UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended January 31,
2009





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 ý     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 ý





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes  ̈     No
ý





The number
of shares of Registrant’s common stock outstanding as of March 13, 2009 was
22,718,306.











DEL
GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES




Table
of Contents




Page
      No.PART
      I
                FINANCIAL
      INFORMATIONITEM
      1  FINANCIAL
      STATEMENTS
                3Consolidated
      Statements of Operations for the Three Months and Six Months Ended January
      31, 2009 and January 26, 2008
                3Consolidated
      Balance Sheets - January 31, 2009 and August 2, 2008
                4-5Consolidated
      Statements of Cash Flows for the Six Months ended January 31, 2009 and
      January 26, 2008
                6Notes
      to Consolidated Financial
      Statements
                7-17Item
      2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
                17-27Item
      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
                27Item
      4.  CONTROLS AND
      PROCEDURES
                27-28PART
      II -
                OTHER
      INFORMATIONItem
      1.  LEGAL
      PROCEEDINGS
                28-31Item
      1A.  RISK
      FACTORS
                31Item
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                31Item
      4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
                32Item
      6.  EXHIBITS
                32SIGNATURES
                33EX-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




PART
I                      FINANCIAL
INFORMATION




ITEM
1 FINANCIAL STATEMENTS




DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(DOLLARS
IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


(UNAUDITED)




Three
      Months Ended
                      
                      
                      Six
      Months EndedJanuary
                          31,
      2009
                      
                      
                      January
                          26,
      2008
                      
                      
                      January
                          31,
      2009
                      
                      
                      January
                          26,
      2008NET
      SALES
                      
                      $
                      24,735
                      
                      
                      $
                      29,894
                      
                      
                      $
                      47,026
                      
                      
                      $
                      56,609COST
      OF SALES
                      
                      
                      18,935
                      
                      
                      
                      22,404
                      
                      
                      
                      35,919
                      
                      
                      
                      42,689GROSS
      MARGIN
                      
                      
                      5,800
                      
                      
                      
                      7,490
                      
                      
                      
                      11,107
                      
                      
                      
                      13,920Selling,
      general and administrative
                      
                      
                      3,862
                      
                      
                      
                      4,165
                      
                      
                      
                      7,705
                      
                      
                      
                      7,905Research
      and development
                      
                      
                      507
                      
                      
                      
                      657
                      
                      
                      
                      996
                      
                      
                      
                      1,137Litigation
      settlement and
      reserves
                      
                      
                      2,500
                      
                      
                      
                      60
                      
                      
                      
                      3,700
                      
                      
                      
                      60Total
      operating expenses
                      
                      
                      6,869
                      
                      
                      
                      4,882
                      
                      
                      
                      12,401
                      
                      
                      
                      9,102OPERATING
      INCOME (LOSS)
                      
                      
                      (1,069
                      )
                      
                      
                      2,608
                      
                      
                      
                      (1,294
                      )
                      
                      
                      4,818Interest
      expense, net of interest income of $19 and $45 for the three and six
      months ended in 2009, respectively; $37 and $90 for the three and six
      months ended in 2008
                      
                      
                      (45
                      )
                      
                      
                      (79
                      )
                      
                      
                      (101
                      )
                      
                      
                      (149
                      )Other
      income (expense)
                      
                      
                      (136
                      )
                      
                      
                      63
                      
                      
                      
                      (68
                      )
                      
                      
                      56INCOME(LOSS)
      BEFORE INCOME TAX PROVISION
                      
                      
                      (1,250
                      )
                      
                      
                      2,592
                      
                      
                      
                      (1,463
                      )
                      
                      
                      4,725INCOME
      TAX PROVISION
                      
                      
                      550
                      
                      
                      
                      1,165
                      
                      
                      
                      946
                      
                      
                      
                      2,191NET
      INCOME (LOSS)
                      
                      $
                      (1,800
                      )
                      
                      $
                      1,427
                      
                      
                      $
                      (2,409
                      )
                      
                      $
                      2,534NET
      INCOME (LOSS) PER BASIC SHARE
                      
                      $
                      (0.08
                      )
                      
                      $
                      0.06
                      
                      
                      $
                      (0.10
                      )
                      
                      $
                      0.10Weighted
      average shares outstanding
                      
                      
                      23,459,991
                      
                      
                      
                      24,179,569
                      
                      
                      
                      23,853,078
                      
                      
                      
                      24,170,488NET
      INCOME (LOSS) PER DILUTED SHARE
                      
                      $
                      (0.08
                      )
                      
                      $
                      0.06
                      
                      
                      $
                      (0.10
                      )
                      
                      $
                      0.10Weighted
      average shares outstanding
                      
                      
                      23,459,991
                      
                      
                      
                      24,792,001
                      
                      
                      
                      23,853,078
                      
                      
                      
                      24,757,196




See notes
to consolidated financial statements.






