SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Date of Report: April 9, 2002
                          -----------------------------

                          DEL GLOBAL TECHNOLOGIES CORP.
                          -----------------------------
             (Exact name of registrant as specified in its charter)

                                     0-3319
                                     ------
                            (Commission File Number)

                                   13-1784308
                                   ----------
                      (IRS Employer Identification Number)

                                    New York
                                    --------
                            (State of Incorporation)

                    1 Commerce Park, Valhalla, New York 10595
                    -----------------------------------------
                    (Address of principal executive offices)

                                  914-686-3600
                                  ------------
              (Registrant's Telephone Number, including area code)


<PAGE>

Item 5. Other Events.

The Audited Consolidated Balance Sheets of the Registrant and its Subsidiaries
as of July 28, 2001 and July 29, 2000, and the Related Statements of Operations,
Stockholders' Equity, and Cash Flows for the Fiscal Year ended July 28, 2001 are
being filed as Exhibit 1 hereto.


<PAGE>

SIGNATURES
----------

            Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                      DEL GLOBAL TECHNOLOGIES CORP.

                                      By: /s/ Samuel E. Park
                                          --------------------------------------
Dated: April 9, 2002                      Samuel E. Park,
                                          President and Chief Executive Officer


<PAGE>

                                    EXHIBIT 1


<PAGE>

Del Global Technologies Corp.
and Subsidiaries

Independent Auditors' Report

Consolidated Financial Statements

Year Ended July 28, 2001
Consolidated Balance Sheet
July 29, 2000


<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Del Global Technologies Corp.
Valhalla, New York

We have audited the accompanying consolidated balance sheets of Del Global
Technologies Corp. and subsidiaries as of July 28, 2001 and July 29, 2000, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the fiscal year ended July 28, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Del Global Technologies Corp. and
subsidiaries at July 28, 2001 and July 29, 2000, and the results of their
operations and their cash flows for the fiscal year ended July 28, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Deloitte & Touche LLP

New York, New York
March 25, 2002


<PAGE>

DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
--------------------------------------------------------------------------------

                                                             July 28,   July 29,
                                                              2001       2000
                                                             --------   --------

ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                  $ 1,402    $   888
  Marketable securities                                          379      1,348
  Trade receivables (net of allowance for doubtful
     accounts of $607 and $604 for 2001 and 2000,
       respectively)                                          19,026     19,167
  Inventory (net of allowance of $5,198 and
    $6,421 for 2001 and 2000, respectively)                   27,528     29,234
  Deferred income tax assets - current                         4,643      3,586
  Prepaid expenses and other current assets                      391      1,265
                                                             -------    -------
           Total current assets                               53,369     55,488
                                                             -------    -------

NON-CURRENT ASSETS:
  Refundable income taxes                                      3,829      3,341
  Fixed assets, net                                            9,731     12,129
  Deferred income tax assets - non-current                     9,796      5,454
  Goodwill, net                                                3,450      4,408
  Other intangible assets, net                                   666        857
  Other assets                                                   817      1,128
                                                             -------    -------
           Total non-current assets                           28,289     27,317
                                                             -------    -------
TOTAL ASSETS                                                 $81,658    $82,805
                                                             =======    =======

See notes to consolidated financial statements


                                      -3-
<PAGE>

DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, except share data)
--------------------------------------------------------------------------------

                                                           July 28,    July 29,
                                                             2001        2000
                                                           --------    --------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-term credit facilities                             $  4,450    $  1,981
  Callable debt                                               8,500       4,804
  Current portion of long-term debt                             790         667
  Accounts payable - trade                                    7,823      12,060
  Accrued liabilities                                         8,825       6,721
  Deferred compensation liability                               228       1,577
  Income taxes payable                                          484         347
                                                           --------    --------
           Total current liabilities                         31,100      28,157
                                                           --------    --------

NON-CURRENT LIABILITIES:
  Long-term debt                                              4,703       5,952
  Obligation to issue subordinated note                       1,519          --
  Other long-term liabilities                                 1,927       2,395
                                                           --------    --------
           Total non-current liabilities                      8,149       8,347
                                                           --------    --------

           Total liabilities                                 39,249      36,504
                                                           --------    --------

COMMITMENTS AND CONTINGENCIES (Note 10)                          --          --

MINORITY INTEREST IN SUBSIDIARY                                 618         239
                                                           --------    --------

SHAREHOLDERS' EQUITY:
  Common stock - $.10 par value;
       authorized - 20,000,000 shares;
       issued - 8,476,081 shares at July 28, 2001
       and 8,557,951 shares at July 29, 2000                    847         856
  Additional paid-in capital                                 52,187      52,139
  Obligation to issue shares and warrants                     4,410          --
  Accumulated other comprehensive loss                         (391)       (189)
  Accumulated deficit                                        (9,760)     (1,239)
  Less common stock in treasury - 628,566 shares at
       July 28, 2001 and 629,437 shares at July 29, 2000     (5,502)     (5,505)
                                                           --------    --------
           Total shareholders' equity                        41,791      46,062
                                                           --------    --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $ 81,658    $ 82,805
                                                           ========    ========

See notes to consolidated financial statements


                                      -4-
<PAGE>

DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, except per share amounts)
--------------------------------------------------------------------------------

                                                                   Fiscal Year
                                                                     Ended
                                                                    July 28,
                                                                      2001
                                                                   -----------

NET SALES                                                           $ 92,955
                                                                    --------

COST OF SALES                                                         74,091
                                                                    --------

GROSS MARGIN                                                          18,864
                                                                    --------

  Selling, general and administrative                                 17,253
  Research and development                                             2,876
  Litigation settlement costs                                          9,759
  Facilities reorganization costs                                        822
                                                                    --------
            Total operating expenses                                  30,710

OPERATING LOSS                                                       (11,846)
                                                                    --------

  Interest expense, net                                                1,308
  Other income                                                           (74)
                                                                    --------
LOSS BEFORE INCOME TAX BENEFIT
  AND MINORITY INTEREST                                              (13,080)

INCOME TAX BENEFIT                                                    (4,938)

                                                                    --------
LOSS BEFORE MINORITY INTEREST                                         (8,142)

MINORITY INTEREST                                                        379
                                                                    --------

NET LOSS                                                            $ (8,521)
                                                                    ========

NET LOSS PER BASIC AND DILUTED SHARES                               $  (1.09)
                                                                    ========

See notes to consolidated financial statements


                                      -5-
<PAGE>

DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JULY 28, 2001
(Dollars in Thousands)
--------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                $(8,521)
Adjustments to reconcile net loss to
  net cash used in operating activities
   Depreciation and amortization                                          2,955
   Deferred income tax benefit                                           (5,207)
   Loss on sale of fixed assets                                               9
   Non cash facilities reorganization charge                                499
   Gain on sale of marketable securities                                   (272)
   Loss on sale of investment                                               190
   Non cash litigation settlement costs                                   5,929
   Non cash pension cost                                                     22
   Non cash compensation expense                                            249
   Minority Interest                                                        379
   Stock based compensation expense                                         150

