<PAGE>
As filed with the Securities and Exchange Commission on January 10, 2001.
Registration No. 333-41342
==============================================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. 2)
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
--------------------------------------------
(Name of small business issuer in its charter)
Utah 334414 87-0427597
------ ------ ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
923 West 500 North
Lindon, Utah 84042
(801) 785-6294
--------------
(Address and telephone number of principal executive offices)
923 West 500 North
Lindon, Utah 84042
------------------
(Address of principal place of business
or intended principal place of business)
David R. Porter
923 West 500 North
Lindon, Utah 84042
------------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 500
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
==============================================================================
CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price per Offering Registration
Registered Registered Share (1) Price (1) Fee
---------- ---------- --------- --------- ---
Common Stock
underlying 1,000,000 $1.28125 $1,281,250 $338.25
Warrants(2) . . . . shares
==============================================================================
(1) Estimated solely for the purpose of calculating the registration fee
under Rule 457(c) under the Securities Act on the basis of the average of the
bid and asked price of our common stock as quoted on the OTC Electronic
Bulletin Board on June 15, 2000.
(2) In accordance with Rule 416 under the Securities Act of 1933, as amended,
a presently indeterminable number of shares of common stock are registered
hereunder which may be issued in the event the anti-dilution provision of the
Warrants becomes operative.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
1,000,000 Shares of Common Stock
This prospectus covers an aggregate of 1,000,000 shares of our
common stock, which may be sold, from time to time, by one of our
stockholders, Verity Global Financial, LLC.
Our common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc., under the symbol "GTSM."
These securities involve a high degree of risk. See the caption
"Risk Factors," beginning on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of the prospectus. Any representation to
the contrary is a criminal offense.
The date of this prospectus is __________, 2001.
1
<PAGE>
TABLE OF CONTENTS
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Forward-Looking Information . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination of Offering Price and Dilution. . . . . . . . . . . . . . 7
Selling Security Holder . . . . . . . . . . . . . . . . . . . . . . . .7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . .8
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Directors, Executive Officers, Promoters and Control Persons . . . . . 11
Security Ownership of Certain Beneficial Owners and Management . . . . 13
Description of Securities . . . . . . . . . . . . . . . . . . . . . . .15
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . .17
Disclosure of Commission Position on Indemnification for Securities . .17
Act Liabilities
Description of Business . . . . . . . . . . . . . . . . . . . . . . . 19
Management's Discussion and Analysis or Plan of Operation . . . . . . .27
Description of Property . . . . . . . . . . . . . . . . . . . . . . . .32
Certain Relationships and Related Transactions . . . . . . . . . . . . 32
Market for Common Equity and Related Stockholder Matters . . . . . . . 34
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 35
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 38
Changes in and Disagreements with Accountants on Accounting and . . . .75
Financial Disclosure
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .75
Dealer Prospectus Delivery Obligations . . . . . . . . . . . . . . . . 75
2
<PAGE>
PROSPECTUS SUMMARY
GALTECH SEMICONDUCTOR MATERIALS, INC.
-------------------------------------
The Company
-----------
Galtech conducts research and development of a reliable method for
growing large, single crystal semiconductor material using cadmium telluride
and cadmium zinc telluride.
Our principal executive offices are located at 923 West 500 North,
Lindon, Utah 84042. Our telephone number is (801) 785-6294.
The Offering
------------
Securities offered by us . . . None
Securities that may be sold
by our stockholders . . . . . . 1,000,000 shares of our common stock. These
shares underlie warrants that we have granted
to Verity Global Financial, LLC, a Texas
limited liability company.
Use of proceeds . . . . . . . . We will not receive any money from the
selling stockholder when it sells its shares
of common stock.
Offering Price . . . . . . . . .Market prices prevailing at the time of sale,
at prices related to the prevailing market
prices, at negotiated prices or at fixed
prices, all of which may change. On December
4, 2000, the price of our common stock as
quoted on the OTC Bulletin Board was $0.55.
Transfer Agent . . . . . . . . .American Registrar & Transfer Company,
342 East 900 South, Salt Lake City, Utah
84110, serves as the transfer agent and
registrar for our outstanding securities.
We have agreed to pay all costs and expenses relating to the
registration of our common stock, but the selling stockholder will be
responsible for any related commissions, taxes, attorney's fees and related
charges in connection with the offer and sale of these securities. Verity may
sell its common stock through one or more broker-dealers, and these broker-
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from Verity.
3
<PAGE>
RISK FACTORS
------------
Our limited operating history creates uncertainty about our chances
of success.
-----------
Although Galtech was incorporated in 1984, it stopped operating in
1990 and has only recently recommenced its operations. You should be aware of
the difficulties that new companies in a highly competitive industry normally
encounter. We have limited evidence that our business plans will prove
successful or that we will be able to market our products successfully. We
can not assure you that we will be able to operate profitably in the future.
If we can not prove our production technology, we may have to cease
operations.
-----------
To date, we have been unsuccessful in our efforts to develop a
consistent, reliable method for producing high quality, round wafers of
cadmium telluride. We can not guarantee that we will succeed. If we fail in
these efforts, we will have no product to sell and no source of revenue and
our business is likely to fail.
Our history of losing money creates uncertainty about our ability to
make a profit in the future.
----------------------------
During the past three and one-half years, we have received gross
revenues of only $42,000. We have had increasingly large net losses in each
fiscal year. In the foreseeable future, we are likely to report losses on an
annual basis. We can not assure you that our business operations will ever be
profitable.
If Verity does not exercise its warrants, we may ultimately have to cease
operations.
-----------
We have granted to Verity warrants to purchase up to 1,000,000
shares of our common stock at a price of $0.25. We plan to use any proceeds
from the warrant exercises for research and development. If Verity does not
exercise its warrants, we will have enough money to conduct these activities
only until April, 2001. If we are not able to produce marketable amounts of
cadmium telluride wafers by then, we will have to obtain additional funding
before continuing our operations.
A weakening economy may make it harder for us to sell any products
we develop.
-----------
Any substantial downturn in economic conditions or any significant
price decreases in the semiconductor industry could reduce our sales of any
product we may develop and would make it harder for us to earn a profit.
Economic conditions such as inflation may also make attractive financing rates
for Galtech or its customers unavailable and may also make it more difficult
for us to receive future funding and revenues.
Unless we create a source of revenue, we will not be able to stay in
business.
---------
We will have no source of revenue until we have shown that we can
produce marketable amounts of high quality cadmium telluride. Our operations
are still in a research and development phase. We can not assure you that we
will succeed in our production efforts. If we are unsuccessful, we will have
to cease operations.
4
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The auditor's "going concern" opinion in our financial statements
creates additional doubt about our ability to stay in business.
---------------------------------------------------------------
The Independent Auditors' Report issued with our audited financial
statements for the calendar years ended December 31, 1999, and 1998, expresses
"substantial doubt about [our] ability to continue as a going concern," due to
our status as a development stage company and our lack of significant
operating results.
If we do not get additional financing, our operations will fail.
----------------------------------------------------------------
Galtech will need substantial additional funding in order to refine
its production model and begin producing enough cadmium telluride to sell. We
will use this funding to upgrade our control software and to purchase three
additional production furnaces and equipment. If we can not get this
financing, we will be able to produce only small amounts of our product and we
may be unable to produce enough material to become profitable. We can not
assure you that we will be able to raise enough funding to make our operations
viable.
If we lose Dr. Pratt or Mr. Porter, we may have trouble locating
replacement personnel with enough technical expertise.
------------------------------------------------------
Our research and development operations depend heavily upon the
technical expertise of William F. Pratt and David R. Porter. The loss of
either Dr. Pratt or Mr. Porter will seriously limit these activities and will
delay our efforts to create a marketable product. Because of the highly
specialized nature of cadmium telluride research, we would probably have
difficulty finding technical personnel to replace them. Galtech does not
carry "key man" insurance on the lives of Dr. Pratt or Mr. Porter.
Our research and development program will be delayed because our
management does not have to spend very much time on our activities.
-------------------------------------------------------------------
Other entities employ our officers full-time. Our officers have not
been able to devote their full time to Galtech's affairs due to delays in
funding. Because of their time commitments, we expect that management will
devote only part time attention to Galtech's activities, at least until
Galtech has tested and refined it production methods and is able to produce
marketable amounts of product.