3




DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(DOLLARS
IN THOUSANDS EXCEPT PAR VALUE)


(UNAUDITED)




ASSETS




January
      31, 2009
              
              
              August
      2, 2008CURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              9,684
              
              
              $
              7,828Trade
      receivables net of allowance for doubtful accounts of $1,512 and $1,400 at
      January 31, 2009 and August 2, 2008, respectively
              
              
              20,449
              
              
              
              25,218Inventories
      net of allowance for excess and obsolete of $3,929 and $4,435 at January
      31, 2009 and August 2, 2008, respectively
              
              
              18,464
              
              
              
              18,439Prepaid
      expenses and other current assets
              
              
              1,861
              
              
              
              2,085Total
      current assets
              
              
              50,458
              
              
              
              53,570NON-CURRENT
      ASSETS:Property
      plant and equipment, net
              
              
              6,516
              
              
              
              7,377Deferred
      income taxes
              
              
              646
              
              
              
              770Goodwill
              
              
              4,526
              
              
              
              4,526Other
      assets
              
              
              83
              
              
              
              110Total
      non-current assets
              
              
              11,771
              
              
              
              12,783TOTAL
      ASSETS
              
              $
              62,229
              
              
              $
              66,353





See notes
to consolidated financial statements.






4




DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(DOLLARS
IN THOUSANDS EXCEPT PAR VALUE)


(UNAUDITED)




LIABILITIES
AND SHAREHOLDERS’ EQUITY




January
      31,2009
              
              
              August
      2, 2008CURRENT
      LIABILITIES:Current
      portion of long-term debt
              
              $
              1,607
              
              
              $
              1,797Accounts
      payable – trade
              
              
              15,720
              
              
              
              12,191Accrued
      expenses
              
              
              9,210
              
              
              
              8,378Total
      current liabilities
              
              
              26,537
              
              
              
              22,366NON-CURRENT
      LIABILITIES:Long-term
      debt, less current portion
              
              
              3,175
              
              
              
              4,504Other
      long-term liabilities
              
              
              2,595
              
              
              
              3,320Total
      non-current liabilities
              
              
              5,770
              
              
              
              7,824Total
      liabilities
              
              
              32,307
              
              
              
              30,190COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS'
      EQUITY:Common
      stock, $.10 par value;Authorized
      50,000,000; issued 24,900,629 and 24,897,723 at January 31, 2009 and
      August 2, 2008, respectively
              
              
              2,490
              
              
              
              2,490Additional
      paid-in capital
              
              
              80,565
              
              
              
              80,398Treasury
      shares – 2,182,323 shares and 654,464 outstanding shares, at cost at
      January 31, 2009 and August 2, 2008, respectively
              
              
              (7,176
              )
              
              
              (5,615
              )Accumulated
      other comprehensive income
              
              
              1,814
              
              
              
              4,252Accumulated
      deficit
              
              
              (47,771
              )
              
              
              (45,362
              )Total
      shareholders' equity
              
              
              29,922
              
              
              
              36,163TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
              
              $
              62,229
              
              
              $
              66,353





See notes
to consolidated financial statements.






5




DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(DOLLARS
IN THOUSANDS)




(UNAUDITED)




Six
      Months EndedJanuary
      31, 2009
                          
                          
                          January
      26, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                          
                          $
                          (2,409
                          )
                          
                          $
                          2,534Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
                          
                          
                          550
                          
                          
                          
                          476Deferred
      income tax provision
                          
                          
                          34
                          
                          
                          
                          (99
                          )Stock
      based compensation expense
                          
                          
                          168
                          
                          
                          
                          256Other
                          
                          
                          -
                          
                          
                          
                          60Changes
      in operating assets and liabilities:Trade
      receivables
                          
                          
                          2,629
                          
                          
                          
                          (1,377
                          )Inventories
                          
                          
                          (1,481
                          )
                          
                          
                          1,347Prepaid
      expenses and other current assets
                          
                          
                          74
                          
                          
                          
                          588Other
      assets
                          
                          
                          23
                          
                          
                          
                          39Accounts
      payable – trade
                          
                          
                          4,462
                          
                          
                          
                          (971
                          )Accrued
      expenses
                          
                          
                          1,605
                          
                          
                          
                          1,157Payment
      of accrued litigation settlement costs
                          
                          
                          (60
                          )
                          
                          
                          -Income
      taxes payable
                          
                          
                          -
                          
                          
                          
                          (764
                          )Other
      long-term liabilities
                          
                          
                          (346
                          )
                          
                          
                          (219
                          )Net
      cash provided by operating activities
                          
                          
                          5,249
                          
                          
                          
                          3,027CASH
      FLOWS FROM INVESTING ACTIVITIES:Property
      plant and equipment purchases
                          
                          
                          (310
                          )
                          
                          
                          (434
                          )Net
      cash used in investing activities
                          
                          
                          (310
                          )
                          
                          
                          (434
                          )CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayment
      of long-term debt
                          
                          
                          (791
                          )
                          
                          
                          (556
                          )Proceeds
      from stock option exercises
                          
                          
                          -
                          
                          
                          
                          4Proceeds
      from warrant exercises
                          
                          
                          -
                          
                          
                          
                          82Purchase
      of treasury shares
                          
                          
                          (1,561
                          )
                          
                          
                          -Net
      cash used in financing activities
                          
                          
                          (2,352
                          )
                          
                          
                          (470
                          )EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                          
                          
                          (731
                          )
                          
                          
                          384CASH
      AND CASH EQUIVALENTS INCREASE FOR THE PERIOD
                          
                          
                          1,856
                          
                          
                          
                          2,507CASH
      AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
                          
                          
                          7,828
                          
                          
                          
                          7,860CASH
      AND CASH EQUIVALENTS, END OF THE PERIOD
                          
                          $
                          9,684
                          
                          
                          $
                          10,367SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid forInterest
                          
                          $
                          69
                          
                          
                          $
                          212Taxes
                          
                          
                          947
                          
                          
                          
                          3,137




See notes
to consolidated financial statements.






