UNITED STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington, D.C.
20549
 
 FORM 10-Q
 
 (Mark
One)
 
 xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended November 1,
2008
  or
 
  ̈TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
transition period from 
to
 
 Commission File Number:
0-3319
 
 DEL
      GLOBAL TECHNOLOGIES CORP.(Exact
      name of registrant as specified in its
charter)
 
 New
      York
                  13-1784308(State
      or other jurisdiction of incorporation or organization)
                  (I.R.S.
      Employer Identification
No.)
 
 11550
      West King Street, Franklin Park, IL
              60131(Address
      of principal executive offices)
              (Zip
      Code)
 
 847-288-7000(Registrant’s
      telephone number, including area code)(Former
      name, former address and former fiscal year, if changed since last
      report)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.     Yes x     No
 ̈
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
(Check one):
  Large
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
                Smaller
      reporting company x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes o    No
x
  The
number of shares of Registrant’s common stock outstanding as of November 16,
2008 was 24,246,165.
  Table Of Contents


DELGLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
  Table
of Contents
  Page. No.PART I
                      FINANCIAL INFORMATIONITEM 1  FINANCIAL STATEMENTS
                      3Consolidated Statements of Operations for the Three Months
      ended November 1, 2008 and October 27, 2007
                      3Consolidated Balance Sheets - November 1, 2008 and August 2,
      2008
                      4-5Consolidated Statements of Cash Flows for the Three Months
      ended November 1, 2008 and October 27, 2007
                      6Notes to Consolidated Financial
    Statements
                      7-14Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                      15-20Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK
                      21Item 4.  CONTROLS AND
    PROCEDURES
                      21PART II -
                      OTHER INFORMATIONItem 1.  LEGAL PROCEEDINGS
                      21-23Item 1A.  RISK FACTORS
                      23Item 6.  EXHIBITS
                      23SIGNATURES
                      24SIGNATURESEX-31.1
      (EX-31.1):  CertificationEX-31.2
      (EX-31.2):  CertificationEX-32.1
      (EX-32.1):  CertificationEX-32.2
      (EX-32.2):  Certification
  2
 Table Of Contents
 
 
 PART
      I
                FINANCIAL
      INFORMATIONITEM
      1
                FINANCIAL
      STATEMENTS
  DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (DOLLARS
IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
 (UNAUDITED)
  Three
      Months EndedNovember
      1, 2008
                  
                  
                  October
      27, 2007NET
      SALES
                  
                  $
                  22,291
                  
                  
                  $
                  26,716COST
      OF SALES
                  
                  
                  16,984
                  
                  
                  
                  20,285GROSS
      MARGIN
                  
                  
                  5,307
                  
                  
                  
                  6,431Selling,
      general and administrative
                  
                  
                  5,043
                  
                  
                  
                  3,740Research
      and development
                  
                  
                  489
                  
                  
                  
                  481Total
      operating expenses
                  
                  
                  5,532
                  
                  
                  
                  4,221OPERATING
      INCOME (LOSS)
                  
                  
                  (225
                  )
                  
                  
                  2,210Interest
      expense, net of interest income of $25 and $53 in 2009 and 2008,
      respectively
                  
                  
                  (55
                  )
                  
                  
                  (70
                  )Other
      income (expense)
                  
                  
                  67
                  
                  
                  
                  (7
                  )INCOME(LOSS)
      BEFORE INCOME TAX PROVISION
                  
                  
                  (213
                  )
                  
                  
                  2,133INCOME
      TAX PROVISION
                  
                  
                  396
                  
                  
                  
                  1,026NET
      INCOME (LOSS)
                  
                  $
                  (609
                  )
                  
                  $
                  1,107NET
      INCOME (LOSS) PER BASIC SHARE
                  
                  $
                  (0.03
                  )
                  
                  $
                  0.05Weighted
      average shares outstanding
                  
                  
                  24,243,259
                  
                  
                  
                  24,161,407NET
      INCOME (LOSS) PER DILUTED SHARE
                  
                  $
                  (0.03
                  )
                  
                  $
                  0.04Weighted
      average shares outstanding
                  
                  
                  24,243,259
                  
                  
                  
                  24,722,392
 
 See
      notes to consolidated financial
statements.
  3
 Table Of Contents
  DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 (DOLLARS
IN THOUSANDS EXCEPT PAR VALUE)
 (UNAUDITED)
  ASSETS
  November
      1, 2008
                
                
                August
      2, 2008CURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                9,583
                
                
                $
                7,828Trade
      receivables (net of allowance for doubtful accounts of $1,230 and $1,400
      at November 1, 2008 and August 2, 2008, respectively)
                
                
                21,199
                
                
                
                25,218Inventories
      (net of allowance for excess and obsolete of $4,102 and $4,435 at November
      1, 2008 and August 2, 2008, respectively)
                
                
                17,602
                
                
                
                18,439Prepaid
      expenses and other current assets
                
                
                1,765
                
                
                
                2,085Total
      current assets
                
                
                50,149
                
                
                
                53,570NON-CURRENT
      ASSETS:Property
      plant and equipment, net
                
                
                6,703
                
                
                
                7,377Deferred
      income taxes
                
                
                660
                
                
                
                770Goodwill
                
                
                4,526
                
                
                
                4,526Other
      assets
                
                
                96
                
                
                
                110Total
      non-current assets
                
                
                11,985
                
                
                
                12,783TOTAL
      ASSETS
                
                $
                62,134
                
                
                $
                66,353
 
 See
      notes to consolidated financial
statements.
  4
 Table Of Contents
  DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (DOLLARS
IN THOUSANDS EXCEPT PAR VALUE)
 (UNAUDITED)
  LIABILITIES
AND SHAREHOLDERS’ EQUITY
  November
      1, 2008
                
                
                August
      2, 2008CURRENT
      LIABILITIES:Current
      portion of long-term debt
                
                $
                1,643
                
                
                $
                1,797Accounts
      payable – trade
                
                
                10,944
                
                
                
                12,191Accrued
      expenses
                
                
                9,328
                
                
                
                8,378Total
      current liabilities
                
                
                21,915
                
                
                
                22,366NON-CURRENT
      LIABILITIES:Long-term
      debt, less current portion
                
                
                3,592
                
                
                
                4,504Other
      long-term liabilities
                
                
                2,762
                
                
                
                3,320Total
      non-current liabilities
                
                
                6,354
                
                
                
                7,824Total
      liabilities
                
                
                28,269
                
                
                
                30,190COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS'
      EQUITY:Common
      stock, $.10 par value;Authorized
      50,000,000; issued-24,900,629 and 24,897,723 at November 1, 2008 and
      August 2, 2008, respectively
                
                
                2,490
                
                
                
                2,490Additional
      paid-in capital
                
                
                80,450
                
                
                
                80,398Treasury
      shares – 654,464 shares, at cost at November 1, 2008 and August 2, 2008,
      respectively
                
                
                (5,615
                )
                
                
                (5,615
                )Accumulated
      other comprehensive income
                
                
                2,512
                
                
                
                4,252Accumulated
      deficit
                
                
                (45,972
                )
                
                
                (45,362
                )Total
      shareholders' equity
                
                
                33,865
                
                
                
                36,163TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                
                $
                62,134
                
                
                $
                66,353
 
 See
      notes to consolidated financial
statements.
  5
 Table Of Contents
  DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (DOLLARS
IN THOUSANDS)
 (UNAUDITED)
  Three
      Months EndedNovember
      1, 2008
                  
                  
                  October
      27, 2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                  
                  $
                  (609
                  )
                  
                  $
                  1,107Adjustments
      to reconcile net income to net
                    cash
      provided by operating activities:
                    Depreciation
      and amortization
                  
                  
                  283
                  
                  
                  
                  227Deferred
      income tax provision
                  
                  
                  41
                  
                  
                  
                  11Stock
      based compensation expense
                  
                  
                  53
                  
                  
                  
                  172Changes
      in operating assets and liabilities:Trade
      receivables
                  
                  
                  2,401
                  
                  
                  
                  (803
                  )Inventories
                  
                  
                  (308
                  )
                  
                  
                  1,370Prepaid
      expenses and other current assets
                  
                  
                  216
                  
                  
                  
                  352Other
      assets
                  
                  
                  12
                  
                  
                  
                  32Accounts
      payable – trade
                  
                  
                  (543
                  )
                  
                  
                  (5,177
                  )Accrued
      expenses
                  
                  
                  1,589
                  
                  
                  
                  148Payment
      of accrued litigation settlement costs
                  
                  
                  (60
                  )
                  
                  
                  -Income
      taxes payable
                  
                  
                  -
                  
                  
                  
                  1,012Other
      long-term liabilities
                  
                  
                  (266
                  )
                  
                  
                  (107
                  )Net
      cash provided by (used in) operating activities
                  
                  
                  2,809
                  
                  
                  
                  (1,656
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Property
      plant and equipment purchases
                  
                  
                  (98
                  )
                  
                  
                  (163
                  )Net
      cash used in investing activities
                  
                  
                  (98
                  )
                  
                  
                  (163
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayment
      of long-term debt
                  
                  
                  (506
                  )
                  
                  
                  (345
                  )Proceeds
      from warrant exercises
                  
                  
                  -
                  
                  
                  
                  68Net
      cash used in financing activities
                  
                  
                  (506
                  )
                  
                  
                  (277
                  )EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                  
                  
                  (450
                  )
                  
                  
                  112CASH
      AND CASH EQUIVALENTS INCREASE (DECREASE) FOR THE PERIOD
                  
                  
                  1,755
                  
                  
                  
                  (1,984
                  )CASH
      AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
                  
                  
                  7,828
                  
                  
                  
                  7,860CASH
      AND CASH EQUIVALENTS, END OF THE PERIOD
                  
                  $
                  9,583
                  
                  
                  $
                  5,876SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid forInterest
                  
                  $
                  81
                  
                  
                  $
                  107Taxes
                  
                  
                  396
                  
                  
                  
