UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended September 25, 2004

OR

For the transition period from __________to___________

Commission File number: 000-22430

ASYST TECHNOLOGIES, INC.

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 o No þ

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

Yes þ No o

The number of shares of the Registrant’s Common Stock, no par value, outstanding as of December 15, 2004 was [47,577,986].

EXPLANATORY NOTE

     We filed a Form 12b-25 with the SEC on November 4, 2004, to report that our filing of this Form 10-Q would be delayed because Asyst Shinko, Inc. (ASI), the company’s 51%-owned joint venture company in Japan, was not able to close its books in a timely manner. In the process of closing ASI’s books, we identified material accounting errors in ASI’s fiscal first quarter results, which led to our determination to restate those results in a Form 10-Q/A for our fiscal first quarter ended June 26, 2004, that we have filed on the date we filed this Form 10-Q. The company also made adjustments to the fiscal first quarter results reported for ATI, our base business.

     The restatement corrects accounting errors at ASI that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation. The principal effects of the restatement adjustments on the consolidated fiscal first quarter results are to:

•		reduce consolidated net sales by $1.5 million, and increase consolidated cost of sales by $2.3 million;
•		reduce gross margin at ASI from 10% to 5%, and reduce consolidated gross margin from 23% to 21%;
•		increase consolidated net loss from $0.9 million to $2.3 million;
•		increase consolidated net loss per share from $0.02 to $0.05.

     Accordingly, the financial statements or information for our fiscal first quarter that have been included in our Form 10-Q filed on August 5, 2004, or included in announcements prior to our press release dated December 20, 2004, should not be relied upon.

     Information concerning the restatement is contained in Part I to this Form 10-Q in Note 2 to the Condensed Consolidated Financial Statements (Unaudited), Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 4, “Controls and Procedures.” This information should be read in conjunction with relevant information in the company’s Form 10-Q/A referred to above. Note 2 to the Restated Condensed Consolidated Financial Statements contained in the Form 10-Q/A also includes a detailed statement of information “as reported” and “as restated” for the fiscal first quarter.

     The financial information in this Form 10-Q reflects the restated financial information in the company’s Form 10-Q/A for our fiscal first quarter.

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ASYST TECHNOLOGIES, INC.

TABLE OF CONTENTS

3

Part I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

4

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

5

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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ASYST TECHNOLOGIES, INC.

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 the flat panel display, or FPD, manufacturing industries.

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

     In October 2002, we purchased a 51.0 percent interest in ASI, a Japanese corporation.

     The above transactions, which were unrelated, were accounted for using the purchase method of accounting. Accordingly, our Condensed Consolidated Statements of Operations for the three- and six-month periods ended September 30, 2004 and 2003, and of Cash Flows for the six-month periods ended September 30, 2004 and 2003, respectively, 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. RESTATEMENT OF FINANCIAL STATEMENTS AND RELATED MATTERS

     Background. In a press release issued November 3, 2004, and Form 12b-25 filed on November 4, 2004, we announced that we would not timely file the Form 10-Q for our fiscal second quarter ending September 25, 2004, because:

•

As a result of a conversion in the fiscal first quarter to a new ERP information system within ASI, ASI was unable to provide timely reconciliation and reporting of inventory and cost information, which prevented us from completing our consolidated financial closing process for the fiscal second quarter on a timely basis.

•

ASI was in a contract dispute with a customer relating to three contracts for a large flat panel display project. The dispute concerned allegations that ASI and a customer employee had an arrangement by which competitive information was shared, and an agreement was made, allegedly, for a future payment of money to the customer employee.

     This customer has since reaffirmed the flat panel display contracts with ASI, and has paid all amounts currently due under the three contracts to ASI. The three contracts had an aggregate original value of $137.0 million at the time the contracts were booked. In conjunction with reaffirming the three contracts, certain terms were renegotiated, including an aggregate price reduction to the customer of approximately $7.0 million under the three contracts at the exchange rate as of September 30, 2004.

     Audit Committee Investigation. Upon notification by Asyst management of the customer dispute referred to above, the Audit Committee of our Board of Directors promptly initiated an independent legal and forensic investigation of this matter in October 2004, which has been completed. The Audit Committee concluded that Asyst management had prevented the payment to the customer employee, no evidence of other improper payments was discovered, and Asyst management was not involved in the improper conduct.

     Closing Process and Restatement. Asyst believes that the ERP system conversion issues that led to inventory reconciliation difficulties at ASI have been addressed and that the system will support the timely preparation and submission of its consolidated financial statements in future reporting periods.

     In the process of closing ASI’s books, we identified material accounting errors in ASI’s fiscal first quarter results, which led to our determination to restate those results in the Form 10-Q/A filed on the same date that we have filed this Form 10-Q for our fiscal second quarter. Additionally, the company made adjustments to the fiscal first quarter results reported for ATI, our base business.

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

     Summary of Restatement. All applicable financial information contained in this Form 10-Q reflects the restatement described above. The financial statements or information for the fiscal first quarter included in our Form 10-Q filed on August 5, 2004, or included in announcements prior to our press release dated December 20, 2004, should not be relied upon.

     The restatement corrects accounting errors at Asyst Shinko, Inc. (ASI), our 51%-owned joint venture company in Japan, that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation. The principal effects of the restatement adjustments on the consolidated fiscal first quarter results are to:

•

reduce consolidated net sales by $1.5 million, and increase consolidated cost of sales by $2.3 million;

•

reduce gross margin at ASI from 10% to 5%, and reduce consolidated gross margin from 23% to 21%;

•

increase consolidated net loss from $0.9 million to $2.3 million;

•

increase consolidated net loss per share from $0.02 to $0.05.

