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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 December 31, 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 January 31, 2004 was 46,962,494.



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TABLE OF CONTENTS



|                               |                                                                                                |                                                      |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part I  FINANCIAL INFORMATION
|                               | Item 1  Financial Statements                                                                 
|                               |                                                                                                | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                               |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                               |                                                                                                | CONDENSED 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 10.50                 
|EXHIBIT 31.1                  
|EXHIBIT 31.2                  
|EXHIBIT 32.1                  



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##### 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  December 31, 2003 and March 31, 2003                                                 |    |          | 3 | 
|                              |                                                                                               | Condensed Consolidated Statements of Operations  Three Months and Nine Months
Ended December 31, 2003 and December 31, 2002 |    |          | 4 | 
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows  Nine Months Ended December
31, 2003 and December 31, 2002                  |    |          | 5 | 
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                                         |    |          | 6 | 
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations |                                                                                                                              |    | 17       |  
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                              |    | 36       |  
|                              | Item 4. Controls and Procedures                                                               |                                                                                                                              |    | 36       |  
|Part II. Other Information    |                                                                                               |                                                                                                                              |    |         
|                              | Item 1. Legal Proceedings                                                                     |                                                                                                                              |    | 37       |  
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                              |    | 38       |  
|Signatures                    |                                                                                               |                                                                                                                              | 40 |         
|Exhibit Index                 |                                                                                               |                                                                                                                              | 41 |         
|Exhibit 10.50                 |                                                                                               |                                                                                                                              |    |         
|Exhibit 31.1                  |                                                                                               |                                                                                                                              |    |         
|Exhibit 31.2                  |                                                                                               |                                                                                                                              |    |         
|Exhibit 32.1                  |                                                                                               |                                                                                                                              |    |         

2



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Part I  FINANCIAL INFORMATION




Item 1  Financial Statements




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

|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |           |         |  |  | 
|------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------ | -------- | ------- | ------------ | ------ | --------- | ------- |  |  | 
|                                                        |                                                                                                                                        |                                                               |        |          |         | December 31, |        | March 31,
|                                                        |                                                                                                                                        |                                                               |        |          |         | 2003         |        | 2003     
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|ASSETS                                                  |                                                                                                                                        |                                                               |        |          |         |              |        |          
|CURRENT ASSETS:                                         |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        | Cash and cash equivalents                                                                                                              |                                                               | $      | 122,406  |         |              | $      | 96,214    |        
|                                                        | Restricted cash                                                                                                                        |                                                               |        | 2,341    |         |              |        | 3,088     |        
|                                                        | Accounts receivable, net of allowance for doubtful accounts of $5,214
and $4,880 at December 31, 2003 and March 31, 2003, respectively |                                                               |        | 122,699  |         |              |        | 74,878    |        
|                                                        | Inventories                                                                                                                            |                                                               |        | 20,577   |         |              |        | 22,204    |        
|                                                        | Prepaid expenses and other                                                                                                             |                                                               |        | 10,613   |         |              |        | 10,317    |        
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        |                                                                                                                                        | Total current assets                                          |        |          | 278,636 |              |        |           | 206,701 | 
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        | Property and equipment, net                                                                                                            |                                                               |        | 23,799   |         |              |        | 24,295    |        
|                                                        | Goodwill                                                                                                                               |                                                               |        | 71,503   |         |              |        | 65,505    |        
|                                                        | Intangible assets, net                                                                                                                 |                                                               |        | 70,210   |         |              |        | 76,862    |        
|                                                        | Other assets                                                                                                                           |                                                               |        | 2,573    |         |              |        | 21,862    |        
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        |                                                                                                                                        | Total assets                                                  |        | $        | 446,721 |              |        | $         | 395,225 | 
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |           |        
|LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITY |                                                                                                                                        |                                                               |        |          |         |              |        |          
|CURRENT LIABILITIES:                                    |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        | Short-term loans and notes payable                                                                                                     |                                                               | $      | 23,888   |         |              | $      | 17,976    |        
|                                                        | Current portion of long-term debt and finance leases                                                                                   |                                                               |        | 2,544    |         |              |        | 1,273     |        
|                                                        | Accounts payable                                                                                                                       |                                                               |        | 53,286   |         |              |        | 36,527    |        
|                                                        | Accounts payable-related party                                                                                                         |                                                               |        | 12,681   |         |              |        | 8,500     |        
|                                                        | Accrued liabilities and other                                                                                                          |                                                               |        | 52,026   |         |              |        | 50,572    |        
|                                                        | Deferred revenue                                                                                                                       |                                                               |        | 2,779    |         |              |        | 2,130     |        
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        |                                                                                                                                        | Total current liabilities                                     |        |          | 147,204 |              |        |           | 116,978 | 
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|LONG-TERM LIABILITIES:                                  |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        | Long-term debt and finance leases, net of current portion                                                                              |                                                               |        | 91,993   |         |              |        | 114,812   |        
|                                                        | Deferred tax liability                                                                                                                 |                                                               |        | 24,181   |         |              |        | 23,754    |        
|                                                        | Other long-term liabilities                                                                                                            |                                                               |        | 12,340   |         |              |        | 12,754    |        
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        |                                                                                                                                        | Total long-term liabilities                                   |        |          | 128,514 |              |        |           | 151,320 | 
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|MINORITY INTEREST                                       |                                                                                                                                        |                                                               | 63,310 |          |         |              | 58,893 |          
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|SHAREHOLDERS EQUITY                                    |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        | Common stock                                                                                                                           |                                                               |        | 444,247  |         |              |        | 332,569   |        
|                                                        | Deferred stock-based compensation                                                                                                      |                                                               |        | (3,215   | )       |              |        | (3,992    | )      
|                                                        | Accumulated deficit                                                                                                                    |                                                               |        | (340,996 | )       |              |        | (265,248  | )      
|                                                        | Accumulated other comprehensive income                                                                                                 |                                                               |        | 7,657    |         |              |        | 4,705     |        
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        |                                                                                                                                        | Total shareholders equity                                    |        |          | 107,693 |              |        |           | 68,034  | 
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |          
|                                                        |                                                                                                                                        | Total liabilities, minority interest and shareholders equity |        | $        | 446,721 |              |        | $         | 395,225 | 
|                                                        |                                                                                                                                        |                                                               |        |          |         |              |        |           |        

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

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

|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |         |         |   | 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | ------- | ------------------ | - | ----------------- | ------- | ------ | - | ------- | ------- | ------- | - | -------- | ------- | ------- | - | 
|                                                             |                                                                                                  |                                            |         |         | Three Months Ended |   | Nine Months Ended
|                                                             |                                                                                                  |                                            |         |         | December 31,       |   | December 31,     
|                                                             |                                                                                                  |                                            |         |         |                    |   |                  
|                                                             |                                                                                                  |                                            |         |         | 2003               |   | 2002              |         | 2003   |   | 2002   
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |        
|NET SALES                                                    |                                                                                                  | $                                          | 74,888  |         |                    | $ | 75,624            |         |        | $ | 171,505 |         |         | $ | 199,807  |        
|COST OF SALES                                                |                                                                                                  |                                            | 64,301  |         |                    |   | 56,495            |         |        |   | 144,475 |         |         |   | 135,955  |        
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             | Gross profit                                                                                     |                                            |         | 10,587  |                    |   |                   | 19,129  |        |   |         | 27,030  |         |   |          | 63,852  |        
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|OPERATING EXPENSES:                                          |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             | Research and development                                                                         |                                            |         | 9,204   |                    |   |                   | 11,160  |        |   |         | 27,219  |         |   |          | 31,510  |        
|                                                             | Selling, general and administrative                                                              |                                            |         | 18,755  |                    |   |                   | 20,462  |        |   |         | 51,274  |         |   |          | 54,346  |        
|                                                             | Amortization of acquired intangible assets                                                       |                                            |         | 5,271   |                    |   |                   | 5,707   |        |   |         | 14,834  |         |   |          | 9,273   |        
|                                                             | Restructuring and other charges                                                                  |                                            |         | 1,743   |                    |   |                   | 2,519   |        |   |         | 6,593   |         |   |          | 7,019   |        
|                                                             | Asset impairment charges                                                                         |                                            |         |        |                    |   |                   | 8,398   |        |   |         | 6,853   |         |   |          | 15,519  |        
|                                                             | In-process research and development of acquired business                                         |                                            |         |        |                    |   |                   | 5,750   |        |   |         |        |         |   |          | 7,834   |        
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             |                                                                                                  | Total operating expenses                   |         |         | 34,973             |   |                   |         | 53,996 |   |         |         | 106,773 |   |          |         | 125,501 |  
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             | Operating loss                                                                                   |                                            |         | (24,386 | )                  |   |                   | (34,867 | )      |   |         | (79,743 | )       |   |          | (61,649 | )      
|OTHER INCOME (EXPENSE):                                      |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             | Interest income and other income (expense)                                                       |                                            |         | (407    | )                  |   |                   | (777    | )      |   |         | 705     |         |   |          | (520    | )      
|                                                             | Interest expense                                                                                 |                                            |         | (1,798  | )                  |   |                   | (1,801  | )      |   |         | (5,298  | )       |   |          | (4,708  | )      
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             |                                                                                                  | Other income (expense), net                |         |         | (2,205             | ) |                   |         | (2,578 | ) |         |         | (4,593  | ) |          |         | (5,228  | )
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             | Loss before provision (benefit) from income taxes,
minority interest and discontinued operations |                                            |         | (26,591 | )                  |   |                   | (37,445 | )      |   |         | (84,336 | )       |   |          | (66,877 | )      
|PROVISION (BENEFIT) FROM INCOME TAXES                        |                                                                                                  |                                            | (2,117  | )       |                    |   |                  |         |        |   | (4,502  | )       |         |   | 58,628   |        
|MINORITY INTEREST                                            |                                                                                                  |                                            | (2,417  | )       |                    |   | (4,824            | )       |        |   | (4,086  | )       |         |   | (4,824   | )      
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|LOSS FROM CONTINUING OPERATIONS                              |                                                                                                  |                                            | (22,057 | )       |                    |   | (32,621           | )       |        |   | (75,748 | )       |         |   | (120,681 | )      
|DISCONTINUED OPERATIONS, net of income tax                   |                                                                                                  |                                            |        |         |                    |   | (8,300            | )       |        |   |        |         |         |   | (11,753  | )      
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|NET LOSS                                                     |                                                                                                  | $                                          | (22,057 | )       |                    | $ | (40,921           | )       |        | $ | (75,748 | )       |         | $ | (132,434 | )      
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|BASIC AND DILUTED LOSS PER SHARE:                            |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             |                                                                                                  | Continuing operations                      |         | $       | (0.52              | ) |                   | $       | (0.86  | ) |         | $       | (1.89   | ) |          | $       | (3.23   | )
|                                                             |                                                                                                  | Discontinued operations, net of income tax |         |         |                   |   |                   |         | (0.22  | ) |         |         |        |   |          |         | (0.32   | )
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|                                                             |                                                                                                  | Net loss                                   |         | $       | (0.52              | ) |                   | $       | (1.08  | ) |         | $       | (1.89   | ) |          | $       | (3.55   | )
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        
|SHARES USED IN THE PER SHARE CALCULATION  basic and
diluted |                                                                                                  |                                            | 42,206  |         |                    |   | 37,932            |         |        |   | 40,066  |         |         |   | 37,316   |        
|                                                             |                                                                                                  |                                            |         |         |                    |   |                   |         |        |   |         |         |         |   |          |        

