UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K




FOR ANNUAL
AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934




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




For the
fiscal year ended August 1, 2009.




OR




oTRANSITION 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
            (I.R.S.
      Employer Identification No.)Incorporation
      or Organization)




50B
      N. GARY AVENUE, ROSELLE, IL
            60172(Address
      of Principal Executive Offices)
            (Zip
      Code)




Registrant’s
telephone number, including area code (847) 288-7000




Securities
registered pursuant to Section 12(b) of the Act:




Title
      of Each Class
            Name
      of Each Exchange on Which RegisteredNONE
            NONE




Securities
registered pursuant to Section 12(g) of the Act:




Common
Stock, $0.10 Par Value (“Common Stock”)




Rights to
Purchase Common Stock, par value $0.10 per share, distributed pursuant to Rights
Agreement dated January 22, 2007




(Common
Stock Purchase Rights)


(Title of
Class)




Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.  Yes o  Nox




Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.   Yes o  Nox




Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x  Noo




Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files) Yes x  Noo




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. T




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 o
            
            Accelerated filer
      oNon-accelerated
      filer o  (Do
      not check if a smaller reporting company)
            Smaller reporting
      company x




Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2). Yes o  Nox




The
aggregate market value of the registrant’s Common Stock held by non-affiliates
of the Registrant as of January 31, 2009 was $14,803,948.  Solely for
the purposes of this calculation, shares held by directors, executive officers
and by each person known by the Registrant to beneficially own 10% or more of
its outstanding common stock of the Registrant have been
excluded.  Such exclusion should not be deemed a determination or an
admission by the Registrant that such individuals are, in fact, affiliates of
the Registrant




As of
October 2, 2009 there were 22,718,306 shares of the registrant’s common stock
outstanding.




DOCUMENTS
INCORPORATED BY REFERENCE




None











PART IITEM 1
              BUSINESS
              1ITEM 1A
              RISK FACTORS
              11ITEM 1B
              UNRESOLVED STAFF COMMENTS
              16ITEM 2
              PROPERTIES
              16ITEM 3
              LEGAL PROCEEDINGS
              16ITEM 4
              SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
              16PART
      IIITEM 5
              MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
      STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY
      SECURITIES
              17ITEM 6
              SELECTED FINANCIAL DATA
              17ITEM 7
              MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OFOPERATIONS
              18ITEM 7A
              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
              28ITEM 8
              FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA
              29ITEM 9
              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING ANDFINANCIAL DISCLOSURE
              29ITEM 9A(T)
              CONTROLS AND PROCEDURES
              29ITEM 9B
              OTHER INFORMATION
              30PART
      IIIITEM 10
              DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
      GOVERNANCE
              31ITEM 11
              EXECUTIVE COMPENSATION
              33ITEM 12
              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND

                  RELATED STOCKHOLDER MATTERS
              41ITEM 13
              CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, 
      AND DIRECTOR INDEPENDENCE
              43ITEM 14
              PRINCIPAL ACCOUNTANT FEES AND
      SERVICES
              44PART
      IVITEM 15
              EXHIBITS AND FINANCIAL STATEMENT
      SCHEDULES
              45SIGNATURES
              
              52












PART
I




ITEM
1BUSINESS


Del Global
Technologies Corp., a New York corporation, was incorporated in
1954.  Unless otherwise specifically indicated, “Del Global”, the
“Company”, “we”, “our”, “ours” and “us” refers to Del Global Technologies Corp.
and its consolidated subsidiaries.  We are a leader in developing,
manufacturing and marketing medical and dental imaging systems and power
conversion subsystems and components worldwide.  Our products include
stationary and portable medical and dental diagnostic imaging systems and
electronic systems and components such as electronic filters, transformers and
capacitors.




The
Company is headquartered in Roselle, Illinois.  The mailing address of
our headquarters is 50B N Gary Avenue, Roselle, Illinois 60172 and our telephone
number is 847-288-7000.  Our website is
www.delglobal.com.  Through the Investor Relations section of our
website, we make our filings with the Securities and Exchange Commission (“SEC”)
available as soon as practicable after they are electronically filed with the
SEC.  These include our Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K. To reach the SEC filings, follow
the link to Investor Relations, and then Financial Reports.




The sale of Del High
Voltage Division (“DHV”), which was part of our Power Conversion Group, was
consummated on October 1, 2004.  Accordingly, this business is
presented as a discontinued operation in all fiscal years presented and
throughout this Form 10-K.




Subsequent
to our fiscal year end the Board of the Company decided to exit the Del Medical
U.S. business unit. This business is part of the Company’s Medical Systems
Group, however, this decision does not include or impact the operations of our
Villa subsidiary which will make up the whole of the Medical Systems Group going
forward.






EMPLOYEES




As of
August 1, 2009, we had 263 employees.  We believe that our employee
relations are good.  None of our approximately 140 U.S. based
employees are represented by a labor union.  Employment by functional
area as of August 1, 2009 is as follows:




Executive
            
            
            2Administration
      and Finance
            
            
            22Manufacturing
            
            
            186Engineering
            
            
            29Sales
      and Marketing
            
            
            24Total
            
            
            263




OPERATING
SEGMENTS




The
operating businesses that we report as segments consist of the Medical Systems
Group and the Power Conversion Group.  For fiscal 2009, the Medical
Systems Group segment accounted for approximately 85% of our revenues and the
Power Conversion Group segment accounted for approximately 15% of our
revenues.  Our consolidated financial statements include a
non-operating segment which covers unallocated corporate costs.  For
the fiscal year ended August 1, 2009, none of our customers accounted for 10% or
more of consolidated revenues and one of our Medical Systems Group customers
accounted for approximately 14% of consolidated gross accounts
receivable.  For the fiscal year ended August 2, 2008, one of our
Medical Systems Group customers accounted for approximately 13% of consolidated
revenues and 1% of gross accounts receivable.  For the fiscal year
ended July 28, 2007, one of our Medical Systems Group customers accounted for
approximately 12% of consolidated revenues and 11% of gross accounts
receivable.  None of our business segments are dependent upon a single
customer or a few customers.  For further information concerning our
operating segments, see Note 8 of the Notes to Consolidated Financial Statements
in Part II, Item 8 of this Annual Report.  Our operating segments and
businesses are summarized in the following table:




DIVISION
            BRANDS
            SUBSIDIARIES
            FACILITIESMEDICAL
      SYSTEMS GROUP:Medical Imaging
            Del
      Medical, Villa,
            Del
      Medical Imaging Corp.
            Roselle,
      ILUNIVERSAL,
      DynaRad, VetVision DRds
            (“Del
      Medical”)Villa
      Sistemi Medicali
            Milan,
      ItalyS.p.A.
      (“Villa”)POWER
      CONVERSION GROUP:Electronic Systems
      & Components
            RFI,
      Filtron, Sprague,
              Stanley
            RFI
      Corporation (“RFI”)
            Bay
      Shore, NY




1





MEDICAL
SYSTEMS GROUP




Our Medical Systems Group
designs, manufactures, markets and sells medical and dental diagnostic imaging
systems consisting of stationary and portable imaging systems,
radiographic/fluoroscopic systems, dental imaging systems and digital
radiography systems. Approximately 60% of this segment’s revenues were
attributed to Villa in fiscal 2009.




Prior to December 23, 2005,
the Company owned 80% of the Villa subsidiary.   On December 23,
2005, the Company acquired the remaining 20% of Villa for $2.6 million plus
904,762 restricted shares of Company common stock which were valued at $2.9
million.




Medical imaging systems of
the types we manufacture use x-ray technology to produce diagnostic images of
matter beneath an opaque surface. An imaging system principally consists of a
high voltage power supply, an x-ray tube, a patient positioning system, and an
image recording system, which is either film or a digital detector. X-rays are
generated as a result of high voltage passing through a filament or cathode in
an x-ray tube.  The cathode emits energized electrons which collide
with a positively charged tungsten anode within the tube.  The
collision of these energized electrons with the anode emits the x-ray photons or
x-rays.  The x-ray tube is surrounded by a lead shield which contains
an opening and various filters to direct the x-rays towards the
patient.




The performance of the
x-ray system, including image resolution, is directly linked to the precision
performance of the high voltage power supply. The object to be imaged is placed
between the x-ray tube and the image recording system. X-rays, which are not
reflected by opaque surfaces, pass through the object and expose the film or
image recording system. However, if the object is comprised of areas of varying
densities or chemical compositions, x-rays will be absorbed in proportion to the
density or chemical composition of the matter. As a result, the film will be
exposed to a varying degree, thereby producing an image of the density or
chemical variation within the object. For example, because bone has a greater
density than the surrounding tissue in the body, x-rays can be used to produce
an image of a skeleton.  X-ray systems are differentiated by a number
of key characteristics such as application, image capture technology, image
resolution, accuracy, portability, size and cost.  The design of an
x-ray system requires complex engineering, which determines the performance
factors required of the various system components.




This segment designs,
manufactures, markets and sells medical and dental diagnostic imaging systems
worldwide in the following markets:




MEDICAL
SYSTEMS GROUP MARKETS SERVED




Hospitals
            Veterinary
      ClinicsTeaching
      Institutions
            Chiropractic
      ClinicsMedical
      Clinics
            Dental
      OfficesPrivate
      Practitioners
            Military/GovernmentOrthopedic
      FacilitiesImaging
      Centers




Our
medical imaging systems are sold under the Del Medical, Villa, UNIVERSAL,
VetVision DRds and DynaRad brand names. The prices of our medical imaging
systems range from approximately $9,000 to $300,000 per unit, depending on the
complexity and flexibility of the system.




2




PRODUCTS
 
 GENERAL RADIOGRAPHIC SYSTEMS-
For more than 100 years, conventional projection radiography has used film to
create x-ray images. Conventional technology requires that x-ray film be exposed
and then chemically processed to create a visible image for
diagnosis.
 
 We produce
a broad line of conventional radiographic products used in outpatient
facilities, as well as more sophisticated and expensive x-ray systems typically
used in hospitals and clinics. For example, our higher-end Advanced Radiography
System (ARSII), U-ARC DRT Digital Radiographic Systems and TITAN lines are
designed to meet the broad requirements of a hospital or teaching university’s
radiographic room, while our mid-range Del Medical and Villa systems are suited
more to the needs of medium sized hospitals, outpatient clinics and private
practitioners.
 
 The
Moviplan product line manufactured under the Villa brand includes a variety of
configurations that fit a wide range of markets, spanning from small private
practices to hospitals, with a specific accent on emerging countries. A leading
model is the tomographic version, which allows users to take images of multiple
sections of the body.  This type of system is manufactured by
relatively few companies worldwide.
 
 We also
have a broad range of products serving medical practitioners, veterinarians and
chiropractors through our UNIVERSAL and VetVision DRds brand product lines.
These units are designed for durability, space efficiency and are priced more
economically. Our UNIVERSAL medical products include a variety of configurations
that can be constructed to best suit the needs of the desired work environment.
Our UNIVERSAL AVChoice and DVChoice veterinary line of products is designed with
many of the same attributes as the medical line. Our UNIVERSAL chiropractic
line, consisting of our DCChoice, Raymaster and PreciseView product, combine
precision alignment and positioning with a versatile chiropractic imaging
systems for both analog and digital applications. Our VetVision DRds is a
digital high-resolution x-ray unit designed to give veterinarians greater
flexibility as it produces high-resolution digital images and takes up less
space than other comparable products.
 
 During
fiscal 2009, we expanded our product portfolio with the introduction of the Del
Medical GEMINI and TITAN digital product lines.    These
systems enable radiologists to obtain better patient images within a fraction of
the time and with lower overall costs than traditional film-based
systems.
  We also
produce a full product line of high frequency medical x-ray generators which
economically provide superior quality x-ray generation, resulting in lower
patient dosage, extended tube life and less blurring due to patient motion when
compared to single phase generators. We continue to investigate arrangements
with generator suppliers on a global basis to further upgrade our medical x-ray
generator offerings.
 
 RADIOGRAPHIC/FLUOROSCOPIC
SYSTEMS - We produce a wide range of radiographic/fluoroscopic, or R/F,
systems that are able to perform complex x-ray examinations with contrast
liquids for sequential and real time images. The Vision and Viromatic systems
are based on the “classical approach” and require the operator to stay in close
contact to the equipment and the patient. These systems are often used for
diagnostic gastrointestinal procedures to image the progress of a radiopaque
solution (typically barium) as it travels through the digestive tract. The
Apollo Remote R/F system is based on the more modern “remote control” technology
and allows the technologist and radiologist to operate the system and perform
the entire examination from a separate room, being totally shielded from the
x-ray source. The remote controlled system is also our most flexible x-ray
imaging unit as it allows skeletal, gastrointestinal, vascular, urological and
gynaecological studies in the same room.  Remote controlled systems
like the Apollo R/F system are also widely used in connection with our digital
acquisition system, DIVA, to perform digital image acquisition and real time
angiographic examinations with a vast choice of image acquisition and
post-processing tools. The DIVA system can also be equipped with DICOM
functionalities that enable images to be sent to centralized archival units,
image reviewing workstations, laser imagers, and in general allow the system to
be fully integrated into PACS (Picture Archival and Communication Systems)
networks within a hospital. As of today, the Apollo Remote R/F system table,
with a DIVA-D digital acquisition system represents a sophisticated system and
technology produced by the Medical Systems Group.   Recently
dynamic flat panels have become an available alternative to carry on fluoroscopy
at 43 x 43 cm detector size. Villa has already released the Apollo DRF version.
Implementing this new technology will help improve the productivity of the
radiographic room by providing a fully digital environment for both radiographic
and fluoroscopic applications. This product represents the most advanced and
sophisticated system produced by the Medical Systems Group.
 
 PORTABLE AND MOBILE MEDICAL X-RAY
SYSTEMS – In 2009, we discontinued the portable x-ray equipment under our
DynaRad brand including the HF-110A and PHANTOM systems.  Previously
purchased units will continue to be covered through our standard
warranty.
  3
  Larger and
more powerful mobile units are also manufactured and distributed under the Villa
brand and include the “Visitor” product line with high frequency generators up
to 30 kilowatts that are typically used in hospitals to take radiographic images
directly at the patient’s bed.
 
 DENTAL SYSTEMS - We produce a
broad range of DC and AC powered intra-oral (commonly known as bite wing) x-ray
systems at our Villa facility.  In addition, our Rotograph Plus and
Strato-2000 systems are utilized to perform panoramic images for dental
applications using both analog and digital image capture technology. The most
recent addition to the dental product line is the new Rotograph Evo panoramic,
which inherits the “Rotograph” name that has been a landmark in the panoramic
imaging for decades and brings important advances such as the possibility to use
one mobile detector to perform both panoramic and cephalometric studies, with a
substantial saving in the investment for the user. The digital versions of the
panoramic units can easily be connected to a personal computer for immediate
image reviewing, post-examination processing and cost effective printing and
archival. The relatively small price differential between digital and analog
panoramic units has triggered a very quick shift to digital technology in the
marketplace which accounts for approximately 12% of the volume of new units sold
over the past three years. The dental products are sold both with our own brand
(Villa), as well as private labeled units to selected OEM
customers.
 
 MAMMOGRAPHY SYSTEMS - We
currently resell the Melody II system outside of the U.S.  The Melody
II unit is manufactured by a European-based manufacturer and sold under the
Villa brand.  Although we have exclusive use of the “Melody II” name,
our supplier markets a similar product in several competing
markets.
 
 SURGICAL C-ARMS – We sell a
mobile C-arm unit called “Arcovis 3000” under the Villa brand.  The
product is manufactured by a European company that also sells similar products
to other customers.
 
 MARKETING
AND DISTRIBUTION
  Our
medical imaging systems are sold in the U.S. and internationally, principally by
a network of over 300 distributors worldwide. This network expanded during
fiscal year 2008 when we partnered with one of the largest dealer buying groups
to distribute our digital and general radiographic imaging equipment for the
medical, chiropractic and veterinary markets.  Medical imaging system
distributors are supported by our regional managers, area managers, marketing
managers and technical support groups, who train distributor sales and service
personnel and participate in customer calls.  Due to the different
markets and end use customers for dental as compared to medical imaging systems,
dental products are distributed by a separate network of dental dealers who
target the dental practitioners market.  In addition, we do some
private label manufacturing of dental products for certain OEM
customers.
 
 Technical
support in the selection, use and maintenance of our products is provided to
distributors and professionals by customer service representatives. We also
maintain telephone hotlines to provide technical assistance to distributors
during regular business hours. We have recently established the position of
“Application Specialists” in both the U.S. and Italian facilities to maximize
customer satisfaction and provide value-added services to our customers buying
digital radiographic and fluoroscopic systems.  Additional product and
distributor support is provided through participation in medical equipment
exhibitions and trade specific advertising.  In 2009 we introduced the
Del Medical Leasing Program, which provides a lease-to-own option that allows
our dealers to facilitate sales and provide more diversity in financing
options.
 
 We
typically exhibit our products at annual conferences, including the RSNA
Conference in Chicago, the MEDICA Medical Conference in Dusseldorf, Germany, the
European Congress of Radiology (ECR) Conference in Vienna, Austria, and the
International Dental Show (IDS) in Cologne, Germany and other venues
worldwide.  Sales of the Company’s products in North America are
typically on open account with 30 day terms.  Our products sold
outside of North America are usually secured by a letter of credit to mitigate
any potential credit risk, with longer terms being given to non-U.S. customers
as is customary in international business.  Our Company also has the
capacity to participate in and win large international tenders, which require
careful assessment of the commercial aspects, regulatory requirements,
production planning and financial exposure.  Multi-million dollar
tenders have been awarded to our Villa operation in the last two fiscal years in
countries, including Mexico, Lithuania, Romania, Russia and
Vietnam.
 
 RAW
MATERIALS AND PRINCIPAL SUPPLIERS
  The
Medical Systems Group in most cases uses two or more alternative sources of
supply for each of its raw materials, which consist primarily of mechanical
subassemblies, electronic components, x-ray tubes and x-ray generators. In
certain instances, however, the Medical Systems Group will use a single source
of supply when directed by a customer or by need. In order to ensure the
consistent quality of the Medical System Group’s products, the Company follows
strict supplier evaluation and qualification procedures, and where possible,
enters into strategic relationships with its suppliers to assure a continuing
supply of high quality critical components.
  4
 
 With
respect to those items which are purchased from single sources, we believe that
comparable items would be available in the event that there was a termination of
our existing business relationships with any such supplier. Actual experience
could differ materially from this belief as a result of a number of factors,
including the time required to locate an alternate source for the
material.
 
 The
majority of the Medical System Group’s raw materials are purchased on open
account from vendors pursuant to various individual or blanket purchase orders.
Procurement lead times are such that the Company is not required to hold
significant amounts of inventory in order to meet customer demand. The Company
believes its sources of supply for the Medical Systems Group are adequate to
meet its needs.
 
 COMPETITION
  Our
Medical Systems Group competes in two major segments of the highly competitive,
world-wide conventional radiographic and R/F products
marketplace.  Our top-tier conventional radiographic products are sold
through national, regional and independent distributors.  In 2006, the
Medical Systems Group extended its access to the U.S. market by entering into
relationships with a national Group Purchasing Organization and several smaller
multi-hospital networks.  The three major competitors in this market
segment are GE Healthcare Systems, a division of General Electric Company,
Siemens Medical Solutions, a division of Siemens AG and Philips Medical Systems,
a division of Philips Electronics N.V. They compete with us on customer support,
features and breadth of product offerings.  These larger competitors
primarily sell directly to large hospitals and teaching institutions and sell a
broader range of products designed to outfit a hospital’s entire imaging
requirements. In Europe, Africa, the Middle East and the Far East, competition
is also represented by other mid-tier European companies, as well as local
manufacturers who mainly address the middle and low market
tier.
 Our
lower-tier conventional radiographic products principally compete with several
small companies based primarily in the U.S. and Europe. In some price-driven
markets, we also find competition from Korean and Chinese
products.  Most of these companies sell through independent
distributors and compete with us primarily on price, quality and performance. We
believe that we can be differentiated from our competitors based on our
combination of price, quality and performance, together with the strength and
breadth of our independent distribution network, and the growth of our product
portfolio.
 
 The
markets for our products are highly competitive and subject to technological
change and evolving industry requirements and standards. Cost containment and
pricing is also a critical driving factor, given the threat that is being posed
by the aggressive policies of Korean and Chinese manufacturers attempting to
capture market shares out of their boundaries.  Price erosion is not
only a factor in the low-end tier, but also at top level, where all companies,
including the large multinationals such as GE, Philips and Siemens are driving
down their prices.We believe that these trends will continue into the
foreseeable future. Some of our current and potential competitors have
substantially greater financial, marketing and other resources than we do. As a
result, they may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than we can. Competition could increase if
new companies enter the market or if existing competitors expand their product
lines or intensify efforts within existing product lines. Although we believe
that our products are more cost-effective than those of our primary competitors,
certain competing products may have other advantages which may limit our market.
There can be no assurance that continuing improvements in current or new
competing products will not make them technically equivalent or superior to our
products in addition to providing cost or other advantages. There can be no
assurance that our current products, products under development or ability to
introduce new products will enable us to compete effectively.
 
 PRODUCT
DEVELOPMENT
  It is generally accepted that digital
radiography will continue to become the dominant technology used in hospitals
and imaging clinics throughout the world over the next 10 to 15 years.
Currently, there are a number of competing technologies available in connection
with the digitization of x-ray images. In addition, there are substantial
hurdles which need to be addressed in terms of transitioning radiology practices
from the current analog environment to a digital environment. These ancillary
issues include image storage and retrieval and record keeping. However, due to
the high cost of this technology, many institutions have not yet adopted digital
technology. In addition, there is uncertainty as to which technology will be
accepted as the industry-standard for image capture and communication and
storage of digital image information.
  5
  For the
medical imaging market, we currently have two digital radiographic solutions and
are committed to expanding our selection to include a wider range of low-cost
offerings for customers. While many of our competitors have invested heavily
into developing a digital detector, we have chosen to align with technology
leaders who have already made digital investments and could benefit from our
x-ray platform design, our systems integration capabilities and our worldwide
dealer network. This strategy also accelerates our time-to-market with new
digital solutions and avoids the significant development costs being incurred by
our competitors.
 
 Consequently,
our current research and development spending is focused on both enhancing our
existing conventional radiographic products and continuing to enhance our
digital radiographic solutions and explore partnerships with strategic vendors
in the digital marketplace.   The introduction of digital imaging
is growing much faster in dental applications where the cost difference between
traditional and digital does not represent a significant barrier.  In
order to more fully participate in the digital dental market, Villa has
initiated a strategic partnership with a French company, Owandy S.A.S., that
provides the digital solutions for dental panoramic units and Villa is offering
a full line of digital panoramic units.
 
 Spending
for research and development for our Medical Systems Group was approximately
$2.0 million for fiscal year 2009, $2.5 million for fiscal year 2008 and $2.0
million for fiscal year 2007.
 
 TRADEMARKS
AND PATENTS
  The
majority of the Medical System Group’s products are based on technology that is
not protected by patent or other rights. Within the Medical System Group,
certain of our products and brand names are protected by trademarks, both in the
U.S. and internationally. Because we do not have patent rights in our products,
our technology may not preclude or inhibit competitors from producing products
that have identical performance as our products. Our future success is dependent
primarily on the technological expertise and management abilities of our
employees and the strength of our relationship with our worldwide dealer
network.
  GOVERNMENT
REGULATION
  Our
medical imaging systems are medical devices subject to regulation by the U.S.
Food and Drug Administration (the “FDA”) and to regulation by foreign
governmental authorities. We also are subject to various state and local
regulations. Regulatory requirements include registration as a manufacturer,
compliance with established manufacturing practices, procedures and quality
standards, strict requirements dealing with the safety, effectiveness and other
properties of the products, conformance with applicable industry standards,
product traceability, adverse event reporting, distribution, record keeping,
reporting, compliance with advertising and packaging standards, labeling, and
radiation emitting qualities of these products. Failure to comply can result in,
among other things, the imposition of fines, criminal prosecution, recall and
seizure of products, injunctions restricting or precluding production or
distribution, the denial of new product approvals and the withdrawal of existing
product approvals.
 
 FDA’S
PREMARKET CLEARANCE AND APPROVAL REQUIREMENTS
 
 In the
U.S., medical devices are classified into three different categories over which
the FDA applies increasing levels of regulation: Class I, Class II and Class
III. Del Medical manufactures several Class I and Class II
devices.  Before a new Class II device can be introduced into the U.S.
market, the manufacturer must obtain FDA clearance or approval through either
premarket notification under Section 510(k) of the Federal Food, Drug, and
Cosmetic Act, or a premarket approval under Section 515 of that Act, unless the
product is otherwise exempt from the requirements.
 
 A Section
510(k) premarket notification must contain information supporting the claim of
substantial equivalence, which may include laboratory results and product
comparisons to existing devices.  Following submission of a 510(k)
application, a manufacturer may not market the device until the FDA finds the
product is substantially equivalent for a specific or general intended use. FDA
510(k) clearance generally takes 90 days and may take longer if FDA requests
additional information. There is no assurance the FDA will ultimately grant a
clearance. The FDA may determine that a device is not substantially equivalent
and may require submission and approval of a premarket approval application or
require further information before it is able to make a determination regarding
substantial equivalence.
 
 After a device receives 510(k)
clearance, any modification made to the device requires the manufacturer to
determine whether the modification could significantly affect its safety or
effectiveness. If it does not, the manufacturer’s decision must be documented.
If the modification could significantly affect the device’s safety and
effectiveness, then the modification requires at least a new 510(k) clearance
or, in some instances, could require a premarket approval. The FDA requires each
manufacturer to make this determination, but the FDA can review any
manufacturer’s decision. If the FDA disagrees with a manufacturer’s decision,
the agency may retroactively require the manufacturer to seek 510(k) clearance
or premarket approval. The FDA also can require the manufacturer to cease
marketing the modified device or recall the modified device (or both) until
510(k) clearance or premarket approval is obtained. We have made minor
modifications to our products and, using the guidelines established by the FDA,
have determined that these modifications do not require us to file new 510(k)
submissions. If the FDA disagrees with our determinations, we may not be able to
sell one or more of our products until the FDA have cleared new 510(k)
submissions for these modifications.
  6
  All of our
products marketed in the U.S. have met the appropriate FDA requirements for
marketing, either because they were exempt from submission or through 510(k)
clearance. We continuously evaluate our products for any required new submission
for changes or modifications.
 
 PERVASIVE
AND CONTINUING FDA REGULATION
 
 Numerous
FDA regulatory requirements apply to our products as well as to components
manufactured by some of our suppliers. These requirements include:
 
 -
              The
      FDA’s quality system regulation which requires manufacturers to create,
      implement and follow numerous design, testing, control, documentation and
      other quality procedures; and
 -
              Medical
      device reporting regulations, which require that manufacturers report to
      the FDA certain types of adverse and other events involving their
      products.
 
 Class II
devices may also be subject to special controls, such as performance standards,
post-market surveillance, patient registries and FDA guidelines that may not
apply to Class I devices. Our products are currently subject to FDA guidelines
for 510(k) cleared devices and are not subject to any other form of special
controls. We believe we are in compliance with the applicable FDA guidelines,
but we could be required to change our compliance activities or be subject to
other special controls if the FDA changes its existing regulations or adopts new
requirements.
 
 We and
some of our suppliers are subject to inspection and market surveillance by the
FDA to determine compliance with regulatory requirements. If the FDA finds that
either we or a supplier have failed to adequately comply, the agency can
institute a wide variety of enforcement actions, ranging from a public warning
letter to more severe sanctions such as: fines, injunctions and civil penalties;
recall or seizure of our products; the imposition of operating restrictions,
partial suspension or total shutdown of production; the refusal of our requests
for 510(k) clearance or premarket approval of new products; the withdrawal of
510(k) clearance or premarket approval already granted; and criminal
prosecution.
 
 The FDA
also has the authority to require repair, replacement or refund of the cost of
any medical device manufactured or distributed by us. Our failure to comply with
applicable requirements could lead to an enforcement action that may have an
adverse effect on our financial condition and results of
operations.
 
 OTHER
FEDERAL AND STATE REGULATIONS
 
 As a
participant in the health care industry, we are subject to extensive and
frequently changing regulation under many other laws administered by
governmental entities at the federal, state and local levels, some of which are,
and others of which may be, applicable to our business. For example, our Del
Medical Imaging facility is also licensed as a medical product manufacturing
site by the state of Illinois and is subject to periodic state regulatory
inspections. Our health care service provider customers are also subject to a
wide variety of laws and regulations that could affect the nature and scope of
their relationships with us.
 
 FOREIGN
GOVERNMENT REGULATION
 
 Our
products are also regulated outside the U.S. as medical devices by foreign
governmental agencies, similar to the FDA, and are subject to regulatory
requirements, similar to the FDA’s, in the countries in which we plan to sell
our products. We work with our foreign distributors to obtain the foreign
regulatory approvals necessary to market our products outside of the U.S. In
certain foreign markets, it is necessary to obtain ISO 9001 certification, which
is analogous to compliance with the FDA’s Good Manufacturing Practices
requirements. It is also necessary to obtain ISO 13485 certification, which
specifies requirements for a quality system to be used for design and
development, production, installation and servicing of medical devices. We have
obtained ISO 9001 certification and ISO 13485 certification, for both of our
medical systems manufacturing facilities.  In many European
Communities and other international locations it is necessary or desirable to
have a “CE” (Communities of Europe) mark on our products. This involves
substantial testing by a third party such as Underwriters Laboratories or
Electronics Testing Laboratories and for some devices, a certificate from a
notified body declaring conformance to applicable directives and regulations. We
have completed the necessary third party testing at both manufacturing
locations, maintain the necessary certifications and are qualified to place the
CE mark on all products intended for sale in such countries. The time and cost
required obtaining market authorization from other countries and the
requirements for licensing a product in another country may differ significantly
from FDA requirements.
  7
  No
assurance can be given that the FDA or foreign regulatory agencies will give the
requisite approvals or clearances for any of our medical imaging systems and
other products under development on a timely basis, if at all. Moreover, after
clearance is given, both in the case of our existing products and any future
products, these agencies can later withdraw the clearance or require us to
change the system or our manufacturing process or labeling, to supply additional
proof of its safety and effectiveness, or to withdraw, recall, repair, replace
or refund the cost of the medical system, if it is shown to be hazardous or
defective.
 
 DISCONTINUED
OPERATIONS
 
 Subsequent
to our fiscal year end the Board of the Company decided to exit the Del Medical
U.S. business unit. This business is part of the Company’s Medical Systems
Group, however, this decision does not include or impact the operations of our
Villa subsidiary which will make up the whole of the Medical Systems Group going
forward.
 
 The
options for exiting the Del Medical U.S. business unit include a sale of the
operations, a sale of certain assets and product lines of the business unit, or
a full shut down. The Company is currently engaged in discussions with
prospective buyers for the operation, product lines, or assets and expects to
make a final decision regarding the business unit in the near
future.
 
 The
results of this business disposition will be reported as a loss from
discontinued operations in our fiscal 2010 first quarter 10-Q in accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”
 
 The loss
on disposition, under the assumption of a full shut down and including non cash
asset write offs, is estimated to be in the range of $6.0 million to $6.5
million and will be recorded in the first quarter results.
 
 POWER
CONVERSION GROUP
 
 Our Power
Conversion Group designs, manufactures, markets and sells high voltage precision
components and sub-assemblies and electronic noise suppression components for a
variety of applications. These products are utilized by original equipment
manufacturers (“OEMs”) who build systems that are used in a broad range of
markets. Our products are sold under the following industry brands: RFI,
Filtron, Sprague and Stanley. This segment is comprised of electronic systems
and components.
 
 This
segment designs and manufactures key electronic components such as transformers,
magnetics, noise suppression filters and high voltage capacitors for use in
precision regulated high voltage applications. Noise suppression filters and
components are used to help isolate and reduce the electromagnetic interference
(commonly referred to as “noise”) among the different components in a system
sharing the same power source. Examples of systems that use our noise
suppression products include aviation electronics, mobile and land-based
telecommunication systems and missile guidance systems.
 
 The Power
Conversion Group provides subsystems and components which are used in the
manufacture of medical electronics, military and industrial applications as
follows:
 
 POWER
CONVERSION GROUP MARKETS SERVED
   AEROSPACE,
      DEFENSE & HOMELAND SECURITY
              
              INDUSTRIAL/COMMERCIALGuidance
      & Weapons Systems
              
              Induction
      HeatingCommunications
              
              MeteorologicalRadar
      Systems
              
              Power
      SystemsMilitary
      Shelters
              
              SatellitePower
      Systems
              
              Shielded
      Rooms/EnclosuresAerospace
      Electronics
              
              Power
      SystemsAircraft
      Lighting SystemsTelecommunication
      ElectronicsTELECOMMUNICATIONS
              
              MEDICALTelecom
      Equipment for Voice & Data Transmission
              
              Radiation
      OncologyTelephone
      Switching Systems
              
              Magnetic
      Resonance Imaging (“MRI”)CT
      ImagingX-Ray
  8
  PRODUCTS
 
 MILITARY APPLICATIONS -
Through our relationships with many of the federal government’s top defense
suppliers, such as Raytheon, Boeing, Lockheed Martin and Northrop Grumman, we
supply electronic components for various classified and unclassified programs
including radar systems, guidance systems, weapons systems and communication
electronics.  On May 24, 2007, the Company's RFI subsidiary was served
with a subpoena to testify before a grand jury of the United States District
Court, Eastern District of New York to provide items and records from its Bay
Shore, New York offices in connection with U.S. Department of Defense (“DOD”)
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. The Company's RFI subsidiary is continuing to
ship products to the U.S. Government as well as to its commercial
customers.
 
 INDUSTRIAL APPLICATIONS - Our
high voltage power components and EMI filters are used in many leading-edge high
technology scientific and industrial applications by OEMs, universities and
private research laboratories. Some industrial applications using high voltage
subsystems include DNA sequencing, molecular analysis, printed circuit board
inspection, structural inspection, food and mail sterilization and semiconductor
capital equipment.
 