5
<PAGE>
Our limited resources may make us unable to compete in a rapidly
changing industry.
------------------
Our limited capital resources could make us unable to develop new
technologies or to respond to our competitors' technological changes. This
could make our products obsolete. If we do not make products that users want
to buy, we will have to go out of business.
Our officers' potential conflicts of interest may make it harder for
us to proceed with our planned operations.
------------------------------------------
Our directors and officers may become officers, directors,
controlling shareholders or partners of other entities engaged in a
variety of businesses not related to Galtech's business. Potential conflicts
of interest exist due to time, effort and corporate opportunity involved in
participation with these other business entities.
You will not be able to sell your shares of our common stock if an
established public market does not develop.
-------------------------------------------
The public market for our common stock is very limited. We can not
guarantee that an established market will develop. If we are not able to
develop an established market, our investors may not be able to sell our
shares.
FORWARD-LOOKING INFORMATION
---------------------------
This prospectus contains "forward-looking" information within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements contained in this prospectus involve known and unknown
risks, uncertainties and other factors that could cause actual results,
financial or operating performance to differ from the future results,
financial or operating performance or achievements expressed or implied by
these forward-looking statements. You should read the prospectus summary and
the "Risk Factors" section along with the more detailed information ,
financial statements and the notes to the financial statements in this
prospectus before you decide whether to purchase the common stock described in
this prospectus.
6
<PAGE>
USE OF PROCEEDS
---------------
Galtech will not receive any part of the proceeds from Verity's sale
of our common stock.
DETERMINATION OF OFFERING PRICE AND DILUTION
--------------------------------------------
We will not receive any money from Verity when it sells its shares
of common stock. Verity may sell all or part of its shares in private
transactions or in the over-the-counter market at prices related to the
prevailing prices of our common stock at the time of negotiation. Because we
can not accurately predict the prices of these sales, we can not accurately
estimate the amount of any dilution that may result from the purchase of these
shares. However, the net tangible book value of our common stock on September
30, 2000, was $0.013 per share. Net tangible book value per share is
determined by subtracting our total liabilities from our total tangible assets
and dividing the remainder by the number of shares of common stock
outstanding.
We can not assure you that any public market for our common stock
will equal or exceed the sales price of the shares of common stock sold by our
stockholders. Purchasers of the shares face the risk that their shares will
not be worth what they paid for them.
SELLING SECURITY HOLDER
------------------------
The following table shows the following information for Verity:
The number of shares of our common stock that it beneficially owned as
of June 15, 2000 and covered by this prospectus; and
The number of shares to be retained after this offering, if any.
Common Stock (1)
----------------
Number of Shares Number of Shares Number of Shares
Name of Selling Owned Prior to Registered in Beneficially Owned
Stockholder the Offering the Offering after the Offering
----------- ------------ ------------ ------------------
Verity Global 1,200,000 (2) 1,000,000 1,000,000 (3)
Financial, LLC
(1) We assume that Verity will not purchase any shares of common stock
under this offering.
(2) Of this amount, Verity holds 200,000 "unregistered" and "restricted"
shares. The remaining 1,000,000 shares underlie warrants to purchase the
shares at a price of $0.25 per share and are the shares being registered in
this offering.
(3) In addition to the 200,000 shares that it currently owns, Verity has
agreed to purchase 800,000 "unregistered" and "restricted" shares within 90
days of the effective date of the Registration Statement of which this
prospectus is a part.
7
<PAGE>
PLAN OF DISTRIBUTION
--------------------
We are registering the shares of our common stock covered by this
prospectus.
We will pay the costs, expenses and fees of registering the common
stock, but Verity will pay any underwriting or brokerage commissions and
similar selling expenses relating to the sale of shares of its common stock.
Verity may sell our common stock at market prices prevailing at the
time of the sale, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices, any of which may change. Verity may
sell some or all of its common stock through:
Ordinary broker's transactions, which may include long or short
sales;
Purchases by brokers, dealers or underwriters as principal and
resale by those purchasers for their own accounts under this
prospectus;
Market makers or into an existing market for the common stock;
Transactions in options, swaps or other derivatives; or
Any combination of the selling options described in this
prospectus, or by any other legally available means.
In addition, Verity may enter into hedging transactions with broker-
dealers, who may engage in short sales of our common stock in the course of
hedging the positions they assume. Finally, Verity may enter into options or
other transactions with broker-dealers that require the delivery of our common
stock to those broker-dealers. Subsequently, the shares may be resold under
this prospectus.
In its selling activities, Verity will have to comply with
applicable provisions of the Securities Exchange Act of 1934, and its rules
and regulations, including Regulation M. These may limit Verity's timing of
purchases and sales of our common stock.
Verity and any broker-dealers involved in the sale or resale of our
common stock may qualify as "underwriters" within the meaning of Section 2(11)
of the Securities Act of 1933. In addition, the broker-dealers' commissions,
discounts or concessions may qualify as underwriters' compensation under the
Securities Act of 1933. If any broker-dealer or Verity qualifies as an
"underwriter," it will have to deliver our prospectus as required by Section
154 of the Securities Act of 1933. In addition, any broker-dealer that
participates in a distribution of these shares will not be able to bid for,
purchase or attempt to induce any person to bid for or purchase as long as it
is participating in the distribution. The ability of participating broker-
dealers to stabilize the price of our shares will also be restricted.
8
<PAGE>
If it sells our shares to or through brokers, dealers or agents,
Verity may agree to indemnify these brokers, dealers or agents against
liabilities arising under the Securities Act of 1933. We do not know of any
existing arrangements between Verity and any other stockholder, broker,
dealer, underwriter or agent relating to the sale or distribution of our
common stock.
In addition to selling its common stock under this prospectus,
Verity may:
Transfer its common stock in other ways not involving market
makers or established trading markets, including by gift,
distribution or other transfer; or
Sell its common stock under Rule 144 of the Securities Act of
1933, if the transaction meets the requirements of Rule 144.
We have advised Verity that, during the time it is engaged in
distribution of its common stock, it must comply with Rule 10b-5 and
Regulation M under the Securities Exchange Act of 1934. It must do all of the
following under those rules:
Not engage in any stabilization activity in connection with our
common stock;
Furnish each broker who may be offering our common stock on its
behalf the number of copies of this prospectus required by each
broker;
Not bid for or purchase any of our common stock or attempt to
induce any person to purchase any of our common stock, other
than
as permitted under the Securities Exchange Act of 1934;
Not use any device to defraud;
Not make any untrue statement of material fact or fail to state
any material fact; and
Not engage in any act that would operate as a fraud or deceit
on
any person in connection with the purchase or sale of our
shares.
To the extent that it may be an "affiliated purchaser," as defined
in Regulation M, Verity has been further advised that it must coordinate its
sales under this prospectus with us for the purposes of Regulation M.
9
<PAGE>
To the extent required by the Securities Act of 1933, a supplemental
prospectus will be filed, disclosing:
The name of any broker-dealers;
The number of securities involved;
The price at which the securities are to be sold;
The commissions paid or discounts or concessions allowed to the
broker-dealers, where applicable;
That the broker-dealers did not conduct any investigation to
verify the information set out in this prospectus, as
supplemented; and
Other facts material to the transaction.
In addition to the registered shares covered by this prospectus,
Verity owns 200,000 "unregistered" and "restricted" shares and has agreed to
purchase an additional 800,000 "unregistered" and "restricted" shares within
90 days of the effective date of the Registration Statement of which this
prospectus is a part. Once Verity has held these shares for one year, it will
be able to begin selling these shares under Rule 144 of the Securities and
Exchange Commission. Under Rule 144, Verity will be able to sell up to one
percent of our total outstanding shares or the average weekly trading volume
of our shares, whichever is greater, during any three month period. Other
restrictions will apply to Verity's sale of "unregistered" and "restricted"
shares. For example, we will have to have current publicly available
information about Galtech and its operations. Verity will also have to sell
these shares in unsolicited market transactions and will not be able to pay
any consideration in connection with its sales, other than the usual and
customary broker's transactions. On March 24, 2001, Verity will have held its
200,000 "unregistered" and "restricted" shares for one year.
