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Optimistic Over Reorganization Prospects : Dense-Pac Records First-Quarter Loss

Times Staff Writer

Dense-Pac Microsystems, a Garden Grove technology firm that filed for protection from creditors a year after going public, said Tuesday it lost $102,000 during the three months ended May 30 but expects to emerge from bankruptcy reorganization within the next three months.

Dense-Pac, a manufacturer of electronic memory modules for the aerospace and defense industries, said the loss for the first quarter of its 1988 fiscal year compares with a loss of $293,000 a year earlier.

Sales were $1.3 million during the latest quarter, more than double the $520,000 recorded during the same period a year ago.

After becoming a public company in early 1986, Dense-Pac encountered overwhelming financial problems caused by a costly overseas expansion, accompanied by an unexpected decline in sales. Dense-Pac filed for protection from creditors under Chapter 11 of the federal bankruptcy code in February, 1987.

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Chairman James Turner said results for the first quarter included expenses associated with the closing of a Puerto Rico manufacturing plant built during Dense-Pac’s expansion program, as well as expenses resulting from the bankruptcy filing.

Excluding those costs, Dense-Pac broke even on continuing operations, Turner said, and the company’s backlog of orders is at a record high of $3.4 million, up from $1.8 million at the end of February.

New Profits Expected

“I feel very comfortable about the prospects,” Turner said. “I expect a return to profitability during this fiscal year and (expect) emergence from Chapter 11 in September.”

Dense-Pac has been operating under an interim reorganization plan filed in February. The company intends to submit a final plan to the bankruptcy court later this month. Turner said the final plan was approved Monday by the company’s unsecured creditors.

Under the proposed reorganization, Electronic Memories Ltd., a British electronics firm, will acquire up to 49% of Dense-Pac in exchange for contributing new capital to the company. Turner said Electronic Memories has already invested about $700,000 in Dense-Pac.

The plan would provide Dense-Pac’s unsecured creditors with about 40 cents in cash for each $1 in claims against the company, plus a prorated share of 200,000 newly issued shares of Dense-Pac stock.

The cash portion will total about $600,000, the company said. The company owes its unsecured creditors about $1.5 million.

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Turner said the company’s secured creditors already have been paid.

Under the reorganization, Dense-Pac’s existing shareholders will retain their stock, but their stake in the company will be reduced to about 38% as a result of the additional shares issued to Electronic Memories and the unsecured creditors.


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