 MARKETING,
SALES AND DISTRIBUTION
  We market
our Power Conversion Group products through in-house sales personnel,
independent sales representatives in the U.S., and international agents in
Europe, Asia, the Middle East, Canada and Australia. Our sales representatives
are compensated primarily on a commission basis and the international agents are
compensated either on a commission basis or act as independent distributors. Our
marketing efforts emphasize our ability to custom engineer products to optimal
performance specifications. We emphasize team selling where our sales
representatives, engineers and management personnel all work together to market
our products. We also market our products through catalogs and trade journals
and participation in industry shows. Sales of the Company’s products are
typically on open account with 30 day terms. New accounts are established with
cash on delivery or cash in advance terms.
 
 RAW
MATERIALS AND PRINCIPAL SUPPLIERS
  The Power
Conversion Group in most cases uses two or more alternative sources of supply
for each of its raw materials, which consist primarily of electronic components
and subassemblies, metal enclosures for its products and certain other
materials. In certain instances, however, the Power Conversion Group will use a
single source of supply when directed by a customer or by need. In order to
ensure the consistent quality of the Power Conversion Group’s products, the
Company performs certain supplier evaluation and qualification procedures, and
where possible, enters into strategic partnerships with its suppliers to assure
a continuing supply of high quality critical components.
 
 With
respect to those items which are purchased from single sources, we believe that
comparable items would be available in the event that there was a termination of
our existing business relationships with any such supplier. Actual experience
could differ materially from this belief as a result of a number of factors,
including the time required to locate an alternate source for the
material.
 
 The
majority of the Power Conversion Group’s raw materials are purchased on open
account from vendors pursuant to various individual or blanket purchase orders.
Procurement lead times are such that the Company is not required to hold
significant amounts of inventory in order to meet customer demand. The Company
believes its sources of supply for the Power Conversion Group are adequate to
meet its needs.
  9
  COMPETITION
  Our Power
Conversion Group competes with several small, privately owned suppliers of
electronic systems and components. From our perspective, competition is
primarily based on each company’s design, service and technical capabilities,
and secondarily on price. Excluding the OEMs that manufacture their own
components, based on market intelligence we have gathered, we believe that we
are among the top two or three in market share in supplying these
products.
 
 The
markets for our products are subject to limited technological changes and
gradually evolving industry requirements and standards. We believe that these
trends will continue into the foreseeable future. Some of our current and
potential competitors may have substantially greater financial, marketing and
other resources than we do. As a result, they may be able to adapt more quickly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources to the promotion and sale of their products than we
can. Competition could increase if new companies enter the market or if existing
competitors expand their product lines or intensify efforts within existing
product lines. Although we believe that our products are more cost-effective
than those of our primary competitors, certain competing products may have other
advantages which may limit our market. There can be no assurance that continuing
improvements in current or new products will not make them technically
equivalent or superior to our products in addition to providing cost or other
advantages. There can be no assurance that our current products, products under
development or our ability to introduce new products will enable us to compete
effectively.
 
 PRODUCT
DEVELOPMENT
  We have a
well developed engineering and technical staff in our Power Conversion Group.
Our technical and scientific employees are generally employed in the engineering
departments at our RFI business unit, and split their time, depending on
business mix and their own technical background, between supporting existing
production and development and research efforts for new product variations or
new customer specifications. Our products include transformers, noise
suppression filters and high voltage capacitors for use in precision regulated
high voltage applications. Noise suppression filters and components are used to
help isolate and reduce the electromagnetic interference (commonly referred to
as “noise”) among the different components in a system sharing the same power
source. Examples of systems that use our noise suppression products include
aviation electronics, mobile and land-based telecommunication systems and
missile guidance systems. No significant engineering related time was charged to
research and development spending for the continuing operations of the Power
Conversion Group in fiscal years 2009, 2008 or 2007.
 
 TRADEMARKS
AND PATENTS
  The
majority of the Power Conversion Group’s products are based on technology that
is not protected by patent or other rights. Within the Power Conversion Group,
certain of our products and brand names are protected by trademarks, both in the
U.S. and internationally. Our future success is dependent primarily on the
technological expertise and management abilities of our employees.
 
 GOVERNMENT
REGULATION
  We are
subject to various U.S. government guidelines and regulations relating to the
qualification of our non-medical products for inclusion in government qualified
product lists in order to be eligible to receive purchase orders from a
government agency or for inclusion of a product in a system which will
ultimately be used by a governmental agency. We have had many years of
experience in designing, testing and qualifying our products for sale to
governmental agencies. Certain government contracts are subject to cancellation
rights at the Government’s election. We have experienced no material termination
of any government contract and are not aware of any pending terminations of
government contracts.
  DISCONTINUED
OPERATION
  As of July
31, 2004, the DHV division was classified as a discontinued operation. This
division manufactured and sold high voltage power systems, primarily for
security, medical, scientific, military and industrial OEM
applications.  The results of this operation are segregated on the
accompanying financial statements as income or loss from discontinued
operation.
 
 SEASONALITY
 
 Revenue in
both operating segments is typically lower during the first quarter of each
fiscal year due to the shutdown of operations in our Milan, Italy (Medical
Systems Group) and Bay Shore, New York (Power Conversion Group) facilities for
part of August as a result of both vacation schedules and year-end physical
inventories.
  10
  BACKLOG
 
 Consolidated
backlog at August 1, 2009 was $13.2 million versus backlog at August 2, 2008 of
approximately $22.7 million. The backlog in the Power Conversion Group of $4.5
million decreased $0.9 million from levels at the beginning of the fiscal year
while there was an $8.6 million decrease in the fiscal year end backlog of our
Medical Systems segment from August 2, 2008 reflecting lower booking during the
twelve month period in international markets. Substantially all of the backlog
should result in shipments within the next 12 to 15 months.
 
 GEOGRAPHIC
AREAS
 
 For
further information about Geographic areas the Company operates in, as well as
other segment related disclosures, refer to Note 8 of the Notes to Consolidated
Financial Statements in Part IV, Item 15 of this Annual Report.
  ITEM
1ARISK
FACTORS
 
 Prospective
investors should carefully consider the following risk factors, together with
the other information contained in this Annual Report, in evaluating the Company
and its business before purchasing our securities.  In particular,
prospective investors should note that this Annual Report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934
(the “Exchange Act”) and that actual results could differ materially from those
contemplated by such statements.  The factors listed below represent
certain important factors which we believe could cause such results to
differ.  These factors are not intended to represent a complete list
of the general or specific risks that may affect us.  It should be
recognized that other risks may be significant, presently or in the future, and
the risks set forth below may affect us to a greater extent than
indicated
  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 the Company’s existing credit facility with Capital One Leverage
Finance Corp. when it expires on May 24, 2010.
 
 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.
 
 WE DO NOT
INTEND TO PAY DIVIDENDS ON SHARES OF OUR COMMON STOCK IN THE FORESEEABLE
FUTURE.
  We
currently expect to retain our future earnings, if any, for use in the operation
and expansion of our business.  We do not anticipate paying any cash
dividends on shares of our common stock in the foreseeable
future.  Moreover, our credit facility with our U.S. lender restricts
our ability to pay dividends.
  COMPLIANCE
WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE MAY
RESULT IN ADDITIONAL EXPENSES.
  Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes Oxley Act of 2002, are creating uncertainty
for companies such as ours.  We are committed to maintaining high
standards of corporate governance and public disclosure.  As a result,
we intend to invest reasonably necessary resources to comply with evolving
standards, and this investment may result in increased general and
administrative expenses and a diversion of management time and attention from
revenue generating activities to compliance activities, which could harm our
business prospects.
  11
  OUR COMMON
STOCK HAS BEEN DELISTED FROM THE NASDAQ NATIONAL MARKET AND WE CANNOT PREDICT
WHEN OR IF IT EVER WILL BE LISTED ON ANY NATIONAL SECURITIES
EXCHANGE.
  Due to our
past failure to comply with the United States Securities Laws, our common stock
was suspended from trading on the NASDAQ National Market in December
2000.  Current pricing information on our common stock has been
available on the Over the Counter Bulletin Board (the “OTCBB”).  The
OTCBB is an over-the-counter market which generally provides significantly less
liquidity than established stock exchanges or the NASDAQ National Market, and
quotes for stocks included in the OTCBB are not listed in the financial sections
of newspapers.  Therefore, prices for securities traded solely in the
OTCBB may be difficult to obtain, and shareholders may find it difficult to
resell their shares.  In order to be re-listed, we will need to meet
certain listing requirements.  There can be no assurance that we will
be able to meet such listing requirements.
  FAILURE BY
US TO ADHERE TO OUR ADMINISTRATIVE AGREEMENT WITH THE DEFENSE LOGISTICS AGENCY
COULD RESULT IN OUR DEBARMENT FROM DOING BUSINESS WITH THE U.S.
GOVERNMENT.
  On April
5, 2005, the Company announced that it had reached an administrative agreement
with the U.S. Defense Logistics Agency (the “DLA”), a component of the U.S.
Department of Defense (the “DOD”), which provides that RFI will not be debarred
from doing business with the U.S. Government entities as long as RFI maintains
its compliance program and adheres to the terms of the administrative
agreement.  If RFI fails to maintain its compliance program or RFI or
the Company fails to adhere to the terms of the administrative agreement, the
DLA could debar the Company from doing business with U.S. Government
entities.
  On May 24,
2007, the Company’s RFI subsidiary was served with a subpoena to testify before
a grand jury of the United States District Court, Eastern District of New York
and to provide items and records from its Bay Shore, New York offices in
connection with U.S. DOD 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.  The
Company’s RFI subsidiary is continuing to ship products to the U.S. Government
as well as to its commercial customers.
  OUR
BUSINESS IS BASED ON TECHNOLOGY THAT IS NOT PROTECTED BY PATENT OR OTHER
RIGHTS.
  The
technology and designs underlying our products are unprotected by patent
rights.  Our future success is dependent primarily on unpatented trade
secrets and on the innovative skills, technological expertise and management
abilities of our employees.  Because we do not have patent rights in
our products, our technology may not preclude or inhibit competitors from
producing products that have identical performance as our
products.  In addition, we cannot guarantee that any protected trade
secret could ultimately be proven valid if challenged.  Any such
challenge, with or without merit, could be time consuming to defend, result in
costly litigation, divert management’s attention and resources and, if
successful, require us to pay monetary damages.
  WE MAY NOT
BE ABLE TO COMPETE SUCCESSFULLY.
  A number
of foreign and domestic companies have developed, or are expected to develop,
products that compete or will compete with our products.  Many of
these competitors offer a range of products in areas other than those in which
we compete, which may make such competitors more attractive to hospitals,
radiology clients, general purchasing organizations and other potential
customers.  In addition, many of our competitors and potential
competitors are larger and have greater financial resources than we do and offer
a range of products broader than our products.  Some of the companies
with which we now compete or may compete in the future have or may have more
extensive research, marketing and manufacturing capabilities and significantly
greater technical and personnel resources than we do, and may be better
positioned to continue to improve their technology in order to compete in an
evolving industry.
  OUR DELAY
OR INABILITY TO OBTAIN ANY NECESSARY U.S. OR FOREIGN REGULATORY CLEARANCES OR
APPROVALS FOR OUR PRODUCTS COULD HARM OUR BUSINESS AND PROSPECTS.
  Our
medical imaging products, with the exception of certain veterinary lines, are
the subject of a high level of regulatory oversight.  Any delay in our
obtaining or our inability to obtain any necessary U.S. or foreign regulatory
approvals for new products could harm our business and
prospects.  There is a limited risk that any approvals or clearances,
once obtained, may be withdrawn or modified which could create delays in
shipping our product, pending re-approval.  Medical devices cannot be
marketed in the U.S. without clearance or approval by the FDA.  Our
Medical Systems Group businesses must be operated in compliance with FDA Good
Manufacturing Practices, which regulate the design, manufacture, packing,
storage and installation of medical devices.  Our manufacturing
facilities and business practices are subject to periodic regulatory audits and
quality certifications and we do self audits to monitor our
compliance.  In general, corrective actions required as a result of
these audits do not have a significant impact on our manufacturing operations;
however there is a limited risk that delays caused by a potential response to
extensive corrective actions could impact our operations.  Virtually
all of our products manufactured or sold overseas are also subject to approval
and regulation by foreign regulatory and safety agencies.  If we do
not obtain these approvals, we could be precluded from selling our products or
required to make modifications to our products which could delay bringing our
products to market.  Because our U.S. product lines are mature, new
product changes are in general relatively minor, and accordingly regulatory
approval is more streamlined.
  12
  WE MUST
RAPIDLY DEVELOP NEW PRODUCTS IN ORDER TO COMPETE EFFECTIVELY.
  Technology
in our industry, particularly in the x-ray and medical imaging businesses,
evolves rapidly, and making timely product innovations is essential to our
success in the marketplace.  The introduction by our competitors of
products with improved technologies or features may render our existing products
obsolete and unmarketable.  If we cannot develop products in a timely
manner in response to industry changes, or if our products do not perform well,
our business and financial condition will be adversely
affected.  Also, our new products may contain defects or errors which
give rise to product liability claims against us or cause the products to fail
to gain market acceptance.
  It is
generally accepted that digital radiography will become the dominant technology
used in hospitals and imaging clinics throughout the world over the next 10 to
15 years.  Currently, there are a number of competing technologies
available in connection with the digitization of x-ray
images.  However, due to the high cost of this technology, many
institutions have not yet adopted digital technology.  In addition,
there is uncertainty as to which technology system will be accepted as the
industry leading protocol for image digitization and
communication.  Lack of an adequate digital capability could impact
our business and result in a loss of market share.
  A SHORTAGE
OF AN ADEQUATE SUPPLY OF RAW MATERIALS COULD INCREASE OUR COSTS AND CAUSE A
DELAY IN OUR ABILITY TO SHIP PRODUCT AND FULFILL ORDERS.  A LARGE
PORTION OF OUR MANUFACTURING COSTS CONSIST OF THE COST OF MATERIALS AND AN
INCREASE IN THESE COSTS COULD ADVERSELY IMPACT OUR GROSS MARGINS.
  We rely on
external sources to supply raw materials, which consist primarily of mechanical
subassemblies, electronic components, x-ray tubes and x-ray generators in the
Medical Systems Group and electronic components and subassemblies and metal
enclosures for its products in the Power Conversion Group.  Our
ability to meet future demand and manufacture our product is dependent on these
sources of supply.  If disruptions in these sources of supply cause
shortages of raw materials, our ability to ship products to customers will be
impacted.  In addition, due to the high material cost component of our
manufactured goods, our gross margins would be adversely impacted by increases
in raw material costs we may be unable to pass along to our customers due to
market conditions.
  DUE TO THE
SIGNIFICANCE OF OUR INTERNATIONAL OPERATIONS, POLITICAL OR ECONOMIC CHANGES IN
THE VARIOUS COUNTRIES OR REGIONS WE MANUFACTURE IN OR SELL OUR PRODUCTS TO COULD
IMPACT OUR FINANCIAL CONDITION.
  International
sales, including products manufactured at our facility in Milan, Italy, as well
as products manufactured in the U.S., comprised 55% and 64% of consolidated
revenues for fiscal years 2009 and 2008, respectively, and will account for
significantly more in 2010 with the closing of DMI.  Our future
results could be adversely affected by a variety of international risks,
including unfavorable foreign currency exchange rates; difficulties in managing
and staffing international operations, political or social unrest; economic
instability or natural disasters; environmental or trade protection measures;
changes in governmental or other entities buying patterns and tender order
procedures; changes in other regulatory or certification
requirements.  In addition, any changes in Italian tax laws including
changes in withholding on dividends from our Italian subsidiary or other
restrictions on transfers of funds to the U.S. could impact our financial
condition.
  THE
COMPANY’S WORKING CAPITAL NEEDS ARE FINANCED IN PART BY CREDIT FACILITIES WITH
U.S. AND ITALIAN BANKS.  THE COMPANY HAS NEEDED TO OBTAIN WAIVERS FROM
ITS U.S. LENDERS FOR COVENANT VIOLATIONS DUE TO LESS THAN ANTICIPATED OPERATING
RESULTS.
  On
December 6, 2006, the Company and its U.S. lender, Capital One, signed an
amendment to its U.S. revolving credit and term loan credit facility which
waived covenant violations existing as of October 28, 2006 and adjusted the
financial covenants for future periods based on a business plan the Company
provided to Capital One.  As of August 1, 2009, the Company had $7.4
million of outstanding borrowings under this revolving credit facility and was
non-compliant with the following covenants: the Senior U.S. Debt Ratio and Fixed
Charge Coverage Ratio due to lower than anticipated performance during fiscal
2009.  On October 30, Capital One waived the non-compliance with these
covenants for the fourth quarter of fiscal 2009 and amended future covenants
through May 24, 2010, the credit facility’s maturity date.
  13
  If the
Company were not able to be in compliance with the amended covenants and its
lender were unable to cure the violations by signing a waiver agreement, or
through other means, the Company could be in default under its domestic credit
agreements and the banks would have the ability to stop revolving credit
borrowings under the facility or accelerate the maturity of any outstanding
balances.  If additional sources of debt or equity capital were not
available at that point, such acceleration could have a material adverse impact
on the Company’s financial position.
  Management
believes that if additional financing is needed once the U.S. revolving credit
facility matures on May 24, 2010, they would be able to obtain new asset based
financing on the remaining U.S. subsidiary, secure a mortgage on the building
owned by the U.S. subsidiary or dividend necessary funds from the foreign
subsidiary.  The Company can make no assurances that it will be able
to obtain additional financing in the future on terms favorable to the Company
or at all.
  WE MUST
CONDUCT OUR BUSINESS OPERATIONS WITHOUT INFRINGING ON THE PROPRIETARY RIGHTS OF
THIRD PARTIES.
  Although
we believe our products do not infringe on the intellectual property rights of
others, there can be no assurance that infringement claims will not be asserted
against us in the future or that, if asserted, any infringement claim will be
successfully defended.  A successful claim, or any claim, against us
could distract our management’s attention from other business concerns and
adversely affect our business, financial condition and results of
operations.
  POTENTIAL
SETTLEMENTS REQUIRED UNDER LEGAL PROCEEDINGS WITH FORMER EMPLOYEES OF THE
COMPANY COULD UNDULY BURDEN OUR COMPANY.
  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 October 30, 2009, RFI is waiting to hear for a response
to their position statement from the EEOC.  RFI intends to defend
vigorously against George Apergis.
  THERE IS A
RISK THAT OUR INSURANCE WILL NOT BE SUFFICIENT TO PROTECT US FROM PRODUCT
LIABILITY CLAIMS, OR THAT IN THE FUTURE PRODUCT LIABILITY INSURANCE WILL NOT BE
AVAILABLE TO US AT A REASONABLE COST, IF AT ALL.
  Our
business involves the risk of product liability claims inherent to the medical
device business. We maintain product liability insurance subject to certain
deductibles and exclusions. There is a risk that our insurance will not be
sufficient to protect us from product liability claims, or that product
liability insurance will not be available to us at a reasonable cost, if at all.
An uninsured or underinsured claim could materially harm our operating results
or financial condition.
  WE FACE
RISKS ASSOCIATED WITH HANDLING HAZARDOUS MATERIALS AND PRODUCTS.
  Our
research and development activity involves the controlled use of hazardous
materials, such as toxic and carcinogenic chemicals. Although we believe that
our safety procedures for handling and disposing of such materials comply with
the standards prescribed by federal, state and local regulations, we cannot
completely eliminate the risk of accidental contamination or injury from these
materials. In the event of an accident, we could be held liable for any
resulting damages, and such liability could be extensive.
  We are
also subject to substantial regulation relating to occupational health and
safety, environmental protection, hazardous substance control and waste
management and disposal. The failure to comply with such regulations could
subject us to, among other things, fines and criminal liability.
  14
  OUR
BUSINESS COULD BE HARMED IF OUR PRODUCTS CONTAIN UNDETECTED ERRORS OR DEFECTS OR
DO NOT MEET CUSTOMER SPECIFICATIONS.
  We are
continuously developing new products and improving our existing
products.  Newly introduced or upgraded products can contain
undetected errors or defects.  In addition, these products may not
meet their performance specifications under all conditions or for all
applications.  If, despite our internal testing and testing by our
customers, any of our products contains errors or defects, or any of our
products fails to meet customer specifications, we may be required to recall or
retrofit these products.  We may not be able to do so on a timely
basis, if at all, and may only be able to do so at considerable
expense.  In addition, any significant reliability problems could
result in adverse customer reaction and negative publicity and could harm our
business and prospects.
  THE
SEASONALITY OF OUR REVENUE MAY ADVERSELY IMPACT THE MARKET PRICES FOR OUR
SHARES.
  Our
revenue is typically lower during the first quarter of each fiscal year due to
the shut-down of operations in our Milan, Italy and Bay Shore, New York
facilities for part of August.  This seasonality causes our operating
results to vary from quarter to quarter and these fluctuations could adversely
affect the market price of our common stock.
  A
SIGNIFICANT NUMBER OF OUR SHARES WILL BE AVAILABLE FOR FUTURE SALE AND COULD
DEPRESS THE MARKET PRICE OF OUR STOCK.
  As of
October 1, 2009, an aggregate of 22,718,306 shares of our common stock were
outstanding.  In addition, as of October 1, 2009, there were
outstanding options to purchase 2,336,315 shares of our common stock, 1,924,688
of which were fully vested.  Sales of large amounts of our common
stock in the market could adversely affect the market price of the common stock
and could impair our future ability to raise capital through offerings of our
equity securities.  A large volume of sales by holders exercising the
warrants or options could have a significant adverse impact on the market price
of our common stock.
  WE HAVE A
LIMITED TRADING MARKET AND OUR STOCK PRICE MAY BE VOLATILE.
  There is a
limited public trading market for our common stock in the Over-the-Counter “OTC”
Market.  We cannot assure you that a regular trading market for our
common stock will ever develop or that, if developed, it will be
sustained.
  The
experiences of other small companies indicate that the market price for our
common stock could be highly volatile.  Many factors could cause the
market price of our common stock to fluctuate substantially,
including:
  ·
              future
      announcements concerning us, our competitors or other companies with whom
      we have business relationships;
  ·
              changes
      in government regulations applicable to our
  business;
  ·
              overall
      volatility of the stock market and general economic
      conditions;
  ·
              changes
      in our earnings estimates or recommendations by analysts;
    and
  ·
              changes
      in our operating results from quarter to
  quarter.
  Accordingly,
substantial fluctuations in the price of our common stock could limit the
ability of our current shareholders to sell their shares at a favorable
price.
  THE
COMPANY MAY SUBMIT, FROM TIME TO TIME, PROPOSALS TO SHAREHOLDERS TO AMEND THE
COMPANY’S CERTIFICATE OF INCORPORATION OR TO INCREASE THE NUMBER OF COMMON
SHARES AUTHORIZED.
  At a
special meeting of shareholders of the Company held on November 17, 2006, the
Company’s shareholders approved an Amendment to the Certificate of Incorporation
of the Company to increase the number of authorized shares of the Company’s
common stock, par value $0.10 per share, from twenty million (20,000,000) shares
to fifty million (50,000,000) shares in order to have
a  sufficient  number of shares
of  Common  Stock to  provide a
reserve  of shares  available for issuance to
meet  business  needs as they may arise in the future. Such
business needs may include, without limitation, rights offerings, financings,
acquisitions, establishing strategic relationships with corporate partners,
providing equity incentives to employees, officers or directors, stock splits or
similar transactions.  Issuances of any additional shares for these or
other reasons could prove dilutive to current shareholders or deter changes in
control of the Company, including transactions where the shareholders could
otherwise receive a premium for their shares over then current market
prices.
  15
   ITEM
1BUNRESOLVED
STAFF COMMENTS
 Not
applicable.
  ITEM
2PROPERTIES
 The
following is a list of our principal properties, classified by segment and
subsidiary:
  SEGMENT
              LOCATION
              APPROX.
      FLOOR AREA IN SQ. FT.
              PRINCIPAL
      USES
              OWNED/LEASED
      (EXPIRATIONDATE
      IF LEASED)MEDICAL
      SYSTEMS GROUP:Del
      Medical Imaging Corp
              Roselle,
      IL
              22,000
              Corporate
      headquarters,
                Design
      and distribution
              Leased
      (2013) (1)Villa
      Sistemi Medicali
              Milan,
      Italy
              67,000
              Design
      and manufacturing
              Leased
      (2011)(2)POWER
      CONVERSION GROUP:RFI
              Bay
      Shore, NY
              55,000
              Design
      and manufacturing
              Owned
  (1)
              Lease
      commencement date was February
2009.
  (2)
              Villa
      has the option to purchase this property at the conclusion of this
      lease.
  We believe
that our current facilities are sufficient for our present and anticipated
future requirements.  The Company’s manufacturing operations run on
one shift and we have the ability to add a second shift, if
needed.  The Company’s domestic credit facilities are secured, in
part, by a mortgage on RFI’s property.
 
 ITEM 3 LEGAL
PROCEEDINGS
  RFI - 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.
  APERGIS -
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 October 30, 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 - 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 4 SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
  None
  16
  PART
II
  ITEM
5MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
 
 Effective
May 11, 2007, our common stock commenced trading on the Over the Counter “OTC”
Bulletin Board under the symbol “DGTC.OB”.  Prior to that, they had
been traded on the “pink sheets,”, under the symbol “DGTC.PK”. The OTC is an
over-the-counter market which provides significantly less liquidity than
established stock exchanges, and quotes for stocks included in the OTC are not
listed in the financial sections of newspapers as are those for established
stock exchanges.  Our securities had been suspended from trading on
the NASDAQ National Market on December 19, 2000 because we had not filed an
Annual Report for the year ended July 29, 2000 within the SEC’s prescribed time
period.
 
 As of
October 1, 2009, there were approximately 744 holders of record of our
common stock. The following table shows the high and low sales prices per share
of our common stock for the past eight quarters, as reported by the over the
counter market. The over-the-counter market quotations listed below reflect
inter-dealer prices, without retail mark-up, mark down or commission and may not
represent actual transactions.
 
 FISCAL PERIOD
              
              
              HIGH
              
              
              LOWFISCAL
      2009First
      Quarter
              
              $
              1.55
              
              
              $
              0.80Second
      Quarter
              
              
              1.04
              
              
              
              0.45Third
      Quarter
              
              
              0.85
              
              
              
              0.28Fourth
      Quarter
              
              
              0.80
              
              
              
              0.20FISCAL
      2008First
      Quarter
              
              $
              3.40
              
              
              
              2.25Second
      Quarter
              
              
              3.25
              
              
              
              2.30Third
      Quarter
              
              
              2.65
              
              
              
              1.99Fourth
      Quarter
              
              
              2.45
              
              
              
              1.15
 
 We have
not paid any cash dividends, except for the payment of cash in lieu of
fractional shares, since 1983. The payment of cash dividends is prohibited under
our U.S. credit facility. We do not intend to pay any cash dividends in the
foreseeable future.
 
 ITEM
6SELECTED
FINANCIAL DATA
  The
selected income statement data presented for the fiscal years ended August 1,
2009, August 2, 2008 and July 28, 2007 and the balance sheet data as of August
1, 2009 and August 2, 2008 have been derived from our audited consolidated
financial statements included elsewhere in this Annual Report. The income
statement data for the years ended July 29, 2006 and July 30, 2005, and the
balance sheet data as of July 28, 2007, July 29, 2006 and July 30, 2005 have
been derived from audited financial statements not included herein. This
selected financial data should be read in conjunction with the Consolidated
Financial Statements and related notes included in Part II, Item 8, “Financial
Statements and Supplementary Data” thereto and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of
this Form 10-K.
 FISCAL
      YEARS ENDED(IN THOUSANDS, EXCEPT PER SHARE
      AMOUNTS)
                
                
                AUGUST 1,2009
                
                
                AUGUST 2,2008
                
                
                JULY 28,2007
                
                
                JULY 29,2006
                
                
                JULY 30,2005INCOME
      STATEMENT DATA:Net
      sales
                
                $
                80,400
                
                $
                108,306
                
                $
                104,167
                
                $
                83,014
                
                $
                84,872Gross
      margin
                
                
                16,728
                
                
                26,787
                
                
                25,017
                
                
                19,358
                
                
                22,281Selling,
      general and administrative
                
                
                13,977
                
                
                15,586
                
                
                14,590
                
                
                13,619
                
                
                16,452Research
      and development
                
                
                1,992
                
                
                2,488
                
                
                2,013
                
                
                1,562
                
                
                1,636Goodwill
      impairment
                
                
                -
                
                
                1,911
                
                
                -
                
                
                -Litigation
      settlement costs
                
                
                3,736
                
                
                450
                
                
                -
                
                
                697
                
                
                300Operating
      income (loss)
                
                
                (2,977
                )
                
                6,352
                
                
                8,414
                
                
                3,480
                
                
                3,893Minority
      interest
                
                
                -
                
                
                -
                
                
                -
                
                
                108
                
                
                393Provision
      for income taxes
                
                
                1,123
                
                
                3,247
                
                
                3,553
                
                
                1,758
                
                
                2,054Income
      (loss) from continuing operation
                
                
                (4,128
                )
                
                2,977
                
                
                3,816
                
                
                269
                
                
                193Discontinued
      operation
                
                
                -
                
                
                -
                
                
                -
                
                
                (175
                )
                
                199Net
      income (loss)
                
                
                (4,128
                )
                
                2,977
                
                
                3,816
                
                
                94
                
                
                392Net
      income (loss) per share – BasicContinuing
      operations
                
                $
                (0.18
                )
                $
                0.12
                
                $
                0.24
                
                $
                0.02
                
                $
                0.02Discontinued
      operation
                
                
                -
                
                
                -
                
                
                -
                
                
                (0.01
                )
                
                0.02Net
      income (loss) per basic share
                
                $
                (0.18
                )
                $
                0.12
                
                $
                0.24
                
                $
                0.01
                
                $
                0.04Net
      income (loss) per share – DilutedContinuing
      operations
                
                $
                (0.18
                )
                $
                0.12
                
                $
                0.23
                
                $
                0.02
                
                $
                0.01Discontinued
      operation
                
                
                -
                
                
                -
                
                
                -
                
                
                (0.01
                )
                
                0.02Net
      income (loss) per diluted share
                
                $
                (0.18
                )
                $
                0.12
                
                $
                0.23
                
                $
                0.01
                
                $
                0.03Weighted
      average shares outstanding – Basic
                
                
                23,286
                
                
                24,196
                
                
                16,155
                
                
                11,244
                
                
                10,490Weighted
      average shares outstanding – Diluted
                
                
                23,286
                
                
                24,646
                
                
                16,455
                
                
                12,076
                
                
                11,465
  17
 
  AS
      OFAUGUST
      1, 2009
              
              
              AUGUST
      2, 2008
              
              
              JULY
      28,2007
              
              
              JULY
      29,2006
              
              
              JULY
      30,2005BALANCE
      SHEET DATA:Working
      capital
              
              $
              22,061
              
              
              $
              31,204
              
              
              $
              24,978
              
              
              $
              6,935
              
              
              $
              10,122Total
      assets
              
              
              55,262
              
              
              
              66,353
              
              
              
              66,339
              
              
              
              49,153
              
              
              
              40,776Long-term
      debt and subordinated note
              
              
              2,385
              
              
              
              4,504
              
              
              
              5,393
              
              
              
              5,133
              
              
              
              6,454Shareholders’
      equity
              
              
              28,628
              
              
              
              36,163
              
              
              
              30,196
              
              
              
              12,814
              
              
              
              9,228
 
  ITEM
7MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
  FORWARD
LOOKING STATEMENTS
 
 In
addition to other information in this Annual Report,
this  Management's Discussion and Analysis of Financial Condition and
Results of Operations contain 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. We caution that
these statements 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 SEC including the Company’s 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.  We
manage our business in two operating segments: our Medical Systems Group and our
Power Conversion Group. In addition, we have a third reporting segment, other,
comprised of certain unallocated corporate General and Administrative expenses.
See Part I, Item 1, “Business-Operating Segments” of this Annual Report for
discussions of the Company’s segments.
 
 On October
1, 2004, we sold the Del High Voltage division, which manufactured proprietary
high voltage power conversion subsystems, for a purchase price of $3.1 million,
plus the assumption of approximately $0.8 million of liabilities. Accordingly,
the results of operations have been restated to show this division as a
discontinued operation.
  18
 
 At a
special meeting of shareholders of the Company held on November 17, 2006, the
Company’s shareholders approved an Amendment of the Certificate of Incorporation
of the Company to increase the number of authorized shares of the Company’s
common stock, par value $0.10 per share, from twenty million (20,000,000) shares
to fifty million (50,000,000) shares in order to have
a  sufficient  number of shares
of  common  stock to  provide a
reserve  of shares  available for issuance to
meet  business  needs as they may arise in the future. Such
business needs may include, without limitation, rights offerings, financings,
acquisitions, establishing strategic relationships with corporate partners,
providing equity incentives to employees, officers or directors, stock splits or
similar transactions.   Issuances of any additional shares for
these or other reasons could prove dilutive to current shareholders or deter
changes in control of the Company, including transactions where the shareholders
could otherwise receive a premium for there shares over then current market
prices.
 
 Subsequent
to our fiscal year end the Board of the Company decided to exit the Del Medical
U.S. business unit. This business is part of the Company’s Medical Systems
Group, however, this decision does not include or impact the operations of our
Villa subsidiary which will make up the whole of the Medical Systems Group going
forward.
 
 CRITICAL
ACCOUNTING POLICIES
 
 Complete
descriptions of significant accounting policies are outlined in Note 1 of the
Notes to Consolidated Financial Statements included in Part II, Item 8,
“Financial Statements and Supplementary Data” of this Annual Report. Within
these policies, we have 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, we have 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 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.  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 we recognize deferred income tax assets and
liabilities for temporary differences between financial reporting basis and
income tax reporting basis and for tax credit carry forwards.
 
 The
Company periodically assesses the realization of our 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.  Our determination is based on what we believe
will be the more likely than not result.
 
 During
fiscal years 2009, 2008 and 2007, 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 tax
assets.  As of August 1, 2009, the Company continues to carry a 100%
valuation allowance on its net U.S. deferred income tax assets.
 
 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 of $0.6 million at
August 1, 2009 will be realized.
 