There is no assurance that Verity will sell any of our common stock.
LEGAL PROCEEDINGS
-----------------
We are 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 us. No director, executive
officer or other person who may be deemed to be an "affiliate" of Galtech or
owner of record or beneficially of more than five percent of our common stock
is a party adverse to Galtech or has a material interest adverse to Galtech in
any proceeding.
A judgment in the amount of $40,563 was entered against us in
December, 1992. This amount is included as an account payable in the
Company's consolidated financial statements.
10
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The following table sets forth the names of all of our current
directors and executive officers. 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 52 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. Dr. Pratt consulted for the Defense Advanced
Research Projects Agency, Metron, Cimetrix and Galtech from 1995 to August
1998. Dr. Pratt has invented several patent-pending technologies dealing with
composite materials and machine design. He is the President of Patterned
Fiber Composites, Inc., a startup software and engineering company that is
developing products for the aerospace and sports equipment markets. He
started that company in November 1997. Dr. Pratt has successfully negotiated
and obtained two Small Business Innovative Research Contracts with the United
States government to do leading edge research in damped composite structural
materials. He has developed analysis software, production machinery, test
11
<PAGE>
equipment and prototype products dealing with this new and innovative
material. Dr. Pratt closely supervises and oversees all aspects of company
business including marketing, technology development, financial statement
preparation and human resources. He holds several patents relating to the
composite technology. This technology is not directly related to Galtech's
business.
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. From 1995 to August 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.
Worth P. Allred, Vice President, Research and Development, Director.
Mr. Allred is 74 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. He has spent the past five
years conducting research in cadmium telluride and cadmium zinc telluride
crystal growth at Galtech. Mr. Allred has published over 33 papers in the
area of crystal growth.
David R. Porter, Secretary/Treasurer and Director. Mr. Porter, age
43, worked for the Maricopa County Facilities Department in Phoenix Arizona,
from 1991 to 1997, in addition to consulting with Galtech in the development
of a crystal growth furnace and software for control systems. Mr. Porter is
currently employed by Patterned Fiber Composites, Inc. as shop foreman.
Patterned Fiber Composites shares its facilities with Galtech. He continues
to direct our manufacturing facilities development. Galtech has the exclusive
license to distribute, use, make and sublease U. S. Patent No. 5,625,241,
which Mr. Porter co-invented. This technology relates to a carousel electric
motor generator system. We are not currently using the license for the
patent, and we have no immediate plans to do so.
Time Commitments by Management.
-------------------------------
Dr. Pratt and David Porter currently devote about 10 hours per week
to Galtech's business, for which they are not compensated. Dr. Pratt has
committed to spend 20 or more hours per week on Galtech's business once we
have received full funding. Once we have received funding, Mr. Porter has
also committed to spend 20 or more hours per week assisting Dr. Pratt in the
development and management of our technology. Dr. Pratt and Mr. Porter will
adjust their time commitments upward as necessary. Kent Holt is currently
managing our marketing efforts on a part-time basis and will devote five or
more hours per week as necessary. Worth Allred serves as a senior scientist
for crystal growth technology and has committed to spend up to 20 hours per
week on our business as necessary.
12
<PAGE>
Significant Employees.
----------------------
We do not currently have any employees who are not executive
officers, but who are expected to make a significant contribution to our
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
Galtech:
(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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth the share holdings of our directors
and executive officers and those persons who owned more than five percent of
our common stock as of April 18, 2000:
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class
---------------- ------------------ --------
<S> <C> <C>
William F. Pratt 1,000,000 6.7%
1184 East 830 South
Pleasant Grove, Utah
84062
13
<PAGE>
S. Kent Holt 382,560 (1) 2.6%
18320 Lochner Road
Spencerville, Indiana
46788
Worth P. Allred 1,000,000 (2) 6.7%
Post Office Box 120
Moroni, Utah
84646
David R. Porter 989,717 6.7%
286 W. Thorneberry Way
Pleasant Grove, Utah
84062
William Tunnell 1,000,000 (3) 6.7%
20165 N. 67th Ave., #122A
Glendale, Arizona 85308
Russell R. Chapman 500,003 3.3%
1242 N. Palm Springs Dr.
Gilbert, Arizona
85234
W. D. Newman 1,000,000 6.7%
3647 Sky Harbor Drive
Coeur d'Alene, Idaho
83814
Firm International
Group Trust 898,000 6.4%
550 South 76th Place
Mesa, Arizona 85208
Verity Global Financial, 800,000 (4) 5.4%
LLC
3621 Frankford Drive
Suite 328
Dallas, Texas 75287
</TABLE>
(1) Does not include options to acquire an additional 500,000
shares. See the caption "Executive Compensation" of this
prospectus.
14
<PAGE>
(2) A total of 800,000 of these shares are held in joint tenancy
with Mr. Allred's wife.
(3) We are holding these shares until Mr. Tunnell performs certain
obligations under our Agreement for Financial Public Relations
Services. See the heading "Other Compensation" under the
caption "Executive Compensation."
(4) This figure includes 200,000 shares that Verity currently owns,
and 600,000 shares that Verity is entitled to purchase on the
effective date of the registration statement of which this
prospectus is a part. Under the Securities Purchase Agreement,
Verity also has the right to purchase 800,000 shares of our
common stock and to exercise a supplemental warrant to
purchase 400,000 shares of our common stock 90 days after the
effective date of the registration statement. If it purchases
these securities, it will beneficially own approximately 12% of
our then-outstanding shares, assuming that we do not issue or
cancel any shares in the meantime. V. L. Farmer, who is the
managing director and the sole control person of Verity, may be
considered the beneficial owner of these securities.
Changes in Control.
-------------------
To the knowledge of management, there are no present arrangements or
pledges of our securities which may result in a change in control of Galtech.
DESCRIPTION OF SECURITIES
-------------------------
We have one class of securities authorized. This class consists of
200,000,000 shares of common voting stock with a par value of $0.00025 per
share. The holders of our common stock are entitled to one vote per share on
each matter submitted to a vote at a meeting of stockholders. The shares of
common stock do not carry cumulative voting rights in the election of
directors.
Our common stockholders have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock
carries no subscription or conversion rights. All shares of common stock now
outstanding are fully paid and non-assessable.
Our common stock is currently quoted on the OTC Bulletin Board of
the NASD. However, there has been no "established public market" for our
common stock during the last five years. If we ever meet the eligibility
requirements, we may try to qualify for quotation on either NASDAQ or a
national securities exchange. However, at least initially, our stock will
probably trade on the OTC Bulletin Board.
There is no correlation between the market price of our common stock
and its book value. As of September 30, 2000, the net book value of a share
of our common stock was $0.013. The average closing bid price during the
quarterly period ended on that date was $1.03125 per share. That amount does
not necessarily bear any relationship to our asset value, net worth or
other established criteria of value. You should not consider it indicative of
Galtech's actual value or the market price of its common stock.
Our common stock is "penny stock" as defined in Reg. Section
240.3a51-1 of the Securities and Exchange Commission. Penny stocks are
stocks:
15
<PAGE>
with a price of less than five dollars per share;
that are not traded on a "recognized" national exchange;
whose prices are not quoted on the NASDAQ automated quotation
system; or
in issuers with net tangible assets less than $2,000,000, if
the
issuer has been in continuous operation for at least three
years, or $5,000,000, if in continuous operation for less than
three years, or with average revenues of less than $6,000,000 for
the last three years.
Section 15(g) of the Securities Exchange Act of 1934 and Reg.
Section 240.15g-2 of the Securities and Exchange Commission require
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before making any transaction in
a penny stock for the investor's account. You are urged to obtain and read
this disclosure carefully before purchasing any of our shares.
Reg. Section 240.15g-9 of the Securities and Exchange Commission
requires broker-dealers in penny stocks to approve the account of any investor
for transactions in these stocks before selling any penny stock to that
investor. This procedure requires the broker-dealer to:
get information about the investor's financial situation,
investment experience and investment goals;
reasonably determine, based on that information, that
transactions
in penny stocks are suitable for the investor and that the
investor can evaluate the risks of penny stock transactions;
provide the investor with a written statement setting forth the
basis on which the broker-dealer made his or her determination;
and
receive a signed and dated copy of the statement from the
investor, confirming that it accurately reflects the investor's
financial situation, investment experience
and investment goals.
