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 JUNE 30, 1998
[ ] 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
d/b/a AMTC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2216818
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
19111 DALLAS PARKWAY
SUITE 300
DALLAS, TEXAS 75287-3106
(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 JULY 31, 1998
- -------------------------------------- ----------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE 14,902,609
INDEX
PART I-FINANCIAL INFORMATION
Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
three months and six months ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II-OTHER INFORMATION
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
2
AMTECH CORPORATION d/b/a AMTC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 1998 December 31, 1997
------------- -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 33,044 $ 15,163
Short-term marketable securities -- 1,010
Accounts receivable, net of allowance for doubtful
accounts of $727,000 in 1998 and $1,113,000 in 1997 15,050 31,559
Due from sale of businesses 6,885 --
Inventories 4,052 11,759
Prepaid expenses 442 801
------- -------
Total current assets 59,473 60,292
Property and equipment, at cost 7,244 28,907
Accumulated depreciation (4,661) (16,164)
------- -------
2,583 12,743
Intangible assets, net 3,516 6,746
Other assets 756 5,742
------- -------
$ 66,328 $ 85,523
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,144 $ 6,167
Accrued expenses 7,947 13,832
Deferred revenues 2,196 1,828
------- -------
Total current liabilities 12,287 21,827
Contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 17,194,509 issued, 14,902,609
outstanding in 1998 and 17,024,563 issued, 16,944,563
outstanding in 1997 172 170
Additional paid-in capital 86,723 86,045
Treasury stock, at cost (11,314) (393)
Accumulated deficit (21,540) (22,126)
------- -------
Total stockholders' equity 54,041 63,696
------- -------
$ 66,328 $ 85,523
======= =======
See accompanying notes.
3
AMTECH CORPORATION d/b/a AMTC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
--------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
Sales $ 29,083 $ 28,877 $ 60,088 $ 53,030
Operating costs and expenses :
Cost of sales 16,650 17,790 34,821 33,148
Research and development 2,122 2,954 4,372 5,772
Marketing, general and administrative 8,710 11,834 19,116 22,123
------ ------ ------ -------
27,482 32,578 58,309 61,043
------ ------ ------ -------
Operating income (loss) 1,601 (3,701) 1,779 (8,013)
Investment income 310 438 572 735
Interest expense -- -- -- (65)
Loss from sale of businesses, net (1,561) -- (1,561) --
------ ------ ------ -------
Income (loss) before income taxes 350 (3,263) 790 (7,343)
Provision for income taxes 123 3,556 204 2,676
------ ------ ------ -------
Net income (loss) $ 227 $ (6,819) $ 586 $ (10,019)
====== ====== ====== =======
Basic and diluted earnings (loss) per share $ 0.01 $ (0.46) $ 0.03 $ (0.68)
====== ====== ====== =======
Shares used in computing earnings (loss) per share:
Basic 16,572 14,723 16,759 14,723
====== ====== ====== =======
Diluted 16,576 14,723 16,765 14,723
====== ====== ====== =======
See accompanying notes.
4
AMTECH CORPORATION d/b/a AMTC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30
-------------
1998 1997
-------- --------
Cash flows from operating activities:
Net income (loss) $ 586 $ (10,019)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 2,454 2,553
Loss from sale of businesses, net 1,561 --
Stock based compensation 516 --
Deferred income taxes -- 3,404
Change in assets and liabilities:
Accounts receivable (2,901) (3,784)
Inventories (1,858) 1,213
Prepaid expenses 114 466
Intangibles and other assets 87 840
Accounts payable and accrued expenses (1,138) 1,402
Deferred income 368 (622)
------ -------
Net cash used by operating activities (211) (4,547)
Cash flows from investing activities:
Purchases of property and equipment (1,546) (1,035)
Proceeds from sale of TSG business, net of
cash conveyed 18,740 --
Purchase of Cardkey Systems -- (1,868)
Purchases of marketable securities -- (4,916)
Sales and maturities of marketable securities 1,010 9,795
Increase in other assets (397) (851)
Other (36) (44)
------ -------
Net cash provided by investing activities 17,771 1,081
Cash flows from financing activities:
Proceeds from issuance of common stock 279 --
Other 36 46
------ -------
Net cash provided by financing activities 315 46
Effect of exchange rate changes on cash and cash equivalents 6 161
------ -------
Increase (decrease) in cash and cash equivalents 17,881 (3,259)
Cash and cash equivalents, beginning of period 15,163 5,296
------ -------
Cash and cash equivalents, end of period $ 33,044 $ 2,037
====== =======
See accompanying notes.
