DAUPHIN TECHNOLOGY INC, S-1, 2000-04-28

DAUPHIN TECHNOLOGY INC
S-1, 2000-04-28
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 3570 87-0455038
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Organization) Industrial Classification Number)
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. ____

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ____

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _____

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _____

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following. ____

<TABLE>
CALCULATION OF REGISTRATION FEE

Title of Each Class Amount to be Proposed Maximum Proposed Maximum
of Securities to be Registered Offering Aggregate Offering Amount of
Registered Price Per Share (2) Price(2) Registration Fee
<S> <C> <C> <C> <C>
Common Stock
$0.001 Par Value (1) 33,291,523 $5.00 $166,457,615 $82,563

(1) Includes 15,332,560 outstanding shares to be registered for sale by
certain selling stockholders; 6,000,000 shares issuable to an institutional
investor and 11,958,963 shares issuable upon exercise of warrants and
options.

(2) 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 April 24, 2000.

In accordance with Rule 416 under the Securities Act of 1933, this
Registration Statement also covers such indeterminate number of additional
Shares as may become issuable to prevent dilution resulting from stock
splits, stock dividends or similar transactions as set forth in the Warrants
referred to above.

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.

Balance of Page Intentionally Left Blank

DAUPHIN TECHNOLOGY, INC.
33,291,523 Shares of Common Stock

Cross-Reference Sheet Between Items of Form S-1 and
Form of Prospectus Pursuant to Regulation S-K, Item 501(b)

Item No. Location in Prospectus

1. Forepart of the Registration Statement
and Outside Front Cover Page of Prospectus..........Outside Front
Cover Page

2. Inside Front and Outside Back Cover
Pages of Prospectus.................................Inside Front and
Outside Back Cover
Pages

3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges..............Prospectus Summary;
Risk Factors;
The Company

4. Use of Proceeds.....................................Use of Proceeds

5. Determination of Offering Price.....................Outside Front
Cover Page; Selling
Stockholders and
Plan of Distribution

6. Dilution............................................Dilution

7. Selling Security Holders............................Selling Stockholders
and Plan of
Distribution

8. Plan of Distribution................................Outside Front Cover
Page; Selling
Stockholders and Plan
of Distribution

9. Description of Securities to be Registered..........Outside Front Cover
Page; Description of
Capital Stock

10. Interests of Named Experts and Counsel.............Legal Matters

11. Information with Respect to the Registrant.........Prospectus Summary;
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.

12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities....................................Not Applicable

DAUPHIN TECHNOLOGY, INC.

33,291,523 Shares of Common Stock
$5.00 Bid Price as of April 24, 2000

THE COMPANY

1. We design and sell hand-held, pen-based computers and related electronic
equipment.

2. Our offices are located at:
800 East Northwest Highway
Suite 900
Palatine, Illinois 60067
(847) 358-4406

3. Our shares trade over the counter under the symbol DNTK.

THE OFFERING

1. We are registering 15,332,560 shares of common stock owned by certain
selling stockholders. The shares were issued to the stockholders in
private transactions.

2. We are registering an additional 11,958,963 shares of common stock for
issuance upon exercise of 6,082,963 warrants issued to certain selling
stockholders, and 5,876,000 options issued to employees and consultants,
in private transactions.

3. We are registering an additional 6,000,000 shares of common stock for
issuance under a $100,000,000 equity line with an institutional investor.

The selling stockholders may sell their 15,332,560 shares from time to
time at prices and at terms prevailing at the time of sale. We will receive
none of the proceeds from the stockholders' sale of their shares. We will
however, receive, assuming a current share price of $5.00, $30,000,000 from
the sale of the 6,000,000 shares issued according to the $100,000,000 equity
line.

The selling stockholders may exercise their 6,082,963 warrants and the
employees and consultants may exercise their 5,876,000 options from time to
time prior to expiration. We will receive $44,732,367 from the exercise of
such warrants and options if all are exercised prior to expiration. We will
receive none of the proceeds of any subsequent sale of shares issued under
the warrants or options.

We may issue as many as 20,000,000 shares and warrants for an additional
1,400,000 shares under the $100,000,000 equity line if we make the maximum
draw, assuming a current share price of $5.00. We will receive $100,000,000
from the issuance of shares under the line and $8,400,000, which is 120% of
the assumed current share price, from the exercise of the warrants if we make
the maximum draw and all warrants are exercised prior to expiration, assuming
a current share price of $5.00. We will receive none of the proceeds of any
subsequent sale of shares issued under the equity line and related warrants.

The selling stockholders, employees, consultants and institutional
investor may be deemed to be "underwriters" in connection with any sale of
their shares. If they use any broker-dealers, commissions or profits received
by the broker-dealers may be deemed underwriting discounts or commissions.
Any profits realized by them may be considered underwriting commissions. We
will pay all costs of the registration of the shares. The selling
stockholders, employees, consultants and institutional investor will pay all
brokerage commissions relating to any sale of their shares.

Investment in shares involves a high degree of risk. You should invest
only if you can afford a complete loss. See "Risk Factors" beginning on page
10.

Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has determined whether this prospectus is truthful or
complete. Nor have they made, nor will they make, any determination as to
whether anyone should buy these securities. Any representation to the
contrary is a criminal offense.

The Date of this Prospectus is April 24, 2000

TABLE OF CONTENTS

Prospectus Summary 5 Business 19
Risk Factors 9 Description of Property 23
Forward Looking Statements 14 Management 23
Where You Can Find More Information 14 Executive Compensation 24
Use of Proceeds 14 Principal Stockholders 25
Dilution 15 Description of Capital Stock 25
Market Price of Common Stock Share Transfer Restrictions 25
and Dividend Policy 16 Plan of Distribution 26
Selected Financial Data 17 Selling Stockholders 28
Management's Discussion and Legal Matters 31
Analysis of Financial Condition Experts 31
and Results of Operations 17 Index to Consolidated
Financial Statements F-1

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
SEC, utilizing a "shelf" registration process. Under this process, we may
from time to time issue up to $10,000,000 of common stock, at prices to be
determined at the time of issuance. The shares may be issued in a series of
draws, not to exceed eighteen, but the aggregate dollar amount of these draws
may not exceed $100,000,000. At the time of each draw, we will also issue
warrants without additional consideration and in number to be determined at
the time of the draw.

Each time we offer shares or warrants we will provide a prospectus
supplement that will contain specific information about that offer.

You should read this prospectus together with the additional information
described under the heading, "Where You Can Find More Information."

No person has been authorized to give any information or to make any
representations in connection with this offering except those contained in
this prospectus. Neither Dauphin nor any of the selling stockholders has
authorized anyone else to provide you with different information.

You should not assume that any information contained in this prospectus is
accurate as of any date other than the date on the front page of this
prospectus. Neither Dauphin nor any selling stockholder is making an offer of
shares in any state where the offer is not permitted.

In this prospectus, reference to "we", "us" and "our" refer to Dauphin
Technology, Inc.

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and financial statements, including the notes to the financial
statements, appearing elsewhere in this prospectus.

Our Business

We design and sell hand-held, pen-based computers and related electronic
equipment. We encountered severe financial problems in 1993 and 1994 relating
to a prior product line. On January 3, 1995, we filed a petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code. We operated
under Chapter 11 until July 23, 1996, when we were discharged and proceedings
ended. Since July 1996 we have been engaged primarily in the following
activities:

1. contract manufacturing for third parties;
2. development of the OrasisTM computer; and
3. acquiring personnel, capital and resources for these activities.

We substantially terminated contract manufacturing during the middle of
1999. We did this for two reasons. First, we sought to focus on production
and marketing of OrasisTM. Second, we sought to identify additional products
for development. We believe these activities present greater opportunity for
growth and profitability than contract manufacturing.

We completed development and production tooling for OrasisTM during 1998
and 1999. OrasisTM is a hand-held, pen-based computer that incorporates
features which we believe provide greater power and flexibility to address
performance requirements in a variety of industrial and commercial uses. We
have produced a limited number of OrasisTM units which have been used for
marketing and limited sales. OrasisTM has been favorably received by
industry publications and potential users.

Toward the end of 1999, we identified set-top boxes as a focus for product
development. A set-top box is an electronic device that converts digital
signals into a user acceptable format via other electronic devices such as
television sets, telephones and computers. It is a routing device that
enables you to access and transmit information to take advantage of services
offered by television, telephone, Internet and other providers of
communication, information or entertainment content or media. For example,
you may connect a set-top box to your television to receive cable television
programming and music broadcasts through your television and home sound
system. You may also connect a set-top box to a computer or various office
equipment to serve a variety of commercial uses.

At the end of 1999, we began negotiations with a European
telecommunications firm seeking to develop an ultra-high speed information
technology network. The firm intends to construct, install and operate a
fiber optic cable network system offering telephone, television, Internet and
other services in a European country. It expects to develop the system with
a group of European and several U.S. based Fortune 500 companies. Our
negotiations culminated in February 2000 when we signed an agreement to
provide the set-top box that will be used in that network.

Our Opportunity

OrasisTM features high-end performance while weighing less than 4 pounds.
Standard unit features provide electro-magnetic pen convenience with a wide
variety of audio-visual capabilities. We believe that OrasisTM represents the
lightest, most versatile hand-held computer presently available. We also
believe that our current pricing will be attractive to niche markets such as
medical, government, sales field automation, transportation, utilities and
educational uses.

The set-top box agreement names us as exclusive supplier for a minimum of
2.5 million set-top boxes for the proposed fiber optic network. We must
develop a set-top box with digital decoding capabilities to access video on
demand, telephone, video-telephone and Internet services. We must begin
shipments in the fourth quarter of 2000, with 200,000 units to be shipped by
the end of the year. Shipments of 125,000 units per quarter are required
during 2001 through the beginning of 2005. Based on these scheduled
deliveries, and current pricing under the agreement, total revenues generated
under the agreement will exceed $500 million if we provide all 2.5 million
units. We believe that we can develop and supply these units at a favorable
gross margin, inclusive of shipping and exporting expenses.

The OrasisTM and set-top box products provide us the opportunity to expand
production, marketing and distribution and to attain profitability. However,
the opportunity will be lost if we fail to respond quickly. Our industry is
characterized by swift change and our products may become obsolete if
competitors offer new technologies or features that we do not possess. In
addition, the set-top box agreement requires us to develop and produce ten
prototype units within 120 days. Consequently, we must act swiftly.

Our Strategy

Our goals are to capture the opportunity presented by the OrasisTM and
set-top box products and to become a leading provider of electronic products.
We intend to focus on hand-held computer products and related accessories.
We expect to develop or acquire a variety of products and services that
complement each other or offer production and operating economies. In this
way, we seek to minimize the risk presented by reliance upon any given
product that may become obsolete through technological change.

We expect to increase our development, production and marketing
capabilities by increasing staff and coordinating relationships with outside
manufacturers and sales representatives. Our immediate focus will involve
collection of additional market information to refine OrasisTM capabilities
so we may aggressively market that product to satisfy customer needs. We will
then establish a responsive level of production and distribution. At the same
time, we will increase engineering staff to develop and deliver ten set-top
box prototypes within the 120 days provided under our agreement. Once a
prototype is approved, we will begin production to meet shipment
requirements.

Recent Developments

Since January 1, 2000, we raised over $7.5 million in a private placement
of shares of common stock to accredited investors that ended on March 20,
2000. Proceeds of the placement were used in part to pay outstanding
operating expenses. Approximately $5 million in placement proceeds is
available for marketing Orasis( and developing the set-top box. The
4,945,301 shares and an additional 1,506,858 shares underlying warrants issued
in the private placement are included in this registration to permit
secondary trading by the holders of such shares and warrants.

On April 12, 2000, we entered into a $100,000,000 equity line with an
institutional investor. The equity line is conditioned on registration of the
shares and warrants to be issued to the investor under the line. We may make
up to eighteen draws of up to $10,000,000 per draw, with a $100,000,000
aggregate draw limit.

THE REGISTRATION

Shares to be registered 33,291,523 shares

Total number of shares outstanding
immediately after the registration 75,591,446 shares

Use of proceeds Net proceeds from this
registration are estimated
to be $77,252,367. We will
use the net proceeds to:

1. fund production and marketing of OrasisTM;
2. fund development and production of the set-top box; and
3. increase working capital generally to develop additional products.

SUMMARY FINANCIAL INFORMATION
(In thousands, except per share data)

The following table summarizes the consolidated financial data for our
business. You should read the following summary consolidated financial data
together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and our Consolidated Financial Statements and
accompanying Notes beginning on page F-1 of this prospectus.

Year Ended December 31
INCOME STATEMENT DATA: 1995 1996 1997 1998 1999
- ------------------------- -------- --------- -------- -------- --------
Revenues $ 183 $ 94 $ 2,730 $ 5,368 $ 2,279
Cost of Sales 94 279 4,345 5,758 4,834
Gross Profits (Loss) 89 (185) (1,615) (390) (2,555)
Net Loss, before
extraordinary item (795) (1,397) (3,988) (6,132) (9,306)

EARNINGS PER COMMON SHARE(1):
Loss Before
Extraordinary Item (0.06) (0.06) (0.13) (0.16) (0.20)
Extraordinary Item - 1.58 - - -
Net Income (Loss) (1) (0.06) 1.52 (0.13) (0.16) (0.20)

As of December 31

BALANCE SHEET DATA: 1995 1996 1997 1998 1999
- ------------------------- -------- --------- -------- -------- --------
Total Assets 426 3,402 7,629 6,719 3,372
Long Term Debt - 43 430 303 185
Working Capital (Deficit) (50,980) 3,020 4,511 (260) (917)
Stockholders Equity
(Deficit) (50,910) 3,093 5,676 2,885 552

(1) Income (Loss) per common share is calculated based on the weighted
average number of shares at December 31 of each referenced year.

RISK FACTORS

Investment in our shares is risky and should be considered speculative. In
addition to the information contained in this prospectus, you should consider
carefully the following risk factors before investing in shares offered under
this prospectus:

Risks Related to Our Financial Results

We have had a history of losses and may experience losses in the future
that could result in a decrease in the market price for our shares.

We operated under Chapter 11 of the Federal Bankruptcy Code from January
3, 1995 until July 23, 1996. We cannot determine the effect of such
operations on potential customers, vendors or employees. In addition, we
have had significant operating losses since our inception. For the years
ended December 31, 1997, 1998 and 1999, we had losses of $3,988,017;
$6,131,557; and $9,306,304. We had an accumulated deficit of $38,826,736 as
of December 31, 1999. There can be no assurance that we will ever operate at
a profit or that an investment in our shares will result in any gain to
stockholders.

We have had a limited operating history.

Since July 1996 we have operated without substantial sales or revenue. Our
limited financial performance may make it difficult for you to evaluate the
viability of our business to date and to assess its future viability.

We have terminated one line of business that will result in reduced
revenue.

We substantially terminated contract-manufacturing services at the end of
the second quarter of 1999 as part of our current operating strategy. For
years ending December 31, 1997, 1998 and 1999, contract manufacturing
services conducted through our subsidiary accounted for $2,658,201,
$5,637,574, and $2,134,563 in revenue. We will no longer offer such services
to third parties but will instead apply such activities to develop and
manufacture our own products.

Risks Related to Our Strategy

We may be unable to identify or acquire additional technologies or
products to diversify our product offering.