6




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 has evaluated
the requirements of SFAS 161, and determined that it does not 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.






7




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.




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 and does 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” and does 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
January 31, 2009, finished goods represented approximately 23.0% of the gross
carrying value of our total gross inventory.  The Company believes the
estimation methodologies used to be appropriate and are consistently
applied.






8




Inventories
at January 31, 2009 and August 2, 2008 is as follows:




January
      31,
                  2009
              
              
              August2,
                  2008Raw
      materials and purchased parts
              
              $
              14,898
              
              
              $
              13,920Work-in-process
              
              
              2,354
              
              
              
              2,526Finished
      goods
              
              
              5,141
              
              
              
              6,42822,393
              
              
              
              22,874Less
      allowance for obsolete and excess inventories
              
              
              (3,929
              )
              
              
              (4,435
              )Total
      inventories
              
              $
              18,464
              
              
              $
              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 three and six months of
fiscal 2009 and 2008 is as follows:




Three
      Months Ended
                
                
                Six
      Months EndedJanuary
      31, 2009
                
                
                January
      26, 2008
                
                
                January
      31, 2009
                
                
                January
      26, 2008Balance
      at beginning of period
                
                $
                902
                
                
                $
                1,168
                
                
                $
                1,077
                
                
                $
                1,065Provision
      for anticipated warranty claims
                
                
                17
                
                
                
                206
                
                
                
                86
                
                
                
                365Costs
      incurred related to warranty claims
                
                
                (145
                )
                
                
                (74
                )
                
                
                (302
                )
                
                
                (178
                )Effect
      of foreign currency fluctuation
                
                
                64
                
                
                
                30
                
                
                
                (23
                )
                
                
                78Balance
      at end of period
                
                $
                838
                
                
                $
                1,330
                
                
                $
                838
                
                
                $
                1,330





The
liability related to warranties is included in accrued expenses on the
accompanying Consolidated Balance Sheets.




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
January 31, 2009 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.






9




Comprehensive
income for the fiscal 2009 and 2008 periods presented was as
follows:




Three
      Months Ended
                    
                    
                    Six
      Months EndedJanuary
      31, 2009
                    
                    
                    January
      26, 2008
                    
                    
                    January
      31, 2009
                    
                    
                    January
      26, 2008Net
      income (loss)
                    
                    $
                    (1,800
                    )
                    
                    $
                    1,427
                    
                    
                    $
                    (2,409
                    )
                    
                    $
                    2,534Foreign
      currency translation adjustments
                    
                    
                    (698
                    )
                    
                    
                    570
                    
                    
                    
                    (2,438
                    )
                    
                    
                    1,204Comprehensive
      income (loss)
                    
                    $
                    (2,498
                    )
                    
                    $
                    1,997
                    
                    
                    $
                    (4,847
                    )
                    
                    $
                    3,738





INCOME
(LOSS) PER SHARE




Common
shares outstanding exclude 2,182,323 and 622,770 shares of treasury stock for
the periods ended January 31, 2009 and January 26, 2008,
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 Ended
                          
                          
                          Six
      Months EndedJanuary
      31, 2009
                          
                          
                          January
      26, 2008
                          
                          
                          January
      31, 2009
                          
                          
                          January
      26, 2008Numerator:Net
      income (loss)
                          
                          $
                          (1,800
                          )
                          
                          $
                          1,427
                          
                          
                          $
                          (2,409
                          )
                          
                          $
                          2,534Denominator:
      (shares in thousands)Weighted
      average number of common shares outstanding used for basic income per
      share
                          
                          
                          23,459
                          
                          
                          
                          24,180
                          
                          
                          
                          23,853
                          
                          
                          
                          24,170Effect
      of dilutive securities
                          
                          
                          -
                          
                          
                          
                          612
                          
                          
                          
                          -
                          
                          
                          
                          587Denominator
      for diluted income per share
                          
                          
                          23,459
                          
                          
                          
                          24,792
                          
                          
                          
                          23,853
                          
                          
                          
                          24,757Income
      (loss) per common share:Basic
                          
                          $
                          (0.08
                          )
                          
                          $
                          0.06
                          
                          
                          $
                          (0.10
                          )
                          
                          $
                          0.10Diluted
                          
                          $
                          (0.08
                          )
                          
                          $
                          0.06
                          
                          
                          $
                          (0.10
                          )
                          
                          $
                          0.10





Antidilutive
securities excluded from above computations:




Three
      Months Ended
              
              
              Six
      Months EndedJanuary
      31, 2009
              
              
              January
      26, 2008
              
              
              January
      31, 2009
              
              
              January
      26, 2008Employee
      stock options
              
              
              2,223
              
              
              
              950
              
              
              
              1,984
              
              
              
              1,031Warrants
              
              
              513
              
              
              
              --
              
              
              
              513
              
              
              
              --





SHORT-TERM
CREDIT FACILITIES AND LONG-TERM DEBT




The
Company did not have any outstanding borrowings under its short-term credit
facilities at January 31, 2009 or August 2, 2008.






