SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PRE-EFFECTIVE AMENDMENT #2
FORM S-1
Registration Statement Under the Securities Act of 1933
DAUPHIN TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
ILLINOIS
(State or Other Jurisdiction of Incorporation or Organization)
3570
(Primary Standard Industrial Classification Code Number)
87-0455038
(I.R.S. Employer Identification No.)
800 E. Northwest Hwy., Suite 950, Palatine, IL 60067 847-358-4406
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Andrew J. Kandalepas, President 800 E. Northwest Hwy., Suite 950, Palatine,
IL 60067 847-358-4406
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement as
determined by the Selling Stockholders.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following. X
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
Each Class Maximum Maximum
of Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share(1) Price Fee
[C] [C] [C] [C] [C]
Common Stock
$0.001 Par Value 27,720,179 $ 1.12 $ 31,046,600 $ 15,404.39
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457, based on the average of the high and low reported sales
on November 20, 1996. Registrant has recently emerged from Chapter 11 of the
Federal Bankruptcy Code and as part of its Third Amended Plan of reorganization
has undertaken to file a registration statement relating to
24,770,179 Shares of its Common Stock currently issued and outstanding, which
are owned by and which may be resold by the Selling Shareholders, and
2,950,000 Reserve Shares which are being registered for sale by the Registrant
directly through its Officers and Directors without compensation.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
DAUPHIN TECHNOLOGY, INC.
Cross-Reference Sheet Between Items of Form S-1 and
Form of Prospectus Pursuant to Regulation S-K, Item 501(b)
Item
No. Location in Prospectus
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus........................Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus.......................Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges....Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds........................Use of Proceeds
5. Determination of Offering Price........Outside Front Cover Page; Selling
Stockholders and Plan of
Distribution
6. Dilution...............................Dilution
7. Selling Security Holders...............Selling Stockholders and Plan of
Distribution
8. Plan of Distribution...................Outside Front Cover Page; Selling
Stockholders and Plan of
Distribution
9. Description of Securities to
be Registered.............................Outside Front Cover Page;
Description of Capital Stock
10. Interests of Named Experts
and Counsel...............................Legal Matters
11. Information with Respect to
the Registrant............................Risk Factors; The Company; Market
Price of Common Stock and Dividend
Policy; Selected Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results
of Operations; Business; Description
of Property; Management; Executive
Compensation: Stock Option Plan;
Reorganization; Certain
Relationships and Related Party
Transactions; Principal
Stockholders; Description of Capital
Stock; Share Transfer Restrictions;
Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities...........................Not Applicable
27,720,179 COMMON SHARES
DAUPHIN TECHNOLOGY, INC.
COMMON STOCK
The Shares of Common Stock (the "Common Stock") of Dauphin Technology, Inc.
("Dauphin" or the "Company") offered hereby include 24,770,179 Shares owned by
stockholders of the Company (the "Selling Stockholders") and 2,950,000 Shares
offered by the Company. The Shares offered by the Selling Stockholders may
be sold from time to time in privately negotiated transactions at negotiated
price without the use of broker-dealer or in the over-the-counter market at
prices and with terms prevailing at the time of sale. The Company will not
receive any of the proceeds from the sale of the Shares owned by the Selling
Stockholders. The Company has undertaken, as part of its Third Amended Plan of
Reorganization, to register all outstanding unregistered shares. The Reserve
Shares, offered by the Company, may be offered directly by the Officers or
Directors of the Company from time to time without the use of a broker or
underwriter and without compensation.
The Selling Stockholders may be deemed to be Underwriters as defined in the
Securities Act of 1933, as amended (the "Securities Act"). If any broker-
dealers are used by the Selling Stockholders, any commissions paid to broker-
dealers and, if broker-dealers purchase any Shares of Common Stock as
principals, any profits received by such broker-dealers on the resale of the
Shares, may be deemed to be underwriting discounts or commissions under the
Securities Act. In addition, any profits realized by the Selling Stockholders
may be deemed to be underwriting commissions. All costs, expenses and fees in
connection with the registration of the Shares offered by the Selling
Stockholders will be borne by the Company. Brokerage commissions, if any,
attributable to the sale of the Shares will be borne by the Selling
Stockholders. (See "Plan of Distribution")
All of the outstanding shares have been "Restricted Securities" under the
Securities Act of 1933, as amended (the "Act") prior to their registration
hereunder. The Company issued 11,650,000 Shares to Selling Stockholders under
the terms of the Third Amended Plan of Reorganization between May 9, 1996, the
date the Plan was approved by the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division, and November 20, 1996 the
date hereof. The Company, also issued 2,600,000 Shares in exchange for
certain inventory in possession of Technology Partners, LLC. ("TPL"), an
affiliate of Dauphin. The Company issued 888,757 of the Reserve Shares
(as hereafter defined) to Selling Stockholders in a private transaction during
1996. Also, there were 9,631,422 shares, that were issued and outstanding,
that have not been registered. The Company wishes to register an additional
2,950,000 Shares to be issued at a later date by the Officers or Directors of
the Company without the use of a broker or underwriter and without
compensation. This Prospectus has been prepared so that future sales of the
Shares by the Selling Stockholders will not be restricted under the Act. In
connection with any sales, the Selling Stockholders and any brokers
articipating in such sales may be deemed to be "underwriters" within the
meaning of the Act. See "Selling Stockholders and Plan of Distribution."
The Common Stock of the Company is quoted in the National Quotation Bureau's
Pink Sheets under the symbol "DNTK".
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
COMMON STOCK
$0.001 Par Value
$1.5675 Bid Price on November 20, 1996
The Date of this Prospectus is November 20, 1996
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files, reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington D.C., and at the Commission's Chicago Regional
Office, 500 West Madison Street, Chicago, Illinois; and New York Regional
Office, 75 Park Place, New York, New York. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statements and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibits to
the Registration Statements, each such statement being qualified in all
respects by such reference. Copies of the Registration Statement, including
all exhibits thereto may be obtained from the Commission's principal office in
Washington D.C. upon payment off the fees prescribed by the Commission, or may
be examined without charge at the offices of the Commission.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and should
be read in conjunction with more detailed information and Financial
Statements, including the Notes thereto, appearing elsewhere in this
Prospectus. Any reference to Dauphin or the Company in this prospectus
means Dauphin Technology, Inc., an Illinois corporation.
Dauphin Technology, Inc. is presently headquartered at 800 E. Northwest Hwy.,
Suite 950, Palatine, Illinois 60067. Corporate phone number is (847)358-4406.
THE COMPANY
The Company's predecessor, Successo, Inc. ("Successo"), was incorporated on
September 8, 1987, as a Utah corporation. On April 4, 1991, Successo entered
into an agreement whereby the stockholders of Successo exchanged 100% of the
common stock for 10,355,800 shares of common stock of Dauphin Technology, Inc.
Dauphin was founded to design, manufacture and market mobile computing
systems, including laptop, notebook, handheld and pen-based computers,
components and accessories. From 1988 through 1992, the Company functioned
primarily as a development-stage company. Historically, the Company marketed
directly and through other distribution channels to both the commercial and
government segments.
In early 1993, the Company introduced the Desk-Top Replacement, version 1
(DTR-1), a pen-based notebook computer with fax/modem features that was
considered a leading edge product with commercial appeal. Sales of the DTR-1
did not meet the Company's expectations and financial problems developed.
During the fourth quarter of 1994, the Company sold the majority of its
finished goods inventory, but was unable to meet its operating expenses. On
January 3, 1995, the Company filed a petition for relief under Chapter 11 of
the Federal Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division. During 1995 and the first six
months of 1996, the Company operated under Chapter 11 as a Debtor-in-
Possession and was in a dormant stage for all practical purposes. On May 9,
1996, the Company's Third Amended Plan of Reorganization was approved by the
Court. On July 23, 1996 the Company was discharged as Debtor-in-Possession
and the bankruptcy case was closed.
The main product of the Company is a handheld computer - Desk Top Replacement,
2nd generation (DTR-2). The basic unit has a 486 central processing unit
with 50 megahertz of processing speed. The unit also has eight to sixteen
megabytes of random access memory, a flat liquid crystal display, a 170
megabytes hard drive, voice and pen recognition, and wireless communications
capability. The units measure 9 inches in length, 5.5 inches width, 1.25
inches thick and weigh 2.7 pounds. The Company also offers various options
and accessories to support customer configuration requirements.
In February 1996 the Company acquired the business plan of Industrial Controls
Inc. (Intercon), with the intent to produce industrial control panels. In
management's view, the products of Intercon would diversify the products
offered by Dauphin and offer access to a large and steady market place. It is
important to note that Intercon's products, for the most part, are expected to
use the same technology and parts as DTR but will be marketed through a
different channel of distribution. The primary uses for the control panels are
machine control and human to machine interface. The development of the
Intercon products is expected to commence in the near future. At the present
time, the management of the Company is focusing their efforts on further
diversifying Dauphin through additional acquisitions.
The Reserve Shares, that the Company is hereby registering, could be used for
expanding the Company's operations either vertically or horizontally by adding
manufacturing facilities or additional products or both.
THE REGISTRATION
Total Number of Common Shares to
be Registered by the Company..........................27,720,179 shares
Total Number of Common Shares to
be Registered by the Selling Stockholders.............24,770,179 shares
Total Number of Common Shares Registered
but not Outstanding...................................2,950,000 shares
Total Number of Common Shares Outstanding
Immediately After the Registration....................29,547,111 shares
Use of Proceeds to the Company........................The Company will receive
no proceeds from this registration of Shares, other than the proceeds derived
from the 2,950,000 Common Shares to be sold at a later date by the Officers or
Directors of the Company without the use of a broker or underwriter and
without compensation.
Trading Symbol.........................................DNTK
SUMMARY FINANCIAL INFORMATION
(In thousands, except per share data)
The following financial information has been derived from the audited
financial statements and other records of the Company. The summary financial
data should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", the Financial Statements
and accompanying Notes contained in this Prospectus. The results for the
interim periods have not been audited and are not necessarily indicative of
results for the full year.
Year Ended Nine Months Ended
December 31 September 30
1991 1992 1993 1994 1995 1995 1996
INCOME STATEMENT DATA: [C] [C] [C] [C] [C] [C] [C]
Revenues $911 $23,540 $23,561 $9,603 $183 $160 $39
Cost of Sales 898 20,607 22,005 47,867 94 83 14
----- ------- ------ ------ ---- --- ---
Gross Profit (Loss) 13 2,933 1,556 (38,264) 89 77 25
Loss before
Extraordinary Item (1,736) (630) (3,398)(49,173) (795) (530) (835)
Extraordinary Items - 215 - - - - 38,065
Net Income (Loss) (1,736) (416) (3,398)(49,173) (795) (530) 37,231
EARNINGS PER COMMON SHARE (1):
Loss Before
Extraordinary Item (0.15) (0.05) (0.24) (3.41) (0.06) (0.04) (0.04)
Extraordinary Item - 0.02 - - - - 1.81
----- ----- ----- ----- ----- ----- -----
Net Income (Loss) (0.15) (0.03) (0.24) (3.41) (0.06) (0.04) 1.77
As of December 31 As of September 30
1991 1992 1993 1994 1995 1995 1996
BALANCE SHEET DATA:
Total Assets 3,035 6,670 15,838 298 426 377 3,402
Long Term Debt 318 568 - - - - 30
Working Capital
(Deficit) 1,032 160 (2,123)(50,167)(49,968)(50,764) 3,186
Shareholders Equity
(Deficit) 1,039 622 (850)(50,028)(50,910)(50,645) 3,276
(1) Income(Loss) per common share is calculated based on the monthly
weighted average number of Common Shares outstanding which were 14,408,354 and
21,018,554 for the nine months periods ended September 30, 1995 and 1996.
Also, weighted average number of Common Shares at December 31, 1991, 1992,
1993, 1994, and 1995 were 11,298,106, 13,570,901, 14,137,100, 14,408,354, and
14,408,354, respectively.
USE OF PROCEEDS
The Company intends to use Reserve Shares to pay for past and/or future
acquisitions, to raise capital, if needed, or to use as incentives for its
employees. The Reserve Shares, that Company is hereby registering, could be
used for expanding the Company's operations either vertically or horizontally
by adding manufacturing facilities or additional products or both. At the
present time, the Company is not engaged in any material negotiations with any
specific enterprise regarding such expansions.
DILUTION
As and to the extent, Reserve Shares will be issued in the future
transactions, current equityholders ownership percentages will de diluted.
RISK FACTORS
AN INVESTMENT IN THE SHARES BEING REGISTERED INVOLVES A HIGH DEGREE OF RISK
AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. SHARES SHOULD NOT
BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF THEIR
ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER AMONG THE
OTHER FACTORS AND FINANCIAL DATA DESCRIBED HEREIN, THE FOLLOWING RISK FACTORS
INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY:
BANKRUPTCY PROCEEDING On January 3, 1995 the Company filed a petition for
relief under Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Northern District of Illinois, Eastern Division.
On May 9, 1996, the Company's Third Amended Plan of Reorganization was
approved by the creditors and shareholders and confirmed by the Court. On July
23, 1996, the provisions of the Plan having been implemented, the Company was
discharged as Debtor-in-Possession and the bankruptcy case was closed. The
effect of this bankruptcy proceeding on past or potential future customers,
vendors or employees cannot be determined. Though the Company is no longer a
Debtor-in-Possession in any bankruptcy proceeding, there can be no assurance
that the Company will ever operate at a profit or that an investment in the
Company will result in any gain to shareholders.
SIGNIFICANT HISTORICAL LOSSES The Company had significant operating losses
since its inception. Recent emergence from bankruptcy resulted in a one time
addition to income, due to debt forgiveness, recorded on books as an
Extraordinary Gain of $38,065,373. For the nine months ended September 30,
1995 and 1996, the Company had a loss of $530,006 and income of $37,230,842
respectively. For the year ended December 31, 1993, 1994 and 1995, the
Company had losses of $3,398,000, $49,173,000 and $795,000, respectively.
ADDITIONAL CAPITAL REQUIRED In order to succeed with its business plan, the
Company must obtain additional capital. Possible sources of capital could come
from operating revenue, from bank borrowing, or from the sale of the
Company's debt or equity securities. There can be no assurance that the
Company will be able to obtain the capital necessary to carry out its business
plan or sustain its operations in the future.
POSSIBILITY OF LOSS OF ENTIRE INVESTMENT An investment in the Company is
extremely speculative and involves a very high risk. As stated elsewhere
herein, the Company was in bankruptcy, has operated at a significant
loss since its inception and at the present time has limited business
operations. The possibility exists that the Company will never be successful
and that an investment in the Company will result in a total loss to the
investor. No person should invest in the Company unless such person can
afford the total loss of his or her investment.
DEPENDENCE UPON LIMITED CUSTOMERS During 1995 and the first six months of
1996, the Company operated under Chapter 11 as a Debtor-in-Possession and was
in a dormant stage for all practical purposes. For this reason, the Company
has to rebuild its entire customer base. The effect of this bankruptcy
proceeding on past or potential future customers cannot be determined.
COMPETITION The Company's primary business is the design, manufacture, and
sale of handheld personal computers and industrial control panels. Both
industries are highly competitive and are affected by frequent introduction of
new or improved products. Continuous improvement in product price/performance
characteristics is the key to future success in both industries. At all
levels of competition, pricing has become very aggressive, and the
Company expects pricing pressures to continue to be intense. Many of the
Company's competitors have significantly greater financial, marketing,
manufacturing resources, broader product lines, brand name recognition and
larger existing customer bases than the Company. There can be no assurance
that the Company will be able to compete in any new market in which it enters.
OBSOLESCENCE OF TECHNOLOGY In the computer industry, hardware and software
products and technology are subject to rapid change, and the Company's future
success will depend on its ability to successfully introduce enhancements to
its present products and to develop new products. The Company must produce
products that are technologically advanced and are comparable to and
competitive with those made by others. Otherwise, the Company's products may
become obsolete. There can be no assurance that the Company's products will
not be rendered obsolete by changing technology or that it will be able to
continue to respond to such advances in technology in a manner as to be
commercially successful.
UNCERTAINTY OF MARKET ACCEPTANCE The DTR-2 is a solutions oriented, pen-based,
mobile computer system. The market for the DTR-2 is, to a large degree,
dependent upon software applications developed for specific users or type of
users, such as insurance adjusters, marketing companies and other users
requiring powerful, yet extremely mobile, pen-based computer systems. As the
availability of software applications geared to pen-based computer systems has
increased, the Company anticipates its market will increase. Although the
current trend for pen-based computers is on the rise and third-party software
developers are expected to increase developing software for pen-based
applications, there is no assurance that such trend will continue in the
future. The Company believes that its DTR-2 product may offer advantages over
competition, no assurance can be given that the DTR-2 product will attain
any degree of market acceptance or that it will generate revenues sufficient
for profitable operations.
Due to the nature of the product line, industrial control panels are less
technology driven. The Company believes that its industrial control panels
will be superior in design to the current state in technology of the
industrial market. On the other hand there is no assurance that such panels,
when developed, will achieve any market acceptance.
AVAILABILITY OF COMPONENTS The Company's products are manufactured and/or
fabricated from various component parts, such as printed circuit boards,
microchips and fabricated metal parts. The Company must obtain such
components from third-party-vendors. The Company's reliance on those
manufacturers and vendors, as well as industry component supply, yields many
risks. Identifiable risks include the possibility of a shortage of
components, increases in component costs, component quality, reduced control
over delivery schedules and potential manufacturer/vendor reluctance to extend
credit with the Company due to its recent bankruptcy. In the event that there
is a shortage of component parts or that the costs of these parts
substantially increases, the operations of the Company and its success in the
marketplace could be adversely affected.
DEPENDENCE ON KEY PERSONNEL The success of the Company and of its business
strategy is dependent in large part on its key management and operating
personnel. The Company believes that its future success will also depend on
its ability to retain the services of its executive officers. The Company will
also have an ongoing need to expand its management personnel and support
staff. The loss of the services of one or more members of management or key
employees or the inability to hire additional personnel as needed may have a
material adverse effect on the Company.
DEPENDENCE ON PROPRIETARY TECHNOLOGY The Company relies on a combination of
trade secrets, copyright and trademark laws, nondisclosure and other
contractual provisions, and technical measures to protect its proprietary
rights in its products. There can be no assurance that these protections will
be adequate or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to its
technology. Although the Company believes that its products do not infringe
upon the proprietary rights of third-parties, there can be no assurance that
third-parties will not assert infringement claims against the Company in the
future or that a license or similar agreement will be available on reasonable
terms in the event of an unfavorable ruling on any such claim. In addition,
any such claim may require the Company to incur substantial litigation
expenses or subject it to significant liabilities that could have a material
adverse effect on its business.
GENERAL ECONOMIC CONDITIONS General economic climate and conditions impact
the operations of the Company. Adverse economic conditions could have the
effect of reduced demand for Company products, increasing customer defaults
and increasing overall credit risks. The availability of alternative financing
from banks, finance companies, insurance companies and other sources may
affect the availability of funds necessary for operations. There can be no
assurance that general economic conditions will be such that the Company will
be able to generate significant revenues or operate at a profit.
SUBJECT TO GOVERNMENT REGULATION To a great extent, the business of the
Company is dependent upon federal, state and local government regulations.
Government regulations which interfere with the Company's business plan could
have an adverse effect on the future business of the Company.
DIVIDEND POLICY The Company has not declared, paid, nor distributed any cash
dividends on its Common Stock in the past, nor are any cash dividends
contemplated in the foreseeable future. There is no assurance that the
Company's operations will generate any profits from which to pay cash
dividends. Even if profits are generated through the Company's operations in
the future, the Company's present intent is to retain any such profits, within
the foreseeable future, to be used as additional working capital.
SHARES ELIGIBLE FOR FUTURE SALE AND LIMITED PUBLIC MARKET Following the
completion of the bankruptcy proceedings, there were 28,658,354 Company Shares
issued and outstanding. An additional 888,757 Company Shares were issued in a
private placement of unsecured promissory notes convertible to Company shares
concluded in July, 1996. A large portion, approximately 16,700,000, of the
shares issued to Company's affiliates are restricted under certain transfer
restriction agreements between the Company and/or its affiliates. There is only
a limited market for the Company's common stock. If a large portion of
the Company Shares eligible for immediate resale after registration were to be
offered for public resale within a short period of time, the current public
market would likely be unable to absorb such Shares, which could result in a
significant reduction in current market prices. There can be no assurance
that investors will be able to resell Company Shares at the price they paid
for the Company Shares or at any price.
POTENTIAL LOSS OF NET OPERATING LOSS CARRY FORWARD The Company has a
significant net operating loss ("NOL") carry forward resulting from prior
operations which, if it continues to be available, may be used to offset
future income. An NOL can be of significant benefit to a company as it allows
the company to reduce future income taxes payable. In 1995 and 1996, changes
in the Company's ownership resulted from the transfer of shares by Alan
Yong to TPL and others in connection with bankruptcy proceedings. Furthermore,
additional Shares were issued in connection with the private
placement of certain convertible notes concluded in July, 1996 and additional
shares may be issued in the future. The result of the issuance and transfer
of Shares during 1995 and 1996, or in the future, may have the effect of
reducing or eliminating the Company's NOL and therefore, reducing or
eliminating a potential significant tax benefit.
LIQUIDITY The Company believes that the funds it currently has on hand, when
coupled with anticipated operating revenues, the additional funds it may
borrow from TPL and/or Kandila in the future, and the funds that the Company
may be able to raise through the registered or private offering of shares to
the public, is expected to provide sufficient funds for the Company to fund
current and continuing operations. There can be no assurance that any of the
events mentioned above will occur and therefore no assurance can be made that
the Company will be able to fund current and future operations.
LITIGATION Due to the Company's filing for protection under Chapter 11 of the
Federal Bankruptcy Code, all legal proceedings and claims were subject to the
automatic stay. By entry of the Bankruptcy Court Order confirming the
Company's Plan, all such proceedings and claims have been satisfied and
discharged pursuant to the provisions of the Plan. As of the date of this
filing, management of the Company is not aware of any pending or threatened
litigation against the Company.
BROKER-DEALER SALES OF COMPANY STOCK The Company's stock is covered by a
Securities and Exchange Commission Rule that implies additional sales practice
requirements on broker-dealers who sell "penny stock" to persons other than
certain established customers. For transactions covered by the rule, the
broker-dealer must obtain sufficient information from the customer to make an
appropriate suitability determination, provide the customer with a written
statement setting forth the basis of the determination and obtain a signed
copy of the suitability statement from the customer. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's stock and also
may affect the ability of stockholders to sell their stock in the secondary
market.
RECENT EVENTS
BANKRUPTCY On January 3, 1995, the Company filed a petition for relief under
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division. Following that
date, the Company operated under Chapter 11 as a Debtor-in-Possession. Under
Chapter 11, certain claims against the Company in existence prior to the
filing of the petition for relief under the Federal Bankruptcy Code were
stayed while the Company continued business operations as a Debtor-in-
Possession. These claims are reflected in the December 31, 1995 balance sheet
as "Liabilities Subject to Compromise".
During operations as a Debtor-in-Possession, the Company was in a dormant
stage for all practical purposes. On April 9, 1996, the Company's Third
Amended Plan and Disclosure Statement was filed with the Court.
Simultaneously, an Order was entered to gather credit holders' and
stockholders' votes for approval or rejection of the Plan. On May 6, 1996, the
votes from all classes of credit holders and stockholders were tallied. On
May 9, 1996, the Plan, having been approved through affirmative vote of over
90% of all ballots, was approved. The Plan was confirmed by Court Order
entered May 14, 1996. The Financial Statements presented reflect the effect
of confirmation of the Plan and Debt-for-Equity exchange as specified in the
Plan. On July 23, 1996, the final Court Order was entered, taking the Company
out of bankruptcy and closing the bankruptcy proceedings.
INDUSTRIAL CONTROLS In February 1996, the Company acquired a business plan
from Industrial Controls Inc. ("Intercon"), with the intent to produce
industrial control panels. It is important to note that Intercon's products,
once developed are expected, for the most part, to use the same technology
and parts as Dauphin products, but will be marketed through a different
channel of distribution with a different use in mind. The primary uses for
the control panels are machine control and human to machine interface. In
management's view, the products of Intercon would diversify the risks
associated with a single product entity, and would offer Dauphin access to an
additional market.
PRIVATE PLACEMENT During the second quarter of 1996, Technology Partners LLC.
("TPL") conducted a private placement of promissory notes convertible to
Company Shares. Upon conclusion of the private placement, and in exchange for
888,757 Shares of Common Stock to convert the notes, the Company received
$995,407.
PRODUCTION OF DTR-2 On June 19, 1996, the Company contracted with a
manufacturing facility to restart production of the DTR-2. In July, five
prototype units were completed and submitted for FCC approval. In October,
upon receipt of approval from FCC, a qualification run was completed and the
first fifty DTR-2's were built. At the present time the Company is marketing
its product and is planning to ramp up production as soon as the need arises.
NEW HEADQUARTERS During May, the Company occupied new corporate offices
located at 800 E. Northwest Hwy., Suite 950, Palatine, Illinois 60067, and its
new telephone number is 847-358-4406.
MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the over-the-counter market in the
National Quotation Bureau's Pink Sheets electronic bulletin board. The
following table shows the range of representative bid prices for the Common
Stock. The prices represent quotations between dealers and do not include
retail mark-up, mark-down, or commission, and do not necessarily represent
actual transactions. The number of stockholders on record as of November 19,
1996, is approximately 2,000. Some of the stockholders on record are brokerage
firms that hold shares in the 'street name'. Therefore, the Company believes
the total number of stockholders may be greater than 2,000.