We expect to avoid reliance upon any given product through acquisition of
additional technologies and products. However, we may be unable to identify
or acquire technologies or products. In that case, we may have to rely upon
our own resources to develop such technologies and products internally. We
may not have sufficient resources to do this. In addition, acquisitions
involve a number of special risks, such as diversion of management's
attention and financing issues, which may have a negative impact on
operations and financial performance.

We may not be able to efficiently integrate any acquired technologies,
products or businesses.

We expect to acquire technologies, products and other businesses to
compliment our operations. For example, we may acquire an existing
engineering business if we require additional staff to develop products and
cannot otherwise retain qualified personnel. There can be no assurance that
we will be able to integrate the operations of any other business
successfully. Acquisitions we do undertake will subject us to a number of
risks, including the following:

1. inability to institute the necessary systems and procedures, such as
accounting and financial reporting systems;
2. failure to retain key personnel;
3. assumption of unanticipated legal liabilities and other problems; and
4. amortization of acquired intangible assets.

In addition, we may acquire technologies or products that prove
incompatible to other products following further development.

Even if we successfully integrate acquired technologies, products or
businesses, we may be unable to effectively manage growth.

We seek to become profitable by expanding sales of OrasisTM, the set-top
box and any new products that we may develop or acquire. To manage growth, we
may be required to:

1. improve existing and implement new operational, production and personnel
systems;
2. hire, train and manage additional qualified personnel; and
3. establish relationships with additional suppliers and strategic partners
while maintaining existing relationships.

Focus on set-top box development under the set-top box agreement subjects
us to risks associated with international operations.

If we successfully develop a set-top box and begin sales under the set-top
box agreement, we risk exposure to international risks, including:

1. greater difficulty in accounts receivable collection and longer
collection periods;
2. unexpected changes in regulatory requirements;
3. reduced protection of intellectual property rights;
4. potentially adverse tax consequences; and
5. political instability.

Focus on set-top box development under the set-top box agreement subjects
us to risks associated with other participants' operations.

We have no control over operations of other businesses involved in
constructing, installing and operating the fiber optic cable network system
for which we expect to provide the set-top box. Decisions regarding
construction, installation and operation of the system will be made without
our input. Such decisions may have a material impact on the system and may
delay shipment of our set-top boxes or otherwise negatively affect our
operations.

Risks Related to Development, Production and Marketing of Our Products

Product development involves substantial expense and resource allocation
that may exceed our capabilities.

We incurred substantial expense in developing the OrasisTM computer. We
expect to continue to develop enhancements and accessory equipment to meet
customer and market demands. The set-top box is in the early stage of
development and although it relies in part upon technology developed for the
OrasisTM, we expect to incur substantial additional expense to fully develop
this product. Delays in development arising from insufficient cash or
personnel resources will hinder our ability to bring these products to market
before competitors introduce comparable products. In that case, we will miss
the opportunity to capitalize on the technological advances, which we believe
such products may offer.

We depend on outside sources for components and may be harmed by
unavailability of components, excessive prices for components or unexpected
delays in component deliveries.

The OrasisTM and set-top box use or will use various component parts, such
as PCBs, microchips and fabricated metal parts. We must obtain these
components from manufacturers and third-party vendors. Our reliance on those
manufacturers and vendors, as well as industry component supply, creates many
risks including the following:

1. the possibility of a shortage of components;
2. increases in component costs;
3. variable component quality;
4. reduced control over delivery schedules; and
5. potential manufacturer/vendor reluctance to extend credit to us.

If there is a shortage of component parts or if the cost of these parts
substantially increases, our operations and our success in the marketplace
could be materially and adversely affected.

Errors or defects in our products could result in customer refund or product
liability claims.

Because our products are complex, they could contain errors or bugs that
can be detected at any point in a product's life cycle. While we continually
test our products for errors and will work with customers to identify and
correct bugs, errors may be found in the future. Although many of these
errors may prove to be immaterial, any of these errors could be significant.
Detection of any significant errors may result in:

1. loss of or delay in market acceptance and sales of our products;
2. diversion of development resources;
3. injury to our reputation; or
4. increased maintenance and warranty costs.

Errors or defects could harm our business and future operating results.
Moreover, because our products will be used in critical computing functions,
we may receive significant liability claims if our products do not work
properly. Our agreements with customers typically do and will contain
provisions intended to limit our exposure to product liability claims.
However, these provisions may not preclude all potential claims. Liability
claims could require us to spend significant time, money and effort in
litigation. They also may result in substantial damage awards. Any such
claim, whether or not successful, could materially damage our reputation and
results of operation.

We will be unable to develop, produce and market our products without
qualified professionals and seasoned management.

Our success depends in large part on our ability to recruit and retain
professionals, key management and operating personnel. We need to complete
development of the set-top box and coordinate production of OrasisTM
computers and the set-top box. We also need to develop marketing channels to
increase market awareness and sales of our products. Qualified professionals,
management and operating personnel are essential for these purposes. Such
individuals are in great demand and are likely to remain a limited resource
in the foreseeable future. Competition for them is intense and turnover is
high. If we cannot attract and retain needed personnel, we will not succeed.

We believe that our future success will depend on our ability to retain
the services of our executive officers. These officers have developed
industry relationships that are critical to our growth and development. They
also will be essential in dealing with the significant challenges that we
expect to arise from anticipated growth in our operations.

We have an ongoing need to expand management personnel and support staff.
The loss of one or more members of management or key employees, or the
inability to hire additional personnel as needed, could have a material
adverse effect on our operations.

Risks Related to Competition within Our Industry

None of our products has achieved widespread distribution or customer
acceptance.

Although the OrasisTM computer has passed the development stage, we have
not established a market for it. The OrasisTM is a solution oriented, pen-
based, mobile computer system, which has been produced and marketed only on a
limited basis. As the market and applications for the OrasisTM increase, we
anticipate its market will increase; however, there is no assurance that this
will happen.

The set-top box is in the early stage of development. We believe we will
successfully develop a set-top box that will conform to specifications under
the set-top box agreement that will address a broad market demand. There can
be no assurance that we will successfully develop the set-top box or that a
market demand will exist if development is completed to set-top box agreement
specifications. In addition, if a market demand exists, it may be met with
alternative products offered by competitors or with pricing that we cannot
match.

Competition in our industry is intense and we may not be able to compete
successfully due to our limited resources.

Our industry is highly competitive and dominated by competitors with
substantial resources. Continuous improvement in product pricing and
performance is the key to future success. At all levels of competition,
pricing has become very aggressive. We expect pricing pressure to continue to
be intense. Many of our competitors are larger and have significantly
greater financial, technical, marketing and manufacturing resources. They
also have broader product lines, greater brand name recognition and larger
existing customer bases. As a result, our competitors may be better able to
finance acquisitions or internal growth or respond to technological changes
or customer needs.

Current and potential competitors also have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address customer needs. There can be no assurance that we
will be able to compete successfully in developing, manufacturing or
marketing our products. An inability to do so would adversely affect our
business, financial condition and market price of our shares.

Our industry is subject to rapid technological change and we may not be able
to keep up.

Rapid technological change, frequent new product introductions and
enhancements, uncertain product life cycles and changes in customer demands
and evolving industry standards, characterize the computer industry. Our
products could become obsolete if products based on new technologies are
introduced or if new industry standards emerge.

Computer equipment is inherently complex. As a result, we cannot
accurately estimate the life cycles of our products. New products and
product enhancements can require long development and testing periods, which
requires retention of increasingly scarce technically competent personnel.
Significant delays in new product releases or significant problems in
installing or implementing new products can seriously damage our business.
In the past, we have experienced delays in scheduled product introductions
and cannot be certain that we will avoid similar delays in the future. We
must produce products that are technologically advanced and comparable to and
competitive with those made by others. Otherwise, our products may become
obsolete or we will fail to achieve market acceptance.

Our future success depends on our ability to enhance existing products,
develop and introduce new products, satisfy customer requirements and achieve
market acceptance. We cannot be certain that we will successfully identify
new product opportunities and develop and bring new products to market in a
timely and cost-effective manner.

We may sell fewer products if other vendors' products are no longer
compatible with ours or other vendors bundle their products with those of our
competitors and sell them at lower prices.

Our ability to sell our products depends in part on the compatibility of
our products with other vendors' software and hardware products. For example,
Orasis( will not sell if it cannot run software, or access resources such as
Internet or telephone services, provided by others. The same is true for the
set-top box. Other vendors may change their products so that they will no
longer be compatible with our products. These vendors also may decide to
bundle their products with products of our competitors for promotional
purposes and to discount the sales price of the bundled products. If this
were to occur, our business and future operating results could suffer.

We have limited intellectual property protection and our competitors may be
able to appropriate our technology or assert infringement claims.

Our products are differentiated from those of our competitors by our
internally developed technology that is incorporated into our products. If we
fail to protect our intellectual property, others may appropriate our
technology and sell products with features similar to ours. This could reduce
demand for our products. We rely on a combination of trade secrets, copyright
and trademark laws, non-disclosure and other contractual provisions with
employees and third parties, and technical measures to protect our
proprietary rights in our products. There can be no assurance that these
protections will be adequate or that our competitors will not independently
develop technologies that are substantially equivalent or superior to ours.

We believe that our products do not infringe upon the proprietary rights
of third parties. However, there can be no assurance that third parties will
not assert infringement claims against us 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
us to commit substantial time and effort, and to incur substantial litigation
expenses, and may subject us to significant liabilities that could have a
material adverse effect on our financial condition and results of operations.

Our business and operations may be affected by government regulations.

Our products may be subject to various federal, state and other government
regulations. For example, we are required to obtain CE approval and
certification for the set-top box under the set-top box agreement. If we do
not receive such approval and certification within thirty days of
application, production will be postponed. In addition, if we do not receive
such approval and certification within sixty days of application, the buyer
may terminate the agreement. The buyer also may terminate the agreement if
permits to install fiber optic and other infrastructure equipment are not
issued. Even if such permits are issued, delays in issuance will delay set-
top box orders and shipments. Consequently, government regulations may
interfere with our business plans could have an adverse effect on our ability
to develop and market our products.

Risks Relating to Our Shares and This Registration

It is likely that our shares will be subject to substantial price and
volume fluctuations due to a number of factors, many of which will be beyond
our control.

The securities markets have recently experienced significant price and
volume fluctuations. The market prices and volume of securities of technology
and development-stage companies have been especially volatile. Market
volatility and other market conditions could reduce the market price for our
shares despite operating performance. In addition, if our operating
performance falls below expectations the market price of our shares could
decrease significantly. You may be unable to resell shares at or above the
registration price. In the past, companies that have experienced volatility
in the market price of their stock have been the subject of securities class
action litigation. If we were the subject of such litigation we could
experience substantial litigation costs and diversion of management's
attention and resources.

We have not paid any dividends and have no expectation of paying dividends in
the foreseeable future.

We have not declared, paid, or distributed any cash dividends on our
shares in the past, nor are any cash dividends contemplated in the
foreseeable future. There is no assurance that our operations will generate
any profits from which to pay cash dividends. Even if profits are generated
through operations in the future, our present intent is to retain any such
profits for acquisitions, product development, production and marketing, and
for general working capital requirements.

Our shares are not widely traded.

There is only a limited market for our shares. 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. This 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.

Our shares are subject to special trading rules relating to "penny stocks"
which restrict trading.

Our shares are covered by an SEC rule that imposes 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. The rule may
affect the ability of broker-dealers to sell our shares and also may affect
your ability to sell shares in the secondary market.

We have broad discretion in how we use any proceeds of this registration, and
we may not use these proceeds effectively.

We could spend any proceeds received from this registration in ways, which
you may not agree or that do not yield a favorable return. Our primary goals
in conducting this registration are to broaden the public market for our
shares and to access funds necessary to develop, produce and market our
products. Proceeds also may be applied to future strategic acquisitions that
may help us to these accomplish these goals, but we not now engaged in any
negotiations any acquisition.

FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. Any statement that is not a statement
of historical fact constitutes a forward-looking statement. You can identify
these statements by forward looking words such as "may," "will," "intend,"
"believe", "anticipate," "estimate," "expect," "project" and similar
words. You should read statements that contain these words carefully because
they discuss our future expectations, contain projections of our future
results of operation and of our financial condition or state other forward
looking information. This prospectus also includes third party estimates
regarding the size and growth of markets and mobile computer equipment usage
in general.

You should not place undue reliance on these forward-looking statements.
The sections captioned "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and results of Operations," as well as any
cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ
materially from our expectations.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of
the forward looking statements after the date of this prospectus or to
conform these statements to actual results or to changes in our expectations,
except with respect to material developments related to previously disclosed
information.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read and copy these reports, proxy
statements and other information at the SEC's public reference rooms at 450
Fifth Street, N.W., Judiciary Plaza, Washington D.C.; 500 West Madison
Street, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such materials can be obtained from the
public reference rooms at prescribed rates. You can obtain information
regarding operation of the public reference rooms by calling the SEC at 1-
800-SEC-0330. Such material can also be inspected and printed from the SEC's
internet site located at http://www.sec.gov.

We have filed with the SEC a registration statement on Form S-1 with
respect to the shares. This prospectus constitutes a part of the registration
statement but does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information with respect to the shares, and us you
should refer to the registration statement and the exhibits and schedules
filed as apart of the registration statement. Statements contained in this
prospectus as to the contents of any contracts or other documents are not
necessarily complete; reference is made to the copy of such contract or
document filed as an exhibit to the registration statement. Each statement is
qualified in all respects by such reference. Copies of the registration
statement, including all exhibits and schedules, may be obtained from the
SEC's public reference rooms upon payment of the prescribed fees. You can
also examine them without charge at the public reference rooms or the SEC's
Internet site.

USE OF PROCEEDS

If all shares underlying warrants and options are issued and we draw the
$30,000,000 available under the equity line, assuming a current share price
of $5 and 420,000 warrants arising from that draw are exercised, net proceeds
of this registration are estimated to be $77,252,367 assuming a current share
price of $5.00.

The primary purposes of this registration are to:

1. broaden the market for our shares;
2. fund production and marketing of OrasisTM;
3. fund development and production of the set-top box and;
4. increase working capital generally to develop additional products.

We expect to use a portion of net proceeds to retain qualified marketing
and other personnel to effectively promote the OrasisTM computer. This will
include advertising and other promotional expenses, as well as assembly costs
to produce an adequate supply of this product.

We expect to use a portion of net proceeds to retain engineering and
production personnel to complete set-top box design and production of units
sufficient to meet set-top box delivery requirements. We intend to conduct
assembly at the facility we previously used for contract manufacturing, but
may need to purchase additional production equipment.

Finally, we will use proceeds to develop new products so that we are not
dependent on any given product and to remain competitive. We may buy new
technologies or products. In addition, if we determine that qualified
personnel or equipment is not generally available, we may use proceeds to
acquire businesses that can satisfy our requirements. However, we are not
now engaged in any negotiations regarding any acquisition.

DILUTION

As and to the extent that we issue any shares in future transactions,
current stockholders' ownership percentages will de diluted.

MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY

Our shares trade 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 our shares. The prices represent
quotations between dealers and do not include retail mark-up, markdown, or
commission, and do not necessarily represent actual transactions. The number
of stockholders on record as of March 31, 2000 is approximately 5,500. Some
of the stockholders on record are brokerage firms that hold shares in the
"street name". Therefore, we believe the total number of stockholders may be
greater than 5,500.

