing of
$2.0 million and $3.3 million from issuance of common stock under our employee
stock programs.

In October 2002, we entered into and fully drew down a $25.0 million
two-year revolving credit agreement with a commercial bank. Borrowings under
the credit agreement bear interest at a rate indexed to LIBOR. We are required
by the lender to maintain compliance with certain financial covenants. These
covenants include a total liabilities to tangible net worth ratio, tangible net
worth and minimum liquidity covenants. We were not in compliance with the
minimum consolidated tangible net worth and the
total liabilities to tangible net worth covenants at June 30, 2003 as defined in
the revolving credit agreement. We received a waiver of default from the lender
with respect to compliance with these covenants at June 30,
2003. We are in the process of amending the financial covenants
contained in the credit agreement. The amount of
the credit line available to us may change based on the amount of receivables
we have and changes in the non-formulary piece of the credit line which is
subject to periodic review and amendment. The credit agreement also restricts
our ability to incur additional indebtedness; pay dividends and make
distributions in respect of our capital stock; redeem capital stock; make
investments or other restricted payments; engage in transactions with
stockholders and affiliates; create liens; sell or otherwise dispose of assets;
make payments on our subordinated debt; and engage in mergers and acquisitions.
Based upon original maturities, this debt will be classified as short-term in
October 2003.

On July 3, 2001, we completed the sale of $86.3 million of 5-3/4 percent
convertible subordinated notes which provided us with aggregate proceeds of
$82.9 million net of issuance costs. The notes are convertible, at the option
of the holder, at any time on or prior to maturity into shares of our common
stock at a conversion price of $15.18 per share, which is equal to a conversion
rate of 65.8718 shares per $1,000 principal amount of notes. The notes mature
July 3, 2008, pay interest on January 3 and July 3 of each year and are
redeemable at our option after July 3, 2004.

AJI had $20.2 and $18.0
million of short-term debt from banks in Japan at June 30, 2003 and March 31,
2003, respectively. The interest rate ranged from 1.4 percent to 2.4 percent
as of June 30, 2003. AJI had secured straight bonds from a bank in Japan of
$4.0 million at June 30, 2003. The bonds bore interest at rates ranging from
1.5 percent to 2.9 percent as of June 30, 2003 and mature in fiscal year 2008.
Certain of AJIs assets have been pledged as security for these secured
straight bonds as well as for short-term debt. As of June 30, 2003, pledged
assets consist of land and other property and equipment, net of accumulated
depreciation, time deposits and accounts receivable totaling approximately
$14.0 million. Additionally Asyst U.S. has provided letters of guarantee to
financial institutions in Japan covering substantially all of AJIs debts.

We anticipate that operating losses will constitute a material use of our
cash resources. The cyclical nature of the semiconductor industry makes it
very difficult for us to predict future liquidity requirements with certainty.
Any upturn in the semiconductor industry may result in short-term uses of cash
in operations as cash may be used to finance additional working capital
requirements such as accounts receivable. However, we believe that our
available cash and cash equivalents will be sufficient to meet our working
capital and operating expense requirements through March 31, 2004.

At some point in the future we may require additional funds to support our
working capital and operating expense requirements or for other purposes and we
may seek to raise these additional funds through public or private debt or
equity financings or the sale of assets. These financings may not be available
to us on a timely basis if at all or, if available, on terms acceptable to us
and not dilutive to our shareholders. If we fail to obtain acceptable
additional financing, we may be required to reduce planned expenditures or
forego investments, which could reduce our revenues, increase our losses, and
harm our business.

New Accounting Pronouncements

In November 2002 the Emerging Issues Task Force, or EITF, reached a
consensus on EITF Issue No. 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables (EITF Issue No. 00-21). EITF Issue No. 00-

22



---



##### Table of Contents



21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
are currently assessing the impact of
EITF Issue No. 00-21 on our consolidated financial statements.

In January 2003 the Financial Accounting Standards Board, or FASB, issued
FIN No. 46, Consolidation of Variable Interest Entities, an Interpretation of
ARB No. 51, or FIN No. 46. FIN No. 46 requires certain variable interest
entities to be consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 is effective immediately for all new variable
interest entities created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1, 2003, the provisions
of FIN No. 46 must be applied for the first interim or annual period beginning
after June 15, 2003. The adoption of FIN No. 46 to date has not had a
significant impact on our consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity, or
SFAS No. 150. SFAS No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope as a liability (or an asset in
some circumstances). Many of those instruments were previously classified as
equity. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first fiscal period beginning after June 15, 2003. It is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of SFAS No. 150 and
still existing at the beginning of the interim period of adoption. Restatement
is not permitted. We believe that the adoption of this standard will have no
material impact on our consolidated financial statements.

Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties, including statements about our future
plans, objectives, intentions and expectations. Many factors, including those
described below, could cause actual results to differ materially from those
discussed in any forward- looking statements.

The semiconductor manufacturing industry is highly cyclical, and the
current substantial downturn is harming our operating results.

Our business is entirely dependent upon the capital expenditures of
semiconductor manufacturers, which at any point in time are dependent on the
then-current and anticipated market demand for semiconductors, as well as
products utilizing ICs. The semiconductor industry is cyclical and has
historically experienced periodic downturns. These periodic downturns, whether
the result of general economic changes or capacity growth temporarily exceeding
growth in demand for semiconductors, are difficult to predict and often have a
severe adverse effect on the semiconductor industrys demand for tools. Sales
of tools to semiconductor manufacturers may be significantly more cyclical than
sales of semiconductors, as the large capital expenditures required for
building new fabs or facilitizing existing fabs is often delayed until
semiconductor manufacturers are confident about future demand growth. If demand
for semiconductor equipment remains depressed for an extended period, it will
seriously harm our business.

The industry is currently experiencing a significant downturn due to
decreased worldwide demand for semiconductors from peak levels reached in 2000.
During this downturn, most of our customers have reduced capital expenditures,
which has adversely impacted our business. Excluding sales of ASI, which was
acquired during the third quarter of fiscal 2003, our net sales declined
sequentially in the third and fourth quarter of fiscal 2003 and again in the
first quarter of fiscal 2004. We cannot assure you that our sales will recover
sufficiently for us to return to profitability in the near future. As a result
of substantial cost reductions in response to the decrease in net sales and
uncertainty over the timing and extent of any industry recovery, we may be
unable to make the investments in marketing, research and development and
engineering that are necessary to maintain our competitive position, which
could seriously curtail our long-term business prospects.

