<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-17864
DAWN TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C>
DELAWARE 13-3493060
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
433 SOUTH MAIN STREET, WEST HARTFORD, CONNECTICUT 06110
(Address of Principal Executive Office) (Zip Code)
</TABLE>
(860) 561-3979
(Issuer's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registration was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's common stock, as of October
31,1997, was:
Class of Stock Shares Outstanding
COMMON STOCK $.001 PAR VALUE PER SHARE 9,419,478
The exhibit index is located at page 12 of this report.
-1-
<PAGE> 2
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION:
Item I - Financial Statements:
Consolidated Balance Sheets, September 30, 1997 (Unaudited) and
December 31, 1996 3
Consolidated Statements of Income and Accumulated Deficit,
Nine Months and Three Months Ended September 30, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows, Nine Months Ended
September 30, 1997 and 1996 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2 - Management's Discussion of Analysis of Financial Condition
and Results of Operations 9
PART II - OTHER INFORMATION 11
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1997 and December 31, 1996
ASSETS
September 30, December 31,
1997 1996
------------- -------------
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash $ 2,655 $ 92,089
Accounts receivable, less allowance for doubtful accounts of $2,500 507,578 637,368
Inventories 225,956 764,939
Insurance claim receivable -- 201,980
Other current assets -- 25,366
------------ -------------
Total current assets 736,189 1,721,742
------------ -------------
PROPERTY AND EQUIPMENT
Land 52,150 52,150
Building and improvements 349,536 349,536
Machinery and equipment 913,315 727,769
Office equipment 341,000 321,543
Leasehold improvements 63,338 42,765
------------ -------------
1,719,339 1,493,763
Less accumulated depreciation and amortization ( 889,168) ( 786,920)
------------ -------------
830,171 706,843
------------ -------------
$ 1,566,360 $ 2,428,585
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank note payable $ 289,566 $ 100,000
Current portion of long-term debt 33,350 166,667
Current portion of capitalized lease obligations 39,204 28,420
Accounts payable and accrued expenses 495,775 839,792
Accrued payroll and related liabilities 47,814 125,732
Current portion of accrued cost of non-compete agreement 99,922 94,700
Income taxes payable 8,243 12,210
------------ -------------
Total current liabilities 1,013,874 1,367,521
------------ -------------
OTHER LIABILITIES
Capitalized lease obligations, less current portion 137,906 122,176
Accrued cost of non-compete agreement, less current portion 219,226 278,628
------------ -------------
Total other liabilities 357,132 400,804
------------ -------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 25,000,000 shares
authorized, 9,419,478 shares issued and outstanding 9,420 9,327
Capital in excess of par value 2,397,708 2,381,151
Unearned restricted common stock issued ( 217,372) ( 217,372)
Treasury stock ( 10,625) ( 10,625)
Accumulated deficit ( 1,983,777) ( 1,502,221)
------------ -------------
195,354 660,260
------------ -------------
$ 1,566,360 $ 2,428,585
============ =============
See the accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
For the Nine Months and Three Months Ended September 30, 1997 and 1996
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $ 3,149,308 $ 4,501,807 $ 880,641 $ 1,255,346
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales 2,941,102 3,533,662 718,402 964,631
Selling, general and administrative expenses 635,905 727,416 165,059 168,879
Product development expenses -- 15,791 -- --
----------- ----------- ----------- -----------
Total costs and expenses 3,577,007 4,276,869 883,461 1,133,510
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (427,699) 224,938 (2,820) 121,836
OTHER INCOME (EXPENSE)
Interest expense (53,857) (79,256) (19,216) (19,014)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (481,556) 145,682 (22,036) 102,822
GAIN FROM INSURANCE PROCEEDS -- 221,126 -- 221,126
----------- ----------- ----------- -----------
NET INCOME (LOSS) (481,556) 366,808 (22,036) 323,948
ACCUMULATED DEFICIT, beginning of period (1,502,221) (1,980,111) (1,961,741) (1,937,251)
----------- ----------- ----------- -----------
ACCUMULATED DEFICIT, end of period $(1,983,777) $(1,613,303) $(1,983,777) $(1,613,303)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ (0.051) $ 0.041 $ (0.002) $ 0.036
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,409,200 9,036,478 9,419,478 9,036,478
=========== =========== =========== ===========
See the accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH
FLOWS For the Nine Months Ended September
30, 1997 and 1996
(Unaudited)
