UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________.
Commission File No. 33-21537-D
DAUPHIN TECHNOLOGY, INC.
(Exact name of registrant as specified in charter)
Illinois 87-0455038
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 E. Northwest Hwy., Suite 950, Palatine, Illinois 60067
(Address of principal executive offices) (Zip Code)
(847) 358-4406
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No _____.
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date:
As of November 10, 1997, the number of Shares of the Registrant's Common Stock,
$.001 par value, 32,407,065 was issued and 31,629,621 was outstanding, with
777,444 treasury shares.
<PAGE 1>
DAUPHIN TECHNOLOGY, INC.
Table of Contents
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996 3
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months and Three Months Ended September, 1997 and 1996 4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Nine Months Ended September 30, 1996,
Twelve Months Ended December 31, 1996 and
Nine Months Ended September 30, 1997 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1997 and 1996 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9
PART II OTHER INFORMATION 11
Item 1. Legal Proceedings
Item 2. Changes in the Rights of the Company's Security Holders
Item 3. Default by the Company on its Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
Item 6(a). Exhibits
Item 6(b). Reports on Form 8-K
SIGNATURE 12
<PAGE 2>
DAUPHIN TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
September 30, December 31,
1997 1996
---------- ----------
CURRENT ASSETS:
Cash $ 174,848 $ 388,600
Restricted Cash ---- 232,000
Accounts Receivable
Trade, net of bad debt reserve
of $7,500 on September 30, 1997 290,671 2,010
Other 45,200 ----
Inventory 3,579,150 2,652,461
Prepaid Expenses 40,588 12,251
---------- ----------
Total Current Assets 4,130,457 3,287,322
PROPERTY AND EQUIPMENT, net of Accumulated
Depreciation of $152,643 at September
30, 1997 and $103,074 at December 31,
1996 535,419 115,538
INTANGIBLE ASSETS, net of Accumulated
Amortization of $11,323 at
September 30, 1997 737,243 ----
---------- ----------
TOTAL ASSETS $ 5,403,119 $ 3,402,860
========== ==========
CURRENT LIABILITIES:
Accounts Payable $ 805,087 $ 204,450
Accrued Expenses 160,051 62,314
Short Term Notes Payable 636,879 ----
---------- ----------
Total Current Liabilities 1,602,017 266,764
LONG TERM LIABILITIES 390,605 43,196
---------- ----------
TOTAL LIABILITIES 1,992,622 309,960
========== ==========
SHAREHOLDERS' EQUITY:
Preferred Stock, $.01 Par Value, 10,000,000
Shares Authorized but None Issued ------ ------
Common Stock $.001 Par Value, 100,000,000
Shares Authorized: 32,407,065 Shares and
31,706,397 Shares Issued at September 30,
1997 and December 31, 1996, and
30,612,021 and 29,547,111 Outstanding at
September 30, 1997 and December 31, 1996 32,407 31,706
Treasury Shares (966,301) (1,407,777)
Paid in Capital 24,934,611 23,869,829
Accumulated Deficit (20,590,220) (19,400,858)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 3,410,497 3,092,900
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 5,403,119 $ 3,402,860
========== ==========
<PAGE 3>
DAUPHIN TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Nine Months Three Months
Ended September 30 Ended September 30
1997 1996 1997 1996
--------- ---------- ---------- ----------
NET SALES $1,466,436 $ 39,792 $1,106,972 $ 18,489
COST OF SALES 1,415,843 14,472 1,027,145 156
--------- ---------- ---------- ----------
Gross Profit 50,593 25,320 79,827 18,333
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 1,007,120 584,888 354,692 267,866
RESEARCH AND DEVELOPMENT
EXPENSE 298,288 43,229 278,499 43,229
--------- ---------- ---------- ----------
(Loss) before Reorganization
Items, Income Taxes
and Extraordinary Item (1,254,815) (602,797) (553,364) (292,762)
REORGANIZATION ITEMS:
Professional Fees ---- 236,530 ---- 40,503
OTHER INCOME 65,453 ---- 7,070 ----
--------- ---------- ---------- ----------
(Loss) before Income Taxes
and Extraordinary Item (1,189,362) (839,327) (546,294) (333,265)
INCOME TAXES ---- ---- ---- ----
--------- ---------- ---------- ----------
(Loss) before Extraordinary
Item (1,189,362) (839,327) (546,294) (333,265)
EXTRAORDINARY ITEM, Net of
Income Taxes of $0 ---- 38,065,373 ---- ----
