Achieves $0.04 in GAAP EPS for Second Quarter SAN JOSE, Calif.,
Aug. 13 /PRNewswire-FirstCall/ -- Document Capture Technologies,
Inc. (OTC:DCMT) (BULLETIN BOARD: DCMT) , a leading provider of
secure imaging solutions, today announced financial results for the
second quarter ended June 30, 2008. Second Quarter Financial
Highlights -- GAAP net income available to shareholders increased
to $746,000, or $0.04 per basic and diluted share from an $(81,000)
loss, or $0.00 loss per share in the year-ago period -- Operating
income swung $479,000 to $302,000 compared to an operating loss of
$(177,000) in the year-ago period -- Total operating expenses for
the second quarter of 2008 decreased 60% to $681,000 from $1.7
million in the year-ago period -- Strengthened balance sheet
through tight inventory control and debt reduction; shareholders'
equity increased to $1.4 million for the period ended June 30, 2008
from a deficit of $(280,000) at December 31, 2007 Subsequent
Highlight -- Edward M. Straw, retired US Navy Vice Admiral and
senior business executive, named Chairman of the Board of Directors
Net sales for the second quarter ended June 30, 2008 were $3.0
million, a 19% decrease compared to $3.7 million in net sales for
the second quarter of 2007. The decrease in net sales in the
quarter was primarily due to the overall slowdown of the general
economic and market conditions in the U.S. economy and the related
slowdown of information technology ("IT") spending as well as
decreased demand from the banking, financial, and insurance
sectors. David P. Clark, Chief Executive Officer, commented, "We
regained profitability and continued to generate healthy cash flow
in the quarter. Although our 2008 sales have thus far been affected
by the general economic slowdown of the U.S. economy, we have kept
a watchful eye on our operating expenses while we refocus on our
core mobile scanner business. The positive effects of our expense
reduction can be seen at the operating and net income level and we
are pleased with the financial progress we made in the quarter. We
continue to generate cash from operations and fully expect GAAP
profitability for the year." Mr. Clark continued, "During the three
and six months ended June 30, 2008, our European sales, to which we
have paid greater attention, continue to show strong growth. We
have nearly doubled our distribution network within this market
during the last six months compared to the year-ago period. We
expect this trend to continue as we have improved our ability to
deliver all channel products from our Netherlands-based warehouse,
improved our time-to-market and reduced our logistics and shipping
costs. We used a good portion of the cash we generated during the
quarter to pay down debt and shareholders' equity increased to $1.4
million this quarter from a deficit of $280,000 at the end of
December 2007. We expect this trend to continue in the third
quarter. Cost of sales for the second quarter of 2008 were $2.0
million, resulting in a gross profit of $983,000, or 33% gross
margin, compared to gross profit of $1.5 million, or 42% gross
margin, based on $2.2 million cost of sales for the second quarter
of 2007. The decreased gross margin in the second quarter of 2008
was directly attributable to the devaluation of the U.S. dollar
against the Chinese Yuan, and also negatively impacted by lower
sales in the period. The gross margin increased over Q1 2008 and
the Company is working to continue that trend. Bill Hawkins, DCT's
President and COO commented, "In the quarter, we continued our
efforts toward reducing our cost-of-goods-sold, which has helped
offset the impact of the weakening dollar against the Chinese Yuan.
