`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

[X]   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934

                     For the fiscal year ended July 28, 2007
                                       OR
[ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from ________________ to ________________

      Commission file number 0-3319

                          DEL GLOBAL TECHNOLOGIES CORP.
                          -----------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                New York                                  13-1784308
                --------                                  ----------
    (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
     Incorporation or Organization)


   11550 WEST KING STREET, FRANKLIN PARK, IL                60131
   -----------------------------------------                -----
    (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 Registered
           NONE                                           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 [ ]  No[X]

   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 [ ]  No[X]

   Indicate  by check mark  whether  the  Registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No[ ]

   Indicate by check mark 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. [X]

   Indicate by check mark whether the registrant is a large  accelerated  filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule  12b-2 of the  Exchange  Act (Check
one).
   Large accelerated filer [ ]  Accelerated filer [ ]  Non-accelerated filer [X]

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



   State the aggregate  market value of the voting and non-voting  common equity
held by non  affiliates  computed by  reference to the price at which the common
equity was last sold, or the average bid and asked price of such common  equity,
as of the last business day of the registrant's  most recently  completed second
fiscal quarter.

The  aggregate   market  value  of  the   registrant's   Common  Stock  held  by
non-affiliates of the Registrant as of January 27, 2007 was $21,499,215.  Solely
for the purposes of this  calculation,  shares held by directors  and  executive
officers 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

   Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.

   As of September 7, 2007,  there were  24,130,808  shares of the  registrant's
common stock outstanding.



PART I.........................................................................1
  ITEM 1  BUSINESS.............................................................1
  ITEM 1A RISK FACTORS........................................................10
  ITEM 1B UNRESOLVED STAFF COMMENTS...........................................15
  ITEM 2  PROPERTIES..........................................................15
  ITEM 3  LEGAL PROCEEDINGS...................................................15
  ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................17

PART II.......................................................................17
  ITEM 5  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
          MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES...................17
  ITEM 6  SELECTED FINANCIAL DATA.............................................20
  ITEM 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS...........................................21
  ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........29
  ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................29
  ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE............................................30
  ITEM 9A CONTROLS AND PROCEDURES.............................................30
  ITEM 9B OTHER INFORMATION...................................................30

PART III......................................................................30
  ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE..............30
  ITEM 11 EXECUTIVE COMPENSATION..............................................32
  ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS.....................................41
  ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,  AND DIRECTOR
          INDEPENDENCE........................................................44
  ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES..............................45

PART IV.......................................................................46
  ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES..........................46

SIGNATURES....................................................................54


                                       i


PART I

ITEM 1  BUSINESS

   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 Franklin Park, IL. The mailing address of our
headquarters  is 11550  West  King  Street,  Franklin  Park,  IL.  60131 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
Report on Form 10-K,  Quarterly Reports on Form 10-Q and Current Reports on Form
8-K.

   The sale of Del High Voltage  Division  ("DHV"),  which was part of our Power
Conversion  Group,  was consummated on October 1, 2004 as described in Note 3 of
the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual
Report.  Accordingly,  this business is presented as a discontinued operation in
all fiscal years presented and throughout this Form 10-K.

EMPLOYEES

   As of July 28,  2007,  we had 331  employees.  We believe  that our  employee
relations  are  good.  None of our  approximately  194 US  based  employees  are
represented by a labor union.  Employment by functional area as of July 28, 2007
is as follows:

Executive ................................................................     2
Administration and finance ...............................................    31
Manufacturing ............................................................   229
Engineering ..............................................................    35
Sales and Marketing ......................................................    34
                                                                             ---
Total ....................................................................   331
                                                                             ===

OPERATING SEGMENTS

   The operating  businesses  that we report as segments  consist of the Medical
Systems  Group and the Power  Conversion  Group.  For fiscal  2007,  the Medical
Systems Group segment  accounted for  approximately  87% of our revenues and the
Power Conversion Group segment  accounted for approximately 13% of our revenues.
Our  consolidated  financial  statements  include a non-operating  segment which
covers unallocated corporate costs. 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 at July 28, 2007. For
fiscal  years  ended July 29, 2006 and July 30,  2005,  no  individual  customer
accounted for greater than 10% of total revenue or accounts receivable,  nor was
either segment dependent upon a single customer or a few customers,  the loss of
any one or more of which would have a material  adverse  effect on such segment.
For further information  concerning our operating  segments,  see Note 10 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           FACILITIES
-----------------------------------  ----------------------  ------------------------  -------------------
MEDICAL SYSTEMS GROUP:
Medical Imaging....................  Del.Medical, Villa,     Del Medical Imaging Corp    Franklin Park, IL
                                     UNIVERSAL, DynaRad      ("Del Medical")

                                                             Villa Sistemi Medicali      Milan, Italy
                                                             S.p.A. ("Villa")
POWER CONVERSION GROUP:
Electronic Systems & Components....  RFI, Filtron, Sprague,  RFI Corporation ("RFI")     Bay Shore, NY
                                     Stanley


                                       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 70% of this segment's revenues are
attributed to Villa.

   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. For further information concerning this acquisition, see Note 2
of the Notes to  Consolidated  Financial  Statements  in Part II, Item 8 of this
Annual Report.

   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 Clinics
            Teaching Institutions                   Chiropractic Clinics
            Medical Clinics                         Dental Offices
            Private Practitioners                   Military/Government
            Orthopedic Facilities                   Home Health Care Providers
            Imaging Centers

Our medical  imaging systems are sold under the Del Medical,  Villa,  UNIVERSAL,
and DynaRad brand names.  The prices of our medical  imaging  systems range from
approximately  $5,000 to $250,000  per unit,  depending  on the  complexity  and
flexibility of the system.

The following is a description of our product lines in this segment.

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.

   General Radiography  represents  approximately 40%-60% of the Medical Systems
Group's revenues  depending on the product mix within each period.  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


                                       2


(ARSII) and U-ARC DRT  Digital  Radiographic  Systems  are  designed to meet the
broad  requirements of a hospital or teaching  university's  radiographic  room,
while our mid-range Del Medical and Villa Medical 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 brand product line. These
units are designed for durability,  are space  efficient,  rugged 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.

   During fiscal 2006, we expanded our product  portfolio with the  introduction
of the Del Medical U-ARC DRT Digital  Radiographic  System.  This system enables
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 and Mercury systems are based
on the more modern "Remote  control"  technology and allow 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 the most  flexible  x-ray  imaging  unit as it allows
skeletal, gastro-intestinal,  vascular, urological and gynaecological studies in
the same room. Remote controlled  systems (Apollo Remote R/F system and Mercury)
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 the
most sophisticated system and technology produced by the Medical Group.

   PORTABLE AND MOBILE MEDICAL X-RAY SYSTEMS - We sell portable x-ray  equipment
under our DynaRad  brand  including  the HF-110A  and PHANTOM  systems,  for the
military and home health care provider  markets.  Both of these portable systems
utilize  high   frequency,   microprocessor-controlled   technology  to  produce
consistent quality x-rays with the added advantages of being smaller, lighter in
weight and more cost-effective than stationary x-ray systems.

   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.  The most recent addition to the dental product
line are Direct  Digital  versions of Strato 2000 and  Rotograph,  which capture
panoramic  images  directly in digital  format and can be  connected to a PC for
image  reviewing and  post-examination  processing.  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 11% of the volume of new units sold over the past two years.
The dental products are sold both with our own brand (Villa), as well as private
labelled units to selected OEM customers.


