DPAC Technologies Reports Financial Results for the Fourth Quarter and Year End of...

DPAC Technologies Reports Financial Results for the Fourth Quarter and Year End of 2007

HUDSON, Ohio--(Business Wire)--
DPAC Technologies Corp. (OTCBB: DPAC), a leader in device
networking and connectivity solutions, today reported results for its
fourth quarter and year ended December 31, 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 consolidated QuaTech
and DPAC after the merger date of February 28, 2006.

Fourth Quarter Operating Results

For the fourth quarter of 2007, net sales of $3.3 million
increased 3.5% from net sales of $3.2 million in the fourth quarter of
2006, and increased 6.6% from net sales of $3.1 million in the third
quarter of 2007. Net sales related to the Company's Device
Connectivity products decreased by $327,000, or 14%, and net sales
related to the Company's Device Networking products, including the
Airborne wireless product line, increased by $438,000, or 52% over the
quarter ended December 31, 2006. The Company reported income from
operations of $215,000 as compared to an operating loss of $165,000
for the fourth quarter of 2006 and operating income of $271,000 for
the for the third quarter of 2007. The Company's reported a net profit
of $84,000 as compared to net loss of $498,000 for the prior year's
fourth quarter and a net profit of $71,000 for the third quarter of
2007. Total operating expenses incurred in the fourth quarter of 2007
of $1.1 million decreased by $317,000, or 22%, from the previous year
period. The decrease was due primarily to decreases in sales and
marketing expenses of $197,000 and G&A expenses of $72,000, as the
Company continued to integrate operating departments since the date of
the Merger. Additionally, the company recorded a non-cash gain of
$198,000 in the current year period compared to $55,000 in the prior
year quarter for the fair value adjustment for the liability for
warrants.

Twelve Months Operating Results

Net sales of $12.1 million for fiscal year 2007 decreased by 12%
from net sales of $13.7 million for 2006. Net sales related to the
Company's Device Connectivity products decreased by $3.0 million, or
28%, while net sales related to the Company's Device Networking
products, including the Airborne wireless product line, increased by
$1.4 million, or 44% over the year ended December 31, 2006. The
Company reported an operating profit of $273,000 for 2007 as compared
to $228,000 for 2006. The Company reported a net loss for the current
year of $766,000 compared to a net loss of $1.2 million for the prior
year. Interest expense of $1.5 million for 2007 included non-cash
charges totaling $608,000, for the amortization of deferred financing
charges and the accretion of success fees and discount on the
subordinated debt. The company recorded a non-cash gain of $415,000
during the current year for the fair value adjustment for the
liability for warrants. An income tax benefit of $244,000 was recorded
in 2006 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 Summary

The Company ended fiscal year 2007 with a cash balance of $257,000
and a deficit in working capital of $3.7 million. This compares to a
cash balance of $38,000 and a deficit in working capital of $2.9
million at the end of fiscal year 2006. The deficit working capital
position at December 31, 2007 is primarily due to $2.1 million in Bank
revolving and term debt that was due on January 31, 2008 and $2.0
million in Subordinated Debt which was due and payable in August 2007.
As previously announced, on January 31, 2008 the Company closed on new
equity and debt financing. The value of this financing, which includes
the sale of preferred stock, as well as senior subordinated notes and
a working capital line of credit, is for approximately $6.0 million,
after deducting financing fees. The company used the proceeds from
this financing to repay its existing senior debt held by National City
Bank, repay its existing subordinated debt held by HillStreet Capital,
notwithstanding the warrant liability, and provide additional working
capital.

Comments

Chief Executive Officer and President Steve Runkel commented, "We
continued to grow our Device Networking business in 2007 through
increased adoption rates of our Airborne embedded 802.11 products
within the emerging Machine to Machine (M2M) market. We have also been
successful in securing design wins for transportation, medical
equipment, industrial and mobile enterprise applications. As these
design wins progress to production shipment levels we should continue
to see significant revenue growth for our Device Networking product
line. "

Mr. Runkel continued: "The decline in revenue for our Device
Connectivity products is primarily a result of reduced purchase levels
from our OEM customers that serve the retail banking market. We have a
strong position as a leading supplier for that market, which has seen
a sharp reduction in technology spending. We have responded to this
slowdown by reducing our operating expense levels to be in line with
expected revenue levels."

