SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 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 MARCH 31, 1997

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

               FOR THE TRANSITION PERIOD FROM        TO          
                                              ------    ------

                        COMMISSION FILE NUMBER: 0-17995

                               AMTECH CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              TEXAS                                    75-2216818
     (STATE OF INCORPORATION)                      (I.R.S. EMPLOYER
                                                IDENTIFICATION NUMBER)

                               17304 PRESTON ROAD
                                 BUILDING E-100
                              DALLAS, TEXAS  75252
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (972) 733-6600
              (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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.


               CLASS                            OUTSTANDING AT APRIL 30, 1997
- --------------------------------------          -----------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE                   14,722,663

 
                                     INDEX


PART I-FINANCIAL INFORMATION                                           Page
                                                                      Number
                                                                      ------
ITEM 1.  FINANCIAL STATEMENTS
 
         Condensed Consolidated Balance Sheets at March 31, 1997
         and December 31, 1996                                             3
         
         Condensed Consolidated Statements of Operations for the
         three months ended March 31, 1997 and 1996                        4
         
         Condensed Consolidated Statements of Cash Flows for the
         three months ended March 31, 1997 and 1996                        5
         
         Notes to Condensed Consolidated Financial Statements              6
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS                                         7
 
 
PART II-OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS                                                 8
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               9
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                  9
 

