About Tegal Corporation

Tegal Today

Since its founding in 1972, Tegal Corporation has been dedicated to the development and application of emerging technologies. In over 35 years of process development and equipment design, Tegal’s legacy is evident in the most advanced consumer and industrial products that incorporate microprocessors, magnetic memories, radio frequency ID chips, acoustic wave devices, sensors, LEDs, and an array of other semiconductor and MEMS devices fabricated by some of the world’s leading companies, including Tegal’s one-time parent, Motorola. Beginning in 2009, in response to a challenging industry and financial environment, Tegal began a process of transitioning out of semiconductor capital equipment and into areas with more opportunity for growth and profitability consistent with the company’s size and resources. Drawing on its historic technology leadership in manufacturing process technology that incorporated electro-magnetics, plasma physics, radio frequency control, and materials science, Tegal is currently engaged in the sponsorship of other related emerging technology areas, including photovoltaic (PV)-based solar power and medical devices.  Tegal‘s objective is to employ its know-how and resources to pursue these opportunities for growth and profitability in order to enhance its value for over 6,000 public shareholders. Tegal is headquartered in Petaluma, California.

Our Strategy

For the past several years Tegal has been in a process of consolidation and transition, driven by the financial crisis and downturn in the semiconductor and MEMS producing sectors, and worsened by our relatively weak strategic and financial position in those sectors. Our main focus has been to preserve as much value for stockholders as possible as we transition to a business model that avoids the high fixed costs of capital equipment and retains our capabilities to attract and exploit emerging technologies broadly related to the semiconductor and MEMS sectors. We successfully sold the majority of our operating and intellectual property assets in those sectors to companies that are much better positioned to benefit from those technologies. We are still engaged in the asset sale process and to date have completed investments in two companies – Sequel Power, in which we have secured an active management and operating role, and NanoVibronix. Our objective is to employ our know-how and resources to pursue these opportunities for growth and profitability in order to enhance our value as a public company. The Sequel Power model for large scale PV-based solar projects is unique in the industry and has won significant acclaim from governments, industrial companies and industry advocates for its innovation and prospect for success. Sequel Power has distilled its model of a vertically integrated power producer into a set of powerful simulation tools that can be applied across a variety of related businesses, including advisory, project management, project development, and underwriting. Tegal has supported the activities of Sequel Power through our direct efforts and through the investigation of related businesses and sectors in which we may make future investments.

NanoVibronix is a medical device company focused on creating products utilizing its proprietary low-intensity surface acoustic wave (SAW) technology. The company's unique, patented approach enables the transmission of low-frequency, low-intensity ultrasound waves through a variety of soft, flexible materials, including skin and tissue, enabling low-cost, breakthrough devices targeted at large, high-growth markets. NanoVibronix has developed a series of products that have been shown to prevent the formation of biofilm in long indwelling catheters. In addition, the company is developing a series of products directed at the treatment of chronic, non-healing wounds, a market whose growth is being fueled by an aging population and the rapidly increasing incidence of diabetes world-wide.

We are focused on working with Sequel Power and NanoVibronix to assist these companies in building successful enterprises. We may make additional investments in these or other technology-based companies in the future.

Our History

The Company was formed in December 1989 to acquire the operations of the former Tegal Corporation, a division of Motorola, Inc. Our predecessor company was founded in 1972 and acquired by Motorola, Inc. in 1978. We completed our initial public offering in October 1995. Beginning in 2002, the Company made a number of acquisitions and divestitures, including the following:

• On August 30, 2002, Tegal acquired all of the outstanding common stock of Sputtered Films, Incorporated (SFI), a privately held California corporation. SFI was a leader in the design, manufacture and service of high performance physical vapor deposition systems for particular applications in the semiconductor and semiconductor packaging industry. SFI was founded in 1967 with the development of its core technology, the S-Gun. The Company sold all of the assets and intellectual property of SFI to OEM Group, Inc. on March 19, 2010.
• On November 11, 2003, Tegal acquired substantially all of the assets and certain liabilities of Simplus Systems Corporation, a development stage company. Simplus had developed a deposition cluster tool and certain patented processes for barrier, copper seed, and high-K dielectric applications. Simplus had coined the term "nano layer deposition" or "NLD" to describe its unique approach to metallorganic chemical vapor deposition (MOCVD). From 2003 until 2010, Tegal funded the continued development of the NLD process and its associated hardware. During that time, Tegal was awarded several US patents. On December 30, 2011, Tegal announced that it had sold over thirty patents from its NLD patent portfolio to multiple bidders for an aggregate consideration of approximately $4 million.  Additional patents in the portfolio are still being offered for sale.
• On May 28, 2004, Tegal purchased substantially all of the assets and assumed certain liabilities of First Derivative Systems, Inc. (FDSI). FDSI, a privately held development stage company, was founded in 1999 as a spin-off of SFI. FDSI had developed a high-throughput, low cost-of-ownership physical vapor deposition (PVD) system with highly differentiated technology for leading edge memory and logic device production on 200 and 300 millimeter wafers. In fiscal 2008, we canceled further internal development of products based on this technology.
• On September 16, 2008, Tegal acquired certain assets from Alcatel Micro Machining Systems (AMMS) and entered into an intellectual property agreement and trademark licensing agreement with Alcatel Lucent. With this acquisition, Tegal entered the market serving the producers of micro-electro-mechanical systems (MEMS) devices. Also known as Deep Reactive Ion Etch (DRIE), systems marketed by Tegal performed a highly anisotropic etch process used to create deep, steep-sided holes and trenches in wafers, with aspect ratios of 20:1 or more.

Beginning in the fiscal third quarter of 2009, following the acquisition of the DRIE product lines from AMMS, Tegal experienced a sharp decline in revenues related to its legacy Etch and PVD products, a result of the collapse of the semiconductor capital equipment market and the global financial crisis. The management and the Board of Directors of the Company considered several alternatives for dealing with this decline in revenues, including the sale of assets which the Company could no longer support. This resulted in the first of two major asset sales:

• On March 19, 2010, the Company and its wholly owned subsidiary, SFI, sold inventory, equipment, intellectual property and other assets related to the Company's legacy Etch and PVD products to OEM Group Inc., a company based in Phoenix, Arizona that specializes in "life cycle management" of legacy product lines for several semiconductor equipment companies. The sale included the product lines and associated spare parts and service business of the Company's 900 and 6500 series plasma etch systems, along with the Endeavor and AMS PVD systems from SFI. In connection with the sale of the assets, OEM Group assumed the Company's warranty liability for recently sold legacy Etch and PVD systems.

The Company retained the DRIE products which it had acquired from AMMS, along with the Compact cluster platform and the NLD technology that it had developed. However, the DRIE products and a small amount of associated spares and service revenue represented the sole source of the Company's income. Since the DRIE markets were also negatively impacted by the downturn in the semiconductor markets and the lack of available capital for new product development globally, it was not clear that DRIE sales alone would have been enough to support the Company, even with significant reductions in operating expenses. As a result, throughout most of fiscal 2010, the Company continued to evaluate alternative strategies, including the sale of its DRIE assets, the transition to a new business model and its voluntary liquidation. Following extensive due diligence, the Company established a new operation:

• On January 14, 2011, Tegal and se2quel Partners LLC, a California limited liability company, formed a joint venture called Sequel Power LLC, a newly formed Delaware limited liability company.  Sequel Power is focused on the promotion of solar power plant development projects worldwide, the development of self-sustaining businesses from such projects, including but not limited to activities relating to and supporting, developing, building, and operating solar photovoltaic fabrication facilities and solar farms, and the consideration of other non-photovoltaic renewable energy projects.  se2quel Partners is owned by Ferdinand Seemann, who previously served as an independent member of the Company's Board of Directors.

Following this investment in Sequel Power, the Company found a buyer for its DRIE assets:

• On February 9, 2011, Tegal and SPP Process Technology Systems Limited, (SPTS), a company incorporated and registered in England, entered into an Asset Purchase Agreement, pursuant to which Tegal sold to SPTS all of the shares of Tegal France, SAS, the Company's wholly-owned subsidiary, and product lines and certain equipment, intellectual property and other assets relating to the Company's DRIE plasma etch systems and certain related technology. SPTS also assumed existing customer contracts, including all installation and warranty obligations of existing customers, and other liabilities arising after the closing.

After several months of research and due diligence in the area of medical devices, Tegal made a small investment in a medical device company with a promising new technology:

• On November 29, 2011, the Company made a $300,000 strategic investment in the form of a convertible note in NanoVibronix Inc. (NV), a private company. NanoVibronix is a company focused on creating products utilizing its proprietary low-intensity surface acoustic wave (SAW) technology in medical applications. NV's unique, patented approach enables the transmission of low-frequency, low-intensity ultrasound waves through a variety of soft, flexible materials, including skin and tissue, enabling low-cost, breakthrough devices targeted at large, high-growth markets.