                  -
 
 See
      notes to consolidated financial
statements.
  6
 Table Of Contents
  DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in thousands, except per share data)
 (Unaudited)
  BASIS
OF PRESENTATION
  The
accompanying unaudited consolidated financial statements of Del Global
Technologies Corp. and its subsidiaries (the “Company”) have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X.  Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements.  In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation of the results for the interim periods have been
included.  Results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the full
year.  These consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company’s annual report on Form 10-K filed with the Securities and Exchange
Commission (the “SEC”) for the fiscal year ended August 2,
2008.  Certain prior year’s amounts have been reclassified to conform
to the current period presentation.
  The
Company’s fiscal year-end is based on a 52/53-week cycle ending on the Saturday
nearest to July 31.  Results of the Company’s subsidiary, Villa
Sistemi Medicali S.p.A. (“Villa”), are consolidated into Del Global’s
consolidated financial statements based on a fiscal year that ends on June 30
and are reported on a one-month lag.
  REVENUE
RECOGNITION
  The
Company recognizes revenue upon shipment, provided there is persuasive evidence
of an arrangement, there are no uncertainties concerning acceptance, the sales
price is fixed, collection of the receivable is probable and only perfunctory
obligations related to the arrangement need to be completed.  The
Company maintains a sales return allowance, based upon historical patterns, to
cover estimated normal course of business returns, including defective or out of
specification product.  The Company’s products are covered primarily
by one year warranty plans and in some cases optional extended warranties for up
to five years are offered.  The Company establishes allowances for
warranties on an aggregate basis for specifically identified, as well as
anticipated, warranty claims based on contractual terms, product conditions and
actual warranty experience by product line.  The Company recognizes
service revenue when repairs or out of warranty repairs are
completed.  The Company has a Food & Drug Administration
obligation to continue to provide repair service for certain medical systems for
up to seven years past the warranty period.  These repairs are billed
to the customers at market rates.
  NEW
ACCOUNTING PRONOUNCEMENTS
  In March
2008, the Financial Accounting Standards Board (the “FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of SFAS No. 133.  The
Statement requires enhanced disclosures about an entity’s derivative and hedging
activities.  The Statement is effective for fiscal years and interim
periods beginning after November 15, 2008.  The Company is currently
evaluating the requirements of SFAS 161, but does not expect it to have a
material impact.
  In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). SFAS
160 requires identification and presentation of ownership interests in
subsidiaries held by parties other than the Company in the consolidated
financial statements within the equity section but separate from the equity
owned by Del Global.  SFAS 160 also requires that (1) the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of operations, (2) changes in ownership interest be accounted for
similarly, as equity transactions and (3) when a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary and the
gain or loss on the deconsolidation of the subsidiary be measured at fair value.
This statement is effective for the Company on August 2, 2009. The Company is
currently evaluating the requirements of SFAS 160 but does not expect it to have
a material impact.
  In
December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS
141R”).  SFAS 141R states that acquisition-related costs are to be
recognized separately from the acquisition and expensed as incurred with
restructuring costs being expensed in periods after the acquisition date. SFAS
141R also states that business combinations will result in all assets and
liabilities of the acquired business being recorded at their fair
values.  The Company is required to adopt SFAS No. 141R effective
August 2, 2009. The impact of the adoption of SFAS No. 141R will depend on the
nature and extent of business combinations occurring on or after the effective
date.
  7
 Table Of Contents
  In
September 2006, the FASB issued SFAS No 157, “Fair Value Measurements,” (“SFAS
157”) which defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about fair
value measurements.  SFAS No. 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by
providing a fair value hierarchy used to classify the source of the information.
In February 2008, the FASB issued FASB Staff Position No. 157-2, which
delays the effective date of SFAS No. 157 for nonfinancial assets and
liabilities, which are not measured at fair value on a recurring basis (at least
annually) until fiscal years beginning after November 15, 2008. This
statement is effective for the Company on August 2, 2009. The Company is
currently evaluating the requirements SFAS No. 157 for nonfinancial assets
and liabilities but do not expect it to have a material impact.
 
 In
February 2007, the FASB released SFAS No. 159, “Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”).  This statement
permits entities to choose to measure many financial instruments and certain
other items at fair value.   The Company is currently evaluating
the requirements SFAS No. 159, “Fair Value Option for Financial Assets and
Financial Liabilities”   but do not expect it to have a
material impact on the financial statements.
 
  INVENTORIES
  Inventories
are stated at the lower of cost (first-in, first-out) or
market.  Inventories and their effect on cost of sales are determined
by physical count for annual reporting purposes and are evaluated using
perpetual inventory records for interim reporting periods.  For
certain subsidiaries during interim periods, the Company estimates the amount of
labor and overhead costs related to finished goods inventories.  As of
November 1, 2008, finished goods represented approximately 27.2% of the gross
carrying value of our total gross inventory.  The Company believes the
estimation methodologies used to be appropriate and are consistently
applied.
  Inventories
at November 1, 2008 and August 2, 2008 is as follows:
  November
      1, 2008
                
                
                August
      2, 2008Raw
      materials and purchased parts
                
                $
                13,091
                
                
                $
                13,920Work-in-process
                
                
                2,703
                
                
                
                2,526Finished
      goods
                
                
                5,909
                
                
                
                6,42821,703
                
                
                
                22,874Less
      allowance for obsolete and excess inventories
                
                
                (4,101
                )
                
                
                (4,435
                )Total
      inventories
                
                $
                17,602
                
                
                $
                18,439
 
 PRODUCT
WARRANTIES
  The
Company’s products are covered primarily by one-year warranty plans and in some
cases optional extended contracts may be offered covering products for periods
up to five years, depending upon the product and contractual terms of
sale.  The Company establishes allowances for warranties on an
aggregate basis for specifically identified, as well as anticipated, warranty
claims based on contractual terms, product conditions and actual warranty
experience by product line.
  The
activity in the warranty reserve accounts in the first quarters of fiscal 2009
and 2008 is as follows:
  Three
      Months EndedNovember
      1,
                                2008
                            
                            
                            October
      27,
                                2007Balance
      at beginning of period
                            
                            $
                            1,077
                            
                            
                            $
                            1,065Provision
      for anticipated warranty claims
                            
                            
                            69
                            
                            
                            
                            159Costs
      incurred related to warranty claims
                            
                            
                            (157
                            )
                            
                            
                            (104
                            )Effect
      of foreign currency fluctuation
                            
                            
                            (87
                            )
                            
                            
                            48Balance
      at end of period
                            
                            $
                            902
                            
                            
                            $
                            1,168
 
 The
liability related to warranties is included in accrued expenses on the
accompanying Consolidated Balance Sheets.
  8
 Table Of Contents
  INCOME
TAX EXPENSE
  The
Company’s foreign subsidiary operates in Italy.  In fiscal 2008, Italy
enacted legislation that reduced tax rates effective for the Company’s fiscal
year 2009.  The foreign subsidiary’s net deferred income tax asset at
November 1, 2008 reflects the impact of the income tax rate
reduction.
  COMPREHENSIVE
INCOME (LOSS)
  Comprehensive
income for the Company includes foreign currency translation adjustments and net
income reported in the Company’s Consolidated Statements of
Operations.
  Comprehensive
income for the fiscal 2009 and 2008 periods presented was as
follows:
  Three
      Months EndedNovember
      1,
                      2008
                  
                  
                  October
      27,
                      2007Net
      income (loss)
                  
                  $
                  (609
                  )
                  
                  $
                  1,107Foreign
      currency translation adjustments
                  
                  
                  (1,740
                  )
                  
                  
                  634Comprehensive
      income (loss)
                  
                  $
                  (2,349
                  )
                  
                  $
                  1,741
 
 INCOME
(LOSS) PER SHARE
  Common
shares outstanding exclude 654,464 and 622,770 shares of treasury stock for the
periods ended November 1, 2008 and October 27, 2007,
respectively.  The computation of dilutive securities includes the
assumed conversion of warrants and employee stock options to purchase Company
stock if such conversion is dilutive.
  Three
      Months EndedNovember
      1, 2008
                  
                  
                  October
      27, 2007Numerator:Net
      income (loss)
                  
                  $
                  (609
                  )
                  
                  $
                  1,107Denominator:
      (shares in thousands)Weighted
      average number of common shares outstanding used for basic income per
      share
                  
                  
                  24,243
                  
                  
                  
                  24,161Effect
      of dilutive securities
                  
                  
                  -
                  
                  
                  
                  561Denominator
      for diluted income per share
                  
                  
                  24,243
                  
                  
                  
                  24,722Income
      (loss) per common share:Basic
                  
                  $
                  (0.03
                  )
                  
                  $
                  0.05Diluted
                  
                  $
                  (0.03
                  )
                  
                  $
                  0.04
 
 Antidilutive
securities excluded from above computations:
  Three
      Months EndedNovember
      1, 2008
                  
                  
                  October
      27, 2007Employee
      stock options
                  
                  
                  1,849
                  
                  
                  
                  1,185Warrants
                  
                  
                  513
                  
                  
                  
                  --
 
 SHORT-TERM
CREDIT FACILITIES AND LONG-TERM DEBT
  The
Company did not have any outstanding borrowings under its short-term credit
facilities at November 1, 2008 or August 2, 2008.
  9
 Table Of Contents
  Long term
debt at November 1, 2008 and August 2, 2008 is summarized as
follows:
  November
      1, 2008
                  
                  
                  August
      2, 2008Foreign
      capital lease obligations
                  
                  $
                  2,287
                  
                  
                  $
                  2,639Foreign
      credit facilities
                  
                  
                  2,239
                  
                  
                  
                  2,703Foreign
      Italian government loans
                  
                  
                  709
                  
                  
                  
                  959Total
      long term debt
                  
                  
                  5,235
                  
                  
                  
                  6,301Less
      current portion of long-term bank debt
                  
                  
                  (1,643
                  )
                  