10




Long term
debt at January 31, 2009 and August 2, 2008 is summarized as
follows:




January
      31,
                  2009
              
              
              August
      2,
                  2008Foreign
      capital lease obligations
              
              $
              2,120
              
              
              $
              2,639Foreign
      credit facilities
              
              
              1,973
              
              
              
              2,703Foreign
      Italian government loans
              
              
              689
              
              
              
              959Total
      long term debt
              
              
              4,782
              
              
              
              6,301Less
      current portion of long-term bank debt
              
              
              (1,607
              )
              
              
              (1,797
              )Long
      term debt, less current portion
              
              $
              3,175
              
              
              $
              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 a 2007 rights offering (the “Rights Offering”) to pay all
outstanding balances under this facility as well as $2,505 of subordinated notes
then outstanding and $146 in related interest.  Total proceeds to the
Company from the Rights Offering, net of $300 of expenses related to the Rights
Offering, were $12,400.




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
January 31, 2009 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.  This difference in borrowing availability was
due to the issuance of a irrevocable standby letter of credit in the amount of
$2,600 (the “Moeller LC”), which the Company filed in lieu of a bond in
connection with the Moeller litigation described below, by which Mr. Moeller
could collect the amount of the judgment entered by the trial court in the event
the appellate court affirmed that judgment.  The Moeller LC was
terminated on February 2, 2009.




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.




The
company received a dividend from its Villa subsidiary in December 2008 of
approximately $1,812 which was used to repurchase the Company’s outstanding
common stock pursuant to the common stock repurchase program described
below.




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.






11




On various
dates in December 2008 the Company repurchased a total of 1,527,859 common
shares then outstanding at a total cost of approximately $1,600.  In
January 2009, the Company’s Board of Directors suspended the common stock
repurchase program.




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 January 31, 2009 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 January 31, 2009 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 1.0 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 4.322%.  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.




In
December 2006, Villa entered into a 1.0 million Euro loan with interest payable
at Euribor 3 months plus 0.95 points, currently 3.809%.  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 January 31, 2009, 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:







12




For
      three months ended
                  January
      31, 2009
                
                Medical
      Systems Group
                
                
                Power
      Conversion Group
                
                
                Other
                
                
                TotalNet
      Sales to External Customers
                
                $
                21,548
                
                
                $
                3,187
                
                
                
                -
                
                
                $
                24,735Cost
      of sales
                
                
                16,960
                
                
                
                1,975
                
                
                
                -
                
                
                
                18,935Gross
      margin
                
                
                4,588
                
                
                
                1,212
                
                
                
                
                
                
                
                5,800Operating
      expenses
                
                
                2,230
                
                
                
                634
                
                
                
                4,005
                
                
                
                6,869Operating
      income (loss)
                
                $
                2,358
                
                
                $
                578
                
                
                $
                (4,005
                )
                
                $
                (1,069
                )





For
      three months ended
                  January
      26, 2008
                
                Medical
      Systems Group
                
                
                Power
      Conversion Group
                
                
                Other
                
                
                TotalNet
      Sales to External Customers
                
                $
                27,230
                
                
                $
                2,664
                
                
                $
                -
                
                
                $
                29,894Cost
      of sales
                
                
                20,695
                
                
                
                1,709
                
                
                
                -
                
                
                
                22,404Gross
      margin
                
                
                6,535
                
                
                
                955
                
                
                
                -
                
                
                
                7,490Operating
      expenses
                
                
                3,805
                
                
                
                697
                
                
                
                380
                
                
                
                4,882Operating
      income (loss)
                
                $
                2,730
                
                
                $
                258
                
                
                $
                (380
                )
                
                $
                2,608





For
      six months ended
                  January
      31, 2009
                
                Medical
      Systems Group
                
                
                Power
      Conversion Group
                
                
                Other
                
                
                TotalNet
      Sales to External Customers
                
                $
                41,107
                
                
                $
                5,919
                
                
                
                -
                
                
                $
                47,026Cost
      of sales
                
                
                32,199
                
                
                
                3,720
                
                
                
                -
                
                
                
                35,919Gross
      margin
                
                
                8,908
                
                
                
                2,199
                
                
                
                
                
                
                
                11,107Operating
      expenses
                
                
                6,885
                
                
                
                1,245
                
                
                
                4,271
                
                
                
                12,401Operating
      income (loss)
                
                $
                2,023
                
                
                $
                954
                
                
                $
                (4,271
                )
                
                $
                (1,294
                )





For
      six months ended
                  January
      26, 2008
                
                Medical
      Systems Group
                
                
                Power
      Conversion Group
                
                
                Other
                
                
                TotalNet
      Sales to External Customers
                
                $
                51,313
                
                
                $
                5,296
                
                
                
                -
                
                
                $
                56,609Cost
      of sales
                
                
                39,311
                
                
                
                3,378
                
                
                
                -
                
                
                
                42,689Gross
      margin
                
                
                12,002
                
                
                
                1,918
                
                
                
                
                
                
                
                13,920Operating
      expenses
                
                
                7,034
                
                
                
                1,284
                
                
                
                784
                
                
                
                9,102Operating
      income (loss)
                
                $
                4,968
                
                
                $
                634
                
                
                $
                (784
                )
                
                $
                4,818





STOCK
OPTION PLAN AND WARRANTS




There were
no stock options granted during the first quarter of fiscal 2009.




During the
second quarter of fiscal year 2009, the Company granted options to purchase
229,000 common shares under the 2007 Incentive Stock Plan at a weighted average
exercise price of $1.00 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 $153.  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 68%, risk free interest rate of 2.78% and the assumption that no
dividends will be paid.