                                       2

 
                               AMTECH CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                  (Unaudited)
March 31, 1997 December 31, 1996 -------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 2,885 $ 5,296 Short-term marketable securities 9,007 11,852 Accounts receivable, net of allowance for doubtful accounts of $976,000 in 1997 and $1,006,000 in 1996 26,423 28,030 Inventories (Note 2) 13,662 13,497 Deferred income taxes 2,025 2,401 Prepaid expenses 742 1,256 -------- -------- Total current assets 54,744 62,332 Property and equipment, at cost 28,255 27,638 Accumulated depreciation (13,789) (12,994) -------- -------- 14,466 14,644 Deferred income taxes 2,084 1,003 Intangible assets, net 8,026 8,214 Other assets 5,243 4,848 -------- -------- $ 84,563 $ 91,041 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,549 $ 6,815 Note payable -- 1,839 Accrued expenses 9,164 8,391 Deferred revenues 1,669 2,240 -------- -------- Total current liabilities 16,382 19,285 Contingencies (Note 3) Stockholders' equity: Preferred stock, $1 par value, 10,000,000 shares authorized; none issued -- -- Common stock, $.01 par value, 30,000,000 shares authorized; 14,802,663 issued, 14,722,663 outstanding in 1997 and 1996 148 148 Additional paid-in capital 76,135 76,510 Treasury stock, at cost (393) (393) Accumulated deficit (7,709) (4,509) -------- -------- Total stockholders' equity 68,181 71,756 -------- -------- $ 84,563 $ 91,041 ======== ========
See accompanying notes. 3 AMTECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended March 31 ------------------- 1997 1996 ------- ------- Sales $24,153 $28,276 Operating costs and expenses: Cost of sales 15,358 17,279 Research and development 2,818 2,564 Marketing, general and administrative 10,289 9,607 ------- ------- 28,465 29,450 ------- ------- Operating loss (4,312) (1,174) Investment income 297 2,078 Interest expense (65) (109) ------- ------- Income (loss) before income taxes (4,080) 795 Provision (benefit) for income taxes (880) 442 ------- ------- Net income (loss) $(3,200) $ 353 ======= ======= Earnings (loss) per share (Note 1) $ (0.22) $ 0.02 ======= ======= Shares used in computing earnings (loss) per share 14,723 14,740 ======= =======
See accompanying notes. 4 AMTECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31 --------------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net income (loss) $(3,200) $ 353 Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation and amortization 1,168 1,082 Realized gain on sale of marketable securities -- (2,150) Deferred income taxes (705) 38 Change in assets and liabilities: (Increase) decrease in accounts receivable 1,191 (4,203) Increase in inventories (165) (2,095) (Increase) decrease in prepaid expenses 514 (121) Increase in other assets (128) (31) Increase (decrease) in accounts payable and accrued expenses (493) 1,973 Increase (decrease) in deferred revenues (571) 613 ------- ------- Net cash used by operating activities (2,389) (4,541) Cash flows from investing activities: Purchases of property and equipment (745) (829) Purchase of Cardkey Systems (1,868) (952) Purchases of marketable securities (4,916) -- Sales and maturities of marketable securities 7,761 5,204 Increase in other assets (295) (49) Other (27) (256) ------- ------- Net cash provided (used) by investing activities (90) 3,118 Cash flows from financing activities: Other 23 -- ------- ------- Net cash provided by financing activities 23 -- Effect of exchange rate changes on cash and cash equivalents 45 ( 32) ------- ------- Decrease in cash and cash equivalents (2,411) (1,455) Cash and cash equivalents, beginning of period 5,296 17,669 ------- ------- Cash and cash equivalents, end of period $ 2,885 $16,214 ======= =======
See accompanying notes. 5 AMTECH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying financial statements, which should be read in conjunction with the audited consolidated financial statements included in the Company's 1996 Annual Report to Shareholders and Form 10-K, are unaudited but have been prepared in the ordinary course of business for the purpose of providing information with respect to the interim periods. The Condensed Consolidated Balance Sheet at December 31, 1996 was derived from the audited Consolidated Balance Sheet at that date which is not presented herein. Management of the Company believes that all adjustments necessary for a fair presentation for such periods have been included and are of a normal recurring nature. The results of operations for the three-month period ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. Earnings per share is computed based on the weighted average number of shares of common stock and dilutive common equivalent shares outstanding. 2. INVENTORIES Inventories consist of the following: March 31, 1997 December 31, 1996 -------------- ----------------- Raw materials $ 7,101,000 $ 7,355,000 Work in process 2,565,000 2,307,000 Finished goods 3,996,000 3,835,000 ----------- ----------- $13,662,000 $13,497,000 =========== =========== 3. CONTINGENCIES WaveNet International Inc. and certain of its employees are the subject of a Canadian $11,000,000 (approximately U.S. $8,000,000) suit brought by Teklogix, Inc., their former employer. The suit alleges improper use of confidential information in WaveNet International, Inc.'s products, theft of technology, misappropriation of business opportunities and similar improprieties. In addition to the damages requested, Teklogix seeks to enjoin the defendants from soliciting customers of Teklogix and from making or selling any products that use intellectual property of Teklogix. Teklogix also seeks a declaration that it owns any WaveNet International, Inc. products that use intellectual property of Teklogix. WaveNet International, Inc. has denied any wrongdoing by it or its employees and intends to vigorously defend the litigation. While the final outcome of this matter cannot be predicted with certainty, the Company believes that the final resolution of this matter will not have a material adverse effect on the consolidated financial position or results of operations of the Company. