Exhibit 99.1
DPAC Technologies Reports Financial Results
for the Third Quarter of Fiscal Year 2007
HUDSON, Ohio--(BUSINESS WIRE)--Nov. 14, 2007--DPAC Technologies
Corp. (OTCBB:DPAC), a leader in device networking and connectivity
solutions, today reported results for its third quarter ended
September 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.
Third Quarter Operating Results
For the third quarter of 2007, net sales of $3.1 million decreased
20% from net sales of $3.9 million in the third quarter of 2006, and
increased 7% from net sales of $2.9 million in the second quarter of
2007. Net sales related to the Company's Device Connectivity products
decreased by $904,000, or 32%, and net sales related to the Company's
Device Networking products, including the Airborne wireless product
line, increased by $131,000, or 12% over the quarter ended September
30, 2006. The Company reported an operating profit of $272,000 as
compared to $347,000 for the third quarter of 2006 and an operating
loss of $52,000 for the for the second quarter of 2007. The Company
reported a net profit of $71,000 as compared to $39,000 for the prior
year's third quarter and a net loss of $382,000 for the second quarter
of 2007. Total operating expenses incurred in the third quarter of
2007 of $1.1 million decreased by $246,000, or 18%, from the previous
year period. The decrease was due primarily to decreases in sales and
marketing expenses of $207,000 and G&A expenses of $103,000, as the
Company continued to integrate operating departments since the date of
the Merger. Additionally, the company recorded a non-cash gain of
$163,000 in the current year period compared to $109,000 in the prior
year quarter for the fair value adjustment for the liability for
warrants. An income tax provision of $34,000 was recorded in the third
quarter of 2006 and no income tax provision was recorded in the
current year period as a full valuation allowance was recorded against
deferred tax assets in the fourth quarter of 2006.
Nine Months Operating Results
Net sales of $8.8 million for the first nine months of 2007
decreased by 16% from net sales of $10.6 million for the same period
of 2006. Net sales related to the Company's Device Connectivity
products decreased $2.7 million, or 32%, while net sales related to
the Company's Device Networking products, including the Airborne
wireless product line, increased by $923,000, or 40% over the nine
months ended September 30, 2006. The Company reported an operating
profit of $58,000 as compared to $392,000 for the 2006 period. The
Company's net loss for the current year period totaled $850,000
compared to $504,000 for the prior year period. Interest expense of
$1.1 million for the first nine months of 2007 included non-cash
charges totaling $594,000, for the amortization of deferred financing
charges and the accretion of success fees and discount on the
subordinated debt. An income tax benefit of $257,000 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 September 30, 2007 we had a cash balance of $257,000 and a
deficit in working capital of $3,583,000. 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 $2,245,000 which are due and payable on
November 30, 2007 and a subordinated debt obligation of approximately
$2,000,000 which was 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. The Company's ability to
continue its operations is dependant upon its ability to raise capital
through debt or equity financing in order to meet its debt obligations
and working capital needs.
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 become
available on terms favorable to the Company, if at all.
Comments
Chief Executive Officer and President Steve Runkel commented, "Our
third quarter results reflect our efforts to bring our expenses in
alignment with our revenue. Our operating expenses were down over 18%
compared to Q3, 2006 and are down approximately 15% on a year to date
basis. This, along with stability in revenue from our Device
Connectivity products on a sequential basis and continued growth in
revenue from our Device Networking products, resulted in income from
operations of $272K in Q3 and $58K on a year to date basis."
Mr. Runkel continued: "Revenue from our Device Connectivity
products, while down over the same period in 2006, grew 5%
sequentially over the second quarter of 2007. The revenue shortfall
from these products compared to 2006 reflects a drop in orders from
several long standing OEM customers who serve the US based retail
banking markets. Our products remain specified as part of the solution
for several of these projects, though order levels have been impacted
by issues associated with that market. We also introduced a new line
of Express Card products in Q3 which will address the device
connectivity requirements for new laptops."
"Additionally, revenue from our Device Networking products grew
10% sequentially over the second quarter of 2007 and is up 40% on a
year to date basis. We began production shipments of a custom 802.11
a/b/g product for a major medical products company in Q3. We also
introduced the WLRA embedded 802.11 a/b/g radio module based on the RF
design of this customer product. This dual band radio module is well
suited for applications that need isolation from interference within
the crowded 2.4GHz frequency."
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,
2007 2006
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 257 $ 38
Accounts receivable, net 1,823 1,421
Inventories 1,276 1,500
Prepaid expenses and other current assets 67 43
------------- ------------
Total current assets 3,423 3,002
Property, net 364 413
Goodwill and intangible assets 8,114 8,578
Other assets 45 81
------------- ------------
TOTAL $11,946 $ 12,074
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CURRENT LIABILITIES:
Revolving credit facility and short term
notes $ 1,998 $ 1,361
Current portion of long-term debt 2,399 2,097
Accounts payable 1,650 1,488
Accrued restructuring costs - current 307 392
Other accrued liabilities 652 514
------------- ------------
Total current liabilities 7,006 5,852
Accrued restructuring costs 120 330
Long-term debt, net of current portion 2,494 2,770
Net stockholders' equity 2,326 3,122
------------- ------------
TOTAL $11,946 $ 12,074
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DPAC TECHNOLOGIES CORP.
Condensed Consolidated Statement of Income
(Unaudited)
(in 000's)
For the quarter For the nine
ended: months ended:
September 30, September 30,
----------------- -----------------
2007 2006 2007 2006
-------- -------- -------- --------
REVENUE $ 3,093 $ 3,866 $ 8,828 $10,556
COST OF GOODS SOLD 1,676 2,129 5,045 5,797
-------- -------- -------- --------
GROSS PROFIT 1,417 1,737 3,783 4,759
OPERATING EXPENSES
Sales and marketing 327 534 1,100 1,680
Research and development 298 233 909 759
General and administrative 397 500 1,348 1,564
Amortization of intangible assets 123 123 368 286
Restructuring charges - - - 78
-------- -------- -------- --------
Total operating expenses 1,145 1,390 3,725 4,367
INCOME FROM OPERATIONS 272 347 58 392
OTHER EXPENSES:
Interest expense 364 383 1,121 1,098
Fair value adjustment of warrant
liability (163) (109) (218) 55
-------- -------- -------- --------
TOTAL OTHER EXPENSES 201 274 903 1,153
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 71 73 (845) (761)
INCOME TAX (PROVISION) BENEFIT - (34) (5) 257
-------- -------- -------- --------
NET INCOME (LOSS) $ 71 $ 39 $ (850) $ (504)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE:
Net Income (Loss) - Basic and
diluted $ 0.00 $ 0.00 ($0.01) ($0.01)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 92,844 92,775 92,832 87,135
======== ======== ======== ========
Diluted 97,171 97,512 92,832 87,135
======== ======== ======== ========
CONTACT: DPAC Technologies
Steve Vukadinovich, Chief Financial Officer, 330-655-9000
Steve.Vukadinovich@dpactech.com
Steve Runkel, Chief Executive Officer, 330-655-9000
Steve.Runkel@Quatech.com