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EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO TITLE 18 SECTION 1350 - CRC CRYSTAL RESEARCH CORPexhibit_32-1.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY AT OF 2002 - CRC CRYSTAL RESEARCH CORPexhibit_31-1.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008


Commission File No. 000-52472
 


CRC CRYSTAL RESEARCH CORPORATION

(Exact name of small business issuer as specified in its charter)
 
Nevada
86-0728263
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
4952 East Encanto Street, Mesa, Arizona 85205
(Address of Principal Executive Offices)

(480) 452-3301
(Issuer’s telephone number)
 
(480) 832-6187
(Issuer’s facsimile number)
 
 

 (Former name, address and fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter periods 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 o
 
 

 
1

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
 
Yes x No o

Revenues for year ended December 31, 2008:   $-0-

Aggregate market value of the voting common stock held by non-affiliates of the registrant as of March 27, 2009 was:  $-0-

Number of shares of our common stock outstanding as of December 4, 2009 is: 16,386,870

The Company’s Transfer Agent is Pacific Stock Transfer Company, 4045 S. Spencer Street, Suite 403, Las Vegas, NV 89119, Phone: 702-361-3033 Fax: 702-433-1979

State the number of shares outstanding of each of the issuer’s classes of common equity, as of December 31, 2008: 13,370,270 shares of common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 


 
2

 

EXPLANATORY NOTE

CRC Crystal Research Corporation, a Nevada corporation, is filing this Amendment No. 1 on Form 10-K/A (Amendment) to its annual report on Form 10-K, which was originally filed with the Securities and Exchange Commission (SEC) on  March 31, 2009 (Original Filing) to restate and reissue its audited financial statements for the fiscal year ending December 31, 2008, contained in the Original Filing to include the opinion of GBH CPAs, PC, a registered public accounting firm.  The previously issued statements were audited by Moore and Associates Chartered, whose registration with the Public Company Accounting Oversight Board was revoked in August of 2009.

 The audited financial statements for fiscal year ended December 31, 2008 have been restated to: (1) accrue legal and accounting fees for services rendered during fiscal year 2008, (2)  accrue management salaries earned during fiscal year 2008, and (3) to present in a separate classification within the 2008 financial statements certain payables  to related parties.  The effect of the restatement is described in note 10 to the financial statements contained in this Amendment.  In addition to the restatements discussed above, this Amendment also amends the information contained in Item 7 of the Original Filing.

Except as described above, no other changes have been made to the Original Filing.  Except as described above, this Amendment No. 1 on From 10-K/A does not reflect events occurring after the filing of the Original Filing or modify or update those disclosures, including any exhibits to the Original Filing affected by subsequent events.  Information not affected by the changes described above is unchanged and reflects disclosures made at the time of the Original Filing.  Accordingly, this Amendment No. 1 on Form 10-K/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Filing, including any amendments to those filings.
 
 
 
 

 
3

 


CRC CRYSTAL RESEARCH CORPORATION

TABLE OF CONTENTS
 
 
   
Page
     
PART I
     
ITEM 1.
DESCRIPTION OF BUSINESS 
5
     
ITEM 2.
DESCRIPTION OF PROPERTY 
17
     
ITEM 3.
LEGAL PROCEEDINGS 
17
     
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
17
     
PART II
     
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 
17
     
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  
17
     
ITEM 8.
FINANCIAL STATEMENTS 
19
     
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
20
     
ITEM 9A.
CONTROLS AND PROCEDURES 
20
     
ITEM 9B.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING 
21
     
PART III
     
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. 
22
     
ITEM 11.
EXECUTIVE COMPENSATION 
24
     
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 
24
     
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 
25
     
PART IV
     
ITEM 14.
EXHIBITS AND REPORTS ON FORM 8-K
26
     
ITEM 15.
PRINCIPAL ACCOUNTANT FEES AND SERVICES 
26
     
SIGNATURES
 
27
 
 
 
 
 

 
4

 

PART I

ITEM 1. 
DESCRIPTION OF BUSINESS

GENERAL

CRC Crystal Research Corporation (the "Company" or the "Registrant") was incorporated in the State of Nevada on June 9, 2006. The Company is the successor in interest to CRC Crystal Research Corporation (“Arizona CRC”), which was incorporated in the State of Arizona on March 22, 1993.  On June 10, 2006, the board of directors of the Company and Arizona CRC approved their merger in order to reincorporate the Arizona CRC in the State of Nevada.  The reincorporation process was completed by the filing of Articles of Merger with the Secretary of State of Nevada on September 20, 2006 and with the Secretary of State of Arizona on September 21, 2006.  The Company was formed by Dr. Kiril Pandelisev to commercialize patents for new technology and new crystal growing processes in the manufacture Crystals and new methods and technology for various crystals and Crystal Products. The technology encompasses a new crystal grower design, new crystal growing processes, and new technology for fabrication of various crystals and more sensitive Crystal and other Products. Management believes that the new technology will allow the Company to manufacture Crystal Products faster, less expensively, and at a higher quality level than that which current industry methods provide.  The Company has as of yet not developed a prototype for any of its potential products.
 
The Company has a non-exclusive license to all technology owned by Single Crystal Technologies, Inc. (“SCT”), which is owned by Dr. Kiril A. Pandelisev.  The licensed technology includes patents, whether approved, pending or in process of filing, other contractual agreements, and technical measures relating to the manufacture of Crystals, Crystal Products and ultra pure materials and products made from them.  The Company plans to raise capital to fund the development of initial manufacturing capabilities to manufacture Crystals, Crystal Products, ultra pure materials and products made from ultra pure materials and alloys for sale in various industrial markets. The Company has never produced any Crystal Products or other products for commercial sale.  The Company estimates that it will need approximately $1,000,000 to begin the manufacturing process.  This funding will allow the Company to prepare for initial production, and produce several types of fully tested prototypes aimed at different segments of the market.  The amount needed for expansion will vary depending on the growth curve of the Company at the time of funding.  Management has had discussions with at least two investment banks as well as a number of investors but has not received any commitments as of yet for the necessary funding.
 
CRC’s continuous plate method of growing flat plates of scintillation material crystal, based on CRC’s patented technology, applies a new solution to an old problem. Crystals can have any desired width, length and thickness equivalent to the needed detector dimensions. The improved melt-solid interface makes heat dissipation and thermal stress non-issues. The control of the purity of the molten material results in predetermined crystal purity and uniform dopant distribution that will result in better scintillation detectors.  The single crystallinity yield of the process is drastically increased and production costs are reduced proportionately. Furthermore, in a paper by Antonio C. Pastor, "METHOD OF GROWING METAL HALIDE AND CHALCOGENIDE CRYSTALS FOR USE IN INFRARED WINDOWS", Patent No.: 4,251,315, February 17, 1981. Assigned to Hughes Aircraft Company, Pastor indicates the space requirement for plate growth is at least 36 times less than that for the standard Bridgman-Stockbarger method.  The Company did not cause the paper written by Antonio C. Pastor to be written for the Company’s benefit, nor did the Company sponsor or pay for the paper.

Initially the company intends to address the scintillation material and scintillation detector products using our patents that preclude others from duplicating our work. Alkali halide, rare earth and semiconductor scintillators will be addressed. CRC’s patented process provides for low cost higher quality crystals and crystal products and detectors. The initial space of 3000-5000 sq.ft based on Pastor’s analysis is equivalent to at least 108,000-180,000 sq. ft and the total capital need associated with the space, equipment and personnel is close to 200 times less than what would be need by the conventional Bridgman method.

Our patents for advanced scintillator devices gives another advantage that will be beneficial to the growing Homeland Security applications, energy applications, medical imaging and many other applications that include but are not limited to beer and beverage industry, automotive industry, and other.
 
CRC's continuous plate method solution goes way beyond that offered by any other method and provides real hope of the production and deployment of inexpensive and yet higher quality  scintillation crystals.
 
