<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] 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) 785-6294
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
September 30, 2000
14,844,018
----------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
[CAPTION]
<TABLE>
ASSETS
September 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 50,924 $ -
Inventory 160,000 160,000
Total Current Assets 210,924 160,000
EQUIPMENT, NET (Note 2) 31,619 58,797
TOTAL ASSETS $ 242,543 $ 218,797
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 1,657 $ -
Accounts payable (Note 5) 40,563 40,563
Note payable - related (Note 3) 8,195 1,424
Accrued expenses 634 72
Total Current Liabilities 51,049 42,059
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $0.00025
par value, 200,000,000
shares authorized; 14,844,018 and
14,644,018 shares issued and
outstanding, respectively 3,713 3,663
Additional paid-in capital 4,934,673 4,884,723
Stock subscription receivable (183,002) (388,002)
Deficit accumulated during
the development stage (4,563,890) (4,323,646)
Total Stockholders' Equity 191,494 176,738
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 242,543 $ 218,797
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
[CAPTION]
<TABLE>
From
Inception on
June 18, 1984
For the Three For the Nine Through
Months Ended Months Ended September 30,
September 30, September 30,
2000 1999 2000 1999 2000
<S> <C> <C> <C> <C> <C>
SALES $ - $ - $ - $ - $ 599,609
COST OF
PRODUCT SOLD - - - - 676,198
GROSS MARGIN - - - - (76,589)
OPERATING EXPENSES
General and
administrative - 92,225 189,537 122,014 2,475,000
Legal and
professional 3,624 29,503 8,389 30,703 839,217
Research and
development 5,538 25,410 16,269 25,410 552,368
Depreciation 9,059 9,059 27,178 27,178 391,549
Total Expenses 18,221 156,197 241,373 205,305 4,258,134
Net Loss
From Operations (18,221) (156,197) (241,373) (205,305) (4,334,723)
OTHER INCOME
(EXPENSE)
Interest expense (205) - (634) - (85,625)
Interest income 716 - 1,763 - 95,190
Loss on disposal
of assets - - - - (241,238)
Miscellaneous - - - - 2,506
Total Other
Income
(Expense) 511 - 1,129 - (229,167)
NET LOSS $ (17,710) $(156,197) $ (240,244) $ (205,305) $ (4,563,890)
BASIC LOSS
PER SHARE $ (0.00) $ (0.02) $ (0.02) $ (0.02)
WEIGHTED
AVERAGE
NUMBER OF
SHARES
OUTSTANDING 14,662,370 10,644,018 14,793,653 10,644,018
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
[CAPTION]
<TABLE>
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)
<Continued>
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
[CAPTION]
<TABLE>
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)
<Continued>
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)
[CAPTION]
<TABLE>
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)
<Continued>
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)
[CAPTION]
<TABLE>
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 ended
December 31, 1993 - - - -
Balance,
December 31, 1993 1,082,318 $ 271 $ 2,319,908 $ (2,337,950)
<Continued>
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 ended
December 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)
[CAPTION]
<TABLE>
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 ended
December 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 predecessor cost
of $0.00 500,000 125 (125) -
Stock issued for
Energy Research
Corporation valued
at predecessor 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)
<Continued>
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 predecessor cost
of $0.00 - - - -
Stock issued for
Energy Research
Corporation valued
at predecessor 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)
[CAPTION]
<TABLE>
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)
<Continued>
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)
[CAPTION]
<TABLE>
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)
<Continued>
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 Stockholders' Equity (Continued)
[CAPTION]
<TABLE>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balance,
December 31, 1999 14,644,018 $ 3,663 $ 4,884,723 $ (4,323,646)
Expense of
subscription
receivable
(unaudited) - - - -
Receipt of stock
subscription
(unaudited) - - - -
Stock issued for
cash at $0.25
per share
(unaudited) 200,000 50 49,950 -
Net loss for
the period ended
September 30, 2000
(unaudited) - - - (240,244)
Balance,
September 30, 2000
(unaudited) 14,844,018 $ 3,713 $ 4,934,673 $ (4,563,890)
<Continued>
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<S> <C> <C> <C> <C>
Balance,
December 31, 1999 - $ - $(388,002) $ 176,738
Expense of
subscription
receivable
(unaudited) - - 180,000 180,000
Receipt of stock
subscription