                                       3


   MAMMOGRAPHY  SYSTEMS - We currently  resell the Melody system  outside of the
US. The Melody unit is manufactured by a  European-based  manufacturer  and sold
under the Villa brand.  Although we have exclusive use of the "Melody" name, our
supplier markets a similar product in several competing markets.

   SURGICAL C-ARMS - We sell a mobile C-arm unit called "Arcovis 2000" 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  US  and  internationally,
principally by a network of over 300  distributors  worldwide.  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 product 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.  Additional product and distributor
support is provided through  participation in medical equipment  exhibitions and
trade specific advertising.

   We typically exhibit our products at annual  conferences,  including the RSNA
Conference in Chicago, the MEDICA Medical Conference in Dusseldorf, Germany, the
European  College of Radiology  (ERC)  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  are sold  worldwide  and payment is therefore
secured by letter of credit to mitigate any potential  credit risk,  with longer
terms being given to non-US 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 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.

   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

   Based on industry  data,  we believe our Medical  Systems Group is either the
number one or number two supplier,  measured by market share, to the independent
distributors  of  radiographic  equipment in North America.  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 US market by entering into relationships with a national Group Purchasing
Organization  and  several  smaller  multi-hospital  networks.  The three  major


                                       4


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  US  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.

   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  application  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 2007 and $1.6 million during each of
fiscal years 2006 and 2005.


                                       5


   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 US 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 and,  therefore,  are subject
to  regulation  by the US  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 US, 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 US  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.

   All  of our  products  marketed  in  the US  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:


                                       6


   - 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 US 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 US. 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 Community 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.

   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.

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


                                       7


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,  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

MILITARY                                  INDUSTRIAL
     Guidance & Weapons Systems              Induction Heating
     Communications                          Automotive
                                             Capital Equipment
COMMERCIAL
     Power Systems                        MEDICAL
     Telecommunications                      Radiation Oncology
     Satellite                               Magnetic Resonance Imaging ("MRI")
     Meteorological

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,  NY 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.

   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 US, 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


                                       8


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

   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  2007,  2006 or 2005.  These  time
allocations  were minimal  because our technical and  scientific  employees were
focused on  reshaping  our  production  and quality  practices  at our Bay Shore
plant.

   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 US 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 US government  guidelines and regulations  relating
to  the   qualification   of  our   non-medical   products   for   inclusion  in


                                       9


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.  See Note 3
of the Notes to Consolidated  Financial  Statements included in Part II, Item 8,
of this Annual Report.

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.

BACKLOG

   Consolidated  backlog at July 28, 2007 was $28.4  million  versus  backlog at
July  29,  2006  of  approximately  $22.4  million.  The  backlog  in the  Power
Conversion  Group of  $16.6  million  increased  $0.3  million  from  levels  at
beginning  of the fiscal  year while  there was a $5.7  million  increase in the
fiscal  year end  backlog of our  Medical  Systems  Segment  from July 29,  2006
reflecting  strong  booking  during the  twelve  month  period in  international
markets.  Substantially all of the backlog should result in shipments within the
next 12 months.

GEOGRAPHIC AREAS

   For further  information  about  Geographic  areas the Company operates in as
well as other  Segment  related  disclosures  refer  to Note 10 of the  Notes to
Consolidated Financial Statements in Part II, Item 8 of this Annual Report.

ITEM 1A RISK 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
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.

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.  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


                                       10


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.

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  "OTC")  published  by
National  Quotation  Bureau,  LLC. The OTC 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 OTC are not
listed in the financial sections of newspapers. Therefore, prices for securities
traded solely in the OTC 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
US  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,  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.  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  US 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


                                       11


obtaining  or our  inability to obtain any  necessary  US 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 US 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
US products  lines are mature,  new  product  changes are in general  relatively
minor, and accordingly regulatory approval is more streamlined.

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 product manufactured at our facility in Milan,
Italy,  as well as  product  manufactured  in the US,  comprised  66% and 64% of
consolidated revenues for fiscal years 2007 and 2006,  respectively.  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 US could impact our financial condition.

THE COMPANYS 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.


                                       12


      On December 6, 2006,  the Company and its U.S.  lender 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 its lender.
Although  the Company was in  compliance  with all  covenants  of its  revolving
credit  and term  loan  facility  as of July 28.  2007  and the  Company  had no
outstanding  borrowings under these agreements,  should the Company's results be
less that  anticipated  in the  business  plan,  the  Company  could have future
covenant  violations.  If the  Company  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 foreign and 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.

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  PAYMENTS  REQUIRED UNDER A CHANGE OF CONTROL  AGREEMENT WITH A FORMER
CEO COULD UNDULY BURDEN OUR COMPANY.

   The Company's  employment  agreement with Samuel E. Park, a former CEO of the
Company,  provides for payments upon certain  changes of control.  The Company's
Board of Directors  elected at the Company's Annual Meeting of Shareholders held
on May 29, 2003,  had reviewed  the "change of  control",  provisions  regarding
payments totaling up to approximately  $1,800,000 under the employment agreement
between  the Company  and Mr.  Park.  As a result of this review and based upon,
among  other  things,  the advice of special  counsel,  the  Company's  Board of
Directors  has  determined  that no  obligation  to pay these  amounts  has been
triggered. Prior to his departure from the Company on October 10, 2003, Mr. Park
orally  informed the Company that,  after reviewing the matter with his counsel,
he believed  that the  obligation to pay these  amounts has been  triggered.  On
October  27,  2003,  the  Company  received  a letter  from Mr.  Park's  counsel
demanding  payment  of  certain  sums and other  consideration  pursuant  to the
Company's  employment agreement with Mr. Park, including these change of control
payments.  On November  17,  2003,  the Company  filed a complaint in the United
States District Court, Southern District of New York, against Mr. Park seeking a
declaratory  judgment  that no change in  control  payment  was or is due to Mr.
Park, and that an amendment to the  employment  contract with Mr. Park regarding
advancement and  reimbursement of legal fees is invalid and  unenforceable.  Mr.
Park answered the complaint and asserted  counterclaims seeking payment from the
Company based on his position that a "change in control"  occurred in June 2003.
Mr. Park is also seeking  other  consideration  he believes he is owed under his
employment  agreement.  The Company  filed a reply to Mr.  Park's  counterclaims
denying that he is entitled to any of these  payments.  Discovery in this matter
was conducted and completed. Following discovery, the Company and Mr. Park filed
motions for summary  judgment on the issues related to change in control and the
amendment to the employment  agreement,  which motions have been fully submitted
to the Court for  consideration.  To date,  no  decision  has been issued by the
Court on these  motions.  If Mr. Park prevails on his claims and the payments he
seeks are required to be paid in a lump sum,  these payments may have a material
adverse effect on the Company's liquidity.

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


                                       13


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.

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 September 7, 2007,  an  aggregate  of  24,130,808  shares of our common
stock were  outstanding.  In  addition,  as of  September  7,  2007,  there were
outstanding  warrants to purchase 537,304 shares of our common stock and options
to purchase 1,913,995 shares of our common stock,  1,522,245 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 of the  Certificate of


                                       14


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.

