Exhibit 99.1
DPAC Technologies Reports Financial Results for the Second Quarter of Fiscal
Year 2006
HUDSON, Ohio--(BUSINESS WIRE)--Aug. 9, 2006--DPAC Technologies Corp.
(OTCBB:DPAC), a leader in device networking and connectivity solutions, today
reported results for its second quarter ended June 30, 2006.
These results include the combined operations of DPAC Technologies Corp.
and QuaTech, Inc. which combined on February 28, 2006 as previously announced.
As a result of the merger, QuaTech has become a wholly-owned subsidiary of DPAC.
For accounting purposes, the transaction is considered a "reverse merger" under
which QuaTech is considered the acquirer of DPAC. Accordingly, the purchase
price was allocated among the fair values of the assets and liabilities of DPAC,
while the historical results of QuaTech are reflected in the results of the
combined company (the "Company"). The results of operations are those of QuaTech
prior to the merger date, and combined QuaTech and DPAC after the merger date of
February 28, 2006.
Second Quarter Operating Results
For the second quarter of 2006, net sales were $3.5 million, up 36% from
net sales of $2.6 million in the second quarter of 2005, and up 9% from net
sales of $3.2 million in the first quarter of 2006. Net sales related to the
Company's Device Connectivity products increased by $200,000, or 8%, and net
sales related to the Company's Device Networking products, including the
Airborne(TM) wireless product line, increased by $733,000, or 685% over the
quarter ended June 30, 2005. The Company reported an operating profit of $97,000
as compared to $302,000 for the second quarter of 2005 and an operating loss of
$52,000 for the first quarter of 2006. The Company's net loss for the current
year second quarter totaled $296,000 as compared to net income of $92,000 for
the prior year's second quarter, and a net loss of $246,000 for the first
quarter of 2006. Total operating expenses incurred in the second quarter of 2006
of $1.5 million increased by $600,000 over the previous year period. The
increase was the result of incremental costs, primarily personnel related, in
Sales & Marketing of $126,000 and R&D of $112,000, incurred to support the
Airborne wireless product line; amortization expense of $122,000 for intangible
assets acquired in the merger; and an increase in General & Administrative
expenses of $254,000. Interest expense of $382,000 for second quarter of 2006
included non-cash charges totaling $219,000, for the amortization of deferred
financing costs and the accretion of success fees and discount on the
subordinated debt. Additionally, the company recorded a non-cash charge of
$163,000 for the accretion of the liability for warrants.
Six Months Operating Results
Net sales for the first six months of 2006 were $6.7 million, up 47% from
net sales of $4.5 million in the same period of 2005. Net sales related to the
Company's Device Connectivity products increased $928,000, or 22%, and net sales
related to the Company's Device Networking products, including the Airborne
wireless product line, increased by $1.2 million, or 470% over the six months
ended June 30, 2005. The Company reported an operating profit of $45,000 as
compared to $335,000 for the 2005 period. The Company's net loss for the current
year period totaled $543,000 as compared to net income of $11,000 for the prior
year period. Interest expense of $715,000 for the first six months of 2006
included non-cash charges totaling $393,000, for the amortization of deferred
financing charges discounts and the accretion of success fees and discount on
the subordinated debt. Additionally, the company recorded a non-cash charge of
$164,000 for the accretion of the liability for warrants.
Balance Sheet Summary
At June 30, 2006, DPAC had total assets of $13.2 million, including cash
and cash equivalents of $28,000. This compares to total assets of $7.6 million
at December 31, 2005, which included $11,000 in cash and cash equivalents. As a
result of the merger, the Company recorded goodwill and intangible assets of
approximately $5.1 million.
Comments
Chief Executive Officer and President Steve Runkel commented, "I am pleased
with our Q2 results. Our sequential revenue growth of 9% and year-over-year
growth of 36% was in line with our objectives."
Mr. Runkel continued, "We continue to make good progress in becoming a
leading provider of industrial 802.11 solutions for the machine-to-machine (M2M)
market as evidenced by the 31% sequential growth and 685% year-over-year growth
of our Device Networking products. In addition, we continue to add design wins
in the transportation, telematics and medical product markets."
Conference Call
Management of DPAC will host a conference call on August 10, 2006 at 10:00
a.m. Eastern/7:00 a.m. Pacific to discuss DPAC's financial performance for the
second quarter of fiscal year 2006. The conference call will feature Chief
Executive Officer Steve Runkel and Chief Financial Officer Steve Vukadinovich.
To participate on the live call, please dial (866) 814-8485 toll free. A phone
replay will be available for 72 hours (beginning two hours after the completion
of the conference call) by dialing (888) 266-2081 and entering the Passcode
948711.