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

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

|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |         |         |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | ------- | ----------------- | ------- | ------------ | -------- | ------- | ------- | -
|                                                             |                                                                                           |                                                            |                                                     |         | Nine Months Ended
|                                                             |                                                                                           |                                                            |                                                     |         | December 31,      |         | December 31,
|                                                             |                                                                                           |                                                            |                                                     |         |                   |        
|                                                             |                                                                                           |                                                            |                                                     |         | 2003              |         | 2002        
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                                           |                                                            |                                                     |         |                   |         |              |         
|                                                             | Net loss                                                                                  |                                                            | $                                                   | (75,748 | )                 |         | $            | (132,434 | )      
|                                                             |                                                                                           | Less: loss from discontinued operations                    |                                                     |         |                  |         |              |          | 11,753  |        
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|                                                             | Net loss from continuing operations                                                       |                                                            |                                                     | (75,748 | )                 |         |              | (120,681 | )      
|                                                             | Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |                                                            |                                                     |         |                   |         |              |          |        
|                                                             |                                                                                           | Depreciation and amortization                              |                                                     |         | 21,732            |         |              |          | 19,928  |        
|                                                             |                                                                                           | Minority interest in net loss in consolidated subsidiary   |                                                     |         | (4,086            | )       |              |          |        |        
|                                                             |                                                                                           | Stock-based compensation                                   |                                                     |         | 1,749             |         |              |          | 2,243   |        
|                                                             |                                                                                           | Provision for doubtful accounts                            |                                                     |         | 334               |         |              |          | (400    | )      
|                                                             |                                                                                           | Provision for excess inventories                           |                                                     |         | 2,566             |         |              |          |        |        
|                                                             |                                                                                           | Non-cash charges for restructuring and write-down of land  |                                                     |         | 6,853             |         |              |          | 10,317  |        
|                                                             |                                                                                           | In-process research and development of acquired business   |                                                     |         |                  |         |              |          | 7,834   |        
|                                                             |                                                                                           | Deferred tax asset, net                                    |                                                     |         | (3,849            | )       |              |          | 59,432  |        
|                                                             |                                                                                           | Impairment of goodwill and other intangible assets         |                                                     |         |                  |         |              |          | 8,398   |        
|                                                             | Changes in assets and liabilities, net of acquisitions:                                   |                                                            |                                                     |         |                   |         |              |          |        
|                                                             |                                                                                           | Accounts receivable                                        |                                                     |         | (37,092           | )       |              |          | (17,473 | )      
|                                                             |                                                                                           | Inventories                                                |                                                     |         | 1,124             |         |              |          | 30,598  |        
|                                                             |                                                                                           | Prepaid expenses and other assets                          |                                                     |         | 4,182             |         |              |          | 362     |        
|                                                             |                                                                                           | Accounts payable, accrued liabilities and deferred revenue |                                                     |         | 12,040            |         |              |          | 23,210  |        
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|                                                             |                                                                                           |                                                            | Net cash provided by (used in) operating activities |         |                   | (70,195 | )            |          |         | 23,768  |  
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                           |                                                            |                                                     |         |                   |         |              |         
|                                                             | Purchase of short-term investments                                                        |                                                            |                                                     |        |                   |         |              | (9,000   | )      
|                                                             | Sale (purchase) of restricted cash and cash equivalents and short-term
investments        |                                                            |                                                     | 987     |                   |         |              | (22,500  | )      
|                                                             | Sale or maturity of restricted cash and cash equivalents and short-term
investments       |                                                            |                                                     |        |                   |         |              | 24,716   |        
|                                                             | Net proceeds from sale of land                                                            |                                                            |                                                     | 12,106  |                   |         |              |         |        
|                                                             | Net cash used in acquisitions                                                             |                                                            |                                                     | (1,179  | )                 |         |              | (52,296  | )      
|                                                             | Purchase of property and equipment                                                        |                                                            |                                                     | (4,097  | )                 |         |              | (7,271   | )      
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|                                                             |                                                                                           |                                                            | Net cash provided by (used in) investing activities |         |                   | 7,817   |              |          |         | (66,351 | )
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|CASH FLOW FROM FINANCING ACTIVITIES:                         |                                                                                           |                                                            |                                                     |         |                   |         |              |         
|                                                             | Net proceeds from short-term and long-term loans                                          |                                                            |                                                     | 13,957  |                   |         |              | 27,995   |        
|                                                             | Repayment of short-term debt, long-term debt and finance leases                           |                                                            |                                                     | (32,837 | )                 |         |              | (620     | )      
|                                                             | Issuance of common stock                                                                  |                                                            |                                                     | 110,704 |                   |         |              | 1,922    |        
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|                                                             |                                                                                           |                                                            | Net cash provided by financing activities           |         |                   | 91,824  |              |          |         | 29,297  |  
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                           |                                                            | (3,254                                              | )       |                   |         | 3,880        |         
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|Net cash provided by (used in) continuing operations         |                                                                                           |                                                            | 26,192                                              |         |                   |         | (9,406       | )       
|Net cash used in discontinued operations                     |                                                                                           |                                                            |                                                    |         |                   |         | (5,038       | )       
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             |                                                                                           |                                                            | 26,192                                              |         |                   |         | (14,444      | )       
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               |                                                                                           |                                                            | 96,214                                              |         |                   |         | 74,577       |         
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                     |                                                                                           | $                                                          | 122,406                                             |         |                   | $       | 60,133       |         
|                                                             |                                                                                           |                                                            |                                                     |         |                   |         |              |          |        

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

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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., or 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, Co., Ltd. ASI renamed this subsidiary Asyst
Shinko America, or ASAM.

In October 2002, we purchased a 51 percent interest in ASI, a Japanese
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 December 31, 2003 and December 31, 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. Certain information and footnote disclosures included
in the financial statements prepared in accordance with generally accepted
accounting principles have been omitted in these interim statements as allowed
by such SEC rules and regulations. However, we believe that the disclosures
are adequate to make the information presented not misleading. All significant
inter-company 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, and our majority-owned subsidiary, Asyst Japan, Inc., or AJI.
Certain prior year amounts in the condensed consolidated financial statements
and the notes thereto have been reclassified where necessary to conform to the
presentation for the quarter ended December 31, 2003. Also during the current
quarter, we recorded a $2.1 million charge to selling, general and
administrative expenses relating to prior quarters of fiscal 2004 and 2003 and
2002. The effect of this adjustment on any prior quarter or year was not
material. We close our books on the last Saturday of each quarter and thus the
actual date of the quarter-end, December 27, 2003, is different from the
month-end dates used throughout this Form 10-Q report. This presentation is
for convenience purposes. The results for interim periods are not necessarily
indicative of the results for the entire year. The year-end condensed
consolidated data was derived from audited financial statements but does not
include all disclosures required by accounting principles generally accepted in
the United States of America. As such, these 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 as amended. 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.

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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 apply to revenue arrangements entered into
in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 to
date did not have a significant impact on our consolidated financial
statements.

In August 2003, the EITF reached a consensus on Issue No. 03-5,
Applicability of AICPA Statement of Position 97-2, Software Revenue
Recognition, to Non-Software Deliverables. This issue focuses solely on
whether non-software deliverables included in arrangements that contain
more-than-incidental software should be accounted for in accordance with SOP
97-2. The Task Force confirmed that in an arrangement that contains software
that is more-than-incidental to the products or services as a whole, only the
software and software-related elements are included within the scope of SOP
97-2. Software-related elements include software-related products and services
such as those listed in paragraph 9 of SOP 97-2, as well as other deliverables
for which the software is essential to their functionality. EITF Issue No.
03-5 is effective for revenue arrangements entered into in fiscal periods
beginning after August 13, 2003. The adoption of EITF Issue No. 03-5 to date did not have a significant
impact 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. In October 2003, the Financial Accounting Standards Board
deferred the latest date by which all public entities must apply FIN No. 46, to
the first reporting period ending after March 15, 2004. We believe that the
adoption of this standard will have no material impact on our consolidated
financial statements.

In May 2003, 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. The adoption of SFAS No. 150 to date
has not had a significant impact on our consolidated financial statements.

Restricted Cash

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

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Inventories

Inventories consist of the following (in thousands):

|                                   |       |   |              |        |           |   |        |        | 
|---------------------------------- | ----- | - | ------------ | ------ | --------- | - | ------ | ------ | 
|                                   |       |   | December 31, |        | March 31,
|                                   |       |   | 2003         |        | 2003     
|                                   |       |   |              |        |          
|Raw materials                      |       | $ | 8,622        |        |           | $ | 8,448  |       
|Work-in-process and finished goods |       |   | 11,955       |        |           |   | 13,756 |       
|                                   |       |   |              |        |           |   |        |       
|                                   | Total |   | $            | 20,577 |           |   | $      | 22,204 | 
|                                   |       |   |              |        |           |   |        |       

During the fiscal year ended March 31, 2003, we began to transition
substantially all of our U.S. manufacturing to Solectron Corporation, or
Solectron. As part of the arrangement, Solectron purchased $20.0 million of
inventory from us. No revenue was recorded for the sale of this inventory to
Solectron. In the quarter ended December 31, 2003, we repurchased $4.3 million
of this inventory that was not used by Solectron in manufacturing our products.
This amount was fully reserved in prior periods. On an on-going basis, we may
be obligated to acquire inventory purchased by Solectron if the inventory is
not used over certain specified period of time per the terms of our agreement.

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, five to 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,
goodwill of $60.5 million was recorded. Purchase accounting for the
acquisition of ASI was finalized in the quarter ended September 30, 2003,
resulting in approximately a $2.0 million adjustment to goodwill. In
connection with the ASAM acquisition in April 2003, ASI recorded goodwill of
$0.4 million.

We completed an annual goodwill impairment test in accordance with SFAS
No. 142 during the quarter ended December 31, 2003 and concluded that there was
no impairment of goodwill and intangible assets.

In connection with the annual impairment test in accordance with SFAS No.
142 during the quarter ended December 31, 2002, a goodwill impairment expense
of $2.1 million was recognized during the third quarter of fiscal 2003 related
to goodwill recorded in connection with our May 2002 acquisition of
substantially all the assets of domainLogix Corporation, or DLC. 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 the quarter ended December 31, 2002, 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 DLC.