ITEM 1B UNRESOLVED STAFF COMMENTS

    Not applicable

ITEM 2  PROPERTIES

   The  following is a list of our principal  properties,  classified by segment
and subsidiary:

                                                        APPROX.
                                                         FLOOR                    OWNED/LEASED
                                                        AREA IN                   (EXPIRATION
SEGMENT                                LOCATION         SQ. FT.   PRINCIPAL USES  DATE IF LEASED)
--------------------------------- ------------------- ---------- ---------------- ---------------
MEDICAL SYSTEMS GROUP:
Del Medical Imaging Corp........   Franklin Park, IL    68,000         Corporate    Leased (2009)
                                                                   headquarters,
                                                                      Design and
                                                                   manufacturing

Villa...........................   Milan, Italy         67,000        Design and    Leased (2011)(1)
                                                                   manufacturing
POWER CONVERSION GROUP:
RFI.............................   Bay Shore, NY        55,000        Design and    Owned
                                                                   manufacturing

(1) 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

   DOD  INVESTIGATION  - On March 8, 2002,  RFI, a subsidiary of the Company and
the remaining  part of the Power  Conversion  Group  segment,  was served with a
subpoena by the US Attorney for the Eastern  District of New York in  connection
with an  investigation  by the DOD. RFI supplies  electro-magnetic  interference
filters for  communications and defense  applications.  The DOD had investigated
certain  past  practices  at RFI which  dated back to before 1996 and pertain to
RFI's  Military  Specification  testing,  record  keeping and general  operating
procedures. Management retained special counsel to represent the Company on this
matter.  The  Company  cooperated  fully  with  this  investigation,   including
voluntarily  providing  employees  to be  interviewed  by the  Defense  Criminal
Investigative Services division of the DOD.

   In June 2003,  the Company was advised that the US Government  was willing to
enter  into   negotiations   regarding  a   comprehensive   settlement  of  this
investigation.  Prior to the preliminary  discussions  with the US Government in
June 2003,  the Company had no basis to estimate  the  financial  impact of this
investigation.   Based  on  preliminary   settlement  discussions  with  the  US
Government,   discussions   with  the  Company's   advisors,   consideration  of
settlements  reached by other  parties in  investigations  of this  nature,  and
consideration of the Company's capital  resources,  management then developed an
estimate of the low end of the potential range of the financial impact.


                                       15


   Accordingly,  during the third quarter of fiscal 2003, the Company recorded a
charge of $2.3 million, which represented its estimate of the low end of a range
of potential fines and legal and professional fees.

   Following  negotiations,  the Company reached a global settlement in February
2004  with the US  Government  that  resolved  the civil  and  criminal  matters
relating  to the  DOD's  investigation.  The  settlement  included  the  Company
pleading  guilty to one criminal count and agreeing to pay fines and restitution
to the US  Government  of $4.6 million if paid by June 30, 2004 and $5.0 million
if paid by September 30, 2004.

   In  connection  with this  settlement,  the Company  recognized an additional
charge of approximately  $3.2 million in the second quarter of fiscal 2004. This
charge  represents the  difference  between the $2.3 million charge taken during
the  third  quarter  of  fiscal  2003,  and up to  $5.0  million  in  fines  and
restitution,  plus  estimated  legal  and  professional  fees  related  to  this
settlement.

   On September 30, 2004,  pursuant to the terms of the settlement,  the Company
fulfilled its obligation under this agreement by paying to the US Government the
sum of $5.0 million representing fines and restitution.  On October 7, 2004, RFI
entered  a guilty  plea to a single  count  conspiracy  charge  pursuant  to the
settlement and a criminal plea agreement. Sentencing occurred on March 15, 2005.
At sentencing,  the Court imposed an additional  fine of $0.3 million to be paid
within 30 days. The Company paid this additional fine on April 8, 2005.

   The Company worked with the US Defense Logistics Agency ("DLA"),  a component
of the DOD, to avoid any future  limitations on the ability of the Company to do
business with US Government  entities.  Such limitations could have included the
US  Government  seeking a  "debarment"  or  exclusion  of the Company from doing
business with US Government entities for a period of time.

   On April 5, 2005, the Company announced that it had reached an administrative
agreement  with the DLA which  provides that RFI will not be debarred from doing
business with U.S.  Government  entities so long as RFI maintains its compliance
program and adheres to the terms of the administrative agreement. This agreement
with  the DLA is the  final  component  of the  Company's  previously  announced
settlement of an investigation by the DOD into practices at RFI.

   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, NY 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.

EMPLOYMENT MATTERS - The Company had an employment agreement with Samuel Park, a
previous Chief Executive  Officer  ("CEO"),  for the period May 1, 2001 to April
30, 2004. The employment agreement provided for certain payments in the event of
a change in the control of the Company.

   On October 10,  2003,  the Company  announced  the  appointment  of Walter F.
Schneider as President  and CEO to replace Mr. Park,  effective as of such date.
As a result,  the  Company  recorded a charge of $0.2  million  during the first
quarter  of fiscal  2004 to  accrue  the  balance  remaining  under  Mr.  Park's
employment agreement.

   The Company's  employment agreement with Mr. Park, provided for payments upon
certain  changes of control.  The  Company's  Board of Directors  elected at the
Company's Annual Meeting of Shareholders  held on May 29, 2003, had reviewed the
"change of control",  provisions regarding payments totaling up to approximately
$1,800,000 under the employment agreement between the Company and Mr. Park. As a
result of this review and based upon, among other things,  the advice of special
counsel,  the Company's  Board of Directors has determined that no obligation to
pay these amounts has been triggered. Prior to his departure from the Company on
October 10, 2003, Mr. Park orally informed the Company that, after reviewing the
matter with his counsel,  he believed  that the  obligation to pay these amounts
has been triggered.  On October 27, 2003, the Company received a letter from Mr.
Park's  counsel  demanding  payment  of  certain  sums and  other  consideration
pursuant to the Company's  employment  agreement with Mr. Park,  including these
change of control payments.  On November 17, 2003, the Company filed a complaint
in the United States District Court,  Southern District of New York, against Mr.
Park seeking a declaratory  judgment that no change in control payment was or is
due to Mr. Park, and that an amendment to the employment  contract with Mr. Park
regarding   advancement  and   reimbursement   of  legal  fees  is  invalid  and
unenforceable.  Mr. Park  answered  the  complaint  and  asserted  counterclaims
seeking  payment  from the  Company  based on his  position  that a  "change  in
control" occurred in June 2003. Mr. Park is also seeking other  consideration he
believes he is owed under his employment agreement. The Company filed a reply to
Mr. Park's  counterclaims  denying that he is entitled to any of these payments.


                                       16


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
change in control and the amendment to the employment  agreement,  which motions
have been fully submitted to the Court for  consideration.  To date, no decision
has been  issued by the Court on these  motions.  If Mr.  Park  prevails  on his
claims and the  payments he seeks are  required to be paid in a lump sum,  these
payments may have a material  adverse effect on the Company's  liquidity.  It is
not  possible to predict the outcome of these  claims.  However,  the  Company's
Board of Directors  does not believe that such a claim is  reasonably  likely to
result in a material  decrease in the  Company's  liquidity  in the  foreseeable
future. The Company has not recorded an accrual for any potential  settlement of
this  claim as it has no basis  upon which to  estimate  either  the  outcome or
amount of loss, if any.