  Changes in operating assets and liabilities:

      Decrease in trade receivables                                        (525)
      Decrease in inventory                                               1,165
      Decrease in prepaid expenses and
        other current assets                                                835
      Increase in other assets                                              (69)
      Increase in refundable income taxes                                  (488)
      Decrease in accounts payable - trade                               (3,839)
      Increase in accrued liabilities                                     2,274
      Payment of deferred compensation liability                         (1,349)
      Increase in income taxes payable                                      142
      Decrease in other long-term liabilities                              (332)
                                                                        -------
Net cash used in operating activities                                    (5,804)
                                                                        -------

CASH FLOWS FROM INVESTING ACTIVITIES
  Fixed asset purchases                                                    (677)
  Net proceeds from sale of marketable securities                         1,241
  Proceeds from sale of investment                                           60
                                                                        -------
Net cash provided by investing activities                                   624
                                                                        -------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from bank borrowings                                           7,539
  Repayment of bank borrowings                                           (1,734)
  Stock repurchase                                                         (108)
                                                                        -------
Net cash provided by financing activities                                 5,697
                                                                        -------
EFFECT OF EXCHANGE RATE CHANGES                                              (3)
                                                                        -------

CASH AND CASH EQUIVALENTS INCREASE FOR THE YEAR                             514
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR                      888
                                                                        -------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR                        $ 1,402
                                                                        =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for interest                              $ 1,229
  Cash paid during the period for income taxes                              488

See notes to consolidated financial statements


                                      -6-
<PAGE>

DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE LOSS
FOR THE FISCAL YEAR ENDED JULY 28, 2001
(Dollars in Thousands, except share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           Obligation   Accumulated
                                        Common Stock Issued   Additional    to issue       Other
                                        -------------------    Paid-In      Shares &    Comprehensive    Accumulated   Comprehensive
                                        Shares       Amount    Capital      Warrants        Loss           Deficit        (Loss)
                                        ------       ------   ----------   ----------   -------------    -----------   -------------
<S>                                   <C>            <C>      <C>           <C>            <C>            <C>             <C>
BALANCE, JULY 29, 2000                8,557,951      $  856   $  52,139                    $  (189)       $ (1,239)

  Shares and warrants to be issued
    for litigation settlement                                               $   4,410

  Shares repurchased

  Compensation cost of
    nonemployee stock options

    and warrants issued                                             150

  Stock Option exercise reversal        (81,870)         (9)       (102)

Comprehensive Loss:
  Foreign Exchange                                                                            (202)                       $   (202)

  Net loss                                                                                                  (8,521)         (8,521)
                                                                                                                          --------

Comprehensive Loss                                                                                                        $  8,723
                                                                                                                          ========

                                      ---------      ------   ---------     ---------      -------        --------
BALANCE, JULY 28, 2001                8,476,081      $  847   $  52,187     $   4,410      $  (391)       $ (9,760)
                                      =========      ======   =========     =========      =======        ========
</TABLE>

                                                 Treasury Stock
                                            Shares       Amount       Total
                                           --------    --------      ---------



BALANCE, JULY 29, 2000                      629,437    $ (5,505)     $ 46,062

  Shares and warrants to be issued
    for litigation settlement                                           4,410

  Shares repurchased                         11,500        (108)        (108)

  Compensation cost of
    nonemployee stock options

    and warrants issued                                                   150

  Stock Option exercise reversal            (12,371)        111            --

Comprehensive Loss:
  Foreign Exchange                                                       (202)

  Net loss                                                             (8,521)


Comprehensive Loss


                                            -------   --------       -------
BALANCE, JULY 28, 2001                      628,566   $ (5,502)      $ 41,791
                                            =======   =========      ========


                                      -7-
<PAGE>

DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 28, 2001 AND JULY 29, 2000 AND FOR THE
FISCAL YEAR ENDED JULY 28, 2001.
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Description of Business Activities - Del Global Technologies Corp. ("Del")
      together with its subsidiaries (collectively, the "Company"), is engaged
      in two major lines of business: Medical Imaging Systems and Power
      Conversion subsystems and products. The Medical Imaging Systems segment
      designs, manufactures and markets imaging and diagnostic systems
      consisting of stationary and portable x-ray imaging systems,
      radiographic/fluoroscopic systems, mammography systems and dental systems.
      The Power Conversion Group segment designs, manufactures and markets
      proprietary precision power conversion and noise suppression subsystems
      and products for medical as well as critical industrial applications.

      Principles of Consolidation - The consolidated financial statements
      prepared on the accrual basis of accounting, which conform to accounting
      principles generally accepted in the United States of America, include the
      accounts of Del and its subsidiaries. All material intercompany accounts
      and transactions have been eliminated.

      Use of Estimates - The preparation of the consolidated financial
      statements in conformity with accounting principles generally accepted in
      the United States of America requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
      consolidated balance sheets. Actual results could differ from those
      estimates.

      Significant estimates underlying the accompanying consolidated financial
      statements include the allowance for doubtful accounts, allowance for
      obsolete and excess inventory, realizability of deferred income tax
      assets, recoverability of intangibles and other long-lived assets, and
      future obligations associated with the Company's litigation.

      Accounting Period - The Company's fiscal year-end is based on a 52/53-week
      cycle ending on the Saturday nearest to July 31.

      Cash and Cash Equivalents - The Company considers highly liquid
      instruments readily convertible to known amounts of cash with original
      maturities of three months or less measured from their acquisition date to
      be cash equivalents.

      Marketable Securities - The Company classifies all of its marketable
      securities as trading. Trading securities are carried at fair value, with
      the unrealized gains and losses reported as a component of income.
      Marketable securities are classified in the consolidated balance sheets as
      current assets. The cost of securities sold is based on the specific
      identification method.

      Inventories - Inventories are stated at the lower of cost or market value.
      Cost comprises direct materials and, where applicable, direct labor costs
      and those overheads that have been incurred in bringing the inventories to
      their present location and condition. Engineering costs incurred to set up
      products to be manufactured for a customer purchase order are capitalized
      when the scope of the purchase order


                                      -8-
<PAGE>

      indicates that such costs are recoverable. Such costs are included in
      work-in-process inventory and amortized on a units shipped basis over the
      life of the customer order from the date of first shipment. Cost is
      calculated using the FIFO method. Market value represents the estimated
      selling price less all estimated costs to completion and costs to be
      incurred in marketing, selling and distribution.

      Fixed Assets, Net - Fixed assets, net are stated at cost less accumulated
      depreciation and amortization. Replacements and major improvements are
      capitalized; maintenance and repairs are expensed as incurred. Gains or
      losses on asset dispositions are included in the determination of net
      income. Depreciation is computed utilizing the straight-line method. With
      respect to leasehold improvements, the cost of leasehold improvements is
      amortized over the shorter of the useful life or the term of the lease.

