FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________ to ________
Commission file number: 000-26957
DCH TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1349374
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
27811 Avenue Hopkins #6
Valencia, CA 91355
(Address of Principal Executive Offices)
Issuer's telephone number: (661) 775-8120
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 31, 1999, the issuer had 16,747,890 shares of common stock,
$.001 par value per share, outstanding.
DCH TECHNOLOGY, INC.
CONTENTS
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
2
PART I. FINANCIAL INFORMATION
DCH Technology, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
CURRENT ASSETS (UNAUDITED)
Cash $ 39,602 $ 1,802
Accounts receivable 143,243 58,829
Inventory 38,890 143,715
Prepaid expenses 45,482 -
Other receivable 127,803 -
Advance to customer 1,200 100,000
------------- ------------
TOTAL CURRENT ASSETS 396,220 304,346
PROPERTY AND EQUIPMENT - NET 124,330 108,659
OTHER ASSETS
Licensed patents, net of amortization 62,420 29,025
Investments with no readily determinable fair value 215,000 -
Investment in partnerships 99,000 99,000
------------- ------------
TOTAL OTHER ASSETS 376,420 128,025
------------- ------------
$ 896,970 $ 541,030
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft - $ 3,212
Accounts payable $ 231,582 174,418
Accrued expenses 338,600 40,799
Deferred revenue - 28,800
------------- ------------
TOTAL CURRENT LIABILITIES 570,182 247,229
LONG TERM LIABILITIES
Loans from stockholders 112,219 180,359
------------- ------------
TOTAL LIABILITIES 682,401 427,588
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.10 par value 5,000,000 shares
authorized, - 0 - shares issued and outstanding - -
Common stock, $0.01 par value, 50,000,000 shares
authorized, 15,877,890 and 12,273,059 shares
issued and outstanding, respectively 158,779 122,731
Additional paid-in-capital 7,153,670 5,021,642
Common stock subscribed, 0 and 160,000 shares,
respectively - 100,000
------------- ------------
7,312,449 5,244,373
Less common stock subscriptions receivable - (100,000)
------------- ------------
7,312,449 5,144,373
Accumulated deficit (7,097,880) (5,030,931)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 214,569 113,442
------------- ------------
$ 896,970 $ 541,030
============= ============
See Notes to Consolidated Financial Statements
3
DCH Technology, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ----------- ------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Sales $ 218,811 $ 14,377 $ 435,584 $ 38,377
Cost of products sold 48,535 1,196 191,413 6,916
------------- ----------- ------------- -----------
Gross profit 170,276 13,181 244,171 31,461
Operating expenses:
Selling, general and administrative
expenses 570,911 631,289 1,604,695 1,912,737
Depreciation and amortization 14,377 10,281 38,391 17,809
Research and development 348,583 386,693 668,082 996,987
------------- ----------- ------------- -----------
933,871 1,028,263 2,311,168 2,927,533
------------- ----------- ------------- -----------
Net loss from operations (763,595) (1,015,082) (2,066,997) (2,896,072)
Other income 2 2,115 47 4,022
------------- ----------- ------------- -----------
Net loss $ (763,593) $(1,012,967) $ (2,066,950) $(2,892,050)
============= =========== ============= ===========
Weighted average common
shares outstanding 14,760,872 10,325,519 13,703,628 9,155,819
============= =========== ============= ===========
Net loss per common share
Basic $ (0.05) $ (0.10) $ (0.15) $ (0.32)
============= =========== ============= ===========
See Notes to Consolidated Financial Statements
4
DCH Technology, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
1999 1998
------------ ------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES (UNAUDITED) (UNAUDITED)
Net loss $ (2,066,950) $ (2,892,050)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 38,391 17,809
Issuance of stock, warrants and options for
services 590,071 693,844
Investment received in lieu of cash for services (150,000) -
Change in:
Accounts receivable (84,414) 580
Inventory 104,824 (40,407)
Prepaid expenses (45,482) 1,500
Other receivable (127,804) -
Bank overdraft (3,212) -
Accounts payable 57,164 82,341
Accrued expenses 302,801 1,295,911
Deferred revenue - 100,152
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,384,611) (740,320)
CASH FLOWS FROM (TO) INVESTING ACTIVITIES
Loans to shareholders, net (68,140) (40,914)
Purchase of licenses (42,000) (30,000)
Purchase of equipment (45,456) (101,865)
------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (155,596) (172,779)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and warrants 1,459,257 1,062,159
Loans from shareholders, net - 4,098
Proceeds from exercise of warrants 18,750 -
Proceeds from common stock subscriptions receivable 100,000 -
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,578,007 1,066,257
------------ ------------
NET INCREASE (DECREASE) IN CASH 37,800 153,158
CASH, BEGINNING OF PERIOD 1,802 1,140
------------ ------------
CASH, END OF PERIOD $ 39,602 $ 154,298
============ ============
Supplemental disclosure of cash flow information is
as follows:
Cash paid for
Interest -
Income taxes $ 1,600
Non-cash transactions
During the nine months ended September 30, 1998, $99,000 of common stock was
issued in connection with Company's acquisition of interests in Infrasoll,
LLC and Renewable Energies, LLC.