   On June 28,  2002,  Jeffrey  N.  Moeller,  the  former  Director  of  Quality
Assurance  and  Regulatory  Affairs of Del  Medical,  commenced an action in the
Circuit  Court of Cook County,  Illinois,  against the Company,  Del Medical and
Walter  Schneider,  the former  President  of Del  Medical.  In the most current
iteration of this pleading,  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.  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,  addressed to alleged
interference  with his  relationship  with  prospective  employers.  The parties
appeared for  mediation in January  2007 but the  mediation  did not result in a
disposition of the action.  Accordingly, it appears that the action will proceed
to trial.  A status  conference  before the Court was held  March 8,  2007,  and
subsequently,  a trial date had been  scheduled  for October 1, 2007.  The trial
date  has  been  postponed  due to  the  unavailability  of a  witness  for  the
plaintiff.  A trial date has been scheduled of January 28, 2008. The Company and
Del Medical  intend to defend  vigorously  against  Mr.  Moeller's  claims.  Mr.
Moeller is seeking $2.37 million in damages  consisting of alleged  income loss,
including salary and benefits,  and the present value of his alleged lost income
and  benefits  in the future  after lump sum tax  adjustments.  The  Company has
recorded an accrual of $0.1  million  relating  to  potential  liability  in the
settlement of these claims.

   OTHER  LEGAL  MATTERS - The  Company is a  defendant  in several  other legal
actions in various US 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

PART II

ITEM 5  MARKET 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" and our warrants are
traded under the symbol  "DGTCW.OB."  Prior to that, they had been traded on the
"pink sheets,", under the symbol "DGTC.PK" and "DGTCW.PK", respectively. The OTC
is an over-the-counter  market which provides  significantly less liquidity than
established stock exchanges or the NASDAQ National Market, and quotes for stocks
included in the OTC are not listed in the  financial  sections of  newspapers as
are those for established  stock exchanges and the NASDAQ National  Market.  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.

   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


                                       17


control of the Company,  including  transactions  where the  shareholders  could
otherwise receive a premium for there shares over then current market prices.

   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 $275,000 of
expenses related to the rights offering, were $12,354,000.

   The  purpose  of this  rights  offering  was to  raise  equity  capital  in a
cost-effective  manner.  Approximately  $7,564,000 of the proceeds were used for
debt repayment and the remainder  invested in short-term money market securities
for anticipated working capital needs and general corporate purposes.  A portion
of the net  proceeds  may  also  ultimately  be used to  acquire  or  invest  in
businesses,   products  and  technologies  that  our  management   believes  are
complementary to the Company's business. Remaining unused proceeds are currently
invested in short-term money market securities.

   In addition,  on January 22, 2007,  the Company  entered into a  stockholders
rights  plan (the  "Rights  Plan").  The  Rights  Plan  provides  for a dividend
distribution  of one common stock purchase right for each  outstanding  share of
the Company's common stock. The Company's Board of Directors  adopted the Rights
Plan to protect stockholder value by protecting the Company's ability to realize
the   benefits  of  its  net   operating   losses   ("NOLs")  and  capital  loss
carryforwards.  The Company has  experienced  substantial  operating and capital
losses in previous years.  Under the Internal Revenue Code and rules promulgated
by the Internal Revenue Service, the Company may "carry forward" these losses in
certain  circumstances to offset current and future earnings and thus reduce its
federal income tax liability,  subject to certain requirements and restrictions.
Assuming  that the  Company  has future  earnings,  the  Company  may be able to
realize  the  benefits of NOLs and capital  loss  carryforwards.  These NOLs and
capital loss carryforwards constitute a substantial asset to the Company. If the
Company  experiences  an  "Ownership  Change,"  as defined in Section 382 of the
Internal   Revenue  Code,   its  ability  to  use  the  NOLs  and  capital  loss
carryforwards could be substantially limited or lost altogether. The Rights Plan
imposes a significant penalty upon any person or group that acquires more than a
certain  percentage of the Company's common stock by allowing other shareholders
to acquire equity securities at half their fair values.

   As of September 4, 2007,  there were  approximately  797 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     LOW
---------------------------------------------------------------- ------- -------
FISCAL 2007
 First Quarter.................................................  $ 2.05  $ 0.60
 Second Quarter................................................    2.30    1.55
 Third Quarter.................................................    2.40    1.20
 Fourth Quarter................................................    2.90    1.35
FISCAL 2006
 First Quarter.................................................  $ 3.15  $ 2.00
 Second Quarter................................................    3.95    2.80
 Third Quarter.................................................    4.50    2.95
 Fourth Quarter................................................    3.35    1.70

   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 US credit facility.  We do not intend to pay any cash dividends in the
foreseeable future.

   The following table  summarizes the securities  authorized for issuance under
equity compensation plans as of the end of Fiscal Year 2007


                                       18


                                                EQUITY COMPENSATION PLAN INFORMATION

                                                                      NUMBEROF                               NUMBER OF
                                                                  SECURITIES TO BE                           SECURITIES
                                                                     ISSUED UPON     WEIGHTED-AVERAGE   REMAINING AVAILABLE
                                                                     EXERCISE OF     EXERCISE PRICE OF  FOR FUTURE ISSUANCE
                                                                     OUTSTANDING        OUTSTANDING         UNDER EQUITY
                                                                  OPTIONS, WARRANTS  OPTIONS, WARRANTS      COMPENSATION
PLAN CATEGORY                                                         AND RIGHTS         AND RIGHTS            PLANS(1)
---------------------------------------------------------------- ------------------- ------------------ -------------------
Equity compensation plans approved by security holders:
  Stock Option Plan ............................................       1,913,995          $   3.51           941,000
Equity compensation plans not approved by security holders:
  Warrants issued in settlement of class action lawsuit (2) ....         573,516          $   1.50         Not applicable

   (1) Excludes  securities to be issued upon exercise of  outstanding  options,
warrants and rights.

   (2) Pursuant to our class action settlement with our shareholders  concerning
allegations that the Company had violated federal Securities laws, we issued 2.5
million  shares of our common  stock and one million  warrants  to purchase  our
common stock at $2.00 per share.  The issuance of these  securities was pursuant
to a court order issued in connection  with the  settlement of this class action
lawsuit  in  January  2002,  and  therefore  was  exempt  from the  registration
requirements  of the  Securities  Act of 1933  pursuant  to  Section  3(a)  (10)
thereof. These warrants were originally set to expire in March 2008.

   In a motion filed in February 2004, a plaintiff  class claimed damages due to
Del Global's failure to timely complete a registration  statement for the shares
of common  stock  issuable  upon  exercise of these  warrants.  The class sought
damages of $1.25 million  together  with  interest and costs,  and a declaration
that $2 million in  subordinated  notes  issued as part of the 2002 class action
settlement were immediately due and payable.  In settlement of this matter,  Del
Global modified the exercise,  or "strike," price of the 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.

PERFORMANCE GRAPH

   The following graph compares the yearly  percentage  change in the cumulative
shareholder return on the Common Stock with The Nasdaq Market Index and the peer
group index for the Standard  Industrial  Classification  Code ("SIC Code") 3844
for the period  commencing  August 3, 2002 and ending  July 28,  2007.  The peer
group for SIC Code 3844 (X-Ray  Apparatus and Tubes) consists of 3 companies and
includes:  American Science  Engineering  Inc.,  Hologic Inc., and Sirona Dental
Systems,  Inc. The graph assumes that $100 was invested on August 3, 2002 in the
Common Stock and in each of the other indices and assumes  monthly  reinvestment
of all dividends.

                               COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
                          COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS


                         ------------------------ FISCAL YEAR ENDING ---------------------
COMPANY/INDEX/MARKET      8/03/2002  8/02/2003  7/31/2004  7/30/2005  7/29/2006  7/28/2007

DEL GLOBAL TECH CORP         100.00      71.43      82.54      86.00      53.97      74.60
X-RAY APPARATUS & TUBES      100.00      86.96     113.06     162.45     281.96     312.28
NASDAQ US ONLY               100.00     129.39     144.22     166.10     164.41     202.67


                                       19


   This stock  price  performance  graph  shall not be deemed to be  "soliciting
material" or "filed" or  incorporated  by  reference in future  filings with the
Commission,  or subject to the  liabilities  of Section 18 of the Exchange  Act,
except to the extent that the Company specifically  incorporates it by reference
into a document filed under the Securities Act or the Exchange Act.

