1
<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-17864
DAWN TECHNOLOGIES, INC.
- -------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3493060
- -------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12 Smull Avenue, Caldwell, New Jersey 07006
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(973) 228 - 1033
- ---------------------------
(Issuer's telephone number)
- ----------------------------------------------------------------------
(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 registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes [ ]
No [ ]
The number of shares outstanding of the issuer's $.001 par value per
share common stock, as of October 31, 1999, was 8,638,944.
<PAGE> 2
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets, September 30,
1999 and December 31, 1998 3
Consolidated Statements of Operations and
Accumulated Deficit, nine months and three
months ended September 30, 1999 and 1998 4
Consolidated Statements of Cash
Flows, nine months ended September 30,
1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operation 7
Part II - OTHER INFORMATION 8-9
<PAGE> 3
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 28,090 $ 90,277
Accounts receivable - 90,277
Inventories - 12,500
---------- ----------
Total current assets 28,090 193,054
---------- ----------
Property and Equipment:
Furniture and fixtures 330,932 330,932
Equipment 945,592 945,592
---------- ----------
1,276,524 1,276,524
Less accumulated depreciation
and amortization (1,016,726) (971,726)
---------- ----------
259,798 304,798
---------- ----------
$ 287,888 $ 497,852
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable $ 135,388 $ 276,743
Capitalized lease obligations 258,730 258,730
Accounts payable and accrued expenses 1,137,636 1,131,208
Accrued cost of non-compete 320,000 320,000
---------- ----------
Total current liabilities 1,851,754 1,986,681
---------- ----------
Stockholders' Equity (Deficit):
Common stock, $.001 par value,
15,000,000 shares authorized,
8,638,944 shares issued and
outstanding 8,639 8,639
Capital in excess of par value 2,181,117 2,181,117
Accumulated deficit (3,753,622) (3,678,585)
---------- ----------
Total stockholders' deficit (1,563,866) (1,488,829)
---------- ----------
$ 287,888 $ 497,852
========== ==========
</TABLE>
See the accompanying notes to consolidated financial statements.
<PAGE> 4
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For the Nine Months and Three Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 27,000 $ 1,198,094 $ 9,000 $ 352,381
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of revenues 57,500 1,887,758 27,500 467,821
Selling, general and
administrative expenses 47,389 495,680 34,053 51,210
----------- ----------- ----------- -----------
104,889 2,383,438 61,553 519,031
----------- ----------- ----------- -----------
Loss from Operations (77,889) (1,185,344) (52,553) (166,650)
ve expenses ----------- ----------- ----------- -----------
Other Income (Expense):
Cancellation of indebtedness 2,852
Interest expense (15,568) (4,568)
Loss on asset disposition (264,016) (264,016)
----------- ----------- ----------- -----------
2,852 (279,584) (268,584)
----------- ----------- ----------- -----------
Net Loss (75,037) (1,464,928) (52,553) (435,234)
Accumulated Deficit:
Beginning of period (3,678,585) (2,213,657) (3,701,069) (3,243,351)
----------- ----------- ----------- -----------
End of period $(3,753,622) $(3,678,585) $(3,753,622) $(3,678,585)
=========== =========== =========== ===========
Net Loss per Common Share $ (0.009) $ (0.170) $ (0.006) $ (0.050)
=========== =========== =========== ===========
Weighted Average Number
of Common Shares
Outstanding 8,638,944 8,638,944 8,638,944 8,638,944
=========== =========== =========== ===========
</TABLE>
See the accompanying notes to consolidated financial statements.