     The information contained in these Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with the relevant information contained in the Form 10-Q/A we have filed for our fiscal first quarter on the date we filed this Form 10-Q. Note 2 to the Restated Condensed Consolidated Financial Statements contained in the Form 10-Q/A also includes a detailed statement of information “as reported” and “as restated” for the fiscal first quarter.

     Nasdaq Notification. We previously announced that Asyst received a letter from the Nasdaq Listing Qualifications Department indicating that, because of the company’s delay in timely filing its Quarterly Report on Form 10-Q for its fiscal second quarter ended September 25, 2004, Asyst is not in compliance with the filing requirements for continued listing on Nasdaq as set forth in Nasdaq Marketplace Rule 4310(c)(14). As a result, Asyst’s common shares are subject to delisting from the Nasdaq National Market, and the trading symbol for Asyst’s common stock was changed from “ASYT” to “ASYTE” at the opening of business on November 18, 2004.

     We appeared before a Nasdaq Listing Qualifications Panel on December 15, 2004, to discuss our filing delay relating to this Form 10-Q for the second fiscal quarter. The panel took no action on that date, and the matter remains open. Although we are hopeful that the panel will accept our submission and our filing of this report and our fiscal first quarter Form 10-Q/A in December 2004 as a basis to continue the listing of our common stock on the Nasdaq National Market, we cannot predict the panel’s decision. If we are delisted, it could severely impact our ability to raise future capital and may have an adverse impact on our overall future liquidity.

     Material Weaknesses. In connection with the matters described above, our company’s management identified and reported to our Audit Committee the following control deficiencies each of which constitutes a material weakness in our internal control over financial reporting as of September 30, 2004:

•

inability to provide timely reconciliation and reporting of inventory and cost information at ASI as a result of conversion to a new ERP system, which in turn prevented the company from completing its consolidated financial closing process for the fiscal second quarter on a timely basis.

•

internal information from ASI indicating that an improper payment was offered by ASI to a customer employee, which in turn created a risk that the customer in the dispute referenced above could claim a right to cancel the contracts.

•

accounting errors at ASI and ATI that led to the restatement of our fiscal first quarter results, primarily relating to errors at ASI that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation.

8

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

     Under the Public Company Accounting Oversight Board Accounting Standard No. 2, a material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

     We intend to strengthen our controls over financial reporting to address the above-noted material weaknesses by strengthening timely reviews and analysis of operations and financial results and increasing the level of staffing in critical functional areas, including cost accounting and internal audit.

3. 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 sheets. 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 the Securities and Exchange Commission, or SEC, rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. All significant intercompany accounts and transactions have been eliminated. Minority shareholders’ interest represents the minority shareholders’ 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 current presentations. We close our books on the last Saturday of each quarter and thus the actual dates of the quarter-end, September 25, 2004 and September 27, 2003, are different from the month-end dates used for reference throughout this Quarterly Report on Form 10-Q. 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, 2004 included in our Annual Report on Form 10-K.

  Recent Accounting Pronouncements

     At its March 2004 meeting, the Emerging Issues Task Force, or EITF, reached a consensus on recognition and measurement guidance previously discussed under EITF 03-01. The consensus clarifies the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity under Statement of Financial Accounting Standards, or SFAS, No. 115 and investments accounted for under the cost method or the equity method. The recognition and measurement guidance for which the consensus was reached in the March 2004 meeting is to be applied to other-than-temporary impairment evaluations in reporting periods effective at the beginning of the first interim period beginning after June 15, 2004. We do not believe that this consensus on the recognition and measurement guidance will have a significant impact on our consolidated results of operations.

     In November 2004, the EITF issued EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” which addressed the issue of when the dilutive effect of contingently convertible debt instruments, or Co-Cos, should be included in diluted earnings per share computations regardless of whether the market price trigger has been met. The provisions of this EITF are effective with fiscal periods ending after December 15, 2004. We do not believe this consensus will have a significant impact on our reported earnings per share.

     In November 2004, the FASB issued FASB Statement No. 151, “Inventory Costs - - an Amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of the provisions of SFAS No. 151 is not expected to have a material impact on our financial position or results of operations.

     In December 2004, the Financial Accounting Standards Board issued its final standard on accounting for share-based payments (SBP), FASB Statement No. 123R (revised 2004), that requires companies to expense the value of employee stock options and similar awards. The standard is effective for public companies for interim and annual periods beginning after June 15, 2005, and applies to all outstanding and unvested SBP awards at a company’s

9

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

adoption date. We are still evaluating the impact of the adoption of the provisions of SFAS No. 123R, but believe it may have a significant adverse impact on our results from operations.

  Restricted Cash and Cash Equivalents

     Restricted cash and cash equivalents at March 31, 2004 primarily represents amounts that were restricted as to their use in accordance with Japanese debt agreements. The debt was fully paid in the first quarter of fiscal 2005, and there was no longer such a requirement.