 The
Company’s foreign subsidiary operates in Italy.  Fiscal 2008 income
tax expense includes a charge that reduces the carrying value of the foreign
subsidiary’s net deferred income tax asset resulting from an income tax rate
reduction in Italy.
 
 Additionally,
the Company’s deferred income tax liabilities as of July 28, 2007 included the
estimated tax obligation that would have been incurred upon a distribution of
the foreign subsidiary’s earnings to its U.S. parent.  This tax
liability was recorded as the foreign subsidiary had routinely distributed
monies to its U.S. parent.  Based on operating results, expectations
of future results and available cash and credit in the U.S., the Company
determined it no longer intends to repatriate monies and  reversed
this tax obligation during fiscal 2008. This reversal resulted in an adjustment
to available net operating loss carryforwards and the related valuation
allowance.   In addition, there was a reduction in tax expense
for fiscal 2008 resulting from the reversal of accrued Italian withholding taxes
on undistributed earnings.
 19
 
 EXCESS AND
OBSOLETE  INVENTORY
 
 We
re-evaluate our 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, we use certain estimates in determining interim operating results. The
most significant estimates in interim reporting relate to the valuation of
finished goods inventories. For certain subsidiaries, for interim periods, we
estimate the amount of labor and overhead costs related to finished goods
inventories. These estimates are revised based on actual results at year
end.  As of August 1, 2009, finished goods represented approximately
25.7% of the gross carrying value of our total gross inventory. We believe the
estimation methodologies used are 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.
  Due
primarily to continued operating results below planned levels and management’s
resulting revaluation of its strategic plan for the Company’s domestic Medical
Systems Group’s reporting unit, the Company completed a special assessment of
that reporting unit’s goodwill realization in the third quarter of fiscal
2008.  As part of its assessment, the Company estimated the fair value
of the domestic 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 $1.9 million impairment
charge during the third quarter of fiscal 2008.
  The
Company’s fiscal 2009 impairment assessment on its international Medical Systems
Group reporting unit did not suggest impairment.  However, future
operating results and earnings could fluctuate, requiring the Company to
reevaluate the carrying value of its goodwill.
  At August
1, 2009, the Company’s market capitalization was below tangible book
value.  While the market capitalization decline was considered in the
Company’s evaluation of fair value, the market metric is only one indicator of
fair value.  In the Company’s opinion, the market capitalization
approach, by itself, is not a reliable indicator of the value for the
Company.
  The
Company will continue to monitor market conditions and determine if any
additional interim review of goodwill is warranted.  Further
deterioration in the market or actual results as compared with our projections
may ultimately result in future impairment.  In the event that the
Company determines goodwill is impaired in the future, it would need to
recognize a non-cash impairment charge, which could have a material adverse
effect on its consolidated balance sheet and results of operations.
  20
 
 CONSOLIDATED
RESULTS OF OPERATIONS
 
 FISCAL
2009 COMPARED TO FISCAL 2008
 
 The
following table summarizes key indicators of consolidated results of
operations:
 
 Year Ended(Dollars
      in thousands, except per share data)
              
              August
      1, 2009
              
              
              August
      2, 2008Sales
              
              $
              80,400
              
              
              $
              108,306Gross
      margin as a percentage of sales
              
              
              20.8
              %
              
              
              24.7
              %Total
      operating expenses
              
              
              19,705
              
              
              
              20,435Net
      income (loss)
              
              
              (4,128)
              
              
              
              2,977Diluted  income
      (loss)  per share
              
              $
              (0.18)
              
              
              $
              0.12
 
 Sales:
 The
following table summarizes sales:
 Year Ended(Dollars
      in thousands)
              
              August
      1, 2009
              
              
              August
      2, 2008Medical
      System Group
              
              $
              68,448
              
              
              $
              95,052Power
      Conversion Group
              
              
              11,952
              
              
              
              13,254Total
              
              $
              80,400
              
              
              $
              108,306
 
 Consolidated
net sales of $80.4 million for fiscal year 2009 reflect a decrease of $27.9
million, or 25.8%, from fiscal 2008 net sales of $108.3 million, due to
decreased sales in our Medical Systems Group.  Sales at the Medical
Systems Group for fiscal 2009 of $68.4 million reflect a decrease of $26.6
million, or 28.0 %, from the prior fiscal year, primarily due to decreased
domestic and international sales volume attributable to the global economic
slowdown and reduction in capital expenditures and credit availability for
customers and a favorable prior year shipment level on an expired international
contract.  The Power Conversion Group’s sales for fiscal 2009 of $12.0
million were approximately $1.3 million less than prior year’s sales, a decrease
of 9.8%, due to weaker sales bookings in fiscal year 2009.
 
 Consolidated
gross margins as a percent of sales were 20.8% in fiscal 2009, compared to 24.7%
in fiscal 2008.  The Medical Systems Group fiscal year 2009 gross
margin percentage of 17.6% was lower than the gross margin of 22.9% in fiscal
2008 due primarily to lower sales volumes and plants operating with excess
capacity.  The Power Conversion Group’s gross margin for fiscal 2009
was 38.9% versus 38.2% in the prior year attributable to a shift in product mix
and decreased overhead expenses.
 
 Operating
Expenses:
 
 Operating
expenses for fiscal year 2009 increased to 24.5% of net sales from 18.9% in the
prior fiscal year.  This increase is primarily due to litigation
settlement costs as discussed elsewhere in this document and the effect of
decreased sales volume discussed above.  This increase was off-set by
a $1.9 million one-time, non cash goodwill impairment charge related to the
Medical Systems Group’s U.S. medical business in the third quarter of fiscal
2008.  In addition, research and development expenses in fiscal 2009
of $2.0 million were $0.5 million lower than fiscal 2008, primarily due to the
effect of favorable currency translation rates.
 
 The
following table summarizes the key increase/(decrease) in operating expenses for
fiscal year 2009 from the prior year:
 
 (Dollars
      in thousands)
              
              August
      1, 2009Research
      and Development
              
              $
              (496
              )Selling,
      General and Administrative
              
              
              (1,609
              )Litigation
      Settlement Cost
              
              
              3,286Goodwill
      Impairment
              
              
              (1,911
              )Change
      in total operating expense
              
              $
              (730
              )
 
 The
operating loss for fiscal year 2009 was ($3.0) million versus operating income
of $6.4 million in fiscal 2008.  In fiscal year 2009, the Medical
Systems Group had an operating loss of ($0.7) million and the Power Conversion
Group achieved an operating profit of $2.1 million.  There were also
unallocated corporate costs of $4.4 million, primarily consisting of litigation
settlement related charges.
  21
 
 Research
and Development expenses for fiscal 2009 were $2.0 million or 2.5% of sales
compared to $2.5 million or 2.3% of sales in fiscal 2008 due primarily to
reduced  international product development efforts in fiscal
2009.
 
 Selling,
General and Administrative expenses (“SG&A”) for fiscal 2009 were $14.0
million or 17.4% of sales compared to $15.6 million or 14.4% of sales in fiscal
2008.  This decrease reflects the Company’s continued focus on cost
reductions in both its foreign and domestic operations.  The increase
in the litigation settlement cost of $3.2 million for fiscal 2009 was due to the
Company’s settlement of both its Park and Moeller litigation as discussed in
note 12 to the consolidated financial statements.
  Interest
expense, net of $0.3 million for fiscal 2009, was unchanged from the previous
fiscal year.
  On a
consolidated basis, the Company recorded a fiscal 2009 pretax loss of ($3.0)
million, comprised of foreign pretax income of $2.5 million offset by a U.S.
pretax loss of ($5.5) million. During fiscal 2008, the Company recorded pretax
income of $6.2 million which included foreign pretax income of $8.3 million,
offset by a U.S. pretax loss of ($2.1) million. The related fiscal 2009 and 2008
income tax expense of $1.1 million and $3.2 million, respectively, was primarily
due to foreign taxes on the profits of Villa. The Company has not provided for
any income tax benefits related to the U.S. pretax losses in either fiscal 2009
or fiscal 2008 due to uncertainty regarding the realizability of its U.S. net
operating loss carry forwards as explained in Critical Accounting Policies
above.
 The
Company recorded a net loss of ($4.1) million, or ($0.18) per basic share and
diluted share, in fiscal 2009, as compared to a net income of $3.0 million, or
$0.12 per basic share and diluted share, in fiscal 2008.
 
 Consolidated
backlog at August 1, 2009 was $13.2 million versus backlog at August 2, 2008 of
approximately $22.7 million. The backlog in the Power Conversion Group of $4.5
million decreased $0.9 million from levels at the beginning of the fiscal year
while there was an $8.6 million decrease in the fiscal year end backlog of our
Medical Systems Segment from August 2, 2008 reflecting weaker booking during the
twelve month period in domestic and international markets due to the global
economic slowdown and reduction in capital expenditures and credit availability
for customers discussed above. Substantially all of the backlog should result in
shipments within the next 12 to 15 months.
 
 FISCAL
2008 COMPARED TO FISCAL 2007
 
 The
following table summarizes key indicators of consolidated results of
operations:
 
 Year
      Ended(Dollars
      in thousands, except per share data)
              
              August
      2, 2008
              
              
              July
      28, 2007Sales
              
              $
              108,306
              
              
              $
              104,167Gross
      margin as a percentage of sales
              
              
              24.7
              %
              
              
              24.0
              %Total
      operating expenses
              
              
              20,435
              
              
              
              16,603Net
      earnings from continuing operations
              
              
              2,977
              
              
              
              3,816Diluted
      earnings per share
              
              $
              0.12
              
              
              $
              0.23
 
 Sales:
 The
following table summarizes sales:
 Year
      Ended(Dollars
      in thousands)
              
              August
      2, 2008
              
              
              July
      28, 2007Medical
      System Group
              
              $
              95,052
              
              
              $
              90,979Power
      Conversion Group
              
              
              13,254
              
              
              
              13,188Total
              
              $
              108,306
              
              
              $
              104,167
 
 
 Consolidated
net sales of $108.3 million for fiscal year 2008 increased by $4.1 million, or
4.0%, from fiscal 2007 net sales of $104.2 million, due primarily to increased
sales in our Medical Systems Group.  The Medical Systems Group’s sales
for fiscal 2008 of $95.1 million increased $4.1 million, or 4.5%, from the prior
fiscal year. Net sales increases were primarily driven by increased
international sales volume of several medical system product lines, particularly
the Apollo line, offset by reduced sales of the domestic digital product
line.  The Power Conversion Group’s sales for fiscal 2008 of $13.3
million were consistent with sales in the prior fiscal year.
 
 Consolidated
backlog at August 2, 2008 was $22.7 million versus backlog at July 28, 2007 of
approximately $28.4 million. The backlog in the Power Conversion Group of $5.4
million decreased $1.2 million from levels at the beginning of the fiscal year
while there was a $4.5 million decrease in the fiscal year end backlog of our
Medical Systems Segment from July 28, 2007 reflecting weaker booking during the
twelve month period in international markets. Substantially all of the backlog
should result in shipments within the next 12 to 15 months.
 
 Gross
margins as a percent of sales were 24.7% in fiscal 2008, compared to 24.0% in
fiscal 2007.  The Power Conversion Group margins were 37.9% in fiscal
2008 as compared to 37.3% in fiscal 2007 reflecting increased margins in product
mix and decreased production cost.  For the Medical Systems Group,
fiscal 2008 gross margins of 22.9% were higher than gross margins of 22.1% in
the prior year due primarily to increased sales in the Del Medical legacy
product lines which have lower selling prices but greater gross
margins.
  22
 Operating
Expenses:
 
 The
following table summarizes the key increase/(decrease) in operating expenses for
fiscal year 2008 from the prior year:
 
 (Dollars
      in thousands)
              
              Year
      EndedAugust 2, 2008Research
      and Development
              
              $
              475Selling,
      General and Administrative
              
              
              996Litigation
      Settlement Cost
              
              
              450Goodwill
      Impairment
              
              
              1,911Change
      in total operating expense
              
              $
              3,832
 
 
 Research
and Development expenses for fiscal 2008 were $2.5 million or 2.3% of sales
compared to $2.0 million or 1.9% of sales in fiscal 2007 due primarily to higher
international product development efforts in fiscal 2008.
 
 Selling,
General and Administrative expenses (“SG&A”) for fiscal 2008 were $15.6
million or 14.4% of sales compared to $14.6 million or 14.0% of sales in fiscal
2007.  The increase is primarily due to higher stock based
compensation expenses related to increased volume of stock options vesting
during fiscal 2008, legal expenses related to the Moeller case discussed
elsewhere in this document and increased expenses related to investigating
potential business acquisitions.
 
 As
discussed above, during the third quarter of fiscal 2008, the Company recognized
a goodwill impairment loss of $1.9 million on the carrying value of the goodwill
of the Medical Systems Group’s U.S. medical business.  No impairment
was recorded in fiscal 2007.
 
 As a
result of the above, we recognized fiscal 2008 operating income of $6.4 million
compared to operating income of $8.4 million in fiscal 2007.  The
Medical Systems Group had an operating profit of $5.0 million in fiscal 2008 and
the Power Conversion Group achieved an operating profit of $2.5 million, offset
by unallocated corporate costs of $1.1 million.  The Medical Systems
Group had an operating profit of $7.5 million in fiscal 2007 and the Power
Conversion Group achieved an operating profit of $2.4 million, offset by
unallocated corporate costs of $1.5 million.
 
 Interest
expense, net of $0.3 million for fiscal 2008 was $0.7 million lower than the
prior year due to a reduction in borrowings resulting from the paydown of U.S.
based debt with the proceeds of our March 2007 Right Offering, partially offset
by additional borrowings in Italy to support it’s day to day
operations.
 
 On a
consolidated basis, the Company recorded fiscal 2008 pretax income of $6.2
million, comprised of foreign pretax income of $8.3 million offset by a U.S.
pretax loss of $2.1 million.  During fiscal 2007, the Company recorded
pretax income of $7.4 million which included foreign pretax income of $8.2
million, offset by a U.S. pretax loss of $0.8 million.  The related
fiscal 2008 and 2007 income tax expense of $3.2 million and $3.6 million,
respectively, was primarily due to foreign taxes on the profits of
Villa.  The Company has not provided for any income tax benefits
related to the U.S. pretax losses in either fiscal 2008 or fiscal 2007 due to
uncertainty regarding the realizability of its U.S. net operating loss carry
forwards as explained in Critical Accounting Policies above.
 
 Reflecting
the above, we recorded net income of $3.0 million, or $0.12 per basic share and
diluted share, in fiscal 2008, as compared to a net income of $3.8 million, or
$0.24 per basic share and $0.23 per diluted share, in fiscal 2007.
  23
 LIQUIDITY
AND CAPITAL RESOURCES
 
 The
Company’s sources of capital include, but are not limited to, cash flow from
operations, short-term credit facilities and the residual proceeds of the Rights
Offering.  Recently, the capital and credit markets have become
increasingly volatile as a result of adverse conditions that have caused the
failure and near failure of a number of large financial services
companies.  If the capital and credit markets continue to experience
volatility and the availability of funds remains limited, it is possible that
the Company’s ability to access the capital and credit markets may be limited by
these or other factors at a time when the Company would like, or need to do so,
which could have an impact on our ability to react to changing economic and
business conditions.  Notwithstanding the foregoing, at this time, we
believe that available short-term and long-term capital recourses  are
sufficient to fund our working capital requirements, scheduled debt payments,
interest payments, capital expenditures and income tax obligations for the next
12 months.
 
 Working Capital -- At August
1, 2009 and August 2, 2008, our working capital was approximately $22.1 million
and $31.2 million, respectively. The decrease in working capital for fiscal 2009
as compared to fiscal 2008 related primarily to increased cash payments for
litigation settlements and decreases in ending accounts receivable resulting
from lower sales and lower foreign currency translation rates. At August 1, 2009
and August 2, 2008, we had approximately $8.0 million and $7.9 million in cash
and cash equivalents, respectively.  This increase is primarily due to
borrowings on our revolving credit facilities offset by payments for litigation
settlement as well as a reduction in accounts payable.  As of August
1, 2009, we had approximately $1.6 million of excess borrowing availability
under our domestic revolving credit facility compared to $6.4 million at August
2, 2008.
 
 In
addition, as of August 1, 2009 and August 2, 2008, our Villa subsidiary had an
aggregate of approximately $11.5 million and $13.5 million, respectively, 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.
 
 The
      following is a summary of the Company’s cash flows:
              
              Year
      Ended(Dollars
      in thousands, except per share data)
              
              August
      1, 2009
              
              
              August
      2, 2008Net
      cash (used in) provided by operating activities
              
              $
              (2,867
              )
              
              $
              1,726Net
      cash used in investing activities
              
              
              (611
              )
              
              
              (1,208
              )Net
      cash provided by (used in) financing activities
              
              
              4,370
              
              
              
              (1,047
              )Effect
      of exchange rate changes on cash
              
              
              (737
              )
              
              
              497Net
      increase (decrease) in cash and cash equivalents
              
              
              155
              
              
              
              (32
              )Cash
      and cash equivalents at beginning of year
              
              
              7,828
              
              
              
              7,860Cash
      and cash equivalents at end of period
              
              $
              7,983
              
              
              $
              7,828
 
 FISCAL
2009 COMPARED TO FISCAL 2008
 
 Cash Flows from Operating
Activities -- For the year ended August 1, 2009, the Company used $2.9
million of cash for continuing operations, compared to generating $1.7 million
in the prior fiscal year. The decrease is largely due to the operating loss and
a  reduction in payables due to aggressive payables management in
fiscal year 2009, offset by a decrease in trade receivables due to lower sales,
as trade receivables produced positive cash flow in 2009 compared to
2008.
  Cash Flows from Investing
Activities – The Company made approximately $0.6 million in facility
improvements and capital equipment expenditures for the fiscal year ended August
1, 2009, which was $0.6 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 have relocated the
Company’s corporate offices.  The cost associated with relocating the
Company’s corporate offices is estimated to be $0.3 million.  The move
to the new facility will result in annual cost savings of $0.3
million.
 
 Cash Flows from Financing
Activities – During the year ended August 1, 2009, the Company borrowed
approximately $7.4 million for use in the business.  The Company
repaid a total of $1.6 million of indebtedness on our Italian borrowings, as
compared to $1.2 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.
 
 24
  The
following table summarizes our contractual obligations, including debt and
operating leases at August 1, 2009 (in thousands):
  OBLIGATIONS
                
                
                TOTAL (1)
                
                
                WITHIN
                  1 YEAR
                
                
                2-3
                  YEARS
                
                
                4-5
                  YEARS
                
                
                AFTER
      5
                  YEARSLong-term
      debt obligations (1)
                
                $
                2,107
                
                $
                1,188
                
                $
                919
                
                $
                -
                
                $
                -Capital
      lease obligations
                
                
                1,931
                
                
                465
                
                
                1,466
                
                
                -
                
                
                -Interest
                
                
                463
                
                
                253
                
                
                210
                
                
                -
                
                
                -Operating
      lease obligations
                
                
                1,191
                
                
                377
                
                
                641
                
                
                173
                
                
                -Total
      contractual cash obligations
                
                $
                5,692
                
                $
                2,283
                
                $
                3,236
                
                $
                173
                
                $
                -
  (1) As of August
1, 2009, the Company had $7.4 million and $0.1 million of outstanding borrowings
under its revolving credit facilities in the U.S. and in Italy
respectively.
 
 FISCAL
2008 COMPARED TO FISCAL 2007
 
 Cash Flows from Operating
Activities -- For the year ended August 2, 2008, the Company generated
approximately $1.7 million of cash for continuing operations, compared to $4.0
million in the prior fiscal year. The decrease is largely due to payment of
accounts payable and income taxes payable in the 2008 period offset by the
effect of reduced inventory levels.
 
 Cash Flows from Investing
Activities -- We made approximately $1.2 million in facility improvements
and capital equipment expenditures for the fiscal year ended August 2,
2008.   We made approximately $0.8 million in facility
improvements and capital equipment expenditures for the comparable prior fiscal
year period.
 
 Cash Flows from Financing
Activities – During the year ended August 2, 2008, we used $1.0 million
in net cash from financing activities versus generating $4.2 million for the
fiscal year ended July 28, 2007.  This decrease is due to the impact
of the net proceeds of our Rights Offering completed in March of 2007 in the
prior fiscal year.  The Rights Offering, discussed below, generated
total proceeds to the Company, net of related expenses of $12.4
million.  Approximately $7.6 million of the proceeds were used for
debt repayment and the remainder invested in short-term money market
securities.  The Company also received $0.1 million in payment of the
exercise price of stock options and warrants in the fiscal year ended August 2,
2008, $0.6 million less than the prior fiscal year.  The Company made a
total of $1.2 million in payments of long term debt during fiscal 2008 compared
to payments of $5.9 million in the previous fiscal year.
 
 CREDIT
FACILITY AND BORROWING
 
 On August
1, 2005, the Company entered into a three-year revolving credit and term loan
facility with North Fork Business Capital, which was acquired by Capital One
Leverage Finance Corp. during fiscal year 2008 (the "North Fork Facility" and
the “Capital One Facility”) and repaid the prior facility. In March 2007, the
Company used a portion of the proceeds from a Rights Offering to pay all
outstanding balances under this facility as well as $2.5 million of subordinated
notes then outstanding and $0.1 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 of 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
August 1, 2009 and August 2, 2008, the Company had approximately $1.6 million
and $6.4 million of availability under the North Fork Facility.  This
difference in borrowing availability is due to draws of $7.4 million against the
line of credit during the third and fourth quarter of fiscal year
2009.
 
 There are
certain covenants, including tangible net worth, that the Company must
meet.  As of the end of the fourth quarter of fiscal 2009, the Company
was non-compliant with the following covenants: the Senior U.S. Debt Ratio and
Fixed Charge Coverage Ratio under the North Fork Credit facility, due to lower
than anticipated performance during fiscal 2009.  On October 30,
Capital One Leverage Finance Corp. waived the non-compliance with these
covenants for the fourth quarter of fiscal 2009 and amended future covenants
through May 24, 2010, the credit facility’s maturity date.  As of the
end of the fourth quarter of fiscal 2008, the Company was in compliance with all
covenants under the North Fork Facility.
 
 Management
believes that if additional financing is needed once the U.S. revolving credit
facility matures on May 24, 2010, they would be able to obtain new asset based
financing on the remaining U.S. subsidiary, secure a mortgage on the building
owned by the U.S. subsidiary or dividend necessary funds from the foreign
subsidiary.  The Company can make no assurances that it will be able
to obtain additional financing in the future on terms favorable to the Company
or at all.
  25
 
 The North
Fork Facility is subject to commitment fees of 0.5% per annum on the
daily-unused portion of the facility, payable monthly.  The Company
granted a security interest to the lender on its U.S. credit facility in
substantially all of its accounts receivable, inventory, property, plant and
equipment, other assets and intellectual property in the U.S.
 
 On October
30, 2009, the Capital One Facility was amended and restated.  As
restated, the Capital One Facility provides for a $3.0 million formula based
revolving credit facility based on the Company’s RFI division’s eligible
accounts receivable and inventory as defined in the credit
agreement.  Interest on the revolving credit and capital expenditure
borrowings is payable at prime plus 2.0% or, alternatively, at a LIBOR rate plus
4.5%.  Other changes to the terms and conditions of the original loan
agreement include the modification of covenants and the addition of weekly
collateral reporting.
 
 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.
 
 The
Company received a dividend from its Villa subsidiary in December 2008 of
approximately $1.8 million, which was used to repurchase the Company’s
outstanding common stock pursuant to the common stock repurchase
program.  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.
 
 In
addition, on November 26, 2008, the Company requested and was granted consent by
Capital One Leverage Finance Corp. to relocate the Company’s chief executive
office and principal place of business within the Chicago, Illinois
area.
 
 The
Company’s Villa subsidiary maintains short term credit facilities which are
renewed annually with Italian banks.  The current balance due on these
credit facilities at August 1, 2009, is $0.1 million.  Available
borrowing under the credit facilities is $11.5 million and variable interest
rates 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 at 2.308%.  The
note is repayable over a 5 year term.  Principal repayment began in
September 2008 and will be completed in September 2011.  The note
contains a financial covenant which provides that the net equity of Villa cannot
fall below 5.0 million Euros.  Villa’s net equity at the end of fiscal
2009 was 11.4 million Euro.
 
 In
December 2006, Villa entered into a 1.0 million Euro loan with interest payable
at Euribor 3 months plus 0.95 points, currently 2.07%.  The loan is
repayable over a 4 year period ending in December 2010.
 
 Villa is
also 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 the end of fiscal year 2009, total principal due is 0.4
million Euro.  Villa’s manufacturing facility is subject to a capital
lease obligation which matures in March 2011 with an option to
purchase.  Villa is in compliance with all related financial covenants
under these short and long-term financings.
 
 EQUITY
MATTERS
 
 On
December 12, 2006, the Company filed a registration statement for a subscription
Rights Offering with the SEC that became effective January 30, 2007. Under the
terms of this Rights Offering, the Company distributed to shareholders of record
as of February 5, 2007, non-transferable subscription rights to purchase one
share of the Company's common stock for each share owned at that date at a
subscription price of $1.05 per share. On March 12, 2007, the Company completed
the Rights Offering, selling 12,027,378 shares of its common stock at $1.05 per
share. Total proceeds to the Company, net of expenses related to the Rights
Offering, were $12.4 million.
 
 The
purpose of this Rights Offering was to raise equity capital in a cost-effective
manner.  Approximately $7.6 million of the proceeds were used for debt
repayment and the remainder invested in short-term money market securities for
anticipated working capital needs and general corporate purposes.  A
portion of the net proceeds may also ultimately be used to acquire or invest in
businesses, products and technologies that Company management believes are
complementary to the Company's business.
  26
 
 In
addition, on January 22, 2007, the Company entered into a stockholders rights
plan (the "Rights Plan"). The Rights Plan provides for a dividend distribution
of one Common Stock purchase right for each outstanding share of the Company's
Common Stock. The Company's Board of Directors adopted the Rights Plan to
protect stockholder value by protecting the Company's ability to realize the
benefits of its net operating losses ("NOLs") and capital loss carryforwards.
The Company has experienced substantial operating and capital losses in previous
years. Under the Internal Revenue Code and rules promulgated by the IRS, the
Company may "carry forward" these losses in certain circumstances to offset
current and future earnings and thus reduce its federal income tax liability,
subject to certain requirements and restrictions. Assuming that the Company has
future earnings, the Company may be able to realize the benefits of NOLs and
capital loss carryforwards. These NOLs and capital loss carryforwards constitute
a substantial asset to the Company. If the Company experiences an "Ownership
Change," as defined in Section 382 of the Internal Revenue Code, its ability to
use the NOLs and capital loss carryforwards could be substantially limited or
lost altogether. In general terms, the Rights Plan imposes a significant penalty
upon any person or group that acquires certain percentages of the Company's
common stock by allowing other shareholders to acquire equity securities at half
their fair values.
 
 LITIGATION
MATTERS
 
 On April
2, 2009, the Company and Samuel Park, a previous CEO of the Company, settled an
action relating to certain payments to be made to Mr. Park in connection with a
change of control of the Company.  Pursuant to the settlement
agreement, the Company made payments to Mr. Park and his counsel totaling $2.5
million.
  On June
28, 2002, Jeffrey N. Moeller, the former Director of Quality Assurance and
Regulatory Affairs of Del Medical Imaging Corp. (“Del Medical”), commenced an
action in the Circuit Court of Cook County, Illinois, against the Company, Del
Medical and Walter Schneider, the former President of Del Medical.  In
the most current iteration of his complaint, the third amended complaint, Mr.
Moeller alleges four claims against the defendants in the action: (1)
retaliatory discharge from employment with Del Medical, allegedly in response to
Mr. Moeller’s complaints to officers of Del Medical about purported prebilling
and his stopping shipment of a product that allegedly did not meet regulatory
standards, (2) defamation, (3) intentional interference with his employment
relationship with Del Medical and prospective employers, and (4) to hold the
Company liable for any misconduct of Del Medical under a theory of piercing the
corporate veil.  In their answer to the third amended complaint, the
defendants denied the substantive allegations of each of these claims and denied
that they have any liability to Mr. Moeller.  By order dated September
15, 2006, the Court denied in part and granted in part defendants’ motion
requesting summary judgment dismissing the third amended
complaint.  The court granted the motion only to the extent of
dismissing that part of Mr. Moeller’s claim of interference with his employment
relationship with Del Medical and his relationship with prospective
employers.
  In fiscal
2007, the Company recorded an accrual of $0.1 million relating to potential
liability in the settlement of these claims.  The parties appeared for
mediation in January 2007 but the mediation did not result in a disposition of
the action.  A trial was held in April 2008 and on April 17, 2008, the
jury returned a verdict in favor of Mr. Moeller for $1.8 million for lost
earnings, back pay, front pay and benefits on the retaliatory discharge claim,
and $0.2 million for emotional distress/reputation damages and $0.2 million in
punitive damages on the defamation claim.  On May 19, 2008, counsel
for the defendants filed their motion for judgment in their favor
notwithstanding the jury verdict, or, alternatively, for a new trial, on those
claims on which the jury found the respective defendants liable.  By
order dated August 15, 2008, the Court denied that motion.
  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.
  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 Annual Report on Form 10-K.
  27
  EFFECTS OF
NEW ACCOUNTING PRONOUNCEMENTS
 
 In March
2008, the FASB issued 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
requires identification and presentation of ownership interests in subsidiaries
held by parties other than the Company in the consolidated financial statements
within the equity section but separate from the equity owned by Del
Global.  SFAS 160 also requires that (1) the amount of consolidated
net income attributable to the parent and to the noncontrolling interest be
clearly identified and presented on the face of the consolidated statement of
operations, (2) changes in ownership interest be accounted for similarly, as
equity transactions and (3) when a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary and the gain or loss
on the deconsolidation of the subsidiary be measured at fair value. This
statement is effective for the Company on August 2, 2009. The Company is
currently evaluating the requirements of SFAS 160 but does not expect it to have
a material impact.
 
 In
December 2007, the FASB issued SFAS No. 141R, Business
Combinations.  SFAS 141R 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 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 of SFAS No. 157 for nonfinancial assets
and liabilities and does not expect it to have a material impact.
 
 In June,
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS
168”).  SFAS 168 will become the source of authoritative U.S.
generally accepted accounting principles recognized by the FASB to be applied by
nongovernmental entities.  On the effective date, SFAS 168 will
supersede all then-existing non-SEC accounting and reporting
standards.  All other non-grandfathered non-SEC accounting literature
not included in the codification will become non-authoritative.  SFAS
168 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009.  The Company is currently evaluating
the requirements of  SFAS 168, but it is not expected to have a
material impact on the Company’s consolidated financial
statements.
  ITEM
7AQUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 We do not
ordinarily hold market risk sensitive instruments for trading purposes. We do,
however, recognize market risk from interest rate and foreign currency exchange
exposure.
 
 INTEREST
RATE RISK
 
 Our U.S.
revolving credit and Italian subsidiary’s long-term debt incur interest charges
that fluctuate with changes in market interest rates. See Note 7 of Notes to
Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report. Based on the balances as of August 1, 2009, an increase of 1/2 of 1% in
interest rates would increase interest expense by approximately $0.1 million.
There is no assurance that interest rates will increase or decrease over the
next fiscal year. Because we believe this risk is not material, we do not
undertake any specific steps to reduce or eliminate this risk.
  28
 
 FOREIGN
CURRENCY RISK
 
 The
financial statements of Villa are denominated in Euros. Based on our historical
results and expected future results, Villa accounts for approximately 54% to 62%
of our total revenues, based in part on the rate at which Villa’s Euro
denominated financial statements have been or will be converted into U.S.
dollars. In addition, over the last three years, Villa has contributed positive
operating income, as compared to U.S. consolidated operating losses. Having a
portion of our future income denominated in Euros exposes us to market risk with
respect to fluctuations in the U.S. dollar value of future Euro earnings. A 5%
decline in the value of the Euro in fiscal 2009, for example, would have reduced
sales by approximately $2.2 million, and would have decreased our consolidated
income from continuing operations by approximately $0.1 million (due to the
reduction in the U.S. dollar value of Villa’s operating income).
  ITEM
8FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
 
 The
consolidated financial statements of the Company, including the notes to all
such statements and other supplementary data are included in this report
beginning on page F-1.
  ITEM
9CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  NONE
  ITEM
9A(T)CONTROLS AND
PROCEDURES
  EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
 
 The
Company, under the supervision and with the participation of the Company's
management, including John J. Quicke, 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 Exchange Act,
as of the end of the period covered by this Annual 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 Annual Report to provide reasonable
assurance that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.
 
 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.
 
 REPORT OF
MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company.  Internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of
America.  Internal control over financial reporting includes policies
and procedures for maintaining records that in reasonable detail accurately and
fairly reflect our transactions; providing reasonable assurance that
transactions are recorded as necessary for the preparation of our financial
statements; providing reasonable assurance that receipts and expenditures of the
Company are made in accordance with management authorization; and providing
reasonable assurance that unauthorized acquisition, use or disposition of
Company assets that could have a material effect on our financial statements
would be prevented or detected on a timely basis.  Because of inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements would
be prevented or detected.
 
 Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.  Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was effective as of August
1, 2009.
 
 This Annual Report does not include an attestation
report of the company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to
attestation by the Company’s registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
company to provide only management’s report in this Annual
Report.
 