 

 
5

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
GENERAL - continued
 
The benefits from the patented technologies are many and most are as disclosed in the patents themselves. Lower production costs, unlimited applicable crystal product size, low to no built in stress, longer life time, optical and other optimization for better signal to noise ratio.  A list of the benefits follows:

Advanced crystal grower design

Enhanced and optimized crystal growth rates ; introduction of  new purification methods; direct production of crystal plates of any applicable size; over 90% yield regardless of size or shape;  almost indefinite lifetime of crystal products.

Long  life oil well logging assemblies:

Lower production cost; enhanced energy detection; enhanced energy resolution; enhanced signal-to-noise ratio; possibility of life time warranty.
 
CRC Oil Well Logging/MWD Assembly Advantages:

Long life -- minimum 5 years expected; lower cost; better shock resistance through stronger crystal and multiple shock isolation; higher light output; improved energy resolution; improved temperature and magnetic shielding.

Enhancement of the Current Energy Exploration Tools:

Smaller CRC Crystal for same signal; enhanced depth penetration; enhanced depth resolution; multi million dollar savings per well through small diameter drill hole.

Long Life Gamma Camera Plate Assemblies With Improved Reflector System:

Enhanced energy detection; Lower production cost; enhanced energy resolution; enhanced spatial resolution; life time warranty.
 
Modular Gamma Camera Plate Assemblies:

Modular; Multi-Crystal or Individual Crystal; Enhanced Energy Resolution; Enhanced Energy Detection; Enhanced Spatial Resolution.

CRC Gamma Camera Plate Assembly  Advantages:

Simple Fabrication Procedure; Long Life; Improved  Spatial Resolution; Improved Energy Resolution; Lower Cost; Plate Size not Limited by Crystal Growth Process Limitations; Light Weight Gamma Camera Plate Assembly.
 
Superior Performance Subassembly for Scintillation Detection and Detectors Employing the Same:

Modular; Enhanced Energy Resolution; Enhanced Energy Detection; Light Output Self-Focusing Capabilities; Enhanced Signal-to-Noise Ratio.
 
Continuous Crystal Growth Process and Apparatus:

Improvement of the Current Crystal Growth Process; Opening of New Frontiers; Higher Crystal Quality; Lower Production Cost; No Size Limitations; In-House Constructed Crystal Growth Hardware.

CRC Approach to Product Improvement:

Optimize Light Output by:

Minimize light absorption by using low absorption crystals and minimize optical path of photons.  Maximize light reflection. Minimize reflection loss. Light guide principle application. Apply Better Seal: Glass-to-metal seal and moisture traps.  Use Superior Crystalline Material.  Direct and Focus Output Light.  Minimize Housing Absorption.

 

 
6

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
GENERAL - continued
 
Scintillation (to produce a flash of light in a phosphor by striking it) crystals transform the invisible gamma rays into visible flashes of light that can be converted into digital signals for processing.
 
The applications of the scintillation crystals (often called phosphors) are many and several examples are as given below.
 
(1)
Homeland security uses scintillation detectors and scintillation detector based systems for scanning personnel, vehicles and cargo vessels, ships, for radioactive exposure and radioactive material contents. Border crossings, airports, seaports, and many other points where passengers and cargo are passing through use these systems.
 
(2)
Medical imaging uses scintillation crystals to analyze the radiation emitted from the patients in order to make health related diagnosis. Gamma scanners employ from one to three crystal plates positioned around the patient in order to obtain two dimensional (using one plate) or three dimensional image (using 2 0r 3 plates) of the patients organs examined.
 
(3)
Energy explorations use scintillation crystals to do a real-time analysis of the soil the drill is in and to provide estimates of the oil contents of certain oil rich deposits (when found).
 
(4)
Engine fabricators use scintillation detectors for integrity and the consistency of the engine wall.
 
(5)
Construction industry uses scintillation detectors for real time weld inspections.
 
(6)
CRC’s patented technology provides multiple independent benefits that result in more affordable and better gamma ray detectors and systems can be summarized as follows:
 
The crystal growth method provides for lower production cost realized through low capital cost requirements, faster crystal production and lower inventory requirements. The crystal growth method also provides for technology for crystal plate sizes beyond what other methods can sustain.
 
The material purification methods and the crystal growth method provide for higher quality crystal used in fabrication of various scintillation detectors.
 
The physics of scintillation detector designs as described in our patents provide for higher quality more sensitive detectors having long life time.
 
The initial equipment design and prototype building for the CRC’s crystal growth technology was done by SCT, LLC in collaboration with Sematech International (Austin, Texas) and the thermal modeling group from Sandia National Laboratories.
 
The thermal modeling of the CRC’s crystal growth process was done by Prof Motakef from MIT, now President of CAPE Simulations. The initial findings for growth of very low heat conductive crystals such as doped and undoped calcium fluoride (CaF2), sodium iodide (NaI) cesium iodide [CsI (Tl, Na)] or any other crystal are very favorable. The crystal growth process is very suitable for making rare earth (europium in particular) doped CaF2(Eu) scintillation plates (of any size) to be used for monitoring enemy laser targeting beams in the battle field or any other observational posts, or one can make low cost scintillation detectors to be used for various monitoring and warning systems. For instance, our modeling indicates production of 2 inch thick crystal plate material can be made 64 times faster. Considering the estimates by Pastor for 36 times less space requirements, and adding the labor, chemicals and power savings, the cost of the produced scintillation detector is only a small fraction of what would have been if the detector was made from a Bridgman-Stockbarger method made crystal.
 
 


 
7

 


ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
GENERAL - continued
 
Since inception the Company has been a development stage company. The initial offering provided for the initial prototype crystal growth, modest modeling efforts and initial products tested by third party. Our initial work within our Microscint™ project was focused on pressing and sintering thallium doped sodium iodide powders which resulted in rather mechanically strong scintillators. The initial scintillation properties were measured at Ludlum Instruments in Texas. Scintillation detectors made using this technique are expected to be mechanically strong and many scintillation materials can be fabricated using this method. Some may include scintillator alloys – multiple scintillator materials that emit different wavelengths combined into one detector.  Inexpensive, mechanically very strong and disposable scintillation detectors can be the result from this approach as well. The energy resolution of the crystal pilot line and the Microscint™ material show excellent energy resolution. The declining modest markets for scintillation products in the nineteen nineties and the “.com” era did not help with our fund raising efforts for expansion. The industrial size equipment development was initiated in January of 2000 in collaboration with SCT, LLC, Sematech International and Sandia National Laboratories. Growth of large crystal plates suitable for fabrication of various products for the Homeland Security, energy and semiconductor applications is now possible. The company plans to use this technology for its initial product lines. Our past discussions with Allied Signal (now part of Honeywell), Halliburton, GE Medical, Schlumberger, Lockheed Martin, Canon, Nikon, Intel, Zeiss, Shott Lithotech, Corning, and others indicate that we have very interesting technology that can make products for many industries. Public funding will be needed to provide for the growth of our products in a planned manner.
 

INDUSTRY BACKGROUND

Crystals are very pure concentrations of elements or compounds that have been melted and then allowed to solidify in such a fashion that their atomic or molecular structure forms a crystal lattice.  A distinguishing characteristic of crystals is that they have a uniform, low energy state as compared to non-crystal concentrations of the same elements or compounds.  When certain impurities (or dopants) are intentionally added to a crystal, the properties of the crystal are altered.  Dopants can be added while the crystal is grown and/or during the processing of the crystal into a finished product.  One significant alteration is that, with certain impurities, the crystal can be made to react to electromagnetic waves, and the reaction can be detected with detection devices.  In addition, impurities at certain concentrations can alter the temperature at which the crystal will react to electromagnetic wages.  By measuring the strength of the reaction to electromagnetic waves, it is possible to measure features of an item or process that is emitting the electromagnetic waves.
 