1997 1998 1999
High Low High Low High Low
First Quarter $1.625 $1.187 $1.625 $1.016 $1.219 $0.453
Second Quarter 1.219 0.750 1.391 0.875 0.938 0.391
Third Quarter 1.172 0.875 2.031 0.875 0.750 0.266
Fourth Quarter 2.590 1.063 0.906 0.500 0.703 0.219

The closing bid price of a share on April 21, 2000 was $5.00. We have
never paid dividends and do not anticipate paying any dividends in the
foreseeable future. We currently intend to retain earnings, if any, for
product development, production and marketing, strategic acquisitions and for
general working capital requirements.

SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)

Year Ended December 31
1995 1996 1997 1998 1999
- ------------------------- -------- --------- -------- -------- --------
INCOME STATEMENT DATA:
Revenues $ 183 $ 94 $ 2,730 $ 5,368 $ 2,279
Cost of Sales 94 279 4,345 5,758 4,834
Gross Profits 89 (185) (1,615) (390) (2,555)
Net Loss before
extraordinary item (795) (1,397) (3,988) (6,132) (9,306)

EARNINGS PER COMMON SHARE:
Loss Before
Extraordinary Item (0.06) (0.06) (0.13) (0.16) (0.20)
Extraordinary Item - 1.58 - - -
Net Income (Loss) (0.06) 1.52 (0.13) (0.16) (0.20)

As of December 31
1995 1996 1997 1998 1999
- ------------------------- -------- --------- -------- -------- --------
BALANCE SHEET DATA:
Total Assets 426 3,402 7,629 6,719 3,372
Long Term Debt - 43 430 303 185
Working Capital (Deficit) (50,980) 3,020 4,511 (260) (917)
Stockholders Equity
(Deficit) (50,910) 3,093 5,676 2,885 552

(1) Income (Loss) per common share is calculated based on the weighted
average number of shares at December 31 of each reported year.

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

Results of Operations 1999 compared to 1998 and 1997

We are engaged in electronic product engineering, development and sales.
Contract manufacturing services were conducted through the second quarter of
1999 through our wholly owned subsidiary, R. M. Schultz & Associates, Inc.
All of our activities are highly competitive and sensitive to many factors
outside of our control, including general economic conditions affecting our
customers and availability of components.

Dauphin Technology, Inc.

Revenue for Dauphin Technology, Inc. increased from $72,000 in 1997 to
$386,000 in 1998 and then decreased to $274,000 in 1999. The revenue decrease
from 1998 to 1999 was a result of financial constraints, which prohibited the
purchase of components necessary to complete the production of Orasis units.

The gross profit margins are not comparable for the periods due to the
inventory write downs and fluctuation in sales. During 1997 and 1998, we
wrote down all obsolete inventory. Originally, such inventory was to be used
in the design of Orasis, but the introduction of new components and newer
design methods rendered such inventory obsolete.

Selling, general and administrative expenses increased to approximately
$2.63 million in 1999 from $2.55 million in 1998 and $1.25 million in 1997.
The increase from 1998 to 1999 was due to increase in professional and
consulting fees incurred as a result of capital raising efforts. During the
third and fourth quarters of 1999, we began cost reduction measures managing
to reduce certain expenses by as much as fifty percent. The increase from
1997 to 1998 was due to additional staffing in sales and marketing
departments and expense related to product demonstrations. We supplied our
sales force with 200 Orasis demonstration units, at an average cost of
$2,500 per unit, to present the product at trade shows and sales
opportunities. We also advertised Orasis in several trade magazines.
Further, internal operations were enhanced with additional personnel.

R.M. Schultz & Associates, Inc.

Revenue for RMS increased from $2.7 million in 1997 to $5.6 million in
1998, but decreased to $2.13 million in 1999 due to our decision to move away
from contract manufacturing and towards new product design and development.

The gross profit from 1998 to 1999 is not comparable due to the inventory
write down and the decrease in revenue. The gross profit margin for RMS
decreased from 9% in 1997 to 6% in 1998 due to an increase in reserve for
obsolescence and startup inefficiencies in manufacturing of Orasis?.

Selling, general and administrative expenses increased in 1999 to
approximately $1.5 million from $712,000 in 1998 and $233,000 in 1997. The
increase in 1999 from 1998 was primarily due to impairment of goodwill and
cost associated with cost reductions. The increase from 1997 to 1998 was
primarily due to full year of operations under the Dauphin umbrella.

Other Expenses and Net Loss

Our net operating loss increased to approximately $9.3 million in 1999
from $6.1 million in 1998 and $4.0 million in 1997. The increase in net loss
from 1998 to 1999 was due to all items mentioned in the RMS sections above.
The increase in the net loss from 1997 to 1998 was due to an increase in
research and development expense from $827,000 to $1.6 million, an increase
in sales and marketing expense, an increase of interest expense from $76,000
to $1 million in 1998 and additional inventory write-downs. We spent in
excess of $2.4 million on the development and an additional $676,000 on
production tooling for Orasis.

Liquidity and Capital Resources

Absence of Operating Profit
We have incurred a net operating loss in each year since our founding. As
of December 31, 1999 our accumulated deficit was $38,826,736. We expect to
incur operating losses over the near term. Our ability to achieve
profitability will depend on many factors including our ability to
manufacture and market commercially acceptable products. There can be no
assurance that we will ever achieve a profitable level of operations or if
profitability is achieved that it can be sustained.

Early Stage of Development of Our Products
From June of 1997 through June of 1999, we were principally engaged in
research and development activities involving Orasis. Since then, we have
been working on new technologies, in particular the design and development of
the set-top box. Our products have been sold in limited quantities and there
can be no assurance that a significant market will develop for such products
in the future. Therefore, our inability to develop, manufacture and market
our products on a timely basis may have a material adverse effect on our
financial results.

Financing Considerations
We raised over $7.5 million in a private placement of shares of common
stock to accredited investors that ended on March 20, 2000. Proceeds of the
placement were used in part to pay outstanding operating expenses.
Approximately $5 million in placement proceeds is available for marketing and
manufacturing OrasisTM and developing the set-top box.

On April 12, 2000, we entered into a common stock purchase agreement,
escrow agreement and registration rights agreement with an institutional
investor. These agreements provide a $100,000,000 equity line conditioned
on registration of the shares and warrants to be issued under the agreements.
We may make up to eighteen draws of up to $10,000,000 per draw, with a
$100,000,000 aggregate draw limit. Upon each draw, we must issue shares to
the investor based upon the amount of the draw and a price determined by
reference to the 22-day average trading price and 45-day average volume of
our shares. Upon each draw, we also must issue to the investor warrants to
purchase additional common shares in an amount equal to 7% of the shares
issued. Each warrant shall have a three-year term and an exercise price equal
to 120% of the daily volume weighted average of our shares on the trading day
preceding the draw.

Inflation and Seasonality
Due to the nature of our products and current market trends, an increase
in the volume of production should generally result in a reduction of cost
per unit. We do not anticipate any major shifts in this trend in a
foreseeable future. Also, since we target industrial customer and not retail
outlets, we should not be affected by the seasonal nature of consumer
purchasing.

BUSINESS

Overview
We design and sell hand-held, pen-based computers and related electronic
equipment for home and business use from facilities in Schaumburg and
McHenry, Illinois. We currently employ approximately 15 people. Our
employees consist of engineering, sales and marketing, administrative and
other personnel. For the past several years, we have functioned as a
development-stage company engaged primarily in the following activities:

1. contract manufacturing for third parties;
2. development of the OrasisTM computer; and
3. acquiring personnel, capital and resources for these activities.

We conducted contract manufacturing from June 1997 to June 1999. We
terminated contract manufacturing to focus on production and marketing of
OrasisTM and to identify additional products for development. We believe
these activities present greater opportunity for growth and profitability
than contract manufacturing.

We began development of OrasisTM in the fall of 1997. We continued
development through 1998. During that year, we began production tooling to
produce a sufficient number of prototype units to begin promotion. We
completed development and production tooling during 1999. We produced a
limited number of units and used them for marketing and limited sales. To
date, however, we have not had sufficient funds to aggressively promote
Orasis.

Toward the end of 1999, we identified the set-top box as a focus for
product development. At the end of 1999, we began negotiations with a
European telecommunications firm seeking to construct, install and operate a
fiber optic cable network system offering telephone, television, internet and
other services in a European country with a group of European and several
U.S. based Fortune 500 companies. On February 11, 2000 we signed an
agreement to develop and supply the set-top box that will be used in that
network.

Strategy

We seek to capture the opportunity presented by the OrasisTM and set-top
box products and to become a leading provider of electronic products. We
intend to focus on hand-held computer products and related accessories, and
will avoid dependency on any given product. We expect to develop or acquire
a variety of products and services that complement each other or offer
production and operating economies. In this way, we seek to minimize the
risk presented by reliance upon any given product which may become obsolete
through technological change.

We expect to increase our development, production and marketing
capabilities by increasing staff and coordinating relationships with outside
manufacturers and sales representatives. Our immediate focus will be
collection of additional market information to refine OrasisTM capabilities
so we may aggressively market that product to satisfy customer demands. We
will then establish a responsive level of production and distribution. At
the same time, we will increase engineering staff to develop and deliver ten
set-top box prototypes within the 120 days provided under the set-top box
agreement. Once a prototype is approved, we expect to ramp-up production at
our assembly facility which was used previously for contract manufacturing.
We also may use outside manufacturers for this purpose.

Products

Orasis is a hand-held computer developed with features to meet the
expressed desires of many potential customers. It was developed with the
multi-sector mobile user in mind. It incorporates an upgradable processor,
user upgradable memory and hard disc, various modules and mobile devices to
satisfy the needs of various industries. Basic unit features are as follows:

1. The unit weight is approximately 3 pounds;
2. The battery operating life is from 2 to 8 hours;
3. The unit is equipped with 166 MHz Pentium MMX processor, which can be
upgraded to 266 MHz Pentium MMX;
4. The standard unit is equipped with 32 MEG of memory upgradable to 128 MEG
of RAM;
5. Standard two type II or a single type III PCMCIA slot;
6. 2.1 GB expandable to 6.4 GB hard drive;
7. Built in speaker and microphone, including sound blaster for voice
recognition and multimedia;
8. Video conferencing port;
9. Modular expansion bay with docking connector;
10. Electro-magnetic pen, voice activation, and an Infra Red keyboard for
data input; and
11. CDROM drive, floppy drive, DVD drive, heads-up goggles, GPS module and
other attachable devices.

Much more flexible and powerful than a personal digital assistant, Orasis?
is an MS-DOS/Windows 95/98/2000, Windows NT and Linux compatible machine.
Although the basic unit carries a number of advanced features, the most
significant advantage of Orasis? is its upgradability. The expansion bay
allows for the use of CDROM, floppy drive, wireless radio, extended battery
pack or any other device through its PCI expansion bus. Unlike competitor
models, Orasis? does not lock the customer into a single format. Orasis?
affords a customer complete flexibility and versatility offered by no other
mobile computer presently on the market. It is a time, labor, and money-
saving device that can be custom-configured with a variety of options to meet
the end-user's needs.

We recently started to design our set-top box. Pursuant to the set-top box
agreement, we will incorporate an integrated modular design to address
present and future technologies. Our set-top box will be an ADSL/VDSL access
unit with he capability to provide video on demand/TV, video-telephone
services, voice telephony and Internet access using a computer. The set-top
box will connect to a gigabit fiber optic infrastructure to provide ultra
high-speed communication services to residential, commercial, civil,
educational, governmental and other users.

Our set-top box will include the following features:

1. ADSL/VDSL modem, which will connect to the client's infrastructure;
2. antenna connector for external interfacing;
3. TV-out connector for TV hook-up;
4. Ethernet option for a PC connection;
5. one set of RCA audio connectors;
6. universal power supply for 110/230V operation; and
7. a set of batteries providing up to 6 hours of telephone operation in case
of a power failure.

The initial version of the set-top box will use Windows CE as its
operating system. It will connect to the proposed fiber optic network with
routing capabilities to direct and re-direct data, voice, and video traffic.
Certain dedicated gateways will connect the network with the other telephone
systems and access the client's state- of- the- art video on demand service
to provide a first class library of movies, as well as live local and
international TV channels, public interest programs and entertainment.

Markets

TV, radio and newspapers remind us daily of people's ability to contact
the farthest reaches of our planet in seconds. We hear about business
meetings that take place over the wires, on a large TV screen instead of in
person. Increased Internet use for commerce and communication drives us to
reach for the things that only a few years ago we read about in science
fiction books. Constant improvements in digital and cellular technology allow
anyone to constantly "stay connected." The mobile computer plays a
significant role in this " brave new world."

Based on recent statistics, the mobile computing devices market is
approximately $95 billion in annual revenue. Sales of laptop and notebook
computers represent a large portion of this market. However, the growth rate
of hand-held pen-based devices exceeds that of laptops and notebooks. Based
on the latest Frost and Sullivan studies, the total pen-tablets market, in
which Orasis competes, is several billion dollars and is growing at
approximately twenty five percent per year. We estimate that market may be
growing even faster than latest predictions.

Unlike several years ago, the pen-based computer market is more defined
and is ready for a product such as Orasis. The total mobile market includes
more than sixty products that fall within the personal digital assistant
category of the pen-based market. These devices include electronic
organizers, mobile fax machines and electronic notepads. Most of these
devices are palm-top size, requiring either pen or keyboard input. In
addition, there are approximately twenty devices that would qualify as
computers or pen tablets. Orasis belongs in the latter category.

Until the introduction of Orasis, pen-based devices were no match for
laptops. Processor speed, limited expandability and memory limitations of
hand-held computers made notebooks and laptops much more popular with the
mobile workforce. Orasis bridges the gap between notebook or laptop computers
and pen-based computers. Orasis added features and flexibility of also might
attract public attention, thereby expanding the overall category.

The set-top box is another device that will serve the desire to "stay
connected". The set-top box market is relatively new. According to
International Data Corporation, the worldwide installed base of set-top boxes
was a mere 2.2 million units in 1998. It is expected to exceed 14.8 million
units during 2000 and to grow to over 35.5 million units during 2002. We
believe the market will continue to expand as set-top box capabilities are
refined and people increase their desire to access television, telephone,
Internet services for communication, information and entertainment purposes.

Sales and Marketing

Orasis is a niche product. We target vertical markets to distribute
Orasis. Initially, we hired six mobile industry experts, or channel managers,
to target various industries. Each channel manager was to find a number of
software solution providers for a particular industry and to partner with
them to offer a final electronic solution to the end user. They targeted
medical, government, sales field automation, transportation, utilities and
education industries. During 1998, approximately 60 VAR's signed Orasis
distribution agreements. During 1999, we changed our marketing strategy and
terminated all channel managers. Currently, all VAR relationships and sales
inquiries are handled internally by our sales and customer service personnel.

We are still defining our sales and marketing strategy for the set-top
box. Our immediate focus is to design a product meeting specifications under
the set-top box agreement signed in February. If we design a unit that
satisfies specifications under the agreement, we may capture sales of a
minimum of 2.5 million set-top boxes for the proposed cable network. Unit
shipments would begin in the fourth quarter of 2000, with 200,000 units to be
shipped by the end of the year. Shipments of 125,000 units per quarter are
required during 2001 through the beginning of 2005. After delivery of the
first 1.2 million units, the buyer may seek market pricing from sources other
than us, but we have a right of first refusal to continue production at any
bona-fide market price obtained. Based on these scheduled deliveries, and
current pricing under the agreement, total revenues generated under the
agreement will exceed $500 million if we provide all 2.5 million units.