 29
 
 Changes in
Internal Control Over Financial Reporting
  There were
no changes in our internal control over financial reporting during the fiscal
year ended August 1, 2009 that have materially affected, or reasonably likely to
materially affect, our internal control over financial reporting.
 ITEM
9BOTHER
INFORMATION
  Subsequent
to our fiscal year end, the Board of the Company adopted a plan on November 10,
2009 to exit the Del Medical U.S. business unit. The decision to exit the Del
Medical U.S. business unit is based on an evaluation of the Company’s strategic
direction, competitive strengths and market potential. This business is part of
the Company’s Medical Systems Group, however, this decision does not include or
impact the operations of our Villa subsidiary which will make up the whole of
the Medical Systems Group going forward.
  The
options for exiting the Del Medical U.S. business unit include a sale of the
operations, a sale of certain assets and product lines of the business unit, or
a full shut down. The Company is currently engaged in discussions with
prospective buyers for the operation, product lines, or assets, expects to make
a final decision regarding the form of disposition or shut down of the business
unit in the near future and expects to substantially complete the exit no later
than January, 2010.
  On
November 10, 2009, the Company concluded that a material charge for impairment
to the Company would result from the exit from the Del Medical U.S. business
unit based on its review of the sale process and other considerations being
discussed. The results of this business disposition will be reported as a loss
from discontinued operations in our fiscal 2010 first quarter 10-Q in accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”
  The loss
on disposition, under the assumption of a full shut down and including non cash
asset write offs, is estimated to be in the range of $6.0 million to $6.5
million and will be recorded in the fiscal 2010 first quarter
results.  The Company expects that between $3.0 million and $3.5
million of the costs included in the loss estimate will result in cash
expenditures during the first half  of fiscal year 2010.
  The
following table summarizes the breakdown of the loss:
  
 Cost Breakdown
              
              Cost EstimateOperating
      losses incurred during the shutdown
              
              $
              2,400Severance
              
              
              1,100Asset
      Write-offs
              
              
              1,600Facility
      rent obligation
              
              
              800Shutdown
      expenses
              
              
              400$
              6,300
 
 30
 
 PART
III
  ITEM
10DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  The names
and ages of each director and executive officers of the Company, each of their
principal occupations at present and for the past five (5) years and certain
other information about each, are set forth below:
  Name
              Age
              All
      Offices with the Company
              Director
      SinceT.
      Scott Avila
              49
              Director
              2009Gerald
      M.  Czarnecki
              69
              Director
              2003James
      R.  Henderson
              51
              Chairman
      of the Board and Director
              2003General
      Merrill A.  McPeak
              73
              Director
              2005James
      A.  Risher
              67
              Director,
      President and Chief Executive Officer
              2005Officer SinceJohn
      J. Quicke
              60
              President
      and Chief Executive Officer
              2009Mark
      A. Zorko
              57
              Chief
      Financial Officer
              2006
  T.Scott Avila has been a
member of the Company’s Board of Directors since March 31, 2009.  He
has served as Managing Partner of CRG Partners, Group, a privately held
professional services company since July 2007. Mr. Avila was also the Managing
Partner of CRP Partners, Group, a privately held professional services company
from July 2003 through July 2007.
  Gerald M. Czarnecki has been
a member of the Company’s Board of Directors since June 3, 2003.  He
has served as the Chairman of The Deltennium Corporation, a privately held
holding company (“Deltennium”), since November 1995 and has served as a director
of Aftersoft, Inc., an entity which provides software, information and related
services to businesses engaged in the automotive aftermarket since August 12,
2008 and its Chairman since September 23, 2009.  Mr. Czarnecki is also
currently serving as President & CEO of Junior Achievement Worldwide, Inc.
and is Managing Director of O2Media Inc. Mr. Czarnecki had a broad career as a
corporate executive including serving as Chairman & CEO of Honfed Bank, a
multi-billion dollar bank; President of UNC Inc., a manufacturing and services
company in the aviation industry; and Senior Vice President of Human Resources
and Administration of IBM, the world’s largest computer company.  Mr.
Czarnecki is a frequent speaker and seminar leader on a broad range of corporate
governance issues and serves on a number of corporate boards.  He has
served as a member of the Board of Directors and Chairman of the Audit Committee
of State Farm Insurance Companies since 1998; He is Chairman of the Board of
Directors of the National Association of Corporate Directors, Florida Chapter
and is Chairman of The National Leadership Institute, a non-profit organization
committed to improving non-profit Leadership and Corporate
Governance.  Mr. Czarnecki has a B.S. in Economics from Temple
University and an M.A. in Economics from Michigan State University and is a
CPA.
  James R.  Henderson
is the Chairman of the Company’s Board of Directors where hehas been a directorsince November 20,
2003. Mr. Henderson is a Managing Director and operating partner of SteelPartners LLC, a global investment
management firm, which is the Investment Manager  for Steel Partners
II Master Fund L.P., Steel PartnersII,
L.P.  and Steel PartnersII (Onshore) L.P.  Mr.
Henderson has been associated with Steel Partners LLC and its affiliates since
August 1999.  Mr. Henderson has, since March 1, 2007, served as an
Executive Vice President of SP Acquisition Holdings, Inc., a “blank check
company” formed for the purpose of acquiring, through a merger, capital stock
exchange, asset acquisition or other similar business combination, one or more
businesses or assets.  He has served as
a director, (currently Chairman of the Board) of Point Blank Solutions, Inc., amanufacturer and provider of bullet, fragmentation and stab resistant
apparel and related ballistic accessories, which are used in the United States
and internationally by military, law enforcement, security and corrections
personnel, as well as government agencies since August 2008 and Chief Executive
Officer since April 2009.  Mr. Henderson has served as a director
(currently Chairman of the Board) of GenCorp Inc., a  manufacturer of
aerospace and defense systems with a real estate segment that includes
activities to the entitlement, sale and leasing of its excess real estate
assets, since March 2008.  He has been a director of BNS Holding,
Inc., a holding company that owns a majority of Collins Industries, Inc., a
manufacturer of school buses, ambulances, and terminal trucks, since June
2004.  Mr. Henderson has been a director of SL Industries, Inc., a
manufacturer and marketer of power and data quality systems and equipment for
industrial, medical, aerospace and consumer applications, since January
2002.  He was a director and Chief Executive Officer of WebFinancial
Corporation, which through its operating subsidiaries, operates niche banking
markets, from June 2005 to April 2008, President and Chief Operating Officer of
WebFinancial from November 2003 to April 2008.  He was also the Chief
Executive Officer of WebBank, a wholly-owned subsidiary of WebFinancial, from
November 2004 to May 2005.  He was a director of ECC International
Corp. (“ECC”), a manufacturer and marketer of computer controlled simulators for
training personnel to perform maintenance and operation procedures on military
weapons, from December 1999 to September 2003 and was acting Chief Executive
Officer from July 2002 to March 2003.  Mr. Henderson has been the
President of Gateway Industries, Inc., a provider of database development and
web site design and development services, from December 2001 to April
2008.  Mr. Henderson was also director of Angelica Corporation, an
outsourced linen management services provider to the healthcare industry, from
August 2006 until August 2008.  From January 2001 to August 2001, he
was President of MDM Technologies, Inc., a direct mail and marketing
company.  Mr. Henderson was employed as Chief Financial Officer with
Aydin Corporation from 1996 to June 1999, which also included tenure as
President and Chief Operating Officer from October 1998 to June
1999.  Prior to his employment with Aydin Corporation, Mr. Henderson
was employed as an executive with UNISYS Corporation, an e-business solutions
provider.
  31
  General Merrill A. McPeak has
been a member of the Company’s Board of Directors since April 27, 2005. General
McPeak is the President of McPeak and Associates, a management-consulting firm
he founded in 1995. General McPeak was Chief of Staff of the Air Force from
November 1990 to October 1994, when he retired from active military service.
General McPeak was for several years Chairman of ECC. He has been a director of
Point Blank Solutions since August 2008 and has served as a director of several
other public companies, including Tektronix, Inc. and TWA. Currently, General
McPeak is Chairman of the Board of Ethicspoint, Inc., a company providing
confidential corporate governance compliance and whistleblower reporting
services. He is a director of Sensis Corp., a privately held manufacturer of
military radars and civilian air traffic control systems. He is an investor in
and director of several public and private companies in the early development
stage. General McPeak received a Bachelor of Arts degree in economics from San
Diego State College and a Master of Science degree in international relations
from George Washington University. He is a member of the Council on Foreign
Relations, New York City.
 James A. Risher has been a
member of the Company’s Board of Directors since April 27, 2005.  On
August 31, 2006 Mr. Risher became the President and CEO of the
Company.  On August 28, 2009, Mr. Risher resigned from his position as
President and Chief Executive Officer of the Company effective August 31, 2009.
Mr. Risher will continue to serve as a director of the Company.  Mr.
Risher has been the Managing Partner of Lumina Group, LLC, a private company
engaged in the business of consulting and investing in small and mid-size
companies, since 1998.  From February 2001 to May 2002, Mr. Risher
served as Chairman and Chief Executive Officer of BlueStar Battery Systems
International, Inc., a Canadian public company that is an e-commerce distributor
of electrical and electronic products to selected automotive aftermarket
segments and targeted industrial markets.  From 1986 to 1998, Mr.
Risher served as a director, Chief Executive Officer and President of Exide
Electronics Group, Inc. (“Exide”), a global leader in the uninterruptible power
supply industry.  He also served as Chairman of Exide from December
1997 to July 1998.  Mr. Risher has also been a director of SL
Industries, Inc. since May 2003 and a director of New Century Equity Holdings
Corp., a holding company seeking to acquire a new business, since October
2004.
 John J. Quickewas appointed
as the Company’s President and Chief Executive Officer on September 1, 2009 and
a member of the Company’s Board of Directors on September 17, 2009.Mr. Quicke has
served as a director of WHX Corporation since July 2005 and as a Vice President
of WHX Corporation since October 2005.  Mr. Quicke served as the
President and Chief Executive Officer of Bairnco Corporation, a subsidiary of
WHX Corporation, from April 2007 to December 2008.  He is a Managing
Director and operating partner of Steel Partners.  Mr. Quicke has been
associated with Steel Partners and its affiliates since September
2005.  He has served as a director of Rowan Companies, Inc., a
contract drilling company, since January 2009.  He has served as a
director of Adaptec, Inc. since December 2007. He served as a director of
Angelica Corporation, a provider of health care linen management services, from
August 2006 to July 2008.  Mr. Quicke served as Chairman of the Board
of NOVT Corporation from April 2006 to January 2008, and served as President and
Chief Executive Officer of NOVT Corporation from April 2006 to November
2006.  Mr. Quicke also served as a director of Layne Christensen
Company, a provider of products and services for the water, mineral,
construction and energy markets, from October 2006 to June 2007.  He
served as a director, President and Chief Operating Officer of Sequa
Corporation, a diversified industrial company, from 1993 to March 2004, and as
Vice Chairman and Executive Officer of Sequa Corporation from March 2004 to
March 2005.  As Vice Chairman and Executive Officer of Sequa
Corporation, Mr. Quicke was responsible for the Automotive, Metal Coating,
Specialty Chemicals, Industrial Machinery and Other Product operating segments
of the company.  From March 2005 to August 2005, Mr. Quicke
occasionally served as a consultant to Steel Partners II, L.P. and explored
other business opportunities.  Mr. Quicke is a Certified Public
Accountant and a member of the AICPA.
  Mark A. Zorkohas served as
our Chief Financial Officer from August 30, 2006.  He continues as a
CFO Partner at Tatum, LLC, a professional services firm where he has held
financial leadership positions with public and private client
companies.  From 1996 to 1999, Mr. Zorko was Chief Financial Officer
and Chief Information Officer for Network Services Co., a privately held
distribution company.  His prior experience includes Vice President,
Chief Financial Officer and Secretary of Comptronix Corporation, a publicly held
electronic system manufacturing company, corporate controller for Zenith Data
Systems Corporation, a computer manufacturing and retail electronics company,
and finance manager positions with Honeywell, Inc.  Mr. Zorko was a
senior staff consultant with Arthur Andersen & Co.  Mr. Zorko
served in the Marine Corps. from 1970 to 1973.  He is on the Board of
Directors of MFRI, Inc, and chairs the audit committee. Mr. Zorko is on the
audit committee for Opportunity Int’l, a microenterprise development
organization, and on the Finance Committee for the Alexian Brothers Health
System.  Mr. Zorko earned a BS degree in Accounting from The Ohio
State University, an MBA from the University of Minnesota, and completed the
FEI's Chief Financial Officer program at Harvard University.  He is a
certified public accountant and a member of the National Association of
Corporate Directors.
 32
  AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS; IDENTIFICATION OF AUDIT COMMITTEE FINANCIAL
EXPERT.
  The Board
of Directors has a standing Audit Committee, the members of which are Gerald
M.  Czarnecki (chairman), General Merrill McPeak and T. Scott
Avila.  The Board of Directors has determined that Mr. Czarnecki is an
"audit committee financial expert" as defined in Item 401(h) of Regulation
S-K.  Although the Company is currently not listed on any exchange,
Mr. Czarnecki, Gen. McPeak and T. Scott Avila are considered to be "independent
directors" as defined in Rule 4200 of the Marketplace Rules of the NASDAQ Stock
Market.
  CODE OF
BUSINESS CONDUCT AND ETHICS.
  The
Company has adopted a Code of Business Conduct and Ethics that applies to the
Company’s Principal Executive Officer and Principal Financial and Accounting
Officer.  The Company’s Code of Business Conduct and Ethics is posted
on the Company’s website, http://www.delglobal.com.  Any
person may obtain a copy of the Code of Business Conduct and Ethics, without
charge, by writing to Del Global Technologies Corp., 50B N. Gary Avenue,
Roselle, Illinois 60172, Attn: Secretary.
  SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
  Section
16(a) of the Exchange Act requires the Company's officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
“Commission”).  Such officers, directors and 10% stockholders are also
required by Commission rules to furnish the Company with copies of all Section
16(a) forms they file.  Based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons, the Company believes that during the fiscal year ended August 1, 2009
there was compliance with all Section 16(a) filing requirements applicable to
its officers, directors and 10% stockholders.  The Company knows of no
failures to file a required Section 16(a) form during the fiscal year ended
August 1, 2009.
  ITEM
11EXECUTIVE
COMPENSATION
  COMPENSATION
DISCUSSION AND ANALYSIS
  This
compensation discussion and analysis describes the elements of compensation paid
to each of the named executive officers who served in the fiscal year ended
August 1, 2009. The discussion focuses primarily on the information contained in
the following tables and related footnotes but may also describe compensation
actions taken before or after the last completed fiscal year to the extent that
such discussion enhances understanding of our compensation philosophy or
policies. The Compensation Committee of the Board, which we refer to in this
discussion as the “Committee”, oversees the design and administration of our
executive compensation program.
 
 THE ROLE
OF THE COMMITTEE
  The
Committee is responsible for ensuring that the Company’s executive compensation
policies and programs are competitive within the markets in which the Company
competes for talent and reflect the long-term investment interests of our
shareholders. The Committee reviews and approves the executive compensation and
benefits programs for all the Company’s executive officers annually, usually in
the first quarter of each fiscal year.  Any options that are granted
as a result of the Committee’s executive compensation review and approval
process are only granted upon full Board approval of the option
grant.  The strike price of such options is set at the closing price
of the Company’s stock on the day the options were granted.
  33
 
 With
respect to the CEO, the Committee reviews and approves corporate goals and
objectives, evaluates the CEO’s performance against these objectives, and based
on that evaluation makes recommendations to the Board regarding the CEO’s
compensation level, or in the case of our current CEO, the terms of the
management services agreement with SP Corporate Services, LLC ("SP Corporate
Services"), effective as of September 1, 2009 (the "Services Agreement"),
pursuant to which SP Corporate Services provides the non-exclusive services of
John J. Quicke to serve as the Company's CEO and President.
  The CEO
participates, together with the Committee, in the executive compensation process
by:
  ·
              approving
      perquisites valued at less than $10,000per year (all
      perquisites valued at greater than this amount are still approved by the
      Committee);
 ·
              participating
      in informal discussions with the Committee regarding satisfaction of
      performance criteria by executive officers, other than the
      CEO;
 ·
              providing
      the Board with recommendations as to who should participate in the Del
      Global Incentive Stock Plan and the size of  option grants to
      such participants; and
 ·
              assigning
      annual budget goals and other objectives that determine bonus awards for
      the CFO.
 
 COMPENSATION
PHILOSOPHY AND OBJECTIVES
  The
Committee is responsible for ensuring that the Company’s executive compensation
policies and programs are competitive within the markets in which the Company
competes for talent and reflect the long-term investment interests of our
shareholders. The goal of the executive compensation program is to (a) attract,
retain and reward executive officers who contribute to the Company’s success and
(b) align executive compensation with the achievement of the Company’s business
objectives and the creation of longer-term value for shareholders. The Committee
also strives to balance short and long-term incentive objectives by establishing
goals, performance criteria, evaluating performance and determining actual
incentive awards that are both effective and efficient. While the Committee
believes that stock ownership by executive officers is an effective way of
aligning the common interests of management and shareholders to enhance
shareholder value, the Company has not established equity ownership guidelines
for its executive officers.
  RELATIONSHIP
OF COMPANY PERFORMANCE TO EXECUTIVE COMPENSATION
  When
determining executive compensation, the Committee also takes into account the
executives’ performance in special projects undertaken during the past fiscal
year, contribution to improvements in our financial situation, development of
new products, marketing strategies, manufacturing efficiencies and other
factors. During the 2009 fiscal year, the Committee focused particularly on
progress with respect to improvement in the Company's revenue growth, operating
earnings and the development of a long-term strategic plan for the Company that
provides a platform for growth and a return to shareholders.
  Satisfaction
of certain performance criteria (including initiative, contribution to overall
corporate performance and managerial ability) is evaluated after informal
discussions with other members of the Board and, for all of the executives other
than the CEO, after discussions with the CEO. No specific weight or relative
importance was assigned to the various qualitative factors and compensation
information considered by the Committee. Accordingly, the Company's compensation
policies and practices may be deemed subjective, within an overall published
framework based on both the financial and non-financial factors.
  ELEMENTS
OF COMPENSATION
  The
Company’s compensation program is comprised primarily of four elements: base
salary, annual cash bonuses, long-term equity incentives and perquisites.
Together, these four elements are structured by the Committee to provide our
named executive officers with cumulative total compensation consistent with our
executive compensation philosophy described above. Each of these elements plays
an important role in balancing executive rewards over short- and long-term
periods, based on our program objectives.
  1.  MANAGEMENT
SERVICES AGREEMENT AND BASE SALARY
  Pursuant
to the Management Services Agreement, we pay SP Corporate Services $30,000
per month (the "CEO Fee") for the services of John J. Quicke, our President and
CEO.  The CEO Fee may be adjustable annually upon mutual agreement by us
and SP Corporate Services or at other times upon the amendment of the
services to be provided by John J. Quicke.  Our base salary levels and the
CEO Fee reflect a combination of factors, including competitive pay levels
relative to our peers, the executive’s experience and tenure, our overall annual
budget for merit increases and pre-tax profit, the executive’s individual
performance, and changes in responsibility.  Base salaries and the CEO
Fee are reviewed annually by the Committee at the beginning of the year, but are
not automatically increased annually.  We do not target base salary or the
CEO Fee at any particular percent of total compensation.  The base salary
for our CFO and former CEO are set forth in their employment agreements, which
are described in more detail below.
  34
  2.  ANNUAL
CASH BONUSES
  The
purpose of the annual cash bonus is to provide a competitive annual cash
incentive opportunity that rewards both the Company’s performance toward
corporate goals and objectives and also individual achievements.  The
annual bonus is a short-term annual incentive paid in cash pursuant to
arrangements that cover all executive officers, including the CEO, and provide
that a bonus will be paid upon achieving the Company’s annual budget
goals.  For fiscal year 2009, the Committee determined that bonuses
would be paid out upon the achievement of improvement of revenue and operating
income as compared to fiscal year 2009 business plan with targets set for the
CEO and CFO of 70% and 45% of their annual base salary
respectively.  Incentive targets for fiscal year 2009 were not
achieved and as a result, the former CEO and CFO did not receive an annual
bonus.
  3.  LONG
TERM EQUITY INCENTIVES
  A.  DEL
GLOBAL STOCK OPTION PLAN
  The
purpose of the Del Global Amended and Restated Stock Option Plan (the “DGTC
Plan”), is to provide for the granting of incentive stock options and
non-qualified stock options to the Company’s executive officers, directors,
employees and consultants.  The Committee administers the DGTC
Plan.  Among other things, the Committee: (i) determines participants
to whom options may be granted and the number of shares to be granted pursuant
to each option, based upon the recommendation of our CEO;  (ii)
determines the terms and conditions of any option under the DGTC Plan, including
whether options will be incentive stock options, within the meaning of Section
422 of the Internal  Revenue Code of 1986, as amended (the “Code”), or
non-qualified stock options; (iii) may vary the vesting schedule of options; and
(iv) may suspend, terminate or modify the DGTC Plan.  Any Committee
recommendations of awards, options or compensation levels for senior executive
officers are approved by the entire Board, excluding any management
directors.
  Under the
DGTC Plan, incentive stock options have an exercise price equal to the fair
market value of the underlying stock as of the grant date and, unless earlier
terminated, are exercisable for a period of ten (10) years from the grant
date.  Non-qualified stock options may have an exercise price that is
less than, equal to or more than the fair market value on the grant date and,
unless earlier terminated, are exercisable for a period of up to ten (10) years
from their grant date.
  For the
fiscal year ended August 1, 2009, no options to purchase the Company’s common
stock were granted under the terms of the DGTC Plan.
  B.  2007
INCENTIVE STOCK PLAN
  The 2007
Incentive Stock Plan (the “2007 Plan”) is designed to provide an incentive to,
and to retain in the employ of the Company and any Subsidiary of the Company,
within the meaning of Section 424(f) of the United States Internal Revenue Code
of 1986, as amended, directors, officers, consultants, advisors and employees
with valuable training, experience and ability; to attract to the Company new
directors, officers, consultants, advisors and employees whose services are
considered valuable and to encourage the sense of proprietorship and to
stimulate the active interest of such persons in the development and financial
success of the Company and its Subsidiaries.
  The 2007
Plan is administered by theCommittee,which has full power and
authority to designate recipients of options (as defined in the 2007 Plan) and
restricted stock under the 2007 Plan and to determine the terms and conditions
of the respective option and restricted stock agreements and to interpret the
provisions and supervise the administration of the 2007 Plan. The Committee also
has the authority to designate which options granted under the 2007 Plan will be
incentive options and which shall be nonqualified options.
  For the
fiscal year ended August 1, 2009, under the terms of the 2007 Plan, the Company
granted (a) James A. Risher an option to purchase 50,000 shares of the Company’s
common stock and (b) Mark A. Zorko an option to purchase 20,000 shares of the
Company’s common stock.
  35
 
 4.  PERQUISITES
  The
Company’s compensation program also includes other benefits and perquisites.
These benefits include annual matching contributions to certain executive
officers’ 401(k) plan accounts, car allowances, living allowances and tax
gross-ups to cover taxes on certain benefits.  We are selective in our
use of perquisites, attempting to utilize perquisites that are within range of
modest to competitive within our industry. The Committee has delegated authority
to the CEO to approve such perquisites for other executive officers, but the
Committee must separately approve any perquisites that exceed $10,000 per
year.
 
 IMPACT OF
TAX AND ACCOUNTING
 
 As a
general matter, the Committee always considers the various tax and accounting
implications of compensation elements employed by the Company and attempts to
structure such compensation in a tax efficient manner. When determining amounts
of long-term incentive grants to executives and employees, the Committee
examines the accounting cost associated with the grants.
 
 Current
compensation levels for our named executive officers are significantly lower
than $1 million at which tax deductions are limited under Internal Revenue Code
Section 162(m).  In the event that future annual total compensation
for any named executive officer exceeds the $1 million threshold, the Committee
intends to balance tax deductibility of executive compensation with its
responsibility to retain and motivate executives with competitive compensation
programs. As a result, the Committee may take such actions as it deems in the
best interests of shareholders, including: (i) provide non-deductible
compensation above the $1 million threshold; (ii) require deferral of a portion
of the bonus or other compensation to a time when payment may be deductible by
the Company; and/or (iii) modify existing programs to qualify bonuses and other
performance-based compensation to be exempt from the deduction
limit.
  FISCAL
YEAR 2009 COMPENSATION DECISION
  For fiscal
year 2009, the Committee conducted an evaluation of the performance of the CEO
and the CFO against per-established goals.  Based upon these
evaluations, decisions were made regarding salary increases and annual
bonuses.  As a result, no  salary increases were granted for
fiscal year 2009.  Incentive targets for fiscal year 2009 were not
achieved and as a result, the CEO and CFO did not receive an annual
bonus.
 
 In keeping
with our philosophy of aligning management and the stockholder interests and
consideration of the future contributions expected of the executive officers,
the Committee granted long-term equity incentives to the CEO and
CFO.  See the “Grants of  Plan-Based Awards Table” for
equity granted to the Named Executive Officers in fiscal year 2008.
 
 SUMMARY
COMPENSATION TABLE
  The
following table sets forth all compensation awarded to, paid or earned by the
following type of executive officers for each of the Company’s last three
completed fiscal years: (i) individuals who served as, or acted in the capacity
of, the Company’s principal executive officer for the fiscal year ended August
1, 2009; (ii) individuals who served as, or acted in the capacity of, the
Company’s principal financial officer for the fiscal year ended August 1, 2009;
(iii) the Company’s three most highly compensated executive officers, other than
the principal executive officer and principal financial officer, who were
serving as executive officers at the end of the fiscal year ended August 1,
2009; and (iv) up to two additional individuals for whom disclosure would have
been provided but for the fact that the individual was not serving as an
executive officer of the Company at the end of the fiscal year ended August 1,
2009 (of which there were none).  We refer to these individuals
collectively as our named executive officers.
  36
  SUMMARY
COMPENSATION TABLE
  Annual
      CompensationName
      and Principal Position
              
              Year
              
              Salary
      ($)(1)
              
              
              Bonus
      ($)(1)
              
              
              Stock
      Awards
              
              
              Option
      Awards(3)
              
              
              All
      Other
                  Compensation(2)
              
              
              TotalJames
      A. Risher, Chief Executive Officer (4)
              
              2009
              
              $
              318,722
              
              
              $
              -
              
              
              $
              -
              
              
              $
              80,425
              
              
              $
              116,256
              
              
              $
              515,4032008
              
              $
              319,743
              
              
              $
              -
              
              
              $
              -
              
              
              $
              75,092
              
              
              $
              125,944
              
              
              $
              520,7792007
              
              $
              274,615
              
              
              $
              224,324
              
              
              $
              -
              
              
              $
              51,171
              
              
              $
              167,686
              
              
              $
              717,796Mark
      A. Zorko, Chief Financial Officer
              
              2009
              
              $
              250,864
              
              
              $
              -
              
              
              $
              -
              
              
              $
              42,551
              
              
              $
              7,717
              
              
              $
              301,1322008
              
              $
              246,571
              
              
              $
              -
              
              
              $
              -
              
              
              $
              37,356
              
              
              $
              8,575
              
              
              $
              292,5022007
              
              $
              214,300
              
              
              $
              131,291
              
              
              $
              -
              
              
              $
              23,526
              
              
              $
              6,844
              
              
              $
              375,961
 
 (1) The
figures reported in the salary and bonus columns represent amounts earned and
accrued for each year.
 (2)The
amounts in this column include the following executive perquisites and other
compensation for fiscal years 2009, 2008 and 2007:
  Name
              Benefit
              
              2009
              
              
              2008
              
              
              2007James
      A. Risher (4)
              Living
      allowance
              
              $
              71,165
              
              
              $
              72,720
              
              
              $
              67,357Tax
      Gross-Ups
              
              
              45,091
              
              
              
              53,224
              
              
              
              41,162Other
              
              
              -
              
              
              
              -
              
              
              
              59,167
              (2(e))$
              116,256
              
              
              $
              125,944
              
              
              $
              167,686Mark
      A. Zorko
              Car
      Allowance
              
              $
              6,900
              
              
              $
              6,900
              
              
              $
              5,750401
      (k) Match
              
              
              817
              (2(c))
              
              
              1,675
              (2(c))
              
              
              1,094
              (2(c))$
              7,717
              
              
              $
              8,575
              
              
              $
              6,844
 Notes:
 2(c)
              Company-matching
      contribution of 50% of the first 4% of salary.  Accelerated
      vesting schedule (100% vested in Company contributions after three (3)
      years of employment).
  2(e)
              During
      fiscal year 2007, but prior to Mr. Risher’s appointment as CEO, Mr. Risher
      received $4,167 as compensation for his service to the Company as a
      Director and $55,000 for his service to the Company as a
      consultant.
  (3)
              Refer
      to Footnote 10 Shareholder Equity in Item 8 “Stock Option Plan And
      Warrants” for details of stock option plan terms, SFAS 123R valuation
      techniques and assumptions and the fair value of stock options
      granted.   Option awards listed represent the stock
      compensation expense recognized in the respective fiscal
    year.
  (4)
              On
      August 28, 2009, James A Risher resigned his position as President and
      Chief Executive Officer of the Company effective August 31, 2009. Mr.
      Risher will continue to serve as a director of the Company.  Mr.
      Risher will continue to receive as severance his base salary and living
      allowance through December 31, 2009, and the Company will continue to pay
      for Mr. Risher’s medical plan through December 31,
  2009.
 
 
 37
  Grants Of
Plan-Based Awards:
  (a)
                
                (b)
                
                (i)
                
                (j)
                
                (k)
                
                (l)All
      Other
                
                All
      OtherStock
                
                OptionAwards:
                
                Awards:Number
                
                Number
      of
                
                Exercise
                
                Grant Dateof Shares
                
                Securities
                
                or
      Base
                
                Fair
      Valueof
      Stock
                
                Underlying
                
                Price
      of
                
                of
      Stockor
      Units
                
                Options
                
                Option
                
                and OptionGrant
                
                
                
                
                
                Awards
                
                AwardsName
                
                Date
                
                (#)
                
                (#)
                
                ($/sh)
                
                ($)James
      A. Risher, Chief Executive Officer
                
                8/31/2006
                
                -
                
                120,000(1)
                
                1.5
                
                118,8009/17/2007
                
                -
                
                50,000(2)
                
                2.7
                
                95,39712/16/2008
                
                -
                
                50,000(1)
                
                1
                
                33,500Mark
      A. Zorko, Chief Financial Officer
                
                8/31/2006
                
                -
                
                60,000(1)
                
                1.5
                
                59,40011/17/2006
                
                -
                
                20,000(1)
                
                2
                
                26,2009/17/2007
                
                -
                
                20,000(2)
                
                2.7
                
                38,15912/16/2008
                
                -
                
                20,000(1)
                
                1
                
                13,400
  (1)Granted pursuant to the
Company's DGTC Plan.
  These
stock options vest and become exercisable as to 25% of such shares on the date
of the option grant and 25% on each of the first, second and third anniversaries
of the date of the grant.
 (2) Granted
pursuant to the Company's 2007 Plan.
  These
stock options vest and become exercisable as to 25% of such shares on the date
of the option grant and 25% on each of the first, second and third anniversaries
of the date of the grant.
  EMPLOYMENT
AGREEMENTS
 
 A.       James
A. Risher Employment Agreements
 
 The
Company and Mr. Risher entered into a Letter Agreement, dated August 31,
2006 (the “Risher Employment Agreement”), providing for Mr. Risher’s employment
with the Company as its CEO and President. Pursuant to the Risher Employment
Agreement, Mr. Risher was entitled to an annual salary of $300,000 and received
an option grant to purchase 120,000 shares of the Company's common stock
pursuant to and in accordance with the Company's DGTC Plan. Such stock options
vest and become exercisable as to one-half of such shares on the first
anniversary of the date of the grant and as to an additional 25% of such shares
on the second and third anniversaries of the date of the grant,
respectively.  Under the terms of the Risher Employment Agreement, Mr.
Risher also received a living allowance of $6,200 per month.   In
addition, Mr. Risher was eligible to receive an annual bonus with a target of
60% of his annual base salary based upon achieving the Company's annual budget
and attaining specific objectives assigned by the Board.  As a result of achieving these specific objectives in
fiscal year 2007, Mr. Risher received a bonus of $224,324.
 
 The Risher Employment
Agreement was superseded by Letter Agreement between the Company and Mr. Risher,
dated September 19, 2007 (the “2007 Risher Agreement”), setting forth the terms
of Mr. Risher’s employment by the Company as its CEO and
President.  For fiscal year 2008, Mr. Risher received an annual base
salary of $320,000 as well as a living allowance of $6,200 per month, which
amount shall be “grossed up” for tax purposes.  In addition, Mr.
Risher was eligible to receive an annual bonus with a target of 70% of his
annual base salary, based on achieving the Company’s annual budget and attaining
specific objectives assigned by the Board.  The annual bonus could
have been anywhere from 0% to 150% of the
target. As a
result of the Company not achieving these specific objectives in fiscal year
2008, Mr. Risher did not receive a bonus for the 2008fiscal year.
 
 The 2007Risher Agreement has been superseded by
Letter Agreement between the Company and Mr. Risher, dated September 16, 2008 (the “2008 Risher Agreement”) setting
forth the terms of Mr. Risher’s continued employment by the Company as its CEO
and President, effective as of September 1,
2008.  The 2008 Risher Agreement terminated on August 31,
2009.  The 2008 Risher Agreement provides for the same compensation as
the 2007 Risher Agreement, including an annual base salary of $320,000 as
well as a living allowance of $6,200 per month, which amount will be “grossed up” for tax
purposes.  In addition, Mr. Risher will be eligible to receive an
annual bonus with a target of 70% of his annual base salary, based on achieving
the Company’s annual budget and attaining specific objectives assigned by the
Board.  The annual bonus can be anywhere from 0% to 150% of the
target.As a result of the Company not
achieving these specific objectives in fiscal year 2009, Mr. Risher did not
receive a bonus for the 2009fiscal
year.  In addition to these terms, the
2008 Risher Agreement provides that in the event Mr. Risher terminates his
employment with the Company for “Good Reason” or if the Company
terminates his employment without “Cause” (and not, in each case, by reason of
Mr. Risher’s death or disability), Mr. Risher will be entitled to certain
payments and benefits more fully described below in the
section  entitled “Potential Payments Upon Termination Or A Change In
Control.”
  38
 
 On August
28, 2009, James A. Risher resigned from his position as President and Chief
Executive Officer of the Company effective August 31, 2009.  Mr.
Risher will continue to serve as a director of the Company. In connection with
the termination of his employment, Mr. Risher will continue to receive as
severance his base salary and living allowance through December 31, 2009, and
the Company will continue to pay for Mr. Risher’s medical plan through December
31, 2009.
 