--------- ---------- ---------- ----------
NET INCOME (LOSS) $(1,189,362) $37,230,842 $(546,294) $(328,469)
========= ========== ========== ==========
INCOME (LOSS) PER COMMON SHARE:
Before Extraordinary Item $ (0.04) $ (0.04) $ (0.02) $ (0.01)
Extraordinary Item ---- 1.81 ---- ----
--------- ---------- ---------- ----------
Net Income (Loss) $ (0.04) $ 1.77 $ (0.02) $ (0.01)
========= ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 30,183,296 21,018,554 30,040,387 29,369,906
<Page 4>
DAUPHIN TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1996, TWELVE MONTHS ENDED DECEMBER 31, 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
Common Stock Paid-in Treasury Stock Accumulated
BALANCE Shares Amount Capital Shares Amount Deficit Total
----------- --------- ----------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31,1995 14,408,354 $ 14,408 $ 5,144,932 --- --- $ (56,069,527) $ (50,910,187)
Issuance of Common Stock in Connection with:
Bankruptcy 11,650,000 11,650 13,036,350 --- --- --- 13,048,000
Purchase of Inventory 2,600,000 2,600 2,909,400 --- --- --- 2,912,000
Private Placement 888,757 889 994,520 --- --- --- 995,409
Net Loss --- --- --- --- --- 37,230,842 37,230,842
----------- --------- ----------- ----------- ----------- -------------- -------------
September 30, 1996 29,547,111 $ 29,547 $22,085,202 --- --- $ (18,838,685) $ 3,276,064
Private Placement 1,059,286 1,059 1,015,727 --- --- --- 1,016,786
Settlement of Notes 1,100,000 1,100 768,900 --- --- --- 770,000
Purchase of Treasury Stock --- --- --- (2,159,286) (1,407,777) --- (1,407,777)
Net Loss --- --- --- --- --- (562,173) (562,173)
----------- --------- ----------- ----------- ----------- -------------- -------------
December 31, 1996 31,706,397 $ 31,706 $23,869,829 (2,159,286) $(1,407,777) $ (19,400,858) $ 3,092,900
Issuance of Common Stock in Connection with:
Private Placement 480,668 481 634,033 --- --- --- 634,514
Purchase of Subsidiary 220,000 220 232,980 --- --- --- 233,200
Purchase of Treasury Stock --- --- --- (905,626) (341,369) --- (341,369)
Issuance of Treasury Stock --- --- 197,769 1,269,868 782,845 --- 980,614
Net Loss --- --- --- --- --- (1,189,362) (1,189,362)
----------- --------- ----------- ----------- ----------- -------------- -------------
September 30, 1997 32,407,065 $ 32,407 $24,934,611 (1,795,044) $ (966,301) $ (20,590,220) $3,410,497
=========== ========= =========== =========== =========== ============== =============
</TABLE>
<PAGE 5>
DAUPHIN TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES -
Net (Loss) $ (1,189,362) $ 37,230,842
Non-Cash Items Included in Net (Loss):
Depreciation 49,569 22,083
Amortization of Goodwill 11,323 ---
Extraordinary Item --- (38,065,373)
Change in - Prior to purchase of
Richard M. Schultz and Associates, Inc.:
Decrease in Accounts Receivable - Trade 301,669 2,254
(Increase)/Decrease in Accounts Receivable - Other (45,200) 167,266
Decrease/(Increase) in Inventory 3,153 (2,592,975)
Decrease/(Increase) in Prepaid Expenses 6,156 (12,459)
(Decrease) in Accounts Payable (518,563) (156,579)
(Decrease) Accrued Expenses (23,870) ---
------------- -------------
Net Cash (Used For)
Operating Activities (1,405,125) (3,404,941)
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of Equipment and Furniture, Net (321,342) (72,845)
Purchase of a Subsidiary (168,717) ---
------------- -------------
Net Cash (Used For) Investing Activity (490,059) (72,845)
CASH FLOWS FROM FINANCING ACTIVITIES -
Long-Term Leases and Other Obligations --- 30,240
McHenry County Economic Development Loan 150,000 ---
Equipment Leasing 155,000 ---
Non-Cash Effect of Inventory Purchase --- 2,584,127
Proceeds from Issuance of Common Stock
In Private Placement 1,615,128 995,409
(Decrease)/Increase in Short Term Borrowing (470,696) 356,804
------------- -------------
Net Cash Provided by Financing Activities 1,449,432 3,966,580
Net (Decrease) Increase in Cash (445,752) 488,794
------------- -------------
CASH BEGINNING OF PERIOD $ 620,600 $ 92,604
CASH END OF PERIOD $ 174,848 $ 581,398
============= =============
CASH PAID DURING THE PERIOD FOR -
Interest $ 53,919 $ 793
Reorganization Costs --- 238,280
Income Taxes --- ---
SUPPLEMENTAL NON-CASH ACTIVITY -
Purchase of Inventory through
Issuance of Stock $ --- $ 2,584,127
Purchase of Richard M. Schultz and Associates, Inc.