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

|                               |                                            |       |   |                   |         |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |        |        | 
|------------------------------ | ------------------------------------------ | ----- | - | ----------------- | ------- | -------------- | - | ------ | ------ | ------ | - | ------------ | ------ | ----------- | - | ------ | ------ |  | - | ----- | ------ |  | - | ------ | ------ | 
|                               |                                            |       |   | December 31, 2003 |         | March 31, 2003
|                               |                                            |       |   |                   |         |               
|                               |                                            |       |   | Gross             |         |                |   |        |        |        |   |              |        | Gross       |   |        |        |  |   |       |        | 
|                               |                                            |       |   | Carrying          |         | Accumulated    |   |        |        |        |   | Carrying     |        | Accumulated |   |        |        | 
|                               |                                            |       |   | Amount            |         | Amortization   |   | Net    |        | Amount |   | Amortization |        | Net        
|                               |                                            |       |   |                   |         |                |   |        |        |        |   |              |        |            
|Amortizable intangible assets: |                                            |       |   |                   |         |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |       
|                               | Developed technology                       |       | $ | 63,545            |         |                | $ | 18,609 |        |        | $ | 44,936       |        |             | $ | 57,294 |        |  | $ | 9,963 |        |  | $ | 47,331 |       
|                               | Customer lists and other
intangible assets |       |   | 35,350            |         |                |   | 15,124 |        |        |   | 20,226       |        |             |   | 32,691 |        |  |   | 8,920 |        |  |   | 23,771 |       
|                               | Licenses and patents                       |       |   | 7,376             |         |                |   | 2,328  |        |        |   | 5,048        |        |             |   | 7,770  |        |  |   | 2,010 |        |  |   | 5,760  |       
|                               |                                            |       |   |                   |         |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |        |       
|                               |                                            | Total |   | $                 | 106,271 |                |   | $      | 36,061 |        |   | $            | 70,210 |             |   | $      | 97,755 |  |   | $     | 20,893 |  |   | $      | 76,862 | 
|Unamortized intangible assets: |                                            |       |   |                   |         |                |   |        |        |        |   |              |        |             |   |        |        |  |   |       |        |  |   |       
|                               | Goodwill                                   |       | $ | 71,503            |         |                | $ |       |        |        | $ | 71,503       |        |             | $ | 65,505 |        |  | $ |      |        |  | $ | 65,505 |       

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Amortization expense was $14.8 million for the nine months ended December
31, 2003 and $9.3 million for the nine months ended December 31, 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 |  | $ | 5,266  | 
|              | 2005              |  |   | 21,072 | 
|              | 2006              |  |   | 19,355 | 
|              | 2007              |  |   | 14,300 | 
|              | 2008 and beyond   |  |   | 10,217 | 

The changes in the carrying amount of goodwill for the nine months ended
December 31, 2003 are as follows (in thousands):

|                                |  |            |       |      |  |       |        |   |  |   |        |  
|------------------------------- |  | ---------- | ----- | ---- |  | ----- | ------ | - |  | - | ------ | -
|                                |  | Fab        |       |      |  |       |        |   |  |  
|                                |  | Automation |       | AMHS |  | Total
|                                |  |            |       |      |  |      
|Balance at March 31, 2003       |  | $          | 2,954 |      |  | $     | 62,551 |   |  | $ | 65,505 |  
|Acquisitions                    |  |            |      |      |  |       | 376    |   |  |   | 376    |  
|Purchase accounting adjustments |  |            |      |      |  |       | (2,017 | ) |  |   | (2,017 | )
|Foreign currency translation    |  |            |      |      |  |       | 7,639  |   |  |   | 7,639  |  
|                                |  |            |       |      |  |       |        |   |  |   |        |  
|Balance at December 31, 2003    |  | $          | 2,954 |      |  | $     | 68,549 |   |  | $ | 71,503 |  
|                                |  |            |       |      |  |       |        |   |  |   |        |  

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 |  |        | 2,892  |  
|Settlements made (in cash or in kind)            |  |        | (2,594 | )
|Other additions                                  |  |        | 640    |  
|                                                 |  |        |        |  
|Balance, December 31, 2003                       |  | $      | 8,499  |  
|                                                 |  |        |        |  

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 recognized 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.

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We recognize revenue for long-term AMHS contracts 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 that 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 $49.3
million and $17.4 million at December 31, 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 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 we have entered into
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 had a loss reserve of approximately $5.6 million and $2.0 million at
December 31, 2003 and March 31, 2003, respectively. The balance at December
31, 2003 mainly related to three AMHS contracts entered into by ASI during the quarter
ended December 31, 2003.

Loss Per Share

Basic earnings (loss) per share is computed using the weighted average
number of common shares outstanding, while diluted earnings (loss) per share is
computed using the sum of the weighted average number of common and common
equivalent shares outstanding. Common equivalent shares used in the
computation of diluted earnings per share result from the assumed exercise of
stock options and warrants, using the treasury stock method. For periods for
which there is a net loss, the numbers 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 |       | Nine Months Ended
|                  |       |  | December 31,       |       | December 31,     
|                  |       |  |                    |       |                  
|                  |       |  | 2003               |       | 2002              |  | 2003  |       | 2002
|                  |       |  |                    |       |                   |  |       |       |     
|Restricted stock  |       |  | 44                 |       |                   |  | 53    |       |      |  | 44    |       |  |  | 50    |      
|Stock options     |       |  | 3,380              |       |                   |  | 938   |       |      |  | 2,203 |       |  |  | 1,342 |      
|Convertible notes |       |  | 5,682              |       |                   |  | 5,682 |       |      |  | 5,682 |       |  |  | 5,682 |      
|                  |       |  |                    |       |                   |  |       |       |      |  |       |       |  |  |       |      
|                  | Total |  |                    | 9,106 |                   |  |       | 6,673 |      |  |       | 7,929 |  |  |       | 7,074 | 
|                  |       |  |                    |       |                   |  |       |       |      |  |       |       |  |  |       |      

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Comprehensive Loss

The components of our comprehensive loss were as follows (in thousands):

|                                         |       |   |                    |         |                   |   |         |         |      |   |         |         |   |   |          |          |  
|---------------------------------------- | ----- | - | ------------------ | ------- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | -------- | -------- | -
|                                         |       |   | Three Months Ended |         | Nine Months Ended
|                                         |       |   | December 31,       |         | December 31,     
|                                         |       |   |                    |         |                  
|                                         |       |   | 2003               |         | 2002              |   | 2003    |         | 2002
|                                         |       |   |                    |         |                   |   |         |         |     
|Net loss, as reported                    |       | $ | (22,057            | )       |                   | $ | (40,921 | )       |      | $ | (75,748 | )       |   | $ | (132,434 | )       
|Foreign currency translation adjustments |       |   | 3,255              |         |                   |   | 2,242   |         |      |   | 2,952   |         |   |   | 2,242    |         
|                                         |       |   |                    |         |                   |   |         |         |      |   |         |         |   |   |          |         
|                                         | Total |   | $                  | (18,802 | )                 |   | $       | (38,679 | )    |   | $       | (72,796 | ) |   | $        | (130,192 | )
|                                         |       |   |                    |         |                   |   |         |         |      |   |         |         |   |   |          |         

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 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 we determined compensation expense for our stock options, employee
stock purchase plan and the restricted stock issuances to employees based on
the fair value at the grant date for the awards, our net loss for the three
months and nine months ended December 31, 2003 and 2002, respectively, would
have increased as indicated below (in thousands, except per share amounts):

|                                                                                                |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |          |  
|----------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | -------- | -
|                                                                                                |  | Three Months Ended |         | Nine Months Ended
|                                                                                                |  | December 31,       |         | December 31,     
|                                                                                                |  |                    |         |                  
|                                                                                                |  | 2003               |         | 2002              |  | 2003 |         | 2002
|                                                                                                |  |                    |         |                   |  |      |         |     
|Net loss - as reported                                                                          |  | $                  | (22,057 | )                 |  | $    | (40,921 | )    |  | $ | (75,748 | ) |  | $ | (132,434 | )
|Add: stock-based compensation expense included in
reported net loss                             |  |                    | 565     |                   |  |      | 635     |      |  |   | 1,749   |   |  |   | 2,243    |  
|Less: stock-based compensation expenses determined under
fair value based method for all awards |  |                    | (3,547  | )                 |  |      | (4,774  | )    |  |   | (10,870 | ) |  |   | (14,323  | )
|                                                                                                |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |          |  
|Net loss - pro forma                                                                            |  | $                  | (25,039 | )                 |  | $    | (45,060 | )    |  | $ | (84,869 | ) |  | $ | (144,514 | )
|                                                                                                |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |          |  
|Basic and diluted net loss per share - as reported                                              |  | $                  | (0.52   | )                 |  | $    | (1.08   | )    |  | $ | (1.89   | ) |  | $ | (3.55    | )
|                                                                                                |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |          |  
|Basic and diluted net loss per share - pro forma                                                |  | $                  | (0.59   | )                 |  | $    | (1.19   | )    |  | $ | (2.12   | ) |  | $ | (3.87    | )
|                                                                                                |  |                    |         |                   |  |      |         |      |  |   |         |   |  |   |          |  

3. RESTRUCTURING AND OTHER CHARGES:

Restructuring charges and related utilization for the nine months ended
December 31, 2003 were as follows (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  |  
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  

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|                             |  |           |        |            |  |             |       |       |  |   |   |  |  |   |        |  
|---------------------------- |  | --------- | ------ | ---------- |  | ----------- | ----- | ----- |  | - | - |  |  | - | ------ | -
|                             |  | Severance |        |            |  |             |       |       |  |   |   |  |  |  
|                             |  | and       |        | Excess     |  | Fixed Asset |       |       |  |  
|                             |  | Benefits  |        | Facilities |  | Impairment  |       | Total
|                             |  |           |        |            |  |             |       |      
|Additional accruals          |  |           | 160    |            |  |             | 327   |       |  |   |  |  |  |   | 487    |  
|Non-cash related utilization |  |           |       |            |  |             |      |       |  |   |  |  |  |   |       |  
|Amounts paid in cash         |  |           | (305   | )          |  |             | (957  | )     |  |   |  |  |  |   | (1,262 | )
|                             |  |           |        |            |  |             |       |       |  |   |   |  |  |   |        |  
|Balance, September 30, 2003  |  | $         | 325    |            |  | $           | 3,577 |       |  | $ |  |  |  | $ | 3,902  |  
|                             |  |           |        |            |  |             |       |       |  |   |   |  |  |   |        |  
|Additional accruals          |  |           | 1,743  |            |  |             |      |       |  |   |  |  |  |   | 1,743  |  
|Non-cash related utilization |  |           | 70     |            |  |             | (47   | )     |  |   |  |  |  |   | 23     |  
|Amounts paid in cash         |  |           | (2,074 | )          |  |             | (491  | )     |  |   |  |  |  |   | (2,565 | )
|                             |  |           |        |            |  |             |       |       |  |   |   |  |  |   |        |  
|Balance, December 31, 2003   |  | $         | 64     |            |  | $           | 3,039 |       |  | $ |  |  |  | $ | 3,103  |  
|                             |  |           |        |            |  |             |       |       |  |   |   |  |  |   |        |  

In the quarter ended December 31, 2003, we recorded net severance and
other charges of $1.0 million primarily related to the settlement and release
of claims arising from the termination of a former officer. We also incurred a
net $0.7 million of severance expenses mainly from headcount reductions in our
Japanese operations resulting from its outsourcing activities. We anticipate
potential restructuring charges of $3.0 million to $5.0 million over the next
several quarters as we continue our previously announced cost reduction
initiatives.

We incurred restructuring charges of $0.5 million during the quarter ended
September 30, 2003, consisting primarily of severance costs of $0.2 million
from a reduction in our worldwide workforce and secondarily for exiting a
facility in connection with our restructuring activities. As a result of these
restructuring activities, we terminated the employment of approximately 49
employees, mainly in manufacturing, from our international operations.

In the quarter ended June 30, 2003, we incurred restructuring charges of
$4.4 million, 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.

In the quarter ended December 31, 2002, we recorded an excess facility
charge of $1.1 million reflecting revised estimates of future sublease income
based on continued weakness in the Austin, Texas commercial real estate market.
We also recorded severance charges of $0.7 million resulting from headcount
reductions of 52 employees, including manufacturing, sales, research and
development and administrative staff. We also recorded a fixed asset
impairment charge of $0.7 million for assets to be disposed of due to headcount
reductions and vacating facilities.

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

4. ASSET IMPAIRMENT CHARGES:

We completed the sale of land in Fremont, California, in the quarter ended
September 30, 2003. The net proceeds from the sale were $12.1 million. 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 the pending sale agreement at the time. We
previously entered into a purchase agreement in September 2002 to sell the land
for $19.0 million, net of selling expenses. This transaction did not close.
As a result, a $7.1 million write-down was recorded in the second quarter in
fiscal 2003.

In the quarter ended December 31, 2002, we completed a periodic goodwill
impairment test. As a result of the test, we determined that impairment
charges of $8.4 million were required because the forecasted undiscounted cash
flows were less than the book values of certain businesses. The charges were
measured on the basis of comparing estimated fair values with corresponding
book values related to the goodwill and intangible assets recorded in
connection with our May 2002 acquisition of substantially all the assets of
domainLogix Corporation, or DLC.

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 carry-back and carry-forward periods, and existing
contracts or sales backlog that will result in future profits.

