<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 0-27177
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
-------------------------------------------
(Name of Small Business Issuer in its Charter)
UTAH 87-0427597
---- ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
923 West 500 North
Lindon, Utah 84042
------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 785-6520
N/A
---
(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act: $0.00025 par
value common stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent files in response to Item
405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Company's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: December 31, 1999 -
$0.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a specified
date within the past 60 days.
March 7, 2000 - $1,937.93. There are approximately 7,751,738 shares of
common voting stock of the Company held by non-affiliates. During the past
two years there has been no "established public market" for shares of common
voting stock of the Company, so the Company has arbitrarily valued these
shares based on $0.00025 par value per share.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
March 7, 2000
14,644,018
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained
in Item 13 of this report.
Transitional Small Business Issuer Format Yes X No ___
<PAGE>
PART I
Item 1. Description of Business.
------------------------
Business Development.
- ---------------------
Galtech Semiconductor Materials Corporation, a Utah corporation (the
"Company"), was organized on June 18, 1984, for the purpose of investing "in
new products, properties and/or businesses which may have potential for
profit."
At inception, the Company was authorized to issue 50,000,000 shares
of common voting stock, par value one mill ($0.001) per share, with fully-paid
stock not to be liable for further call or assessment. Copies of the
Company's Articles of Incorporation and Bylaws were attached as exhibits to
its Registration Statement on Form 10-SB, which was filed with the Securities
and Exchange Commission on August 30, 1999, and which is incorporated herein
by this reference. See Item 13 of this Report.
Charter Amendments
------------------
Since its inception, the Company has amended its Articles of
Incorporation as follows:
Changed its name to "Galtech, Inc. and amended Article IV of the
Articles of Incorporation to provide the authority to issue
200,000,000 shares of $0.00025 par value common stock, with fully
paid stock not to be liable for further call or assessment
(Amendment filed January 29, 1986).
Changed its name to "Galtech Semiconductor Materials Corporation
(Amendment filed September 9, 1986).
Effected a reverse split of the Company's outstanding shares in
the ratio of 20-to-one, with fractional shares rounded to a whole
share (Amendment filed February 24, 1995).
Unless otherwise indicated, all computations in this Report take
into account these adjustments.
Copies of all amendments to the Company's Articles of Incorporation
were attached as exhibits to its Registration Statement on Form 10-SB, which
was filed with the Securities and Exchange Commission on August 30, 1999 and
which is incorporated herein by this reference. See Item 13 of this Report.
General History
---------------
The Company commenced operations in approximately January, 1986.
These activities consisted of the development of a process for manufacturing
cadmium telluride, a compound used in the production of semiconductors, and
the renovation of a manufacturing facility to produce the Company's products.
A fire destroyed its facilities in 1990 and the Company has not yet
recommenced its semiconductor development activities.
On February 28, 1995, the Company acquired all of the issued and
outstanding common stock of Commodity Recovery Corporation, a Utah corporation
("CRC"), in exchange for 500,000 "unregistered" and "restricted" shares of the
Company's common stock. CRC was organized on October 31, 1994, for the
purpose of marketing products for destroying aflatoxin, a cancer-causing
substance found in grain and other foodstuffs.
Also on February 28, 1995, the Company issued 4,200,000
"unregistered" and "restricted" shares of common stock in exchange for all of
the issued and outstanding common stock of Energy Recovery Corporation, an
Arizona corporation ("ERC"). ERC was incorporated on February 7, 1994, for
the purpose of developing and producing alternative energy sources.
At the time of their acquisitions by the Company, neither CRC nor
ERC had any assets or operations. After its acquisition, CRC developed a
treatment method using ammonia vapor to destroy aflatoxin. In 1997,
management decided to narrow its focus to the development of its semiconductor
materials and ceased further development of its aflatoxin technology. The
State of Utah has administratively dissolved CRC for failure to file its
annual report.
On April 29, 1997, ERC was awarded a patent on a carousel electric
generator that was designed to provide a high level of electrical power in a
compact structure. The Company has conducted preliminary testing on the
generator and believes that it has potential for use in electric-powered
vehicles. The Company has built an electric vehicle for additional testing.
However, due to management's decision to focus on its semiconductor materials
operations, the Company does not plan to expend substantial additional
resources on its generator project in the foreseeable future. The State of
Arizona has administratively dissolved ERC for failure to file its annual
report.
After reviewing the current market for semiconductor materials, in
1997, the Company began work on modernizing and redesigning its antiquated
semiconductor equipment for the purpose of developing a reliable and
repeatable process for growing large area, single crystal, bulk cadmium
telluride and cadmium zinc telluride semiconductor material. The Company is
presently configuring a research and development and production facility in
Lindon, Utah, for this purpose.
Business.
- ---------
The Company's principal operations focus on the development and
commercial exploitation of a new and more economical method of growing II-VI
semiconductor compounds than current methods.
The semiconductor industry is a multi-billion dollar market that has
been supplied predominantly by silicon materials. However, other materials
also have general and specific semiconductor applications. Cadmium telluride
and cadmium zinc telluride are semiconductor materials used in electronic
equipment such as infrared detectors, weapons guidance systems, satellite
surveillance, solar cells, deep space communications, light emitting diodes,
infrared night vision devices, laser applications, tumor detectors, nuclear
radiation and gamma detectors, spectrometers for chemical identification,
nuclear medicine and related applications.
Prior to a 1990 fire in its facilities, the Company had been
successful in producing cadmium telluride crystal substrates (i.e., wafers) of
up to four to six square inches; previous commercially manufactured cadmium
telluride substrates had been only one to two square inches. In addition, the
Company was able to produce round wafers, rather than the customary D-shaped
and rectangular wafers. Round wafers are preferred by industry users.
At present, the Company is concentrating its efforts on refining its
methods for the production of cadmium telluride and cadmium zinc telluride
substrates and reproducing its earlier production results. In the future,
depending on the success of its research and development efforts, market
conditions and the Company's success with its principal operations, it will
consider the development of monocrystalline substrates and polycrystalline
substrates and ingots made from the following compounds: Indium Phosphide;
Indium Antimonide; Gallium Antimonide; and Gallium Arsenide, as well as metal
organic chemical vapor depositor epitaxial layers on each of these substrates.
The term "epitaxial" refers to the overgrowth in layers of a crystalline
substance deposited in a definite orientation on a base or substratum composed
of different crystals.
Principal Products and Services
- --------------------------------
The Company is committing its resources to the development of a
reliable and repeatable process for growing large area, single crystal bulk
compound semiconductor material. The focus of this effort is the creation of
a viable and inexpensive production capability for cadmium telluride and
cadmium zinc telluride.
Each class of semiconductor material seems to have its own unique
properties that make it useful for specified applications. The II-VI
compounds as shown on the Periodic Table of Elements, which include cadmium
telluride and cadmium zinc telluride, have strong virtues in the field of
photo electronics. Devices such as photo cathodes (for night vision
instruments), solar cells and radiation detectors (used for applications such
as medical imaging equipment) are particularly well suited for the II-VI
compounds. The market for these devices has traditionally been military
applications. As these devices are adapted for consumer use, the market for
these compound semiconductor materials is also expected to expand. Management
also believes that cadmium telluride can also be used in medical imaging
devices market, which currently exceeds $2 billion per year. The use of II-VI
compounds to produce images in a digital format would be a revolutionary
development in the medical imaging device industry.