  Accounts Receivable, net of allowance for doubtful accounts

     Accounts receivable, net of allowance for doubtful accounts were as follows (in thousands):

     We estimate our allowance for doubtful accounts based on a combination of specifically identified amounts and an additional reserve calculated based on the aging of receivables. The additional reserve is provided for the remaining accounts receivable after specific allowances at a range of percentages from 1.25 percent to 50.0 percent based on the aging of receivables. If circumstances change (such as an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us or its payment trends), we may adjust our estimates of the recoverability of amounts due to us. Included in the allowance for doubtful accounts are specific allowances of $0.7 million and $2.8 million at September 30, 2004 and March 31, 2004, respectively. During the three-month period ended September 30, 2004, we wrote off $1.5 million of accounts receivable which we determined to be uncollectible and for which we had recorded specific reserves in previous quarters. We do not record interest on outstanding and overdue accounts receivable.

     We offer both open accounts and letters of credit to our customer base. Our standard open accounts are net 30 days; however, the customary local industry practices may differ and prevail where applicable. As of September 30, 2004, our gross accounts receivable aging, before allowance for doubtful accounts, was as follows (in thousands):

     Our Japan subsidiary, AJI, and ASI have agreements with certain Japanese banking institutions to sell some of our trade receivables. For the six-month period September 30, 2004, AJI and ASI sold approximately $0.1 million and $10.1 million, respectively, of accounts receivable without recourse.

  Inventories

     Inventories consist of the following (in thousands):

10

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

     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. On an on-going basis, we may be obligated to acquire inventory purchased by Solectron if the inventory is not used over a certain specified period of time per the terms of our agreement. As of September 30, 2004, we have total inventory reserves of approximately $15.3 million of which $5.5 million is for our obligation to repurchase inventory at Solectron.

  Goodwill and Other Intangible Assets, net

     Goodwill

     In accordance with SFAS No. 142, we expect to complete a periodic goodwill impairment test in the third quarter of fiscal 2005. During the third quarter of fiscal 2004, we completed an annual goodwill impairment test and concluded that there was no impairment of goodwill and intangible assets.

     Goodwill balances and the changes in the carrying amount of goodwill during the six-month period ended September 30, 2004 were as follows (in thousands):

     Intangible assets

     Intangible assets were as follows (in thousands):

     Amortization expense totaled $5.0 million and $4.8 million for the three-month periods ended September 30, 2004 and 2003, respectively. Amortization expense totaled $10.1 million and $9.6 million for the six-month periods ended September 30, 2004 and 2003, respectively.

     Expected future intangible amortization expense, based on current balances, for the remainder of fiscal 2005 and subsequent fiscal years, is as follows (in thousands):

11

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

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 reserve (in thousands):

     The warranty reserve balance at the end of the period is reflected in accrued liabilities and other.

  Revenue Recognition

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

     We recognize revenue for long-term contracts at ASI in accordance with the American Institute of Certified Public Accountants, or AICPA, Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” We use the percentage-of-completion method to calculate revenue and related costs of these contracts because they are long-term in nature and estimates of cost to complete and extent of progress toward completion of long-term contracts are available and reasonably dependable. We record revenue each period based on the percentage of completion to date on each contract, measured by costs incurred to date relative to the total estimated costs of each contract. We treat contracts as substantially complete when we receive technical acceptance of our work by the customer. We disclose material changes in our financial results that result from changes in estimates.

     We account for software revenue in accordance with the AICPA 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 probable.

  Contract Loss Reserve

     We routinely evaluate the contractual commitments with our customers and suppliers to determine if a probable 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 $4.0 million and $4.8 million at September 30, 2004 and March 31, 2004, respectively. The balance at September 30, 2004 primarily relates to four AMHS contracts entered into by ASI and one contract entered into by ATI during the fiscal year ended March 31, 2004 and one contract entered into by ASI during the six-month period ended September 30, 2004.

12

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

  Comprehensive Loss

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

  Earnings (Loss) Per Share

     Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding, while diluted net income (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 in which there is a net loss, the numbers of shares used in the computation of diluted net income (loss) per share are the same as those used for the computation of basic net income (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 reported in the statement of operations, nor in the table presented in the Stock-Based Compensation section below, as to do so would be anti-dilutive (in thousands):

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

  Stock-Based Compensation

     Had compensation expense for our stock options, employee stock purchase plan and the restricted stock issuances to employees been determined based on the fair value at the grant or issuance date, consistent with the provision of SFAS No. 123 and SFAS No. 148, our net losses for the three and six-month periods ended September 30, 2004 and 2003, respectively, would have increased as indicated below (in thousands, except per share amounts):

4. RESTRUCTURING CHARGES

     Restructuring charges and related utilization for the three-month periods ended June 30 and September 30, 2004 were (in thousands):

     We incurred restructuring charges of $0.4 million and $0.2 million for the three-month periods ended September 30 and June 30, 2004, respectively, consisting primarily of severance costs resulting from a reduction in workforce. We terminated the employment of approximately 6 employees, including 5 in manufacturing, and 1 in selling, general and administration, from our international operations as a result of these restructuring activities.

     The outstanding reserve amount at September 30, 2004 consists primarily of future lease obligations on vacated facilities in excess of estimated future sublease proceeds which will be paid over the next four quarters. All remaining accrual balances are expected to be settled in cash.

     Restructuring charges and related utilization for the three-month periods ended June 30 and September 30, 2003 were (in thousands):

14

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

     We incurred restructuring charges of $0.5 million during the three-month period 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.

     During the six-month period ended September 30, 2003, we incurred restructuring charges of $4.9 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.

