DAUPHIN TECHNOLOGY INC, S-1, 1998-03-17

DAUPHIN TECHNOLOGY INC
S-1, 1998-03-17
COMPUTER & OFFICE EQUIPMENT

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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
<TABLE>
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Offering Aggregate Offering Amount of
Registered Amount to be Registered Price Per Share (1) Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock
$0.001 Par Value 7,487,935 $ 1.00 $ 7,487,935 $ 4,492.76

</TABLE>

(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 March 13, 1998.

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
<TABLE>
<S> <C>
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........................................ Not Applicable

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...... The Company; The Registration;
Risk Factors; 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; 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
</TABLE>

<PAGE 2>
7,487,935 COMMON SHARES

DAUPHIN TECHNOLOGY, INC.
COMMON STOCK

The shares of Common Stock (the "Shares") of Dauphin Technology, Inc.
("Dauphin" or the "Company") offered hereby consist of 4,523,608 Shares
owned by stockholders of the Company described herein (the "Selling
Stockholders") and 2,964,327 Shares offered by the Company. The Shares
offered by the Selling Stockholders may be sold from time to time in
transactions in the over-the-counter market or otherwise at prices and
at terms prevailing at the time of sale, at prices related to the then-
current market price or in negotiated transactions without the use of a
broker-dealer or underwriter. The Company will not receive any of the
proceeds from the sale of the Shares owned by the Selling Stockholders.
The 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-dealer 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 of the Shares
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 the Shares to the Selling
Stockholders in a private transaction during 1997. In connection with
such private transaction, the Company also issued 131,756 of the Shares
to a sales agent and such Shares are also covered by this registration.
The Company wishes to register an additional 2,964,327 Shares to be
issued at a later date by the Company without the use of a broker-dealer
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 broker-dealers participating 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
$1.281 Bid Price on March 13, 1998
The Date of this Prospectus is March 13, 1998

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance
therewith, reports, proxy statements and other information filed 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 60661; and New York Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. 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. In addition, such material may be inspected
and printed from the Commission's internet site located at
http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on
Form S-1 (together with any amendments thereto, the "Registration
Statement") 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 Shares,
reference is made to the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the
contents of any contracts 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 exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
Copies of the Registration Statement, including all exhibits and
schedules thereto may be obtained from the Commission's principal office
in Washington D.C. upon payment of 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.

The Company is presently headquartered at 800 E. Northwest Hwy., Suite
950, Palatine, Illinois 60067. The corporate phone number is (847) 358-
4406.

THE COMPANY

The Company was founded to design, manufacture and market mobile
computing systems, including laptop, notebook, hand-held and pen-based
computers, components and accessories. From 1988 through 1992, the
Company functioned primarily as a development-stage company.
Historically, the Company marketed its products directly and through
other distribution channels to both the commercial and government
segments.

In early 1993, the Company introduced the Desk-Top Replacement ("DTR"),
a pen-based hand-held computer with fax/modem features that was
considered a leading edge product for commercial applications. Sales of
the DTR did not meet the Company's expectations and financial problems
developed. 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. The Company operated under Chapter 11 as a Debtor-in-
Possession until July 23, 1996 when it was discharged as Debtor-in-
Possession and bankruptcy proceedings were closed.

Before it emerged from bankruptcy, the Board of Directors was
reconstituted and a new management team was recruited. Individuals with
strong engineering and manufacturing backgrounds, as well as finance,
accounting, sales and marketing skills, were hired. This new
management formulated a strategic plan to diversify the Company's
operations to eliminate dependence on a single product line or industry.
The plan incorporated a focus on hand-held mobile computer products,
coupled with targeted acquisitions in the technology sector, to create a
technology company with synergistic, self-managed wholly-owned
subsidiaries. The subsidiaries are intended to share resources and
cross-market products and engineering, contract manufacturing and
product development services.

As part of its management's plan, the Company reintroduced its DTR and
in the process devised its new OrasisTM hand-held computer line, which
management expects to supercede the DTR.

Based upon customer feedback received during the reintroduction of the
DTR, management decided to supplement the Company's computer product
line with a new model that could provide greater performance,
functionality, expandability and battery life capacity. In July, 1997,
the Company contracted with several firms specializing in electronics
engineering, packaging, mechanical and industrial design to develop the
OrasisTM hand-held computer. The OrasisTM computer features high-end
performance using 133 megahertz Pentium processor, upgradeable to 233
megahertz Pentium MMX, 32 megabytes of RAM, and 1.6 and 2.1 gigabit
hard drive options, while weighing less than 3 pounds. Standard unit
features include infra-red keyboard, electro-magnetic pen, standard two
type II or single type III PCMCIA slot, five screen options, and built-
in speaker and microphone (including sound blaster for voice
recognition and multi-media). Management believes that the OrasisTM
model will be the lightest, most versatile hand-held computer on the
market. Prototypes of the OrasisTM computer were introduced to the
public at COMDEX in November, 1997 and a limited number of pre-
production models has been completed and demonstrated to potential
customers for marketing purposes. Based on responses received at COMDEX,
management expects OrasisTM to supercede the DTR product line.
Management presently expects OrasisTM to be in production during the
second quarter of 1998.

During the Spring of 1997, the Company began negotiations which
culminated in June, 1997, with the acquisition, through a stock-for-
stock exchange, of all outstanding shares of stock in R. M. Schultz &
Associates, Inc., an Illinois corporation ("RMS"). RMS is an
electronics contract manufacturing firm. It operates from a 53, 000
square foot facility located in McHenry, Illinois from which it provides
engineering, testing and contract manufacturing services.

Currently, RMS serves several large commercial enterprises, as well as,
numerous small and medium sized firms. The Company has advanced over
$1,400,000, and has guaranteed $400,000 in borrowings, to upgrade RMS
facilities by installing a more advanced electronic assembly line and to
provide working capital for operations. Management believes the
Company's investment in RMS will create a manufacturing and engineering
"one-stop shop" capable of providing expanded and additional services
to present customers while attracting new and larger customers.

On September 8, 1997, the Company executed a letter of understanding to
acquire CADserv Corporation, an Illinois corporation ("CADserv").
CADserv is an electronics design services firm located in Schaumburg,
Illinois, and engaged in the design of printed circuit boards ("PCBs"),
engineering services and sub-contracting of PCB manufacturing and
electronic assembly. The proposed acquisition is conditioned upon Board
of Directors' approval and procurement of necessary financing. It has
not yet been presented to the Board. As of the date hereof, no
valuation or price has been determined and no definitive agreements have
been entered.

THE REGISTRATION

Total Number of Common Shares to be
Registered by the Company......................... 2,964,327 Shares

Total Number of Common Shares to be
Registered by the Selling Stockholders............ 4,523,608 Shares

Total Number of Common Shares Outstanding
Immediately After the Registration................ 36,305,096 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 2,964,327 Shares to be sold at a later date by the
Officers and Directors of the Company without the use of a broker-dealer
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.

<TABLE>
Year Ended December 31

1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 23,561 $ 9,603 $ 183 $ 94 $ 2,730

Cost of Sales 22,005 47,867 94 279 4,345
-------- ------- ----- ---- -------
Gross Profit (Loss) 1,556 (38,264) 89 (185) (1,615)

Loss before Extraordinary Item (3,398) (49,173) (795) (1,397) (3,988)

Extraordinary Items - - - 38,065 -

Net Income (Loss) (3,398) (49,173) (795) 36,668 (3,988)

EARNINGS PER COMMON SHARE (1):
Loss Before Extraordinary Item (0.24) (3.41) (0.06) (0.06) (0.13)

Extraordinary Item - - - 1.58 -
-------- ------- ----- ---- -------
Net Income (Loss) (0.24) (3.41) (0.06) 1.52 (0.13)

As of December 31
1993 1994 1995 1996 1997
BALANCE SHEET DATA:
Total Assets 15,838 298 426 3,402 7,629

Long Term Debt - - - 43 346

Working Capital (Deficit) (2,123) (50,167) (49,968) 3,020 4,427

Stockholders Equity (Deficit) (850) (50,028) (50,910) 3,093 5,676

</TABLE>

(1) Income(Loss) per common share is calculated based on the weighted
average number of Common Shares at December 31, 1993, 1994, 1995, 1996,
and 1997 were 14,137,100; 14,408,354; 14,408,354; 24,076,301; and
30,734,045, respectively.

USE OF PROCEEDS

The Company will receive no proceeds from any sale of Shares by the
Selling Stockholders. The Company intends to use proceeds of Shares
registered for its sale to pay for future acquisitions, to raise
capital, if needed, to fund production of the OrasisTM hand-held
computer and RMS contract manufacturing operations, and to expand the
Company's employee benefits and product and service offerings. At the
present time, the Company is not engaged in any material negotiations
with any specific enterprise regarding any acquisition, other than
CADserv.

DILUTION

As and to the extent, any Shares will be issued by the Company in
future transactions, current equityholders' ownership percentages will
de diluted.

FORWARD LOOKING STATEMENTS

Certain information contained in or incorporated by reference into this
Prospectus may be deemed to be forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934 and is subject to the "Safe Harbor"
provisions of those sections. This information includes, without
limitation, statements concerning future revenues, future earnings,
future costs, future margins and future expenses; pending or future
acquisitions or corporate combinations; plans for expansion;
anticipated technological advances; future capabilities of the Company
to integrate and effectively manage acquired business operations; the
outcome of and any liabilities resulting from any claims, investigations
or proceedings against the Company or its subsidiaries; future levels of
dividends (if any); the future mix of business; and future operations,
future product demand, future industry conditions, future capital
expenditures and future financial condition. These statements are based
on current expectations and involve a number of risks and uncertainties.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct.

When used in or incorporated by reference into this Prospectus, the
words "anticipate," "estimate," "expect," "may," "project" and similar
expressions are intended to be among the statements that identify
forward-looking statements. Important factors that could affect the
Company's actual results and cause actual results to differ materially
from those results that might be projected, forecast, estimated or
budgeted by the Company in such forward-looking statements include, but
are not limited to , the following: fluctuations in operating levels at
the Company's facilities; retention and financial condition of major
customers; effects of future costs; collectibility of receivables; the
inherent unpredictability of adversarial or administrative proceedings;
effects of environmental and other governmental regulations; currency
exchange fluctuations; the price of and demand for hand-held computers
or related electronics products and future levels and timing of capital
expenditures.

These statements are further qualified by the Risk Factors identified
below. Many of the factors affecting revenues and costs are outside of
the control of the Company, including general economic and financial
market conditions and governmental regulations and factors involved in
administrative and other proceedings.