23



---



##### Table of Contents



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

We have existing debts, and may not be able to secure additional financing
to meet our future capital needs.

We currently anticipate that our available cash resources, which include
existing cash and cash equivalents, short-term investments, cash generated from
operations and other existing sources of working capital will be sufficient to
meet our anticipated needs for working capital and capital expenditures for at
least the next 12 months. In October 2002, we entered into and fully drew down
a $25 million 2-year revolving credit agreement with Comerica Bank -
California. We are required under this agreement to maintain compliance with
financial covenants, including a total liabilities to tangible net worth ratio,
tangible net worth and minimum liquidity covenants. We were not in compliance
with the minimum consolidated tangible net worth and the total
liabilities to tangible net worth covenants at June 30, 2003 as
defined in the revolving credit agreement. We received a waiver of default from
the lender with respect to compliance with these covenants at
June 30, 2003. We are in the process of amending the financial
covenants contained in the credit agreement. However, we cannot assure
you that we will reach an agreement with the bank on the amendment. The
amount of the credit line available to us may change based on the amount of
receivables we have and changes in the non-formulary piece of the credit line
which is subject to periodic review and amendment. Additionally, our Japanese
subsidiary, AJI, has loans outstanding with Japanese banks totaling
approximately $24.2 million, substantially all of which is guaranteed by the
U.S. parent company.

We may be unable to meet the financial covenants contained in our credit
agreement with Comerica in future periods. If we are unable to meet
the covenants, we cannot assure you that the bank will grant future
waivers, and Comerica may
require us to repay the outstanding balance. Further, we cannot
assure you that we will reach an agreement with the bank on the
amended loan covenant language that will resolve the covenant
violations present at June 30, 2003. If the amount of credit available
to us changes, we may also be required to repay some or all of the outstanding
balance. Additionally, the Japanese banks may call our outstanding loans,
requiring repayment, some of which would be paid by the U.S. parent under
existing loan guarantees. This could leave us with inadequate cash resources
to effectively manage the business and require us to obtain additional
financing.

In July 2001, we completed the sale of $86.3 million of 5-3/4 percent
convertible subordinated notes which are convertible, at the option of the
holder, at any time on or prior to maturity into share of our common stock at a
converstion price of $15.18 per share, which is equal to a conversion rate of
65.8718 shares per $1,000 principal amount of notes. The notes mature July 3,
2008, pay interest on January 3 and July 3 of each year and are redeemable at
our option after July 3, 2004.

We may be unable to obtain any required additional financing on terms
favorable to us, if at all. If adequate funds are not available on acceptable
terms, we may be unable to fund our expansion, successfully develop or enhance
products, respond to competitive pressures or take advantage of acquisition
opportunities, any of which could have a material adverse effect on our
business. We may pursue additional funds to support our working capital and
operating expense requirements or for other purposes. We may pursue these
additional funds through public or private debt, equity financings or the sale
of assets. If we raise additional funds through the issuance of equity
securities, our shareholders may experience dilution of their ownership
interest, and the newly-issued securities may have rights superior to those of
the common stock. If we raise additional funds by issuing debt, we may be
subject to limitations on our operations. This strain on our capital resources
could adversely affect our business.

Our new credit facility contains restrictive covenants that may limit our
ability to expand or pursue our business strategy.

The $25 million credit facility we entered into in October 2002 restricts,
without agreement from our lender, Comerica Bank - California, our ability to:



| |  |  | incur additional indebtedness;                                       
| | - |  | ---------------------------------------------------------------------
|
| |  |  | pay dividends and make distributions in respect of our capital stock;
|
| |  |  | redeem capital stock;                                                
|
| |  |  | make investments or other restricted payments;                       

24



---



##### Table of Contents





| |  |  | engage in transactions with stockholders and affiliates;
| | - |  | --------------------------------------------------------
|
| |  |  | Create liens;                                           
|
| |  |  | sell or otherwise dispose of assets;                    
|
| |  |  | make payments on our subordinated debt; and             
|
| |  |  | engage in mergers and acquisitions.                     

We are also required under the credit facility to maintain compliance with
financial tests, including a total leverage ratio and net worth and liquidity
covenants. We were not in compliance with the minimum consolidated tangible
net worth and the total liabilities to tangible net worth covenants
at June 30, 2003 as defined in the revolving credit agreement.
We received a waiver of default from the lender with respect to compliance with
these covenants at June 30, 2003. We are in the process of
amending the financial covenants contained in the credit agreement.
However, we cannot assure you that we will reach an agreement with
the bank on the amendment. Covenants in the credit facility may also
impair our ability to expand or pursue our business strategies. Our operating
and financial performance, changes in business conditions or results of
operations, adverse regulatory developments or other events beyond our control
may impair our ability to comply with these covenants and other provisions of
the credit facility. In addition, if we do not comply with these covenants, we
may be required to negotiate new terms and conditions with our lender, or the
lender may accelerate our debt under the credit facility. New terms and
conditions could be more restrictive than under the current credit facility. If
the indebtedness under the credit facility is accelerated, we may be required
to repay all outstanding indebtedness in full. Forced repayment of our
indebtedness would reduce our available cash balances. Any of these scenarios
could have an adverse impact on our operating or financial performance or could
impair our ability to expand or pursue our business strategies.

Upon the occurrence of a change of control as defined in the indenture for
our subordinated convertible notes due in 2008, we will be required to offer to
repurchase those notes at 100 percent of the principal amount of the notes,
together with accrued and unpaid interest, if any, to the date of purchase.
However, we are prohibited under our new credit facility, and may be prohibited
under indebtedness we may incur in the future, from purchasing any notes prior
to their stated maturity. In such circumstances, we will be required to repay
all or a portion of the outstanding principal and any accrued interest under
the credit facility and any such other future indebtedness, or obtain the
requisite consent from the lender under the credit facility and the holders of
any other future indebtedness to permit the repurchase of the notes. If we are
unable to repay all of this indebtedness or are unable to obtain the necessary
consents, we will be unable to offer to repurchase the notes, which would
constitute an event of default under the indenture for the notes, which in turn
would constitute a default under our new credit facility and could constitute a
default under the terms of any future indebtedness that we may incur.