13




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
second quarter of fiscal 2009 and 2008, the Company recorded $115 and $84,
respectively, of compensation expense related to stock options.  In
the six months ended January 31, 2009 and January 26, 2008, the Company recorded
$168 and $256, respectively, of compensation expense related to stock
options.  There were no exercises of stock options during the first
six months of fiscal 2009.  During the second quarter and first six
months of fiscal 2008, 2,500 stock options were exercised for cash proceeds to
the Company of $4 and an intrinsic value of $3.  The intrinsic value
is the amount by which the market value of the underlying stock exceeds the
exercise price of the option.




No
warrants were exercised during the first six months of fiscal
2009.  During the first quarter of fiscal 2008, 47,527 warrants were
exercised for cash proceeds to the Company of $68.  During the second
quarter of fiscal 2008, 3,380 warrants were exercised for cash proceeds to the
Company of $14.




As of
January 31, 2009 and January 26, 2008, 512,500 and 525,109 warrants to purchase
common stock were outstanding, respectively. The warrants expire on March 28,
2009.




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 as defined in the
agreement.  On October 9, 2003, the Company terminated Mr. Park’s
employment, and 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 of salary
remaining under Mr. Park’s employment agreement.




The
Company’s employment agreement with Mr. Park provided for payments upon a change
in control as defined in the agreement.  The Company’s Board of
Directors elected at the Company’s Annual Meeting of Shareholders held on May
29, 2003, reviewed the “change in control” provisions in the employment
agreement between the Company and Mr. Park, regarding a payment to him in the
event of a change in control as defined in the agreement.  As a result
of this review and based upon, among other things, the advice of special
counsel, the Company’s Board of Directors determined that no obligation to make
the payment 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
him for a change in control had 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 a change in control payment.  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 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 and a declaration
that the amendment on legal fees incurred by him was valid and
enforceable.  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
or the declaration of validity and enforceability of the legal fees
amendment.  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.






14




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.




By motion
served on February 2, 2009, as amended by reply papers served by Mr. Park on
February 25, 2009, Mr. Park sought entry of judgment in the amount of
$2,153,412, along with post-judgment interest thereon, on Mr. Park’s first
counterclaim (change in control payment) and on his third counterclaim (in the
amount of the attorneys’ fees and disbursements incurred by him through November
30, 2008).  The motion also sought as part of the judgment a direction
that Del Global pay Park’s attorneys’ fees and disbursements incurred in the
action from on and after December 1, 2008 within thirty days after Mr. Park
submits to the Company written notice thereof.




Mr. Park’s
counsel advised the Court by letter in January 2009 that in his second
counterclaim, which was not a subject of any of the motions for summary judgment
previously made in the action, Mr. Park seeks a total of approximately $920,000
in alleged damages and interest thereon.  This total includes the
following items allegedly owed to him in the following approximate
amounts:  $605,000 for stock options, $193,000 (subsequently changed
to $174,000) for bonus for fiscal year 2004 pro rated to April 30, 2004, $81,000
for unused vacation, and $41,000 for business expenses.




On March
6, 2009, the parties reached an agreement in principal to settle the action for
payments by the Company to Mr. Park and his counsel totaling $2.5 million, all
subject to a written settlement agreement being signed by the
parties.  In contemplation of settlement, the Court dismissed the
action subject to either party requesting that it be restored to the calendar by
letter to the Court before March 23, 2009.




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.






15




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 could collect the amount of judgment
entered by the trial court in the event the appellate court affirms that
judgment.




By
Settlement Agreement and Release signed by the parties in January 2009, the
parties agreed to a settlement of this matter for payments by the Company to Mr.
Moeller and his counsel, totaling $1.6 million, which payments have been
made.  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 March 13,
2009, 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.






16




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
      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 January 31, 2009 (this “Quarterly Report”) for discussions of the
Company’s segments.






17




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.




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 January 31, 2009, 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 January 31, 2009
will be realized.






18




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 January 31, 2009 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 January 31, 2009, 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 the interim
periods of certain subsidiaries, we estimate the amount of labor and overhead
costs related to finished goods inventories.  As of January 31, 2009,
finished goods represented approximately 23.0% 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.  As part
of its assessment, the Company estimated the fair value of the reporting unit
based on internal cash flows expected to be earned by the business and an
appropriate risk-adjusted discount rate.  While such estimates are
subject to significant uncertainties and actual results could be materially
different, the analysis resulted, pursuant to the implementation guidance of
FASB No. 142, Accounting for Goodwill and Intangible Assets, in a complete
impairment of the unit’s goodwill balance.  Accordingly, the Company
recorded a $1,911 impairment charge during the third quarter of fiscal
2008.






19




CONSOLIDATED
RESULTS OF OPERATIONS




Three
Months and Six Months Ended January 31, 2009 Compared to Three and Six Months
Ended January 26, 2008




Consolidated
net sales of $24.7 million for the second quarter of fiscal 2009 reflect a
decrease of $5.2 million or 17.4% from fiscal 2008 second quarter net sales of
$29.9 million due to decreased sales in our Medical Systems Group in fiscal
2009.  The Medical Systems Group’s second quarter fiscal 2009 sales of
$21.5 million were $5.7 million or 20.9 % less than the prior year’s second
quarter with decreases primarily due to decreased international sales volume
attributable to a favorable prior year shipment level on an expired
international contract partially offset by increased domestic medical equipment
shipments. Sales at the Power Conversion Group during the second quarter of
fiscal 2009 were $3.2 million, approximately $0.5 million more than prior year’s
sales, this increase was due to stronger sales bookings in the current
period.