5
AMTECH CORPORATION d/b/a AMTC 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
1997 Annual Report to Shareholders on 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, 1997 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 except for the
special charges as explained in Notes 3, 4 and 5. The results of operations for
the six-month period ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") effective for years beginning after December 15, 1997. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of financial statements. The differences between net
income and comprehensive income were not significant for the three-month and
six-month periods ended June 30, 1998.
Basic earnings per share is computed based on the weighted average number of
shares of common stock outstanding. Diluted earnings per share includes the
effect of dilutive employee stock options.
2. INVENTORIES
Inventories consist of the following:
June 30, 1998 December 31, 1997
------------- -----------------
Raw materials $1,755,000 $ 4,956,000
Work in process 683,000 3,107,000
Finished goods 1,614,000 3,696,000
---------- -----------
$4,052,000 $11,759,000
========== ===========
3. DISPOSITION OF BUSINESSES
Transportation Systems Group
----------------------------
On June 11, 1998, the Company sold its Transportation Systems Group to
UNOVA, Inc. ("UNOVA"), effective as of May 31, 1998, for approximately
$33,500,000 and recorded a gain of $1,139,000 from the transaction. As
consideration for the sale, the Company received approximately $20,000,000 in
cash, 2,2ll,900 unregistered shares of the Company's Common Stock that were
previously purchased by UNOVA in late 1997 valued at approximately $11,000,000,
and is due an additional amount from UNOVA of approximately $2,500,000.
Included in UNOVA's purchase were the Company's manufacturing and technology
facility in Albuquerque, New Mexico, the Company's radio frequency
identification technologies and other intellectual properties, the brand name
Amtech, and all current operations associated with the transportation business.
6
Cotag International
-------------------
On July 7, 1998, the Company sold the net assets of its Cotag International
("Cotag") business unit to Metric Gruppen AB ("Metric") of Solna, Sweden,
effective as of June 30, 1998, for approximately $4,400,000 and recorded a loss
of $2,700,000 from the transaction, including a $2,800,000 write-off of
intangible assets. The Company received approximately $2,700,000 in July 1998
with the remaining $1,700,000 to be received by January 1999. The Company may
receive up to an estimated additional $1,400,000, depending on the level and mix
of Cotag revenues achieved in 1998 and 1999. Included in Metric's purchase is
the brand name and intellectual property underlying Cotag's hands-free proximity
technology, Cotag's manufacturing facility in Cambridge, England, and the
ongoing business of the unit.
4. SPECIAL OPERATING AND INCOME TAX CHARGES
In July 1997, the Company announced that it would withdraw from the
wireless LAN terminal market and seek buyers for its Interactive Data Group
("IDG"). Operating results include non-cash charges of $2,075,000 in the three
months and six months ended June 30, 1997 to reduce the assets of the IDG to
their estimated net realizable values. Allocation of the charges to operating
costs and expenses are $1,000,000 in cost of sales, $100,000 in research and
development expense and $975,000 in marketing, general and administrative
expense. The IDG was sold in late 1997.
In the second quarter of 1997, in light of continued operating losses, the
Company determined that future taxable income in the U.S. was uncertain. As a
result, the provision for income taxes in the second quarter of 1997 includes
$4,680,000, representing the effect of establishing a valuation allowance for
U.S. deferred tax assets, in accordance with the requirements of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes."
5. MANAGEMENT CHANGE
On February 28, 1998, Mr. David P. Cook replaced the chairman, president
and chief executive officer of the Company. The provisions of the former
executive's severance agreement and various stock options resulted in a charge
in the first quarter 1998 of approximately $1,000,000, including a cash payment
of approximately $650,000, which is included in marketing, general and
administrative expenses for the six month period ended June 30, 1998.