About DPAC Technologies
DPAC Technologies provides embedded 802.11 wireless networking products for
machine-to-machine communication applications. DPAC's Airborne(TM) and
AirborneDirect(TM) 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. DPAC Technologies is based in Hudson, OH. The Company's web site
address is www.dpactech.com. Information concerning DPAC is filed by DPAC with
the SEC and is available on the SEC website, www.sec.gov.
About QuaTech
QuaTech, Inc., a wholly-owned subsidiary of DPAC, delivers high performance
device networking & connectivity solutions to help companies improve their
bottom line performance. QuaTech enables reliable machine-to-machine (M2M)
communications via secure 802.11 wireless or traditional wired networks with
industrial grade (hardened) embedded radios, modules, boards and external device
servers and bridges. For local and mobile connections, QuaTech serial adapters
provide secure connectivity and port expansion via any interface option.
Satisfied customers rely on our unique combination of performance and support to
improve bottom line performance through real-time remote monitoring & control,
streamlined systems and lower total cost of ownership (TCO). QuaTech markets its
products through a global network of distributors, resellers, systems
integrators and original equipment manufacturers (OEMs). Founded in 1983,
QuaTech is headquartered in Hudson, Ohio, and merged with DPAC Technologies,
Inc. in February 2006. www.quatech.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. More
information about the risks and challenges faced by DPAC Technologies Corp. is
contained in the Securities and Exchange Commission filings made by the Company
on Form S-4, 10-K, 10-Q or 10-QSB 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.
- tables to follow -
DPAC TECHNOLOGIES CORP.
Condensed Consolidated Balance Sheet Information
(Unaudited)
(In 000's)
June 30, December 31,
2006 2005
-------- ------------
CURRENT ASSETS:
Cash and cash equivalents $28 $11
Accounts receivable, net 1,842 1,330
Inventories 1,748 1,633
Prepaid expenses and other current assets 183 119
-------- ------------
Total current assets 3,801 3,093
Property, net 452 282
Goodwill and intangible assets 8,896 4,196
Other assets 56 -
-------- ------------
TOTAL $13,205 $7,571
======== ============
CURRENT LIABILITIES:
Notes payable $84 $-
Revolving credit facility 1,400 1,175
Current portion of long-term debt 310 1,125
Accounts payable 1,799 1,284
Accrued restructuring costs - current 555 -
Other accrued liabilities 501 591
-------- ------------
Total current liabilities 4,649 4,175
Deferred tax liability 31 324
Accrued restructuring costs 427 -
Long-term debt, net of current portion 4,516 1,773
Net stockholders' equity 3,582 1,299
-------- ------------
TOTAL $13,205 $7,571
======== ============
DPAC TECHNOLOGIES CORP.
Condensed Consolidated Statement of Income
(Unaudited)
(in 000's)
For the quarter ended: For the six months ended:
June 30, June 30,
---------------------- -------------------------
2006 2005 2006 2005
---------- ----------- ------------ ------------
REVENUE $3,496 $2,563 $6,690 $4,538
COST OF GOODS SOLD 1,929 1,391 3,668 2,448
---------- ----------- ------------ ------------
GROSS PROFIT 1,567 1,172 3,022 2,090
OPERATING EXPENSES
Sales and marketing 542 416 1,145 785
Research and
development 261 150 526 313
General and
administrative 544 290 1,064 629
Amortization of
intangible assets 123 14 164 28
Restructuring
charges - - 78 -
---------- ----------- ------------ ------------
Total operating
expenses 1,470 870 2,977 1,755
INCOME FROM
OPERATIONS 97 302 45 335
OTHER EXPENSES:
Interest expense 381 148 715 290
Accretion of
warrant liability 164 - 164 -
Miscellaneous
expense - 16 - 28
---------- ----------- ------------ ------------
TOTAL OTHER EXPENSES 545 164 879 318
---------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES (448) 138 (834) 17
INCOME TAX
(PROVISION) BENEFIT 152 (46) 291 (6)
---------- ----------- ------------ ------------
NET INCOME (LOSS) $(296) $92 $(543) $11
========== =========== ============ ============
NET INCOME (LOSS) PER
SHARE:
Net Income (Loss) -
Basic and diluted $0.00 $0.00 ($0.01) $0.00
========== =========== ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic 92,775 42,016 75,885 42,016
========== =========== ============ ============
Diluted 92,775 65,339 75,885 65,339
========== =========== ============ ============
CONTACT: DPAC Technologies Corp.
Steve Vukadinovich, Chief Financial Officer, 714-898-0007
Steve.Vukadinovich@dpactech.com
or
Steve Runkel, Chief Executive Officer, 330-655-9000
Steve.Runkel@Quatech.com