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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.

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 |       | Nine Months Ended
|                         |  | December 31,       |       | December 31,     
|                         |  |                    |       |                  
|                         |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                         |  |                    |       |                   |  |      |       |     
|Fab Automation Products: |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   |       |  
|Net sales                |  | $                  | 32.5  |                   |  | $    | 51.5  |      |  | $ | 82.0  |   |  | $ | 175.7 |  
|Operating loss           |  | $                  | (18.0 | )                 |  | $    | (22.5 | )    |  | $ | (67.9 | ) |  | $ | (43.5 | )
|AMHS:                    |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   |       |  
|Net sales                |  | $                  | 42.4  |                   |  | $    | 24.1  |      |  | $ | 89.5  |   |  | $ | 24.1  |  
|Operating loss           |  | $                  | (6.4  | )                 |  | $    | (12.4 | )    |  | $ | (11.8 | ) |  | $ | (18.1 | )
|Total:                   |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   |       |  
|Net sales                |  | $                  | 74.9  |                   |  | $    | 75.6  |      |  | $ | 171.5 |   |  | $ | 199.8 |  
|Operating loss           |  | $                  | (24.4 | )                 |  | $    | (34.9 | )    |  | $ | (79.7 | ) |  | $ | (61.6 | )

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

|                   |       |   |                    |      |                   |   |      |      |      |   |      |       |  |   |      |       | 
|------------------ | ----- | - | ------------------ | ---- | ----------------- | - | ---- | ---- | ---- | - | ---- | ----- |  | - | ---- | ----- | 
|                   |       |   | Three Months Ended |      | Nine Months Ended
|                   |       |   | December 31,       |      | December 31,     
|                   |       |   |                    |      |                  
|                   |       |   | 2003               |      | 2002              |   | 2003 |      | 2002
|                   |       |   |                    |      |                   |   |      |      |     
|North America      |       | $ | 16.9               |      |                   | $ | 23.5 |      |      | $ | 38.3 |       |  | $ | 71.6 |      
|Japan              |       |   | 19.7               |      |                   |   | 9.3  |      |      |   | 55.3 |       |  |   | 38.4 |      
|Taiwan             |       |   | 9.4                |      |                   |   | 16.7 |      |      |   | 23.1 |       |  |   | 36.5 |      
|Korea              |       |   | 16.0               |      |                   |   | 8.9  |      |      |   | 18.3 |       |  |   | 9.0  |      
|Other Asia/Pacific |       |   | 6.8                |      |                   |   | 12.7 |      |      |   | 21.4 |       |  |   | 30.1 |      
|Europe             |       |   | 6.1                |      |                   |   | 4.5  |      |      |   | 15.1 |       |  |   | 14.2 |      
|                   |       |   |                    |      |                   |   |      |      |      |   |      |       |  |   |      |      
|                   | Total |   | $                  | 74.9 |                   |   | $    | 75.6 |      |   | $    | 171.5 |  |   | $    | 199.8 | 
|                   |       |   |                    |      |                   |   |      |      |      |   |      |       |  |   |      |      

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 that AMP and SemiFab were not critical
to our long-term strategy. We completed the sale of each business in March
2003.

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Summarized selected financial information for discontinued operations in
the three and the nine months ended December 31, 2002 is as follows (in
thousands):

|                         |          |   |              |        |              |   |         |         |  
|------------------------ | -------- | - | ------------ | ------ | ------------ | - | ------- | ------- | -
|                         |          |   | Three Months |        | Nine Months 
|                         |          |   | Ended        |        | Ended       
|                         |          |   | December 31, |        | December 31,
|                         |          |   |              |        |             
|                         |          |   | 2002         |        | 2002        
|                         |          |   |              |        |             
|Net sales                |          | $ | 2,876        |        |              | $ | 10,859  |        
|                         |          |   |              |        |              |   |         |        
|Loss before income taxes |          |   | (8,300       | )      |              |   | (11,753 | )      
|Income taxes (benefit)   |          |   |             |        |              |   |        |        
|                         |          |   |              |        |              |   |         |        
|                         | Net loss |   | $            | (8,300 | )            |   | $       | (11,753 | )
|                         |          |   |              |        |              |   |         |        

8. ACQUISITIONS:

ASYST SHINKO AMERICA (ASAM)

In April 2003, ASI acquired the portion of Shinko Technologies, Inc., a
subsidiary of Shinko Electric, Co., Ltd., or Shinko, that provided ongoing
support to ASIs North American AMHS customers. Shinko 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 is as 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                    |  |   | 390   |  
|                            |  |   |       |  
|Net cash paid               |  | $ | 1,179 |  
|                            |  |   |       |  

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.

ASYST SHINKO INC. (ASI)

On October 16, 2002, we established a joint venture with Shinko called
Asyst Shinko, Inc, or ASI. The joint venture develops, manufactures and
markets market-leading AMHS with principal operations in Tokyo and Ise, Japan.
Under terms of the joint venture 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 September 30, 2003
include the results of ASI for the quarter and year-to-date. We acquired ASI
to enhance our presence in the 300mm AMHS and flat panel display markets. 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 completed our final analysis of the acquisition
and recorded all remaining adjustments in the second quarter of fiscal year
2004. A summary of the transaction is as follows (in thousands):

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|                                                                          |  |   |         | 
|------------------------------------------------------------------------- |  | - | ------- | 
|Total Enterprise Value                                                    |  |   | 128,824 | 
|Transaction costs                                                         |  |   | 1,796   | 
|                                                                          |  |   |         | 
|                                                                          |  | $ | 130,620 | 
|Less fair value of identifiable intangibles contributed by Shinko:        |  |   |         | 
|Net assets                                                                |  |   | 1.036   | 
|Developed technology                                                      |  |   | 44,500  | 
|Customer lists                                                            |  |   | 18,800  | 
|In-process research and development                                       |  |   | 5,750   | 
|                                                                          |  |   |         | 
|Excess of consideration over fair value of net assets acquired -
Goodwill |  | $ | 60,534  | 
|                                                                          |  |   |         | 

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 $60.5 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 $63.3 million was recorded at December 31, 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)
including its own interest in amortization of intangible assets 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                    |  |   | 52,955  |  
|Property plant and equipment            |  |   | 3,332   |  
|Other assets                            |  |   | 775     |  
|Current liabilities                     |  |   | (31,234 | )
|Deferred tax liabilities                |  |   | (26,586 | )
|Pension and other long-term liabilities |  |   | (13,406 | )
|                                        |  |   |         |  
|Net assets acquired                     |  | $ | 1,036   |  
|                                        |  |   |         |  

As part of the acquisition, we assumed pension-related obligations. In
addition, as certain pension obligations are included in the former owner of
Shinko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
Shinkos 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 53/4 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 $22.3 million and
$22.1 million of debt from banks in Japan at December 31, 2003 and March 31,
2003, respectively. The interest rates ranged from 1.4 percent to 3.0 percent
as of December 31, 2003. Certain of AJIs assets have been pledged as security
for this debt. As of December 31, 2003, pledged assets consist of land and
other property and equipment, net of accumulated depreciation, time deposits
and accounts receivable totaling approximately $15.1 million. Additionally,
Asyst has provided letters of guarantee to financial institutions in Japan
covering substantially all of AJIs debts.

We have a $25.0 million 2-year revolving credit agreement with a
commercial bank. The specific amount of the credit line available, however,
may change based on the amount of receivables held. Any outstanding borrowings
under the credit agreement are repayable in full in October 2004. The credit
line was fully paid down during the
quarter ended December 31, 2003 from the proceeds of the sale of
6,900,000 shares of common
stock (refer to footnote 10).

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During the quarter ended September 30,
2003, we amended the financial covenants. As amended, we are required under
the agreement to maintain compliance with certain financial covenants,
including a quarterly net income/loss target, calculated on an after-tax basis
excluding depreciation, amortization and other non-cash items. We must also
meet a minimum liquidity covenant. As of the quarter ended December 31, 2003,
we were not in compliance with certain of these financial covenants, however,
we have obtained a waiver from the bank of compliance with these certain
covenants. We are currently negotiating with the bank to amend and extend the
credit agreement and, specifically, to revise the applicable financial
covenants. Non-compliance with the financial covenants in the future may
preclude our ability to borrow under the credit agreement or require us to
repay any borrowings outstanding.

In September 2003, ASI entered into a short-term bank facility with a
Japanese bank under which it may borrow up to approximately $27.9 million at
the exchange rate as of December 31, 2003. The current interest rate is 1.4%.
This facility primarily supports ASIs working capital requirements during the
construction phase of the projects currently in process in Japan where
substantially all of the payment is expected upon completion of the projects.
ASI had outstanding borrowings of $9.3 million under this facility at December
31, 2003. Under terms of the bank facility, ASI must generate annual operating
profits on a statutory basis. We were in compliance with the covenants for the
quarter ended December 31, 2003.

10. SALE OF EQUITY SECURITIES

In November 2003, we sold 6,900,000 shares of our common stock, including
exercise of the underwriters over-allotment option, at an offering price to the public of $15.17 per
share. We received total proceeds of $99.0 million, net of the related
issuance fees and costs.

11. RELATED PARTY TRANSACTIONS:

At December 31, 2003, we held notes from two current non-officer employees
totaling $0.4 million. These notes receivable are secured by deeds of trust on
certain real property and/or pledged securities of Asyst owned by the employees
and are included in other assets at December 31, 2003.

Our majority-owned subsidiary, ASI, has certain transactions with the
minority shareholder, Shinko. At December 31, 2003, significant balances owed
(to) from Shinko were (in thousands):

|                                          |  |              |         |           |  |   |        |  
|----------------------------------------- |  | ------------ | ------- | --------- |  | - | ------ | -
|                                          |  | December 31, |         | March 31,
|                                          |  | 2003         |         | 2003     
|                                          |  |              |         |          
|Accounts and notes receivable from Shinko |  | $            | 1,476   |           |  | $ | 391    |  
|Accounts payable due to Shinko            |  | $            | (12,681 | )         |  | $ | (8,500 | )
|Accrued liabilities due to Shinko         |  | $            | (654    | )         |  | $ | (755   | )

In addition, ASI purchased various administrative and information
technology services from Shinko. During the nine months ended December 31,
2003, material and services purchased from Shinko were (in thousands):

|                   |  |              |        |              |  |   |        |  
|------------------ |  | ------------ | ------ | ------------ |  | - | ------ | -
|                   |  | Three Months |        | Nine Months 
|                   |  | Ended        |        | Ended       
|                   |  | December 31, |        | December 31,
|                   |  |              |        |             
|Material purchased |  | $            | (5,194 | )            |  | $ | (9,183 | )
|Services purchased |  | $            | (8,747 | )            |  | $ | (9,237 | )

12. 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.

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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.
The case was subsequently narrowed to the 421 patent, and we sought monetary
damages for defendants infringement, equitable relief, and an award of
attorneys fees. On October 9, 2003, the court: (i) granted defendants motion
for summary judgment to the effect that the defendants had not infringed our
patent claims at issue and (ii) directed that judgment be entered for
defendants. We have filed a notice of appeal of both the order and the entry
of judgment against us. The court also denied defendants motion for judgment
as to the invalidity of our asserted patents. Defendants have filed a notice
of appeal as to the courts denial of that motion.

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 sought compensatory
damages in excess of $5.0 million plus punitive damages and attorneys fees.
The matter has since been resolved pursuant to a settlement and release
agreement entered into by the parties, and the claims underlying the action
have been dismissed with prejudice. We recorded severance and associated costs
of $1.3 million related to the settlement in the quarter ended December 31,
2003.

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 December 31, 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 of operations should be read
in conjunction with our condensed consolidated financial statements and the
related notes included elsewhere in this report.