Competition

A dozen manufacturers including Epson, Fujitsu, IBM, Mitsubishi and
Kalidor produce "pen tablets". The list of competitors may be imposing, but
we feel that Orasis has advantages over the competition including
flexibility, adaptability and compactness. Based on the opinions of industry
experts such as Pen Computing magazine, units produced by these firms are
less capable than Orasis. Such units are generally designed with a single
processor and become obsolete as soon as new processors or faster software is
introduced. Also, due to the fact that major components of Orasis are
upgradable, the life expectancy of the product is estimated to be 5 years.
Over time, consumers' return on investment of Orasis should be much higher
than any existing computer.

Scientific Atlanta and General Instruments are among the companies
presently manufacturing set-top boxes. If we satisfy specifications under
the set-top box agreement, our set-top box will meet or exceed features
available from exiting units. Our multi-purpose set-top box, in conjunction
with the wide bandwidth infrastructure, will provide advanced Internet
capabilities, as well as a wide span of conveniences, including cost savings
and many other benefits. It will adapt to any of the existing communication
standards and offer the allocated bandwidth to users. Users will have access
to more bandwidth than any time in the past. They will be able to connect
directly to the set-top box and with the available bandwidth will be able to
accommodate Web hosting, Web browsing, email, eCommerce, voice/video
conferencing and video on demand, very economically. In addition, our unit
will support both U.S. and European TV viewing standards.

Our products, including Orasis and the set-top box, will gain market
acceptance only as long as they offer leading technology and features. Any
time a new product is introduced, there is a small window of opportunity
before clones are developed. Being a small company, we feel our strength is
in our flexibility to meet industry demands and to partner with solution
providers to jointly offer unique solutions for problems that customers
encounter.

Customer Dependence

Our products have not yet achieved market acceptance and Orasis has been
sold only on a limited basis. Consequently, we are not presently dependent on
any one customer. If our set-top box satisfies set-top box agreement
specifications, we will be dependent upon the buyer for substantially all of
our sales, unless we acheive suuccess in promoting Orasis. In any event, we
will not receive any revenue under the set-top box agreement until 360 days
following delivery of acceptable units.

Research and Development

Due to our relatively small size, most of our product development was done
in cooperation with three contract engineering firms. Approximately
$1,576,000 was spent on research and development in 1998 and approximately
$510,000 more was spent in 1999. We retained all rights and intellectual
property acquired during the development of Orasis.

We are planning to continue research and development of electronic
products to complement Orasis. In addition to peripheral devices such as
office and mobile docking station, we are planning to work on various scaled
down, higher-tech devices besides Orasis.

We began research and development of set-top boxes during the third
quarter of 1999, in connection with negotiating the set-top box agreement.
Costs incurred at that time were not material.

Production

Because the main components of Orasis are complex, the assembly of the
motherboard is out-sourced. SMT Unlimited, LLC supplies us with the ready
assembled and tested motherboards for final assembly. SMT Unlimited, LLC is
capable of producing hundreds of motherboards per day.

RMS assembles, tests and ships the final product to our customers. RMS
performs all manufacturing support for the product. With additional staffing,
RMS is capable of assembling 200 Orasis units per day.

We currently expect to assemble set-top boxes at our RMS facility.
However, we may decide later to use an outside manufacturer.

Source and Availability of Raw Materials

Component parts are obtained from suppliers around the world. Since the
development of Orasis commenced late in 1997 and throughout 1998, all
components used in the design are state of the art and are Year 2000
compliant. Components such as the latest mobile Intel processors, color
video controllers and CACHE memory chips are in high demand. Such components
are available in short supply. However, management does not anticipate any
delays in production.

Software Licensing Agreements

We lease BIOS (basic input/output software) for Orasis from Phoenix
Technologies Ltd. ("Phoenix"). Phoenix designs, develops, markets and
licenses proprietary software products for original equipment manufacturers
and related software for personal computers. A Master License Agreement was
signed for the right of distribution of Phoenix software. We pay $4 per unit
sold under this license.

We are a party to a Pen Products Original Equipment Manufacturing
Distribution License Agreement and Sub-license Agreement for Dedicated
Systems with Annabooks Software LLC ("Annabooks"), the supplier of products
offered by Microsoft Corporation ("Microsoft"). Microsoft is the third-party
beneficiary under these agreements. These agreements authorize us to install
DOS, Windows 95, 98, 2000 and NT, and Windows for Pen, among others, on the
computers that we sell. We must pay Annabooks royalties for each unit sold,
although quantity discounts are available. We pay approximately $78 per
license for each computer we sell.

Patents, Copyrights and Trademarks

Because of rapid technological and design changes inherent to the computer
industry, we do not believe that, in general, patents and/or copyrights are
an effective means of protecting our interests. However, due to the unique
configuration of the Orasis, we did patent its mechanical design and
processor upgradability concepts. We also expect to patent our set-top box
design following development. We attempt to maintain our proprietary rights
by trade secret protection and by the use of non-disclosure agreements. It is
possible that our products could be duplicated by competitors and duplication
and sale could therefore adversely affect on our business. However, we
believe that the time spent by competitors engineering the product would be
too long for the rapidly changing computer industry.

In 1997 the Company applied for and received a trademark on the name
"Orasis."

Assembly Capability

Using automatic assembly equipment, we are capable of assembling large
quantities of electronic products through our subsidiary, RMS. The majority
of the work performed by RMS since its inception has been in a through-hole
or large component electronic assembly. Since June, 1997 we have spent more
than $750,000 to build a 5,000 square foot environmentally controlled room
inside the RMS facility and to acquire surface mount equipment. Surface mount
assembly equipment allows for high-speed/high-tech component placement on a
printed circuit board, a newer method of product assembly. Under our current
strategy, we expect to apply these contract-manufacturing capabilities our
own products, including assembly of Orasis? units, set-top boxes and other
products, which we may develop in the future.

DESCRIPTION OF PROPERTY

Our 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. We pay approximately $12,000 per month to
rent the facilities. In December 1998, in conjunction with upgrading the
facilities, we signed a five-year lease extension. The lease called for
increased rent, but provided for reconstruction of facilities to better suit
our needs. We believe the space will be adequate for the foreseeable future.

RMS facilities are located at 1809 South Route 31, McHenry, Illinois
60050. The facilities are leased from Enclave Corporation, a company that is
owned by Richard M. Schultz, past President of RMS. RMS occupies 53,000
square feet of space, of which 7,000 square feet is for office space and
5,000 square feet is surface mount portion of production. The lease has a
five-year term starting on June 6, 1997 with an optional extension for an
additional five years. The rent is approximately $14,000 per month. We
believe the space will be adequate for the foreseeable future.

MANAGEMENT
Directors and Executive Officers

The following table sets forth the name, age and position, present
principal occupation and employment history for the past five years for each
of our directors and executive officers, as of April 24, 2000.

Name Age Present Office

Andrew J. Kandalepas 48 Chairman of the Board of Directors
Chief Executive Officer

Christopher L. Geier 37 Executive Vice President, acting CFO

Jeffrey L. Goldberg 47 Secretary, Director

Gary E. Soiney 59 Director

Andrew Prokos 37 Director

Mr. Kandalepas became Chairman of the Board in February 1995. He was named
CEO and President in November of 1995. Mr. Kandalepas is the founder and
President of CADserv, an engineering services firm. He 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 in 1986.

Mr. Geier is Executive Vice President and is currently the acting CFO. He
leads ours overall organization, including its subsidiary business. Prior to
his appointment, Mr. Geier founded and managed several multimillion-dollar
private corporations, as well as a $100 million region of a large retail
distribution company. He earned an MBA from the University of Chicago
Graduate School of Business and received a Bachelor of Arts in Criminal
Justice/Pre Law from Washington State University.

Mr. Goldberg has served as Secretary and as a Director since June of 1995.
He is a partner at FERS, an international accounting firm. He formerly
served as the President of Financial Consulting Group, LTD., a lawyer at the
Chicago law firm of Goldberg and Goodman, and prior to that, was a tax senior
with Arthur Andersen LLP. Mr. Goldberg is an attorney, CPA and certified
financial planner.

Mr. Soiney has served as a Director since November of 1995. He graduated
from the University of Wisconsin in Milwaukee with a degree in Business
Administration. He is currently a 75% owner in Pension Design & Services,
Inc., a Wisconsin corporation, which performs administrative services for
qualified pension plans to business primarily in the Mid-West.

Mr. Prokos has served as a Director since February 1995. He is also Vice-
President of CADserv and has served in this capacity since 1995. Mr. Prokos
is a graduate of DeVry Institute with an Associate Degree in Electronics.

All directors and executive officers are elected annually and hold office
until the next annual meeting of the stockholders or until their successors
have been elected and qualified.

Family Relationship

Andrew Prokos is a cousin of Andrew Kandalepas.

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.

Involvement by Management in Public Companies

None of our directors or executive officers are directors of any other
public companies.

Indemnification of Directors and Officers

We have adopted a by-law provision which stipulates that we 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 reasonably believed to be in, or not opposed to, our best
interest, 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 the
company, 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 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.

EXECUTIVE COMPENSATION

At the Board of Directors meeting held on December 29, 1998, the Board
established two committees, Audit and Compensation. SEC regulations mandate
disclosure of all compensation including salary, bonus and stock options,
paid to executive officers and directors that exceeds $100,000. No director
or executive officer was paid compensation exceeding $100,000 during 1997,
1998 or 1999. Our Chairman, Chief Executive Officer and President, Andrew
Kandalepas, received compensation of $84,000 for the year ending December 31,
1999.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

CADserv, an engineering services company based in Schaumburg, Illinois, is
controlled by Andrew Kandalepas. It has contributed to the design, packaging
and manufacturing of our product lines and will likely continue in this
capacity in the future. We paid CADserv $0 during 1999 and $140,192 in 1998.

In 1999 we borrowed $286,000 from related entities including two members
of the Board of Directors.The loans accrued interest at 1% per month until
maturity. As of the date of this prospectus all loans including interest have
been paid off.

RMS facilities are leased from Enclave Corporation, a company that is owned
by Richard M. Schultz, former President of RMS. We paid $179,684 of rent and
$24,150 of real estate taxes for the property lease in 1999 and $165,660 of
rent and $22,500 of real estate taxes for the property lease for 1998.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding shares owned
beneficially as of March 31 2000, by (i) each of our directors and executive
officers, (ii) all directors and executive officers as a group, and (iii)
each person that beneficially own more than 5% of our shares:

</TABLE>
<TABLE>

Amount and Nature of
Name of Beneficial Owner Position Beneficial Percent
Shares Owned of Class
<S> <C> <C> <C>
Andrew J. Kandalepas Chairman, Chief 3,826,837 (1) 7.1%
Executive Officer & President

Christopher L. Geier Executive Vice President 500,000 (1) 0.9%

Jeffrey L. Goldberg Secretary, Director 497,800 (2) 0.9%

Gary E. Soiney Director 50,000 (2) 0.1%

Andrew Prokos Director 314,000 (2) 0.6%

Morgan Stanley, Dean Witter & Co.
As trustees for Bank Lyonnais ------ 3,909,000 7.2%

Officers and Directors and
5% Beneficial Owners (as a group) 9,097637 (3) 16.8%

(1) Includes options to purchase 500,000 shares under immediately exercisable
options.
(2) Includes options to purchase 50,000 shares under immediately exercisable
options.
(3) Includes options to purchase 1,150,000 shares under immediately
exercisable options.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 100,000,000 shares of $0.001 par
value common stock and 10,000,000 shares of $0.01 par value preferred stock.
As of April 24, 2000 there were 57,632,483 shares of common stock outstanding
and beneficially owned by approximately 5,500 beneficial stockholders, and no
shares of preferred stock were outstanding. The following summary is
qualified in its entirety by reference to our certificate of incorporation,
which is available upon request.

Common Stock

The holders of common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding preferred stock,
holders of common stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available therefor
(see "Market Price of Common Stock" and "Dividend Policy"). In the event of a
liquidation, dissolution or winding up of the company, holders of the common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding preferred
stock. Holders of common stock have no right to convert their common stock
into any other securities and have no cumulative voting rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.

Preferred Stock

The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders, and may include voting rights
(including the right to vote as a series on particular matters), preferences
as to dividends and liquidation, conversion and redemption rights and sinking
fund provisions. We have no present plans to issue preferred stock. However,
the issuance of any such preferred stock could affect the rights of the
holders of common stock and reduce the value of the common stock. In
particular, specific rights granted to future holders of preferred stock
could be used to restrict our ability to merge with or sell our assets to a
third party, thereby preserving control of the company by present owners.

Warrants and Options

As of March 27, 2000 warrants to purchase 6,082,963 shares of common stock
were issued and outstanding in the hands of approximately 30 investors. The
warrants are convertible at any time. The strike prices of these warrants
range from $0.20 to $2.00. The warrants expire between three and five years
from the date of issuance. The warrants include a change of form provision in
them so that if a change in the form of the common stock occurs due to stock
splits, stock dividends, or mergers, the holders are entitled to receive a
pro-rata increase of shares at a discounted price. However, the holders of
the warrants do not have any voting rights and are not entitled to receive
any cash or property dividends declared by the Board of Directors until they
convert the warrants into common shares. If warrants are exercised, the
common stockholders pro-rata share of the company will be diluted. If such
warrants are not exercised within the allotted time, they expire.

As of March 27, 2000 options to purchase 3,880,500 shares of common stock
were issued and outstanding in the hands of certain consultants resulting
from funding raised by such consultants. These options are exercisable at any
time. Options for 18,000 shares are exercisable at $1.00 per share and the
remainder is exercisable at $10.00 per share. These options expire between
three and five years from the date of issuance. Additionally, there are
2,241,000 options issued and outstanding in the hands of more than twenty
employees and former employees. These options are exercisable at any time for
common stock at prices ranging from $0.50 to $1.00 per share. These options
expire between three and five years from the date of issuance. If such
options are exercised, the common stockholders' pro-rata share of the company
will be diluted. If such options are not exercised within the allotted time,
they expire.

On April 12, 2000, we entered into a common stock purchase agreement,
escrow agreement and registration rights agreement with an institutional
investor. These agreements provide a $100,000,000 equity line conditioned on
registration of the shares and warrants to be issued under the agreements.
We may make up to eighteen draws of up to $10,000,000 per draw, with a
$100,000,000 aggregate draw limit. Upon each draw, we must issue shares to
the investor based upon the amount of the draw and a price determined by
reference to the 22-day average trading price and 45-day average volume of
our shares. Upon each draw, we also must issue to the investor warrants to
purchase additional common shares in an amount equal to 7% of the shares
issued. Each warrant shall have a three-year term and an exercise price equal
to 120% of the daily volume weighted average of our shares on the trading day
preceding the draw.

Transfer Agent and Registrar

Our transfer agent and registrar is American Stock Transfer and Trust
Company, 40 Wall Street, New York, NY 10005 (212) 936-5100.

PLAN OF DISTRIBUTION

We are registering the following securities:

1. 15,332,560 shares of common stock owned by certain selling stockholders.
The shares were issued to the stockholders in private transactions.

2. An additional 11,958,963 shares of common stock for issuance upon exercise
of 6,082,963 warrants issued to certain selling stockholders, and 5,876,000
options issued to employees and consultants, in private transactions.

3. An additional 6,000,000 shares of common stock for issuance under a
$100,000,000 equity line with an institutional investor.