Liabilities Assumed $ 2,041,531 $ ---
Stock Issued $ 233,200 $ ---
<PAGE 6>
DAUPHIN TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. From 1988 to 1992, it functioned
primarily as a development stage company that focused most of its efforts on
developing mobile computers that would meet the specifications of certain
government contracts. Historically, the Company marketed directly and through
computer solution providers to both the commercial and government markets.
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The interim consolidated financial statements presented herein include the
accounts of Dauphin Technology, Inc. and its subsidiaries. References to
"Dauphin" or the "Company" mean Dauphin Technology, Inc. and, unless the context
indicates otherwise, consolidated subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. These interim
consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). In the opinion of management, the unaudited financial
statements for the three-month and nine-month periods ended September 30, 1996
and 1997, are presented on a basis consistent with audited financial statements
and contain all adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation. The interim consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the year ended December 31, 1996 included in
the Company's Form 10-K.
The results of operations for interim periods are not necessarily indicative of
results of operations for the full year.
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 the first half of 1996,
the Company operated under Chapter 11 and without an approved Plan of
Reorganization.
On May 9, 1996, the Third Amended Plan of Reorganization was approved by the
shareholders and creditors and confirmed by the Court. On July 23, 1996 the
Bankruptcy Court approved the implementation of the Third Amended Plan of
Reorganization and discharged Dauphin as Debtor-in-Possession. This final
decree closed Dauphin's bankruptcy proceedings.
2. EQUITY TRANSACTIONS
On January 27, 1997, the Company issued 146,500 common shares for $147,300 or
$1.01 per share to an accredited investor. The common shares issued in
connection with this transaction were unissued shares that were previously
registered by the Company. Funds obtained from these transactions were used to
repurchase 146,500 common shares for $80,575 or $0.55 per common share that were
issued as part of the bankruptcy settlement to an affiliate. These shares are
currently being held as treasury shares. As a net result of the transaction, the
Company obtained $66,725 for normal operating expenses of the Company.
In June 1997, the Company issued 1,045,528 shares for $950,203 or $0.91 per
share to a group of accredited investors. The common shares issued in connection
with this transaction were unissued shares that were previously registered by
the Company and some of the treasury shares that were acquired by the Company in
the past. Funds obtained from these transactions were used to complete the
acquisition of RMS as described below and for normal operating expenses of the
Company.
Also in June, July and August 1997, the Company borrowed a combined sum of
$492,500 from related parties. As of the date of this document all funds have
been repaid with interest accrued at an annual rate of twenty four percent.
On July 16, 1997 the Company repurchased 745,126 shares held by Alan S.K. Yong,
former founder and President of Dauphin for $260,794 or $0.35 per share.
Simultaneously, the Company accepted Mr. Yong's resignation from the Board of
Directors. The repurchase and the resignation were on friendly terms.
<PAGE 7>
In July, August and September 1997, the Company sold 531,054 common shares to a
group of five accredited investors for $504,500 or $0.95 per share. The common
shares issued in connection with this transaction were treasury shares.
On September 5, as part of acquisition of Richard M. Schultz & Associates, the
Company issued 12,500 shares to Richard M. Schultz. The common shares issued in
connection with this transaction were treasury shares.
In October, the Company issued 192,868 shares in exchange for $190,000 or $0.99
per share to a group of two accredited investors. The common shares issued in
connection with this transaction were treasury shares.
On October 20, the Company began a private placement of 5,650,000 shares of
common stock at $1.00 per share. As part of the transaction, participating
broker/dealer(s) shall receive ten (10%) percent cash compensation for amounts
invested. Also as part of the compensation, the broker/dealer shall receive
three (3) common shares and four (4) options, exercisable at a $1.00 within one
year, for each one hundred (100) common shares placed. The private placement is
scheduled to be closed by November 30, 1997, but in no event later then March 1,
1998.
3. ACQUISITION OF RICHARD M. SCHULTZ & ASSOCIATES, INC.
On June 6, 1997, the Company purchased all outstanding common stock of Richard
M. Schultz and Associates, Inc. ("RMS"), for $2,463,884, consisting of issuance
of common stock for $233,200, acquisition costs of $168,717 and an assumption of
$2,041,531 of liabilities. The purchase price was allocated to accounts
receivable ($590,330), inventories ($923,536), other current assets ($71,636),
property and equipment ($148,108), with the remaining amount ($730,273) being
allocated to goodwill. The acquisition was accounted for as a purchase. The
goodwill is being amortized over 20 years and the amortization expense for the
third quarter of 1997 was $9,105.
