SAN JOSE, Calif., May 15 /PRNewswire-FirstCall/ -- Document Capture
Technologies, Inc. (OTC:DCMT) (BULLETIN BOARD: DCMT) , a leading
provider of secure imaging solutions, today announced financial
results for the first quarter ended March 31, 2008. Net sales for
the first quarter ended March 31, 2008 were $2.5 million, a
decrease of 39%, compared to $4.1 million in net sales for the
first quarter of 2007. The decrease in net sales in the quarter was
primarily due to the timing and rescheduling of significant
customer orders that resulted in a lower number of scanners shipped
in the quarter and less favorable market conditions in the U.S.
First quarter revenue comparisons were also impacted by pushed out
orders from the fourth quarter of 2006 worth approximately $700,000
that were recognized in the first quarter of 2007. David P. Clark,
Chief Executive Officer, commented, "Though the domestic spending
environment remains challenged for growth, and we have seen some of
this impact on our customers' quarterly order patterns, we remain
optimistic in our ability to grow our business and look forward to
being able to report additional progress in dialogs with strategic
partners, new product launches, and new initiatives in the coming
months. The strength of our balance sheet continues to work to our
advantage and our business generated over one million dollars in
cash for the quarter, a positive swing of approximately two million
dollars compared to last year's first quarter." Cost of sales for
the first quarter of 2008 were $1.8 million, resulting in lower
gross profit of $733,000, or 29% gross margin, compared to gross
profit of $1.6 million, or 40% gross margin, based on $2.5 million
cost of sales for the first quarter of 2007. The decreased gross
margin percentage in the first quarter of 2008 as compared to the
first quarter of 2007 was directly attributable to the devaluation
of the U.S. dollar against the Chinese Yuan and certain product mix
factors. William Hawkins, Chief Operating Officer commented, "While
we did experience some softness in orders, particularly due to the
general slow down in consumer IT spending, we expect to book many
of these orders in the second quarter. Operational improvements and
decreases in overhead due to the absence of HD expenses were a
partial net offset to financial effects of the lower revenue. There
is no shortage of opportunities in the marketplace for applications
and integration of products like ours and we believe that our
state-of-the-art products, product pipeline, and financial
stability will enable us to meet our internal budgeting goals and
resume growth throughout this year." Total operating expenses for
the first quarter of 2008 were $1.2 million, a decrease of $0.9
million, or 44%, from $2.1 million in the first quarter of 2007.
Selling and marketing expenses decreased 37% to $251,000 from
$400,000; general and administrative expenses decreased 22% to
$710,000 from $915,000; and research and development expenses
decreased 74% to $203,000 compared to $777,000 in the year-ago
period. The decrease in selling and marketing expenses was
primarily a result of the termination of HD display-related
activities as a result of terminating that portion of the business
in November 2007. The decrease in general and administrative
expense was a result of lower stock-based compensation costs (a
non-cash charge). 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. GAAP net loss for
the quarter decreased by $328,000, or 41% to $(480,000) compared to
GAAP net loss of $(808,000), for the first quarter 2007. GAAP net
loss available to common stockholders was $(813,000) for the first
quarter 2008 compared to a GAAP net loss of $(1.0) million for the
first quarter of 2007. On a non-GAAP* basis, net income available
to stockholders in the first quarter of 2008 was $48,000 compared
to a non-GAAP net income of $357,000 in the first quarter of 2007.
Non-GAAP net income excludes certain non cash items, including
stock-based compensation cost, and the accounting for derivative
instruments. In the quarter the Company sold its remaining
HD-related assets for a total of $600,000 and received an initial
cash payment of $400,000 which was recorded as a gain on sale of
assets in the first quarter ended March 31, 2008. A second cash
payment of $150,000 was received on May 2, 2008 and will be
recorded as a gain on sale of assets in the quarter ended June 30,
2008. The final $50,000 payment will be reflected in DCT's
financial statements as a gain on sale of assets when the cash is
received. The Company had cash and cash equivalents of $1.3
million, working capital of $1.8 million, and a current ratio of
1.7 to 1 at March 31, 2008 as 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. Additionally, the Company
converted all the outstanding Series A Preferred Stock, which
eliminates any future cash obligations related to the Series A
Preferred A Stock. Mr. Clark concluded, "We expect that the
majority of our growth in 2008 will come in the third and fourth
quarters driven in large part by new products we are scheduled to
introduce to the marketplace in that timeframe. However, because of
the mixed effect of general economic conditions and lack of
visibility in the markets we serve, the Company has concluded that
it is prudent to refrain from offering financial guidance at this
time." *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
May 15, 2008, at 4:30 PM ET: Management will host a conference call
today to discuss the audited results at 4:30 PM ET. Anyone
interested in participating in the conference call should dial in
to 800-762-8779 if calling within the United States or 480-629-9041
if calling internationally. A replay will be available until May
22, 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 3876728 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. (OTC:DCMT) (BULLETIN BOARD:
DCMT) , 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 four key patents with an additional one 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
(561) 835-4069 Investor Contact: Hayden Communications, Inc. Peter
Seltzberg (646) 415-8972 tables follow DOCUMENT CAPTURE
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) March 31, December 31, 2008 2007 ASSETS (Unaudited)
(Audited) Current assets: Cash and cash equivalents $1,299 $1,770
Trade receivables 1,618 2,464 Inventories, net 1,194 1,400 Prepaid
expenses and other current assets 29 32 Total current assets 4,140
5,666 Fixed assets, net 111 127 Total assets $4,251 $5,793
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities:
Notes payable and related warrant liability $1,123 $1,239 Trade
payables to related parties 715 578 Trade payables and other
current liabilities 531 658 Accrued dividends on Series A 5%
cumulative convertible preferred stock - 178 Total current
liabilities 2,369 2,653 Long-term bank line of credit 700 2,021
Liability under derivative contracts 569 255 Total liabilities
3,638 4,929 Commitments and contingencies Convertible preferred
stock, $.001 par value, 2,000 authorized: Series A 5% cumulative
convertible preferred stock, 0 and 11.5 issued and outstanding at
March 31, 2008 and December 31, 2007, respectively; liquidation
value of $0 and $1,150 at March 31, 2008 and December 31, 2007,
respectively - 1,074 Series B convertible preferred stock, 1.5
shares issued and outstanding at March 31, 2008 and December 31,
2007; liquidation value of $150 at March 31, 2008 and December 31,
2007 82 70 Stockholders' equity (deficit): Common stock $.001 par
value, 50,000 authorized, 18,444 shares issued and outstanding at
March 31, 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 31,944 30,323 Accumulated deficit (31,431) (30,618)
Total stockholders' equity (deficit) 531 (280) Total liabilities
and stockholders' equity (deficit) $4,251 $5,793 DOCUMENT CAPTURE
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) (in thousands, except per share amounts) Three Months
Ended March 31, 2008 2007 Net sales $2,538 $4,127 Cost of sales
1,805 2,484 Gross profit 733 1,643 Operating expenses: Selling and
marketing 251 400 General and administrative 710 915 Research and
development 203 777 Total operating expenses 1,164 2,092 Operating
loss (431) (449) Other income (expense): Change in fair value of
derivative instruments (314) (368) Gain on sale of assets 400 -
Other (133) 9 Total other income (expense) (47) (359) Net loss
before income taxes (478) (808) Provision for income taxes 2 - Net
loss (480) (808) Dividend on Series A and accretion of Series A and
Series B preferred stock redemption value (102) (241) Deemed
dividend on Series A preferred stock maturity and Conversion (231)
- Net loss available to common stockholders $(813) $(1,049) Net
loss per common share - basic and diluted $(0.05) $(0.04) Weighted
average common shares outstanding: Basic and diluted 16,442 23,850
DOCUMENT CAPTURE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months
Ended March 31, 2008 2007 Operating activities: Net loss available
to common stockholders $(813) $(1,049) Adjustments to reconcile net
loss to net cash provided (used) by operating activities:
Depreciation expense 16 9 Stock-based compensation cost - options
110 814 Fair value of common stock warrants issued for services
rendered 34 4 Interest expense attributable to amortization of debt
issuance costs 84 - Change in fair value of derivative instruments
314 368 Accretion of Series A and Series B preferred stock
redemption value 88 220 Deemed dividend on Series A preferred stock
231 - Changes in operating assets and liabilities: Trade
receivables 846 (689) Inventories 206 332 Prepaid expenses and
other current assets 3 (78) Accrued dividends on Series A 5%
cumulative convertible stock 13 21 Trade payables to related
parties 137 (780) Trade payables and other current liabilities
(127) (109) Cash provided (used) by operating activities 1,142
(937) Investing activities: Capital expenditures - (32) Cash used
by investing activities - (32) Financing activities: Net (payments)
advances on bank line of credit (1,321) 500 Payments on notes
payable (300) - Proceeds from exercise of employee stock options 8
- Cash (used) provided by financing activities (1,613) 500 Net
decrease in cash and cash equivalents (471) (469) Cash and cash
equivalents at beginning of period 1,770 1,333 Cash and cash
equivalents at end of period $1,299 $864 Non-cash investing and
financing activities: Restricted common stock acquired from related
party $- $2 Conversion of convertible preferred stock to common
stock $1,339 $- Increase in the warrant liability of common stock
warrants in connection with debt financing $100 $- DOCUMENT CAPTURE
TECHNOLOGIES, INC. RECONCILIATION OF GAAP NET LOSS TO NON-GAAP PRO
FORMA NET INCOME (in thousands) Three Months Ended March 31, 2008
2007 Net loss available to common stockholders (GAAP) $(813)
$(1,049) Adjustments: Stock-based compensation cost - options 110
814 Fair value of common stock warrants issued for services
rendered 34 4 Interest expense attributable to amortization of debt
issuance costs 84 - Change in fair value of derivative instruments
314 368 Accretion of Series A and Series B preferred stock
redemption value 88 220 Deemed dividend on Series A preferred stock
231 - Net income available to common stockholders (Non-GAAP Pro
Forma) $48 $357 DATASOURCE: Document Capture Technologies, Inc.
CONTACT: David P. Clark of Document Capture Technologies, Inc.,
+1-561-835-4069, ; or Investors, Peter Seltzberg of Hayden
Communications, Inc., +1-646-415-8972, , for Document Capture
Technologies, Inc. Web site: http://www.docucap.com/
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