During the nine months ended September 30, 1999, $65,000 of Hydrogen Burner
Technology common stock was received in satisfaction of related advance to
customer, accounts payable and deferred revenue.
See Notes to Consolidated Financial Statements
5
DCH TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Principles
--------------------------------------------
Unaudited Interim Financial Information
- ---------------------------------------
The interim consolidated financial statements as of September 30, 1999 have
been prepared by DCH Technology, Inc. (the Company) pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") for interim
financial reporting. These consolidated statements are unaudited and, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments and accruals) necessary to present fairly the consolidated balance
sheets, consolidated operating results, and consolidated cash flows for the
periods presented in accordance with generally accepted accounting principles.
The consolidated balance sheet at December 31, 1998 has been derived from the
audited consolidated financial statements at that date. Operating results for
the quarter and nine-month periods ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the rules and regulations of the
SEC. These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements, and accompanying notes, included
in the Company's Registration Statement on Form 10-SB (File No. 0-26957).
Certain prior period amounts have been reclassified to conform to the current
period presentation.
Use of Estimates in Preparation of Consolidated Financial Statements
- --------------------------------------------------------------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenue, expenses and
disclosure of contingent assets and liabilities to prepare these financial
statements in accordance with generally accepted accounting principles.
Accordingly, actual results may differ from those estimates.
Loss Per Share
- --------------
Loss per share of common stock is computed using the weighted average number of
common shares outstanding during the period shown. Common stock equivalents are
not included in the determination of the weighted average number of shares
outstanding, as they would be antidilutive.
2. Investments
-----------
The Company acquired shares of two privately held companies without readily
determinable market values in exchange for services rendered. The Company
accounts for these transactions as prescribed by Accounting Principles Board
(APB) 18 under the "cost method".
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT
LIMITATION, STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS
OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES",
"INTENDS", "BELIEVES", OR SIMILAR LANGUAGE. THESE FORWARD-LOOKING STATEMENTS
INVOLVE RISKS, UNCERTAINTIES AND OTHER FACTORS. ALL FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON
THE DATE HEREOF AND SPEAK ONLY AS OF THE DATE HEREOF. THE FACTORS DISCUSSED
BELOW UNDER "FORWARD-LOOKING STATEMENTS" AND ELSEWHERE IN THIS QUARTERLY REPORT
ON FORM 10QSB ARE AMONG THOSE FACTORS THAT IN SOME CASES HAVE AFFECTED THE
COMPANY'S RESULTS AND COULD CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto.
General
- -------
DCH seeks out patented technologies, secures those patented technologies
through licensing agreements with the patent holders and converts the
technologies into viable products which DCH then produces and sells. DCH focuses
on technologies related to the use of hydrogen, primarily hydrogen gas sensors
and fuel cells. DCH currently obtains its funding from private placements of
equity securities and product sales. DCH commenced initial production of its
first product line, the Robust Hydrogen Sensor product line, in November 1998.
As production activity increases, the production facilities are more fully
utilized and DCH fully implements its marketing strategies, management expects
revenues from sales of product to increase in proportion to funding from
continued equity placements.
Results of Operations
- ---------------------
Three Months Ended September 30, 1999 Compared With Three Months Ended
- ----------------------------------------------------------------------
September 30, 1998
- ------------------
For the three months ended September 30, 1999, DCH had sales of $218,811
compared to sales of $14,377 for the three months ended September 30, 1998. The
increased sales in 1999 were due primarily to DCH's introduction of its Robust
Hydrogen Sensor product line in November 1998. In accordance with the growth in
sales, the cost
7
of products sold increased to $48,535 for the three months ended September 30,
1999 compared to $1,196 for the comparable period in 1998. Gross profit was
$170,276 for the three months ended September 30, 1999 compared to $13,181 for
the three months ended September 30, 1998, also reflecting the increased sales.
