Exhibit 99.1
DPAC Technologies Reports Financial
Results for the First Quarter of Fiscal Year 2006
GARDEN GROVE, Calif.--(BUSINESS WIRE)--July 14, 2005--DPAC
Technologies Corp. (Nasdaq:DPAC), a technology company that provides
embedded wireless networking and connectivity products, today reported
results for its first quarter of fiscal year 2006, ended May 31, 2005.
For comparative purposes the Company has reclassified certain
financial information appearing in this press release as it relates to
information for the quarter ended May 31, 2004 to present the memory
stacking product line and the industrial, defense and aerospace
("IDA") product line as discontinued operations.
Operating Results
For the first fiscal quarter, net sales from continuing operations
were $264,000 compared to net sales of $401,000 for the first quarter
of the previous year. The current year net sales consisted of $256,000
of Airborne product shipments and $8,000 of revenues derived from
engineering contracts, as compared to the previous year's first
quarter, which consisted of $253,000 of Airborne product shipments and
$148,000 of revenues derived from engineering development contracts.
The Company's net loss from continuing operations totaled $1.2
million, or $(0.05) per share. The net loss from continuing operations
for the prior year's first quarter was $1.4 million, or $(0.06) per
share, and included $85,000 of restructuring charges. Selling and
marketing expenses of $370,000 for the current year decreased by
$125,000 from the prior year's first quarter, primarily due to reduced
spending on marketing activities. The Company incurred a higher level
of spending on marketing initiatives during the first quarter of
fiscal year 2005 related to launching the Airborne wireless product
line.
Discontinued operations in the first quarter realized a gain of
$278,000, or $0.01 per share, as compared to a loss of $956,000, or
$(0.04) per share for the previous year's first quarter. The current
year gain resulted primarily from royalties earned under a license for
the sale and manufacture of IDA products and the subleasing of vacated
manufacturing space, resulting in the reduction of the associated
restructuring accrual.
Balance Sheet Summary
At May 31, 2005, DPAC had total assets of $2.8 million, including
cash and cash equivalents of $1.3 million. This compares to total
assets of $4.1 million at February 28, 2005, which included $2.7
million in cash and cash equivalents and $164,000 of assets related to
discontinued operations. Working capital at May 31, 2005 was $423,000
compared to $1.5 million at February 28, 2005. 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
February 28, 2005 financial statements.
Comment and Outlook
Kim Early, DPAC's Chief Executive Officer, stated, "The decline in
our first quarter revenues was disappointing. It was caused primarily
by delays in new product launches from our customer base. However, our
backlog of customer orders increased to approximately $1 million at
the end of the first quarter and has subsequently further increased to
approximately $1.5 million during the course of our second quarter."
Mr. Early continued, "The first quarter revenue performance places
additional strain on our limited financial resources. We continue to
work on securing the necessary financing to close the previously
announced stock for stock acquisition of QuaTech, Inc. We are also
exploring financing arrangements to sustain the company while we
continue to work on the QuaTech transaction."
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. Our
financial resources could run out before we realize our goals. 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.
DPAC Technologies Corp.
Condensed Balance Sheet Information
(Unaudited)
(in 000's)
May 31, February 28,
2005 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $1,285 $2,694
Accounts receivable, net 162 253
Inventories 291 147
Prepaid expenses and other current assets 444 279
Current assets of discontinued operations 53 164
------------ ------------
Total current assets 2,235 3,537
Property, net 215 230
Other assets 314 364
------------ ------------
TOTAL $2,764 $4,131
============ ============
CURRENT LIABILITIES:
Note payable $60 $148
Accounts payable 387 399
Accrued compensation 137 173
Accrued restructuring costs - current 606 627
Other accrued liabilities 231 176
Current liabilities of discontinued
operations 390 468
------------ ------------
Total current liabilities 1,811 1,991
Accrued restructuring costs 112 258
Non-current liabilities of discontinued
operations 307 443
Net stockholders' equity 534 1,439
------------ ------------
TOTAL $2,764 $4,131
============ ============
DPAC TECHNOLOGIES CORP.
Condensed Statement of Income
(Unaudited)
(in 000's)
For the Quarter Ended:
May 31,
-----------------------
2005 2004
----------- -----------
Net Sales - Continuing Operations $264 $401
Cost of sales 208 357
----------- -----------
Gross profit 56 44
COSTS AND EXPENSES:
Sales and marketing 370 495
Research and development 315 314
General and administrative 562 577
Goodwill impairment charge
Restructuring charges 85
----------- -----------
Total costs and expenses 1,247 1,471
LOSS FROM OPERATIONS (1,191) (1,427)
----------- -----------
INTEREST INCOME 8 8
----------- -----------
LOSS BEFORE INCOME TAX BENEFIT (1,183) (1,419)
INCOME TAX PROVISION - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS (1,183) (1,419)
DISCONTINUED OPERATIONS, Net 278 (956)
----------- -----------
NET LOSS (905) (2,375)
=========== ===========
NET GAIN (LOSS) PER SHARE:
Continuing Operations - Basic and diluted $(0.05) $(0.06)
=========== ===========
Discontinued Operations - Basic and diluted $0.01 $(0.04)
=========== ===========
Net Loss - Basic and diluted $(0.04) $(0.11)
=========== ===========
Basic and diluted shares 23,745 22,076
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CONTACT: DPAC Technologies Corp.
Stephen Vukadinovich or Kim Early, 714-898-0007
Steve.Vukadinovich@dpactech.com
Kim.Early@dpactech.com