The effectiveness and quality of a crystal is dependent on the purity of the element or compound used for the crystal, and the number of flaws in the crystal lattice structure, which is determined by the crystal growth process. Optical transmission, scintillation properties and heat tolerance also depend on the uniformity of a crystal, as well as the amount and uniformity of distributions of dopants within the crystal.  For instance, sodium iodide (NaI) in its pure state can detect gamma rays only at very low temperatures. By adding a small amount of Thallium metal to the crystal (about 0.01%), the crystal can detect gamma rays or nuclear particles at much higher temperatures. Sodium iodide detectors used in the medical imaging need only work at room temperature, while sodium iodide detectors used in energy exploration operate can be made to work in temperatures as high as 200oC by altering the concentrations of Thallium metal added as a dopant.
 
A wide variety of commercial and industrial applications have been developed to take advantage of the properties of crystals.  For example:
 
Medical Imaging:  In medical imaging applications (i.e., a CAT scan), sodium iodide crystals are shaped into plates and placed around a patient that has been injected with radioactive tracer material. The gamma rays emitted from the patient enter the crystal plates and cause a scintillation event, or flash of light, when they strike a Thallium atom which is used as the dopant.  A light sensor, such as photo multiplier tube (PMT), detects the scintillation events, converts each scintillation event into an electrical pulse and assigns coordinates to the scintillation event. Special electronics amplify these signals and analyze billions of events per second. The result of the analysis is the image of the organ that is scanned. Since healthy tissue absorbs the injected radioactive material differently than cancerous tissue, a radiologist can detect the cancerous material as darker or brighter material (depending on the radioactive material injected). SCT has developed technology that it believes can make the crystals at lower cost and more sensitive, which will enable more accurate diagnosis of the patient.
 
 


 
8

 


ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
INDUSTRY BACKGROUND - continued
 
Petroleum Exploration:  When drilling for oil or gas, it is important to know the geological formations which are being penetrated. By adding a scintillation crystal to the drilling assembly, a geologist on the surface can be provided with that information. Oil well surveys are conducted by injecting small traces of radioactive materials into wells under high steam pressure. Gamma rays emitted from the walls of the well and detected by the crystal can be analyzed and interpreted to show the composition of the geological formation in which the crystal is located and whether it contains hydrocarbons. This measurement is called oil well logging and is often referred to as "measured while drilling." When the driller encounters a potential producing zone, a geologist can use the crystal measurements to assess how much oil is present in the zone and determine whether to stop drilling or continue drilling in search for a more productive zone.  SCT’s patents provide technology for more sensitive soil and hydrocarbon detection and can sustain rougher, hotter environments without being damaged.
 
Homeland Security:  In homeland security applications, crystal detection devices are commonly used in airports, courthouses, government buildings, nuclear plants and other sensitive areas to for scanning people, luggage and shipping containers for weapons and “dirty bomb” materials.
 
Bridgman-Stockbarger Method of Crystal Production
 
The predominant method of crystal production for industrial uses is the Bridgman-Stockbarger Method, which was perfected in the 1930’s.  Under the Bridgman Stockbarger Method, a crucible is filled with particulate raw materials and melted at a high temperature.  The melted material is then allowed to solidify by slowly lowering it into a cooling section, which cools the bottom of the crucible.  The entire crystal is formed by slowly cooling the entire crucible from the bottom to the top.  Particularly with respect to non-metallic crystals, which are characterized by poor heat conductivity, the Bridgman-Stockbarger Method suffers from the following manufacturing problems:
 
 
·
The yield for marketable crystals is low, and for large crystals can be as low as 1-3%;
 
 
·
There are limitations on the maximum possible size of the crystals;
 
 
·
The growth rate of the crystals is low, thus inhibiting volume production and increasing crystal production time;
 
 
·
There is significant impurity variation within crystals. Often, less than 10% of the crystal produced is within the desired range;
 
 
·
The capital investment for mass production is large.
 
The Bridgeman-Stockbarger Method is inefficient and costly, particularly for non-metallic crystals that are based upon elements or compounds with low heat conductivity.  The Bridgman-Stockbarger Method requires special melting and annealing stations, expensive platinum crucibles, heavy material handling equipment and considerable personnel. Conventional Bridgman-Stockbarger furnaces can cost over one million dollars to build. Presently, crystals are taken out of furnaces when they are over 900°F, exposing personnel to unhealthy concentrations of iodine and thallium iodide vapors. The crystals produced are subject to thermal induced stress damage, production yields of 70% or less, and size limited to a maximum of 30 inches in diagonal dimension.
 
The source raw material for CRC’s products may or may not be the same for different products. For instance, Mallinckrodt Chemical manufactures a variety of specialty chemicals for sales to clients in various industry segments. The production of sodium iodide based scintillator consists of melting pure grade sodium iodide powder made by Mallinckrodt Chemical and growing crystal out of it. To our knowledge there is no shortage of sodium iodide and the raw material can be purchased from many sources around the globe. The gas atmosphere in the crystal grower is either Nitrogen or Argon. Many gas companies such as Air Products, Air Liquide and other gas companies offer an abundant choice of gasses, including Nitrogen and Argon.

MEMC, Sumitomo Metal, and other offer high purity silicon feed material for our silicon/silicon alloy product lines, Chemetall produces high quality Cesium Iodide powder, Tanumal Chemical from Oklahoma, Stella from Japan, Sérigraphie Richford Inc. from Canada, and others offer calcium Fluoride powder. CRC has over 500 lb of Calcium fluoride powder and there is no shortage of calcium fluoride powder used to make calcium fluoride crystals. Furthermore, CRC intends to produce high purity starting materials or further purify materials offered by others for its production.

To our knowledge there is no shortage of materials that would impede our initial and/or continued production.

 
 

 
9

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
PRINCIPAL PRODUCTS AND THEIR MARKETS

The uses for CRC’s Crystal Products are numerous. For example:
 
 
·
the medical imaging industry uses NaI crystal plates to transform invisible gamma rays into visible light, which can be converted into an image of the object examined;
 
 
·
bottlers use NaI crystal detectors to prevent overfilling of aluminum cans;
 
 
·
automobile manufacturers use crystal detectors to control the paint spraying process to guarantee proper color mixing;
 
 
·
steel manufacturers use NaI crystal detectors to adjust gigantic rollers to insure uniform thickness of rolled steel;
 
 
·
nuclear power plants use thousands of small NaI crystal detectors to measure radiation levels throughout the plant and control any possible leakage of radioactive material that might threaten the general population;
 
 
·
Engine manufacturers use scintillation technology to ensure proper engine wall thickness, alloy uniformity and crack free parts;
 
 
·
Airports use crystals in personal and baggage scanners for detection of controlled substances, explosives and radioactive material;
 
 
·
Borders and ports use scintillation based detectors for detection of controlled substances, explosives and radioactive material.
 
Various federal agencies, including the Homeland Security Agency, the Environmental Protection Agency and the Nuclear Regulatory Commission, use crystal detectors for qualitative and quantitative composition assessment of nuclear waste. They are effective in providing for the safety of the nuclear waste depositories by detecting possible leaks from the containers caused by chemical reactions and the effects of nuclear particles bombardment. Crystal detectors are also used to maintain inventory records of nuclear stockpiles and to impose sophisticated security protection measures for these materials, especially those materials used for military applications.
 
The following table sets forth certain crystal types, their applications, and market information:
 
Crystal Type/High Tech Product
Application
Market Information
Sodium Iodide (NaI)
Homeland Security; Borders, Ports, and inland applications.
Major Customers: US Government, Lockheed Martin, General Electric, Others.
Current Market Size:  Approximately $362 Billion
Current Producer:  Saint Gobain, Foreign Corporation.
 
Sodium Iodide (NaI)
Oil Well Logging Detectors
Major Customers: Schlumberger, Halliburton, Baker Hughes
Current Market Size:  Approximately $100 Million
Current Producer:  Saint Gobain, Foreign Corporation.
 