 B.       Mark
A. Zorko Employment Agreement
 
 The
Company and Mr. Zorko entered into a Letter Agreement, dated August 30, 2006
(the “Zorko Employment Agreement), which remains in effect as of the date
hereof, and provides for Mr. Zorko’s employment with the Company as its Chief
Financial Officer.  Pursuant to the Zorko Employment Agreement, Mr.
Zorko is entitled to an annual salary of $245,000 and received an option grant
to purchase 60,000 shares of the Company's common stock pursuant to and in
accordance with the Company's DGTC Plan.  Mr. Zorko is also entitled
to receive an automobile allowance of $575 per month.  In addition,
Mr. Zorko was eligible to receive an annual bonus with a target of 45% of his
annual base salary based upon achieving the Company's annual budget and
attaining specific objectives assigned by the CEO of the Company.  As
a result of the Company not achieving these specific objectives in fiscal year
2008 or 2009, Mr. Zorko did not receive a bonus for either fiscal
year.
 
 OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END:
 
 Option
      Awards
              Stock
      Awards(a)
              (b)
              (c)
              (d)
              (e)
              (f)
              (g)
              (h)
              (i)
              (j)Name
              Number
      of Securities Underlying Unexercised Options (#)
      Exercisable
              Number
      of Securities Underlying Unexercised Options(#)
      Unexercisable
              Equity
      Incentive Plan Awards: Number of Securities Underlying
      Unexercised Unearned Options(#)
              Option
      Exercise Price($) (1)
              Option
      Expiration Date
              Number
      of Shares or Units of Stock That Have Not Vested
      (#)
              Market
      Value of Shares or Units of Stock That Have Not
      Vested ($)
              Equity
      Incentive Plan Awards:Number of Unearned Shares, Units
      or Other Rights That Have Not Vested (#)
              Equity
      Incentive Plan Awards: Market or Payout Value of
      Unearned Shares, Units or Other Rights That Have
      Not Vested ($)James
      A. Risher, Chief Executive Officer
              25,000
      (2)
              -
      (2)
              -
              2.70
              4/26/1510,000
      (2)
              -
      (2)
              -
              2.26
              6/13/1690,000
      (2)
              30,000
      (2)
              -
              1.50
              8/31/16
              -
              -
              -
              -25,000
      (3)
              25,000
      (3)
              
              2.70
              9/17/1712,500(3)
              37,500(3)
              
              1.00
              12/16/18Mark
      A. Zorko, Chief Financial Officer
              45,000
      (2)
              15,000
      (2)
              -
              1.50
              8/31/1615,000
      (2)
              5,000
      (2)
              -
              2.00
              11/17/16
              -
              -
              -
              -10,000
      (3)
              10,000
      (3)
              
              2.70
              9/17/175,000
      (3)
              15,000
      (3)
              -
              1.00
              12/16/18
 
  (1)
              The
      exercise price per share of each option was equal to the closing price of
      the shares of Common Stock on the date of
grant.
  (2)
              Granted
      pursuant to the Company's DGTC
Plan.
  (3)
              Granted
      pursuant to the Company's 2007
Plan.
  POTENTIAL
PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
  Separation
Agreements with Current and Certain Former Named Executive
Officers.
  James A. Risher
 Pursuant to the 2008 Risher Agreement, in the event Mr.
Risher terminates his employment with the Company for “Good Reason” or
if the Company terminates his employment without “Cause” (and not, in each case,
by reason of Mr. Risher’s death or disability), Mr. Risher will be entitled
to continue receiving his full salary, including the living allowance,
subject to applicable withholding tax requirements, until August 31,
2009.  The full value of these payments for the term of the 2008
Risher Agreement is $394,400.  Pursuant to the Employment Agreement,
Mr. Risher is not entitled to receive any other severance or compensation
from the Company in the event his employment with the Company is
terminated.
  For the purposes of the 2008 Risher
Agreement:
 “Good Reason” means: (a) a material diminution in
Mr. Risher’s duties as customarily performed by Mr. Risher for the Company,
including but not limited to the assignment to Mr. Risher of duties inconsistent
with the CEO position, duties or responsibilities as in effect after the date of
execution of this Agreement and (b) the Company requires Mr. Risher to relocate
50 miles or more from his present place of work, provided, in each case, that
Mr. Risher has given prompt notice to the Company of the existence of the
condition (but in no event later than 90 days after its initial existence) and
Mr. Risher has provided the Company with a minimum of 30 days following such
notice to remedy such condition.
 
 “Cause” means: (i) a material breach, by Mr.
Risher, of any written agreement with the Company or its affiliates (after
notice and, if capable of being cured, reasonable opportunity of not less than
thirty (30) days to cure), (ii) a breach of Mr. Risher’s fiduciary duty to the
Company (after notice and, if capable of being cured, reasonable opportunity of
not less than thirty (30) days to cure) or any misappropriation, embezzlement or
fraud with respect to the Company of affiliate of the Company, or any of their
security holders, customers or suppliers, (iii) the commission by Mr. Risher of
a felony, a crime involving dishonesty or moral turpitude or other engaging in
material misconduct that has caused or is reasonably expected to cause injury to
a the Company or an affiliate thereof, or their interests including, but not
limited to, harm to the standing and reputation of, or which otherwise brings
public disgrace or disrepute to the Company or any of its affiliates,
(iv) Mr. Risher’s continued failure or refusal to perform any material duty
to the Company or any of its affiliates, which is normally attached to his
position (after notice and reasonable opportunity of not less than thirty (30)
days to cure), (v) Mr. Risher’s gross negligence or willful misconduct in
performing those duties which are normally attached to his position (after
notice and reasonable opportunity of not less than thirty (30) to cure if
capable of being cured), (vi) any breach of this Agreement, or (vii) a
material breach by Mr. Risher of any written code of conduct or other material
written policy of the Company or any of its affiliates.
  39
  On August
28, 2009, James A. Risher resigned from his position as President and Chief
Executive Officer of the Company effective August 31, 2009.  Mr.
Risher will continue to receive as severance his base salary and living
allowance through December 31, 2009, and the Company will continue to pay for
Mr. Risher’s medical plan through December 31, 2009.
 
 Mark
A. Zorko
  Pursuant
to the Zorko Employment Agreement, Mr. Zorko is entitled to a severance payment
in the event his employment is terminated by the Company without
cause.  The severance payment is equal to one-year base salary
(currently $245,000).  The Company will make no such payment if
employment is terminated for cause.
  DIRECTOR
COMPENSATION
  The
Company seeks highly qualified individuals to serve as outside directors and
compensates them with a combination of cash fees and stock option
grants.  The Company also reimburses Directors for, or pays, travel
costs associated with meeting attendance. There is no retirement plan for
outside directors, and no program of perquisites. The Compensation Committee
periodically assesses whether its compensation structure is competitive in terms
of attracting and retaining the type and quality of outside directors
needed.
  COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
  The
Compensation Committee consists of Merrill A. McPeak as Chairman, Gerald M.
Czarnecki and James R. Henderson. None of these individuals were at any time
during the fiscal year ended August 1, 2009 or at any other time one of our
officers or employees.   Other than Mr. Risher, the Company’s
CEO, none of our executive officers serve as a member of the Board or the
Compensation Committee of any other entity which has one or more executive
officers serving as a member of our Board or Compensation Committee
 
 DIRECTOR
COMPENSATION:
  (a)
                    
                    (b)
                    
                    (d)
                    
                    (g)
                    
                    (h)Name
                    
                    Fees Earned or
      Paid in Cash(1)
                      ($)
                    
                    Option
      Awards(2)
                      ($)
                    
                    All
      Other Compensation
                      ($)
                    
                    Total
                      ($)  T.  Scott
      Avila
                      
                      15,667
                      
                      
                      2,859
                      
                      
                      
                      
                      18,526Gerald
      M.  Czarnecki (4)
                      
                      45,000
                      
                      
                      19,568
                      
                      
                      -
                      
                      64,568James
      R.  Henderson
                        (Chairman) (4)
                      
                      39,000
                      (3)
                      
                      42,782
                      
                      
                      -
                      
                      81,782General Merrill
      A.  McPeak (4)
                      
                      45,500
                      
                      
                      17,687
                      
                      
                      -
                      
                      63,187James A. Risher(5)
                      
                      -(5)
                      
                      
                      -(5)
                      
                      
                      -
      (5)
                      
                      - (5)
 
 (1) Fees consist
of:
 
 ·
                    Each
      non-employee director receives an annual retainer of
    $20,000;
 ·
                    Each
      non-employee director receives an additional fee of $1,000 per each full
      length Board meeting attended (with lesser compensation for telephonic
      meetings, at the discretion of the chair of the Board or committee, as
      applicable);
 ·
                    Each
      non-employee member of each standing committee receives a fee of $500 per
      each full-length committee meeting attended; and $250 for shorter duration
      committee meetings attended; and
 ·
                    Chairs
      of the Board and the various standing committees, excepting the Audit
      Committee, receives double meeting fees.  In lieu of the
      foregoing, the Chair of the Audit Committee receives an additional $1,000
      per Audit Committee meeting.
 
 (2) During fiscal
2009, Mr. Avila received a grant to purchase 25,000 shares of the Company’s
common stock at an exercise price of $0.53 per share and an aggregate fair value
of $8,750; Mr. Czarnecki received a grant to purchase 12,500 shares of the
Company’s common stock at an exercise price of $1.00 per share and an aggregate
fair value of $8,375; Mr. Henderson received grants to purchase 15,000 shares of
the Company’s common stock at an exercise price of $1.00 per share and aggregate
fair values of $10,050 and General McPeak received a grant to purchase 11,500
shares of the Company’s common stock at an exercise price of $1.00 per share and
an aggregate fair value of $7,705.  Upon election to the Board, each
non-employee member of the Board receives a one-time grant of 25,000 options to
purchase the Company’s Common Stock, with an exercise price equal to the fair
market value on the date of grant. Effective as of June 13,
2006,  Directors also received annual grants of 10,000 options
commencing  after  their  first  year of
service as a director.  The Chairman of the Audit Committee receives
an additional annual grant of 2,500 options.  The Chairman of the
Committee receives an additional annual grant of 1,500 options.  The
Chairman of the Governance and Nominating Committee receives an additional
annual grant of 1,000 options (as long as such person is not the Chair of any
other committee of the Board). The Chairman of the Board receives an additional
annual grant of 5,000 options.  The annual grants of stock options to
directors in fiscal year 2009 were made pursuant to the Company’s 2007
Plan.  Directors are also eligible to receive restricted stock awards
under the terms of the Company’s 2007 Plan.  The dollar amounts in this column reflect the dollar
amounts recognized for all options for financial statement reporting purposes
with respect to the fiscal year in accordance with FAS
123R.Refer to Footnote 9 Shareholder Equity in Item 8 “Stock
Option Plan And Warrants” for details of stock option plan
vesting  terms, SFAS 123R valuation techniques and assumptions and the
fair value of stock options granted.
 
 (3) In addition
to the above meeting fees, the Chairman of the Board receives $750 per each day
other than Board meeting days where he or she spends more than half of such day
working at the Company facilities.  This amount is included in the
amount reflected in Column (b).
 
 (4) At August 1,
2009, Mr. Avila held an aggregate of 25,000 options to purchase the Company’s
Common Stock, of which 6,250 were exercisable; Mr. Czarnecki held an aggregate
of 75,000 options to purchase the Company’s Common Stock, of which 56,250 were
exercisable; Mr. Henderson held an aggregate of 136,000 options to purchase the
Company’s Common Stock, of which 101,000 exercisable; Mr. McPeak held an
aggregate of 71,000 options to purchase the Company’s Common Stock, of which
53,750 were exercisable.
 
 (5)           As Mr. Risher was the Company's  CEO, he was
not eligible to receive
any  compensation  for  his  service  as
a  Director.
 
 40
 
 Restricted
Stock and Option Awards
 
 Upon
election to the Board, each non-employee member of the Board receives a one-time
grant of 25,000 options to purchase the Company’s Common Stock.  The
exercise price for such options is equal to the fair market price per share on
the date of the grant, which is approved by the Committee.  These
options vest and become exercisable as to 25% of such shares on the date of the
option grant, 25% on the first anniversary of the date of the grant and as to an
additional 25% of such shares on the second and third anniversaries of the date
of the grant, respectively, based on continued service through the applicable
vesting date.   Effective as of June 13, 2006, Directors also
received annual grants of 10,000 options commencing after their first year of
service as a director.  The Chairman of the Audit Committee receives
an additional annual grant of 2,500 options.  The Chairman of the
Stock Option and Compensation Committee receives an additional annual grant of
1,500 options.  The Chairman of the Governance and Nominating
Committee receives an additional annual grant of 1,000 options (as long as such
person is not the Chair of any other committee of the Board). The Chairman of
the Board receives an additional annual grant of 5,000
options.  Directors are also eligible to receive restricted stock and
option awards under the terms of the Company’s 2007 Plan.  The annual
grants of stock options to directors in fiscal year 2007 were made pursuant to
the DGTC Plan and the annual grants of stock options to directors in fiscal year
2008 and 2009 were made pursuant to the 2007 Plan.
 
 COMPENSATION
COMMITTEE REPORT
  We have
reviewed and discussed with management certain Executive Compensation and
Compensation Discussion and Analysis provisions to be included in this Annual
Report filed on Form 10K, filed pursuant the Exchange Act.  Based on
the reviews and discussions referred to above, we recommend to the Board of
Directors that the Executive Compensation and Compensation Discussion and
Analysis provisions referred to above be included in this Annual
Report.
  Submitted
by the Compensation Committee of the Board of Directors
  General
Merrill A. McPeak, Chairman
 Gerald M.
Czarnecki
 James R.
Henderson
  This
Compensation Committee Report is not deemed incorporated by reference by any
general statement incorporating by reference this Annual Report into any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under either such Acts.
  ITEM
12 SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
 EQUITY
COMPENSATION PLAN INFORMATION
  The
following table summarizes the securities authorized for issuance under equity
compensation plans as of the end of Fiscal 2008:
  Plan
      Category
                    
                    Number
      of Securities to be Issued Upon Exercise of Outstanding
      Options, Warrants and Rights
                    
                    
                    Weighted-Average
      Exercise Price of Outstanding Options, Warrants and
      Rights
                    
                    
                    Number
      of Securities Remaining Available for Future Issuance Under
      Equity Compensation Plans(1)Equity
      compensation plans approved by security holders:
                      Stock
      Option
      Plan
                    
                    
                    2,236,315
                    
                    
                    $
                    3.24
                    
                    
                    
                    385,500Equity
      compensation plans not approved by security holders:None
                    
                    
                    -
 (1)
                    Excludes
      securities to be issued upon exercise of outstanding options, warrants and
      rights.
  
 41
 
 SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
  The
following table sets forth information concerning beneficial ownership of common
stock of the Company outstanding at October 2,
2009 by each person or entity (including any "Group" as such term is used
in Section 13(d) (3) of the Exchange Act, known by the Company to be the
beneficial owner of more than five percent of its outstanding common
stock.  The percentage ownership of each beneficial owner is based
upon 22,718,306shares of common stock issued and
outstanding as of October 2, 2009 plus shares issuable upon exercise of options,
warrants or convertible securities (exercisable within 60 days after said date)
that are held by such person or entity, but not those held by any other person
or entity.  The information presented in this table is based upon the
most recent filings with the Commission by such persons or upon information
otherwise provided by such persons to the Company.
  Name
      and address
                          of
      beneficial owner
                      
                      Amount
      and nature of
                          beneficial
      ownership(1)
                      
                      Percent
      of ClassSteel
      Partners Holdings, L.P.
                        Warren
      G.  Lichtenstein
                        c/o
      Steel Partners II, L.P.
                        590
      Madison Avenue
                        32nd
      Floor
                        New
      York, NY 10022
                      
                      3,136,162(2)
                      
                      13.8%Wellington
      Management Co. LLP
                        75
      State Street
                        Boston,
      MA 02109
                      
                      3,333,115(3)
                      
                      14.7%Wellington
      Trust Company NA
                        c/o
      Wellington Management Co. LLP
                        75
      State Street
                        Boston,
      MA 02109
                      
                      2,117,341
      (4)
                      
                      9.3%Royce
      & Associates, LLC
                        1414
      Avenue of the Americas
                        New
      York, NY 10019
                      
                      1,513,885
      (5)
                      
                      6.7%
   (1)
                      Unless
      otherwise noted, each beneficial owner has sole voting and investment
      power with respect to the shares shown as beneficially owned by him or
      it.(2)
                      According
      to information contained in Amendment No. 16to Schedule 13D filed jointly on
      September 8, 2009 with the SEC by Mr. Lichtenstein,Steel Partners
      II, L.P., a Delaware limited partnership ("SPII"), Steel PartnersHoldings, L.P.,
      a Delaware limited partnership (“SPH”), Steel Partners LLC, A Delaware
      limited liability company (“Steel Partners”), Steel Partners II GP LLC, a
      Delaware limited liability company (“SP II GP”), James R. Henderson and
      John J. Quicke (i) as of the close of business on September 4, 2009,
      SP II owned directly 3,078,870 share of Common Stock.  By virtue of
      their relationships with SP II, as described below, each of SPH, Steel
      Partners, SP II GP and Warren G. Lichtenstein may be deemed to
      beneficially own the Shares owned directly by SP II; and (ii) as of the
      close of business on September 4, 2009, SPH owned directly 57,292 shares
      of Common Stock.  By virtue of their relationships with SPH, as
      described below, each of Steel Partners, SP II GP and Warren G.
      Lichtenstein may be deemed to beneficially own the Shares owned directly
      by SH.  SPHis the sole limited partner of SP II.  Steel
      Partners is the manager of SP II and SPH.  SP II GP is the general
      partner of SP II and SPH.  Warren G. Lichtenstein is the manager of
      Steel Partners and the managing member of SP II GP.  James R.
      Henderson is a Managing Director and operating partner of Steel
      Partners.  Mr. Henderson is also a director of the Company. 
      John J. Quicke is a Managing Director and operating partner of Steel
      Partners.  Mr. Quicke is also President and Chief Executive Officer
      and a director of the Company.(3)
                      According
      to information contained in Amendment No. 9 to a Schedule 13G
      dated December 31, 2008, Wellington Management Company, LLP
      (“Wellington”), an investment advisor registered under the Investment Act,
      may be deemed the beneficial owner of 3,333,115 shares of Common Stock of
      the Company. Clients of Wellington are the owners of record of the shares
      held by Wellington. Accordingly, in its role as investment advisor,
      Wellington has shared power to vote as to 2,483,459 of our Common Stock
      and shared power to dispose of all 3,333,115 shares of our Common Stock
      beneficiallyowned by Wellington.(4)
                      According
      to information contained in Amendment No. 1 to Schedule 13G dated December
      31, 2008, Wellington Trust Company NA, a bank as defined by the Investment
      Act, may be deemed the beneficial owner of 2,117,341 shares of Common
      Stock of the Company.  Clients of
      Wellington Trust are the owners of record of the shares held by Wellington
      Trust. Accordingly, in its role as investment advisor, Wellington Trust
      has shared power to vote and dispose2,117,341of our Common Stock beneficially owned by
      Wellington Trust.(5)
                      According
      to information contained in Amendment No. 6 to a Schedule 13G dated
      December 31, 2009, Royce & Associates, LLC, an
      investment advisor registered under the Investment Act, may be deemed the
      beneficial owner of  1,513,885 shares of Common Stock of the
      Company.
 
 42
 
 SECURITY
OWNERSHIP OF DIRECTORS AND MANAGEMENT
  The
following table sets forth information concerning beneficial ownership of Common
Stock of the Company outstanding at October 2, 2009 by (i) each director; (ii)
each Named Executive Officer of the Company and (iii) by all directors and
executive officers of the Company as a group.  The percentage
ownership of each beneficial owner is based upon 22,718,306 shares of Common
Stock issued and outstanding as of October 2, 2009, plus shares issuable upon
exercise of options, warrants or convertible securities (exercisable within 60
days after said date) that are held by such person or entity, but not those held
by any other person or entity.  The information presented in this
table is based upon the most recent filings with the Commission by such persons
or upon information otherwise provided by such persons to the
Company
  Name
      and address of beneficial owner
                    
                    Amount
      and nature of beneficial ownership(1)
                    
                    Percent
      of ClassMark
      A. Zorko
                    
                    115,000
                    (2)
                    
                    *T.  Scott
      Avila
                    
                    6,250
                    (2)
                    
                    *Gerald
      M.  Czarnecki
                    
                    93,043
                    (2)
                    
                    *James
      A.  Risher
                    
                    224,000
                    (2)
                    
                    *James
      R.  Henderson(3)
                    
                    113,500
                    (2)
                    
                    *Merrill A.
      McPeak
                    
                    94,866
                    (2)
                    
                    *John
      J. Quicke
                    
                    25,000
                    
                    
                    *All
      Directors and Executive Officers as a group (7 persons)
                    
                    671,659
                    (2)
                    
                    2.89%
  *
                    Represents
      less than 1% of the outstanding shares of our Common
  Stock(1)
                    Unless
      otherwise noted, each director and executive officer has sole voting and
      investment power with respect to the shares shown as beneficially owned by
      him.(2)
                    Includes
      shares of our common stock which may be acquired upon the exercise of
      stock options which are presently exercisable or will become exercisable
      within 60 days of October 1, 2009, in the following amounts: Mark A.
      Zorko — 95,000, T.  Scott
      Avila — 6,250; Gerald M. Czarnecki — 56,250, James A. Risher — 205,000,
      James R. Henderson — 113,500, Merrill
      A. McPeak — 53,750 and John J. Quicke — 25,000.(3)
                    Mr. Henderson
      is a Managing Director and operating partner of Steel Partners and
      disclaims beneficial ownership of the (i) 3,078,870 shares of Common Stock
      owned directly by SP II and (ii) 57,292 shares of Common Stock owned
      directly by SPH.(4)
                    Mr.
      Quicke is a Managing Director and operating partner of Steel Partners and
      disclaims beneficial ownership of the (i) 3,078,870 shares of Common Stock
      owned directly by SP II and (ii) 57,292 shares of Common Stock owned
      directly by SPH.
 
 ITEM
13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, 
AND DIRECTOR INDEPENDENCE
  TRANSACTIONS
WITH RELATED PERSONS
 
 On October
15, 2009, the Company entered into the Services Agreement.  Pursuant to the
Services Agreement, SP Corporate Services provides the Company with the services
of John J. Quicke as the Company’s Chief Executive Officer.  Mr.
Quicke had been serving as the Company’s President and Chief Executive Officer
since his appointment to such position on August 28, 2009, and is a member of
the Company’s Board of Directors.
 
 Pursuant
to the Services Agreement, the Company pays SP Corporate Services $30,000 per
month as consideration for Mr. Quicke’s services.  Additionally, the
Company agreed to reimburse SP Corporate Services and Mr. Quicke for certain
expenses, including but not limited to reasonable and necessary business
expenses incurred on behalf of the Company.  The Services Agreement
will terminate immediately upon the earlier of (i) appropriate written notice
given by either party, or (ii) the death of Mr. Quicke.
 
 SP
Corporate Services is an affiliate of Steel Partners.  Mr. Quicke is a
Managing Director and operating partner of Steel Partners.  James
Henderson, Chairman of the Company’s Board of Directors, is a Managing Director
and operating partner of Steel Partners. Steel Partners is the manager of SP II,
which reported in a Schedule 13D with respect to its investment in the Company,
originally filed with the SEC on September 26, 2002 and subsequently amended,
most recently on September 8, 2009, that it owns approximately 13.8% of the
Company’s outstanding common stock.
  The
Services Agreement was unanimously approved by the Company’s disinterested
directors and the Audit Committee of the Board of Directors, and SP Corporate
Services will be subject to the supervision and control of the Company’s
disinterested directors while performing its obligations under the Services
Agreement.
  43
 
 REVIEW,
APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
  During
fiscal 2009, the Company had a policy for the review of transactions in
which the Company was a participant, the amount involved exceededthe lesser of $120,000 or one percent of the
average of the Company's total assets at year end for the last two completed
fiscal yearsand in which any of the Company’s directors or
executive officers, or their immediate family members, had a direct or indirect
material interest.  Any such related person transaction was to be for the
benefit of the Company and upon terms no less favorable to the Company than if
the related person transaction was with an unrelated party. While this policy
was not in writing during fiscal 2009, the
Company's Board of Directors was responsible for approving any such transactions
and the CEO was responsible for maintaining a list of all existing related
person transactions.  Other than the transaction described above, the
Company had no transactions, nor are there any currently proposed transactions,
in which the Company was or is to be a participant, where the amount involved
exceeded the lesser of $120,000 or one percent of
the average of the Company's total assets at year end for the last two completed
fiscal years, and any director, executive officer or any of their
immediate family members had a material direct or indirect interest reportable
under applicable SEC rules or that required approval of the Board of Directors
under the Company’s Related Person Transaction Policy.
  DIRECTOR
INDEPENDENCE
  Although
the Company is currently not listed on any exchange, the Board of Directors has
determined that four of the members of the Board of Directors, Mr.
Czarnecki, Mr. Henderson, Gen. McPeak and Mr. Avila, are “independent” as
defined in Rule 5605 of the Listing Rules of the NASDAQ.  Committee
membership of the Company’s directors is as follows:
 
 Director
                    Audit
      Committee
                    Compensation  Committee
                    Nominating
      and Governance
      CommitteeGerald
      M. Czarnecki*
                    Chair
                    X
                    XJames
      R. Henderson *
                    -
                    X
                    ChairGeneral
      Merrill A. McPeak*
                    X
                    Chair
                    XT.
      Scott Avila*
                    X
                    X
                    XJohn
      J. Quicke
                    -
                    -
                    -James
      A. Risher
                    -
                    -
                    -
  *Independent
  ITEM
14PRINCIPAL ACCOUNTANT FEES AND
SERVICES
  Audit Fees-The aggregate
fees billed by BDO Seidman, LLP for professional services rendered for the audit
of our annual financial statements set forth in our Annual Report on Form 10-K
for the fiscal years ended August 1, 2009, August 2, 2008 and July 28, 2007, for
the reviews of the interim financial statements included in our Quarterly
Reports on Form 10-Q for those fiscal years and for assistance with other
registration statement filings made by the Company during those fiscal years
were $296,753, $323,755, and $290,650, respectively.
  Audit-Related Fees- There
were no fees billed by BDO Seidman, LLP for Audit-Related services for the
fiscal year ended  August 1, 2009.
  Tax Fees -The aggregate fees
billed by BDO Seidman, LLP for tax services for the fiscal years ended August 1,
2009, August 2, 2008 and July 28, 2007 were $0, $0 and $71,665,
respectively.  These fees related to tax planning and consulting
work.
  All Other
Fees - For the fiscal year ended August 2, 2008, fees billed by BDO Seidman, LLP
for due diligence related services related to a potential business acquisition
was approximately $99,600.  There were no fees for other professional
services rendered during the fiscal years ended August 1, 2009, August 2, 2008
and July 28, 2007.
  The Audit
Committee’s policy is to pre-approve services to be performed by the Company’s
independent public accountants in the categories of audit services,
audit-related services, tax services and other
services.  Additionally, the Audit Committee will consider on a
case-by-case basis and, if appropriate, approve specific engagements that are
not otherwise pre-approved.  The Audit Committee has approved all fees
and advised us that it has determined that the non-audit services rendered by
BDO Seidman, LLP during our most recent fiscal year are compatible with
maintaining the independence of such auditors.
 
 44
 
 PART
IV
  ITEM
15EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
 PAGE
      NUMBER(a)
      1. FINANCIAL STATEMENTSCONSOLIDATED
      FINANCIAL STATEMENTS OF DEL GLOBAL TECHNOLOGIES CORP. AND
      SUBSIDIARIES:Report
      of Independent Registered Public Accounting Firm
                    F-1Consolidated
      Balance Sheets as of August 1, 2009 and August 2, 2008
                    F-2Consolidated
      Statements of Operations for the Fiscal Years Ended August 1, 2009, August
      2, 2008 and July 28, 2007
                    F-3Consolidated
      Statements of Cash Flows for the Fiscal Years Ended August 1, 2009, August
      2, 2008 and July 28, 2007
                    F-4Consolidated
      Statements of Shareholders’ Equity for the Fiscal Years Ended August 1,
      2009, August 2, 2008 and July 28, 2007
                    F-5Notes
      to Consolidated Financial Statements for the Fiscal Years Ended August 1,
      2009, August 2, 2008 and July 28, 2007
                    F-6
      – F-22
 
 3. EXHIBITS
 
 EXHIBIT
                      NUMBER
                    
                    DESCRIPTION OF DOCUMENT2.1
                    
                    Stock
      Purchase Agreement (related to the acquisition of Villa Sistemi Medicali
      S.p.A.) dated as of December 28, 1999. Filed as Exhibit 2.1 to Del Global
      Technologies Corp. Current Report on Form 8-K dated May 4, 2000 and
      incorporated herein by reference.2.2
                    
                    Asset
      Purchase Agreement dated as of October 1, 2004 by and between Spellman
      High Voltage Electronics Corporation and Del Global Technologies Corp.
      Filed as Exhibit 99.01 to Del Global Technologies Corp. Current Report on
      Form 8-K filed October 7, 2004 and incorporated herein by
      reference.3.1
                    
                    Certificate
      of Incorporation dated October 25, 1954. Filed as Exhibit to Del
      Electronics Corp. Registration Statement on Form S-1 (No. 2-16839) and
      incorporated herein by reference.3.2
                    
                    Certificate
      of Amendment of Certificate of Incorporation dated January 26, 1957. Filed
      as Exhibit to Del Electronics Corp. Registration Statement on Form S-1
      (No. 2-16839) and incorporated herein by reference.3.3
                    
                    Certificate
      of Amendment of Certificate of Incorporation dated July 12, 1960. Filed as
      Exhibit to Del Electronics Corp. Registration Statement on Form S-1 (No.
      2-16839) and incorporated herein by reference.3.4
                    
                    Certificate
      of Amendment of Certificate of Incorporation dated March 18, 1985. Filed
      as Exhibit 3.5 to Del Electronics Corp. Form 10-K for the year ended
      August 2, 1989 and incorporated herein by reference.3.5
                    
                    Certificate
      of Amendment of Certificate of Incorporation dated January 19, 1989. Filed
      as Exhibit 4.5 to Del Electronics Corp. Form S-3 (No. 33-30446) filed
      August 10, 1989 and incorporated herein by reference.3.6
                    
                    Certificate
      of Amendment of the Certificate of Incorporation of Del Electronics Corp.,
      dated February 5, 1991. Filed with Del Electronics Corp. Proxy Statement
      dated January 22, 1991 and incorporated herein by
    reference.3.7
                    
                    Certificate
      of Amendment of the Certificate of Incorporation of Del Electronics Corp.
      dated February 14, 1996. Filed as Exhibit 3.6 to Del Global Technologies
      Corp. Annual Report on Form 10-K for the year ended August 1, 1998 and
      incorporated herein by reference.3.8
                    
                    Certificate
      of Amendment of Certificate of Incorporation of Del Global Technologies
      Corp. dated February 13, 1997. Filed as Exhibit 3.1 to Quarterly Report on
      Form 10-Q for the quarter ended February 1, 1997 and incorporated herein
      by reference.  45
   3.9
                    
                    Amended
      and Restated By-Laws of Del Global Technologies Corp. Filed as Exhibit 3.1
      to Current Report on Form 8-K dated September 5, 2001 and incorporated
      herein by reference.3.10
                    
                    Amendment
      No. 1 to the Amended and Restated By-Laws of Del Global Technologies Corp.
      dated July 17, 2003. Filed as Exhibit 3.01 to Current Report on Form 8-K
      dated July 30, 2003 and incorporated herein by
  reference.3.11
                    
                    Certificate
      of Amendment at the Certificate of Incorporation of Del Global
      Technologies Corp. dated November 17, 2006.  Filed as Exhibit
      3.01 to Current Report on Form 8-K filed November 22, 2006 and
      incorporated herein by reference.3.12
                    
                    Amendment No. 2 to the Amended and Restated
      By-Laws of Del Global Technologies Corp. dated December 5, 2007. Filed as
      Exhibit 3.1 to Current Report on Form 8-K dated December 6, 2007 and
      incorporated herein by reference.4.1
                    
                    INTENTIONALLY
      OMITTED.4.2
                    
                    INTENTIONALLY
      OMITTED.4.8
                    
                    Warrant
      Certificate of Laurence Hirschhorn. Filed as Exhibit 4.1 to Del Global
      Technologies Corp. Quarterly Report on Form 10-Q for the quarter ended
      January 29, 2000 and incorporated herein by reference.4.9
                    
                    Warrant
      Certificate of Steven Anreder. Filed as Exhibit 4.2 to Del Global
      Technologies Corp. Quarterly Report on Form 10-Q for the quarter ended
      January 29, 2000 and incorporated herein by reference.4.10
                    
                    Warrant
      Certificate of UBS Capital S.p.A. dated as of December 28, 1999. Filed as
      Exhibit 4 to Del Global Technologies Corp. Quarterly Report on Form 10-Q
      for the quarter ended January 29, 2000 and incorporated herein by
      reference.4.11*
                    
                    Del
      Global Technologies Corp. Amended and Restated Stock Option Plan (as
      adopted effective as of January 1, 1994 and as amended December 14, 2000).
      Filed as Exhibit 4.11 to Del Global Technologies Corp. Annual Report on
      Form 10-K for the year ended August 3, 2002 and incorporated herein by
      reference.4.12*
                    
                    Stock
      Purchase Plan. Filed as Exhibit 4.9 to Del Electronics Corp. Annual Report
      on Form 10-K for the year ended July 29, 1989 and incorporated herein by
      reference.4.13*
                    
                    Option
      Agreement, substantially in the form used in connection with options
      granted under the Plan. Filed as Exhibit 4.8 to Del Electronics Corp.
      Annual Report on Form 10-K for the year ended July 29, 1989 and
      incorporated herein by reference.4.14*
                    
                    Option
      Agreement dated as of December 28, 1999. Filed as Exhibit 4.2 to Del
      Global Technologies Corp. Current Report on Form 8-K dated May 4, 2000 and
      incorporated herein by reference.4.15
                    
                    Warrant
      Agreement substantially in the form used for 1,000,000 warrants issued in
      connection with the settlement of the Class Action Lawsuit on January 29,
      2002. Filed as Exhibit 10.12 to Del Global Technologies Corp. Annual
      Report on Form 10-K for the year ended August 3, 2002 and incorporated
      herein by reference.4.16*
                    