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(481,556) $ 366,808
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 102,248 64,800
Expenses related to restricted common stock earned -- 10,000
Changes in assets and liabilities:
Accounts receivable 129,790 263,986
Inventories 538,983 124,982
Other current assets 25,366 23,665
Insurance claim receivable 201,980 --
Accounts payable and accrued expenses (344,017) (295,468)
Accrued payroll and related liabilities (77,918) (195,630)
Income taxes payable (24,386) (48,677)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 90,909 314,466
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equipment (174,676) (31,591)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term borrowings 189,566 --
Payments on non-compete agreement (54,180) (22,032)
Repayments of long-term debt (116,667) (275,549)
Payments on capitalized lease obligations (13,052) (3,226)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (5,667) (300,807)
--------- ---------
NET DECREASE IN CASH (89,434) (17,932)
CASH, Beginning of period 92,089 96,005
--------- ---------
CASH, End of period $ 2,655 $ 78,073
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 11,524 $ 21,145
Interest paid $ 52,857 $ 78,295
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During the nine-month period ended September 30, 1997, $16,650 of long-term debt
was converted into 92,500 shares of the Company's $.001 par value common stock.
During the nine-month period ended September 30, 1997, the Company entered into
a capital lease agreement for machinery and equipment at an original cost of
$50,900.
See the accompanying notes to consolidated financial statements.
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<PAGE> 6
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not
include all the information and footnotes required by generally accepted
accounting principles. All adjustments which are of a normal recurring
nature and, in the opinion of management, necessary for a fair presentation
have been included. These statements should be read in conjunction with the
financial statements and notes thereto included in the Company's annual
report filed in its Form 10-KSB for the year ended December 31, 1996.
NOTE 2 - RELATED PARTY TRANSACTIONS:
In October, 1996, Mr. Dennis DiDonato, a former officer and director of the
Company filed an action against the Company, it's Chairman of the Board, and
it's two subsidiaries, in the Supreme Court of New York, Westchester County, to
collect compensation claimed due him for services rendered in 1994 plus interest
thereon and for severance allegedly owed him in the sum of $150,000,plus
interest, and for the alleged breach of an unsigned three year employment
contract, in the sum of $500,000 plus interest.
On January 28, 1997, the Company agreed in a settlement to pay Mr. DiDonato
$60,000 in twelve monthly equal installments. The balance due is included in
accrued payroll and related liabilities on the consolidated balance sheet at
September 30, 1997.
NOTE 3 - MAJOR CUSTOMERS:
At September 30, 1997, accounts receivable includes approximately $256,100 from
one major customer, International Business Machines Corp. Approximate sales to
major customers are summarized below:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
International Business Machines $1,065,121 $1,000,948 $516,979 $ 239,028
United States Postal Service 1,167,633 3,253,918 82,372 873,036
---------- ---------- -------- ----------
$2,232,754 $4,254,866 $599,351 $1,112,064
========== ========== ======== ==========
</TABLE>
NOTE 4 - STOCKHOLDERS' EQUITY:
In January of 1997, the Company issued 92,500 shares of common stock of the
Company upon the conversion of $16,650 due on a subordinated convertible note.
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<PAGE> 7
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE:
Bank notes payable consist of the following at September 30, 1997:
<TABLE>
<S> <C>
Bank note payable on demand which is secured by all the assets of the
Company and guaranteed by the Company's principal stockholders. The
note bears interest at 1% above the bank's prime rate (9.5% at Sept 30, 1997) $ 100,000
Line of Credit, secured by substantially all the assets of the Company.
The note bears interest at 1% above the bank's prime rate(9.5% at
Sept 30, 1997) 100,000
Bank note, equipment line. Borrowings up to $150,000 to be used only
for the acquisition of equipment. The note is secured by certain assets
of the Company and bears interest at 1% above the bank's prime rate (9.5% at
Sept. 30, 1997). 89,566
------------
$ 289,566
============
</TABLE>
NOTE 6- LONG-TERM DEBT:
Long-term debt consists of a subordinated convertible note payable due
October,1998. This note bears interest at 10% and can be converted into 107,500
shares of the Company's common stock during the term of the loan.