Selling, general and administrative expenses were $570,911 for the three
months ended September 30, 1999, compared to $631,289 for the comparable period
in 1998. Substantially all of the selling, general and administrative expenses
in the third quarter of 1999 were derived from the commercialization and
introduction of the Robust Hydrogen Sensor product line, while a substantial
portion of the 1998 expenses reflected stock-based awards issued by DCH to
employees and non-employees in consideration of services or goods provided.
Depreciation and amortization increased slightly to $14,377 for the three
months ended September 30, 1999, compared to $10,281 for the three months ended
September 30, 1998, due to purchases by DCH of equipment for its operations.
DCH expended $348,583 on research and development during the three months
ended September 30, 1999 compared to expenditures of $386,693 for the three
months ended September 30, 1998. The slight decrease was due to the movement of
the Robust Hydrogen Sensor product line from the research and development phase
to initial production, while research and development efforts continued on other
DCH products.
As a result of the foregoing factors, DCH's net loss decreased to $763,593
for the three months ended September 30, 1999, from a net loss of $1,012,967 for
the three months ended September 30, 1998. Due in part to an increase in the
number of shares outstanding during the period, the net loss per share decreased
to $.05 for the three months ended September 30, 1999 from $.10 for the
comparable period in 1998.
Nine Months Ended September 30, 1999 Compared With Nine Months Ended
- --------------------------------------------------------------------
September 30, 1998
- ------------------
For the nine months ended September 30, 1999, DCH had sales of $435,584
compared to sales of $38,377 for the nine months ended September 30, 1998. The
increased sales in 1999 were due primarily to DCH's introduction of its Robust
Hydrogen Sensor product line in November 1998. In accordance with the growth in
sales, the cost of products sold increased to $191,413 for the nine months ended
September 30, 1999 compared to $6,916 for the comparable period in 1998. Gross
profit was $244,171 for the nine months ended September 30, 1999 compared to
$31,461 for the nine months ended September 30, 1998, also reflecting the
increased sales.
Selling, general and administrative expenses were $1,604,695 for the nine
months ended September 30, 1999, compared to $1,912,737 for the comparable
period in 1998. Substantially all of the selling, general and administrative
expenses in the first three quarters of 1999 were derived from the
commercialization and introduction of the Robust Hydrogen Sensor product line,
while the 1998 expenses reflected stock-based awards
8
issued by DCH to employees and non-employees in consideration of services or
goods provided.
Depreciation and amortization increased to $38,391 for the nine months
ended September 30, 1999, compared to $17,809 for the nine months ended
September 30, 1998, due to purchases by DCH of equipment for its operations.
DCH expended $668,082 on research and development during the nine months
ended September 30, 1999 compared to expenditures of $996,987 for the three
months ended September 30, 1998. The decrease was due to the movement of the
Robust Hydrogen Sensor product line from the research and development phase to
initial production, while research and development efforts continued on other
DCH products.
As a result of the foregoing factors, DCH's net loss decreased to
$2,066,950 for the nine months ended September 30, 1999, from a net loss of
$2,892,050 for the nine months ended September 30, 1998. Due in part to an
increase in the number of shares outstanding during the period, the net loss per
share decreased to $.15 for the nine months ended September 30, 1999 from $.32
for the comparable period in 1998.
Liquidity and Capital Resources
- -------------------------------
To date, DCH has funded its operations primarily through private placements
of equity securities and secondarily through product sales and loans from
officers and major shareholders. Such placements generated net proceeds of
$1,429,256 during the nine months ended September 30, 1999, $1,310,729 for the
year ended December 31, 1998 and $81,500 during the year ended December 31,
1997. At September 30, 1999, DCH had a working capital deficit of $173,962,
including cash of $39,602, compared to working capital of $57,117, including
$1,802 in cash, at December 31, 1998.