1994 1995 1996
High Low High Low High Low
[C] [C] [C] [C] [C] [C]
First Quarter $2.7500 $0.7500 $1.8125 $0.2500 $1.6250 $0.8750
Second Quarter 1.0000 0.2500 1.2500 0.2500 1.7188 1.1250
Third Quarter 0.7500 0.1250 1.0675 0.6250 1.6250 1.1250
Fourth Quarter 1.5675 0.1250 1.0000 0.5675
The closing bid price of a share of the Company's Common Stock on November 20,
1996 was $1.5675. The Company has never paid dividends on its Common Stock and
does not anticipate paying any dividends in the foreseeable future. The
Company currently intends to retain its earnings, if any, to use as working
capital.
SELECTED FINANCIAL DATA
(In thousands, except per share data)
The following financial information has been derived from the Company's
Financial Statements. The results of interim periods are not audited and are
not necessary indicative of operation for the full year. This selected
financial information should be read in conjunction with "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", the
Company's Financial Statements and Notes thereto, and the other financial
information appearing in this Prospectus.
Year Ended Nine Months Ended
December 31 September 30
1991 1992 1993 1994 1995 1995 1996
INCOME STATEMENT DATA: [C] [C] [C] [C] [C] [C] [C]
Revenues $911 $23,540 $23,561 $9,603 $183 $160 $39
Cost of Sales 898 20,607 22,005 47,867 94 83 14
----- ------- ------ ------ ---- --- ---
Gross Profit (Loss) 13 2,933 1,556 (38,264) 89 77 25
Loss before
Extraordinary Item (1,736) (630) (3,398)(49,173) (795) (530) (835)
Extraordinary Items - 215 - - - - 38,065
Net Income (Loss) (1,736) (416) (3,398)(49,173) (795) (530) 37,231
EARNINGS PER COMMON SHARE (1):
Loss Before
Extraordinary Item (0.15) (0.05) (0.24) (3.41) (0.06) (0.04) (0.04)
Extraordinary Item - 0.02 - - - - 1.81
----- ----- ----- ----- ----- ----- -----
Net Income (Loss) (0.15) (0.03) (0.24) (3.41) (0.06) (0.04) 1.77
As of December 31 As of September 30
1991 1992 1993 1994 1995 1995 1996
BALANCE SHEET DATA:
Total Assets 3,035 6,670 15,838 298 426 377 3,402
Long Term Debt 318 568 - - - - 30
Working Capital
(Deficit) 1,032 160 (2,123)(50,167)(49,968)(50,764) 3,186
Stockholders Equity
(Deficit) 1,039 622 (850)(50,028)(50,910)(50,645) 3,276
(1) Income(Loss) per common share is calculated based on the monthly
weighted average number of Common Shares outstanding which were 14,408,354 for
the period ended September 30, 1995, and 21,018,554 for the nine month period
ended September 30, 1996. Also, weighted average number of Common Shares at
December 31, 1991, 1992, 1993, 1994, and 1995 were 11,298,106, 13,570,901,
14,137,100, 14,408,354, and 14,408,354, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
financial statements, related notes and other financial information included
elsewhere in this prospectus.
GENERAL
The Company's predecessor, Successo, Inc. ("Successo"), was incorporated on
September 8, 1987, as a Utah corporation. On April 4, 1991, Successo entered
into an agreement whereby the stockholders of Successo exchanged 100% of the
common stock for 10,355,800 shares of common stock of Dauphin Technology, Inc.
Dauphin was founded to design, manufacture and market mobile computing
systems, including laptop, notebook, handheld and pen-based computers,
components and accessories. From 1988 through 1992, Dauphin functioned
primarily as a development-stage company. Historically, the Company marketed
directly and through other distribution channels to both the commercial and
government segments.
In early 1993, the Company introduced the Desk-Top Replacement, version 1
("DTR-1"), a pen-based notebook computer with fax/modem features that was
considered a leading edge product with commercial appeal. Sales of the
DTR-1 did not meet the Company's expectations and financial problems
developed. During the fourth quarter of 1994, the Company sold the majority
of its finished goods inventory but was unable to meet its operating expenses.
Bankruptcy On January 3, 1995, the Company filed a petition for relief under
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division. During 1995 and
the first six months of 1996, the Company operated under Chapter 11 as a
Debtor-in-Possession and was in a dormant stage for all practical purposes.
On May 9, 1996, the Company's Third Amended Plan of Reorganization was
approved by the Court. On July 23, 1996, the Company was discharged as
Debtor-in-Possession and the bankruptcy case was closed.
Interactive Controls, Inc. Transaction On February 6, 1996, the Company
entered into an agreement (the "Intercon Agreement") with Interactive
Controls, Inc. and Victor Baron and Savely Burd, its sole shareholders.
Intercon has developed and is the owner of a business plan (the "Intercon
Business Plan") for the development, production, sale and installation of
miniature computers for industrial control panels and operation. Under the
terms of the Intercon Agreement, the Company acquired the rights to the
Intercon Business Plan, and hired Baron to act as the Company's Chief
Operating Officer and President of the Company's new "Intercon Division". It
also hired Burd to act as its Chief Financial Officer. Messrs. Baron and Burd
joined Mr. Kandalepas to comprise a three person Executive Committee. Under
the terms of the Intercon Agreement, and in addition to an annual salary and
bonus which will be paid by the Company to Baron and Burd, Intercon will be
entitled to receive certain shares of the reorganized Company's stock as
payment for the transfer to the Company of the Intercon Business Plan. The
Intercon Agreement provides that commencing upon the effective date of the
Plan and thereafter during the balance of the term of the Agreement,
Intercon (or its successors) will be issued Asset Acquisition Shares
determined as follows:
Subject to the adjustment procedures set forth below, during the term,
Intercon will receive:
(a) 1 million Asset Acquisition Shares the first fiscal year in which the
Company realizes aggregate gross revenue of $5 million (determined by
reference to the Company's year end financial statement which shall be
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis).
(b) 200,000 Asset Acquisition Shares for each additional $1 million in gross
sales realized by the Company in excess of $5 million and less than the
aggregate of $10 million in a single fiscal year (determined by reference
to the Company's year end financial statement which shall be prepared in
accordance with GAAP applied on a consistent basis). Intercon's right to
receive Asset Acquisition Shares under the provisions of this paragraph (b)
shall terminate when the aggregate number of Asset Acquisition Shares issued
to Intercon under the provisions of this paragraph (b) equals 1 million.
(c) After Intercon has received the Asset Acquisition Shares called for in
paragraph (a) and (b) above, but not prior thereto, it should also be
entitled to 0.25 Asset Acquisition Shares for each dollar in net earnings
before taxes which the Company realizes (determined by reference to the
Company's year end financial statement which shall be prepared in accordance
with GAAP applied on a consistent basis.)
Notwithstanding the forgoing, Intercon will not receive Asset Acquisition
Shares which would result in Intercon and/or Baron and Burd, in the aggregate,
in excess of 25% of the total of the Company's outstanding shares of common
stock, on a fully diluted basis.
Current Operations The main product of the Company is a handheld computer -
Desk Top Replacement, 2nd generation ("DTR-2"). The basic unit has a 486
central processing unit with 50 megahertz of processing speed. The unit also
has eight to sixteen megabytes of random access memory, a flat liquid crystal
display, a 170 megabytes hard drive, voice and pen recognition, and wireless
communications capability. The units measure 9 inches in length, 5.5 inches
width, 1.25 inches thick and weigh 2.7 pounds. The Company also offers
various options and accessories to support customer configuration
requirements.
On June 19, 1996, the Company placed a purchase order with a manufacturing
facility to start the production of DTR-2. In total, 155 units were ordered to
be delivered in three stages; five test units which were delivered in June and
were submitted to FCC for approval; following with fifty which were delivered
in October and then one hundred additional units to be delivered shortly
thereafter. In conjunction with this purchase order, Dauphin signed an
Irrevocable Letter of Credit in the amount of $232,000. As of the date of
hereof, no funds have been released under the Letter of Credit.
RESULTS OF OPERATIONS
September 30, 1996 Compared to September 30, 1995
Revenues
Total sales revenue for the nine months ended September 30, 1996 decreased to
$39,792 in 1996 from $160,484 in 1995. The decrease was primarily due to the
dormant state, the Company was in, for the majority of 1996. The first
fifty DTR-2 computers were assembled by the beginning of October 1996, so none
were available for sale during the year. Due to the small dollar value of
sales, the change in the gross profit margin cannot be compared to historical
margins and is not indicative of future margins.
Expenses
The increase in salaries and employment taxes was primarily due to an
increased number of employees in 1996 from 1995. Salaries represent a major
part of expenses for the nine months ended September 30, 1996. Other large
expense were research and development, tooling for the production of DTR-2,
and professional fees related to bankruptcy proceedings and SEC filings.
Net Income(Loss)
Due to debt forgiveness, the Company recognized income, including the
Extraordinary Gain, in the amount of $37,230,842 or $1.77 per share for the
nine months ended September 30, 1996. The (loss) after tax but before
Extraordinary Gain increased for the nine months to ($835,000) or ($0.04) per
share from ($530,000) or ($0.04) per share in 1995 on a fully diluted basis,
due primarily to lack of sales and increased expenses over the nine months of
1996.
Year Ended December 31, 1993 Compared to 1994 and 1995
Revenues Total sales revenues decreased at December 31, from $23,561,000 in
1993 to $9,603,000 in 1994 and $183,000 in 1995. This sharp decline in
revenue, from 1993 to 1994, was primarily due to Company's inability to
service its debts and subsequent liquidation of the DTR inventory by
manufacturer. During 1995, the Company was operating under Chapter 11 of the
Federal Bankruptcy Law and was in a dormant stage for all practical purposes.
Expenses Selling, general and administrative expenses decreased in 1995 to
$681,000 from $4,954,000 in 1994 and $3,436,000 in 1993. The decrease resulted
from the Company operating under Chapter 11 of the Federal Bankruptcy
Law. During 1995, over $180,000 was spent on professional services relating
to the Bankruptcy.
Research and development (R & D) expenses decreased to $22,000 in 1995 from
$937,000 in 1994 and $1,403,000 in 1993. Litigation settlement expense
incurred in 1994 was the result of an out-of-court settlement of an
outstanding claim.
Net Loss Net loss in 1995 was $795,000 or $0.06 per share compared to
$49,173,000 or $3.41 per share in 1994 and $3,398,000 or $0.24 per share in
1993. During 1994, the Company expensed a purchase commitment to a contract
manufacturer in the amount of $32,978,000 and a litigation settlement in the
amount of $4,935,000. For these reasons and the other items discussed above,
the loss was smaller in 1995 than prior years.
The gross profit margins are not comparable for the periods due to the extreme
fluctuations in sales and the recording, as cost of sales, due to a purchase
commitment to a contract manufacturer in 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, bankruptcy proceedings were concluded and all
material conditions precedent to the Plan were resolved. The financial
statements contained herein reflect the cumulative effect of culmination of
bankruptcy proceedings. As such, all debt, subject to and not subject to
compromise, with exception of Federal Priority Tax Liens and ongoing operating
expenses, was converted into equity. Simultaneously, certain inventory in
possession of TPL, was turned over to Dauphin, in exchange for common stock as
specified in the Third Amended Plan of Reorganization.
The increase in net inventory is attributable to an agreement with Technology
Partners, L.L.C. to purchase inventory in their possession which they received
when they purchased the secured claim from IBM on May 31, 1995. The
inventory ($2,912,000) was recorded at fair market value in conformity with
generally accepted accounting principles. (See "STATEMENTS OF SHAREHOLDERS'
EQUITY (DEFICIT)", "BALANCE, December 31, 1995", Column "Paid-in Capital" Page
F-5). Technology Partners, LLC received 2,600,000 shares of common shares
which placed the per share price at $1.12. The nature of the inventory
consisted of raw materials for future use in production of DTR-2 and other raw
materials.
Stockholders Equity (Deficit) increased in the third quarter from
($50,645,000) at September 30, 1995 to $3,276,064 at September 30, 1996 due to
culmination of the bankruptcy proceedings and capital infusion from the
private placement.
On October 22, 1996 the Company issued a convertible note to Tiedemann/Economos
Global Emerging Growth in the principal amount of $770,000.
The note is unsecured, accrues interest at the rate of 9% per annum, and is
due and payable on December 31, 1996. The Company is required to pay interest
at maturity. At the election of the holder, the note may be converted at
maturity to 1,100,000 shares.
Management anticipates that DTR and development and production of the Intercon
product lines will be the focus of the Company. It is estimated that both
product lines will require between $2.5 to $3 million of combined investment
in research and development over the next three years.
Cash flow from the sales of DTR-2 is expected to provide sufficient capital
for ongoing operations and anticipated growth. To meet operational
requirements, the Company will need to sell approximately 2,500 DTR-2's at
current margin levels, due to relatively small overhead. The market demand
for the competitive product suggests that these sales levels are attainable.
The Company believes that the funds it currently has on hand, when coupled
with anticipated operating revenues, the additional funds it may borrow from
TPL and/or Kandila in the future, and the funds that the Company may be able
to raise through the registered or private offering of shares to the public,
is expected to provide sufficient funds for the Company to fund current and
continuing operations. There can be no assurance that any of the events
mentioned herein will occur and therefore no assurance can be made that the
Company will be able to fund current and future operations.
INFLATION AND SEASONALITY
Due to the nature of the Company's products and current market trends,
increase in volume of production should generally result in a reduction of
cost per unit produced. Management does not anticipate any major shifts in
this trend in a foreseeable future. Also, due to the fact that the Company
targets industrial customer and not a retail outlet, the Company should not be
effected by the seasonal nature of consumer purchasing.
ACCOUNTING MATTERS
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of"
(effective for fiscal years beginning after December 15, 1995), in the first
quarter of 1996. The adoption did not have a material impact on the Company.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
based Compensation" (effective for fiscal years beginning after December 15,
1995) encourages, but does not require, employers to adopt a fair value
method of accounting for employee stock-based compensation, and requires
increased stock-based compensation disclosures if the fair value method is not
adopted. The Company has not implemented this Statement. Future
implementation will have an immaterial effect on the Company's operating
results or financial condition.
BUSINESS
SUMMARY The Company commenced operations in 1988 and from 1988 to 1992, it
functioned primarily as a development stage company which focused most of its
efforts on developing mobile computers that would meet the specifications of
certain government contracts. The Company identified the federal government
market place as one of the areas in which it could potentially compete in
designing and marketing mobile computers.
In December 1993, the Company introduced the DTR-1. The DTR-1 was a 2.7 pound,
486 SLC-Based computer with DOS/Windows capability. It had a mini-keyboard, a
six inch backlit VGA display, a variety of ports, pen input and an
internal Ethernet and modem. Due to some production delays and start-up
manufacturing problems with the product, the Company ran into serious
financial troubles. The Company proceeded to develop and market the DTR-1 and
it's next generation DTR-2, up to January 3, 1995, when financial difficulties
forced the Company into voluntary bankruptcy under Chapter 11 protection of
the Federal Bankruptcy Code.
During 1995 and the first five months of 1996, the Company operated under
bankruptcy protection and for all practical purposes was in a state of
dormancy. On May 9, 1996 the Third Amended Plan of Reorganization was
approved by the creditors and stockholders and confirmed by the Court. On
July 23, 1996, Dauphin was officially discharged as a Debtor-in-Possession and
the bankruptcy case was closed.
PLAN OF OPERATION The Company's current principal product is the DTR-2, a
second generation miniature portable windows-based, pen-capable 486 computer.
The Company believes, and the prototypes of the unit indicate, that this
product can be manufactured quantities and with quality. Also, the Company
believes that mobile computing is a significant aid to the efficiency of
several applications for so-called 'niche' or 'vertical-market' applications
in the defense, medical and numerous other industries. Mobile and laptop
computing is projected to be a $54 billion market in the next five years.
While the Company previously lacked profitability, the Company has
historically enjoyed a leadership position in the burgeoning market of mobile
computing. Armed with its current product, the reorganized Company hopes to be
able to rekindle that leadership position and convert it into profits.
Current management believes that past operational difficulties were primarily
caused by certain market misconceptions and expectations regarding palmtop
products, as well as the unreasonably large production quantities of the DTR-l
produced during the initial phase of the manufacturing cycle. The DTR-l,
developed in 1992 and early 1993, had advanced extended features such as pen-
based (keyboard/mouse replacement) hand-writing recognition and an
assortment of external peripherals which made it a versatile alternative to
traditional desktop or laptop computers. The concept of such a computer was
then merely in the developmental stages with most major computer hardware and
software manufacturers. Competitors were concentrating their efforts on
similar, but less capable, versions of palmtop computing devices, referred to
as Personal Digital Assistants or PDA's. The most notable of the PDAs is APPLE's
Newton notepad. Unlike the DTR, these products were designed to be
electronic data communicators capable only of pen sketch capture and
communications to the host PC or among themselves but, did not have the
capabilities of the Company's DTR miniature computers.
Initially, PDA's were negatively received by the market, causing an erroneous
image about the true capabilities of hand-held computers in general.
Therefore, the Company's chances to promote its product with its unique power,
capability and versatility were crippled. The Company's operation at that time
reached its most critical point because; first the product was misclassified
and second, the Company made excessive commitments to produce much larger
quantities of product than it could immediately sell in a hesitant market.
Large production runs, new untested technology and lack of revenues can be
fatal to any small to medium sized company because of the strains created on
capital and other resources. A company the size of Dauphin can overcome such
strains when dealing with a new viable technology, provided that the financial
commitments do not exceed its available resources.
In addition to present management's approach to production, major events, that
took place later, in the mobile pen-based market, have dramatically changed
the Company's position. The advent of PCMCIA options, sound capabilities,
pen recognition improvements, mobile wireless communication, and the recent
explosion of the Internet, as well as the proliferation of the laptop
computers, started a new wave of public interest in palmtop computers.
Over the last several years the competition in the pen-based computing
industry became more competitive. Several large and medium size electronics
firms have entered the market, increasing market awareness and creating the
infrastructure. Surprisingly, DTR-2, which was designed three years ago and
only slightly modified to reflect the current state of wireless communication
and electronics manufacturability, is still on the cutting edge of technology.
Based on customer response and market analysis, DTR-2 is as capable as any
palm-top computer produced by other electronics firms. The DTR-2 is also a
competitively priced product. Management anticipates, due to constant change
and improvement of electronics manufacturing and computer technology, DTR-2
will eventually need to be redesigned to maintain its status.
Management understands, that the future financial stability of the Company
will be assured by minimizing risks and having controlled expenditures and
product diversification. The Company presently owns sufficient inventory to
produce the DTR-2 in small quantities. The Company began production of the
DTR-2 in August, 1996. Production was started with small quantities to ensure
product quality and process efficiency prior to ramp-up. Delivery schedules
and further product development will be correlated with current market
requirements and sales performance. This approach will also allow for
adjustments in product configurations to satisfy the price and functionality
requirements of the targeted OEM markets. The Company does not, nor is it
planning to, cater specifically to the general consumer market.
Rather it prefers to target specialty and niche market opportunities, where
the unique features of the Company's products are more appreciated and profit
margins are usually more generous.
In order to achieve long term stability for the Company, the management has
developed its present strategy to get away from a single product-line
dependency. Such diversification will take place on the basis of related
product technologies and partnerships. Engagements will be selected with the
purpose, focus and objective to expand the Company's customer base and
diversify its sales and marketing. Diversification in products and marketing
will not only stabilize the financial position of the Company, but it will
provide a wide range of options for financial and technological resources.
Pursuant to the provisions of the Intercon Agreement, the Company has acquired
the right to incorporate into its business plan the business plan which
Intercon has developed for the design and manufacturing of modern Control
Systems and Software. The primary market to the products which the Company
will develop under the Intercon Business Plan will be industrial and
commercial manufacturing enterprises in need of high-efficiency low-cost
process/machine control and touch-screen graphics interface solutions. Revenues
will be generated through the sale and support of "EZ-Panel" and
"FLEX-Control" parts of "Interactive Solution" systems and "FLEX-Design"
software.
DTR SALES The DTR (an acronym for "Desk Top Replacement") products developed
and manufactured by the Company are full featured DOS/Windows, Windows 95
capable Personal Computers ("PC") in a package that would fit into the palm of
a person's hand. The DTR-1, developed in 1992 and early 1993, had features
such as a pen-based keyboard/mouse replacement with hand-writing recognition
and an assortment of external peripherals that made it a versatile alternative
to traditional desktop or laptop computers. The DTR-2 was developed in 1993
and early 1994. Unfortunately, due to its financial troubles, the Company did
not have the opportunity to allow full product development and production
cycle to occur. In addition, the DTR-2, unlike the DTR-1, features two type
II or one type III PCMCIA ("Memory Card International Association" standard)
slots for wireless communication capabilities, voice recognition and improved
connectivity with external systems.
The DTR-2 is a significant technological step forward among mobile computing
devices. It is a time, labor, and money-saving device that is designed to
free users from their desks. The DTR-2, which weighs about 2.7 pounds,
continues the trend toward smaller, more portable computers. Much more
flexible and powerful than a PDA, the DTR-2 is DOS/Windows, Windows 95
compatible. New developments in battery technology allow the device to be
portable and useful to customers who need computing capacity in remote
locations. In addition to a small keyboard, the DTR-2 allows "pen input"
which is ideal for note taking, record keeping, organization and on-the-road
fax communications. The DTR-2 has the ability to recognize handwriting and
convert it to ASCII text as well as recognizing and transcribing verbal
commands. Lastly, the DTR-2 can use wireless technology, either radio
frequency or cellular technology, to transmit data. This allows users to send
and receive "e-mail" and facsimiles from nearly anywhere in the world while
being part of a local area network at the same time. Future generations of the
DTR series may incorporate global positioning systems and other innovations
that will service particular vertical market needs.
The DTR-2 is designed to be a pen-based mobile computer solution. Until
recently, there has been limited pen-based software applications available.
During the last year, the number of pen-based software application has
increased significantly with additional applications expected in the future.
As more applications become available, the Company's management believes that
the market for the of DTR-2 will continue to grow.
The management of the Company believes today's mobile computer and wireless
communication markets provide an opportunity to further develop the DTR line
of products. Based upon this belief, the Company started the production of
the DTR-2. Production has started and will thereafter proceed in accordance
with financial capabilities of the Company and market demand for the product.
The Company purchased certain inventory from TPL, which TPL acquired in
connection with its purchase of IBM's pre-bankruptcy claims against the
Company. The Company presently owns sufficient inventory to support production
of the DTR-2 in small quantities. Production schedules and further product
developments will be correlated with market requirements and sales
performance. Accordingly, adjustments in product configurations will be made
to satisfy the price and functionality requirements of the targeted OEM markets.
The research and development of the future generations of DTR
computers will commence as soon as it is financially feasible.
The Company has only recently commenced marketing of the DTR-2. Historically,
the Company has marketed computers and not solutions to specific problems or
needs. The Company intends to offer not only the DTR-2 as a mobile computer,
but to develop and market the DTR-2 as part of a solution to a specific
customer use or need. Management believes that the DTR-2 will find acceptance
for uses such as insurance adjusting and claim work, development of medical
records, sales and marketing tools and defense industry related uses.
OTHER PRODUCTS Currently, the Company's management is in the process of
establishing an organizational structure that will enable its Intercon
Division to launch the first phase of development of Intercon's products.
Pursuant to the provisions of the Intercon Agreement described above, the
Company has acquired the right to utilize the Intercon Business Plan. The
primary market for Intercon's control systems and software will be industrial
and commercial manufacturing enterprises in need of high-efficiency low cost
Process/machine control and touch-screen graphics interface solutions. Revenue
will be generated through the sales and support of "Expanel" and "FLEX-
Control" parts of "Interactive Solution" systems and "FLEX-Design" software.
DIVERSIFICATION PLAN At the present time, the management of the Company is
actively seeking strategic acquisitions to further diversify its operations.
It is anticipated that some portion of the Shares may be used to effect
acquisitions but the number of shares that might be used for this purpose, if
any, cannot be determined. The Company's diversification plan is intended to
strengthen its short, mid and long term business and sales. Diversification
will take place on the basis of strategic partnerships with vendors or
customers, or through an acquisition of related technologies. Engagements
will be selected and decided upon with the objective of expanding the
Company's customer base and diversifying its products.
MANUFACTURING The DTR-2 units, currently being demonstrated to potential
customers, are first-production models. The Company has entered into a
manufacturing agreement and relationship with a qualified manufacturing
company for the production of DTR-2 units. The DTR-2 will be manufactured by
using a variety of components which are generally available from a number of
sources. The Company currently has sufficient inventory to assemble a small
number of DTR-2's.
COMPETITION The Company's only fully developed product is the DTR-2. This
product competes in the mobile computer market. Worldwide, there are 40 or so
companies competing in this market. Some of these competitors are large, well
financed entities. In order to be competitive, the Company must have its
products on the leading edge of technology. When new products are introduced,
there is a small window of opportunity before clones are developed. The
remaining windows of opportunity for the DTR-2 cannot be precisely determined,
but is expected to be approximately one year. However, being a small company,
management believes that Company's strength is its flexibility and low
overhead.
RESEARCH AND DEVELOPMENT The Company has a history of developing and bringing
to market products on the leading edge of technology. Due to the financial
problems the Company had experienced during the last several years,
Dauphin reduced the size of the engineering and technical staff dedicated to
research and development. The challenge for the Company is to develop
strategic partners or an in-house staff, which will enable it to expand its
product line and to continue to be the development leader in mobile computing.