ITEM 6  SELECTED FINANCIAL DATA

   The selected income  statement data presented for the fiscal years ended July
28, 2007,  July 29, 2006 and July 30, 2005 and the balance sheet data as of July
28,  2007 and July 29,  2006 have been  derived  from our  audited  consolidated
financial  statements  included  elsewhere  in this  Annual  Report.  The income
statement  data for the years  ended  July 31,  2004 and  August 2, 2003 and the
balance  sheet data as of July 30,  2005,  July 31, 2004 and August 2, 2003 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
                                                     ---------------------------------------------------------
                                                      JULY 28,    JULY 29,    JULY 30,    JULY 31,   AUGUST 2,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)                    2007        2006        2005       2004(1)    2003(2)
--------------------------------------------------   ---------   ---------   ---------   ---------   ---------
INCOME STATEMENT DATA:
Net sales ........................................   $104,167    $ 83,014    $ 84,872    $ 83,827    $ 68,212
Gross margin .....................................     25,017      19,358      22,281      21,315      15,670
Selling, general and administrative ..............     14,590      13,619      16,452      15,907      17,904
Research and development .........................      2,013       1,562       1,636       1,562       1,593
Litigation settlement costs ......................       --           697         300       3,652       2,126
Facilities reorganization costs ..................       --          --          --          --           128
Operating income (loss) ..........................      8,414       3,480       3,893         194      (6,081)
Minority interest ................................       --           108         393         559         115
Provision for income taxes .......................      3,553       1,758       2,054       8,691       8,233
Income (loss) from continuing operation ..........      3,816         269         193     (10,729)    (15,173)
Discontinued operation ...........................       --          (175)        199      (5,095)        128
Net income (loss) ................................      3,816          94         392     (15,824)    (15,045)
Net income (loss) per share - Basic
Continuing operations ............................   $   0.24    $   0.02    $   0.02    $  (1.04)   $  (1.46)
Discontinued operation ...........................       --         (0.01)       0.02       (0.49)       0.01
                                                     --------    --------    --------    --------    --------
Net income (loss) per basic share ................   $   0.24    $   0.01    $   0.04    $  (1.53)   $  (1.45)
Net income (loss) per share - Diluted
Continuing operations ............................   $   0.23    $   0.02    $   0.01    $  (1.04)   $  (1.46)
Discontinued operation ...........................       --         (0.01)       0.02       (0.49)       0.01
                                                     --------    --------    --------    --------    --------
Net income (loss) per diluted share ..............   $   0.23    $   0.01    $   0.03    $  (1.53)   $  (1.45)
                                                     ========    ========    ========    ========    ========
Weighted average shares outstanding - Basic ......     16,155      11,244      10,490      10,334      10,376
Weighted average shares outstanding - Diluted ....     16,455      12,076      11,465      10,334      10,376

                                                                               AS OF
                                                     ---------------------------------------------------------
                                                      JULY 28,    JULY 29,    JULY 30,    JULY 31,   AUGUST 2,
                                                        2007        2006        2005        2004       2003
                                                     ---------   ---------   ---------   ---------   ---------
BALANCE SHEET DATA:
Working capital ..................................   $24,977      $ 6,935     $10,122      $ 7,764     $13,598
Total assets .....................................    66,339       49,153      40,776       49,261      60,492
Long-term debt and subordinated note .............     5,398        5,133       6,454        7,038       7,100
Shareholders' equity .............................    30,196       12,814       9,228        7,775      22,979

   (1) Net loss for the year ended July 30,  2004  includes a $9,794  income tax
provision related to the establishment of a deferred tax valuation allowance. In
addition,  the net loss reflects the accrual of a $3,199  charge  related to the
DOD  investigation  of our RFI  subsidiary and $454 related to a motion filed in
February 2004 related to the warrants to purchase  common stock that were issued
in fiscal year 2002. For more information about these legal charges, see Part I,
Item 3 "Legal Proceedings" of this Annual Report.

   (2) Net loss for the year ended August 2, 2003 includes  approximately $7,967
income tax provision  related to the  establishment  of a deferred tax valuation


                                       20


allowance.  In addition,  the net loss  reflects the accrual of a $2,347  charge
related  to an  ongoing  DOD  Investigation  of our  RFI  subsidiary.  For  more
information  about  the DOD  investigation,  see  Part I,  Item  3,  and  "Legal
Proceedings"  of  this  Annual  Report.  See  Notes  to  Consolidated  Financial
Statements included in Part II, Item 8," of this Annual Report.

ITEM 7  MANAGEMENT'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 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.

   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.

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 and the allowance for obsolete and excess inventory 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,


                                       21


the sales price is fixed,  collection  of the  receivable  is probable  and only
perfunctory  obligations  related to the arrangement  need to be completed.  The
Company maintains a sales return allowance,  based upon historical patterns,  to
cover estimated normal course of business returns, including defective or out of
specification  product. The Company's products are covered primarily by one year
warranty  plans and in some cases  optional  extended  warranties for up to five
years are offered.  The Company  establishes  allowances  for  warranties  on an
aggregate basis for specifically  identified,  as well as anticipated,  warranty
claims  based on  contractual  terms,  product  conditions  and actual  warranty
experience by product line. The Company  recognizes service revenue when repairs
or out of warranty  repairs are completed.  The Company has an FDA obligation to
continue to provide repair service for certain  medical  systems for up to seven
years past the warranty  period.  These  repairs are billed to the  customers at
market rates.

DEFERRED TAXES

   We  account  for  deferred  income  taxes in  accordance  with  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 109 "Accounting for Income Taxes"
whereby  we  recognize   deferred  tax  assets  and  liabilities  for  temporary
differences between financial reporting basis and income tax reporting basis and
for net operating loss carry forwards.

   We periodically  assess the realization of our net deferred tax assets.  This
evaluation is primarily based upon current operating results and expectations of
future operating  results.  A valuation  allowance is recorded if we believe our
net deferred 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 2007 and 2006 and 2005,  the Company  reported  operating
income on a  consolidated  basis.  For tax  reporting  purposes,  the  Company's
foreign tax reporting  entity was profitable  and its US tax reporting  entities
incurred a taxable  loss.  Based on these  results  and  expectations  of future
results,  the  Company  concluded  that  it  should  maintain  a 100%  valuation
allowance on its net U.S. deferred tax assets.

   Because  the  Company's  foreign tax  reporting  entity was  profitable,  the
Company recorded a non-U.S.  tax provision in all periods  presented.  While the
Company can make no assurances that our foreign subsidiary will generate profits
in the  future,  the Company  believes  that it is more likely than not that its
$1.0  million  Villa-related  net  deferred  tax assets at July 28, 2007 will be
realized.

OBSOLETE AND EXCESS 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. As of July 28, 2007, finished goods represented approximately
25.8% of the gross carrying value of our total gross  inventory.  We believe the
estimation methodologies used to be appropriate and are consistently applied.