In 1990, Worth P. Allred, the Company's Vice President for Research
and Development, was able to produce large (four to six square inches)
crystalline substrates of cadmium telluride with rocking curve measurements of
9.6 to 20 arc seconds. Previous best measurements were 34 to 50 arc seconds.
Independent analyses performed at the University of Washington and California
State University, Fresno, showed these substrates to have extremely low
imperfections. The Company's current business operations are focused on the
development of a reliable, low cost method for reproducing these results and
commencing large-scale production of cadmium telluride semiconductor
materials.
The markets that the Company has targeted are primarily in the
United States, but potential opportunities are global. The major areas of
concentration outside of the United States are Japan, Taiwan, China, Korea,
the United Kingdom, West Germany, France and Italy.
Subject to the perfection of its production model, the Company
intends to serve the II-VI compound semiconductor market with both mono and
polycrystalline ingots and substrates. Presently, the only suppliers of any
quantities of specialty semiconductor materials such as cadmium telluride are
doing so at extremely high prices and in very small and inconsistent
quantities. Supply is so uncertain that some users of this material find it
necessary to internally produce material to supplement the short and uncertain
supply. These users have expressed a desire for additional suppliers to
supplement or improve their current sources of material. The Company's goal
will be to provide cadmium telluride materials in wafer form at potentially
lower cost and in larger amounts than other suppliers.
Cadmium telluride has properties that make it a good substrate for
the epitaxial growth of mercury cadmium telluride, a material with critical
applications for infrared photodetectors. Its advantages include infrared
transparency, lattice constancy, coefficient of expansion and ability to reach
into the far infrared regions.
There is also a small market for polycrystalline cadmium telluride
for use in optics. The Company expects that any sales in this market would be
secondary to its principal markets.
Distribution Methods of the Products or Services
- ------------------------------------------------
Companies such as Rockwell, Santa Barbara Research, Texas
Instruments, Hewlett-Packard, General Dynamics, ITT, McDonnell Douglas and
General Electric have done work in cadmium telluride device technology
development or production and would be potential customers of the Company.
Demand for cadmium telluride far exceeds the supply, with current
prices approximating $900 per square inch at a thickness of 20 to 30
thousandths of an inch. Management estimates that a six inch boule of
monocrystalline cadmium telluride would retail for approximately $500,000.
The Company believes that its production model will allow for semiconductor
crystal growth that produces much higher yields at high quality and will help
the Company to penetrate the market more easily. As the supply increases,
management expects that the demand for the material will increase,
particularly in the military market for infrared detectors and sensors.
The estimated market for cadmium telluride has grown from $30
million to approximately $60 million from 1994 to 1998. Users have also
questioned the quality of material currently on the market. Management
believes that the Company will be able to produce wafers approximately 300%
larger and with a higher quality monocrystalline structure.
If it is able to perfect its production model, the Company's first
aim will be to expand the market for cadmium telluride semiconductor materials
by producing them for approximately one-half the cost of current production.
This savings will be reflected in the prices at which the Company will sell
its materials. Management believes that these reduced prices, coupled with
increased product quality, will increase the demand for cadmium telluride
products; the Company will then provide the products necessary to meet this
demand.
The Company has personnel with contacts in the semiconductor
industry. It will place whole cadmium telluride ingots in the hands of
potential users so they can sample, test and evaluate them. Once potential
customers have evaluated the materials and are ready to make a purchase, the
parties will negotiate a price.
In order to place itself in a leadership position, the Company will
market its scientific staff as leaders and experts in the industry. Worth P.
Allred, the Company's Vice President for Research and Development, is the
world's leading expert in the field of Horizontal Bridgman crystal growth, the
method used to produce the Company's materials. Part of the Company's
marketing strategy will be to have the research and development staff prepare
research papers for presentation at crystal growth conferences and tradeshows,
and to co-author papers and projects with other leaders in the industry. Mr.
Allred has written several papers and participated in several conferences on
this subject.
The Company plans to use both an in-house sales force and contract
brokers to market its products. As sales increase, management intends to
increase its sales force. The marketing department will be given a budget for
advertising, promotion, sales visits with potential customers and
informational materials. However, in management's experience, the best and
most enduring sales in the semiconductor industry are made through personal
contacts and visits to the customer's plant. As a result, the sales manager's
focus will be on getting to know customers, their processes and products. As
sales increase, the Company plans to hire regional representatives for areas
that the sales manager can not handle personally or that require constant
attention that can not be given by the Company's in-house sales people.
Regional representatives will report to the sales manager.
Status of any Publicly Announced New Product or Service.
- --------------------------------------------------------
None; not applicable.
Competitive Business Conditions.
- --------------------------------
Crystal growth yields; wafer size and quality; and overhead costs
are the three problems that beleaguer each of the companies providing
semiconductor materials. The most successful materials suppliers are those
that master these problems best.
Yields. There are many problems associated with crystal growth
yields in the production of cadmium telluride. All of the Company's present
competitors have difficulty growing crystals with a single or monocrystalline
structure. The Company's process is designed to allow the manufacture of
large (greater than two square inches) wafers of a completely single
crystalline structure.
The Company's process includes a method that provides for the
production of large ingots that are three to 15 inches in length. This will
allow more of the ingot that is grown to be used in the end product. This end
product will be larger wafers at a lower or equal price than competitors'
products. This reduces cost stems largely from the less expensive growth
furnace that the Company will use. The Company has also developed a process
for lower wafer processing costs that should increase the yields of usable
material by over 50%.
Wafer Size and Quality. Due to the current small size of cadmium
telluride wafers, many device manufacturers have begun experimenting with
other substrate materials that could replace cadmium telluride. These
manufacturers have met with moderate success, but would prefer to use cadmium
telluride substrate if it were available in sufficient quantities and
qualities.
At present, the Company is able to match the size and quality of
materials being produced, and is conducting research to develop larger ingots
with consistency and of a quality of substrate that is not otherwise present
in today's market. The dislocation counts (a measurement of undesirable
lattice mismatch and stress) will be on the order of 10,000 dislocations or
less per square centimeter, rather than the usual 100,000 or more dislocations
in other products.
Management expects that other parameters of wafer quality and size
will exceed or equal all present customer specifications and that initial
introduction of the Company's product will take six to 12 months after the
production method is perfected. Once the acceptance and initial utilization
phase has passed, management believes that small evaluation orders of one to
50 square inches will grow to larger orders in excess of 100 square inches,
and even "original equipment manufacturer" accounts.
Overhead Costs. Using its production protocol, management believes
that the Company's manufacturing costs of its semiconductor compound materials
will be approximately one-fourth of the overhead and capital equipment costs
of the methods currently used by its competition. Normally, 25 to 50 people
are required to operate a small crystal growth facility. The Company has
calculated that it will be able to operate its facility with 15 to 20 people,
which will result in substantial overhead reduction.
Major competitors in the production of cadmium telluride are II-VI,
Inc., located in Saxonburg, Pennsylvania, and Nippon Mining, Ltd., of Japan.
II-VI, Inc., employs approximately 150 people and and controls approximately
75% of the market for cadmium telluride of one to three square centimeters.
Its product is generally cut from large three-inch polycrystalline ingots.
Nippon Mining is a major supplier of cadmium telluride to the Japanese market.
It also ships to Unites States users and its materials are reported to be of
good quality. The Company estimates Nippon Mining's market share at
approximately five to 10%. Each of these competitors has financial,
personnel, marketing and other resources significantly greater than
those of the Company, as well as other competitive advantages including
customer bases. The Company can provide no assurance that it will be able to
compete successfully in its industry.