NOTE 7 - CAPITALIZED LEASE OBLIGATIONS
The following is a summary of capitalized leases at September 30, 1997:
<TABLE>
<S> <C>
Six equipment leases payable with monthly installments ranging from
$176 to $1605 including interest ranging from 11.75% to 14.74%. $ 177,110
Less current portion ( 39,204)
---------------
$ 137,906
===============
Aggregate future principal payments on capitalized lease obligations are as
follows:
Twelve-month period ending September 30:
1998 $ 39,204
1999 45,529
2000 47,842
2001 34,805
2002 9,730
---------------
$ 177,110
===============
</TABLE>
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<PAGE> 8
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES:
The provision for income taxes represents minimum state corporate taxes
currently due.
The net operating loss incurred in 1994 created an uncertainty as to whether the
Company will be able to utilize its net operating loss carryforwards and realize
its deferred tax asset. Accordingly, management elected to record a valuation
allowance for the entire amount of its deferred tax asset. At December 31,1996,
the Company has a net operating loss carryforward of approximately $860,000 for
federal income tax purposes.
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<PAGE> 9
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and results of
operations during the periods included in the accompanying consolidated
financial statements.
Comparison of Operating Results for the Nine Months Ended September 30, 1997 to
1996
Sales decreased from $4,501,807 in 1996 to $3,149,308 in 1997. This
decrease is due primarily to reduced sales volume to the United States
Postal Service.
Cost of sales as a percentage of sales increased from 78.5% in 1996 to
93.49% in 1997. This increase is primarily due to increased end of program
costs on contracts with the United States Postal Service and expensed
start-up costs on new contracts.
Selling, general and administrative expenses, decreased from $727,416 in
1996 to $635,905 in 1997 which is primarily due to lower volume and cost
cutting measures implemented by management.
As a result of all the factors discussed above, income from operations
decreased from $224,938 in 1996 to loss from operations of $427,699 in
1997.
Interest expense decreased from $79,256 in 1996 to $53,857 in 1997. This
decrease is due to the corresponding debt being reduced.
During 1996, the Company recorded a gain of $221,126 as a result of
insurance claims related to the 1996 fire at it's Blakely facility.
As a result of all factors discussed above, net income decreased from
$366,808 in 1996 to a net loss of $481,556 in 1997.
Comparison of Operating Results for the Three Months Ended September 30, 1997
to 1996
Sales decreased from $1,255,346 in 1996 to $880,641 in 1997. This decrease
is due primarily to reduced sales volume to the United States Postal
Service.
Cost of sales as a percentage of sales increased from 76.8% in 1996 to
81.6% in 1997. This increase is primarily due to increased end of program
costs on contracts with the United States Postal Service and expensed
start-up costs on new contracts.
Selling, general and administrative expenses, decreased from $168,879 in
1996 to $165,059 which is not a material change.
As a result of all the factors discussed above, income from operations
decreased from $121,836 in 1996 to loss from operations of $22,036 in 1997.
Interest expense increased from $19,014 in 1996 to $19,216 in 1997 which is
not a material change.
During 1996, the Company recorded a gain of $221,126 as a result of
insurance claims related to the 1996 fire at it's Blakely facility.
As a result of all factors discussed above, net income decreased from
$323,948 in 1996 to a net loss of $22,036 in 1997.
-9-
<PAGE> 10
Backlog
As of November 12, 1997, the Company had a sales backlog of approximately
$2,072,413. Scheduled shipments of this backlog are approximately $548,857
in 1997 and $1,523,556 in 1998. The backlog does not reflect anticipated
orders from certain repeat customers.
Management is aggressively pursuing efforts to diversify the Company's
product line and attract new customers, along with expanding services
within its current base.
Future sales beyond the shipments of items in the Company's backlog cannot
be predicted.
All of the orders in the Company's backlog are subject to cancellation. In
certain cases the Company may be entitled to some compensation in the event
of cancellation.
Liquidity and Capital Resources
Operating activities provided cash of $90,909 in 1997 and $314,466 in 1996.