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. Its emergence from bankruptcy in 1996
resulted in a one time addition to income, due to debt forgiveness and
not operations, recorded on books as an Extraordinary Gain of
$38,065,373. For the years ended December 31, 1996 and 1997, the
Company had income of $36,669,000 and a loss $3,988,000 respectively.
For the years ended December 31, 1993, 1994 and 1995, the Company had
losses of $3,398,000, $49,173,000 and $795,000, respectively.

ABSENCE OF COMBINED OPERATING HISTORY; INTEGRATING ACQUIRED OPERATIONS
The Company acquired RMS in June of 1997. Management also expects to
make other acquisitions it may from time to time consider appropriate
and complimentary to Company operations. The Company and RMS each has
operated as separate independent entities, and there can be no assurance
that the Company will be able to integrate the operations of these
businesses successfully or to institute the necessary systems and
procedures, including accounting and financial reporting systems, to
manage the combined enterprise on a profitable basis. There can be no
assurance that management will be able to manage combined operations or
to realize or implement effectively its strategic plan for growth
through acquisitions and diversification. The pro forma combined
historical financial results of operations included in the Financial
Statements contained herein cover periods when the Company and RMS were
not under common control or management and may not be indicative of the
Company's future financial or operating results. The inability of the
Company to integrate the other operations successfully would have a
material adverse effect on the Company's business financial condition
and results of operations and would make it unlikely that the Company's
acquisition and diversification strategy will be successful.

THE COMPANY'S ACQUISITION STRATEGY The Company intends to grow through
acquisitions that management may from time to time consider appropriate
and complimentary to Company operations. The Company expects to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities and may lead to higher acquisition prices.
There can be no assurance that the Company will be able to identify,
acquire or manage profitably additional businesses or to integrate
successfully any acquired businesses into the Company without
substantial costs, delays or other operational or financial
difficulties. Further, acquisitions involve a number of special risks,
including failure of the acquired business to achieve expected results,
diversion of management's attention, failure of the acquired business to
achieve expected results, failure to retain key personnel of the
acquired business and risks associated with unanticipated events or
liabilities, some or all of which could have a material adverse effect
on the Company's business, financial condition and results of
operations. In addition, there can be no assurance that the Company or
other businesses acquired in the future will achieve anticipated net
sales and earnings.

ACQUISITION FINANCING The timing, size and success of the Company's
acquisition efforts and the associated capital commitments cannot be
readily predicted. The Company currently intends to finance future
acquisitions by using shares of its Common Stock for all or a
substantial portion of the consideration to be paid. If the Common
Stock does not maintain a sufficient market value, or if potential
acquisition candidates are otherwise unwilling to accept Common Stock as
part of the consideration for the sale of their businesses, the Company
may be required to utilize more of its cash resources, if available, to
initiate and maintain its plan for growth through diversification and
acquisitions. If the Company does not have sufficient cash resources,
its growth could be limited unless it is able to obtain additional
capital through debt or equity financings. However, there can be no
assurance that such line of credit will be sufficient or that the
Company will be able to obtain additional financing it may need for
management to implement its strategic plan for growth on terms that it
deems acceptable.

INTERNAL GROWTH AND OPERATING STRATEGIES Key elements of the
management's strategy is to improve the profitability of the Company and
subsequently acquired business and to continue to expand the net sales
of the Company and any subsequently acquired businesses. Although the
Company intends to seek to improve the profitability of its operations
and any subsequently acquired businesses by various means, including
realizing overhead, marketing and purchasing efficiencies, there can be
no assurances that the Company will be able to do so. The Company's
ability to increase the net sales will be affected by various factors,
including demand for its electronic products and related design and
manufacturing services, pricing and availability of raw materials, the
Company's ability to expand the range of products and services offered
by it and any subsequently acquired businesses and the Company's ability
to successfully enter new markets. Many of these factors are beyond the
control of the Company, and there can be no assurance that the Company's
strategies will be successful or that it will be able to generate cash
flow adequate for its operations and to support internal growth. A key
component of the Company's strategy is to conduct its operations, and
operations of subsequently acquired businesses, on a decentralized
basis, with local management retaining responsibility for day-to-day
operations, profitability and the growth of the business. If proper
overall business controls are not implemented, this decentralized
operating strategy could result in inconsistent operating and financial
practices at the Company and subsequently acquired businesses and the
Company's overall profitability could be adversely affected.

CONTROL BY EXISTING MANAGEMENT The Company's Directors and Executive
Officers, and entities affiliated with them, beneficially own
approximately 7,422,099 of the outstanding shares of Common Stock.
These holders of Common Stock will control in the aggregate
approximately 20% of the votes of all shares of Common Stock, and, if
acting in concert, will be able to substantially influence the Company's
affairs, the election of Directors and the outcome of any matter
submitted to a vote of stockholders.

PRODUCTION CAPITAL REQUIREMENTS As noted above, the Company must obtain
additional capital for acquisition and working capital purposes.
However, it also must obtain capital for successful production of the
OrasisTM computers and any other computer products it may develop or
hope to develop in the future. Such production costs will be
substantial. 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 conclude production of the
OrasisTM computers, or any of such other products, and any failure to
obtain such capital would have a material and adverse impact on the
Company's financial condition and results of operation.

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.

COMPETITION The Company's primary business is the design, manufacture
and sale of hand-held personal computers and provision of contract
manufacturing services through its wholly-owned subsidiary, RMS. 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 OrasisTM computers are solutions
oriented, pen-based, mobile computer systems, each of which has been
produced and marketed only on a limited basis. As the market and
applications for such computer systems has increased, the Company
anticipates its market will increase; however, there is no assurance
that such trend will continue in the future. While the Company believes
that OrasisTM may offer advantages over competition, no assurance can
be given that OrasisTM will attain any degree of market acceptance or
that it will generate revenues sufficient for profitable operations.

AVAILABILITY OF COMPONENTS The Company's products are manufactured
and/or fabricated from various component parts, such as PCBs, 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
including, but not limited to, 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 materially and
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, non-
disclosure 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 financial condition and results of
operations.

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 financing from banks, finance companies, insurance companies and
other sources may affect the availability of funds necessary for
acquisitions, product development, production and marketing, and
operations in general. 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.

GOVERNMENT REGULATIONS 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 for
acquisitions, product development, production and marketing, and for
general working capital requirements.

LIMITED PUBLIC MARKET There is only a limited market for the Company's
Common Stock. If a large portion of the 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 Shares at the price they paid for the Shares or at any
price.

LIQUIDITY The Company believes that the funds it currently has on hand,
when coupled with anticipated operating revenues, and the funds that the
Company may be able to raise through the sale of Shares or registered or
private offering of shares to the public, will be sufficient to fund
current and continuing operations; however, there can be no assurance
that such funds will be able to fund current and future operations.

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.

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 March 13, 1998, is approximately 3,000. 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 3,000.

<TABLE>
1995 1996 1997
--------------- --------------- -----------------
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter $1.812 $0.250 $1.625 $0.875 $1.625 $1.187
Second Quarter 1.250 0.250 1.719 1.125 1.219 0.750
Third Quarter 1.067 0.625 1.625 1.125 1.172 0.875
Fourth Quarter 1.000 0.567 2.000 0.938 2.590 1.063

The closing bid price of a share of the Company's Common Stock on March
13, 1998 was $1.281. 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,
for acquisitions, product development, production and marketing, and for
general working capital requirements, including employee benefits.

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.

</TABLE>
<TABLE>
Year Ended December 31

1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 23,561 $ 9,603 $ 183 $ 94 $ 2,730

Cost of Sales 22,005 47,867 94 279 4,345
-------- ------- ----- ---- -------
Gross Profit (Loss) 1,556 (38,264) 89 (185) (1,615)

Loss before Extraordinary Item (3,398) (49,173) (795) (1,397) (3,988)

Extraordinary Items - - - 38,065 -

Net Income (Loss) (3,398) (49,173) (795) 36,668 (3,988)

EARNINGS PER COMMON SHARE (1):
Loss Before Extraordinary Item (0.24) (3.41) (0.06) (0.06) (0.13)

Extraordinary Item - - - 1.58 -
-------- ------- ----- ---- -------
Net Income (Loss) (0.24) (3.41) (0.06) 1.52 (0.13)

As of December 31
1993 1994 1995 1996 1997
BALANCE SHEET DATA:
Total Assets 15,838 298 426 3,402 7,629

Long Term Debt - - - 43 346

Working Capital (Deficit) (2,123) (50,167) (49,968) 3,020 4,427

Stockholders Equity (Deficit) (850) (50,028) (50,910) 3,093 5,676

</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS 1997 COMPARED TO 1996 AND 1995

The Company and its subsidiary are primarily engaged in electronic
product engineering, development and sales, and contract manufacturing
services. All of these activities are highly competitive and sensitive
to many factors outside of the control of the Company, including general
economic conditions affecting Company's clients and availability of
components.

The total revenue for the Company increased from $183,000 in 1995 and
$94,000 in 1996 to over $2,700,000 in 1997, increasing sales almost 29
times from 1996. This growth rate was due to the acquisition of RMS.
Additionally, in 1995 and in the first half of 1996, the Company was
operating under Chapter 11 as a Debtor-in Possession and was in a
dormant state for all practical purposes.

The gross profit margins are not comparable for the period due to the
acquisition of RMS, inventory write down and the extreme fluctuations
in sales.

In the fourth quarter of 1997, in conjunction with the final stages of
development of OrasisTM and introduction of the product at the Fall 1997
COMDEX show, some of the inventory previously acquired for the
production of the DTR product line became obsolete. Originally, the
Company intended to use all parts of the DTR line in the design and
production of OrasisTM. The Company wrote down approximately $1.7
million of raw materials inventory comprised primarily of DTR line
batteries, power cords, digitizer panels and LCD screens. These items
have been redesigned or upgraded for OrasisTM. Also, the cost of DTR
product line was devalued to reflect the change in focus from DTR to
OrasisTM and the expected sales price of the DTR product.

Selling, general and administrative expenses increased in 1997 to
approximately $1,500,000 from $1,007,000 in 1996 and $681,000 in 1995.
The increase from 1996 to 1997 was attributable to the addition of RMS,
which accounted for over $300,000 of such expenses, an increase in trade
show and advertising expenses, annual franchise taxes and interest
expense. The increase from 1995 to 1996 was attributable to the addition
of personnel and professional services relating to reorganization
proceedings.

The net operating loss, before extraordinary item, increased to
approximately $4,000,000 in 1997 from $1,400,000 in 1996 and $795,000
in 1995. The increase in net loss was due to $1,800,000 write down of
inventory, increased research and development activity, and the
introduction of the new OrasisTM product late in the fourth quarter of
1997. In total the Company spent in excess of $825,000 for the
research, development and introduction of OrasisTM in 1997 in comparison
to $77,000 spent in 1996 and $22,000 spent in 1995.