SOURCE AND AVAILABILITY OF RAW MATERIALS The Company subcontracts the ssembly
of the finished product from component parts, which are obtained from
suppliers throughout the world. The Company presently owns sufficient
inventory, which it purchased from TPL, which should allow the company to
produce or cause to be manufactured sufficient quantities of DTR-2 to re-enter
the marketplace. However, the purchase of this inventory does not mean that
the Company will have sufficient raw material of each and every component to
build DTR-2 in larger quantities.
STRATEGIC PARTNERING The Company is in the process of reviewing and possible
renewing its existing strategic partnership agreement with Phoenix
Technologies Ltd. ("Phoenix"). Phoenix designs, develops, markets and licenses
proprietary compatibility software products for original equipment
manufacturers, including BIOS (basic input output system) and related system
software for personal computers.
The Company has entered into a Pen Products Original Equipment Manufacturing
Distribution License Agreement and Sublicense Agreement for Dedicated Systems
with Annabooks Software LLC ("Annabooks"), the supplier of products offered by
Microsoft Corporation ("Microsoft"). Microsoft is the third-party beneficiary
under these agreements. Under the terms of these agreements, the Company is
authorized to install Microsoft's DOS, Windows 3.11, Windows 95, and
Windows for Pen, amongst others, on computers it sells. For this right, the
Company must pay Microsoft through Annabooks royalties for each units sold,
with quantity discounts available.
PATENTS, COPYRIGHTS AND TRADEMARKS The computers offered by the Company are
the result of engineering design by its employees and strategic partners. The
Company will attempt to maintain its proprietary rights by trade secret
protection and by the use of non-disclosure agreements. It is possible that
the Company's products could be duplicated by competitors and the Company
could therefore be adversely affected by duplication and sales. However,
in view of the rapid technological and design changes incident to the computer
industry, the Company does not believe that, in general, patent and/or
copyright protection would be an effective means to protect its interest.
CUSTOMER DEPENDENCE During 1995 and the first six months of 1996, the Company
operated under Chapter 11 as a Debtor-in-Possession and was in a dormant stage
for all practical purposes. For this reason, the Company has no current
customer base. Notwithstanding this, prior to bankruptcy, the DTR-2 has been
approved for several military contracts. The management is in the process of
renegotiating some of these contracts. The effect of the bankruptcy
proceeding on past or potential future customers cannot be determined.
SALES AND MARKETING As a result of its financial problems, the Company had
limited inventory to sell during the last two years. Many of the distribution
channels that were previously used by or available to the Company are in
question. Furthermore, the DTR-2 is a niche product which has a long sales
cycle. The Company has rehired an employee, who was formerly involved in sales
of Company's products, to head up its marketing and sales efforts. Since
it inception, a significant portion of the Company's revenue had been derived
from sales of products to government agencies including the Department of
Defense. The Company intends to continue to attempt to market products to
government agencies but also attempt to expand its marketing efforts to
commercial users.
EMPLOYEES As of November 19, 1996, the Company has eleven employees. These
employees are executives, sales, production, technical support and
administrative personnel. None of the Company's personnel are represented by a
union. The management believes its employee relations to be good.
DESCRIPTION OF PROPERTY
FACILITIES The Company's executive offices consist of 7,300 square feet of
office space and 2,700 square feet of warehouse space located at 800 E.
Northwest Hwy., Suite 950, Palatine, Illinois 60067. The Company pays
approximately $10,000 per month to rent the facilities. The lease has a three
year term with a five year renewal option. The Company believes the space
will be adequate for the foreseeable future.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OFFICERS The following table sets forth the
name, age, date appointed a director, executive officer or officer, position
with Company or present principal occupation and employment history for the
past five years of each person who is a director, executive officer or
officer.
Name Age Date Appointed Present Office
Andrew J. Kandalepas 44 1995 Chairman of the Board of Directors
Chief Executive Officer, President
Mr. Kandalepas joined Dauphin Technology, Inc. as Chairman of the Board
in February, 1995. He was named CEO and President of Dauphin in November of
1995. In addition, Mr. Kandalepas is the founder and President of CADServ
Corporation, an engineering services company based in Schaumburg, Illinois.
Mr. Kandalepas graduated from DeVry Institute in 1974 with a Bachelor's Degree
in Electronics Engineering Technology. He then served as a product engineer at
GTE for two years. Mr. Kandalepas left GTE to serve ten years as a supervisor
of PCB design for Motorola just prior to founding CADServ Corporation.
Victor I. Baron 40 1996 Chief Operating Officer
Mr. Baron was appointed Chief Operating Officer of Dauphin Technology,
Inc. and as President of the Intercon Division in 1996. He has extensive
experience in strategic planning, design and technical sales of industrial
controls. An engineering graduate of Riga Poly Technical Institute, (Riga,
Latvia), in 1977, Mr. Baron has worked for over nineteen years in the high-
tech design field during which he has developed a wide range of long-term
relationships within the manufacturing industry. Before his appointment with
Dauphin, Mr. Baron worked for Total Control Products, an operator interface
manufacturer.
Savely Burd 32 1996 Chief Financial Officer
Mr. Burd was appointed Chief Financial Officer of Dauphin Technology,
Inc. in 1996. After graduation from the University of Illinois in 1987, Mr.
Burd began his career as a staff auditor at Arthur Andersen LLP. After
several promotions and a career move, Mr. Burd was hired as a Controller for
Clarklift of Chicago North, Inc., a materials handling equipment dealer.
Before his appointment with Dauphin, Mr. Burd was employed by Merrill Lynch.
Mr. Burd, a CPA, is a graduate of J. L. Kellogg Graduate School of Management.
Jeffrey L. Goldberg 44 1995 Secretary, Director
Mr. Goldberg has served as Secretary and a Director of Dauphin
Technology, Inc. since June of 1995. Since 1983, Mr. Goldberg has served as
President of Financial Consulting Group, Ltd., a Northfield, Illinois
financial planning firm he founded in that year. Mr. Goldberg was formerly
with a Chicago law firm, Goldberg and Goodman, and prior to that, was a tax
senior with Arthur Andersen LLP. He is an attorney, CPA and a Certified
Financial Planner.
Alan S. K. Yong 50 1988 Director
Mr. Yong served as President, Chief Executive Officer and a Director of
Dauphin Technology, Inc., from June 1988 when he founded the Company to June
1995. Since June 1995, he has served as a Director of the Company. From 1981
through the present, he has been serving as President of Manufacturing and
Maintenance Systems, (MMS) Inc. a privately held company based in Lombard,
Illinois that he founded in 1981. MMS designs, manufactures and markets
industrial computers for the alignment of rotating equipment. He is a
graduate of George Williams College and received his Masters in Business
Administration from Northern Illinois University.
Wm. Paul Bunnell 37 1995 Director
Mr. Bunnell has served as a Director of Dauphin Technology, Inc. since
June of 1995. Since 1991, Mr. Bunnell has served as Vice President of
Financial Consulting Group, Ltd. a Northfield, Illinois financial
planning firm. He was previously a corporate accounting and financial manager
with expertise in business planning and long range strategic planning.
Gary E. Soiney 56 1995 Director
Mr. Soiney has served as a Director of Dauphin Technology, Inc. since
November of 1995. He graduated from the University of Wisconsin in Milwaukee
as a marketing major with a degree in Business Administration. He is currently
a 75% owner in Pension Design & Services, Inc., a Wisconsin corporation which
performs administrative services for qualified pension plans to business
primarily in the Mid-West.
Douglas P. Morris 40 1995 Director
Mr. Morris has been a Director of Dauphin Technology since November of
1995. He is also the owner of H & M Capital Investments, Inc. and Hyacinth
Resources Inc., which are privately-held business consulting firms
that consult privately and publicly held companies in the matters related to
management, debt and equity financing. Mr. Morris received his Bachelor of
Arts Degree in Judicial Administration from Brigham Young University in 1978
and his Masters Degree in Public Administration from the University of
Southern California in 1982.
Andrew Prokos 34 1995 Director
Mr. Prokos has served as a Director of Dauphin Technology, Inc. since
February 1995. He is also Vice-President of CADServ Corporation in
Schaumburg, Illinois, a position he has held for the past five years. Mr.
Prokos is a graduate of DeVry Institute with an Associate Degree in
Electronics.
Dean F. Prokos 32 1995 Director
Mr. Prokos has served as a Director of Dauphin Technology, Inc. since
August 1995. He is the Regional Manager for the Secretary of State Drivers
Services Department, a position he has held for the past five years.
He attended Loyola University and received a degree in Business Management and
has been previously involved with management of various food establishments.
All Directors will be elected annually and hold office until the next annual
meeting of the stockholders of the Company or until their successors have been
elected and qualified.
INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company has adopted a by-law
provision which stipulates that it shall indemnify any director or officer who
was or is a party, or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, investigative
or administrative, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonable incurred
by him/her in connection with such action, suit or proceeding, if he/she acted
in good faith and in a manner he/she reasonable believed to be in, or not
opposed to, the best interest of the Company, had no reasonable cause to
believe his/her conduct was unlawful; provided, however, no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation, unless, and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonable entitled
to indemnity for such expenses as the court shall deem proper. These
indemnification provisions are not expected to alter the liability of
directors and officers under federal securities laws.
FAMILY RELATIONSHIPS
Both Andrew Prokos and Dean Prokos are cousins of Andrew Kandalepas, Chairman
of the Board of Directors. Andrew Prokos and Dean Prokos are siblings.
OTHER: INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There have been no events under any bankruptcy act, no criminal proceedings
and no judgments or injunctions material to the evaluation of the ability and
integrity of any Director or Executive Officer during the past five years.
EXECUTIVE COMPENSATION
Although the Company does not have a formal Compensation Committee, the Board
of Directors performs the equivalent functions of a Compensation Committee,
and seeks to align compensation with business strategy, Company value,
management initiatives and Company performance. Securities and Exchange
Commission regulations mandate disclosure of all compensation, including
salary, bonus and stock options, paid to executive officers and directors,
that exceeds $100,000. No executive officer or director was paid compensation
exceeding $100,000 during 1993, 1994 or 1995.
During 1995 and first half of 1996, Andrew J. Kandalepas worked for the
Company in various management positions and was not compensated for these
services. Other members of the Board of Directors do not get compensated for
their participation in management of the Company.
STOCK OPTION PLAN
At the Company's 1992 Annual Meeting of Stockholders, the stockholders
approved the 1992 Stock Option Plan pursuant to which stock options to
purchase up to 1,500,000 shares of the Company's common stock could be granted
to employees of the Company. In 1995, all options granted under the Plan
expired due to the termination of these employees and their failure to
exercise their options in a timely manner within the time period established
under the plan. The Plan itself was terminated during 1995.
REORGANIZATION
1995 Events
On January 3, 1995, the Company filed a petition for relief under Chapter 11
of the Federal Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division. At the time of the filing,
the Company an outstanding trade payable to IBM of approximately $40,000,000.
During 1995, the Company operated under Chapter 11 as a Debtor-in-Possession
without an approved Plan of Reorganization.
On January 19, 1995, the Court entered an Order authorizing the Company to use
IBM's cash collateral pursuant to the terms set forth in the Order. Despite
its continued use of 100% of the cash collateral, the Company did not have
sufficient funds to continue operations or to proceed with reorganization. On
March 31, 1995, all employees were terminated and all remaining assets were
put in storage while the Company pursued potential Debtor-in-Possession
financing. In an attempt to save the Company, TPL, an Illinois limited
liability company then controlled by Kevin Koy and Andrew J. Kandalepas,
purchased IBM's claim.
On June 20, 1995, the Court entered an Order approving an employment agreement
between the Company, Alan Yong, its then majority shareholder, Kevin Koy and
Andrew J. Kandalepas. The terms of the employment agreement were as follows:
Term - One year with automatic successive one-year renewals unless
either party gives one month prior written notice of an intention not to
renew.
Compensation - Annual rate of $70,000 for the first three months
increasing to an annual rate of $150,000 in the fourth month. The Company
granted Alan Yong options to purchase 700,000 shares of stock at $0.75
a share. These options were exercisable twelve months from the time they
become registered.
Purchase Inventory from Executive - The Company agreed to purchase
inventory valued at $50,000 over a five-month period at $10,000 per month.
Executive's Stock - Alan Yong and his family transferred 8,000,000
shares of the Company's stock to the designee of TPL pursuant to certain
transfer provisions.
As of July 15, 1995, all the transfer provisions had been met and the Yong
shares were transferred. This transaction resulted in a change in control of
the Company.
On July 10, 1995, the Bankruptcy Court entered an Order approving Debtor-in-
Possession financing between the Company and TPL.
On July 31, 1995, the Company filed a Preliminary Plan of Reorganization and
Related Disclosure Statement. On October 3, 1995, the Company filed its First
Amended Plan of Reorganization.
On October 11, 1995, the Company, TPL, the directors, officers and employees
of both organizations, including but not limited to Kevin Koy and Andrew J.
Kandalepas as guarantors and Alan Yong, entered into a settlement and
general release of the above Alan Yong employment agreement. Alan Yong was in
possession of certain assets of the Company with an approximate cost of
$60,000. Yong's stock options were also canceled. As part of the
consideration for this agreement, the Company conveyed ownership of the assets
then held by Yong to Yong.
On November 16, 1995, the Bankruptcy Court entered an Interim Order approving
additional Debtor-in-Possession financing between the Company and TPL.
During November 1995, certain disagreements arose between the members of the
Board of Directors and Kevin Koy and Russ Felker. The Company's then President
and Chief Financial Officer, concerning the management of the Company.
Because of such disagreements, Kevin Koy and Russ Felker were removed from
their positions as Chief Executive Officer and President of the Company,
respectively, on November 20, 1995. Andrew J. Kandalepas was then appointed
to serve as Chief Executive Officer and President of the Company.
On November 30, 1995, the Bankruptcy Court entered an Interim Order approving
Debtor-in-Possession financing between the Company and Kandila, an Illinois
limited liability company controlled by Andrew J. Kandalepas.
1996 Events
On January 16, 1996, the Company's counsel filed motions with the Bankruptcy
Court to retrieve all funds mistakenly paid to professional advisors of TPL,
Kevin Koy and Russ Felker, and to terminate the employment agreements with
Messrs. Koy and Felker. In addition, the motions sought to terminate a letter
of intent and related employment and stock incentive agreements related to a
proposed purchase of Cormark, Inc., an Illinois corporation engaged in the
manufacture and sale of point of purchase displays and controlled by John
Prinz. Return of a $60,000 deposit made to Cormark in anticipation of the
proposed purchase was also requested. Pursuant to the motions, all employment
and incentive agreements, as well as the letter of intent to purchase Cormark,
Inc., were terminated. The $60,000 deposit was returned to the Company and an
additional $107,000 in mistaken payments was recovered, and Messrs. Koy,
Felker and Prinz resigned from the Company as Directors. Mr. Koy terminated
all capacities with TPL and released all ownership interests in TPL.
On February 6, 1996, the Company entered into an agreement with Victor Baron,
Savely Burd and Interactive Controls, Inc., an Illinois corporation
("Intercon") relating to the Company's purchase of the Intercon Business Plan
for the development, production, sale and installation of miniature computers
for industrial control and operation. At that time, the Company Baron to act
as the Company's Chief Operating Officer and President of the Company's new
"Intercon Division." It also hired Burd to act as its Chief Financial
Officer. Messrs. Baron and Burd joined Mr. Kandalepas to comprise a three
person Executive Committee.
On February 14, 1996, the Company filed its Second Amended Plan of
Reorganization. On April 1, 1996, the Company filed the Third Amended Plan of
Reorganization. On May 9, 1996, the Third Amended Plan of Reorganization was
approved by the stockholders and creditors and confirmed by the Court.
Under this Plan, the creditors/equity holders were assigned to one of nine
classes. Satisfaction of claims of each class under this Plan was provided as
follows:
Class 1 - Post-Petition Administrative Claims
- To be paid in full on the effective date of the Plan (the
"Effective Date") or soon thereafter.
Class 2 - Priority Tax Claims
- To be paid in full with 9% interest in monthly payments.
Class 3 - Non-Tax Priority Claims
- To be paid in full on the Effective Date or soon
thereafter.
Class 4 - Pre-Petition Claims of TPL and IBM
- To receive 6,400,000 Shares of the Company's Common Stock
on the Effective Date or soon thereafter.
Class 5 - Post-Petition Claims of TPL and Kandila
- To receive 4,200,000 Shares of the Company's Common Stock
on the Effective Date or soon thereafter.
Class 6 - Claims of Wong's Electronics
- To receive, along with Class 8 creditors, a prorated
share of 1,000,000 Shares of the Company's Common Stock
on the Effective Date for their unsecured portion of the
claims.
- To receive 50,000 shares in settlement of their secured
portion of the claims on the Effective Date or soon
thereafter.
Class 7 - Claims Under Expressed or Implied Warranties
- To receive 10% product discount certificates on the
Effective Date or soon thereafter.
Class 8 - Claims Unsecured Creditors Not Otherwise Classified Under
the Plan
- To receive, along with Class 6 creditors, a prorated
shares of 1,000,000 shares of the Company's Stock on the
Effective Date or soon thereafter.
Class 9 - Equity Interest of Debtor's Stockholders
- To retain their shares of the Company's Stock.
On July 23, 1996 the Court approved the implementation of the Third Amended
Plan of Reorganization and discharged the Company as Debtor-in-Possession.
This terminated the Company's bankruptcy proceedings.
The Company has issued the 11,650,000 Shares of its Common Stock pursuant to
the Plan. This has effectively converted all pre-petition credit holders to
equity holders. Shares issued under the Plan have a certain holding period,
during which the Shares cannot be traded. The holding period continues through
the earlier of nine months from the Effective Date or the date the Shares are
registered by the Company.
According to the Plan, in addition to the stock issued to satisfy creditors'
claims, the Company is authorized to issue and register up to 16 million
additional shares (the "Reserve Shares") which can be used by the Company for
future business operations and growth and to satisfy potential share issuance
requirements under the Intercon agreement.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CADServ Corporation, an engineering services company based in Schaumburg,
Illinois, controlled by Andrew J. Kandalepas, has contributed to the design,
packaging and manufacturing of Dauphin's DTR product line and will
likely continue in this capacity in the future. CADServ is compensated on
substantially the same terms which could be obtained from non-related
companies in the marketplace.
Manufacturing and Maintenance Systems, Inc., an Illinois corporation
controlled by Alan S. K. Yong ("MMS"), made advances to, and payments on
behalf of the Company from time to time; however, all claims of MMS were
released in connection with the settlement and general release entered into on
October 11, 1995 by the Company, TPL and Mr. Yong.
On July 10, 1995, the Bankruptcy Court entered an Order approving Debtor-in-
Possession financing between the Company and TPL. TPL agreed to make available
for the Company's use from time to time, loans not to exceed $400,000, in the
aggregate, to be used by the Company for general working capital purposes.
Interest accrues on the principal balance at the rate of 11% per annum.
On November 16, 1995, the Bankruptcy Court entered an Interim Order approving
additional Debtor-in-Possession financing between the Company and TPL. TPL
agreed to make available for the Company's use from time to time, loans not to
exceed $150,000, in the aggregate, to be used by the Company for general
working capital purposes. Interest accrues on the principal balance of such
loan at the rate of 11% per annum.
On November 30, 1995, the Bankruptcy Court entered an Interim Order approving
Debtor-in-Possession financing between the Company and Kandila Investments,
Ltd., an Illinois limited liability company controlled by Mr. Kandalepas.
Kandila agreed to make available for the Company's use from time to time
during, loans not to exceed $500,000, in the aggregate, to be used by the
Company for general working capital purposes. Interest accrues on the
principal balance of such loan at the rate of 11% per annum. All loans made
by TPL and Kandila, together with interest accrued thereon, were converted and
exchanged for 4,200,000 Shares pursuant to the Plan.
On April 19, 1996, TPL commenced a private placement of certain 9% unsecured
promissory notes convertible to certain Dauphin shares. As a result of the
private placement and conversion of notes as specified in the Offering
Memorandum, Dauphin received $995,408, in exchange for 888,757 Reserve Shares
at $1.12 per share.
On October 22, 1996 the Company issued a convertible note to
Tiedemann/Economos Global Emerging Growth in the principal amount of $770,000.
The note is unsecured, accrues interest at the rate of 9% per annum, and is
due and payable on December 31, 1996. The Company is required to pay interest
at maturity. At the election of the holder, the note may be converted at
maturity to 1,100,000 shares.
PRINCIPAL STOCKHOLDERS
INFORMATION ON OUTSTANDING STOCK The following table sets forth certain
information regarding Shares of Common Stock of the Company owned beneficially
as of November 19, 1996, by (i) each Officer and Director of the Company, (ii)
all Officers and Directors as a group, and (iii) each person known by the
Company to beneficially own more than 5% of the Common Stock of the Company:
Name and Amount and Nature
Address of of Beneficial Percent
Beneficial Owner Position Shares Owned of Class
[C] [C] [C] [C]
Alan S. K. Yong
1 N. 756 Hillcrest
West Chicago, IL 60185 Director 825,126 (1) 2.8%
Andrew J. Kandalepas
770 Michigan Ave.
Elk Grove Village, IL 60007 Chairman, Chief
Executive Officer &
President 3,478,242 (2)(6)(7) 11.8%
Victor L. Baron
759 North Ave.
Highland Park, IL 60035 Chief Operating
Officer 15,000 0.1%
Savely Burd
9445 Kenton, #411
Skokie, IL 60076 Chief Financial
Officer 0 0.0%
Jeffrey L. Goldberg
2800 Acacia Terrace
Buffalo Grove, IL 60089 Secretary, Director 3,520,471 (3)(6) 11.9%
Wm. Paul Bunnell
9049 N. Bronx 2-S
Skokie, IL 60077 Director 5,912,471 (3)(6) 20.0%
Gary E. Soiney
4524 Maple Rd.
East Troy, WI 53120 Director 0 0.0%
Douglas P. Morris
515 Red Cyprus Dr.
Cary, IL 60013 Director 311,167 (4)(5) 1.1%
Andrew Prokos
2359 N Windsor Drive
Arlington Hts., IL 60004 Director 204,000 0.7%
Dean F. Prokos
415 Pheasant Ridge Drive
Lake Zurich, IL 60047 Director 0 0.0%
Hyacinth Resources Inc.
515 Red Cyprus Dr.
Cary, IL 60013 ------ 300,000 (5) 1.0%
Northfield Technology Group
790 Frontage Rd.
Northfield, IL 60093 ------ 3,283,000 (3) 11.1%
H & M Capital Investment
330 E. Maine St.
Barrington, IL 60010 ------ 11,167 (4) 0.0%
Technology Partners LLC
790 Frontage Rd.
Northfield, IL 60093 ------ 237,471 (6) 0.8%
DNS Escrow Trust
790 Frontage Rd.
Northfield, IL 60093 ------ 2,392,000 8.1%
K & L Trust
322 N. Prospect Rd.
Park Ridge, IL 60068 ------ 235,800 (2)(7) 0.8%
Marinis Loukas Trust
322 N. Prospect Rd.
Park Ridge, IL 60068 ------ 2,032,500 6.9%
Virtual Technology LTD.
C/O TrustNet
CIDB Building
Avarua, Rarotonga
Cook Islands ------ 2,133,000 7.2%
Tiedemann/Economos Global
Emerging Growth L.F.
P.O Box N-920A Charlotte House
Charlotte Street
Nassau, Bahamas ------ 4,200,000 14.2%
Officers and Directors
(as a group) 10,508,535 35.6%
1. The 825,126 Shares listed for Alan S. K. Yong include Shares owned by
members of his family.
2. The 3,478,242 Shares listed for Andrew J. Kandalepas include 2,974,167
Shares held individually, 30,804 Shares held by CADServ Corporation, 237,471
Shares held by Technology Partners, and 235,800 beneficially owned in
the K&L Trust.
3. Jeffrey L. Goldberg and Wm. Paul Bunnell are managing members of
Northfield Technology Group and share voting.
4. Douglas P. Morris is President of H & M Capital Investments, Inc. which
owns 11,167 Shares.
5. Douglas P. Morris is President of Hyacinth Resources which owns 300,000
Shares.
6. Andrew J. Kandalepas, Jeffrey L. Goldberg and Wm. Paul Bunnell are managing
members of Technology Partners LLC, and share voting.
7. Andrew J. Kandalepas is a beneficiary of K & L Trust.
VOTING RIGHTS OF CONTROL PERSONS
INFORMATION ON OUTSTANDING STOCK The following table sets forth certain
information regarding Shares of Common Stock of the Company voted by control
persons as of November 19, 1996, by (i) each Officer and Director of
the Company, (ii) all Officers and Directors as a group, and (iii) each person
known by the Company to beneficially own more than 5% of the Common Stock of
the Company:
Name and Amount and Nature
Address of of Beneficial Percent
Beneficial Owner Position Shares Owned of Class
[C] [C] [C] [C]
Alan S. K. Yong
1 N. 756 Hillcrest
West Chicago, IL 60185 Director 825,126 (1) 2.8%
Andrew J. Kandalepas
770 Michigan Ave.
Elk Grove Village, IL 60007 Chairman, Chief
Executive Officer &
President 7,198,275 (2) 24.4%
Victor L. Baron
759 North Ave.
Highland Park, IL 60035 Chief Operating
Officer 15,000 (3) 0.0%
Savely Burd
9445 Kenton, #411
Skokie, IL 60076 Chief Financial
Officer 0 0.0%
Jeffrey L. Goldberg
2800 Acacia Terrace
Buffalo Grove, IL 60089 Secretary, Director 3,520,471 (2) 11.9%
Wm. Paul Bunnell
9049 N. Bronx 2-S
Skokie, IL 60077 Director 7,279,471 (2) 24.6%
Gary E. Soiney
4524 Maple Rd.
East Troy, WI 53120 Director 0 0.0%
Douglas P. Morris
515 Red Cyprus Dr.
Cary, IL 60013 Director 311,167 0.1%
Andrew Prokos
2359 N Windsor Drive
Arlington Hts., IL 60004 Director 204,000 (4) 0.1%
Dean F. Prokos
415 Pheasant Ridge Drive
Lake Zurich, IL 60047 Director 0 0.0%
Tiedemann/Economos Global
Emerging Growth L.F.