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

The markets for our products are highly competitive and subject to rapid
technological change. We currently face direct competition with respect to all
of our products. In addition, the facility automation market has periods of
rapid consolidation. Some of our competitors, especially following
consolidation, may have greater name recognition, more extensive engineering,
manufacturing and marketing capabilities and substantially greater financial,
technical and personnel resources than those available to us.

Brooks Automation, Inc. and TDK are our primary competitors in the area of
isolation systems. Our SMART-Traveler System products face competition from bar
code technology as well as Brooks and a number of smaller competitors. We
also compete with several companies in the robotics area, including, but not
limited to, Brooks Automation, Newport Corp., Rorze Corporation and Yasukawa
Super Mectronics Division. In the area of AMHS, our products face competition
from Daifuku Co., Ltd., Murata Co., Ltd., and Brooks Automation. Our wafer and
reticle sorters compete primarily with products from Recif, Inc. and Brooks
Automation.

In addition, the transition to 300mm wafers is likely to draw new
competitors to the facility automation market and may result in additional
consolidation. In the 300mm wafer market, we expect to face intense competition
from a number of companies such as Brooks Automation, as well as potential
competition from semiconductor equipment and cleanroom construction companies.

25



---



##### Table of Contents



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

New products developed by our competitors or more efficient production of
their products could increase pricing pressure on our products. In addition,
companies in the semiconductor capital equipment industry have been facing
pressure to reduce costs. Either of these factors may require us to make
significant price reductions to avoid losing orders. Further, our current and
prospective customers continuously exert pressure on us to lower prices,
shorten delivery times and improve the capabilities of our products. Failure to
respond adequately to such pressures could result in a loss of customers or
orders.

Our gross margins on 300mm products may be lower than on 200mm products,
which could result in decreased profitability.

The gross margins on our 300mm products currently are not as favorable as
on our 200mm products. This is primarily because our 300mm products are early
in their production life, we face increased competition in this production line
and we sell a greater percentage of our 300mm products directly to OEMs rather
than semiconductor manufacturers.

The 300mm market is still relatively new. Manufacturing costs are
generally higher in the early stages of new product introduction and decrease
as demand increases, due to better economies of scale and efficiencies
developed in the manufacturing processes. However, we cannot assure you that we
will see such economies of scale and efficiencies in our future manufacturing
of 300mm products. We face increased competition for our 300mm products because
of the development of SEMI standards for 300mm products. While semiconductor
manufacturers purchased a majority of 200mm automation products, OEM
manufacturers are purchasing most of the tool automation products for 300mm.

These and other factors may prevent us from achieving or maintaining the
same relative pricing and gross margin performance on 300mm products as we have
achieved on 200mm products.

Because the semiconductor manufacturing industry is subject to rapid
demand shifts which are difficult to predict, our inability to efficiently
manage our manufacturing capacity and inventory levels in response to these
rapid shifts may cause a reduction in our gross margins, profitability and
market share.

The semiconductor manufacturing industry experiences rapid demand shifts.
Our ability to respond to these demand shifts is limited because we incur
manufacturing overhead, inventory expense and other costs, many of which are
fixed in the short-term, based on projections of anticipated customer demand.

During a downturn, our ability to quickly reduce our production costs may
be hampered by manufacturing commitments and accrued inventory based on earlier
and more optimistic projections of demand. If market demand does not match our
projections, we will have to carry or write off excess and obsolete inventory
and our gross margins will decline which, in turn, could prevent us from
operating profitably. For example, we incurred an inventory charge in the
fiscal fourth quarter of 2003 of $4.6 million which was associated with
additional inventory reserves for obsolete and excess inventory. This inventory
accumulated largely due to the steep decline in demand for our products.
Furthermore, if we do not accurately predict the demand for our 200mm and 300mm
automation products, we could encounter additional problems with excess and
obsolete inventory.

During periods of increasing demand, our ability to satisfy increased
customer demand may be constrained by our projections. If our projections
underestimate demand, we may have inadequate inventory and may not be able to
easily expand our manufacturing capacity, which could result in delays in
shipments and loss of customers. Even if we are able to sufficiently expand our
capacity, we may not be able to do so efficiently, which would adversely affect
our gross margin and profitability.

26



---



##### Table of Contents



While our outsourcing agreement with Solectron includes commitments from
Solectron as to how quickly they can increase or decrease manufacturing based
on updates to our forecast demand. Solectron may be unable to meet these
commitments and, even if it can, we may be unable to react efficiently to rapid
fluctuations in demand.

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

The markets in which we sell our products are comprised of a relatively
small number of OEMs and semiconductor manufacturers. Large orders from a
relatively small number of customers account for a significant portion of our
revenue and makes our relationship with each customer critical to our business.
The high cost of building a fab is causing increasing numbers of semiconductor
manufacturers to outsource the manufacturing of their semiconductors to
foundries. This trend toward foundry outsourcing, combined with increasing
consolidation within the semiconductor industry, could decrease the number of
our potential customers and increase our dependency on our remaining customers.
This concentrated customer base is even more pronounced at ASI. We may not be
able to retain our largest customers or attract additional customers, and our
OEM customers may not be successful in selling their equipment with our
embedded systems. Our success will depend on our continued ability to develop
and manage relationships with significant customers. In addition, our customers
have in the past sought price concessions from us and may continue to do so in
the future, particularly during downturns in the semiconductor market. Further,
some of our customers may in the future shift their purchases of products from
us to our competitors. Additionally, the inability to successfully develop
relationships with additional customers or the need to provide future price
concessions would have a negative impact on our business.

If we are unable to collect a receivable from a large customer, our
financial results will be negatively impacted. In addition, since each customer
represents a significant percentage of net sales, the timing of the completion
of an order can lead to a fluctuation in our quarterly results. As we complete
projects for a customer, business from that customer will decline substantially
unless it undertakes additional projects incorporating our products.

We may experience lost sales due to outsourcing of most of our product
manufacturing, which could negatively impact our business.

In an effort to focus on core competencies and reduce the impact of
cyclical peaks and troughs on our operating results, we have outsourced the
manufacturing of our U.S. products to Solectron Corporation. Outsourcing may
not yield the benefits we expect, and instead could result in increased product
costs, and product delivery delays.