                  
                  (1,797
                  )Long
      term debt, less current portion
                  
                  $
                  3,592
                  
                  
                  $
                  4,504
 
 On August
1, 2005, the Company entered into a three-year revolving credit and term loan
facility with North Fork Business Capital (the “North Fork Facility”) and repaid
the prior facility.  In March 2007, the Company used a portion of the
proceeds from the Rights Offering described below to pay all outstanding
balances under this facility as well as $2,505 of subordinated notes then
outstanding and $146 in related interest.
  On June
1, 2007, the North Fork Facility was amended and restated.  As
restated, the North Fork Facility provides for a $7,500 formula based revolving
credit facility based on the Company’s eligible accounts receivable and
inventory as defined in the credit agreement and a capital expenditure loan
facility up to $1,500.  Interest on the revolving credit and capital
expenditure borrowings is payable at prime plus 0.5% or alternatively at a LIBOR
rate plus 2.5%.  Other changes to the terms and conditions of the
original loan agreement include an extension through May 24, 2010, the
modification of covenants, removal of the Villa stock as loan collateral and the
removal of daily collateral reporting which was part of the previous asset-based
facility requirements.
  As of
November 1, 2008 and August 2, 2008, no amounts were outstanding and the Company
had approximately $6,400 and $9,000 of availability respectively under the North
Fork Facility, of which North Fork has reserved $1,000 against possible
litigation settlements.
  The North
Fork Facility is subject to commitment fees of 0.5% per annum on the
daily-unused portion of the facility, payable monthly.  The Company
granted a security interest to the lender on its U.S. credit facility in
substantially all of its accounts receivable, inventory, property, plant and
equipment, other assets and intellectual property in the U.S.
  On
November 26, 2008 the Company requested and was granted consent by Capital One
Leverage Finance Corp., who acquired Northfork Business Capital during fiscal
year 2008, to repurchase up to 2,424,616 shares, or up to $3.0 million
(approximately 10%), of Del Global’s outstanding shares of common stock, par
value $0.10, from its shareholders provided none of the funds used to fund the
proposed repurchase are proceeds of loans and that no less than $2.0 million of
the funds used to repurchase said shares are from proceeds of cash dividends
paid by Villa.  Terms of the common stock repurchase program are
detailed below.
 
 In
addition, on November 26, 2008 the Company requested and was granted consent by
Capital One Leverage Finance Corp to relocate the chief executive office and
principal place of business within the Chicago, Illinois area.
 
  There are
certain covenants, including tangible net worth that the Company must meet. As
of November 1, 2008 and August 2, 2008, the Company was in compliance with all
covenants under the North Fork Facility.
  The
Company’s Villa subsidiary maintains short term credit facilities which are
renewed annually with Italian banks.  Currently, these facilities are
not being utilized and the balance due at November 1, 2008 is
$0.  Interest rates on these facilities are variable and currently
range from 3.7 – 14.25%.
  In
October 2006, Villa entered into a 1.0 million Euro loan for financing of
R&D projects, with an option for an additional 1 million Euro upon
completion of 50% of the projects.  In April 2008, the Company
declined the option for additional financing and demonstrated successful
completion of the project, triggering a more favorable interest
rate.  Interest, previously payable at Euribor 3 months plus 1.3
points, was reduced in the first fiscal quarter of 2009 to Euribor plus 1.04
points, currently 6.004%.  The note is repayable over a 7
year term. Repayment began in September 2008.  The note contains
a financial covenant which provides that the net equity of Villa cannot fall
below 5.0 million Euros.  This covenant could limit Villa’s ability to
pay dividends to the U.S. parent company in the event future losses, future
dividends or other events should cause Villa’s equity to fall below the defined
level.
  10
 Table Of Contents
  In
December 2006, Villa entered into a 1.0 million Euro loan with interest payable
at Euribor 3 months plus 0.95 points, currently 6.227%.  The loan is
repayable in 4 years.
  Villa is
also a party to two Italian government long-term loans with a fixed interest
rate of 3.425% with principal payable annually through maturity in February and
September 2010.  At November 1, 2008, total principal due is 0.7
million Euro.  Villa’s manufacturing facility is subject to a capital
lease obligation which matures in 2011 with an option to
purchase.  Villa is in compliance with all related financial covenants
under these short and long-term financings.
  SEGMENT
INFORMATION
  The
Company has three reportable segments: Medical Systems Group, Power Conversion
Group and Other.  The “Other” segment includes unallocated corporate
costs.  Interim segment information is as follows:
  For
      three months ended
                    November
      1, 2008
                
                Medical
      Systems Group
                
                
                Power
      Conversion Group
                
                
                Other
                
                
                TotalNet
      Sales to External Customers
                
                $
                19,558
                
                
                $
                2,733
                
                
                
                -
                
                
                $
                22,291Cost
      of sales
                
                
                15,239
                
                
                
                1,745
                
                
                
                -
                
                
                
                16,984Gross
      margin
                
                
                4,319
                
                
                
                988
                
                
                
                
                
                
                
                5,307Operating
      expenses
                
                
                4,654
                
                
                
                613
                
                
                
                265
                
                
                
                5,532Operating
      income (loss)
                
                $
                (335
                )
                
                $
                375
                
                
                $
                (265
                )
                
                $
                (225
                )
  For
      three months ended
                      October
      27, 2007
                  
                  Medical
      Systems Group
                  
                  
                  Power
      Conversion Group
                  
                  
                  Other
                  
                  
                  TotalNet
      Sales to External Customers
                  
                  $
                  24,084
                  
                  
                  $
                  2,632
                  
                  
                  $
                  -
                  
                  
                  $
                  26,716Cost
      of sales
                  
                  
                  18,616
                  
                  
                  
                  1,669
                  
                  
                  
                  -
                  
                  
                  
                  20,285Gross
      margin
                  
                  
                  5,468
                  
                  
                  
                  963
                  
                  
                  
                  -
                  
                  
                  
                  6,431Operating
      expenses
                  
                  
                  3,230
                  
                  
                  
                  587
                  
                  
                  
                  404
                  
                  
                  
                  4,221Operating
      income (loss)
                  
                  $
                  2,238
                  
                  
                  $
                  376
                  
                  
                  $
                  (404
                  )
                  
                  $
                  2,210
 
  
  STOCK
OPTION PLAN AND WARRANTS
  There
were no stock options granted during the first quarter of fiscal
2009.
  During
the first quarter of fiscal year 2008, the Company granted options to purchase
212,500 common shares under the 2007 Incentive Stock Plan at a weighted average
exercise price of $2.72 per share.  The options under these grants
vest 25% immediately and 25% per year over the next three years.  The
aggregate fair value of these options was $556.  The fair values of
the grants awarded were determined using the following assumptions in the
Black-Scholes model: an estimated life of seven years, volatility of
approximately 64 to 72%, risk free interest rate of 3.6% to 4.20% and the
assumption that no dividends will be paid.
  In the
first quarter of fiscal 2009 and 2008, the Company recorded $52 and $172,
respectively, of compensation expense related to stock options.  There
were no exercises of stock options during the first quarter of fiscal 2009 or
2008.
  As of
November 1, 2008 and October 27, 2007, 512,500 and 527,563 warrants to purchase
common stock were outstanding, respectively.  There were no warrant
exercises during the first quarters of fiscal 2009 or 2008.
  11
 Table Of Contents
  CONTINGENCIES
  EMPLOYMENT
MATTERS - The Company had an employment agreement with Samuel Park, a previous
Chief Executive Officer (“CEO”), for the period May 1, 2001 to April 30,
2004.  The employment agreement provided for certain payments in the
event of a change in the control of the Company.  On October 10, 2003,
the Company announced the appointment of Walter F. Schneider as President and
CEO to replace Mr. Park, effective as of such date.  As a result, the
Company recorded a charge of $0.2 million during the first quarter of fiscal
2004 to accrue the balance remaining under Mr. Park’s employment
agreement.
  The
Company’s employment agreement with Mr. Park provided for payments upon certain
changes in control.  The Company’s Board of Directors elected at the
Company’s Annual Meeting of Shareholders held on May 29, 2003, had reviewed the
“change of control” provisions regarding payments totaling up to approximately
$1.8 million under the employment agreement between the Company and Mr.
Park.  As a result of this review and based upon, among other things,
the advice of special counsel, the Company’s Board of Directors has determined
that no obligation to pay these amounts has been triggered.  Prior to
his departure from the Company on October 10, 2003, Mr. Park orally informed the
Company that, after reviewing the matter with his counsel, he believed that the
obligation to pay these amounts has been triggered.  On October 27,
2003, the Company received a letter from Mr. Park’s counsel demanding payment of
certain sums and other consideration pursuant to the Company’s employment
agreement with Mr. Park, including these change of control
payments.  On November 17, 2003, the Company filed a complaint in the
United States District Court, Southern District of New York, against Mr. Park
seeking a declaratory judgment that no change in control payment was or is due
to Mr. Park, and that an amendment to the employment contract with Mr. Park
regarding advancement and reimbursement of legal fees is invalid and
unenforceable.  Mr. Park answered the complaint and asserted
counterclaims seeking payment from the Company based on his position that a
“change in control” occurred in June 2003.  Mr. Park is also seeking
other consideration he believes he is owed under his employment
agreement.  The Company filed a reply to Mr. Park’s counterclaims
denying that he is entitled to any of these payments.  Discovery in
this matter was conducted and completed.  Following discovery, the
Company and Mr. Park filed motions for summary judgment on the issues related to
the change in control and the amendment to the employment agreement, which
motions were  fully submitted to the court for
consideration.
  By
memorandum decision and order dated December 15, 2008, the court denied the
Company’s motion for summary judgment, and granted Mr. Park’s motion for partial
summary judgment (a) on his first counterclaim seeking a declaration that he is
entitled to a change in control payment from the Company and an order that such
payment be made to him together with interest and (b) on his third counterclaim
for a declaration that he is entitled to recover his legal fees and expenses
reasonably incurred by him in, as he alleges, enforcing the terms of his
employment agreement with the Company and an order directing payment of such
fees.  The court’s decision and order granted summary judgment on Mr.
Park’s third counterclaim to the extent of concluding that the amendment to Mr.
Park’s employment agreement, providing for the Company to pay his legal fees
reasonably incurred in his enforcement of the terms of the employment agreement
was valid.  The Company intends to defend vigorously against Mr.
Park’s claims, including seeking the reversal of the court’s decision and
order.
  If Mr.
Park ultimately prevails on his claims and the payments he seeks are required to
be paid in a lump sum, these payments may have a material adverse effect on the
Company’s liquidity.  The Company has not recorded an accrual for any
potential settlements of this claim.
  On May
24, 2007, the Company’s Power Conversion subsidiary, RFI Corporation (“RFI”),
was served with a subpoena to testify before a grand jury of the United States
District Court of New York and to provide items and records from its Bay Shore
NY offices in connection with U.S. Department of Defense contracts.  A
search warrant from the United States District Court, Eastern District
of New York was issued and executed with respect to such
offices.  The Company believes that it is in full compliance with the
quality standards that its customers require and is fully cooperating with
investigators to assist them with their review.  RFI continues to ship
products to the U.S. Government, as well as to its commercial
customers.
  On June
28, 2002, Jeffrey N. Moeller, the former Director of Quality Assurance and
Regulatory Affairs of Del Medical Imaging Corp. ("Del Medical”), commenced an
action in the Circuit Court of Cook County, Illinois, against the Company, Del
Medical and Walter Schneider, the former President of Del Medical.  In
the most current iteration of his complaint, the third amended complaint, Mr.
Moeller alleges four claims against the defendants in the action: (1)
retaliatory discharge from employment with Del Medical, allegedly in response to
Mr. Moeller’s complaints to officers of Del Medical about purported prebilling
and his stopping shipment of a product that allegedly did not meet
regulatory standards, (2) defamation, (3) intentional interference with his
employment relationship with Del Medical and prospective employers, and (4) to
hold the Company liable for any misconduct of Del Medical under a theory of
piercing the corporate veil.  In their answer to the third amended
complaint, the defendants denied the substantive allegations of each of these
claims and denied that they have any liability to Mr. Moeller.  By
order dated September 15, 2006, the Court denied in part and granted in part
defendants’ motion requesting summary judgment dismissing the third amended
complaint.  The court granted the motion only to the extent of
dismissing that part of Mr. Moeller’s claim of interference with his employment
relationship with Del Medical and his relationship with prospective
employers.
  In fiscal
2007, the Company recorded an accrual of $0.1 million relating to potential
liability in the settlement of these claims.  The parties appeared for
mediation in January 2007 but the mediation did not result in a disposition of
the action.  A trial was held in April 2008 and on April 17, 2008, the
jury returned a verdict in favor of Mr. Moeller for $1.8 million for lost
earnings, back pay, front pay and benefits on the retaliatory discharge claim,
and $0.2 million for emotional distress/reputation damages and $0.2 million in
punitive damages on the defamation claim.  On May 19, 2008, counsel
for the defendants filed their motion for judgment in their favor
notwithstanding the jury verdict, or, alternatively, for a new trial, on those
claims on which the jury found the respective defendants liable.  By
order dated August 15, 2008, the Court denied that motion.
  12
 Table Of Contents
  On August
25, 2008, the Company and the other defendants filed their notice of appeal by
which they appeal to the Appellate Court of Illinois, First District, among
other things, the judgment entered against the Company and the other defendants
on the jury verdict.  On September 12, 2008, the Company and the other
defendants filed an amended notice of appeal intending to pursue an appeal
seeking a reversal of the judgment and to have a judgment entered in favor of
the Company and the other defendants or to have a new trial.  In lieu
of a bond, the Company filed an irrevocable standby letter of credit in the
amount of $2.6 million by which Mr. Moeller can collect the amount of judgment
entered by the trial court in the event the appellate court affirms that
judgment.
  On
December 10, 2008, the parties agreed to the principal terms of a settlement of
this matter for payments by the Company to Mr. Moeller and his counsel, totaling
$1.6 million, and are in the process of negotiating a definitive settlement
agreement.  In the first quarter of fiscal 2009, the Company recorded
an additional reserve of $1.2 million relating to settlement of this
matter.
 
