Exhibit 99.1
DPAC Technologies Reports Financial
Results for the Third Quarter of Fiscal Year 2006
HUDSON, Ohio--(BUSINESS WIRE)--Nov. 13, 2006--DPAC Technologies
Corp. (OTCBB:DPAC), a leader in device networking and connectivity
solutions, today reported results for its third quarter ended
September 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.
Third Quarter Operating Results
For the third quarter of 2006, net sales were $3.9 million, up 32%
from net sales of $2.9 million in the third quarter of 2005, and up
11% from net sales of $3.5 million in the second quarter of 2006. Net
sales related to the Company's Device Connectivity products increased
by $117,000, or 4.4%, and net sales related to the Company's Device
Networking products, including the Airborne wireless product line,
increased by $818,000, or 315% over the quarter ended September 30,
2005. The Company reported an operating profit of $347,000 as compared
to $219,000 for the third quarter of 2005 and an operating profit of
$97,000 for the second quarter of 2006. The Company reported a net
profit for the current year third quarter of $39,000 as compared to
net income of $29,000 for the prior year's third quarter, and a net
loss of $296,000 for the second quarter of 2006. Total operating
expenses incurred in the third quarter of 2006 of $1.4 million
increased by $222,000 over the previous year period, due primarily to
increases in G&A expenses of $89,000 and amortization expense of
$118,000. Interest expense of $383,000 for third quarter of 2006
included non-cash charges of $94,000 for the accretion of success
fees, $36,000 for the amortization of deferred financing costs, and
$91,000 for the amortization of the discount on subordinated debt.
Additionally, the company recorded a non-cash gain of $109,000 for the
fair value adjustment of the liability for warrants.
Nine Months Operating Results
Net sales for the first nine months of 2006 were $10.6 million, up
41% from net sales of $7.5 million in the same period of 2005. Net
sales related to the Company's Device Connectivity products increased
$1.1 million, or 16%, and net sales related to the Company's Device
Networking products, including the Airborne wireless product line,
increased by $2.0 million, or 774% over the nine months ended
September 30, 2005. The Company reported an operating profit of
$392,000 as compared to $554,000 for the 2005 period. The Company's
net loss for the current year period totaled $504,000 as compared to
net income of $40,000 for the prior year period. Interest expense of
$1.1 million for the first nine months of 2006 included non-cash
charges totaling $614,000, for the amortization of deferred financing
charges discounts, the accretion of success fees and amortization of
the discount on the subordinated debt. Additionally, the company
recorded a non-cash charge of $55,000 for the fair value adjustment of
the liability for warrants.
Balance Sheet Summary
At September 30, 2006, DPAC had total assets of $12.8 million,
including cash and cash equivalents of $91,000. 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, "Our
results for Q3 were in line with the objectives. I am pleased with the
top line growth of 11% sequentially and 32% over the same period last
year. I'm also pleased that we have been able to carefully manage our
expenses, resulting in improved operating profit on both a sequential
and year-over-year basis."
Mr. Runkel continued: "Revenue from the Device Networking product
revenue, which includes the Airborne 802.11 product line, continues to
grow as our OEM customers release their products to the market. Within
the quarter we announced important new relationships with Digi Key and
Ingram Micro Canada as we continue to expand the channel for our
products. This will increase the exposure for our product line and
support our growth objectives."
About DPAC Technologies
DPAC Technologies provides embedded 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.
DPAC TECHNOLOGIES CORP.
Condensed Consolidated Balance Sheet Information
(Unaudited)
(In 000's)
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $91 $11
Accounts receivable, net 1,608 1,330
Inventories 1,662 1,633
Prepaid expenses and other current assets 160 119
------------- ------------
Total current assets 3,521 3,093
Property, net 441 282
Goodwill and intangible assets 8,737 4,196
Other assets 56 -
------------- ------------
TOTAL $12,755 $7,571
============= ============
CURRENT LIABILITIES:
Notes payable $19 $-
Revolving credit facility 1,393 1,175
Current portion of long-term debt 2,006 1,125
Accounts payable 1,541 1,284
Accrued restructuring costs - current 473 -
Other accrued liabilities 409 591
------------- ------------
Total current liabilities 5,841 4,175
Deferred tax liability 65 324
Accrued restructuring costs 385 -
Long-term debt, net of current portion 2,844 1,773
Net stockholders' equity 3,620 1,299
------------- ------------
TOTAL $12,755 $7,571
============= ============
DPAC TECHNOLOGIES CORP.
Condensed Consolidated Statement of Income
(Unaudited)
(in 000's)
For the For the
quarter ended: nine months ended:
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
REVENUE $3,866 $2,936 $10,556 $7,474
COST OF GOODS SOLD 2,129 1,549 5,797 3,997
--------- --------- --------- ---------
GROSS PROFIT 1,737 1,387 4,759 3,477
OPERATING EXPENSES
Sales and marketing 534 530 1,680 1,315
Research and development 233 220 759 533
General and administrative 500 414 1,564 1,043
Amortization of intangible
assets 123 4 286 32
Restructuring charges - - 78 -
--------- --------- --------- ---------
Total operating expenses 1,390 1,168 4,367 2,923
INCOME FROM OPERATIONS 347 219 392 554
OTHER (INCOME) EXPENSES:
Interest expense 383 146 1,098 436
Fair Value adjustment for
warrant liability (109) - 55 -
Miscellaneous expense - 13 - 41
--------- --------- --------- ---------
TOTAL OTHER EXPENSES 274 159 1,153 477
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES 73 60 (761) 77
INCOME TAX (PROVISION) BENEFIT (34) (31) 257 (37)
--------- --------- --------- ---------
NET INCOME (LOSS) $39 $29 $(504) $40
========= ========= ========= =========
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 87,135 42,016
========= ========= ========= =========
Diluted 97,512 65,339 87,135 65,339
========= ========= ========= =========
CONTACT: DPAC TECHNOLOGIES
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