Outsourced manufacturing could create disruptions in the availability of
our products if the timeliness or quality of products delivered does not meet
our requirements. These problems could be caused by a number of factors
including, but not limited to: manufacturing process flow issues, financial
viability of an outsourced vendor, availability of raw materials to the
outsourced vendor, improper product specifications, and the learning curve to
commence manufacturing at a new outsourced site. If products are delayed
because of problems in outsourcing we may lose sales and profits.

If our agreement with Solectron terminates or if Solectron does not
perform its obligations under our agreement, it could take several months to
establish alternative manufacturing for these products and we may not be able
to fulfill our customers orders for most of our products in a timely manner.
If our agreement with Solectron terminates, we may be unable to find another
suitable external manufacturer.

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

27



---



##### Table of Contents



If we are unsuccessful in fully commercializing our FasTrack Automated
Materials Handling System, and/or we cannot generate new business from our
Asyst Shinko joint venture, our growth prospects could be negatively impacted.

AMHS is an important component of our growth strategy. We have completed
only one successful commercial installation of our FasTrack system in a 200mm
fab. Our FasTrack system currently is not a complete AMHS solution, and we may
not be successful in some or all of our current efforts to develop or otherwise
obtain the additional components that comprise a complete solution. If we are
able to offer a complete solution, we still could find it difficult to compete
against companies with greater experience and resources in the AMHS market. In
addition, our joint venture company, Asyst Shinko, may not continue to succeed
in the 300mm AMHS market, and may not be able to help us gain market acceptance
for FasTrack. Any failure to win market acceptance of our products, either
FasTrack or joint venture products, would negatively impact our growth
prospects.

Because we do not have long-term contracts with our customers, our
customers may cease purchasing our products at any time if we fail to meet
their needs.

We do not have long-term contracts with our customers. As a result, our
agreements with our customers do not provide any assurance of future sales.
Accordingly:



| |  |  | our customers can cease purchasing our products at any time without penalty;
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | our customers are free to purchase products from our competitors;           
|
| |  |  | we are exposed to competitive price pressure on each order; and             
|
| |  |  | our customers are not required to make minimum purchases.                   

Sales are typically made pursuant to individual purchase orders and product
delivery often occurs with extremely short lead times. If we are unable to
fulfill these orders in a timely manner, we could lose sales and customers.

The timing of the transition to 300mm technology is uncertain and
competition may be intense.

We have invested, and are continuing to invest, substantial resources to
develop new systems and technologies to automate the processing of 300mm
wafers. However, the timing of the industrys transition from the current,
widely used 200mm manufacturing technology to 300mm manufacturing technology is
uncertain, partly as a result of the recent period of reduced wafer fabrication
capacity utilization. Delay in the adoption of 300mm manufacturing technology
could adversely affect our potential revenue.

Manufacturers implementing factory automation in 300mm pilot projects may
initially seek to purchase systems from multiple vendors. Competition,
including price competition, for these early 300mm orders could be vigorous. A
vendor whose system is selected for an early 300mm pilot project may have, or
be perceived to have, an advantage in competing for future orders, and thus the
award to a competitor of one or more early 300mm orders could cause our stock
price to fall.

If our fully integrated tool front-end solutions are not widely accepted,
our growth prospects could be negatively impacted.

Our portal solutions offers our OEM customers a complete, automated
interface between the OEMs tool and the fab, an alternative to designing and
manufacturing automated equipment front-ends for their tools utilizing
purchased components and in-house engineering and manufacturing resources. The
decision by OEMs to adopt our system for a large product line involves
significant organizational, technological and financial commitments by the
OEMs. OEMs expect the portal solutions to meet stringent design, reliability
and delivery specifications. To date, we have penetrated only a small
percentage of OEM tools. We believe that our growth prospects in the OEM market
depend in large part upon our ability to gain acceptance of the portal
solutions and follow-on products by a broader group of OEM customers. If we
fail to satisfy these expectations, whether based on limited or expanded sales
levels, OEMs will not adopt the portal solutions. We cannot assure you that
these tools will be widely accepted in the marketplace or that additional OEMs
will adopt the system. Notwithstanding our solution, OEMs may purchase
components to assemble interfaces or invest in the development of their own
complete interfaces. If our products are not adopted by OEMs, our prospects
will be negatively impacted and our profits substantially harmed.

28



---



##### Table of Contents



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

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

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

We have made and may continue to make additional acquisitions of, or
significant investments in, businesses that offer complementary products,
services, technologies or market access. Our recent acquisitions include our 51
percent ownership in ASI, as well as DLC, GW, SemiFab, AMP and MECS
Corporation. We subsequently merged MECS into AJI. During fiscal 2003 we sold
SemiFab, AMP and our wafer and reticle carrier product lines.

In the future we may make additional acquisitions of, or significant
investments in, businesses that offer complementary products, services,
technologies or market access. For example, in May 2002, we completed the asset
purchase from DLC, and in October 2002 we completed the acquisition of a 51
percent ownership of ASI. If we are to realize the anticipated benefits of past
and future acquisitions, the operations of these companies must be integrated
and combined efficiently with those of Asyst. The process of integrating supply
and distribution channels, computer and accounting systems and other aspects of
operations, while managing a larger entity, has in the past and will continue
to present a significant challenge to our management. In addition, it is not
certain that we will be able to incorporate different technologies into our
integrated solution. We may not succeed with the integration process and we may
not fully realize the anticipated benefits of the business combinations. For
example, in fiscal 2003, we decided to discontinue operations of our SemiFab
and AMP subsidiaries, as these subsidiaries were not considered critical to our
long-term strategy. These subsidiaries were sold at the end of fiscal 2003.
We may be required to record significant future impairment costs, such as the
$8.4 million and $22.6 million charge recorded in fiscal 2003 and 2002,
respectively in the event that the carrying value exceeds the fair value of
acquired intangible assets. The dedication of management resources to such
integration or divestitures may detract attention from the day-to-day business,
and we may need to hire additional management personnel to successfully
rationalize our acquisitions or divestitures. The difficulties of integration
may increase because of the necessity of combining personnel with disparate
business backgrounds and combining different corporate cultures. We may incur
substantial costs associated with these activities and we may suffer other
material adverse effects from these integration efforts which could materially
reduce our short-term earnings. Consideration for future acquisitions could be
in the form of cash, common stock, rights to purchase stock or a combination
thereof. Dilution to existing shareholders and to earnings per share may result
if shares of common stock or other rights to purchase common stock are issued
in connection with any future acquisitions.