                    Amendment
      No. 1 dated July 17, 2003 to the Del Global Technologies Corp. Amended and
      Restated Stock Option Plan (as adopted effective as of January 1, 1994 and
      as amended December 14, 2000). Filed as Exhibit 4.1 to Del Global
      Technologies Corp. Quarterly Report on Form 10-Q for the quarterly period
      ended November 1, 2003 and incorporated herein by
    reference.4.17*
                    
                    Amendment
      No. 2 dated July 7, 2005 to the Del Global Technologies Corp. Amended and
      Restated Stock Option Plan (as adopted effective as of January 1, 1994 and
      as amended December 14, 2000 and July 17, 2003). Filed as Exhibit 99.01 to
      Del Global Technologies Corp. Current Report on Form 8-K dated July 7,
      2005 and incorporated herein by reference.4.18
                    
                    Stock
      Purchase Agreement dated as of December 22, 2005 by and among Del Global
      Technologies Corp. and Mr. Giuseppe Carmelo Ammendola, Mr. Emilio Bruschi,
      Mr. Roberto Daglio and Mr. Luigi Emmanuele Filed as Exhibit 10.1 to Del
      Global Technologies Corp. Current Report on Form 8-K filed December 28,
      2005 and incorporated herein by reference.4.19
                    
                    Rights
      Agreement, dated as of January 22, 2007, and between Del Global
      Technologies Corp. and Mellon investor Services LLC, as rights agent
      (including as Exhibit A the Form of Right Certificate and as Exhibit B the
      Summary of Rights to Purchase Common Stock). Filed as Exhibit 4.1 to Del
      Global Technologies Corp. Current Report on Form 8-K filed January 23,
      2007 and incorporated herein by
reference.  46
  4.20
                    
                    Joinder
      Agreement, dated June 27, 2007, between Del Global Technologies Corp. and
      Continental Stock Transfer & Trust Company.  Filed as
      Exhibit 4.1 to Del Global Technologies Corp. Current Report on Form 8-K
      filed June 27, 2007 and incorporated herein by
  reference.4.21*/**
                    
                    2007
      Incentive Stock Plan, dated February 22,
      2007.Filed as
      Exhibit 4.21 to Del Global Technologies Corp.Annual Report on Form 10-K for the year ended
      July 28, 2007 and incorporated herein by
  reference.10.2
                    
                    INTENTIONALLY
      OMITTED.10.3
                    
                    INTENTIONALLY
      OMITTED.10.4
                    
                    INTENTIONALLY
      OMITTED.10.5
                    
                    INTENTIONALLY
      OMITTED.10.6
                    
                    INTENTIONALLY
      OMITTED.10.7
                    
                    Lease
      Agreement dated April 7, 1992 between Messenger Realty and Del Electronics
      Corp. Filed as Exhibit 6(a) to Del Electronics Corp. Quarterly Report on
      Form 10-Q for the quarter ended May 2, 1992 and incorporated herein by
      reference.10.8
                    
                    Lease
      and Guaranty of Lease dated May 25, 1994 between Leshow Enterprises and
      Bertan High Voltage Corp. Filed as Exhibit 2.5 to Del Electronics Corp.
      Current Report on Form 8-K dated June 10, 1994 and incorporated herein by
      reference.10.9
                    
                    Lease
      dated January 4, 1993 between Curto Reynolds Oelerich Inc. and Del Medical
      Imaging Corp. (formerly knows as Gendex-Del Medical Imaging Corp.). Filed
      as Exhibit 10.21 to the Del Global Technologies Corp. Registration
      Statement on Form S-2 (No. 333-2991) dated April 30, 1997 and incorporated
      herein by reference.10.10
                    
                    Loan
      and Security Agreement dated June 10, 2002, in the principal amount of
      $10,000,000, between Del Global Technologies Corp., Bertan High Voltage
      Corp., RFI Corporation and Del Medical Imaging Corp. (Borrowers) and
      Transamerica Business Capital Corporation. The Company agrees to furnish
      supplementally a copy of any omitted exhibits or schedules to the SEC upon
      request. Filed as Exhibit 99.01 to Del Global Technologies Corp. Current
      Report on Form 8-K filed on November 4, 2002 and incorporated herein by
      reference.10.11
                    
                    Subordinated
      Promissory Note substantially in the form used for a total principal
      amount of $2 million issued in connection with the settlement of the Class
      Action Lawsuit on January 29, 2002. Filed as Exhibit 10.11 to Del Global
      Technologies Corp. Annual Report on Form 10-K for the year ended August 3,
      2002 and incorporated herein by reference.10.12
                    
                    INTENTIONALLY
      OMITTED.10.13*
                    
                    Executive
      Employment Agreement dated May 1, 2001, by and between Del Global
      Technologies Corp. and Samuel E. Park. Filed as Exhibit 99.1 to Del Global
      Technologies Corp. Current Report on Form 8-K filed on August 1, 2001 and
      incorporated herein by reference.10.14*
                    
                    Change
      of Control Agreement substantially in the form used by the Company for the
      current executive officers as named in Item 11, except for Samuel E. Park
      (see Exhibit 10.13). Filed as Exhibit 10.14 to Del Global Technologies
      Corp. Annual Report on Form 10-K for the year ended August 3, 2002 and
      incorporated herein by reference.10.15
                    
                    Extension
      and Modification Agreement (lease agreement) dated as of July 30, 2002
      between Praedium II Valhalla LLC and Del Global Technologies Corp. Filed
      as Exhibit 10.15 to Del Global Technologies Corp. Annual Report on Form
      10-K for the year ended August 3, 2002 and incorporated herein by
      reference.10.16
                    
                    Grant
      Decree No. 0213 between the Ministry of Industry, Trade and Handicrafts
      and Villa Sistemi Medicali S.p.A. dated September 6, 1995. Filed as
      Exhibit 10.16 to Del Global Technologies Corp. Annual Report on Form 10-K
      for the year ended August 3, 2002 and incorporated herein by
      reference.   47
   10.17
                    
                    Financial
      Property Lease Contract no. 21136 dated March 30, 2000 between ING Lease
      (Italia) S.p.A. and Villa Sistemi Medicali S.p.A. Filed as Exhibit 10.17
      to Del Global Technologies Corp. Annual Report on Form 10-K for the year
      ended August 3, 2002 and incorporated herein by
  reference.10.18
                    
                    Declaration
      of Final Obligation between the Ministry of Productive Industry and Villa
      Sistemi Medicali S.p.A. dated May 6, 2002. Filed as Exhibit 10.18 to Del
      Global Technologies Corp. Annual Report on Form 10-K for the year ended
      August 3, 2002 and incorporated herein by reference.10.19
                    
                    Private
      Contract between Banca Mediocredito S.p.A and Villa Sistemi Medicali
      S.p.A. dated November 4, 1998 in the principal amount of 3 billion Lire.
      Filed as Exhibit 10.19 to Del Global Technologies Corp. Annual Report on
      Form 10-K for the year ended August 3, 2002 and incorporated herein by
      reference.10.20*
                    
                    Change
      of Control Agreement as approved by the Board of Directors on October 24,
      2002, substantially in the form used by its current executive officers (in
      the case of Walter F. Schneider, as amended pursuant to Exhibit 10.22
      hereof). Filed as Exhibit 10.20 to Del Global Technologies Corp. Annual
      Report on Form 10-K for the year ended August 3, 2002 and incorporated
      herein by reference.10.21
                    
                    Waiver
      and First Amendment to Loan and Security Agreement dated as of November 1,
      2002 among Del Global Technologies Corp., Bertan High Voltage Corp., RFI
      Corporation and Del Medical Imaging Corp. (Borrowers) and Transamerica
      Business Capital Corporation. Filed as Exhibit 99.02 to Del Global
      Technologies Corp. Current Report on Form 8-K filed on November 4, 2002
      and incorporated herein by reference.10.22
                    
                    Second
      Amendment to the Loan and Security Agreement dated December 17, 2002 among
      Del Global Technologies Corp., Bertan High Voltage Corp., RFI Corporation
      and Del Medical Imaging Corp. (Borrowers) and Transamerica Business
      Capital Corporation. Filed as Exhibit 10.1 to Del Global Technologies
      Corp. Quarterly Report on Form 10-Q for the quarter ended November 2, 2002
      and incorporated herein by reference.10.23
                    
                    Settlement
      Agreement and Release dated March 10, 2003 by and between Del Global
      Technologies Corp. and its affiliates, subsidiaries, present and former
      directors, officers, agents, accountants, attorneys, stockholders,
      predecessors and the agents and attorneys of its present and former
      directors, and Leonard A. Trugman and each of his heirs, administrators,
      liquidators, executors, successors, and assigns. Filed as Exhibit 10.22 to
      Del Global Technologies Corp. Quarterly Report on Form 10-Q for the
      quarter ended February 1, 2003 and incorporated herein by
      reference.10.24
                    
                    Separation
      Agreement and General Release of Claims dated April 9, 2003, by and
      between James M. Tiernan and Del Global Technologies Corp. Filed as
      Exhibit 99.01 to Del Global Technologies Corp. Amendment to Current Report
      on Form 8-K/A filed on April 23, 2003 and incorporated herein by
      reference.10.25
                    
                    Separation
      Agreement and General Release of Claims dated April 9, 2003, by and
      between David Michael, David Michael & Co., P.C. and Del Global
      Technologies Corp. Filed as Exhibit 99.02 to Del Global Technologies Corp.
      Amendment to Current Report on Form 8-K/A filed on April 23, 2003 and
      incorporated herein by reference.10.26
                    
                    Form
      of Indemnification Agreement. Filed as Exhibit 10.22 to Del Global
      Technologies Corp. Amendment #1 to Registration Statement on Form S-1/A,
      filed on May 1, 2003 and incorporated herein by
  reference.10.27
                    
                    Amendment
      to Executive Employment Agreement dated May 28, 2003 by and between Del
      Global Technologies Corp. and Samuel E. Park. Filed as Exhibit 10.23 to
      Del Global Technologies Corp. Quarterly Report on Form 10-Q for the
      quarterly period ended May 3, 2003 and incorporated herein by
      reference.10.28
                    
                    Amendment
      dated October 10, 2003 to Change of Control Agreement for Walter F.
      Schneider filed as Exhibit 10.28 to Del Global Technologies Corp. Annual
      Report on Form 10-K for the year ended August 2, 2003 and incorporated
      herein by reference.10.29
                    
                    Waiver
      and Third Amendment to the Loan and Security Agreement dated as of October
      30, 2003, among Del Global Technologies Corp., Bertan High Voltage Corp.,
      RFI Corporation and Del Medical Imaging Corp. (Borrowers) and Transamerica
      Business Capital Corporation filed as Exhibit 10.29 to Del Global
      Technologies Corp. Annual Report on Form 10-K for the year ended August 2,
      2003 and incorporated herein by reference.10.30
                    
                    Waiver,
      Consent and Fourth Amendment to the Loan and Security Agreement dated as
      of March 12, 2004, by and among Del Global Technologies Corp. and General
      Electric Capital Corporation, as successor by assignment to Transamerica
      Business Corporation. Filed as Exhibit 10.30 to Del Global Technologies
      Corp. Quarterly Report on Form 10-Q for the quarterly period ended January
      31, 2004 and incorporated herein by
reference.  48
  10.31*
                    
                    Letter
      Agreement dated as of February 10, 2003 between Mark Koch and Del Global
      Technologies Corp. Filed as Exhibit 99.01 to Del Global Technologies Corp.
      Current Report on Form 8-K filed August 27, 2004 and incorporated herein
      by reference.10.32
                    
                    Non-Competition
      Agreement dated as of September 8, 2004 by and between Del Global
      Technologies Corp. and Walter F. Schneider. Filed as Exhibit 99.01 to Del
      Global Technologies Corp. Current Report on Form 8-K filed September 10,
      2004 and incorporated herein by reference.10.33
                    
                    Separation
      Agreement and Release dated as of September 1, 2004 between Del Global
      Technologies Corp. and Thomas V. Gilboy. Filed as Exhibit 99.01 to Del
      Global Technologies Corp. Current Report on Form 8-K filed September 15,
      2004 and incorporated herein by reference.10.34
                    
                    Amendment
      No. 1 dated as of September 15, 2004 to the Letter Agreement dated
      February 10, 2003 between Mark Koch and Del Global Technologies Corp.
      Filed as Exhibit 99.01 to Del Global Technologies Corp. Current Report on
      Form 8-K filed September 20, 2004 and incorporated herein by
      reference.10.35
                    
                    Loan
      Agreement dated as of September 23, 2004 between Del Global Technologies
      Corp. (“Del Global”) and Villa Sistemi Medicali S.p.A., a subsidiary of
      Del Global. Filed as Exhibit 99.01 to Del Global Technologies Corp.
      Current Report on Form 8-K filed September 28, 2004 and incorporated
      herein by reference.10.36
                    
                    Waiver,
      Consent and Fifth Amendment to the Loan and Security Agreement dated as of
      September 23, 2004, by and among Del Global Technologies Corp., Bertan
      High Voltage Corp., RFI Corporation and Del Medical Imaging Corp.
      (Borrowers) and General Electric Capital Corporation, as successor by
      assignment to Transamerica Business Capital Corporation. Filed as Exhibit
      99.02 to Del Global Technologies Corp. Current Report on Form 8-K filed
      September 28, 2004 and incorporated herein by
reference.10.37
                    
                    Settlement
      Agreement dated as of September 30, 2004, by and among the United States
      of America, on behalf of the Department of Defense, acting through the
      United States Attorney’s Office for the Eastern District of New York, Del
      Global Technologies Corp. and RFI Corporation. Current Report on Form 8-K
      filed October 5, 2004 and incorporated herein by
  reference.10.38
                    
                    Assignment,
      Assumption and Amendment of Lease dated as of October 1, 2004 among DP 16,
      LLC, Del Global Technologies Corp. and Spellman High Voltage Electronics
      Corporation. Filed as Exhibit 99.02 to Del Global Technologies Corp.
      Current Report on Form 8-K filed October 7, 2004 and incorporated herein
      by reference.10.39
                    
                    First
      Amendment to Villa Loan Agreement dated October 22, 2004 between Del
      Global Technologies Corp and Villa Sistemi Medicali, S.p.A filed as
      Exhibit 99.01 to Del Global Technologies Corp. Current Report on Form 8-K
      filed October 26, 2004 and incorporated herein by
    reference.10.40
                    
                    Sixth
      Amendment to the Loan and Security Agreement dated as of October 25, 2004
      by and among Del Global Technologies Corp, Bertan High Voltage Corp, RFI
      Corporation and Del Medical Imaging Corp (Borrowers) and General Electric
      Capital Corporation as successor to Transamerica Business Capital
      Corporation filed as Exhibit 99.02 to Del Global Technologies Corp.
      Current Report on Form 8-K filed October 26, 2004 and incorporated herein
      by reference.10.41
                    
                    Consent
      and Seventh Amendment to the Loan and Security Agreement dated as of
      February 2, 2005, among Del Global Technologies Corp., Bertan High Voltage
      Corp., RFI Corporation and Del Medical Imaging Corp. (Borrowers) and GE
      Business Capital Corporation F/K/A Transamerica Business Capital
      Corporation filed as Exhibit 99.1 to Del Global Technologies Corp. Current
      Report on Form 8-K filed February 7, 2005 and incorporated herein by
      reference.10.42
                    
                    Administrative
      Agreement dated as of April 1, 2005 between Del Global Technologies Corp.,
      RFI Corporation and the Defense Logistics Agency. Filed as Exhibit 99.01
      to Del Global Technologies Corp. Current Report on Form 8-K filed April 5,
      2005 and incorporated herein by
reference.  49
  10.43
                    
                    Consent
      and Eighth Amendment to the Loan and Security Agreement dated as of April
      5, 2005, among Del Global Technologies Corp., Bertan High Voltage Corp.,
      RFI Corporation and Del Medical Imaging Corp. (Borrowers) and GE Business
      Capital Corporation F/K/A Transamerica Business Capital Corporation filed
      as Exhibit 99.02 to Del Global Technologies Corp. Current Report on Form
      8-K filed April 5, 2005 and incorporated herein by
    reference.10.44*
                    
                    Senior
      Management Incentive Plan filed as Exhibit 99.01 to Del Global
      Technologies Corp. Current Report on Form 8-K filed May 3, 2005 and
      incorporated herein by reference.10.45*
                    
                    Severance
      Benefits Letter Agreement dated as of May 23, 2005 between Del Global
      Technologies Corp. and Walter F. Schneider. Filed as Exhibit 99.01 to Del
      Global Technologies Corp. Current Report on Form 8-K filed May 25, 2005
      and incorporated herein by reference.10.46*
                    
                    Severance
      Benefits Letter Agreement dated as of May 23, 2005 between Del Global
      Technologies Corp. and Mark A. Koch. Filed as Exhibit 99.02 to Del Global
      Technologies Corp. Current Report on Form 8-K filed May 25, 2005 and
      incorporated herein by reference.10.47
                    
                    Separation
      Agreement and Release dated as of April 1, 2005 between Del Global
      Technologies Corp. and Edward Ferris filed as Exhibit 99.01 to Del Global
      Technologies Corp. Current Report on Form 8-K filed June 6, 2005 and
      incorporated herein by reference.10.48
                    
                    Waiver
      and Ninth Amendment to the Loan and Security Agreement dated as of June 9,
      2005, among Del Global Technologies Corp., Bertan High Voltage Corp., RFI
      Corporation and Del Medical Imaging Corp. (Borrowers) and GE Business
      Capital Corporation F/K/A Transamerica Business Capital Corporation filed
      as Exhibit 99.01 to Del Global Technologies Corp. Current Report on Form
      8-K filed June 9, 2005 and incorporated herein by
    reference.10.49
                    
                    Loan
      and Security Agreement dated as of August 1, 2005 among Del Global
      Technologies Corp., RFI Corporation, Del Medical Imaging Corp. and North
      Fork Business Capital Corporation. Filed as Exhibit 10.01 to Del Global
      Technologies Corp. Current Report on Form 8-K filed August 3, 2005 and
      incorporated herein by reference.10.50
                    
                    Second
      Amendment to Villa Loan Agreement dated August 1, 2005 between Del Global
      Technologies Corp and Villa Sistemi Medicali, S.p.A filed as Exhibit 10.02
      to Del Global Technologies Corp. Current Report on Form 8-K filed August
      3, 2005 and incorporated herein by reference.10.51
                    
                    Waiver
      and First Amendment to the Loan and Security Agreement dated as of
      December 12, 2005 among Del Global Technologies Corp., RFI Corporation and
      Del Medical Imaging Corp. (Borrowers) and North Fork Business Capital
      Corporation. Filed as Exhibit 10.51 to Del Global Technologies Corp.
      Quarterly Report on Form 10-Q for the quarterly period ended October 29,
      2005 and incorporated herein by reference.10.52
                    
                    Waiver
      to the Loan and Security Agreement dated as of March 14, 2006 among Del
      Global Technologies Corp., RFI Corporation and Del Medical Imaging Corp.
      (Borrowers) and North Fork Business Capital Corporation. Filed as Exhibit
      10.52 to Del Global Technologies Corp. Quarterly Report on Form 10-Q for
      the quarterly period ended January 28, 2006 and incorporated herein by
      reference.10.53*
                    
                    Separation
      Agreement and Release dated as of March 21, 2006 by and between Del Global
      Technologies Corp. and Christopher N. Japp. Filed as Exhibit 99.1 to Del
      Global Technologies Corp. Current Report on Form 8-K filed March 24, 2006
      and incorporated herein by reference.10.54
                    
                    Waiver
      to the Loan and Security Agreement dated as of June 13, 2006 by and among
      Del Global Technologies Corp., Del Medical Imaging Corp., RFI Corporation
      (Borrowers) and North Fork Business Capital Corporation. Filed as Exhibit
      10.53 to Del Global Technologies Corp. Quarterly Report on Form 10-Q for
      the quarterly period ended April 29, 2006 and incorporated herein by
      reference.10.55
                    
                    Consulting
      Agreement dated as of June 14, 2006 by and between Del Global Technologies
      Corp. and Lumina Group LLC. Filed as Exhibit 99.1 to Del Global
      Technologies Corp. Current Report on Form 8-K filed June 30, 2006 and
      incorporated herein by reference.10.56
                    
                    Second
      Amendment to the Loan and Security Agreement dated as of June 30, 2006
      among Del Global Technologies Corp., RFI Corporation and Del Medical
      Imaging Corp. (Borrowers) and North Fork Business Capital Corporation.
      Filed as Exhibit 99.01 to Del Global Technologies Corp. Current Report on
      Form 8-K filed July 7, 2006 and incorporated herein by
      reference.10.57*
                    
                    Separation
      Agreement and Release dated as of July 24, 2006 by and between Del Global
      Technologies Corp. and Walter F. Schneider. Filed as Exhibit 99.01 to Del
      Global Technologies Corp. Current Report on Form 8-K filed July 24, 2006
      and incorporated herein by reference.  50
  10.58*
                    
                    Letter
      Agreement dated as of August 31, 2006 between Del Global Technologies
      Corp. and James A. Risher. Filed as Exhibit 99.01 to Del Global
      Technologies Corp. Current Report on Form 8-K filed August 31, 2006 and
      incorporated herein by reference.10.59*
                    
                    Letter
      Agreement dated as of August 30, 2006 between Del Global Technologies
      Corp. and Mark Zorko. Filed as Exhibit 99.02 to Del Global Technologies
      Corp. Current Report on Form 8-K filed August 31, 2006 and incorporated
      herein by reference.10.60
                    
                    Full-Time
      Permanent Engagement Resources Agreement dated as of August 21, 2006
      between Del Global Technologies Corp. and Tatum, LLC. Filed as Exhibit
      99.01 to Del Global Technologies Corp. Current Report on Form 8-K filed
      August 31, 2006 and incorporated herein by reference.10.61*
                    
                    Separation
      Agreement and Release dated as of September 7, 2006 by and between Del
      Global Technologies Corp. and Mark A. Koch. Filed as Exhibit 99.01 to Del
      Global Technologies Corp. Current Report on Form 8-K filed September 7,
      2006 and incorporated herein by reference.10.62
                    
                    Waiver
      and Third Amendment to the Loan and Security Agreement dated as
      of  October 25, 2006 by and among Del Global Technologies Corp.,
      Del Medical
      Imaging Corp., RFI Corporation (Borrowers) and North Fork Business Capital
      Corporation.  Filed as Exhibit 10.62 to Del Global
      Technologies Corp. Annual Report on Form 10-K filed October 27, 2006 and
      incorporated herein by reference.10.63
                    
                    Waiver
      and Fourth Amendment to the Loan and Security Agreement dated as of
      December 6, 2006 by and among Del Global Technologies Corp., Del Medical
      Imaging Corp., RFI Corporation (Borrowers) and North Fork Business Capital
      Corporation. Filed as Exhibit 10.63 to Del Global Technologies Corp.
      Quarterly Report on Form 10-Q for the quarterly period ended October 28,
      2006 and incorporated herein by reference.10.64
                    
                    Amendment
      No. 5 dated as of January 18, 2007 to the Loan and Security Agreement by
      and among the registrant, RFI Corporation, Del Medical Imaging Corp. and
      North Fork Business Capital Corporation, dated as of August 1,
      2005.  Filed as Exhibit 99.02 to Del Global Technologies Corp.
      Current Report on Form 8-K filed January 23, 2007 and incorporated herein
      by reference.10.65
                    
                    Amended
      and Restated Loan Agreement, dated as of May 25, 2007, among Del Global
      Technologies Corp., RFI Corporations, Del Medical Imaging Corp. and North
      Fork Business Capital Corporation. Filed as Exhibit 10.1 to Del Global
      Technologies Corp. Current Report on Form 8-K filed June 4, 2007 and
      incorporated herein by reference.10.66*
                    
                    Letter
      Agreement dated as of September 19, 2007 between Del Global Technologies
      Corp. and James A. Risher.  Filed as Exhibit 10.1 to Del Global
      Technologies Corp. Current Report on Form 8-K filed September 20, 2007 and
      incorporated herein by reference.10.67
                    
                    First Amendment dated September 3, 2008, to the
      Amended and Restated Loan and Security Agreement by and among the Del
      Global Technologies Corp., Del Medical Imaging Corp., RFI Corporation and
      North Fork Business Capital Corporation, now known as  Capital
      One Leveraged Finance Corp., dated as of May 25, 2007.
                      Filed as Exhibit 10.1 to Del Global Technologies
      Corp. Current Report on Form 8-K filed September 5, 2008 and incorporated
      herein by reference.10.68*
                    
                    Letter Agreement dated as of September 16, 2008
      between Del Global Technologies Corp. and James A.
      Risher.  Filed as Exhibit 10.1 to Del Global Technologies Corp.
      Current Report on Form 8-K filed September 17, 2008 andincorporated herein by
      reference.21.1**
                    
                    List
      of Subsidiaries23.1**
                    
                    Consent
      of BDO Seidman, LLP.32.1**
                    
                    Certification
      of the Chief Executive Officer, James Risher, pursuant to 18 USC. Section
      1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2**
                    
                    Certification
      of the Principal Financial Officer, Mark Zorko, pursuant to 18 U.S.C.
      Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 ____________
 *      Represents
a management contract or compensatory plan or arrangement.
 
 **   Filed
herewith
  51
 
 SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) 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.November
      9, 2009
                      By:
                      /s/
      John
      J. QuickeJohn
      J. QuickePresident
      and Chief Executive Officer(Principal
      Executive Officer)November
      9, 2009
                      By:
                      /s/
      Mark
      A. ZorkoMark
      A. ZorkoChief
      Financial Officer(Principal
      Financial and Accounting Officer)
 
 
 Pursuant
to the requirements of the Securities and Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
 
 Director
      – Chairman
                    November
      9, 2009James
      HendersonDirector
                    November
      9, 2009Merrill
      McPeakDirector
                    November
      9, 2009Gerald
      M. CzarneckiDirector
                    November
      9, 2009James
      A. RisherDirector
                    November
      9, 2009T.
      Scott Avila
   52
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 Del Global
Technologies Corp.
 Roselle,
Illinois
 
 We have
audited the accompanying consolidated balance sheets of Del Global Technologies
Corp. and subsidiaries as of August 1, 2009 and August 2, 2008, and the related
consolidated statements of operations, shareholders’ equity and cash flows for
each of the three years in the period ended August 1, 2009. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Del Global Technologies
Corp. and subsidiaries as of August 1, 2009 and August 2, 2008, and the results
of their operations and their cash flows for each of the three years in the
period ended August 1, 2009, in conformity with accounting principles generally
accepted in the United States of America.
 
 /s/ BDO
SEIDMAN, LLP
 
 Chicago,
Illinois
 November
4, 2009
 
 F-1
 
 DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES
 
 CONSOLIDATED
BALANCE SHEETS
 (DOLLARS
IN THOUSANDS EXCEPT PAR VALUE)
 
 AUGUST
      1,
                      2009
                    
                    
                    AUGUST
      2,
                      2008ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                    
                    $
                    7,983
                    
                    
                    $
                    7,828Trade
      receivables (net of allowance for doubtful accounts of $1,648 and $1,400
      for 2009 and 2008, respectively)
                    
                    
                    18,043
                    
                    
                    
                    25,218Inventories
      (net of allowance for excess and obsolete of $4,496 and $4,435 for 2009
      and 2008, respectively)
                    
                    
                    16,004
                    
                    
                    
                    18,439Prepaid
      expenses and other current assets
                    
                    
                    1,719
                    
                    
                    
                    2,085Total
      current assets
                    
                    
                    43,749
                    
                    
                    
                    53,570NON-CURRENT
      ASSETS:Property
      plant and equipment, net
                    
                    
                    6,305
                    
                    
                    
                    7,377Deferred
      income taxes
                    
                    
                    611
                    
                    
                    
                    770Goodwill
                    
                    
                    4,526
                    
                    
                    
                    4,526Other
      assets
                    
                    
                    71
                    
                    
                    
                    110Total
      non-current assets
                    
                    
                    11,513
                    
                    
                    
                    12,783TOTAL
      ASSETS
                    
                    $
                    55,262
                    
                    
                    $
                    66,353
  LIABILITIES
      AND SHAREHOLDERS’ EQUITYCURRENT
      LIABILITIES:Revolving
      loan
                    
                    $
                    7,492
                    
                    
                    
                    -Current
      portion of long-term debt
                    
                    $
                    1,653
                    
                    
                    $
                    1,797Accounts
      payable – trade
                    
                    
                    7,304
                    
                    
                    
                    12,191Accrued
      expenses
                    
                    
                    5,239
                    
                    
                    
                    8,378Total
      current liabilities
                    
                    
                    21,688
                    
                    
                    
                    22,366NON-CURRENT
      LIABILITIES:Long-term
      debt, less current portion
                    
                    
                    2,385
                    
                    
                    
                    4,504Other
      long-term liabilities
                    
                    
                    2,561
                    
                    
                    
                    3,320Total
      non-current liabilities
                    
                    
                    4,946
                    
                    
                    
                    7,824Total
      liabilities
                    
                    
                    26,634
                    
                    
                    
                    30,190COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS’
      EQUITY:Common
      stock -- $.10 par value; authorized – 50,000,000 shares; issued –
      24,897,723 shares at August 1, 2009 and  August 2, 2008,
      respectively
                    
                    
                    2,490
                    
                    
                    
                    2,490Additional
      paid-in capital
                    
                    
                    80,739
                    
                    
                    
                    80,398Treasury
      shares – 2,182,323 and 654,464 shares at August 1, 2009 and August 2,
      2008, respectively, at cost
                    
                    
                    (7,176
                    )
                    
                    
                    (5,615
                    )Accumulated
      other comprehensive income
                    
                    
                    2,065
                    
                    
                    
                    4,252Accumulated
      deficit
                    
                    
                    (49,490
                    )
                    
                    
                    (45,362
                    )Total
      shareholders’ equity
                    
                    
                    28,628
                    
                    
                    
                    36,163TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                    
                    $
                    55,262
                    
                    
                    $
                    66,353
 
 See notes
to consolidated financial statements.
  F-2
  DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
 FISCAL
      YEARS ENDEDAUGUST
      1,
                      2009
                    
                    
                    AUGUST
      2,
                      2008
                    
                    
                    JULY
      28,
                      2007NET
      SALES
                    
                    $
                    80,400
                    
                    
                    $
                    108,306
                    
                    
                    $
                    104,167COST
      OF SALES
                    
                    
                    63,672
                    
                    
                    
                    81,519
                    
                    
                    
                    79,150GROSS
      MARGIN
                    
                    
                    16,728
                    
                    
                    
                    26,787
                    
                    
                    
                    25,017Selling,
      general and administrative
                    
                    
                    13,977
                    
                    
                    
                    15,586
                    
                    
                    
                    14,590Research
      and development
                    
                    
                    1,992
                    
                    
                    
                    2,488
                    
                    
                    
                    2,013Goodwill
      impairment
                    
                    
                    -
                    
                    
                    
                    1,911
                    
                    
                    
                    -Litigation
      settlement costs
                    
                    
                    3,736
                    
                    
                    
                    450
                    
                    
                    
                    -Total
      operating expenses
                    
                    
                    19,705
                    
                    
                    
                    20,435
                    
                    
                    
                    16,603OPERATING
      INCOME (LOSS)
                    
                    
                    (2,977
                    )
                    
                    
                    6,352
                    
                    
                    
                    8,414Interest
      expense (net of interest income of $58, $141 and $91 in 2009, 2008 and
      2007, respectively)
                    
                    
                    (294
                    )
                    
                    
                    (313
                    )
                    
                    
                    (991
                    )Other
      income (loss)
                    
                    
                    266
                    
                    
                    
                    185
                    
                    
                    
                    (54
                    )INCOME
      (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
                    
                    
                    (3,005
                    )
                    
                    
                    6,224
                    
                    
                    
                    7,369INCOME
      TAX PROVISION
                    
                    
                    1,123
                    
                    
                    
                    3,247
                    
                    
                    
                    3,553NET
      INCOME (LOSS)
                    
                    $
                    (4,128
                    )
                    
                    $
                    2,977
                    
                    
                    $
                    3,816NET
      INCOME (LOSS) PER BASIC SHARE
                    
                    $
                    (0.18
                    )
                    
                    $
                    0.12
                    
                    
                    $
                    0.24Weighted
      average shares outstanding
                    
                    
                    23,286
                    
                    
                    
                    24,196
                    
                    
                    
                    16,155NET
      INCOME (LOSS) PER DILUTED SHARE
                    
                    $
                    (0.18
                    )
                    
                    $
                    0.12
                    
                    
                    $
                    0.23Weighted
      average shares outstanding
                    
                    
                    23,286
                    
                    
                    
                    24,646
                    
                    
                    
                    16,455
 
 See notes
to consolidated financial statements.
  F-3
 DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (DOLLARS
IN THOUSANDS)
 FISCAL YEARS ENDEDAUGUST
      1,
                      2009
                    
                    
                    AUGUST
      2,
                      2008
                    
                    
                    JULY
      28,
                      2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss)
                    
                    $
                    (4,128
                    )
                    
                    $
                    2,977
                    
                    
                    $
                    3,816Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
                    
                    
                    1,090
                    
                    
                    
                    1,076
                    
                    
                    
                    899Deferred
      income tax provision
                    
                    
                    67
                    
                    
                    
                    384
                    
                    
                    
                    229Loss
      on sale of property plant and equipment
                    
                    
                    26
                    
                    
                    
                    3
                    
                    
                    
                    65Non
      cash litigation settlement costs
                    
                    
                    -
                    
                    
                    
                    450
                    
                    
                    
                    -Imputed
      interest - subordinated note
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    185Stock
      based compensation expense
                    
                    
                    341
                    
                    
                    
                    481
                    
                    
                    
                    220Goodwill
      impairment
                    
                    
                    -
                    
                    
                    
                    1,911
                    
                    
                    
                    -Changes
      in operating assets and liabilities:Trade
      receivables
                    
                    
                    5,133
                    
                    
                    
                    (1,832
                    )
                    
                    
                    (2,814
                    )Inventories
                    
                    
                    1,193
                    
                    
                    
