Exhibit 99.1
DPAC Technologies Reports Financial Results for Fourth Quarter and Fiscal Year
Ended February 28, 2005
GARDEN GROVE, Calif.--(BUSINESS WIRE)--June 7, 2005--DPAC Technologies Corp.
(Nasdaq:DPAC), a technology company that provides embedded wireless networking
and connectivity products, today reported results for its fourth quarter and
fiscal year ended February 28, 2005. For comparative purposes the Company has
reclassified certain financial information appearing in this press release as it
relates to information for the quarter and year ended February 29, 2004 to
present the memory stacking product line and the industrial, defense and
aerospace ("IDA") product line as discontinued operations.
Operating Results
For the fourth fiscal quarter, revenues from continuing operations were $469,000
compared to revenues of $74,000 for the fourth quarter of the previous year, and
40% higher than the third fiscal quarter revenues of $334,000. The Company's net
loss from continuing operations totaled $5.7 million, or $(0.24) per share,
which includes a non-cash write-off of goodwill of $4.5 million. The net loss
from continuing operations for the prior year's fourth quarter was $2.4 million,
or $(0.11) per share, and did not include a similar goodwill impairment charge,
but did include $871,000 of restructuring charges.
Discontinued operations in the fourth quarter realized a gain of $237,000, or
$0.01 per share, as compared to a loss of $2.1 million, or $(0.10) per share for
the previous year's fourth quarter. The current year gain resulted primarily
from royalties earned under a license for the sale and manufacture of IDA
products.
Revenues from continuing operations for fiscal year 2005 totaled $1.4 million as
compared to $96,000 for the previous fiscal year, a period in which the wireless
product line was primarily still under development. The net loss from continuing
operations for fiscal year 2005 was $10.7 million, or $(0.46) per share,
compared to a net loss of $10.8 million, or $(0.51) per share, for the prior
year. The net loss from continuing operations in the current year includes a
non-cash write-off of goodwill of $4.5 million, while the net loss from
continuing operations in the prior year included a $4.8 million non-cash income
tax provision. The current year loss from continuing operations includes
$665,000 in restructuring charges, primarily for severance costs, as compared to
$871,000 in restructuring charges in the prior year. Selling and marketing
expenses increased by $1.1 million to $1.9 million for fiscal year 2005 as
compared to the prior year, as a result of increases in spending to launch the
Airborne(TM) wireless product line. General and administrative expenses for
fiscal year 2005 of $2.6 million decreased by $113,000 from the previous fiscal
year. Since the Airborne(TM) product line is in the early stages of introduction
to the OEM wireless connectivity market, revenues are currently composed
primarily of development kits, prototype orders, pre-production quantities,
non-recurring engineering fees and early stage production runs.
The net gain from discontinued operations for fiscal year 2005 was $238,000, or
$0.01 per share, compared to a net loss of $3.1 million, or $(0.15) per share
for the previous fiscal year. The results of discontinued operations for fiscal
year 2005 include a gain of $721,000 on the sale of assets resulting from the
sales of the memory stacking and IDA product lines, as well as $518,000 in
royalty revenues. The losses for the prior fiscal year included a $960,000
charge for the write-off of Durastack production equipment and a $320,000 charge
relating to a terminated facility lease.
Balance Sheet Summary
At February 28, 2005, DPAC had total assets of $4.1 million, including cash and
cash equivalents of $2.7 million and assets related to discontinued operations
of $164,000. This compares to total assets of $13.1 million at February 29,
2004, with $4.5 million in cash and cash equivalents and $3.0 million of assets
related to discontinued operations. Working capital at February 28, 2005 was
$1.5 million compared to $4.3 million at February 29, 2004. As a result of the
recurring operating losses and anticipated need for additional capital in the
next twelve months, Moss Adams LLP, the Company's independent registered public
accounting firm, has included a going-concern emphasis paragraph in its
auditor's report on the Company's year end financial statements.
Comment and Outlook
Kim Early, DPAC's Chief Executive Officer stated, "Our rate of growth has been
lower than we had anticipated. Our revenue growth depends on the timing of our
OEM customers completing their design, testing and initial launch of their
products incorporating our Airborne products. Due to this our revenues have been
less consistent and less predictable than we had expected."
Mr. Early continued, "We continue to work on completing our previously announced
merger with QuaTech, Inc. in exchange for common stock. We are currently engaged
in securing the necessary financing to close the transaction. We would expect to
file an S-4 registration statement describing QuaTech and the transaction
shortly after the financing has been committed. We would then proceed to seek
shareholder approval of the transaction and proceed to a close later in the
summer."
Conference Call
Management of DPAC will host a conference call on Wednesday June 8 at 10:30 a.m.
Pacific/1:30 p.m. Eastern to discuss DPAC's financial performance fiscal year
2005. The conference call will feature Chief Executive Officer Kim Early and
Chief Financial Officer Steve Vukadinovich. To participate on the live call,
please dial (866) 814-8483 toll free. A phone replay will be available for 48
hours (beginning two hours after the completion of the conference call) by
dialing (888) 266-2081 and entering the Passcode 719181.
About DPAC Technologies
Located in Garden Grove, California, DPAC Technologies provides embedded
wireless networking and connectivity products for machine-to-machine
communication applications. DPAC's wireless products are used by major OEMs in
the transportation, instrumentation and industrial control, homeland security,
medical diagnostics and logistics markets to provide remote data collection and
control. The Company's web site address is www.dpactech.com.