      Depreciable lives are generally as follows:

           Description                                           Useful Lives

           Buildings                                                 25-33
           Machinery and equipment                                    5-15
           Furniture and fixtures                                     5-10
           Transportation equipment                                    3-4
           Computer and other equipment                                3-7

      Recoverability of Long-Lived Assets - The Company evaluates the carrying
      amounts of long-lived assets (including intangibles) to determine if
      events have occurred which would require modification to the carrying
      values. In evaluating carrying values of long-lived assets, the Company
      reviews certain indicators of potential impairment, such as undiscounted
      projected cash flows and business Plans. In the event that impairment has
      occurred, the fair value of the related asset is determined and the
      Company records a charge to operations calculated by comparing the asset's
      carrying value to the estimated fair value. The Company estimates fair
      value based on the best information available making whatever estimates,
      judgments and projections are considered necessary.

      Deferred Financing Costs, Net - Financing costs, including fees,
      commission and legal expenses are capitalized and amortized on a straight
      line basis, which approximates the interest method, over the term of the
      relevant loan. Amortization of deferred financing costs is included in
      interest expense (income), net.

      Goodwill, Net - Goodwill represents the excess of the cost of acquisitions
      over the fair value of the identifiable assets acquired and liabilities
      assumed. Goodwill is amortized on a straight-line basis over 15 to 25
      years. Accumulated amortization for goodwill was $1,155 and $1,046 at July
      28, 2001 and July 29, 2000, respectively.

      Other Intangibles, Net - Other intangible assets are patents, trademarks,
      manufacturing rights, customer lists and non-compete agreements acquired
      with the purchase of certain assets of a subsidiary. Intangibles are being
      amortized on a straight-line basis over their estimated useful lives,
      which range from 5 to 10 years. The cost of renewing patents and
      trademarks are charged to the operations as incurred. Accumulated
      amortization for intangibles was $1,298 and $1,134 at July 28, 2001 and
      July 29, 2000, respectively.

      Revenue Recognition - Sales of goods are recognized when goods are shipped
      and title has passed.

      Research and Development Costs - Research and development costs are
      recognized as an expense in the period in which they are incurred.


                                      -9-
<PAGE>

      Income Taxes - Deferred income tax assets and liabilities represents the
      effects of the differences between the income tax basis and financial
      reporting basis of assets and liabilities at the tax rates expected at the
      time the deferred tax liability or asset is expected to be settled or
      realized.

      Loss Per Share - Loss per share are computed by dividing net loss by the
      weighted average number of common shares outstanding during the year.
      Options to purchase common stock have been excluded from the calculation
      of loss per share because their inclusion would be antidilutive.

      Financial Instruments - The carrying amount of the Company's financial
      instruments, which include cash equivalents, marketable securities,
      accounts receivable, short-term credit facilities, callable debt and
      accounts payable, approximates their fair value at July 28, 2001, and July
      29, 2000.

      Concentration of Credit Risk - Financial instruments, which potentially
      subject the Company to concentrations of credit risk, are cash
      equivalents, investments in marketable securities and trade receivables.
      With respect to accounts receivable, the Company limits its credit risk by
      performing ongoing credit evaluations and, when deemed necessary,
      requiring letters of credit, guarantees or collateral. Management does not
      believe significant risk exists in connection with the Company's
      concentrations of credit at July 28, 2001.

      Stock-Based Compensation - The Company accounts for stock based employee
      compensation arrangements in accordance with Accounting Principles Board
      Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and
      complies with the disclosure provisions of SFAS No. 123, Accounting for
      Stock-Based Compensation. Under APB 25, compensation expense is based on
      the difference, if any, between the fair value of the Company's stock and
      the exercise price of the option. Options are generally granted at the
      fair market value at the date of grant. The Company accounts for equity
      instruments issued to non employees in accordance with the provisions of
      SFAS No. 123 and Emerging Issues Task Force ("EITF") Issue No. 96-18
      Accounting for Equity Instruments That Are Issued to Other Than Employees
      for Acquiring, or in Conjunction with Selling, Goods or Services. All
      transactions in which goods or services are the consideration received for
      the issuance of equity instruments are accounted for based on the fair
      value of the consideration received or the fair value of the equity
      instruments issued, whichever is more reliably measurable. The measurement
      date of the fair value of the equity instruments issued is the date on
      which the counter party's performance is complete.

      Recent Accounting Pronouncements - Effective July 30, 2000, the Company
      adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging
      Activities, and its corresponding amendments under SFAS No. 138. SFAS 133
      requires the Company to measure all derivatives, including certain
      derivatives embedded in other contracts, at fair value and to recognize
      them in the consolidated balance sheet as an asset or liability, depending
      on the Company's rights or obligations under the applicable derivative
      contract. The adoption of SFAS 133 as of July 30, 2000 did not have an
      impact on the Company's consolidated financial statements.

      During July 2001, the FASB issued SFAS No. 141, Business Combinations, and
      SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires
      the use of the purchase method of accounting for all business combinations
      initiated after June 30, 2001. Additionally, this statement further
      clarifies the criteria for recognition of intangible assets separately
      from goodwill for all business combinations completed after June 30, 2001,
      as well as requiring additional disclosures for business combinations.
      SFAS No. 142 requires that goodwill acquired after June 30, 2001 no longer
      be subject to amortization over their estimated useful lives. Beginning on
      August 3, 2002, amortization of goodwill will no longer be permitted and
      the Company will be required to assess these assets for impairment
      annually, or more frequently if circumstances indicate a potential
      impairment. Furthermore, this statement provides specific guidance for
      testing goodwill for impairment. Transition-related impairment


                                      -10-
<PAGE>

      losses, if any, which result from the initial assessment of goodwill and
      certain intangible assets would be recognized by the Company as a
      cumulative effect of accounting change on August 3, 2002. The Company has
      not yet determined the impact, if any, that the adoption of this statement
      will have on its consolidated financial statements.

      SFAS No. 143, Accounting for Asset Retirement Obligations, was issued in
      June 2001. This statement addresses financial accounting and reporting for
      the obligations associated with the retirement of tangible long-lived
      assets and the associated asset retirement costs. This statement is
      effective for financial statements issued for fiscal years beginning after
      June 15, 2002. The Company has not yet determined the impact, if any, that
      the adoption of this statement will have on its consolidated financial
      statements.

      SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
      Assets, was issued in October 2001. SFAS No. 144 replaces SFAS No. 121,
      Accounting for the Impairment of Long-Lived Assets and for Long-Lived
      Assets to be Disposed Of. SFAS No. 144 requires that long-lived assets
      whose carrying amount is not recoverable from its undiscounted cash flows
      be measured at the lower of carrying amount or fair value less cost to
      sell, whether reported in continuing operations or in discontinued
      operations. Therefore, discontinued operations will no longer be measured
      at net realizable or include amounts for operating losses that have not
      yet occurred. SFAS No. 144 also broadens the reporting of discontinued
      operations to include all components of an entity with operations that can
      be distinguished from the rest of the entity and that will be eliminated
      from the ongoing operations of the entity in a disposal transaction. The
      provisions of SFAS No. 144 are effective for financial statements issued
      for fiscal years beginning after December 15, 2001 and are to be applied
      prospectively. The Company has not yet determined the impact, if any, that
      the adoption of this statement will have on its consolidated financial
      statements.

