-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aybi6STyl8bG5TiaQa447qiwynypIHKov6YP5DvEs4aAsqQLwOLUCLui1HXc7yzJ 8mV9YHR19drmxdkN+I/nSQ== 0000096313-06-000147.txt : 20060605 0000096313-06-000147.hdr.sgml : 20060605 20060605171834 ACCESSION NUMBER: 0000096313-06-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060605 DATE AS OF CHANGE: 20060605 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAUPHIN TECHNOLOGY INC CENTRAL INDEX KEY: 0000832489 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 870455038 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-21537-D FILM NUMBER: 06887082 BUSINESS ADDRESS: STREET 1: 800 E NORTHWEST STREET 2: STE 950 CITY: PALATINE STATE: IL ZIP: 60067 BUSINESS PHONE: 8473584406 MAIL ADDRESS: STREET 1: 800 E NORTHWEST HIGHWAY SUITE 950 CITY: PALATINE STATE: IL ZIP: 60067 FORMER COMPANY: FORMER CONFORMED NAME: SUCCESSO INC DATE OF NAME CHANGE: 19910410 10-Q 1 dauphin10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE - ---------- SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2006 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE - ---------- SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________ to ____________. Commission File No. 33-21537-D DAUPHIN TECHNOLOGY, INC. (Exact name of registrant as specified in charter) Illinois 87-0455038 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1014 E. Algonquin Rd., Suite 111, Schaumburg, Illinois 60067 (Address of principal executive offices) (Zip Code) (847) 303-6566 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X ------ ------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ------ ------- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of June 5, 2006, 99,569,028 shares of the registrant's common stock, $.001 par value, was issued and outstanding. Dauphin Technology, Inc. (A Development Stage Company) Table of Contents ----------------- Page PART I FINANCIAL INFORMATION Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2006 and December 31, 2005 3 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 2006 and 2005 and cumulative amounts since January 1, 2004 (Commencement of development stage) 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2006 and 2005 and cumulative amounts since January 1, 2004 (Commencement of development stage) 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 Item 3. Controls and Procedures 11 PART II OTHER INFORMATION 11 Item 1. Legal Proceedings 11 Item 2. Unregistered sale of equity securities and Use of Proceeds 12 Item 3. Default Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6(a). Exhibits 12 Item 6(b). Reports on Form 8-K 12 SIGNATURE 12 2
Dauphin Technology, Inc. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS March 31, 2006 and December 31, 2005 - --------------------------------------------------------------------------------------------------------------- ASSETS March 31, 2006 December 31, 2005 --------------- ----------------- CURRENT ASSETS: (Unaudited) Cash $ 11,124 $ 78,381 --------------- --------------- Total assets $ 11,124 $ 78,381 --------------- --------------- LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 241,997 $ 196,813 Accrued expenses 371,507 320,609 Short-term borrowings 163,215 50,000 Current portion of long-term debt 13,515 13,515 Derivative liability 1,136,409 1,231,158 Convertible debentures 950,000 950,000 Convertible loans 3,091,978 3,031,478 --------------- --------------- Total current liabilities 5,968,621 5,793,573 --------------- --------------- COMMITMENTS AND CONTINGENCIES - - SHAREHOLDERS' DEFICIT: Preferred stock, $0.01 par value, 10,000,000 shares authorized, issued and outstanding 100,000 100,000 Common stock, $0.001 par value, 100,000,000 shares authorized; 99,569,028 shares issued and outstanding at March 31, 2006 and December 31, 2005 99,569 99,569 Additional paid-in capital 65,619,652 65,619,652 Accumulated deficit (71,776,718) (71,534,413) --------------- --------------- Total shareholders' deficit (5,957,497) (5,715,192) --------------- --------------- Total liabilities and shareholders' deficit $ 11,124 $ 78,381 --------------- --------------- The accompanying notes are an integral part of these consolidated financial statements.
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Dauphin Technology, Inc. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, 2006 and 2005 and cumulative amounts since January 1, 2004 (commencement of development stage) (Unaudited) - ------------------------------------------------------------------------------------------------------------- Cumulative Amounts since becoming a Three Months Ended March 31, development stage 2006 2005 company --------------- --------------- ---------------- NET SALES $ - $ - $ - COST OF SALES - - - --------------- --------------- -------------- Gross profit - - - GENERAL AND ADMINISTRATIVE EXPENSES 319,157 161,048 2,743,868 --------------- --------------- -------------- Loss from operations (319,157) (161,048) (2,743,868) Derivative (loss) gain 94,749 (30,583) (148,647) INTEREST EXPENSE (17,897) (15,000) (417,265) --------------- --------------- -------------- Net loss from continuing operations (242,305) (207,431) (3,368,095) DISCONTINUED OPERATIONS Loss from discontinued operations - - (548,865) --------------- --------------- -------------- Net loss $ (242,305) $ (207,431) $ (3,858,645) --------------- --------------- -------------- LOSS PER SHARE: Continuing Operations $ 0.00 $ 0.00 $ (0.03) Discontinued Operations 0.00 0.00 (0.01) --------------- --------------- -------------- Total Basic and Diluted $ 0.00 $ 0.00 $ (0.04) --------------- --------------- -------------- Weighted average number of shares of common stock outstanding Basic 99,569,000 99,002,000 98,198,000 Diluted 99,569,000 99,002,000 98,198,000 The accompanying notes are an integral part of these consolidated financial statements.