The selling stockholders' may sell their 15,332,560 shares from time to
time at prices and at terms prevailing at the time of sale.

We are registering 6,420,000 shares, which includes 420,000 shares
underlying warrants to be issued under the $100,000,000, assuming a share
price of $5.00. We will receive $30,000,000 from the issuance of 6,000,000
shares under the line and $2,520,000 from shares underlying the warrants if
they are all exercised prior to expiration, assuming a current share price of
$5.00.

The selling stockholders, employees, consultants and institutional
investor may be deemed to be "underwriters" in connection with any sale of
their shares. If they use any broker-dealers, commissions or profits
received by the broker-dealers may be deemed underwriting discounts or
commissions. Any profits realized by them may be considered underwriting
commissions. We will pay all costs of the registration of the shares. The
selling stockholders, employees, consultants and institutional investor will
pay all brokerage commissions relating to any sale of their shares.

Because selling stockholders, employees, consultants and institutional
investor may be deemed to be "underwriters", they will be subject to
prospectus delivery requirement under the federal securities law.
Furthermore, in the event of a "distribution" of shares, the selling
stockholders, employees, consultants and institutional investor 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 shares in connection with the offering.

There is no assurance that the selling stockholders, employees,
consultants or institutional investor will be able to sell all or any of the
shares or that buyer of shares, if any, will be willing to pay prices sought
by them.

SELLING STOCKHOLDERS

The selling stockholders', employees' and consultants' shares were issued
in accordance with private placements. The shares are being registered to
remove their restricted status under federal securities law. Although the
selling stockholders, employees and consultants have not advised us that they
currently intend to sell shares pursuant to this registration, they 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 139 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 shares.

</TABLE>
<TABLE>

Beneficially Beneficially
Owned Owned Registered Shares
Shares Beneficially Shares to be Shares Beneficially Owned
Owned Registered to be Sold After Registration
Name Number % Number % Number Number %
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------- ---------- ------- ---------- ------- ------ ---------- -------
Techrich International Limited 6,000,000 9.4% 6,000,000 9.4% 0 6,000,000 9.4%
Kandalepas, Andrew / Self
Declaration of Trust 1,335,351 2.1% 1,335,351 2.1% 0 1,335,351 2.1%
Crescent International Limited 1,048,951 1.7% 1,048,951 1.7% 0 1,048,951 1.7%
Marinis Loukas Trust 927,500 1.5% 927,500 1.5% 0 927,500 1.5%
Schlapkphl, Dan 862,283 1.4% 862,283 1.4% 0 862,283 1.4%
Zeedyk, Paul 660,808 1.0% 660,808 1.0% 0 660,808 1.0%
Senglaub, Jeffrey 549,999 0.9% 549,999 0.9% 0 549,999 0.9%
Miller, Ryan 500,000 0.8% 500,000 0.8% 0 500,000 0.8%
Bulfon S.A. 480,000 0.8% 480,000 0.8% 0 480,000 0.8%
Invictus Trust DTD 3-28-1996
/Revocable Living Trust/Samuel
Craig Wilson TTEE 465,493 0.7% 465,493 0.7% 0 465,493 0.7%
Klose, Clifford F. / IRA 400,000 0.6% 400,000 0.6% 0 400,000 0.6%
Loukas, Koula 400,000 0.6% 400,000 0.6% 0 400,000 0.6%
FOX Investments Limited 358,540 0.6% 358,540 0.6% 0 358,540 0.6%
Lekkos, Jim 350,000 0.6% 350,000 0.6% 0 350,000 0.6%
Arthur, Kevin / Arthur, Lonnie JTWROS 341,325 0.5% 341,325 0.5% 0 341,325 0.5%
Senglaub, Jeffrey W. TR 309,825 0.5% 309,825 0.5% 0 309,825 0.5%
Jones, Rick 308,000 0.5% 308,000 0.5% 0 308,000 0.5%
Fegen, Nick 300,000 0.5% 300,000 0.5% 0 300,000 0.5%
Curry, David 276,000 0.4% 276,000 0.4% 0 276,000 0.4%
DeVito, Mark 250,000 0.4% 250,000 0.4% 0 250,000 0.4%
Dimitropoulos, Angelo 214,600 0.3% 214,600 0.3% 0 214,600 0.3%
Smith, Brian 207,142 0.3% 207,142 0.3% 0 207,142 0.3%
Loukas, Georgia 200,000 0.3% 200,000 0.3% 0 200,000 0.3%
Loukas, Pat 200,000 0.3% 200,000 0.3% 0 200,000 0.3%
Loukas, Tom 200,000 0.3% 200,000 0.3% 0 200,000 0.3%
Prokos, Andrew 200,000 0.3% 200,000 0.3% 0 200,000 0.3%
Lemberger, Joe 170,000 0.3% 170,000 0.3% 0 170,000 0.3%
Executive Pension Design 152,850 0.2% 152,850 0.2% 0 152,850 0.2%
Sigmatron International, Inc. 144,243 0.2% 144,243 0.2% 0 144,243 0.2%
Klose, Clifford F. TTEE/Marjorie
J. Klose TTEE/Clifford F. Klose
& Marjorie J. Klose Trust DTD10/21/88 142,000 0.2% 142,000 0.2% 0 142,000 0.2%
Bright Star LP 125,000 0.2% 125,000 0.2% 0 125,000 0.2%
Delis, Steve 125,000 0.2% 125,000 0.2% 0 125,000 0.2%
Anderson Living Trust DTD 5/22/98/
Robert W. & Elizabeth Anderson, TTEE 123,050 0.2% 123,050 0.2% 0 123,050 0.2%
Kolb, Jeffrey D / Kolb, Diana JTWROS 121,000 0.2% 121,000 0.2% 0 121,000 0.2%
Thomas, George 120,000 0.2% 120,000 0.2% 0 120,000 0.2%
Patriotes Fund 113,000 0.2% 113,000 0.2% 0 113,000 0.2%
Mpitsos, George Karen Mpitsos JTWROS 105,263 0.2% 105,263 0.2% 0 105,263 0.2%
ASIC/ADI Designs, Inc. 100,000 0.2% 100,000 0.2% 0 100,000 0.2%
Johnson, Vincent L./Johnson,
Megan K. JTWROS 100,000 0.2% 100,000 0.2% 0 100,000 0.2%
Nord, Clint 100,000 0.2% 100,000 0.2% 0 100,000 0.2%
Johnson, Dwayne A. 75,000 0.1% 75,000 0.1% 0 75,000 0.1%
Sillery, Kevin L. 71,428 0.1% 71,428 0.1% 0 71,428 0.1%
Thomas, Terry 63,035 0.1% 63,035 0.1% 0 63,035 0.1%
Cohen, Shirley W. Living
Trust Dated 7/11/77 62,500 0.1% 62,500 0.1% 0 62,500 0.1%
Jefferson Current
Electric Inc. / Pension Plan 60,000 0.1% 60,000 0.1% 0 60,000 0.1%
Notaro, Stephen 60,000 0.1% 60,000 0.1% 0 60,000 0.1%
Candice, Robert
P. / Candice, Denise JTWROS 57,619 0.1% 57,619 0.1% 0 57,619 0.1%
Cleveland, Todd M. 57,143 0.1% 57,143 0.1% 0 57,143 0.1%
K & L Trust 54,536 0.1% 54,536 0.1% 0 54,536 0.1%
Gornet, Matthew / Ratts,
Valerie JTWROS 53,191 0.1% 53,191 0.1% 0 53,191 0.1%
Lux, Paul S./ Lux, Leslie JTWROS 53,191 0.1% 53,191 0.1% 0 53,191 0.1%
Martin, Dr. Jeffrey / Martin Ann JTWROS 53,191 0.1% 53,191 0.1% 0 53,191 0.1%
Dietrich, Gary 50,128 0.1% 50,128 0.1% 0 50,128 0.1%
Mpitsos, Flora 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Nord, Curt 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Nothum, J. Glenn 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Senglaub, James 50,000 0.1% 50,000 0.1% 0 50,000 0.1%
Ellis, Ronald M. / Ellis,
Pamela L. JTWROS 48,037 0.1% 48,037 0.1% 0 48,037 0.1%
Schubert, Brian 48,000 0.1% 48,000 0.1% 0 48,000 0.1%
Conti, Dr. Mary
W. / Salvatore Conti MD JTWROS 47,750 0.1% 47,750 0.1% 0 47,750 0.1%
Senglaub, Michael L. / Senglaub,
Doris A. JTWROS 45,000 0.1% 45,000 0.1% 0 45,000 0.1%
Shack, Donald 42,983 0.1% 42,983 0.1% 0 42,983 0.1%
Augustine Fund, LP 41,413 0.1% 41,413 0.1% 0 41,413 0.1%
Mahoney, Sharon IRA 41,063 0.1% 41,063 0.1% 0 41,063 0.1%
Mahoney, Richard IRA 41,062 0.1% 41,062 0.1% 0 41,062 0.1%
Furher, Phyllis Living Trust 38,461 0.1% 38,461 0.1% 0 38,461 0.1%
Keltner, Richard / Keltner,
Patricia JTWROS 34,285 0.1% 34,285 0.1% 0 34,285 0.1%
Anderson, Robert IRA 31,250 0.0% 31,250 0.0% 0 31,250 0.0%
Dralle, Gregory / Dralle, Karen JTWROS 31,000 0.0% 31,000 0.0% 0 31,000 0.0%
Jefferson Current Electric
Inc. / Profit Sharing Plan 30,000 0.0% 30,000 0.0% 0 30,000 0.0%
Sanfilippo, Joseph B. 28,960 0.0% 28,960 0.0% 0 28,960 0.0%
Hoff, Lynn 26,042 0.0% 26,042 0.0% 0 26,042 0.0%
Fitts, John P. 25,000 0.0% 25,000 0.0% 0 25,000 0.0%
Gundaker, Gordon 25,000 0.0% 25,000 0.0% 0 25,000 0.0%
Johnson, Curtis
L. / Johnson, Jacqueline JTWROS 25,000 0.0% 25,000 0.0% 0 25,000 0.0%
Singer, Craig B 25,000 0.0% 25,000 0.0% 0 25,000 0.0%
Watson, John / Gloria Ortiz JTWROS 25,000 0.0% 25,000 0.0% 0 25,000 0.0%
Jenkins, John T. / Jenkins,
Jacquelyn JTWROS 24,776 0.0% 24,776 0.0% 0 24,776 0.0%
McGuire, Daniel R. 23,676 0.0% 23,676 0.0% 0 23,676 0.0%
Amos, Michael G. / Amos, Tracy O. JTWROS 23,450 0.0% 23,450 0.0% 0 23,450 0.0%
Robertson, Virginia
Sue Trust Ltd 9-28-88 23,057 0.0% 23,057 0.0% 0 23,057 0.0%
Draper, Jack / c/o Dynamite Drywall Inc. 21,428 0.0% 21,428 0.0% 0 21,428 0.0%
Dimitropoulos, Penny 21,000 0.0% 21,000 0.0% 0 21,000 0.0%
Dralle, David / Dralle, Gregory JTWROS 21,000 0.0% 21,000 0.0% 0 21,000 0.0%
Candice, Raymond G. / Candice,
Deborah A. JTWROS 20,476 0.0% 20,476 0.0% 0 20,476 0.0%
Gabriele, John 20,000 0.0% 20,000 0.0% 0 20,000 0.0%
Reid, Daniel P. 20,000 0.0% 20,000 0.0% 0 20,000 0.0%
Dimitropoulos, Chris 19,715 0.0% 19,715 0.0% 0 19,715 0.0%
Krueger, Lee & Kreuger, Elma TR 19,500 0.0% 19,500 0.0% 0 19,500 0.0%
Kolb, Janet M., Irrevocable Trust 18,000 0.0% 18,000 0.0% 0 18,000 0.0%
Zouras, John / Zouras, Pat JTWROS 16,500 0.0% 16,500 0.0% 0 16,500 0.0%
Frederick, Karl / IRA 16,384 0.0% 16,384 0.0% 0 16,384 0.0%
Lambert, Todd 14,300 0.0% 14,300 0.0% 0 14,300 0.0%
Mahoney, Richard L. 13,594 0.0% 13,594 0.0% 0 13,594 0.0%
Geniale, Hank 13,020 0.0% 13,020 0.0% 0 13,020 0.0%
Lilenthal, John F. 12,820 0.0% 12,820 0.0% 0 12,820 0.0%
IS Investments Inc. 12,407 0.0% 12,407 0.0% 0 12,407 0.0%
Podolsky, Mitchell 10,909 0.0% 10,909 0.0% 0 10,909 0.0%
Winkler, Paul 10,294 0.0% 10,294 0.0% 0 10,294 0.0%
Dwyer, Daniel A. 10,274 0.0% 10,274 0.0% 0 10,274 0.0%
Five West Foods, Inc. 10,196 0.0% 10,196 0.0% 0 10,196 0.0%
Panos, Tom 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Tzortzis, John 10,000 0.0% 10,000 0.0% 0 10,000 0.0%
Frederick, Karl / Helen
Frederick JTWROS 9,297 0.0% 9,297 0.0% 0 9,297 0.0%
Tipton, Thomas L. 7,812 0.0% 7,812 0.0% 0 7,812 0.0%
Frederick, Michael / IRA 6,915 0.0% 6,915 0.0% 0 6,915 0.0%
Kostecki, Ted 6,900 0.0% 6,900 0.0% 0 6,900 0.0%
Davis, Michael A. / Maddock,
Deborah K. JTWROS 6,544 0.0% 6,544 0.0% 0 6,544 0.0%
Dwyer, Patrick A. (TOD:Carolyn Dwyer) 6,274 0.0% 6,274 0.0% 0 6,274 0.0%
Johnson, Vincent
L. / Johnson, Dwayne JTWROS 6,250 0.0% 6,250 0.0% 0 6,250 0.0%
Podolsky, Marshall / Podolsky,
Sharon JTWROS 6,000 0.0% 6,000 0.0% 0 6,000 0.0%
Solomon, Brent 5,780 0.0% 5,780 0.0% 0 5,780 0.0%
Fitzgerald, John Michael 5,229 0.0% 5,229 0.0% 0 5,229 0.0%
Demos, Demetrios 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
Lesmeister, Jerome
M. / Lesmeister, Judith G. JTWROS 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
Vasilopoulos, Gust 5,000 0.0% 5,000 0.0% 0 5,000 0.0%
Wimsatt, Charles / Mary Wimsatt JTWROS 4,762 0.0% 4,762 0.0% 0 4,762 0.0%
Goldenhirsch, Steve 4,375 0.0% 4,375 0.0% 0 4,375 0.0%
Grossman, Ree / Pritikin,
Renee Z. JTWROS 3,676 0.0% 3,676 0.0% 0 3,676 0.0%
Frederick, Michael / Stephany
Frederick JTWROS 3,529 0.0% 3,529 0.0% 0 3,529 0.0%
Fitzgerald, John Thomas 3,268 0.0% 3,268 0.0% 0 3,268 0.0%
Francis, Richard L. 3,268 0.0% 3,268 0.0% 0 3,268 0.0%
Groeper, Steve 3,268 0.0% 3,268 0.0% 0 3,268 0.0%
Gabriele, Carmelo A. 3,145 0.0% 3,145 0.0% 0 3,145 0.0%
Kontos, Dena 3,000 0.0% 3,000 0.0% 0 3,000 0.0%
Kodner, David O. 2,890 0.0% 2,890 0.0% 0 2,890 0.0%
Glazik, Anthony 2,500 0.0% 2,500 0.0% 0 2,500 0.0%
CADserve Company 2,365 0.0% 2,365 0.0% 0 2,365 0.0%
Dralle, David 2,300 0.0% 2,300 0.0% 0 2,300 0.0%
Mineo, John Sr. / John Mineo
Jr. / Anna Mineo JTWROS 2,137 0.0% 2,137 0.0% 0 2,137 0.0%
Domagalla, Randy 2,000 0.0% 2,000 0.0% 0 2,000 0.0%
Cannata, Thomas Michael / Cannata,
Beth B. JTWROS 1,961 0.0% 1,961 0.0% 0 1,961 0.0%
Dwyer Patrick a (TOD Mark A. Dwyer) 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Dwyer Patrick A. (TOD Kathleen A Dwyer) 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Dwyer Patrick A. (TOD David A. Dwyer) 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Dwyer Patrick A.
(TOD Patrick A. Dwyer Jr) 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Economou, Dena 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Mandarino, Despina 1,000 0.0% 1,000 0.0% 0 1,000 0.0%
Frederick, Stephany / IRA 848 0.0% 848 0.0% 0 848 0.0%

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares being
registered have been passed upon for the company by Rieck and Crotty, P.C.,
55 West Monroe Street, Suite 3390, Chicago, Illinois 60603.