CONSOLIDATED RESULTS OF OPERATIONS

FISCAL 2007 COMPARED TO FISCAL 2006

   Consolidated  net sales of $104.2  million for fiscal year 2007  increased by
$21.2  million,  or 25.5%,  from  fiscal 2006 net sales of $83.0  million,  with
increases at both the Power  Conversion  Group and Medical  Systems  Group.  The
Medical Systems  Group's sales for fiscal 2007 of $91.0 million  increased $20.7
million,  or 29.5 %, from the prior fiscal year, with increases primarily due to
increased international sales as well as stronger than expected dental sales and
increased sales of higher priced digital products.  The Power Conversion Group's
sales for fiscal 2007 of $13.2 million  increased by $.5 million,  or 3.6%, from
the prior year's levels, reflecting increased sales in the transformer business.


                                       22


   Consolidated  backlog at July 28, 2007 was $28.4  million  versus  backlog at
July  29,  2006  of  approximately  $22.4  million.  The  backlog  in the  Power
Conversion  Group of  $16.6  million  increased  $0.3  million  from  levels  at
beginning  of the fiscal  year while  there was a $5.7  million  increase in the
fiscal  year end  backlog of our  Medical  Systems  Segment  from July 29,  2006
reflecting  strong  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 24.0% in fiscal  2007,  compared to
23.3% in fiscal 2006. The Power  Conversion  Group margins were 37.3 % in fiscal
2007 as compared to 35.5% in fiscal 2006 reflecting increased margins in product
mix and decreased  production  cost. For the Medical Systems Group,  fiscal 2007
gross margins of 22.1% were higher than gross margins of 21.1% in the prior year
due  primarily  to the reversal of warranty  reserves as the warranty  period on
several  specific  items  expired.  This  impact was  partially  offset by lower
margins  associated with increased sales of digital products.  Generally digital
product  have a higher  selling  price,  as well as a higher  cost than the non-
digital product offerings, resulting in lower gross margin percentage

   Selling,  General and  Administrative  expenses ("SG&A") for fiscal 2007 were
$14.6 million  (14.0% of sales)  compared to $13.6  million  (16.4% of sales) in
fiscal 2006. The increase is primarily due to increased  corporate legal and bad
debt expense offset by reduced selling cost in the Power Conversion Group.

   Litigation  settlement  costs of $0.7 million recorded in fiscal 2006 include
the accrual of $0.6 million  based on a November  2005  settlement of litigation
filed  during  fiscal  2005 by the  potential  buyers of the  Company's  Medical
Systems Group.  The Company  previously  disclosed  this  litigation but had not
recorded any  affiliated  expense during fiscal 2005, as it had no basis at that
time upon which to  estimate  either the  outcome or amount of loss.  The fiscal
2006 cost also includes the settlement of two employment  actions at our foreign
subsidiary  totaling $0.2 million net of the reversal of a $0.1 million  accrual
related to a previously settled litigation.  No additional litigation settlement
costs were incurred during 2007.

   As a result of the above, we recognized  fiscal 2007 operating income of $8.4
million compared to operating income of $3.5 million in fiscal 2006. 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. We recognized fiscal 2006 operating
income of $3.5 million.  The Medical  Systems  Group had an operating  profit of
$3.6 million in fiscal 2006 and the Power Conversion Group achieved an operating
profit of $2.4 million, offset by unallocated corporate costs of $2.5 million.

   Interest  expense of $1.0 million for fiscal 2007 was $0.3 million lower than
the prior year due to a reduction in borrowings resulting from the paydown of US
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 2007 pretax income of
$7.4 million,  comprised of foreign pretax income of $8.2 million offset by a US
pre-tax loss of $0.8 million. The related fiscal 2007 income tax expense of $3.6
million was due to foreign  taxes on the profits of Villa.  During  fiscal 2006,
the Company recorded pretax income of $2.1 million which included foreign pretax
income of $3.7 million,  offset by a US pretax loss of $1.6 million. The Company
has not provided for any income tax benefits  related to the US pretax losses in
either fiscal 2007 or fiscal 2006 due to uncertainty regarding the realizability
of its US net operating loss carry forwards as explained in Critical  Accounting
Policies above.

   Fiscal 2006  Discontinued  Operations  reflects  the accrual of an  estimated
liability  of $0.2  million  related to a New York State  Sales tax audit of the
Company's prior DHV business sold in October 2004.

   Reflecting  the above,  we recorded net income of $3.8 million,  or $0.24 per
basic share and $0.23 per diluted  share,  in fiscal 2007,  as compared to a net
income of $0.1 million, or $0.01 per basic and diluted share, in fiscal 2006.

FISCAL 2006 COMPARED TO FISCAL 2005

   Consolidated  net sales of $83.0  million for fiscal year 2006  decreased  by
$1.9  million,  or 2.2%,  from  fiscal  2005 net  sales of $84.9  million,  with
decreases at both the Power  Conversion  Group and Medical  Systems  Group.  The
Medical  Systems  Group's sales for fiscal 2006 of $70.3 million  decreased $0.5
million,   or  0.7%,   from  the  prior  fiscal  year,  with  increases  at  our
international  location  across  several  product  lines,  more  than  offset by
decreases at its  domestic  location.  International  sales for the prior fiscal
period included shipments of $8.8 million under an international  Romanian sales
order.  The Power  Conversion  Group's  sales for fiscal  2006 of $12.7  million


                                       23


decreased by $1.4 million,  or 9.9%,  from the prior year's  levels,  reflecting
catch-ups  of late orders from  fiscal  2004  during  fiscal 2005 and  decreased
demands  from an OEM  customer  in  fiscal  2006 due to a  planned  move of this
production to a customer owned facility.

   Consolidated backlog at July 28, 2006, was $22.4 million, compared to backlog
at July 30,  2005 of  approximately  $14.6  million.  The  backlog  in the Power
Conversion  Group  increased  $0.2 million  from levels at the  beginning of the
fiscal year, and there was a $7.6 million increase in the backlog at our Medical
Systems Segment,  reflecting  increases of $0.4 million at our domestic location
and $7.2 million at our international  location due to increased bookings during
the fiscal  2006  period.  Substantially  all of the  backlog  should  result in
shipments within the next twelve months.

   Gross  margins as a percent of sales were 23.3% in fiscal  2006,  compared to
26.3% in fiscal 2005.  The Power  Conversion  Group margins were 35.5% in fiscal
2006 as compared to 41.0% in fiscal 2005 reflecting the $1.4 million decrease in
sales  volume  during the fiscal 2006  period.  For the Medical  Systems  Group,
fiscal 2006 gross margins of 21.1% were lower than gross margins of 23.3% in the
prior year due to volume reductions at its domestic location and internationally
due both to the effect of product  mix and  pricing  pressure in the fiscal 2006
period.

   Selling,  General and  Administrative  expenses ("SG&A") for fiscal 2006 were
$13.6 million  (16.4% of sales)  compared to $16.5  million  (19.4% of sales) in
fiscal 2005.  The  decrease in SG&A in fiscal 2006 is  primarily  due to reduced
corporate legal and accounting costs of $0.7 million,  and reduced selling costs
in both the Power  Conversion  Group and the Medical  Systems  Group of $0.6, as
well as due to higher  costs in fiscal  2005  related  to a review of  strategic
alternatives of $1.0 million.