5. ASSET IMPAIRMENT CHARGES

     We completed the sale of land in Fremont, California, in the three-month period 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. Initially, we leased the land from a syndicate of financial institutions pursuant to an original lease agreement and an amended lease agreement. We purchased the land on October 22, 2001 for $41.1 million, and paid the syndicate of financial institutions approximately $2.9 million for engineering costs incurred in preparation for making leasehold improvements to the land. Based upon market data at June 30, 2001, and our non-cancelable commitment to purchase the land, we estimated that the then-market value of the land had been impaired and as such recorded a $15.0 million write-down to its estimated market value during the three-month period ended June 30, 2001. We 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, an additional $7.1 million write-down was recorded in the second quarter in fiscal 2003. In the three-month period ended June 30, 2003, 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.

6. INCOME TAXES

     Income tax provision for the three-month period ended September 30, 2004 was $67,000, primarily due to a tax benefit of $1.7 million from the amortization of deferred tax liabilities recorded in connection with the ASI acquisition offset by a $1.5 million tax provision recorded by ASI and tax provision of $0.3 million recorded by other international subsidiaries, primarily Japan and Taiwan. Income tax benefit for the six-month period ended September 30, 2004 was approximately $1.6 million, primarily due to a tax benefit of $3.3 million from the amortization of deferred tax liabilities recorded in connection with the ASI acquisition, offset by $1.2 million of tax provisions recorded by ASI and tax provisions of $0.5 million recorded by other international subsidiaries, primarily Japan and Taiwan. Income tax benefit of $1.0 million and $2.4 million was recorded for the three- and six-month periods ended September 30, 2003, respectively. The amounts reported were primarily due to amortization of deferred tax liabilities recorded in connection with the ASI acquisition, offset by tax provisions in our international subsidiaries, primarily Japan and Taiwan. Deferred tax assets related to our Japan subsidiary, AJI, and ASI are recognized to the extent realizable. In fiscal 2003, we established a full valuation allowance for our domestic net deferred tax assets.

7. REPORTABLE SEGMENTS

     We have two reportable product segments: Fab Automation and AMHS. The Fab Automation segment includes interface products, substrate-handling robotics, wafer and reticle carriers, auto-ID systems, sorters and connectivity software products. The AMHS segment, which consists principally of the entire ASI operations, includes automated

15

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

transport and loading systems for semiconductor fabs and flat panel display manufacturers.

     We evaluate performance and allocate resources based on revenues and operating income (loss). Operating income (loss) for each segment includes selling, general and administrative expenses directly attributable to the segment.

     Segment information is summarized as follows (in thousands):

     Total operating loss is equal to consolidated loss from operations for the periods presented. We do not allocate other income (expense), net to individual segments.

     One customer accounted for 35.0 percent and 19.0 percent of our net sales for the three- and six-month periods ended September 30, 2004, respectively. No other customer accounted for more than 10.0 percent of our net sales for the three- and six-month periods ended September 30, 2004.

8. DEBT

     We had $35.4 million and $18.2 million of short-term debt issued by banks in Japan at September 30 and March 31, 2004, respectively. Approximately $11.0 million and $13.5 million at September 30 and March 31, 2004, respectively, is owed by our Japanese subsidiary, AJI, and is guaranteed by Asyst in the United States. The remaining portion, $24.4 million and $4.7 million at September 30 and March 31, 2004, respectively, is owed by ASI. As of September 30, and March 31, 2004, the interest rate ranged from 1.4 percent to approximately 3.0 percent.

     Long-term debt and capital leases consisted of the following (in thousands):

16

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

     At September 30, 2004, maturities of all long-term debt and capital leases are as follows (in thousands):

  Convertible Subordinated Notes

     On July 3, 2001, we completed the sale of $86.3 million of 5 3/4 percent convertible subordinated notes that resulted in aggregate proceeds of $82.9 million to us, 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 on July 3, 2008, pay interest on January 3 and July 3 of each year and are redeemable at our option after July 3, 2004. Debt issuance costs of $2.9 million, net of amortization, are being amortized over 84 months and are being charged to other income (expense). Debt amortization costs totaled $0.1 million during each of the three-month periods ended September 30, 2004 and 2003, respectively; and $0.2 million during each of the six-month periods ended September 30, 2004 and 2003, respectively.

  Secured Straight Bonds

     We had $5.6 million and $7.1 million of secured straight bonds from a bank in Japan at September 30, 2004 and March 31, 2004, respectively. The bonds bore interest at rates ranging from 1.4 percent to 3.0 percent as of September 30 and March 31, 2004, and mature in fiscal year 2008. Certain of our assets in Japan have been pledged as security for short-term debt and secured straight bonds.

  Lines of Credit

     At September 30, 2004, we had available to us a $25.0 million two-year revolving line of credit with a commercial bank, as amended during the first quarter of fiscal year 2005. The amended line of credit requires 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), and a requirement that we maintain with the bank during the term of the line of credit a minimum balance of $5.0 million of cash and cash equivalents. In addition, the amendment extended the line of credit through May 15, 2006, changed and expanded the base of assets under which we qualify for borrowing under the line of credit and reduced certain fees and interest charges applicable to borrowing under the line of credit. The specific amount of borrowing available under the line of credit at any time, however, may change based on the amount of current receivables we have outstanding. The line of credit was fully paid down during the three-month period ended December 31, 2003. As of September 30, 2004, there was no amount outstanding under the line of credit, and we were in compliance with the financial covenants.

