<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 March 31, 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) 785-6520
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:
April 18, 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
March 31, 2000 and December 31, 1999
<PAGE>
C O N T E N T S
Independent Accountants' Review Report . . . . . . . . . . . 3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity. . . . . . . 6
Consolidated Statements of Cash Flows. . . . . . . . . . . 14
Notes to the Consolidated Financial Statements . . . . . . 16
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
Galtech Semiconductor Materials Corporation
and Subsidiaries
(A Development Stage Company)
Lindon, Utah
We have reviewed the accompanying consolidated balance sheets of Galtech
Semiconductor Materials Corporation and Subsidiaries (a development stage
company) as of March 31, 2000 and the related statements of operations,
stockholders' equity and cash flows for the periods ended March 31, 2000 and
1999. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements referred to
above for them to be in conformity with accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of Galtech Semiconductor
Materials Corporation and Subsidiaries (a development stage company) as of
December 31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the year then ended (not presented herein) and in
our report dated February 8, 2000, we expressed an unqualified opinion on
those consolidated financial statements.
HJ & Associates, LLC
Salt Lake City, Utah
May 4, 2000
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1999 1999
<S> <C> <C>
CURRENT ASSETS
Cash $ 73,079 $ -
Inventory 160,000 160,000
Total Current Assets 233,079 160,000
EQUIPMENT, NET (Note 2) 49,738 58,797
TOTAL ASSETS $ 282,817 $ 218,797
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 487 $ -
Accounts payable (Note 5) 40,563 40,563
Note payable - related (Note 3) 8,410 1,424
Accrued expenses 210 72
Total Current Liabilities 49,670 42,059
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $0.00025 par value, 200,000,000
shares authorized; 14,814,018 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 (4,522,237) (4,323,646)
Total Stockholders' Equity 233,147 176,738
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 282,817 $ 218,797
</TABLE>
<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 Three Months Ended Through
March 31, March 31,
2000 1999 2000
<S> <C> <C> <C>
SALES $ - $ - $ 599,609
COST OF PRODUCT SOLD - - 676,198
GROSS MARGIN - - (76,589)
OPERATING EXPENSES
General and administrative 183,695 3,049 2,469,158
Legal and professional 5,816 1,200 836,644
Research and development - 25,000 536,099
Depreciation 9,059 9,059 373,430
Total Expenses 198,570 38,308 4,215,331
Net Loss From Operations (198,570) (38,308) (4,291,920)
OTHER INCOME (EXPENSE)
Interest expense (210) - (85,201)
Interest income 189 - 93,616
Loss on disposal of assets - - (241,238)
Miscellaneous - - 2,506
Total Other Income (Expense) (21) - (230,317)
NET LOSS $ (198,591) $ (38,308)$(4,522,237)
BASIC LOSS PER SHARE $ (0.01) $ (0.00)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 14,662,370 10,644,018
</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 - - 411,073 -
$2.11 per share
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
<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 (403,976) (5,950) - (5,950)
stock
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 $(1,700,520)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<C> <C> <C> <C>
Balance forward (207,318)$ (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 $ (159,786)$ (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
<C> <C> <C> <C>
Balance forward $ (159,315)$ (15,786)$ (732,300)$ (164,758)
Stock issued for cash at - - - 20,000
$2.00 per share
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 ended
December 31, 1993 - - - -
Balance,
December 31, 1993 1,082,318 $ 271 $ 2,319,908 $(2,337,950)
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<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)
</TABLE>
<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 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
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
<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
<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)
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<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 - - (180,000) 360,000
$0.27 per share
Stock issued for debt and
subscription valued at
$0.27 per share - - (208,998) 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)
<TABLE>
<CAPTION>
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 - - - -
Receipt of stock
subscription - - - -
Stock issued for cash at
$0.25 per share 200,000 50 49,950 -
Net loss for the period
ended March 31, 2000 - - - (198,591)
Balance,
March 31, 2000 14,844,018 $ 3,713 $ 4,934,673 $ 4,522,237
Treasury Stock Subscription Total
Shares Amount Receivable Equity
<C> <C> <C> <C>
Balance,
December 31, 1999 $ - $ - $ (388,002)$ 176,738
Expense of subscription
receivable - - 180,000 180,000
Receipt of stock
subscription - - 25,000 25,000
Stock issued for cash at
$0.25 per share - - - 50,000
Net loss for the period
ended March 31, 2000 - - - (198,591)