In 1996, due to debt forgiveness related to corporate restructuring and
closing of the bankruptcy proceedings, the Company recognized a one-time
extraordinary income of over $38,000,000.

LIQUIDITY AND CAPITAL RESOURCES

Almost half of the corporate assets are in liquid securities or cash due
to the conclusion of a private placement that raised approximately
$4,400,000 in the fourth quarter of 1997. After paying broker/dealer
fees and placement costs, the Company retained approximately $4,000,000
for operations. Approximately $280,000 of proceeds of the private
placement were used for settlement of short-term notes and approximately
$800,000 for ongoing research and development needs.

With the acquisition of RMS in June, 1997, the Company received
accounts receivable that have averaged approximately $400,000 during the
six month period ending December 31, 1997. With additional growth in
sales and profitability of RMS, management expects accounts receivable
to grow and provide a stable capital resource. During 1997, RMS
negotiated a capital lease to purchase certain surface mount equipment
for a total of $155,000, as well as, a $150,000 unsecured loan from the
McHenry Economic Development Board for expansion of the facilities and
creation of jobs.

Total working capital for the Company increased from just over
$3,000,000 in 1996 to approximately $4,800,000 in 1997, or an increase
of more than 50% previously due to various private stock transactions in
1997. Also, almost two-thirds of the working capital total for 1997 is
in liquid securities or cash versus only 20% in 1996.

The cash raised in the private placement should provide the operating
cash need for the current year as well as the starting capital for pre-
production and initial inventory build-up. The introduction of OrasisTM
and its anticipated sales should provide a source of capital needed for
further growth of Company operations. Management is reviewing its
current banking relationship to include a credit facility for the
future.

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 has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" (effective for financial statements issued for
periods ending after December 15, 1997). SFAS No. 128 replaces primary
earnings per share with basic earnings per share, which excludes
dilution, and requires presentation of both basic and diluted earnings
per share on the face of the income statement. SFAS No. 128 requires
restatement of all prior earnings per share data presented. The
adoption is not expected to have a material impact on the Company's
earnings per share computations.

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 if the fair value method is not
adopted. The Company does not have any stock-based compensation
arrangements covered by this Statement. Future implementation will have
an immaterial effect on the Company's operating results or financial
condition.

OTHER

Based on a preliminary study, the Company expects to spend approximately
$75,000 to $100,000 from March, 1998 through 1999 to modify its computer
information systems enabling proper processing of transactions relating
to the year 2000 and beyond. The Company continues to evaluate
appropriate courses of corrective action, including replacement of
certain systems whose associated costs would be recorded as assets and
amortized. Accordingly, the Company does not expect the amounts
required to be expensed over the next two years to have a material
effect on its financial position or results of operations.

BUSINESS

GENERAL The Company was founded to design, manufacture and market
mobile computing systems, including lap-top, notebook, hand-held and
pen-based computers, components and accessories. Following the Company's
voluntary filing on January 3, 1995 of a petition for relief under
Chapter 11 of the Federal Bankruptcy Code, through its discharge and
closing of bankruptcy proceedings on July 23, 1996, Company operations
were in a dormant stage, for all practical purposes.

During reorganization, the Board of Directors was reconstituted and a
new management team was recruited. The new Company management
formulated a strategic plan to diversify Company operations to eliminate
dependence on a single product line or industry. The plan incorporates
a focus on hand-held mobile computer products, coupled with targeted
acquisitions in the technology sector, to create a holding company with
synergistic, self-managed wholly-owned subsidiaries. The subsidiaries
are intended to share resources and cross-market products and
engineering, contract manufacturing and product development services.

STRATEGIC PLAN Management believes that past operational and
financial difficulties resulted from the Company's single product
dependency and production practices that created substantial parts,
inventory and assembly cost liabilities that caused the Company to
invoke bankruptcy protection when customer orders were delayed.
Management further believes that the future operational and financial
stability of the Company may be realized only by minimizing risks
through product diversification and tight control over production
practices and costs. Diversification is expected to take place on the
basis of related product technologies, strategic partnerships and
acquisitions. Engagements will be selected with the purpose of
expanding the Company's customer base and to diversify its product and
service offerings and sales and marketing capabilities.

Management believes that the mobile computer electronics and contract
manufacturing industries are fragmented, with many participants
offering a variety of products and services that complement each other
or that involve or utilize overlapping production and operating
functions and resources. The Company intends to develop or acquire
products, services or companies that complement each other or offer
production and operating economies. The Company expects to grow through
acquisitions that management may from time to time consider appropriate
and complementary to Company operations. The Company expects to finance
acquisitions by using its shares of Common Stock for all or part of the
consideration to be paid. If such shares do not provide or maintain
sufficient market value, or if potential acquisition candidates are
unwilling to accept such shares, the Company expects to use its cash
resources, if available, or additional debt or equity financings to
complete desirable acquisitions. The Company expects to conduct its
operations, and operations of any subsequently acquired businesses, on a
decentralized basis, with local management retaining responsibility for
day-to-day operations, profitability and growth.

The timing, size and success of Company acquisition efforts and
associated capital commitments cannot readily be predicted and there can
be no assurance that the Company will at any given time possess or have
access to resources sufficient to finance an acquisition considered
attractive to management. Moreover, management recognizes the need to
carefully oversee and institute controls to ensure decentralized
operations do not result in inconsistent operating and financial
practices. With these caveats in mind, the Company reintroduced the DTR
and in the process devised the new OrasisTM hand-held computer, which
management expects to supercede the DTR. The Company also acquired, on
June 6, 1997, all outstanding shares of stock in RMS, an electronics
contract manufacturing firm located in McHenry, Illinois. On September
8, 1997, the Company executed a letter of understanding to acquire
CADserv, an electronics design services firm located in Schaumburg,
Illinois. The acquisition is conditioned upon Company Board of
Directors' approval and procurement of necessary financing. As of the
date hereof, the proposed acquisition has not been presented to the
Board, no valuation or price has been determined and no definitive
agreements have been entered.

DTR PRODUCTS The Company historically enjoyed a leadership
position in the burgeoning market of mobile computing based upon its DTR
product line, which was marketed primarily to "niche" or "vertical-
market" users in the defense, medical and insurance industries. The
Company reintroduced the DTR in an effort to regain that leadership
position following reorganization. The Company reintroduced the DTR to
incorporate design changes and features to address current market
conditions, including the advent of PCMCIA options, sound capabilities,
pen recognition improvements, mobile wireless communications, and the
recent explosion of the Internet, as well as the proliferation of the
lap-top computers, which started a new wave of interest in palm-top
computers. In so doing, the Company devised its new OrasisTM hand-held
computer line which management expects to supercede the DTR.
Consequently, the Company at this time does not expect to actively
market or produce the DTR product line.

ORASISTM PRODUCTS Based upon customer feedback received during the
reintroduction of the DTR, management decided to create a new computer
that could provide greater performance, functionality, expandability
and battery life capacity. Customer feedback indicated to management
that many past misconceptions regarding mobile computer capabilities had
been reduced including, but not limited to, previous customer confusion
of the DTR product with less capable, versions of palm-top computing
devices, referred to as Personal Digital Assistants or PDA's, such as
APPLE's Newton notepad. Unlike the DTR, PDAs 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 DTR miniature computers. In designing its new hand-
held computer, the Company addressed 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 lap-top computers, which started a new wave of
public interest in palm-top computers.

In July 1997, the Company contracted with several firms specializing in
electronics engineering, packaging, mechanical and industrial design to
develop the OrasisTM hand-held computer. To date, the Company has
invested over $1,400,000 in developing OrasisTM and has retained all
intellectual property rights to the OrasisTM product.

The OrasisTM computer, which was introduced to the public at COMDEX in
November 1997, is the Company's new, market driven hand-held computer
developed on the basis of specific customer feature and design
suggestions received during DTR reintroduction. The basic unit weighs
less than three pounds and has a battery life of from two to eight hours
or more. Equipped with 133 MHz Pentium MMX processor, up-gradable to 233
MHz Pentium MMX, it is faster any hand-held computer presently
available. In addition, the basic unit includes infra-red keyboard,
electro-magnetic pen, standard two type II or a single type III PCMCIA
slot, 1.6 GB expandable to 2.1 GB hard drive, five screen options, built
in speaker and microphone (including sound blaster for voice recognition
and multi-media) and many other options.

The main advantage of OrasisTM is represented by its up-gradable
features such as its processor, screens and modular expansion bay. The
expansion bay allows for the use of CD/ROM, floppy drive, and wireless
radio, extended battery pack or any other device through the PCI
expansion bus. Unlike other products, OrasisTM does not lock the user
into a single format or a costly catch-all unit. OrasisTM provides
complete flexibility and versatility unlike any other computer presently
on the market. It is a time, labor, and money-saving device that was
designed to free users from their desks. Much more flexible and
powerful than a PDA, the OrasisTM is an MS-DOS/Windows/Windows95/Windows
NT-compatible machine.

At the present time, OrasisTM is in the pre-production stage of
development. Several prototypes have been demonstrated to potential
customers since its introduction in November 1997. Due to the fact that
lead times for some of the components range form six to twelve weeks,
management presently plans to build additional pre-production models for
marketing purposes only.

Markets Unlike several years ago, the hand-held computer market is
more defined and is ready for a product such as OrasisTM. OrasisTM is a
significant technological and marketing step forward among mobile
computing devices. New developments in battery technology allow the
device to be portable and useful to customers who need computing
capacity at remote locations. Moreover, the advent of PCMCIA options,
sound capabilities, pen recognition improvements, mobile wireless
communications, and explosion of the Internet started a new wave of
interest in hand-held computers. According to the latest estimates
published in industry magazines, the total market for mobile hand-held
computing devices exceeds $2.5 billion. This market does not include
notebook or laptop computers. Mobile hand-held pen computers represent
about $500 million of the total mobile computing devices market. The
remainder of the market consists of PDA's, that are communication
devices only. Management believes that the actual market for the mobile
computers is much larger than the latest estimates. Management also
believes that available mobile hand-held devices do not offer as much of
a challenge to notebook computers. The introduction of OrasisTM may
expand the customer base to companies that are currently using notebooks
in their business. The power, modularity and upgradability of OrasisTM
can be equated to the most sophisticated notebook computers today.
Added features and flexibility of the unit may also attract public
attention, thereby growing the overall category. The Company believes
that today's mobile computer and wireless communication market provides
an opportunity to further develop the mobile line of products.
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.

Competition The Company is currently marketing its OrasisTM product.
This product competes in the mobile pen- based computer market.
Worldwide there are less than thirty companies competing in this market.
However, notebook computer manufacturers could be considered competitors
to OrasisTM. Some of these competitors are large, well financed
entities, such as Fujitsu or IBM. In order for the Company to have a
competitive edge, it must have leading technology, market-driven
products or cost effective products. When new products are introduced,
there is a small window of opportunity before clones are developed.
However, being a small company, the Company's strength will be in its
flexibility to meet industry demands and to partner with solution
providers to jointly offer unique solutions for specific problems that
customers encounter.