Sodium Iodide (NaI)
Medical Imaging
Major Customers: GE, ADAC, Siemens, Toshiba
Current Market Size: Over $400 Million
Current Producer: Saint Gobain, Foreign Corporation.
 
 
 

 


 
10

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
PRINCIPAL PRODUCTS AND THEIR MARKETS - continued
 
Cesium Iodide
High Energy Physics
Major Customers: U.S. Nat'l Research Facilities
Current Market Size: Approximately Over $100 Million
Current Producer:  Saint Gobain, Foreign Corporation, and several Chinese Government owned entities.
 
Calcium Fluoride (CaF2)
Semiconductor Equipment manufacturing, Space Applications, Consumer optical products
Major Customers: Nikon, Canon, ASML, Zeiss, US Government.
Current Market Size: Over $1 Billion(per Deutche Bank report)
Current Producers: Canon, Nikon, Corning, Shott Lithotech
 
Barium Fluoride (BaF2); Strontium Fluoride (SrF2)
Airborne Laser Defense Systems; Medical Imaging; Semiconductor Equipment Manufacturing
 
Major Customers: Lockheed Martin, Northrop Grumman, Boeing, GE, Phillips.
Current Market Size: Over $1 Billion
Current Producers: Korth Kristale (Germany), Russian and Chinese Government Companies.
 
Metal and Metal  Alloys
Jet Engine Turbine Blades, Space applications
Major customers: Honeywell International, GE, Rolls Royce
Current Market Size: Over $1 Billion
Major producers: No major producers,
 
Silicon/Silicon Alloy products
Semiconductor Manufacturing, Chemical Industry, Space Applications
Major customers: Intel, Freescale, TI, Sony, AMD, Others.
Current Market Size: Over $5 Billion
Major producers: Toshiba, Norton, Kyocera,
 
High Purity Quartz & Quartz products
Semiconductor manufacturing, Fiber Optic Industry; Food industry
Major customers: Intel, Freescale, Sony, AMD, Others
Current Market Size: Over $1 Billion
Major producers Corning, Asahi, Shott Glass
 

Except for the Deutsche Bank report and US Government reports, the market size estimates are based on published data that management could find or management estimates, but is not based on a formal CRC commissioned market study.
 
 
STRATEGY
 
Management believes its innovative, manufacturing process will significantly reduce production costs of certain non-metallic crystals; reduce the capital expenditures needed to finance a manufacturing facility; more than triple the rate of crystal production; provide a product yield ranging from approximately 80% to 90% and produce higher quality crystals and crystal products.
 
Initially, the Company will focus on production of NaI and other scintillation Crystals and Crystal Products for Homeland Security applications and for Energy Exploration applications. Currently, the market for NaI Crystal Products for oil well drilling and nuclear detection applications is serviced solely by Saint Gobain and its subsidiary, Harshaw-Bicron Corporation. Management believes that many NaI and other scintillation Crystals and Crystal Products customers will welcome a new supplier that can supply higher quality products, without long and uncertain delivery times and constant price increases.
 
With respect to the Homeland Security market, the Company is in negotiations to be the sodium iodide crystal supplier for scintillation crystals and nuclear detection devices incorporating the crystal detectors that would be purchased directly or indirectly by entities that need such devices, such as cities, states, ports, mass transit authorities, and military installations.  With the government contracts, the Company plans to develop a Nuclear/Radioactive Isotope Detection System that is based on radiation detected by sodium iodide and other scintillation crystals and detectors . Available software algorithms allow the system to distinguish threat isotopes (e.g., cobalt-60, cesium-137, iridium-192, and strontium-90) from isotopes naturally occurring in household items, such as fish, bananas, and ceramic tile, or those used for medical purposes (e.g., potassium-40, thorium-232, and technetium-99m).
 

 
 

 
11

 


ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
STRATEGY - continued
 
The system also measures background radiation at predetermined intervals against a standard low-level radiation source within the detector unit to constantly benchmark naturally occurring radiation levels. This will eliminate the possibility of false positive alarms. The sensor system has centralized detection and monitoring capabilities for identifying both the type and amount of radioactive isotopes.
 
Indirect deployment - Sales of system components to system integrators that sell the system or products made within a joint venture with the end user is referred as indirect deployment. Direct deployment - Sale of company made systems or products to the end user is referred to as direct deployment.
 
The Company plans to deploy its products either indirectly, where it will sell system components to system integrators that then sell the system or products made within a joint venture to the end user or directly where the Company will sell its products directly to the end user. Alarms occur only when a valid threat is detected through the presence of a threat isotope or an unusually large presence of a non-threat isotope.  For example, the system could be mounted under the spreader bars of the cranes that unload cargo containers, so that the system will be able to silently monitor each container as it is unloaded without any additional steps by port workers.  The system would also be mounted in U-Frames, which could be placed at entrances to ports, government and business complexes, airports, train platforms, schools, toll booths, and special public events to silently monitor vehicles and pedestrian traffic as the pass through the U-Frame.  Finally, the Company plans for portable model to use to verify positive readings generated by the stationary models.
 
With respect to the Energy Exploration market, the Company intends to become a supplier to a major oilfield service companies by providing superior product at a reasonable price. Our patented technology provides for basis for low cost superior products for energy exploration and other applications.

After the Company has entered the homeland security and energy exploration markets, the Company intends to enter into the gamma camera market, the optical industry for semiconductor process applications and air-borne laser defense applications, the development of high purity materials for support of the crystal growth process and for the fabrication of chip processing chambers.
 
 
DISTRIBUTION METHODS

We plan to offer our products to major customers having a need for products with our technology incorporated therein and to serve as sub-contractor to many US Government contractors that sell various security and other systems to the US Government and Military but have no in-house manufacturing of crystals and crystal detectors.
 
 
STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCTS

CRC is basing its technology on substantial number of patents and related intellectual property that present a significant opportunity for future sales growth and profitability.

The patents in USA and elsewhere could lead to products for the following markets (to name few, and not in any specific order):

 
1.
Ultra pure materials – high purity metals and alloys for direct or indirect use in the semiconductor, medical, energy exploration, military, space, and other leading edge industries.
 
2.
Crystals and crystal products for the semiconductor industry, optics industry, medical applications, military and defense applications, homeland security, aerospace industry, deep space applications, and other industries.
 
3.
Semiconductor manufacturing system components – high purity, high temperature silicon based wafer processing chamber components.
 
4.
Equipment and Process for production of ultra-pure materials for semiconductor, space and military applications.
 
5.
All silicon CVD equipment and processes.
 
6.
Equipment and process for crystal growth for the semiconductor industry, space applications and many defense industry products.
 
7.
Equipment and single crystals for Medical Imaging System Assemblies.
 
8.
Energy Exploration drilling sensor assemblies and drilling tools employing them.
 
9.
Airport security screening systems
 
10.
Nuclear material radiation sensing and inspecting systems.

 
 
 
12

 
 
 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued

STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCTS - continued
 
 
11.
Fiber optic products – fused silica grain with desired size and purity, preforms, and near-net-shape fused silica products.
 
12.
Equipment and Process for fiber optic preforms.
 
13.
Fused silica processes
 
14.
Sensors and systems for industrial safety and control.

In particular, the Pandelisev patents cover:

 
·
Various products for the energy exploration and homeland security applications, all based on detection of gamma rays and particle rays.
 
·
A novel approach for full body scanning technology.
 
·
The growth of large, high purity crystals of several important compounds such as sodium iodide, cesium iodide, calcium fluoride, barium fluoride – all doped and un-doped materials (by adding or subtracting specific impurities).
 
·
The process and technology for purification of materials and materials mixtures.
 
·
The process and technology to manufacture components for the semiconductor industry.
 