Forward-Looking Statements
This press release includes forward-looking statements. You can identify these
statements by their forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "guidance," "estimate," "intend," predict," and
"continue" or similar words or any connection with any discussion of future
events or circumstances or of management's current estimates or beliefs.
Forward-looking statements are subject to risks and uncertainties, and therefore
results may differ materially from those set forth in those statements. The
QuaTech merger transaction is subject to certain conditions, including DPAC's
shareholders approval, which must be fulfilled in order to close. Full details
of the transaction will be provided to DPAC shareholders and filed with the SEC
by DPAC as and when appropriate. The QuaTech merger transaction is and shall
continue to be subject to numerous conditions and contingencies until the
transaction is completed. DPAC Technologies Corp. will provide further detailed
information to its shareholder as and when required to solicit their consent.
The transaction's costs and diversion of management attention could negatively
impact results. Other factors that affect DPAC's business and its ability to
conclude a merger transaction include, but are not limited to, that our
Airborne(TM) products are new, that we sell to original equipment manufacturers
for new product introductions by them, and that all of these are subject to
risks and uncertainties regarding new product introductions such as uncertainty
of market acceptance. The parties need additional financing to complete the
transactions as envisioned. Such financing may not be available on favorable
terms. Also, there can be no assurance that such transaction will be completed,
or if completed that it will be successful. The transaction would involve in a
change of control, in that it is likely that voting control of DPAC may be given
to former shareholders of QuaTech, and if the principal former shareholders of
QuaTech were to act in concert, they might be able to elect a majority of DPAC's
Board of Directors. More information about the risks and challenges faced by
DPAC Technologies Corp. is contained in the Securities and Exchange Commission
(SEC) filings made by the Company on Forms 10-K, 10-Q and 8-K. DPAC Technologies
Corp. specifically disclaims any obligation to update or revise any
forward-looking statements whether as a result of new information, future
developments or otherwise.
Additional Information:
DPAC and QUATECH strongly urge their respective shareholders to read the
relevant documents related to this transaction as and when filed by DPAC with
the SEC, because they shall contain important information all the shareholders
should consider. All DPAC's SEC filings are made available free of charge at the
SEC web site (www.sec.gov). Such documents, when filed, also are made available
free of charge by DPAC. On April 27, 2005 DPAC filed a Form 8-K containing the
current agreement between DPAC and QuaTech. This news release is neither a
solicitation of any proxies nor an offer of any securities of any kind
whatsoever. No securities mentioned herein have been registered or authorized or
approved by any federal or state securities regulator or commission.
- tables to follow -
DPAC TECHNOLOGIES CORP.
Condensed Consolidated Balance Sheet Information
(unaudited)
(In 000's)
February February
28, 29,
2005 2004
CURRENT ASSETS:
Cash and cash equivalents $2,694 $4,477
Accounts receivable, net 253 31
Inventories 147 37
Prepaid expenses 279 323
Current assets of discontinued operations 164 1,747
Total current assets 3,537 6,615
Property, net 230 264
Goodwill - 4,529
Other assets 364 406
Non-current assets of discontinued operations - 1,274
TOTAL $4,131 $13,088
CURRENT LIABILITIES:
Note payable $148 $-
Accounts payable 399 336
Accrued compensation 173 217
Accrued restructuring costs - current 627 489
Other accrued liabilities 176 104
Current liabilities of discontinued
operations 468 1,192
Total current liabilities 1,991 2,338
Accrued restructuring costs 258 328
Non-current liabilities of discontinued
operations 443 361
Net stockholders' equity 1,439 10,061
TOTAL $4,131 $13,088
DPAC TECHNOLOGIES CORP.
Condensed Statement of Income
(Unaudited)
(in 000's)
For Periods Ended February 28, 2005
and February 29, 2004 Fourth Quarter Fiscal Year
2005 2004 2005 2004
Net Sales - Continuing Operations $469 $74 $1,426 $96
Cost of sales 257 82 1,037 101
Gross profit 212 (8) 389 (5)
COSTS AND EXPENSES:
Sales and marketing 418 298 1,922 847
Research and development 318 441 1,404 1,648
General and administrative 543 745 2,608 2,721
Goodwill impairment charge 4,529 - 4,529 -
Restructuring charges 92 871 665 871
Total costs and expenses 5,900 2,355 11,128 6,087
LOSS FROM OPERATIONS (5,688) (2,363) (10,739) (6,092)
INTEREST INCOME 11 10 36 56
LOSS BEFORE INCOME TAX BENEFIT (5,677) (2,353) (10,703) (6,036)
INCOME TAX PROVISION - - - 4,764
LOSS FROM CONTINUING OPERATIONS (5,677) (2,353) (10,703) (10,800)
GAIN (LOSS) FROM DISCONTINUED
OPERATIONS 237 (2,130) 238 (3,124)
NET LOSS (5,440) (4,483) (10,465) (13,924)
NET GAIN (LOSS) PER SHARE:
Continuing Operations - Basic and
diluted $(0.24) $(0.11) $(0.46) $(0.51)
Discontinued Operations - Basic
and diluted $0.01 $(0.10) $0.01 $(0.15)
Net Loss - Basic and diluted $(0.23) $(0.21) $(0.45) $(0.66)
Basic and diluted shares 23,737 21,221 23,318 21,102
CONTACT: DPAC Technologies Corp.
Stephen Vukadinovich, 714-898-0007
Steve.Vukadinovich@dpactech.com
or
Kim Early, 714-898-0007
Kim.Early@dpactech.com