DCH's cash increased by $37,800 during the nine months ended September 30,
1999. The increase was due primarily to financing activities, which provided
$1,578,007 to DCH during the first nine months of 1999. Operating activities
during the nine months ended September 30, 1999 utilized $1,384,611 of cash, and
investing activities utilized $155,596 during the same period. In October 1998,
DCH advanced the sum of $100,000 to Hydrogen Burner Technology, Inc. ("HBT"),
one of its customers, in anticipation of future services. The advance was to be
repaid on or before September 30, 1999. On September 30, 1999, HBT and DCH
agreed upon the services to be performed; HBT also agreed to issue 13,000 shares
of its common stock to DCH in repayment of the advance.
DCH remains dependent upon its ability to obtain outside financing through
the issuance of additional securities until it achieves sustained profitability
through increased sales. Management believes that DCH will require significant
resources for the remainder of 1999, principally to fund DCH's working capital
needs to support the commercialization of DCH's hydrogen sensor and fuel cell
products and continuing research and development efforts. At the present time,
management estimates that DCH will require approximately $15,300,000 to fund its
operations (including the commercialization of its products and
9
ongoing research and development) through the year 2001. Of this amount, DCH
estimates that it will require approximately $2,300,000 to fund its operations
for 1999. DCH expects to generate the necessary resources for its 1999 business
plan through a combination of the contribution from sales of its products and
additional private placements of equity securities. No assurances can be given,
however, that DCH will be able to obtain such additional resources.
DCH anticipates that its capital requirements of approximately $13,000,000
for the balance of the period ending December 31, 2001 will be met through cash
generated from operations and from equity investments. There can be no
assurance, however, that DCH will be able to generate capital sufficient to meet
these long-term needs.
If DCH is unsuccessful in generating anticipated resources from one or more
of the anticipated sources and is unable to replace any shortfall with funding
from another source, DCH may be able to extend the period for which available
resources would prove adequate by deferring the satisfaction of various
commitments or otherwise scaling back operations. If DCH were unable to generate
the required resources, its ability to meet its obligations and to continue its
operations would be adversely affected. DCH's financial statements have been
prepared under the assumption of a going concern. Failure to generate required
resources and to achieve sustained profitability would have an adverse effect on
the financial position, results of operations, cash flows and prospects of DCH
and ultimately on its ability to continue as a going concern.
Year 2000 Readiness Disclosure
- ------------------------------
The Year 2000 ("Y2K") issue refers to the potential for failure of computer
systems that use two digits rather than four digits to identify the applicable
year. Many computers and other equipment with embedded chips or microprocessors
may not be able to appropriately interpret dates after December 31, 1999,
because such systems use only two digits to indicate a year in the date field
rather than four digits. If not corrected, many computers and computer
applications could fail or create miscalculations, causing disruptions to DCH's
operations. In addition, the failure of customer and supplier computer systems
could result in interruption of sales and deliveries of key supplies or
utilities. Because of the complexity of the issues and the number of parties
involved, DCH cannot reasonably predict with certainty the nature or likelihood
of such impacts.
DCH has actively addressed this situation and anticipates that it will not
experience a material adverse impact to its operations, liquidity or financial
condition related to systems under control. DCH has addressed the Year 2000
issue in four overlapping phases: (i) identification and assessment of all
critical software systems and equipment requiring modification or replacement
prior to 2000; (ii) assessment of critical business relationships requiring
modification prior to 2000; (iii) corrective action and testing of critical
systems; and (iv) development of contingency and business continuation plans to
mitigate any disruption to DCH's operations arising from the Year 2000 issue.
10
DCH has obtained information from its external service providers,
significant suppliers and customers, and financial institutions to confirm their
plans and readiness to become Year 2000 compliant, in order to better understand
and evaluate how their Year 2000 issues may affect DCH's operations. Based on
this information received to date, DCH believes that it has received reasonable
assurances that its material service providers, suppliers, customers and
financial institutions are Year 2000 compliant.
In 1998, DCH contracted with a Year 2000 consultant who, in concert with
DCH personnel and one of DCH's aerospace customers, conducted a comprehensive
evaluation of all its systems, including the internal network, local
microcomputers, test equipment, financial systems and software embedded in its
products. Based on this testing, DCH was found to be Year 2000 compliant in all
of its products and internal systems. DCH has also received assurances from the
suppliers of the software it employs that such software is Year 2000 compliant,
and has obtained assurances that any computer software and hardware purchased in
1999 is Year 2000 compliant. DCH does not believe that its insistence upon Year
2000 compliant hardware or software will materially increase the cost thereof.