P.O Box N-920A Charlotte House
Charlotte Street
Nassau, Bahamas ------ 4,200,000 14.2%
Officers and Directors (as a group) 15,614,039 52.8%
1. The 825,126 Shares listed for Alan S. K. Yong include Shares owned by
members of his family.
2. Andrew J. Kandalepas, Jeffrey L. Goldberg, and Wm. Paul Bunnell are
managing members of Technology Partners LLC, and share voting 237,471 shares.
3. Andrew J. Kandalepas votes these shares.
4. Andrew J. Kandalepas has voting rights of 200,000 of these shares.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 Shares of
Common Stock, par value $0.001 per share ("Common Stock") and 10,000,000
Shares of Preferred Stock, par value $0.01 per share ("Preferred Stock"). As
of November 20, 1996 there were 29,547,111 Shares of Common Stock outstanding
and beneficially owned by approximately 2,000 beneficial stockholders, and no
Shares of Preferred Stock were outstanding. The following summary is qualified
in its entirety by reference to the Company's Certificate of Incorporation,
which is available from the Company.
COMMON STOCK The Common Stock possesses ordinary voting rights for the
election of directors and in respect of other corporate matters, each share
being entitled to one vote. There are no cumulative voting rights, meaning
that the holders of a majority of the Shares voting for the election of
directors can elect all the directors if they choose to do so. The Common
Stock carries no preemptive rights and is not convertible, redeemable,
assessable, or entitled to the benefits of any sinking fund. The holders of
Common Stock are entitled to dividends in such amounts and at such times
as may be declared by the Board of Directors out of funds legally available
therefor. See "Market Price for Common Stock and Dividend Policy" for
information regarding dividend policy. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company available after payment or provision for
payment of all debts and other liabilities, subject to the prior rights of any
outstanding Preferred Stock.
PREFERRED STOCK The Board of Directors of the Company is empowered, without
approval of the stockholders, to cause Shares of Preferred Stock to be issued
in one or more series, with the numbers of Shares of each series to be
determined by it. The Board of Directors is authorized to fix and determine
variations in the designations, preferences, and relative, optional or other
special rights (including, without limitation, special voting rights,
preferential rights to receive dividends or assets upon liquidation, rights of
Conversion into Common Stock or other securities, redemption provisions and
sinking fund provisions) between series and between the Preferred Stock or any
series thereof and the Common Stock, and the qualifications, limitations or
restrictions of such rights; and the Shares of Preferred Stock or any series
thereof may have full or limited voting powers or be without voting powers.
Although the Company has indicated that it has no present intention to issue
Shares of Preferred Stock, the issuance of Shares of Preferred Stock or the
issuance of rights to purchase such Shares, could be used to discourage an
unsolicited acquisition proposal. For instance, the issuance of a series of
Preferred Stock might impede a business combination by including class voting
rights that would enable the holders to block such a Conversion; or such
issuance might facilitate a business combination by including voting rights
that would provide a required percentage vote of the stockholders. In
addition, under certain circumstances, the issuance of Preferred Stock could
adversely affect the voting power of the holders of the Common Stock. Although
the Board of Directors is required to make any determination to issue such
stock based on its judgments as to the best interests of the stockholders of
the Company, the Board of Directors could act in a manner that would
discourage an acquisition attempt or other Conversion that some or a majority
of the stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market
price of such stock. The Board of Directors does not at present intend to seek
stockholder approval prior to any issuance of currently authorized stock.
SHARE TRANSFER RESTRICTIONS
The Company intends to hereby register all Shares issued in the connection
with the Plan as well as other shares. Accordingly, if the securities
registration is declared effective by the SEC and state securities
administrators, substantially all of the Company Shares then issued and
outstanding would be freely tradable in market transactions, other then Shares
held by affiliates, which will remain subject to volume limits. To assist the
Company in attempting to maintain an orderly trading market, TPL, its members,
and certain of their affiliates (the "Restricted Persons"), have agreed to
restrict their right to transfer their Shares in market transactions.
The Restricted Persons have entered into a Share Transfer Restriction
Agreement whereby they have agreed to limit their collective sales of Company
Shares in market transactions to an aggregate of 50,000 Shares per calendar
month. This means that all of the Restricted Persons, as a group, may not
sell more than 50,000 Company Shares in market transactions in any calendar
month.
The following persons who are currently stockholders of the Company have
agreed to restrict their transfer of Shares following the Effective Date:
Number of
Restricted Persons Restricted Shares
Technology Partners LLC 237,471
K & L Trust 235,800
Northfield Technology Group 3,283,000
DNS Escrow Trust 2,392,000
Virtual Technology LTD. 2,133,000
Marinis Loukas Trust 2,032,500
Fox Investment Co. 1,367,000
Hyacinth Resources, Inc. 300,000
Patriotes Fund Escrow 300,000
Metamorphosis Tou Soteros 250,000
Maloha Trust 225,000
October 1994 Redemption Trust Fund 195,000
Andrew J. Kandalepas TTEE 2,939,167
Others 602,533
TOTAL 16,492,471
The Share Transfer Restriction Agreement has a term of two (2) years
commencing on the Effective Date of the Plan. The restriction on transfers is
limited to public market transactions effected through a broker-dealer. There
are no restrictions on privately negotiated transactions which are not
effected through a broker-dealer, provided however, that the transferee agrees
to be bound by the terms and conditions of the Share Transfer Restriction
Agreement.
In addition to the Share Transfer Restriction Agreement described above, Alan
S. K. Yong has entered into an agreement to limit his sales of shares to not
more than 10,000 per month. Such restriction terminates twenty-four (24)
months from April 1, 1996.
TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the
Company's Shares is American Stock Transfer and Trust Company, 40 Wall Street,
New York, NY 10005 (212) 936-5100.
PLAN OF DISTRIBUTION
The Company is registering 24,770,179 Shares of Common Stock for the Selling
Stockholders. All costs, expenses and fees (estimated to be not more then
$44,000) in connection with the registration of the Shares offered hereby,
will be borne by the Company. Brokerage commissions, if any, attributable to
the sale of the Shares by the Selling Stockholders will be borne by the
Selling Stockholders. The Company will not receive any proceeds from the sale
of Shares by Selling Stockholders.
The Selling Stockholders' sale of Shares may be effective from time to time in
transactions (which may include block transactions) in the over-the-counter
market, in negotiated transactions, or a combination of such methods of sale,
or at negotiated prices. The Selling Stockholders may also transfer a portion
of their Shares registered pursuant to this Prospectus by way of a gift or
other gratuitous transactions.
The Selling Stockholders may effect transactions by selling Shares directly to
purchasers or to or though broker-dealers which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both. The Selling Stockholders and any
broker-dealers that act in connection with the sale of the Shares might be
deemed to be "underwriter" within the meaning of Section 2(11) of the
Securities Act and any commissions received by them and any profit on the
resale of the Shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act.
Because the Selling Stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Stockholders will
be subject to prospectus delivery requirement under the Securities Act.
Furthermore, in the event of a "distribution" of his or her Shares, such
Selling Stockholders, any selling broker or dealer and any "affiliated
purchasers" may be subject to Rule 10b-6 under the Exchange Act until his or
her participation in the distribution is completed. In addition, Rule 10b-7
under the Exchange Act prohibits any "stabilizing bid" or "stabilizing
purchase" for the purpose of pegging, fixing or stabilizing the price of
common Stock in connection with the offering.
There is no assurance that the Selling Stockholders will be able to sell all
or any of the Shares offered hereby.
SELLING STOCKHOLDERS
The shares to be registered hereunder were issued in accordance with the Third
Amended Plan of Reorganization and a private placement during 1996. Certain
of these shares have registration rights. See "Description of Capital Stock".
The shares are being registered to remove their restricted status under the
1933 Act. Although the Selling Stockholders have not advised the Company that
they currently intend to sell Shares, pursuant to this registration the
Selling Stockholders may choose to sell all or portion of the Shares from time
to time in the over-the-counter market or otherwise at prices and terms then
prevailing or at prices related to the current market price, or negotiated
transactions. The Selling Stockholders include approximately 413 private and
institutional investors. Shares registered for persons who are or have been
affiliates of the Company or who hold more than five percent of the
outstanding Common Stock are as follows: Andrew J. Kandalepas, Jeffrey L.
Goldberg, Wm. Paul Bunnell, Technology Partners, L.L.C., Northfield
Technology Group L.L.C., DNS Escrow Trust, Virtual Technology Ltd., and
Tiedemann/Economos Global Emerging Growth L.F.; Transfers of Shares by these
parties are restricted by lock up agreements described above in "Share
Transfer Restriction".
Beneficially Beneficially Registered
Beneficially Owned Shares Owned Shares
Owned to be Shares Beneficially
Shares Registered to be Owned
Sold After
Registration
Number % Number % Number Number %
[C] [C] [C] [C] [C] [C] [C]
Dauphin Technology
Inc. Reserve Shares 2,950,000 10.6% 2,950,000 10.6% 0 2,950,000 10.6%
Tiedemann/Economos
Global Emerging
Growth L.F. 4,200,000 15.1% 4,200,000 15.2% 0 4,200,000 15.1%
Northfield Technology
Group 3,283,000 11.8% 3,283,000 11.8% 0 3,283,000 11.8%
Kandalepas, Andrew
J., Declaration of
Trust 2,939,167 10.6% 2,939,167 10.6% 0 2,939,167 10.6%
DNS Escrow Trust 2,392,000 8.6% 2,392,000 8.6% 0 2,392,000 8.6%
Virtual Technology
Limited 2,133,000 7.7% 2,133,000 7.7% 0 2,133,000 7.7%
Marinis Loukas Trust 2,032,500 7.3% 2,032,500 7.3% 0 2,032,500 7.3%
Fox Investment Co. 1,367,000 4.9% 1,367,000 4.9% 0 1,367,000 4.9%
Lionville MFG. Corp,
C/O Chuhak &
Tecson P.C. 453,700 1.6% 453,700 1.6% 0 453,700 1.6%
Yong, Lucy 319,289 1.1% 319,289 1.2% 0 319,289 1.1%
Hyacinth Resources,
Inc. 300,000 1.1% 300,000 1.1% 0 300,000 1.1%
Patriotes Fund Escrow 300,000 1.1% 300,000 1.1% 0 300,000 1.1%
Yong, Lucy 296,926 1.1% 296,926 1.1% 0 296,926 1.1%
Metamorphosis Tou
Soteros 250,000 0.9% 250,000 0.9% 0 250,000 0.9%
Technology Partners,
LLC 237,471 0.9% 237,471 0.9% 0 237,471 0.9%
K&L Trust 235,800 0.8% 235,800 0.9% 0 235,800 0.8%
Maloha Trust, Dimitrios
N Lekkos, Trustee 225,000 0.8% 225,000 0.8% 0 225,000 0.8%
Inspectech Corp 224,693 0.8% 224,693 0.8% 0 224,693 0.8%
Prokos, Andrew 200,000 0.7% 200,000 0.7% 0 200,000 0.7%
October 1994 Redemption
Trust Fund 195,000 0.7% 195,000 0.7% 0 195,000 0.7%
Dimitropoulos, Angelo 170,857 0.6% 150,000 0.5% 0 170,857 0.6%
Senglaub, Jeffrey 169,643 0.6% 169,643 0.6% 0 169,643 0.6%
Jones, Rick G. 133,155 0.5% 133,155 0.5% 0 133,155 0.5%
Douros, John 122,000 0.4% 122,000 0.4% 0 122,000 0.4%
Mikroulis, Anastasios 96,786 0.3% 96,786 0.3% 0 96,786 0.3%
Yong, Alan 79,723 0.3% 79,723 0.3% 0 79,723 0.3%
Murphy, Margaret J. 66,965 0.2% 66,965 0.2% 0 66,965 0.2%
Messineo, Leonard, TTEE,
Leonard E. Messineo
Revocable Trust 65,000 0.2% 65,000 0.2% 0 65,000 0.2%
Swislow, Sidney, TTEE
of the Sidney Swislow
Trust UA Dated 9/10/87 65,000 0.2% 65,000 0.2% 0 65,000 0.2%
Pierce, J. Brian 60,000 0.2% 60,000 0.2% 0 60,000 0.2%
Watson, John V. 54,643 0.2% 54,643 0.2% 0 54,643 0.2%
Hiotos Hrysikos Building 50,108 0.2% 50,108 0.2% 0 50,108 0.2%
ASIC Designs Inc. 50,000 0.2% 50,000 0.2% 0 50,000 0.2%
Huang, Nick, Trustee
for David Yong 50,000 0.2% 50,000 0.2% 0 50,000 0.2%
Klose, Clifford F.
Trust IRA 50,000 0.2% 50,000 0.2% 0 50,000 0.2%
Wongs Electronics Inc 50,000 0.2% 50,000 0.2% 0 50,000 0.2%
Yong, Caroline 50,000 0.2% 50,000 0.2% 0 50,000 0.2%
Erwin, Lisa M. 44,643 0.2% 44,643 0.2% 0 44,643 0.2%
Ferguson, Kirk 44,643 0.2% 44,643 0.2% 0 44,643 0.2%
Jachec, Lawrence 44,643 0.2% 44,643 0.2% 0 44,643 0.2%
Mayer, Harold M. 44,643 0.2% 44,643 0.2% 0 44,643 0.2%
Phillips, Jerry A. 44,643 0.2% 44,643 0.2% 0 44,643 0.2%
Rutkowski, Barbara Ann 44,643 0.2% 44,643 0.2% 0 44,643 0.2%
Wong's Electronics Inc 41,882 0.2% 41,882 0.2% 0 41,882 0.2%
Forman, Franklin &
Joan, JTWROS 41,779 0.2% 41,779 0.2% 0 41,779 0.2%
Darraugh, Mike P. 35,715 0.1% 35,715 0.1% 0 35,715 0.1%
Felger, Joseph & Carol
A., JTWROS 35,715 0.1% 35,715 0.1% 0 35,715 0.1%
Tzortzis, John & Jane 35,000 0.1% 35,000 0.1% 0 35,000 0.1%
Kandalepas, Andrew 35,000 0.1% 5,000 0.0% 0 35,000 0.1%
Michel, James E., TTEE,
James E. Michel Trust 33,333 0.1% 33,333 0.1% 0 33,333 0.1%
CADserv Corp 30,804 0.1% 30,804 0.1% 0 30,804 0.1%
Delaware Charter Trust
Co. FBO Jane
Rodgers IRA 30,000 0.1% 30,000 0.1% 0 30,000 0.1%
Dellis, Steve 30,000 0.1% 30,000 0.1% 0 30,000 0.1%
Larsen, Donald 30,000 0.1% 30,000 0.1% 0 30,000 0.1%
Phoenix Technologies 28,490 0.1% 28,490 0.1% 0 28,490 0.1%
Nickerson, Orlando E. 26,786 0.1% 26,786 0.1% 0 26,786 0.1%
Mitsumi Electronics
Corp 25,399 0.1% 25,399 0.1% 0 25,399 0.1%
Lakeshore Consulting 22,322 0.1% 22,322 0.1% 0 22,322 0.1%
Voutiritsas, Nick D. 22,322 0.1% 22,322 0.1% 0 22,322 0.1%
Shipley, Richard W.
(TR) Fragments, Inc.
Pft Shg Pln #001 22,000 0.1% 22,000 0.1% 0 22,000 0.1%
Velavidas, Jim 21,333 0.1% 21,333 0.1% 0 21,333 0.1%
Yong, Alan 21,324 0.1% 21,324 0.1% 0 21,324 0.1%
Vasilopoulos, Gust P. 20,200 0.1% 20,200 0.1% 0 20,200 0.1%
MFG & Maintenance System 19,055 0.1% 19,055 0.1% 0 19,055 0.1%
Baumann, Angela &
Denapoli, Phillip,
JTWROS 17,858 0.1% 17,858 0.1% 0 17,858 0.1%
Enriquez, Rick F. 17,858 0.1% 17,858 0.1% 0 17,858 0.1%
Lutheran Church of
Redeemer 17,858 0.1% 17,858 0.1% 0 17,858 0.1%
McMahon, James F. 17,858 0.1% 17,858 0.1% 0 17,858 0.1%
Schuhknecht, Wesley H.
& Joseph, JTWROS 17,858 0.1% 17,858 0.1% 0 17,858 0.1%
Steckel, Iven H. 17,858 0.1% 17,858 0.1% 0 17,858 0.1%
Duval, Casimir J. 17,000 0.1% 17,000 0.1% 0 17,000 0.1%
Huberfel, Robert 15,727 0.1% 15,727 0.1% 0 15,727 0.1%
Patti, Robert 15,727 0.1% 15,727 0.1% 0 15,727 0.1%
Microsoft Corp. 15,112 0.1% 15,112 0.1% 0 15,112 0.1%
Baron, Victor 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Schak, Donald 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Sears Logistic Services 14,644 0.1% 14,644 0.1% 0 14,644 0.1%
Terminal Handling D/B/A
Sears Logistics
Services 13,624 0.0% 13,624 0.0% 0 13,624 0.0%
Collins, Roger L &
Sandra R, JTWROS 13,393 0.0% 13,393 0.0% 0 13,393 0.0%
Tumilty, James R. &
Marlene A., JTWROS 13,393 0.0% 13,393 0.0% 0 13,393 0.0%
Ashkinazi, Gregory 13,000 0.0% 13,000 0.0% 0 13,000 0.0%
Vreugdenhil, John &
Helen, JTWROS 12,580 0.0% 8,580 0.0% 0 12,580 0.0%
Resources Trust IRA
FBO Richard Farmer 12,000 0.0% 12,000 0.0% 0 12,000 0.0%
H & M Capital
Investments, Inc. 11,167 0.0% 11,167 0.0% 0 11,167 0.0%
Richmond, Thomas E.
& Eleanor, JTWROS 11,000 0.0% 11,000 0.0% 0 11,000 0.0%
Van Hyfte, Robert J. 11,000 0.0% 11,000 0.0% 0 11,000 0.0%
Berman, Seymour 10,715 0.0% 10,715 0.0% 0 10,715 0.0%
Defensor, Dennis 10,481 0.0% 10,481 0.0% 0 10,481 0.0%
Rollinge, Dennis 10,481 0.0% 10,481 0.0% 0 10,481 0.0%
Pernini, Robert B. 10,045 0.0% 10,045 0.0% 0 10,045 0.0%
Collins, Thomas 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Forret, James G. 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Heydenberk, David D. &
Constance R., JTWROS 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Pragalz, William F. 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Schramek, Percy J.
Revocable Living
Trust DTD 10/22/91 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Senglaub, James 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Thanos, Tom 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Trendel, Sheila A. 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Baigh, Margie, Cal
Central Trust Bank
TTEE FBO 9,900 0.0% 9,900 0.0% 0 9,900 0.0%
Kreider, Larry W. 9,900 0.0% 9,900 0.0% 0 9,900 0.0%
Roberts, Alfred 9,900 0.0% 9,900 0.0% 0 9,900 0.0%
Stofac, Robert L. 9,900 0.0% 9,900 0.0% 0 9,900 0.0%
Yoon, Mi Ran 9,900 0.0% 9,900 0.0% 0 9,900 0.0%
Delaware Charter Trust
Co. FBO Sean Ryan IRA 8,942 0.0% 8,942 0.0% 0 8,942 0.0%
Devlin, Paul A. 8,929 0.0% 8,929 0.0% 0 8,929 0.0%
Schuhknecht, Wesley
H.& Vincent, JTWROS 8,929 0.0% 8,929 0.0% 0 8,929 0.0%
Yacullo, David G. 8,929 0.0% 8,929 0.0% 0 8,929 0.0%
Gillogly, Russell R. 8,801 0.0% 8,801 0.0% 0 8,801 0.0%
Carlson, Terry W. 8,250 0.0% 8,250 0.0% 0 8,250 0.0%
Yong, Alan S. K. 7,864 0.0% 7,864 0.0% 0 7,864 0.0%
Keevins, Edward & Heidi,
JTWROS 7,700 0.0% 7,700 0.0% 0 7,700 0.0%
Meizels, Philip &
Carol, JT 7,700 0.0% 7,700 0.0% 0 7,700 0.0%
Wagner, Dennis J. 7,500 0.0% 7,500 0.0% 0 7,500 0.0%
Ryan, Sean F. 7,465 0.0% 7,465 0.0% 0 7,465 0.0%
Tobias, Eli 6,666 0.0% 6,666 0.0% 0 6,666 0.0%
Baigh, Neal 6,600 0.0% 6,600 0.0% 0 6,600 0.0%
Axarides, Tim & Betty 6,000 0.0% 6,000 0.0% 0 6,000 0.0%
Circuit Systems, Inc. 6,000 0.0% 6,000 0.0% 0 6,000 0.0%
Dellis, Louis & Karen 6,000 0.0% 6,000 0.0% 0 6,000 0.0%
Saramadis, George 6,000 0.0% 6,000 0.0% 0 6,000 0.0%
Oetter, Donald R. 5,800 0.0% 5,500 0.0% 0 5,800 0.0%
Halbreiter, Peter J. 5,500 0.0% 5,500 0.0% 0 5,500 0.0%
Smith, James G. 5,500 0.0% 5,500 0.0% 0 5,500 0.0%
Curtco Publishing 5,490 0.0% 5,490 0.0% 0 5,490 0.0%
Star Die Molding 5,418 0.0% 5,418 0.0% 0 5,418 0.0%
DeBouvre, Gerald &
Darlene, JTWROS 5,358 0.0% 5,358 0.0% 0 5,358 0.0%
Halicki, Christine 5,246 0.0% 5,246 0.0% 0 5,246 0.0%
Plahm, David 5,246 0.0% 5,246 0.0% 0 5,246 0.0%
Radiometrics Midwest 5,173 0.0% 5,173 0.0% 0 5,173 0.0%
Homann, Charles &
Delores, JT 5,081 0.0% 5,081 0.0% 0 5,081 0.0%
Obartuch, Wm Henry II 5,081 0.0% 5,081 0.0% 0 5,081 0.0%
Gross, Jeffrey T. &
Joanne E., JTWROS 5,023 0.0% 5,023 0.0% 0 5,023 0.0%
Appert, David 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
Manolis, Thomas K. 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
OSL Orthopedic
Surgery Limited 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
Patras, James 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
Mitsul Comtex Corp 4,997 0.0% 4,997 0.0% 0 4,997 0.0%
Penright Inc./Telxon 4,574 0.0% 4,574 0.0% 0 4,574 0.0%
Merisel 4,506 0.0% 4,506 0.0% 0 4,506 0.0%
Baerson, Charles 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Deerbrook Travel 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Johnson, Jr., Grant H. 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Kaskel, Leonard 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Patel, Bhupen D. &
Meena B., JTWROS 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Richards, Gregory S. 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Rubin, Scott A. & Desnet,
Holly D., JTWROS 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Witonski, Daniel M.