EXPERTS

The financial statements included in this prospectus and elsewhere in
this registration statement, to the extent and for the periods indicated in
their report, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said
firm as experts in giving said report. Reference is made to said report,
which includes an explanatory paragraph with respect to the uncertainty
regarding the Company's ability to continue as a going concern as discussed
in note 2 to the consolidated financial statements.

The audited consolidated financial statement as of and for the year ended
December 31, 1999, which is included in this prospectus and appears in the
registration statement has been audited by Grant Thornton LLP, independent
certified public accountants, as set forth in their report thereon which
appears elsewhere in the prospectus and in the registration statement, and is
included in reliance upon the authority of such firm as experts in accounting
and auditing.

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public
Accountants......................................................F-2
Report of Independent Public
Accountants......................................................F-3
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1999 AND
1998.............................................................F-4
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1999, 1998 AND
1997.............................................................F-5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998
AND 1997.........................................................F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997.....................F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........................F-8

Report of Independent Certified Public Accountants

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

We have audited the accompanying consolidated balance sheet of DAUPHIN
TECHNOLOGY, INC. (an Illinois corporation) and Subsidiary, as of December 31,
1999, and the related consolidated statements of operations, consolidated
shareholders' equity and consolidated cash flows for the year ended December
31, 1999. 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 audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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
audit provides 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. and its Subsidiary as of December 31, 1999 and the results
of their operations and their cash flows for the year ended December 31,
1999, in conformity with accounting principles generally accepted in the
United States.

GRANT THORNTON LLP

Chicago, Illinois
March 26, 2000

Report of Independent Public Accountants

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

We have audited the accompanying consolidated balance sheet of DAUPHIN
TECHNOLOGY, INC. (an Illinois corporation) and Subsidiary, as of December 31,
1998, and the related consolidated statements of operations, consolidated
shareholders' equity and consolidated cash flows for each of the two years in
the period ended December 31, 1998. 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. and Subsidiary as of December 31, 1998, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company has suffered recurring losses
from operations and has insufficient cash on hand to sustain future
operations that raises substantial doubt about the entity's ability to
continue as a going concern. The Company has received certain funding subject
to the terms and conditions outlined in the first five sentences of paragraph
five of Note 17. Management's plans in regards to these matters are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

ARTHUR ANDERSEN LLP

Chicago, Illinois
March 31, 1999 (except with respect to the matters
discussed in the first five sentences of paragraph five of Note 17, as to
which the date is April 15, 1999)

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1999 AND 1998

1999 1998
-------------- --------------
CURRENT ASSETS:
Cash $ 31,087 $ 55,701
Accounts receivable-
Trade, net of allowance for bad
debt of $428,599
and $11,238 at December 31,
1999 and 1998 124,844 689,713
Employee receivables 118 45,987
Inventory, net of reserve for obsolescence
of $1,945,296 and $152,000 at December
31, 1999 and 1998 1,521,886 2,953,686
Prepaid expenses 38,779 46,596
-------------- --------------
Total current assets 1,716,714 3,791,683

INVESTMENT 290,000 300,000

PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $712,192 and $378,051
at December 31, 1999 and 1998 1,365,440 1,673,901

DEFERRED FINANCING COST, net of
accumulated amortization of $29,128
at December 31, 1998 - 186,576

GOODWILL, net of accumulated amortization
of $107,971 at December 31, 1998 - 767,475
-------------- --------------
Total assets $ 3,372,154 $ 6,719,635
============== ==============

CURRENT LIABILITIES
Accounts payable $ 1,894,663 $ 2,103,572
Accrued expenses 26,719 215,305
Current portion of long-term debt 127,249 113,436
Customer deposits 300,000 -
Short-term borrowings, net of discount
of $3,845 at December 31, 1998 286,000 246,155
Convertible debentures, net of discount
of $47,012 - 852,988
-------------- --------------
Total current liabilities 2,634,631 3,531,456

LONG-TERM DEBT 185,179 302,951

COMMITMENTS AND CONTINGENCIES - -
-------------- --------------
Total liabilities 2,819,810 3,834,407

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; 51,671,582 shares
issued and outstanding at December 31, 1999
and 40,000,000 shares issued and 39,861,818
outstanding at December 31, 1998 51,671 40,000
Treasury stock, at cost, 138,182
shares at December 31, 1998 - (33,306)
Warrants to purchase 4,211,958 and
200,000 shares at December 31, 1999 and 1998 1,238,089 55,181
Paid-in capital 38,089,320 32,343,785
Accumulated deficit (38,826,736) (29,520,432)
-------------- --------------
Total shareholders' equity 552,344 2,885,228
-------------- --------------
Total liabilities and shareholders' equity $ 3,372,154 $ 6,719,635
============== ==============

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, 1999, 1998 AND 1997

1999 1998 1997
------------- ------------- -------------
REVENUES $ 2,279,058 $ 5,367,514 $ 2,730,035
COST OF SALES 4,833,601 5,757,889 4,345,315
------------- ------------- -------------
Gross loss (2,554,543) (390,375) (1,615,280)
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,173,095 3,273,132 1,484,979
RESEARCH AND DEVELOPMENT EXPENSE 510,287 1,576,477 827,843
------------- ------------- -------------
Loss from operations (7,237,925) (5,239,984) (3,928,102)

INTEREST EXPENSE 2,099,179 968,414 75,988
INTEREST INCOME 30,800 76,841 16,073
------------- ------------- -------------
Loss before income taxes (9,306,304) (6,131,557) (3,988,017)

INCOME TAXES - - -
------------- ------------- -------------
Net loss $ (9,306,304) $ (6,131,557) $ (3,988,017)
============= ============= =============

BASIC and DILUTED LOSS PER SHARE:
Loss per share $ (0.20) $ (0.16) $ (0.13)
============= ============= =============

Weighted average number of shares
of common stock outstanding 46,200,408 37,287,432 30,734,045

The accompanying notes are an integral part of these statements.

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

</TABLE>
<TABLE>
Common Stock Paid-in Treasury Stock Accumulated
Shares Amount Capital Warrants Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------- ------------ --------- ------------ ---------- ----------- ------------ ------------- -----------
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 - - 812,085 - 2,307,835 1,266,399 - 2,078,484
Stock bonuses paid - - 6,250 - 12,500 6,875 - 13,125
Net loss - - - - - - (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
Issuance of common stock in connection with:
Conversions of debt 2,705,391 2,705 2,743,811 - 542,272 205,903 - 2,952,419
Commissions to
placement agent 172,700 173 178,745 - - - - 178,918
Purchase of fixed assets 60,000 60 67,440 - - - - 67,500
Issuance of warrants in
connection with debt issuance - - - 55,181 - - - 55,181
Stock bonuses paid 26,236 26 70,653 - 50,123 16,493 - 87,172
Net loss - - - - - - (6,131,557) (6,131,557)
------------ --------- ------------ ---------- ----------- ------------ ------------- -----------
BALANCE,
December 31, 1998 40,000,000 $ 40,000 $ 32,343,785 $ 55,181 (138,182) $ (33,306) $ (29,520,432) $ 2,885,228
Issuance of common stock in connection with:
Conversions of debt 4,985,358 4,985 3,842,235 287,700 101,673 24,402 - 4,159,322
Private placement 6,003,529 6,004 1,481,167 895,208 14,963 3,591 - 2,385,970
Settlement of
Trade Payables 656,322 656 395,243 - 1,546 371 - 396,270
Stock bonuses paid 26,373 26 26,890 - 20,000 4,942 - 31,858
Net loss - - - - - - (9,306,304) (9,306,304)
------------ --------- ------------ ---------- ----------- ------------ ------------- -----------
BALANCE,
December 31, 1999 51,671,582 $ 51,671 $ 38,089,320 $1,238,089 - $ - $ (38,826,736) $ 552,344
============ ========= ============ ========== =========== =========== ============= ===========

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, 1999, 1998 AND 1997

1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,306,304) $ (6,131,557) $ (3,988,017)
Non-cash items included in net loss
Depreciation and amortization 1,101,616 318,405 93,671
Inventory reserve 1,793,296 - -
Bad debt reserve 417,361 - -
Interest expense on
convertible debt 2,062,451 814,882 -
Stock bonus 31,858 87,172 13,125
Changes in-
Accounts receivable
- trade 147,508 (226,892) 129,519
- employee 45,869 (25,792) (20,195)
Inventory (361,495) (1,422,222) 1,893,655
Prepaid expenses 7,817 (7,395) (14,396)
Accounts payable (208,909) 1,312,788 (532,866)
Accrued expenses (188,586) (70,532) (21,410)
------------ ------------ ------------
Net cash used in
operating activities (4,457,518) (5,351,143) (2,446,914)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (25,680) (1,068,578) (201,965)
Investment 10,000 (300,000) -
------------ ------------ ------------
Net cash used in
investing activities (15,680) (1,368,578) (201,965)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received in acquisition - - 31,162
Short-term borrowings (payments) 286,000 162,606 (706,390)
Purchase of treasury stock - - (341,369)
Issuance of convertible debentures
and warrants net of financing costs 1,776,614 2,991,936 -
Proceeds from issuance
of common stock 2,385,970 - 6,665,756
------------ ------------ ------------
Net cash provided by
financing activities 4,448,584 3,154,542 5,649,159
------------ ------------ ------------
Net increase (decrease) in cash (24,614) (3,565,179) 3,000,280

CASH, beginning of year 55,701 3,620,880 620,600
------------ ------------ ------------
CASH, end of year $ 31,087 $ 55,701 $ 3,620,880
============ ============ ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 36,728 $ 153,532 $ 75,988
------------ ------------ ------------

NONCASH TRANSACTIONS:
Common stock issued in
connection with
Purchase of fixed assets $ - $ 67,500 $ -
Settlement of trade payables 396,270 - -
Conversion of debentures 4,159,322 2,952,419 -
Commissions to placement agent - 178,918 -
Acquisition of R.M. Schultz & Associates -
Assumption of liabilities - - 2,197,058
Issuance of stock - - 233,200
Capital equipment leased - - 347,189
------------ ------------ ------------

The accompanying notes are an integral part of these statements

DAUPHIN TECHNOLOGY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:

Description of Business

Dauphin Technology, Inc. ("Dauphin") and its Subsidiary designs, manufactures
and markets mobile hand-held, pen-based computers as well as other electronic
devices for home and business use. Dauphin markets its products through a
network of value added resellers and software integrators to the commercial
and government market segments throughout the United States. Through its
subsidiary, the Company marketed its contract manufacturing services through
July 1999.

Basis of Presentation

The consolidated financial statements include the accounts of Dauphin and
its wholly owned subsidiary, R.M. Schultz & Associates, Inc. (the "Company").
All significant inter-company transactions and balances have been eliminated
in consolidation.

2. RISK AND UNCERTAINTIES:

Absence of Operating Profit

The Company has incurred a net operating loss in each year since it's
founding and as of December 31, 1999 has an accumulated deficit of
$38,826,736. The Company expects to incur operating losses over the near
term. The Company's ability to achieve profitability will depend on many
factors including the Company's ability to manufacture and market
commercially acceptable products. There can be no assurance that the Company
will ever achieve a profitable level of operations or if profitability is
achieved, that it can be sustained.

Early Stage of Development of the Company's Products

From June of 1997 through June of 1999, the Company was principally engaged
in research and development activities involving the hand-held computer.
Since then, the Company has been working on new technologies, in particular
the design and development of the set-top boxes. The Company's products have
been sold in limited quantities and there can be no assurance that a
significant market will develop for such products in the future. Therefore,
the Company's inability to develop, manufacture and market its products on a
timely basis may have a material adverse effect on the Company's financial
results.

Financing Considerations

Currently, the Company is working to ensure it has appropriate funding to
finance future operations. During the first quarter of 2000, through private
placements, management raised in excess of $7.5 million. As of the date
hereof the Company has approximately $5 million of cash on deposit in the
bank (Refer to Note 18). Management is seeking additional financing and is
negotiating final terms and conditions with several potential funding
sources. With the combination of existing funds, additional financing and
future sales of its products, Management believes the Company will have
sufficient capital to sustain future operations.

3. SUMMARY OF MAJOR ACCOUNTING POLICIES:

Cash and Cash Equivalents

Cash and cash equivalents include all cash and liquid investments that mature
three months or less from when they are purchased. The carrying amount
approximates the fair value due to short maturity of these investments.

Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-
out basis) or market and include material, labor and factory overhead.

Property and Equipment

Property and equipment are stated at cost. Depreciation is being computed
using the straight-line methods over the estimated useful lives (principally
three to seven years for machinery and equipment) and leasehold improvements
over the lesser of the lease term or their useful life.

Intangible Assets

Debt issue costs are amortized to interest expense over the term of the
related debt. Other intangibles are amortized by the straight-line method
over their respective estimated lives. Goodwill is amortized over ten years.

Long-lived assets including goodwill and other intangible assets are reviewed
for impairment whenever events or change in circumstances indicate that the
carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, the related assets'
carrying value is compared to the undiscounted estimated future cash flows
from the related operations.

Income Taxes

Deferred tax liabilities and assets are recognized for the expected future
tax consequences of events that have been included in the financial
statements and tax returns. Deferred tax liabilities and assets are
determined based on the difference between the financial statement basis and
tax basis of assets and liabilities (excluding non-deductible goodwill) and
using enacted tax rates in effect for the years in which the differences are
expected to become recoverable or payable.

Revenue Recognition

The Company recognizes revenue upon shipment of mobile computers, computer
accessories and assembled products. Revenue from the fulfillment of
manufacturing contracts, generally less then year in length, is recognized
upon shipment of the finished assembly.

Earnings (Loss) Per Common Share

Basic loss per common share is calculated on income available to common
stockholders divided by the weighted-average number of shares outstanding
during the period, which were 46,200,408, 37,287,432 and 30,734,045 for the
years ending December 31, 1999, 1998 and 1997, respectively. Diluted loss
per common share is adjusted for the assumed exercise of stock options and
warrants unless such adjustment would have an anti-dilutive effect.
Approximately 4.2 million additional shares would be outstanding if all stock
options and warrants were exercised as of December 31, 1999. Refer to Note
18 for dilution subsequent to December 31, 1999.