Under the terms of the acquisition, RMS shareholders received 220,000 shares of
Dauphin common stock, with an additional 105,000 of such shares deposited into
an escrow to be released over the next three years if certain financial goals of
RMS are achieved. Upon issuance of the contingent shares, there will be an
additional element of cost related to the transaction that will be recorded as
goodwill and amortized over the remaining life. Also, as part of the
acquisition, Richard M. Schultz, assumed a role of President of the newly formed
subsidiary and in such role will receive 12,500 option shares per quarter over
the next three years.
In addition to shares exchange, Dauphin assumed all liabilities of RMS,
including certain LaSalle Bank notes, related party note and trade debts. The
terms of the LaSalle Revolving Line of Credit have been negotiated and at the
closing Dauphin transferred $300,000 to LaSalle as a down payment. Dauphin is
repaying the remainder of the note at $71,424 per month until the note is
satisfied. The final payment on this note is due in February 1998.
Results of the operations of Richard M. Schultz & Associates, Inc. are included
within the consolidated financial statements commencing June 6, 1997. Unaudited
consolidated pro forma results as of January 1, 1996 and 1997 are as follows:
Three Months Ended Nine Months Ended
9/30/96 9/30/97 9/30/96 9/30/97
----------- ----------- ----------- -----------
Revenues $ 1,456,497 $ 1,106,972 $ 4,144,731 $ 3,330,134
Net Income $ (340,033) $ (546,294) $37,064,716 $(1,749,439)
Number of Common Shares 29,369,906 30,040,387 21,018,554 30,183,296
Net Income Per Common Share $ (0.02) $ (0.02) $ 1.77 $ (0.06)
Such pro forma information is not necessarily indicative of the results of
future operations.
4. CADserv LETTER OF UNDERSTANDING
In its effort to become a technology holding company, on September 8, 1997
Dauphin signed a Letter of Understanding to acquire all issued and outstanding
shares of CADserv Corporation ("CADserv"), an electronic engineering and project
management company. The price of the transaction has been determined by an
independent third party evaluation agency since Dauphin CEO and Chairman of the
Board, Andrew Kandalepas, is a sole owner and beneficiary of CADserv. At the
present time both companies are performing their due diligence with intent to
complete the transaction in the near future.
<PAGE 8>
5. LIABILITIES
As part of the RMS acquisition, Dauphin assumed all existing liabilities of RMS.
RMS has an existing line of credit facility through LaSalle Bank, NI,
collateralized by all Accounts Receivable, Inventories and Equipment. The
Company anticipates that the line will be paid in full by February of 1998.
Also, some of the existing equipment and vehicles at RMS are leased. These are
capital leases, with a $1 buyout option, that have expiration dates one to three
years.
On September 18, 1997 RMS received McHenry County Economic Development Loan in
the amount of $150,000. The loan is designated for the improvement of the
facilities at RMS. The loan is not collateralized, carries six percent (6%)
rate of interest and is due to be repaid monthly over the next seven years.
On September 15, 1997 RMS signed a lease with World Wide Leasing Co. for certain
manufacturing equipment. Such lease calls for a $1 buyout option at the end of
the five-year term of the lease. The lease and the equipment have been
capitalized at $155,000, the original purchase price of the equipment.
6. INVENTORY
Due to the fact that the Company is in the final stages of development of its
next generation product, introduced in a press release dated November 10, 1997,
the Company will be reviewing the realizability of its current inventory. In
connection therewith a significant portion of the $2.6 million of DTR-2
inventory may have to be sold or disposed of at less then recorded amounts on
the accompanying balance sheet. The charge to the statement of operations could
be material to the fourth quarter results.
<PAGE 9>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Note: This discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ significantly from
those set forth herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed herein, as well as
those discussed in the Company's fiscal year 1996 Annual Report on Form 10-K.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any revision
to these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
CHANGES IN FINANCIAL POSITION
September 30,1997 Compared to December 31, 1996
Due to the acquisition of RMS, total assets increased to $5,403,000 at September
30, 1997 from $3,403,000 at December 31, 1996. Decrease in cash from $620,600
on December 31, 1996 to $174,848 on September 30, 1997, was primarily due to
payment of normal operating expenses and costs associated with the acquisition.