As previously disclosed, the Company and Mr. Cook entered into certain
employment and option arrangements. The employment arrangement provides for a
three year term, beginning April 29, 1998. Mr. Cook will receive no salary
under the employment arrangement, although, as consideration for entering into
the employment arrangement, Mr. Cook received an option to acquire 4,254,627
shares of the Company's Common Stock. The option exercise price is $7.00 per
share, which was twice the closing price of the Company's Common Stock on April
28, 1998. The options have a five year term and vest quarterly over two years.
The options vest immediately in the event (i) of a change of control or sale of
the Company or the sale of any material Company subsidiary that is engaged in
the digital data distribution business or other business involving a concept
primarily fostered by Mr. Cook, (ii) more than 25% of the Company's voting
securities are acquired by any person, (iii) a majority of the Company's Board
of Directors consists of persons other than the current incumbents or persons
whose initial election or nomination to the Board is approved by the current
incumbents or their approved successors, (iv) Mr. Cook's employment is
terminated without "cause" (as defined in the employment agreement), or (v) Mr.
Cook terminates employment for "good reason" (as defined in the employment
agreement). The options also carry demand registration rights, which may be
exercised after the occurrence of any of the events specified in (i) through
(iii) above, and piggyback registration rights.
6. NEW BUSINESS
The Company intends to pursue digital data distribution businesses and has
acquired Petabyte Corporation ("Petabyte"), a start-up enterprise founded by Mr.
Cook. The acquisition was approved by the Company's board of directors
excluding Mr. Cook. At the time of the acquisition, Petabyte had no operations.
Included in the assets acquired was certain intellectual property (the use of
which entitles Mr. Cook to receive a royalty) in the digital data
7
distribution arena, including a patent pending authored by Mr. Cook, certain
existing know-how and the exclusive rights to know-how created or conceived by
Mr. Cook during the next three years in the digital data distribution arena, and
certain Internet domain names and certain service marks. The targeted businesses
for Petabyte are scaleable systems for selling and distributing customized
digital data products wherein a customer selects particular data products
(primarily large data sets, such as software, music, governmental publications,
NASA satellite imaging, etc.) over the Internet, by telephone, from terminals at
retail sites, by fax, e-mail, or other embodiments. Such data sets could be
automatically assembled and manufactured on compact disk, digital versatile disk
(DVD), or other media format and then shipped to, or transmitted digitally to,
the customer. In consideration of the sale of Petabyte, the Company has agreed
to pay Mr. Cook five annual payments of $200,000 each. The Company has the
right, exercisable at any time within the next four years, to return the
Petabyte enterprise back to Mr. Cook. If the Company exercises this right, no
further payments are required to be made.
The Company has engaged the services of a law firm to assist in obtaining
exclusive or non-exclusive rights, or both, to certain data products for use in
pursuit of the digital data distribution businesses. In exchange for these
services, a wholly-owned subsidiary of the Company has agreed to issue options
to acquire approximately 5% of the subsidiary's common stock, which is
convertible into Common Stock of the Company. The number of Common Stock shares
into which these options are convertible is based on a formula that is dependent
upon the value of the subsidiary, which is imputed from the market value of the
Company's Common Stock after subtracting the value of the Company's other
assets. The options vest over a two year period or may accelerate depending
upon the results of obtaining the exclusive or non-exclusive rights. The
Company may terminate the engagement at any time and, in most circumstances, any
options not vested would expire.
8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
At the beginning of 1998, the Company was organized into two market oriented
groups. 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 Transportation Systems Group ("TSG"),
included Amtech Systems Corporation, Amtech World Corporation and Amtech
International S.A., develops and provides high-frequency radio frequency
identification solutions to the transportation markets. These markets included
electronic toll and traffic management ("ETTM"), rail, airport, parking and
access control, intermodal and motor freight.
On June 11, 1998, the Company sold its Transportation Systems Group to
UNOVA, Inc. ("UNOVA"), effective as of May 31, 1998, for approximately
$33,500,000 and recorded a gain of $1,139,000 from the transaction. As
consideration for the sale, the Company received approximately $20,000,000 in
cash, 2,2ll,900 unregistered shares of the Company's Common Stock that were
previously purchased by UNOVA in late 1997 valued at approximately $11,000,000,
and is due an additional amount from UNOVA of approximately $2,500,000.