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is organized into three market-oriented groups. The Transportation Systems Group ("TSG"), which includes Amtech Systems Corporation, Amtech World Corporation and Amtech International S.A., develops and provides high-frequency radio frequency identification (RFID) solutions to the transportation markets. These markets include electronic toll and traffic management (ETTM), rail, airport, parking and access control, intermodal, and motor freight. The Electronic Security Group ("ESG"), which focuses on products and services for electronic access control applications, includes Amtech Europe Limited and Cardkey Systems, Inc. The Interactive Data Group ("IDG"), consisting of WaveNet, Inc. and WaveNet International, Inc. (collectively, "WaveNet"), is a start-up enterprise that is developing a line of products targeted to the interactive data marketplace consisting of mobile radio frequency data communications terminals using wireless local area networks for use in portable computing, logistics, warehousing, transportation, and medical applications. The IDG faces the risks and uncertainties inherent in any start- up enterprise. RESULTS OF OPERATIONS Sales for the three months ended March 31, 1997 decreased $4,123,000 or 15% from the comparable period in 1996. The first quarter 1997 sales were less than expected due to a combination of overall softness in orders for the Company's products and services, nominal revenue ramp-up of the IDG, delays in the roll- out of certain new products from the ESG, and delays in timing of revenue recognition of certain system integration contracts and European manufacturing delays in the TSG. TSG sales to a single systems integration services contract decreased from $4,580,000 in 1996 to $845,000 in 1997 as the project nears completion. Gross profit as a percentage of total sales decreased from 39% for the first quarter of 1996 to 36% for the first quarter of 1997, primarily due to a decrease in TSG's gross profit margin from 32% in 1996 to 24% in 1997. The TSG decrease resulted in part from a reduction in the gross profit margin currently estimated to be realized on a single systems integration services contract based on the updated estimate of costs required to complete the contract. The ESG's gross profit margin remained constant at 41% for both periods. Research and development expenses for the three months ended March 31, 1997 increased $254,000 or 10% from the comparable period in 1996, primarily due to an increase in new product development activities in the TSG as expenditures increased from $1,261,000 in 1996 to $1,496,000 in 1997. Marketing, general and administrative expenses for the three months ended March 31, 1997 increased $682,000 or 7% from the comparable period in 1996. The increase was primarily attributable to an increase in WaveNet expenditures from $123,000 in 1996 to $758,000 in 1997. The building of a sales and administrative infrastructure for WaveNet did not begin until the first quarter of 1996. As a result of the foregoing, the Company experienced an operating loss of $4,312,000 for the three months ended March 31, 1997 as compared to a loss of $1,174,000 for the comparable period in 1996. Each of the market-oriented groups incurred operating losses in the 1997 quarter. 7 Investment income decreased to $297,000 for the three months ended March 31, 1997 from $2,078,000 for the comparable period in 1996. The decrease is primarily attributable to non-recurring gains of $2,150,000 realized in 1996 from the sale of remaining corporate equity securities in the Company's investment portfolio. Income taxes as a percentage of the income before taxes for the three months ended March 31, 1997 and 1996 is different from the U.S. statutory rate of 34%, primarily due to the effect of certain goodwill not being deductible for tax purposes and unbenefitted foreign losses. The Company has deferred tax assets of $4,109,000 at March 31, 1997. If it becomes apparent later this year that the Company will not be profitable from its U.S. operations during 1997, then under generally accepted accounting principles the Company may be required to record a charge to earnings to increase the valuation allowance for a portion of its deferred tax assets. As a result of the foregoing, the Company experienced a net loss of $3,200,000 for the three months ended March 31, 1997 as compared to net income of $353,000 for the comparable period in 1996. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method it currently uses to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. These new requirements are not expected to materially change primary or fully diluted earnings per share for the three months ended March 31, 1997 and 1996. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997 the Company's principal source of liquidity is its net working capital position of $38,362,000. For the three months ended March 31, 1997 the Company used cash of $2,389,000 for operating activities, which was primarily to fund operating losses, and $2,217,000 for the final note payment associated with the acquisition of Cardkey. During the quarter ended March 31, 1997 the Company pledged nearly $5,000,000 of the Company's short-term marketable securities to support a TSG performance bond for a large systems integration services contract and a letter of credit in favor of the European- based manufacturer of the TSG's DYNICOM/TM/ European rail products. The Company expects to invest up to an additional $3,700,000 in 1997 for property and equipment and will be required to invest several million dollars in 1997 for working capital to support a large systems integration services contract of the TSG. Depending on the level of funding needed to support this systems integration services contract and the Company's operating results, the Company may need to obtain a working capital line of credit. Additional acquisitions, if any, would be financed by the most attractive alternative available which could be the issuance of debt or equity securities. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The information set forth under Part I, Notes to Condensed Consolidated Financial Statements, Note 3 is incorporated herein by reference. 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting of shareholders on April 24, 1997. At this meeting, the shareholders elected as directors of the Company, David P. Cook, Stuart M. Evans, Gary J. Fernandes, Elmer W. Johnson, Dr. Jeremy A. Landt, Thomas W. Luce, III, James S. Marston, G. Russell Mortenson, and Antonio R. Sanchez, Jr. The tabulation of the votes with respect to the election of directors is as follows: Nominee Shares For Shares Withheld ------------- ---------- --------------- David P. Cook 12,913,821 288,689 Stuart M. Evans 12,910,624 291,886 Gary J. Fernandes 12,912,721 289,789 Elmer W. Johnson 12,913,811 288,699 Dr. Jeremy A. Landt 12,910,261 292,249 Thomas W. Luce, III 12,899,584 302,926 James S. Marston 12,876,021 326,489 G. Russell Mortenson 12,906,590 295,920 Antonio R. Sanchez, Jr. 12,912,521 289,989 The shareholders ratified the selection of Ernst and Young LLP as independent auditors for the year ending December 31, 1997. The tabulation of the votes with respect to the ratification is as follows: For 13,068,756 Against 64,002 Abstain 69,752 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q. DESCRIPTION OF EXHIBITS ----------------------- 10.1* 1997 Executive Management Cash Bonus Plan 27.1* Financial Data Schedule. (b) No reports of the registrant on Form 8-K have been filed with the Securities and Exchange Commission during the three months ended March 31, 1997. * Filed herewith. - -------------------------------------------------------------------------------- 9 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMTECH CORPORATION (Registrant) Date: May 15, 1997 By: /s/ Steve M. York -------------------------------------- Steve M. York Senior Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer and Duly Authorized Officer) 10