(unaudited) - - 25,000 25,000
Stock issued for
cash at $0.25
per share
(unaudited) - - - 50,000
Net loss for
the period ended
September 30, 2000
(unaudited) - - - (240,244)
Balance,
September 30, 2000
(unaudited) - $ 3,713 $(183,002) $ 191,494
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
[CAPTION]
<TABLE>
From
Inception on
June 18, 1984
For the Three Months Ended For the Nine Months Ended Through
September 30, September 30, September 30,
2000 1999 2000 1999 2000
<S> <C> <C> <C> <C> <C>
CASH FLOWS
FROM OPERATING
ACTIVITIES
Net loss $(17,710) $(156,197) $(240,244) $ (205,305) $(4,563,890)
Adjustment to
reconcile net
loss to net
cash used by
operating
activities:
Depreciation 9,059 9,059 27,178 27,178 391,549
Common stock
issued for
services - 115,000 205,000 115,000 1,604,400
Loss on
disposal of
property - - - - 241,238
Changes in
operating assets
and liabilities:
(Increase)
in inventory - - - - (160,000)
Increase
(decrease)
in accounts
payable (3,914) - 1,657 - 1,657
Increase
(decrease)
in accrued
liabilities 205 - 562 - 60,304
Net Cash
(Used) by
Operating
Activities (12,360) (32,138) (5,847) (63,127) (2,424,742)
CASH FLOWS FROM
INVESTING
ACTIVITIES
Capital
expenditures - - - - (718,191)
Purchase of
treasury stock - - - - (19,450)
Stock
subscription - - - - (732,300)
Net Cash (Used)
from Investing
Activities - - - - (1,469,941)
CASH FLOWS FROM
FINANCING
ACTIVITIES
Proceeds
(payments on)
from note
payable
- related (393) 32,138 6,771 63,127 547,569
Repayments of
note payable
- related - - - - (443,761)
Sale of
treasury stock - - - - 1,911,183
Cancellation of
stock subscription - - - - 732,300
Common stock
issued for cash - - 50,000 - 1,198,316
Net Cash
(Used) Provided
by Financing
Activities $(393) $ 32,138 $ 56,771 $ 63,127 $ 3,945,607
</TABLE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
[CAPTION]
<TABLE>
From
Inception on
June 18, 1984
For the Three Months Ended For the Nine Months Ended Through
September 30, September 30, September 30,
2000 1999 2000 1999 2000
<S> <C> <C> <C> <C> <C>
INCREASE
(DECREASE)
IN CASH
AND CASH
EQUIVALENTS $(12,753) $ - $ 50,924 $ - $ 50,924
CASH AND CASH
EQUIVALENTS
AT BEGINNING
OF PERIOD 63,677 - - - -
CASH AND CASH
EQUIVALENTS END
OF PERIOD $50,924 $ - $ 50,924 $ - $ 50,924
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 $ - $ 115,000 $205,000 $115,000 $1,604,400
Common stock
issued for debt $ - $ - $ - $ - $ 61,998
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
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.
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Income Taxes
No provision for taxes has been made, due to cumulative
operating losses at September 30, 2000. The Company has net
operating loss carryforwards of approximately $4,563,000
which will expire by 2020. 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 Three Months Ended
September 30, 2000
Loss Shares Per Share
(Numerator) (Denominator) Amount
$ (17,710) 14,662,370 $ (0.00)
For the Three Months Ended
September 30, 1999
Loss Shares Per Share
(Numerator) (Denominator) Amount
$(156,197) 10,644,018 $ (0.02)
For the Nine Months Ended
September 30, 2000
Loss Shares Per Share
(Numerator) (Denominator) Amount
$(240,244) $ 18,793,653 $ (0.02)
For the Nine Months Ended
September 30, 1999
Loss Shares Per Share
(Numerator) (Denominator) Amount
$ (205,305) $ 10,644,018 $ (0.02)
The computations of basic loss per share of common stock is
based on the weighted average number of shares outstanding
during the period.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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.
j. Unaudited Financial Statements
The accompanying unaudited financial statements include all
of the adjustments which, in the opinion of management, are
necessary for a fair presentation. Such adjustments which,
in the opinion of management, are necessary for a fair
presentation. Such adjustments are of a normal recurring
nature.
NOTE 2 - EQUIPMENT
September 30, December 31,
2000 1999
(Unaudited)
Equipment consists of the following:
Research equipment $ 181,187 $ 181,187
Less: accumulated depreciation (149,568) (122,390)
Net Equipment $ 31,619 $ 58,797
Amounts charged to depreciation expense were $27,178 and
$27,178 for the periods ended September 30, 2000 and 1999,
respectively.
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 3 - RELATED PARTY TRANSACTIONS
In 1999, the former president of the Company, paid expenses
of $61,998 toward the stock subscription of $270,000. In
March of 2000, an additional $25,000 was paid toward the
stock subscription. Additionally, the current president made
advances to the Company of $3,294 which bear interest at 10%,
are unsecured and due on demand.
