DPAC Technologies Corp. (OTCBB: DPAC), a leader in device networking and connectivity solutions, today reported results for its second quarter ended June 20, 2010.
Second Quarter Operating Results
The Company reported revenue of $1.98 million for the second quarter of 2010, compared with $1.72 million for the second quarter of 2009, an increase of $267,000 or 16%, and exceeded first quarter 2010 revenue by $215,000 or 12%.
Gross margin percentage for the second quarter increased to 42.8%, compared to 37.3% for the same period of 2009. The increase in margin was due to improvements in product mix, resulting in lower direct material costs as a percentage of sales as well as increased efficiencies in our operations.
Total operating expenses incurred in the second quarter of 2010 of $818,000 decreased by $54,000, or 6%, from the previous year period. The decrease was due primarily to decreases in sales and marketing expenses of $49,000 and R&D expense of $21,000, offset by an increase of G&A expenses of $7,000 and an increase of expense due to Amortization of intangible assets of 10,000.
The Company reported income from operations of $32,000 as compared to an operating loss of $230,000 for the second quarter of 2009 and an operating profit of $57,000 for the first quarter of 2010. The Company reported a net loss of $93,000 as compared to a net loss of $378,000 for the prior year’s second quarter and a net loss of $96,000 for the first quarter of 2009.
Results for the Six Months Ended June 30, 2010
For the six months ended June 30, 2010, the Company reported revenue of $3.75 million compared with revenue of $3.71 million for the six months ended June 30, 2009, an increase of 1%.
Gross margin percentage for the six months ended June 30, 2010 was 45.1%, compared to 41.5% for the same period of 2009. Total operating expenses for the six months ended June 30, 2010 were $1.6 million, a reduction of $251,000 or 14%, from the six months ended June 30, 2009. The Company reported income from operations for the six months ended June 30, 2010 of $89,000 as compared to an operating loss of $316,000 for the six months ended June 30, 2009. The Company reported a net loss of $189,000 for the six months ended June 30, 2010 as compared to a net loss of $601,000 for the six months ended June 30, 2009.
Chief Executive Officer and President Steve Runkel commented, “We continued to see our business strengthen in our second quarter of 2010. Revenue increased for the third consecutive quarter, driven by 38% growth over the second quarter of 2009 revenue and 36% sequential growth over our first quarter of 2010 revenue from our Device Networking products. The order rates from our key Device Networking customers have increased significantly compared to this point in 2009 as our customers are seeing improvements in their business climates. Extended lead times and shortages of critical components resulted in an increase in the lead times for delivery of our products, delaying revenue from the second quarter later into in 2010.”
Mr. Runkel continued, “The acquisition of the Socket Serial product line at the beginning of the fourth quarter of 2009 has stabilized the revenue levels from our Device Connectivity products. While revenue from this product line is down 16% during the first half of 2010 compared to the same period in 2009, this is the result of a large shipment of product during the first fiscal quarter of 2009 to a long standing customer supporting a military application. Extended lead times and component level shortages has also impacted lead times for our Device Connectivity products.”
“The increase in revenue, along with continued focus on carefully managing our expenses, resulted in us generating non-GAAP net income of $59,000 for the second quarter of 2010 and $114,000 for the six months ended June 30, 2010. This marked the third consecutive quarter of non-GAAP profitability.” Non-GAAP net income is defined as net income before non-cash compensation expense for stock options and amortization expense for intangible assets acquired by acquisitions. Management believes this is a more relevant measurement of Company performance and cash generation potential from operations.
About DPAC Technologies
DPAC Technologies provides embedded wireless networking products for machine-to-machine communication applications. DPAC’s Airborne™ and AirborneDirect™ 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.
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.
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.
|June 30, 2010||December 31,|
|Accounts receivable, net||1,151||1,124|
|Prepaid expenses and other current assets||80||74|
|Total current assets||2,259||2,293|
|Deferred financing costs||86||102|
|Goodwill and intangible assets||6,782||7,027|
|Revolving credit facility||$||1,500||$||1,425|
|Current portion of long-term debt||300||230|
|Liability for put warrants||65||100|
|Other accrued liabilities||585||367|
|Total current liabilities||3,541||3,636|
|Long-term debt, net of current portion||3,199||3,267|
|Net stockholders' equity||3,098||3,283|
DPAC TECHNOLOGIES CORP.
|For the quarter ended:||For the six months ended:|
|June 30,||June 30,|
|COST OF GOODS SOLD||1,135||1,076||2,062||2,171|
|Sales and marketing||190||238||365||491|
|Research and development||194||215||382||421|
|General and administrative||302||296||592||698|
|Amortization of intangible assets||132||123||264||245|
|Total operating expenses||818||872||1,603||1,855|
|INCOME (LOSS) FROM OPERATIONS||32||(230||)||89||(316||)|
|Fair value adjustment for warrant liability||(36||)||-||(36||)||-|
|TOTAL OTHER EXPENSES||125||148||278||285|
|PREFERRED STOCK DIVIDENDS||113||48||225||96|
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
|NET INCOME (LOSS) PER SHARE:|
|Net Income (Loss) - Basic and diluted||$||0.00||$||0.00||$||0.00||($0.01||)|
|WEIGHTED AVERAGE SHARES OUTSTANDING:|
|Basic and diluted||109,415||103,039||109,415||101,822|
|An itemized reconciliation between net earning on a GAAP basis and non-GAAP basis is as follows:|
|GAAP net loss||$||(93||)||$||(378||)||$||(189||)||$||(601||)|
|Amortization of intangibles assets||132||123||264||245|
|Compensation expense for stock options||20||20||39||81|
|Non-GAAP net income (loss)||$||59||$||(235||)||$||114||$||(275||)|