Sources and Availability of Raw Materials.
- ------------------------------------------
The Company's source of cadmium telluride is Alfa Aesar, a Johnston
Matthey Company, located in Ward Hill, Massachusetts. Alfa Aesar provides
cadmium telluride in a variety of forms, including powder and lumps of various
sizes. The product is available in purities of 99.999% and 99.99999%. Alfa
Aesar's most recent catalog lists a retail price of $1182 for 100 grams of
cadmium telluride of 99.99999% purity. The Company generally purchases in
five kilogram quantities; an average production run uses approximately two
kilograms. Cadmium telluride is reusable, with a loss of approximately five
percent of the original material with each additional production run.
Alfa Aesar is a well-established company and management believes
that it will be able to provide as much raw material as the Company requires.
However, a disruption in availability for an extended period of time would
have a substantial adverse impact on the Company's operations, particularly if
it results in an inability to fill customer orders.
Dependence on One or a Few Major Customers.
- -------------------------------------------
At present, there is a substantial worldwide shortage of cadmium
telluride suppliers and quality products. It is projected that demand will
exceed supply for the next 10 to 15 years. The Company expects that there
will be sufficient demand for its products for the foreseeable future.
However, the development of a better quality, less expensive alternative to
cadmium telluride would be likely to render the Company's technology and
product obsolete.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Payments or
Labor Contracts.
- ----------------
In April, 1997, ERC was assigned a U.S. patent (Patent No.
5,625,241) on a carousel electric generator that was invented by Russell R.
Chapman, David R. Porter (the Company's Secretary/Treasurer) and Harold E.
Ewing. The Company has no trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts. Because semiconductor material crystal
growth patents are difficult to protect, the production processes are closely
guarded. The Company will allow only a select group of researchers access to
its processes and each employee will be required to sign a nondisclosure
agreement before receiving knowledge of the Company's processes.
Need for Government Approval of Principal Products or Services.
- ---------------------------------------------------------------
To the knowledge of management, the Company's processes and products
will not be subject to governmental approval.
Effect of Existing or Probable Governmental Regulations on Business.
- --------------------------------------------------------------------
As with other manufacturing companies, the Company's operations will
be subject to state and federal regulations in the areas of workplace safety
and environmental emissions. The Company intends to take all steps necessary
to ensure compliance with these laws and regulations.
Cadmium telluride is a stable, odorless material when in a solid
form. It has a melting point of 1905.8 degrees Fahrenheit; heat, sparks and
open flame can cause it to become unstable. Exposure to cadmium telluride can
cause irritation to the eyes, skin and mucous membranes, as well as lung
cancer and liver damage. Precautions for safe handling include the use of a
respirator, chemical goggles and protective clothing. The Company will ensure
that all employees that handle cadmium telluride comply with these workplace
safety requirements. In addition, the Company has installed an air scrubber
in its production furnace to remove cadmium telluride from the air.
Cadmium telluride tends to stay within approximately one inch of the
soil surface and does not generally leach into groundwater. The Company
intends to dispose of waste in accordance with federal, state and local
regulations. Management believes that the costs of compliance with applicable
regulations will be less than 1% of gross profits.
Research and Development
- ------------------------
During the calendar years ended December 31, 1999, and 1998, the
Company expended $25,411 and $9,553, respectively, on research and development
activities.
Costs and Effects of Compliance with Environmental Laws.
- --------------------------------------------------------
See the heading "Effect of Existing or Probable Governmental
Regulations on Business."
Number of Employees.
- --------------------
The Company presently employs nine unpaid part-time employees and no
full-time employees. During the next 12 months, management expects that the
Company will have approximately 12 to 15 full-time employees and no part-time
employees.
Item 2. Description of Property.
------------------------
The Company is presently using the facilities of Patterned Fiber
Composites, Inc., which employs the Company's President and CEO, William F.
Pratt, and its Secretary/Treasurer, David R. Porter. The facilities are
located in Lindon, Utah, and are provided rent-free. They consist of
approximately 4,800 square feet, of which approximately 1600 square feet is
office space and 3,200 is a warehouse and production facility. In addition,
the Company has access to a full-service machine shop located next to its
facility. Patterned Fiber Composites has a two-year lease on the facility,
with approximately one year remaining.
If the Company is able to raise sufficient funds through future
fundraising efforts, it will enter into a lease with Patterned Fiber
Composites at a monthly rental of $450. If Carbon Fiber Products' lease is
terminated or is not renewed after the end of the term, depending on the
success of its research and development efforts and the availability of
sufficient funds, the Company will seek out a facility of its own to rent or
purchase.
Item 3. Legal Proceedings.
------------------
The Company is not a party to any pending legal proceeding. To the
knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against the Company. No director,
executive officer or other person who may be deemed to be an "affiliate" of
the Company or owner of record or beneficially of more than five percent of
the Company's common stock is a party adverse to the Company or has a material
interest adverse to the Company in any proceeding.
A judgment in the amount of $40,563 was entered against the Company
in December, 1992. This amount is included as an account payable in the
Company's consolidated financial statements. See Item 7 of this Report.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None; not applicable.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
---------------------------------------------------------
Market Information
- ------------------
The Company's common stock is quoted on the OTC Bulletin Board of
the NASD, but there is currently no established market for such stock and
there can be given that one will develop or be maintained. For any market
that develops for the Company's common stock, the sale of "restricted
securities" (common stock) pursuant to Rule 144 of the Securities and Exchange
Commission by members of management or any other person to whom any such
securities may be issued in the future may have a substantial adverse impact
on any such public market. Information about the date when current holders'
holding period of "restricted securities" commenced can be found under the
heading "Recent Sales of Unregistered Securities," below.
A minimum holding period of one year is required for resales under
Rule 144, along with other pertinent provisions, including publicly available
information concerning the Company; limitations on the volume of "restricted
securities" which can be sold in any 90 day period; the requirement of
unsolicited broker's transactions; and the filing of a Notice of Sale on Form
144.
The following quotations were provided by the National Quotation
Bureau, LLC, and do not represent actual transactions; these quotations do not
reflect dealer markups, markdowns or commissions.
<TABLE>
<CAPTION>
STOCK QUOTATIONS*
CLOSING BID
Quarter ended: High Low
- -------------- ---- ---
<S> <C> <C>
March 31, 1998 0.65 0.22
June 30, 1998 0.55 0.21
September 30, 1998 0.31 0.16
December 31, 1998 0.17 0.07
March 31, 1999 0.19 0.08
June 30, 1999 0.27 0.10
September 30, 1999 0.78125 0.19
December 31, 1999 0.4375 0.19
</TABLE>
Holders.
- --------
The number of record holders of the Company's securities as of the
date of this Report is approximately 1,698.
Dividends.
- ----------
The Company has not declared any cash dividends with respect to its
common stock, and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and if and until the Company completes any sales of its
products, no such policy will be formulated. There are no material
restrictions limiting, or that are likely to limit, the Company's ability to
pay dividends on its securities.
Recent Sales of Unregistered Securities.
- ----------------------------------------
Common Stock
------------
Date Number of Aggregate
Name Acquired Shares Consideration
---- -------- --------- -------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Two subscribers 1/15/97 100,000 Services valued at
under Rule 504 $0.50 per share
offering
Five subscribers 1/22/97 771,700 (1) $385,850 (1)
under Rule 504
offering
One subscriber 2/13/97 272,000 $136,000
under Rule 504
offering
North American 7/31/97 150,000 $ 75,000
Corporate
Consultants, Inc.