   Litigation  settlement  costs of $0.7 million recorded in fiscal 2006 include
the accrual of $0.6 million  based on a November  2005  settlement of litigation
filed  during  fiscal  2005 by the  potential  buyers of the  Company's  Medical
Systems Group.  The Company  previously  disclosed  this  litigation but had not
recorded any  affiliated  expense during fiscal 2005, as it had no basis at that
time upon which to  estimate  either the  outcome or amount of loss.  The fiscal
2006 cost also includes the settlement of two employment  actions at our foreign
subsidiary  totaling  $0.2 million and the  reversal of a $0.1  million  accrual
related to a previously  settled  litigation.  Fiscal 2005 included $0.3 million
related to the final settlement of the previously disclosed DOD investigation of
our RFI subsidiary.

   As a result of the above, we recognized  fiscal 2006 operating income of $3.5
million compared to operating income of $3.9 million in fiscal 2005. The Medical
Systems  Group had an  operating  profit of $3.6  million in fiscal 2006 and the
Power Conversion  Group achieved an operating profit of $2.4 million,  offset by
unallocated corporate costs of $2.5 million. In fiscal 2005, the Medical Systems
Group had an  operating  profit of $5.6 million and the Power  Conversion  Group
achieved an operating  profit of $2.8 million,  offset by unallocated  corporate
costs of $4.5 million.

   Interest  expense for fiscal 2006 was  slightly  lower than the prior year as
increased  borrowings and higher  interest rates were offset by decreases due to
fees  incurred  in the  prior  year in  conjunction  with  modifications  to the
Company's  domestic  revolving credit facility.  In addition,  the Company's new
credit facility entered into on August 1, 2005,  eliminated an unfavorable floor
borrowing  interest  calculation  and certain  monthly  fees that were in effect
under the previous lending facility.

   On a consolidated  basis,  the Company  recorded fiscal 2006 pretax income of
$2.1 million,  comprised of foreign pretax income of $3.6 million offset by a US
pre-tax loss of $1.5 million. The related fiscal 2006 income tax expense of $1.7
million was  primarily due to foreign taxes on the profits of Villa and includes
a  provision  of $0.4  million in the US to provide  for  deferred  taxes on the
undistributed earnings of Villa. During fiscal 2005, the Company recorded pretax
income of $2.6 million which  included  foreign  pre-tax income of $3.8 million,
offset by a US pretax loss of $1.2 million. The Company has not provided for any
income tax  benefits  related to the US pretax  losses in either  fiscal 2006 or
fiscal  2005  due  to  uncertainty  regarding  the  realizability  of its US net
operating  loss carry  forwards as  explained  in Critical  Accounting  Policies
above.

   Fiscal 2006  Discontinued  Operations  reflects  the accrual of an  estimated
liability  of $0.2  million  related to a New York State  Sales tax audit of its
Valhalla  location,  including  the DHV  business  sold  in  October  2004.  The
Discontinued  Operations  operating  results for fiscal 2005 reflect income from
operations of $0.2 million from the DHV division.

   Reflecting  the above,  we recorded net income of $0.1 million,  or $0.01 per
basic and diluted  share,  in fiscal  2006,  as compared to a net income of $0.4
million, or $0.04 per basic share and $0.03 per diluted share, in fiscal 2005.


                                       24


   LIQUIDITY AND CAPITAL RESOURCES

   FISCAL 2007 COMPARED TO FISCAL 2006

   We fund our investing and working capital needs through a combination of cash
flow from operations and short-term  credit facilities and the proceeds from our
Right Offering discussed below.

   Working  Capital -- At July 28, 2007 and July 29, 2006,  our working  capital
was approximately $25.0 million and $6.9 million,  respectively. The increase in
ending  working  capital for fiscal  2007 as  compared  to fiscal  2006  relates
primarily to unused cash and cash equivalents from the Rights Offering discussed
below,  increases in ending inventories and accounts receivable and decreases in
short-term debt offset by an increase in trade accounts payable.

   At July 28, 2007 and July 29, 2006 we had approximately $8.0 million and $0.3
million,  respectively,  in cash and cash equivalents. The increase is primarily
due to cash generated from  operations,  the net proceeds of the Rights Offering
discussed below, offset by domestic revolver and debt repayments. As of July 28,
2007, we had approximately  $9.0 million of excess borrowing  availability under
our  domestic  revolving  credit  facility  compared to $1.0 million at July 29,
2006.

   In addition,  as of July 28, 2007 and July 29, 2006, our Villa subsidiary had
an aggregate of approximately $11.0 million and $4.4 million,  respectively,  of
excess borrowing  availability  under its various  short-term credit facilities.
Terms of the  Italian  credit  facilities  do not  permit  the use of  borrowing
availability to directly finance operating activities at our US subsidiaries.

   Cash Flows from Operating Activities -- For the year ended July 28, 2007, the
Company generated  approximately $4.0 million of cash for continuing operations,
compared to $0.3 million in the prior  fiscal year due  primarily to an increase
in net  income and a larger  increase  in  accounts  and  income  taxes  payable
partially offset by a larger increase in inventories.

   Cash Flows from Investing Activities -- We made approximately $0.8 million in
facility  improvements  and capital  equipment  expenditures for the fiscal year
ended July 28, 2007 and for the  comparable  prior fiscal year  period.  We also
used  approximately $2.6 million to fund the cash portion of the purchase of the
minority interest in our Italian subsidiary in fiscal 2006.

   Cash Flows from  Financing  Activities - During the year ended July 28, 2007,
we generated  $4.2  million in net cash from  financing  activities  versus $2.1
million  for the  fiscal  year  ended  July 29,  2006 due  primarily  to the net
proceeds of our Rights Offering completed in March of 2007, The Rights Offering,
discussed  below,  generated  total  proceeds  to the  Company,  net of expenses
related 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.  In addition,  the Company  received  $0.7 million in payment of the
exercise  price of stock  options and  warrants.  During the year ended July 29,
2006,  the Company  refinanced its domestic  credit  agreement and borrowed $2.0
million under a term loan. In addition,  the Company borrowed a net $0.8 million
under  revolving  credit  facilities and received $0.2 million in payment of the
exercise  price of stock  options.  The Company  made a total of $1.0 million in
payments of long term debt during fiscal 2006.

   The following table  summarizes our contractual  obligations,  including debt
and operating leases at July 28, 2007 (in thousands):
                                                        WITHIN     2-3     4-5     AFTER 5
                                           TOTAL (1)    1 YEAR    YEARS   YEARS     YEARS
                                          -----------   ------   ------   ------   --------

Long-Term Debt Obligations ............     $3,834      $  698   $1,968   $  899    $  269
Capital Lease Obligations .............      2,650         389      860    1,401      --
 Interest .............................        479         166      250       63      --
Operating Lease Obligations ...........        759         329      355       75      --
                                            ------      ------   ------   ------    ------
Total Contractual Cash Obligations ....     $7,722      $1,582   $3,433   $2,438    $  269

(1)   As of July 28, 2007, we did not have any outstanding  borrowings under our
      revolving credit facilities in the US or in Italy.

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 (the "North Fork  Facility")  and repaid the prior  facility.  The North
Fork Facility  provides for a $6 million formula based revolving credit facility
based on the Company's  eligible accounts  receivable and inventories as defined
in the credit  agreement.  In addition,  the Company borrowed $2 million under a
term loan  facility  secured  by the  Company's  Bay Shore,  New York  building.
Interest on the  revolving  credit  borrowings  is payable at prime plus 0.5% or
alternatively  at a LIBOR rate plus 2.5%. The $2 million term loan was repayable
in 36 monthly  installments  of $16,667 with a balloon  payment of the remaining
balance  due at the  maturity  in 2008.  Interest  on the term loan was  payable


                                       25


monthly at prime plus 0.75% or a LIBOR rate plus 2.75%. As of July 28, 2007, the
Company had  approximately  $6.7  million of  availability  under the North Fork
Facility,  of  which  North  Fork  has  reserved  $1  million  against  possible
litigation settlements. The term loan was extinguished and the revolver was paid
down to $0 with a portion of the  proceeds  received  from a March  2007  Rights
Offering  discussed below. 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 US credit facility
in substantially all of its accounts receivable, inventories, property plant and
equipment, other assets and intellectual property in the US.