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Dauphin Technology, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, 2006 and 2005 and cumulative amounts since January 1, 2004 (commencement of development stage) (Unaudited) ------------------------------------------------------------------------------------------------------------ Cumulative Amounts since becoming a Three Months Ended March 31, development stage 2006 2005 company --------------- --------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (242,305) $ (207,431) $ (3,858,645) Non-cash items included in net loss: Amortization of debt discount - - 269,588 Convertible loans issued in lieu of consulting fees - - 1,161,500 Common stock issued in lieu of convertible loans - 37,500 37,500 Common stock issued for consulting fees - - 447,517 Common stock issued for employee settlement - - 39,510 Changes in: Accounts receivable - - 3,248 Assets of discontinued operations - 8,832 166,123 Prepaid expenses - 2,500 2,500 Accounts payable 45,184 147,780 108,908 Accrued expenses 50,898 52,900 3,166 Liabilities from discontinued operations - (243,748) (1,188,240) --------------- --------------- -------------- Net cash used in operating activities (146,223) (201,667) (2,807,325) CASH FLOWS FROM INVESTING ACTIVITIES - - - --------------- --------------- -------------- Net cash used in investing activities - - - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of restricted shares - - 323,000 Derivative liability (94,749) 30,583 151,430 Issuance of preferred stock - - 550,000 Issuance of convertible loans 60,500 - 1,930,478 Repayment of convertible debentures - (37,500) (100,000) (Decrease) in short-term borrowing - - (200,000) Increase in short-term borrowing 113,215 250,000 163,215 --------------- --------------- -------------- Net cash provided by financing activities 78,966 243,083 2,818,123 --------------- --------------- -------------- Net increase (decrease) in cash (67,257) 41,416 10,798 CASH BEGINNING OF PERIOD 78,381 7,829 326 --------------- --------------- -------------- CASH END OF PERIOD $ 11,124 $ 49,245 $ 11,124 --------------- --------------- -------------- CASH PAID DURING THE PERIOD FOR: Interest $ - $ - $ 18,262 NONCASH TRANSACTIONS: Common stock issued in connection with: Services $ - $ 37,500 $ 37,500 The accompanying notes are an integral part of these consolidated financial statements
5 Dauphin Technology, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General The accompanying financial statements are unaudited, but in the opinion of the management of the Company, contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at March 31, 2006, the results of operations for the three months ended March 31, 2006 and 2005, and the cash flows for the three months ended March 31, 2006 and 2005 and cumulative amounts since January 1, 2004 (date of commencement of development stage). Reference is made to the Company's Form 10-K for the year ended December 31, 2005. The results of operations for the three months ended March 31, 2006 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2006. Effective January 1, 2004, the Company is considered a development stage company as defined in Statement of Accounting Standards (SFAS) No. 7. The Company's development stage activities consist of evaluating potential merger candidates and raising additional financing. 2. Related Party Transactions Our Chairman and Chief Executive Officer loaned approximately $13,000 to the Company and it is reflected in short-term borrowings. 3. Stock-Based Compensation For stock options granted to employees prior to January 1, 2006, the Company utilized the footnote disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 encourages entities to adopt a fair-value based method of accounting for stock options or similar equity instruments. However, it also allows an entity to continue measuring compensation cost for stock-based compensation using the intrinsic-value method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The Company elected to continue to apply the provisions of APB 25 and provide pro forma footnote disclosures required by SFAS No. 123 as applicable. Accordingly, no compensation cost has been recognized in the consolidated financial statements for stock options granted to employees. There have been no stock options granted during the first quarter of 2006 or 2005, nor since January 1, 2004. 