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##### Table of Contents



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 our 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.

In October 2002, we purchased a 51 percent interest in Asyst Shinko, Inc.,
or ASI, a Japanese corporation, for $67.5 million of cash and transaction
costs. The consolidated financial statements for the three- and nine-month
periods ended December 31, 2003 include the results of ASI. The acquisition
has been accounted for as a purchase acquisition.

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 AMHS customers from Shinko Electric, Co., Ltd.
ASI renamed this subsidiary Asyst Shinko America, or ASAM.

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 December 31, 2003 and December 31, 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.

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.

Three Months and Nine Months Ended December 31, 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):

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|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |      |      | 
|------------------------------------------------------------------------------------------------ | -------------------------------------------------------- | ------------------------ | ----- | ------------------ | ---- | ----------------- | ----- | ---- | ---- | ---- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                                                                                 |                                                          |                          |       | Three Months Ended |      | Nine Months Ended
|                                                                                                 |                                                          |                          |       | December 31,       |      | December 31,     
|                                                                                                 |                                                          |                          |       |                    |      |                  
|                                                                                                 |                                                          |                          |       | 2003               |      | 2002              |       | 2003 |      | 2002
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |     
|Net sales                                                                                        |                                                          |                          | 100.0 | %                  |      |                   | 100.0 | %    |      |      | 100.0 | %    |      |  | 100.0 | %   
|Cost of sales                                                                                    |                                                          |                          | 85.9  |                    |      |                   | 74.7  |      |      |      | 84.2  |      |      |  | 68.0  |     
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Gross profit                                                                                     |                                                          |                          | 14.1  |                    |      |                   | 25.3  |      |      |      | 15.8  |      |      |  | 32.0  |     
|Operating expenses:                                                                              |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|                                                                                                 | Research and development                                 |                          |       | 12.3               |      |                   |       | 14.8 |      |      |       | 15.8 |      |  |       | 15.8 |     
|                                                                                                 | Selling, general and administration                      |                          |       | 25.0               |      |                   |       | 27.1 |      |      |       | 29.9 |      |  |       | 27.2 |     
|                                                                                                 | Amortization of acquired intangible assets               |                          |       | 7.1                |      |                   |       | 7.5  |      |      |       | 8.7  |      |  |       | 4.7  |     
|                                                                                                 | Restructuring and other charges                          |                          |       | 2.3                |      |                   |       | 3.3  |      |      |       | 3.8  |      |  |       | 3.5  |     
|                                                                                                 | Asset impairment charges                                 |                          |       |                   |      |                   |       | 11.1 |      |      |       | 4.1  |      |  |       | 7.8  |     
|                                                                                                 | In-process research and development of acquired business |                          |       |                   |      |                   |       | 7.6  |      |      |       |     |      |  |       | 3.9  |     
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|                                                                                                 |                                                          | Total operating expenses |       |                    | 46.7 |                   |       |      | 71.4 |      |       |      | 62.3 |  |       |      | 62.9 | 
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Operating loss                                                                                   |                                                          |                          | (32.6 | )                  |      |                   | (46.1 | )    |      |      | (46.5 | )    |      |  | (30.9 | )   
|Other income (expense), net                                                                      |                                                          |                          | (2.9  | )                  |      |                   | (3.4  | )    |      |      | (2.7  | )    |      |  | (2.6  | )   
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Loss before provision (benefit) from income taxes, minority interest and
discontinued operations |                                                          |                          | (35.4 | )                  |      |                   | (49.5 | )    |      |      | (49.2 | )    |      |  | (33.5 | )   
|Provision (benefit) for/from income taxes                                                        |                                                          |                          | (2.9  | )                  |      |                   |      |      |      |      | (2.6  | )    |      |  | 29.3  |     
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Minority interest                                                                                |                                                          |                          | (3.2  | )                  |      |                   | (6.4  | )    |      |      | (2.4  | )    |      |  | (2.4  | )   
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Loss from continuing operations                                                                  |                                                          |                          | (29.4 | )                  |      |                   | (43.1 | )    |      |      | (44.2 | )    |      |  | (60.4 | )   
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Discontinued operations, net of income tax                                                       |                                                          |                          |      |                    |      |                   | (11.0 | )    |      |      |      |      |      |  | (5.9  | )   
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     
|Net loss                                                                                         |                                                          |                          | (29.4 | )%                 |      |                   | (54.1 | )%   |      |      | (44.2 | )%   |      |  | (66.3 | )%  
|                                                                                                 |                                                          |                          |       |                    |      |                   |       |      |      |      |       |      |      |  |       |     

Results of Operations

Net Sales.We have two reportable segments: Fab Automation and AMHS. Fab
Automation products include interface products, substrate-handling robotics,
auto-ID systems, sorters and connectivity software.
AMHS products include automated transport and loading systems for
semiconductor fabs and flat panel display, or FPD, 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 |      | Nine Months Ended
|                         |  | December 31,       |      | December 31,     
|                         |  |                    |      |                  
|                         |  | 2003               |      | 2002              |  | 2003 |      | 2002
|                         |  |                    |      |                   |  |      |      |     
|Fab Automation Products: |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Net sales                |  | $                  | 32.5 |                   |  | $    | 51.5 |      |  | $ | 82.0  |  |  | $ | 175.7 | 
|AMHS:                    |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Net sales                |  |                    | 42.4 |                   |  |      | 24.1 |      |  |   | 89.5  |  |  |   | 24.1  | 
|                         |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Total:                   |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Net sales                |  | $                  | 74.9 |                   |  | $    | 75.6 |      |  | $ | 171.5 |  |  | $ | 199.8 | 
|                         |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 

Total net sales in the three months ended December 31, 2003 were
relatively flat from the same quarter in the prior year with a marginal 1.0
percent decline. However, net sales for the quarter ended December 31, 2003
increased by $23.6 million, or 46 percent, from the prior quarter. Net sales
for the nine months ended December 31, 2003 decreased by $28.3 million or 14.2
percent from the same period last year. Total net sales included ASI net sales
of $42.4 million and $89.4 million by ASI during the three and nine month
periods, respectively. We acquired our fifty-one percent majority interest in
ASI in October 2002.

Net sales of Fab Automation products decreased by $19.0 million or 36.9
percent in the three months ended December 31, 2003 and by $93.7 million or
53.3 percent in the nine months ended December 31, 2003 compared to the same
periods in the prior year. This decrease was mainly due to the general decline
in the semiconductor equipment sector and the sale of our wafer and reticle
carrier product lines during fiscal 2003. These product lines generated $6.9
million and $30.0 million of revenue in the three months and the nine months
ended December 31, 2002, respectively.

Net sales of AMHS products increased by $18.3 million,
or 75.9 percent, in the three months ended December 31, 2003. The increase was mainly due to growth in both semiconductor
and FPD businesses. AMHS net sales for the nine months ended December
31, 2003 were $89.5 million compared to $24.1 million for nine
months ended December 31, 2002. Nine months ended December 31,
2002 only included ASI net sales from the date of acquisition in
October 2002.

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

|                   |       |   |                    |      |                   |   |      |      |      |   |      |       |  |   |      |       | 
|------------------ | ----- | - | ------------------ | ---- | ----------------- | - | ---- | ---- | ---- | - | ---- | ----- |  | - | ---- | ----- | 
|                   |       |   | Three Months Ended |      | Nine Months Ended
|                   |       |   | December 31,       |      | December 31,     
|                   |       |   |                    |      |                  
|                   |       |   | 2003               |      | 2002              |   | 2003 |      | 2002
|                   |       |   |                    |      |                   |   |      |      |     
|North America      |       | $ | 16.9               |      |                   | $ | 23.5 |      |      | $ | 38.3 |       |  | $ | 71.6 |      
|Japan              |       |   | 19.7               |      |                   |   | 9.3  |      |      |   | 55.3 |       |  |   | 38.4 |      
|Taiwan             |       |   | 9.4                |      |                   |   | 16.7 |      |      |   | 23.1 |       |  |   | 36.5 |      
|Korea              |       |   | 16.0               |      |                   |   | 8.9  |      |      |   | 18.3 |       |  |   | 9.0  |      
|Other Asia/Pacific |       |   | 6.8                |      |                   |   | 12.7 |      |      |   | 21.4 |       |  |   | 30.1 |      
|Europe             |       |   | 6.1                |      |                   |   | 4.5  |      |      |   | 15.1 |       |  |   | 14.2 |      
|                   |       |   |                    |      |                   |   |      |      |      |   |      |       |  |   |      |      
|                   | Total |   | $                  | 74.9 |                   |   | $    | 75.6 |      |   | $    | 171.5 |  |   | $    | 199.8 | 
|                   |       |   |                    |      |                   |   |      |      |      |   |      |       |  |   |      |      

The increase in Japan and other Asia Pacific countries in the three months
and nine months ended December 31, 2003 from the same periods in the prior year
is primarily due to an increase in AMHS sales, offset by decreases in our
traditional business. Compared to the same periods in the prior year, all
other regions were mostly down due to lower sales activities in our traditional
business which was in line with the downturn of the industry.

Gross Profit. Gross profit decreased to $10.6 million, or 14.1 percent of
net sales, for the quarter ended December 31, 2003, compared to $19.1 million,
or 25.3 percent of net sales, for the quarter ended December 31, 2002. The
decline was primarily the result of three factors. First, an increased
proportion of sales in the period at our ASI joint venture, which generates
lower profit margins than that of our traditional business. Second, ASI
accrued a $5.4 million charge in the quarter for the estimated loss that is
anticipated on one large, and two smaller, customer contracts.
Other projects and services that contributed to ASI revenue in the quarter
delivered an average gross margin of 25%. Finally, ASI also recorded in the
current quarter a $0.9 million inventory provision relating to excess and
obsolete inventory which also negatively impacted reported gross margins in the
period. Although our traditional business helped by our continuing transition
to outsourced manufacturing and a lower cost supply chain, the gross profit
improvement from the prior quarter was partly offset by an increased mix of
legacy portal and sorter products which carry lower gross margins.

Gross profit decreased $36.8 million to $27.0 million, or 15.8 percent of
net sales, for the nine months ended December 31, 2003, compared to $63.9
million, or 32.0 percent of net sales, for the corresponding period of the
prior year. The decrease in gross margin was primarily due to lower gross
margins at ASI and changes in product mix. The shift in the product mix to
newer 300mm products negatively impacted gross profit for the first three
quarters of fiscal 2004 as our 300mm products are early in their product life
cycle and currently have lower margins compared 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 profit to improve. However, because of the anticipated size of the
emerging 300mm product market, we face strong price competition from existing
and new competitors and pressure to enhance product features. Our gross profit
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
$2.0 million to $9.2 million for the quarter ended December 31, 2003, compared
with $11.2 million for the quarter ended December 31, 2002. As a percentage of
net sales, research and development decreased to 12.3 percent of net sales for
the quarter ended December 31, 2003, compared to 14.8 percent for the quarter
ended December 31, 2002. The decrease in spending is due to headcount
reductions and other spending cuts in the preceding quarters to reduce research
and development expenses in response to declines in our net sales. Our third
quarter fiscal 2004 results included approximately $1.7 million of research and
development spending at ASI. Excluding ASI, research and development expenses
were approximately $7.5 million, a decline of $2.2 million or 22.7 percent,
from the third 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.

Research and development expenses for the nine months ended December 31,
2003 were $27.2 million, or 15.8 percent of net sales, compared to $31.5
million, or 15.8 percent of net sales, for the nine months ended December 31,
2002. The decrease of $4.3 million is due to headcount reductions and other
spending cuts during the past year to reduce expenses in response to declines
in our sales, offset by spending at ASI.