North American 11/11/97 150,000 Services valued at
Corporate $0.50 per share
Consultants, Inc.
William F. Pratt 6/25/98 550,000 Services valued at
$0.12 per share
Worth P. Allred 6/25/98 800,000 Services valued at
$0.12 per share
S. Kent Holt 6/25/98 500,000 Services valued at
$0.12 per share
Flood Thomas 6/25/98 80,000 Services valued at
$0.12 per share
Jay Reynolds 6/25/98 20,000 Services valued at
$0.12 per share
Jim Whiting 6/25/98 10,000 Services valued at
$0.12 per share
James G. and 6/25/98 20,000 Services valued at
Tracy Davis $0.12 per share
C. Greg Jensen 6/25/98 20,000 Services valued at
$0.12 per share
Firm International 6/25/98 1,000,000 Services valued at
Group Trust $0.12 per share
</TABLE>
(1) A total of 30,000 of these shares were subsequently canceled.
Management believes each of the foregoing persons or entities was
either an "accredited investor," or a "sophisticated investor" as defined in
Rule 506 of Regulation D of the Securities and Exchange Commission. Each had
access to all material information regarding the Company prior to the offer,
sale or issuance of these "restricted securities." The Company believes these
shares were exempt from the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), pursuant to Section 4(2) and/or 3(b)
thereof.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Plan of Operation.
- ------------------
During the next six months, the Company plans to perform test
production runs to test the model developed by Dr. Pratt. Each production
run requires approximately three to four weeks to heat the metal in the
Company's furnace and allow it to cool. The Company has a fully instrumented,
custom-designed control program that will allow it to compare actual
production data to its model and make appropriate adjustments in the
production process. The Company has sufficient equipment, supplies and
materials to continue this process for six months. Any funds required at this
stage are expected to be minimal.
In the following six month period, management expects to transition
the engineering effort from the "proof-of-principle" effort of the preceding
six months, to a pilot production level. The Company will need to raise
substantial additional funding to purchase the necessary equipment, upgrade
its software. The Company will seek sufficient funds to allow it to continue
its research and development efforts for two years without the need for
additional capital. In this regard, the Company has negotiated an agreement
with Verity Global Financial, L.L.C., of Dallas, Texas ("Verity"), by which
Verity is to provide the Company with $500,000 in consideration of 2,000,000
shares of the Company's common stock.
The terms of the Verity funding are as follows:
Verity will provide the Company with $50,000 in exchange for
200,000 "unregistered" and "restricted" shares of common stock.
Verity is to have "piggyback" registration rights to demand
registration of these securities if the Company files a
registration statement with the Securities and Exchange Commission
(other than a registration statement on Forms S-8 or S-4), within
five years;
Upon the effectiveness of the Company's anticipated Registration
Statement on Form SB-2 with respect to 1,000,000 shares of its
common stock, Verity will provide an additional $150,000 in
exchange for 600,000 registered shares;
Within 90 days of its providing the above-referenced $150,000,
Verity is to provide an additional $300,000 in exchange for
800,000 "unregistered" and "restricted" shares and 400,000
registered shares of common stock.
The Company and Verity have not yet executed binding subscription
agreements with respect to the anticipated funding, and there can be no
assurance that the Company will be successful in this regard. If the Company
is able to obtain this funding, the proceeds will be allocated to research and
development and working capital.
Once its production process has been refined and the Company is able
to produce cadmium telluride substrates of consistently high quality and size,
it intends to provide samples of its product to potential customers such as
Texas Instruments, Sandia and Santa Barbara Research for analysis. If its
research and development efforts are successful, and if it is able to raise
sufficient capital, the Company expects to be able to begin full-scale
production in two years.
The foregoing contains "forward-looking" statements and information,
all of which is modified by reference to the caption "Risk Factors" contained
in the Company's Registration Statement on Form 10-SB, which is incorporated
herein by this reference. See Item 13 of this Report.
Results of Operations.
- ---------------------
The Company has not had any material operations since approximately
1990. In anticipation of renewed operations, it has conducted three test
crystal growths in the last two completed calendar years. In January, 2000,
which is subsequent to the period covered by this Report, the Company began
another experimental crystal growth.
Liquidity.
- ----------
The Company received no revenues during the calendar years ended
December 31, 1999, and 1998. Net loss for these periods were $729,731 and
$464,211, respectively.
The Company is presently located in a facility leased by Patterned
Fiber Composites, Inc., which it uses rent-free. The Company has sufficient
equipment, supplies and materials to continue its process improvements and
engineering analysis for the next six months. Current operations may be
characterized as a "proof-of-principle" effort, during which the Company is
testing and refining its production processes. At the end of this six month
period, management expects that the Company will need to raise substantial
additional capital in order to allow it to proceed to the pilot production
level.
Item 7. Financial Statements.
---------------------
Consolidated Financial Statements for the
years ended December 31, 1999, and 1998
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1999
Consolidated Statements of Operations for the
Years Ended December 31, 1999, and 1998, and
from Inception on June 18, 1984, through
December 31, 1999
Consolidated Statements of Stockholders' Equity
from Inception on June 18, 1984, to December 31,
1999
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, and 1998, and
from Inception on June 18, 1984, through
December 31, 1999
Notes to Consolidated Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
None; not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
Identification of Directors and Executive Officers
- --------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders or until their successors are elected
or appointed and qualified, or their prior resignations or terminations.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
William F. Pratt CEO 8/98 *
President 8/98 *
S. Kent Holt Executive VP 8/98 *
Director 8/98 *
Worth P. Allred VP, Research
& Development 9/91 *
Director 9/91 *
David R. Porter Secretary/ 8/98 *
Treasurer 8/98 *
Director 8/98 *
</TABLE>
* These persons presently serve in the capacities indicated.
Business Experience.
- --------------------
William F. Pratt, Chief Executive Officer and President. Dr. Pratt
is 51 years old. He received his undergraduate engineering degree in 1970
from the United States Military Academy at West Point. He also holds a
Masters in Engineering Management degree from the Brigham Young University
Marriott School of Management and a Ph.D. in Mechanical Engineering from
Brigham Young University. From 1970 to 1990, he served as an armored cavalry
officer in the U. S. Army with qualifications in special operations. From
1991 to 1993, he was the New Business Development Manager for EDO
Corporation's Active Noise and Vibration Control business initiative to
commercialize piezoelectronic technology developed for the U. S. Navy. Dr.
Pratt consulted for the Defense Advanced Research Projects Agency, Metron,
Cimetrix and the Company from 1994 to 1997. Dr. Pratt is the inventor of
several patent-pending technologies dealing with composite materials and
machine design, and has been the President of a startup software and
engineering company that developed products for the aerospace and sports
equipment markets.
S. Kent Holt, Executive Vice President and Director. Mr. Holt, age
47, holds an executive MBA degree from Washington University in St. Louis and
Bachelor of Science degrees in Nutrition and Food Science and Business
Administration from Utah State University. He was employed by Ralston
Purina's Protein Technologies International Division for nine years, serving
from 1977 to 1982 as Ralston Purina's resident joint venture manager in Japan.
In this position, he was responsible for the marketing and sale of Ralston
Purina's products in that country. From 1991 to 1998, Mr. Holt was Director,
New Products with the Corn Products Division of CPC International, where he
directed the New Product Marketing, Product Development and Applications
Research groups, and directed cross-functional product development teams vital
to creating new business for the company. Mr. Holt has been awarded two
patents in his field of expertise and is fluent in Japanese.