Included in UNOVA's purchase were the Company's manufacturing and technology
facility in Albuquerque, New Mexico, the Company's radio frequency
identification technologies and other intellectual properties, the brand name
Amtech, and all current operations associated with the transportation business.
On July 7, 1998, the Company sold the net assets of its Cotag International
("Cotag") business unit (formerly included in the ESG) to Metric Gruppen AB
("Metric") of Solna, Sweden, effective as of June 30, 1998, for approximately
$4,400,000 and recorded a loss of $2,700,000 from the transaction, including a
$2,800,000 write-off of intangible assets. The Company received approximately
$2,700,000 in July 1998 with the remaining $1,700,000 to be received by January
1999. The Company may receive up to an estimated additional $1,400,000,
depending on the level and mix of Cotag revenues achieved in 1998 and 1999.
Included in Metric's purchase is the brand name and intellectual property
underlying Cotag's hands-free proximity technology, Cotag's manufacturing
facility in Cambridge, England, and the ongoing business of the unit.
The Interactive Data Group ("IDG") business, consisting of WaveNet, Inc. and
WaveNet International, Inc. was sold in November 1997. The sales of TSG and IDG
impact the comparability of the Company's 1998 results with those of 1997.
RESULTS OF OPERATIONS
Sales for the three months and six months ended June 30, 1998 increased
$206,000 or 1% and $7,058,000 or 13%, respectively, from the comparable periods
in 1997. Sales for the ESG increased from $16,187,000 in the second quarter of
1997 to $18,444,000 for the comparable period in 1998, and from $30,701,000 in
the first six months of 1997 to $34,215,000 for the comparable period in 1998
primarily in its U.S.-based operations. The TSG's sales decreased from
$12,498,000 in the second quarter of 1997 to $10,639,000 for the comparable
period in 1998 as only two months of sales were included in 1998 due to the
disposition of the TSG. Even with the sale of the TSG resulting in only five
months of operations included in 1998, the group's sales increased from
$21,970,000 in the first six months of 1997 to $25,873,000 for the comparable
period in 1998 as 1997 sales were abnormally low due to delays in timing of
revenue recognition of certain systems integration contracts and European
manufacturing delays.
Gross profit as a percentage of sales increased from 38% in 1997 to 43% in
1998 for the three month periods and from 37% in 1997 to 42% in 1998 for the six
month periods. The increase in the three month and six month periods is
primarily due to a $1,000,000 provision in 1997 to adjust certain IDG assets to
their estimated net realizable values. Also affecting the increase in the six
month period is an increase in TSG's gross profit margin from 33% in 1997 to 39%
in 1998. This increase is due in part to improved gross profit margins on
systems integration services contract work in the first half of 1998, although
revenues of $3,000,000 from the Florida Department of Transportation electronic
toll collection contract had no gross profit margin as expected. Additionally,
the TSG gross profit margin in 1998 increased as a result of lower manufacturing
costs due to higher
9
sales volumes of Company-manufactured products. The ESG's gross profit margin
was 42% in both of the 1998 periods compared to 41% in the 1997 periods.
Research and development for the three months and six months ended June 30,
1998 decreased $832,000 or 28% and $1,400,000 or 24% from the comparable periods
in 1997, primarily due to the dispositions of the IDG in November 1997 and the
TSG effective May 1998. IDG expenditures were $352,000 and $705,000 for the
three month and six month periods in 1997. The TSG expenditures decreased from
$1,679,000 in 1997 to $1,044,000 in 1998 for the three month periods and from
$3,175,000 in 1997 to $2,488,000 in 1998 for the six month periods.