  On April
28, 2008, George Apergis, the former General Manager of RFI, filed a charge with
the EEOC alleging that RFI discriminated against him by terminating his
employment with RFI on December 18, 2007. George Apergis alleged three claims
against RFI: (1) violation of Title VII of the Civil Rights Act; (2) violation
of the Age Discrimination in Employment Act and (3) retaliation.  RFI
responded to the EEOC charge with a position statement filed with the EEOC on
June 26, 2008 denying each allegation of the charge.  As of November
30, 2008, RFI is waiting to hear for a response to their position statement from
the EEOC.  RFI intends to defend vigorously against George
Apergis.
  In
December 2007, the Company was added to an action (Diamond v. Allied Diagnostic
Imaging Resources, Inc., et al. (Superior Court, County of Los Angeles; Case No.
BC362544)) brought against several other defendants in which the plaintiff
alleges that she is the wife of a chiropractor who died in June
2005.  Plaintiff alleges that her husband was exposed to chemical
products used in developing x-ray film and cleaning film processing machines and
worked with x-ray film processing machines and x-ray machines, and that the
defendants manufactured, supplied or serviced the chemical products and
machines.  The complaint further alleges that the decedent was exposed
to toxic chemicals and radiation from the chemical products used on or in the
machines, which caused “serious injuries to his internal organs, including
acute myelogenous leukemia,” resulting in his death.
  The
complaint alleges the following six claims against the defendants: (1)
negligence in manufacturing and distributing the chemical products and machines,
servicing the machines, and failing adequately to warn decedent of the hazards
of the chemical products and machines, (2) violation of a California statute and
regulation by failing to determine whether the chemical products caused health
hazards and failing to label or identify in material safety data sheets a health
hazard relating to acute myelogenous leukemia, (3) strict products liability for
failing to warn adequately of the chemical products’ and machines’ health
hazards, (4) strict products liability for defects in the design of the chemical
products and machines, (5) fraudulent concealment of the toxic and carcinogenic
nature of the chemical products and the machines, and (6) breach of implied
warranties as to the fitness of the chemical products and machines for intended
uses, merchantability, and lack of defects.
  While the
complaint does not allege a total amount of damages sought, plaintiff alleges
that she has suffered damages consisting of medical, funeral, and burial
expenses, the decedent’s lost earnings prior to and lost wages after his death,
lost benefits after his death, the value of his services in managing his
family’s home, and loss of companionship and similar losses.  The
plaintiff also requests punitive damages.  The Company has not
recorded an accrual for any potential settlement of this claim as it has no
basis upon which to estimate either the outcome or amount of loss, if
any.  In its answer to the complaint, the Company denied the
substantive allegations of the complaint and denied that it has any liability to
plaintiff.  The Company intends to defend vigorously against
plaintiff’s claims.
  In
addition, the Company is a defendant in several other legal actions in various
U.S. and foreign jurisdictions, arising from the normal course of
business.  Management believes the Company has meritorious defenses to
such actions and that the outcomes will not be material to the Company’s
consolidated financial statements.
  RIGHTS
OFFERING AND STOCKHOLDER’S RIGHT PLAN
  On
December 12, 2006, the Company filed a registration statement for a subscription
rights offering with the SEC that became effective January 30,
2007.  Under the terms of this rights offering, the Company
distributed to shareholders of record as of February 5, 2007, non-transferable
subscription rights to purchase one share of the Company’s common stock for each
share owned at that date at a subscription price of $1.05 per
share.  On March 12, 2007, the Company completed the rights offering,
selling 12,027,378 shares of its common stock at $1.05 per
share.  Total proceeds to the Company, net of $275,000 of expenses
related to the rights offering, were $12,354,000.
  13
 Table Of Contents
  The
purpose of this rights offering was to raise equity capital in a cost-effective
manner.  Approximately $7,564,000 of the proceeds were used for debt
repayment and the remainder invested in short-term money market securities for
anticipated working capital needs and general corporate purposes.  A
portion of the net proceeds may also ultimately be used to acquire or invest in
businesses, products and technologies that our management believes are
complementary to the Company’s business.  Remaining unused proceeds
are currently invested in short-term money market securities.
  In
addition, on January 22, 2007, the Company entered into a stockholders rights
plan (the “Rights Plan”).  The Rights Plan provides for a dividend
distribution of one common stock purchase right for each outstanding share of
the Company’s common stock.  The Company’s Board of Directors adopted
the Rights Plan to protect stockholder value by protecting the Company’s ability
to realize the benefits of its net operating losses (“NOLs”) and capital loss
carryforwards.  The Company has experienced substantial operating and
capital losses in previous years.  Under the Internal Revenue Code and
rules promulgated by the Internal Revenue Service (the “IRS”), the Company may
“carry forward” these losses in certain circumstances to offset current and
future earnings and thus reduce its federal income tax liability, subject to
certain requirements and restrictions.  Assuming that the Company has
future earnings, the Company may be able to realize the benefits of NOLs and
capital loss carryforwards.  These NOLs and capital loss carryforwards
constitute a substantial asset to the Company.  If the Company
experiences an “Ownership Change,” as defined in Section 382 of the Internal
Revenue Code, its ability to use the NOLs and capital loss carryforwards could
be substantially limited or lost altogether.  The Rights Plan imposes
a significant penalty upon any person or group that acquires more than a certain
percentage of the Company’s common stock by allowing other shareholders to
acquire equity securities at half their fair values.
  14
 Table Of Contents
  DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
  Item 2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
  This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995.  These statements are based
on current expectations and the current economic environment and are not
guarantees of future performance.  They involve a number of risks and
uncertainties that are difficult to predict including, but not limited to, our
ability to implement our business plan, retention of management, changing
industry and competitive conditions, obtaining anticipated operating
efficiencies, securing necessary capital facilities and favorable determinations
in various legal and regulatory matters.  Actual results could
differ materially from those expressed or implied in the forward-looking
statements.  Important assumptions and other important factors that
could cause actual results to differ materially from those in the
forward-looking statements are specified in the Company’s filings with the
Securities and Exchange Commission including our Annual Report on Form 10-K for
the fiscal year ended August 2, 2008, our Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K.
  OVERVIEW
  The
Company is primarily engaged in the design, manufacture and marketing of
cost-effective medical and dental diagnostic imaging systems consisting of
stationary and portable imaging systems, radiographic/fluoroscopic systems,
dental imaging systems and digital radiography systems.  The Company
also manufactures electronic filters, high voltage capacitors, pulse modulators,
transformers and reactors, and a variety of other products designed for
industrial, medical, military and other commercial applications.  The
Company manages its business in two operating segments: the Medical Systems
Group and the Power Conversion Group.  In addition, the Company has a
third reporting segment, Other, comprised of certain unallocated corporate
General and Administrative expenses.  See “Segment Information” in
Part I, Item 1 of this Quarterly Report on Form 10-Q for the fiscal quarter
ended November 1, 2008 (this “Quarterly Report”) for discussions of the
Company’s segments.
  CRITICAL
ACCOUNTING POLICIES
  Complete
descriptions of significant accounting policies are outlined in Note 1 of the
Notes to Consolidated Financial Statements included in our Annual Report on Form
10-K for the fiscal year ended August 2, 2008.  Within these policies,
the Company has identified the accounting for revenue recognition, deferred tax
assets, the allowance for obsolete and excess inventory and goodwill as being
critical accounting policies due to the significant amount of estimates
involved.  In addition, for interim periods, the Company has
identified the valuation of finished goods inventory as being critical due to
the amount of estimates involved.
  Revenue
Recognition
  The
Company recognizes revenue upon shipment, provided there is persuasive evidence
of an arrangement, there are no uncertainties concerning acceptance, the sale
price is fixed, collection of the receivable is probable and only perfunctory
obligations related to the arrangement need to be completed.  The
Company maintains a sales return allowance, based upon historical patterns, to
cover estimated normal course of business returns, including defective or out of
specification product.  The Company’s products are covered primarily
by one-year warranty plans and in some cases optional extended warranties for up
to five years are offered.  The Company establishes allowances for
warranties on an aggregate basis for specifically identified, as well as
anticipated, warranty claims based on contractual terms, product conditions and
actual warranty experience by product line.  The Company recognizes
service revenue when repairs or out of warranty repairs are
completed.  The Company has an FDA obligation to continue to provide
repair service for certain medical systems for up to seven years past the
warranty period.  These repairs are billed to the customers at market
rates.
  Deferred
Income Taxes
  The
Company accounts for deferred income taxes in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes,”
whereby it recognize deferred income tax assets and liabilities for temporary
differences between financial reporting basis and income tax reporting basis and
for tax credit carryforwards.
  15
 Table Of Contents
  The
Company periodically assesses the realization of its net deferred income tax
assets.  This evaluation is primarily based upon current operating
results and expectations of future operating results.  A valuation
allowance is recorded if the Company believes its net deferred income tax assets
will not be realized.  The Company’s determination is based on what it
believes will be the more likely than not result.
  For
fiscal year 2008, the Company recorded operating income on a consolidated
basis.  The Company’s foreign tax reporting entity was profitable and
its U.S. tax reporting entities incurred a taxable loss.  Based
primarily on these results, the Company concluded that it should maintain a 100%
valuation allowance on its net U.S. deferred income tax assets.  For
the quarter ended November 1, 2008, the Company continues to carry a 100%
valuation allowance on its net U.S. deferred income tax asset.
  The
Company recorded a tax expense with respect to its foreign subsidiary’s income
in all periods presented and based on a more likely than not standard, believes
that the foreign subsidiary’s net deferred income tax asset at November 1, 2008
will be realized.
  The
Company’s foreign subsidiary operates in Italy.  Italy recently
enacted legislation that reduces tax rates effective for the Company’s fiscal
year 2009.  The fiscal quarter ended November 1, 2008 income tax
expense includes a charge that reduces the carrying value of the foreign
subsidiary’s net deferred income tax asset resulting from the income tax rate
reduction.
  The
Company’s primary income tax jurisdictions are in the United States and
Italy.  The Company is currently not under audit in either
jurisdiction.  Tax years since 2003 are open pursuant to statutes in
Italy and tax years since 2004 are open pursuant to statutes in the United
States.
  It is the
Company’s practice to recognize interest and/or penalties related to income tax
matters in tax expense.  As of November 1, 2008, there were no
material interest or penalty amounts to accrue.
 