Sales and Marketing OrasisTM is a "niche" product. The Company's
plan is to sell OrasisTM through software integrators and value-added
resellers to industrial buyers. Presently, the Company has
successfully recruited several sales channel managers, whose sole
responsibility is to manage distribution chains within targeted markets.
The Company has targeted four main vertical markets: medical automation;
sales and field force automation; utilities; and financial automation.
Other markets such as government or inventory and plant maintenance may
be targeted later.

Patents, Copyrights and Trademarks OrasisTM is the result of
engineering design by the Company and its 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 OrasisTM 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. The Company has, however, filed a trademark/tradename
registration for the OrasisTM mark and name.

THE RMS ACQUISITION AND PRODUCTS As part of its strategic plan, the
Company acquired on June 6, 1997, through a stock-for-stock exchange, of
all outstanding shares of stock in R. M. Schultz & Associates, Inc., an
Illinois corporation ("RMS"). RMS is engaged in contract engineering
and manufacturing services. It operates from a 53,000 square foot
facility located in McHenry, Illinois with approximately sixty
employees, including seven electronic engineers, ten administrative
staff and operational management, and the remainder represented by
production personnel.

RMS began as a one-man consulting and design firm in 1979. Since then
it grew in personnel, customer base, revenue and facility space. For
the past fifteen years, RMS has been involved in the design and
manufacturing of products ranging from baby toys to communication
devices. Some of the more visible products that RMS has produced
include scoreboards at the Soldier Field and The United Center in
Chicago, ThreeCom Park in San Francisco and Dallas Stadium, which were
completed for a large Chicago sign company. RMS has also designed and
built the credit card validation system for a large debit card provider,
water softener control system equipment for a bottled water company and
process data acquisition system for a large chemical company.

Services The capabilities of the engineering staff at RMS encompass a
wide range of microprocessor, analog, digital, and control disciplines.
Each RMS engineer has a specific product, which he/she is responsible
for. By having a key person on the engineering staff assigned to each
production project, an effective liaison is created. Engineers are
responsible for helping to develop the product, as well as, the
production process, work stations, tools, and fixtures. RMS also
provides consulting services on many product development and improvement
projects.

With the aid of automatic assembly equipment, RMS is able to assemble
large quantities of various electronic products. The majority of the
work performed by RMS since its inception has been in through-hole or
large component electronic assembly. Even though this represents an
older production method, it still represents the majority of electronic
products assembly. Since the RMS acquisition, more than $400,000 was
spent to build a Class B+ clean room (environmentally controlled room)
inside the RMS facility, and to acquire surface mount equipment. Such
equipment allows for high-speed/high-tech component placement on a PCB,
a newer method of product assembly. In the past, RMS had to employ
other firms to incorporate surface mount portions in the final product.
In combination with the through-hole process, surface mount technology
allows RMS to target over 90% of electronic products manufactured today.

Markets The contract manufacturing market grew substantially in the
early-1990's, when large companies began to shed captive manufacturing
plants and engineering staffs. That trend became evident in the
electronic manufacturing industry. Technological advancements were too
frequent and too dramatic for an individual company to absorb. Instead,
many companies saw the opportunity to cut the cost of capital
expenditures and labor by out-sourcing work to specialty shops like RMS.
In the latest Frost & Sullivan studies, released in 1997, the electronic
contract manufacturing industry is expected to grow from $22,000,000,000
in 1997 to an estimated $110,000,000,000 in 2004. Management believes
that the growth rate, estimated at 26% per year, will actually exceed
that projection.

Sales and Marketing In October, 1997, RMS retained the services of
an industrial marketing firm, which performed a study of the local
electronic contract manufacturing market. The study identified the
Midwestern states that represent a high percentage of the contract
manufacturing expenditures made over the last several years. In
January, 1998, RMS hired a sales manager who, in conjunction with RMS'
existing sales force, will concentrate efforts on direct sales contact
with firms in need of electronic contract manufacturing in those
states.

Competition RMS has a number of competitors in the Midwest and around
the country. Some of these firms, like Morey Corporation or Solectron,
are well established and well capitalized. However, the majority of
these firms are located outside of the Midwest. Also, most of RMS'
competitors do not have engineering capability on staff to offer to
their customers. Management believes that lack of a major competitor in
the Midwest and the engineering capacity of RMS pose an opportunity to
capture a leadership position in this market.

Customer Dependence To date, three customers represent over 70% of
gross sales revenue for RMS. On January 5, 1998, RMS recruited a sales
manager, whose sole responsibility is to bring additional clients and to
diversify RMS' customer base (See "Sales and Marketing" above).

Patents, Copyrights and Trademarks RMS regularly assists its customers
in registering patents on designs devised by its staff. In such cases,
RMS's engineer is identified as the inventor or co-inventor with rights
assigned to the customer. The RMS logo is both a registered trade and
service mark.

THE CADSERV ACQUISITION On September 4, 1997, the Company executed a
letter of understanding to acquire CADserv, an electronics design
services firm located in Schaumburg, Illinois. Since its founding in
1986, it has been engaged in the design of printed circuit boards
("PCBs"), engineering services and sub-contracting of PCB
manufacturing and electronic assembly. CADserv's customers include
several Fortune 500 companies located in the Midwest. CADserv provided
design and engineering services to the Company during development and
re-design of the DTR products. Management believes that by acquiring
CADserv, which presently utilizes unrelated suppliers and vendors in
completing assembly work, the Company will be able to capture assembly
work for RMS, while enabling CADserv and RMS to work conjunctively in
the design, development and manufacture of electronic products. CADserv
presently is wholly-owned by the Company's CEO/ President, Andrew J.
Kandalepas, and employs Mr. Kandalepas and Company Director Andrew
Prokos as its President and Vice-President, respectively. The
acquisition is conditioned upon Company Board of Directors' approval and
procurement of necessary financing. As of the date hereof, the proposed
acquisition has not been presented to the Board, no valuation or price
has been determined and no definitive agreements have been entered.

SOFTWARE LICENSING AGREEMENTS The Company has purchased BIOS (basic
input/output software) for OrasisTM from 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. A Master License Agreement was executed for the
right of distribution of Phoenix software with the OrasisTM product.

The Company has entered into a Pen Products Original Equipment
Manufacturing Distribution License Agreement and Sublicense Agreement
for Dedicated Systems with Annabooks Software L.L.C. ("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, among
others, on computers it sells. For this right, the Company must pay
Microsoft through Annabooks royalties for each unit sold, with quantity
discounts available.

CUSTOMER DEPENDENCE During the 18 months ended July 23, 1997, during
which 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. The effect of the bankruptcy
proceeding on past or potential future customers cannot be determined.

EMPLOYEES The Company presently has approximately ten employees. These
employees are executives, sales, production, technical support and
administrative personnel. None of the Company's personnel are
represented by a union. 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
is for a three year term commencing May 15, 1996, with a five year
renewal option. The Company believes the space will be adequate for the
foreseeable future.

The Company's wholly-owned subsidiary, RMS, occupies a facility located
at 1809 South Route 31, McHenry, Illinois 60050. The facilities are
leased from Enclave Corporation, an Illinois corporation wholly-owned by
Richard M. Schultz, President of RMS. RMS occupies 53,000 square feet
of space, of which 7,000 is office space and 5,000 square feet represent
the clean room facility built for the surface mount portion of
production. The lease is for a five-year term commencing June 1, 1997,
with an optional extension for an additional five years Monthly rent is
approximately $14,000. The Company believes the space will be adequate
for the foreseeable future.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the
name, age and position of each Director and Executive Officer of the
Company. All Directors are 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. Executive Officers are
appointed by the Board of Directors.

Name Age Present Office

Andrew J. Kandalepas 46 Chairman of the Board of Directors
Chief Executive Officer, President

Savely Burd 34 Chief Financial Officer

Jeffrey L. Goldberg 45 Secretary, Director

Wm. Paul Bunnell 39 Director, Director of Acquisitions

Gary E. Soiney 57 Director

Douglas P. Morris 41 Director

Andrew Prokos 35 Director

Dean F. Prokos 33 Director

Set forth below are descriptions of the backgrounds of the Directors and
Executive Officers of the Company and their principal occupations for
the past five years.

Mr. Kandalepas joined the Company as Chairman of the Board in February,
1995. He was named CEO and President in November, 1995. In addition,
Mr. Kandalepas is the founder and President of CADserv. 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 prior to founding CADserv.

Mr. Burd was appointed Chief Financial Officer of the Company 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 the Company, Mr. Burd was employed by
Merrill Lynch. Mr. Burd, a CPA, is a graduate of J. L. Kellogg Graduate
School of Management.

Mr. Goldberg has served as Secretary and Director since June of 1995.
Mr. Goldberg is a partner at FERS, an international accounting firm. He
previously 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.

Mr. Bunnell has served as a Director since June, 1995. He also serves
as Director of Acquisitions and as an active member of the management
team. He previously served as Vice President of Financial Consulting
Group, Ltd., a Northfield, Illinois financial planning firm. Mr.
Bunnell was previously a corporate accounting and financial manager with
expertise in business planning and long range strategic planning.

Mr. Soiney has served as a Director since November, 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 Midwest.

Mr. Morris has been a Director since November, 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 with
privately- and publicly- held companies in 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.

Mr. Andrew Prokos has served as a Director since February, 1995. He is
also Vice-President of CADserv, a position he has held for the past five
years. Mr. Prokos is a graduate of DeVry Institute with an Associate
Degree in Electronics.

Mr. Dean Prokos has served as a Director 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.

INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company has adopted a by-
law provision which stipulates that it shall indemnify any Director or
Executive 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 reasonably 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/her duty to Company, unless, and only to the
extent that the court in which such action or suit was brought shall
determine upon application the that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person
is fairly and reasonably 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 Executive Officers
under federal securities laws.

FAMILY RELATIONSHIPS Both Andrew Prokos and Dean Prokos are siblings
and cousins of Andrew J. Kandalepas, President, CEO and Chairman of the
Board of Directors.

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
Directors and Executive Officers, that exceeds $100,000. No Director or
Executive Officer was paid compensation exceeding $100,000 during 1995,
1996 or 1997. Members of the Board of Directors are not compensated for
their participation in management of the Company.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

CADserv is wholly-owned by Company CEO/President, Andrew J. Kandalepas.
CADserv employs Mr. Kandalepas and Company Director Andrew Prokos as its
President and Vice-President, respectively. CADserv has contributed to
the design and development of the Company's DTR and OrasisTM product
lines and has been compensated for such services on substantially the
same terms which could be obtained from non-related companies in the
marketplace. On September 8, 1997, the Company entered into a letter of
understanding with Mr. Kandalepas pursuant to which the Company proposed
to acquire all issued and outstanding shares of stock in CADserv at a
price to be determined by an independent third party appraiser. The
acquisition is subject to Company's Board of Directors' approval and
procurement of necessary financing. At of the present date, the
transaction has not been presented to the Board, nor has any valuation
or price been determined.