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

We rely on a combination of patent, trade secret and copyright protection
to establish and protect our intellectual property. While we intend to take
reasonable steps to protect our patent rights, we cannot assure you that our
patents will not be challenged, invalidated or avoided, or that the rights
granted thereunder will provide us with competitive advantages. We also rely on
trade secrets that we seek to protect, in part, through confidentiality
agreements with employees, consultants and other parties. These agreements may
be breached, we may not have adequate remedies for any breach, or our trade
secrets may otherwise become known to, or independently developed by, others.

Intellectual property rights are uncertain and involve complex legal and
factual questions. We may unknowingly infringe on the intellectual property
rights of others and may be liable for that infringement, which could result in
significant liability for us. If we do infringe the intellectual property
rights of others, we could be forced to either

29



---



##### Table of Contents



seek a license to intellectual property rights of others or alter our products
so that they no longer infringe the intellectual property rights of others. A
license could be very expensive to obtain or may not be available at all.
Similarly, changing our products or processes to avoid infringing the rights of
others may be costly or impractical or could detract from the value of our
product.

There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Litigation
may be necessary to enforce our patents, to protect our trade secrets or know
how, to defend Asyst against claimed infringement of the rights of others or to
determine the scope and validity of the patents or intellectual property rights
of others. Any litigation could result in substantial cost to us and divert the
attention of our management, which by itself could have an adverse material
effect on our financial condition and operating results. Further, adverse
determinations in any litigation could result in our loss of intellectual
property rights, subject us to significant liabilities to third parties,
require us to seek licenses from third parties or prevent us from manufacturing
or selling our products. Any of these effects could have a negative impact on
our financial condition and results of operations.

Because our quarterly operating results are subject to variability,
quarter to quarter comparisons may not be meaningful.

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



| |  |  | the timing of significant customer orders;                                                           
| | - |  | -----------------------------------------------------------------------------------------------------
|
| |  |  | the timing of product shipment and acceptance;                                                       
|
| |  |  | variations in the mix of products sold;                                                              
|
| |  |  | the introduction of new products;                                                                    
|
| |  |  | changes in customer buying patterns;                                                                 
|
| |  |  | fluctuations in the semiconductor equipment market;                                                  
|
| |  |  | the availability of key components;                                                                  
|
| |  |  | lost sales due to outsourcing of manufacturing;                                                      
|
| |  |  | pressure from competitors; and                                                                       
|
| |  |  | general trends in the semiconductor manufacturing industry, electronics industry and overall
economy.

The sales cycle to new customers ranges from 6 to 12 months from initial
inquiry to placement of an order, depending on the complexity of the project.
This extended sales cycle makes the timing of customer orders uneven and
difficult to predict. A significant portion of the net sales in any quarter is
typically derived from a small number of long-term, multi-million dollar
customer projects involving upgrades of existing facilities or the construction
of new facilities. Generally, our customers may cancel or reschedule shipments
with limited or no penalty. These factors increase the risk of unplanned
fluctuations in net sales. Moreover, a shortfall in net sales in a quarter as a
result of these factors could negatively impact our operating results for the
quarter. Given these factors, we expect quarter to quarter performance to
fluctuate for the foreseeable future. In one or more future quarters, our
operating results are likely to be below the expectations of public market
analysts and investors, which may cause our stock price to decline.

30



---



##### Table of Contents



Shortages of components necessary for our product assembly can delay our
shipments and can lead to increased costs which may negatively impact our
financial results.

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

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

A significant portion of our net sales are attributable to sales outside
the United States, primarily in Taiwan, Japan, China, Singapore and Europe. We
expect that international sales will continue to represent a significant
portion of our total revenue in the future. This concentration increases our
exposure to any risks in this area. Sales to customers outside the United
States are subject to various risks, including:



| |  |  | exposure to currency fluctuations;                                                                                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the imposition of governmental controls;                                                                                               
|
| |  |  | the laws of certain foreign countries may not protect our intellectual
property to the same extent as do the laws of the United States;
|
| |  |  | the need to comply with a wide variety of foreign and U.S. export laws;                                                                
|
| |  |  | political and economic instability;                                                                                                    
|
| |  |  | Trade restrictions;                                                                                                                    
|
| |  |  | changes in tariffs and taxes;                                                                                                          
|
| |  |  | longer payment cycles typically associated with foreign sales;                                                                         
|
| |  |  | the greater difficulty of administering business overseas; and                                                                         
|
| |  |  | general economic conditions.                                                                                                           

In addition, in Taiwan, our business could be impacted by the political,
economic and military conditions in that country. China does not recognize
Taiwans independence and the two countries are continuously engaged in
political disputes. Both countries have continued to conduct military exercises
in or near the others territorial waters and airspace. These disputes may
continue or escalate, resulting in an economic embargo, a disruption in
shipping or even military hostilities. The political instability in Taiwan
could result in the creation of political or other non-economic barriers to our
being able to sell our products or create local economic conditions that reduce
demand for our products among our target market.

In both Taiwan and Japan, our customers are subject to risk of natural
disasters, which, if they were to occur, could harm our revenue. Semiconductor
fabrication facilities have in the past experienced major reductions in foundry
capacity due to earthquakes in Taiwan and Japan. For example, in 1999, Taiwan
experienced several earthquakes which impacted foundries due to power outages,
physical damage and employee dislocation. Our business could suffer if a major
customers manufacturing capacity was adversely affected by a natural disaster
such as an earthquake, fire, tornado or flood.

Any kind of economic instability in Taiwan and Japan or other parts of
Asia where we do business can have a severe negative impact on our operating
results due to the large concentration of our sales activities in this region.
For example, during 1997 and 1998, several Asian countries, including Taiwan
and Japan, experienced severe currency fluctuation and economic deflation,
which negatively impacted our revenues and also negatively impacted

31



---



##### Table of Contents



our ability to collect payments from customers. During this period, the lack of
capital in the financial sectors of these countries made it difficult for our
customers to open letters of credit or other financial instruments that are
guaranteed by foreign banks. The economic situation during this period
exacerbated a decline in selling prices for our products as our competitors
reduced product prices to generate needed cash. Although we invoice a majority
of our international sales in United States dollars, for sales in Japan, we
invoice our sales in Japanese yen. Future changes in the exchange rate of the
U.S. dollar to the Japanese yen may adversely affect our future results of
operations.