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The decrease in our research and
development expenses was achieved even as we accelerated efforts on key new
products. Our research and development expenses vary as a percentage of net
sales because these expenditures are based on long-term product development
plans targeted toward future revenue opportunities and we may or may not modify
our expenditures levels based on short-term changes in the actual or
anticipated level of net sales.

Selling, General and Administrative.Selling, general and administrative,
or SG&A, expenses decreased $1.7 million to $18.8 million for the quarter ended
December 31, 2003, compared to $20.5 million for the quarter ended December 31,
2002. SG&A expenses decreased, as a percentage of net sales, 2.1 percent to
25.0 percent for the quarter ended December 31, 2003, compared to 27.1 percent
for the quarter ended December 31, 2002. For the nine months ended December
31, 2003, SG&A expenses were $51.3 million, down $3.0 million from the same
period a year ago. However, due to lower sales, SG&A expenses increased, as a
percentage of net sales, 2.7 percent to 29.9 percent of net sales, compared to
27.2 percent of net sales, for the corresponding period of the prior year. The
decrease in SG&A expenses was mainly due to substantial headcount reductions in
the first half of fiscal 2004 and other spending controls to reduce expenses in
response to declines in our sales, offset by $8.0 million of SG&A spending at
ASI and a $2.1 million charge to SG&A expenses relating to prior quarters of
fiscal 2004 and 2003 and 2002. The effect of this adjustment on any prior
quarter or year was not material. Excluding the impact of additional costs
assumed from ASI, our SG&A costs declined by $2.0 million, or approximately
11.0 percent, from the third quarter of fiscal 2003.

Amortization of Acquired Intangible Assets.Amortization expenses relating
to acquired intangible assets were $5.3 million, or 7.1 percent of net sales,
for the quarter ended December 31, 2003 and $5.7 million, or 7.5 percent of net
sales, for the quarter ended December 31, 2002. Amortization expense for
acquired intangible assets was $14.8 million for the nine months ended December
31, 2003 and $9.3 million for the nine months ended December 31, 2002. The
increase in amortization expense for the nine months ended December 31, 2003
was primarily due to the acquisition of the ASI joint venture in the third
quarter of fiscal 2003. We amortize acquired intangible assets over periods
ranging from three to ten years.

Restructuring and Other Charges. The following table summarizes the
activities in our restructuring accrual during the nine months ended December
31, 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  |  
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|Additional accruals          |  |           | 160    |            |  |             | 327   |       |  |   |     |   |  |   | 487    |  
|Non-cash related utilization |  |           |       |            |  |             |      |       |  |   |     |   |  |   |       |  
|Amounts paid in cash         |  |           | (305   | )          |  |             | (957  | )     |  |   |     |   |  |   | (1,262 | )
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|Balance, September 30, 2003  |  | $         | 325    |            |  | $           | 3,577 |       |  | $ |     |   |  | $ | 3,902  |  
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|Additional accruals          |  |           | 1,743  |            |  |             |      |       |  |   |     |   |  |   | 1,743  |  
|Non-cash related utilization |  |           | 70     |            |  |             | (47   | )     |  |   |     |   |  |   | 23     |  
|Amounts paid in cash         |  |           | (2,074 | )          |  |             | (491  | )     |  |   |     |   |  |   | (2,565 | )
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  
|Balance, December 31, 2003   |  | $         | 64     |            |  | $           | 3,039 |       |  | $ |     |   |  | $ | 3,103  |  
|                             |  |           |        |            |  |             |       |       |  |   |      |   |  |   |        |  

In the quarter ended December 31, 2003, we recorded the net severance and
other charges of $1.0 million primarily related to the settlement for the
termination of a former officer. We also incurred a net $0.7 million of
severance expenses mainly from headcount reductions in our Japanese operations
resulting from its outsourcing activities. We anticipate potential
restructuring charges of $3.0 million to $5.0 million over the next several
quarters as we continue our previously announced cost reduction initiatives.

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We incurred restructuring charges of $0.5 million during the quarter ended
September 30, 2003, consisting primarily of severance costs of $0.2 million
from a reduction in our worldwide workforce and secondarily for
exiting a facility in connection with our restructuring activities. As a
result of these restructuring activities, we terminated the employment of
approximately 49 employees, mainly in manufacturing, from our international
operations. We anticipate additional restructuring charges during the
remainder of fiscal 2004 as we complete the workforce reductions and
outsourcing of manufacturing in Japan.

In the quarter ended June 30, 2003, we incurred restructuring charges of
$4.4 million, 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.

In the quarter ended December 31, 2002, we recorded an excess facility
charge of $1.1 million reflecting revised estimates of future sublease income
based on continued weakness in the Austin, Texas commercial real estate market.
We also recorded severance charges of $0.7 million resulting from headcount
reductions of 52 employees, including manufacturing, sales, research and
development and administrative staff. We also recorded a fixed asset
impairment charge of $0.7 million for assets to be disposed of due to headcount
reductions and vacating facilities.

Asset Impairment Charges.We completed the sale of land in Fremont,
California, in the quarter ended September 30, 2003. The net proceeds from the
sale were $12.1 million. 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 the pending sale
agreement at the time. We previously entered into a purchase agreement in
September 2002 to sell the land for $19.0 million, net of selling expenses,
which was expected to close in the quarter ending December 31, 2002. As a
result, a $7.1 million write-down was recorded in the second quarter in fiscal
2003.

In the quarter ended December 31, 2002, we completed a periodic goodwill
impairment test. As a result of the test, we determined that impairment
charges of $8.4 million were required because the forecasted undiscounted cash
flows were less than the book values of certain businesses. The charges were
measured on the basis of comparing estimated fair values with corresponding
book values related to the goodwill and intangible assets recorded in
connection with our May 2002 acquisition of DLC.

In-process Research and Development Costs of Acquired Business.On October
16, 2002, we acquired 51 percent of the common stock of Asyst-Shinko Inc., our
Japanese joint venture. In connection with the purchase price allocation, in
the quarter ended December 31, 2002 we assigned $5.8 million to in-process
research and development, or IPR&D.

On May 29, 2002, Asyst Connectivity Technologies, Inc., or ACT, a
wholly-owned subsidiary of Asyst, purchased substantially all of the assets of
DLC. In connection with the estimated purchase price allocation, $2.5 million
was assigned to 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. For the nine months ended December 31,
2002, a total of $7.8 million was recorded as IPR&D. The amounts allocated to
IPR&D were estimated through established valuation techniques in the
high-technology industry and were expensed upon acquisition as it was
determined that the projects had not reached technological feasibility at the
time of our acquisition.

Other Income (Expense), net.The other income (expense) for the three
months ended December 31, 2003 is decreased from the quarter in the prior year
due to royalty income and the foreign exchange gains due to the strengthening
yen. The net decrease in other income (expense) for the nine months ended
December 31, 2003 is due to royalty income for the full nine months more than
offsetting higher interest expense due to the higher debt balances.

Provision/Benefit from Income Taxes. We recorded a benefit from income
taxes of $2.1 million in total for the quarter ended December 31, 2003, or 2.9
percent of our loss before income taxes. The benefit is primarily due to $2.2
million amortization of deferred tax liabilities recorded in connection with
the ASI acquisition, offset by tax provisions in our international
subsidiaries. We recorded a benefit from income taxes of $4.5 million for the
nine months ended December 31, 2003. A tax benefit has been recognized in the
three months and nine months ended December 31, 2003 as we expect to have net
income in Japan for the 12-month period ending March 31, 2004.

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We had no expenses or benefit for income taxes in the quarter ended
December 31, 2002 but recorded $62.7 million in the second quarter official
2003, therefore netting a $58.6 million for the nine months ended December 31,
2002. As a result of the review undertaken at September 30, 2002, we concluded
that it was appropriate to establish a full valuation allowance for our U.S.
net deferred tax assets. We expect to provide a full valuation allowance on
future U.S. tax benefits until we can sustain a level of profitability that
demonstrates the ability to utilize the assets.

Minority Interest. Benefit from Minority interest for the third quarter and
year-to-date of fiscal 2004 were $2.4 million and $4.1 million, respectively.
Benefit from minority interest of $4.8 million was first recorded in the quarter ended
December 31, 2002. The amount for minority interest represents our joint
venture partners 49 percent interest in the results of operations of ASI.

Discontinued Operations, net of income tax.There were no losses from
discontinued operations for the three or nine months ended December 31, 2003,
and the losses from discontinued operations were $8.3 million and $11.8 million
for the three months and nine months ended December 31, 2002, respectively.
Included in the losses was a one-time charge of $6.6 million related to the
impairment of the value of assets in the companies to be divested based on
expected value. 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 December 31, 2003, we had approximately $122.4 million in
cash and cash equivalents, $2.3 million in restricted cash, $131.4 million in
working capital and $92.0 million in long-term debt and finance leases.

Operating
activities.Net cash used in operating activities was $70.2
million for the nine months ended December 31, 2003, primarily consisting of
our $75.7 million net loss and increases in receivables of $37.1 million.
These uses of cash were partially offset by non-cash charges of $21.7 million
for depreciation and amortization, $6.9 million for impairment
in our land prior to its sale and the increases in current assets and
liability accounts resulted from our higher sales volume compared
with the prior quarters.

Net cash provided by operating activities was $23.8 million for the nine
months ended December 31, 2002, primarily consisting of non-cash charges of
$59.4 million for a valuation allowance on the Companys deferred tax asset;
$28.6 million of charges primarily related to the impairment of intangible
assets, restructuring charges, write-down of land and fixed assets and the
write-off of in-process research and development; $19.9 million of depreciation
and amortization; and $36.7 million of changes in assets and liabilities. The
changes in assets and liabilities are largely attributable to the sale of $20
million of inventory to Solectron and usage of inventory in operations and
higher payables in the base business, offset by increased receivables due to
higher sales. These sources of cash were largely offset by the $120.7 million
net loss from operations.

Investing
activities.Net cash provided by investing activities was $7.8
million for the nine months ended December 31, 2003, due to the net proceeds of
$12.1 million from the sale of land offset by the purchases of property and
equipment of $4.1 million and ASAM acquisition of $1.2 million.

Net cash used in investing activities for the nine months ended December
31, 2002 was $66.4 million, This consisted primarily of $52.3 million of net
cash used in the acquisition of the Asyst-Shinko JV interest; $22.5 million of
purchases of restricted cash equivalents and short-term investments; $9.0
million of purchase of short-term investments; and $7.3 million for the
purchase of property, plant and equipment. These were partially offset by the
sale of $24.7 million of restricted cash equivalents and short-term
investments.

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Financing
activities. Net cash provided by financing activities was $91.8
million for the nine months ended December 31, 2003, including total loan
proceeds of $14.0 million from a short-term borrowing and additional long-term
debt in our Japanese subsidiaries, offset by $32.8 million of loan
repayments including the $25.0 million Comerica line of credit in the quarter
ended December 31, 2003. Additionally, a total of $110.7 million was provided
from issuance of common stock through our secondary stock offering in the third
quarter of fiscal 2004 and under our employee stock programs for the nine
months ended December 31, 2003.

Net cash provided by financing activities of $29.3 million for the nine
months ended December 31, 2002 consisted primarily of $25.0 million of proceeds
from our line of credit, $2.3 million of proceeds from short-term loans net of
payments and $1.9 million from the issuance of common stock.

In November 2003, we sold 6,900,000 shares of our common stock, including
the exercise of the underwriters over-allotment option, at an offering price to the public of $15.17 per
share. We received total proceeds of $99.0 million, net of the related
issuance fees and costs.

In September 2003, ASI entered into a short-term bank facility with a
Japanese bank under which it may borrow up to approximately $27.0 million at
the exchange rate as of December 31, 2003. The current interest rate is 1.4%.
This facility primarily supports ASIs working capital requirements during the
current construction of two projects currently in process in Japan where
customers generally pay four to six months after acceptance of a completed
project. ASI had outstanding borrowings of $9.3 million under this facility at
December 31, 2003. Under terms of the bank facility, ASI must generate annual
operating profits on a statutory basis.

