U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 01-8929
INTERNATIONAL SEMICONDUCTOR CORP.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Nevada 13-3432594
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 31st Street, Suite 240, Santa Monica, California 90405
(Address of principal executive offices) (Zip Code)
(310) 425-2376
(Issuer's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
The aggregate number of shares outstanding of the Issuer's Common
Stock, its sole class of common equity, was 10,062,511 as of
March
31, 1996.
This report consists of 10 pages.
Part 1
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
Background. Israel Semiconductor Corporation continues to be a
development-stage corporation (the "Company"). The Company was
incorporated on March 13, 1987, initially as an inactive publicly
held corporation pursuing a business acquisition.
Business Development. In September 1993, the Company committed
to invest in shares of a newly founded Israeli development stage
company, GAD Semiconductors, Ltd. ("GAD"), specializing in
gallium arsenide applications, initially in the specialty diodes
area. The Company commited to invest an amount up to $1,000,000
($900,000 in cash and $100,000 in loans) and undertook to raise
additional funds by means of commercial banking loans, grants and
government loans which GAD is qualified to receive as a
recognized Approved Enterprise under the Israeli Encouragement of
Capital Investment- 1959 Law. Together with the initial
investment, this has aggregated to approximately $3,400,000,
which is $400,000 in excess of the originally agreed upon amount.
In return for the initial commitment, GAD issued to the Company
60% of its common stock, par value $2,033. The subsequent
investment of $400,000 was converted into additional common stock
of GAD for which GAD issued 1000 shares (approximately 10% of the
common stock then outstanding) to the Company in September, 1995.
The major part of the investment, up to the amount which the
Company has undertaken to invest in GAD's shares, has been
considered as premium on the shares. As of September 30, 1996,
the Company was well past its initial commitment for investment,
and has exceeded the original program by approximately $700,000,
most of which has been converted to additional equity in GAD.
All subsequent advances are in the form of loans, which total
approximately $400,000 at the end of the third quarter. Under
the approved capital investment program, GAD received, during the
second and third quarters of 1996, no funds from State guaranteed
loans, although amounts are accruing which may be realized during
the fourth quarter of this year.
Capital Resources and Liquidity. The Company has sustained a
negative cash flow since the beginning of 1994. The Company
raised $1,538,125 during 1995 in various private placements, and
has, thus far in 1996, raised additional equity of $939,786 by
the sale of 1,308,667 shares in private placements and an S-8
registration.
During the fourth quarter of 1995, and the first quarter, 1996,
the Company borrowed $208,000 from Tweed Investments, Ltd., which
was in the form of a convertible note, with a conversion rate of
$0.60 per share during the succeeding 6 months for the initial
$158,000 and $1.05 per share for the final $50,000. Tweed
converted the first loan into equity during the second quarter
and has since converted the remaining $50,000 note according to
its terms at $1.05 per share. The Company received additional
loans from Tweed during the second and third quarters cumulating
to $564,274. $200,000 of this debt was converted into equity at
$1.05 per share (190,476 new shares) on September 27, 1996, and
discussions are underway to convert additional debt to equity.
Employee Stock Transactions. The Company has employment
agreements with key personnel, Robert M. Terry, the Company's
President, and Dr. Alex Lahav, President of the GAD subsidiary.
Mr. Terry receives $7,500 per month, in the form of stock of the
Company, for his services. He is also entitled to acquire 10,000
shares of stock for each month in service of the Company,
commencing with his original service period as Chairman, January
1, 1994, and extending through February, 1996, at an exercise
price of $1.50 per share. This option is now fully vested.
Pursuant to the provisions of the S-8 registration, the company
sold, from August 16 to August 20, 45,000 shares of stock and
paid Mr. Terry $102,080 in past due salary/consulting fees and
expenses. The Company is in the process of concluding an option
plan and contracts with 10 employees of GAD, pursuant to which
the Company would assume responsibility for an option plan
already in place at GAD. This should be completed during the
fourth quarter.
Manufacturing. GAD commenced, during the first quarter of 1996,
limited production activities to fill orders existing from
outside third-party purchasers. During the second quarter,
delivery of these early production diodes commenced. GAD has
subcontracted packaging jobs to contractors, which have been
successful in the areas of axial, plastic and metal glass
packages. During the third quarter, GAD entered into a marketing
and production agreement with Advanced Power Technology, Inc.
("APT"), pursuant to which APT will package GAD GaAs chips in 3
industry-standard configurations, market these specific devices
to existing APT customers, and then undertake exclusive
representation on a world-wide basis for the TO-3 and TO-247
diodes, so long as annual sales equal or exceed minimums
established in the contract. GAD has retained the right to be a
"second source" for these completed diodes, but cannot sell more
than 50% of APT's annual volume. APT sepcializes in high- power
semiconductor devices, and has a current annual sales volume of
$30,000,000.