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

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

Anti-takeover provisions in our articles of incorporation, bylaws and our
shareholder rights plan may prevent or delay an acquisition of Asyst that might
be beneficial to our shareholders.

Our articles of incorporation and bylaws include provisions that may have
the effect of deterring hostile takeovers or delaying changes in control or
management of Asyst. These provisions include certain advance notice procedures
for nominating candidates for election to our Board of Directors, a provision
eliminating shareholder actions by written consent and a provision under which
only our Board of Directors, our Chairman of the Board, our President or
shareholders holding at least 10 percent of the outstanding common stock may
call special meetings of the shareholders. We have entered into agreements with
our officers and directors indemnifying them against losses they may incur in
legal proceedings arising from their service to Asyst, including losses
associated with actions related to third-party attempts to acquire Asyst.

We have adopted a share purchase rights plan, pursuant to which we have
granted to our shareholders rights to purchase shares of junior participating
preferred stock. Upon the earlier of (1) the date of a public announcement that
a person, entity, or group of associated persons has acquired 15 percent of our
common stock or (2) 10 business days following the commencement of, or
announcement of, a tender offer or exchange offer, the rights granted to our
shareholders will become exercisable to purchase our common stock at a price
substantially discounted from the then applicable market price of our common
stock. These rights could generally discourage a merger or tender offer
involving the securities of Asyst that is not approved by our Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on shareholders who might want to
vote in favor of such merger or participate in such tender offer.

In addition, our Board of Directors has authority to issue up to 4,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of those shares without any future vote
or action by the shareholders. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisition and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of Asyst. Furthermore,
such preferred stock may have other rights, including economic rights senior to
the common stock, and as a result, the issuance thereof could have a material
adverse effect on the market value of the common stock. We have no present
plans to issue shares of preferred stock.

32



---



##### Table of Contents



Our stock price may fluctuate significantly which could be detrimental to
our shareholders.

Our stock price has in the past fluctuated and will fluctuate in the
future in response to a variety of factors, including the following:



| |  |  | quarterly fluctuations in results of operations;                                                    
| | - |  | ----------------------------------------------------------------------------------------------------
|
| |  |  | announcements of new products by Asyst or our competitors;                                          
|
| |  |  | changes in either our earnings estimates or investment recommendations by stock market analysts;    
|
| |  |  | announcements of technological innovations;                                                         
|
| |  |  | Conditions or trends in the semiconductor manufacturing industry;                                   
|
| |  |  | announcements by Asyst or our competitors of acquisitions, strategic partnerships or joint ventures;
|
| |  |  | additions or departures of senior management; and                                                   
|
| |  |  | other events or factors many of which are beyond our control.                                       

In addition, in recent years, the stock market in general and shares of
technology companies in particular have experienced extreme price fluctuations,
and such extreme price fluctuations may continue. These broad market and
industry fluctuations may adversely affect the market price of our common
stock.

Representatives of Arthur Andersen LLP are not available to consent to the
inclusion of Arthur Andersen LLPs reports on our financial statements and
incorporated in our SEC filings, and you will not be able to recover against
Arthur Andersen LLP under Section 11 of the Securities Act of 1933.

Arthur Andersen LLP was previously our independent accountant. On March
14, 2002, Andersen was indicted on federal obstruction of justice charges
arising from the governments investigation of Enron Corporation and on June
15, 2002, Andersen was found guilty. Arthur Andersen has ceased practicing
before the SEC. SEC rules require us to present historical audited financial
statements in various SEC filings, such as registration statements into which
our Annual Report on Form 10-K may be incorporated by reference, along with
Arthur Andersens consent to our inclusion of its audit report in those
filings. In light of the cessation of Arthur Andersens SEC practice, we will
not be able to obtain the consent of Arthur Andersen to the inclusion of its
audit report in our relevant current and future filings. The SEC has provided
regulatory relief designed to allow companies that file reports with the SEC to
dispense with the requirement to file a consent of Arthur Andersen in certain
circumstances. Because representatives for Arthur Andersen LLP are not
available to provide the consents required for the inclusion of their report on
our consolidated financial statements for the year ended March 31, 2001, you
will not be able to recover against Arthur Andersen LLP under Section 11 of the
Securities Act of 1933 for any untrue statements of a material fact contained
in these financial statements audited by Arthur Andersen LLP.




Item 3  Quantitative and Qualitative Disclosures About Market Risk

There has not been a material change in our exposure to interest rate and
foreign currency risks since March 31, 2003, the end of our preceding fiscal
year.

Interest Rate Risk. Our exposure to market risk for changes in interest
rates relate primarily to the investment portfolio. We do not use derivative
financial instruments in our investment portfolio. Our investment portfolio
consists of short-term fixed income securities and by policy we limit the
amount of credit exposure to any one issuer. As stated in our investment
policy, we ensure the safety and preservation of our invested principal funds
by limiting default risk, market risk and reinvestment risk. We mitigate
default risk by investing in safe and high-credit quality securities and by
constantly positioning our portfolio to respond appropriately to a significant
reduction in a credit rating of any investment issuer, guarantor or depository.
The portfolio includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity. These securities, like all fixed
income instruments, carry a degree of interest rate risk. Fixed rate securities
have their fair market value adversely affected due to rise in interest rates.
If market interest rates were to increase immediately and uniformly by 10
percent from

33



---



##### Table of Contents



levels at June 30, 2003, the fair market value of these investments would
decline by an immaterial amount. We also have the ability to keep our fixed
income investments fairly liquid. Therefore, we would not expect our operating
results or cash flows to be affected to any significant degree by a sudden
change in market interest rates on our securities portfolio.

Foreign Currency Exchange Risk. We engage in international operations and
transact business in various foreign countries. The primary foreign currency
cash flows are located mainly in Japan and to a lesser extent in China, Taiwan,
Singapore and Europe. Although we operate and sell products in various global
markets, substantially all sales are denominated in the U.S. dollar, except in
Japan, therefore reducing the foreign currency risk factor. In March 2001, we
began to employ a foreign currency hedge program utilizing foreign currency
forward exchange contracts in Japan. To date, the foreign currency transactions
and exposure to exchange rate volatility have not been significant. If the
Japanese Yen were to fluctuate by 10 percent, our quarterly results of
operations may improve or deteriorate in the range of $1.0 million. Although
we do not anticipate any significant fluctuations within a quarter, there can
be no assurance that foreign currency risk will not be a material impact on our
financial position, results of operations or cash flow in the future.