Balance,
March 31, 2000 $ - $ - $ 183,002 $ 233,147
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
For the June 18, 1984
Three Months Ended Through
March 31, March 31,
2000 1999 2000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (198,591) $ (38,308) $ (4,522,237)
Adjustment to reconcile net loss to net
cash used by operating activities:
Depreciation 9,059 9,059 373,430
Common stock issued for services 205,000 - 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 487 - 487
Increase (decrease) in accrued
liabilities 138 - 59,880
Net Cash (Used) by Operating
Activities 16,093 (29,249) (2,402,802)
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 from note payable - related 6,986 29,249 547,784
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 $ 56,986 $ 29,249 $ 3,945,822
</TABLE>
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception on
For the June 18, 1984
Three Months Ended Through
March 31, March 31,
2000 1999 2000
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 73,079 $ - $ 73,079
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - - -
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 73,079 $ - $ 73,079
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 $ 205,000 $ - $ 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
March 31, 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.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 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
March 31, 2000. The Company has net operating loss carryforwards of
approximately $4,522,000 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
March 31, 2000
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (198,591) 14,662,370 $ (0.01)
For the Three Months Ended
March 31, 1999
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (38,308) 10,644,018 $ (0.00)
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
March 31, 2000 and December 31, 1999
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
March 31, December 31,
2000 1999
Equipment consists of the following:
Research equipment $ 181,187 $ 181,187
Less: accumulated depreciation (131,449) (122,390)
Net Equipment $ 49,738 $ 58,797
Amounts charged to depreciation expense were $9,059 and $36,237 for the period
ended March 31, 2000 and December 31, 1999, respectively.
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 $5,116, which also bear interest at 10%, are unsecured and due on
demand. Thus, making total related part debt $8,410 at March 31, 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.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
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.
In March 2000, the Company issued 200,000 shares of common stock for cash at
$0.25 per share.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
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 March 31, 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 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.
<PAGE>
Item 2. 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 for production of cadmium telluride
substrates for use in semiconductors. This model was developed by the
Company's President, Dr. William F. 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:
During the quarterly period ended March 31, 2000, Verity provided
the Company with $50,000 in exchange for 200,000 "unregistered"
and "restricted" shares of common stock. These shares were issued
on March 24, 2000;
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.
With the exception of Verity's subscription for the initial 200,000
"unregistered" and "restricted" shared, 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 6 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 four test
crystal growths in the last two years, with the latest one completed at the
end of the March 31, 2000 quarter.
Liquidity.
- ----------
The Company received no revenues during the quarterly periods ended
March 31, 2000, and 1999. Net losses for these periods were $198,591 and
$38,308, 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ----------------------------
None; not applicable.
Item 2. Changes in Securities and Use of Proceeds.
- ---------------------------------------------------
On March 24, 2000, the Company issued 200,000 "unregistered" and
"restricted" shares of its common stock to Verity Global Financial, LLC, in
consideration of the sum of $50,000 dollars. These proceeds have been
allocated to working capital. For additional information about the Company's
relationship with Verity Global Financial, see Part I, Item 2 of this Report.
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 10-SB, filed with
the Securities and Exchange Commission on August 30,
1999. *
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
* This document, together with related exhibits,
has previously been filed with the Securities
and Exchange Commission and is 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: 11 May 2000 By: /s/ William F. Pratt
-------------- -------------------------------------
William F. Pratt
CEO, President and Director
Date: 11 May 2000 By: /s/ David R. Porter
-------------- -------------------------------------
David R. Porter
Secretary/Treasurer and Director
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