& Shirley, JTWROS 4,465 0.0% 4,465 0.0% 0 4,465 0.0%
Hersey, James M. 4,400 0.0% 4,400 0.0% 0 4,400 0.0%
Hivon, Mark 4,400 0.0% 4,400 0.0% 0 4,400 0.0%
Majerus, Robert L. 4,400 0.0% 4,400 0.0% 0 4,400 0.0%
Lo, Shiung-Yin 4,108 0.0% 4,108 0.0% 0 4,108 0.0%
Michel, Charlette J. 4,000 0.0% 4,000 0.0% 0 4,000 0.0%
Ministor Peripherals 3,988 0.0% 3,988 0.0% 0 3,988 0.0%
Goulet, Michel 3,841 0.0% 3,841 0.0% 0 3,841 0.0%
Kramer, Francis &
Jean, JTWROS 3,841 0.0% 3,841 0.0% 0 3,841 0.0%
Mann, Michael B. 3,841 0.0% 3,841 0.0% 0 3,841 0.0%
Schottmueller, Werner 3,520 0.0% 3,520 0.0% 0 3,520 0.0%
Chelios, Tracee 3,333 0.0% 3,333 0.0% 0 3,333 0.0%
Kenyeres, Peter 3,333 0.0% 3,333 0.0% 0 3,333 0.0%
Larmer, Steve 3,333 0.0% 3,333 0.0% 0 3,333 0.0%
Drosos, George 3,300 0.0% 3,300 0.0% 0 3,300 0.0%
Wolln Products Inc 3,176 0.0% 3,176 0.0% 0 3,176 0.0%
Stotis, Bill George 3,000 0.0% 3,000 0.0% 0 3,000 0.0%
Tackett, Terry L. 3,000 0.0% 3,000 0.0% 0 3,000 0.0%
Telecommunicaitons
Devices Inc 2,893 0.0% 2,893 0.0% 0 2,893 0.0%
Colletier, Pascal &
Barbara, JT 2,750 0.0% 2,750 0.0% 0 2,750 0.0%
Jaskolski, James A. 2,750 0.0% 2,750 0.0% 0 2,750 0.0%
Lockhart, Alex 2,750 0.0% 2,750 0.0% 0 2,750 0.0%
Hansen, Joe 2,500 0.0% 2,500 0.0% 0 2,500 0.0%
Tru-Cut Employees
Profit Sharing Plan 2,500 0.0% 2,500 0.0% 0 2,500 0.0%
Kurta 2,348 0.0% 2,348 0.0% 0 2,348 0.0%
Willie, Scott W. 2,268 0.0% 2,268 0.0% 0 2,268 0.0%
Bates, Marion D. 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Collins, Thomas N. 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Danna, Rosalie F. 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Dodd, Loyal 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Hivon, Patrick M. 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Robert W. Baird & Co. Inc 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Summers, Richard & Debra 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
Venetos, John 2,200 0.0% 2,200 0.0% 0 2,200 0.0%
SRT Lab 2,191 0.0% 2,191 0.0% 0 2,191 0.0%
Rosenthal, Howard 2,175 0.0% 2,175 0.0% 0 2,175 0.0%
Chresanthakes, Peter 2,143 0.0% 2,143 0.0% 0 2,143 0.0%
Columbia Graphics 2,089 0.0% 2,089 0.0% 0 2,089 0.0%
Fisher, Donald 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Fisher, Donald R &
Anna M, JTWROS 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Hanley, Patrick 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Joyce, Bernard J. 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Kourtis, Peter 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Stotis, George 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Taylor, Jr., Reuben W.,
TTEE, Reuben W
Taylor Trust 1,900 0.0% 1,900 0.0% 0 1,900 0.0%
Haberman, Harry &
Margret, JT 1,769 0.0% 1,769 0.0% 0 1,769 0.0%
Milgray Electronics 1,685 0.0% 1,685 0.0% 0 1,685 0.0%
Beyer, Wolfgang 1,667 0.0% 1,667 0.0% 0 1,667 0.0%
Telesystem/Aironet 1,643 0.0% 1,643 0.0% 0 1,643 0.0%
Parker, John E. 1,625 0.0% 1,625 0.0% 0 1,625 0.0%
Trinity Mortgage 1,625 0.0% 1,625 0.0% 0 1,625 0.0%
Belford, Daniel J. 1,524 0.0% 1,524 0.0% 0 1,524 0.0%
Internal Revenue Service 1,520 0.0% 1,520 0.0% 0 1,520 0.0%
Santa Rita Bottling 1,518 0.0% 1,518 0.0% 0 1,518 0.0%
SCI Mfg 1,472 0.0% 1,472 0.0% 0 1,472 0.0%
LCS Telegraphics 1,427 0.0% 1,427 0.0% 0 1,427 0.0%
Endlichhofer, Sigfreid 1,361 0.0% 1,361 0.0% 0 1,361 0.0%
Ericsson, GE Mobile Comm 1,162 0.0% 1,162 0.0% 0 1,162 0.0%
Collins, Nicholas &
Ismene, JTWROS 1,100 0.0% 1,100 0.0% 0 1,100 0.0%
Danna, Rosalie &
Kimberly T
Danna-Mulick, JT 1,100 0.0% 1,100 0.0% 0 1,100 0.0%
Eckwall, Donald W. 1,100 0.0% 1,100 0.0% 0 1,100 0.0%
Kenyeres, Peter 1,100 0.0% 1,100 0.0% 0 1,100 0.0%
Armonis, John 1,050 0.0% 1,050 0.0% 0 1,050 0.0%
Aspen, Robert J. 1,016 0.0% 1,016 0.0% 0 1,016 0.0%
Hanifen Imhoff Clearing 1,016 0.0% 1,016 0.0% 0 1,016 0.0%
Watson, Ray 1,016 0.0% 1,016 0.0% 0 1,016 0.0%
Watts, Earl & Lova, JT 1,016 0.0% 1,016 0.0% 0 1,016 0.0%
Antonakos, Anagyros &
Antonia 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Barton, John & Michael,
JTWROS 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Braun, Mark & Jill, JT 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Christ Ross Economy 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Coules, Jr., Peter 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Cusinier, Francis X 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Grant, Kathy 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Lambke, David G. &
Elizabeth O., JTWROS 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Meizels, Kane, Fox &
Boroian, DDS PC 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Meizels, Phillip &
Jeffery, JTWROS 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Munro, William H. 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Nordheim, Alan &
Willis I., JTWROS 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Ortiz, Gloria 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Peters, Ron 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Rycroft, Mary 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Shogren, Ronald 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Swanson, Donald &
Janet, JTWROS 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Willert, James &
Carol, JTWROS 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Zouras, Pete 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
UV Tek Corp 947 0.0% 947 0.0% 0 947 0.0%
Future Active Ind Elec. 940 0.0% 940 0.0% 0 940 0.0%
O'Neill, Bruce C. 933 0.0% 933 0.0% 0 933 0.0%
Gillogly, Russell R. 907 0.0% 907 0.0% 0 907 0.0%
Scriptel Corp 894 0.0% 894 0.0% 0 894 0.0%
Tech Data Corp 860 0.0% 860 0.0% 0 860 0.0%
Federal Express corp 820 0.0% 820 0.0% 0 820 0.0%
Ameritech 784 0.0% 784 0.0% 0 784 0.0%
LDDS Communications 780 0.0% 780 0.0% 0 780 0.0%
Wireless for the Corp User 764 0.0% 764 0.0% 0 764 0.0%
Miller, Thomas J. 763 0.0% 763 0.0% 0 763 0.0%
Ultratech Inc 761 0.0% 761 0.0% 0 761 0.0%
Power Sensors Corp 730 0.0% 730 0.0% 0 730 0.0%
Nelson, Terry L. 700 0.0% 700 0.0% 0 700 0.0%
Seagate Technology Inc 657 0.0% 657 0.0% 0 657 0.0%
Sub-Sem Inc 635 0.0% 635 0.0% 0 635 0.0%
J-Tech Metal Products 608 0.0% 608 0.0% 0 608 0.0%
NEC Technologies 608 0.0% 608 0.0% 0 608 0.0%
Airborne Freight Corp 607 0.0% 607 0.0% 0 607 0.0%
Airborne Express 587 0.0% 587 0.0% 0 587 0.0%
Phoenix Co 564 0.0% 564 0.0% 0 564 0.0%
RC Dredge 563 0.0% 563 0.0% 0 563 0.0%
International Data
Products 559 0.0% 559 0.0% 0 559 0.0%
Trimberger, John R. 558 0.0% 558 0.0% 0 558 0.0%
Anderson, Millie C. 550 0.0% 550 0.0% 0 550 0.0%
Eakright, Lee & Gail, JT 550 0.0% 550 0.0% 0 550 0.0%
Frey, Ann C. 550 0.0% 550 0.0% 0 550 0.0%
Wesley, William W. 550 0.0% 550 0.0% 0 550 0.0%
Metro Graphx Inc. 543 0.0% 543 0.0% 0 543 0.0%
Field Data Systems 537 0.0% 537 0.0% 0 537 0.0%
Assurance Agency Ltd 531 0.0% 531 0.0% 0 531 0.0%
KDA Photo Systems 519 0.0% 519 0.0% 0 519 0.0%
Baurer, Sr., Thomas N. 508 0.0% 508 0.0% 0 508 0.0%
Chellos, Tracee 508 0.0% 508 0.0% 0 508 0.0%
Doyle, Michael J. 508 0.0% 508 0.0% 0 508 0.0%
Hanson, Edward &
Roberta, JT 508 0.0% 508 0.0% 0 508 0.0%
Kenyeres, Peter 508 0.0% 508 0.0% 0 508 0.0%
Monroe, James & Jeri, JT 508 0.0% 508 0.0% 0 508 0.0%
Van Gorden, Shuyler H. 508 0.0% 508 0.0% 0 508 0.0%
Blinstrup, Karen, C/F
Bryan M Blinstrup UTMA IL 500 0.0% 500 0.0% 0 500 0.0%
Blinstrup, Karen, C/F Ian
M Blinstrup UTMA IL 500 0.0% 500 0.0% 0 500 0.0%
Blinstrup, Karen, C/F
Jason M Blinstrup UTMA IL 500 0.0% 500 0.0% 0 500 0.0%
Blinstrup, Karen, C/F
Kyrsten J Blinstrup UTMA IL 500 0.0% 500 0.0% 0 500 0.0%
Daniels, Thomas E. 500 0.0% 500 0.0% 0 500 0.0%
Gounaris, Jonothan Glenn 500 0.0% 500 0.0% 0 500 0.0%
Savvakis, Damianos 500 0.0% 500 0.0% 0 500 0.0%
Taylor, Laurent 500 0.0% 500 0.0% 0 500 0.0%
Metal Threads 490 0.0% 490 0.0% 0 490 0.0%
Caseworks of Chicago 464 0.0% 464 0.0% 0 464 0.0%
Ridgemoor Electronics 463 0.0% 463 0.0% 0 463 0.0%
Ball, Derk R. 454 0.0% 454 0.0% 0 454 0.0%
Copot, Stephen & Olga 454 0.0% 454 0.0% 0 454 0.0%
Larmer, Steve 454 0.0% 454 0.0% 0 454 0.0%
South Bay Circuits 449 0.0% 449 0.0% 0 449 0.0%
Hodes & Pilon 442 0.0% 442 0.0% 0 442 0.0%
Huck Bourna Martin 427 0.0% 427 0.0% 0 427 0.0%
Steering Electronics 403 0.0% 403 0.0% 0 403 0.0%
United Parcel Service 402 0.0% 402 0.0% 0 402 0.0%
Karowski, Tony 400 0.0% 400 0.0% 0 400 0.0%
Taylor, Charles E. 400 0.0% 400 0.0% 0 400 0.0%
Taylor, Elizabeth 400 0.0% 400 0.0% 0 400 0.0%
Taylor, William R. 400 0.0% 400 0.0% 0 400 0.0%
PEN Computing Magazine 387 0.0% 387 0.0% 0 387 0.0%
AM Standard Circle 371 0.0% 371 0.0% 0 371 0.0%
Custom Computer 367 0.0% 367 0.0% 0 367 0.0%
Kingston Technology Inc 355 0.0% 355 0.0% 0 355 0.0%
Consolidated Freightways 349 0.0% 349 0.0% 0 349 0.0%
First Colony Life 340 0.0% 340 0.0% 0 340 0.0%
KSO Metalfab Inc 335 0.0% 335 0.0% 0 335 0.0%
Federal Insurance co. 329 0.0% 329 0.0% 0 329 0.0%
Trace Laboratories 311 0.0% 311 0.0% 0 311 0.0%
Helsey, Mulcahy & Fesler 295 0.0% 295 0.0% 0 295 0.0%
Plumbline Inc 294 0.0% 294 0.0% 0 294 0.0%
Prototec Engineering 294 0.0% 294 0.0% 0 294 0.0%
Max Group 272 0.0% 272 0.0% 0 272 0.0%
Computer City Super Center 266 0.0% 266 0.0% 0 266 0.0%
Commonwealth Edison 256 0.0% 256 0.0% 0 256 0.0%
Miller, Eleanor 254 0.0% 254 0.0% 0 254 0.0%
Hi-Tech Hut 231 0.0% 231 0.0% 0 231 0.0%
Assembly International 216 0.0% 216 0.0% 0 216 0.0%
Humphrey, Jerrianne 200 0.0% 200 0.0% 0 200 0.0%
Nale, David S. 200 0.0% 200 0.0% 0 200 0.0%
Pen Magazine/Pen World 197 0.0% 197 0.0% 0 197 0.0%
Cameo Container Corp 192 0.0% 192 0.0% 0 192 0.0%
Wyant, Roseda 181 0.0% 181 0.0% 0 181 0.0%
AT&T Capital Services 179 0.0% 179 0.0% 0 179 0.0%
Gamino, David & Lourdes, JT 179 0.0% 179 0.0% 0 179 0.0%
Mobile Mark, Inc. 175 0.0% 175 0.0% 0 175 0.0%
AFCO 172 0.0% 172 0.0% 0 172 0.0%
Unick, Ervin 172 0.0% 172 0.0% 0 172 0.0%
QPS Electronics 166 0.0% 166 0.0% 0 166 0.0%
Cyrix Corp 163 0.0% 163 0.0% 0 163 0.0%
Maxtor Corp 158 0.0% 158 0.0% 0 158 0.0%
Pyramid Broadcasting Pub 158 0.0% 158 0.0% 0 158 0.0%
Impression Unlimited 156 0.0% 156 0.0% 0 156 0.0%
East Coast Concepts corp 152 0.0% 152 0.0% 0 152 0.0%
Omiotek Coil Spring Co 148 0.0% 148 0.0% 0 148 0.0%
Fanning Grafx 140 0.0% 140 0.0% 0 140 0.0%
SND Electronics Inc 138 0.0% 138 0.0% 0 138 0.0%
Niro Scavone Haller & Niro 137 0.0% 137 0.0% 0 137 0.0%
Chilcott, John C. 133 0.0% 133 0.0% 0 133 0.0%
American Speedy Printing 128 0.0% 128 0.0% 0 128 0.0%
Details Inc 127 0.0% 127 0.0% 0 127 0.0%
Technology Group Inc 122 0.0% 122 0.0% 0 122 0.0%
Carlson Paint/Glass Art 116 0.0% 116 0.0% 0 116 0.0%
Huang, Nai-Yu 115 0.0% 115 0.0% 0 115 0.0%
Timmers, Sr., John C 112 0.0% 112 0.0% 0 112 0.0%
Tumilty, James R. 110 0.0% 110 0.0% 0 110 0.0%
General Electric Rental
Lease 108 0.0% 108 0.0% 0 108 0.0%
Hague, Sidney 100 0.0% 100 0.0% 0 100 0.0%
Yoon, Joseph 100 0.0% 100 0.0% 0 100 0.0%
ANLE Paper Co. 98 0.0% 98 0.0% 0 98 0.0%
Electronic Distributor 97 0.0% 97 0.0% 0 97 0.0%
D & L Offset Lithograph 96 0.0% 96 0.0% 0 96 0.0%
Warehouse Direct 95 0.0% 95 0.0% 0 95 0.0%
AM Stock Transfer Trust 91 0.0% 91 0.0% 0 91 0.0%
Belford Electronics 91 0.0% 91 0.0% 0 91 0.0%
Cadtrack Corp 91 0.0% 91 0.0% 0 91 0.0%
Business Wire 86 0.0% 86 0.0% 0 86 0.0%
Computer Bay 84 0.0% 84 0.0% 0 84 0.0%
KRL/Bantry Components 82 0.0% 82 0.0% 0 82 0.0%
PTC Electronics Prepress 76 0.0% 76 0.0% 0 76 0.0%
Business Machine Agent 74 0.0% 74 0.0% 0 74 0.0%
Langas, Peter 74 0.0% 74 0.0% 0 74 0.0%
Century Container Corp 71 0.0% 71 0.0% 0 71 0.0%
Perfect Image 70 0.0% 70 0.0% 0 70 0.0%
Vision Components 70 0.0% 70 0.0% 0 70 0.0%
Abdulghany, Yosu 69 0.0% 69 0.0% 0 69 0.0%
Post Modern Computing 61 0.0% 61 0.0% 0 61 0.0%
Dietrich & Associates 60 0.0% 60 0.0% 0 60 0.0%
Nalwad, Vijendra 60 0.0% 60 0.0% 0 60 0.0%
Hirose Electric USA 57 0.0% 57 0.0% 0 57 0.0%
Looi, Joan 57 0.0% 57 0.0% 0 57 0.0%
Oce Brunning Inc 55 0.0% 55 0.0% 0 55 0.0%
Joseph Electronics 52 0.0% 52 0.0% 0 52 0.0%
Chang, Jesse C K 47 0.0% 47 0.0% 0 47 0.0%
Georgia World Congress 47 0.0% 47 0.0% 0 47 0.0%
Minute Men Press 46 0.0% 46 0.0% 0 46 0.0%
Healthcare Informatics 45 0.0% 45 0.0% 0 45 0.0%
Media Link 45 0.0% 45 0.0% 0 45 0.0%
Chen, Ho-FA 41 0.0% 41 0.0% 0 41 0.0%
AXON Cable Inc. 39 0.0% 39 0.0% 0 39 0.0%
Behna, Remy 36 0.0% 36 0.0% 0 36 0.0%
Quade, Julianne M. 36 0.0% 36 0.0% 0 36 0.0%
JST Corporation 35 0.0% 35 0.0% 0 35 0.0%
Omni Computer Products 35 0.0% 35 0.0% 0 35 0.0%
Tree Town Repo Services 35 0.0% 35 0.0% 0 35 0.0%
Roseville Telephone Co 25 0.0% 25 0.0% 0 25 0.0%
United Ribbon Co 25 0.0% 25 0.0% 0 25 0.0%
Inacom FSG 23 0.0% 23 0.0% 0 23 0.0%
Rubachem Inc 20 0.0% 20 0.0% 0 20 0.0%
Ostrego, Michael M. 18 0.0% 18 0.0% 0 18 0.0%
Quill Corp 18 0.0% 18 0.0% 0 18 0.0%
Abbas, Nidal 15 0.0% 15 0.0% 0 15 0.0%
Deltnet Technology Inc 15 0.0% 15 0.0% 0 15 0.0%
Nu-Horizons Elec Corp 15 0.0% 15 0.0% 0 15 0.0%
Central Supplies 13 0.0% 13 0.0% 0 13 0.0%
Emery Worldwide 13 0.0% 13 0.0% 0 13 0.0%
Knight Protective Ind 13 0.0% 13 0.0% 0 13 0.0%
Vantage Communications 11 0.0% 11 0.0% 0 11 0.0%
Simon & Shuster 10 0.0% 10 0.0% 0 10 0.0%
Victorin Business Machine 9 0.0% 9 0.0% 0 9 0.0%
McGraw Hill Publiching 7 0.0% 7 0.0% 0 7 0.0%
Pitney Bowes Credit Corp 7 0.0% 7 0.0% 0 7 0.0%
B&H Industries 6 0.0% 6 0.0% 0 6 0.0%
Dean Witter Reynolds 5 0.0% 5 0.0% 0 5 0.0%
DHL Airway 5 0.0% 5 0.0% 0 5 0.0%
EZI America Corp 4 0.0% 4 0.0% 0 4 0.0%
Philadelphia Depository
Trust Co 4 0.0% 4 0.0% 0 4 0.0%
Zalud Motor Express 4 0.0% 4 0.0% 0 4 0.0%
Homann, Charles &
Delores JTWROS 3 0.0% 3 0.0% 0 3 0.0%
Lep Profit Int'l 3 0.0% 3 0.0% 0 3 0.0%
Obartuch, Wm Henry II 3 0.0% 3 0.0% 0 3 0.0%
PCS Special Interest GP 3 0.0% 3 0.0% 0 3 0.0%
TNT Skypak 3 0.0% 3 0.0% 0 3 0.0%
John V. Carr & Sons 2 0.0% 2 0.0% 0 2 0.0%
Aspan, Robert J. 1 0.0% 1 0.0% 0 1 0.0%
Commscan 1 0.0% 1 0.0% 0 1 0.0%
PBB USA Inc 1 0.0% 1 0.0% 0 1 0.0%
Peace International 1 0.0% 1 0.0% 0 1 0.0%
Tape Products 1 0.0% 1 0.0% 0 1 0.0%
Tobias, Eli 1 0.0% 1 0.0% 0 1 0.0%
---------- ---------- ----------
27,775,336 27,720,179 27,775,336
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock offered
hereby have been passed upon for the Company by Rieck and Crotty, P.C.,
Chicago, Illinois. Rieck and Crotty , P.C. owns 2,000 Shares of Common Stock
and the Rieck and Crotty, P.C. Profit Sharing Plan owns 5,000 Shares of Common
Stock.
EXPERTS
The audited financial statements of the Company included in this Prospectus
and appearing in registration statement, have been by Arthur Andersen LLP
independent public accountants. Their reports thereon appear elsewhere herein
and in the registration statement, and are included in reliance upon the
authority of such firm as experts in giving said reports.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants
F-2 Debtor-in-Possession Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996 (Unaudited)
F-3 Debtor-in-Possession Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995 and the Nine Months Ended September
30, 1995 (Unaudited) and September 30, 1996 (Unaudited)
F-4 Debtor-in-Possession Statements of Stockholders' Equity (Deficit) for
the Years Ended December 31, 1993, 1994 and 1995 the Nine Months Ended
September 30, 1996 (Unaudited)
F-5 Debtor-in-Possession Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995 and the Nine Months Ended September
30, 1995 (Unaudited) and September 30, 1996 (Unaudited)
F-6 Notes to Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of
Dauphin Technology, Inc.:
We have audited the accompanying debtor-in-possession balance sheets of
DAUPHIN TECHNOLOGY, INC. (an Illinois corporation) as of December 31, 1994 and
1995, and the related debtor-in-possession statements of operations,
shareholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1995. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 Dauphin Technology, Inc. as
of December 31, 1994 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has experienced
significant recurring losses from operations, and has a net capital
deficiency of $50,910,187 at December 31, 1995. In addition, as described in
Note 2 to the accompanying financial statements, in January, 1995, the Company
filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy
Code. These matters, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in
regard to these matters, including a Plan of Reorganization, are also
described in Note 2. In the event a Plan of Reorganization is accepted,
continuation of the business thereafter is dependent on the Company's ability
to achieve successful future operations. The accompanying financials do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 15, 1996
DAUPHIN TECHNOLOGY, INC.
(debtor-in-possession)
BALANCE SHEETS
December 31, September 30,
1994 1995 1996
(unaudited)
CURRENT ASSETS: [C] [C] [C]
Cash $ - $ 92,604 $ 581,398
Accounts receivable-
Trade 44,676 5,791 3,537
Other (Note 2) - 167,266 -
Prepaid Expenses - - 12,459
Inventory, net 113,786 91,142 2,684,117
------------ ------------ ------------
Total current assets 158,462 356,803 3,281,511
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $78,537,
$78,516 and $91,707
(unaudited) at December 31,
1994, 1995 and September 30,
1996 respectively 139,632 69,690 120,442
------------ ------------ ------------
Total assets $ 298,094 $ 426,493 $ 3,401,953
============ ============ ============
LIABILITIES NOT SUBJECT TO COMPROMISE-CURRENT LIABILITIES:
Accounts payable
and accrued expenses $ - $ 252,228 $ 95,649
Short-term borrowings - 759,947 -
Bank overdraft 1,299 - -
------------ ------------ ------------
Total liabilities not
subject to compromise-
current liabilities 1,299 1,012,175 95,649
------------ ------------ ------------
LIABILITIES SUBJECT TO COMPROMISE:
Accounts payable 11,186,395 11,186,395 -
Short-term borrowings 46,500 46,500 -
Accrued purchase commitment 32,977,790 32,977,790 -
Accrued liabilities 617,898 617,898 -
Debentures payable 317,500 317,500 -
Advances from related
parties (Note 11) 208,422 208,422 -
Claim payable 4,970,000 4,970,000 -
------------ ------------ ------------
Total liabilities
subject to compromise 50,324,505 50,324,505 -
------------ ------------ ------------
LONG-TERM LEASES AND
COMMITMENTS (Note 10) - - 30,240
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par
value, 10,000,000 shares
authorized but unissued - - -
Common stock, $.001 par value,
100,000,000 shares authorized;
14,408,354 shares issued and
outstanding at December 31, 1994
and 1995, and 29,015,496 shares
outstanding at September 30,
1996 (unaudited) 14,408 14,408 29,547
Paid-in capital 5,232,597 5,144,932 22,085,202
Accumulated equity deficit (55,274,715) (56,069,527) (18,838,685)
------------ ------------ ------------
Total shareholders'
equity (deficit) (50,027,710) (50,910,187) 3,276,064
------------ ------------ ------------
Total liabilities and
shareholders' equity
(deficit) $ 298,094 $ 426,493 $ 3,401,953
============ =========== ============
The accompanying notes are an integral part of these balance sheets
DAUPHIN TECHNOLOGY, INC.
(debtor-in-possession)
STATEMENTS OF OPERATIONS
Years Ended December 31, Nine Months Ended
September 30,
1993 1994 1995 1995 1996
(unaudited)(unaudited)
REVENUES' sales of
computers and
accessories, net [C] [C] [C] [C] [C]
(Notes 1, 2 and 3) $23,560,986 $9,603,021 $183,083 $160,484 $39,792
COST OF SALES 22,004,922 47,867,060 93,852 83,453 14,472
----------- ----------- --------- -------- --------
Gross profit (loss) 1,556,064 (38,264,039) 89,231 77,031 25,320
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,436,276 4,953,588 681,335 466,963 584,888
RESEARCH AND DEVELOPMENT
EXPENSE 1,402,801 937,029 22,388 - 43,229
LITIGATION SETTLEMENT - 4,934,985 - - -
INTEREST EXPENSE 115,142 82,943 - - -
----------- ---------- --------- -------- --------
Loss before
reorganization items,
income taxes and
extraordinary item (3,398,155)(49,172,584) (614,492) (389,932) (602,797)
REORGANIZATIONAL ITEMS:
Professional fees - - 180,320 140,074 236,530
INTEREST INCOME - - - - 4,796
----------- ---------- --------- -------- --------
Loss before income
taxes and
extraordinary item (3,398,155)(49,172,584) (794,812) (530,006) (834,531)
INCOME TAXES (Note 9) - - - - -
EXTRAORDINARY ITEM net of
income taxes of $0 - - - - 38,065,373
----------- ----------- -------- --------- -----------
Net Income(loss) $(3,398,155)$(49,172,584)$(794,812) $(530,006) $37,230,842
=========== ============ ========= ========= ===========
EARNINGS PER COMMON SHARE
Income(Loss)
Before extraordinary
item (0.24) (3.41) (0.06) (0.04) (0.04)
Extraordinary item - - - - 1.81
---------- ---------- ------- --------- ----------
Income(Loss) per
common share ($0.24) ($3.41) ($0.06) ($0.04) $1.77
The accompanying notes are an integral part of these statements.