4. Weighted Average Shares The computation of basic income (loss) per common share is based on the weighted average number of shares outstanding during each period. The computation of diluted income (loss) per common share is based on the weighted average number of common shares outstanding during the period, plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding, using the treasury stock method and the average market price per share during the period. Warrants to purchase 1,399,999 shares, and 1,704,999 shares at March 31, 2006 and 2005, respectively, at prices between $.10 and $1.36 were outstanding but were excluded for the calculations for diluted income (loss) per share as the effect was antidilutive. 5. Supplemental Cash Flow Information Interest in the amount of $18,262 has been paid during the period from January 1, 2004 to March 31, 2006. No amounts have been paid for income taxes during the same period. 6. Liquidity The Company is a development stage company and does not have revenues from operations. In addition, the Company has a deficit in working capital and stockholder's equity, and has incurred sustained losses. The Company has funded losses from operations in the current quarter primarily from the issuance of debt and the sale of the Company's restricted common stock in private placement transactions, and will require additional funding from these sources to sustain its future operations. The Company anticipates that the issuance of debt and the sale of the Company's restricted common stock will continue to fund operating losses in the short-term; however, there can be no assurance that it will be successful in doing so. 6 Dauphin Technology, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Definitive Merger Agreement with GeoVax On January 20, 2006, Dauphin entered into a Definitive Agreement and Plan of Merger (the "Merger") whereby the Company's wholly owned subsidiary, GeoVax Acquisition Corp., would merge with and into GeoVax. Upon completion of the Merger, GeoVax would survive the Merger as a wholly owned subsidiary of Dauphin. GeoVax, Inc., a Georgia biotechnology company, was established to develop, license and commercialize the manufacture and sale of human vaccines for diseases caused by HIV-1 (Human Immunodeficiency Virus) and other infectious agents. The Merger shall become effective upon, among other things, an affirmative vote of approval from each companies' shareholders. If the Merger is completed, there is no assurance that the surviving company will be economically successful. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-looking statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than historical or current facts, including, without limitation, statements about our business strategy, plans and objectives of management and our future prospects, are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. Such risks and uncertainties include, without limitation, the following: o financing of future operations, variations in our quarterly results, the occurrence of unanticipated events and circumstances and general economic conditions, including stock market volatility, results of future operations, including the ability to continue as a going concern and the successful closing of the GeoVax transaction. These risks and uncertainties are beyond our control and, in many cases; we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. When used in this document, the words "assumptions," "believes," "plans," "expects," "anticipates," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate," or the negative of such terms and similar expressions as they relate to us or our management are intended to identify forward-looking statements. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report and the condensed consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the period ending December 31, 2005. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods. Critical 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. 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. 7 (Loss) Per Common Share Basic loss per common share is calculated by dividing net loss for the year by the weighted-average number of shares outstanding during the period, which were 99,569,000 and 99,002,000 for the periods ending March 31, 2006 and 2005 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 Use of Estimates The presentation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of the derivative liability. Fair Value of Financial Instruments The Company financial instruments consist of cash, payables, and notes payable. The carrying amount of cash and payables approximates fair value because of the short-term nature of these items. The aggregate carrying amount of notes payable approximates fair value as the individual notes bear interest at market interest rates. Strategic Direction In November 2003, Dauphin's Board of Directors, as then constituted, considered and approved a plan to discontinue all operations effective January 1, 2004, and to seek out potential merger and or acquisition candidates. As a result the Company is considered a development stage business since January 1, 2004 for financial reporting purposes. On January 20, 2006, Dauphin entered into a definitive Agreement and Plan of Merger (the "Merger") whereby the Company's wholly owned subsidiary, GeoVax Acquisition Corp., would merge with and into GeoVax. Upon completion of the Merger, GeoVax would survive the Merger as a wholly owned subsidiary