Two other related parties made advances to the Company to
cover operating expenses of $5,294, which also bear interest
at 10%, are unsecured and due on demand. Thus, making total
related part debt $8,588 at June 30, 2000.
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.
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.
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 4 - STOCK TRANSACTIONS (Continued)
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.
In March 2000, the Company issued 200,000 shares of common
stock for cash at $0.25 per share.
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
June 30, 2000. 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 which were written off has
expired. The Company does not intend to pay the liabilities
which were written off, 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.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
--------------------------------------------------------------------
Plan of Operation.
------------------
During the first six months following receipt of the anticipated
funding from Verity Global Financial, LLC, a Texas limited liability company,
as discussed below, we plan to perform test production runs in furtherance of
the development of our model for the production of cadmium telluride
semiconductor material. Each production run requires approximately three to
four weeks to heat the metal in our furnace and allow it to cool. We have a
fully instrumented, custom-designed control program that will allow us to
acquire and analyze production data and make appropriate adjustments in the
production process.
In the second six month period after receipt of the anticipated
Verity funding, management expects to refocus our engineering effort from the
"proof-of-principle" effort of the preceding six months, to a pilot production
level. We will seek sufficient funds to allow us to continue our research and
development efforts for two years without the need for additional capital. In
this regard, on May 26, 2000, we executed the Securities Purchase Agreement
with Verity, by which Verity is to give us a total of $500,000 in exchange for
2,000,000 shares of our common stock.
The terms of the Verity funding are as follows:
In March, 2000, Verity purchased 200,000 "unregistered" and
"restricted" shares of our common stock for $50,000;
Upon the effectiveness of our Registration Statement on Form SB-2,
which was filed with the Securities and Exchange Commission on
July 13, 2000, and amended on September 25, 2000, Verity will have
30 days to exercise a warrant to purchase 600,000 shares at a
price of $150,000;
Beginning on the date that is 90 days after the effective date of
the Registration Statement, Verity will have 30 days to exercise a
warrant to purchase 400,000 shares at a price of $100,000;
On the 90th day after the effective date of the Registration
Statement, Verity will purchase 800,000 "unregistered" and
"restricted" shares of common stock for $200,000.
Verity's exercise of the warrants and its purchase of the 800,000
shares for $200,000 are conditioned upon the Registration Statement becoming
effective. If we take a record of common stockholders for the purpose of
entitling them to receive a dividend payable in, or other distribution of
common stock, the number of warrant shares will be adjusted so that Verity is
entitled to purchase the same number of shares as a stockholder who held the
same number of shares immediately before the distribution would own
immediately after the distribution. The exercise price of each warrant will
also be adjusted to equal (i) the current exercise price multiplied by the
number of warrants shares; divided by (ii) the number of shares for which the
warrant is exercisable immediately after the adjustment. These adjustment
procedures will also apply if we conduct any splits or reverse splits of our
common stock.
Also on May 26, 2000, we executed a Registration Rights Agreement
with Verity, under which we agreed to register the 1,000,000 shares of common
stock underlying the warrants. These shares are all of the securities covered
by the above-referenced Registration Statement and the prospectus that is a
part of the Registration Statement.
We have allocated the proceeds from this funding to research and
development and working capital.
Under the Securities Purchase Agreement, Verity is required to
purchase the 800,000 shares for $200,000, but it is not obligated to exercise
its warrants. If we are unable to get the full funding from Verity, and
assuming no additional funding from other investors, we have sufficient funds
to pursue meaningful development of the process only through March 2001.
Unless we get funding from Verity, we do not expect to have enough money to
purchase cadmium telluride and other crystal growth supplies after March 2001.
If our research and development is successful during this time period, we plan
to begin pilot production of material for the purpose of providing samples and
if possible, low volume sales to interested customers. We anticipate that
these customers will take from three to nine months to evaluate our material
and approve Galtech as a source of supply for cadmium telluride wafers.
If we receive the anticipated funding from Verity, we will hire
personnel and build additional crystal growth equipment to increase the level
of research and development activity. We expect that Galtech will have enough
operating funds for 18 months of intense development effort. Management
anticipates that at this increased level of effort we will spend about $25,000
per month during this developmental period. For every $100,000 in additional
funding received, we should be able to operate for four months in our current
facilities.