Compliance with these requirements may make harder for our investors
to resell their shares to third parties.
Of the 14,844,018 shares of our common stock that were issued and
outstanding on June 15, 2000, 8,062,213 shares are "restricted."
Approximately 7,862,213 of these "restricted" shares are currently eligible
for resale under Rule 144 of the Securities and Exchange Commission. The
remaining 200,000 "restricted" shares will become eligible for resale under
Rule 144 by March, 2001.
16
<PAGE>
Under Rule 144, if certain information about Galtech is publicly
available, people who have held our restricted securities for at least one
year may sell up to one percent of our outstanding common stock or the average
weekly reported volume in our common stock. Under Rule 144(k), non-affiliates
may make unlimited sales of our restricted stock if they have held our shares
for two years. Future sales under Rule 144 or Rule 144(k) could depress the
market price of our shares.
Outstanding Options, Warrants and Calls
---------------------------------------
On May 26, 2000, Galtech and Verity executed a Securities Purchase
Agreement under which we issued to Verity warrants to purchase up to 1,000,000
shares of our common stock at a price of $0.25 per share. A total of 600,000
of these warrants were designated "Initial Warrants" and are exercisable for
30 days after the effective date of the Registration Statement of which this
prospectus is a part. The remaining 400,000 warrants are called "Supplemental
Warrants." They are exercisable for a 30-day period beginning 90 calendar
days after the effective date of the Registration Statement. The 1,000,000
shares of common stock underlying the warrants are the only securities covered
by this prospectus or the Registration Statement.
In addition to the warrants, Verity agreed to purchase 800,000
"unregistered" and "restricted" shares of our common stock for a total
purchase price of $200,000. The purchase price is payable 90 calendar days
after the effective date of the Registration Statement. See the caption
"Management's Discussion and Analysis" of this prospectus.
Other than the warrants and Mr. Holt's options to acquire up to
500,000 shares of the our common stock at a price of $0.27 per share, there
are no outstanding warrants, options or calls with respect to our common
stock. See the caption "Executive Compensation" of this prospectus.
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
We have included our financial statements as of December 31, 1999,
in reliance on the report of Jones, Jensen & Company, which is now known as
"HJ & Associates, LLC", independent certified public accountants, appearing
elsewhere, and upon the authority of that firm as experts in accounting and
auditing.
We have not hired any expert or counsel on a contingent basis. No
expert or counsel will receive a direct or indirect interest in Galtech, and
no such person was a promoter, underwriter, voting trustee, director, officer
or employee of Galtech.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Section 16-10a-902(1) of the Utah Revised Business Corporation Act
authorizes a Utah corporation to indemnify any director against liability
incurred in any proceeding if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
17
<PAGE>
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful.
Section 16-10a-902(4) prohibits a Utah corporation from
indemnifying a director in a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation or in a
proceeding in which the director was adjudged liable on the basis that he or
she improperly received a personal benefit. Otherwise, Section 16-10a-902(5)
allows indemnification for reasonable expenses incurred in connection with a
proceeding by or in the right of a corporation.
Unless limited by the Articles of Incorporation, Section 16-10a-905
authorizes a director to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction. Section 16-10a-907(1)
extends this right to officers of a corporation as well.
Unless limited by the Articles of Incorporation, Section 16-10a-903
requires that a corporation indemnify a director who was successful, on the
merits or otherwise, in defending any proceeding to which he or she was a
party against reasonable expenses incurred in connection with that defense.
Section 16-10a-907(1) extends this protection to officers of a corporation as
well.
Under Section 16-10a-904(1), the corporation may advance a director's
expenses incurred in defending any proceeding upon receipt of an undertaking
and a written affirmation of his or her good faith belief that he or she has
met the standard of conduct specified in Section 16-10a-902. Unless limited
by the Articles of Incorporation, Section 16-10a-907(2) extends this
protection to officers, employees, fiduciaries and agents of a corporation as
well.
Regardless of whether a director, officer, employee, fiduciary or
agent has the right to indemnity under the Utah Revised Business Corporation
Act, Section 16-10a-908 allows the corporation to purchase and maintain
insurance on his or her behalf against liability resulting from his or her
corporate role.
This is only a summary of the indemnification provisions of the Utah
Revised Business Corporation Act.
Neither our Articles of Incorporation, as amended, nor our Bylaws
contain any provisions about indemnification of our directors and executive
officers. However, the provisions of the Utah Revised Business Corporation
Act will apply.
If indemnification for liabilities arising under the Securities Act
of 1933 is permitted to directors, officers and controlling persons of Galtech
under these provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission this indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
18
<PAGE>
DESCRIPTION OF BUSINESS
-----------------------
Business Development.
---------------------
Galtech 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, Galtech was authorized to issue 50,000,000 shares
of common voting stock, par value $0.001 per share, with fully-paid
stock not to be liable for further call or assessment.
Charter Amendments
------------------
Since its inception, Galtech has amended its Articles of
Incorporation as follows:
On January 29, 1986, 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.
On September 9, 1986, changed its name to "Galtech
Semiconductor
Materials Corporation.
On February 24, 1995, effected a 20-to-one reverse split of its
outstanding shares, with fractional shares rounded to a whole
share.
Unless otherwise indicated, all computations in this prospectus take
into account these adjustments.
General History
---------------
Galtech began operating in approximately January, 1986. We
conducted research and development of a process for manufacturing cadmium
telluride and the renovation of a manufacturing facility to produce our
products. Cadmium telluride is a compound used in the production of
semiconductors. A fire destroyed our facilities in 1990 and we have only
recently recommenced our semiconductor development activities.
On February 28, 1995, we acquired all of the issued and outstanding
common stock of Commodity Recovery Corporation, a Utah corporation, in
exchange for 500,000 "unregistered" and "restricted" shares of our 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.
19
<PAGE>
Also on February 28, 1995, we 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 was incorporated on February 7, 1994, for the purpose of
developing and producing alternative energy sources.
When we acquired them, 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. We have conducted preliminary testing on the generator and
believe that it has potential for use in electric-powered vehicles. We have
built an electric vehicle for additional testing. However, due to
management's decision to focus on our semiconductor materials operations, we
do not plan to spend very much money on our 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, we began work on modernizing and redesigning our 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. Some of the
electronics and controls had not been updated for at least 15 years. Updates
to the prototype equipment have included installation of new computers and
software, power electronics and improvements to the crystal growth equipment.
Future plans for expansion will depend on our success with semiconductor
growth.
Our equipment consists of a walk-in growth furnace area and computer
equipment to monitor the crystal growth. It is located at our facility in
Lindon, Utah. It is currently in a prototype/research state. We are changing
it constantly to incorporate new concepts and to make incremental improvements
based on results to date. This will continue as the process is perfected.
Business.
---------
Our principal operations focus on the development and commercial
exploitation of a new and more economical method of growing cadmium telluride
and related compounds with zinc and mercury semiconductor compounds.
Prior to a 1990 fire in our facilities, we had successfully
produced cadmium telluride crystal wafers of up to four to six square inches.
Previous commercially manufactured cadmium telluride wafers had been only one
to two square inches. In addition, we were able to produce round wafers,
rather than the customary D-shaped and rectangular wafers. Industry users
prefer round wafers.
20
<PAGE>
We are now concentrating our efforts on refining our methods for
producing cadmium telluride and cadmium zinc telluride wafers and reproducing
our earlier production results. In the future, depending on the success of
our research and development efforts, market conditions and our success with
our principal operations, we will consider developing similar crystals made
from the following compounds: indium phosphide; indium antimonide; gallium
antimonide; and gallium arsenide.
Principal Products or Services and Their Markets.
-------------------------------------------------
We are attempting to develop a reliable and repeatable process for
growing large area, single crystal, cadmium telluride semiconductor material.
Each class of semiconductor material has its own unique properties that make
it useful for specific applications. Cadmium telluride and cadmium zinc
telluride are useful as photo cathodes -- the detector part of the device --
in night vision instruments, focal plane arrays for aerospace guidance and
imaging devices and as radiation detectors for medical imaging equipment, to
name a few uses. In these applications, the cadmium telluride is used to
convert different parts of the light spectrum, such as infrared light, x-rays
and gamma rays, into an electronic signal that is used by computers to produce
an image for the operator. The market for these devices has traditionally been
military due to the high production costs of the cadmium telluride crystals.