      Reclassifications - Certain reclassifications have been made to the 2000
      balance sheet to conform with the presentation adopted in 2001.

2.    MARKETABLE SECURITIES AND DEFERRED COMPENSATION

      At July 28, 2001 and July 29, 2000, marketable securities consisted of
      corporate debt, United States Treasury bonds, and equity securities
      classified as trading and recorded at fair market value.

      The cost and fair value of marketable securities classified as trading at
      July 28, 2001 and July 29, 2000, based on maturity dates are as follows:

<TABLE>
<CAPTION>
                                                              July 28, 2001           July 29, 2000
                                        Maturity          --------------------     --------------------
       (Dollars in Thousands)             Dates           Cost      Fair Value       Cost    Fair Value

<S>                                     <C>               <C>         <C>            <C>       <C>
      Corporate debt securities         2001-2003         $353        $320           $640      $  733

      Equity securities                                     68          59            524         615
                                                          -----       -----        -------     ------

      Total                                               $421        $379         $1,164      $1,348
                                                          ====        ====         ======      ======
</TABLE>

      The Company's investments consisted of $59 and $1,311 at July 28, 2001 and
      July 29, 2000, respectively, intended for use by management for the
      deferred compensation of the Company's former Chief Executive Officer
      ("CEO") and certain key executives. Further, $23 and $106 of cash at July
      28, 2001 and July 29, 2000, respectively, was intended for use by
      management for deferred compensation for a total liability of $228 and
      $1,577 at July 28, 2001 and July 29, 2000, respectively.


                                      -11-
<PAGE>

      Gains and losses, either recognized or unrealized, are for the benefit or
      detriment of these key executives' individual deferred compensation.

      In connection with the termination of employment of the Company's former
      Chief Executive Officer, and certain other executives during the second
      and third quarters of fiscal year 2001, $1,442 of the amounts included in
      deferred compensation was paid to the terminated executives by liquidating
      the investments.

3.    INVENTORY

      Inventory consists of the following:

                                             July 28, 2001     July 29, 2000
                                             -------------     -------------

      Raw materials and purchased parts           $ 13,671          $ 13,889
      Work-in-process                               15,069            13,333
      Finished goods                                 3,986             8,433
                                                  --------          --------
                                                    32,726            35,655
      Less allowance for obsolete and
        excess inventory                            (5,198)           (6,421)
                                                  --------          --------

      Total inventory, net                        $ 27,528          $ 29,234
                                                  ========          ========

      The Company has pledged all of its inventories in the United States of
      America having a carrying amount of approximately $20,400 and $24,000 at
      July 28, 2001 and July 29, 2000, respectively, to secure its credit
      facilities with its bank.

4.    FIXED ASSETS

      Fixed assets consist of the following:

                                             July 28, 2001     July 29, 2000
                                             -------------     -------------

      Land                                        $    694          $    694
      Buildings                                      4,832             5,065
      Machinery and equipment                       13,620            13,720
      Furniture and fixtures                         1,379             1,537
      Leasehold improvements                         1,408             1,524
      Transportation equipment                          19                35
      Computers and other equipment                  3,245             3,090
                                                  --------          --------
                                                    25,197            25,665
      Less accumulated depreciation and
        amortization                               (15,466)          (13,536)
                                                  --------          --------

      Fixed assets, net                           $  9,731          $ 12,129
                                                  ========          ========

      The Company has pledged all of its machinery and equipment in the United
      States of America having a carrying amount of approximately $6,284 and
      $8,370 at July 28, 2001 and July 29, 2000, respectively, to secure its
      credit facilities with its bank.

      Depreciation expense for fiscal year ended 2001 was $2,172.


                                      -12-
<PAGE>

5.    DEBT AND OBLIGATION TO ISSUE SUBORDINATED NOTE

      Callable debt is summarized as follows:

                                               July 28, 2001    July 29, 2000
                                               -------------    -------------
                                                 Due Within        Due Within
                                                   One Year          One Year

      Acquisition credit line                      $   --            $1,199

      Revolving line of credit                      8,500             3,500

      Other Loans                                      --               105
                                                   ------            ------

                                                   $8,500            $4,804
                                                   ======            ======

      As a result of the delay in issuing the July 29, 2000 financial
      statements, the Company is not in compliance with the terms of its U.S.
      credit agreement, and the amounts outstanding under such agreement ($8,500
      and $4,804 at July 28, 2001, and July 29, 2000, respectively), are
      callable by the lenders. The Company's U.S. subsidiaries' cash and
      investment balances at July 28, 2001, are not sufficient to fund the
      repayment of the amounts owed under the U.S. subsidiaries' debt agreement.

      On March 21, 2002, the Company signed a commitment letter for working
      capital financing with a replacement lender. This new credit facility is
      for $10 million. Conditions for closing of this new credit facility are
      customary for these types of agreements, and management believes that it
      will be able to close this new financing during the fourth quarter of
      fiscal 2002.

      The Company's current credit facility at its US subsidiaries with its
      lending bank is comprised of an acquisition credit line of $15,000 and a
      revolving line of credit of $10,000. At July 28, 2001, the Company has
      letters of credits outstanding of $1,327 with its bank.

      Interest under the U.S. credit facility is at prime, or at the Company's
      option, at a rate tied to LIBOR. The interest rate on the revolving line
      of credit is at prime, which was 7.0% and 8.0% at July 28, 2001 and July
      29, 2000, respectively. The credit facility is subject to commitment fees
      of 1/4% on the daily-unused portion of the facility, payable quarterly.
      Management believes that its debt obligations are stated at fair value,
      because the interest rates on its credit lines are indexed with either the
      Prime Rate or LIBOR.

      Borrowings under this U.S. credit facility were on an unsecured basis;
      however, in April 2001, the Company granted a security interest to the
      lender in certain accounts receivable, inventory, and machinery and
      equipment. Because of the continued non-compliance with the terms of the
      credit agreement, the Company negotiated a Forbearance Agreement with the
      lender in June 2001. The Forbearance Agreement provided that the lender
      would forbear from instituting any remedies under the credit agreement for
      the period of the Forbearance Agreement. In exchange for this forbearance,
      the Company paid the lender $100. In addition, as of June 1, 2001, the
      lender increased the interest rate on the credit facility 2%, the default
      rate pursuant to the credit agreement. The Forbearance Agreement initially
      covered the period to September 15, 2001. In September 2001, the Company
      and the lender extended the Forbearance Agreement until November 30, 2001,
      and agreed that the Company would make up to $750 of repayments under the
      facility prior to November 30, 2001, and would pay an $80 forbearance fee.
      The Forbearance Agreement has not been extended beyond November 30, 2001.
      The lender has not taken action against the company or called the debt.