DCH sells its products for integration in other systems developed by its
customers. While management believes those systems to either be Year 2000
compliant or committed to be Year 2000 compliant by January 1, 2000 (based on
DCH's survey of those customers), DCH has no control over the ability and
internal commitment of such customers to meet this goal. Therefore, the
possibility remains that some DCH products may be integrated with other
companies' non-Year 2000 compliant equipment.
The costs associated with monitoring Year 2000 compliance by suppliers and
customers and dealing with any non-compliance has not been material to date. The
failure of DCH or any of its principal customers or suppliers to become Year
2000 compliant in a timely manner could have a material adverse effect on DCH's
business, financial condition, results of operations and cash flow.
Forward-Looking Statements
- --------------------------
The forward-looking statements contained in this Quarterly Report on Form
10-QSB are subject to various risks, uncertainties and other factors that could
cause actual results to differ materially from the results anticipated in such
forward-looking statements. Included among the important risks, uncertainties
and other factors are those discussed below.
Few of the forward-looking statements in this Quarterly Report on Form
10-QSB deal with matters that are within the unilateral control of DCH. The
availability of equity and debt financing to DCH is affected by, among other
things, domestic and world economic conditions and the competition for funds.
Rising interest rates might affect the feasibility of debt financing that is
offered. Potential investors and lenders will be influenced by their evaluations
of DCH and its products and comparisons with alternative investment
opportunities.
11
The markets for DCH's products are at a very early stage of development,
are rapidly changing and are characterized by an increasing number of market
entrants. As is typical for a new and rapidly evolving industry, demand for and
market acceptance of recently introduced products are subject to a high level of
uncertainty and risk. Acceptance and usage of DCH's fuel cells is dependent on
continued growth in use of alternative energy sources by businesses and
consumers. Businesses that already have invested substantial resources in
traditional or other energy sources may be reluctant to adopt new alternative
sources. Individuals with established patterns of purchasing goods and services
may be reluctant to alter those patterns. Accordingly, it is not assured that
sufficient demand for DCH's products will develop to sustain its business.
DCH's products do not provide the exclusive means for accomplishing an
objective, and customers may choose alternative means. The markets for hydrogen
sensors and fuel cells are intensely competitive, and DCH expects competition to
increase significantly. Many of DCH's competitors have significantly greater
financial and other resources than does DCH, which may enable such competitors
to market their products in a manner that achieves commercial success even in
the fact of technical superiority on the part of DCH's products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On September 27, 1999 (prior to DCH becoming a "reporting company" under
the Securities Exchange Act of 1934), DCH consummated an offering of 890,000
shares of its Common Stock pursuant to Rule 504 of Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). An
aggregate of $348,900 was raised in this placement; the purchaser represented to
DCH that he was an "accredited investor" as defined in the Securities Act.
On September 30, 1999, DCH closed a private placement of 446,951 shares of
Common Stock to three investors, raising an aggregate of $180,000. The issuance
and sale of these shares was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof as a transaction by an issuer
not involving a public offering. All of the purchasers represented to DCH that
they were acquiring the shares
12
for their own accounts and not for the account or benefit of another person;
that the shares were being acquired for investment and not with a view to the
distribution thereof; and that the purchasers did not intend to sell or
otherwise dispose of all or any part of the shares at the time of purchase or
upon the occurrence or nonoccurrence of any predetermined event. Each purchaser
also agreed that he or she would offer or resell shares only if the shares were
registered under the Securities Act or an exemption from such registration were
available. No advertising or public solicitation was used in the placement. DCH
placed a restrictive legend on the certificates representing the shares and
placed "stop transfer" instructions with its transfer agent.
On September 30, 1999, DCH issued an aggregate of 563,436 shares of Common
Stock to employees and consultants for services previously rendered to DCH. The
issuance of these shares was exempt from the registration requirements of the
Securities Act pursuant to Rule 701 thereof. At the time of the issuance, DCH
was not subject to the registration requirements of the Securities Exchange Act
of 1934, and the value of the securities issued did not exceed $1,000,000 (at
the date of issuance, the shares had an aggregate value of $231,538). The shares
were issued to investors for bona fide services previously provided to DCH, and
were not in connection with a capital-raising transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended September 30,
1999.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DCH TECHNOLOGY, INC.
Date: November 15, 1999 By: /s/ David A. Walker
-------------------------------
David A. Walker,
President
(Principal Accounting and
Financial Officer)
14
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule