Exhibit 99.1
DPAC Technologies Reports Financial Results
for the Second Quarter of Fiscal Year 2006
GARDEN GROVE, Calif.--(BUSINESS WIRE)--Oct. 14, 2005--DPAC
Technologies Corp. (OTCBB:DPAC), a technology company that provides
embedded wireless networking and connectivity products, today reported
results for its fiscal year 2006 second quarter ended August 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 August 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 second fiscal quarter, net sales from continuing
operations were $540,000 compared to net sales of $223,000 for the
second quarter of the previous year. The current year net sales
consisted of $417,000 of Airborne product shipments, $110,000 of
revenues derived from engineering contracts and $12,000 of royalty
revenue from the QuaTech license, as compared to the previous year's
second quarter, which consisted of $216,000 of Airborne product
shipments and $7,000 of revenues derived from engineering development
contracts. The Company's net loss from continuing operations totaled
$1.5 million, or $(0.06) per share. The net loss from continuing
operations for the prior year's second quarter was $2.2 million, or
$(0.09) per share, and included $488,000 of restructuring charges.
During the second quarter ended August 31, 2005, the Company wrote-off
the balance due from the DigiVision technology license of $283,000,
due to the uncertainty of the realization and collectibility of
amounts due under the license agreement. Included in general and
administrative expenses are acquisition related expenses of $360,000
incurred in regard to the QuaTech transaction, which the Company
expensed in the current quarter.
For the six-months ended August 31, 2005, net sales from
continuing operations were $804,000 as compared to $623,000 for the
same period last year. The current year period's net sales consisted
of $674,000 of Airborne product shipments, $118,000 of revenues from
engineering contracts and $12,000 of royalty revenue from the QuaTech
license, as compared to $469,000 of Airborne product shipments and
$154,000 of revenues derived from engineering development contracts
for the previous year period. The Company's net loss from continuing
operations for the current year period totaled $2.7 million, or
$(0.11) per share. The net loss from continuing operations for the
prior year's six month period was $3.6 million, or $(0.16) per share,
and included $573,000 of restructuring charges.
Subsequent to August 5, 2005 revenues from continuing operation
will be derived primarily from the collection of royalty payments from
the QuaTech license. Additionally, substantially all the costs
associated with sales and marketing and research and development
efforts were transferred to QuaTech effective August 5, 2005. (See
"QuaTech Transaction Update" below.)
For the three and six months ended August 31, 2005, discontinued
operations realized a gain of $209,000, or $0.01 per share, and
$487,000, or $0.02 per share, respectively. For the three months ended
August 31, 2004, discontinued operations realized a gain of $449,000,
or $0.02 per share, and for the six months ended August 31, 2004,
discontinued operations realized a loss of $506,000, or $(0.02) per
share. 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 August 31, 2005, DPAC had total assets of $1.8 million,
including cash and cash equivalents of $787,000 and $164,000 of assets
related to discontinued operations. 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 August 31, 2005 was a negative $117,000
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.
QuaTech Transaction Update
On August 5, 2005, we amended the definitive merger agreement with
QuaTech and simultaneously entered into a technology licensing
agreement (the "License") and a $500,000 convertible loan agreement
(the "Bridge Loan") with QuaTech's largest shareholder, Development
Capital Ventures LP ("DCV"). As a result of the License Agreement,
DPAC will have no on-going business operations other than the
collection of royalties under the QuaTech License and under a
previously issued license granted to Twilight Technologies, Inc for
certain Industrial, Defense and Aerospace products as included in
discontinued operations. If our shareholders do not approve the
License with DCV and QuaTech, QuaTech will have the option to continue
the licensing arrangement on a non-exclusive basis, and DPAC would
have the ability to license the Airborne(TM) technology to other
potential licensees. If the Merger with QuaTech is terminated for any
reason, under the License Agreement QuaTech has the option, subject to
DPAC shareholder approval, to purchase an exclusive Airborne(TM)
product license for the fair market value of the technology as
determined by independent appraisal. The License also provides QuaTech
with the exclusive world-wide right, subject to shareholder approval,
to sell, manufacture and distribute the Airborne(TM) products in
exchange for specified royalties on products sold. If the merger
between QuaTech and DPAC's subsidiary is consummated, the License will
be cancelled.
Comment and Outlook
Kim Early, DPAC's Chief Executive Officer stated, "The bridge loan
provides us with needed additional capital while the license agreement
reduces our monthly cash consumption by transferring operations to
QuaTech. Although we saw improvement in both sequential and year over
year quarterly operating results, our nominal cash position
necessitated securing additional financing to sustain the Company
while working to complete the merger transaction. The license
agreement also enhances support to our customer base by transferring
operations to a company with additional resources, both in engineering
and customer service."
Mr. Early continued, "We continue to work on securing the
necessary financing to close the previously announced stock for stock
acquisition of QuaTech, Inc. Our performance will continue to strain
our limited financial resources and we will continue to explore other
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 shareholders 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 a change of control, in that voting control
of DPAC may be given to former shareholders of QuaTech, and the
principal former shareholder of QuaTech would 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 the QuaTech 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 website
(www.sec.gov). Such documents, when filed, also are made available
free of charge by DPAC. On April 27, 2005 and August 9, 2005 DPAC
filed Forms 8-K containing the current agreements 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)
August 31, February 28,
2005 2005
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 787 $ 2,694
Accounts receivable, net 313 253
Inventories 139 147
Prepaid expenses and other current assets 166 279
Current assets of discontinued operations 164 164
----------- -----------
Total current assets 1,569 3,537
PROPERTY, Net 194 230
OTHER ASSETS 41 364
----------- -----------
TOTAL $ 1,804 $ 4,131
=========== ===========
CURRENT LIABILITIES:
Note payable $ 500 $ 148
Accounts payable 208 399
Accrued compensation 47 173
Accrued restructuring costs -- current 186 627
Other accrued liabilities 293 176
Current liabilities of discontinued
operations 452 468
----------- -----------
Total current liabilities 1,686 1,991
ACCRUED RESTRUCTURING COSTS 465 258
NON-CURRENT LIABILITIES OF DISCONTINUED
OPERATIONS 399 443
NET STOCKHOLDERS' (DEFICIT) EQUITY (746) 1,439
----------- -----------
TOTAL $ 1,804 $ 4,131
=========== ===========
DPAC TECHNOLOGIES CORP.
Condensed Statement of Income
(Unaudited)
(in 000's)
For the Quarter For the Six Months
Ended: Ended:
August 31, August 31,
------------------- -------------------
2005 2004 2005 2004
--------- -------- -------- ---------
Net Sales -- Continuing
Operations $ 540 $ 223 $ 804 $ 623
Cost of sales 396 202 604 559
--------- -------- -------- ---------
Gross profit 144 21 200 64
COSTS AND EXPENSES:
Sales and marketing 223 479 593 974
Research and development 161 384 476 698
General and administrative 966 845 1,528 1,421
Write-off of technology
license 282 - 282 -
Restructuring charges - 488 - 573
--------- -------- -------- ---------
Total costs and expenses 1,632 2,196 2,879 3,666
LOSS FROM OPERATIONS (1,488) (2,175) (2,679) (3,602)
--------- -------- -------- ---------
INTEREST INCOME (EXPENSE),
net (1) 8 7 15
--------- -------- -------- ---------
LOSS BEFORE INCOME TAX
BENEFIT (1,489) (2,167) (2,672) (3,587)
INCOME TAX PROVISION - -
--------- -------- -------- ---------
LOSS FROM CONTINUING
OPERATIONS (1,489) (2,167) (2,672) (3,587)
DISCONTINUED OPERATIONS,
Net 209 449 487 (506)
--------- -------- -------- ---------
NET LOSS (1,280) (1,718) (2,185) (4,093)
========= ======== ======== =========
NET GAIN (LOSS) PER SHARE:
Continuing Operations --
Basic and diluted $ (0.06) $ (0.09) $ (0.11) $ (0.16)
========= ======== ======== =========
Discontinued Operations --
Basic and diluted $ 0.01 $ 0.02 $ 0.02 $ (0.02)
========= ======== ======== =========
Net Loss -- Basic and
diluted $ (0.05) $ (0.07) $ (0.09) $ (0.18)
========= ======== ======== =========
Basic and diluted shares 23,745 23,732 23,745 22,904
========= ======== ======== =========
CONTACT: DPAC Technologies Corp.
Stephen Vukadinovich or Kim Early, 714-898-0007
Steve.Vukadinovich@dpactech.com
Kim.Early@dpactech.com