                                      -13-
<PAGE>

      In addition to the credit facilities at the US subsidiaries discussed
      above, the Company's Italian subsidiary has certain short-term credit
      facilities, with interest rates ranging from 5.5% to 12.6%. The total
      amount outstanding on the short-term credit facilities at July 28, 2001
      was $4,450.

      Long-Term Debt - Long-term debt was comprised of long-term debt on the
      Company's Italian subsidiary of $5,255 and $6,169 at July 28, 2001 and
      July 29, 2000, respectively, and a note payable of $238 and $450 at July
      28, 2001 and July 29, 2000, respectively, with an effective interest rate
      of 12% in connection with the acquisition of a domestic subsidiary.

<TABLE>
<CAPTION>
                                                        July 28, 2001    July 29, 2000       Interest Rate
                                                        -------------    -------------       -------------
<S>                                                          <C>               <C>                   <C>
      Italian subsidiary's total long-term debt:
        Capital lease obligation                           $ 2,430          $  2,703                 6.7%
        Medium-term credit facilities with
        commercial institutions: variable rate               1,316             1,432       Euribor + 1.0%
                                 fixed rate                    128               418                 5.7%
        Italian Government long-term loans                   1,381             1,616                 3.4%
                                                           -------          --------

                                                             5,255             6,169
      U.S. subsidiary long-term debt                           238               450                  12%
                                                           -------          --------
                                                             5,493             6,619

               Less: current portion                          (790)             (667)
                                                           -------          --------

               Long-term debt                              $ 4,703          $  5,952
                                                           =======          ========
</TABLE>

      The variable interest rate at July 29, 2001 on the medium-term credit
      facility, based on the formula Euribor + 1%, amounts to 5.4%.

      The principal of medium-term credit facility at a variable interest rate
      is payable on a semi-annual basis, interest payments are due on a
      quarterly basis. Payments are due from September 2001 until March 2007.
      The outstanding balance for the medium-term credit facility at a fixed
      rate is due on September 2001, which represents the last payment. Payments
      relating to the two Italian Government long-term loans are due annually
      from February 2002 until February 2010 and from September 2002 until
      September 2010, respectively. The U.S. subsidiary long-term debt is
      payable annually, with the last payment due November 2001.

      Obligation to Issue Subordinated Note - In connection with the preliminary
      settlement reached on July 26, 2001 with the plaintiffs in the class
      action litigation, the Company recorded the present value at 12% of a
      $2,000 subordinated note to be issued and due five years after issuance.
      The note which will be issued in April 2002, bears interest at 6% per
      annum and with a discounted present value of $1,519 at July 28, 2001.


                                      -14-
<PAGE>

      The Company is obligated to make principal payments under its long-term
      debt and obligation to issue subordinated note ("Debt") and capital lease
      as follows:

                                                         Capital
         Fiscal Year Ending                   Debt        Lease        Total

      2002                                   $  717      $  235
      2003                                      353         245
      2004                                      358         258
      2005                                      362         258
      2006 and beyond                         2,792       1,939
      Purchase option                            --         658
                                             ------      ------

      Total payments                          4,582       3,593

      Less imputed interest                      --      (1,163)
                                             ------      ------

      Total                                  $4,582      $2,430       $7,012
                                             ======      ======       ======

6.    EMPLOYEE BENEFITS

      The Company has employee benefit Plans for eligible employees. One of the
      Plans is a profit sharing Plan, which provides for contributions as
      determined by the Board of Directors. The contributions can be paid to the
      Plan in cash or common stock of the Company. No contribution was
      authorized for fiscal year ended 2001. The Plan also incorporates a 401(k)
      Retirement Plan that is available to substantially all employees, allowing
      them to defer a portion of their salary. The Company also has a defined
      benefit Plan frozen effective February 1, 1986.

7.    SEGMENT REPORTING

      The Company has two reportable segments which are Medical Imaging Systems
      and Power Conversion Group. Operating segments are defined as components
      of an enterprise, about which separate financial information is available,
      that is evaluated regularly by the chief decision maker, or decision
      making group, in deciding how to allocate resources and in assessing
      performance. The Company's chief operating decision making group is
      comprised of the Chief Executive Officer and the senior executives of the
      Company's operating segments. The Company evaluates its operating segments
      based on operating income/(loss).

      Other represents the costs associated with the litigation settlement.

      The accounting policies of the segments are the same as those described in
      the summary of significant accounting policies. Revenues are attributable
      to geographic areas based on the location of the customers.


                                      -15-
<PAGE>

Selected financial data of these segments is as follows:

<TABLE>
<CAPTION>
                                                             Medical         Power
                                                             Imaging       Conversion
                                                             Systems          Group           Other          Total
                                                            --------        --------        --------       ---------
<S>                                                         <C>             <C>             <C>            <C>
      Net sales to external customers                       $ 46,528        $ 46,427        $     --       $  92,955
                                                            --------        --------        --------       ---------
      Cost of sales                                           37,234          36,857              --          74,091
                                                            --------        --------        --------       ---------

      Gross Margin                                             9,294           9,570              --          18,864

      Selling, general and administrative                      7,334           9,919              --          17,253
      Research and development                                 1,552           1,324              --           2,876
      Litigation settlement costs                                 --              --           9,759           9,759
      Facilities reorganization costs                             52             770              --             822
                                                            --------        --------        --------       ---------

                  Total operating expenses                     8,938          12,013           9,759          30,710
                                                            --------        --------        --------       ---------

      Operating income / (loss)                             $    356        $ (2,443)       $ (9,759)        (11,846)
                                                            ========        ========        ========       =========
      Interest  expense                                                                                        1,308
      Other income                                                                                               (74)
                                                                                                           ---------

      Loss before income tax benefit
        and minority interest                                                                              $(13,080)
                                                                                                           =========

      Depreciation                                          $    267        $  1,905              --       $   2,172
      Amortization                                               369             414              --             783

      Segment  Assets                                         30,603          32,786          18,269          81,658

      Expenditures for segment assets, net                       485             192              --             677
</TABLE>

      Intersegment sales were $33 for fiscal year ended July 28, 2001. Segment
      assets of $19,502 are located in Italy.

      Major Customers and Export Sales - During fiscal year ended July 28, 2001,
      no one customer accounted for more than 10% of the Company's consolidated
      net sales.

      Export sales were 30% of the Company's consolidated net sales in fiscal
      year ended July 28, 2001.

Net sales by geographic areas were:

United States                       $65,381        70%
Europe                               17,900        19%
Other North America                   3,647         4%
Far East                              2,765         3%
South America                         1,444         2%
Africa                                  951         1%
Middle East                             749         1%
Australia                               118         0%
                                    -------       ---
                                    $92,955       100%
                                    =======       ===


                                      -16-
<PAGE>

8.    SHAREHOLDERS' EQUITY

      Obligation to issue Shares and Warrants - The Company's Obligation to
      issue shares and warrants included in the shareholder's equity section,
      reflect the terms of the settlement reached in July 2001 in connection
      with a class action complaint brought by shareholders against the Company
      and other parties. As a result of the settlement, the Company is obligated
      to issue subordinated notes, shares and warrants to certain shareholders.
      The equity portion of the settlement totaled $4,410 and appears as
      "Obligation to issue Shares and Warrants" in the consolidated balance
      sheet and consolidated statement of shareholders' equity. Common shares
      were valued at $3,750 and warrants at $660. These shares and warrants were
      revalued at January 29, 2002 when final court approval was obtained, with
      a resulting increase in value of $7,000.