The facilities of the Company's wholly-owned subsidiary, RMS, are
leased from Enclave Corporation, an Illinois corporation wholly-owned by
Richard M. Schultz, President of RMS. The lease is for a five-year term
commencing June 1, 1997, with a monthly base of $14,000.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding Common
Stock of the Company owned beneficially as of March 13, 1998, by (i)
each Director and Executive Officer of the Company, (ii) all Directors
and Executive Officers 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 Address of Amount and Nature of % of
Beneficial Owner Position Beneficial Shares Owned Class
- ---------------------------- ------------- ---------------------- --------
Andrew J. Kandalepas Chairman, Chief
770 Michigan Ave. Executive Officer
Elk Grove Village, IL 60007 & President 5,309,337 (1) 14.3%

Savely Burd
9445 Kenton, #411 Chief Financial
Skokie, IL 60076 Officer 58,000 0.2%

Jeffrey L. Goldberg
2800 Acacia Terrace
Buffalo Grove, IL 60089 Secretary, Director 1,248,388 (2) 3.4%

Wm. Paul Bunnell
637 Constitution Dr., #5
Palatine, IL 60077 Director 1,248,388 (2) 3.4%

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 301,167 (3) 0.8%

Andrew Prokos
2359 N Windsor Drive
Arlington Hts., IL 60004 Director 204,000 0.6%

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 ------ 290,000 (3) 0.8%

Northfield Technology Group
790 Frontage Rd.
Northfield, IL 60093 ------ 1,248,388 (2) 3.4%

H & M Capital Investment, Inc.
330 E. Maine St.
Barrington, IL 60010 ------ 11,167 (3) 0.0%

Marinis Loukas Trust
322 N. Prospect Rd.
Park Ridge, IL 60068 ------ 1,982,500 (1) 5.4%

Morgan Stanley, Dean
Witter & Co Trustee 7,133,500 19.3%
---------- -----
Officers and Directors and
5% Beneficial Owners (as a group) 14,555,559 39.3%

1 The 5,309,337 shares listed for Andrew J. Kandalepas include
shares held individually, 30,650 shares held by CADServ, and
1,982,500 shares held by Marinis Loukas Trust, for which
Mr. Kandalepas has voting but no pecuniary interest in such shares.
2 The shares listed for Jeffrey L. Goldberg and Wm. Paul Bunnell
include 1,248,388 shares held by Northfield Technology Group.
Messrs. Goldberg and Bunnell share voting of these shares.
3 Douglas P. Morris is President of H & M Capital Investments, Inc.
and Hyacinth Resources, Inc., which own 11,167 shares and 290,000
shares, respectively.

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 March 13, 1998 there were 36,305,096 shares of Common
Stock outstanding and beneficially owned by approximately 3,000
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.

In February 6, 1996, the Company entered into an agreement with Victor
I. Baron, Savely Burd and Interactive Controls, Inc., an Illinois
corporation ("Intercon"). Under the terms of the agreement, the Company
acquired a business plan devised by Intercon for the design and
manufacture of industrial control systems and software. The Company also
agreed to employ Messrs. Baron and Burd and provided Intercon the
opportunity to receive (a)1,000,000 shares of Common Stock the first
fiscal year the Company realizes aggregate gross revenues of $5,000,000;
(b) an additional 200,000 shares of Common Stock for each additional
$1,000,000 in gross sales revenues exceeding $5,000,000 and up to
$10,000,000; and (c) an additional .25 shares of Common Stock for each
dollar in net earnings before taxes. The aggregate number of shares
issued under the Intercon agreement may not in any event exceed 25% of
the Company's shares outstanding as of the effective date of its Plan of
Reorganization and are subject to trading restrictions. To date, no
Intercon products have been developed or produced under the business
plan and no shares have been issued to Intercon. Mr. Burd continues to
serve as an employee and Chief Financial Officer of the Company. Mr.
Baron's employment with the Company terminated on February 24, 1998.

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

To assist the Company in attempting to maintain an orderly trading
market, Messrs. Kandalepas, Goldberg, Bunnell, Morris and Loukas (the
"Restricted Persons") have entered into a Share Transfer Restriction
Agreement whereby they have agreed to limit the collective sales of
Company Shares by them individually, and by any entity controlled by
them, in market transactions to an aggregate of 50,000 Shares per
calendar month.

The Share Transfer Restriction Agreement has a term of two years ending
on May 31, 1998. 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. Although a substantial number of the shares
which are subject to the transfer restrictions contained in the Share
Transfer Restriction Agreement are held by control persons subject to
trading volume limitations, a substantial increase in the number of
shares available for public sales will occur upon expiration of the
Share Transfer Restriction Agreement. While none of the parties to the
Share Transfer Restriction Agreement has expressed a present intent to
sell any shares upon expiration of the Share Transfer Restriction
Agreement, there can be no assurance that such sales will not occur. In
the event of such sales, the the market price of Shares may decrease
substantially and Selling Stockholders may not be able to find buyers
should they decide to offer their Shares for sale, or may be unable to
find buyers willing to pay the price sought.

Any shares issued under the Intercon agreement are subject to a one-year
trading restriction as well as holding, volume and other restrictions
under Securities and Exchange Commission Rule 144. In general, under
Rule 144, if a period of at least one year has elapsed between the date
on which restricted shares are acquired from the Company or the date
they were acquired from an affiliate, the holder , including an
affiliate, is entitled to sell a number of shares within any three-month
period that does not exceed the greater of (a) one percent of the then
outstanding shares of Common Stock in the Company; or (b) the average
weekly reported trading volume of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain requirements pertaining to the manner of such sales,
notices of such sales and availability of public information regarding
the Company. Under Rule 144(k), if a period of at least two years has
elapsed between the later of the date on which restricted shares were
acquired from the Company or an affiliate, a holder of such restricted
shares who is not an affiliate and who has not been an affiliate for at
least three months prior to the sale, is entitled to sell the shares
immediately without regard to the volume limitation sand other
conditions referenced above.

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 7,487,935 Shares of Common Stock for the
Selling Stockholders. All costs, expenses and fees (estimated to be not
more than $30,493) 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
Company intends to use Shares registered for future acquisitions, to
raise capital, if needed, to fund production of the OrasisTM hand-held
computer and RMS contract manufacturing operations, and to expand the
Company's product and service offerings. At the present time, the
Company is not engaged in any material negotiations with any specific
enterprise regarding any acquisition, other than CADserv.

The Selling Stockholders' sale of Shares may be made 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 gifts 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 an "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 or that buyers of Shares, if any, will be
willing to pay prices sought by Selling Stockholders.

SELLING STOCKHOLDERS

The Shares to be registered hereunder were issued in accordance with a
private placement during 1997, pursuant to which the holders of Shares
were granted certain registration rights. 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 consist of
138 investors, each of whom was represented as an accredited investor at
the time of subscription for Shares, and none of whom who are or have
been affiliates of the Company or who hold more than 5% of the
outstanding Common Stock.

<TABLE>
Beneficially Beneficially Registered Beneficially Registered Shares
Owned Shares Owned Shares Owned Shares Beneficially Owned
To be Registered to be Sold After Registration
Number % Number % Number Number %
<S> <C> <C> <C> <C> <C> <C> <C>