Concentration of Credit Risk

The majority of the Company's receivables arise from sales of contract
manufacturing services. The Company maintains reserves for potential losses
on receivables from these customers. Three customers represent $2,281,000 or
43%, $1,114,000 or 21% and $617,000 or 11% of the Company's revenue during
1998. These percentages were consistent during 1998 and 1997.

Use of Estimates

The presentation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

4. INVENTORY

Inventory is comprised of material, labor and overhead and consists of the
following at December 31:

1999 1998
------------- ------------
Finished goods $ 93,955 $ 310,766
Work in process 625,450 1,333,147
Raw materials 2,747,777 1,461,773
------------- ------------
3,467,182 3,105,686
Less - Reserve for Obsolescence 1,945,296 152,000
------------- ------------
$ 1,521,886 $ 2,953,686
============= ============

In the third quarter of 1999, as a result of curtailing operations at RMS due
to reductions in customer orders the Company wrote down approximately
$1,793,000 of inventory, which consists of $1,168,000 of raw materials and
$625,000 of work-in-process. This inventory was acquired to produce
assemblies for RMS clients only.

5. PROPERTY AND EQUIPMENT

Plastic molds are being amortized over the number of estimated parts to be
produced (approximately 100,000) or three years whichever is less. Property
and equipment consist of the following:

1999 1998
------------- ------------
Furniture and fixtures $ 89,084 $ 89,084
Office equipment 247,537 228,618
Manufacturing and warehouse equipment 624,690 618,904
Leasehold improvements 407,186 405,836
Plastic molds for the Orasis 696,862 697,237
Automobile 12,273 12,273
------------- ------------
2,077,632 2 ,051,952
Less - Accumulated depreciation
and amortization 712,192 378,051
------------- ------------
$ 1,365,440 $ 1,673,901
============= ============

6. INVESTMENT

During the third quarter of 1998, the Company invested in non marketable
securities of a company that was managed by a former director of Dauphin. The
investment is carried on the books at cost.

7. SHORT-TERM BORROWINGS:

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

1999 1998
------------- ------------
Due to affiliates $ 286,000 $ -
Short-term note, net of discount of $3,845 - 246,155
------------- ------------
Total short-term borrowings $ 286,000 $ 246,155
============= ============

On December 17, 1998, the Company borrowed $250,000 from an investor through
a note that matured on January 17, 1999. Interest accrues at 3 % per month.
The note was unsecured and on January 17, 1999 was converted into a
Convertible Subordinated Debenture substantially on the same terms as
described in Note 9. In addition to interest, the holder received a
detachable warrant, which allows the holder to purchase up to 25,000 shares
of common stock at an exercise price of $0.79 per share. The warrant was
valued at $3,845 using the Black-Scholes securities valuation model assuming,
among other things, a 7% risk free interest rate, $0 dividend yield, 3-year
life and 28% volatility. The warrant expires in three years and is
exercisable immediately. On March 29, 1999, this note, including $7,500 of
interest, was converted into 427,667 shares of the Company's common stock.

During 1999, the Company borrowed $286,000 from related affiliates with an
interest accrued at 1% per month till the day of payment. Subsequent to
December 31, 1999 all such borrowings including interest have been paid off.

8. LONG-TERM DEBT

As of December 31, 1999, the fair value of long-term debt approximates its
book value. At December 31, long-term liabilities consist of:

1999 1998
------------- ------------
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
is unsecured and is due on 10/1/2004. $ 113,149 $ 127,607
PACJETS Financial Ltd. 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. 111,881 128,153
PACJETS Financial Ltd. furniture lease
payable in equal monthly installments
over 36 months. The lease carries a 23%
annual interest rate and is due on
11/15/2000. The lease is collateralized
by the furniture and has a one-dollar
buy-out option. 27,176 54,214
Forest Financial Corporation computer
equipment lease payable in equal monthly
installments over 60 months. The lease
carries a 16.38% annual interest rate and
is due on 01/01/2003. The lease is
collateralized by the equipment and has
a one-dollar buy-out option. 11,016 25,417
Other - Capital leases for certain vehicles,
machinery and equipment and certain priority
tax claims due and payable in equal monthly
installments over 36 to 72 months. All
debts, collateralized by the equipment,
are due starting in June 2000 through
October 2002 and carry interest rates
ranging from 9% to 18%. 49,206 80,996
------------- ------------
Total long-term liabilities 312,428 416,387
Less short-term 127,249 113,436
------------- ------------
Total long-term $ 185,179 $ 302,951
============= ============

Future minimum debt payments are as follows:

Year Amount Due
2000 $ 127,249
2001 73,581
2002 65,696
2003 26,664
2004 19,238
------------
Total long-term debt $ 312,428
============

9. CONVERTIBLE DEBT AND WARRANTS

On May 13, 1998 the Company issued 8% Convertible Subordinated Debentures -
2001 ("2001 Debentures") to four accredited investors in an aggregate
principal amount of $1,000,000 which is due and payable on or about May 13,
2001. Debenture holders also received detachable warrants, allowing them to
purchase up to 150,000 shares of common stock at exercise prices ranging from
$1.06 to $1.73 per share. The warrants are exercisable immediately and
expire in three years. Warrants to purchase 200,000 shares of common stock,
including 50,000 warrants issued to the placement agent, were valued at
$51,336 using the Black-Scholes securities valuation model, assuming among
other things, a 7% risk free interest rate, $0 dividend yield, 3 year life
and 27% volatility. Through October 1998, all of the Convertible Subordinated
Debentures - 2001, including $8,016 of interest, have been converted into
1,141,411 common shares.

On August 1, 1998 the Company issued 8% Convertible Subordinated Debentures -
2001A ("2001A Debentures") to the same four accredited investors in an
aggregate principal amount of $2,000,000, which is due and payable on or
about August 1, 2001. Through December 31, 1998 a total of $1.1 million of
these debentures, including $13,054 of interest, were converted into
2,106,252 shares of the Company's common stock. All of these debentures have
been converted into 1,672,600 shares of Company's common stock.

On March 30, 1999, the Company signed an agreement with an accredited
investor ("Investor") for financing as follows: The Investor agreed to commit
up to $6 million according to the following conditions. A) The first closing
for $1 million will occur upon execution of agreed upon documentation as well
as a deposit of 2 million common shares (which shall be pledged by current
shareholders) in escrow. This tranche will take the form of an 8% promissory
note convertible into stock beginning sixty days after closing. If the
Company's stock value is below the 5/8 bid for two consecutive days the
Company must replenish the escrow account with additional shares until the
escrow value is greater than $1.5 million. The Investor received a warrant to
purchase 100,000 shares of common stock at an exercise price of $1.00 per
share for the commitment. In April, the Company received the funds and
subsequently deposited additional 400,000 shares into an escrow account to
compensate for the decline in share price. In May, the note was converted
into common stock and the escrow account was disbursed to the Investor. As of
December 31, 1999 the 41,414 shares still due to the Investor have not been
delivered. However, such shares have been considered outstanding as of the
conversion date.

10. STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 provides an alternative to Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APBO 25") and requires additional disclosures. During 1998, the Company
issued non-qualified stock options to purchase 233,000 shares of common stock
to certain key employees at exercise prices ranging from $0.56 to $1.22 per
share (approximating the market price at date of grant). The options vest
immediately and expire in three years if the individual is still employed
with the Company. Had the Company accounted for its stock options in
accordance with Statement 123, at December 31, 1999 and 1998 pro forma
earnings per share would have been:

December 31, 1999 December 31, 1998
Net loss as reported (000's) $ (9,232) $ (6,132)
Pro forma net loss for
Statement 123 (000's) (9,245) (6,232)
Basic and diluted loss per common
share as reported (0.21) (0.16)
Pro forma basic and diluted loss
per common share (0.21) (0.17)

Pro forma disclosure is not likely to be indicative of pro forma results
which may be expected in future years because of the fact that options vest
over several years, pro forma compensation expense is recognized as the
options vest and additional awards may be granted.

For purposes of determining the pro forma effect of these options, the fair
value of each option is estimated on the date of grant based on the Black-
Scholes single-option-pricing model:

December 31, 1999 December 31, 1998
Dividend yield 0.0% 0.0%
Risk-free interest rate 6.0% 7.0%
Volatility factor 120% 29%
Expected life in years 1.95 2.67

Information regarding these options for 1999 and 1998 is as follows:

</TABLE>
<TABLE>
1999 1998
--------------------------- ---------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
-------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Options outstanding beginning of year 233,000 $ 0.7748 0 $ 0.00
Options exercised 0 0.00 0 0.00
Options granted 0 0.00 263,000 0.8076
Options forfeited (183,000) 0.8073 (30,000) 1.0625
-------- -------------- -------- --------------
Options outstanding at year end 50,000 $ 0.6563 233,000 $ 0.7748

Weighted average fair value of options
granted during the year $ - $ 0.39
Options exercisable at year end 50,000 233,000
Option price range at year end $ 0.6563 $ 0.5625 to $1.2188

The following table summarizes information about the options outstanding at
December 31, 1999 and 1998:

</TABLE>
<TABLE>
Options Outstanding Options Exercisable
- ------------------------------------------------------------- --------------------------
Range of Number Weighted Avg. Weighted Avg. Number Weighted Avg.
Exercise Prices of Shares Contractual Life Exercise Price of Shares Exercise Price
<S> <C> <C> <C> <C> <C>
- --------------- --------- ---------------- -------------- --------- -------------
$ 1.0625 70,000 2.5 $ 1.0625 70,000 $ 1.0625
$ 1.2188 13,000 2.75 $ 1.2188 13,000 $ 1.2188
$ 0.5625 80,000 2.88 $ 0.5625 80,000 $ 0.5625
$ 0.6250 20,000 2.88 $ 0.6250 20,000 $ 0.6250
$ 0.6563 50,000 2.88 $ 0.6563 50,000 $ 0.6563
- --------------- --------- ---------------- -------------- --------- -------------
Total for 1998 233,000 2.78 $ 0.7748 233,000 $ 0.7748

$ 0.6563 50,000 1.95 $ 0.6563 50,000 $ 0.6563
- --------------- --------- ---------------- -------------- --------- -------------
Total for 1999 50,000 1.95 $ 0.6563 50,000 $ 0.6563
========= ============== ========= =============

11. EMPLOYEE BENEFIT PLAN

The Company maintains a salary deferral 401(k) plan covering substantially
all employees who meet specified service requirements. Contributions are
based upon participants' salary deferrals and compensation and are made
within Internal Revenue Service limitations. For the fiscal years 1999, 1998
and 1997, the Company did not make any matching contributions. The Company
does not offer post-employment or post-retirement benefits. The Company does
not administer this plan, and contributions are determined in accordance with
provisions of the plan.

12. IMPAIRMENT OF ASSETS

Goodwill is being amortized on a straight-line basis over 10 years. On an
ongoing basis, the Company estimates the future undiscounted cash flows,
before interest, of the operating unit to which the goodwill relates in order
to evaluate its impairment. If impairment exists, the carrying amount of the
goodwill is reduced by the estimated shortfall of cash flows. During the
third quarter of 1999 the Company experienced an impairment of goodwill, when
an estimated cash flow from the operating unit dramatically decreased. The
Company recorded $767,475 as an amortization expense during 1999.

13. INCOME TAXES:

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

1999 1998 1997
------------ ------------- ------------
U.S. federal statutory rate
appliedto pretax loss $ (2,143,858) $ (2,084,729) $ (1,355,926)
Permanent differences and
adjustments 785,739 120,802 31,906
Tax assets including net
operating loss carryforward 1,358,119 1,963,927 1,324,020
------------ ------------- ------------
Income tax provision $ - $ - $ -

As of December 31, 1999 and 1998, the Company had generated deferred tax
assets as follows:

December 31,
1999 1998
-------------- --------------
Gross deferred tax assets-
Net operating loss (NOL) carryforward $ 24,680,762 $ 16,962,154
Reserves for inventory obsolescence 1,945,296 152,000
Bad debt reserve 428,599 11,238
Depreciation 5,567 44,260
Other timing differences 10,200 9,075
-------------- --------------
27,070,424 17,178,727
Current federal statutory rate 34% 34%
-------------- --------------
Deferred tax assets 9,203,944 5,840,767
Less- SFAS 109 valuation allowance 9,203,944 5,840,767
-------------- --------------
Net deferred tax asset $ - $ -
============== ==============

Deferred income taxes include the tax impact of net operating loss (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
$9,203,944 and $5,840,767 at December 31, 1999 and 1998, 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.

14. BUSINESS SEGMENTS:

The Company has adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information". The Company has two reportable segments:
Dauphin Technology, Inc. and R.M. Schultz & Associates, Inc. ("RMS"). Dauphin
is involved in design, manufacturing and distribution of hand-held pen-based
computer systems and accessories. RMS is an electronic contract-
manufacturing firm.

The reportable segments are managed separately because each business has
different customer requirements, either as a result of the regional
environment of the country or differences in products and services offered.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Intangible assets are
included in each segment's reportable assets and the amortization of these
intangible assets is included in the determination of a segment's operating
profit or loss. The Company evaluates performance based on profit or loss
from operations before income taxes, interest, and non-operating income
(expenses).

1999 1998 1997
------------- ------------- -------------
Revenue
Dauphin $ 273,544 $ 385,739 $ 71,834
RMS 2,134,563 5,637,574 2,658,201
Inter-company elimination (129,049) (655,799) -
------------- ------------- -------------
Total 2,279,058 5,367,514 2,730,035

Operating (Loss)
Dauphin (2,947,396) (4,707,321) (3,929,690)
RMS (4,286,231) (499,885) 1,588
Inter-company elimination (4,298) (32,778) -
------------- ------------- -------------
Total (7,237,925) (5,239,984) (3,928,102)

Assets
Dauphin 6,443,079 4,991,346 6,073,910
RMS 2,156,937 5,078,453 2,979,143
Inter-company elimination (5,227,862) (3,350,164) (1,783,917)
------------- ------------- -------------
Total 3,372,154 6,719,635 7,269,136

Capital Expenditures
Dauphin 18,544 748,131 9,145
RMS 7,136 387,947 540,009
------------- ------------- -------------
Total 25,680 1,136,078 549,154

15. COMMITMENTS AND CONTINGENCIES:

Minimum annual rental commitments at December 31, 1999, under non-cancelable
operating leases, principally for real estate, are payable as follows:

Dauphin RMS
---------- ----------
2000 $ 114,701 $ 190,660
2001 120,438 190,660
2002 51,190 81,025
---------- ----------
$ 388,803 $ 653,005
========== ==========

Total rental expense was approximately $300,000, $276,000 and $162,000 for
1999, 1998 and 1997 respectively. The leases contain renewal options and
escalation clauses.

The Company is involved in a lawsuit with an ex-employee/officer that has
claimed that the Company wrongfully discharged him. The lawsuit is seeking
specific performance under the contract and any reasonable relief that Court
deems just. The suit was filed on April 11, 1998 and as of April 13, 1999
four out of five claims in the lawsuit have been dismissed. It is the opinion
of management that the ultimate liability, if any, will not be material to
the Company's results of operations or financial position.