DAUPHIN TECHNOLOGY, INC.
(debtor-in-possession)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
BALANCE, [C] [C] [C] [C] [C]
December 31, 1992 13,570,901 $13,571 $3,352,772 $(2,703,976) $662,367
Exchange and
conversion of
warrants
outstanding 413,380 413 431,757 - 432,170
Issuance of
common stock 424,073 424 1,218,259 - 1,218,683
Contribution of
capital by
shareholder - - 88,168 - 88,168
Compensatory
effect of stock
options granted, net - - 146,618 - 146,618
Net gain(loss) - - - (3,398,155) (3,398,155)
---------- ------ ---------- ---------- ----------
December 31, 1993 14,408,354 14,408 5,237,574 (6,102,131) (850,149)
Contribution of
capital by
shareholder - - 93,132 - 93,132
Reverse accumulated
compensatory effect
of stock options
granted, net - - (98,109) - (98,109)
Net gain(loss) - - - (49,172,584)(49,172,584)
---------- ------ ---------- ---------- ----------
December 31, 1994 14,408,354 14,408 5,232,597 (55,274,715)(50,027,710)
Reverse accumulated
compensatory effect
of stock
options granted, net - - (87,665) - (87,665)
Net gain(loss) - - - (794,812) (794,812)
---------- ------ ---------- ---------- ----------
December 31, 1995 14,408,354 14,408 5,144,932 (56,069,527)(50,910,187)
Issuance of Common Stock in Connection with:
Private Placement
(unaudited) 888,757 889 994,520 - 995,409
Purchase of Inventory
(unaudited) 2,600,000 2,600 2,909,400 - 2,912,000
Bankruptcy Conversion
(unaudited) 11,650,000 11,650 13,036,350 - 13,048,000
Net Income(loss) for the
Period (unaudited) - - - 37,230,842 37,230,842
---------- ------ ---------- ---------- ----------
September 30, 1996
(unaudited) 29,547,111 $29,547 $22,085,202 $(18,838,685) $3,276,064
========== ======= =========== ============ ==========
The accompanying notes are an integral part of these statements.
DAUPHIN TECHNOLOGY, INC.
(debtor-in-possession)
STATEMENTS OF CASH FLOWS
Years Ended December 31, Nine Months Ended
September 30,
1993 1994 1995 1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited)(unaudited)
[C] [C] [C] [C] [C]
Net income(loss) $ (3,398,155) $(49,172,584) $(794,812) $(530,006)$37,230,842
Noncash items included in net loss-
Loss on disposition
of property and
equipment - 434,874 41,053 - -
Depreciation
and amortization 571,149 710,516 39,698 30,000 22,083
Extraordinary item - - - - (38,065,373)
Compensatory effect
of stock options
earned 146,618 (98,109) (87,665) (87,665) -
Changes in-
Accounts receivable (104,079) 4,590,050 (128,381) 32,743 2,254
Inventory, net (8,337,512) 8,527,314 22,644 19,006 (8,848)
Prepaid software
and other current
assets (728,773) 1,255,499 - (1,667) (12,459)
Other assets (3,650) 40,951 - (99,663) 167,266
Bank overdraft - 1,299 (1,299) (1,299) -
Accounts payable,
accrued expenses
and claims
payable 10,649,343 34,416,231 252,228 298,418 (156,579)
---------- ---------- ------- ------- --------
Net cash provided
by (used for)
operating
activities (1,205,059) 706,041 (656,534) (340,133) (820,814)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment
and furniture, net (284,898) (53,116) (10,809) (8,888) (72,845)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease)
in short-term
borrowing 350,495 (615,941) 759,947 399,949 356,804
Contribution of
capital by
shareholders - 93,132 - - -
Proceeds from
issuance of common
shares 1,095,853 - - - 995,409
Long-Term Leases - - - - 30,240
Advances from
(payments to)
related
parties, net (83,196) (164,260) - - -
---------- ---------- ------- ------- --------
Net cash provided
by (used in)
financing
activities 1,363,152 (687,069) 759,947 399,949 1,382,453
---------- ---------- ------- ------- --------
NET CHANGE IN CASH (126,805) (34,144) 92,604 50,928 488,794
CASH, beginning
of year 160,949 34,144 - - 92,604
---------- ---------- ------- ------- --------
CASH, end of year $ 34,144 $ - $ 92,604 $ 50,928 $581,398
========== ========== ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 111,816 $ 82,943 $ - $ - $ 793
Income taxes paid - - - - -
Reorganization costs paid - - 180,320 53,259 238,280
NONCASH TRANSACTIONS:
Common stock issued in payment of-
Accounts payable $ 400,000 $ - $ - $ - $ -
Notes payable 155,000 - - - -
Contributed common
stock used for
payment of
accounts payable 88,168 - - - -
Stocks for
inventory exchange - - - - 2,584,127
The accompanying notes are an integral part of these statements.
DAUPHIN TECHNOLOGY, INC.
(debtor-in-possession)
NOTES TO FINANCIAL STATEMENTS
(Data with respect to nine months ended September 30, 1995 and 1996
are unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
Dauphin Technology, Inc. (the "Company") was founded to design, manufacture
and market mobile computing systems, including laptop, notebook, handheld and
pen-based computers, components and accessories. Historically, the Company
marketed directly and through other distribution channels to both the
commercial and government market segments.
In the opinion of management, the financial statements for the nine month
period ended September 30, 1995 and 1996 are presented on a basis consistent
with the audited financial statements and contain all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation. The
results of operations for the interim periods are not necessarily indicative
of results for the full year.
Basis of Presentation
On January 3, 1995, the Company filed petitions for relief under Chapter 11 of
the federal bankruptcy laws in the United States Bankruptcy Court for the
Northern District of Illinois Eastern Division. During 1995, the Company
operated under Chapter 11 and without an approved Plan of Reorganization.
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern that presume the
realization of assets and the settlement of liabilities in the ordinary course
of business, rather than through a process of forced liquidation.
Accordingly, the statements do not purport to present the realizable values of
all assets or the settlement amounts of all liabilities.
Under Chapter 11, certain claims against the Company in existence prior to the
filing of the petitions for relief under the federal bankruptcy laws are
stayed while the Company continues business operations as debtor-in-
possession. These claims are reflected in the December 31, 1995 and 1994,
balance sheets as "liabilities subject to compromise". Additional claims
(liabilities subject to compromise) may arise subsequent to the filing date
resulting from rejection of executory contracts, including leases, and from
the determination by the court (or agreed to by parties in interest) of
allowed claims for contingencies and other disputed amounts. The ultimate
settlement amount of these claims could differ from the reported amounts.
2. LIQUIDITY:
1994 Events
For the year ended December 31, 1994, the Company had a net loss of
$49,172,584. Of this loss, $32,977,790 was the result of accruing a purchase
commitment to an equipment manufacturer (see Note 3), $4,934,985 was the
result of the settlement of a claim against the Company (see Note 4),
$1,712,959 was the result of a write-down of inventory, $672,000 from the
write-down of prepaid software costs and $435,000 was the result of bad debts.
Historically, operating deficiencies were funded with capital contributions,
debt financing and sale of common stock and subordinated debentures. During
the current year, the Company was unable to use these conventional
methods of financing and, on April 4, 1994, the Company signed a series of
agreements ("Restructuring Documents") (see Note 3) with its equipment
manufacturer. These documents allowed the Company to sell equipment and use
the proceeds to fund its operations and delay the payment to the equipment
manufacturer. They also allowed the equipment manufacturer to sell excess
inventory in its possession and to recall unsold inventory in the Company's
possession. During the third quarter, the equipment manufacturer sold 13,500
units of DTR-1 at prices far below the Company's cost. Of these units, 11,000
were from the equipment manufacturer's excess inventory and 2,500 were
recalled from the Company. This transaction created a serious problem for the
Company since it reduced its inventory of DTR-1 units to 800 units and
established a new market price for these units far below the Company's cost.
In July of 1994, the Company introduced the DTR-2. This product improves upon
the DTR-1 but is still a vertical market product, which means the sales cycle
is long and sales, if any, will be application specific. The Company was able
to have manufactured a small number of preproduction units. These units were
either used as test units to debug the product or sold as trial units.
During the fourth quarter, the Company sold the majority of its finished goods
inventory but was unable to generate enough cash flow to meet its operating
expenses. It was also unable to meet its obligations under the "Restructuring
Documents", its obligations under the claim settlement agreement and its
obligation to retire the debentures.
On December 31, 1994, the Company had a cash deficit and less than $160,000 of
accounts receivable and inventory.
1995 Events
On January 3, 1995, the Company filed a petition for relief under Chapter 11
of the Federal Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Illinois Eastern Division. During 1995, the Company
operated under Chapter 11 and without an approved Plan of Reorganization.
On January 19, 1995, the Court entered an order authorizing the Company to use
International Business Machines Corporation's ("IBM") cash collateral pursuant
to the terms set forth in the order. Despite its continued use of 100% of the
cash collateral, the Company did not have sufficient funds to continue
operations or to proceed with its reorganization. On March 31, 1995, all
employees were terminated and all remaining assets were put in storage while
the Company pursued potential debtor-in-possession financing. In an attempt
to save the Company, Technology Partners L.L.C. ("TPL") purchased IBM's claim.
On June 20, 1995, the Court entered an order approving an employment agreement
between the Company, Alan Yong, its majority shareholder, Kevin Koy and Andy
Kandalepas. The terms of the employment agreement are as follows:
Term--One year with automatic successive one-year renewals unless either party
gives one month prior written notice of an intention not to renew.
Compensation--Annual rate of $70,000 for the first three months, increasing to
an annual rate of $150,000 in the fourth month. The Company granted Yong
options to purchase 700,000 shares of stock at $0.75 a share. These options
may be exercised 12 months from the time they are registered.
Purchase Inventory from Executive--The Company will purchase inventory valued
at $50,000 over a five-month period at $10,000 per month.
Executive's Stock--Mr. Yong and his family transferred 8,000,000 shares of the
Company's stock to the designee of TPL pursuant to certain transfer
provisions. As of July 15, 1995, all the transfer provisions had been met and
the shares have been transferred. After this transaction, there is a change
in control of the Company.
On October 11, 1995, the Company, TPL, the directors, officers and employees
of both organizations, including but not limited to Kevin Koy and Andrew
Kandalepas as guarantors and Alan Yong entered into a settlement and general
release of the above employment agreement. Alan Yong was in possession of
certain assets of the Company with an approximate cost of $60,000. As part of
the consideration for this agreement, the Company grants title to and conveys
ownership of the equipment currently held by Yong to Yong.
On July 10, 1995, the Bankruptcy Court entered an Order approving debtor-in-
possession financing between the Company and TPL. The terms of the facility
are as follows:
General Terms--TPL will make available for the Company's use from time to time
during the term, loans not to exceed $400,000, in the aggregate, to be used by
the Company for general working capital purposes.
Interest--11% per annum for actual days elapsed on a 360-day year basis.
Interest shall be paid monthly. After a continuing event of default, the
interest rate shall be equal to 14%.
Term--12 months.
Security--All assets and tangible and intangible property of the Company.
On November 16, 1995, the Bankruptcy Court entered an Interim Order approving
additional debtor-in-possession financing between the Company and TPL. The
terms of the facility are as follows:
General Terms--TPL will make available for the Company's use from time to time
during the term, loans not to exceed $150,000, in the aggregate, to be used by
the Company for general working capital purposes.
Interest--11% per annum for actual days elapsed on a 360-day year basis.
Interest shall be paid monthly. After a continuing event of default, the
interest rate shall be equal to 14%.
Term--12 months.
Security--All assets and tangible and intangible property of the Company.
On November 30, 1995, the Bankruptcy Court entered an Interim Order approving
debtor-in-possession financing between the Company and Kandila Investments
Ltd. The terms of the facility are as follows:
General Terms--Kandila Investments Ltd. will make available for the Company's
use from time to time during the term, loans not to exceed $500,000, in the
aggregate, to be used by the Company for general working capital purposes.
Interest--11% per annum for actual days elapsed on a 360-day year basis.
Interest shall be paid monthly. After a continuing event of default, the
interest rate shall be equal to 14%.
Term--All loans together with interest accrued thereon under the Facility
shall be due and payable upon the earlier of (a) the date upon which any the
LLC's debtor-in-possession loans to the debtor become due, (b) upon the
occurrence of an event of default hereunder or (c) an entry of an order of the
Bankruptcy Court that confirms a Plan of Reorganization in the debtor's
Chapter 11 case.
Security--All assets and tangible and intangible property of the Company
subject to the prior claims of TPL.
Subsequent Events
On January 16, 1996, the Company's counsel filed motions with the Bankruptcy
Court to retrieve all funds mistakenly paid to professional advisors of TPL,
Kevin Koy and Russ Felker, and to terminate the employment agreements with
Messrs. Koy and Felker. In addition, the motions sought to terminate a letter
of intent and related employment and stock incentive agreements related to a
proposed purchase of Cormark, Inc., an Illinois corporation engaged in the
manufacture and sale of point of purchase displays and controlled by John
Prinz. Return of a $60,000 deposit made to Cormark in anticipation of the
proposed purchase was also requested. Pursuant to the motions, all employment
and incentive agreements, as well as the letter of intent to purchase
Cormark, Inc., were terminated. The $60,000 deposit was returned to the
Company and an additional $107,000 in mistaken payments was recovered, and
Messrs. Koy, Felker and Prinz resigned from the Company as Directors.
Mr. Koy terminated all capacities with TPL and release all ownership interests
in TPL.
On February 6, 1996, the Company entered into an agreement with Victor Baron,
Savely Burd and Interactive Controls, Inc., an Illinois corporation
("Intercon"). Intercon has developed and is the owner of a business plan (the
"Intercon Business Plan") for the development, production, sale and
installation of miniature computers for industrial control and operation.
Under the terms of the agreement ("the Intercon Agreement"), the Company
acquired the rights to the Intercon Business Plan. Under the Intercon
Agreement, the Company hired Baron to act as the Company's chief operating
officer and president of the Company's new "Intercon Division" and it hired
Burd to act as its chief financial officer.
Under the terms of the Intercon Agreement, in addition to an annual salary and
bonus which will be paid to Baron and Burd, Intercon will be entitled to
receive certain shares of the reorganized Company's stock as payment for the
transfer to the Company of the Intercon Business Plan and Intercon's other
assets. The Intercon Agreement provides that commencing upon the plan
effective date and thereafter during the balance of the term of the agreement,
Intercon (or its successors) will be issued certain shares of the Company's
common stock (the "Asset Acquisition Shares") determined as follows:
Subject to the adjustment procedures set forth below, during the term,
Intercon will receive:
a. One million Asset Acquisition Shares the first fiscal year in which the
Company realizes aggregate gross revenue of $5 million (determined by
reference to the Company's year-end financial statements which shall be
prepared in accordance with generally accepted accounting principles
(GAAP) applied on a consistent basis).
b. Two hundred thousand Asset Acquisition Shares for each additional $1
million in gross sales realized by the Company in excess of $5 million and
less than the aggregate of $10 million in a single fiscal year (determined by
reference to the Company's year-end financial statements which shall be
prepared in accordance with GAAP applied on a consistent basis). Intercon's
right to receive Asset Acquisition Shares under the provisions of this
Paragraph b. shall terminate when the aggregate number of Asset Acquisition
Shares issued to Intercon under the provisions of this Paragraph b. equals one
million.
c. After Intercon has received the Asset Acquisition Shares called for in
Paragraphs a. and b. above, but not prior thereto, .25 Asset Acquisition
Shares for each dollar in net earnings before taxes which the Company realized
(determined by reference to the Company's year-end financial statements
which shall be prepared in accordance with GAAP applied on a consistent
basis).
Notwithstanding the forgoing, Intercon will not receive Asset Acquisition
Shares which would result in Intercon and/or employees holding, in the
aggregate, in excess of 25% of the total of the Company's outstanding shares
of common stock as of the plan effective date on a fully diluted basis.
On July 31, 1995, the Company filed a Preliminary Plan of Reorganization and
Related Disclosure Statement. On October 3, 1995, the Company and TPL filed
the First Amended Joint Plan of Reorganization. And on February 14, 1996, the
Company filed the Second Amended Plan of Reorganization. Under this plan, the
creditors/equity holders were assigned to one of nine classes. The
distribution under the proposed plan to each class is as follows:
Class 1--Postpetition Administrative Claims--To be paid in full on the
effective date.
Class 2--Priority Tax Claims--To be paid in full with 9% interest in monthly
payments.
Class 3--Nontax Priority Claims--To be paid in full on the effective date.
Class 4--Prepetition Claims of TPL and IBM--Will receive 6,450,000 shares of
the debtor's stock upon the effective date.
Class 5--Postpetition Claims of TPL and Kandila--Will receive 4,200,000 shares
of the debtor's stock on the effective date.
Class 6--Claims of Wong's Electronics--Will, along with Class 8 creditors,
receive a prorated share of 750,000 shares of the debtor's stock on the
effective date.
Class 7--Claims Under Expressed or Implied Warranties--Will receive 10%
discount certificates upon the effective date.
Class 8--Claims Unsecured Creditors Not Otherwise Classified Under the Plan--
Will, along with Class 6 creditors, receive a prorated share of 750,000 shares
of the debtor's stock on the effective date.
Class 9--Equity Interest of Debtor's Shareholders--Will retain their shares of
the debtor's stock.
If the plan is approved, the Company will be issued an additional 11,400,000
shares of its common stock.
The alternative to the plan as proposed would be the liquidation of the
debtor's assets by the Chapter 11 trustee or, in the event of the conversion
of the Chapter 11 case to a Chapter 7 case, the liquidation of the debtor's
assets by an appointed or elected Chapter 7 trustee. The debtor believes
that, in the event of such liquidation, 100% of the proceeds of such
liquidation would be distributed to TPL and Kandila and no distribution
whatsoever would be received by any other creditors or any of the debtor's
equity holders.
With the debtor-in-possession financing which the Company procured from TPL
and Kandila, the Company currently has sufficient funds on hand to fund its
immediate cash needs. The plan contemplates that, in addition to the stock to
be issued under the plan, the Company will register 16 million shares which
will be held by the Company for future business operations and growth. It is
contemplated that these registered shares may be offered to the public after
the company completes the contemplated registration of all of the Company's
stock, which the Company anticipated may take up to nine months after the
effective date to complete. In the interim, as and to the extent needed and
provided the Company obtains any authorization required from the Bankruptcy
Court, the Company may enter into additional borrowings with TPL and Kandila,
on terms substantially similar to the Company's prior borrowings from them.
The Company believes that the funds it currently has on hand, when coupled
with its anticipated operating profits, the additional funds it may borrow
from TPL and/or Kandila in the future, and the funds that the Company may be
able to raise through the offering of the above described registered shares to
the public at the end of the registration process will provide sufficient fund
for the Company to fund its operations and complete its reorganization.
3. RESTRUCTURING DOCUMENTS:
On April 4, 1994, the Company signed the Restructuring Documents defining a
payment schedule and a method of handling the Company's commitments under open
purchase orders with IBM. The Restructuring Documents include a Promissory
Note, Sales Agreement, Lockbox A Agreement, Lockbox B Agreement and a security
Agreement.
The terms of the Promissory Note required weekly payments to start on November
25, 1994. The Company was unable to make these payments and, as of December
31, 1994, the Company was in default on these Restructuring Documents.
These agreements and the Promissory Note were acquired from IBM by Technology
Partners L.L.C. (see Note 2).
4. LITIGATION SETTLEMENT:
In March, 1991, LMC Viktron Limited Partnership (LMC) filed a complaint
against the Company and Alan Yong in the Circuit Court of DuPage County,
Illinois. The complaint demanded $2,996,646 for a breach of an alleged "cost
plus" manufacturing agreement for several models of the Company's laptop
computers, principally the LapPro and the Dauphin 2000. The Company and Yong
claimed in a counterclaim that they incurred substantial damages as the result
of LMC's breach of the manufacturing agreement and breach of the warranty for
failure to manufacture working, marketable machines.
LMC, the Company and Yong reached an out-of-court settlement on September 21,
1994. The general terms and conditions of the settlement are as follows:
a. Defendant Dauphin agreed to pay plaintiff LMC the negotiated sum of one
million dollars ($1,000,000) in accordance with the terms of this settlement
order.
b. That, plaintiff LMC will take no action to execute or satisfy this debt
as long as payments are being made as aforesaid or unless a bankruptcy or
reorganization petition is filed by or against defendant Dauphin. In the
event of a default in the negotiated sum and failure to cure said default
within seven (7) days after notice to defendant Dauphin, then plaintiff LMC
shall be entitled to entry of a judgment in the amount of five million dollars
($5,000,000), less credit for payments received.
The Company was unable to make the January 1, 1995, payment and declared
Chapter 11 bankruptcy before it could cure this default within seven days.
Since the Company filed for Chapter 11 bankruptcy, the entire $5,000,000
judgment was recorded in these financial statements.
5. SUMMARY OF MAJOR ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue on the sale of computers and accessories upon
delivery and the expiration of certain return provisions, if applicable.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined on the
first-in, first-out (FIFO) basis. Inventory consists of the following at:
December 31 Septemer 30 1996
1994 1995 (unaudited)
Finished goods $ 74,848 $ - $ -
Computer accessories,
components and supplies 1,641,786 111,731 2,704,706
--------- -------- ----------
1,716,634 111,731 2,704,706
Less- Reserve for
obsolescence (1,602,848) (20,589) (20,589)
--------- -------- ----------
$ 113,786 $ 91,142 $ 2,684,117
========== ======== ============
The majority of the computer accessories, components and supplies relate to
product lines that were discontinued in 1994; accordingly the Company reserved
for these items as of December 31, 1994.
The increase in net inventory on June 28, 1996 is attributable to an agreement
with Technology Partners, L.L.C. to purchase inventory in their possession
which they received when they purchased the secured claim from IBM on
May 31, 1995. The inventory ($2,912,000) was recorded at fair market value in
conformity with generally accepted accounting principles. (See STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIT), "BALANCE, December 31, 1995", Column "Paid-in
Capital" Page F-5). Technology Partners, LLC received 2,600,000 shares of
common shares which placed the per share price at $1.12. The nature of the
inventory consisted of raw materials for future use in production of DTR-2 and
other raw materials.
Prepaid Software Costs
The Company capitalizes all minimum royalty payments under software licensing
agreements based on a fixed payment schedule. Additionally, the Company
capitalizes costs related to the modification of certain software used
in the Company's products. These costs are charged to cost of sales upon the
shipment of product. At December 31, 1994, the Company had minimal finished
goods in inventory and no means of obtaining additional finished goods. For
this reason, all prepaid software costs were expensed during 1994.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using
straight-line methods over the estimated lives of the related assets, which
range between two and seven years. The estimated lives of certain equipment
such as tooling and evaluation units depends upon the product life of the
related computers. Since the bulk of this equipment was for product lines
that were discontinued in 1994, this equipment was written off during 1994.
Research and Development
Costs incurred in connection with research and development are expensed as
they are incurred.
Income (Loss) Per Common Share
Income(Loss) per common share is calculated based on the monthly weighted
average number of Common Shares outstanding which were 14,408,354 for the
period September 30, 1995, and 21,018,554 for the nine month period
September 30, 1996. Also, weighted average number of Common Shares at
December 31, 1993, 1994, and 1995 were 14,137,100, 14,408,354, and 14,408,354,
respectively.
6. SHORT-TERM BORROWINGS:
Short-term borrowings consist of the following at:
December 31, September 30, 1996
1994 1995 (unaudited)
Debtor-in-possession
per July 10, 1995,
order (Note 2) $ - $400,000 $ -
Debtor-in-possession
per November 16, 1995, interim
order (Note 2) - 150,000 -
Debtor-in-possession per
November 30, 1995, interim
order (Note 2) - 209,947 -
Unsecured, non-interest-bearing
demand note payable to
individual 46,500 46,500 -
------- -------- --------
Total notes payable $46,500 $806,447 $ 0
======= ======== ========
7. DEBENTURES PAYABLE:
During 1991, the Company authorized the issuance of 333,333 shares of common
stock and $500,000 of 12% subordinated debentures in a private placement.
Upon completion of this offering, 212,000 shares and $317,500 debentures were
sold. The principal amount of the debentures matures on December 31, 1994.
Interest at 12% per annum is payable on December 31 and July 1 of each year,
beginning January 1, 1992. The Company did not pay the interest which was due
on July 1, 1994, and December 31, 1994, nor did it retire these debentures on
the maturity date. The Company is in default on these debentures. As of the
Plan of Reorganization confirmation these Debentures have been converted to
Common Stock of the Company.
8. INCOME TAXES:
A reconciliation of the income tax expense on income before extraordinary item
per the U.S. federal statutory rate to the reported income tax expense
follows:
Years Ended December 31, Nine Months
Ended September 30
1993 1994 1995 1995 1996
(unaudited)(unaudited)
U.S. federal statutory [C] [C] [C] [C] [C]
rate applied
to pretax income $(1,155,373) $(16,718,679) $(270,236) $(81,103) $172,061
Permanent differences
and adjustments 65,538 10,020 (153) (153) -
Tax assets and net
operating loss
carryforwards not
recognized for
financial reporting
purposes (changes
in valuation
allowances) 1,089,835 16,708,659 270,389 81,256 (172,061)
---------- ---------- ------- ------ -------
Income tax provision $ - $ - $ - $ - $ -
========== ========== ======= ====== =======
The Company had generated deferred tax assets as follows:
December 31, September 30,
1994 1995 1996
Gross deferred tax assets- (unaudited)
Net operating loss
(NOL) carryforward $14,412,296 $ 17,149,842 $ 17,655,904
Reserves for warranty
items and inventory
obsolescence 1,528,000 20,589 20,589
Accrual for officer's
salary 385,414 385,414 -
Commitment payable 32,977,790 32,977,790 -
Litigation reserve 4,970,000 4,970,000 -
Other timing differences 434,874 - -
---------- ---------- ----------
54,708,374 55,503,635 17,676,493
Current federal statutory
rate 34% 34% 34%
Deferred tax assets 18,600,847 18,871,236 6,010,008
Less- SFAS 109 valuation
allowance (18,600,847) (18,871,236) (6,010,008)
---------- ---------- ----------
Net deferred tax asset $ - $ - $ -
========== ========== ==========
Deferred income taxes include the tax impact of NOL carryforwards.
Realization of these assets, as well as other assets listed above, is
contingent on future taxable earnings by the Company. In accordance with the
provisions of SFAS 109, a valuation allowance of $(18,600,847) and
$(18,871,236) at December 31, 1994 and 1995, respectively, has been applied to
these assets. During 1995, there was an ownership change in the Company as
defined under Section 382 of the Internal Revenue Code of 1986, which
adversely affects the Company's ability to utilize the NOL carryforward.
9. OPTIONS:
In March, 1992, the Board of Directors of the Company adopted and the
shareholders of the Company subsequently approved the 1992 Stock Option Plan
(the Plan). The Plan provides for the availability of an aggregate of
1,500,000 shares of the Company's common stock for issuance to eligible
employees at not less than 85% of the market value of the stock, as determined
by the Board of Directors. The Plan is administered by a Stock Option
Committee (the Committee), which consists of the Board of Directors.
Options issued under the Plan vest over a period of time based on the year of
issuance, as stated in the Plan. Compensation expense associated with these
options totaled $146,618, $(98,109) and $(87,665) for 1993, 1994 and
1995, respectively, and is included in selling, general and administrative
expenses.
The following table contains information on stock options:
1 9 9 4 1 9 9 5
Average Option Average Option
Shares Price Per Share Shares Price Per Share
[C] [C] [C] [C]
Outstanding, beginning
of year 500,936 $5 121,083 $5
Granted during the year 1,115,000 - - -
Exercised during the year - - - -
Canceled during the year (593,130) (2) (121,083) (5)
--------- ----- --------- -----
Outstanding, end of year 1,022,806 $1 - $ -
========= ===== ======== =====
Exercisable, end of year 121,083 $5 - $ -
========= ===== ======== =====
During 1994 and 1995, certain employees were terminated from the Company.
Options granted to these employees (121,083 in 1995 and 593,130 in 1994)
expired due to employees termination and related compensation expense
previously recognized was reversed in the 1994 and 1995 statement of
operations.
10. LONG-TERM LEASES AND COMMITMENTS:
Numerous suppliers have claims against the Company for amounts owed. Since
the Company filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code on January 3, 1995, the final amount paid to
vendors, including the landlord and other suppliers with claims, will be
determined by the reorganization plan to be completed by the Company and
submitted for approval by the Bankruptcy Court.
As of the date of this filing, most claims against the Company, incurred prior
to filing of the bankruptcy petition, have been settled.
Certain first priority government tax liens, which existed prior to bankruptcy
petition filing, have not been discharged in bankruptcy. The Company is
obligated to repay approximately $21,000 of such liens on a monthly basis over
the next six years.
During the third quarter, the Company financed a purchase of certain operating
equipment. The Company financed approximately $23,000 of such purchases over
the next three years.
11. RELATED-PARTY TRANSACTIONS:
Manufacturing and Maintenance Systems, Inc. (MMS), a company wholly owned by
Alan and Lucy Yong has made advances to, and payments on behalf of, the
Company from time to time. Amounts due to MMS related to these advances, net
of amounts repaid, are approximately $208,422 at December 31, 1995 and 1994,
respectively, and are payable upon demand and do not accrue interest.
Pursuant to the Company's Plan, amounts payable to MMS were converted in
exchange for shares of common stock.
12. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF AUDITORS' REPORT:
Emergence from Bankruptcy On July 23, 1996 the District Court of Northern
Illinois approved the implementation of Dauphin's Third Amended Plan of
Reorganization and discharged the Company as Debtor-in-Possession. This
closed Dauphin's bankruptcy proceedings. As of September 30, 1996, the plan
was confirmed and all material conditions precedent to the plan's becoming
binding were resolved, pursuant to paragraph 35 of SOP 90-7 and, as such the
reporting principles of SOP 90-7 were applicable.
The Company issued the 11,650,000 shares of its common stock pursuant to the
Plan. This has effectively converted all pre-petition credit holders to equity
holders. Each present equity holder's position has been diluted since
additional shares of stock have been issued. Shareholder's Equity - Common
Stock and Paid-in-Capital and the Extraordinary Item reflect the consequence
of issuance of additional shares in exchange for the debt at $1.12 per share.
Private Placement On April 19, 1996, TPL commenced a private placement of
certain 9% unsecured promissory notes convertible into Dauphin shares at $1.12
per share. In connection with this private placement, the Company
received $995,407 in conversion and exchange for 888,757 shares by the end of
August 1996.
No person has been authorized to give any
information or to make any representations in
connection with this offering other than those
contained in this Prospectus and, if given or made,
such other information and representations must not
be relied upon as having been authorized by the
Company or the Selling Stockholders. Neither the
delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that there has been no change in the
affairs of the Company since the date hereof or that
information contained herein is correct as of any
time subsequent to its date. This Prospectus does not
constitute an offer to sell or a solicitation of an offer
to buy any securities other than the registered
securities to which it relates. This Prospectus does
not constitute an offer to sell or a solicitation of an
offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful.
- ------------
TABLES OF CONTENTS
Available Information 4
Prospectus Summary 5
The Company 5
The Registration 6
Summary Financial Information 7
Use of Proceeds 8
Dilution 8
Risk Factors 8
Recent Events 12
Market Price of Common Stock
and Dividend Policy 13
Selected Financial Data 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
Business 19
Description of Property 23
Management 23
Executive Compensation 25
Principal Stockholders 29
Voting Rights of Control Persons 31
Description of Capital Stock 32
Share Transfer Restrictions 33
Selling Stockholders and
Plan of Distribution 35
Legal Matters 46
Experts 46
Index to Financial Statements F-1
27,720,179 COMMON SHARES
DAUPHIN TECHNOLOGY, INC.
COMMON STOCK
$0.001 Par Value
$1.5675 Bid Price on November 20, 1996
- ----------
PROSPECTUS
- ----------
- ------------
November 20, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby. All amounts
are estimated except the Securities and Exchange Commission registration
fee.
Amount
SEC registration fee $ 15,404.39
Blue Sky fees and expenses 5,000.00
Accounting fees and expenses 7,500.00
Legal fees and expenses 10,000.00
Printing 0.00
Registrar and transfer agent's fees 5,000.00
Miscellaneous fees and expenses 1,000.00
----------
Total $ 43,904.39
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Registrant is incorporated in the State of Illinois. Section 8.75 of the
Illinois Business Corporation Act defines the powers of registrant to
indemnify officers, directors, employees and agents.
In additional to the provisions of Illinois Business Corporation Act Section
8.75, and pursuant to the power granted therein, registrant has adapted
Article XII of its Bylaws which provides as follows:
ARTICLE XII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1 The corporation shall indemnify any person who was or is a party,
or is threaten to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a directors, officer, employee or agent
of the corporation or fiduciary of any employee benefit plan maintained by the
corporation, or who is or was a director, officer, employee or agent of the
corporation of a fiduciary as aforesaid, or who is or was serving at the
request of the corporation as a director, officer, employee, agent of
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation (or, in the case of a fiduciary, the best
interests of the plan and plan participants) and, with respect to any criminal
action proceeding, had no reasonable cause to believe his conduct was
unlawful. This termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contender or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that this
conduct was unlawful.
SECTION 2 The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or fiduciary as aforesaid, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to the best interests of the corporation
(or, in the case of a fiduciary, the best interests of the plan and plan
participants), except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless, and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
as the court shall deem proper.
SECTION 3 To the extent that a director, officer, employee or agent of a
corporation or fiduciary as aforesaid has been successful, on the merits or
otherwise, in the defense of any action, suit or proceeding referred to in
proceeding sections, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
SECTION 4 Any indemnification under section 1 and 2 hereof (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case, upon a determination of the director, officer, employee, agent of
fiduciary is proper on the circumstances because he has met the applicable
standard of conduct set forth in said sections. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtained, or even if obtainable, a quorum of
disinterest directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
SECTION 5 Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding, as authorized by the board of directors in
the specific case, upon receipt of an undertaking by or oh behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
SECTION 6 The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaws, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent, and shall incur to the benefit of the heirs, executors and
administrators of such person.
SECTION 7 The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation of fiduciary, or who is or was serving at the request of the
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions of
this Article.
SECTION 8 In the case of a merger, the term "corporation" shall include, in
additional to the surviving corporation, any merging corporation absorbed in a
merger, which if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers and employees or
agents, so that any person who was a director, officer, employee or agent of
such merging corporation, or was serving at the request of another
corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this section with respect to the surviving
corporation as such person would have with respect to such merging if its
separate existence had continued.
SECTION 9 For the purpose of this Article, referenced to "other enterprises"
shall include employee benefit plans; reference to "fines" shall include any
excise tax assessed on a person with respect to an employee benefit plan; and
references to the phrase "serving at the request of the corporation" shall
include any service as a director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries. A person who
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Article.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of registrant
pursuant to the foregoing provisions, or otherwise, registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, enforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by registrant of expenses incurred in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such an issue.
Except to the extent herein above set forth, there is no charter provision,
bylaw, contract, arrangement or statute pursuant to which any director or
officer of registrant is indemnified in any manner against any liability which
he may incur in his capacity as such.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES
I. In the third quarter of 1993, the Company issued 50,000 Shares to Donald
Larsen at $2.00 a Share when $100,000 of a $350,000 loan was converted into
Company Stock according to the loan agreement.
II. In the fourth quarter of 1993, the Company issued 30,000 Shares as
additional compensation for a 145 day extension of a $250,000 loan and issued
6,000 shares at $3.50 a Share to Circuit Systems, Inc. and 50,000 Shares at
$4.00 a Share to Asic Design, Inc.
III. On May 9, 1996, the Third Amended Plan of Reorganization was approved by
the stockholders and creditors and confirmed by the Court. Under this Plan,
the creditors/equity holders were assigned to one of nine classes.
Satisfaction of claims of each class under this approved Plan is as follows:
Class 1 - Post-Petition Administrative Claims
- To be paid in full on the effective date of the Plan (the
Effective Date) or soon thereafter.
Class 2 - Priority Tax Claims
- To be paid in full with 9% interest in monthly payments.
Class 3 - Non-Tax Priority Claims
- To be paid in full on the Effective Date or soon thereafter.
Class 4 - Pre-Petition Claims of TPL and IBM
- To receive 6,400,000 Shares of the Company's Stock on the
Effective Date or soon thereafter.
Class 5 - Post-Petition Claims of TPL and Kandila
- To receive 4,200,000 Shares of the Company's Stock on the
Effective Date or soon thereafter.
Class 6 - Claims of Wong's Electronics
- To receive, along with Class 8 creditors, a prorated share
of 1,000,000 shares of the Company's Stock on the Effective
Date for their unsecured portion of the claims.
- To also receive 50,000 shares in settlement of their secured
portion of the claims on the Effective Date or soon
thereafter.
Class 7 - Claims Under Expressed or Implied Warranties
- To receive 10% product discount certificates on the
Effective Date or soon thereafter.
Class 8 - Claims Unsecured Creditors Not Otherwise Classified Under
the Plan
- To receive, along with Class 6 creditors, a prorated shares
of 1,000,000 Shares of the Company's Stock on the Effective
Date or soon thereafter.
Class 9 - Equity Interest of Debtor's Shareholders
- To retain their Shares of the Company's Stock.
On July 23, 1996 the District Court approved the implementation of the Third
Amended Plan of Reorganization and discharged the Company as Debtor-in-
Possession. This terminated the Company's bankruptcy proceedings.
The Company issued the 11,650,000 Shares of its Common Stock pursuant to the
Plan. This effectively converted all pre-petition credit holders to equity
holders. Shares issued under the Plan have a holding period, during which the
shares cannot be traded. The holding period continues through the earlier of
nine months from the Effective Date of the Plan or the date the Shares are
registered by the Company.
According to the Plan, in addition to the stock issued to satisfy creditors'
claims, the Company is authorized to issue and register up to 16 million
additional Shares (the "Reserve Shares") which can be used by the Company for
future business operations and growth and to satisfy potential Share issuance
requirements under the Intercon Agreement.
IV. On April 19, 1996, TPL commenced a private placement of certain 9%
unsecured promissory notes convertible into Dauphin shares at $1.12 per share.
In connection with this private placement, the Company received $995,407 in
conversion and exchange for 888,757 Shares.
V. On July 22, 1996, the Company issued 15,000 Shares to Donald Schak as
rental consideration for execution of the office lease to the Company's
present office space.
VI. On June 28, 1996 the Company entered into an agreement with Technology
Partners, L.L.C. to purchase inventory in their possession which they received
when they purchased the secured claim from IBM on May 31, 1995. The value of
the inventory was established within generally accepted accounting procedures
and valued at $2,912,000. (See "STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)',
"BALANCE, December 31, 1995", Column "Paid-in Capital" Page F-5).
Technology Partners, LLC received 2,600,000 shares of common shares which
placed the per share price at $1.12 which was the per share price of the
recent private offering conducted by Technology Partners.
VII. On October 21, 1996 the Company issued a convertible note to
Tiedemann/Economos Global Emerging Growth in the principal amount of $770,000.
The note is unsecured, accrues interest at the rate of 9% per annum, and is
due and payable on December 31, 1996. The Company is required to pay interest
at maturity. At the election of the holder, the note may be converted at
maturity to 1,100,000 shares.
The sale and issuance of securities described above were believed to be exempt
from registration under the Securities Act by virtue of Section 4 (2) thereof
and Regulation D as transactions not involving any public offering, as well
as, securities issued in conversion of debt in accordance with Section 1145 of
the Bankruptcy Code and the Company's Third Amended Plan of Reorganization
approved and confirmed by the Bankruptcy Court on May 9, 1996. The recipients
represented their intention to acquire securities for investment purposes only
and not with a view to distribution thereof. Appropriate legends were affixed
to stock certificates issues in such transactions and all recipients had
adequate access to information about the Company. No underwriter was used and
no underwriting fee or other compensation was paid in connection with these
transactions.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No. Description of Document
*3(1) Certificate of Incorporation filed July 27, 1990, incorporated herein by
reference to exhibit 7(c)(1) of Form 8-K filed May 14, 1991.
*3(2) By-Laws as amended, incorporated herein by reference to exhibit 3(2) of
Form 10-K for the fiscal year ended December 31, 1991.
*4(1) Specimen Common Stock Certificate incorporated herein by reference to
exhibit 4(1) of Form S-18 filed June 1, 1990.
*4(2) Specimen Common Stock Purchase Warrant incorporated herein by reference
to exhibit 4(2) of Form S-18 filed June 1, 1990.
*4(3) Warrant Agreement between the Company and Warrant Agent incorporated
herein by reference to exhibit 4(3) of Form S-18 filed June 1, 1990.
*10(1)Agreement and Plan of Reorganization incorporated herein by reference to
exhibit 7(c) of Form 8-K filed April 4, 1991.
*10(2)Plan and Agreement of Merger incorporated herein by reference to exhibit
7(c)(1) of Form 8-K filed May 14, 1991.
*10(3)1992 Stock Option Plan adopted by the Board of Directors on March 1,
1992, incorporated herein by reference to exhibit 10(6) of Form 8-K for
the year ended December 31, 1991.
*10(4)Computer Technology License Agreement dated September 23, 1991, between
Phoenix Technology, Inc. and amendments, incorporated herein by
reference to exhibit 10(11) to Form 10-K for the fiscal year ended
December 31, 1993.
*10(5)License Agreement dated January 1, 1993, between Microsoft Corporation
and Dauphin Technology, Inc. and amendments, incorporated herein by
reference to exhibit 10(12) to Form 10-K for the fiscal year ended
December 31, 1993.
*10(6)DIP Credit Facility dated June 16, 1995 between Technology Partners,
L.L.C. and Dauphin Technology, Inc. incorporated herein by reference to
exhibit 7(u) of Form 8-K for the year ended July 5, 1995.
*10(7)Interim Order Approving Debtor's Motion to authorize DIP Financing and
Granting Liens and Administrative Priority pursuant to Section 364 of
Bankruptcy Code dated June 20, 1995 incorporated herein by reference to
exhibit 7(b) of Form 8-K filed July 5, 1995.
*10(8)Employment Agreement dated as of May 22, 1995 between Alan Yong, Dauphin
Technology, Inc., Kevin Koy and Andrew Kandalepas incorporated herein by
reference to exhibit 7(c) of Form 8-K for the year ended July 5, 1995.
*10(9)Interim Order Approving Debtors Motion to authorize Kandila Investments
Ltd. DIP Financing and Granting Liens and Administrative Priority
pursuant to Section 364 of the Bankruptcy Code dated November 30, 1995
incorporated herein by reference to exhibit 7(h) of Form 8-K filed
November 30, 1995.
*10(10)Debtor's Motion Seeking Entry of Order Authorizing the Debtor to enter
into Settlement Agreement with Cormark, Inc. and Certain of its
Employees filed January 16, 1996 with United States Bankruptcy Court
incorporated herein by reference to exhibit 7(b) of Form 10-Q filed
January 26, 1996.
*10(11)Debtor's Motion Seeking Entry of Order Authorizing the Debtor to enter
into Settlement Agreement with Technology Partners LLC., Kevin Koy,
Russ Felker and John Prinz filed January 16, 1996 with United States
Bankruptcy Court incorporated herein by reference to exhibit 7(b) of
Form 10-Q filed January 26, 1996.
*10(12)Debtor's Motion Seeking Entry of Order Authorizing the Debtor to enter
into Asset Purchase Agreement with Victor Baron, Savely Burd and
Interactive Controls, Inc. filed February 6, 1996 with United States
Bankruptcy Court incorporated herein by reference to exhibit 7(b) of
Form 10-Q filed May 15, 1996.
*10(13)Debtor's Third Amended and restated Plan of Reorganization filed May 9,
1996 with United States Bankruptcy Court incorporated herein by
reference to exhibit 7(b) of Form 10-Q filed January 26, 1996.
10(14)Letter of Credit requested by the Company generated by First of America
to SMT Unlimited for $232,000.00 for the purpose to begin manufacturing
of the DTR-2.
10(15)On October 21, 1996 the Company issued a convertible note to
Tiedemann/Economos Global Emerging Growth in the principal amount of
$770,000. The note is unsecured, accrues interest at the rate of 9% per
annum, and is due and payable on December 31, 1996. The Company is
required to pay interest at maturity. At the election of the holder,
the note may be converted at maturity to 1,100,000 shares.
10(16)Share Restriction Agreement dated April 30, 1996 for several control
persons. The parties are persons on the Board of Directors and
Executives of the Company. The agreement continues for two years from
date of emergence from bankruptcy. The maximum amount of shares
allowable for trade on the market is 50,000 shares per month.
10(17)Share Restriction Agreement dated October 11, 1995 for Alan Yong, past
President and present Board Member, including all of his family. The
agreement continues for two years from October 11, 1995. The maximum
amount of shares allowable for trade on the market is 10,000 shares per
month.
24(1) Consent of Arthur Andersen LLP., independent public accountants.
24(2) Consent of Rieck and Crotty, P.C..
*28(1)Confidential Private Placement Memorandum dated April 19, 1996, included
in Form 10-Q filed May 15, 1996, incorporated herein by reference.
* Previously filed or incorporated by reference.
Item 17. UNDERTAKINGS
(A) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Company hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in the section.
(B) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, post-
effective amendment to this registration statement:
(i) To include any Prospectus required by Section 10(a) of the Securities
Act of 1993;
(ii) To disclose in the Prospectus any change in the offering price at which
any registering shareholders subject to the requirement of a Pricing Amendment
are offering their registered securities for sale;
(iii) To reflect in the Prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iv) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(C) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the forgoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjustment of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Pre-Effective Amendment No. 1 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Palatine and State of Illinois, on the 20th day of
November, 1996.
DAUPHIN TECHNOLOGY, INC.
By:____________________________
Andrew J. Kandalepas, President
By:____________________________
Savely Burd, Chief Financial Officer/Controller
Pursuant to the requirement of the Securities Act of 1933, as amended, this
Registration Statement has been duly signed by the following persons in the
capacity and on the dates indicated.
SIGNATURE/TITLE Date
11/20/96
Andrew J. Kandalepas, Chairman of
the Board of Directors /President/Chief
Executive Officer
Douglas P. Morris, Director 11/20/96
Jeffrey Goldberg, Secretary/Director 11/20/96
Dean F. Prokos, Director 11/20/96
Wm. Paul Bunnell, Director 11/20/96
Alan S.K. Yong, Director 11/20/96
Gary E. Soiney, Director 11/20/96
Andrew Prokos, Director 11/20/96
EXHIBIT 24(1)
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made part of this
Registration Statement Amendment No. 2 on Form S-1 for Dauphin Technology,
Inc.
Arthur Andersen LLP
Chicago, Illinois
November 20, 1996
EXHIBIT 24(2)
November 20, 1996
Dauphin Technology, Inc.
600 East Northwest Highway
Suite 950
Palatine, Illinois 60067
In re Form S-1 Registration Statement No. 1
Gentlemen:
We have acted as counsel to Dauphin Technology, Inc., an Illinois corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), of a Registration Statement on Form S-l (the
"Registration Statement") relating to the registration of 27,720,179 Shares of
the Company's common stock (the "Shares").
As such counsel, we have examined the Registration Statement and such other
papers, documents and certificates of public officials and certificates of
officers of the Company as we have deemed relevant and necessary as a basis
for the opinions hereinafter expressed. In such examinations, we have assumed
the genuiness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us and conformed or photocopies.
Based upon and subject to the foregoing, it is our opinion that the Shares
covered by the Registration Statement have heretofore been legally issued by
the Company and are fully paid and non-assessable and shall continue to be
such when and if sold by the Selling Stockholders.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus Constituting a part of the Registration
Statement.
Very truly yours,
Rieck and Crotty, P.C.
EXHIBIT 10(14)
FIRST 0F AMERICA
IRREVOCABLE STANDBY LETTER OF CREDIT
First of America bank-Illinois, N.A. To: SMT UNLIMITED L.P.
9101 Greenwood Avenue 47650 Westinghouse Drive
Niles, Illinois 60115 Fremont, CA 94539
Date: June 18,1996
Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit No.2520100 in
your favor for account of DAUPHIN TECHNOLOGY, INC. for a sum not exceeding TWO
HUNDRED THIRTY TWO THOUSAND AND NO/100 Dollars ($232,000.00) available by your
draft or drafts on First of America Bank-Illinois, N.A. at sight when
accompanied by the following documents:
UPON EACH SHIPMENT, DELIVERY PROVIDED PRODUCT CONDITION AND QUALITY
ACCEPTANCE, DAUPHIN TECHNOLOGY, INC. WILL (WITHIN 15 DAYS), SEND
CONFIRMATION TO THE VENDOR AND THE BANK TO RELEASE APPROPRIATE AMOUNTS
FOR PAYMENT ON THE 30TH DAY AITER THE BILL DATE.
All sight drafts drawn under this Credit must be marked "Drawn under First of
America Bank-Illinois, N.A. Irrevocable Standby Letter of Credit No. 2520100
dated JUNE 18,1996."
This credit shall be governed by the Uniform Commercial Code as enacted in
ILLINOIS from time to time, and to the extent not modified by said law, the
Uniform Customs and Practice for Documentary Credits as most recently
published by the International Chamber of Commerce.
The original of this Letter of Credit must be submitted to us whenever a
partial draw or cancellation of this Credit is requested. In every case of
partial draw the Letter of Credit shall be promptly returned and remain
valid for the balance unused.
We hereby agree with bona fide holders that all sight drafts drawn under and
in compliance with the terms of this Credit shall meet with due honor upon
presentation and delivery of the documents as specified if negotiated at our
offices on or before.