We continue to experience some softness in orders as our larger VAR
(Value Added Reseller) channel orders are often related to large
capital expenditures, particularly in the healthcare, banking and
financial sectors. We are encouraged by the initial success of a
product pilot project with a new customer. We are confident that
several unique (vertical) integrations of our technology will
deliver efficiencies and a competitive advantage as they roll out
in the remainder of 2008 and the early part of 2009. We continue to
introduce new products that meet our customer's needs including one
in early June that has drawn a very positive response. Two
additional new products are expected to be introduced before the
end of the year." Total operating expenses for the second quarter
of 2008 were $681,000, a decrease of $1.0 million, or 60%, from
$1.7 million in the second quarter of 2007. Selling, general and
administrative expenses decreased 48% to $511,000 from $974,000;
and research and development expenses decreased 77% to $170,000
compared to $749,000 in the year-ago period. The decrease in
selling, general and administrative expenses was primarily a result
of the termination of HD display-related activities in November
2007 as well as lower stock-based compensation costs (a non-cash
charge), which were somewhat offset by increased personnel costs,
including those related to the costs of complying with the
Sarbanes-Oxley Act. The decrease in research and development
expenses was primarily due to the termination of all R&D
activities related to the HD display development efforts. Operating
income for the second quarter of 2008 was $302,000 compared to a
net operating loss of $(177,000) in the year-ago period,
representing an operating margin of 10%. GAAP net income for the
second quarter 2008 increased by $596,000, or 368% to $758,000
compared to GAAP net income of $162,000, for the second quarter
2007. GAAP net income available to common stockholders was
$746,000, or $0.04 per basic and diluted share (based on 18.4 and
20.8 million weighted average common shares outstanding,
respectively) compared to a GAAP net loss of $(81,000), or $0.00
per basic and diluted share (based on 21.8 million weighted average
common shares outstanding) for the second quarter of 2007. The 2008
second quarter's net results were favorably impacted by a change in
fair value of derivative instruments and the gain on sale of assets
totaling $575,000, and partially offset by the increased interest
expense. On a non-GAAP* basis, net income available to stockholders
in the second quarter of 2008 was $537,000 compared to a non-GAAP
net income of $79,000 in the second quarter of 2007. Non-GAAP net
income excludes certain non cash items, including stock-based
compensation cost, and the accounting for derivative instruments.
Net sales for the six months ended June 30, 2008 were $5.5 million,
a 29% decrease compared to $7.8 million in net sales for the same
period in 2007. The decrease in net sales in the quarter was
primarily due to the overall slowdown of the general economic and
market conditions in the U.S. economy and the related slowdown of
"IT" spending as well as decreased demand from the banking,
financial, and insurance sectors. GAAP net income for the six
months ended June 30, 2008 increased to $278,000 compared to a GAAP
net loss of $(646,000) for the year-ago period. GAAP net loss
attributed to common stockholders was $(67,000), or $0.00 per basic
and diluted share (based on 17.5 million weighted average common
shares outstanding) for the first six months of 2008 compared to a
GAAP net loss of $(1.1) million, or $(0.05) loss per basic and
diluted share (based on 22.9 million weighted average common shares
outstanding) for the same period in 2007. On a non-GAAP* basis, net
income available to stockholders in the six months ended June 30,
2008 was $586,000 compared to a non-GAAP net income of $436,000 in
the year-ago period. Non-GAAP net income excludes certain non cash
items, including stock-based compensation cost, and the accounting
for derivative instruments. The Company had cash and cash
equivalents of $1.2 million, working capital of $2.1 million, and a
current ratio of 2.1 to 1 at June 30, 2008 compared to cash and
cash equivalents of $1.8 million, working capital of $3.0 million
and a current ratio of 2.1 to 1 at December 31, 2007. Mr. Clark
concluded, "Subsequent to the end of the quarter, there were some
important changes to our Board, highlighted by the Board's
unanimous consent naming Edward M. Straw as Chairman. We welcome
Mr. Straw's participation on the board and his 30-year track record
as a leader in global logistics and supply chain management and
believe he, as well as the rest of the board, will be a valuable