In addition, the Company used cash of $174,676 in 1997 and $31,591 in 1996
to acquire property and equipment, borrowed an aggregate of $189,566
against it's line of credit and equipment line in 1997 and repaid long-term
debt and capital lease obligations of $141,053 in 1997 and $278,775 in
1996.
The Company had a working capital deficit of $277,685 at September 30, 1997
and surplus of $354,221 at December 31, 1996. The ratio of current assets
to current liabilities was .73 to 1.00 at September 30, 1997 and 1.26 to
1.00 at December 31, 1996.
Management believes that the Company has sufficient liquidity, borrowing
capacity and other capital resources to meet its planned needs for the next
year.
Inflation
The Company does not believe that inflation would have a significant effect
on its operations because the Company factors in potential escalation's in
the costs of material, labor and overhead when preparing its bids for
contract awards and when pricing its products.
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<PAGE> 11
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Dawn Technologies, Inc. held its Annual Meeting of Stockholders on September 18,
!997.
At that meeting, the persons listed below were elected as the Board of Directors
of Dawn Technologies, Inc., and the votes of the number of shares of common
stock set forth below were cast as set forth below with respect to each of them.
There were no other nominees for director of Dawn Technologies, Inc. at that
meeting. In addition, there were no broker non-votes with respect to the
election of directors.
<TABLE>
<CAPTION>
Authority to Vote
For Withheld
--- --------
<S> <C> <C>
Warren K. Novick 8,312,771 29,261
Placido Saretto 8,316,467 25,565
Victor Winogrado 8,316,467 25,565
Murray Trachen 8,316,467 25,565
</TABLE>
At the meeting, the stockholders also ratified the appointment by the Board of
Directors of Dawn Technologies, Inc., of Arthur Anderson LLP as the Company's
independent auditors for the year 1997. The votes of 8,319,034 shares of common
stock were cast in favor of ratification of the appointment, the votes of 22,098
shares were cast against ratification, the votes of 900 shares abstained and
there were no broker non-votes with respect to the ratification of the
appointment of Arthur Anderson LLP as independent auditors for the year 1997.
At the meeting, the stockholders also approved an amendment to the Certificate
of Incorporation of Dawn Technologies, Inc. to increase the number of authorized
common shares from 15,000,000 to 25,000,000. The votes of 8,208,653 shares were
cast in favor of the amendment, the votes of 97,879 shares were cast against
the amendment, the votes of 35,500 shares abstained and there wereno broker
non-votes with respect to the amendment.
ITEM 5 - OTHER INFORMATION
On November 12, 1997 the Company entered into an additional contract with BE
Aerospace Inc. for the manufacture of certain components to be used in the
aerospace industry. The contract is for approximately $1,200,000 and is to be
completed over a fourteen month period.
-11-
<PAGE> 12
6 - EXHIBITS AND REPORTS ON FORM 8-K
a The following exhibits are filed as a part of this report.
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page #
- ---------- ------------------- ------
<S> <C> <C>
3.1a Certificate of Incorporation,as amended, incorporated by reference
to Form 10KSB for the year ended December 31, 1993.
3.1b Certificate of Amendment to the Certificate of Incorporation of Dawn
Technologies, Inc., dated September 18, 1997. 14
10.16a Subordinated convertible note payable to Paul Elliot
dated September 28,1993 incorporated by reference to Form 10KSB for
the year ended December 31, 1996.
10.16b Endorsement #1 to the subordinated convertible note to Paul
Elliot dated October 1, 1997 15
27 Financial Data Schedule 16
</TABLE>
b. Reports on Form 8-K.
No reports on Form 8-K were filed by the issuer during the
quarter for which this report is filed.
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dawn Technologies, Inc.
/S/ David Sklar November 14, 1997
------------------------------------------ -----------------
By: David Sklar Date
President and Chief Executive
Officer (Principal Executive Officer)
Dawn Technologies, Inc.
/S/ John Scanlon November 14, 1997
------------------------------------------ -----------------
By: John Scanlon Date
Chief Financial and Accounting
Officer (Principal Financial and
Accounting Officer)
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<PAGE> 1
Exhibit 3.1b
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DAWN TECHNOLOGIES, INC.