     In September 2003, ASI entered into a short-term bank facility with a Japanese bank under which it may borrow up to approximately 3.0 billion Japanese Yen, or approximately $27.1 million at the exchange rate as of September 30, 2004. As of September 30, 2004 and March 31, 2004, respectively, ASI had outstanding borrowings of 1.4 billion Japanese Yen and 0.5 billion Japanese Yen, or approximately $12.7 million and $4.7 million, respectively, at the exchange rate as of September 30, 2004 and March 31, 2004, respectively, that is recorded in short-term debt. Under terms of the ASI bank facility, ASI must generate operating profits on a statutory basis. ASI was in compliance with the loan covenants at September 30, 2004 and at March 31, 2004.

     On September 21, 2004, ASI established a revolving credit facility, or the “Mizuho facility”, with Mizuho Bank of Japan to support its working capital requirements in its performance of long-term construction-type projects. During periods of rapid growth in project activity, ASI can require substantial short-term working capital to support the manufacturing and installation of systems ahead of invoicing and collection of payments for the systems. The maximum amount that can be borrowed under the Mizuho facility is 2.0 billion Japanese Yen, or approximately $18.1 million at the exchange rate as of September 30, 2004. The Mizuho facility has a term of one year, and all amounts outstanding under the facility are due and payable on September 20, 2005 (unless the facility is extended). The Mizuho facility requires no

17

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

collateral from AJI or guarantee in the event of ASI’s default from Asyst. It carries a variable interest rate based on the Tokyo Interbank Offered Rate, or TIBOR (as of September 30, 2004, 0.07 percent), plus a margin of 1.25 percent. Under the Mizuho facility, ASI is required to maintain compliance with certain financial covenants, including requirements that for its current fiscal year ASI report positive operating and net income, before extraordinary items as identified under generally accepted accounting principles in Japan, and maintain at least 80.0 percent of the equity it reported as of March 27, 2004. On September 22, 2004, ASI drew an advance of 1.3 billion Japanese Yen, or approximately $11.7 million at the exchange rate as of September 30, 2004, on the Mizuho facility, all of which remains outstanding as of September 30, 2004. ASI was in compliance with the loan covenants at September 30, 2004.

     On September 17, 2004, AJI borrowed a total of 0.8 billion Japanese Yen, or approximately $7.1 million at the exchange rate as of September 30, 2004, in short-term bank loans from a financial institution in Japan. The loans are repayable on February 28, 2005, and carry interest rates ranging from 1.625 percent to 2.125 percent as of September 30, 2004. In addition, AJI has entered into arrangements with two financial institutions in Japan to provide short-term credit facilities, which total 0.5 billion Japanese Yen of available borrowing, or approximately $4.9 million at the exchange rate as of September 30, 2004. As of September 30, 2004, 0.4 billion Japanese Yen, or approximately $4.0 million at the exchange rate as of September 30, 2004, was outstanding. The interest rate was 1.375 percent on such credit facilities as of September 30, 2004. None of these short-term loans and credit facilities requires collateral from AJI or guarantees from Asyst in the event of ASI’s default.

     We have guaranteed certain lease payments with respect to equipment and real estate of AJI, our Japanese subsidiary.

9. EMPLOYEE STOCK OPTION AND STOCK PURCHASE PLANS

  Employee Stock Option Grants

     Options to purchase 534,450 shares and 265,500 shares of common stock were granted to employees during the three-month periods ended September 30, 2004 and 2003, respectively. Options to purchase 1,580,950 and 2,689,908 shares of common stock were granted to employees for the six-month periods ended September 30, 2004 and 2003, respectively. At September 30, 2004, options to purchase 8,235,027 shares of common stock were outstanding, and 1,072,568 shares of common stock were available for issuance under our 2001 and 2003 stock option plans.

  Employee Stock Purchase Plan

     As of September 30, 2004, 1,960,814 shares had been purchased and 489,186 shares of common stock were available for issue under the Employee Stock Purchase Plan.

  Fair Value Disclosures

     Information regarding net loss and net loss per share, as adjusted, is required by SFAS No. 123, which also requires that the information be determined as if we had accounted for our employee stock options granted under the fair value method. The fair value for these options was estimated using the Black-Scholes option pricing model. The per share weighted average estimated fair value for employee options granted was $3.58 and $8.54 during the three-month periods September 30, 2004 and 2003, respectively, and $5.19 and $3.66 during the six-month periods ended September 30, 2004 and 2003, respectively. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no restrictions and are fully transferable and negotiable in a freely traded market. Black-Scholes does not consider the employment, transfer or vesting restrictions that are inherent in our employee options. The usage of an option valuation model, as required by SFAS No. 123, includes highly subjective assumptions based on long-term predictions, including the expected stock price volatility and average life of each option grant. Because our employee options have characteristics significantly different from those of freely traded options, and because changes in the subjective input assumptions can materially affect our estimate of the fair value of those options, it is our opinion that the existing valuation models, including Black-Scholes, are not reliable single measures and may misstate the fair value of our employee options.

18

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

     The following weighted average assumptions are included in the estimated fair value calculations for stock option grants in the three- and six-month periods ended September 30, 2004 and 2003, respectively:

     Using Black-Scholes, the per share weighted average estimated fair value of rights to purchase our stock issued under our Employee Stock Purchase Plan during the three-month periods ended September 30, 2004 and 2003 was $1.69 and $2.04, respectively, and for the six-month periods ended September 30, 2004 and 2003 was $3.38 and $1.68, respectively,

     The following weighted average assumptions are included in the estimated grant date fair value calculations for rights to purchase stock under the Employee Stock Purchase Plan:

10. RELATED PARTY TRANSACTIONS

     At September 30, 2004 and March 31, 2004, we held notes from two current non-officer employees totaling $0.3 million and $0.4 million, respectively. One of the notes receivable is secured by a deed of trust on certain real property. These notes receivable are included in other assets in the condensed consolidated balance sheet.