·
The process and technology to manufacture fiber optic enhanced sensor technology for energy applications (MWD and LWD included), homeland security, nuclear stockpile storage, airport security and other applications.

The potential customers for many of our technology made products are many large corporations such as  Siemens, GE, Lockheed Martin, Honeywell, Boeing, Northrop Grumman, Intel, IBM, Hitachi, Toshiba, Schlumberger,  to name a few. Our discussions with various companies are bound by terms of non-disclosure agreements which limit our ability to conduct a detailed explanation of the specifics of the discussions.  The Company has had contact with companies such as Zeiss, Shott Lithotech, Canon, Nikon, Toyo Tanso, Intel, Applied Materials, Corning, GE Medical, Picker, Halliburton, Schlumberger, and Allied Signal.  Meetings with executives from some of the companies listed above occurred in the United States, Japan, and Germany.  Some of the other companies with which CRC has had discussions were held by telephone and through e-mail exchanges,  The common theme in the discussions to date has been the need for CRC to develop its manufacturing capability in order to demonstrate to potential clients the working and beneficial aspects of CRC’s technology.  Once the prototypes are completed we will revisit our discussions with the interested parties regarding the sale of our products and services, as well as many joint venture programs.  We are in discussions regarding various needs of our products in the Homeland security, defense and many military applications in general. Having working prototypes will reactivate many of these discussions and initiate our entry into these multi billion dollar markets.

At this date, laboratory verification of several crystal products has been made, and process modeling that applies to the production of many of these products has also been completed. Laboratory verification verifies the viability of equipment, technique or process. Process modeling is computer analysis of the process. It is commonly used to understand any process, including crystal growth equipment design and crystal growth process. Hardware development needed for many of these applications has been developed, however the development process is an ongoing activity and this is reflected through the various granted and ongoing patent applications listed herein.

 
COMPETITION

The competitive environment in the sodium iodide scintillation crystal detector market is quite unique in today’s global economy, in that a single supplier dominates the world market.  This supplier, St. Gobain of France ($15+ Billion Company), has over 90% share of the market. The two largest other suppliers, Russian Imports and Horiba Instruments, are very small, with a very limited product offering. It is our understanding that all known competitors utilize the outdated Bridgeman-Stockbarger (developed in the 1930's) crystal growth technology.
 
It appears that all current suppliers have failed to keep pace with their customers’ needs in the areas of product performance, delivery, reliability and customer service.  Their detector products are often described as being of inconsistent quality, with long and erratic delivery times. These characteristics coupled with an aging technology that cannot provide cost effective, high performance scintillation crystal detectors lead to a significant opportunity for CRC.
 
 
 
 
 
13

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
COMPETITION - continued
 
In addition to the competition described above, there are competing technologies that present a choice for the user of gamma radiation detectors. Some of these technologies include rare earth scintillators, plastic scintillators and ionization tubes.  Detectors based on these technologies have a relatively narrow, limited use in specialized applications.  They do not currently pose a threat to erode or replace the alkali halide detector market due to many performance price and/or performance limitations.

 
SOURCES AND AVAILABILITY OF PRODUCTS

There are numerous applications for the technology of the Registrant.  As discussed in the Description of Business section of this prospectus we anticipate offering many different products based on our technology to a number of major customers involved in various segments of the industrial, and national security sectors of the economy.

 
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS

The energy exploration is dominated by very large original equipment manufacturers.  The nuclear research customers consist of the national and international Laboratories, while the homeland security detector segment is made up of the US Government, several large corporations such as Boeing, Northrop Grumman, Lockheed Martin and GE, and numerous relatively small specialty equipment manufacturers.

The petroleum exploration segment led by Halliburton (with Dresser Industries), and followed by Schlumberger, and Baker Hughes Inteq (including the acquisition of Western Atlas) represents over half of the market. Medium size companies (Tensor, now part of Honeywell, Computalog, etc.) and numerous small companies that provide drilling and logging services to the exploration community represent the remaining half.
 
CRC will initially develop several technologies and products for the Homeland Security and Energy Exploration applications. According to the Homeland Security Research’s Homeland Security and Homeland Defense 2006-2015 Global Market Outlook, the Worldwide Homeland Security outlay will continue to grow over the next 10 years should no major terror event occur. It is forecasted that, absent a major terror event in the 2006-2015 periods, overall annual global security and defense outlays will grow from $362.3 billion in 2006 to approximately $518 billion by 2015. In the aggregate, from 2006 to 2015, $1.5 trillion dollars will be spent on homeland security worldwide and $2.1 trillion dollars spent on homeland defense. The dollars break out to be: $656.1 billion on Borders and Transportation, $193.2 billion on Catastrophic Threats, $415.5 billion on Critical Infrastructure, $394.9 billion on Domestic Terrorism, $709.0 billion on Emergency Preparedness and Response, and $182.6 billion on Intelligence and Warning.

The nuclear research and homeland security segment is comprised of the national and international Laboratories, while the homeland security detector segment is made up of the US Government and numerous relatively small specialty equipment manufacturers. These potential customers use standard general-purpose detectors as well as one-of-a-kind custom designed, complex detector configurations.  Portions of these customers are resellers of crystal detectors.  CRC continues its efforts to establish proper dialogue with these customers regarding designing CRC’s detectors into their instruments.

CRC will “target” major customers within each industry and work with these customers to create value for them through the improved performance and reliability of our crystal detectors. Our focus will be on solving customers’ problems and creating value by providing detectors that offer improved performance and reliability, and creating new products for their new and more demanding applications.  We will also be able to be more responsive to customers’ needs due to our shorter manufacturing time and customer-focused management.
 
Low capital requirements and large size of the markets were used as a guide for our initial product decision.
 
 
PATENTS AND TRADEMARKS

The Company has entered into a non-exclusive license of technology from Single Crystal Technologies, Inc. (“SCT”), which is owned by Dr. Pandelisev.  SCT holds patents obtained by Dr. Pandelisev pertaining to a new method of growing crystals, purifying base compounds, introducing dopants and incorporating finished crystals into industrial applications.  Among the patents issued to Dr. Pandelisev and licensed to the Company by SCT are:
 

 
 
 
14

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued

PATENTS AND TRADEMARKS - continued
 
Patents Issued
 
 
v
6,402,840  Crystal growth employing embedded purification chamber
 
 
v
6,352,588  Material Purification
 
 
v
6,334,899  Continuous crystal plate growth apparatus
 
 
v
6,153,011  Continuous crystal plate growth process and apparatus
 
 
v
6,071,339  Continuous crystal plate growth process and apparatus
 
 
v
5,993,540  Continuous crystal plate growth process and apparatus
 
 
v
5,753,918  Superior performance subassembly for scintillation detection and detectors employing the subassembly
 
 
v
5,614,721  Modular gamma camera plate assembly with enhanced energy detection  and resolution
 
 
v
5,548,116  Long life oil well logging assembly
 
 
v
5,521,385  Long life gamma camera plate assembly with improved reflector system
 
 
v
5,229,613  Extended lifetime scintillation camera plate assembly
 
 
v
5,178,719  Continuous refill crystal growth method
 
 
v
6,743,294 Continuous crystal plate growth process and apparatus
 
 
v
6,800,137  Binary and ternary crystal purification and growth method and  apparatus
 
The licensing agreement with SCT was entered into on September 25, 2006, and is a non-exclusive license.  The following are the basic terms of the licensing agreement with SCT:
 
(1) Sign up fee: Upon execution of the licensing agreement CRC was to pay to SCT a sign up fee of $50,000 but not before CRC raised a minimum of  $500,000 as its licensee capitalization,
 
(2) Terms: CRC is to pay SCT a licensing fee on the following terms
-1.5% of the sales if the Licensee’s end product uses only one Licensor’s patents;
-3% of the sales if the Licensee’s end product uses two Licensor’s patents;
-4.5% of the sales if the Licensee’s end product uses three Licensor’s patents; and
-6% of the sales if the Licensees’ end product uses four or more of Licensor’s patents.
 