asset to our management team. Through Ed's extensive contact
network and relationships we believe he will be a key contributor
to current initiatives we're working on, as well as the development
of our customer base and sales pipeline with the objective of
accelerating our top-and bottom-line growth." *In addition to
reporting financial results in accordance with generally accepted
accounting principles, or GAAP, DCT uses non-GAAP measures of net
income (loss) and income (loss) per share, which are adjustments
from results based on GAAP to exclude non-cash stock-based
compensation costs in accordance with SFAS 123R and the non-cash
accounting for derivative financial instruments. DCT's management
believes the non-GAAP financial information provided in this
release is useful to investors' understanding and assessment of
DCT's ongoing core operations and prospects for the future. The
presentation of this non-GAAP financial information is not intended
to be considered in isolation or as a substitute for results
prepared in accordance with GAAP. Management uses both GAAP and
non-GAAP information in evaluating and operating business
internally and as such deemed it important to provide all this
information to investors. Conference Call on August 13, 2008, at
4:30 PM ET: Management will host a conference call today to discuss
the results at 4:30 PM ET. Anyone interested in participating in
the conference call should dial in to 800-762-8908 if calling
within the United States or 480-248-5081 if calling
internationally. A replay will be available until August 20, 2008,
which can be accessed by dialing 800-406-7325 if calling within the
United States or 303-590-3030 if calling internationally. Please
use passcode 3909116 to access the replay. The call will also be
available live by webcast over the Internet and accessible at the
company's corporate website at http://www.docucap.com/. About
Document Capture Technologies, Inc. Document Capture Technologies,
Inc. (OTCBB: DCMT.OB), headquartered in San Jose, Calif., designs
and manufactures document capture solutions for OEM customers
worldwide. The company currently manufactures over 20 proprietary
document capture products and has become one of the world's largest
private-label manufacturers of USB-powered mobile document scanning
devices. The Company's growing intellectual property portfolio in
document capture includes key patents with additional patent
pending. Forward-Looking Statements Statements contained in this
press release, which are not historical facts, are forward-looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are
based largely on current expectations and are subject to a number
of known and unknown risks, uncertainties and other factors beyond
the Company's control that could cause actual events and results to
differ materially from these statements. These risks include,
without limitation, that there can be no assurance that any
strategic opportunities will be available to the Company and that
any strategic opportunities may only be available on terms not
acceptable to the Company. These statements are not guarantees of
future performance, and readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this release. Document Capture undertakes no
obligation to update publicly any forward-looking statements.
Company Contact: Document Capture Technologies, Inc. David P. Clark
(408)-213-3701 Investor Contact: Hayden Communications, Inc. Peter
Seltzberg (212) 946-2849 tables follow DOCUMENT CAPTURE
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) June 30, December 31, 2008 2007 ASSETS (Unaudited)
(Audited) Current assets: Cash and cash equivalents $1,150 $1,770
Trade receivables 1,838 2,464 Inventories, net 989 1,400 Prepaid
expenses and other current assets 56 32 Total current assets 4,033
5,666 Fixed assets, net 101 127 Total assets $4,134 $5,793
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities:
Notes payable and related warrant liability $806 $1,239 Trade
payables to related parties 668 578 Trade payables and other
current liabilities 276 658 Deferred revenue 213 - Accrued
dividends on Series A 5% cumulative convertible preferred stock -
178 Total current liabilities 1,963 2,653 Long-term bank line of
credit 534 2,021 Liability under derivative contracts 144 255 Total
liabilities 2,641 4,929 Convertible preferred stock, $.001 par
value, 2,000 authorized: Series A 5% cumulative convertible
preferred stock, 0 and 11.5 shares issued and outstanding at June
30, 2008 and December 31, 2007, respectively; liquidation value of
$0 and $1,150 at June 30, 2008 and December 31, 2007, respectively
- 1,074 Series B convertible preferred stock, 1.5 shares issued and
outstanding at June 30, 2008 and December 31, 2007; liquidation