Kenneth M. Anderson 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Lowell K. Anderson 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
David R. Appert M.D.
TTEE OSL Profit 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Badger Coaches, Inc. 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Norman C. Barsanti 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Delaware Charter
FBO Seymour Berman IRA 8,000 0.1% 8,000 0.1% 0 8,000 0.1%
Michael Blumenfeld 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Jonathan R. Borren 22,500 0.1% 22,500 0.1% 0 22,500 0.1%
Paul Brosseit 26,000 0.1% 26,000 0.1% 0 26,000 0.1%
Burpee Co. 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Chiropractic Medicine
and Associates of
DuPage (Forman) 8,000 0.1% 8,000 0.1% 0 8,000 0.1%
Roger L. Collins and
Sandra R. Collins 35,000 0.1% 35,000 0.1% 0 35,000 0.1%
Mike P. Darraugh 45,000 0.1% 45,000 0.1% 0 45,000 0.1%
Steve Daugherty 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Resources Trust Co.
FBO Steve Daugherty IRA 16,000 0.1% 16,000 0.1% 0 16,000 0.1%
Frank A. Davenport
Trust DTD 9/25/81 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Scott Davis 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Delaware Charter
FBO Andre Lareau 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Delaware Charter
FBO Patrick J. Rodgers 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
John Doyle 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Robert Ellis 26,300 0.1% 26,300 0.1% 0 26,300 0.1%
Engel Enterprises, Inc. 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Rick F. Enriquez 200,000 0.1% 200,000 0.1% 0 200,000 0.1%
Henry Erfurth 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Lisa Marilyn Erwin 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Spencer Ewald 12,500 0.1% 12,500 0.1% 0 12,500 0.1%
Executive Pension
Design, Inc. Profit
Sharing Plan 99,000 0.1% 99,000 0.1% 0 99,000 0.1%
Resources Trust Co. 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Richard C. Farmer
IRA C/O Resources
Trust Co. 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Joseph W. Felger
Carol A. Felger 60,000 0.1% 60,000 0.1% 0 60,000 0.1%
Kirk Ferguson
Suzanne Ferguson 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Craig Ferguson
Susan Ferguson 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Michael Fieseler 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Delaware Charter
FBO Michael Fieseler IRA 8,000 0.1% 8,000 0.1% 0 8,000 0.1%
Paul A. Fischer
Annette D. Fischer 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Jay Fisher 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Dr. Franklin Forman 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Resources Trust Co.
FBO Franklin Forman IRA 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
William C. Frazier 100,000 0.1% 100,000 0.1% 0 100,000 0.1%
William C. Frazier 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
John P. Gahagan 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Eileen K. Gifford 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Anne M. Graham 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Ronald J. Gregorio 165,000 0.1% 165,000 0.1% 0 165,000 0.1%
Delaware Charter FBO
Jeffrey D. Guenther IRA 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Chad R. Hahn 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Dave Heydenberk 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Steven A. Holland 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Steven L. Holtz 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Impact Associates 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Jefferson Current
Electric, Inc.
Profit Sharing Plan 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Jefferson Current
Electric, Inc.
Pension Plan 40,000 0.1% 40,000 0.1% 0 40,000 0.1%
Delaware Charter
FBO Craig G. Johnson 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Melinda Peters-Jones 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Rick Jones 210,000 0.1% 210,000 0.1% 0 210,000 0.1%
Edward H. Keevins 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Richard G. Kleine 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
John Kluesner
Michelle M. Kluesner 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Paul Kolbeck 125,000 0.1% 125,000 0.1% 0 125,000 0.1%
Lee Krueger 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Lake Shore Consulting Group 32,500 0.1% 22,500 0.1% 0 32,500 0.1%
Andre G. Lareau and
Mary R. Lareau 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
James S. Lee 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Resources Trust FBO Joseph V.
Lemberger IRA 100,000 0.1% 100,000 0.1% 0 100,000 0.1%
David Lentz 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Gary D. Long 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Carl D. Luna and
Marsha L. Luna 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Gary Malek
Money Purchase Plan 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Resources Trust Co. FBO
William B. Matt IRA 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Linda M. Mausser 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
David H. Meier 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Eddie D. Merida 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Michael Milcarek 30,000 0.1% 30,000 0.1% 0 30,000 0.1%
Daniel B. Miller and
Melinda F. Miller 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Daniel B. Miller and
Nathan D. Miller 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Elmer J. Miller 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Ryan Miller 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Kipton D. Mills 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Daniel E. Mix 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Delaware Charter FBO
Terry Moffit IRA 7,500 0.1% 7,500 0.1% 0 7,500 0.1%
Sherry Moore 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
William R. Nicholas 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Milos Nikolic 100,000 0.1% 100,000 0.1% 0 100,000 0.1%
Glenn Nitzsche 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Glenn Nitzsche Custodian
for Brooke Nitzsche 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Nord Cleaning
Service, Inc. 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Jerome K. Nord 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Clint Nord 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Delaware Charter & Trust
FBO Curt R. Nord IRA 7,000 0.1% 7,000 0.1% 0 7,000 0.1%
Rita Nord 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Stephen J. Notaro 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Borel Bank & Trust Company
Custodian FBO 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Jolanda O'Brien 4,000 0.1% 4,000 0.1% 0 4,000 0.1%
Delaware Charter & Trust
FBO Joanne Panici 5,500 0.1% 5,500 0.1% 0 5,500 0.1%
Steven Pettersen 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Valie Pettersen 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Jerry A. Phillips
Living Trust 45,000 0.1% 45,000 0.1% 0 45,000 0.1%
Pommier Construction Co., Inc. 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Pommier Construction Co., Inc. 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Brian M. Rafferty 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Michelle Randolph 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Shari Rhode
Patricia Covington 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
James L. Rose CPA SC
Defined Benefit Plan 38,600 0.1% 38,600 0.1% 0 38,600 0.1%
Jerry W. Sanders 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Lawrence D. Scaro 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Percy Schramek TTEE Emilie
E. Schramek Rev Trust 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Robert D. Schauenberg
Susan K. Schauenberg 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Dan Schlapkohl 100,000 0.1% 100,000 0.1% 0 100,000 0.1%
Gary N. Schmedding
Rose Marie Schmedding 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Brian Schubert 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
Brian Schubert 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
James Senglaub 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Michael L. Senglaub
Doris A. Senglaub 30,000 0.1% 30,000 0.1% 0 30,000 0.1%
Jeffery W. Senglaub 100,000 0.1% 100,000 0.1% 0 100,000 0.1%
Jeffery W. Senglaub
Charitable Reminder
Unit Trust 160,000 0.1% 160,000 0.1% 0 160,000 0.1%
Ted Smith 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Charles D. Spagnoli 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
George T. Stathas 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Resources Trust Co.
FBO George T. Stathas 28,000 0.1% 28,000 0.1% 0 28,000 0.1%
Larry J. Steffen 20,000 0.1% 20,000 0.1% 0 10,000 0.1%
Joseph P. Tate 200,000 0.1% 200,000 0.1% 0 200,000 0.1%
Steve Theofanous 200,000 0.1% 200,000 0.1% 0 200,000 0.1%
Fano Theofanous 150,000 0.1% 150,000 0.1% 0 150,000 0.1%
George G. Thomas 15,000 0.1% 15,000 0.1% 0 15,000 0.1%
David R. Tompos 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Loren L. Troyer
Kathrine Troyer 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
Delaware Charter FBO
Loren L. Troyer IR 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Loren L. Troyer Custodian for
Casey N. Troyer 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Loren L. Troyer Custodian for
Morgan M. Troyer 5,000 0.1% 5,000 0.1% 0 5,000 0.1%
Michael Tucker
Mark Tucker 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
John V. Watson 155,800 0.1% 155,800 0.1% 0 155,800 0.1%
John Randall Wear
Trust DTD 7/8/97 20,000 0.1% 20,000 0.1% 0 20,000 0.1%
Winner Products, Inc. Defined
Benefit Pension Plan 26,652 0.1% 26,652 0.1% 0 26,652 0.1%
Robert A. Wolfe 10,000 0.1% 10,000 0.1% 0 10,000 0.1%
Work Force of America, Inc. 25,000 0.1% 25,000 0.1% 0 25,000 0.1%
David G. Yacullo 10,000 0.1% 10,000 0.1% 0 10,000 0.1%

ACAP Financial Inc. C/O Dauphin
Technology Inc. 131,756 0.1% 131,756 0.1% 0 131,756 0.1%
--------- ---------- ----------
4,548,608 4,548,608 4,548,608

</TABLE>

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. The Rieck and Crotty, P.C. Profit
Sharing Plan owns 7,000 Shares of Common Stock.

EXPERTS

The audited consolidated financial statements of the Company included in
this Prospectus and appearing in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon which appears elsewhere herein and in the
registration statement, and is included in reliance upon the authority
of such firm as experts in giving said reports.

DAUPHIN TECHNOLOGY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996 F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 F-4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7

Report of Independent Public Accountants

To the Board of Directors and
Shareholders of
Dauphin Technology, Inc.:

We have audited the accompanying consolidated balance sheets of DAUPHIN
TECHNOLOGY, INC. (an Illinois corporation) and Subsidiary, as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, consolidated shareholders' equity (deficit) and consolidated
cash flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Dauphin Technology, Inc. as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois,
February 20, 1998

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996

1997 1996
CURRENT ASSETS:
Cash $ 3,620,880 $ 388,600
Restricted cash - 232,000
Accounts receivable-
Trade, net of allowance for bad debt
of $7,500 and $0 in 1997 and 1996 462,821 2,010
Other 20,195 -
Inventory, net of reserve for
obsolescence of $2,143,934 and
$185,783 in 1997 and 1996 1,531,464 2,652,461
Prepaid expenses 39,201 12,251
------------ ------------
Total current assets 5,674,561 3,287,322

PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $176,318
and $103,074 at December 31, 1997
and 1996, respectively 739,556 115,538

GOODWILL, net of amortization of
$20,427 for 1997 855,019 -
------------ ------------
Total assets $ 7,269,136 $ 3,402,860
============ ============

CURRENT LIABILITIES:
Accounts payable $ 790,784 $ 204,450
Accrued expenses 285,837 62,314
Current portion of long-term debt 83,782 -
Short-term borrowings 87,394 -
------------ ------------
Total current liabilities 1,247,797 266,764

LONG-TERM DEBT 345,744 43,196

COMMITMENTS AND CONTINGENCIES (Note 9)

SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 10,000,000
shares authorized but unissued - -
Common stock, $0.001 par value, 100,000,000
shares authorized; 37,035,673 shares issued
and 36,305,096 shares outstanding at December
31, 1997 and 31,706,397 shares issued and
29,547,111 outstanding at December 31, 1996 37,036 31,706
Treasury stock, 730,577 and 2,159,286 shares
at December 31, 1997 and 1996 (255,702) (1,187,607)
Paid-in capital 29,283,136 23,649,659
Accumulated deficit (23,388,875) (19,400,858)
------------- -------------
Total shareholders' equity 5,675,595 3,092,900
------------- -------------
Total liabilities and
shareholders' equity $ 7,269,136 $ 3,402,860
============= =============

The accompanying notes are an integral part of these balance sheets.

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
1997 1996 1995
<S> <C> <C> <C>
REVENUES $ 2,730,035 $ 93,947 $ 183,083
COST OF SALES 4,345,315 279,232 93,852
----------- ------------ -----------
Gross profit (loss) (1,615,280) (185,285) 89,231

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,484,979 1,007,309 681,335

RESEARCH AND DEVELOPMENT EXPENSE 827,843 76,711 22,388
----------- ----------- -----------
Loss from operations (3,928,102) (1,269,305) (614,492)

INTEREST EXPENSE 75,988 2,310 -

INTEREST INCOME 16,073 9,997 -
----------- ----------- -----------
Loss before reorganizational items,
income taxes and extraordinary item (3,988,017) (1,261,618) (614,492)

REORGANIZATIONAL ITEMS:
Professional fees - 135,086 180,320
----------- ----------- -----------
Loss before income
taxes and extraordinary item (3,988,017) (1,396,704) (794,812)

INCOME TAXES - - -
----------- ----------- -----------
Loss before extraordinary item (3,988,017) (1,396,704) (794,812)
----------- ----------- -----------

EXTRAORDINARY ITEM, forgiveness of debt
net of income taxes of $0 - 38,065,373 -
----------- ----------- -----------
Net income (loss) $ (3,988,017) $ 36,668,669 $ (794,812)
=========== =========== ===========

BASIC and DILUTED EARNINGS (LOSS) PER SHARE:
Before extraordinary item $ (0.13) $ (0.06) $ (0.06)
Extraordinary item - 1.58 -
----------- ----------- -----------
Net income (loss) per share $ (0.13) $ 1.52 $ (0.06)
=========== =========== ===========

Weighted average number of shares of
common stock outstanding 30,734,045 24,076,301 14,408,354

</TABLE>

The accompanying notes are an integral part of these statements.

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
Common Stock Paid-in Treasury Stock Accumulated
Shares Amount Capital Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, 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 - - (87,665) - - - (87,665)
Net loss - - - - - (794,812) (794,812)
------------ --------- ------------ ----------- ---------- ----------- ------------
BALANCE, 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 conversion 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 1,948,043 1,948 1,790,077 - - - 1,792,025
Settlement of note payable 1,100,000 1,100 768,900 - - - 770,000
Purchase of treasury stock - - - (2,159,286) (1,187,607) - (1,187,607)
Net income - - - - - 36,668,669 36,668,669
------------ --------- ------------ ----------- ---------- ----------- -------------
BALANCE, December 31, 1996 31,706,397 31,706 23,649,659 (2,159,286) (1,187,607) (19,400,858) 3,092,900
Issuance of common stock in connection with:
Private placement 4,872,520 4,873 4,582,294 - - - 4,587,167
Commissions to broker/dealer 131,756 132 (132) - - - -
Purchase of a subsidiary 220,000 220 232,980 - - - 233,200
Escrow shares 105,000 105 - - - - 105
Purchase of treasury stock - - - (891,626) (341,369) - (341,369)
Issuance of treasury stock - - 812,084 2,307,835 1,266,400 - 2,078,484
Stock bonuses paid - - 6,250 12,500 6,875 - 13,125
Net income - - - - - (3,988,017) (3,988,017)
------------ --------- ------------ ----------- ---------- ----------- -------------
BALANCE, December 31, 1997 37,035,673 $ 37,036 $ 29,283,136 (730,577) $ (255,702) $(23,388,875) $ 5,675,595
============ ========= ============ =========== ========== ============ ============

</TABLE>

The accompanying notes are an integral part of these statements.