  Obsolete
and excess inventory
  The
Company re-evaluates allowance for obsolete inventory once a quarter, and this
allowance comprises the most significant portion of our inventory
reserves.  The re-evaluation of reserves is based on a written policy,
which requires at a minimum that reserves be established based on our analysis
of historical actual usage on a part-by-part basis.  In addition,
if management learns of specific obsolescence in addition to this minimum
formula, these additional reserves will be recognized as
well.  Specific obsolescence might arise due to a technological or
market change, or based on cancellation of an order.  As we typically
do not purchase inventory substantially in advance of production requirements,
we do not expect cancellation of an order to be a material
risk.  However, market or technology changes can occur.
  Valuation
of finished goods inventories
  In
addition, the Company uses certain estimates in determining interim operating
results.  The most significant estimates in interim reporting relate
to the valuation of finished goods inventories.  For certain
subsidiaries, for interim periods, we estimate the amount of labor and overhead
costs related to finished goods inventories.  As of November 1, 2008,
finished goods represented approximately 27.2% of the gross carrying value of
our total gross inventory.  We believe the estimation methodologies
used to be appropriate and are consistently applied.
  Goodwill
  The
Company’s goodwill is subject to, at a minimum, an annual fourth fiscal quarter
impairment assessment of its carrying value. Goodwill impairment is deemed to
exist if the net book value of a reporting unit exceeds its estimated fair
value.  Estimated fair values of the reporting units are estimated
using an earnings model and a discounted cash flow valuation model. The
discounted cash flow model incorporates the Company’s estimates of future
cash flows, future growth rates and management’s judgment regarding the
applicable discount rates used to discount those estimated cash
flows.
  
 CONSOLIDATED
RESULTS OF OPERATIONS
  Three
Months Ended November 1, 2008 Compared to three Months Ended October 27,
2007
  Consolidated
net sales for the first quarter of fiscal 2009 decreased 16.6% to $22.3 million
from $26.7 million in the first quarter of fiscal 2008, due to decreased sales
at the Medical Systems Group.  Net sales at the Medical Systems Group
declined 18.8% to $19.6 million from the comparable prior year period, due to
decreased international sales volume attributable to an unusually favorable
prior year shipment level on an international contract partially offset by
increased domestic medical equipment shipments.  Sales at the Power
Conversion Group during the first quarter of fiscal 2009 were $2.7 million,
roughly equivalent to sales in the comparable prior year period.
  16
 Table Of Contents
 
 Consolidated
backlog at November 1, 2008 was $23.4 million as compared to $25.7 million at
October 27, 2007.  Backlog at the Medical Systems Group increased $0.1
million from August 2, 2008.  Backlog at Power Conversion Group
increased $0.6 million to $6.0 million from levels at the beginning of the
fiscal year.  Substantially all of the backlog should result in
shipments within the next 12 to 15 months.
 
 Consolidated
gross margin decreased to 23.8% of sales during the first quarter of fiscal 2009
from 24.1% of sales in the first quarter of fiscal 2008, due to the impact of
lower sales volume.  Gross margin at the Medical Systems Group during
the first quarter of fiscal 2009 declined to 22.1% from 22.7% in the prior
year’s first quarter attributable to the reduced international shipments
partially offset by increased margin on domestic shipments. Gross margin at
Power Conversion Group decreased to 36.1% from 36.5% in the first quarter of
fiscal 2008.
 
 Total
operating expense increased $1.3 million to $5.5 million in the first quarter of
2009 from $4.2 million in the same period one year ago.  This increase
was primarily due to expenses related to the additional $1.2 million litigation
settlement reserves in the Moeller case discussed in the notes of this document,
travel expenses related to developing sourcing alliances in Asia and
restructuring expenses.  Research and development expenses in the
first quarter of fiscal 2009 of $0.5 million was equal to research and
development expense in the comparable prior year period, reflecting the
Company’s continued investment in new product development.
 
 Operating
loss for the first quarter of fiscal 2009 was $(0.2) million compared to
operating income of $2.2 million in the comparable prior year
period.  Operating loss at the Medical Systems Group was $(0.3)
million compared to operating income of $2.2 million in the first quarter of
fiscal 2008 due primarily to the settlement of litigation noted above and due to
volume reduction from international shipments and increased income from domestic
operations.  Power Conversion Group generated operating income of $0.4
million, equivalent to operating income in the comparable prior year
period.  Unallocated corporate expenses for the first quarter of
fiscal 2009 totaled $0.3 million as compared to $0.4 million in the comparable
prior year period.
  Net loss
in the first quarter of fiscal 2009 was $(0.6) million, or $(0.03) per diluted
share, compared to net income of $1.1 million, or $0.04 per diluted share in the
comparable prior year period.  For the first quarter of fiscal 2009,
there were approximately 24.3 million weighted average common shares diluted
outstanding (“shares outstanding”) as compared to 24.7 million shares
outstanding diluted in the first quarter of fiscal 2008.  The decrease
in diluted shares outstanding was due to the impact of dilutive warrants that
expired August 2, 2008, and the expiration of unexercised employee stock
options.
 