Restricted Cash that was designated for the satisfaction of Letter of Credit was
disbursed and the Letter of Credit was settled. Accounts Receivable represent
certain funds due to the Company as part of the normal operations of the
Company, including RMS. Increase in Inventory, Property, Plant and Equipment
and Goodwill was due to acquisition of RMS.
Total liabilities increased by approximately $1,683,000 as a result of
acquisition of RMS. The remaining debt represents normal obligations incurred in
a day-to-day operation of the Company. Shareholders Equity - Common Stock,
Paid-in-Capital and treasury Shares reflect the issuance of additional shares as
part of the private placement, the repurchase of shares from an affiliate and
the issuance of shares in connection with the acquisition of RMS.
RESULTS OF OPERATIONS
September 30, 1997 Compared to September 30, 1996
Revenues
Due to acquisition of RMS, a complete quarter of operations resulted in
tremendous growth in sales from year to year. Total sales revenue in the third
quarter of 1997 were $1.1 million compared to $18,000 a year ago. Year to date
the Company reported $1.466 million versus $40,000 for the same period a year
ago. Due to such a large swing from year to year, the change in the gross
profit margin cannot be compared to historical margins and is not indicative of
future margins.
Operating Expenses
Salaries, research and development and employment taxes for current employees
represent a major part of expenses for the quarter. The Company employs a total
of seventy-five people now compared to twelve a year ago. Other large expenses
were rents, interest expense and professional fees related to the acquisition.
Net Income (Loss)
The (loss) after tax increased for the third quarter of 1997 to ($1,189,000) or
($0.04) per share from ($839,000) or ($0.04) per share in 1996. (Loss) per
common share is calculated based on the monthly weighted average number of
common shares outstanding which were 30,183,296 and 21,018,554 for the nine
month period September 30 1997 and 1996 respectively.
<PAGE 10>
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial requirements were met through cash generated from
private equity placement and borrowing from related parties.
Cash generated from sales of its subsidiary was sufficient to operate such
subsidiary. Cash flow generated from the sales of the Company's new product
will be applied to current and future working capital needs. The Company is
pursuing avenues to raise additional operating capital through private placement
and a credit facility.
The Company believes that the funds it currently has on hand, when coupled with
its anticipated operating profits, any additional funds generated through the
private placement or which it may borrow in the future, and the funds that were
raised through the issuance of the Reserve Shares, provide sufficient funds for
the Company to finance its operations.
FUTURE GROWTH RATES
The management anticipates, that a combination of all current and anticipated
product lines and services will provide steady growth for the Company in 1998.
CONTINGENCY
Due to the fact that the Company is in the final stages of development of its
next generation product, introduced in a press release dated November 10, 1997,
the Company will be reviewing the realizability of its current inventory. In
connection therewith a significant portion of the $2.6 million of DTR-2
inventory may have to be sold or disposed of at less then recorded amounts on
the accompanying balance sheet. The charge to the statement of operations could
be material to the fourth quarter results.
<PAGE 11>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The management of the Company is not aware of any current pending or threatening
litigation.
Item 2. Changes in the Rights of the Company's Security Holders. None.
Item 3. Default by the Company on its Senior Securities. None.
Item 4. Submission of Matters to a Vote of Securities Holders. None.
Item 5. Other Information. None.
Item 6(a). Exhibits. None.
Item 6(b). Reports on Form 8-K.
Form 8-K dated June 6, 1997 and filed on June 20, 1997 reporting Company's
acquisition of all issued and outstanding shares of Richard M. Schultz &
Associates, Inc.
<PAGE 12>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, Registrant's Chief Financial Officer, thereunto duly authorized.
Dated: November 13, 1997
DAUPHIN TECHNOLOGY, INC.
(Registrant)
By:
Savely Burd
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
These Statements have not been audited.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 174,848
<SECURITIES> 0
<RECEIVABLES> 298,171
<ALLOWANCES> (7,500)
<INVENTORY> 3,579,150
<CURRENT-ASSETS> 4,130,457
<PP&E> 688,062
<DEPRECIATION> (152,643)
<TOTAL-ASSETS> 5,403,119
<CURRENT-LIABILITIES> 1,602,017
<BONDS> 390,605
0
0
<COMMON> 32,407
<OTHER-SE> 3,378,090
<TOTAL-LIABILITY-AND-EQUITY> 5,403,119
<SALES> 1,106,972
<TOTAL-REVENUES> 1,106,972
<CGS> 1,027,145
<TOTAL-COSTS> 1,027,145
<OTHER-EXPENSES> 579,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,919
<INCOME-PRETAX> (553,364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (546,294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (546,294)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