Worth P. Allred, Vice President, Research and Development, Director.
Mr. Allred is 73 years of age. He has over 40 years of experience in
semiconductor compound materials and is one of the world's leading experts in
the field of crystal growth. Mr. Allred received a Masters degree in Nuclear
Physics from Brigham Young University in 1953. For six years, he was a
faculty member at the University of Southern California's Materials Science
Department. Mr. Allred also worked for six years at Bell and Howell, Pasadena
Research Center, where he headed the Gallium Arsenide Research and Production
Facility. Prior to that he spent seven years conducting primary research in
crystal growth at the Batelle Memorial Institute in Columbus, Ohio. He was
also the founder and President of Crystal Specialties, Inc., a gallium
arsenide manufacturer that was located in Monrovia, California. Mr. Allred
has published over 33 papers in the area of crystal growth and has been
granted several patents, with others pending.
David R. Porter, Secretary/Treasurer and Director. Mr. Porter, age
42, worked for the Maricopa County Facilities Department in Phoenix Arizona,
from 1991 to 1997, in addition to consulting with the Company in the
development of a crystal growth furnace and software for control systems. Mr.
Porter is currently employed by Patterned Fiber Composites, Inc., which shares
its facilities with the Company. He continues to direct the Company's
manufacturing facilities development.
Significant Employees.
- ----------------------
The Company does not currently have any employees who are not
executive officers, but who are expected to make a significant contribution to
its business.
Family Relationships.
- ---------------------
There are no family relationships between any director or executive
officer.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of
the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
Item 10. Executive Compensation.
-----------------------
Cash Compensation
- -----------------
The following table sets forth the aggregate compensation paid by
the Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Options outs ensat'n
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William F. 12/31/97 -0- -0- -0- -0- -0- -0- -0-
Pratt 12/31/98 -0- -0- -0- 550,000 -0- -0- -0-
CEO, Pres. 12/31/99 -0- -0- -0- -0- -0- -0- -0-
and Director
S. Kent Holt 12/31/97 -0- -0- -0- -0- -0- -0- -0-
Exec. Vice 12/31/98 -0- -0- -0- 500,000 500,000 (1)-0- -0-
President 12/31/99 -0- -0- -0- -0- -0- -0- -0-
and Director
Worth P. 12/31/97 -0- -0- -0- -0- -0- -0- -0-
Allred 12/31/98 -0- -0- -0- 800,000 -0- -0- -0-
Vice Pres., 12/31/99 -0- -0- -0- -0- -0- -0- -0-
R & D
and Director
David R. 12/31/97 -0- -0- -0- -0- -0- -0- -0-
Porter 12/31/98 -0- -0- -0- -0- -0- -0- -0-
Secretary/ 12/31/99 -0- -0- -0- -0- -0- -0- -0-
Treasurer
and Director
</TABLE>
(1) On July 1, 1998, Mr. Holt was granted options to purchase
500,000 "unregistered" and "restricted" shares of the
Company's common stock at the average closing price of
such stock for the 10 days immediately preceding the
notification of the Company's stockholders of Mr. Holt's
appointment as a director and executive officer. Based
on this formula, the exercise price of the options is
$0.27 per share. Options to purchase 250,000 shares
vested on July 1, 1999, and the options to purchase
the remaining 250,000 shares will vest on July 1, 2000.
The options are exercisable for three years from the
date of vesting. Unless otherwise prohibited, Mr. Holt
was granted the right to vote all 500,000 shares on
July 1, 1998.
No cash compensation, deferred compensation or long-term incentive
plan awards were issued or granted to the Company's management during the
years ended December 31, 1999, or 1998. Other than the above-referenced
options granted to Mr. Holt, no member of the Company's management has been
granted any option or stock appreciation rights; accordingly, no tables
relating to such items have been included within this Item.
Bonuses and Deferred Compensation
- ---------------------------------
None.
Compensation Pursuant to Plans
- ------------------------------
None.
Pension Table
- -------------
None; not applicable.
Other Compensation
- ------------------
None.
Compensation of Directors
- -------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as a director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
- -------------
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from the Company, with respect
to any director or executive officer of the Company which would in any way
result in payments to any such person because of his or her resignation,
retirement or other termination of employment with the Company or its
subsidiaries, any change in control of the Company, or a change in the
person's responsibilities following a change in control of the Company.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Each of the Company's directors and executive officers filed a Form
3 Initial Statement of Beneficial Ownership of Securities with the Securities
and Exchange Commission on February 8, 2000.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth the share holdings of those persons
who own more than five percent of the Company's common stock as of the date
hereof:
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class(1)
- ---------------- ------------------ --------
<S> <C> <C>
William F. Pratt 1,000,000 6.8%
1184 East 830 South
Pleasant Grove, Utah
84062
Worth P. Allred 1,000,000 (1) 6.8%
Post Office Box 120
Moroni, Utah
84646
Russell R. Chapman 1,500,003 (2) 10.2%
1242 N. Palm Springs Dr.
Gilbert, Arizona
85234
David R. Porter 1,009,717 6.9%
286 W. Thorneberry Way
Pleasant Grove, Utah
84062
William Tunnell 2,000,000 13.7%
20165 N. 67th Ave., #122A
Glendale, Arizona 85308
</TABLE>
(1) A total of 800,000 of these shares are held in joint tenancy
with Mr. Allred's wife.
(2) A total of 1,000,000 of these shares are held of record by
Firm International Group Trust, a trust of which Mr. Chapman is
the settlor.
Security Ownership of Management.
- ---------------------------------
The following table sets forth the share holdings of the Company's
directors and executive officers as of the date hereof. Information regarding
the capacities in which each person serves for the Company is contained in
Item 9.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name and Address Beneficially Owned of Class
- ---------------- ------------------ -------------
<S> <C> <C>
William F. Pratt 1,000,000 6.8%
1184 East 830 South
Pleasant Grove, Utah
84062
Worth P. Allred 1,000,000 (1) 6.8%
Post Office Box 120
Moroni, Utah
84646
David R. Porter 1,009,717 6.9%
286 W. Thorneberry Way
Pleasant Grove, Utah
84062
S. Kent Holt 382,560 (2) 2.6%
18320 Lochner Road
Spencerville, Indiana
46788
All directors and executive
officers as a group
(4 persons) 3,392,277 23.2%
</TABLE>
(1) A total of 800,000 of these shares are held in joint tenancy
with Mr. Allred's wife.
(2) Does not include options to acquire an additional 500,000
shares. See Item 10 of this Report.
Changes in Control
- ------------------
To the knowledge of the Company's management, there are no present
arrangements or pledges of the Company's securities which may result in a
change in control of the Company.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
Transactions with Management and Others.
- ----------------------------------------
During the past two years, the only transactions between members of
management, nominees to become a director or executive officer, five percent
stockholders, or promoters or persons who may be deemed to be parents of the
Company are:
Issued a total of 550,000 shares of the Company's common stock to
William F. Pratt;
Issued a total of 500,000 shares of the Company's common stock to
S. Kent Holt;
Granted to S. Kent Holt options to purchase up to 500,000 shares
of the Company's common stock at a price of $0.27 per share;
Issued a total of 800,000 shares of the Company's common stock to
Worth P. Allred; and
Received advances totaling $80,691 from Russell Chapman to cover
operating expenses and equipment acquisitions. These advances
have been recorded as a note payable which is unsecured, non-
interest bearing and due upon demand.
