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 June 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 9,802,492 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 form of diodes, 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 June 30, 1996,
the Company was well past its initial commitment for investment,
and has exceeded the original program by approximately $500,000,
most of which has been converted to additional equity in GAD.
Under the approved capital investment program, GAD received, during
the second quarter of 1996, no State guaranteed loans, although
amounts are accruing which should be realized during the third
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 an additional $939,786 by the sale of 1,308,667
shares in private placements and an S-8 registration. During the
second quarter, the Company raised $725,404 through the placement
of 760,040 shares.
This was accomplished by the raise of an additional $100,000 by the
sale of 53,900 shares to a foreign investor, Amram Ohayon, and
retirement of $158,000 of debt by the conversion of promissory
notes due Tweed Investments into stock. The Company also retired
a significant portion of its accrued debt to consultants and
employees by the registration of employee and consultant stock in
an S-8 registration (file #333-02395) on April 10, 1996. The
registration statement also provided for future payments to certain
consultants and employees for purposes of incentivizing them with
more immediately saleable stock and stock options. During the
second quarter, and pursuant to private placements and the S-8
registration, the Company retired $30,000 of debt to Allen Jones,
$7,500 of legal fees to Richard Klein, $15,000 of legal fees to
Atlas, Pearlman, Trop & Borkson, $93,251.39 of past due fees,
expenses and costs advanced to Dieterich & Associates, $70,326 in
consulting fees and expenses due Arik Makleff, exercise of an
earlier option by Ami Appelbaum, which raised $60,653, and the
cancellation of $161,000 of debt due Bank Hapoalim.
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 has already
converted the first loan into equity and has inicated that it will
convert the $50,000 note according to its terms.
Employee Stock Transactions. The Company has personal 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.
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. GAD demonstrated
that its unique product can be packaged and adapted to fit any
existing design. During the first quarter, GAD received purchase
orders in excess of 200,000 Shekels ($67,000) in value and is
currently operating to fill those orders.
GAD was also able to satisfy the preliminary testing requirements
of Motorola for purposes of future purchases of diodes, in the
first quarter, and Motorola subsequently initiated 3 purchase
orders.
Selling and Marketing. GAD has now supplied sample product to
numerous interested customers, to include Rectronix, Mitsubishi,
Polovodice, Systel, IBM, Braun, Sanyo, Lambda, EKM, Usha, and
Delphi/GM and Hughes. GAD is starting 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 (Motorola), and a second international
company, based in Europe, has approached GAD for samples, which
upon successful testing, can lead to an additional volume. No
definitive contract was expected to be signed in the second
quarter, but testing orders are underway.
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
None
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: August 20, 1996
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
Current Assets
Cash $ 137,366
Accounts Receivable 13,293
Other Receivable 19,630
Inventories 26,000
Total Current Assets $ 196,289
Fixed Assets
Machinery and Equipment 1,082,027
Vehicles 43,948
Furniture 48,500
Leasehold Improvements 448,836
Less Accumulated Depreciation (322,502)
Total Fixed Assets 1,300,809
Total Assets $ 1,497,098
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable $ 180,927
Other Payables 197,451
Total Current Liabilities $ 378,378
Long-Term Liabilities
Severance Pay Liability 64,483
Notes Payable 2,071,595
Loans Payable 206,927
Total Long-Term Liabilities 2,343,005
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 5,308,712
Accumulated Deficit During
The Development Stage (6,542,799)
Total Stockholders' Deficit (1,224,285 )
Total Liabilities and Stockholders' Deficit $1,497,098
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED
DEFICIT
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995 AND FOR THE PERIOD FROM
INCEPTION TO JUNE 30, 1996
6 Months 6 Months Inception
Ended Ended of Gallium
June June to June
30, 1996 30, 1995 30, 1996
Revenues
Sales $ 15,738 $ 0 $15,738
Expenses
Start-up Expenses 0 0 400,920
Research and Development 53,036 15,174 425,903
Marketing Expenses 178,744 68,410 576,083
General and Administrative 540,449 521,953 3,022,131
Financing Expenses 69,493 51,287 817,108
Loss from Sale of Subsidiary 0 865,022 1,316,392
Total Expenses 841,722 1,521,846 6,558,537
Net Income (Loss) ( 825,984) (1,521,846) (6,542,799)
Accumulated Deficit, Beginning (5,716,815) (2,984,490) 0
Accumulated Deficit, Ending (6,542,799) (4,506,336) (6,542,799)
INTERNATIONAL SEMICONDUCTORS CORP
(A Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative
Six Months Ended Amounts from
June 30, Inception of
1995 1996 Gallium
Cash Flows From Operating Activities
Net (Loss) $(1,521,846) $(825,984) $(6,542,799)
Reconciliation of Net Loss to
Net Cash Used by Operating
Activities
795,016 ( 659,550) 1,974,715
Net Cash Used by
Operating Activities (726,830) (1,485,534) ( 4,568,084)
Cash Flows From Investing Activities
Investment in Fixed Assets (393,806) ( 9,433) ( 5,884,486)
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 4,706
Loans to Related Parties 0 0 ( 98,413)
Net Cash Used by
Investing Activities ( 280,544) ( 9,433) ( 3,108,054)
Cash Flows from Financing Activities
Issue of Shares 603,175 382,000 1,867,532
Receipt of Long-Term Loans 69,583 1,250,333 4,960,179
Repayment of
Long-Term Loans 0 0 ( 186,543)
Receipt of Loans from
Related Parties 100,000 0 417,121
Increase in Short-Term
Credit from Other 205,000 0 0
Decrease in Short-Term
Credit from Banks ( 43,753) 0 602,178
Net Cash Provided by
Financing Activities 934,005 1,632,333 7,660,467
Net Increase (Decrease) In Cash
and Cash Equivalents ( 73,369) 137,366 ( 15,671)
Cash and Cash Equivalents at
Beginning of Period 85,035 0 153,037
Cash and Cash Equivalents
at End of Period $ 11,666 $ 137,366 $ 137,366
INTERNATIONAL SEMICONDUCTORS CORP
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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