Our goal is to produce high quality, round shaped, single crystal
wafers with a high yield process. If Verity or another entity provides full
funding, we will pursue four subprojects in an effort to meet our goal:
Finite Element Model Development -
Cadmium telluride crystal growth is a very slow process measured in
weeks. A system of testing ideas in computer simulation is much quicker and
allows for a greater variety of designs. No one has adequately applied a
computer simulation system to crystal growth. Our efforts in this area will
build on experience that we have gained in the past two years in modeling,
refining, and understanding the key parameters for our growth process. From
this effort, we expect to verify the growth model by:
correlating results to our model predictions;
making adjustments in the model to more accurately
reflect actual performance;
investigating the effects of design changes in the
configuration of the growth furnace and the process;
and
finding a better furnace and process design.
Equipment Upgrade -
We have already upgraded much of the equipment that we use in the
growth and production of crystals. Our lack of funding has restricted the
number of furnaces and spare furnace parts available. We hope to use the
results of our research and development efforts to improve the components of
the furnace. Our goal is to have enough replacement parts to avoid project
delays when a key piece of equipment wears out under the extreme heat of the
growth process.
Crystal Design of Experiments
A design of experiments is the most efficient way to quickly
determine the key variables that affect any physical process. It is
especially useful in when a process only sporadically produces outstanding
results. The purpose of a DOE is to identify those variables that have the
greatest effect on the quality and reproducibility of the process. We have
planned two experiments for this subproject.
With the resources that we have allocated for this phase, we should
be able to produce about 40 cadmium telluride boules, or lumps. In general,
every actual crystal growth will first be modeled and tested in a computer
simulation many times before we grow it in the laboratory.
Sixteen boules will be used in DOE 1. The goal of DOE 1 will be to:
verify and adjust the parameters of the computer model;
identify the main factors affecting the growth process; and
test two competing design improvements for the process.
We will combine information from DOE 1 with information from our
computer modeling efforts to adjust the process variables and growth furnace
design.
Galtech plans to use the second 16 boules in DOE 2, which will take
a more detailed look at the main factors identified in DOE 1 and will attempt
to determine the three or four main variables to use in the production of
cadmium telluride.
We will use the final eight boules to verify our selection of
optimal process variables from DOE 2 and to find out whether the process is
repeatable. We will perform eight confirmation runs using the best
combination of process variables that we identify from DOE 2 and from our
computer testing. Another goal of our confirmation runs will be to establish
production costs.
Galtech will thoroughly analyze each set of experiments, using
accepted techniques for assessing crystal quality. We will send parts of
exceptional boules to laboratories and potential customers for further
analysis.
If we are successful with our research and development efforts
during this time period, we plan to begin pilot production of material for
samples and low volume sales to interested customers. Although results to
date have been encouraging and one boule is being evaluated, laboratory
results are too preliminary to be material. We have not yet completed the
development process and it is difficult to say when we can expect success.
If our research and development efforts are successful, and if we
are able to raise sufficient capital, we expect to be able to begin full-scale
production in two years after funding. We can not assure you that we will be
successful in any of these endeavors.
This discussion contains "forward-looking" statements and
information, all of which is modified by reference to the caption "Risk
Factors" contained in our Registration Statement on Form SB-2, as amended, and
which is incorporated herein by this reference.
Results of Operations.
----------------------
We have not had any material operations since approximately
1990. In anticipation of renewed operations, we have conducted three test
crystal growths in the last two years. In January, 2000, we began another
experimental crystal growth. As of the date of this Report, laboratory
results are too preliminary to be material.
Liquidity and Capital Resources.
--------------------------------
We received no revenues during the quarterly periods ended September
30, 2000, and 1999. Net loss for these periods were $17,710 and $156,197,
respectively.
Galtech is presently located in a facility leased by Patterned
Fiber Composites, Inc. We use the facility rent-free. We have sufficient
equipment, supplies and materials to continue our process improvements and
engineering analysis for the first six months after funding. Current
operations may be characterized as a "proof-of-principle" effort, during which
we are testing and refining our production processes. At the end of this six
month period, management expects that Galtech will need to raise substantial
additional capital from Verity or another source in order to allow it to
proceed to the pilot production level.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
----------------------------
None; not applicable.
Item 2. Changes in Securities and Use of Proceeds.
---------------------------------------------------
None; not applicable.
Item 3. Defaults Upon Senior Securities.
------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
--------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
-------------------------------------------
(a) Exhibits.
Registration Statement on Form SB-2, filed with
the Securities and Exchange Commission on July 13, 2000,
and amended September 25, 2000. *
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
* These documents, together with related exhibits,
have previously been filed with the Securities
and Exchange Commission and are incorporated
herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION
Date: 13 Nov. 2000 By: /s/ William F. Pratt
-------------- -------------------------------------
William F. Pratt
CEO, President and Director
Date: 13 Nov. 2000 By: /s/ David R. Porter
-------------- -------------------------------------
David R. Porter
Secretary/Treasurer and Director