      Stock Buy-Back Program - In September 2000, the Board of Directors
      approved an additional repurchase of $3,000 of the Company's common stock
      bringing the total authorized to $7,500. Prior year approvals were made in
      April of 1997, 1998 and 1999 for $1,500 each. During the fiscal years
      ended July 28, 2001 and July 29, 2000, the Company repurchased a total of
      489,806 and 478,306 shares for $4,502 and $4,389, respectively. Of the
      total purchases, 189,200 of these shares were repurchased from the
      Company's former Chief Executive Officer for $1,851.

      Nonqualified Stock Option Plan and Warrants - The Company has a
      nonqualified stock option plan under which a total of 3,874,293 options to
      purchase common stock may be granted. Substantially, all of the options
      granted under this Plan provide for graded vesting and vest at a rate of
      25% per year, beginning one year from the date of grant, expiring fifteen
      years from the date they are granted. The option price per share is
      determined by the Board of Directors, but cannot be less than 85 percent
      of fair market value of a share at the date of grant. All options to date
      have been granted at the fair market value of the Company's stock at the
      date of grant. No options can be granted under this plan subsequent to
      December 31, 2009.

      As of July 28, 2001, the Company granted a total of 936,870 options during
      the fiscal year 2001, 50,000 in July and September at prices ranging from
      $8.63 to $9.13, 81,870 in December at $1.36 and 805,000 granted in April
      2001 at $1.00 per share. Newly appointed Corporate Officers received
      310,000 options while various employees, directors and consultants
      received 545,000. No options were exercised during the fiscal year ended
      July 28, 2001.

      In December 2000, the Company's Board of Directors approved the recession
      of 81,870 shares previously exercised by one of its members. The
      transaction has been reflected in the consolidated statement of changes in
      shareholder equity. Shares originally used to exercise the option recorded
      as treasury have also been adjusted and reflected in the consolidated
      statement of changes in shareholder equity. The Company recorded an
      expense in connection with the recession and deferred tax assets were
      adjusted accordingly for the previous tax benefit recognized.

      In December 2000, the Board of Directors approved an extension of time to
      exercise for all stock option holders. The extension covers all options
      which would have expired during the period from the stock de-listing date
      up to the date that the shares finally become re-listed. This extension
      will allow stock option holders a period of six months from the date of
      re-listing to exercise vested options which may have expired without the
      extension.

      As of July 29, 2000, the Company has granted options to purchase 1,051,974
      shares to the former Chief Executive Officer and 372,149 shares to former
      officers. At July 29, 2000, the former Chief Executive Officer had 463,007
      outstanding options, and former officers who left during fiscal 2001 had
      141,888 outstanding options all of which were subsequently cancelled or
      expired. One retired former officer was granted 178,667 options, which are
      still outstanding. In addition, one former officer was


                                      -17-
<PAGE>

      granted 77,790 shares and 1,651,920 shares were granted to various
      employees and consultants. Former officers and directors' exercised
      230,251 options and various employees and consultants exercised 43,193
      options during the fiscal year ended July 29, 2000.

Option Activity

The following stock option information is as of:

                                                   July 28, 2001   July 29, 2000

      Granted and outstanding, beginning of year    1,503,683
      Granted                                         936,870
      Exercised                                            --
      Cancelled and forfeited                        (615,498)
                                                    ----------

      Outstanding at end of year                    1,825,055        1,503,683
                                                   ==========       ==========

      Exercisable at end of year                    1,064,935        1,001,673
                                                   ==========       ==========

      As of July 28, 2001 the distribution of stock option exercise prices is as
      follows:

<TABLE>
<CAPTION>
                                           Options Outstanding                         Options Exercisable
                                   -------------------------------------      ---------------------------------
                                      Number of       Weighted Remaining        Shares       Weighted Remaining
      Exercise Price Range         Options Shares        Exercise Price       Exercisable      Exercise Price

<S>                                   <C>                   <C>                  <C>                <C>
      $1.00 - $2.49                   1,041,074             $1.15                474,822            $1.33
      $4.28 - $6.18                     315,674              5.10                315,675             5.10
      $7.00 - $8.25                     338,598              7.62                196,479             7.65
      $8.56 - $10.00                    129,709              9.36                 77,959             9.44
                                     ----------             -----              ---------            -----

                                      1,825,055             $3.62              1,064,935            $4.21
                                      =========             =====              =========            =====
</TABLE>

      At July 28, 2001 and July 29, 2000 there were outstanding warrants of
      65,000 and 127,813 respectively. Of these warrants 52,813 had been granted
      to the Company's lending bank and 10,000 had been granted to a consultant
      which expired in fiscal 2001 and 50,000 were granted to the former
      majority shareholder of Villa Sistemi Medicali S.p.A ("Villa") in
      connection with the acquisition of Villa and 15,000 were granted to
      consultants for services rendered.

      As of July 28, 2001 the distribution of warrants is as follows:

      Exercise Price     Number of Warrants           Expiration Date

         $7.94                50,000                  December 2005
         $7.69                15,000                  October 2004
                              ------

                              65,000
                              ------

      The fair value of options and warrants granted to non-employees was $150
      and $271 at July 28, 2001 and July 29, 2000, respectively.


                                      -18-
<PAGE>

      The Company follows the provisions of APB 25 to account for its stock
      option plan. The fair value of the options were determined on the date of
      grant using a Black-Scholes option pricing model. These options were
      valued based on the following assumptions: an estimated life of seven
      years, volatility of 90%, risk free interest rate 6.2%, and no dividend
      yield.

      Had compensation cost for the Company's stock option plans been determined
      based on the fair value at the grant dates for awards under those plans
      consistent with the methods recommended by SFAS No. 123, the Company's net
      loss and net loss per share for the fiscal year ended July 28, 2001, would
      have been stated at the pro forma amounts indicated below:

                                                          For fiscal year ended
                                                               July 28, 2001

      Net loss:
        As reported                                             $  (8,521)
        Pro forma                                               $  (9,127)

      Basic and diluted loss per share (as reported)            $   (1.09)
      Basic and diluted loss per share (pro forma)              $   (1.16)
      Weighted average number of shares outstanding              7,847,515
                                                                 ---------

      Accumulated Other Comprehensive Loss - Accumulated other comprehensive
      loss is comprised of a foreign currency translation loss of $391 at July
      28, 2001. At July 29, 2000 accumulated other comprehensive loss was
      comprised of a foreign currency translation loss of $167 and an
      accumulated unfunded obligation for pension trust of $22, net of the
      income tax benefit of $14.