value of $150 at June 30, 2008 and December 31, 2007 95 70
Stockholders' equity (deficit): Common stock $.001 par value,
50,000 authorized, 18,444 shares issued and outstanding at June 30,
2008 and 15,904 shares issued and 15,404 outstanding at December
31, 2007 (500 shares held in escrow) 18 15 Additional paid-in
capital 32,065 30,323 Accumulated deficit (30,685) (30,618) Total
stockholders' equity (deficit) 1,398 (280) Total liabilities and
stockholders' equity (deficit) $4,134 $5,793 DOCUMENT CAPTURE
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) (in thousands, except per share amounts) Three Months
Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 Net
sales $3,003 $3,696 $5,541 $7,823 Cost of sales 2,020 2,150 3,825
4,634 Gross profit 983 1,546 1,716 3,189 Operating expenses:
Selling, general and administrative 511 974 1,472 2,289 Research
and development 170 749 373 1,526 Total operating expenses 681
1,723 1,845 3,815 Operating income (loss) 302 (177) (129) (626)
Other income (expense) Change in fair value of derivative
instruments 425 330 111 (38) Gain on sale of assets 150 - 550 -
Other (119) 11 (252) 20 Total other income (expense) 456 341 409
(18) Net income (loss) before income taxes 758 164 280 (644)
Provision for income taxes - 2 2 2 Net income (loss) 758 162 278
(646) Dividend on Series A and accretion of Series A and Series B
preferred stock redemption value (12) (243) (114) (484) Deemed
dividend on Series A preferred stock maturity and Conversion - -
(231) - Net income (loss) available to common stockholders $746
$(81) $(67) $(1,130) Basic income (loss) per common share $0.04
$0.00 $0.00 $(0.05) Diluted income (loss) per common share $0.04
$0.00 $0.00 $(0.05) Weighted average common shares outstanding
18,444 21,805 17,488 22,815 Weighted average common shares
outstanding, assuming dilution 20,784 21,805 17,488 22,815 DOCUMENT
CAPTURE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED) (in thousands) Six Months Ended June 30,
2008 2007 Operating activities Net loss available to common
stockholders $(67) $(1,130) Adjustments to reconcile net loss to
net cash used by operating activities: Depreciation expense 26 21
Stock-based compensation cost - options 214 1,080 Fair value of
warrants issued for services rendered 51 8 Interest expense
attributable to amortization of debt issuance costs 167 - Change in
fair value of derivative instruments (111) 38 Accretion of Series A
and Series B preferred stock redemption value 101 440 Deemed
dividend on Series A preferred stock 231 - Changes in operating
assets and liabilities: Trade receivables 626 (1,099) Inventories
411 165 Prepaid expenses and other current assets (24) (44) Accrued
dividends on Series A 5% cumulative convertible stock 13 44 Trade
payables to related parties 90 (588) Deferred revenue 213 - Trade
payables and other current liabilities (382) 71 Cash provided
(used) by operating activities 1,559 (994) Investing activities
Capital expenditures - (67) Cash used by investing activities -
(67) Financing activities Net (payments) advances on bank line of
credit (1,487) 500 Payments on notes payable (700) - Proceeds from
exercise of employee stock options 8 - Cash (used) provided by
financing activities (2,179) 500 Net decrease in cash and cash
equivalents (620) (561) Cash and cash equivalents at beginning of
period 1,770 1,333 Cash and cash equivalents at end of period
$1,150 $772 Non-cash investing and financing activities: Restricted
common stock acquired from related party $- $2 Conversion of
convertible preferred stock to common stock $1,339 $26 Increase to
the warrant liability of common stock warrants in connection with
debt financing $100 $- DOCUMENT CAPTURE TECHNOLOGIES, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands, except per share amounts) Three Months Ended June
30, Six Months Ended June 30, 2008 2007 2008 2007 Net income (loss)
available to common stockholders (GAAP) $746 $(81) $(67) $(1,130)
Stock-based compensation cost - options 104 266 214 1,080 Fair
value of warrants issued for services rendered 17 4 51 8 Interest
expense attributable to amortization of debt issuance costs 83 -
167 - Change in fair value of derivative instruments (425) (330)
(111) 38 Accretion of Series A and Series B preferred stock
redemption value 12 220 101 440 Deemed dividend on Series A
preferred stock - - 231 - Net income available to common
stockholders (Non-GAAP) $537 $79 $586 $436 DATASOURCE: Document
Capture Technologies, Inc. CONTACT: David P. Clark of Document
Capture Technologies, Inc., +1-408-213-3701, ; or Investors, Peter
Seltzberg of Hayden Communications, Inc., +1-212-946-2849, , for
Document Capture Technologies, Inc. Web site:
http://www.docucap.com/
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