The undersigned corporation, in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is Dawn Technologies, Inc.
SECOND: The corporation hereby amends its Certificate of Incorporation
as follows:
Paragraph FOURTH of the Certificate of Incorporation, relating to the
authorized stock of the corporation, is hereby amended to read as follows:
"Fourth: The aggregate number of shares
which the corporation shall have authority to issue is 25,000, 000 shares, with
a part value of $.001 Per share, which shall be designated "common shares"."
THIRD: The amendment effected herein was authorized by the affirmative
vote of the holders of a majority of the outstanding shares entitled
to vote thereon at a meeting of shareholders pursuant to Sections 222
and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I hereunder sign my name and affirm that the
statements made herein are true under the penalties of perjury this
18th day of September, 1997.
/S/ Warren Novick
-----------------------------------
Warren Novick, Chairman
of the Board
-14-
<PAGE> 1
Exhibit 10.16b
ENDORSEMENT NO. 1
The undersigned, PAUL ELLIOT IRA ROLLOVER ("Holder") and DAWN
TECHNOLOGIES, INC. (the "Company"), hereby amend the Dawn Technologies, Inc. 10%
Subordinated Convertible Debenture for the principal amount of Thirty-three
Thousand Three Hundred Fifty ($33,350.00) Dollars dated as of September 28, 1993
originally issued to Holder (the "Original Debenture") to which this Endorsement
No. 1 is attached as follows:
1. The "Maturity Date" as set forth in the Original Debenture is hereby
changed to October 6, 1998. Accordingly, the first paragraph of the Original
Debenture is amended to read in its entirety as follows:
Dawn Technologies, Inc., a Delaware corporation ("Company),
for value received, hereby promises to pay to the order of Paul Elliot
IRA Rollover or assigns ("Holder") October 6, 1998 (the "Maturity
Date"), the amount of Thirty-three thousand Three Hundred Fifty
($33,350.00) dollars ("Principal").
2. Section 3.1 (a) of the Original Debenture is amended to
read in its entirety as follows:
(a) Subject to an upon compliance with the provisions of this
Article, the Holder shall have the right, at his option, from time to
time prior to the close of business on the Maturity Date, to convert
all or any part of unpaid Principal as of the "Conversion Date" (as
defined in subsection 3.3 (b) ) into fully paid and non-assessable
whole shares of Common Stock of the Company, par value $0.001 per
Share, ("Common Stock") (calculated as to each conversion to the
nearest whole share) at a conversion price ("Conversion Price") equal
to Fourteen Cents ($.14) for each share of Common Stock. The Conversion
Price as most recently adjusted, is referred to below as the "Current
Conversion Price."
Except as expressly amended by this Endorsement No. 1, all the terms
and conditions of the Original Debenture to which this Endorsement No. 1 refers
and is attached shall continue in full force and effect.
This Endorsement No. 1 shall be effective as of October 1, 1997.
Attest: Dawn Technologies, Inc.
/S/ Warren Novick /S/ William Winakor
- --------------------------- By: -----------------------------------------
Warren K. Novick, Secretary William Winakor, Executive Vice President
Chairman of the Board & Chief Operating Officer
Paul Elliot IRA Rollover
/S/ Paul Elliot
By: -----------------------------------------
Paul Elliot
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2655
<SECURITIES> 0
<RECEIVABLES> 510078
<ALLOWANCES> (2500)
<INVENTORY> 225956
<CURRENT-ASSETS> 736189
<PP&E> 1719339
<DEPRECIATION> (889168)
<TOTAL-ASSETS> 1566360
<CURRENT-LIABILITIES> 1013874
<BONDS> 0
0
0
<COMMON> 9420
<OTHER-SE> 185934
<TOTAL-LIABILITY-AND-EQUITY> 1566360
<SALES> 3149308
<TOTAL-REVENUES> 3149308
<CGS> 2941102
<TOTAL-COSTS> 3577007
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53857
<INCOME-PRETAX> (481556)
<INCOME-TAX> 0
<INCOME-CONTINUING> (481556)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (481556)
<EPS-PRIMARY> (.051)
<EPS-DILUTED> (.051)
</TABLE>