Very truly yours,
___________________________________
By: Peter. Schmuggerow
Its: Loan Officer
___________________________________
By: William V. Iaculla
Its: Vice President
EXHIBIT 10(15)
CONVERTIBLE UNSECURED PROMISSORY NOTE
October 21, 1996
Palatine, Illinois
FOR VALUE RECEIVED, DAUPHIN TECHNOLOGY INC., an Illinois corporation
("Payor"), hereby promises to pay to the order of Tiedemann/Economos Emerging
Growth Fund ("Payee"), the principal sum of Seven Hundred Seventy Thousand
Dollars (U.S. $770,000.00), together with interest thereon from the date
hereof accruing at the rate of Nine Percent (9%) per annum. Principal and all
accrued interest shall be payable as set forth below but in no event later
than December 31, 1996. All payments shall be made by Payor mailing on the due
date a check to the order of Payee at the following address:
Tiedemann/Economos Emerging Growth Fund
Charlotte House
Charlotte Street
Nassau, Bahamas
This Note will either be repaid in full in cash by Payor, or at the sole
option of the Payee, converted into Dauphin Shares (see "Payment Terms"). If
Payee elects to convert this Note into Dauphin Shares, Payor will then issue
shares for such proceeds at the price of $ .70 per share and all of such
newly issued Dauphin Shares will be delivered to Payee.
This Note may be converted into Dauphin Shares by surrender of this Note to
Payor at its principal office at, 800 Northwest Hwy., Suite 950, Palatine, IL
60067 (or at such other office as Payor shall designate to Payee from time
to time). The conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the Note shall have been
so surrendered to Payor.
As promptly as practicable after the conversion of this Note, and in any event
within thirty days thereafter, the Payor, at its expense, will cause
certificates for the number of Dauphin Shares issuable upon such conversion to
be delivered to Payee. All Dauphin Shares which shall be so delivered shall be
duly and validly issued and fully paid and nonassessable.
PAYMENT TERMS
The principal or interest under this Note shall be payable on the following
terms:
This Note may be prepaid, in whole or in part; without premium or penalty at
any time. All payments made shall be credited first to accrued interest and
then to principal, however, in the event of default, Payee may in its sole
discretion apply any payment to interest and other lawful charges accruing
under this Note and then to principal. It is the intention of the parties
hereto that the provisions herein shall not provide directly or indirectly for
the payment of a greater interest or the retention of any other charge than is
allowed by applicable law. If, for any reason, interest in excess of such
legal rate or a charge prohibited by applicable law shall at any time be paid,
any such excess shall either constitute and be treated as a payment on the
principal or he refunded directly to Payor.
DEFAULT
Upon the happening of any of the following events, each of which shall
constitute a default, all of the entire unpaid principal of this Note and
accrued interest thereon, shall immediately become due and payable. Events
of default shall be defined as follows: (a) failure of a Payor to pay to Payee
the principal and/or interest as required by this Note, when due; (b) the
dissolution of Payor; (c) the insolvency of Payor, the filing of a petition
in bankruptcy by or against Payor, or the adjudication of bankruptcy under any
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding under any federal or state statute, by or against Payor; or
(d) an application for the appointment of a receiver for, or of the making of
a general assignment for the benefit of creditors by, Payor.
In any litigation related to this Note, the prevailing party shall be entitled
to have its litigation costs, including legal fees, paid by the other party.
Upon the occurrence of an event of default Payee may institute appropriate
legal proceedings against Payor to obtain judgment on the Note and/or
otherwise exercise all rights and remedies under applicable law.
Payor hereby waives demand, notice and protest of and against any action taken
by Payee under the terms of this Note. If placed in the hands of an attorney
for collection, Payor agrees to pay any and all reasonable attorneys fees
and costs (including an appeal).
OTHER PROVISIONS
This Note shall be construed according to, and shall be governed by, the laws
of the State of Illinois. The provisions of this Note shall be deemed
severable, so that if any provision hereof is declared invalid under the laws
of any state, or of the United States, all other provisions of this Note shall
continue in full force and effect. This Note may be amended only by a writing
signed by Payor and Payee of each party.
Any suit filed to enforce this Note or collect the money owed hereunder shall
be filed in any state or federal court having subject matter jurisdiction and
located in Cook County, Illinois.
This Note shall be binding upon the successors and assigns of Payor, and shall
inure to the benefit of and be enforceable by the heirs, personal
representatives, successors and assigns of Payee or any other holder hereof.
IN WITNESS WHEREOF, the undersigned has duly executed, sealed and delivered
this Note the day and year first above written.
DAUPHIN TECHNOLOGY, INC.
An Illinois Corporation
_____________________________________
By:
Savely Burd, Chief Financial Officer
EXHIBIT 10(16)
SHARE TRANSFER RESTRICTION AGREEMENT
Agreement made and entered into on the dates indicated on the signature
page hereof by and among, Dauphin Technology, Inc. (the "Corporation"), Andrew
J. Kandalepas ("Kandalepas"), Mario Loukas ("Loukas"), Jeffrey L. Goldberg
("Goldberg"), Douglas Morris ("Morris"), and Wm. Paul Bunnell ("Bunnell") and
any entity who is controlled by the above mentioned.
Recitals:
Dauphin Technology Inc. is currently a Debtor-in-Possession in a Chapter
11 Bankruptcy Proceeding. As part of the Corporation's Third Amended Plan of
Reorganization, the Corporation proposes to issue shares of its common stock
("Common Stock") to various creditors as payment of their claims against the
Corporation.
Technology Partners, LLC is currently in the process of a Private
Placement to sell a portion of its Dauphin Common shares in a non-market
transaction.
Kandalepas, Goldberg, Loukas, Morris, and Bunnell currently controls
and/or owns and/or may hereafter acquire shares of the Corporation's Common
Stock.
The Corporation's Common Stock is traded, on a limited basis, in the
over-the-counter market and is quoted on the NASD's Electronic Bulletin Board.
Kandalepas, Goldberg, Loukas, Morris, and Bunnell and the Corporation mutually
desire to have an active and orderly market for the Corporation's Common Stock
following the confirmation of the Corporation's Third Amended Plan of
Reorganization.
The Corporation, Kandalepas, Goldberg, Loukas, Morris, and Bunnell
believe that the development and maintenance of an orderly trading market,
will result from or be desirable to restrict the transfer of all of
Kandalepas, Goldberg, Loukas, Morris, and Bunnell's shares of the
Corporation's Common Stock in market transactions on the terms and conditions
set forth herein.
Kandalepas, Goldberg, Loukas, Morris, and Bunnell's shares which are
restricted hereunder and which are subject to the terms of this Agreement, are
hereafter referred to as the "Restricted Shares."
NOW THEREFORE, in coordination of the foregoing, the parties hereto
hereby agree as follows:
1.1 Restriction on Market Transfers. Kandalepas, Goldberg, Loukas, Morris,
and Bunnell hereby agree to limit the sale of Restricted Shares in market
transactions to an amount not to exceed 50,000 Restricted Shares total as a
group, per calendar month, on a cumulative basis. Kandalepas, Goldberg, and
Bunnell are also governed by Rule 144 due to their present positions as a
Member of the Board of Directors and/or executive officers of Dauphin
Technology, Inc. All Rule 144 restrictions supersede volume restriction under
this agreement and may cause the amount eligible for transfer by Kandalepas,
Goldberg, Loukas, Morris, and Bunnell during any calendar month, to be less
than the 50,000 Restricted Shares otherwise eligible for transfer hereunder in
any given month.
1.2 The restriction from transfer hereunder is limited only to transfers
made in market transactions effected through an NASD registered broker-dealer.
Such transactions are referred to as "Voluntary Limitation Transactions".
There is no restriction on sales or other Transfers (as hereafter defined)
effected in privately negotiated, non-market transactions if the transferee
agrees to he bound by the terms of this Agreement. Transactions which are not
market transactions and to which no volume limitation is in effect, are
hereafter referred to as "Non-Volume Limitation Transactions." Notwithstanding
anything else contained herein to the contrary, any and all Transfers must be
made in accordance with applicable federal and state securities laws and any
other contractual restrictions relating to transfer.
1.3 Kandalepas, Goldberg, Loukas, Morris, and Bunnell agree to enter into
such escrow or other agreements or arrangements which the Company may
reasonably deem necessary to effect the terms of this Agreement and to
facilitate transfers of the Restricted Shares in accordance with the
restrictions set forth herein.
2. Shares to be Restricted. All of the shares of the Corporation's
Common Stock owned and/or controlled by Kandalepas, Goldberg, Loukas, Morris,
and Bunnell are restricted from transfer hereunder and are subject to the
terms of this Agreement. The number of shares owned by Kandalepas, Goldberg,
Loukas and Bunnell and all entities related or listed below will be Restricted
Shares under this Agreement. Shares purchased by any of these parties prior
to April 1995, are excluded from these restrictions.
Name of Entities
Technology Partners LLC (TPL)
K&L Trust
Northfield Technology Group LLC (NTG)
Hyacinth Resources, Inc.
3. Termination of Restrictions. This Agreement shall be for a term of
two (2) years commencing on the Effective Date of the Court's acceptance of
the Corporation's Third Amended Plan of Reorganization.
4. Legend on Certificates. Certificates representing the Restricted
Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO TRANSFER RESTRICTIONS
CONTAINED IN CERTAIN AGREEMENTS BY AND BETWEEN THE ISSUER AND/OR
OTHER SHAREHOLDERS, A COPY OF EACH OF WHICH IS ON FILE AT THE OFFICE
OF THE ISSUER. IT IS RECOMMENDED THAT HOLDERS CONSULT THEIR OWN
COUNSEL.
5.1 Transferees in Non-Volume Limitation Transactions are Subject to
Restrictions. Although the Restricted Shares are not subject to restrictions
for transfers effected in Non-Volume Limitation Transactions, Kandalepas,
Goldberg, Loukas, Morris, and Bunnell may not sell, assign, donate, give,
encumber, or hypothecate or otherwise transfer ("Transfer") any Restricted
Share in a Non-Volume Limitation Transaction unless the transferee
("Transferee") agrees to be bound by the terms of this Agreement. Transferees
in a Volume Limitation Transaction will not be subject to the terms of this
Agreement.
5.2 Option to Purchase. If a Transferee purports to acquire ownership
of any Restricted Shares from Kandalepas, Goldberg, Loukas, Morris, and
Bunnell in a Non-Volume Limitation Transaction in contravention of this
Agreement, the Corporation shall have the option at any time for a period up
to six months after the Transferred Shares have been presented to the
Corporation (or its transfer agent) for the registration of such Transfer, to
purchase such Transferred Shares for a purchase price equal to the lesser of:
(i) $.10 per share; or (ii) the purchase price paid by such Transferee,
payable on the same terms and conditions as applied in the Transaction
by which the transferee acquired such Shares. The purported Transferee's
obligation to sell the Transferred Shares to the Corporation pursuant to this
section 5.2 may be specifically enforced by the Corporation.
5.3 Transfer by Operation of Law. In the event that an involuntary
Transfer of Restricted Shares occurs or is about to occur because Kandalepas,
Goldberg, Loukas, Morris, and/or Bunnell (a) files a voluntary petition under
any bankruptcy or insolvency law or a petition for the appointment of a
receiver or makes an assignment for the benefit of creditors: (b) is subjected
involuntarily to such a petition or assignment and such involuntary petition
or assignment, or: (c) is subjected to any other involuntary Transfer of such
Restricted Shares by legal process including, without limitation, a Transfer
pursuant to foreclosure or other realization upon collateral under a stock
pledge, the Corporation shall have the right to purchase such Restricted
Shares for a period of five (5) years from the date of such involuntary
Transfer in accordance with the procedures set forth in Section 5.2 above.
6.0 Miscellaneous.
6.1 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties, their assigns, successors in interest, and legal
representatives. Whenever in this Agreement an act or decision is to be made
or taken by the Corporation it may be made or taken by its Board of Directors,
its Executive Committee or the designee of the Board all as provided in the
Corporation's By-laws and corporate minutes. Future signatories shall be bound
by this agreement as present signatories are.
6.2 Further Assurances. Each party to this Agreement agrees to perform
any other acts and to execute and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
6.3 Amendment. This Agreement may be amended at any time by written
agreement between Corporation, Kandalepas, Goldberg, Loukas, Morris, and
Bunnell.
6.4 Notice. Any notice required or permitted under this Agreement
shall be deemed served if hand delivered or mailed by first class mail,
postage prepaid, and properly addressed to the respective party to whom
such notice relates at the addresses set forth in this Agreement or at such
different address as shall be specified by notice given in the manner provided
in this paragraph.
6.5 Governing Law. This Agreement shall be construed pursuant to the
laws of the State of Illinois.
6.6 Injunction. In the event of Kandalepas, Goldberg, Loukas, Morris,
and/or Bunnell's actual or threatened breach of this Agreement, Kandalepas,
Goldberg, Loukas, Morris, and Bunnell specifically acknowledges that the
Corporation, Kandalepas, Goldberg, Loukas, Morris, and/or Bunnell will incur
incalculable and irreparable damage and that the Corporation, Kandalepas,
Goldberg, Loukas, Morris, and/or Bunnell have no adequate remedy at law for
such threatened and continuing breach. Therefore, the Corporation, Kandalepas,
Goldberg, Loukas, Morris, and/or Bunnell shall be entitled to injunctive
relief immediately and permanently restraining Kandalepas, Goldberg, Loukas,
Morris, and/or Bunnell from such continuing or threatened breach, in
addition to all other remedies available to the Corporation, Kandalepas,
Goldberg, Loukas, Morris, and/or Bunnell at law or in equity (including,
without limitation, a temporary restraining order, preliminary or permanent
injunction, specific performance and money damages). Kandalepas, Goldberg,
Loukas, Morris, and/or Bunnell expressly agree that a temporary restraining
order may be granted without prior notice to Kandalepas, Goldberg, Loukas,
Morris, and/or Bunnell and the Kandalepas, Goldberg, Loukas, Morris, and/or
Bunnell hereby expressly waives any and all right to such prior notice.
6.7 Arbitration. With the exception of the Corporation's right to a
temporary restraining order, a preliminary injunction or a permanent
injunction under 6.6 above, controversies under, or claims arising out of, or
relating to this Agreement, or any breach thereof, shall be resolved by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association in effect at the time of arbitration. Judgment upon
any Arbitration Award under this Agreement may be entered in any court having
jurisdiction thereof under any applicable Illinois arbitration act. It is the
intention of the parties that only the issue of whether or not the Corporation
may be entitled to, and have entered, a Temporary Restraining Order, a
Preliminary Injunction, or a Permanent Injunction, under 6.6 above, shall not
be subject to, and not be required, to be arbitrated under this Agreement. In
any arbitration proceeding under this Agreement, costs, including reasonable
attorney's fees, shall be granted to the party prevailing in such arbitration.
6.8 Attorney Fees. In the event of an arbitration, suit, or other action
is brought by any party under this Agreement to enforce any of its terms, and
in any appeal therefrom, it is agreed that the prevailing party shall be
entitled to reasonable attorneys fees to be fixed by the arbitrator, trial
court, and/or appellate court.
6.9 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
6.10 Authority. Each signatory represents and warrants that he has full
and complete authority to execute this Agreement and to bind each person or
entity for which each such signatory signs and, specifically, Kandalepas,
Goldberg, and/or Bunnell represent and warrant they have full and complete
authority to execute this agreement on behalf of each entity and each entity
whose beneficiary is a member of his family.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
the day and year first above written.
DAUPHIN TECHNOLOGY, INC.:
Dated: April 30, 1996 By
_______________________________
Andrew Kandalepas, President
Dated: April 30, 1996 By
_______________________________
Andrew Kandalepas, Individually and
Managing Member of TPL
Dated: April 30, 1996 By
_______________________________
Mario Loukas, Individually and
on behalf of K&L Trust
Dated: April 30, 1996 By
_______________________________
Jeffrey L. Goldberg, Individually and
Managing Member of NTG & TPL
Dated: April 30, 1996 By
_______________________________
Wm. Paul Bunnell, Individually and
Managing Member of NTG & TPL
Dated: April 30, 1996 By
_______________________________
Doug Morris, Individually and President
Hyacinth Resources, Inc.
EXHIBIT 10(17)
SHARE TRANSFER RESTRICTION AGREEMENT
Agreement made and entered into on the dates indicated on the signature
page hereof by and among Dauphin Technology, Inc. (the "Corporation"), and
Alan Yong, his family and any entity whose beneficiary is a member of Alan
Yong's family, any entity in business controlled by Alan Yong or his family
members (each and all of whom is hereafter referred to as "Yong",
collectively) .
Recitals:
Dauphin Technology, Inc. entered into a settlement agreement with Alan
Yong dated October 11, 1995 terminating his employment contract with the
Corporation. Alan Yong received certain severance compensation for the
termination. In addition, Technology Partners, LLC purchased 300,000 shares
from Yong as an inducement to restrict and limit tradability of Yong's
remaining shares.
Dauphin Technology Inc. is currently a Debtor-in-Possession in a Chapter
11 Bankruptcy Proceeding. As part of the Corporation's Third Amended Plan of
Reorganization, the Corporation proposes to issue shares of its common stock
("Common Stock") to various creditors as payment of their claims against the
Corporation.
Yong currently owns and/or may hereafter acquire shares of the
Corporation's Common Stock. Yong presently control and/or owns a significant
portion of the Corporation's Common Stock.
The Corporation's Common Stock is traded, on a limited basis, in the
over-the-counter market and is quoted on the NASD's Electronic Bulletin Board.
Yong and the Corporation mutually desire to have an active and orderly market
for the Corporation's Common Stock following the confirmation of the
Corporation's Third Amended Plan of Reorganization.
The Corporation and Yong believe that the development and maintenance of
an orderly trading market, will result from or be desirable to restrict the
transfer of all of Yong's shares of the Corporation's Common Stock in market
transactions on the terms and conditions set forth herein.
Yong's shares which are restricted hereunder and which are subject to the
terms of this Agreement, are hereafter referred to as the "Restricted Shares."
NOW THEREFORE, in coordination of the foregoing, the parties hereto
hereby agree as follows:
1.1 Restriction on Market Transfers. Yong hereby agree to limit the sale
of Restricted Shares in market transactions to an amount not to exceed 10,000
Restricted Shares per calendar month, on a non-cumulative basis. Alan Yong
is also governed by Rule 144 due to his present position as a Member of the
Board of Directors of Dauphin Technology, Inc. All Rule 144 restriction
supersede volume restriction under this agreement and may cause the amount
eligible for transfer by Yong during any calendar month, to be less than the
10,000 Restricted Shares otherwise eligible for transfer hereunder in any
given month.
1.2 The restriction from transfer hereunder is limited only to transfers
made in market transactions effected through an NASD registered broker-dealer.
Such transactions are referred to as "Voluntary Limitation Transactions".
There is no restriction on sales or other Transfers (as hereafter defined)
effected in privately negotiated, non-market transactions if the transferee
agrees to he bound by the terms of this Agreement. Transactions which are not
market transactions and to which no volume limitation is in effect, are
hereafter referred to as "Non-Volume Limitation Transactions." Notwithstanding
anything else contained herein to the contrary, any and all Transfers must be
made in accordance with applicable federal and state securities laws and
any other contractual restrictions relating to transfer.
1.3 Yong agrees to enter into such escrow or other agreements or
arrangements which the Company may reasonably deem necessary to effect the
terms of this Agreement and to facilitate transfers of the Restricted Shares
in accordance with the restrictions set forth herein.
2. Shares to be Restricted. All of the shares of the Corporation's Common
Stock owned and/or controlled by Yong are restricted from transfer hereunder
and are subject to the terms of this Agreement. The number of shares owned by
Yong, his family, and all entities related or listed below are Restricted
Shares under this Agreement:
Name of Entities
Alan Yong
Lucy Yong
Shares in trust for the benefit of
Alan Yong's family
MMS Inc.
3. Termination of Restrictions. This Agreement shall be for a term of two
(2) years commencing on April 1, 1996.
4. Legend on Certificates. Certificates representing the Restricted
Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO TRANSFER RESTRICTIONS
CONTAINED IN CERTAIN AGREEMENTS BY AND BETWEEN THE ISSUER AND/OR
OTHER SHAREHOLDERS, A COPY OF EACH OF WHICH IS ON FILE AT THE OFFICE
OF THE ISSUER. IT IS RECOMMENDED THAT HOLDERS CONSULT THEIR OWN
COUNSEL.
5.1 Transferees in Non-Volume Limitation Transactions are Subject to
Restrictions. Although the Restricted Shares are not subject to restrictions
for transfers effected in Non-Volume Limitation Transactions, Yong may not
sell, assign, donate, give, encumber, or hypothecate or otherwise transfer
("Transfer") any Restricted Share in a Non-Volume Limitation Transaction
unless the transferee ("Transferee") agrees to be bound by the terms of this
Agreement. Transferees in a Volume Limitation Transaction will not be subject
to the terms of this Agreement.
5.2 Option to Purchase. If a Transferee purports to acquire ownership of
any Restricted Shares from Yong in a Non-Volume Limitation Transaction in
contravention of this Agreement, the Corporation shall have the option at any
time for a period up to six months after the Transferred Shares have been
presented to the Corporation (or its transfer agent) for the registration of
such Transfer, to purchase such Transferred Shares for a purchase price equal
to the lesser of: (i) $.10 per share; or (ii) the purchase price paid by such
Transferee, payable on the same terms and conditions as applied in the
Transaction by which the transferee acquired such Shares. The purported
Transferee's obligation to sell the Transferred Shares to the Corporation
pursuant to this section 5.2 may be specifically enforced by the Corporation.
5.3 Transfer by Operation of Law. In the event that an involuntary
Transfer of Restricted Shares occurs or is about to occur because Yong (a)
files a voluntary petition under any bankruptcy or insolvency law or a
petition for the appointment of a receiver or makes an assignment for the
benefit of creditors: (b) is subjected involuntarily to such a petition or
assignment and such involuntary petition or assignment, or: (c) is subjected
to any other involuntary Transfer of such Restricted Shares by legal process
including, without limitation, a Transfer pursuant to foreclosure or other
realization upon collateral under a stock pledge, the Corporation shall have
the right to purchase such Restricted Shares for a period of five (5) years
from the date of such involuntary Transfer in accordance with the procedures
set forth in Section 5.2 above.
6.0 Miscellaneous.
6.1 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties, their assigns, successors in interest, and legal
representatives. Whenever in this Agreement an act or decision is to be made
or taken by the Corporation it may be made or taken by its Board of Directors,
its Executive Committee or the designee of the Board all as provided in the
Corporation's By-laws and corporate minutes. Future signators shall be bound
by this agreement as present signators are.
6.2 Further Assurances. Each party to this Agreement agrees to perform
any other acts and to execute and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
6.3 Amendment. This Agreement may be amended at any time by written
agreement between Corporation and Yong.
6.4 Notice. Any notice required or permitted under this Agreement shall
be deemed served if hand delivered or mailed by first class mail, postage
prepaid, and properly addressed to the respective party to whom such notice
relates at the addresses set forth in this Agreement or at such different
address as shall be specified by notice given in the manner provided in this
paragraph.
6.5 Governing Law. This Agreement shall be construed pursuant to the laws
of the State of Illinois.
6.6 Injunction. In the event of Yong's actual or threatened breach of
this Agreement, Yong specifically acknowledges that the Corporation and/or
Yong will incur incalculable and irreparable damage and that the Corporation
and/or Yong have no adequate remedy at law for such threatened and continuing
breach. Therefore, the Corporation and/or Yong shall be entitled to
injunctive relief immediately and permanently restraining Yong from such
continuing or threatened breach, in addition to all other remedies available
to the Corporation and/or Yong at law or in equity (including, without
limitation, a temporary restraining order, preliminary or permanent
injunction, specific performance and money damages). Yong expressly agrees
that a temporary restraining order may be granted without prior notice to Yong
and Yong hereby expressly waives any and all right to such prior notice.
6.7 Arbitration. With the exception of the Corporation's right to a
temporary restraining order, a preliminary injunction or a permanent
injunction under 6.6 above, controversies under, or claims arising out of, or
relating to this Agreement, or any breach thereof, shall be resolved by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association in effect at the time of arbitration. Judgment upon
any Arbitration Award under this Agreement may be entered in any court having
jurisdiction thereof under any applicable Illinois arbitration act. It is the
intention of the parties that only the issue of whether or not the Corporation
may be entitled to, and have entered, a Temporary Restraining Order, a
Preliminary Injunction, or a Permanent Injunction, under 6.6 above, shall not
be subject to, and not be required, to be arbitrated under this Agreement. In
any arbitration proceeding under this Agreement, costs, including reasonable
attorney's fees, shall be granted to the party prevailing in such arbitration.
6.8 Attorney Fees. In the event of an arbitration, suit, or other action
is brought by any party under this Agreement to enforce any of its terms, and
in any appeal therefrom, it is agreed that the prevailing party shall be
entitled to reasonable attorneys fees to be fixed by the arbitrator, trial
court, and/or appellate court.
6.9 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
6.10 Authority. Each signator represents and warrants that he has full and
complete authority to execute this Agreement and to bind each person or entity
for which each such signator signs and, specifically, Yong represents and
warrants he has full and complete authority to execute this agreement on
behalf of each entity and each entity whose beneficiary is a member of his
family.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
the day and year first above written.
DAUPHIN TECHNOLOGY, INC.:
Dated: October 11, 1995 By
_______________________________
Andrew Kandalepas, President
Dated: October 11, 1995 By
_______________________________
Alan Yong, On behalf of Himself and his
family
Dated: October 11, 1995 By
_______________________________
Lucy Yong
Dated: October 11, 1995 By
_______________________________
MMS Inc. by its President
Alan Yong
Dated: October 11, 1995 By
_______________________________
Nick Huang, as Trustee for any trust with
a beneficiary of Yong's family