     Our majority-owned subsidiary, ASI, has certain transactions with the minority shareholder, Shinko. At September 30, 2004 and March 31, 2004 accounts payable due to Shinko were $9.2 million and $17.2 million, respectively. Materials and services purchased from Shinko for the six-month periods ended September 30, 2004 and 2003 were $8.1 million and $4.5 million, respectively.

11. COMMITMENTS AND CONTINGENCIES

  Lease Commitments

     We lease various facilities under non-cancelable capital and operating leases. At September 30, 2004, the future minimum commitments under these leases are as follows (in thousands):

     Rent expense under our operating leases was approximately $1.2 million and $1.3 million for the three-month periods ended September 30, 2004 and 2003, respectively; and $2.6 million and $2.8 million for the six-month periods ended

19

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

September 30, 2004 and 2003, respectively.

  Legal Commitments

     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.

     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 that 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 or other payments in the future which may adversely impact gross margins. Litigation is inherently unpredictable, and we cannot predict the outcome of the legal proceedings described above with any certainty. Because of uncertainties related to both the amount and range of losses in the event of an unfavorable outcome in the lawsuits listed above or in certain other pending proceedings for which loss estimates have not been recorded, we are unable to make a reasonable estimate of the losses that could result from these matters. As a result, no losses have been accrued for the legal proceedings described above in our financial statements as of September 30, 2004.

  Indemnifications

     We, as permitted under California law and in accordance with our Bylaws, indemnify our officers, directors and members of our senior management for certain events or occurrences, subject to certain limits, while they were serving at our request in such capacity. The maximum amount of potential future indemnification is unlimited; however, we have a Director and Officer Insurance Policy that enables us to recover a portion of certain future amounts paid (if paid, and subject to the terms of the policy). As a result of the insurance policy coverage, we believe the fair value of these indemnification agreements is not likely to be material. Our sales agreements indemnify our customers for certain expenses or liability resulting from claimed infringements of patents, trademarks or copyrights of third parties. The terms of these indemnification agreements are generally perpetual any time after execution of the sales agreement. The maximum amount of potential future indemnification is unlimited. However, to date, we have not paid any claims or been required to defend any lawsuits with respect to any claim.

  Sale of Receivables

     Our Japan subsidiary, AJI, and ASI have agreements with certain Japanese banking institutions to sell some of our trade receivables. For the six-month period ended September 30, 2004, AJI and ASI sold approximately $0.1 million and $10.1 million, respectively, of accounts receivable without recourse.

12. SUBSEQUENT EVENTS

     In our press release dated December 9, 2004, we announced plans to move forward on a restructuring of our ATI operations (our base business, excluding ASI) with a reduction in worldwide workforce. The action is expected to provide annual expense savings of approximately $8.0 to $9.0 million and reflects the continuing transition of our business model.

     As a result of the workforce action, we expect to incur cash severance and termination charges of approximately $2.0 million in our third fiscal quarter ending December 25, 2004.

20

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

     In our press release dated December 17, 2004, we also announced that management, in consultation with our Audit Committee, determined to remove from service and make available for sale certain land and building in Nagoya, Japan that relates to our wholly-owned Japanese subsidiary Asyst Japan, Inc., or AJI. As a result, the company expects to record an impairment charge in its third fiscal quarter in the range of $4.0 million to $5.0 million, based on the company’s most-recent assessment of fair market value. The building has been underutilized since a prior decision to outsource manufacturing, and has previously been partially written down.

21

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report and our audited consolidated financial statements and related notes as of March 27, 2004 and March 31, 2003, and for each of the three years in the period ended March 27, 2004 as filed in our Annual Report Form 10-K for the year ended March 27, 2004. Certain prior period amounts have been reclassified to conform to current period presentation.

     Unless expressly stated or the context otherwise requires, the terms “we”, “our”, “us” and “Asyst” refer to Asyst Technologies, Inc. and its subsidiaries.

Overview

     We develop, manufacture, sell and support integrated automation systems primarily for the worldwide semiconductor and the flat panel display, or FPD industries.

     We principally sell directly to the semiconductor and FPD manufacturing industries. We also sell to other original equipment manufacturers, or OEMs that make production equipment for sale to semiconductor manufacturers. Our strategy is to offer integrated automation systems that enable semiconductor and FPD manufacturers to increase their manufacturing productivity and yield and to protect their investment in fragile materials during the manufacturing process.

     On October 16, 2002, we established a joint venture with Shinko Electric Co. Ltd or Shinko called Asyst Shinko, Inc, or ASI. The joint venture develops, manufactures, sells and supports AMHS with principal operations in Tokyo and Ise, Japan. Under terms of the joint venture agreement, we acquired 51.0 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, and acquired the remaining 49.0 percent interest. We acquired ASI to enhance our presence in the 300mm AMHS and flat panel display markets.

     We have two reportable segments:

     The AMHS segment, which consists principally of the entire ASI operations, includes automated transport and loading systems, semiconductor and flat panel display products.

     The Fab Automation Product segment includes interface products, auto-ID Systems, Substrate-Handling Robotics, Sorters, Connectivity Software, and continuous flow technology (CFT).