Marketing, general and administrative expenses for the three months and six
months ended June 30, 1998 decreased $3,124,000 or 26% and $3,007,000 or 14%
from the comparable periods in 1997, primarily due to the dispositions of the
IDG in November 1997 and the TSG effective May 1998. IDG expenditures were
$1,770,000 and $2,528,000 for the three month and six month periods in 1997,
including a second quarter provision of $975,000 to adjust certain IDG assets to
their estimated net realizable values. TSG expenditures decreased from
$3,282,000 in 1997 to $1,800,000 in 1998 for the three month periods and from
$6,503,000 in 1997 to $4,882,000 in 1998 for the six month periods. These
expenditure reductions were partially offset during the six month period in 1998
by an expense charge of approximately $1,000,000 pursuant to the provisions of
the Company's former chairman, president and chief executive officer's severance
agreement and various stock options.
Investment income for the three months and six months ended June 30, 1998
decreased from $438,000 to $310,000 and decreased from $735,000 to $572,000,
respectively. The decrease for both periods is primarily attributable to a gain
realized in 1997 on the sale of an equity investment.
The income tax provision of $123,000 and $204,000 for the three months and
six months ended June 30, 1998 consists primarily of state and foreign income
taxes. The Company has net operating loss carryforwards available in the U.S. to
offset a portion of its current tax expense. In the second quarter of 1997, in
light of continued operating losses, the Company determined that future taxable
income in the U.S. was uncertain. As a result, the provision for income taxes in
the second quarter of 1997 includes $4,680,000, representing the effect of
establishing a valuation allowance for U.S. deferred tax assets, in accordance
with the requirements of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes."
As a result of the foregoing, the Company experienced net income of $227,000
and $586,000 for the three months and six months ended June 30, 1998 as compared
to a net loss of $6,819,000 and $10,019,000 for the same periods in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company's principal source of liquidity is its net
working capital position of $47,186,000 including cash and cash equivalents of
$33,044,000. The Company received cash proceeds of $20,000,000 in June 1998 from
the sale of TSG and approximately $2,700,000 in July 1998 from the sale of
Cotag. The Company will also receive approximately $4,200,000 by January 1999
from the sale of TSG and Cotag. The Company has no borrowings and believes a
working capital line of credit could be obtained if necessary or desired. The
Company believes that its existing working capital position and other capital
funding alternatives should be sufficient to meet the short-term capital
requirements to pursue digital data distribution businesses.
OTHER MATTERS
As previously disclosed, the Company and Mr. David P. Cook entered into
certain employment and option arrangements. The employment arrangement provides
for a three year term, beginning April 29, 1998. Mr. Cook will receive no
salary under the employment arrangement, although, as consideration for entering
into the employment arrangement, Mr. Cook received an option to acquire
4,254,627 shares of the Company's Common Stock. The option exercise price is
$7.00 per share, which was twice the closing price of the Company's Common Stock
on April 28, 1998. The options have a five year term and vest quarterly over
two years. The options vest immediately in the event (i) of a change of control
or sale of the Company or the sale of any material Company subsidiary that is
engaged in the digital data distribution business or other business involving a
concept primarily
10
fostered by Mr. Cook, (ii) more than 25% of the Company's voting securities are
acquired by any person, (iii) a majority of the Company's Board of Directors
consists of persons other than the current incumbents or persons whose initial
election or nomination to the Board is approved by the current incumbents or
their approved successors, (iv) Mr. Cook's employment is terminated without
"cause" (as defined in the employment agreement), or (v) Mr. Cook terminates
employment for "good reason" (as defined in the employment agreement). The
options also carry demand registration rights, which may be exercised after the
occurrence of any of the events specified in (i) through (iii) above, and
piggyback registration rights.
The Company intends to pursue digital data distribution businesses and has
acquired Petabyte Corporation ("Petabyte"), a start-up enterprise founded by Mr.
Cook. The acquisition was approved by the Company's board of directors
excluding Mr. Cook. At the time of the acquisition, Petabyte had no operations.