(3) Duration and Termination: The Agreement is to remain in force until the expiration of the last patent licensed by SCT to CRC.  Other events such as failure to cure a breach within 60 days, bankruptcy/insolvency, appointment of a trustee/receiver, or failure to commercialize the patents within two years from the signing of the Agreement constitute further grounds for termination of the Agreement.
 
When $500,000 is raised $50,000 is paid to SCT, Inc. The funds will be used for research and development of new technologies, and/or refinement of the already patented technologies now part of CRC.

All licensing fees are shown as part of the production cost of the products based on those patents.
 
 
 
 
15

 

 
ITEM 1. 
DESCRIPTION OF BUSINESS - continued
 
PATENTS AND TRADEMARKS - continued
 
In addition, the SCT and Dr. Pandelisev have the following pending patents that relating the manufacture of Crystals and the development of Crystal Products:
 
Publication (Pending Application)
 
 
v
20020117625 Fiber optic enhanced scintillation detector
     
 
v
20020092465 Binary and ternary crystal purification and growth method and apparatus
 
 
v
20020083741 Hot substrate deposition of fused silica
 
 
v
20020083740 Process and apparatus for production of silica grain having desired properties and their fiber optic and semiconductor application
 
 
v
20020083739 Hot substrate deposition fiber optic performs and perform components process and apparatus
 
 
v
20020062784 Material purification
 
 
v
20020053317 Material purification
 
 
v
20020040675 Continuous crystal plate growth process and apparatus
 
Global Filings
 
Patents in U.S., Europe and Asia with an impressive 100 supporting claims.
 
Duration of Licensed Patents
 
The life time of the patents is 20 years from filing, unless extended by the patent office. The licensing of the know-how has no time limit. No negative impact  is currently expected to occur to the Company upon expiration of any of the patents.  The Company will apply to the patent office to renew any patents that may be expiring.
 
Environmental Laws
 
Neither the materials supplied to manufacture the Crystal Products, the crystal manufacturing process, or refuse produced by the crystal manufacturing process is subject to any federal or state environmental regulations. The refuse discarded after production of Crystal Products is not classified as a "hazardous substance" under either federal or state law and the airborne, chemicals emitted from the production process do not exceed federal or state ambient air quality standards.
 
CRC Crystal Research Corporation currently has three officers and six directors. None of the Company’s officers receives a salary.

As of December 31, 2008 CRC Crystal Research Corporation had 13,370,270 shares of $0.001 par value common stock issued and outstanding.

CRC Crystal Research Corporation has administrative offices located at 4952 East Encanto Street, Mesa, Arizona 85205.

CRC Crystal Research Corporation fiscal year end is December 31.

 
EMPLOYEES

We have no full time employees.  Dr. Kiril Pandelisev, our President, Chief Executive Officer and Director,  has agreed to allocate a portion of his time to our activities without compensation.  On June 21, 2007 the following individuals were elected to the Board of Directors of the Company as Directors: Charlie Searock, Don Jackson, and Shariar Motakef.  The new Directors have also agreed to allocate a portion of their time to the Company’s activities receiving shares of common stock as compensation for their services.
 
 
 
 
16

 
 
 
ITEM 2. 
DESCRIPTION OF PROPERTY
 
CRC Crystal Research Corporation maintains its main office at 4952 East Encanto Street, Mesa, Arizona 85205. There are currently no proposed programs for the renovation, improvement or development of the facilities currently in use.

 
ITEM 3. 
LEGAL PROCEEDINGS

There is no litigation pending or threatened by or against us.

 
ITEM 4. 
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

 
PART II

ITEM 5. 
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On December 31, 2008, there were 66 shareholders of record of our common stock.  Our shares of common stock have never been traded on any recognized stock exchange.

 
DIVIDENDS

We do not intend to retain future earnings to support our growth.  Any payment of cash dividends in the future will be dependent upon: the amount of funds legally available therefore; our earnings; financial condition; capital requirements; and other factors which our Board of Directors deems relevant.

 
ITEM 7. 
MANGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Plan of Operation

CRC Crystal Research Corporation (the "Company" or the "Registrant") was incorporated in the State of Nevada on June 9, 2006. The Company is the successor in interest to CRC Crystal Research Corporation (“Arizona CRC”), which was incorporated in the State of Arizona on March 22, 1993.  On June 10, 2006, the board of directors of the Company and Arizona CRC approved their merger for the purpose of reincorporating Arizona CRC in the State of Nevada.  The reincorporation was completed by the filing of Articles of Merger with the Secretary of State of Nevada on September 20, 2006 and with the Secretary of State of Arizona on September 21, 2006.
 
Results of Operation

We did not have any operating income from inception (March 22, 1993) through December 31, 2008.  For the year ended December 31, 2008, we recognized a net loss of $1,021,249.  Some general and administrative expenses during the quarter were accrued.  Expenses for the quarter were comprised of costs mainly associated with legal, accounting, and office.

Liquidity and Capital Resources

At December 31, 2008, we had no capital resources and will rely upon the issuance of common stock and additional capital contributions from shareholders to fund administrative and manufacturing expenses.

The Company is looking to raise up to $1 Million to expand its quartz products and services to the semiconductor industry and to start selling crystals and crystal products and an additional $1.5 Million for facilities expansions.



 
17

 

 
ITEM 7. 
MANGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
Inflation
 
We believe that inflation has not had a material effect on our operations during 2007 and 2008.

Off-balance Sheet Arrangements

We did not have any off-balance sheet arrangements during 2007 and 2008.

Recently Issued Accounting Standards
 
Below is a listing of the most recent Statement of Financial Accounting Standards (SFAS) issued by the Financial Accounting Standards Board (FASB) SFAS 157-163 and their effect on the Company.

Statement No. 157Fair Value Measurements
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to clarify how to measure fair value and to expand disclosures about fair value measurements.  The expanded disclosures include the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value on earnings and is applicable whenever other standards require (or permit) assets and liabilities to be measured at fair value.  SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.
 
The adoption of this new Statement has not had a material effect on our current financial position, results or operations, or cash flows.
 
Statement No. 141 (revised 2007) – Business Combinations
 
In December 2007, the FASB revised SFAS No. 141 (revised 2007), Business Combinations.  This revision changes the way the minority interest in a company is measured, recorded and reported in the parent companies financial statements to the end that a statement user can better evaluate the nature and financial effects of the business combination.  The Company will adopt this statement beginning March 1, 2009.
 
It is not believed that this will have an impact on our consolidated financial position, results of operations or cash flows.
 
Statement No. 160 – Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51
 
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51.  A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements related to the noncontrolling or minority interest.
 
We will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on our consolidated financial position, results of operations or cash flows.

Statement No. 162 – The Hierarchy of Generally Accepted Accounting Principles
 
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles.  SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards.

SFAS No. 162 has no effect on our financial position, statements of operations, or cash flows at this time.
 
Statement No. 163 – Accounting for Financial Guarantee Insurance Contracts – and interpretation of FASB Statement No. 60
 
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60.  SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts.  SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years.
 
SFAS No. 163 has no effect on our financial position, statements of operations, or cash flows at this time.

Critical Accounting Policies and Estimates
 
We prepared our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America.  In preparing these consolidated financial statements, we are required to make judgments, assumptions and estimates, which we believe are reasonable and prudent based on the available facts and circumstances.  These judgments, assumptions and estimates affect certain of our revenues and expenses and their related balance sheet.   On an on-going basis, we re-evaluate our selection of assumptions and the method of calculating our estimates.  Actual results, however, may materially differ from our calculated estimates and this difference would be reported in our current operations.  We do not have any critical accounting policies.