Consolidated
net sales of $47.0 million for the first six months of fiscal 2009 reflect a
decrease of $9.6 million or 16.9% from fiscal 2008 net sales of $56.6 million,
due to decreased sales in our Medical Systems Group in fiscal
2009.  Sales at the Medical Systems Group for the first half of fiscal
2009 of $41.1 million reflect a decrease of $10.2 million or 19.9 % from the
prior year’s first half, primarily due to decreased international sales volume
attributable to a favorable prior year shipment level on an expired
international contract partially offset by increased domestic medical equipment
shipments, as noted above.  The Power Conversion Group’s sales for the
first half of fiscal 2009 of $5.9 million were approximately $0.6 million more
than prior year’s sales due to stronger sales bookings in the current
period.




Consolidated
backlog at January 31, 2009 was $17.6 million compared to a backlog at August 2,
2008 of approximately $22.7 million.  The backlog in the Power
Conversion Group of $5.3 million reflects a decrease of $0.1 million from levels
at the beginning of the fiscal year.  In addition, the Company’s
Medical System segment experienced a decrease in second quarter backlog of $5.0
million from August 2, 2008, this decrease was due to a weak global economy,
resulting in lower bookings during the first six month period of fiscal
2009.  Substantially all of the backlog should result in shipments
within the next 12 to 15 months.




Gross
margins as a percent of sales were 23.4% for the second quarter of fiscal 2009,
compared to 25.1% in the second quarter of fiscal 2008.  The Power
Conversion Group’s gross margins for the second quarter of fiscal 2009 were
37.9%, versus 35.9% in the prior year second quarter, reflecting increased
margins in product mix and steady production costs.  For the Medical
Systems Group, second quarter of fiscal 2009 gross margins of 21.3% were lower
than gross margins of 24.0 % in the second quarter of fiscal 2008 due primarily
to increased sales in our digital products.  Generally, digital
products have a higher selling price than the non-digital product offerings, but
they also have a higher cost resulting in lower gross margin
percentages.





Gross
margins as a percent of sales were 23.6% for the first six months of fiscal
2009, compared to 24.6% for the first six months of fiscal 2008, this was due to
increased sales of digital products with a lower gross margin as discussed
above.





Total
operating expenses increased $2.0 million to $6.9 million in the second quarter
of fiscal 2009 from $4.9 million for the same period in the prior fiscal
year.  This increase was primarily due to a $2.5 million litigation
settlement reserve for a legal settlement with a former employee, offset by
reduced selling and administration and travel expenses during the second quarter
of fiscal 2009. Research and
development expenses in the second quarter of fiscal 2009 of $0.5 million were
$0.2 million lower compared to the same period in the prior year, primarily due
to the effect of favorable currency translation rates.






20





Operating
loss for the second quarter of fiscal 2009 was $(1.1) million compared to
operating income of $2.6 million in the comparable prior year
period.  Operating income at the Medical Systems Group for the second
quarter of fiscal 2009 was $2.4 million compared to $2.7 million for the same
period the prior year.  Power Conversion Group generated operating
income of $0.6 million in the second quarter of fiscal 2009, an increase over
the comparable prior year period of $0.3 million.





Operating
loss for the first six months of fiscal 2009 was $(1.3) million versus income of
$4.8 million in the comparable prior year period.  In the first half
of fiscal 2009, the Medical Systems Group had an operating profit of $2.0
million and the Power Conversion Group achieved an operating profit of $0.1
million.




Net loss
in the second quarter of fiscal 2009 was $(1.8) million, or $(0.08) per basic
share, compared to net income of $1.4 million, or $0.06 per basic share in the
comparable prior year period.  For the second quarter of fiscal 2009,
there were approximately 23.5 million weighted average common shares diluted
outstanding (“shares outstanding”) as compared to 24.1 million shares
outstanding diluted in the second quarter of fiscal 2008.  The
decrease in diluted shares outstanding was due to the impact of dilutive
warrants that expired August 2, 2008, the expiration of unexercised employee
stock options, and the Company’s repurchase of 1,527,859 outstanding common
shares pursuant to the common stock repurchase program described
below.




The
Company recorded net loss of $(2.4) million or $(0.10) per basic share in the
first half of fiscal 2009, compared to net income of $2.5 million or $0.10 per
basic share in the first half of the prior fiscal year.







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 residual
proceeds of the Rights Offering.




Working
Capital — At January 31, 2009 and August 2, 2008, our working capital was
approximately $24.0 million and $31.2 million, respectively.  The
decrease in working capital for the first six 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 resulting from lower sales and lower foreign currency translation
rates.




At January
31, 2009 and August 2, 2008, we had approximately $9.7 million and $7.9 million,
respectively, in cash and cash equivalents.  This increase is
primarily due to cash generated from a reduction in accounts receivable and an
increase in accrued liabilities.  As of January 31, 2009, we had
approximately $6.4 million of excess borrowing availability under our domestic
revolving credit facility compared to $9.0 million at January 26,
2008.  This decrease was due to the issuance of the Moeller LC, which
was terminated on February 2, 2009.




In
addition, as of January 31, 2009 and August 2, 2008, our Villa subsidiary had an
aggregate of approximately $11.5 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.