See the caption "Security Ownership of Certain Beneficial Owners and
Management" of this Report.
Parents of the Issuer.
- ----------------------
The Company has no parents.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
Reports on Form 8-K
-------------------
None.
Exhibits*
(i)
Where Incorporated
in this Report
--------------
Registration Statement on Form 10-SB, Part I
filed August 30, 1999**
(ii)
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
* Summaries of all exhibits contained within this
Report are modified in their entirety by reference
to these Exhibits.
** These documents and related exhibits have been
previously filed with the Securities and Exchange
Commission and are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION
Date: 3-16-2000 By /s/ William F. Pratt
--------- --------------------------------------
William F. Pratt
CEO, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION
Date: 3-16-2000 By /s/ William F. Pratt
--------- -------------------------------------
William F. Pratt
CEO, President and Director
Date: 3-24-2000 By /s/ S. Kent Holt
--------- -------------------------------------
S. Kent Holt
Executive Vice President and
Director
Date: 3-21-2000 By /s/ Worth P. Allred
--------- -------------------------------------
Worth P. Allred
Vice President, Research and
Development, and Director
Date:3-16-2000 By /s/ David R. Porter
--------- -------------------------------------
David R. Porter
Secretary/Treasurer and Director
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity. . . . . . . . . 6
Consolidated Statements of Cash Flows. . . . . . . . . . . . . 13
Notes to the Consolidated Financial Statements . . . . . . . . 15
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Galtech Semiconductor Materials Corporation
and Subsidiaries
(A Development Stage Company)
Lindon, Utah
We have audited the accompanying consolidated balance sheet of Galtech
Semiconductor Materials Corporation and Subsidiaries (A Development Stage
Company) as of December 31, 1999 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1999 and 1998 and from inception on June 18, 1984 through December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Galtech
Semiconductor Materials Corporation and Subsidiaries (A Development Stage
Company) as of December 31, 1999 and the results of their operations and their
cash flows for the years ended December 31, 1999 and 1998 and from inception
on June 18, 1984 through December 31, 1999, in conformity with generally
accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 6 to the financial
statements, the Company is a Development Stage Company with no significant
operating results to date. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 6. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
February 8, 2000
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
December 31,
1999
CURRENT ASSETS
Inventory $ 160,000
Total Current Assets 160,000
EQUIPMENT, NET (Note 2) 58,797
TOTAL ASSETS $ 218,797
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable (Note 5) $ 40,563
Note payable - related (Note 3) 1,424
Accrued expenses 72
Total Current Liabilities 42,059
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $0.00025 par value, 200,000,000 shares
authorized; 14,644,018 shares issued and outstanding 3,663
Additional paid-in capital 4,884,723
Stock subscription receivable (388,002)
Deficit accumulated during the development stage (4,323,646)
Total Stockholders' Equity 176,738
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 218,797
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
From
Inception on
June 18, 1984
For the Years Ended Through
December 31, December 31,
1999 1998 1999
<S> <C> <C> <C>
SALES $ - $ - $ 599,609
COST OF PRODUCT SOLD - - 676,198
GROSS MARGIN - - (76,589)
OPERATING EXPENSES
General and administrative 636,755 47,084 2,285,463
Legal and professional 31,256 356,400 830,828
Research and development 25,411 9,553 536,099
Depreciation 36,237 31,997 364,371
Total Expenses 729,659 (445,034) 4,016,761
Net Loss From Operations (729,659) (445,034) (4,093,350)
OTHER INCOME (EXPENSE)
Interest expense (72) - (84,991)
Interest income - 106 93,427
Loss on disposal of assets - (19,283) (241,238)
Miscellaneous - - 2,506
Total Other Income (Expense) (72) (19,177) (230,296)
NET LOSS $ (729,731) $ (464,211) $(4,323,646)
BASIC LOSS PER SHARE $ (0.06) $ (0.05)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 12,605,662 9,211,908
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance, June 18, 1984 - $ - $ - $ -
Stock issued for cash at
$0.0143 per share 140,173 35 1,965 -
Balance,
December 31, 1984 140,173 35 1,965 -
Stock issued for cash at
$0.05 per share 400,000 100 19,900 -
Stock issuance costs - - (4,450) -
Purchase of treasury
stock - - - -
Sale of treasury stock at
$2.11 per share - - 411,073 -
Stock issued to officers
for services at $0.005
per share 438,600 110 2,083 -
Net loss for the year
ended December 31, 1985 - - - (146,384)
Balance,
December 31, 1985 978,773 $ 245 $ 430,571 $ (146,384)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance, June 18, 1984 - $ - $ - $ -
Stock issued for cash at
$0.0143 per share - - - 2,000
Balance,
December 31, 1984 - - - 2,000
Stock issued for cash at
$0.05 per share - - - 20,000
Stock issuance costs - - - (4,450)
Purchase of treasury
stock (403,976) (5,950) - (5,950)
Sale of treasury stock at
$2.11 per share 196,658 2,896 - 413,969
Stock issued to officers
for services at $0.005
per share - - - 2,193
Net loss for the year
ended December 31, 1985 - - - (146,384)
Balance,
December 31, 1985 (207,318) $ (3,054) $ - 281,378
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance forward 978,773 $ 245 $ 430,571 $ (146,384)
Purchase of treasury
stock - - - -
Sale of treasury stock at
$29.65 per share - - 1,838,032 -
Net loss for the year
ended December 31, 1986 - - - (542,930)
Balance,
December 31, 1986 978,773 245 2,268,603 (689,314)
Net loss for the year
ended December 31, 1987 - - - (509,693)
Balance,
December 31, 1987 978,773 245 2,268,603 (1,199,007)
Stock issued for services
at $0.60 per share 25,000 6 14,994 -
Net loss for the year
ended December 31, 1988 - - - (501,513)
Balance,
December 31, 1988 1,003,773 $ 251 $2,283,597 $(1,700,520)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance forward (207,318) $ (3,054) $ - $ 281,378
Purchase of treasury
stock (13,997) (13,500) - (13,500)
Sale of treasury stock at
$29.65 per share (62,000) 768 (732,300) 1,106,500
Net loss for the year
ended December 31, 1986 - - - (542,930)
Balance,
December 31, 1986 (159,315) (15,786) (732,300) 831,448
Net loss for the year
ended December 31, 1987 - - - (509,693)
Balance,
December 31, 1987 (159,315) (15,786) (732,300) 321,755
Stock issued for services
at $0.60 per share - - - 15,000
Net loss for the year
ended December 31, 1988 - - - (501,513)
Balance,
December 31, 1988 (159,315) $ (15,786) $ (732,300) $ (164,758)
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance forward 1,003,773 $ 251 $ 2,283,597 $(1,700,520)
Stock issued for cash at
$2.00 per share 10,000 3 19,997 -
Stock issued for cash
at $0.575 per share 20,000 5 11,495 -
Sale of treasury stock
and subscription
receivable - - (34,786) -
Net loss for the year
ended December 31, 1989 - - - (306,612)
Balance
December 31, 1989 1,033,773 259 2,280,303 (2,007,132)
Cancellation of shares (5) - - -
Stock issued for cash
at $0.10 per share 25,000 6 2,494 -
Stock issued for cash
at $0.005 per share 3,150 1 15 -
Additional compensation
for treasury stock - - 34,701 -
Balance 1,061,918 $ 266 $ 2,317,513 $(2,007,132)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance forward (159,315) $ (15,786) $ (732,300) $ (164,758)
Stock issued for cash at
$2.00 per share - - - 20,000
Stock issued for cash
at $0.575 per share - - - 11,500
Sale of treasury stock
and subscription
receivable 159,315 15,786 732,300 713,300
Net loss for the year
ended December 31, 1989 - - - (306,612)
Balance
December 31, 1989 - - - 273,430
Cancellation of shares - - - -
Stock issued for cash
at $0.10 per share - - - 2,500
Stock issued for cash
at $0.005 per share - - - 16