  FINANCIAL
CONDITION
 LIQUIDITY
AND CAPITAL RESOURCES
  The
Company funds it’s investing and working capital needs through a combination of
cash flow from operations, short-term credit facilities and the proceeds of the
Rights Offering described below.
  Working
Capital — At November 1, 2008 and August 2, 2008, our working capital was
approximately $28.2 million and $31.2 million, respectively.  The
decrease in working capital for the first three months of fiscal 2009 related
primarily to an increase in accrued liabilities due to the reserve established
for the settlement of litigation noted above and decreases in ending accounts
receivable and prepaid expenses.
  At
November 1, 2008 and August 2, 2008, we had approximately $9.6 million and $7.9
million, respectively, in cash and cash equivalents.  This increase is
primarily due to cash generated from operations.  As of November 1,
2008, we had approximately $6.4 million of excess borrowing availability under
our domestic revolving credit facility compared to $9.0 million at October 27,
2007.
  In
addition, as of November 1, 2008 and August 2, 2008, our Villa subsidiary had an
aggregate of approximately $11.7 million and $13.5 million of excess borrowing
availability under its various short-term credit facilities,
respectively.  Terms of the Italian credit facilities do not permit
the use of borrowing availability to directly finance operating activities at
our U.S. subsidiaries.
  Cash
Flows from Operating Activities – For the three months ended November 1, 2008,
the Company generated approximately $2.8 million of cash from operations,
compared to a use of ($1.7) million in the comparable prior fiscal year
period.  The increase is largely due to aggressive payables management
and collection of receivable balances in the first quarter of 2009.
  17
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  Cash
Flows from Investing Activities — The Company made $0.09 million of facility
improvements and capital equipment expenditures for the three months ended
November 1, 2008, which was equal to the facility improvements and capital
equipment expenditures for the comparable prior fiscal year period.
  Cash
Flows from Financing Activities — During the three-month period ended November
1, 2008, the Company repaid a total of approximately $0.5 million of
indebtedness on our Italian borrowings, as compared to $0.3 million in the
comparable prior fiscal year period.  In addition, the Company
received $0.1 million in payment of the exercise price of warrants in the first
quarter of fiscal 2008.
  The
Company’s contractual obligations, including debt and operating leases, as
previously disclosed on our Annual Report on Form 10-K for the fiscal year ended
August 2, 2008, have not changed materially at November 1, 2008.
  As of
November 1, 2008 and August 2, 2008, we did not have any outstanding borrowings
under our revolving credit facilities in the U.S. or Italy.  The U.S.
term loan was extinguished and the revolver was paid down to $0 with a portion
of the proceeds received from a March 2007 Rights Offering.
  On August
1, 2005, the Company entered into a three-year revolving credit and term loan
facility with North Fork Business Capital (the “North Fork Facility”) and repaid
the prior facility.  In March 2007, the Company used a portion of the
proceeds from the Rights Offering described below to pay all outstanding
balances under this facility as well as $2.505 million of subordinated notes
then outstanding and $1.46 million in related interest.
  On June
1, 2007, the North Fork Facility was amended and restated.  As
restated, the North Fork Facility provides for a $7.5 million formula based
revolving credit facility based on the Company’s eligible accounts receivable
and inventory as defined in the credit agreement and a capital expenditure loan
facility up to $1.5 million.  Interest on the revolving credit and
capital expenditure borrowings is payable at prime plus 0.5% or alternatively at
a LIBOR rate plus 2.5%.  Other changes to the terms and conditions of
the original loan agreement include an extension through May 24, 2010, the
modification of covenants, removal of the Villa stock as loan collateral and the
removal of daily collateral reporting which was part of the previous asset-based
facility requirements.
  As of
November 1, 2008 and August 2, 2008, no amounts were outstanding and the Company
had approximately $6.4 million and $9.0 million of availability respectively
under the North Fork Facility, of which North Fork has reserved $1.0 million
against possible litigation settlements.
  The North
Fork Facility is subject to commitment fees of 0.5% per annum on the
daily-unused portion of the facility, payable monthly.  The Company
granted a security interest to the lender on its U.S. credit facility in
substantially all of its accounts receivable, inventory, property, plant and
equipment, other assets and intellectual property in the U.S.
  On
November 26, 2008 the Company requested and was granted consent by Capital One
Leverage Finance Corp., who acquired Northfork Business Capital during fiscal
year 2008, to repurchase up to 2,424,616 shares, or up to $3.0 million
(approximately 10%), of Del Global’s outstanding shares of common stock, par
value $0.10, from its shareholders provided none of the funds used to fund the
proposed repurchase are proceeds of loans and that no less than $2.0 million of
the funds used to repurchase said shares are from proceeds of cash dividends
paid by Villa.  Terms of the common stock repurchase program are
detailed below.
 
 In
addition, on November 26, 2008 the Company requested and was granted consent by
Capital One Leverage Finance Corp to relocate the chief executive office and
principal place of business within the Chicago, Illinois area.
 
 There are
certain covenants, including tangible net worth that the Company must
meet.  As of November 1, 2008 and August 2, 2008, the Company was in
compliance with all covenants under the North Fork Facility.
  The
Company’s Villa subsidiary maintains short-term credit facilities that are
renewed annually with Italian banks.  Currently, these facilities are
not being utilized and the balance due at November 1, 2008 is
$0.  Interest rates on these facilities are variable and currently
range from 3.7 – 14.25%.
  In
October 2006, Villa entered into a 1.0 million Euro loan for financing of
R&D projects, with an option for an additional 1 million Euro upon
completion of 50% of the projects.  In April 2008, the Company
declined the option for additional financing and demonstrated successful
completion of the project, triggering a more favorable interest
rate.  Interest, previously payable at Euribor 3 months plus 1.3
points, was reduced in the first fiscal quarter of 2009 to Euribor plus 1.04
points, currently 6.004%.  The note is repayable over a 7 year
term.  Repayment began in September 2008.  The note contains
a financial covenant which provides that the net equity of Villa cannot fall
below 5.0 million Euros.  This covenant could limit Villa’s ability to
pay dividends to the U.S. parent company in the event future losses, future
dividends or other events should cause Villa’s equity to fall below the defined
level.
  18
 Table Of Contents
  In
December 2006, Villa entered into a 1.0 million Euro loan with interest payable
at Euribor 3 months plus 0.95 points, currently 6.227%.  The loan is
repayable in 4 years.
  Villa is
also a party to two Italian government long-term loans with a fixed interest
rate of 3.425% with principal payable annually through maturity in February and
September 2010.  At November 1, 2008, total principal due is 0.7
million Euro.  Villa’s manufacturing facility is subject to a capital
lease obligation, which matures in 2011 with an option to
purchase.  Villa is in compliance with all related financial covenants
under these short and long-term financings.
  COMMON
STOCK REPURCHASE PROGRAM
 
 On
November 26, 2008, the Company’s Board of Directors authorized the repurchase of
up to 2,424,616 shares, or up to $3.0 million (approximately 10%), of Del
Global’s outstanding shares of common stock, par value $0.10.  In
connection with this share repurchase program, the Company entered into a Rule
10b5-1 sales trading plan agreement with Mutual Securities, Inc. (the “Trading
Plan Agreement”), which is effective from and including November 26, 2008
through November 25, 2009, unless earlier terminated.
  On
November 26, 2008, the Company also entered into an amendment (the “First
Amendment to Rights Agreement”) to the Rights Agreement dated as of January 22,
2007, between the Company and Continental Stock Transfer & Trust Company, as
the rights agent (the “Rights Agreement”).  Pursuant to the First
Amendment to Rights Agreement, the definition of an “Acquiring Person” set forth
in Section 1(a) of the Rights Agreement has been amended to provide that a
person shall not be deemed to have become an “Acquiring Person” solely as a
result of the acquisition of shares of common stock of the Company by the
Company, that by reducing the number of shares of common stock outstanding,
increases the percentage of shares beneficially owned by such
person.
 