     Our net sales for the six-month period ended September 30, 2004 increased by 218.8 percent compared to the corresponding period of fiscal 2004. The increase was primarily due to the sale of our AMHS products, which increased 255.45 percent for the six-month period ended September 30, 2004 compared to the same period of fiscal 2004. In addition, net sales of Fab Automation Products for the six-month period ended September 30, 2004 increased by 184.0 percent compared to the same period of fiscal 2004. AMHS revenues represented 54.4 percent of our total revenue for the six-month period ended September 2004, compared to 48.8 percent for the six-month period ended September 2003.

     For the remainder of fiscal 2005, we believe critical success factors include product quality, customer relationship, and demand. Demand for our products can change significantly from period to period as a result of numerous factors, including,

22

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS — (Continued)

but not limited to, changes in: (1) global economic conditions; (2) fluctuations in the semiconductor equipment market; (3) changes in customer buying patterns due to technological advancement and/or capacity requirements; (4) the relative competitiveness of our products; and (5) our ability to manage successfully the outsourcing of our manufacturing activities to meet our customers’ demands for our products and services. For this and other reasons, our results of operations for the three- and six-month periods ended September 30, 2004 may not be indicative of future operating results.

     We intend the discussion of our financial condition and results of operations that follow to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements.

Restatement of Financial Statements and Related Matters

          Background. In a press release issued November 3, 2004, and Form 12b-25 filed on November 4, 2004, we announced that we would not timely file the Form 10-Q for our fiscal second quarter ending September 25, 2004, because:

•

As a result of a conversion in the fiscal first quarter to a new ERP information system within ASI, ASI was unable to provide timely reconciliation and reporting of inventory and cost information, which prevented us from completing our consolidated financial closing process for the fiscal second quarter on a timely basis.

•

ASI was in a contract dispute with a customer relating to three contracts for a large flat panel display project. The dispute concerned allegations that ASI and a customer employee had an arrangement by which competitive information was shared, and an agreement was made, allegedly, for a future payment of money to the customer employee.

     This customer has since reaffirmed the flat panel display contracts with ASI, and has paid all amounts currently due under the three contracts to ASI. The three contracts had an aggregate original value of $137.0 million at the time the contracts were booked. In conjunction with reaffirming the three contracts, certain terms were renegotiated, including an aggregate price reduction to the customer of approximately $7.0 million under the three contracts at the exchange rate as of September 30, 2004.

     Audit Committee Investigation. Upon notification by Asyst management of the customer dispute referred to above, the Audit Committee of our Board of Directors promptly initiated an independent legal and forensic investigation of this matter in October 2004, which has been completed. The Audit Committee concluded that Asyst management had prevented the payment to the customer employee, no evidence of other improper payments was discovered and determined that Asyst management was not involved in the improper conduct.

     Closing Process and Restatement. Asyst believes that the ERP system conversion issues that led to inventory reconciliation difficulties at ASI have been addressed and that the system will support the timely preparation and submission of its consolidated financial statements in future reporting periods.

     In the process of closing ASI’s books, we identified material accounting errors in ASI’s fiscal first quarter results, which led to our determination to restate those results in this Form 10-Q/A filed on the same date that we have filed our Form 10-Q for our fiscal second quarter. Additionally, the company made adjustments to the fiscal first quarter results reported for ATI, our base business.

     Summary of Restatement. All applicable financial information contained in this Form 10-Q gives effect to the restatement described above. The financial statements or information for the fiscal first quarter included in our Form 10-Q filed on August 5, 2004, or included in announcements prior to our press release dated December 20, 2004, should not be relied upon.

     The restatement corrects accounting errors at Asyst Shinko, Inc. (ASI), our 51%-owned joint venture company in Japan, that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss from operations by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation. The principal effects of the restatement adjustments on the

23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS — (Continued)

consolidated fiscal first quarter results are to:

•

reduce consolidated net sales by $1.5 million, and increase consolidated cost of sales by $2.3 million;

•

reduce gross margin at ASI from 10% to 5%, and reduce consolidated gross margin from 23% to 21%;

•

increase consolidated net loss from $0.9 million to $2.3 million;

•

increase consolidated net loss per share $0.02 to $0.05.

     The information contained in the Condensed Consolidated Financial Statements (Unaudited) in this report should be read in conjunction with the relevant information contained in the Form 10-Q/A we have filed for our fiscal first quarter on the date we filed this Form 10-Q. Note 2 to the Restated Condensed Consolidated Financial Statements contained in the Form 10-Q/A also includes a detailed statement of information “as reported” and “as restated” for the fiscal first quarter.

     See also Part I, Item 4, “Disclosure Controls and Procedures” for a discussion of material weaknesses in our internal control over financial reporting and other information relating to the matters discussed above.

     Nasdaq Notification. We previously announced that Asyst received a letter from the Nasdaq Listing Qualifications Department indicating that, because of the company’s delay in timely filing its Quarterly Report on Form 10-Q for its fiscal second quarter ended September 25, 2004, Asyst is not in compliance with the filing requirements for continued listing on Nasdaq as set forth in Nasdaq Marketplace Rule 4310(c)(14). As a result, Asyst’s common shares are subject to delisting from the Nasdaq National Market, and the trading symbol for Asyst’s common stock was changed from “ASYT” to “ASYTE” at the opening of business on November 18, 2004.

     We appeared before a Nasdaq Listing Qualifications Panel on December 15, 2004, to discuss our filing delay relating to this Form 10-Q for the second fiscal quarter. The panel took no action on that date, and the matter remains open. Although we are hopeful that the panel will accept our submission and our filing of this report and our fiscal first quarter Form 10-Q/A in December 2004 as a basis to continue the listing of our common stock on the Nasdaq National Market, we cannot predict the panel’s decision. If we are delisted, it could severely impact our ability to raise future capital and may have an adverse impact on our overall future liquidity.