In October 2002, we entered into a $25.0 million two-year revolving credit
agreement with a commercial bank. The specific amount of the credit line
available, however, may change based on the amount of receivables held. Any
outstanding borrowings under the credit agreement are repayable in full in
October 2004. Borrowings under the credit agreement bear interest at a rate
indexed to LIBOR. The credit line was fully paid down during the quarter ended
December 31, 2003. During the quarter ended September 30, 2003, we amended the
financial covenants. As amended, we are required under the agreement to
maintain compliance with financial covenants, including a quarterly net
income/loss target, calculated on an after-tax basis excluding depreciation,
amortization and other non-cash items. We must also meet a minimum liquidity
covenant. As of the quarter ended December 31, 2003, we were not in compliance
with certain of these financial covenants, however, we have obtained a waiver
from the bank of compliance with these certain covenants. We are currently
negotiating with the bank to amend and extend the credit agreement and,
specifically, to revise the applicable financial covenants. 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 shareholders and affiliates; create liens; sell or otherwise
dispose of assets; make payments on our subordinated debt; and engage in
mergers and acquisitions. We cannot assure you that we will meet the quarterly
net income/loss covenant in the subsequent quarters. Non-compliance with the
financial covenants in the future may preclude our ability to borrow under the
credit agreement or require us to repay any borrowings outstanding.

On July 3, 2001, we completed the sale
of $86.3 million of 53⁄4 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 $22.3 million and $22.1 million of debt from banks in Japan at
December 31, 2003 and March 31, 2003, respectively. The interest rates ranged
from 1.4 percent to 3.0 percent as of December 31, 2003. Certain of AJIs
assets have been pledged as security for this debt. As of December 31, 2003,
pledged assets consist of land and other property and equipment, net of
accumulated depreciation, time deposits and accounts receivable totaling
approximately $15.1 million. Additionally, Asyst U.S. has provided letters of
guarantee to financial institutions in Japan covering substantially all of
AJIs debts. Certain notes of AJI will mature in the second half of fiscal
2004. We intend to renew or roll over these notes but we cannot assure you
that we will be successful in renewing these notes.

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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 $20.0 million of inventory from us. No
revenue was recorded for the sale of this inventory to Solectron. In the
quarter ending December 31, 2003, we repurchased $4.3 million of this inventory
that was not used by Solectron in manufacturing our products. This amount was
fully reserved in prior periods. On an on-going basis, we may be obligated to
acquire inventory purchased by Solectron based on our forecasts and inventory
not used in 180 days under terms of our agreement.

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.
However, we believe that our
available cash and cash equivalents will be sufficient to meet our working
capital and operating expense requirements through the end of fiscal 2005.

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. 00-21 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 apply to revenue arrangements entered into
in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 to
date did not have a significant impact on our consolidated financial
statements.

In August 2003, the EITF reached a consensus on Issue No. 03-5,
Applicability of AICPA Statement of Position 97-2, Software Revenue
Recognition, to Non-Software Deliverables. This issue focuses solely on
whether non-software deliverables included in arrangements that contain
more-than-incidental software should be accounted for in accordance with SOP
97-2. The Task Force confirmed that in an arrangement that contains software
that is more-than-incidental to the products or services as a whole, only the
software and software-related elements are included within the scope of SOP
97-2. Software-related elements include software-related products and services
such as those listed in paragraph 9 of SOP 97-2, as well as other deliverables
for which the software is essential to their functionality. EITF Issue No.
03-5 is effective for revenue arrangements entered into in fiscal periods
beginning after August 13, 2003. The adoption of EITF Issue No. 03-5
to date did not have a significant impact 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. In October 2003, the Financial Accounting Standards Board
deferred the latest date by which all public entities must apply FIN No. 46, to
the first reporting period ending after March 15, 2004. We believe that the
adoption of this standard will have no material impact on our consolidated
financial statements.

In May 2003, 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. The adoption of SFAS No. 150 to date
has not had a significant impact on our consolidated financial statements.

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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.

Risk Related to Our Business

If we fail to maintain our position in Automated Materials Handling
System, through our ASI joint venture, our growth prospects could be negatively
impacted.

Sales of Automated Materials Handling Systems, or AMHS, accounted for
approximately 56 percent of our sales in the quarter ended December 31, 2003
and are expecetd to be an important component of our future revenues.
Substantially all of our AMHS sales are through our majority-owned joint
venture subsidiary, ASI, of which we acquired 51 percent in the third quarter
of fiscal 2003. While we have effective operating control of ASI, certain
major decisions require the approval of our joint venture partner, Shinko
Electric Co., Ltd., and our future success depends in part on the strength of
our relationship with our joint venture partner. Other than a right of first
refusal if our joint venture partner is considering selling its stake, we have
no mechanism to acquire the 49 percent of ASI that is currently owned by
Shinko. Even if Shinko were to offer to sell its stake in ASI to us, we may
not have sufficient funds available to facilitate such acquisition. In
addition, we have limited experience managing operations in Japan, and our
failure to manage effectively could harm our business.

Orders for AMHS are relatively large, often exceeding $20 million for a
given project. Because of the size of these orders, our revenues are often
concentrated among a small number of customers in any fiscal period.
Additionally, the manufacture and installation of these systems at our
customers manufacturing facilities can take up to 6 months. We recognize
revenue and costs for AMHS based on percentage of completion because the
contracts are long-term in nature. Payments under these contracts often occur
well after we incur our manufacturing costs. For example, terms for our
Japanese AMHS customers require payment to be made 6 months after customer
acceptance of the installation. The consequence of the AMHS payment cycle is
that significant demands can be placed on our working capital. Further, gross
margins on our AMHS sales are lower than those for our other products. Our
overall financial performance will therefore be impacted by the mix of sales
between AMHS and other products in a given period.

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

In recent quarters, ASI has begun to sell AMHS to FPD manufacturers.
While we believe that FPD AMHS presents a significant opportunity for growth,
the size of this market opportunity depends in large part on capital
expenditures by FPD manufacturers. The market for FPD products is highly
cyclical and has experienced periods of oversupply resulting in significantly
reduced demand for manufacturing and automation equipment. If the FPD market
enters into a cyclical downturn, demand for our FPD AMHS may be significantly
reduced, impacting our growth prospects.

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

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

The 300 mm market is still relatively new. 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.

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Manufacturers who are implementing factory automation in 300mm fabs may seek to
purchase systems from multiple vendors. Competition, including price
competition, for these 300mm orders is intense. We face increased competition
for our 300mm products from a number of new entrants because of the development
of Semiconductor Equipment and Materials International, or SEMI, standards for
300mm products.

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 to OEMs rather than
directly to semiconductor manufacturers. 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 300 mm
products, which will be supplied primarily by contract manufacturers. SEMI
standards for 300 mm products have enabled more suppliers to enter our markets,
thereby increasing competition and creating pricing pressure. While
semiconductor manufacturers purchased a majority of 200 mm tool automation
products, OEMs are purchasing most of the tool automation products for 300mm.
Sales to OEMs typically have lower gross margins.

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

Most of our manufacturing is outsourced and we rely on a single contract
manufacturer for much of our product manufacturing.

We have outsourced the manufacturing of most of our products. Solectron
currently manufactures, under a long-term contract, our products, other than
AMHS and our Japanes robotics products. ASI also has outsourced a large
portion of its AMHS manufacturing to third parties. In the future we may
increase our dependence on contract manufacturers. 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. From time to time, we have experienced delays in receiving
products from Solectron. Problems with quality or timeliness could be caused
by a number of factors including, but not limited to: manufacturing process
flow issues, financial viability of an outsourced vendor, availability of raw
materials or components to the outsourced vendor, improper product
specifications, and the learning curve to commence manufacturing at a new
outsourced site. Our contract with Solectron contains minimum purchase
commitments which, if not met, could result in increased costs, which would
adversely affect our gross margins. We must also provide Solectron with
forecasts and targets based on actual and anticipated demand, which we may not
be able to do effectively or efficiently. If Solectron purchases inventory
based on our forecasts, and that inventory is not used, we must repurchase the
unused inventory, which would adversely affect both our cash flows and our
gross margins. If product supply is adversely affected because of problems in
outsourcing we may lose sales and profits.

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

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

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

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

We have significant existing debts; the restrictive covenants under some
of our debt agreements may limit our ability to expand or pursue our business
strategy; if we are forced to pay some or all of this indebtedness our
financial position would be severely and adversely affected.

We have a significant amount of outstanding indebtedness. At December 31,
2003, our long-term debt was $92.0 million, and our short-term debt was $23.9
million, for an aggregate of $118.4 million. We have $86.3 million of 53/4
percent convertible subordinated notes outstanding which are convertible, at
the option of the holder, at any time on or prior to maturity into shares of
our common stock at a conversion price of $15.18 per share. We are required to
pay interest on these convertible notes on January 3 and July 3 of each year.
These convertible notes mature July 3, 2008, and are redeemable at our option
after July 3, 2004. Our majority-owned joint venture, Asyst Shinko, Inc., or
ASI, entered into a short-term facility with a Japanese bank under which it may
borrow up to approximately $27.0 million, of which $9.3 million is currently
outstanding. We have also guaranteed the loans of our Japanese subsidiary,
Asyst Japan, Inc., or AJI, which loans total approximately $22.3 million.

Our revolving credit agreement with Comerica requires us to maintain
compliance with numerous financial covenants, including a quarterly net
income/loss target, calculated on an after-tax basis excluding depreciation,
amortization and other non-cash items. We must also meet a minimum liquidity
covenant. The specific amount of the credit line available, however, may
change based on the amount of receivables held.The covenants contained in our
credit agreement with Comerica also restrict our ability to take certain
actions, including 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 shareholders and affiliates;             
|
| |  |  | create liens;                                                        
|
| |  |  | sell or otherwise dispose of assets;                                 
|
| |  |  | make payments on our debt, other than in the ordinary course; and    
|
| |  |  | engage in mergers and acquisitions.                                  

The credit line was fully paid down during the quarter ended December 31,
2003. As of the quarter ended December 31, 2003, we were not in compliance
with certain of these financial covenants, however, we have obtained a waiver
of compliance from the bank on the non-compliance with the loan covenants. We
are currently negotiating with the bank to amend and extend the credit
agreement and, specifically, to revise the applicable financial covenants.
While we believe that we will obtain agreement from the bank on an appropriate
amendment

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and extension to the loan agreement, we cannot assure you of the outcome and,
absent such amendment and extension, of the continued availability of credit
under the credit agreement. We cannot assure you that we will meet the
financial covenants contained in our credit agreement with Comerica in
subsequent quarters. Specifically, we may be unable to meet the maximum loss
covenant or the minimum liquidity covenant in future quarters. If we are
unable to meet any covenants, we cannot assure you that the bank will again
grant waivers and amend the covenants, and Comerica may terminate the
agreement, preclude further borrowings and require us to repay the outstanding
borrowings.

Under terms of the ASI bank facility, ASI must generate operating profits
on a statutory basis. Additionally, upon an event of default, the Japanese
banks may call the loans outstanding at AJI, requiring repayment, which we have
guaranteed.

As long as our indebtedness remains outstanding, the restrictive covenants
could impair our ability to expand or pursue our business strategies. Forced
repayment of some or all of our indebtedness would reduce our available cash
balances and have an adverse impact on our operating and financial performance.

We may not be able to secure additional financing to meet our future
capital needs; if we do secure financing, it may be on unfavorable terms.