  RIGHTS
OFFERING AND STOCKHOLDER RIGHTS PLAN
  On
December 12, 2006, the Company filed a registration statement for a subscription
rights offering with the SEC that became effective January 30,
2007.  Under the terms of this rights offering, the Company
distributed to shareholders of record as of February 5, 2007, non-transferable
subscription rights to purchase one share of the Company’s common stock for each
share owned at that date at a subscription price of $1.05 per
share.  On March 12, 2007, the Company completed the rights offering,
selling 12,027,378 shares of its common stock at $1.05 per
share.  Total proceeds to the Company, net of $0.3 million of expenses
related to the rights offering, were $12.4 million.
  The
purpose of this rights offering was to raise equity capital in a cost-effective
manner.  Approximately $7.6 million of the proceeds were used for debt
repayment and the remainder invested in short-term money market securities for
anticipated working capital needs and general corporate purposes.  A
portion of the net proceeds may also ultimately be used to acquire or invest in
businesses, products and technologies that Company management believes are
complementary to the Company’s business.
  In
addition, on January 22, 2007, the Company entered into a stockholder rights
plan (the “Rights Plan”).  The Rights Plan provides for a dividend
distribution of one Common Stock purchase right for each outstanding share of
the Company’s Common Stock.  The Company’s Board of Directors adopted
the Rights Plan to protect stockholder value by protecting the Company’s ability
to realize the benefits of its net operating losses (“NOLs”) and capital loss
carryforwards.  The Company has experienced substantial operating and
capital losses in previous years.  Under the Internal Revenue Code and
rules promulgated by the IRS, the Company may “carry forward” these losses in
certain circumstances to offset current and future earnings and thus reduce its
federal income tax liability, subject to certain requirements and
restrictions.  Assuming that the Company has future earnings, the
Company may be able to realize the benefits of NOLs and capital loss
carryforwards.  These NOLs and capital loss carryforwards constitute a
substantial asset to the Company.  If the Company experiences an
“Ownership Change,” as defined in Section 382 of the Internal Revenue Code, its
ability to use the NOLs and capital loss carryforwards could be substantially
limited or lost altogether.  In general terms, the Rights Plan imposes
a significant penalty upon any person or group that acquires certain percentages
of the Company’s common stock by allowing other shareholders to acquire equity
securities at half their fair values.
  19
 Table Of Contents
  Contingencies
  The
Company had an employment agreement with Samuel Park, a previous CEO, for the
period May 1, 2001 to April 30, 2004.  The employment agreement
provided for certain payments in the event of a change in the control of the
Company.  On October 10, 2003, the Company announced the appointment
of Walter F. Schneider as President and CEO to replace Mr. Park, effective as of
such date.  As a result, the Company recorded a charge of $0.2 million
during the first quarter of fiscal 2004 to accrue the balance remaining under
Mr. Park’s employment agreement.
  The
Company’s employment agreement with Mr. Park provided for payments upon certain
changes in control.  The Company’s Board of Directors elected at the
Company’s Annual Meeting of Shareholders held on May 29, 2003, had reviewed the
“change of control” provisions regarding payments totaling up to approximately
$1.8 million under the employment agreement between the Company and Mr.
Park.  As a result of this review and based upon, among other things,
the advice of special counsel, the Company’s Board of Directors has determined
that no obligation to pay these amounts has been triggered.  Prior to
his departure from the Company on October 10, 2003, Mr. Park orally informed the
Company that, after reviewing the matter with his counsel, he believed that
the obligation to pay these amounts has been triggered.  On October
27, 2003, the Company received a letter from Mr. Park’s counsel demanding
payment of certain sums and other consideration pursuant to the Company’s
employment agreement with Mr. Park, including these change of control
payments.  On November 17, 2003, the Company filed a complaint in the
United States District Court, Southern District of New York, against Mr. Park
seeking a declaratory judgment that no change in control payment was or is due
to Mr. Park, and that an amendment to the employment contract with Mr. Park
regarding advancement and reimbursement of legal fees is invalid and
unenforceable.  Mr. Park answered the complaint and asserted
counterclaims seeking payment from the Company based on his position that a
“change in control” occurred in June 2003.  Mr. Park is also seeking
other consideration he believes he is owed under his employment
agreement.  The Company filed a reply to Mr. Park’s counterclaims
denying that he is entitled to any of these payments.  Discovery in
this matter was conducted and completed.  Following discovery, the
Company and Mr. Park filed motions for summary judgment on the issues related to
the change in control and the amendment to the employment agreement, which
motions were fully submitted to the court for
consideration.
  By
memorandum decision and order dated December 15, 2008, the court denied the
Company’s motion for summary judgment, and granted Mr. Park’s motion for partial
summary judgment (a) on his first counterclaim seeking a declaration that he is
entitled to a change in control payment from the Company and an order that such
payment be made to him together with interest and (b) on his third counterclaim
for a declaration that he is entitled to recover his legal fees and expenses
reasonably incurred by him in, as he alleges, enforcing the terms of his
employment agreement with the Company and an order directing payment of such
fees.  The court’s decision and order granted summary judgment on Mr.
Park’s third counterclaim to the extent of concluding that the amendment to Mr.
Park’s employment agreement, providing for the Company to pay his legal fees
reasonably incurred in his enforcement of the terms of the employment agreement
was valid.  The Company intends to defend vigorously against Mr.
Park’s claims, including seeking the reversal of the court’s decision and
order.
  If Mr.
Park ultimately prevails on his claims and the payments he seeks are required to
be paid in a lump sum, these payments may have a material adverse effect on the
Company’s liquidity.  The Company has not recorded an accrual for any
potential settlements of this claim.
  On May
24, 2007, the Company’s Power Conversion subsidiary, RFI, was served with a
subpoena to testify before a grand jury of the United States District Court of
New York and to provide items and records from its Bay Shore NY offices in
connection with U.S. Department of Defense contracts.  A search
warrant from the United States District Court, Eastern District of New York was
issued and executed with respect to such offices.  The Company
believes that it is in full compliance with the quality standards that its
customers require and is fully cooperating with investigators to assist them
with their review.  RFI continues to ship products to the U.S.
Government, as well as to its commercial customers.
  On June
28, 2002, Jeffrey N. Moeller, the former Director of Quality Assurance and
Regulatory Affairs of Del Medical, commenced an action in the Circuit Court of
Cook County, Illinois, against the Company, Del Medical and Walter Schneider,
the former President of Del Medical.  In the most current iteration of
his complaint, the third amended complaint, Mr. Moeller alleges four claims
against the defendants in the action: (1) retaliatory discharge from employment
with Del Medical, allegedly in response to Mr. Moeller’s complaints to officers
of Del Medical about purported prebilling and his stopping shipment of a product
that allegedly did not meet regulatory standards, (2) defamation, (3)
intentional interference with his employment relationship with Del Medical and
prospective employers, and (4) to hold the Company liable for any misconduct of
Del Medical under a theory of piercing the corporate veil.  In their
answer to the third amended complaint, the defendants denied the substantive
allegations of each of these claims and denied that they have any liability to
Mr. Moeller.  By order dated September 15, 2006, the Court denied in
part and granted in part defendants’ motion requesting summary judgment
dismissing the third amended complaint.  The court granted the motion
only to the extent of dismissing that part of Mr. Moeller’s claim of
interference with his employment relationship with Del Medical and his
relationship with prospective employers.
  In fiscal
2007, the Company recorded an accrual of $0.1 million relating to potential
liability in the settlement of these claims.  The parties appeared for
mediation in January 2007 but the mediation did not result in a disposition of
the action.  A trial was held in April 2008 and on April 17, 2008, the
jury returned a verdict in favor of Mr. Moeller for $1.8 million for lost
earnings, back pay, front pay and benefits on the retaliatory discharge claim,
and $0.2 million for emotional distress/reputation damages and $0.2 million in
punitive damages on the defamation claim.  On May 19, 2008, counsel
for the defendants filed their motion for judgment in their favor
notwithstanding the jury verdict, or, alternatively, for a new trial, on those
claims on which the jury found the respective defendants liable.  By
order dated August 15, 2008, the Court denied that motion.
  On August
25, 2008, the Company and the other defendants filed their notice of appeal by
which they appeal to the Appellate Court of Illinois, First District, among
other things, the judgment entered against the Company and the other defendants
on the jury verdict.  On September 12, 2008, the Company and the other
defendants filed an amended notice of appeal intending to pursue an appeal
seeking a reversal of the judgment and to have a judgment entered in favor of
the Company and the other defendants or to have a new trial.  In lieu
of a bond, the Company filed an irrevocable standby letter of credit in the
amount of $2.6 million by which Mr. Moeller can collect the amount of judgment
entered by the trial court in the event the appellate court affirms that
judgment.
 
 On
December 10, 2008, the parties agreed to the principal terms of a settlement of
this matter for payments by the Company to Mr. Moeller and his counsel, totaling
$1.6 million, and are in the process of negotiating a definitive settlement
agreement.  In the first quarter of fiscal 2009, the Company recorded
an additional reserve of $1.2 million relating to settlement of this
matter.
 