Critical Accounting Policies and Estimates

     Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect our consolidated financials statements. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of long-lived assets, asset impairments, restructuring charges, goodwill and intangible assets, income taxes, and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     Management believes there have been no significant changes during the three- and six-month periods ended September 30, 2004 to the items that we disclosed as our critical accounting policies and estimates in Management Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended March 27, 2004.

24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS — (Continued)

Results of Operations

The following is a summary of our net sales and income (loss) from operations by segment and consolidated total for the periods presented below:

     The $74.5 million increase in AMHS sales for the three month period ended September 30, 2004 as compared to the same period of fiscal 2004 was primarily due to a $66.5 million increase in sales to flat panel display manufacturers, principally to one customer in Asia, and a $8.0 million increase in sales to semiconductor fabs, predominantly in North America, Korea, and Japan. The $120.3 million increase in AMHS sales for the six month period ended September 30, 2004 as compared to the same period of fiscal 2004 was primarily due to an $82.3 million increase in sales to flat panel display manufacturers, predominantly in Asia, and a $38.0 million increase in sales to semiconductor fabs, predominantly in Asia and North America.

The $42.8 million increase in Fab Automation sales for the three month period ended September 30, 2004 as compared to the same period of fiscal 2004 was primarily due to a $35.2 million increase in revenues for factory interface and software products. The $91.1 million increase in Fab Automation sales for the six month period ended September 30, 2004 as compared to the same period of fiscal 2004 was primarily due to a $79.0 million increase in revenues for factory interface and software products.

25

Gross Margin

     Gross margin decreased to 19.3 percent of net sales for the three-month period ended September 30, 2004, compared to 23.4 percent of net sales for the corresponding period of the prior year. The decrease was primarily due to decreased gross margins in the AMHS segment, which declined to 9.5 percent of net sales in the current period compared to 21.4 percent of net sales for the corresponding period of the prior year. This decline was primarily due to an increase in lower margin flat panel display business in the current quarter compared with the corresponding period of the prior year. This decline was partly offset by improved gross margins in the Fab Automation business. The gross margins improved to 33.5 percent in the current period compared to 25.3 percent in the corresponding period of the prior year.

     For the six-month period ended September 30, 2004, gross margin increased to 20.0 percent of net sales compared to 17.0 percent of net sales for the corresponding period of the prior year. The increase was primarily due to the improved gross margins in the Fab Automation business, where gross margins improved to 33.5 percent in the current period compared to 11.2 percent in the corresponding period of the prior year. The gross margin improvement was primarily due to an increase in mix of higher margin 200mm factory interface products and software products.

     We expect 300mm product sales to continue to trend higher as new 300mm AMHS product installations commence, although quarterly fluctuations are possible. Additionally, 200mm SMIF upgrades or new 200mm fabs may result in significant mix changes. Our 300mm products are very early in their product life cycle and currently have lower margins compared with our 200mm products. Swings in product mix may impact our gross margins on a quarter-over-quarter basis. Through cost reduction initiatives and our outsourcing strategy, we expect 300mm gross margins to improve over time. However, we face strong competition on price and features for these products from existing and new competitors due to the anticipated size of the emerging 300mm product market. For the next two quarters of fiscal 2005, the change in product mix is expected to be primarily driven by our recently announced $120.0 million Generation 6 flat panel display order, which at the end of the current period was approximately 50.0 percent complete. We expect a decline in our 200 mm product sales in the next two quarters as sales to our key markets in China and elsewhere show signs of slowing down. Our gross margin will continue to be affected by future changes in product mix and net sales volumes, as well as market competition.

Research and Development

26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS — (Continued)

     The research and development expenses increased to $9.1 million for the three-month period ended September 30, 2004, compared with $8.4 million in the corresponding period of the prior year. For the six-month period ended September 30, 2004, research and development expenses increased to $18.8 million from $18.0 million in the comparable period of the prior year. The increase was primarily due to additional costs incurred for development of our continuous flow technology, or CFT, product. As a percentage of sales, research and development expenses declined to 5.4 percent of net sales for the three-month period ended September 30, 2004, compared with 16.3 percent of net sales in the corresponding period of the prior year. The decrease as a percentage of sales is largely due to a larger revenue base in the current period.

     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.

Selling, General and Administrative

     The increase in selling, general and administrative, or SG&A, expenses for the three- and six-month periods ended September 30, 2004, compared with the same periods of fiscal 2004, was primarily due to increases in accounting and compliance costs, and legal fees and costs associated with our review, documentation and testing of internal control over financial reporting required under SEC rules and accounting standards. Higher expenses also reflect increased spending on consultants to implement business process improvements not related to compliance requirements. Our SG&A expenses are expected to continue to increase in the third fiscal quarter due to an estimated $1.0 million to $2.0 million of accounting, legal and other costs related to the fiscal second quarter delay in closing ASI’s books, delayed filing of this report and resulting Nasdaq listing qualifications process, and the Audit Committee’s investigation and restatement described in this report.

Amortization of Acquired Intangible Assets

     The increase in amortization expense for the three- and six-month periods ended September 30, 2004, compared with the corresponding periods in the prior year, was due to exchange rate fluctuations as the majority of our intangible assets are denominated in Yen.

Restructuring Charges