Additional compensation
for treasury stock - - - 34,701
Balance - $ - $ - $ 310,647
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance forward 1,061,918 $ 266 $ 2,317,513 $ 2,007,132)
Net loss for the year
ended December 31, 1990 - - - (123,676)
Balance,
December 31, 1990 1,061,918 266 2,317,513 (2,130,808)
Stock issued for services
at $0.12 per share 20,400 5 2,395 -
Net loss for the year
ended December 31, 1991 - - - (207,142)
Balance,
December 31, 1991 1,082,318 271 2,319,908 (2,337,950)
Net loss for the year
ended December 31, 1992 - - - -
Balance,
December 31, 1992 1,082,318 271 2,319,908 (2,337,950)
Net loss for the year
endedDecember 31, 1993 - - - -
Balance,
December 31, 1993 1,082,318 $ 271 $ 2,319,908 $(2,337,950)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance forward - $ - $ - $ 310,647
Net loss for the year
ended December 31, 1990 - - - (123,676)
Balance,
December 31, 1990 - - - 186,971
Stock issued for services
at $0.12 per share - - - 2,400
Net loss for the year
ended December 31, 1991 - - - (207,142)
Balance,
December 31, 1991 - - - (17,771)
Net loss for the year
ended December 31, 1992 - - - -
Balance,
December 31, 1992 - - - (17,771)
Net loss for the year
endedDecember 31, 1993 - - - -
Balance,
December 31, 1993 - $ - $ - $ (17,771)
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1993 1,082,318 $ 271 $ 2,319,908 $(2,337,950)
Net loss for the year
endedDecember 31, 1994 - - - (10,964)
Balance,
December 31, 1994 1,082,318 271 2,319,908 (2,348,914)
Stock issued for
Commodity Recovery
Corporation valued at
predessor cost of $0.00 500,000 125 (125) -
Stock issued for Energy
Research Corporation
valued at predessor cost
of $0.00 4,200,000 1,050 (1,050) -
Conversion of debt to
equity - - 3,500 -
Net loss for the year
ended December 31, 1995 - - - (89,740)
Balance,
December 31, 1995 5,782,318 $ 1,446 $ 2,322,233 $(2,438,654)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance,
December 31, 1993 - $ - $ - $ (17,771)
Net loss for the year
ended December 31, 1994 - - - (10,964)
Balance,
December 31, 1994 - - - (28,735)
Stock issued for
Commodity Recovery
Corporation valued at
predessor cost of $0.00 - - - -
Stock issued for Energy
Research Corporation
valued at predessor cost
of $0.00 - - - -
Conversion of debt to
equity - - - 3,500
Net loss for the year
ended December 31, 1995 - - - (89,740)
Balance,
December 31, 1995 - $ - $ - $ (114,975)
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1995 5,782,318 $ 1,446 $ 2,322,233 $(2,438,654)
Stock issued for cash
cash at $0.60 per share 150,000 38 89,962 -
Stock issued for
services valued at $1.00
per share 288,000 73 287,927 -
Stock subscription
receivable at $0.50 per
share 40,000 10 19,990 -
Net loss for the year
ended December 31, 1996 - - (400,501) -
Balance,
December 31, 1996 6,260,318 1,567 2,720,112 (2,839,155)
Stock issued for cash
at $0.50 per share 1,163,700 291 575,773 -
Stock issued for services
at $0.50 per share 250,000 63 124,937 -
Receipt of stock
subscription - - - -
Net loss for the year
ended December 31, 1997 - - - (290,549)
Balance,
December 31, 1997 7,674,018 $ 1,921 $ 3,420,822 $(3,129,704)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance,
December 31, 1995 - $ - $ - $ (114,975)
Stock issued for cash
cash at $0.60 per share - - - 90,000
Stock issued for
services valued at $1.00
per share - - - 288,000
Stock subscription
receivable at $0.50 per
share - - (20,000) -
Net loss for the year
ended December 31, 1996 - - - (400,501)
Balance,
December 31, 1996 - - (20,000) (137,476)
Stock issued for cash
at $0.50 per share - - - 576,064
Stock issued for services
at $0.50 per share - - - 125,000
Receipt of stock
subscription - - 20,000 20,000
Net loss for the year
ended December 31, 1997 - - - (290,549)
Balance,
December 31, 1997 - $ - $ - $ 293,039
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1997 7,674,018 $ 1,921 $ 3,420,822 $(3,129,704)
Stock issued for services
valued at $0.12 per
share 2,970,000 742 355,658 -
Contribution of capital
by shareholder - - 29,243 -
Net loss for the year
ended December 31, 1998 - - - (464,211)
Balance,
December 31, 1998 10,644,018 2,663 3,805,723 (3,593,915)
Stock Issued for
services valued at
$0.27 per share 1,000,000 250 269,750 -
Stock issued for
services to be rendered
valued at $0.27 per
share 2,000,000 500 539,500 -
Stock issued for debt and
subscription valued at
$0.27 per share 1,000,000 250 269,750 -
Net loss for the year
ended December 31, 1999 - - - (729,731)
Balance,
December 31, 1999 14,644,018 $ 3,663 $ 4,884,723 $(4,323,646)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance,
December 31, 1997 - $ - $ - $ 293,039
Stock issued for services
valued at $0.12 per
share - - - 356,400
Contribution of capital
by shareholder - - - 29,243
Net loss for the year
ended December 31, 1998 - - - (464,211)
Balance,
December 31, 1998 - - - 214,471
Stock Issued for
services valued at
$0.27 per share - - - 270,000
Stock issued for
services to be rendered
valued at $0.27 per
share - - (180,000) 360,000
Stock issued for debt and
subscription valued at
$0.27 per share - - (208,002) 61,998
Net loss for the year
ended December 31, 1999 - - - (729,731)
Balance,
December 31, 1999 - $ - $ (388,002) $ 176,738
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
June 18, 1984
For the Years Ended Through
December 31, December 31,
1999 1998 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(729,731) $ (464,211) $(4,323,646)
Adjustment to reconcile net loss to net
cash used by operating activities:
Depreciation 36,237 31,997 364,371
Common stock issued for services 630,000 356,400 1,399,400
Loss on disposal of property - 19,283 241,238
Changes in operating assets and
liabilities: (Increase) in inventory - - (160,000)
(Increase) decrease in note receivable - 8,510 -
Increase (decrease) in accrued
liabilities 72 - 59,742
Net Cash (Used) by Operating
Activities (63,422) (48,021) (2,418,895)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures - (13,545) (718,191)
Purchase of treasury stock - - (19,450)
Stock subscription - - (732,300)
Net Cash (Used) from Investing
Activities - (13,545) (1,469,941)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable - related 63,422 13,000 540,798
Repayments of note payable - related - (31,933) (443,761)
Sale of treasury stock - - 1,911,183
Cancellation of stock subscription - - 732,300
Common stock issued for cash - - 1,148,316
Net Cash (Used) Provided by Financing
Activities $ 63,422 $ (18,933) $ 3,888,836
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception on
June 18, 1984
For the Years Ended Through
December 31, December 31,
1999 1998 1999
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ - $ (80,499) $ -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - 80,499 -
CASH AND CASH EQUIVALENTS
END OF PERIOD $ - $ - $ -
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR
Interest $ - $ - $ 84,919
Income taxes $ - $ - $ -
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Common stock issued for services $ 630,000 $ 356,400 $1,399,400
Common stock issued for debt $ 61,998 $ - $ 61,998
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements presented are those of Galtech
Semiconductor Materials Corporation (the Company) and its wholly-owned
subsidiaries Energy Research Corporation (ERC) and Commodity Recovery
Corporation (CRC). The Company was incorporated on June 18, 1984 under
the laws of the State of Utah as Versa tech, Inc. On April 30, 1985,
the Company changed its name to Galtech, Inc., and on June 18, 1986,
the Company changed its name to Galtech Semiconductor Materials
Corporation. The Company was engaged in the manufacture of compound
semiconductor materials, but ceased all operations in 1990 when a fire
destroyed the Company's research and development as well as the
Company's operations center. Principal operations have not yet
resumed. On February 28, 1995, the Company issued 500,000 shares of
common stock in exchange for 100% of the issued and outstanding common
stock of CRC. On February 28, 1995, the Company issued 4,200,000
shares of common stock in exchange for 100% of the issued and
outstanding shares of ERC.