<PAGE> 5
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (75,037) $ (1,464,928)
Depreciation and amortization 45,000 90,000
Loss on asset disposition 264,016
Changes in assets and liabilities"
Accounts receivable 90,277 452,873
Inventory 12,500 214,953
Other current assets - 3,322
Accounts payable and accrued expenses 6,428 415,666
------------ ------------
Net Cash Provided (Used) by Operating
Activites 79,168 (34,098)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITES:
Proceeds from sale of property - 200,000
Purchases of equipment - (19,886)
------------ ------------
Net Cash Used by Financing Activities - 180,114
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (141,355) (81,062)
Repayment of capitalized lease obligations - (24,514)
------------ ------------
Net Cash Used by Financing Activities (141,355) (105,576)
------------ ------------
Net Increase (Decrease) in Cash (62,187) 40,440
Cash, Beginning of period 90,277 13,403
------------ ------------
Cash, End of period $ 28,090 $ 53,843
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ - $ -
============ ============
Interest paid $ - $ 15,568
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Increase in capitalized lease obligations $ - $ 120,000
============ ============
</TABLE>
See the accompanying notes to consolidated financial statements.
<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
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, the last being filed for the Company's year
ended December 31, 1996.
BANKRUPTCY - On September 1, 1999, Dawn Technologies, Inc. (the
Company) filed for bankruptcy protection under Chapter 11 of the
United States Bankruptcy Code. On September 3, 1999, the Company
filed a motion in the bankruptcy court to substantively consolidate
the bankruptcy matter with the previously filed bankruptcy proceeding
of its wholly owned subsidiary, Dawn Special Systems Corp. Dawn
Special Systems Corp. had previously filed for protection under
Chapter 11 on September 18, 1998.
GOING CONCERN - The Company's financial position is such that it
suggests that the Company might have difficulty continuing in business
as a going concern. Without relief from its debts and the infusion of
new capital and customers, the Company will likely fail to continue in
existence as a going concern. Management is uncertain of the outcome
of the bankruptcy proceeding and has made no adjustments attempting to
estimate the outcome of the matter, including the recognition of
interest expense subsequent to the initial filing for protection by
the Company's operating subsidiary.
ESTIMATES - Because of the significance of the uncertainty regarding
the bankruptcy and the Company's continuing in existence, including
any additional costs which may arise as a result of the bankruptcy
proceeding, these financial statements reflect significant estimates
made by management. Future actual results and circumstances,
including potential liabilities, may vary significantly from the
estimates made when preparing these financial statements.
ACCELERATION OF LONG-TERM DEBT - All of the Company's secured
creditors have indicated that the Company is in default on its
obligations and have accelerated and called for payment in full of the
related obligations. Accordingly, all such obligations are reflected
as current in these financial statements.
BACKLOG - The Company has no sales backlog at this time.
<PAGE> 7
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATIONS - During 1998, the Company's operating subsidiary suffered
significant financial losses, including significant reductions in
sales, losses of customers and a failure to generate new customers or
prospects. The result being net losses sufficient to require the
Company to seek protection under Chapter 11 of the United States
Bankruptcy Code.
Operating results since September 18, 1999 include the sale of certain
residual inventory and the leasing of the Company's equipment on a
month to month basis. These operations have not been sufficient to
provide any meaningful sales and have not contributed sufficient
revenues to generate a profit. Accordingly, the Company has continued
to suffer losses through 1999.
BANKRUPTCY - On September 1, 1999, Dawn Technologies, Inc. (the
Company) filed for bankruptcy protection under Chapter 11 of the
United States Bankruptcy Code. On September 3, 1999, the Company
filed a motion in the bankruptcy court to substantively consolidate
the bankruptcy matter with the previously filed bankruptcy proceeding
of its wholly owned subsidiary, Dawn Special Systems Corp. Dawn
Special Systems Corp. had previously filed for protection under
Chapter 11 on September 18, 1998.
GOING CONCERN - The Company's financial position is such that it
suggests that the Company might have difficulty continuing in business
as a going concern. Without relief from its debts and the infusion of
new capital and customers, the Company will likely fail to continue in
existence as a going concern. Management is uncertain of the outcome
of the bankruptcy proceeding and has made no adjustments attempting to
estimate the outcome of the matter, including the recognition of
interest expense subsequent to the initial filing for protection by
the Company's operating subsidiary.
