EXHIBIT 99.1
DPAC Technologies Reports Financial Results for the
Second Quarter of Fiscal Year 2007
HUDSON, Ohio--(BUSINESS WIRE)--Aug. 14, 2007--DPAC Technologies
Corp. (OTCBB:DPAC), a leader in device networking and connectivity
solutions, today reported results for its second quarter ended June
30, 2007.
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 2007, net sales of $2.9 million
decreased 17% from net sales of $3.5 million in the second quarter of
2006, and increased 2% from net sales of $2.8 million in the first
quarter of 2007. Net sales related to the Company's Device
Connectivity products decreased by $977,000, or 35%, and net sales
related to the Company's Device Networking products, including the
Airborne wireless product line, increased by $374,000, or 52% over the
quarter ended June 30, 2006. The Company reported an operating loss of
$52,000 as compared to an operating profit of $97,000 for the second
quarter of 2006 and an operating loss of $162,000 for the first
quarter of 2007. The Company's net loss for the current year second
quarter totaled $382,000 as compared to a net loss of $296,000 for the
prior year's second quarter, and a net loss of $539,000 for the first
quarter of 2007. Total operating expenses incurred in the second
quarter of 2007 of $1.2 million decreased by $239,000, or 16%, from
the previous year period. The decrease was due primarily to decreases
in sales and marketing expenses of $193,000 and G&A expenses of
$89,000, as the Company continued to integrate operating departments
since the date of the Merger. Additionally, the company recorded a
non-cash gain of $54,000 in the current period compared to a charge of
$164,000 in the prior year quarter for the fair value adjustment for
the liability for warrants. An income tax benefit of $152,000 was
recorded in the second quarter of 2006 and no income tax benefit was
recorded in the current year period as a full valuation allowance was
recorded against deferred tax assets in the fourth quarter of 2006.
Six Months Operating Results
Net sales of $5.7 million for the first six months of 2007
decreased by 14% from net sales of $6.7 million for the same period of
2006. Net sales related to the Company's Device Connectivity products
decreased $1.8 million, or 32%, while net sales related to the
Company's Device Networking products, including the Airborne wireless
product line, increased by $803,000, or 67% over the six months ended
June 30, 2006. The Company reported an operating loss of $214,000 as
compared to an operating gain of $45,000 for the 2006 period. The
Company's net loss for the current year period totaled $921,000
compared to $543,000 for the prior year period. Interest expense of
$757,000 for the first six months of 2007 included non-cash charges
totaling $443,000, for the amortization of deferred financing charges
discounts and the accretion of success fees and discount on the
subordinated debt. An income tax benefit of $291,000 was recorded in
the 2006 period and no income tax benefit was recorded in the current
year period as a full valuation allowance was recorded against
deferred tax assets in the fourth quarter of 2006.
Balance Sheet and Liquidity Summary
At June 30, 2007 we had a cash balance of $223,000 and a deficit
in working capital of $3,591,000. This compares to a cash balance of
$38,000 and a deficit in working capital of $2,851,000 at the end of
fiscal year 2006. Additionally, the Company has Bank loan balances of
approximately $2,078,000 which are due and payable on August 24, 2007
and a subordinated debt obligation of approximately $1,884,000 which
is due and payable on August 31, 2007. The amount of cash the Company
can generate from future operations will not be sufficient to satisfy
the debt obligations at that time. If the Company does not raise
sufficient equity or debt financing to pay its loan balances on the
due dates above, the Company will be in default of its debt
obligations.
Management is currently engaged in seeking additional funds to
satisfy the debt obligations either through an equity capital raise or
through new debt financing, or a combination of both. We may also seek
to merge the Company with another entity or look to sell certain
assets of the Company. Although management believes that efforts
currently underway to obtain additional funding can be successful,
there can be no assurance that additional financing will be available
if and when needed on terms favorable to the Company.
Comments
Chief Executive Officer and President Steve Runkel commented, "Our
second quarter results reflect continued softness in our Device
Connectivity product line offset by continued growth in our Device
Networking products. Our Device Connectivity revenue was down 8%
sequentially and down 35% on a year over year basis. This revenue
shortfall was primarily due to decreased shipments to several of our
traditional OEM customers that utilize our serial port connectivity
products."
Mr. Runkel continued: "Our Device Networking products generated
revenue growth of 22% sequentially and growth of 52% on a year over
year basis, reflecting our continued success in this market."
"Additionally, we continue to reduce our spending levels as we
complete the integration initiatives from the merger in Q1, 2006. On a
year to date basis our spending in Sales and Marketing has decreased
by 32.5% as a result of integrating the two sales teams. Our general
and administrative expenses decreased by $89,000 as a result of moving
out of the Garden Grove facility."
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.
- tables to follow -
DPAC TECHNOLOGIES CORP.
Condensed Consolidated Balance Sheet Information
(Unaudited)
(In 000's)
June 30, December 31,
2007 2006
-------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 223 $ 38
Accounts receivable, net 1,478 1,421
Inventories 1,589 1,500
Prepaid expenses and other current assets 81 43
-------- ------------
Total current assets 3,371 3,002
Property, net 379 413
Goodwill and intangible assets 8,261 8,578
Other assets 45 81
-------- ------------
TOTAL $ 12,056 $ 12,074
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CURRENT LIABILITIES:
Revolving credit facility and short term notes $ 1,820 $ 1,361
Current portion of long-term debt 2,316 2,097
Accounts payable 2,006 1,488
Accrued restructuring costs - current 365 392
Other accrued liabilities 455 514
-------- ------------
Total current liabilities 6,962 5,852
Accrued restructuring costs 172 330
Long-term debt, net of current portion 2,680 2,770
Net stockholders' equity 2,242 3,122
-------- ------------
TOTAL $ 12,056 $ 12,074
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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,
---------------------- -------------------------
2007 2006 2007 2006
----------- ---------- ------------ ------------
REVENUE $ 2,891 $ 3,496 $ 5,735 $ 6,690
COST OF GOODS SOLD 1,713 1,929 3,369 3,668
----------- ---------- ------------ ------------
GROSS PROFIT 1,178 1,567 2,366 3,022
OPERATING EXPENSES
Sales and marketing 349 542 772 1,145
Research and
development 303 261 611 526
General and
administrative 455 544 952 1,064
Amortization of
intangible assets 123 123 245 164
Restructuring
charges - - - 78
----------- ---------- ------------ ------------
Total operating
expenses 1,230 1,470 2,580 2,977
INCOME (LOSS) FROM
OPERATIONS (52) 97 (214) 45
OTHER EXPENSES:
Interest expense 381 381 757 715
Fair value
adjustment of
warrant liability (54) 164 (54) 164
----------- ---------- ------------ ------------
TOTAL OTHER
EXPENSES 327 545 703 879
----------- ---------- ------------ ------------
LOSS BEFORE INCOME
TAXES (379) (448) (917) (834)
INCOME TAX
(PROVISION) BENEFIT (3) 152 (4) 291
----------- ---------- ------------ ------------
NET LOSS $ (382) $ (296) $ (921) $ (543)
=========== ========== ============ ============
NET LOSS PER SHARE:
Net Loss - Basic
and diluted $0.00 $0.00 ($0.01) ($0.01)
=========== ========== ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic and diluted 92,844 92,775 92,832 75,885
=========== ========== ============ ============
CONTACT: DPAC Technologies, Inc.
Steve Vukadinovich, Chief Financial Officer, 330-655-9000
Steve.Vukadinovich@dpactech.com
or
Steve Runkel, Chief Executive Officer, 330-655-9000
Steve.Runkel@Quatech.com