"The progress that we have made in our Device Networking product
line, along with our demonstrated ability to align our cost structure
to our business levels, were important in our efforts to close on the
new balance sheet financing that was announced in Q1. With this
financing behind us we are positioned to continue to take advantage of
the growth opportunities for our Device Networking products. We have
assembled a strong product development team, with significant
experience in 802.11, and will continue to invest in those
opportunities that will position us as a market leader in the M2M
space."

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.

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DPAC TECHNOLOGIES CORP.
Condensed Consolidated Balance Sheet Information
(Unaudited)
(In 000's)

December 31, December 31,
2007 2006
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 257 $ 38
Accounts receivable, net 1,646 1,421
Inventories 1,337 1,500
Prepaid expenses and other current assets 67 43

------------ ------------
Total current assets 3,307 3,002

Property, net 357 413
Goodwill and intangible assets 7,989 8,578
Other assets 18 81
------------ ------------
TOTAL $ 11,671 $ 12,074
============ ============

CURRENT LIABILITIES:
Revolving credit facility $ 1,982 $ 1,361
Current portion of long-term debt 2,250 2,097
Accounts payable 1,866 1,488
Accrued restructuring costs - current 269 392
Liability for warrants 129 -
Other accrued liabilities 556 514
------------ ------------
Total current liabilities 7,052 5,852

Accrued restructuring costs 52 330
Long-term debt, net of current portion 2,141 2,226
Liability for warrants - 544

Net stockholders' equity 2,426 3,122

------------ ------------
TOTAL $ 11,671 $ 12,074
============ ============
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DPAC TECHNOLOGIES CORP.
Condensed Consolidated Statement of Income
(Unaudited)
(in 000's)

For the quarter ended: For the year ended:
December 31, December 31,
---------------------- -------------------
2007 2006 2007 2006
------------- -------- ---------- --------

REVENUE $ 3,297 $ 3,184 $ 12,125 $13,740

COST OF GOODS SOLD 1,958 1,908 7,003 7,705
------------- -------- ---------- --------

GROSS PROFIT 1,339 1,276 5,122 6,035

OPERATING EXPENSES
Sales and marketing 304 501 1,404 2,181
Research and development 270 318 1,179 1,077
General and
administrative 427 499 1,776 2,063
Amortization of
intangible assets 123 123 490 408
Restructuring charges - - - 78
------------- -------- ---------- --------
Total operating
expenses 1,124 1,441 4,849 5,807
------------- -------- ---------- --------

INCOME FROM OPERATIONS 215 (165) 273 228

OTHER (INCOME)EXPENSES:
Interest expense 334 375 1,454 1,474
Fair Value adjustment
for warrant liability (198) (55) (415) -
------------- -------- ---------- --------
TOTAL OTHER EXPENSES 136 320 1,039 1,474

------------- -------- ---------- --------
INCOME (LOSS) BEFORE INCOME
TAXES 79 (485) (766) (1,246)

INCOME TAX (PROVISION)
BENEFIT 5 (13) - 244
------------- -------- ---------- --------

NET INCOME (LOSS) $ 84 $ (498) $ (766) $(1,002)
============= ======== ========== ========

NET INCOME (LOSS) PER
SHARE:
Net Income (Loss) -
Basic and diluted $ 0.00 $ 0.00 ($0.01) ($0.01)
============= ======== ========== ========

WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 97,381 92,775 92,850 84,315
============= ======== ========== ========
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DPAC Technologies
Steve Vukadinovich, 330-655-9000
Chief Financial Officer
Steve.Vukadinovich@dpactech.com
or
Steve Runkel, 330-655-9000
Chief Executive Officer
Steve.Runkel@Quatech.com

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