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,988,017) $ 36,668,669 $ (794,812)
Non-cash items included in net income (loss)-
Loss on disposition of property and equipment - 1,850 41,053
Depreciation and amortization 93,671 33,459 39,698
Compensatory effect of stock options earned - - (87,665)
Extraordinary item - (38,065,373) -
Stock bonus 13,125 - -
Changes in-
Accounts receivable
- trade 129,519 3,781 (128,381)
- other (20,195) 167,266 -
Inventory 1,893,655 22,807 22,644
Prepaid software and other current assets (14,396) (12,251) -
Bank overdraft - - (1,299)
Accounts payable, accrued expenses and
claims payable (554,276) 14,536 252,228
------------- ------------- -------------
Net cash (used for) operating activities (2,446,914) (1,165,256) (656,534)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture (201,965) (81,210) (10,809)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received in acquisition 31,162 - -
Short-term borrowing and DIP financing (706,390) 375,000 759,947
Purchase of treasury stock (341,369) (1,187,607) -
Issuance of debt - 795,044 -
Proceeds from issuance of common stock 6,665,756 1,792,025 -
------------- ------------- -----------
Net cash provided by financing activities 5,649,159 1,774,462 759,947
------------- ------------- -----------
Net change in cash 3,000,280 527,996 92,604

CASH, beginning of year 620,600 92,604 -
------------- ------------- -----------
CASH, end of year $ 3,620,880 $ 620,600 $ 92,604
============= ============= ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 75,988 $ 2,310 $ -
Reorganization item - 135,086 1,80,320
============= ============ ===========

NONCASH TRANSACTIONS:
Common stock issued in connection with -
Bankruptcy settlement $ - $ 13,048,000 $ -
Purchase of inventory - 2,912,000 -
Settlement of notes payable - 770,000 -
Acquisition of R.M. Schultz & Associates -
Assumption of liabilities 2,197,058 - -
Issuance of stock 233,200 - -
Capital equipment leased 347,189 - -
============ =========== ===========

</TABLE>

The accompanying notes are an integral part of these statements

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997, 1996 AND 1995

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:

Description of Business
Dauphin Technology, Inc. was founded to design, manufacture and market
mobile computing systems, including laptop, notebook, hand-held 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.

On June 6, 1997, Dauphin acquired all issued and outstanding shares of
R.M. Schultz & Associates, Inc., ("RMS") an electronics contract
manufacturing firm located in McHenry, Illinois. RMS is involved in
electronics design, development and production of products for
manufacturers located in Illinois and Wisconsin (see Note 3).

Basis of Presentation
The consolidated financial statements include the accounts of Dauphin
Technology, Inc. and its wholly-owned subsidiary, RMS (the "Company").
All significant intercompany transactions and accounts have been
eliminated in consolidation.

On January 3, 1995, the Company filed a petition for relief under
Chapter 11 of the Federal Bankruptcy Code. During 1995 and the first six
months of 1996, the Company operated under Chapter 11. On May 9, 1996,
the Company's Third Amended Plan of Reorganization was approved by the
majority of creditors and shareholders and confirmed by the Court. On
July 23, 1996, the Court discharged the Company as a Debtor-in-
Possession and the bankruptcy case was closed.

2. 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, accessories and
fulfillment of certain manufacturing contracts. Revenues from sales of
products are recognized upon delivery. Revenue from the fulfillment of
manufacturing contracts is recognized upon shipment of the product.

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:

1997 1996
Finished goods $ 22,343 $ -
Work in process 191,872 -
Semi-finished units 168,420 144,327
Raw materials 651,990 -
Computer accessories, components
and supplies 2,640,773 2,693,917
------------ ------------
3,675,398 2,838,244
Less- Reserve for obsolescence (2,143,934) (185,783)
------------ ------------
$ 1,531,464 $ 2,652,461
============ ============

In the fourth quarter of 1997, in conjunction with the final stages of
development of Orasis( and its introduction at the fall 1997 COMDEX
show, some of the inventory previously acquired for the production of
DTR product line became obsolete. Originally the Company intended to
use all parts of the DTR line in the design and production of Orasis(.
The Company wrote down approximately $1.7 million of raw materials
inventory comprised primarily of DTR line batteries, power cords,
digitizer panels and LCD screens. These items have been redesigned or
upgraded for Orasis(. Also, with the introduction of Orasis(, the semi-
finished DTR units inventory was written down to net realizable value.

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 three and seven years. The estimated lives
of certain leasehold improvements are amortized over the remaining term
of the facilities leased. Fixed assets consist of the following:

1997 1996
Furniture and fixtures $ 40,950 $ 30,776
Office equipment 174,659 169,015
Manufacturing and warehouse equipment 427,791 6,111
Leasehold improvements 260,201 12,710
Automobile 12,273 -
------------- -------------
915,874 218,612
Less - Accumulated depreciation (176,318) (103,074)
------------- -------------
$ 739,556 $ 115,538
============= =============

Research and Development

Costs incurred in connection with research and development are expensed
as incurred. All salaries paid to employees associated with the
research and development are included as part of the expense.

Earnings (Loss) Per Common Share

Earnings per share are calculated under guidelines of FASB No. 128
"Earnings per Share" wherein earnings per share are presented for basic
and diluted shares on income from operations and net income. Basic
earnings per share are calculated on income available to common
stockholders divided by the weighted-average number of shares
outstanding during the period, which were 30,734,045, 24,076,301 and
14,408,354 at December 31, 1997, 1996 and 1995, respectively. Diluted
earnings per share are calculated using earnings available to each share
of common stock outstanding during the period and to each share that
would have been outstanding assuming the issuance of common shares for
all dilutive potential common shares outstanding during the reporting
period. There is no difference between basic and diluted earnings per
share as there are no potential dilutive common shares.

To date, three customers represent over seventy percent of revenue for
RMS.

3. BUSINESS DEVELOPMENT

R. M. Schultz & Associates, Inc.
On June 6, 1997, the Company acquired all outstanding common stock of
Richard M. Schultz and Associates, Inc., for $2,430,258, consisting of
issuance of common stock for $233,200 and an assumption of $2,197,058 of
liabilities. The transaction was accounted for as a purchase. The
price was allocated to accounts receivable ($590,330), inventories
($772,658), other current assets ($43,716), property and equipment
($148,108), with the remaining amount ($875,446) being allocated to
goodwill. The goodwill is being amortized over 20 years and the
amortization expense for 1997 was $20,427.

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 equally over the next
three years if certain financial goals of RMS are achieved. Upon
issuance of the 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.

Results of the operations of RMS are included within the consolidated
financial statements commencing June 6, 1997. Unaudited pro forma
results as if the transaction occurred on January 1, 1996 are as follows
(unaudited):

Twelve Months Ended December 31,
1997 1996
Revenues $ 4,614,121 $ 5,290,490
(Loss) before extraordinary item (4,418,852) (1,556,273)
Net income (4,418,852) 36,509,100
Basic and diluted earnings (loss)
per share before extraordinary item $ (0.14) $ (0.07)
Basic and diluted earnings (loss)
income per share (0.14) 1.52

Weighted average shares outstanding 30,734,045 24,076,301

Such pro forma information is not necessarily indicative of the results
of future operations.

CADserv Corporation

On September 4, 1997, the Company signed a letter of understanding to
acquire CADserv Corporation ("CADserv"). CADserv is wholly owned by an
officer and a major shareholder of the Company. As of the date hereof,
the letter of understanding has been verbally extended and the
acquisition of CADserv is pending the approval of the Company's Board of
Directors and procurement of the necessary financing. No valuation or
price has been determined and no definitive agreements have been
entered.

Other

In 1996 the Company established a 401(k) retirement and pension plan.
The plan provides for discretionary contributions by the Company. There
were no contributions in 1997 or 1996.

4. SHORT-TERM BORROWINGS:

Short-term borrowings consist of the following at December 31:

1997 1996
LaSalle Bank Cash Collateral Account $ 71,421 $ -
DCCA Loan 5,634 -
Advacom/Adler & Associates 10,339 -
-------- --------
Total short-term notes payable $ 87,394 $ -
======== ========

LaSalle Bank Cash Collateral Account is a revolving line of credit with
accounts receivable, inventory and unencumbered fixed assets as
collateral. The loan carried 16% annual interest rate. As of February
1, 1998, LaSalle Bank Cash Collateral Account has been paid. All assets
and Dauphin corporate guarantee that were posted as collateral for this
loan have been released.

Two other short-term borrowings represent amounts due to vendors of RMS
that were converted from trade credits to short-term loans prior to
acquisition. Both loans are uncollateralized and are due in June 1998.
These loans carry 7% annual rate of interest.