of Dauphin. GeoVax, Inc., a Georgia biotechnology company, was established to develop, license and commercialize the manufacture and sale of human vaccines for diseases caused by HIV-1 (Human Immunodeficiency Virus) and other infectious agents. The Merger shall become effective upon, among other things, an affirmative vote of approval from each companies' shareholders. If the Merger is completed, there is no assurance that the surviving company will be economically successful. Results of Operations The Company was unsuccessful in its previous operations and terminated those operations in December 2003. We were unsuccessful in generating income from or positive cash flow from any of our operations. Currently, the Company is working on the proposed transaction with GeoVax as described above. The loss of $242,305 for the three months ended March 31, 2006 is primarily the result of legal fees associated with disputes with our preferred shareholders and compensation to our chief executive officer, offset by a gain in the derivative instrument. The loss of $207,431 for the three months ended March 31, 2005 is primarily due to general and administrative expenses and the loss associated with the derivative instrument. We anticipate that our general and administrative expenses going forward will be approximately $90,000 per month. Liquidity and Capital Resources The Company has incurred a net operating loss in each year since its founding and as of March 31, 2006, has an accumulated deficit of $71,776,718. The Company expects to incur operating losses over the near term. As of March 31, 2006 the Company had current liabilities in excess of current assets of approximately $5,957,000. 8 The Company has funded losses from operations in the current year primarily from the issuance of debt and the sale of the Company's restricted common stock in private placement transactions, and will require additional funding from these sources to sustain its future operations. The Company anticipates that the issuance of debt and the sale of the Company's restricted common stock will continue to fund operating losses in the short-term. There is no assurance that the Company will be successful in raising the needed amounts of capital and debt needed to sustain the Company. When used in this Form 10-Q, the words "expects," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties, including those set forth under the "Risks and Uncertainties" set forth below that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. Dauphin expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. This discussion should be read together with the financial statements and other financial information included in this Form 10-Q. We are a development stage company as defined in SFAS No. 7 effective January 1, 2004. The Company's development stage activities consist of evaluating potential merger candidates and raising additional financing. Risks and Uncertainties Readers should carefully consider the risks described below in evaluating the Company's business. The following risks and uncertainties are not the only risks and uncertainties facing the Company. We have an accumulated deficit due to substantial losses incurred over the last ten years Since July 1996 we have operated with substantial losses from operations and have an accumulated deficit of $71,776,718 as of March 31, 2006. 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 procure 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. Our financial performance may make it difficult for potential sources of capital to evaluate the viability of our business to date and to assess its future viability. We currently have no operations. The Company was unsuccessful in its operations and terminated those operations in December 2003. Our previous business operations were limited and did not result in (i) significant revenues, (ii) the accumulation of a significant dollar amount of assets, or (iii) in earnings. Because of a lack of resources, we were unable to fund the costs of complying with our filing requirements under Section 13 of the Securities Exchange Act of 1934, as amended. In November 2003, Dauphin's Board of Directors, as then constituted, considered and approved a plan to discontinue all operations effective January 1, 2004, and to seek out potential merger and or acquisition candidates. The Company's ability to continue as a going concern is questionable Because of recurring operating losses, the excess of current liabilities over current assets, the stockholders' deficit, and negative cash flows from operations, there is substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on attaining profitable operations, restructuring its debt obligations, and obtaining additional outside financing. The Company has funded losses from operations in the current year primarily from the issuance of debt and the sale of the Company's restricted common stock in private placement transactions, and will require additional funding from these sources to sustain its future operations. The Company anticipates that the issuance of debt and the sale of the Company's restricted common stock will continue to fund operating losses in the short-term but there is no assurance that the Company will be successful