As the production costs decrease and these devices are adapted for consumer
use, we expect the market for cadmium telluride and cadmium telluride
compounds of mercury and zinc to expand.
Worth P. Allred, our senior scientist for crystal research and
development, was able to produce large -- four centimeters by three
centimeters -- crystalline wafers of cadmium telluride with rocking curve
measurements of 9.6 to 20 arc seconds. Arc seconds measure the amount of
scatter when a gamma ray is projected onto a material. The lower the reading,
the better. Rocking curve measurements indicate how uniform the crystal
lattice is in the material. The more uniform the lattice, the fewer flaws in
the material and the better the material is at performing its intended
function. Previous best measurements were 34 to 50 arc seconds. Washington
State University's independent analyses of material produced by Mr. Allred
documented the high quality of these wafers. (Khan, A.A., et al., Growth and
Structural Properties of Low Defect, Sub-Grain Free CdTe Substrates Grown by
the Horizontal Bridgman Technique. Journal of Electronic Materials, Vol. 15,
Number 3, 1986.)
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, infrared night vision devices, tumor detectors, nuclear
radiation and gamma detectors, spectrometers for chemical identification,
nuclear medicine, astronomy and related applications. (Whitaker, T., Picture
This, Compound Semiconductor, Vol. 4 Number 4, 17-20, May 1998).
21
<PAGE>
A Discover Magazine article cited a July 1997 award to Sandia
National Laboratories for development of a compact cadmium zinc telluride
sensor. The following is quoted from the award citation: "Since these sensors
are compact and work at room temperature, they could be used not only for
monitoring plutonium but also for detecting environmental radioactivity,
exploring for minerals, and helping doctors find tumors."
Cadmium telluride can be used in high capacity solar cells.
(Galloway, S.A, Characterisation of thin film CdS/CdTe solar cells using
electron and optical beam induced current, Solar Energy Materials and Solar
Cells, Vol. 57 pp. 61-74, 1999.) Cadmium telluride can also be used in high
temperature infrared and near infrared sensors. (Mullins, J.T., Carles, J. and
Brinkman, A.W., High temperature optical properties of cadmium telluride,
Journal of Applied Physics, Vol. 81, No. 9, pp. 6374-6379, 1997.)
Cadmium telluride, cadmium zinc telluride and cadmium mercury
telluride are difficult to grow in high quality crystalline structures, but
are popular in spite of these limitations because of their superior properties
in infrared sensing applications. (Whitaker, T., Picture This, Compound
Semiconductor, Vol. 4 Number 4, 17-20, May 1998),(Rogalski, A. Optical
Engineering. Vol. 36, Pg. 1994.)
Most of our target markets are 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, Germany,
France and Italy. (Private Communication with Sanghamitra Sen, Santa Barbara
Research Center, Raytheon, Goleta CA, August, 1998).
Presently, the only suppliers of specialty semiconductor materials
such as cadmium telluride are supplying at extremely high prices and in very
small and inconsistent quantities. (Private Communication with Sanghamitra
Sen, Santa Barbara Research Center, Raytheon, Goleta CA, August, 1998). Users
of this material have expressed a desire for additional suppliers to
supplement or improve their current sources of material. (Private
Communication with Sanghamitra Sen, Santa Barbara Research Center, Raytheon,
Goleta CA, August, 1998). Our goal will be to provide cadmium telluride
materials in wafer form at lower cost and in larger amounts than other
suppliers. If we are successful in doing this, we expect the interest in
cadmium telluride material to increase not only in military and aerospace
applications but also in a number of non-military applications, the most
notable of which is the medical imaging device area.
While the military and aerospace markets continue to be attractive
markets for us because of the high prices being paid for the cadmium telluride
material for focal plane arrays, these markets appear to be less robust and
growing at a lower rate than the non-military and non-aerospace markets. While
the civilian aerospace demand is growing, the military requirements have been
dropping on a year-to-year basis due to cutbacks in government military
spending. As a result, we believe that our product will allow us to compete
effectively in these important markets where cost and quality are increasingly
important.
22
<PAGE>
The medical imaging market is undergoing a dramatic change and
moving beyond X-film technologies. This change involves the use of
floroscopic techniques that reduce the x-ray dosage to the patient while
providing high definition images. The high degree of clarity in this
technology allows the equipment to be used in cardiac procedures on a beating
heart as well as standard vascular procedures. Currently, cesium iodide
receptors are used in this application. The problem with cesium iodide is
that receptors made from this material can only be used in a curved receptor
that distorts the image and requires special correction of the image to allow
the physician to perform the procedure. Even with correction, the image
remains distorted to some degree.
Cadmium telluride has several advantages over cesium iodide. A flat
panel receptor is possible with cadmium telluride detectors. These detectors
produce a receptor with reduced size, thickness and weight. A true flat image
receptor gives a more constant amount of illumination and is a much better
detector for medical procedures. The potential market for devices using this
type of receptor is about $750 million dollars per year, with the
semiconductor material used in the receptor device being a large part of this
value. (Private communicaton, Market Analysis report-Medical Imaging Market,
Ross Riches, Consultant, Angola, IN, May 2000).
Distribution Methods of the Products or Services.
-------------------------------------------------
In the military and aerospace markets, companies such as Rockwell;
Raytheon (Santa Barbara Research); Texas Instruments; Hewlett-Packard; ITT;
McDonnell Douglas; General Electric and NASA have done work in cadmium
telluride device development or production. Each would be a potential
customer for Galtech. In the medical imaging area, companies such as GE
Medical Systems; Philips Medical Systems; Siemens Medical Systems; Fischer
Imaging; Fluoroscan Imaging Systems; Lunar Corp.; Ziehm International Medical
Systems and Xiscan Medical are all potential customers and users of this
semiconductor material. (Private communicaton, Market Analysis report-Medical
Imaging Market, Ross Riches, Consultant, Angola, IN, May 2000).
If we are successful in our research and development methods for
producing high quality, single crystal cadmium telluride, we expect the cost
and the market price of cadmium telluride based products to decrease. We
believe this will present us with additional market opportunities.
We plan to use both an in-house sales force and contract brokers to
market our products. In our experience, the best and most enduring sales in
the semiconductor industry are made through personal contacts and visits to
the customer's plant. These will be handled by regional representatives.
Status of any Publicly Announced New Product or Service.
--------------------------------------------------------
None; not applicable.
23
<PAGE>
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. As a result, prices range from $900 to $1200 per
square inch for a 20 to 30 thousandths inch thick wafer. Due the lack of
domestic suppliers capable of supplying consistent high quality material, most
military and civilian contractors are forced to grow much of their own cadmium
telluride material. They have told us that they would welcome other suppliers
of this material. (Private Communication with Sanghamitra Sen, Santa Barbara
Research Center, Raytheon, Goleta CA, August, 1998).
Yields. Our present competitors have difficulty growing
monocrystalline structures, or wafers with a single crystal. (Private
Communication with Sanghamitra Sen, Santa Barbara Research Center, Raytheon,
Goleta CA, August, 1998). The proprietary process that we are developing is
designed to provide large area, single crystal cadmium telluride wafers more
efficiently, more cost effectively and of a higher quality than our current
competitors.
Wafer Size and Quality. Due to the current small size of cadmium
telluride wafers, many device manufacturers have begun experimenting with
other wafer materials that could replace cadmium telluride. These
manufacturers have met with moderate success, but would prefer to use a
cadmium telluride wafer if it was available in sufficient quantities and
qualities. (Private Communication with Sanghamitra Sen, Santa Barbara Research
Center, Raytheon, Goleta CA, August, 1998).
Overhead Costs. Using its production protocol, management believes
that the manufacturing costs of Galtech's semiconductor compound materials
will be approximately one-fourth of the overhead and capital equipment costs
of its competitors' methods. We have calculated that we will be able to
operate our facility in the near term with four to five people. This should
significantly reduce our overhead.