The Company is involved in a breach of contract lawsuit with the Enclave
Corporation, current landlord of RMS. The suit was filed on January 5, 2000
in the Nineteenth Judicial Circuit Court, McHenry Illinois. The suit is
claiming $5,200 damages and other non-monetary breaches. The Company feels
that it has several defenses and intends to vigorously defend its position.
In any event, any unfavorable disposition will not be material to the
Company's results of operations or financial position.

During 1999 and through the date of this report, the Company has been engaged
in various legal proceedings. Management believes that all material events
have been fully accounted for in the financial statements attached hereto.
Further resolution of any existing litigation would not be material to the
overall financial condition of the Company.

16. 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 product lines and will
likely continue in this capacity in the future. The Company paid $0 during
1999, $140,192 in 1998 and $75,000 in 1997 for such services.

On February 6, 1996 the Company entered into an agreement with Victor Baron,
Savely Burd and Interactive Controls, Inc., an Illinois corporation
("Intercon"). On December 29, 1998 the Board of Directors voted unanimously
to terminate the Intercon agreement. The Company no longer employs Messrs.
Baron and Burd.

In 1999 the Company borrowed $286,000 from related affiliates, including two
members of the Board of Directors. The loans accrue interest at 1% per month
until maturity. As of the date of this report all loans including interest
have been paid off.

RMS facilities are leased from Enclave Corporation, a company that is owned
by Richard M. Schultz, former President of RMS. The Company paid $179,684 of
rent and $24,150 of real estate taxes for the property lease in 1999 and
$165,660 of rent and $25,267 of real estate taxes for the second half of
1998.

17. EQUITY TRANSACTIONS:

1999 Transactions

In January and April 1999, the Company issued a total of 46,373 shares under
an employment contract with Richard M. Schultz. As of May 14, 1999, the
Company no longer employs Richard M. Schultz.

In February and March 1999, the Company issued a total of 87,380 treasury
shares and 1,570,927 shares in exchange for $660,000 of principal, $17,123 of
interest and $32,909 of original issue discount amortization on Convertible
Debentures - 2001A. In addition, in March the short-term loan from an
investor in the amount of $250,000 together with $7,500 of interest was
converted into 427,667 shares.

In March 1999, the Company issued warrants to an investment banker to
purchase 50,000 shares at an exercise price of $0.60 exercisable after the
market bid price of the Company's stock exceeds $1.00 for 15 consecutive
trading days. Also in March of 1999 the Company issued warrants to the same
investment banker to purchase 50,000 shares at an exercise price of $0.50
exercisable after the market bid price of the Company's stock exceeds $2.00
for 15 consecutive trading days. The warrants were valued at $48,000 using
the Black-Scholes securities valuation model, assuming among other things, a
6% risk free interest rate, 0% dividend yield, 1 and 2 year life respectively
and 120% volatility.

In March 1999, the Company issued 507,160 shares to five accredited investors
in exchange for $403,492. In addition to the shares, the Company issued
warrants to purchase 300,000 shares of common stock at an exercise price of
$1.10 per share exercisable immediately. The warrants were valued at $165,600
using the Black-Scholes securities valuation model, assuming among other
things, a 7% risk free interest rate, 0% dividend yield, 5 year life and 120%
volatility.

On March 30, 1999, Dauphin signed an agreement with an accredited investor
("Investor") where the Investor agreed to commit up to $6 million. The first
closing for $1 million occurred on April 15, 1999 when the parties executed
agreed upon documentation and Dauphin deposited 2 million common shares in
escrow. This tranche was in the form of an 8% promissory note convertible
into stock beginning sixty days after closing. The conversion was at 15%
discount from the closing bid price of the Company's common stock. The
contract also called for the adjustment in escrowed shares in case stock
value decreases, under the 5/8 bid for two consecutive days. As specified on
the contract, on April 22 due to decline in market price of the stock, the
Company deposited additional 400,000 shares in an escrow account to replenish
the $1.5 million value in the account. As an incentive, the Investor received
a warrant to purchase 100,000 common shares of stock at an exercise price of
$1.00 per share. The warrant was valued at $52,200 using Black-Scholes
securities valuation model, assuming among other things, a 6% risk free
interest rate, 0% dividend yield, 1 and 2 year life respectively and 120%
volatility. On May 24, 1999 $1 million funded under the note, together with
accrued interest, was converted into 2,441,414 shares of common stock of
which 2,400,000 common shares were disbursed to the Investor. As of the date
of this report, the remaining shares have not been issued.

In May 1999, the Company issued 150,000 shares to two accredited investors in
exchange for $82,500. In addition to the shares the Company issued warrants
to purchase 150,000 shares of common stock at an exercise price of $0.55 per
share. The warrants are exercisable immediately and expire in three years.
The warrants were valued at $53,250 using the Black-Scholes securities
valuation model, assuming among other things, a 6% risk free interest rate,
0% dividend yield, 5 year life and 120% volatility.

In May 1999, the company issued 586,764 common shares in exchange for
$240,000 of the remaining principal of the Convertible Debentures-2001A. That
closed out all debts the Company had in relation to the Convertible
Debentures.

On May 28, 1999 the Company signed a Stock Purchase Agreement with another
accredited investor ("Investor"), which allows the Company and obligates the
Investor to purchase shares from the Company based on terms and conditions
outlined in the agreement. In total the Investor agreed to purchase up to
$2,250,000 of the common stock within the next twenty-four months. The
Investor agreed to purchase from the Company shares based on ninety percent
of the daily average trading value, which is computed by multiplying the
closing bid price by the daily volume of the Company's common stock traded
average over the twenty days prior to closing. In connection therewith the
Company sold to the Investor 1,048,951 shares for $450,000 at an average
price of $0.43 per share including $58,000 of closing fees. The Company has
the right to sell additional shares with an interval of 25 business days with
a minimum of $100,000 per sale and a maximum of $500,000 based on the average
daily value as described above. In addition to the stock, the Investor
received an Incentive Warrant to purchase 750,000 common shares at a price of
$0.6435 per share. The Warrants were valued at $235,500 using Black-Scholes
securities valuation model assuming among other things 6% risk free rate, 0%
dividend yield, five years life and 120% volatility.

In connection with the Stock Purchase Agreement signed by the Company on May
28, 1999, the Company sold to the Investor 350,000 shares for $148,050 at an
average price of $0.423 per share, including $2,961 of closing fees.

In the third quarter of 1999, the Company issued 14,963 treasury shares and
2,086,540 common shares to a group of accredited investors in exchange for
$598,817 or an average of $0.29 per share. In addition to the shares the
Company issued warrants to purchase 1,651,600 shares of common stock at an
average exercise price of $0.47 per share. The warrants are exercisable
immediately and expire in three to five years. The Warrants were valued at
$443,622 using Black-Scholes securities valuation model assuming among other
things 6% risk free rate, 0% dividend yield, five years life and 120%
volatility.

During the third quarter, the Company agreed to issue a total of 407,868
shares to satisfy certain payables in the cumulative amount of $223,825 or
approximately $0.55 per share.

In September 1999, a Warrant for a total of 100,000 shares that was issued in
July 1999 was exercised at $0.53 per share. The Company received a total of
$53,000 from such exercise.

On October 26 1999, the Company issued 93,358 shares in exchange for $29,643
or $0.32 per share net of $605 of closing fees in accordance with the Stock
Purchase Agreement signed by the Company on May 28, 1999.

On October 27, 1999 in connection with the Stock Purchase Agreement signed by
the Company on May 28, 1999, the Company sold to the Investor 447,012 shares
for $141,935 at an average price of $0.32 per share, including $2,897 of
closing fees.

In November 1999, the Company issued 457,650 shares to three accredited
investors in exchange for $156,500 or $0.33 per share.

During the third quarter of 1999 a Warrant for 302,858 shares at $0.20 was
exercised. The Company received a total of $60,285 for the shares. As of the
date of this report, these shares have not been issued.

In November 1999, in exchange for services rendered, the Company issued
300,000 shares to a consultant.

In December 1999, the Company converted $70,000 of short-term notes
including $5,000 of interest from an affiliate into 350,000 shares.

In December 1999, the Company issued 362,858 shares in exchange for $72,572
from two accredited investors. In addition to shares, the Company issued two
Warrants for the total of 362,858 common shares to the investors with a
strike price of $0.20. The Warrants were valued at $68,637 using Black-
Scholes securities valuation model assuming among other things 6% risk free
rate, 0% dividend yield, five years life and 120% volatility.

1998 Transactions

On January 5, March 5, June 5 and September 5, 1998, under an employment
contract relating to the RMS acquisition, the Company issued 12,500 shares on
each date 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. On March 6, 1998, Mr. Schultz returned
7,901 shares to treasury as repayment of his obligation to the Company and on
July 6, 1998 the Company issued additional 1,260 shares to Mr. Schultz to
compensate for the decrease in price of the stock on the day of issuance.

On March 3, 1998, for services performed, the Company issued 30,000 shares to
Mr. Mikolai Prociuk, an employee of the Company, as a bonus.

On March 31, 1998 the Company registered with Securities and Exchange
Commission 4,523,608 shares issued to accredited investors in a private
placement that concluded in December 1997. In addition to the shares issued
in the private placement, the Company registered 2,964,327 shelf shares for
use, if needed, for future acquisitions, to raise capital, to fund production
of Orasis( hand-held computer or RMS contract manufacturing operations.

On May 8, 1998, the Company issued 60,000 common shares to Family Tools, Inc.
for industrial molds used in the production of Orasis( hand-held computer.
The shares were valued at $1.125, closing bid price on that day.

On June 24, 1998, for services performed, the Company issued 3,000 shares to
Ms. Nina O'Connor, an employee of the Company, as a bonus.

Since May of 1998, 2,705,391 shares that were previously registered as shelf
shares and 542,272 treasury shares were issued in exchange for $1 million of
principal of 2001 Debentures and $1.1 million of principal of 2001A
Debentures and $21,070 of interest. $34,400 and 172,700 shares in lieu of
$178,918 in fees were issued to brokers for the 2001 Debentures and 2001A
Debentures (Note 7).

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, Dauphin 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. 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 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.

18. SUBSEQUENT EVENTS:

During the first quarter of 2000, the Company has sold 4,943,252 shares in
exchange for $7,524,235, or $1.52 per share to two groups of accredited
investors. Along with the shares some of the investors received Warrants to
purchase 624,520 shares at $0.25. The placement agents shall receive
3,630,000 options convertible into the Company's common stock of which 18,000
options shall be converted at a $1 strike price and the remainder shall be
converted at a $10.00 strike price per share.

In January 2000, the Company granted 1,941,000 options to purchase common
stock at prices equal to or greater than the market price on the date of the
grant to directors, employees and former employees. These options expire
between three and five years from the date of issuance. The compensation
expense associated with the grants to former employees was not significant.

During the first quarter of 2000, with the funds that it raised in the
private placement, the Company settled approximately $1.5 million of
outstanding payables with approximately $875,000.

On February 15, 2000 the Company signed a contract with a European Union firm
to provide the high bandwidth xDSL Set-Top Box for its telecommunications
project. Dauphin's Set-Top Box will be an integral part to the firm's Fiber
Optics Infrastructure. The contract is part of a multi-year program that will
provide unprecedented bandwidth and other IT capabilities in that European
Union nation.

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 $ 82,563.00
Blue Sky fees and expenses 3,000.00
Accounting fees and expenses 10,000.00
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 $ 115,563.00

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

1999 Transactions

In January and April 1999, the Company issued a total of 46,373 shares under
an employment contract with Richard M. Schultz. As of May 14, 1999, the
Company no longer employs Richard M. Schultz.

During the third quarter, the Company agreed to issue a total of 407,868
shares to satisfy certain payables in the cumulative amount of $223,825 or
approximately $0.55 per share.

In September 1999, a Warrant for a total of 100,000 shares that was issued in
July 1999 was exercised at $0.53 per share. The Company received a total of
$53,000 from such exercise.

In November 1999, the Company issued 457,650 shares to three accredited
investors in exchange for $156,500 or $0.33 per share.

In November 1999, in exchange for services rendered, the Company issued
300,000 shares to a consultant.

In December 1999, the Company converted $70,000 of short-term notes
including $5,000 of interest from an affiliate into 350,000 shares.

2000 Transactions

During the first quarter of 2000, with the funds that it raised in the
private placement, the Company settled approximately $1.5 million of
outstanding payables with approximately $875,000.

The outstanding shares were offered and sold in private placements with
accredited investors during 1998 and 1999 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.

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. included as an
exhibit to Form S-1 filed march 17, 1998, incorporated herein by
reference.
*10(4) License Agreement dated May 3, 1996, between Microsoft Corporation and
Dauphin Technology, Inc. included as an exhibit to Form S-1 filed
March 17, 1998, incorporated herein by reference.
*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) Promissory Note, Subscription Agreement, Form of Warrant and
Conversion Notice for Augustine Capital Management dated April 13,
1999 included as an exhibit to Form 10-Q for the quarter ended March
31, 1999, incorporated herein by reference.
*10(8) Stock Purchase Agreement by and between Crescent International Limited
and Dauphin Technology, Inc. dated May 28, 1999, including
Registration Rights Agreement, Form of Incentive Warrant, Form of
Early Put Warrant, Form of Opinion of the Company's Independent
Counsel and Form of Transfer Agent Instructions included as an exhibit
to Form 10-Q for the quarter ended June 30, 1999, incorporated herein
by reference.
*10(9) Equity line of credit agreement by and between Techrich International
Limited and Dauphin Technology, Inc. dated April 12, 2000 including
Common Stock Purchase Agreement, Registration Rights Agreement, Escrow
Agreement and Form of a stock Purchase Warrant included as an exhibit
to Form 8-K filed on April 20, 2000 incorporated herein by reference.
24(1) Consent of Arthur Andersen LLP., independent public accountants.
24(2) Consent of Grant Thornton LLP., independent public accountants.
24(3) Consent of Rieck and Crotty, P.C.

* 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 26 day of April, 2000.

DAUPHIN TECHNOLOGY, INC.

By:s/Andrew J. Kandalepas/
Andrew J. Kandalepas, President

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 4/26/00
s/Andrew J. Kandalepas/
Andrew J. Kandalepas,
Chairman of the Board of Directors /President/Chief Executive Officer

4/26/00
s/Jeffrey Goldberg/
Jeffrey Goldberg,
Secretary/Director

4/26/00
s/Gary E. Soiney/
Gary E. Soiney,
Director

4/26/00
s/Andrew Prokos/
Andrew Prokos,
Director

EXHIBIT 24(1)

Consent of Independent Public Accountants

Board of Directors
Dauphin Technology, Inc.

We have issued our report dated March 26, 2000, accompanying the
consolidated financial statements included in the Registration Statement on
Form S-1 of Dauphin Technology, Inc. as of and for the year ended December
31, 1999. We hereby consent to the incorporation by reference of said report
in the Registration Statements of Dauphin Technology, Inc. and to the use of
our name as it appears under the caption "experts".

Grant Thornton LLP

Chicago, Illinois
April 24, 2000

EXHIBIT 24(1)

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the use of our
report dated March 31, 1999 (except with respect to the matters discussed
in the first five sentences of paragraph five of Note 17, as to which the
date is April, 15, 1999) and to all references to our Firm included in or
made a part of this Registration Statement on Form S-1 for Dauphin
Technology, Inc.

s/Arthur Andersen/

Arthur Andersen LLP

Chicago, Illinois
April 27, 2000

EXHIBIT 24(2)

April 25, 2000

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 33,291,523 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,

s/Rieck and Crotty/

Rieck and Crotty, P.C.

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