in obtaining additional capital or financial resources. Planned transaction with GeoVax may not be completed On January 20, 2006, Dauphin entered into a definitive Agreement and Plan of Merger (the "Merger") whereby the Company's wholly owned subsidiary, GeoVax Acquisition Corp., would merge with and into GeoVax. Upon completion of the Merger, GeoVax would survive the Merger as a wholly owned subsidiary of Dauphin. GeoVax, Inc., a Georgia biotechnology company, was established to develop, license and commercialize the manufacture and sale of human vaccines for diseases caused by HIV-1 (Human Immunodeficiency Virus) and other infectious agents. The Merger shall become effective upon, among other things, an affirmative vote of approval from each companies' shareholders. There is no assurance that we will be successful in finalizing this transaction. If the transaction is completed, there is no assurance that the surviving company will be economically successful. Regardless of the outcome with GeoVax, we may not be successful in finding any suitable merger or acquisition candidate. If we are not successful in finding any suitable candidate, it would raise substantial doubt as to our ability to continue any operations. 9 Funding Requirements In order to continue its planned transaction, the Company must obtain additional funding. The Company has no source of working capital except the prospect of obtaining new equity or debt financing. We have no revenues and therefore rely solely on obtaining either equity or debt financing. The Company must continue to sell equity or find another source of operating capital until its operations are profitable. While the Company's financial statements have been prepared under the assumption that the Company will continue as a going concern, the independent registered public accounting firm's report on the Company's 2005 financial statements, included an explanatory paragraph relating to the substantial doubt as to the Company's ability to continue as a going concern. The Company does not have sufficient shares of common stock authorized to meet its obligations Currently, we do not have enough authorized shares of common stock to issue to holders of options and warrants, as well obligations pursuant to our convertible loans and convertible debentures. This deficiency in the number of authorized shares of common stock can only be rectified by an affirmative vote of the majority of our shareholders to amend our Articles of Incorporation to reflect an increased number of authorized shares of common stock. There can be no assurance that our shareholders will approve an amendment to our Articles of Incorporation. Shareholders may suffer dilution from the exercise of existing options, warrants and convertible notes; the terms upon which we will be able to obtain additional equity capital could be adversely affected Our common stock may become diluted if any of the outstanding warrants to purchase our common stock are exercised. The total number of shares that may be issued pursuant to the outstanding warrants is 1,399,999 at March 31, 2006 and is presently 700,000. 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 development-stage companies have been especially volatile. Market volatility and other market conditions could reduce the market price for our shares. Our stock price has fluctuated in the past and could continue to do so in the future. Your investment in the Company's stock could lose value. Some of the factors that could significantly affect the market price of the Company's stock are discussed in these Risk Factors and elsewhere in this report, and also include: variations in quarterly financial results; changes in political, economic and market conditions either generally or specifically to particular industries; and fluctuations in stock prices generally, particularly with respect to the stock prices for other biotechnology companies. A significant drop in our stock price could expose us to the risk of securities class action lawsuits. Defending against such lawsuits could result in substantial costs and divert management's attention and resources. An unfavorable outcome of such a matter may have a material adverse impact on the business, results of operations, financial position, or liquidity. General Economic and Other Conditions The Company's business may be adversely affected from time to time by such matters as changes in general economic, business and international conditions, prices and costs, technological developments and other factors of a general nature. 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. 10 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. Item 3. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures We maintain disclosure controls and procedures designed to ensure that financial information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the required time periods, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure. In connection with the completion of its audit of, and issuance of its report on, our consolidated financial statements for the year ended December 31, 2005, our independent auditor identified deficiencies that existed in the design or operation of our internal control over financial reporting that it considered to be "significant deficiencies" or "material weaknesses." The Public Company Accounting Oversight Board ("PCAOB") has defined "significant deficiency" as a control deficiency, or a combination of control deficiencies, that adversely affects the company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that the misstatement of the company' annual or interim financial statements that is more than inconsequential will not be detected. The PCAOB has defined a "material weakness" as a "significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial will not be prevented or detected." The significant deficiencies or material weakness in our internal controls relate to segregation of incompatible duties, establishment of procedures and controls over debt documentation and derivative transactions and debt accounting as well as the establishment of a Code of Ethics. We have disclosed these significant deficiencies and material weaknesses to our Board of Directors. Additional effort is needed to fully remedy these significant deficiencies and material weaknesses and we are continuing our efforts to improve and strengthen our internal controls over financial reporting. Our management and Board of Directors will continue to work with our management and outside advisors with the goal to implement internal controls over financial reporting that are adequate and effective. (b) Changes in internal controls and procedures There has been no change in our internal control over financial reporting during the first quarter ended March 31, 2006, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On March 7, 2006, the Company filed legal action against preferred shareholders Stavros N. Papageorgiou and Nikolaos S. Papageorgiou, their advisor, Miltos Louizidis, and the investment banking firm of Crescent International, Ltd. (the "Defendants"). The complaint alleges, among other things, breaches of various agreements, fraud, tortious interference, conspiracy, and breaches of fiduciary duties by the Defendants. Specifically, Dauphin alleges that the Defendants embarked upon a scheme to defraud, tortiously interfere with contracts and business relationships, and to breach fiduciary duties in order to steal from Dauphin and its shareholders certain critical business opportunities, including its current efforts to merge with GeoVax, Inc. On May 15, 2006, the Company and the preferred shareholders agreed to settle all legal actions between them. The settlement confirms the parties' agreement to proceed with the GeoVax merger, based upon a conversion and exchange of preferred shares upon closing of the merger, on the basis of a 11 1-preferred-for-2-common share exchange, as anticipated by the Merger Agreement. In addition, a convertible note representing a Company liability of approximately $1.3 million has been cancelled. On May 16, 2006, an agreed order was entered in the Circuit Court of Cook County, Illinois, dismissing all claims. Item 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS - None. Item 3. DEFAULTS UPON SENIOR SECURITIES - None. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None. Item 5. OTHER INFORMATION - None. Item 6 (a). EXHIBITS 31. Certifications 31.1 Certification of Chief Executive and Chief Financial Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of Item 6 (b). REPORTS ON FORM 8-K On January 24, 2006, we filed a report on Form 8-K, which reported the definitive Agreement and Plan of Merger entered in to by and among GeoVax, Inc., our subsidiary GeoVax Acquisition Corp., and Dauphin Technology. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DAUPHIN TECHNOLOGY, INC. BY: /s/ Andrew J. Kandalepas ------------------------ Andrew J. Kandalepas, President, Chief Executive and Chief Financial Officer (Principal Executive and Financial Officer) Date: June 5, 2006 12 EX-31 2 dauphin10qexh311.txt Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a - 15(e) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Andrew Kandalepas, Chairman, Chief Executive Officer and Chief Financial Officer of Dauphin Technology, Inc. certify that: (1) I have reviewed this quarterly report on Form 10-Q of Dauphin Technology, Inc.; (2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; (3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; (4) I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) I have disclosed, based on our most recent evaluation, to the registrant's auditors and the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which would adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: June 5, 2006 /s/ Andrew J. Kandalepas ------------------------ Andrew Kandalepas Chief Executive Officer Chief Financial Officer EX-32 3 dauphin10qexh321.txt Exhibit 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002 In connection with the quarterly report of Dauphin Technology, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2006, Andrew J. Kandalepas hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that to the best of his knowledge: 1. The quarterly report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: June 5, 2006 /s/ Andrew J. Kandalepas ------------------------- Andrew Kandalepas Principal Executive Officer Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----