21




Cash Flows
from Operating Activities – For the six months ended January 31, 2009, the
Company generated approximately $5.2 million of cash from operations, compared
$3.0 million in the comparable prior fiscal year period.  The increase
is largely due to aggressive payables management and reduction of receivable
balances in the second quarter of 2009.




Cash Flows
from Investing Activities — The Company made $0.3 million of facility
improvements and capital equipment expenditures for the six months ended January
31, 2009, which was $0.1 million less than the facility improvements and capital
equipment expenditures for the comparable prior fiscal year
period.  As part of our cost reduction strategy, we will be relocating
the Company’s corporate location in April 2009.  The approximate cost
associated with this move will range between $0.15 to $0.25
million.







Cash Flows
from Financing Activities — During the six-month period ended January 31, 2009,
the Company repaid a total of $0.8 million of indebtedness on our Italian
borrowings, as compared to $0.6 million in the comparable prior fiscal year
period.  In addition, the Company repurchased approximately $1.6
million of its common stock outstanding in the second quarter of fiscal
2009.




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 January 31, 2009.




As of
January 31, 2009 and August 2, 2008, we did not have any outstanding borrowings
under our revolving credit facilities in the U.S. or Italy.




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 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
January 31, 2009 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.  This difference in borrowing
availability was due to the issuance of the Moeller LC, which was terminated on
February 2, 2009.




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.






22




The
company received a dividend from its Villa subsidiary in December 2008 of
approximately $1.812 million which was used to repurchase the Company’s
outstanding common stock per the common stock repurchase program described
below.




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.  On
February 4, 2009, the Company signed a lease for this new facility, which it
expects to occupy beginning April 2009.




On various
dates in December 2008 the Company repurchased a total of 1,527,859 common
shares then outstanding at a total cost of approximately $1.6
million.  In January 2009, the Company’s Board of Directors suspended
the common stock repurchase program.




There are
certain covenants, including tangible net worth that the Company must
meet.  As of January 31, 2009 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 January 31, 2009 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 1.0 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.




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 January 31, 2009, 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.






23




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.




On various
dates in December 2008 the Company repurchased a total of 1,527,859 common
shares then outstanding at a total cost of approximately $1.6
million.  In January 2009, the Company’s Board of Directors suspended
the common stock repurchase program.




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 as defined in the agreement.  On October 9, 2003, the Company
terminated Mr. Park’s employment, and 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 of
salary remaining under Mr. Park’s employment agreement.




The
Company’s employment agreement with Mr. Park provided for payments upon a change
in control as defined in the agreement.  The Company’s Board of
Directors elected at the Company’s Annual Meeting of Shareholders held on May
29, 2003, reviewed the “change in control” provisions in the employment
agreement between the Company and Mr. Park, regarding a payment to him in the
event of a change in control as defined in the agreement.  As a result
of this review and based upon, among other things, the advice of special
counsel, the Company’s Board of Directors determined that no obligation to make
the payment 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
him for a change in control had 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 a change in control payment.  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 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 and a declaration
that the amendment on legal fees incurred by him was valid and
enforceable.  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
or the declaration of validity and enforceability of the legal fees
amendment.  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.






24




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.




By motion
served on February 2, 2009, as amended by reply papers served by Mr. Park on
February 25, 2009, Mr. Park sought entry of judgment in the amount of
$2,153,412, along with post-judgment interest thereon, on Mr. Park’s first
counterclaim (change in control payment) and on his third counterclaim (in the
amount of the attorneys’ fees and disbursements incurred by him through November
30, 2008).  The motion also sought as part of the judgment a direction
that Del Global pay Park’s attorneys’ fees and disbursements incurred in the
action from on and after December 1, 2008 within thirty days after Mr. Park
submits to the Company written notice thereof.




Mr. Park’s
counsel advised the Court by letter in January 2009 that in his second
counterclaim, which was not a subject of any of the motions for summary judgment
previously made in the action, Mr. Park seeks a total of approximately $920,000
in alleged damages and interest thereon.  This total includes the
following items allegedly owed to him in the following approximate
amounts:  $605,000 for stock options, $193,000 (subsequently changed
to $174,000) for bonus for fiscal year 2004 pro rated to April 30, 2004, $81,000
for unused vacation, and $41,000 for business expenses.




On March
6, 2009, the parties reached an agreement in principal to settle the action for
payments by the Company to Mr. Park and his counsel totaling $2.5 million, all
subject to a written settlement agreement being signed by the
parties.  In contemplation of settlement, the Court dismissed the
action subject to either party requesting that it be restored to the calendar by
letter to the Court before March 23, 2009.




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.






25




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 could collect the amount of judgment
entered by the trial court in the event the appellate court affirms that
judgment.




By
Settlement Agreement and Release signed by the parties in January 2009, the
parties agreed to a settlement of this matter for payments by the Company to Mr.
Moeller and his counsel, totaling $1.6 million, which payments have been
made.  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 March 13,
2009, 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.






26




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.




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.






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.




Item
      4.
            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.






27




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




Item
      1.
            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 as defined in the agreement.  On October 9, 2003, the Company
terminated Mr. Park’s employment, and 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 of
salary remaining under Mr. Park’s employment agreement.




The
Company’s employment agreement with Mr. Park provided for payments upon a change
in control as defined in the agreement.  The Company’s Board of
Directors elected at the Company’s Annual Meeting of Shareholders held on May
29, 2003, reviewed the “change in control” provisions in the employment
agreement between the Company and Mr. Park, regarding a payment to him in the
event of a change in control as defined in the agreement.  As a result
of this review and based upon, among other things, the advice of special
counsel, the Company’s Board of Directors determined that no obligation to make
the payment 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
him for a change in control had 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 a change in control payment.  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 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 and a declaration
that the amendment on legal fees incurred by him was valid and
enforceable.  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
or the declaration of validity and enforceability of the legal fees
amendment.  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.