                    5,667
                    
                    
                    
                    (4,519
                    )Prepaid
      expenses and other current assets
                    
                    
                    249
                    
                    
                    
                    (333
                    )
                    
                    
                    (328
                    )Other
      assets
                    
                    
                    36
                    
                    
                    
                    85
                    
                    
                    
                    50Accounts
      payable – trade
                    
                    
                    (4,069
                    )
                    
                    
                    (6,563
                    )
                    
                    
                    5,331Accrued
      expenses
                    
                    
                    (2,329
                    )
                    
                    
                    241
                    
                    
                    
                    (654
                    )Payment
      of accrued litigation settlement costs
                    
                    
                    (60
                    )
                    
                    
                    (390
                    )
                    
                    
                    (200
                    )Income
      taxes payable
                    
                    
                    -
                    
                    
                    
                    (2,003
                    )
                    
                    
                    1,573Other
      long-term liabilities
                    
                    
                    (416
                    )
                    
                    
                    (428
                    )
                    
                    
                    142Net
      cash (used in) provided by operating activities
                    
                    
                    (2,867
                    )
                    
                    
                    1,726
                    
                    
                    
                    3,995CASH
      FLOWS FROM INVESTING ACTIVITIESProperty
      plant and equipment purchases
                    
                    
                    (611
                    )
                    
                    
                    (1,208
                    )
                    
                    
                    (779
                    )Net
      cash used in investing activities
                    
                    
                    (611
                    )
                    
                    
                    (1,208
                    )
                    
                    
                    (779
                    )CASH
      FLOWS FROM FINANCING ACTIVITIESBorrowing
      under short-term credit facilities
                    
                    
                    7,400
                    
                    
                    
                    -
                    
                    
                    
                    37,193Repayment
      under short-term credit facilities
                    
                    
                    94
                    
                    
                    
                    -
                    
                    
                    
                    (43,247
                    )Borrowings
      of long-term debt
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,113Repayment
      of long-term debt
                    
                    
                    (1,563
                    )
                    
                    
                    (1,184
                    )
                    
                    
                    (5,900
                    )Proceeds
      from rights offering, net of related costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,354Proceeds
      from warrant exercises
                    
                    
                    -
                    
                    
                    
                    91
                    
                    
                    
                    551Proceeds
      of stock option exercises
                    
                    
                    -
                    
                    
                    
                    46
                    
                    
                    
                    170Purchase
      of treasury shares-
                    
                    
                    (1,561
                    )
                    
                    
                    -
                    
                    
                    
                    -Dividend
      paid to minority shareholders
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (16
                    )Net
      cash provided by (used in) financing activities of continuing
      operations
                    
                    
                    4,370
                    
                    
                    
                    (1,047
                    )
                    
                    
                    4,218EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                    
                    
                    (737
                    )
                    
                    
                    497
                    
                    
                    
                    93CASH
      AND CASH EQUIVALENTS (DECREASE) INCREASE FOR THE YEAR
                    
                    
                    155
                    
                    
                    
                    (32
                    )
                    
                    
                    7,527CASH
      AND CASH EQUIVALENTS, BEGINNING OF THE YEAR
                    
                    
                    7,828
                    
                    
                    
                    7,860
                    
                    
                    
                    333CASH
      AND CASH EQUIVALENTS, END OF THE YEAR
                    
                    $
                    7,983
                    
                    
                    $
                    7,828
                    
                    
                    $
                    7,860SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
                    
                    $
                    352
                    
                    
                    $
                    454
                    
                    
                    $
                    744Cash
      paid during the period for income taxes
                    
                    
                    1,123
                    
                    
                    
                    4,817
                    
                    
                    
                    837
 
 See notes
to consolidated financial statements.
  F-4
  DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 (DOLLARS
IN THOUSANDS)
 
 ACCUMULATEDOTHERCOMMON
                    
                    
                    ADDITIONAL
                    
                    
                    COMPRE-STOCK ISSUED
                    
                    
                    PAID-IN
                    
                    
                    HENSIVE
                    
                    
                    ACCUMULATED
                    
                    
                    TREASURY STOCKSHARES
                    
                    
                    AMOUNT
                    
                    
                    CAPITAL
                    
                    
                    INCOME
                    
                    
                    DEFICIT
                    
                    
                    SHARES
                    
                    
                    AMOUNT
                    
                    
                    TOTALBALANCE,
      JULY 29, 2006
                    
                    
                    12,258,294
                    
                    
                    
                    1,226
                    
                    
                    
                    67,679
                    
                    
                    
                    1,610
                    
                    
                    
                    (52,155
                    )
                    
                    
                    622,770
                    
                    
                    
                    (5,546
                    )
                    
                    
                    12,814Stock
      option exercises
                    
                    
                    101,000
                    
                    
                    
                    10
                    
                    
                    
                    161
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    171Stock
      warrant exercises
                    
                    
                    366,854
                    
                    
                    
                    37
                    
                    
                    
                    514
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    551Stock
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    220
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    220Issuance
      of stock for Rights Offering
                    
                    
                    12,027,378
                    
                    
                    
                    1,202
                    
                    
                    
                    11,152
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,354Comprehensive
      income:Net
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,816
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,816Foreign
      currency adjustments
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    270
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    270Total
      comprehensive income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    4,086
 
 BALANCE,
      JULY 28, 2007
                    
                    
                    24,753,526
                    
                    
                    
                    2,475
                    
                    
                    
                    79,726
                    
                    
                    
                    1,880
                    
                    
                    
                    (48,339
                    )
                    
                    
                    622,770
                    
                    
                    
                    (5,546
                    )
                    
                    
                    30,196Stock
      option exercises
                    
                    
                    83,181
                    
                    
                    
                    9
                    
                    
                    
                    106
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    31,694
                    
                    
                    
                    (69
                    )
                    
                    
                    46Stock
      warrant exercises
                    
                    
                    61,016
                    
                    
                    
                    6
                    
                    
                    
                    85
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    91Stock
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    481
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    481Comprehensive
      income:Net
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,977
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,977Foreign
      currency adjustments
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,372
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,372Total
      comprehensive income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    5,349
 
 BALANCE,
      AUGUST 2, 2008
                    
                    
                    24,897,723
                    
                    
                    
                    2,490
                    
                    
                    
                    80,398
                    
                    
                    
                    4,252
                    
                    
                    
                    (45,362
                    )
                    
                    
                    654,464
                    
                    
                    
                    (5,615
                    )
                    
                    
                    36,163Stock
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    341
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    341Purchase
      of treasury shares
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,527,859
                    
                    
                    
                    (1,561
                    )
                    
                    
                    (1,561
                    )Comprehensive
      income:Net
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (4,128
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (4,128
                    )Foreign
      currency adjustments
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (2,187
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (2,187
                    )Total
      comprehensive income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (6,315
                    )BALANCE,
      AUGUST 1, 2009
                    
                    
                    24,897,723
                    
                    
                    $
                    2,490
                    
                    
                    $
                    80,739
                    
                    
                    $
                    2,065
                    
                    
                    $
                    (49,490
                    )
                    
                    
                    2,182,323
                    
                    
                    $
                    (7,176
                    )
                    
                    $
                    28,628
 
 See notes
to consolidated financial statements.
 
 F-5
 
 DEL GLOBAL
TECHNOLOGIES CORP. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (DOLLARS
IN THOUSANDS, EXCEPT PER SHARE DATA)
  1. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
  DESCRIPTION
OF BUSINESS ACTIVITIES - Del Global Technologies Corp. (“Del Global”) together
with its subsidiaries (collectively, the “Company”), is engaged in two major
lines of business: Medical Systems Group and Power Conversion Group. The Medical
Systems Group segment designs, manufactures and markets imaging and diagnostic
systems consisting of stationary and portable x-ray imaging systems,
radiographic/fluoroscopic systems, mammography systems and dental systems. The
Power Conversion Group segment designs, manufactures and markets key electronic
components such as transformers, noise suppression filters and high voltage
capacitors for use in precision regulated high voltage
applications.
 
 Subsequent
to our fiscal year end the Board of the Company decided to exit the Del Medical
U.S. business unit. This business is part of the Company’s Medical Systems
Group, however, this decision does not include or impact the operations of our
Villa subsidiary which will make up the whole of the Medical Systems Group going
forward.
 
 PRINCIPLES
OF CONSOLIDATION - The consolidated financial statements are prepared on the
accrual basis of accounting, which conforms to accounting principles generally
accepted in the United States of America, (“U.S. GAAP”) and include the accounts
of Del Global and its subsidiaries. All material intercompany accounts and
transactions have been eliminated.
 
 USE OF
ESTIMATES - The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated balance
sheets, as well as reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Significant
estimates underlying the accompanying consolidated financial statements include
the allowance for doubtful accounts, allowance for obsolete and excess
inventory, realizability of deferred income tax assets, recoverability of
intangibles and other long-lived assets, and future obligations associated with
the Company’s litigation.
 
 Certain
reclassifications have been made to prior years' amounts to conform to the
current year's presentation.
 
 We have
evaluated subsequent events through the time of filing this Form 10-K with the
Securities and Exchange Commission (“SEC”) on November 9.  No material
subsequent events have occurred since August 1, 2009 that required recognition
or disclosure in these financial statements, except as discussed in Note
14.
 
 ACCOUNTING
PERIOD - 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.
 
 CASH
EQUIVALENTS - The Company considers highly liquid instruments readily
convertible to known amounts of cash with original maturities of three months or
less (measured from their acquisition date) to be cash equivalents.
 
 FOREIGN
CURRENCY TRANSLATION - The financial statements of Villa are recorded in “Euro”
and translated into U.S. dollars.  Villa’s balance sheet accounts are
translated at the current exchange rate and income statement items are
translated at the average exchange rate for the period. Gains and losses
resulting from translation are accumulated in a separate component of
shareholders’ equity.
 
 INVENTORIES
- Inventories are stated at the lower of cost or market value. Cost is comprised
of direct materials and, where applicable, direct labor costs and overhead that
has been incurred in getting the inventories to their present location and
condition. Engineering costs incurred to set up products to be manufactured for
a customer purchase order are capitalized when the scope of the purchase order
indicates that such costs are recoverable. Such costs are included in
work-in-process inventory and amortized on a units shipped basis over the life
of the customer order from the date of first shipment. Cost is calculated using
the first in, first out  method. Market value represents the estimated
selling price less all estimated costs to completion and costs to be incurred in
marketing, selling and distribution.
  F-6
  
 PROPERTY
PLANT AND EQUIPMENT, NET – Property, plant and equipment, net are stated at cost
less accumulated depreciation and amortization. Replacements and major
improvements are capitalized; maintenance and repairs are expensed as incurred.
Gains or losses on asset dispositions are included in the determination of net
income or loss. Depreciation is computed utilizing the straight-line method. The
cost of leasehold improvements is amortized over the shorter of the useful life
or the term of the lease.
 
 Depreciable
lives are generally as follows:
 
 DESCRIPTION
                    USEFUL
      LIVESBuildings
                    25-33Machinery
      and equipment
                    5-15Furniture
      and fixtures
                    5-10Transportation
      equipment
                    3-4Computer
      and other equipment
                    3-7
 
 DEFERRED
FINANCING COSTS, NET - Financing costs, including fees, commission and legal
expenses, are capitalized as other non-current assets and amortized on a
straight line basis, which approximates the interest method, over the term or
expected term of the relevant loan. Amortization of deferred financing costs is
included in interest expense.
 
 GOODWILL -
Goodwill represents the excess of the cost of acquisitions over the fair value
of the identifiable assets acquired and liabilities assumed. The Company
evaluates goodwill for impairment on an annual basis by comparing the fair value
to the carrying value for reporting units within the Medical Systems
Group.  Fair value is primarily determined using a discounted cash
flow method.
 
 At August
1, 2009, the Company’s market capitalization was below tangible book
value.  While the market capitalization decline was considered in the
Company’s evaluation of fair value, the market metric is only one indicator of
fair value.  In the Company’s opinion, the market capitalization
approach, by itself, is not a reliable indicator of the value for the
Company.
 
 The
Company will continue to monitor market conditions and determine if any
additional interim review of goodwill is warranted.  Further
deterioration in the market or actual results as compared with our projections
may ultimately result in future impairment.  In the event that the
Company determines goodwill is impaired in the future, it would need to
recognize a non-cash impairment charge, which could have a material adverse
effect on its consolidated balance sheet and results of operations.
 
 RECOVERABILITY
OF LONG-LIVED ASSETS - The Company evaluates the carrying amounts of long-lived
assets (including goodwill) whenever events have occurred (and at least annually
for goodwill) which might require modification to the carrying values. In
evaluating carrying values of long-lived assets, the Company reviews certain
indicators of potential impairment, such as undiscounted projected cash flows
and business plans. In the event that impairment has occurred, the fair
estimated value of the related asset is determined and the Company records a
charge to operations calculated by comparing the asset’s carrying value to the
estimated fair value. The Company estimates fair value based on the best
information available making whatever estimates, judgments and projections are
considered necessary.
 
 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.  These
repairs are billed to the customers at market rates.
 
 RESEARCH
AND DEVELOPMENT COSTS - Research and development costs are recognized as an
expense in the period in which they are incurred.
 
 INCOME
TAXES - Deferred income tax assets and liabilities represents the effects of the
differences between the income tax basis and financial reporting basis of assets
and liabilities and tax credit carryforwards at the tax rates expected at the
time the deferred income tax liability or asset is expected to be settled or
realized. Management provides valuation allowances on deferred income tax assets
for which realization does not meet a “more likely than not”
standard.
  F-7
  NET INCOME
(LOSS) PER SHARE - Net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding during
the year. The effect of the assumed exercise of options and warrants to purchase
common stock are excluded from the calculation of earnings (loss) per share when
their inclusion would be anti-dilutive.
 
 CONCENTRATION
OF CREDIT RISK - Financial instruments which potentially subject the Company to
concentrations of credit risk are cash equivalents, investments in marketable
securities, trade receivables and lines of credit. With respect to accounts
receivable, the Company limits its credit risk by performing ongoing credit
evaluations and, when necessary, requiring letters of credit, guarantees or
collateral. Management does not believe significant risk exists in connection
with the Company’s concentrations of credit at August 1, 2009.
 
 The
activity in allowances for doubtful accounts is as follows:
 BALANCE
      AT
                      BEGINNING
      OF
                      YEAR
                    
                    
                    CHARGED
      TO
                      COSTS
      AND
                      EXPENSE
                    
                    
                    DEDUCTIONS(1)
                    
                    
                    BALANCE
      AT
                      END OF YEARYEAR
      ENDED AUGUST 1, 2009Allowance
      for doubtful accounts
                    
                    $
                    1,400
                    
                    
                    $
                    487
                    
                    
                    $
                    239
                    
                    
                    $
                    1,648YEAR
      ENDED AUGUST 2, 2008Allowance
      for doubtful accounts
                    
                    $
                    1,569
                    
                    
                    $
                    250
                    
                    
                    $
                    419
                    
                    
                    $
                    1,400YEAR
      ENDED JULY 28, 2007Allowance
      for doubtful accounts
                    
                    $
                    1,095
                    
                    
                    $
                    646
                    
                    
                    $
                    172
                    
                    
                    $
                    1,569
 
 (1)  Write-off
of accounts receivable previously charged to costs and expenses and impact of
foreign currency fluctuation.
 
 
 STOCK-BASED
COMPENSATION – In December 2004, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123
(R), “Share-Based Payments,” which established standards for transactions in
which an entity exchanges its equity instruments for goods and
services.  The standard requires a public entity to measure the equity
instruments award based on the grant-date fair value.  This eliminates
the exception to account for such awards using the intrinsic method previously
allowed under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting
for Stock Issued to Employees.” SFAS No. 123 (R) was adopted beginning in fiscal
year 2006.  The adoption did not require restatement of previously
issued statements and is being applied on a prospective basis.  See
Note 9, Shareholders’ Equity.
 
 EFFECTS OF
NEW ACCOUNTING PRONOUNCEMENTS - In March 2008, the FASB issued 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 requires
identification and presentation of ownership interests in subsidiaries held by
parties other than the Company in the consolidated financial statements within
the equity section but separate from the equity owned by Del
Global.  SFAS 160 also requires that (1) the amount of consolidated
net income attributable to the parent and to the noncontrolling interest be
clearly identified and presented on the face of the consolidated statement of
operations, (2) changes in ownership interest be accounted for similarly, as
equity transactions and (3) when a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary and the gain or loss
on the deconsolidation of the subsidiary be measured at fair value. This
statement is effective for the Company on August 2, 2009. The Company is
currently evaluating the requirements of SFAS 160 but does not expect it to have
a material impact.
 
 In
December 2007, the FASB issued SFAS No. 141R, Business
Combinations.  SFAS 141R 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 157 for nonfinancial assets and
liabilities, which are not measured at fair value on a recurring basis (at lease
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 of SFAS No. 157 for nonfinancial assets
and liabilities and does not expect it to have a material impact.
  F-8
 
 In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS
168”).  SFAS 168 will become the source of authoritative U.S.
generally accepted accounting principles recognized by the FASB to be applied by
nongovernmental entities.  On the effective date, SFAS 168 will
supersede all then-existing non-SEC accounting and reporting
standards.  All other non-grandfathered non-SEC accounting literature
not included in the codification will become non-authoritative.  SFAS
168 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009.  The Company is currently evaluating
the requirements of  SFAS 168, but it is not expected to have a
material impact on the Company’s consolidated financial statements.
  INVENTORIES
  Inventories consists of the
      following:AUGUST 1, 2009
                    
                    
                    AUGUST , 2008Raw
      materials and purchased parts
                    
                    $
                    13,294
                    
                    
                    $
                    13,920Work-in-process
                    
                    
                    1,929
                    
                    
                    
                    2,526Finished
      goods
                    
                    
                    5,277
                    
                    
                    
                    6,42820,500
                    
                    
                    
                    22,874Less:
      allowance for excess and obsolete inventories
                    
                    
                    (4,496
                    )
                    
                    
                    (4,435
                    )Total
      inventories net
                    
                    $
                    16,004
                    
                    
                    $
                    18,439
 
 The
activity in the allowance for excess and obsolete inventories accounts is as
follows:
 
 BALANCE
      AT
                      BEGINNING
      OF
                      YEAR
                    
                    
                    CHARGED
      TO
                      COSTS
      AND
                      EXPENSE
                    
                    
                    DEDUCTIONS(1)
                    
                    
                    BALANCE
      AT
                      END OF YEARYEAR
      ENDED AUGUST 1, 2009Allowance
      for excess and obsolete inventories
                    
                    $
                    4,435
                    
                    
                    $
                    1,211
                    
                    
                    $
                    1,150
                    
                    
                    $
                    4,496YEAR
      ENDED AUGUST 2, 2008Allowance
      for excess and obsolete inventories
                    
                    $
                    3,869
                    
                    
                    $
                    1,554
                    
                    
                    $
                    988
                    
                    
                    $
                    4,435YEAR
      ENDED JULY 28, 2007Allowance
      for excess and obsolete inventories
                    
                    
                    3,703
                    
                    
                    
                    651
                    
                    
                    
                    485
                    
                    
                    
                    3,869
 
 (1)  Write-off
of inventories previously charged to costs and expenses and foreign currency
fluctuation.
 
 The
Company has pledged all of its inventories in the U.S. having a net carrying
amount of approximately $4,337 and $6,154 at August 1, 2009 and August 2, 2008,
respectively, to secure its credit facility with its U.S. lender.
  3. PROPERTY
PLANT AND EQUIPMENT
  Property
plant and equipment consist of the following:
 
 AUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008Land
                    
                    $
                    694
                    
                    
                    $
                    694Buildings
                    
                    
                    6,749
                    
                    
                    
                    7,249Machinery
      and equipment
                    
                    
                    7,107
                    
                    
                    
                    7,153Furniture
      and fixtures
                    
                    
                    652
                    
                    
                    
                    694Leasehold
      improvements
                    
                    
                    1,655
                    
                    
                    
                    1,810Transportation
      equipment
                    
                    
                    92
                    
                    
                    
                    106Computers
      and other equipment
                    
                    
                    3,045
                    
                    
                    
                    2,87019,994
                    
                    
                    
                    20,576Less:
      accumulated depreciation and amortization
                    
                    
                    (13,689
                    )
                    
                    
                    (13,199
                    )Property
      plant and equipment, net
                    
                    $
                    6,305
                    
                    
                    $
                    7,377
 
 The
Company has pledged all of its property, plant and equipment in the U.S. having
a net carrying amount of approximately $2,062 and $2,045 at August 1, 2009 and
August 2, 2008, respectively, to secure its credit facility with its U.S.
lender. Included in the table above are assets held under capital leases,
including the Villa building, in the net amount of $1,931 and $2,639 at August
1, 2009 and August 2, 2008, respectively. Accumulated amortization relating to
capital leases was $1,076 and $983 at August 1, 2009 and August 2, 2008,
respectfully. Amortization expense relating to capital leases was $93, $125 and
$116 for fiscal 2009, 2008 and 2007, respectively.
 
 Depreciation
expense, including amortization of capital leased assets, for fiscal years 2009,
2008 and 2007 was $1,090, $1,076 and $899, respectively.
  F-9
  4. GOODWILL
  Goodwill
consists of the following:
  Medical SystemsBalance
      at July 28, 2007
                      
                      $
                      6,437Impairment
      of goodwill
                      
                      
                      (1,911
                      )Balance
      at August 2, 2008 and August 1, 2009
                      
                      $
                      4,526
 Due
primarily to continued operating results below planned levels and management’s
resulting revaluation of its strategic plan for the Company’s domestic Medical
Systems Group’s reporting unit, the Company completed a special assessment of
that reporting unit’s goodwill realization during the third quarter of
2008.  The Company’s scheduled assessment of goodwill is during the
fourth quarter of each fiscal year.
 
 As part of
its assessment, the Company estimated the fair value of the domestic 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
SFAS 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 fiscal 2008.  The
Company’s annual fourth quarter assessments of Villa’s goodwill has not
indicated any impairment.  However, due to the nature and inputs to
the Company’s fair value calculation of goodwill, declines in future operating
results could affect the calculated fair value of Villa’s goodwill and
potentially result in impairment.
 
 5. 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, which is included in accrued
expenses, is as follows:
 
 AUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008Balance
      at beginning of year
                    
                    $
                    1,077
                    
                    
                    $
                    1,065Provision
      for anticipated warranty claims
                    
                    
                    137
                    
                    
                    
                    526Costs
      incurred related to warranty claims
                    
                    
                    (510
                    )
                    
                    
                    (514
                    )Balance
      at end of year
                    
                    $
                    704
                    
                    
                    $
                    1,077
  6. SHORT-TERM
CREDIT FACILITIES, LONG-TERM DEBT AND SUBORDINATED NOTE
 At August
1, 2009, the Company had $7.4 million and $0.1 million in borrowings under its
domestic and foreign short term credit facilities, respectively.
 
 The
Company did not have any outstanding borrowings under its short term credit
facilities at August 2, 2008.
 
 Long-term
debt was comprised of the following:
 AUGUST
      1,
                      2009
                    
                    
                    AUGUST
      2,2008
                    
                    
                    INTEREST
      RATE AT AUGUST 1,2009Foreign
      capital lease obligation
                    
                    $
                    1,931
                    
                    
                    $
                    2,639
                    
                    
                    
                    5.0
                    %Foreign
      credit facilities
                    
                    
                    1,585
                    
                    
                    
                    2,703
                    
                    
                    Euribor
      + 1.00
                    %Foreign
      Italian Government loans
                    
                    
                    522
                    
                    
                    
                    959
                    
                    
                    
                    3.4
                    %Total
      long term debt
                    
                    
                    4,038
                    
                    
                    
                    6,301Less
      current portion of long-term bank debt
                    
                    
                    (1,653
                    )
                    
                    
                    (1,797
                    )Long-term
      debt, less current portion
                    
                    $
                    2,385
                    
                    
                    $
                    4,504
   F-10
 
 On August
1, 2005, the Company entered into a three-year revolving credit and term loan
facility with North Fork Business Capital, which was acquired by Capital One
Leverage Finance Corp. during fiscal year 2008 (the "North Fork Facility" and
the “Capital One Facility”) and repaid the prior facility. In March 2007, the
Company used a portion of the proceeds from a Rights Offering to pay all
outstanding balances under this facility as well as $2.5 million of subordinated
notes then outstanding and $0.1 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 of 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
August 1, 2009 and August 2, 2008, the Company had approximately $1.6 million
and $6.4 million of availability under the North Fork Facility.  This
difference in borrowing availability is due to draws of $7.4 million against the
line of credit during the third and fourth quarter of fiscal year
2009.
 
 There are
certain covenants, including tangible net worth, that the Company must
meet.  As of the end of the fourth quarter of fiscal 2009, the Company
was non-compliant with the following covenants: the Senior U.S. Debt Ratio and
Fixed Charge Coverage Ratio covenants under the North Fork Credit facility, due
to lower than anticipated performance during fiscal 2009.  On October
30, Capital One Leverage Finance Corp. waived the non-compliance with these
covenants for the fourth quarter of fiscal 2009 and amended future covenants
through May 24, 2010, the credit facility’s maturity date.  As of the
end of the fourth quarter of fiscal 2008, the Company was in compliance with all
covenants under the North Fork Facility.
 
 Management
believes that if additional financing is needed once the U.S. revolving credit
facility matures on May 24, 2010, they would be able to obtain new asset based
financing on the remaining U.S. subsidiary, secure a mortgage on the building
owned by the U.S. subsidiary or dividend necessary funds from the foreign
subsidiary.  The Company can make no assurances that it will be able
to obtain additional financing in the future on terms favorable to the Company
or at all.
  The North
Fork Facility is subject to commitment fees of 0.5% per annum on the
daily-unused portion of the facility, payable monthly.  The Company
granted a security interest to the lender on its U.S. credit facility in
substantially all of its accounts receivable, inventory, property, plant and
equipment, other assets and intellectual property in the U.S..
 
 On October
30, 2009, the Capital One Facility was amended and restated.  As
restated, the Capital One Facility provides for a $3.0 million formula based
revolving credit facility based on the Company’s RFI division’s eligible
accounts receivable and inventory as defined in the credit
agreement.  Interest on the revolving credit and capital expenditure
borrowings is payable at prime plus 2.0% or, alternatively, at a LIBOR rate plus
4.5%.  Other changes to the terms and conditions of the original loan
agreement include the modification of covenants and the addition of weekly
collateral reporting.
 
 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.
 
 The
Company received a dividend from its Villa subsidiary in December 2008 of
approximately $1.8 million, which was used to repurchase the Company’s
outstanding common stock pursuant to the common stock repurchase
program.  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.
 
 In
addition, on November 26, 2008, the Company requested and was granted consent by
Capital One Leverage Finance Corp. to relocate the Company’s chief executive
office and principal place of business within the Chicago, Illinois
area.
  F-11
 
 The
Company’s Villa subsidiary maintains short term credit facilities which are
renewed annually with Italian banks.  The current balance due on these
credit facilities at August 1, 2009, is $0.1 million.  Available
borrowing under the credit facilities is $11.5 million and variable interest
rates 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 at 2.308%.  The
note is repayable over a 5 year term.  Principal repayment began in
September 2008 and will be completed in September 2011.  The note
contains a financial covenant which provides that the net equity of Villa cannot
fall below 5.0 million Euros.  Villa’s net equity at the end of fiscal
2009 was 11.4 million Euro.
 
 In
December 2006, Villa entered into a 1.0 million Euro loan with interest payable
at Euribor 3 months plus 0.95 points, currently 2.07%.  The loan is
repayable  over a 4 year period ending in December 2010.
 
 Villa is
also 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 the end of fiscal year 2009, total principal due is 0.4
million Euro.  Villa’s manufacturing facility is subject to a capital
lease obligation which matures in March 2011 with an option to
purchase.  Villa is in compliance with all related financial covenants
under these short and long-term financings.
 
 SUBORDINATED
NOTE-In
connection with the settlement reached on January 29, 2002, with the plaintiffs
in the class action litigation, the Company recorded the present value at 12% of
the $2.0 million of subordinated notes that were issued in April 2002 and
matured in March 2007. The subordinated notes did not pay interest currently,
but accrued interest at 6% per annum, and were recorded at issuance at a
discounted present value of $1.5 million. The balance was paid on March 29, 2007
with a portion of the proceeds from a Rights Offering described
below.
 
 The
Company is obligated to make principal payments under its long-term debt and
capital lease obligation as follows:
 
 FISCAL YEARS
                    
                    DEBT
                    
                    
                    CAPITAL
                      LEASE
                    
                    
                    TOTAL2010
                    
                    $
                    1,188
                    
                    
                    $
                    465
                    
                    
                    $
                    1,6532011
                    
                    
                    810
                    
                    
                    
                    371
                    
                    
                    
                    1,1812012
                    
                    
                    109
                    
                    
                    
                    --
                    
                    
                    
                    109Purchase
      option
                    
                    
                    --
                    
                    
                    
                    1,095
                    
                    
                    
                    1,095Total
      payments
                    
                    
                    2,107
                    
                    
                    
                    1,931
                    
                    
                    
                    4,038Less:
      amount representing interest
                    
                    
                    --
                    
                    
                    
                    (181
                    )
                    
                    
                    (181
                    )Total
                    
                    $
                    2,107
                    
                    
                    $
                    1,750
                    
                    
                    $
                    3,857
   7. EMPLOYEE
BENEFITS
 The
Company has a Profit Sharing Plan that provides for contributions as determined
by the Board of Directors. The contributions can be paid to the Plan in cash or
common stock of the Company.  No contributions were authorized for
fiscal years 2009, 2008 or 2007.
 
 The Profit
Sharing Plan also incorporates a 401(k) Retirement Plan that is available to
substantially all domestic employees, allowing them to defer a portion of their
salary. The Company matches employee contributions at a 50% rate up to a maximum
of 4% of annual salary, and recorded a related expense of $54, $102 and $20 for
fiscal years 2009, 2008 and 2007, respectively.
 
 The
Company contribution match noted above was temporarily suspended during
2009.  The Company expects to reinstate this benefit in the
future.
 
 In
addition, the Company’s Villa subsidiary provides for employee termination
indemnities.  Villa has established a reserve, representing the
liability for indemnities payable upon termination of employment, accrued in
accordance with labor laws and labor agreements in force.  This
liability is subject to annual revaluation using the officially-established
indices. The liability for these indemnities is included in other long-term
liabilities on the accompanying Consolidated Balance Sheets and was $2,444 and
$3,172 at August 1, 2009 and August 2, 2008, respectively.  Provisions
for employee termination indemnities were $477, $729 and $357 for fiscal years
2009, 2008 and 2007, respectively.
  F-12
  8. SEGMENT
REPORTING
 The
Company has three reportable segments; the Medical Systems Group, the Power
Conversion Group and Other. The Other segment includes unallocated corporate
costs. For each fiscal year presented, corporate costs (which include certain
shared services) were allocated to domestic subsidiaries on the basis of a
percentage of each unit’s annual sales. Corporate costs were allocated at a
fixed dollar amount to the international subsidiary based upon an intercompany
management services agreement.  The percentages and the dollar amounts
used to allocate actual corporate costs are based on management’s estimate of
the benefits received by each reporting segment from corporate activities and
shared services.
 
 Operating
segments are defined as components of an enterprise, about which separate
financial information is available which is evaluated regularly by the chief
decision maker, or decision making group, in deciding how to allocate resources
and in assessing performance.  The Company’s chief operating decision
making group is comprised of the Chief Executive Officer and the senior
executives of the Company’s operating segments. The Company evaluates its
reporting segments based on operating income or loss.  The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies.
 
 Selected
financial data of these segments are as follows:
 FISCAL
      YEAR ENDED
                      AUGUST 1, 2009
                    
                    MEDICAL
                      SYSTEMS
                      GROUP
                    
                    
                    POWER
                      CONVERSION
                      GROUP
                    
                    
                    OTHER
                    
                    
                    TOTALNet
      sales to external customers
                    
                    $
                    68,448
                    
                    
                    $
                    11,952
                    
                    
                    $
                    --
                    
                    
                    $
                    80,400Cost
      of sales
                    
                    
                    56,381
                    
                    
                    
                    7,291
                    
                    
                    
                    --
                    
                    
                    
                    63,672Gross
      margin
                    
                    
                    12,067
                    
                    
                    
                    4,661
                    
                    
                    
                    --
                    
                    
                    
                    16,728Selling,
      general and administrative
                    
                    
                    10,851
                    
                    
                    
                    2,434
                    
                    
                    
                    692
                    
                    
                    
                    13,977Research
      and development
                    
                    
                    1,935
                    
                    
                    
                    57
                    
                    
                    
                    --
                    
                    
                    
                    1,992Litigation
      settlement costs
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    3,736
                    
                    
                    
                    3,736Total
      operating expenses
                    
                    
                    12,786
                    
                    
                    
                    2,491
                    
                    
                    
                    4,428
                    
                    
                    
                    19,705Operating
      income (loss)
                    
                    $
                    (719
                    )
                    
                    $
                    2,170
                    
                    
                    $
                    (4,428
                    )
                    
                    $
                    (2,977
                    )Interest
      expense
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (294
                    )Other
      income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    266Income
      (loss) before income taxes
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    (3,005
                    )Depreciation
                    
                    $
                    900
                    
                    
                    $
                    170
                    
                    
                    $
                    --
                    
                    
                    $
                    1,070Amortization
                    
                    
                    20
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    20Segment
      assets
                    
                    
                    44,425
                    
                    
                    
                    6,725
                    
                    
                    
                    4,112
                    
                    
                    
                    55,262Capital
      expenditures
                    
                    
                    430
                    
                    
                    
                    181
                    
                    
                    
                    --
                    
                    
                    
                    611
 
 Inter-segment
sales were $105 for the fiscal year ended August 1, 2009. Approximately $41,267
of Medical Systems Group assets are located in Italy, including $9,407 of
long-lived assets.
 