 

 
18

 


ITEM 8. 
FINANCIAL STATEMENTS

Our financial statements, together with the report of auditors, are as follows:

CRC CRYSTAL RESEARCH CORPORATION

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008

CRC Crystal Research Corporation
Financial Statements Table of Contents
 
 
 
Page
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
F-1
   
BALANCE SHEETS
F-2
   
STATEMENTS OF OPERATIONS 
F-3
   
STATEMENTS OF STOCKHOLDERS’ EQUITY
F-4
   
STATEMENTS OF CASH FLOWS
F-7
   
NOTES TO THE FINANCIAL STATEMENTS
F-8
 


 

 



 


 
19

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
CRC Crystal Research Corporation
(A Development Stage Company)
Mesa, Arizona

We have audited the accompanying balance sheets of CRC Crystal Research Corporation (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2008, 2007 and since inception on March 22, 1993 to December 31, 2008. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required, to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CRC Crystal Research Corporation (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2008, 2007 and since inception on March 22, 1993 to December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit of $2,605,102, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 10 to the financial statements, these financial statements have been restated.


/s/ GBH CPAs, PC

www.gbhcpas.com
Houston, Texas

December 4, 2009



 


 
F-1

 

 
CRC CRYSTAL RESEARCH CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS


   
December 31,
       
   
2008
   
December 31
 
   
As Restated
   
2007
 
ASSETS
Current assets
           
Cash
  $ 2,730     $ 500  
                 
Total assets
  $ 2,730     $ 500  
                 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
               
Accounts payable and accrued expenses
  $ 313,000     $ 750  
Accounts payable and accrued liabilities – related parties
    10,260       -  
Advances from shareholders
    73,954       21,556  
                 
Total current liabilities
    397,214       22,306  
                 
Stockholders' deficit
               
                 
Preferred stock, par value $0.001
               
50,000,000 shares authorized,
               
no issued or outstanding
    -       -  
                 
Common stock, par value $0.001
               
450,000,000 shares authorized,
               
13,370,270 and 12,327,449 shares
               
issued and outstanding, respectively
    13,370       12,327  
                 
Paid in Capital
    2,197,248       1,549,720  
                 
Deficit accumulated during the development stage
    (2,605,102 )     (1,583,853 )
                 
Total stockholders' deficit
    (394,484 )     (21,806 )
                 
Total liabilities and stockholders' deficit
  $ 2,730     $ 500  
                 
The accompanying notes are an integral part of these statements

 
 

 
F-2

 


CRC CRYSTAL RESEARCH CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2008 and 2007 and For the
Period From March 22, 1993(Inception) to December 31, 2008

               
March 22, 1993
 
   
Year Ended
   
(Inception) to
 
   
December 31,
   
December 31,
 
   
2008
As Restated
   
2007
   
2008
As Restated
 
                   
Operating expenses
                 
     General and administrative
 
$
326,444
   
$
29,443
   
$
1,379,632
 
     Loss on sale of asset
   
-
     
-
     
7,491
 
     Patent maintenance
   
7,070
             
7,070
 
     Research and development
   
-
     
-
     
331,459
 
     Impairment of manufacturing equipment
   
627,821
     
-
     
826,752
 
     Professional fees
   
59,914
     
33,763
     
148,669
 
                         
     Total expenses
   
1,021,249
     
63,206
     
2,701,073
 
                         
Loss from operations
   
(1,021,249
)
   
(63,206
)
   
(2,701,073
)
                         
Other income (expenses)
                       
     Other income
   
-
     
-
     
6,654
 
     Gain on write-off of debt
   
-
     
-
     
230,000
 
     Interest expense
   
-
     
-
     
(140,683
)
                         
Net Loss
 
$
(1,021,249
)
 
$
(63,206
)
 
$
(2,605,102
)
                         
Basic and Diluted Loss per Share
 
$
(0.08
)
 
$
(0.01
)
       
                         
Basic and diluted weighted average
                       
number of shares outstanding
   
13,075,863
     
11,361,778
         
                         
                         
The accompanying notes are an integral part of these statements



 


 
F-3

 

 
CRC CRYSTAL RESEARCH CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Period From March 22, 1993 (Inception) to December 31, 2008
 
                           
Deficit
       
                           
Accumulated
       
                           
During the
   
Total
 
   
Common Stock
   
Paid in
   
Subscriptions
   
Development
   
Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Receivable
   
Stage
   
Equity
 
Balance at inception, March 22, 1993
   
-
   
$
-
   
$
-
   
$
-
   
$
-
   
$
-
 
                                                 
Common shares issued to founder
                                               
   for cash and subscriptions
   
2,210,000
     
2,210
     
22,926
     
(12,555
)
   
-
     
12,581
 
Payment of stock subscription
                           
12,555
             
12,555
 
                                                 
Net Loss
                                   
(33,292
)
   
(33,292
)
                                                 
Balance, December 31, 1994
   
2,210,000
     
2,210
     
22,926
     
-
     
(33,292
)
   
(8,156
)
                                                 
Common shares issued for services
   
44,000
     
44
     
1,956
                     
2,000
 
Common shares issued for services
   
47,000
     
47
     
11,703
                     
11,750
 
Common shares issued for cash
   
112,333
     
112
     
24,888
                     
25,000
 
Common shares issued in
                                           
-
 
   conversion of convertible notes
   
100,000
     
100
     
24,900
                     
25,000
 
Common shares issued for services
   
31,600
     
32
     
7,868
                     
7,900
 
Common shares issued in
                                           
-
 
   conversion of convertible notes
   
40,000
     
40
     
9,960
                     
10,000
 
                                                 
Net (Loss)
                                   
(236,109
)
   
(236,109
)
                                                 
Balance, December 31, 1995
   
2,584,933
     
2,585
     
104,201
     
-
     
(269,401
)
   
(162,615
)
                                                 
Common shares issued for cash
   
40,000
     
40
     
9,960
                     
10,000
 
Common shares issued for services
   
7,000
     
7
     
1,743
                     
1,750
 
Common shares issued for services
   
4,000
     
4
     
996
                     
1,000
 
Common shares issued for services
   
15,200
     
15
     
3,785
                     
3,800
 
                                                 
Net (Loss)
                                   
(192,969
)
   
(192,969
)
                                                 
Balance, December 31, 1996
   
2,651,133
     
2,651
     
120,685
     
-
     
(462,370
)
   
(339,034
)
                                                 
Common shares issued for cash
   
50,000
     
50
     
24,950
                     
25,000
 
Common shares issued for services
   
22,000
     
22
     
10,978
                     
11,000
 
Common shares issued in
                                               
   conversion of convertible notes
   
80,000
     
80
     
19,920
                     
20,000
 
Common shares issued for services
   
15,000
     
15
     
7,485
                     
7,500
 
Common shares issued for cash
   
70,000
     
70
     
34,930
                     
35,000
 
Common shares issued in
                                               
   conversion of convertible notes
   
120,000
     
120
     
29,880
                     
30,000
 
Common shares issued for cash
   
113,472
     
113
     
56,623
                     
56,736
 
Common shares issued for cash
   
30,000
     
30
     
14,970
                     
15,000
 
Common shares issued for services
   
85,000
     
85
     
42,415
                     
42,500
 
                                                 
Net (Loss)
                                   
(175,534
)
   
(175,534
)
                                                 
Balance, December 31, 1997
   
3,236,605
     
3,236
     
362,836
     
-
     
(637,904
)
   
(271,832
)
                                                 
Common shares issued for cash
   
20,000
     
20
     
9,980
                     
10,000
 
Common shares issued for services
   
8,000
     
8
     
3,992
                     
4,000
 
Common shares issued for cash
   
64,000
     
64
     
31,936
                     
32,000
 
Common shares issued for cash
   
30,000
     
30
     
14,970
                     
15,000
 
Common shares issued for services
   
3,000
     
3
     
1,497
                     
1,500
 
                                                 
Net (Loss)
                                   
(220,547
)
   
(220,547
)
 