Included in the assets acquired was certain intellectual property (the use of
which entitles Mr. Cook to receive a royalty) in the digital data distribution
arena, including a patent pending authored by Mr. Cook, certain existing know-
how and the exclusive rights to know-how created or conceived by Mr. Cook during
the next three years in the digital data distribution arena, and certain
Internet domain names and certain service marks. The targeted businesses for
Petabyte are scaleable systems for selling and distributing customized digital
data products wherein a customer selects particular data products (primarily
large data sets, such as software, music, governmental publications, NASA
satellite imaging, etc.) over the Internet, by telephone, from terminals at
retail sites, by fax, e-mail, or other embodiments. Such data sets could be
automatically assembled and manufactured on compact disk, digital versatile disk
(DVD), or other media format and then shipped to, or transmitted digitally to,
the customer. In consideration of the sale of Petabyte, the Company has agreed
to pay Mr. Cook five annual payments of $200,000 each. The Company has the
right, exercisable at any time within the next four years, to return the
Petabyte enterprise back to Mr. Cook. If the Company exercises this right, no
further payments are required to be made.
The Company has engaged the services of a law firm to assist in obtaining
exclusive or non-exclusive rights, or both, to certain data products for use in
pursuit of the digital data distribution businesses. In exchange for these
services, a wholly-owned subsidiary of the Company has agreed to issue options
to acquire approximately 5% of the subsidiary's common stock, which is
convertible into Common Stock of the Company. The number of Common Stock shares
into which these options are convertible is based on a formula that is dependent
upon the value of the subsidiary, which is imputed from the market value of the
Company's Common Stock after subtracting the value of the Company's other
assets. The options vest over a two year period or may accelerate depending
upon the results of obtaining the exclusive or non-exclusive rights. The
Company may terminate the engagement at any time and, in most circumstances, any
options not vested would expire.
BUSINESS CONSIDERATIONS
Successful development of a start-up enterprise, particularly Internet
related businesses, can be difficult and costly; there are no assurances of
ultimate success and a start-up enterprise involves risks and uncertainties,
including the following: (1) There are no assurances that the Company will be
able to successfully develop Petabyte's targeted businesses, that it will be
able to compete effectively against similar or alternative digital data
distribution businesses, that it will gain market acceptance, that it will not
be made obsolete by further technological development, that it can be
successfully integrated into the Company's existing operations, or that it will
not encounter other, and even unanticipated, risks. (2) Use of the Internet by
consumers, while growing, is still at an early stage of development, and market
acceptance of the Internet as a medium for entertainment, commerce and
information is still subject to a high level of uncertainty. (3) The Company may
decide to exit the digital data distribution business at any time.
11
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Effective August 24, 1998, the Company's new address will be One
Galleria Tower, 13355 Noel Road, Suite 1555, Dallas, Texas 75240-6604.
The new telephone number will be (972) 702-7055.
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 AMTC Corporation Stock Option Agreement, effective as of
April 29, 1998, between David P. Cook and Amtech
Corporation d/b/a AMTC Corporation.
*10.2 Employment Agreement, effective as of April 29, 1998,
between David P. Cook and Amtech Corporation d/b/a AMTC
Corporation.
*27.1 Financial Data Schedule.
(b) The Registrant filed Form 8-K on June 19, 1998 to report the June
11, 1998 sale of its Transportation Systems Group to UNOVA, Inc.
The report included a pro forma condensed consolidated balance
sheet as of March 31, 1998 and pro forma condensed consolidated
statements of operations for the year ended December 31, 1997 and
the three months ended March 31, 1998.
The Registrant filed Form 8-K on July 21, 1998 to report the July
7, 1998 sale of its Cotag International unit, which was effective
June 30, 1998, to Metric Gruppen AB. The report included a pro
forma condensed consolidated balance sheet as of March 31, 1998
and pro forma condensed consolidated statements of operations for
the year ended December 31, 1997 and the three months ended March
31, 1998.
- --------------------------------------------------------------------------------
*Filed herewith.
12
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 d/b/a AMTC CORPORATION
(Registrant)
Date: August 14, 1998 By: /s/ Steve M. York
--------------------------------------
Steve M. York
Senior Vice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
13
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- ------ -----------
10.1 AMTC Corporation Stock Option Agreement, effective as of April 29, 1998,
between David P. Cook and Amtech Corporation d/b/a AMTC Corporation.
10.2 Employment Agreement, effective as of April 29, 1998, between David P.
Cook and Amtech Corporation d/b/a AMTC Corporation.
27.1 Financial Data Schedule.