9.    LOSS PER SHARE

                                                         Year Ended July 28,2000

Numerator:
                Net loss                                      $    (8,521)
                                                              ===========

      Denominator:
            Denominator for basic loss per share:
                    Weighted average shares outstanding         7,847,515
                Effect of dilutive securities                          --
                                                              -----------

                Denominator for diluted loss per share          7,847,515
                                                              ===========

      Loss per basic and diluted common share                 $     (1.09)
                                                              -----------

      Common shares outstanding for the year ended July 28, 2001 were reduced by
      628,566 shares of treasury stock.

      The computation of diluted shares outstanding does not include 1,825,055
      employee stock options and 65,000 warrants to purchase company common
      stock, since the effect of their assumed conversion would be antidilutive.


                                      -19-
<PAGE>

10.   INCOME TAXES

      Provision (benefit) for income taxes consists of the following:

                                                  Fiscal Year Ended July 28,2001

          Current Tax Expense:
          Foreign                                           $   269

      Deferred (Benefit):
          Federal                                            (4,325)
          State and local                                      (798)
          Foreign                                               (84)
                                                            -------

      Net Benefit                                           $(4,938)
                                                            =======

      The following is a reconciliation of the statutory Federal and effective
      income tax rates:

                                                            Fiscal Year Ended
                                                              July 28,2001

      Statutory Federal income tax rate (Benefit)                (34.0)%
      State tax (Benefit), less Federal tax effect                (4.0)%
      Foreign                                                      1.4%
      Other                                                       (1.2)%
                                                                  ----

      Effective tax benefit rate                                 (37.8)%
                                                                  ====

      Deferred income tax assets (liabilities) are comprised of the following:

                                                July 28, 2001    July 29, 2000

      Deferred income tax assets:
        Federal net operating loss carryforward     $   6,129         $  3,192
        Foreign net operating loss carryforward         1,774            3,944
        Litigation settlement costs                     2,229               --
        State tax credits and operating
          loss carryforward                             2,235            1,682
        Federal R&D tax credits                           604              604
        Reserve for inventory obsolescence              1,902            2,127
        Allowances and reserves not
          currently deductible                            735            1,494
        Amortization                                      454              454
        Accumulated comprehensive loss                     --               14
        Defined benefit pension                            57              (98)
                                                     --------         --------

          Gross deferred income tax assets             16,119           13,413
                                                     --------         --------

      Less valuation allowance                           (955)          (3,589)
                                                     --------         --------

                    Deferred income tax assets         15,164            9,824
                                                     --------         --------


                                      -20-
<PAGE>

                                                July 28, 2001    July 29, 2000

      Deferred income tax liabilities:
        Federal effect of state tax credits              (336)            (336)
        Depreciation                                     (355)            (355)
        Difference in basis of fixed assets                --              (59)
        Inventory                                         (34)             (34)
                                                    ---------         --------

        Gross deferred income tax liabilities            (725)            (784)

      Net deferred income tax assets                $  14,439         $  9,040
                                                    =========         ========

      Deferred income tax assets are recorded in the consolidated balance sheets
      as follows:

                                                 July 28, 2001    July 29, 2000

      Deferred tax assets - current                   $ 4,643           $ 3,586
      Deferred tax assets - non-current                 9,796             5,454
                                                      -------           -------

                                                      $14,439           $ 9,040
                                                      =======           =======

      Valuation allowance has been recorded for New York State tax credits and
      for foreign subsidiary net operating loss carryforward not expected to be
      realized before expiring. The portion of the valuation allowance
      attributable to the foreign subsidiary net operating loss carryforward
      decreased from $2,994 at 2000 to $297 at 2001.

      At July 28, 2001, for income tax purposes, the Company had Federal net
      operating loss carryforwards of approximately $18,026, State net operating
      loss carryforwards of $15,644 and research and development tax credit
      carryforwards of $604, which will expire in 2018 through 2021.

      For foreign tax purposes, the Company's subsidiary has net operating loss
      carryforwards of approximately $1,449, which will expire in 2002 through
      2004.

      Refundable income taxes of $3,829 and $3,341 at July 28, 2001 and July 29,
      2000, respectively, are comprised of refunds that will be requested from
      federal and state government agencies, by the filing of amended tax
      returns for the fiscal years 1997, 1998, 1999, and 2000 as well as refunds
      that will be requested with the filing of the July 28, 2001 corporate tax
      returns.

11.   COMMITMENTS AND CONTINGENCIES

      a.    Security and Exchange Commission ("SEC") Investigation - On December
            11, 2000, the Division of Enforcement of the SEC issued a formal
            Order Directing Private Investigation, designating SEC officers to
            take testimony and requiring the production of certain documents, in
            connection with matters giving rise to the need to restate the
            Company's previously issued financial statements. The Company has
            provided numerous documents to and continues to cooperate fully with
            the SEC staff. In connection with the ongoing SEC investigation,
            there is a possibility that the SEC will assess some monetary fine
            against the Company in connection with the accounting practices
            under review. The likelihood or the dollar amount of such a fine or
            penalty is unknown at this time. Management of the Company cannot
            predict the duration of such investigation or its potential outcome.


                                      -21-
<PAGE>

      b.    Class Action Litigation - A consolidated class action complaint
            against the Company, certain of its former officers and directors
            and its auditors has been filed in the United States District Court
            for the Southern District of New York. The complaint alleged
            violations of the federal securities laws and sought to recover
            damages on behalf of all purchasers of the Company's common stock
            during the class period November 6, 1997 to November 6, 2000. The
            complaint sought rescission of the purchase of shares of the
            Company's Common Stock or alternatively, unspecified compensatory
            damages, along with costs and expenses including attorney's fees.

            On July 26, 2001, the Company and certain other defendants reached
            an agreement in principle to settle the complaint. Under the terms
            of the settlement, the Company will provide the plaintiffs: (i) a
            $2,000 subordinated note due five years from the date of issuance
            with interest accrued at 6% per annum; (ii) 2.5 million shares of
            the Company's common stock; and, (iii) 1 million warrants to
            purchase the Company's Common Stock at $2 per share. The Warrants
            are callable by the Company at $0.25 per share if the Company stock
            trades at a price in excess of $4 for 10 days or more. This
            settlement was approved by the United States District Court for the
            Southern District of New York on January 29, 2002.

            Management of the Company believes the terms of the agreement in
            principle provided a reasonable basis to estimate the value of the
            Company's portion of the settlement as of July 28, 2001 and,
            accordingly, recorded a charge of $9,759 in fiscal year 2001. This
            amount was calculated using a discount factor of 12% to present
            value the subordinated note, the per share price of $1.50 that was
            the closing price of the Company's stock in the over the counter
            market on July 28, 2001, and an option pricing model to value the
            warrants. Also included in the charge are legal and other
            specialized fees incurred through July 2001 of $3,572 and an accrual
            of legal and related fees to be incurred in the future of $821.