 

 
F-4

 

STATEMENT OF STOCKHOLDERS’ DEFICIT - continued
 
Balance, December 31, 1998
   
3,361,605
     
3,361
     
425,211
     
-
     
(858,451
)
   
(429,879
)
                                                 
Common shares issued for cash
   
12,000
     
12
     
5,988
                     
6,000
 
Common shares issued for cash
   
8,000
     
8
     
3,992
                     
4,000
 
Common shares issued for services
   
8,000
     
8
     
3,992
                     
4,000
 
                                                 
Net (Loss)
                                   
(154,943
)
   
(154,943
)
                                                 
Balance, December 31, 1999
   
3,389,605
     
3,389
     
439,183
     
-
     
(1,013,394
)
   
(570,822
)
                                                 
Common shares issued for services
   
290,000
     
290
     
72,210
                     
72,500
 
                                                 
Net (Loss)
                                   
(231,985
)
   
(231,985
)
                                                 
Balance, December 31, 2000
   
3,679,605
     
3,679
     
511,393
     
-
     
(1,245,379
)
   
(730,307
)
                                                 
Net (Loss)
                                   
(80,558
)
   
(80,558
)
                                                 
Balance, December 31, 2001
   
3,679,605
     
3,679
     
511,393
     
-
     
(1,325,937
)
   
(810,865
)
                                                 
Net (Loss)
                                   
(16,760
)
   
(16,760
)
                                                 
Balance, December 31, 2002
   
3,679,605
     
3,679
     
511,393
     
-
     
(1,342,697
)
   
(827,625
)
                                                 
Net (Loss)
                                   
(18,063
)
   
(18,063
)
                                                 
Balance, December 31, 2003
   
3,679,605
     
3,679
     
511,393
     
-
     
(1,360,760
)
   
(845,688
)
                                                 
Net (Loss)
                                   
(142,763
)
   
(142,763
)
                                                 
Balance, December 31, 2004
   
3,679,605
     
3,679
     
511,393
     
-
     
(1,503,523
)
   
(988,451
)
                                                 
Contributed service
                   
660,000
                     
660,000
 
                                                 
Net Income / (Loss)
                                   
113,674
     
113,674
 
                                                 
Balance, December 31, 2005
   
3,679,605
     
3,679
     
1,171,393
     
-
     
(1,389,849
)
   
(214,777
)
                                                 
Common shares issued for
                                               
  exercise of warrants for debt
   
869,844
     
870
     
100,305
                     
101,175
 
Common shares issued for
                                               
  conversion of related party debt
   
5,800,000
     
5,800
     
226,200
                     
232,000
 
Common shares issued for services
   
300,000
     
300
     
11,700
                     
12,000
 
Common shares issued for services
   
10,000
     
10
     
390
                     
400
 
                                                 
Net (Loss)
                                   
(130,798
)
   
(130,798
)



 

 
F-5

 
 
STATEMENT OF STOCKHOLDERS’ DEFICIT - continued
 
Balance, December 31, 2006
   
10,659,449
     
10,659
     
1,509,988
     
-
     
(1,520,647
)
   
-
 
                                                 
Common shares issued for services
   
1,050,000
     
1,050
     
9,450
                     
10,500
 
Common shares issued for services
   
618,000
     
618
     
30,282
                     
30,900
 
                                                 
Net Income / (Loss)
                                   
(63,206
)
   
(63,206
)
                                                 
Balance, December 31, 2007
   
12,327,449
     
12,327
     
1,549,720
     
-
     
(1,583,853
)
   
(21,806
)
                                                 
Common shares issued to acquire:
                                               
     Assets
   
627,821
     
628
     
627,193
                     
627,821
 
Common shares issued for services
   
415,000
     
415
     
20,335
                     
20,750
 
                                                 
Net Income (Loss)
                                   
(1,021,249
)
   
(1,021,249
)
                                                 
Balance, December 31, 2008
   
13,370,270
   
$
13,370
   
$
2,197,248
   
$
-
   
$
(2,605,102
)
 
$
(394,484
)
                                                 
 
On June 9, 2006 the Company exercised articles of conversion from an Arizona Corporation to a Nevada Corporation and changed its capital stock from no par value stock to a $0.001 par value, this change has been retroactively applied to this schedule.

On June 10, 2006 the Company exercised a 4:1 forward stock split that has been retroactively applied to this schedule and increases the number of shares issued and thereby decreases the price per share.

The accompanying notes are an integral part of these statements
 

 



 
F-6

 

CRC CRYSTAL RESEARCH CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007 and For the
Period From March 22, 1993(Inception) to December 31, 2008

         
March 22, 1993
 
   
Year Ended
   
(Inception) to
 
   
December 31,
   
December 31,
 
   
2008
As Restated
   
2007
   
2008
As Restated
 
Operating Activities:
                 
     Net loss
 
$
(1,021,249
)
 
$
(63,206
)
 
$
(2,605,102
)
                         
     Adjustments to reconcile net loss to cash:
                       
          Depreciation
   
-
     
-
     
25,545
 
          Loss on sale of asset
   
-
     
-
     
7,491
 
          Impairment of manufacturing equipment
   
627,821
     
-
     
826,752
 
          Common stock issued for service
   
20,750
     
41,400
     
245,750
 
          Contributed services
   
-
     
-
     
660,000
 
     Changes in operating assets and liabilities
                       
          Increase in accounts payable and accrued liabilities
   
312,250
     
750
     
328,718
 
          Increase in accounts payable and accrued liabilities – related parties
   
10,260
     
-
     
10,260
 
                         
Net used in operating activities
   
(50,168
)
   
(21,056
)
   
(500,586
)
                         
Investment Activities:
                       
     Equipment purchase
   
-
     
-
     
(17,858
)
     Manufacturing equipment purchase
   
-
     
-
     
(214,109
)
                         
Cash used in investment activities
   
-
     
-
     
(231,967
)
                         
Financing Activities:
                       
     Net proceeds from shareholder advances
   
52,398
     
21,556
     
276,411
 
     Proceeds from Series A convertible notes
   
-
     
-
     
200,000
 
     Proceeds from sale of common stock
   
-
     
-
     
258,872
 
                         
Cash provided by financing activities
   
52,398
     
21,556
     
735,283
 
                         
Net increase in cash
   
2,230
     
500
     
2,730
 
                         
Cash, beginning of year
   
500
     
-
     
-
 
                         
Cash, end of year
 
$
2,730
   
$
500
   
$
2,730
 
                         
Supplemental  cash flow information:
                       
     Interest expense paid in cash
 
$
-
   
$
-
   
$
140,683
 
     Income taxes paid in cash
 
$
-
   
$
-
   
$
-
 
                         
Non-cash investing and financing activities:
                       
     Stock issued for purchase of assets
 
$
627,821
   
$
-
   
$
627,821
 
     Stock issued to convert notes
 
$
-
   
$
-
   
$
85,000
 
     Stock issued  to convert related-party debt
 
$
-
   
$
-
   
$
333,175
 
                         
The accompanying notes are an integral part of these statements

 

 
F-7

 
CRC CRYSTAL RESEARCH CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
(December 31, 2008 (restated) and December 31, 2007)
 
NOTE 1. 
GENERAL ORGANIZATION AND BUSINESS

CRC Crystal Research Corporation (“CRC Arizona”) was organized in the state of Arizona on March 22, 1993.  CRC Arizona had difficulty obtaining sufficient capital to maintain operations and ceased active operations in 1999.  In June, 2006, CRC Arizona’s board approved a plan to reincorporate in the State of Nevada.  CRC Arizona completed the reincorporation by filing of Articles of Merger with the States of Arizona and Nevada on September 21, 2006, which affected the merger of the CRC Arizona with and into CRC Crystal Research Corporation (“CRC Nevada”), a Nevada corporation.  Prior to filing the Articles of Merger, CRC Nevada was a w