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 controls approximately
75 percent of the market for cadmium telluride of one to three square
centimeters. Its product is generally cut from large three-inch multi-crystal
ingots. Nippon Mining is a major supplier of cadmium telluride to the
Japanese market. It also ships to United States users and its materials are
reported to be of good quality. We estimate Nippon Mining's market share at
approximately five to 10 percent.
24
<PAGE>
Sources and Availability of Raw Materials.
------------------------------------------
Our 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, and $228 per 100 gms of 99.999% purity.
We generally purchase 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 Galtech
requires.
Dependence on One or a Few Major Customers.
-------------------------------------------
There is a worldwide shortage of quality cadmium telluride wafers.
We expect that there will be sufficient demand for our products for the
foreseeable future.
Need for Governmental Approval of Principal Products or Services.
-----------------------------------------------------------------
To the knowledge of management, our processes and products
will not require governmental approval.
Effect of Existing or Probable Governmental Regulations on the Business.
------------------------------------------------------------------------
As with other manufacturing companies, Galtech's operations will
have to comply with state and federal workplace safety and environmental
emissions regulations. We intend 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. We will ensure that all
employees that handle cadmium telluride comply with these workplace safety
requirements. In addition, we have installed an air scrubber in our
production furnace to remove cadmium telluride from the air. Galtech 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 one percent of gross profits.
Research and Development.
-------------------------
During the calendar year ending December 31, 1998, we spent $9,553,
on crystal growth research and development. In 1999, we spent $25,411 on
research and development, of which $7,986 was spent for crystal growth
research. The remainder of research and development expenses for 1999 was
donated equipment and effort associated with our motor technology as discussed
below. For the nine months ended September 2000, expenditures on crystal
growth research were $14,751, with $1545 spent on our motor technology. In
summary, $33,808 has been spent during the past 33 months on crystal growth
research.
25
<PAGE>
Galtech received $50,000 in the first calendar quarter of 2000 to
continue research on crystal growth. At the current level, and assuming no
additional funding from investors, Galtech has sufficient funds to pursue
meaningful development of the process through March 2001. Our current
resources will allow us to conduct no more than five crystal growth trials
through that date.
We have been working on the growth of single crystal cadmium
telluride for about two years. During that time, we have conducted four
crystal growths. We only have one growth furnace, so any problem with the
growth of a crystal will stop all progress until the problem is fixed. This
lack of additional furnaces has greatly slowed the development of the process.
If successful with our growth trials before April 2001, 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.
Upon receipt of the anticipated funding from Verity, Galtech will
hire personnel and build additional crystal growth equipment to increase the
level of research and development effort. We anticipate that Galtech will
have enough operating funds for 18 months of intense development effort. See
the caption "Management's Discussion and Analysis or Plan of Operation" for a
discussion of our research and development plans.
In 1999, the former president of Galtech and co-inventor of
Galtech's motor technology purchased a used automobile, an electric conversion
kit, and paid to convert the vehicle from gasoline to electric power. The
vehicle was donated to Galtech for baseline testing, performance evaluation,
and as a test bed for possible future development of the motor technology.
Although we are not actively pursuing development of the technology,
interested individuals are donating their time and effort to evaluate the
current state of the art. In 2000, we spent a total of $1545 to update the
charging system. We do not plan to spend any other significant funds on this
project in the near term.
Costs and Effects of Compliance with Environmental Laws.
--------------------------------------------------------
See the heading "Effect of Existing or Probable Governmental
Regulations on Business."
Number of Employees.
--------------------
Galtech has nine unpaid part-time employees and no full-time
employees. During the next 12 months, management expects that we will have
approximately three to four full-time employees and no part-time employees.
26
<PAGE>
Reports to Security Holders.
----------------------------
The National Association of Securities Dealers, Inc. requires that
all issuers maintaining quotations of their securities on the OTC Bulletin
Board file periodic reports under the Securities Exchange Act of 1934, and
Galtech does file periodic reports with the Securities and Exchange Commission
under Section 13 of the 1934 Act.
The public may read and copy any materials that we file with the
Securities and Exchange Commission at the Commission's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address
of that site is http://www.sec.gov.
We intend to furnish to our stockholders annual reports containing
financial statements audited and reported upon by our independent accounting
firm and other periodic reports as we may determine to be appropriate or as
may be required by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
During the next six months, following receipt of the anticipated
funding from Verity as discussed below, we plan to perform test production
runs. 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,
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.
27
<PAGE>
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 this prospectus and 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,
28
<PAGE>
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.
29
<PAGE>
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.
We have received preliminary results from tests on a boule of our
material. Results were delayed because the U.S. government laboratory
conducting the tests was not able to cut a boule as large as the one we gave
them. As a result, the material had to be sent to on outside firm to be cut
into wafers. Because of the quality and size of the single crystal in the
boule, the laboratory felt compelled to spend more time and money on the
evaluation than previously anticipated.
Overall, the laboratory evaluated the boule as being of moderately
high to high quality. This evaluation is based on a comparison of our
material to material that is currently available from other companies.
The boule contained areas of very large single crystal. Our own
evaluation of the material remaining from the boule after the laboratory
completed its test revealed three crystals with no rotational twins, or
crystals having the same crystal orientation as the main crystal but with a
180 degree phase shift in one of the crystal planes. The largest crystal
accounts for about 70% of the total volume of the sample. This means that we
should be able to get higher yields than the current industry average for high
grade cadmium telluride. The industry average is about 5% to 15%. We are
also encouraged by the fact that this test boule was not seeded. Seeding
involves the use of an existing crystal to cause a new crystal to solidify and
develop the same orientation as the seed crystal. We expect to get even
better results in future runs of boules that are not seeded.
The crystalline material in our boule showed high resistivity. It
is unusual for material grown only from cadmium telluride, without the
addition of a doping agent, to demonstrate high resistivity. Doping agents
give a crystal a positive or negative bias for use in semiconductor
substrates. Resistivity is an important characteristic for certain devices
and detectors. Doping agents such as zinc are generally added to increase
this characteristic. We believe that we will be able to increase the
resistivity of our material even more with the addition of a doping agent.
30
<PAGE>
The laboratory computed the rocking curve of our material as 15 arc
seconds. We believe this further supports the conclusion that the material
was of high quality. We will continue our research and development efforts to
refine the process. Although results to date have been encouraging, 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."
Results of Operations.
----------------------
We have not had any material operations since approximately
1990. In anticipation of renewed operations, we have conducted four test
crystal growths in the last two years. In January, 2000, we began another
experimental crystal growth. The results of a government laboratory analysis
of our material are discussed above.
Liquidity and Capital Resources.
--------------------------------
We 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.
We did not receive any revenues during the nine months ended
September 30, 2000. Our net loss during that period was $240,244, as compared
to a net loss of $205,305 during the nine months ended September 30, 1999.
Russell R. Chapman has paid our costs of preparation of this
prospectus and the Registration Statement of which it is a part and related
legal work. On July 6, 1999, we issued 1,000,000 "unregistered" and
"restricted" shares of our common stock to Mr. Chapman for debt and a
subscription valued at $270,000. As of September 30, 2000, the value of this
stock subscription receivable was $183,002.
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 next 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.
31
<PAGE>
DESCRIPTION OF PROPERTY
-----------------------
Galtech 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. Patterned
Fiber Composites has a two-year lease on the facility, which expires March 31,
2001.
If Galtech is able to raise sufficient funds through its fundraising
efforts with Verity, 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, we will seek out a facility of our own to rent or purchase.
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:
On June 25, 1998, we issued 550,000 shares of our common stock
to
William F. Pratt in exchange for services valued at $66,000, or
$0.12 per share. These services included approximately 1800
hours' worth of work on the development of our crystal growth
process, including modeling and design, as well has his
executive
services as our President and Chief Executive Officer.
On June 25, 1998, we issued 500,000 shares of our common stock
to
S. Kent Holt in exchange for service valued at $60,000, or
$0.12
per share. Mr. Holt has assisted us with market analysis,
identification of potential strategic partners, and making
contact
with potential customers. He worked at these tasks full-time
from
April, 1998, through October of that year. Since then, he has
spent about five hours per week working on our business.
We granted to S. Kent Holt options to purchase up to 500,000
shares of our common stock at a price of $0.27 per share.