Item 4  Controls and Procedures

Introduction. Rules promulgated under the Securities Exchange Act of
1934, as amended, or the Act, define disclosure controls and procedures to
mean controls and procedures that are designed to ensure that information
required to be disclosed by public companies in the reports filed or submitted
under the Act is recorded, processed, summarized and reported, within the time
periods specified in the SECs rules and forms (Disclosure Controls). New
rules promulgated under the Act define internal control over financial
reporting to mean a process designed by, or under the supervision of, a public
companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors,
management and other personnel, 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, or GAAP, including those policies and procedures that (i) pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the company, (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a
material effect on the financial statements (Internal Controls).

We have designed our Disclosure Controls and Internal Controls to provide
reasonable assurances that their objectives will be met. A control system, no
matter how well designed and operated, can provide only reasonable, but not
absolute, assurance that its objectives will be met. All control systems are
subject to inherent limitations, such as resource constraints, the possibility
of human error and the possibility of intentional circumvention of these
controls. Furthermore, the design of any control system is based in part upon
assumptions about the likelihood of future events, which assumptions may
ultimately prove to be incorrect. As a result, we cannot assure you that our
control system will detect every error or instance of fraudulent conduct.

Evaluation of Disclosure Controls and Procedures.Our Chief Executive
Office, or CEO, and our Chief Financial Officer, or CFO, are responsible for
establishing and maintaining our Disclosure Controls and Procedures. Our CEO
and CFO, after evaluating the effectiveness of our Disclosure Controls and
Procedures as of June 30, 2003, have concluded that our Disclosure Controls and Procedures are effective to
provide reasonable assurances that our Disclosure Controls and Procedures will
meet their defined objectives.

Changes in Internal Controls.During the period covered by this report,
we did not make any significant changes in our internal controls or in other
factors that could significantly affect these controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

34



---



##### Table of Contents






PART II  OTHER INFORMATION




Item 1  Legal Proceedings

On October 28, 1996 we filed suit in the United States District Court for
the Northern District of California against Empak, Inc., Emtrak, Inc., Jenoptik
AG, and Jenoptik Infab, Inc., alleging, among other things, that certain
products of these defendants infringe our United States Patents Nos. 5,097,421
(the 421 patent) and 4,974,166 (the 166 patent). Defendants filed
answers and counterclaims asserting various defenses, and the issues
subsequently were narrowed by the parties respective dismissals of various
claims, and the dismissal of defendant Empak pursuant to a settlement
agreement. The remaining patent infringement claims against the remaining
parties proceeded to summary judgment, which was entered against us on June 8,
1999. We thereafter took an appeal to the United States Court of Appeals for
the Federal Circuit. On October 10, 2001, the Federal Circuit issued a written
opinion, Asyst Technologies, Inc. v. Empak, 268 F.3d 1365 (Fed. Cir. 2001),
reversing the decision of the trial court, and remanding the matter to the
trial court for further proceedings. We have since narrowed our case to the
421 patent, and we continue to seek monetary damages for defendants
infringement, equitable relief, and an award of attorneys fees. Defendants
related declaratory judgment claims are also pending. The trial court held a
claims construction hearing on September 30, 2002, and issued its claims
construction ruling on February 28, 2003. We have filed motions seeking
summary judgment of infringement and summary judgment against certain claims of
invalidity and unenforceability brought by defendants. Defendants have filed
motions seeking summary judgment of non-infringement and patent invalidity.
The trial court is scheduled to hear these motions on September 22, 2003. The
Court has set a trial date of November 3, 2003 for any matters not resolved by
summary judgment. We believe the remaining claims are meritorious and intend
to vigorously pursue this matter.

On February 25, 2003, Mihir Parikh, our former Chief Executive Officer and
Chairman of the Board, filed a demand for arbitration with the American
Arbitration Association against us, alleging breach of his employment
agreement, wrongful termination in violation of public policy, discrimination
based on age, race and national origin, fraud and deceit, defamation and
violation of the California Labor Code. On March 4, 2003, Dr. Parikh resigned
as a member of our Board of Directors. On June 17, 2003, Dr. Parikh filed an
amended demand for arbitration adding as respondents our Chief Executive
Officer and Chairman of the Board, Stephen S. Schwartz, and three outside
directors, Walter W. Wilson, Stanley J. Grubel and Anthony E. Santelli to all
claims other than the breach of contract claim. Dr. Parikh seeks compensatory
damages in excess of $5 million plus punitive damages and attorneys fees. We
deny Dr. Parikhs allegations and intend to defend the action vigorously. The
arbitration hearing has not been scheduled but we believe it will be held in
the first half of 2004.

From time to time, we are also involved in other legal actions arising in
the ordinary course of business. We have incurred certain costs while
defending these matters. There can be no assurance third party assertions will
be resolved without costly litigation, in a manner that is not adverse to our
financial position, results of operations or cash flows or without requiring
royalty payments in the future which may adversely impact gross margins. No
estimate can be made of the possible loss or possible range of loss associated
with the resolution of these contingencies. As a result, no losses have been
accrued in our financial statements as of June 2003.