 
                                                                    EXHIBIT 10.1

          AMTECH CORPORATION 1997 EXECUTIVE MANAGEMENT CASH BONUS PLAN


     The participants in this Plan are members of the senior management of
Amtech Corporation and its subsidiaries that have been selected by the Company's
Board of Directors for participation.

     The philosophy of the Plan is to:

     (1)  reward on a successful efforts basis, creating the utmost incentive to
                      ------------------
          management to enhance shareholder value by creating increased profits;
                                                              ---------

     (2)  maintain a lean management structure, while rewarding those who
          successfully discharge major responsibilities;

     (3)  focus a significant portion of all individual bonus opportunities to
          the common goal of meeting or exceeding the 1997 planned earnings per
          share or pre-tax operating income, as applicable, whereby the senior
          management team is "rewarded" or "goes without" as a team;
                                                               -----

     (4)  provide for individual bonus opportunities to reward individual
          performance where appropriate;

     (5)  make time be of the essence by requiring an increasing amount of bonus
          opportunity be forfeited for each quarter the year-to-date planned
          earnings per share or operating income goal, as applicable, is not
          achieved; and finally

     (6)  hold back a percentage of each quarterly bonus even though year-to-
          date quarterly earnings per share or operating income goals, as
          applicable, are met, whereby material bonuses are not paid in the
          event the annual goals are not achieved.
                    ------


Mechanics of Plan
- -----------------

     The participants in the Plan and the extent of their bonus opportunity
(which varies from 10-30% of base salary) shall be established by the Board of
Directors.  A description of how the bonus opportunity may actually be realized
is set forth below.

     For the participants in the Plan, 65% of the Participant's bonus
opportunity is tied to the Company or the employing operating group, as
applicable, achieving its 1997 operating income or earnings per share goal, as
applicable, as approved by the Company's Board of Directors. The remaining
percentage is discretionary based upon individual performance as determined by
the Company's President/Chief Executive Officer and other applicable members of
senior management.

                                      -1-

 
     The bonus opportunity that is tied to the Company meeting its 1997
operating income or earnings per share goals, as applicable, is administered as
set forth below:

          (1) The Bonus opportunity is allocated evenly over four quarters
     ("Quarterly Bonus Pool").

          (2) The quarterly distribution, if any, is based upon whether the
     Company has achieved the year-to-date planned operating income or earnings
                              ------------
     per share goals, as applicable.

          (3) Quarterly distributions earned, if any, will be paid at the end of
     the month following the applicable quarter.

          (4) If, at the end of the year, the yearly operating income or
     earnings per share goal, as applicable, has been achieved, then the
     forfeited amounts will be paid to employee.

          (5) The Quarterly calculations, cash payments, amount of bonus
     opportunities deferred to next quarter, and amount of bonus opportunity
     forfeited are as set forth below:

Quarter            Goal Met                      Goal Not Met
- -------            --------                      ------------
 
First     50% of 1st Quarter Quarterly    25% of 1st Quarter Quarterly
          Bonus Pool is paid to employee  Bonus Pool is forfeited and
          and remaining 50% is deferred   remaining 75% is deferred
          and added to 2nd Quarter        and added to 2nd Quarter
          Quarterly Bonus Pool            Quarterly Bonus Pool
          creating a 2nd Quarter YTD      creating a 2nd Quarter YTD
          Bonus Pool.                     Bonus Pool.

Second    70% of 2nd Quarter YTD Bonus    35% of 2nd Quarter YTD Bonus
          Pool is paid to employee and    Pool is forfeited and remaining
          remaining 30% is deferred       65% is deferred and added to
          and added to 3rd Quarter        3rd Quarter Quarterly Bonus
          Quarterly Bonus Pool            Pool creating a 3rd Quarter
          creating a 3rd Quarter YTD      YTD Bonus Pool.
          Bonus Pool.

Third     80% of 3rd Quarter YTD Bonus    40% of 3rd Quarter YTD Bonus
          Pool is paid to employee and    Pool is forfeited and remaining
          remaining 20% is deferred       60% is deferred and added to
          and added to 4th Quarter        4th Quarter Quarterly Bonus
          Quarterly Bonus Pool            Pool creating a 4th Quarter
          creating a 4th Quarter YTD      YTD Bonus Pool.
          Bonus Pool.

Fourth    100% of 4th Quarter YTD Bonus   100% of 4th Quarter YTD Bonus
          Pool is paid to employee.       Pool is forfeited.

                                      -2-

 
     Furthermore, in the case of certain Plan participants selected by the Board
of Directors, if the Company or market oriented group, as applicable, does not
achieve its 1997 operating income or earnings per share goals, as applicable,
but achieves a specified percentage (as determined by the Board of Directors) of
the operating income or earnings per share goals, as applicable, then a
percentage (as determined by the Board of Directors) of the bonus amount that
would have been payable under the Plan if the goals had been met will be paid.
Also, additional bonus amounts will be paid if the goals are exceeded.

                                      -3-
 


5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 2,885 9,007 27,399 976 13,662 54,744 28,255 13,789 84,563 16,382 0 0 0 148 68,033 84,563 18,783 24,153 8,514 15,358 0 171 65 (4,080) (880) (3,200) 0 0 0 (3,200) (0.22) (0.22)