Our operations are currently consuming cash and are expected to continue
to do so for the next few quarters. As a consequence, in the future we may be
required to seek additional financing to meet our working capital needs and to
finance capital expenditures, as well as to fund operations. We may be unable
to obtain any required additional financing on terms favorable to us, if at
all. 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. 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.

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

The decision by OEMs to adopt our tool front-end, or portal, solutions 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. If we fail to
satisfy these expectations, whether based on limited or expanded sales levels,
OEMs will not adopt our portal solutions. We cannot ensure that these tools
will be widely accepted in the marketplace or that additional OEMs will adopt
them. We have invested significant time and expense in the development of
Spartan, our next generation portal offering specifically designed for the
300mm market. While we believe Spartan may improve our competitive position
and gross margins in the 300mm industry, if the market acceptance of Spartan is
less than we have forecast or if the timing of this acceptance is delayed, our
financial performance could be impacted. Notwithstanding our solutions, OEMs
may purchase components to assemble or invest in the development of their own
comparable portals. If our solutions are not adopted by OEMs, our prospects
will be negatively impacted and our profits substantially harmed.

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 on a timely basis.

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



| |  |  | our customers can cease purchasing our products at any time without penalty;
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | our customers are free to purchase products from our competitors;           
|
| |  |  | we are exposed to competitive price pressure on each order; and             

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| |  |  | our customers are not required to make minimum purchases.
| | - |  | ---------------------------------------------------------

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

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

The markets in which we sell our products 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 make our relationship with each customer critical to our business.
The sales cycle to new customers range 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.

Our customers demand for our products is largely driven by the timing of
new fab construction and the upgrading of existing fabs initiated by those
customers. As such, when we complete projects for a customer, business from
that customer will decline substantially unless it undertakes additional
projects incorporating our products. 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 continue to decrease the number of our potential customers and
increase our dependency on our remaining customers. We may not be able to
retain our largest customers or attract additional customers, and our OEM
customers may not be successful in selling the OEM equipment in which our
systems are embedded. 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 new 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.

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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, which could
have a negative impact on our financial condition and results of operations.

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 and other intellectual property rights 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 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.

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

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

We may not be able to 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. 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 our own. 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 presented 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, both of which we
had acquired in February 2001, as these subsidiaries were generating
significant operating losses and not considered critical to our long-term
strategy. These subsidiaries were sold at the end of fiscal 2003 at a
substantial loss. 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.

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

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



| |  |  | general trends in the overall economy, electronics industry and
semiconductor manufacturing industry;
| | - |  | -----------------------------------------------------------------------------------------------------
|
| |  |  | fluctuations in the semiconductor equipment market;                                                  
|
| |  |  | changes in customer buying patterns;                                                                 
|
| |  |  | the degree of competition we face;                                                                   

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| |  |  | the size, timing and product mix of customer orders;                                                          
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | lost sales due to any failure in the outsourcing of our manufacturing;                                        
|
| |  |  | the availability of key components;                                                                           
|
| |  |  | the timing of product shipment and acceptance, which are factors in
determining when we recognize revenue; and
|
| |  |  | the timely introduction and acceptance of new products.                                                       

These and other factors increase the risk of unplanned fluctuations in our
net sales. A shortfall in net sales in a quarter or a fiscal year as a result
of these factors could negatively impact our operating results for that period.
Given these factors, we expect quarter-to-quarter and year-to-year performance
to fluctuate for the foreseeable future. As a result, period-to-period
comparisons of our performance may not be meaningful, and you should not rely
on them as an indication of our future performance. In one or more future
periods, our operating results may be below the expectations of public market
analysts and investors, which may cause our stock price to decline.

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

A significant portion of our net sales is attributable to sales outside
the United States, primarily in Taiwan, Japan, China, Korea, Singapore and
Europe. International sales were 61 percent of our net revenue for our 2001
fiscal year, 55 percent in our 2002 fiscal year and 65 percent in our 2003
fiscal year and 78 percent for the first nine months of our 2004 fiscal year.
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;                                                                                                    
|
| |  |  | terrorism and anti-American sentiment;                                                                                                 
|
| |  |  | trade restrictions;                                                                                                                    
|
| |  |  | changes in tariffs and taxes;                                                                                                          
|
| |  |  | longer payment cycles; and                                                                                                             
|
| |  |  | the greater difficulty of administering business overseas.                                                                             

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

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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. We do not currently engage
in active currency hedging transactions. Nonetheless, as we expand our
international operations, we may allow payment in additional foreign currencies
and our exposure to losses in foreign currency transactions may increase.
Moreover, the costs of doing business abroad may increase as a result of
adverse exchange rate fluctuations. For example, if the United States dollar
declined in value relative to a local currency, we could be required to pay
more for our expenditures in that market, including salaries, commissions,
local operations and marketing expenses, each of which is paid in local
currency. In addition, we may lose customers if exchange rate fluctuations,
currency devaluations or economic crises increase the local currency price of
our products or reduce our customers ability to purchase our products.

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

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

We may expand our operations through both internal growth and
acquisitions. We expect that this expansion will strain our systems and
operational and financial controls. In addition, we may incur higher operating
costs and be required to expend substantial working capital to fund operations
during such an expansion. In addition, during an expansion, we may incurr
significantly increased up front costs of sale and product manfuacture well in
advance of receiving revenue for such product sales. To manage our growth
effectively, we must continue to improve and expand our systems and controls.
If we fail to do so, our growth will be limited and our liquidity and abiloity
to fund our operations could be significantly strained. Our officers have
limited experience in managing large or rapidly growing businesses.

If we lose any of our key personnel or are unable to attract, train or
retain qualified personnel, our business would be harmed.

Our success depends, in large part, on the continued contributions of our
key management and other key personnel, many of whom are highly skilled and
would be difficult to replace. In particular, the services of Dr. Stephen
Schwartz, Chairman of our Board of Directors, Chief Executive Officer and
President, who has led our company since August 2002 and been Chairman since
January 2003, are very important to our business. None of our senior
management, key technical personnel or key sales personnel is bound by written
employment contracts to remain with us for a specified period. In addition, we
do not currently maintain key person life insurance covering our key personnel.
The loss of any of our senior management or key personnel could harm our
business.

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

Moreover, some of the individuals on our management team have been in
their current positions for a relatively short period of time. For example,
our Chief Financial Officer joined us during the quarter ended September 30,
2003. Our future success will depend to a significant extent on the ability of
our management team to work effectively together.

Representatives of Arthur Andersen LLP are not available to consent to the
inclusion of Arthur Andersen LLPs 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.

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Arthur Andersen LLP was previously our independent accountant. On March
14, 2002, Arthur Andersen was indicted on federal obstruction of justice
charges arising from the governments investigation of Enron Corporation and on
June 15, 2002, Arthur 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 are not
available to provide the consents required for the inclusion of its report on
our consolidated financial statements for the year ended March 31, 2001, you
will not be able to recover against Arthur Andersen 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.

Risks Related to our Industry

The semiconductor manufacturing industry is highly cyclical, and these
cycles can harm our operating results.

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

Since 2000, our industry has been experiencing a significant downturn due
to decreased worldwide demand for semiconductors. 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. Although our net sales in the third quarter ended December 31, 2003
increased $23.5 million, or 45.8 percent, from the prior quarter, 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 harm our long-term
business prospects.

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

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

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

Brooks Automation, Inc., or Brooks, and TDK Corporation of Japan are our
primary competitors in the area of isolation systems. Our SMART-Traveler
System products face competition from bar code technology as well as from
Brooks, and a number of smaller competitors. We also compete with several
companies in the robotics area, including, but not limited to, Brooks, 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. Our wafer and reticle sorters compete primarily with
products from Recif, Inc. and Brooks. In addition, the transition to

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300mm wafers is likely to draw new competitors to the facility automation
market. In the 300mm wafer market, we expect to face intense competition from
a number of established automation companies such as Brooks, as well as new
competition from semiconductor equipment and cleanroom construction companies.

We expect that our competitors will continue to develop new products in
direct competition with our systems, improve the design and performance of
their products and introduce new products with enhanced performance
characteristics. 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.

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




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 exchange 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 relates primarily to our 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
periodically 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 levels at December 31, 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
investment portfolio.

Foreign Currency Exchange Risk. We engage in international operations and
transact business in various foreign countries. The primary source of foreign
currency cash flows is Japan and to a lesser extent China, Taiwan, Singapore
and Europe. Although we operate and sell products in various global markets,
substantially all sales are denominated in U.S. dollars, except in Japan,
thereby reducing our foreign currency risk. 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 from the level at December 31, 2003, our quarterly
results of operations may improve or deteriorate in the range of $2.0 to $3.0
million. Although we do not anticipate any significant fluctuations within a
quarter, there can be no assurance that foreign currency exchange risk will not
have a material impact on our financial position, results of operations or cash
flow in the future.




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

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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 as defined
in Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Our CEO and CFO,
after evaluating the effectiveness of our Disclosure Controls and Procedures as
of December 31, 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.







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. The case was subsequently narrowed to the
421 patent, and we sought monetary damages for defendants infringement,
equitable relief, and an award of attorneys fees. On October 9, 2003, the
court: (i) granted defendants motion for summary judgment to the effect that
the defendants had not infringed our patent claims at issue and (ii) directed
that judgment be entered for defendants. We have filed a notice of appeal of
both the order and the entry of judgment against us. The court also denied
defendants motion for judgment as to the invalidity of our asserted patents.
Defendants have filed a notice of appeal as to the courts denial of that
motion.

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

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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 sought compensatory damages in excess of $5.0 million plus punitive
damages and attorneys fees. The matter has since been resolved pursuant to a
settlement and release agreement entered into by the parties, and the claims
underlying the action have been dismissed with prejudice. We recorded
severance and associated costs of $1.3 million related to the settlement in the
quarter ended December 31, 2003.

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 December 31, 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.                                                                                                                                              
|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.                                                                                      
|10.50*  |  | Amendment and Modification Agreement to Manufacturing
Services and Supply Agreement among the Company and Solectron
Corporation and its subsidiaries and affiliates, effective as
of September 22, 2003.
|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.

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(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.

* Confidential treatment has been requested for portions of this document.

** 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 October 6, 2003, we filed a Current Report on Form 8-K, dated
October 3, 2003, to furnish our public announcement of our filing of a Form S-3
shelf registration statement with the Securities and Exchange Commission.

2.     On November 12, 2003, we filed a Current Report on Form 8-K, dated
November 6, 2003, to furnish our public announcement of our results for our
second fiscal quarter ended September 27, 2003.

3.     On November 14, 2003, we filed a Current Report on Form 8-K, dated
November 12, 2003, to furnish our public announcement of our public offering of
common stock.

4.     On November 21, 2003, we filed a Current Report on Form 8-K, dated
November 20, 2003, to furnish our public announcement of the pricing of common
stock in our public offering.

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SIGNATURES

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

|                        |  |  |                          |                                               
|----------------------- |  |  | ------------------------ | ----------------------------------------------
|                        |  |  | ASYST
TECHNOLOGIES, INC.
|                        |  |  |                          |                                               
|Date: February 10, 2004 |  |  | By:                      | /s/ David L. White                            
|                        |  |  |                          |                                               
|                        |  |  |                          | David L. White                                
|                        |  |  |                          | Senior Vice President                         
|                        |  |  |                          | Chief Financial Officer                       
|                        |  |  |                          |                                               
|                        |  |  |                          | Signing on behalf of the registrant and as the
|                        |  |  |                          | principal accounting and financial officer    

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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.                                                                                      
|10.50*  |  | Amendment and Modification Agreement to Manufacturing
Services and Supply Agreement among the Company and Solectron
Corporation and its subsidiaries and affiliates, effective as
of September 22, 2003.
|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.

* Confidential treatment has been requested for portions of this document.

** 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.

41