On June 25, 1998, we issued 800,000 shares of our common stock
to
Worth P. Allred for services valued at $96,000, or $0.12 per
share. Mr. Allred has assisted us with the development of our
growth process and the analysis of test results.
32
<PAGE>
We 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.
On July 6, 1999, we issued 1,000,000 shares of our common stock
to
David R. Porter in exchange for services valued at $270,000, or
$0.27 per share. These services have included work on our
crystal
growth process and executive services as our Secretary/Treasurer.
Mr. Porter worked full-time on these matters from July, 1996,
to
February, 1999, and has worked about 30 hours per month since
then.
On July 6, 2000, we issued 2,000,000 shares of our common stock
to
William Tunnell for services valued at $540,000, or $0.27 per
share. Since 1997, Mr. Tunnell has spent about 8,330 hours
helping us with investor relations and investment banking
matters.
We are holding 1,000,000 of these shares until we receive
$500,000
in funding from Verity. See the heading "Other Compensation"
under the caption "Executive Compensation."
On July 6, 1999, we issued 1,000,000 shares of our common stock
to
Russell R. Chapman for debt and a subscription valued at
$270,000,
or $0.27 per share. As of September 30, 2000, Mr. Chapman has
paid $86,998 in legal and other expenses for us. This amount
has
been paid toward his stock subscription and, as of September
30,
2000, the stock subscription receivable is valued at $183,002.
The debt and subscription receivable are not evidenced by any
written document.
We valued the shares issued for services based on the approximate
value of these services if rendered by unrelated third parties in an arm's
length transaction. See the caption "Security Ownership of Certain Beneficial
Owners and Management" of this prospectus.
Galtech has a policy that permits it to enter into transactions with
affiliates on terms no less favorable to Galtech than would be available in
similar arm's length transactions with unaffiliated third parties.
33
<PAGE>
Parents of the Issuer.
----------------------
Galtech has no parents.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information.
-------------------
Our common stock is quoted on the OTC Bulletin Board of the NASD,
but there is currently no established market for the stock. We can not assure
you that one will develop or be maintained. For any market that develops for
our common stock, the sale of "restricted securities" under Rule 144 of the
Securities and Exchange Commission may hurt our stock price.
Rule 144 requires that the selling stockholder has held his or her
shares for at least one year. The public must also have access to information
about us. Sellers under Rule 144 may not sell more than a certain number of
shares during any three month period. Their sales must be through unsolicited
broker's transactions, and the sellers must file with the Securities and
Exchange Commission a Notice of Sale on Form 144.
The National Quotation Bureau, LLC, provided the following
quotations. They do not represent actual transactions and they 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
March 31, 2000 4.3125 0.44
June 30, 2000 2 0.75
September 30, 2000 1.3125 0.75
</TABLE>
34
<PAGE>
Holders.
--------
As of the date of this prospectus, we have about 1,662 stockholders.
This figure does not include an indeterminate number of stockholders who may
hold their shares in "street name."
Dividends.
----------
Galtech has not declared any cash dividends with respect to its
common stock. We do not intend to declare dividends in the foreseeable
future. We will not know our future dividend policy until we sell any of our
products. We do not have any material restrictions on our ability to
pay dividends on our securities. However, you should not invest in our shares
if you need the income that dividends provide.
EXECUTIVE COMPENSATION
----------------------
Cash Compensation
-----------------
The following table sets forth the aggregate compensation that
Galtech has paid 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 9/30/00 -0- -0- -0- -0- -0- -0- -0-
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 9/30/00 -0- -0- -0- -0- -0- -0- -0-
35
<PAGE>
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 9/30/00 -0- -0- -0- -0- -0- -0- -0-
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 9/30/00 -0- -0- -0- -0- -0- -0- -0-
and Director
</TABLE>
(1) On July 1, 1998, we granted Mr. Holt options to purchase
500,000 "unregistered" and "restricted" shares of our
common stock at the average closing price of
our stock for the 10 days immediately preceding the
notification of our stockholders of Mr. Holt's
appointment as a director and executive officer. Based
on this formula, the exercise price of the options is
$0.27 per share. Options to purchase 250,000 shares
vested on July 1, 1999, and the options to purchase
the remaining 250,000 shares vested on July 1, 2000.
The options are exercisable for three years from the
date of vesting. Unless otherwise prohibited, Mr. Holt
has had the right to vote all 500,000 shares since
July 1, 1998.
We did not grant any cash compensation, deferred compensation or
long-term incentive plan awards to our management during the years ended
December 31, 1999, or 1998. Other than Mr. Holt's options, we have not
granted any member of management any option or stock appreciation rights.
The following table shows the number and value of our outstanding
options on December 31, 1999.
36
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/SAR
VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY End (#) at FY End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name (1) on Exercise (#) Realized ($) Unexercisable Unexercisable
------------------------------------------------------------------------------
S. Kent Holt -0- -0- 250,000 $41,875 (2)
exercisable
250,000 $41,875 (2)
unexercisable
(1) S. Kent Holt is the only officer to whom we have granted options
in the last three calendar years, or since then.
(2) Calculated based on the $0.4375 closing bid price of Galtech's
common stock on December 31, 1999, less the exercise price of
$0.27 per share.
Bonuses and Deferred Compensation
---------------------------------
None.
Compensation Under Plans
------------------------
None.
Pension Table
-------------
None; not applicable.
37
<PAGE>
Other Compensation
------------------
On October 24, 2000, we entered into an Agreement for Financial
Public Relations Services with William R. Tunnell. Under the Agreement, Mr.
Tunnell is to provide various investor relations and fundraising services for
us, in exchange for 2,000,000 "unregistered" and "restricted" shares of our
common stock. These shares vest as follows:
500,000 shares on July 6, 1999;
500,000 shares upon signing of the Securities Purchase
Agreement
with Verity; and
1,000,000 shares upon receipt of $500,000 in funding from
Verity.
Mr. Tunnell has received his first 1,000,000 shares, and we are
holding the remaining shares until we receive the Verity funding.
Compensation of Directors
-------------------------
Galtech does not have any standard arrangements to compensate
directors for their services as directors. We do not pay our directors for
committee participation or special assignments.
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
-------------
We do not have any employment contracts, compensatory plans or
arrangements, including payments to be received from us, with respect
to any director or executive officer which would result in payments to that
person because of his or her resignation, retirement or other termination of
employment, any change in control of Galtech, or a change in the person's
responsibilities following a change in control of Galtech.
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
Each of our 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.
FINANCIAL STATEMENTS
--------------------
(i) 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
38
<PAGE>
(ii) Consolidated Financial Statements
September 30, 2000 and December 31, 1999
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
39
<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
40
<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
The accompanying notes are an integral part of these consolidated financial
statements.
41
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
</TABLE>
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
45
<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
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
46
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
47
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
48
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
49
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
50
<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>
The accompanying notes are an integral part of these consolidated financial
statements.
51
<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.
52
<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.
53
<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.
54
<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.
55
<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 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.
56
<PAGE>
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
57
<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>
58
<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>
59
<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>
60
<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>
61
<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>
62
<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>
63
<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>
64
<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>
65
<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>
66
<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>
67
<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>
68
<PAGE>
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>
69
<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.
70
<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)
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.
71
<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.
72
<PAGE>
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.
73
<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 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.
74
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
During our two most recent calendar years, and since then, our
principal independent accountant has not resigned or declined to stand for re-
election, and we have not dismissed our principal independent accountant
during that period.
You may rely only on the information contained in this prospectus.
We have not authorized anyone to provide information different from that
contained in this prospectus. Neither the delivery of the prospectus nor the
sale of common stock means that information contained in this prospectus is
correct after the date of this prospectus. This prospectus is not an offer to
sell or a solicitation of an offer to buy these shares of common stock in any
circumstances under which the offer or solicitation is unlawful.
AVAILABLE INFORMATION
---------------------
We file periodic reports with the Securities and Exchange
Commission. These documents may be inspected and copied at the Public
Reference Room of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-
SEC-0330 for additional information. Our Commission filings are also
available from the Commission's web site: http://www.sec.gov.
We have filed a registration statement with the Commission on Form
SB-2, under the Securities Act of 1933, with respect to the securities
described in this prospectus. This prospectus is filed as part of the
registration statement. It does not contain all of the information set forth
in the registration statement and the exhibits and schedules filed with it.