Selling and Marketing. GAD has now supplied product to numerous
interested customers, to include Rectronix, Mitsubishi,
Polovodice, Systel, IBM, Braun, Sanyo, Lambda, EKM, Usha, and
Delphi/GM and Hughes, and is displaying its product at the
Munich, Germany trade fair in November. GAD continues to receive
orders for small samples to undergo individual customer and
end-user testing. The first major potential buyer has now
commenced purchases of chips for actual applications, and a
second international company, based in Europe, has acquired
samples, which upon successful testing, can lead to an additional
volume.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
Change of accountants, dated September 24, 1996
from Braude Bavley to Skeehan & Co.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL SEMICONDUCTOR CORP.
(Registrant)
By: /s/ Robert M. Terry
Robert M. Terry,
Chairman
Dated: November 27, 1996
<PAGE>
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
ASSETS
Current Assets
Cash $ 19,085
Accounts Receivable 37,470
Other Receivable 19,630
Inventories 42,000
Total Current Assets $ 118,185
Fixed Assets
Machinery and Equipment 1,134,821
Vehicles 43,948
Furniture 50,462
Leasehold Improvements 448,836
Less Accumulated Depreciation ( 375,700)
Total Fixed Assets 1,302,367
Total Assets $ 1,420,552
<PAGE>
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable $ 217,846
Other Payables 118,944
Total Current Liabilities $ 336,790
Long-Term Liabilities
Severance Pay Liability 57,338
Notes Payable 2,150,707
Loans Payable 416,201
Total Long-Term Liabilities 2,624,246
Stockholders' Deficit
Common Stock, $.001 par value,
authorized 26,000,000 shares,
issued and outstanding
9,802,492 shares 9,802
Additional Paid-In Capital 5,308,912
Accumulated Deficit During
The Development Stage (6,859,198)
Total Stockholders' Deficit (1,540,484)
Total Liabilities and
Stockholders' Deficit $ 1,420,552
==========
See Notes to Financial Statements
<PAGE>
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 AND FOR THE PERIOD FROM
INCEPTION TO SEPTEMBER 30, 1996
9 Months 9 Months Inception
Ended Ended of Gallium
September September to Sept.
30, 1996 30, 1995 30, 1996
Revenues
Sales $ 15,738 $ 0 $ 15,738
Expenses
Start-up Expenses 0 0 400,920
Research and Development 108,172 130,362 481,039
Marketing Expenses 210,529 86,350 607,868
General and Administrative 734,186 666,305 3,215,868
Financing Expenses 105,234 63,839 852,849
Loss from Sale of Subsidiary 0 865,022 1,316,392
-------- --------- ---------
Total Expenses 1,158,121 1,811,878 6,874,936
-------- --------- ---------
Net Income (Loss) (1,142,383)(1,811,878)(6,859,198)
Accumulated Deficit, Beginning (5,716,815)(2,984,490) 0
-------- --------- ---------
Accumulated Deficit, Ending (6,859,198)(4,796,368)(6,859,198)
========= ========= =========
See Notes to Financial Statements
<PAGE>
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative
Nine Months Ended Amounts from
September 30, Inception of
1995 1996 Gallium
------------ --------- ------------
Cash Flows From Operating Activities
Net (Loss) (1,811,878) (1,142,383) (6,859,198)
Reconciliation of Net
Loss to Net Cash Used
by Operating Activities 919,439 (687,917) 1,946,348
--------- --------- ---------
Net Cash Used by Operating
Activities (892,439) (1,830,300) (4,912,850)
-------- --------- ---------
Cash Flows From Investing Activities
Investment in Fixed Assets (446,851) (64,189) (5,939,242)
Proceeds from Sale of Fixed
Assets 0 0 8,186
Investment Grants Received 113,262 0 2,872,430
Decrease (increase) in
Short-Term Bank Deposit 0 0 ( 10,477)
Cash of Acquired Parties 0 0 4,706
Loans to Related Parties 0 0 ( 98,413)
------- ------- ---------
Net Cash Used by
Investing Activities (333,589) ( 64,189) (3,162,810)
------- ------- ---------
Cash Flows from Financing Activities
Issue of Shares 1,218,175 382,000 1,867,532
Receipt of Long-Term Loans 32,699 1,329,445 5,039,291
Repayment of Long-Term Loans 0 (7,145) ( 193,688)
Receipt of Loans from
Related Parties 75,000 209,274 626,395
Increase in Short-Term
Credit from Other 0 0 0
Decrease in Short-Term
Credit from Banks (18,902) 0 602,178
------- --------- ---------
Net Cash Provided by
Financing Activities 1,306,972 1,913,574 7,941,708
Net Increase (Decrease) In
Cash and Cash Equivalents 80,944 19,085 ( 133,952)
Cash and Cash Equivalents
at Beginning of Period 85,035 0 153,037
--------- --------- ---------
Cash and Cash Equivalents
at End of Period $ 165,979 19,085 19,085
========= ========= =========
See Notes to Financial Statements
<PAGE>
INTERNATIONAL SEMICONDUCTORS CORP
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - ADJUSTMENTS
The accompanying unaudited interim financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
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