5. LONG-TERM DEBT:

At December 31, long-term liabilities consist of:

1997 1996
McHenry County Department of
Planning and Development loan
for expansion of RMS, payable in
equal monthly installments over
84 months with 6% interest. This
loan has no collateral and is
due on 10/1/2004 $ 145,655 $ -
PACJETS Financial Ltd. surface
mount equipment lease, payable
in equal monthly installments
over 60 months. The lease is
collateralized by the equipment
and has a one dollar buy-out
option. The lease carries 12%
interest and is due on 10/15/2003 148,501 -
PACJETS Financial Ltd. Furniture
leases payable in equal installments
over 36 months. The lease carries a
23% annual interest rate and is due
on 11/15/2000 is collateralized by
the equipment and has a one dollar
buy-out option 54,262 -
Other represents capital lease for
certain vehicles, machinery and
equipment and certain priority tax
claims due and payable on an equal
monthly installments over 36 to 72
months. All debts are due from
starting in June 2000 through October
2002, carry interest rate ranging
from 9% to 18% 81,108 43,196
------------ ------------
Total long-term liabilities $ 429,526 $ 43,196
============ ============

Future minimum debt payments are as follows:

Year Amount Due
1998 $ 83,782
1999 89,378
2000 90,006
2001 63,283
2002 61,470
Thereafter 41,607
------------
Total long-term debt: $ 429,526
============

6. INCOME TAXES:

A reconciliation of the income tax expense on income at the U.S. federal
statutory rate to the reported income tax expense follows:

<TABLE>
1997 1996 1995
<S> <C> <C> <C>
U.S. federal statutory rate applied to pretax income $ (1,355,926) $ (502,395) $ (270,236)
Permanent differences and adjustments 31,906 6,270 (153)
Tax assets and net operating loss carryforwards
not recognized for financial reporting purposes
(changes in valuation allowances) 1,324,020 496,125 270,389
------------ ---------- ---------
Income tax provision $ - $ - $ -
============ ========== =========

As of December 31, 1997 and 1996, the Company had generated deferred tax
assets as follows:

December 31,
1997 1996
Gross deferred tax assets-
Net operating loss (NOL) carryforward $ 7,779,866 $ 4,629,283
Reserves for inventory obsolescence 2,068,734 185,783
Bad debt reserve 7,500 -
Vacation Accrual 58,377 -
Other timing differences 37,053 -
------------ -------------
9,951,530 4,815,066
Current federal statutory rate 34% 34%
------------ -------------
Deferred tax assets 3,383,520 1,637,122
Less- SFAS 109 valuation allowance (3,383,520) (1,637,122)
------------ -------------
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 $(3,383,520)
and $(1,637,122) at December 31, 1997 and 1996, 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.

7. EQUITY TRANSACTIONS:

1997 Transactions

During 1997, the Company, through several private transactions with
accredited investors, sold approximately 2.8 million of common stock for
approximately $2.7 million or approximately $0.98 per share. Of the
shares issued, 2.3 million were issued from treasury shares. As a
result of these transactions, the Company raised in excess of $2.6
million for its working capital, implementation of the Company's
acquisition strategy and research and development.

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.

On September 5, 1997, under the employment contract, the Company issued
12,500 shares to Richard M. Schultz. Under the contract, Mr. Schultz is
entitled to purchase 50,000 common shares per year for the duration of
his employment contract at $1.00 below the market value on the date
immediately preceding the date of exercise. The common shares issued in
connection with this transaction were treasury shares.

In the fourth quarter, the Company conducted a private placement of
4,391,852 shares of common stock at $1.00 per share. All shares issued
were previously unissued and unregistered. In total, $4,391,852 was
raised. As of December 31, 1997, the Company closed this private
placement. As part of the transaction, a lead broker/dealer received
$439,185 or ten (10%) percent cash compensation and 131,756 common
shares or three (3) shares for each 100 shares placed as commission for
the amount raised. The broker/dealer also has an option to purchase
additional 175,674 shares or four (4) shares for each 100 shares placed
at a $1.00 each within one year from the close of this transaction.

1996 Transactions

On February 6, 1996 the Company entered into an agreement with Victor
Baron, Savely Burd and Interactive Controls, Inc., an Illinois
corporation ("Intercon"). Under the terms of the agreement, the Company
acquired a business plan devised by Intercon for the design and
manufacturing of industrial control systems and software. The Company
also agreed to employ Messrs. Baron and Burd and provided Intercon the
opportunity to receive (a) 1,000,000 shares of common stock the first
fiscal year the Company realizes aggregate gross revenue of $5,000,000;
(b) an additional 200,000 shares of common stock for each additional
$1,000,000 in gross sales revenues exceeding $5,000,000 and up to
$10,000,000; and (c) additional .25 shares of common stock for each
dollar in net earnings before taxes. The aggregate number of shares
issued under the Intercon agreement may not in any event exceed 25% of
the Company's shares outstanding as of the effective date of its Plan of
Reorganization. To date, no Intercon products have been developed or
produced under the business plan and no shares have been issued to
Intercon. Mr. Burd continues to serve as an employee and Chief
Financial Officer of the Company. Mr. Baron's employment with the
Company terminated on February 24, 1998.

On April 19, 1996, TPL, a related party, commenced a private placement
of certain 9% unsecured promissory notes convertible to certain
Company's shares received by it in connection with debtor-in-possession
financing provided by TPL to the Company. As a result of the private
placement and conversion of notes as specified in the Offering
Memorandum, the Company received $995,409, or sixty percent of the
proceeds of the private placement, 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 Fund (a shareholder of the
Company) in the principal amount of $770,000. The note, at the election
of the holder, was converted into 1,100,000 common shares.
Simultaneously, the Company conducted a private placement to qualified
investors of 1,059,286 common shares for $796,616 or $0.75 per share.
The common shares issued in connection with these transactions were
unissued shares that were previously registered by the Company. The
funds obtained from these transactions were used to repurchase 2,159,286
common shares for $1,187,607 or $0.55 per share. As a result of the
transaction, the Company generated $379,009 for operating capital.

On November 12, 1996, the Company registered with the SEC all corporate
unregistered shares issued in private transactions and as a result of
bankruptcy settlement. Also, 2,950,000 reserve shares were registered
for future capital or expansion needs, of which 2,159,286 shares were
reissued in connection with above described share repurchase
transaction.

Subsequent Events

On January 5, 1997, under the employment contract, the Company issued
12,500 shares to Richard M. Schultz. Under the contract, Mr. Schultz is
entitled to purchase 50,000 common shares per year for the duration of
his employment contract at $1.00 below the market value on the date
immediately preceding the date of exercise. The common shares issued in
connection with this transaction were treasury shares.

8. COMMITMENTS AND CONTINGENCIES:

The Company is paying approximately $10,000 per month to rent its
corporate facilities. The lease has a three-year term with a five-year
renewal option. The Company leases RMS facilities for approximately
$14,000 per month. The lease on RMS facility has a five-year term with
an additional five-year optional extension.

9. RELATED-PARTY TRANSACTIONS:

CADserv, an engineering services company based in Schaumburg, Illinois,
controlled by an Officer and a major shareholder, has contributed to the
design, packaging and manufacturing of Dauphin's DTR and Orasis( product
lines and will likely continue in this capacity in the future.

In June, July and August 1997, the Company borrowed an aggregate sum of
$492,500 from related parties. As of the date of these financial
statements all funds have been repaid together with $35,220 of accrued
interest.

On July 16, 1997 the Company repurchased 745,126 shares held by Alan
S.K. Yong, former founder and President of the Company for $260,794 or
$0.35 per share. Simultaneously, the Company accepted Mr. Yong's
resignation from the Board of Directors.

On September 4, 1997, the Company signed a letter of understanding to
acquire CADserv. As of the date hereof, the letter of understanding has
been verbally extended and the acquisition of CADserv is pending the
approval of the Company's Board of Directors and obtain the necessary
financing.

RMS facilities are leased from Enclave Corporation that is owned by
Richard M. Schultz, President of RMS.

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.

------------

TABLE OF CONTENTS
Available Information 4
Prospectus Summary 5
The Company 5
The Registration 6
Summary Financial Information 7
Use of Proceeds 8
Forward Looking Statements 8
Risk Factors 8
Market Price of Common Stock
and Dividend Policy 12
Selected Financial Data 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Business 15
Description of Property 19
Management 20
Executive Compensation 21
Principal Stockholders 22
Description of Capital Stock 23
Share Transfer Restrictions 24
Plan of Distribution 25
Selling Stockholders 25
Legal Matters 30
Experts 30
Index to Financial Statements F-1

7,487,935 COMMON SHARES

DAUPHIN TECHNOLOGY, INC.

COMMON STOCK
$0.001 Par Value
$1.281 Bid Price on March 13, 1998

__________
PROSPECTUS
__________

------------

March 13, 1998

<PAGE>

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 $ 4,493.00
Blue Sky fees and expenses 3,000.00
Accounting fees and expenses 3,000.00
Legal fees and expenses 15,000.00
Printing 2,000.00
Registrar and transfer agent's fees 1,000.00
Miscellaneous fees and expenses 2,000.00
----------
Total $ 30,493.00
==========

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

The Shares were offered and sold in a private placement conducted by the
Company during the last calendar quarter of 1997 and are being
registered pursuant to certain registration rights granted to
subscribers. The sale and issuance of the Shares 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. The recipients represented their status as accredited
investors at the time of subscription and their intention to acquire
securities for investment purposes only and not with a view to
distribution thereof. Appropriate legends were affixed to stock
certificates issued in such transactions and all recipients had adequate
access to information about the Company. In connection with these
transactions, ACAP Financial, Inc., a registered broker-dealer, was paid
an underwriting fee equal to $439,185, representing 10% of subscription
proceeds received by the Company from investors introduced by such
broker-dealer. ACAP Financial, Inc. also received 131,756 Shares and
such Shares are included in this registration, as well as an option to
purchase an additional 175,674 Shares at a price of $1.00 per Share
during the twelve month period ending December 31, 1998.

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.

*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) Computer Technology License Agreement dated November 12, 1997,
between Phoenix Technology, Inc. and Dauphin Technology, Inc.

10(4) License Agreement dated May 3, 1996, between Microsoft Corporation
and Dauphin Technology, Inc.

*10(5) 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(6) 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(7) Share Transfer Restriction Agreement dated April 30, 1996 for
several control persons. The parties are persons on the Board of
Directors and Executives of the Company incorporated herein by reference
to exhibit 10(16) of Form S-1 filed November 29, 1996.

*10(8) Stock Exchange Agreement dated June 6, 1997 between Richard M.
Schultz, Georgette Scarpelli, Donald Kirk and Dauphin Technology, Inc.
incorporated herein by reference to exhibit 6(b) of Form 8-K filed June
20, 1997.

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 September 1, 1997
included as an exhibit to Form 10-Q for the quarter ended September 30,
1997, and filed October 14, 1997, 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 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 13th day of March, 1998.

DAUPHIN TECHNOLOGY, INC.

By:_______________________________ By: _________________________________
Andrew J. Kandalepas, President Savely Burd, Chief Financial Officer

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 SIGNATURE/TITLE Date
3/13/98 3/13/98
_____________________________ ____________________________
Andrew J. Kandalepas, Chairman of Douglas P. Morris, Director
the Board of Directors /President
/Chief Executive Officer

3/13/98 3/13/98
_____________________________ ____________________________
Jeffrey Goldberg, Secretary Dean F. Prokos, Director
/Director

3/13/98 3/13/98
____________________________ ___________________________
Wm. Paul Bunnell, Director Gary E. Soiney, Director

3/13/98

____________________________
Andrew Prokos, Director

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 on Form S-1 for Dauphin Technology, Inc.

Arthur Andersen LLP

Chicago, Illinois
March 13, 1998

EXHIBIT 24(2)

March 13, 1998

Dauphin Technology, Inc.
800 East Northwest Highway
Suite 950
Palatine, Illinois 60067

In re Form S-1 Registration Statement

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
7,487,935 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 genuineness 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.

</TABLE>