28




By motion
served on February 2, 2009, as amended by reply papers served by Mr. Park on
February 25, 2009, Mr. Park sought entry of judgment in the amount of
$2,153,412, along with post-judgment interest thereon, on Mr. Park’s first
counterclaim (change in control payment) and on his third counterclaim (in the
amount of the attorneys’ fees and disbursements incurred by him through November
30, 2008).  The motion also sought as part of the judgment a direction
that Del Global pay Park’s attorneys’ fees and disbursements incurred in the
action from on and after December 1, 2008 within thirty days after Mr. Park
submits to the Company written notice thereof.




Mr. Park’s
counsel advised the Court by letter in January 2009 that in his second
counterclaim, which was not a subject of any of the motions for summary judgment
previously made in the action, Mr. Park seeks a total of approximately $920,000
in alleged damages and interest thereon.  This total includes the
following items allegedly owed to him in the following approximate
amounts:  $605,000 for stock options, $193,000 (subsequently changed
to $174,000) for bonus for fiscal year 2004 pro rated to April 30, 2004, $81,000
for unused vacation, and $41,000 for business expenses.




On March
6, 2009, the parties reached an agreement in principal to settle the action for
payments by the Company to Mr. Park and his counsel totaling $2.5 million, all
subject to a written settlement agreement being signed by the
parties.  In contemplation of settlement, the Court dismissed the
action subject to either party requesting that it be restored to the calendar by
letter to the Court before March 23, 2009.




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 could collect the amount of judgment
entered by the trial court in the event the appellate court affirms that
judgment.






29




By
Settlement Agreement and Release signed by the parties in January 2009, the
parties agreed to a settlement of this matter for payments by the Company to Mr.
Moeller and his counsel, totaling $1.6 million, which payments have been
made.  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 March 13,
2009, 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.




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.






30




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




Our annual
report on Form 10-K for the fiscal year ended August 2, 2008 contains a detailed
discussion of our risk factors. The information below updates and should be read
in conjunction with the risk factors and other information disclosed in our 2008
Annual Report on Form
10-K.





Recent
and future economic conditions, including turmoil in the financial and credit
markets, may adversely affect our business.





Recent
economic conditions may adversely affect our business, including as a result of
the potential impact on the medical imaging and power
conversion system industries, our customers, our financing and other
contractual arrangements.  In addition, conditions may remain
depressed in the future or may be subject to further
deterioration.  Recent or future developments in the U.S. and global
economies may lead to a reduction in spending on the products we
provide, which could have an adverse impact on sales of our
products.





Tightening
of the credit markets and recent or future turmoil in the financial markets
could also make it more difficult for us to refinance our existing indebtedness
(if necessary), to enter into agreements for new indebtedness or to obtain
funding through the issuance of the Company’s
securities.  Specifically, the tightening of the credit markets and
turmoil in the financial markets could make it more difficult or impossible for
us to refinance or renew the Company’s existing credit facility with Capital One
Leverage Finance Corp. when it expires.





Worsening
economic conditions could also result in difficulties for financial institutions
(including bank failures) and other parties that we may do business with, which
could potentially, impair our ability to access financing under existing
arrangements or to otherwise recover amounts as they become due under our other
contractual arrangements.




Item 2.
            UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF
PROCEEDS




On
November 26, 2008, the Company announced that its 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.




Repurchases
pursuant to the Company’s stock repurchase program were made in the open market
or in negotiated transactions.  For the three months ended
January 31, 2009, the Company purchased 1,527,859 shares pursuant to the
Trading Plan Agreement, which is effective through November 25, 2009, unless
earlier terminated.  In January 2009, the Company’s Board of Directors
suspended the common stock repurchase program.  At the time the
Company’s Board of Directors suspended the repurchase program, the maximum
number of shares that were yet to be purchased under this plan was
896,757.






31





Period
                        Total
      Number of Shares Purchased
                        Average
      Price Paid Per ShareNovember,
      2008
                        0December,
      2008
                        1,527,859
                        $1.00January,
      2009
                        0





Item
4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS




At the
Company’s Annual Meeting of Shareholders held on December 16, 2008 (the “Annual
Meeting”), the Company’s shareholders reelected four (4) members of the board of
directors of the Company (Gerald M. Czarnecki, James R. Henderson, General
Merrill A. McPeak, James A. Risher) all of whom were incumbent directors elected
at the Company’s Annual Meeting of Shareholders held on February 26,
2008.  The votes cast for all nominees were as follows:





Nominees
                    In
      Favor
                    WithheldGerald
      M. Czarnecki
                    20,304,170
                    702,630James
      R. Henderson
                    20,303,058
                    703,742General
      Merrill A. McPeak
                    20,782,737
                    224,063James
      A. Risher
                    20,797,225
                    209,575





The votes
cast for, against and abstain to ratify the appointment of BDO Seidman, LLP as
our independent registered public accountants for the fiscal year ending August
1, 2009 were as follows:




FOR:  20,964,933
                    AGAINST:  36,590
                    ABSTAIN:  5,277









Item
6.      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






32




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:  March
17, 2009








33