Item 6  Exhibits and Reports on Form 8-K

(a) Exhibits

|        |  |                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                              
|Number  |  | Description of Document                                                                                      
|3.1(1)  |  | Amended and Restated Articles of Incorporation of the Company.                                               
|        |  |                                                                                                              
|3.2(1)  |  | Bylaws of the Company.                                                                                       
|        |  |                                                                                                              
|3.3(2)  |  | Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed September 24, 1999.    
|        |  |                                                                                                              
|3.4(3)  |  | Second Certificate of Amendment of the Amended and Restated
Articles of Incorporation, filed October 5, 2000.
|        |  |                                                                                                              
|4.1(4)  |  | Rights Agreement among the Company and Bank of Boston, N.A.,
as Rights Agent, dated June 25, 1998.           
|        |  |                                                                                                              
|4.2(5)  |  | Common Stock Purchase Agreement, dated as of May 26, 1999.                                                   

35



---



##### Table of Contents



|        |  |                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                       
|Number  |  | Description of Document                                                                                                                                               
|4.3(6)  |  | Indenture dated as of July 3, 2001 between the Company, State
Street Bank and Trust Company of California, N.A., as
trustee, including therein the forms of the notes.
|        |  |                                                                                                                                                                       
|4.4(6)  |  | Registration Rights Agreement dated as of July 3, 2001
between the Company and State Street Bank and Trust Company
of California, N.A.                                
|        |  |                                                                                                                                                                       
|4.5(7)  |  | Amendment to Rights Agreement among the Company and Bank of
Boston, N.A. as rights agent, dated November 30, 2001.                                                    
|        |  |                                                                                                                                                                       
|31.1    |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                           
|        |  |                                                                                                                                                                       
|31.2    |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                           
|        |  |                                                                                                                                                                       
|32.1*   |  | Certifications required by Rule 13a-14(b) or Rule 15d-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. 1350).                    

(1)  Previously filed as an Exhibit to our Registration Statement on Form S-1,
as amended, File No. 333-66184, filed with the Securities and Exchange
Commission on July 19, 1993, and incorporated herein by reference.

(2)  Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, filed with the Securities and Exchange
Commission on October 21, 1999, and incorporated herein by reference.

(3)  Previously filed with our Definitive Proxy Statement for the 2000 Annual
Meeting of Shareholders, filed with the Securities and Exchange Commission on
July 31, 2000, and incorporated herein by reference.

(4)  Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities and Exchange Commission on June 29, 1998, and incorporated
herein by reference.

(5)  Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities and Exchange Commission on June 18, 1999, and incorporated
herein by reference.

(6)  Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, filed with the Securities and Exchange Commission
on August 14, 2001, and incorporated herein by reference.

(7)  Previously filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended March 31, 2002, filed with the Securities and Exchange
Commission on June 28, 2002, and incorporated herein by reference.

*  The certification attached as Exhibit 32.1 accompanies the Quarterly Report
on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.

(b) Reports on Form 8-K.

1.     On April 8, 2003, we filed a Current Report on Form 8-K, dated April 1,
2003, to furnish our public announcement of preliminary results for our fourth
fiscal quarter ended March 31, 2003.

2.     On May 6, 2003, we filed a Current Report on Form 8-K, dated April 29,
2003, to furnish our public announcement of our results for our fourth fiscal
quarter ended March 31, 2003.

3.     On June 30, 2003, we filed a Current Report on Form 8-K, dated April
29, 2003, to furnish a correction of certain of the numbers reported in the
consolidated balance sheets and statements of operations included in our public
announcement of our results for our fourth fiscal quarter ended March 31, 2003.

36



---



##### Table of Contents






SIGNATURES

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

|                      |  |                          |  |                        
|--------------------- |  | ------------------------ |  | -----------------------
|                      |  | ASYST
TECHNOLOGIES, INC.
|                      |  |                          |  |                        
|Date: August 12, 2003 |  | By:                      |  | /s/ Geoffrey G. Ribar  
|                      |  |                          |  |                        
|                      |  |                          |  | Geoffrey G. Ribar      
|                      |  |                          |  | Senior Vice President  
|                      |  |                          |  | Chief Financial Officer

| |  |  |  |                                                                                         
| |  |  |  | ----------------------------------------------------------------------------------------
| |  |  |  | Signing on behalf of
the registrant and as theprincipal accounting and financial officer

37



---



##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                       
|Number  |  | Description of Document                                                                                                                                               
|3.1(1)  |  | Amended and Restated Articles of Incorporation of the Company.                                                                                                        
|        |  |                                                                                                                                                                       
|3.2(1)  |  | Bylaws of the Company.                                                                                                                                                
|        |  |                                                                                                                                                                       
|3.3(2)  |  | Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed September 24, 1999.                                                             
|        |  |                                                                                                                                                                       
|3.4(3)  |  | Second Certificate of Amendment of the Amended and Restated
Articles of Incorporation, filed October 5, 2000.                                                         
|        |  |                                                                                                                                                                       
|4.1(4)  |  | Rights Agreement among the Company and Bank of Boston, N.A.,
as Rights Agent, dated June 25, 1998.                                                                    
|        |  |                                                                                                                                                                       
|4.2(5)  |  | Common Stock Purchase Agreement, dated as of May 26, 1999.                                                                                                            
|        |  |                                                                                                                                                                       
|4.3(6)  |  | Indenture dated as of July 3, 2001 between the Company, State
Street Bank and Trust Company of California, N.A., as
trustee, including therein the forms of the notes.
|        |  |                                                                                                                                                                       
|4.4(6)  |  | Registration Rights Agreement dated as of July 3, 2001
between the Company and State Street Bank and Trust Company
of California, N.A.                                
|        |  |                                                                                                                                                                       
|4.5(7)  |  | Amendment to Rights Agreement among the Company and Bank of
Boston, N.A. as rights agent, dated November 30, 2001.                                                    
|        |  |                                                                                                                                                                       
|31.1    |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                           
|        |  |                                                                                                                                                                       
|31.2    |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                           
|        |  |                                                                                                                                                                       
|32.1*   |  | Certifications required by Rule 13a-14(b) or Rule 15d-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. 1350).                    

(1)  Previously filed as an Exhibit to our Registration Statement on Form S-1,
as amended, File No. 333-66184, filed with the Securities and Exchange
Commission on July 19, 1993, and incorporated herein by reference.

(2)  Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, filed with the Securities and Exchange
Commission on October 21, 1999, and incorporated herein by reference.

(3)  Previously filed with our Definitive Proxy Statement for the 2000 Annual
Meeting of Shareholders, filed with the Securities and Exchange Commission on
July 31, 2000, and incorporated herein by reference.

(4)  Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities and Exchange Commission on June 29, 1998, and incorporated
herein by reference.

(5)  Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities and Exchange Commission on June 18, 1999, and incorporated
herein by reference.

(6)  Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, filed with the Securities and Exchange Commission
on August 14, 2001, and incorporated herein by reference.

(7)  Previously filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended March 31, 2002, filed with the Securities and Exchange
Commission on June 28, 2002, and incorporated herein by reference.

*  The certification attached as Exhibit 32.1 accompanies the Quarterly Report
on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.