(Note 4)
Energy Research Corporation (ERC) was incorporated on February 7, 1994
under the laws of the State of Arizona. ERC was incorporated to
develop and produce alternative sources of energy.
Commodity Recovery Corporation (CRC) was incorporated on October 31,
1994 under the laws of the State of Utah. CRC was incorporated to
develop and market products relating to the decontamination of
aflatoxin.
At the time of acquisition of CRC and ERC, the Company was essentially
inactive, with no operations and minimal assets. Neither CRC or ERC
had any assets or operations. As such, the acquisition was recorded at
predessor cost which was $0. The Company is the continuing entity for
accounting and legal purposes.
a. Accounting Methods
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
b. Equipment
Depreciation of equipment is provided using the straight-line method
over the estimated lives of five years.
Maintenance and repairs of the equipment that do not improve or extend
the lives of the respective assets are charged to expense as incurred.
Major renewals and betterments are treated as capital expenditures and
depreciated accordingly.
When assets are retired or otherwise disposed of, or become fully
depreciated, the cost of the assets and the related accumulated
depreciation are removed from the accounts with any gain or loss on
disposition reflected in the statement of operations.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Income Taxes
No provision for taxes has been made, due to cumulative operating
losses at December 31, 1999. The Company has net operating loss
carryforwards of approximately $4,300,000 which will expire by 2019.
The potential tax benefits of the loss carryforwards are offset by a
valuation allowance of the same amount.
d. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
e. Basic Loss Per Share
For the Year Ended
December 31, 1999
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (729,731) 12,605,662 $ (0.06)
For the Year Ended
December 31, 1998
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (464,211) 9,211,908 $ (0.05)
The computations of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period.
f. Principles of Consolidation
The consolidated financial statements include those of Galtech
Semiconductor Materials Corporation (the Company) and its 100% owned
subsidiaries Energy Research Corporation and Commodity Recovery
Corporation. All significant intercompany accounts and transactions
have been eliminated.
g. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Inventory
The inventory of raw materials for crystal growing is stated at the
lower of cost or market and is accounted for on a first-in-first-out
basis.
i. Revenue Recognition
When the Company begins operations, revenue will be recorded upon the
sale and delivery of the finished products.
NOTE 2 - EQUIPMENT
December 31,
1999
Equipment consists of the following:
Research equipment $ 181,187
Less: accumulated depreciation (122,390)
Net Equipment
$ 58,797
Amounts charged to depreciation expense were $36,237 and $31,997 for
the years ended December 31, 1999 and 1998, respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
The former president of the Company has provided advances to the
Company to cover operating expenses as well as equipment acquisitions
which have been recorded as a note payable - related. This note is
unsecured, non-interest bearing and is due upon demand. The advances
are repaid as the Company's cash needs allow. During the year ended
December 31, 1998, the former President advanced $13,000 to the
Company, was repaid $31,933 and contributed the balance of the advance
payable to him of $29,243, to the Company.
In 1999, the former president paid expenses of $61,998 toward the stock
subscription of $270,000. Additionally, the current president made
advances to the Company of $1,434 which bear interest at 10%, are
unsecured and due on demand.
NOTE 4 - STOCK TRANSACTIONS
On February 8, 1995, the Board of Directors approved a 20 to 1 reverse
stock split. All references to shares outstanding and earnings per
share have been retroactively restated to reflect the reverse stock
split.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 4 - STOCK TRANSACTIONS (Continued)
On February 28, 1995, the Board of Directors issued 500,000 shares of
common stock to acquire Commodity Research Corporation (CRC). CRC has
no assets or operating history and the acquisition was valued at $0.
On February 28, 1995, the Board of Directors issued 4,200,000 shares of
common stock to acquire Energy Research Corporation (ERC). ERC had no
assets or operating history, and the acquisition was valued at
predecessor cost of $0.
In November 1995, the Company issued 125,000 shares of common stock for
public relations services to be performed. The contract was canceled
in December, 1995 and the stock was returned and canceled.
Accordingly, the financial statements do not reflect the issuance and
cancellation of the 125,000 shares.
In 1996, the Company issued 150,000 shares of common stock for cash at
$0.60 per share.
In 1996, the Company issued 40,000 shares of common stock for a
subscription receivable valued at $0.50 per share.
In 1996, the Company issued 288,000 shares of common stock for legal
and professional services rendered, valued at $1.00 per share.
In 1997, the Company issued 1,163,700 shares of common stock for cash
at $0.50 per share.
In 1997, the Company issued 250,000 shares of common stock for
services, valued at $0.50 per share.
In 1998, the Company issued 2,970,000 shares of common stock for
services valued at $0.12 per share.
In 1999, the Company issued 3,000,000 shares of common stock for
services valued at $0.27 per share.
In 1999, the Company issued 1,000,000 shares of common stock for debt
and subscription valued at $0.27 per share.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - COMMITMENTS AND CONTINGENCIES
On December 18, 1992, a judgment was entered against the Company for
$40,563 for non-payment of an account payable. This amount has been
included in the accounts payable for December 31, 1999. The Company
has written off other accounts payable which were incurred prior to
1990. The Company's legal counsel has represented that the statute of
limitations for collection of the payables has expired. The Company
does not intend to pay the liabilities however there is no assurance
that the creditors will not make claims against the Company.
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has little cash
and without realization of additional adequate financing, it would be
unlikely for the Company to pursue and realize its objective of
operating profitably. The Company plans to continue the research and
development process prior to the sales of its product. In the interim,
management has committed to covering the operating expenses of the
Company.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001093432
<NAME> GALTECH SEMICONDUCTOR MATERIALS CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 160000
<CURRENT-ASSETS> 160000
<PP&E> 181187
<DEPRECIATION> (122390)
<TOTAL-ASSETS> 218797
<CURRENT-LIABILITIES> 42059
<BONDS> 0
0
0
<COMMON> 3663
<OTHER-SE> 173075
<TOTAL-LIABILITY-AND-EQUITY> 218797
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 729659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> (729731)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (729731)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