ESTIMATES - Because of the significance of the uncertainty regarding
the bankruptcy and the Company's continuing in existence, including
any additional costs which may arise as a result of the bankruptcy
proceeding, these financial statements reflect significant estimates
made by management. Future actual results and circumstances,
including potential liabilities, may vary significantly from the
estimates made when preparing these financial statements.
ACCELERATION OF LONG-TERM DEBT - All of the Company's secured
creditors have indicated that the Company is in default on its
obligations and have accelerated and called for payment in full of the
related obligations. Accordingly, all such obligations are reflected
as current in these financial statements.
BACKLOG - The Company has no sales backlog at this time
MANAGEMENT - In July 1999, Nicholas M. Garruto was elected to the
Board of Directors (by vote of the existing Board of Directors). Upon
the election of Mr. Garruto to the Board of Directors, all other
existing members of the Board of Directors resigned. Mr. Garruto
currently holds all the executive offices of the Company. Mr.
Garruto's efforts are directed toward administration of the bankruptcy
proceedings and development of future business opportunities for the
Company. The success or failure of Mr. Garruto's efforts cannot be
predicted.
<PAGE> 8
DAWN TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On September 1, 1999, Dawn Technologies, Inc. (the Company) filed for
bankruptcy protection under Chapter 11 of the United States Bankruptcy
Code. On September 3, 1999, the Company filed a motion in the
bankruptcy court to substantively consolidate the bankruptcy matter
with the previously filed bankruptcy proceeding of its wholly owned
subsidiary, Dawn Special Systems Corp. Dawn Special Systems Corp. had
previously filed for protection under Chapter 11 on September 18,
1998.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
The Company has defaulted on the payment of interest to two banks
(Citibank and Penn Security Bank) and four equipment-leasing companies
(Textron Financial, Colonial Pacific Leasing, CIT Credit and JLA
Credit). All of the Company's secured creditors have indicated that
the Company is in default on its obligations and have accelerated and
called for payment in full of the related obligations. Accordingly,
all such obligations are reflected as current in these financial
statements.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
During 1998, the Company's operating subsidiary suffered significant
financial losses, including significant reductions in sales, losses of
customers and a failure to generate new customers or prospects. The
result being net losses sufficient to require the Company to seek
protection under Chapter 11 of the United States Bankruptcy Code.
Operating results since September 18, 1999 include only the sale of
certain residual inventory and the leasing of the Company's equipment
on a month to month basis. These operations have not been sufficient
to provide any meaningful sales and have not contributed sufficient
revenues to generate a profit. Accordingly, the Company has continued
to suffer losses through 1999. The Company's financial position is
such that it suggests that the Company might have difficulty
continuing in business as a going concern. Without relief from its
debts and the infusion of new capital and customers, the Company will
likely fail to continue in existence as a going concern. Management
is uncertain of the outcome of the bankruptcy proceeding and has made
no adjustments attempting to estimate the outcome of the matter,
including the recognition of interest expense subsequent to the filing
for protection by the Company's operating subsidiary. The Company has
no sales backlog at this time.
<PAGE> 9
In July 1999, Nicholas M. Garruto was elected to the Board of
Directors (by vote of the existing Board of Directors). Upon the
election of Mr. Garruto to the Board of Directors, all other existing
members of the Board of Directors resigned. Mr. Garruto currently
holds all the executive offices of the Company. Mr. Garruto's efforts
are directed toward administration of the bankruptcy proceedings and
development of future business opportunities for the Company. The
success or failure of Mr. Garruto's efforts cannot be predicted.
ITEM 6 - EXHIBITS AND REPORTS OF FORM 8-K
EXHIBITS - There are no exhibits filed as a part of this report.
REPORTS ON FORM 8-K - The Company filed a report on Form 8-K on
September 22, 1999 announcing the filing for protection under Chapter
11 of the United States Bankruptcy Code.
SIGNATURES
/s/ Nicholas M. Garruto November 12, 1999
- ----------------------------------------- ------------------
By : Nicholas M. Garruto Date
Chief Executive and Chief Financial
Officer