 FISCAL
      YEAR ENDEDAUGUST 2, 2008
                    
                    MEDICAL
                      SYSTEMS
                      GROUP
                    
                    
                    POWER
                      CONVERSION
                      GROUP
                    
                    
                    OTHER
                    
                    
                    TOTALNet
      sales to external customers
                    
                    $
                    95,052
                    
                    
                    $
                    13,254
                    
                    
                    $
                    --
                    
                    
                    $
                    108,306Cost
      of sales
                    
                    
                    73,317
                    
                    
                    
                    8,202
                    
                    
                    
                    --
                    
                    
                    
                    81,519Gross
      margin
                    
                    
                    21,735
                    
                    
                    
                    5,052
                    
                    
                    
                    --
                    
                    
                    
                    26,787Selling,
      general and administrative
                    
                    
                    11,840
                    
                    
                    
                    2,522
                    
                    
                    
                    1,224
                    
                    
                    
                    15,586Research
      and development
                    
                    
                    2,488
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    2,488Goodwill
      impairment
                    
                    
                    1,911
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    1,911Litigation
      settlement costs
                    
                    
                    450
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    450Total
      operating expenses
                    
                    
                    16,689
                    
                    
                    
                    2,522
                    
                    
                    
                    1,224
                    
                    
                    
                    20,435Operating
      income (loss)
                    
                    $
                    5,046
                    
                    
                    $
                    2,530
                    
                    
                    $
                    (1,224
                    )
                    
                    
                    6,352Interest
      expense
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (313
                    )Other
      income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    185Income
      before income taxes
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    6,224Depreciation
                    
                    $
                    891
                    
                    
                    $
                    163
                    
                    
                    $
                    --
                    
                    
                    $
                    1,054Amortization
                    
                    
                    22
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    22Segment
      assets
                    
                    
                    53,133
                    
                    
                    
                    4,651
                    
                    
                    
                    8,569
                    
                    
                    
                    66,353Capital
      expenditures
                    
                    
                    1,140
                    
                    
                    
                    68
                    
                    
                    
                    --
                    
                    
                    
                    1,208
 
 Inter-segment
sales were $83 for the fiscal year ended August 2, 2008. Approximately $50,678
of Medical Systems Group assets are located in Italy, including $10,656 of
long-lived assets.
  F-13
  
 FISCAL
      YEAR ENDED
                      JULY 28, 2007
                    
                    MEDICAL
                      SYSTEMS
                      GROUP
                    
                    
                    POWER
                      CONVERSION
                      GROUP
                    
                    
                    OTHER
                    
                    
                    TOTALNet
      sales to external customers
                    
                    $
                    90,979
                    
                    
                    $
                    13,188
                    
                    
                    $
                    --
                    
                    
                    $
                    104,167Cost
      of sales
                    
                    
                    70,879
                    
                    
                    
                    8,271
                    
                    
                    
                    --
                    
                    
                    
                    79,150Gross
      margin
                    
                    
                    20,100
                    
                    
                    
                    4,917
                    
                    
                    
                    --
                    
                    
                    
                    25,017Selling,
      general and administrative
                    
                    
                    10,635
                    
                    
                    
                    2,476
                    
                    
                    
                    1,479
                    
                    
                    
                    14,590Research
      and development
                    
                    
                    2,013
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    2,013Litigation
      settlement costs
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    --Total
      operating expenses
                    
                    
                    12,648
                    
                    
                    
                    2,476
                    
                    
                    
                    1,479
                    
                    
                    
                    16,603Operating
      income (loss)
                    
                    $
                    7,452
                    
                    
                    $
                    2,441
                    
                    
                    $
                    (1,479
                    )
                    
                    
                    8,414Interest
      expense
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (991
                    )Other
      expense
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (54
                    )Income
      before income taxes
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    7,369Depreciation
                    
                    $
                    704
                    
                    
                    $
                    165
                    
                    
                    $
                    3
                    
                    
                    $
                    872Amortization
                    
                    
                    27
                    
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    27Segment
      assets
                    
                    
                    60,658
                    
                    
                    
                    5,014
                    
                    
                    
                    667
                    
                    
                    
                    66,339Capital
      expenditures
                    
                    
                    703
                    
                    
                    
                    76
                    
                    
                    
                    --
                    
                    
                    
                    779
 
 Inter-segment
sales were $86 for the fiscal year ended July 28, 2007. Approximately $43,720 of
Medical Systems Group assets are located in Italy, including $10,110 of
long-lived assets.
 
 MAJOR
CUSTOMERS AND EXPORT SALES – For the fiscal year ended August 1, 2009, none of
our customers accounted for 10% or more of consolidated revenues and one of our
Medical Systems Group customers accounted for approximately 14% of consolidated
gross accounts receivable.  For the fiscal year ended August 2, 2008
one of our Medical Systems Group customers accounted for approximately 15% of
consolidated revenues and 1% of gross accounts receivable at August 2,
2008.  For the fiscal years ended July 28, 2007, one of our Medical
Systems Group customers accounted for approximately 12% of consolidated revenues
and 11% of gross accounts receivable at July 28, 2007.
 
 Foreign
sales were 55%, 64% and 66% of the Company’s consolidated net sales in fiscal
years ended August 1, 2009, August 2, 2008 and July 28, 2007, respectively. Net
sales by geographic areas were:
 
 AUGUST
      1, 2009
                    
                    
                    AUGUST
      2, 2008
                    
                    
                    JULY
      28, 2007United
      States
                    
                    $
                    36,572
                    
                    
                    
                    45
                    %
                    
                    $
                    40,402
                    
                    
                    
                    37
                    %
                    
                    $
                    38,397
                    
                    
                    
                    37
                    %Canada
                    
                    
                    1,111
                    
                    
                    
                    1
                    %
                    
                    
                    2,045
                    
                    
                    
                    2
                    %
                    
                    
                    869
                    
                    
                    
                    1
                    %Europe
                    
                    
                    30,377
                    
                    
                    
                    38
                    %
                    
                    
                    55,428
                    
                    
                    
                    51
                    %
                    
                    
                    48,129
                    
                    
                    
                    46
                    %Far
      East
                    
                    
                    6,827
                    
                    
                    
                    9
                    %
                    
                    
                    7,354
                    
                    
                    
                    7
                    %
                    
                    
                    7,603
                    
                    
                    
                    7
                    %Mexico,
      Central and South America
                    
                    
                    3,296
                    
                    
                    
                    4
                    %
                    
                    
                    514
                    
                    
                    
                    1
                    %
                    
                    
                    3,117
                    
                    
                    
                    3
                    %Africa,
      Middle East and Australia
                    
                    
                    2,217
                    
                    
                    
                    3
                    %
                    
                    
                    2,563
                    
                    
                    
                    2
                    %
                    
                    
                    6,052
                    
                    
                    
                    6
                    %$
                    80,400
                    
                    
                    
                    100
                    %
                    
                    $
                    108,306
                    
                    
                    
                    100
                    %
                    
                    $
                    104,167
                    
                    
                    
                    100
                    %
 
 Revenues
are attributable to geographic areas based on the location of the
customers.
  9. SHAREHOLDERS’
EQUITY
 RIGHTS
OFFERING AND STOCKHOLDERS’ RIGHTS PLAN – On December 12, 2006, the Company filed
a registration statement for a subscription rights offering with the SEC that
became effective January 30, 2007.  Under terms of this rights
offering, the Company distributed to shareholders of record as of February 5,
2007, non-transferable subscription rights to purchase one share of the
Company’s common stock for each share owned at that date at a subscription price
of $1.05 per share.  On March 12, 2007, the Company completed the
rights offering, selling 12,027,378 shares of its common stock at $1.05 per
share.  Total proceeds to the Company, net of $275 of expenses related
to the rights offering, were $12,354.
 
 The
purpose of this rights offering was to raise equity capital in a cost-effective
manner.  Approximately $7,564 of the proceeds were used for debt
repayment and the remainder invested in short-term money market securities for
anticipated working capital needs and general corporate purposes.  A
portion of the net proceeds may also ultimately be used to acquire or invest in
businesses, products and technologies that Company management believes are
complementary to the Company's business.
  F-14
 
 In
addition, on January 22, 2007, the Company entered into a stockholders’ rights
plan (the “Rights Plan”).  The Rights Plan provides for a dividend
distribution of one common stock purchase right for each outstanding share of
the Company’s common stock.  The Company’s Board of Directors adopted
the Rights Plan to protect stockholder value by protecting the Company’s ability
to realize the benefits of its net operating losses (“NOLs”) and capital loss
carryforwards.  The Company has experienced substantial operating and
capital losses in previous years.  Under the Internal Revenue Code and
rules promulgated by the Internal Revenue Service, the Company may “carry
forward” these losses in certain circumstances to offset current and future
earnings and thus reduce its federal income tax liability, subject to certain
requirements and restrictions.  Assuming that the Company has future
earnings, the Company may be able to realize the benefits of NOLs and capital
loss carryforwards.  These NOLs and capital loss carryforwards
constitute a substantial asset to the Company.  If the Company
experiences an “Ownership Change,” as defined in Section 382 of the Internal
Revenue Code, its ability to use the NOLs and capital loss carryforwards could
be substantially limited or lost altogether.  In general terms, the
Rights Plan imposes a significant penalty upon any person or group that acquires
certain percentages of the Company’s common stock by allowing other shareholders
to acquire equity securities at half their fair values.
 
 STOCK
BUY-BACK PROGRAM - On November 26, 2008, the Company requested and was granted
consent by Capital One Leverage Finance Corp. , which acquired Northfork
Business Capital during fiscal year 2008 (see Note 6), to repurchase up to
2,424,616 shares, or up to $3,000 (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.  On various
dates in December 2008, the Company repurchased 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.
 
 INCREASE
OF AUTHORIZED SHARES - At a special meeting of shareholders of the Company held
on November 17, 2006, the Company’s shareholders approved an Amendment of the
Certificate of Incorporations of the Company to increase the number of
authorized shares of the Company’s common stock, par value $0.10 per share, from
twenty million (20,000,000) shares to fifty million (50,000,000) shares in order
to have a  sufficient  number of shares
of  Common  Stock to  provide a
reserve  of shares  available for issuance to
meet  business  needs as they may arise in the future. Such
business needs may include, without limitation, rights offerings, financings,
acquisitions, establishing strategic relationships with corporate partners,
providing equity incentives to employees, officers or directors, stock splits or
similar transactions.
 
 STOCK
OPTION PLAN AND WARRANTS – Effective July 31, 2005, the Company adopted SFAS No.
123 (R).  This standard requires that the Company measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant date fair value of the award.  That cost will be
recognized over the period in which the employee is required to provide the
services – the requisite service period (usually the vesting period) – in
exchange for the award.  The grant date fair value for options and
similar instruments will be estimated using option pricing
models.  Under SFAS 123 (R), the Company is required to select a
valuation technique or option pricing model that meets the criteria as stated in
the standard, which includes a binomial model and the Black-Scholes
model.  At the present time, the Company is continuing to use the
Black-Scholes model.  The adoption of SFAS 123 (R), applying the
“modified prospective method,” as elected by the Company, requires the Company
to value stock options granted prior to its adoption of SFAS 123 (R) under the
fair value method and expense the related unvested amounts over the remaining
vesting period of the stock options.
 
 Details
regarding the fair value of stock options granted in fiscal 2009, 2008 and 2007
are as follows:
 
 2009
                    
                    
                    2008
                    
                    
                    2007Estimated
      life (in years)
                    
                    
                    7
                    
                    
                    
                    7
                    
                    
                    
                    7Volatility
      rate
                    
                    
                    66%-70%
                    
                    
                    
                    64%-72%
                    
                    
                    
                    63%-74%Risk
      free interest rate
                    
                    
                    2.70%-2.78%
                    
                    
                    
                    3.60%-4.20%
                    
                    
                    
                    4.44%-5.16%Dividend
      rate
                    
                    
                    0%
                    
                    
                    
                    0%
                    
                    
                    
                    0%Forfeiture
      rate
                    
                    
                    2%
                    
                    
                    
                    2%
                    
                    
                    
                    2%Weighted
      average fair value
                    
                    
                    0.64
                    
                    
                    
                    1.82
                    
                    
                    
                    1.16Recorded
      compensation
      expense
                    
                    $
                    341
                    
                    
                    $
                    481
                    
                    
                    $
                    220
 
 The Black
Scholes Option Pricing Model requires the use of various
assumptions.  The key assumptions are summarized as
follows:
 
 Estimated
life:  The Company derives its estimated life based on historical
experience.
 
 Volatility
rate:  The Company estimates the volatility of its common stock at the
date of grant based on historical volatility of its common stock.
 
 Risk free
interest rate: The Company derives its risk-free interest rate on the Barron’s
zero coupon bond rate for a term equivalent to the expected life of the
option.
  Dividend
rate:  The Company estimates the dividend yield assumption based on
the Company’s historical and projected dividend payouts.
  Forfeiture
rate:  The Company estimates the annual forfeiture rate based on
historical experience.
  F-15
  On March
20, 2007, shareholders approved the 2007 Incentive Stock Plan.  A
total of 1,000,000 shares of the Company’s common stock may be granted under the
Plan, of which, 385,500 shares are still available for grant as of August 1,
2009.  No additional options will be granted under the former stock
option plan.  Substantially all of the options granted under this Plan
and the prior plan provide for graded vesting and vest generally at a rate of
25% per year beginning with the date of grant, expiring ten to fifteen years
from the date they are granted. The option price per share is approved by the
Board of Directors. All options to date have been granted at the fair market
value of the Company’s stock at the date of grant. No options can be granted
under this plan subsequent to February 21, 2017.
 
 In
December 2000, the Board of Directors approved an extension of time to exercise
for all stock option holders. The extension covers all options whose term would
have expired during the period from the stock de-listing date (December 19,
2000) up to the date that the shares become re-listed on a national exchange.
This extension grants those stock option holders a period of six months from the
date of re-listing to exercise vested options which may have otherwise expired
without the extension.  Options that otherwise expired due to
termination of employment for cause were not effected by this
extension.  During fiscal 2005, the plan was modified to remove this
extension provision from options granted after January 2005.  The
majority of the Company’s stock options have a 10 year term, however, due to
uncertainty regarding the duration of this extension, the Company cannot
calculate the weighted average remaining contractual term of outstanding or
vested options.  The extension provision does not impact the 2007
Incentive Stock Plan.
 
 OPTION
ACTIVITY
 
 The
following stock option information is as of:
 
 AUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008
                    
                    
                    JULY 28, 2007SHARES
                      OUTSTANDING
                    
                    
                    WEIGHTED
                      AVERAGE
                      EXERCISE
                      PRICE
                    
                    
                    SHARES
                      OUTSTANDING
                    
                    
                    WEIGHTED
                      AVERAGE
                      EXERCISE
                      PRICE
                    
                    
                    SHARES
                      OUTSTANDING
                    
                    
                    WEIGHTED
                      AVERAGE
                      EXERCISE
                      PRICEGranted
      and outstanding, beginning of year
                    
                    
                    2,094,815
                    
                    
                    $
                    3.45
                    
                    
                    
                    1,913,996
                    
                    
                    $
                    3.51
                    
                    
                    
                    1,545,996
                    
                    
                    $
                    3.93Granted
                    
                    
                    254,000
                    
                    
                    
                    0.95
                    
                    
                    
                    336,500
                    
                    
                    
                    2.62
                    
                    
                    
                    469,000
                    
                    
                    
                    1.73Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (83,181
                    )
                    
                    
                    1.37
                    
                    
                    
                    (101,000
                    )
                    
                    
                    1.69Cancelled
      and forfeited
                    
                    
                    (112,500
                    )
                    
                    
                    1.99
                    
                    
                    
                    (72,500
                    )
                    
                    
                    3.58
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      at end of year
                    
                    
                    2,236,315
                    
                    
                    
                    3.24
                    
                    
                    
                    2,094,815
                    
                    
                    
                    3.45
                    
                    
                    
                    1,913,996
                    
                    
                    
                    3.51Exercisable
      at end of
    year
                    
                    
                    1,792,814
                    
                    
                    
                    3.62
                    
                    
                    
                    1,595,438
                    
                    
                    
                    3.85
                    
                    
                    
                    1,494,743
                    
                    
                    
                    4.00
 
 As
mentioned above, due to an extension of exercise time granted to option holders
that has an uncertain term, the Company is unable to calculate the weighted
average contractual term of the above options.
 
 As of
August 1, 2009 the distribution of stock option exercise prices is as
follows:
 
 OPTIONS OUTSTANDING
                    
                    
                    OPTIONS
      EXERCISABLEEXERCISE
                      PRICE RANGE
                    
                    
                    NUMBER
      OF
                      OPTION SHARES
                    
                    
                    WEIGHTED
                      AVERAGE
                      EXERCISE
                      PRICE
                    
                    
                    SHARES
                      EXERCISABLE
                    
                    
                    WEIGHTED
                      AVERAGE
                      EXERCISE
                      PRICE$1.00
      - $3.34
                    
                    
                    
                    1,555,607
                    
                    
                    $
                    1.78
                    
                    
                    
                    1,112,106
                    
                    
                    $
                    1.80$4.00
      - $6.60
                    
                    
                    
                    313,256
                    
                    
                    
                    4.85
                    
                    
                    
                    313,256
                    
                    
                    
                    4.85$7.00
      - $7.94
                    
                    
                    
                    220,775
                    
                    
                    
                    7.51
                    
                    
                    
                    220,775
                    
                    
                    
                    7.51$8.00
      - $10.00
                    
                    
                    
                    146,677
                    
                    
                    
                    8.93
                    
                    
                    
                    146,667
                    
                    
                    
                    8.932,236,315
                    
                    
                    $
                    3.24
                    
                    
                    
                    1,792,814
                    
                    
                    $
                    3.62
 
 At August
1, 2009, the aggregate intrinsic value of options outstanding and options
exercisable was $2 and $0, respectively.  The intrinsic value is the
amount by which the market value of the underlying stock exceeds the exercise
price of the option at the measurement date for all-in-the money
options.
  F-16
 Future
compensation expense related to the vesting of employee options granted by
August 1, 2009 is expected to be $207 in 2010, $84 in 2011 and $17 in
2012.
 
 Cash
proceeds and intrinsic value related to total stock options exercised are
provided in the following table:
 
 YEAR
      ENDED
                    
                    AUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008
                    
                    
                    JULY 28, 2007Proceeds
      from stock options exercised
                    
                    $
                    -
                    
                    
                    $
                    46
                    (a)
                    
                    $
                    170Intrinsic
      Value
                    
                    
                    -
                    
                    
                    
                    71
                    
                    
                    
                    57
 
 (a)
In addition to these proceeds, the Company accepted 31,694 shares of common
stock held by the option holder and valued at $69 into treasury.
 
 WARRANTS
 
 On
February 6, 2004, a motion was filed for summary judgment to enforce a January
2002 class action settlement agreement entered into by the Company. The motion
sought damages in the amount of $1,250 together with interest, costs and
disbursements, and a declaration that $2,000 in promissory notes issued as part
of the class action settlement are immediately due and payable, as the value of
damages due to the Company’s failure to timely complete a registration statement
related to the common shares underlying certain warrants granted in the class
action settlement. The Company filed opposition to this matter on March 5, 2004.
Plaintiffs filed reply papers on March 19, 2004. In addition, the Company filed
a registration statement related to the warrant shares on March 23, 2004, and it
was declared effective by the SEC on May 7, 2004. In July 2004, in settlement of
this matter, Del Global modified the exercise, or “strike,” price of the
1,000,000 warrants issued in 2002 from $2.00 to $1.50 per share, and extended
the expiration date of such warrants by one year to March 28, 2009. During
fiscal 2009, 2008 and 2007, 0, 61,016 and 366,854, respectively, of these
warrants were exercised for cash proceeds to the Company of $0, $91 and $551,
respectively.  As of March 28, 2009, these warrants expired and no
warrants remain outstanding.
 
 10.
                    INCOME
      (LOSS) PER SHARE
 
 FOR FISCAL YEARS ENDEDAUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008
                    
                    
                    JULY 28, 2007Numerator:Net
      income (loss)
                    
                    $
                    (4,128
                    )
                    
                    $
                    2,977
                    
                    
                    $
                    3,816Denominator:Weighted
      average shares outstanding for basic income per share
                    
                    
                    23,285,694
                    
                    
                    
                    24,195,498
                    
                    
                    
                    16,154,552Effect
      of dilutive securities
                    
                    
                    -
                    
                    
                    
                    450,911
                    
                    
                    
                    300,673Weighted
      average shares outstanding for diluted income per share
                    
                    
                    23,285,694
                    
                    
                    
                    24,646,409
                    
                    
                    
                    16,455,225Income
      (loss) per basic common share
                    
                    $
                    (0.18
                    )
                    
                    $
                    0.12
                    
                    
                    $
                    0.24Income
      (loss) per diluted common share
                    
                    $
                    (0.18
                    )
                    
                    $
                    0.12
                    
                    
                    $
                    0.23
 
 Common
shares outstanding for the fiscal years ended August 1, 2009, August 2, 2008 and
July 28, 2007, were reduced by 2,182,323, 654,464 and 622,770 shares of treasury
stock, respectively.
 
 The
computation of diluted shares outstanding does not include the effect of the
assumed exercise of 2,236,315, 1,295,612 and 1,121,684 for employee stock
options outstanding as of August 1, 2009, August 2, 2008 and July 28, 2007,
respectively, and no warrants to purchase Company common stock for those years
because the effect of their assumed exercise would be
anti-dilutive.
  11. INCOME
TAXES
 The
Company’s consolidated (loss) income from continuing operations before income
tax benefit for fiscal years 2009, 2008 and 2007 of $(3,005), $6,224 and $7,369
reflects foreign pre-tax net income of $2,548, $8,294 and $8,180 for fiscal
years 2009, 2008 and 2007, respectively, and a U.S. pre-tax loss of $5,553
$2,070 and $811, respectively.
 
 Provision
for income taxes consists of the following:
 
 FOR FISCAL YEARS ENDEDAUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008
                    
                    
                    JULY 28, 2007CURRENT
      TAX EXPENSE:Foreign
                    
                    $
                    965
                    
                    
                    $
                    3,297
                    
                    
                    $
                    3,410State
      and local
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    5DEFERRED
      PROVISION (BENEFIT):Federal
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -State
      and local
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    --Foreign
                    
                    
                    158
                    
                    
                    
                    (50
                    )
                    
                    
                    138NET
      PROVISION
                    
                    $
                    1,123
                    
                    
                    $
                    3,247
                    
                    
                    $
                    3,553
 
 F-17
 
 The
following is a reconciliation of the statutory Federal and effective income tax
rates:
 
 FOR FISCAL YEARS ENDEDAUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008
                    
                    
                    JULY 28, 2007Statutory
      Federal income tax rate
                    
                    
                    (34.0
                    )%
                    
                    
                    34.0
                    %
                    
                    
                    34.0
                    %State
      tax, less Federal tax effect
                    
                    
                    0.0.
                    %
                    
                    
                    0.0.
                    %
                    
                    
                    0.1.
                    %Foreign
      taxes
                    
                    
                    8.5
                    %
                    
                    
                    12.7
                    %
                    
                    
                    9.2
                    %Valuation
      allowance adjustment
                    
                    
                    46.4
                    %
                    
                    
                    41.9
                    %
                    
                    
                    (1.9
                    )%Provision
      (reversal) for undistributed earnings of foreign subsidiary
                    
                    
                    0.0
                    %
                    
                    
                    (36.7
                    )%
                    
                    
                    7.2
                    %Provision
      for distributed earnings of foreign subsidiary
                    
                    
                    18.7
                    %
                    
                    
                    -
                    
                    
                    
                    -Other
                    
                    
                    (2.3
                    )%
                    
                    
                    0.3
                    %
                    
                    
                    (0.4
                    )%Effective
      tax rate
                    
                    
                    37.3
                    %
                    
                    
                    52.2
                    %
                    
                    
                    48.2
                    %
 
 Deferred
income tax assets (liabilities) are comprised of the following:
 
 AUGUST 1, 2009
                    
                    AUGUST 2, 2008Deferred
      income tax assets:Federal
      net operating loss carry forward
                    
                    $
                    16,722
                    
                    $
                    15,375State
      tax credits and operating loss carry forwards
                    
                    
                    2,318
                    
                    
                    2,071Reserve
      for inventory obsolescence
                    
                    
                    1,556
                    
                    
                    1,545Allowances
      and reserves not currently deductible
                    
                    
                    932
                    
                    
                    1,076Amortization
                    
                    
                    207
                    
                    
                    295Stock
      based compensation
                    
                    
                    694
                    
                    
                    599Fixed
      assets
                    
                    
                    -
                    
                    
                    133Other
                    
                    
                    27
                    
                    
                    -Gross
      deferred income tax assets
                    
                    
                    22,456
                    
                    
                    21,094Deferred
      income tax liabilities:Undistributed
      earnings of foreign subsidiary
                    
                    
                    -
                    
                    
                    -Fixed
      assets
                    
                    
                    (4
                    )
                    
                    -Other
                    
                    
                    (-
                    )
                    
                    (15
                    )Gross
      deferred income tax liabilities
                    
                    
                    (4
                    )
                    
                    (15
                    )Less:
      valuation allowance
                    
                    
                    (21,841
                    )
                    
                    (20,309
                    )Net
      deferred income tax assets
                    
                    $
                    611
                    
                    $
                    770
 
 Deferred
income tax assets and liabilities are recorded in the consolidated balance
sheets as follows:
 
 AUGUST 1, 2009
                    
                    
                    AUGUST 2, 2008Deferred
      income tax assets - non-current
                    
                    $
                    611
                    
                    
                    $
                    770Deferred
      income tax liabilities - non-current
                    
                    
                    -
                    
                    
                    
                    -$
                    611
                    
                    
                    $
                    770
 
 The
Company accounts for deferred income taxes in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 109 “Accounting for Income
Taxes”  whereby it recognizes deferred tax assets and liabilities for
temporary differences between financial
 reporting
basis and income tax reporting basis and for tax credit carry
forwards.
 
 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.  Its determination is based on what it believes
will be the more likely than not result.
  F-18
  
 During
fiscal years 2009, 2008 and 2007, the Company’s foreign tax reporting entity was
profitable, and its U.S. tax reporting entities incurred a
loss.  Based primarily on these results, the Company concluded that it
should maintain a 100% valuation allowance on its net U.S. deferred tax assets
as of August 1, 2009.
 
 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 of $611 at August 1,
2009 will be realized.
 
 The
Company’s foreign subsidiary operates in Italy.  Fiscal 2008 income
tax expense includes a charge that reduces the carrying value of the foreign
subsidiary’s net deferred income tax asset resulting from an income tax rate
reduction in Italy.
 
 Additionally,
the Company’s deferred income tax liabilities as of July 28, 2007 included the
estimated tax obligation that would have been incurred upon a distribution of
the foreign subsidiary’s earnings to its U.S. parent.  This tax
liability was recorded as the foreign subsidiary had routinely distributed
monies to its U.S. parent.  Based on operating results, expectations
of future results and available cash and credit in the U.S., the Company
determined it no longer intended to repatriate monies and reversed this tax
obligation during Fiscal 2008.  The reversal resulted in an adjustment
to available net operating loss carryforwards and the related valuation
allowance.  In addition, there was a reduction in tax expense for
Fiscal 2008 resulting from the reversal of accrued Italian withholding taxes on
undistributed earnings.
 
 At August
1, 2009, the Company has federal net operating loss carry forwards of $49,109
that expire at various times between July, 2020 and July, 2029.
 
 It is the
Company’s practice to recognize interest and/or penalties related to income tax
matters in tax expense.  As of August 1, 2009, there were no material
interest or penalty amounts to accrue.
  12. COMMITMENTS
AND CONTINGENCIES
 LITIGATION
MATTERS
   PARK-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 also sought other consideration he believed he
was owed under his employment agreement.  The Company filed a reply to
Mr. Park’s counterclaims denying that he was 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.
  F-19
  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 alleged, 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 $2.2
million, 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 sought a total of approximately $0.9
million in alleged damages and interest thereon.  This total included
the following items allegedly owed to him in the following approximate
amounts:  $0.6 million for stock options, $0.2 million (subsequently
changed to $0.2 million) for bonus for fiscal year 2004 pro rated to April 30,
2004, $0.1 million for unused vacation, and business expenses.
  The
parties entered into an agreement as of April 2, 2009, settling the
action.  Pursuant to the settlement agreement, the Company made
payments to Mr. Park and his counsel totaling $2.5 million.  The Court
signed an order on April 13, 2009 dismissing the action with prejudice, which
was entered by the Clerk of the Court.
  RFI-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.
  MOELLER-On
June 28, 2002, Jeffrey N. Moeller, the former Director of Quality Assurance and
Regulatory Affairs of Del Medical Imaging Corp. (“Del Medical”), commenced an
action in the Circuit Court of Cook County, Illinois, against the Company, Del
Medical and Walter Schneider, the former President of Del Medical.  In
the most current iteration of his complaint, the third amended complaint, Mr.
Moeller alleges four claims against the defendants in the action: (1)
retaliatory discharge from employment with Del Medical, allegedly in response to
Mr. Moeller’s complaints to officers of Del Medical about purported prebilling
and his stopping shipment of a product that allegedly did not meet regulatory
standards, (2) defamation, (3) intentional interference with his employment
relationship with Del Medical and prospective employers, and (4) to hold the
Company liable for any misconduct of Del Medical under a theory of piercing the
corporate veil.  In their answer to the third amended complaint, the
defendants denied the substantive allegations of each of these claims and denied
that they have any liability to Mr. Moeller.  By order dated September
15, 2006, the Court denied in part and granted in part defendants’ motion
requesting summary judgment dismissing the third amended
complaint.  The court granted the motion only to the extent of
dismissing that part of Mr. Moeller’s claim of interference with his employment
relationship with Del Medical and his relationship with prospective
employers.
  In fiscal
2007, the Company recorded an accrual of $0.1 million relating to potential
liability in the settlement of these claims.  The parties appeared for
mediation in January 2007 but the mediation did not result in a disposition of
the action.  A trial was held in April 2008 and on April 17, 2008, the
jury returned a verdict in favor of Mr. Moeller for $1.8 million for lost
earnings, back pay, front pay and benefits on the retaliatory discharge claim,
and $0.2 million for emotional distress/reputation damages and $0.2 million in
punitive damages on the defamation claim.  On May 19, 2008, counsel
for the defendants filed their motion for judgment in their favor
notwithstanding the jury verdict, or, alternatively, for a new trial, on those
claims on which the jury found the respective defendants liable.  By
order dated August 15, 2008, the Court denied that motion.
  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.
  F-20
  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
  APERGIS-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 October 30, 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-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.
  LEASE
COMMITMENTS - The Company leases facilities for its manufacturing operations
with expiration dates ranging from 2010 through 2014.  In addition,
the Company has various office equipment and auto leases accounted for as
operating leases. The future minimum annual lease commitments as of August 1,
2009 are as follows:
 
 FISCAL YEARS
                    
                    AMOUNT2010
                    
                    $
                    3772011
                    
                    
                    3702012
                    
                    
                    2712013
      and 2014
                    
                    
                    173Total
                    
                    $
                    1,191
 
 Rent
expense for fiscal years 2009, 2008 and 2007 was $478, $416, and, $396,
respectively.
  13. SUPPLEMENTAL
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
 YEAR ENDED
AUGUST 1, 2009
  QUARTERFIRST
                    
                    
                    SECOND
                    
                    
                    THIRD
                    
                    
                    FOURTHNet
      sales
                    
                    $
                    22,291
                    
                    
                    $
                    24,735
                    
                    
                    $
                    17,104
                    
                    
                    $
                    16,269Gross
      margin
                    
                    $
                    5,307
                    
                    
                    $
                    5,800
                    
                    
                    $
                    2,963
                    
                    
                    $
                    2,658Net
      income (loss)
                    
                    $
                    (609
                    )
                    
                    $
                    (1,800
                    )
                    
                    $
                    (815
                    )
                    
                    $
                    (904
                    )Net
      income (loss) per basic share
                    
                    $
                    (0.03
                    )
                    
                    $
                    (0.08
                    )
                    
                    $
                    (0.04
                    )
                    
                    $
                    (0.04
                    )Net
      income (loss) per diluted share
                    
                    $
                    (0.03
                    )
                    
                    $
                    (0.08
                    )
                    
                    $
                    (0.04
                    )
                    
                    $
                    (0.04
                    )
 
 YEAR ENDED
AUGUST 2, 2008
  QUARTERFIRST
                    
                    
                    SECOND
                    
                    
                    THIRD
                    
                    
                    FOURTHNet
      sales
                    
                    $
                    26,716
                    
                    
                    $
                    29,894
                    
                    
                    $
                    24,450
                    
                    
                    $
                    27,246Gross
      margin
                    
                    $
                    6,431
                    
                    
                    $
                    7,490
                    
                    
                    $
                    5,715
                    
                    
                    $
                    7,151Net
      income
                    
                    $
                    1,107
                    
                    
                    $
                    1,427
                    
                    
                    $
                    (1,638
                    )
                    
                    $
                    2,081Net
      income (loss) per basic share
                    
                    $
                    0.05
                    
                    
                    $
                    0.06
                    
                    
                    $
                    (0.07
                    )
                    
                    $
                    0.08Net
      income (loss) per diluted share
                    
                    $
                    0.04
                    
                    
                    $
                    0.06
                    
                    
                    $
                    (0.07
                    )
                    
                    $
                    0.09
 
 
 14.  SUBSEQUENT
EVENT-DISCONTINUED OPERATIONS
 
 Subsequent
to our fiscal year end the Board of the Company decided to exit the Del Medical
U.S. business unit. This business is part of the Company’s Medical Systems
Group, however, this decision does not include or impact the operations of our
Villa subsidiary which will make up the whole of the Medical Systems Group going
forward.
 
 The
options for exiting the Del Medical U.S. business unit include a sale of the
operations, a sale of certain assets and product lines of the business unit, or
a full shut down. The Company is currently engaged in discussions with
prospective buyers for the operation, product lines, or assets and expects to
make a final decision regarding the business unit in the near
future.
  The
results of this business disposition will be reported as a loss from
discontinued operations in our fiscal 2010 first quarter 10-Q in accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”
 
 The loss
on disposition, under the assumption of a full shut down and including non cash
asset write offs, is estimated to be in the range of $6.0 million to $6.5
million and will be recorded in the first quarter results.
  F-21