            When the Court approved the class action settlement on January 29,
            2002, and opportunities for appeal expired on March 21, 2002, all
            uncertainty regarding the final value of the securities issued by
            the Company in the settlement had been eliminated. Therefore, in the
            Third Quarter of Fiscal Year 2002, the Company will recognize an
            additional charge related to the increase in the value of the common
            stock and warrants from July 28, 2001, to January 29, 2002. This
            additional charge will be approximately $7,000.

      c.    Department of Defense Investigation - On March 8, 2002, RFI
            Corporation, a subsidiary of the Company and part of the Power
            Conversion Group segment, was served with a subpoena by US Attorney
            Eastern District of New York. RFI supplies noise suppression filters
            for communications and defense applications. A portion of RFI's
            sales is to prime contractors to the US Government, and
            approximately 14% to 17% of RFI's sales over each of the last three
            years has been sales directly to the Department of Defense ("DoD"),
            Defense Supply Centers ("DSC") or to the US Armed Forces.

            The Company believes that the DoD has launched an investigation into
            RFI's quality control practices and record keeping. In addition, the
            DoD appears to be investigating other suppliers, some of whom may be
            distributors who sell many different components to the DoD,
            including some parts that may be manufactured by RFI.


                                      -22-
<PAGE>

            The Company is fully cooperating with this investigation, and has
            retained special counsel to represent the Company on this matter.
            Management of the Company cannot predict the duration of such
            investigation or its potential outcome.

      d.    ERISA Matters - During the year ended July 28, 2001, management of
            the Company concluded that violations of the Employee Retirement
            Income Security Act, ("ERISA") existed relating to a defined benefit
            Plan for which accrual of benefits had been frozen as of February 1,
            1986. The violations related to excess concentrations of the Common
            Stock of the Company in the Plan assets. In July 2001, management of
            the Company decided to terminate this Plan, and as a result in the
            fourth quarter of the year ended July 28, 2001, the Company recorded
            a charge of approximately $461 as the amount to fund this Plan to
            the termination value.

      e.    Employment Matters - The Company had an employment agreement with
            the former Chief Executive Officer through July 2005. The agreement
            provided a minimum base salary, deferred compensation and bonuses,
            as defined. The Company accrued deferred compensation at a rate of
            5% of pretax income with a minimum of $100 and a maximum of $125.
            The accumulated amount at July 28, 2001 and July 29, 2000 was $0 and
            $1,261, respectively.

                                                 July 28, 2001     July 29, 2000

      Deferred compensation liabilities:
         Former Chief Executive Officer                 $   --            $1,261
         Other officers                                    228               316
                                                        ------            ------

      Total deferred compensation liabilities           $  228            $1,577
                                                        ======            ======

      In the third quarter of fiscal 2001, the employment of the former Chief
      Executive Officer was terminated. In connection with the termination of
      the former Chief Executive Officer's employment, there is a possibility of
      the former Chief Executive Officer making certain claims under his
      employment agreement. The likelihood or the dollar amount of such a claim
      is unknown at this time. The Company believes that is has substantiated
      counterclaims that it could assert in any such action and, therefore,
      believes that its exposure to such a potential claim is not material to
      the Company's consolidating financial statements.

      The Company has entered into an employment agreement with its new Chief
      Executive Officer for the period July 2001 to April 2004. The terms of
      this agreement provide base salary, bonuses and deferred compensation. The
      new Chief Executive Officer may earn a bonus, which will be based on a
      percentage of his base salary, if certain performance goals established by
      the board are achieved. The new Chief Executive Officer's agreement
      provides that the new Chief Executive Officer will have the option to
      defer a portion of his bonus. In addition, the new Chief Executive
      Officer's employment agreement provides for certain payments in the event
      of death, disability or change in the control of the Company.

      In connection with the acquisition of a subsidiary, the Company has a
      deferred compensation agreement with the former president of the acquired
      company. Under the terms of the agreement, the Company will accrue
      deferred compensation at a base compensation rate of $20 per year,
      increased by 4% per year for 10 years. The accumulated amount of deferred
      compensation liability was $228 and $227 as of July 28, 2001 and July 29,
      2000, respectively. This liability is intended to be funded by management
      by part of the Company's marketable securities of $59 and $68 as of July
      28, 2001 and July 29, 2000, respectively, and cash of $23. Gains and
      losses, either recognized or unrealized, are for the benefit or detriment
      of this individual's deferred compensation.


                                      -23-
<PAGE>

      f.    Other Legal Matters - The Company is a defendant in several other
            legal actions arising from normal course of business. On the advice
            of counsel, management believes the Company has meritorious defenses
            to such actions and that the outcomes will not be material to the
            Company's consolidated results of operations or consolidated
            financial condition.

      g.    Non-compete Agreements - In connection with the acquisition of a
            subsidiary in 1992, the Company entered into a ten-year non-compete
            agreement with the former president of the acquired company. The
            Company has recorded a non-compete intangible, net of accumulated
            amortization of $44 and $91 as of July 28, 2001 and July 29, 2000,
            respectively. The net present value of future obligations relating
            to this obligation was $51 and $204 as of July 28, 2001, and July
            29, 2000, respectively. In connection with the acquisition of a
            subsidiary, in April 1998 the former president of the acquired
            company became a technical consultant to the Company. The Company
            and the technical consultant have agreed to a ten-year non-compete
            agreement at a minimum annual rate of $50 as adjusted for the
            greater of five percent per annum or increases to the cost of living
            index. Additionally, in June 1994, the Company entered into a
            ten-year non-compete agreement with the former Chairman of the
            acquired company with the same terms. As of July 28, 2001 and July
            29, 2000, the Company has recorded non-compete intangibles net of
            accumulated amortization of $323 and $402 in connection with these
            agreements, respectively. The amount recorded in the accompanying
            consolidated financial statements for the net present value of
            future obligations relating to these agreements was $547 and $635,
            classified as other long-term liabilities as of July 28, 2001 and
            July 29, 2000, respectively.

      h.    Lease Commitments - The Company leases facilities for its
            manufacturing operations with expiration dates ranging from July
            2002 through April 2004. In addition, the Company has various auto
            leases accounted for as operating leases. The future minimum annual
            lease commitments as of July 28, 2001 are as follows:

                        Fiscal Year                          Amount

                         2002                                $1,296
                         2003                                   727
                         2004                                   433
                         2005                                   126
                         2006 and thereafter                     --
                                                             ------
                                                             $2,582
                                                             ------

      Rent expense for fiscal 2001 was $1,241

12.   RESTRUCTURING CHARGES

      In 2001, the Company's management decided to close its Dynarad
      manufacturing in Deer Park New York and recorded a restructuring charge of
      $770. This charge included a $349 write off of the carrying value of fixed
      assets, a $150 charge for impairment of goodwill, severance and
      outplacement cost related to the termination of 5 individuals for $10, and
      $261 of rent expense relating to the remaining commitment on the lease of
      the closed facility. In addition in 2001, the Company's management decided
      to terminate a lease for a small facility used by Del Medical Imaging, and
      recorded a restructuring charge of $52. At July 28, 2001, amounts due in
      connection with restructuring plan are $271 which are included in accrued
      expenses and are expected to be paid in fiscal 2002.

                                  * * * * * *