 On April
28, 2008, George Apergis, the former General Manager of RFI, filed a charge with
the EEOC alleging that RFI discriminated against him by terminating his
employment with RFI on December 18, 2007.  George Apergis alleged
three claims against RFI: (1) violation of Title VII of the Civil Rights Act;
(2) violation of the Age Discrimination in Employment Act and (3)
retaliation.  RFI responded to the EEOC charge with a position
statement filed with the EEOC on June 26, 2008 denying each allegation of the
charge.  As of November 30, 2008, RFI is waiting to hear for a
response to their position statement from the EEOC.  RFI intends to
defend vigorously against George Apergis.
  In
December 2007, the Company was added to an action (Diamond v. Allied Diagnostic
Imaging Resources, Inc., et al. (Superior Court, County of Los Angeles; Case No.
BC362544)) brought against several other defendants in which the plaintiff
alleges that she is the wife of a chiropractor who died in June
2005.  Plaintiff alleges that her husband was exposed to chemical
products used in developing x-ray film and cleaning film processing machines and
worked with x-ray film processing machines and x-ray machines, and that the
defendants manufactured, supplied or serviced the chemical products and
machines.  The complaint further alleges that the decedent was exposed
to toxic chemicals and radiation from the chemical products used on or in the
machines, which caused “serious injuries to his internal organs, including acute
myelogenous leukemia,” resulting in his death.
  The
complaint alleges the following six claims against the defendants: (1)
negligence in manufacturing and distributing the chemical products and machines,
servicing the machines, and failing adequately to warn decedent of the hazards
of the chemical products and machines, (2) violation of a California statute and
regulation by failing to determine whether the chemical products caused health
hazards and failing to label or identify in material safety data sheets a health
hazard relating to acute myelogenous leukemia, (3) strict products liability for
failing to warn adequately of the chemical products’ and machines’ health
hazards, (4) strict products liability for defects in the design of the chemical
products and machines, (5) fraudulent concealment of the toxic and carcinogenic
nature of the chemical products and the machines, and (6) breach of implied
warranties as to the fitness of the chemical products and machines for intended
uses, merchantability, and lack of defects.
  While the
complaint does not allege a total amount of damages sought, plaintiff alleges
that she has suffered damages consisting of medical, funeral, and burial
expenses, the decedent’s lost earnings prior to and lost wages after his death,
lost benefits after his death, the value of his services in managing his
family’s home, and loss of companionship and similar losses.  The
plaintiff also requests punitive damages.  The Company has not
recorded an accrual for any potential settlement of this claim as it has no
basis upon which to estimate either the outcome or amount of loss, if
any.  In its answer to the complaint, the Company denied the
substantive allegations of the complaint and denied that it has any liability to
plaintiff.  The Company intends to defend vigorously against
plaintiff’s claims.
  The
Company is a defendant in several other legal actions in various U.S. and
foreign jurisdictions, arising from the normal course of
business.  Management believes the Company has meritorious defenses to
such actions and that the outcomes will not be material to the Company’s
consolidated financial statements.
  We
anticipate that cash generated from operations and amounts available from credit
facilities will be sufficient to satisfy currently projected operating cash
needs for at least the next twelve months, and for the foreseeable
future.
  OFF
BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
  The
Company has not had any investments in unconsolidated variable interest entities
or other off balance sheet arrangements during any of the periods presented in
this Quarterly Report on Form 10-Q.
  20
 Table Of Contents
  Item 3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  The
Company does not hold market risk sensitive instruments for trading
purposes.  The Company, however, recognizes market risk from interest
rate and foreign currency exchange exposure.  There have been no
changes in financial market risks as described in the Company’s Annual Report on
Form 10-K for the fiscal year ended August 2, 2008.
  Item4.
              CONTROLS
      AND PROCEDURES
  The
Company, under the supervision and with the participation of the Company’s
management, including James A. Risher, Chief Executive Officer, and Mark A.
Zorko, Chief Financial Officer, has evaluated the effectiveness of the design
and operation of the Company’s “disclosure controls and procedures”, as such
term is defined in Rules 13a-15e and 15d-15e promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the
period covered by this Quarterly Report.  Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that the
Company’s disclosure controls and procedures were effective as of the end of the
period covered by this Quarterly Report to ensure that all material information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is accumulated and communicated to management as
appropriate to allow timely decisions regarding required disclosure and that all
such information is recorded, processed, summarized and reported as specified in
the SEC’s rules and forms.
  There
have not been any changes in the Company’s internal control over financial
reporting during the fiscal quarter to which this Quarterly Report relates that
have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
  A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute assurance that the objectives of the control system are
met.  Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been
detected.
  PART II- OTHER INFORMATION
 Item1.
              LEGAL
      PROCEEDINGS
  Employment Matters- The
Company had an employment agreement with Samuel Park, a previous CEO, for the
period May 1, 2001 to April 30, 2004.  The employment agreement
provided for certain payments in the event of a change in the control of the
Company.  On October 10, 2003, the Company announced the appointment
of Walter F. Schneider as President and CEO to replace Mr. Park, effective as of
such date.  As a result, the Company recorded a charge of $0.2 million
during the first quarter of fiscal 2004 to accrue the balance remaining under
Mr. Park’s employment agreement.
  The
Company’s employment agreement with Mr. Park provided for payments upon certain
changes in control.  The Company’s Board of Directors elected at the
Company’s Annual Meeting of Shareholders held on May 29, 2003, had reviewed the
“change of control” provisions regarding payments totaling up to approximately
$1.8 million under the employment agreement between the Company and Mr.
Park.  As a result of this review and based upon, among other things,
the advice of special counsel, the Company’s Board of Directors has determined
that no obligation to pay these amounts has been triggered.  Prior to
his departure from the Company on October 10, 2003, Mr. Park orally informed the
Company that, after reviewing the matter with his counsel, he believed that the
obligation to pay these amounts has been triggered.  On October 27,
2003, the Company received a letter from Mr. Park’s counsel demanding payment of
certain sums and other consideration pursuant to the Company’s employment
agreement with Mr. Park, including these change of
control payments.  On November 17, 2003, the Company filed a
complaint in the United States District Court, Southern District of New York,
against Mr. Park seeking a declaratory judgment that no change in control
payment was or is due to Mr. Park, and that an amendment to the employment
contract with Mr. Park regarding advancement and reimbursement of legal fees is
invalid and unenforceable.  Mr. Park answered the complaint and
asserted counterclaims seeking payment from the Company based on his position
that a “change in control” occurred in June 2003.  Mr. Park is also
seeking other consideration he believes he is owed under his employment
agreement.  The Company filed a reply to Mr. Park’s counterclaims
denying that he is entitled to any of these payments.  Discovery in
this matter was conducted and completed.  Following discovery, the
Company and Mr. Park filed motions for summary judgment on the issues related to
the change in control and the amendment to the employment agreement, which
motions were fully submitted to the court for
consideration.
  By
memorandum decision and order dated December 15, 2008, the court denied the
Company’s motion for summary judgment, and granted Mr. Park’s motion for partial
summary judgment (a) on his first counterclaim seeking a declaration that he is
entitled to a change in control payment from the Company and an order that such
payment be made to him together with interest and (b) on his third counterclaim
for a declaration that he is entitled to recover his legal fees and expenses
reasonably incurred by him in, as he alleges, enforcing the terms of his
employment agreement with the Company and an order directing payment of such
fees.  The court’s decision and order granted summary judgment on Mr.
Park’s third counterclaim to the extent of concluding that the amendment to Mr.
Park’s employment agreement, providing for the Company to pay his legal fees
reasonably incurred in his enforcement of the terms of the employment agreement
was valid.  The Company intends to defend vigorously against Mr.
Park’s claims, including seeking the reversal of the court’s decision and
order.
  If Mr.
Park ultimately prevails on his claims and the payments he seeks are required to
be paid in a lump sum, these payments may have a material adverse effect on the
Company’s liquidity.  The Company has not recorded an accrual for any
potential settlements of this claim.
  21
 Table Of Contents
  On
June 28, 2002, Jeffrey N. Moeller, the former Director of Quality Assurance and
Regulatory Affairs of Del Medical, commenced an action in the Circuit Court of
Cook County, Illinois, against the Company, Del Medical and Walter Schneider,
the former President of Del Medical.  In the most current iteration of
his complaint, the third amended complaint, Mr. Moeller alleges four claims
against the defendants in the action: (1) retaliatory discharge from employment
with Del Medical, allegedly in response to Mr. Moeller’s complaints to officers
of Del Medical about purported prebilling and his stopping shipment of a product
that allegedly did not meet regulatory standards, (2) defamation, (3)
intentional interference with his employment relationship with Del Medical and
prospective employers, and (4) to hold the Company liable for any misconduct of
Del Medical under a theory of piercing the corporate veil.  In their
answer to the third amended complaint, the defendants denied the substantive
allegations of each of these claims and denied that they have any liability to
Mr. Moeller.  By order dated September 15, 2006, the Court denied in
part and granted in part defendants’ motion requesting summary judgment
dismissing the third amended complaint.  The court granted the motion
only to the extent of dismissing that part of Mr. Moeller’s claim of
interference with his employment relationship with Del Medical and his
relationship with prospective employers.
  In fiscal
2007, the Company recorded an accrual of $0.1 million relating to potential
liability in the settlement of these claims.  The parties appeared for
mediation in January 2007 but the mediation did not result in a disposition of
the action.  A trial was held in April 2008 and on April 17, 2008, the
jury returned a verdict in favor of Mr. Moeller for $1.8 million for lost
earnings, back pay, front pay and benefits on the retaliatory discharge claim,
and $0.2 million for emotional distress/reputation damages and $0.2 million in
punitive damages on the defamation claim.  On May 19, 2008, counsel
for the defendants filed their motion for judgment in their favor
notwithstanding the jury verdict, or, alternatively, for a new trial, on those
claims on which the jury found the respective defendants liable.  By
order dated August 15, 2008, the Court denied that motion.
  On August
25, 2008, the Company and the other defendants filed their notice of appeal by
which they appeal to the Appellate Court of Illinois, First District, among
other things, the judgment entered against the Company and the other defendants
on the jury verdict.  On September 12, 2008, the Company and the other
defendants filed an amended notice of appeal intending to pursue an appeal
seeking a reversal of the judgment and to have a judgment entered in favor of
the Company and the other defendants or to have a new trial.  In lieu
of a bond, the Company filed an irrevocable standby letter of credit in the
amount of $2.6 million by which Mr. Moeller can collect the amount of judgment
entered by the trial court in the event the appellate court affirms that
judgment.
  On
December 10, 2008, the parties agreed to the principal terms of a settlement of
this matter for payments by the Company to Mr. Moeller and his counsel, totaling
$1.6 million, and are in the process of negotiating a definitive settlement
agreement.  In the first quarter of fiscal 2009, the Company recorded
an additional reserve of $1.2 million relating to settlement of this
matter.
 
  On April
28, 2008, George Apergis, the former General Manager of RFI, filed a charge with
the EEOC alleging that RFI discriminated against him by terminating his
employment with RFI on December 18, 2007.  George Apergis alleged
three claims against RFI: (1) violation of Title VII of the Civil Rights Act;
(2) violation of the Age Discrimination in Employment Act and (3)
retaliation.  RFI responded to the EEOC charge with a position
statement filed with the EEOC on June 26, 2008 denying each allegation of the
charge.  As of November 30, 2008, RFI is waiting to hear for a
response to their position statement from the EEOC.  RFI intends
to defend vigorously against George Apergis.
  Other Legal Matters – On
May 24, 2007, the Company’s Power Conversion subsidiary, RFI, was served with a
subpoena to testify before a grand jury of the United States District Court of
New York and to provide items and records from its Bay Shore NY offices in
connection with U.S. Department of Defense contracts.  A search
warrant from the United States District Court, Eastern District of New York was
issued and executed with respect to such offices.  The Company
believes that it is in full compliance with the quality standards that its
customers require and is fully cooperating with investigators to assist them
with their review.  RFI continues to ship products to the U.S.
Government, as well as to its commercial customers.
  In
December 2007, the Company was added to an action (Diamond v. Allied Diagnostic
Imaging Resources, Inc., et al. (Superior Court, County of Los Angeles; Case No.
BC362544)) brought against several other defendants in which the plaintiff
alleges that she is the wife of a chiropractor who died in June
2005.  Plaintiff alleges that her husband was exposed to chemical
products used in developing x-ray film and cleaning film processing machines and
worked with x-ray film processing machines and x-ray machines, and that the
defendants manufactured, supplied or serviced the chemical products and
machines.  The complaint further alleges that the decedent was exposed
to toxic chemicals and radiation from the chemical products used on or in the
machines, which caused “serious injuries to his internal organs, including acute
myelogenous leukemia,” resulting in his death.
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  The
complaint alleges the following six claims against the defendants: (1)
negligence in manufacturing and distributing the chemical products and machines,
servicing the machines, and failing adequately to warn decedent of the hazards
of the chemical products and machines, (2) violation of a California statute and
regulation by failing to determine whether the chemical products caused health
hazards and failing to label or identify in material safety data sheets a health
hazard relating to acute myelogenous leukemia, (3) strict products liability for
failing to warn adequately of the chemical products’ and machines’ health
hazards, (4) strict products liability for defects in the design of the chemical
products and machines, (5) fraudulent concealment of the toxic and carcinogenic
nature of the chemical products and the machines, and (6) breach of implied
warranties as to the fitness of the chemical products and machines for intended
uses, merchantability, and lack of defects.
  While the
complaint does not allege a total amount of damages sought, plaintiff alleges
that she has suffered damages consisting of medical, funeral, and burial
expenses, the decedent’s lost earnings prior to and lost wages after his death,
lost benefits after his death, the value of his services in managing his
family’s home, and loss of companionship and similar losses.  The
plaintiff also requests punitive damages.  The Company has not
recorded an accrual for any potential settlement of this claim as it has no
basis upon which to estimate either the outcome or amount of loss, if
any.  In its answer to the complaint, the Company denied the
substantive allegations of the complaint and denied that it has any
liability to plaintiff.  The Company intends to defend vigorously
against plaintiff’s claims.
  In
addition, the Company is a defendant in several other legal actions in various
U.S. and foreign jurisdictions, arising from the normal course of
business.  Management believes the Company has meritorious defenses to
such actions and that the outcomes will not be material to the Company’s
consolidated financial statements.
  Item 1A.
              RISK
      FACTORS
  The risk
factors included in our Annual Report on Form 10-K for fiscal year ended August
2, 2008 have not materially changed.
  
 
  Item6.
              EXHIBITS
  Exhibits31.1*
              Certification
      of the Chief Executive Officer, James A. Risher, pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002.31.2*
              Certification
      of Chief Financial Officer, Mark A. Zorko, pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1*
              Certification
      of the Chief Executive Officer, James A. Risher, pursuant to 18 U.S.C.
      Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2*
              Certification
      of the Chief Financial Officer, Mark A. Zorko, pursuant to 18 U.S.C.
      Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*
      Filed herewith
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 DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
  SIGNATURES
  Pursuant
to the requirements of the Securities and Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
  DEL
      GLOBAL TECHNOLOGIES CORP./s/
      James A. RisherJames
      A. RisherChief
      Executive Officer
 
 /s/
      Mark A. ZorkoMark
      A. ZorkoChief
      Financial Officer
 
 Dated:
 December 16, 2008
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