For further information about us and the common stock described by this
prospectus, we refer you to the registration statement and to the exhibits and
schedules filed with it. Copies of these documents may be inspected at or
obtained from the Public Reference Branch.
DEALER PROSPECTUS DELIVERY OBLIGATION
-------------------------------------
Until _________, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
------------------------------------------------------------------------------
-
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-
75
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers
-----------------------------------------
Section 16-10a-902(1) of the Utah Revised Business Corporation Act
authorizes a Utah corporation to indemnify any director against liability
incurred in any proceeding if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful.
Section 16-10a-902(4) prohibits a Utah corporation from
indemnifying a director in a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation or in a
proceeding in which the director was adjudged liable on the basis that he or
she improperly received a personal benefit. Otherwise, Section 16-10a-902(5)
allows indemnification for reasonable expenses incurred in connection with a
proceeding by or in the right of a corporation.
Unless limited by the Articles of Incorporation, Section 16-10a-905
authorizes a director to apply for indemnification to the court conducting the
proceeding or another court of competent jurisdiction. Section 16-10a-907(1)
extends this right to officers of a corporation as well.
Unless limited by the Articles of Incorporation, Section 16-10a-903
requires that a corporation indemnify a director who was successful, on the
merits or otherwise, in defending any proceeding to which he or she was a
party against reasonable expenses incurred in connection with that defense.
Section 16-10a-907(1) extends this protection to officers of a corporation as
well.
Under Section 16-10a-904(1), the corporation may advance a director's
expenses incurred in defending any proceeding upon receipt of an undertaking
and a written affirmation of his or her good faith belief that he or she has
met the standard of conduct specified in Section 16-10a-902. Unless limited
by the Articles of Incorporation, Section 16-10a-907(2) extends this
protection to officers, employees, fiduciaries and agents of a corporation as
well.
Regardless of whether a director, officer, employee, fiduciary or
agent has the right to indemnity under the Utah Revised Business Corporation
Act, Section 16-10a-908 allows the corporation to purchase and maintain
insurance on his or her behalf against liability resulting from his or her
corporate role.
This is only a summary of the indemnification provisions of the Utah
Revised Business Corporation Act.
Neither our Articles of Incorporation, as amended, nor our Bylaws
contain any provisions about indemnification of our directors and executive
officers. However, the provisions of the Utah Revised Business Corporation
Act will apply.
Item 25. Other Expenses of Issuance And Distribution
-------------------------------------------
The following table sets forth the expenses which we expect to incur
in connection with the registration of the shares of common stock being
registered by this Registration Statement. All of these expenses, except for
the Commission registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 338.25
Legal fees and expenses....................................$25,000
Accounting fees............................................$ 1,250
Printing and engraving expenses............................$ 0
Transfer agent fees........................................$ 500
Miscellaneous..............................................$ 500
--------
Total................................................$27,588.25
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
Common Stock
------------
<TABLE>
Date Number of Aggregate
Name Acquired Shares Consideration
---- -------- --------- -------------
<S> <C> <C> <C>
Two subscribers 1/15/97 100,000 Services valued at
under Rule 504 $0.50 per share
offering (1)
Five subscribers 1/22/97 771,700 (2) $385,850
under Rule 504
offering (1)
One subscriber 2/13/97 272,000 $136,000
under Rule 504
offering (1)
North American 7/31/97 150,000 $ 75,000
Corporate
Consultants, Inc. (1)
North American 11/11/97 150,000 Services valued at
Corporate $0.50 per share
Consultants, Inc. (1)
William F. Pratt (3) 6/25/98 550,000 Services valued at
$0.12 per share
Worth P. Allred (3) 6/25/98 800,000 Services valued at
$0.12 per share
S. Kent Holt (3) 6/25/98 500,000 Services valued at
$0.12 per share
Flood Thomas (1) 6/25/98 50,000 Services valued at
$0.12 per share
Jay Reynolds (1) 6/25/98 20,000 Services valued at
$0.12 per share
Jim Whiting (1) 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 (1) $0.12 per share
C. Greg Jensen (1) 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 (1) $0.12 per share
David R. Porter (3) 7/6/99 1,000,000 Services valued at
$0.27 per share
William Tunnell (1) 7/6/99 2,000,000 Services valued at
$0.27 per share
Russell R. Chapman (1) 7/6/99 1,000,000 Debt and subscrip-
tion valued at
$0.27 per share
Verity Global 3/24/00 200,000 $50,000
Financial, LLC (4)
</TABLE>
(1) Management believes that these sales were exempt from the
registration requirements of the Securities Act of 1933, as
amended, under Section 3(b) thereof and Rule 504 of Regulation
D of the Securities and Exchange Commission. At the time of
this offering, Galtech did not have to meet the reporting
requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, and the aggregate offering price of
all securities sold in this offering did not exceed $1,000,000.
Management also believes that all offers and sales under this
offering complied with Rules 501 and 502 of Regulation D, with
the exception of Rule 502(c) and 502(d), which do not apply to
offerings under Rule 504.
(2) A total of 30,000 of these shares were subsequently canceled.
(3) Management believes each of these persons was an "accredited
investor" as defined in Rule 501(a)(4) of Regulation D of the
Securities and Exchange Commission, because each was a director
or executive officer of Galtech when these shares were issued.
We believe these shares were exempt from the registration
requirements of the Securities Act of 1933, as amended, under
the "safe harbor" provided by Rule 506 of Regulation D and
Section 4(2) of the Securities and Exchange Commission, as the
number of unaccredited purchasers did not exceed 35 and each
purchaser had access to all material information about Galtech
prior to the offer, sale or issuance of these "restricted
securities." Nor did the offer or sale of these securities
involve any general solicitation or general advertising.
(4) Under our Securities Purchase Agreement, Verity will also
become obligated to buy 800,000 "unregistered" and "restricted"
shares of our common stock 90 days after the effective date of
this Registration Statement. The purchase price will be
$200,000.
We did not use an underwriter in connection with any securities
sales listed in the above table.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ ------------
<S> <C>
3.1 Articles of Incorporation filed June 18, 1984*
3.2 Articles of Amendment filed on April 30, 1985*
3.3 Articles of Amendment filed September 9, 1986*
3.4 Articles of Amendment filed February 24, 1995*
3.5 Bylaws*
5.1 Opinion of Branden T. Burningham, Esq. regarding legality*
10.1 Securities Purchase Agreement, with exhibits*
10.2 Agreement for Financial Public Relation Services
23.1 Consent of HJ & Associates, LLC, formerly known as "Jones, Jensen
& Company"
23.2 Consent of Branden T. Burningham, Esq.*
23.3 Consent of Sanghamitra Sen
23.4 Consent of Ross Riches
23.5 Consent of Worth P. Allred
27.1 Financial Data Schedule*
* Each of these documents was filed with Galtech's original
Registration Statement on Form SB-2, filed July 13, 2000, and is
incorporated herein by reference.
Item 28. Undertakings
------------
Galtech hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and, notwithstanding the foregoing, any increase
or decrease in volume of securities offered, if the total dollar value of
securities offered would not exceed that which was registered, and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) include any additional or changed material
information
on the plan of distribution.
(2) For determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, executive officers
and controlling persons the foregoing provisions or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against
these liabilities, other than our payment of expenses incurred or paid by any
of our directors, executive officers or controlling persons in the successful
defense of any action, suit or proceeding, is asserted by the director,
executive officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of that issue.
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Lindon, State of Utah, on January 10, 2001.
GALTECH SEMICONDUCTOR MATERIALS
CORPORATION
By /s/ William F. Pratt
------------------------------
William F. Pratt
CEO, President and Director
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
/s/ William F. Pratt
------------------------------
William F. Pratt
CEO, President and Director
/s/ S. Kent Holt
------------------------------
S. Kent Holt
Executive Vice President and
Director
/s/ Worth P. Allred
------------------------------
Worth P. Allred
Vice President, Research and
Development, and Director
/s/ David R. Porter
------------------------------
David R. Porter
Secretary/Treasurer and Director
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GALTECH SEMICONDUCTOR MATERIALS CORPORATION
</TABLE>