   As of the  end of  the  fourth  quarter  of  fiscal  2006,  the  Company  was
non-compliant with the following covenants:  the Adjusted US Earnings,  Adjusted
Earnings,  Senior US Debt Ratio and Fixed Charge  Coverage Ratio covenants under
the North Fork Facility,  due to the lower than anticipated  performance  during
fiscal 2006. On October 25, 2006, the Company and North Fork signed an amendment
to the facility  that waived the  non-compliance  with these  covenants  for the
fourth  quarter of fiscal 2006 and adjusted the  covenant  levels going  forward
through the maturity of the credit facility.  In addition the amendment reversed
$0.3  million of a sinking  fund  reserved  for the March 2007  maturity  of the
subordinated  shareholder notes and eliminated  additional sinking fund reserves
provisions related to the subordinated notes.

   As of  the  end of  the  first  quarter  of  fiscal  2007,  the  Company  was
non-compliant  with the  tangible  net  worth  covenant  under  the  North  Fork
Facility.  On December 6, 2006, North Fork waived the  non-compliance  with this
covenant for the first  quarter of fiscal 2007 and adjusted the covenant  levels
going forward through the maturity of the credit facility.

   As of the  end of  fiscal  2007,  the  Company  was in  compliance  with  all
covenants under the North Fork Facility.

   On June 1, 2007,  the North Fork  Facility  was  amended  and  restated.  The
amendment  increases the revolving  credit  facility to a maximum amount of $7.5
million and provides a capital  expenditure  loan  facility up to $1.5  million.
Other changes to the terms and conditions of the original loan agreement include
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.

   The Company  received a dividend from its Villa subsidiary in October 2006 of
approximately  $1.560  million  which was used to pay down  amounts  outstanding
under the North Fork Facility, in accordance with provisions of the facility.

   Our Villa subsidiary maintains short term credit facilities which are renewed
annually with Italian banks. Currently,  these facilities are not being utilized
and the balance due at July 28, 2007 is $0.  Interest rates on these  facilities
are variable and currently range from 3.7-13.75%.

   In October 2006,  Villa entered into a 1.0 million Euro loan for financing of
R&D projects, with an option for an additional 1 million Euro upon completion of
50% of the  projects.  Interest  payable is at Euribor 3 months plus 1.3 points,
currently  5.475%.  The spread may be reduced to 1.04 points upon  completion of
the project if  objectives  are  achieved.  The note is repayable  over a 7 year
term,  with  reimbursement  starting  in  September  2008.  The note  contains a
financial covenant which provides that the net equity of Villa cannot fall below
5.0 million Euros. This covenant could limit Villa's ability to pay dividends to
the US parent company in the event of future losses,  future  dividends or other
events should cause Villa's equity to fall below the defined level.

   In December  2006,  Villa  entered into a 1.0 million Euro loan with interest
payable at Euribor 3 months  plus 0.95  points,  currently  5.125%.  The loan is
repayable in 4 years.

   Villa was party to a 1.6 million  Euro loan which was  extinguished  in March
2007.  Two final  installments  for a total of 0.3  million  Euro were repaid in
fiscal year 2007.

   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 2007, total principal due
is 2.3 million Euro. Villa manufacturing  facility is subject to a capital lease
obligation  which  matures  in 2011  with an  option  to  purchase.  Villa is in
compliance with all related financial  covenants under these short and long-term
financings.

   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 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.


                                       26


   During fiscal 2005, the Company applied to the Pension Benefit  Guaranty Corp
and to the IRS for a  determination  letter and approval to terminate this plan.
In the fourth quarter of fiscal 2005, the Company  recognized a related non-cash
charge of  approximately  $0.5  million to write off the  pension  assets on its
balance sheet in  recognition  of the formal  decision to terminate the plan. In
preparation  for the plan  termination,  during  fiscal 2005 the  Company  fully
funded the  expected  cash  disbursement  of $0.2 million  dollars.  The Company
received the IRS determination  letter approving the final settlement during the
second quarter of fiscal 2006 and fully paid out all of the plan participants in
March 2006.

   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.

   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.

   The Company had an employment  agreement  with Samuel Park, a previous  Chief
Executive  Officer  ("CEO"),  for the period May 1, 2001 to April 30, 2004.  The
employment  agreement  provided for certain payments in the event of a change in
the control of the Company.

   On October 10,  2003,  the Company  announced  the  appointment  of Walter F.
Schneider as President  and CEO to replace Mr. Park,  effective as of such date.
As a result,  the  Company  recorded a charge of $0.2  million  during the first
quarter  of fiscal  2004 to  accrue  the  balance  remaining  under  Mr.  Park's
employment agreement.

   The Company's  employment  agreement with Mr. Park provided for payments upon
certain  changes of control.  The  Company's  Board of Directors  elected at the
Company's Annual Meeting of Shareholders  held on May 29, 2003, had reviewed the
"change of control",  provisions regarding payments totaling up to approximately
$1,800,000 under the employment agreement between the Company and Mr. Park. As a
result of this review and based upon, among other things,  the advice of special
counsel,  the Company's  Board of Directors has determined that no obligation to
pay these amounts has been triggered. Prior to his departure from the Company on
October 10, 2003, Mr. Park orally informed the Company that, after reviewing the
matter with his counsel,  he believed  that the  obligation to pay these amounts
has been triggered.  On October 27, 2003, the Company received a letter from Mr.
Park's  counsel  demanding  payment  of  certain  sums and  other  consideration
pursuant to the Company's  employment  agreement with Mr. Park,  including these
change of control payments.  On November 17, 2003, the Company filed a complaint
in the United States District Court,  Southern District of New York, against Mr.
Park seeking a declaratory  judgment that no change in control payment was or is
due to Mr. Park, and that an amendment to the employment  contract with Mr. Park
regarding   advancement  and   reimbursement   of  legal  fees  is  invalid  and
unenforceable.  Mr. Park  answered  the  complaint  and  asserted  counterclaims
seeking  payment  from the  Company  based on his  position  that a  "change  in
control" occurred in June 2003. Mr. Park is also seeking other  consideration he
believes he is owed under his employment agreement. The Company filed a reply to


                                       27


Mr. Park's  counterclaims  denying that he is entitled to any of these payments.
Discovery in this matter was conducted and completed.  Following discovery,  the
Company and Mr. Park filed motions for summary judgment on the issues related to
change in control and the amendment to the employment  agreement,  which motions
have been fully submitted to the Court for  consideration.  To date, no decision
has been  issued by the Court on these  motions.  If Mr.  Park  prevails  on his
claims and the  payments he seeks are  required to be paid in a lump sum,  these
payments may have a material  adverse effect on the Company's  liquidity.  It is
not  possible to predict the outcome of these  claims.  However,  the  Company's
Board of Directors  does not believe that such a claim is  reasonably  likely to
result in a material  decrease in the  Company's  liquidity  in the  foreseeable
future. The Company has not recorded an accrual for any potential  settlement of
this  claim as it has no basis  upon which to  estimate  either  the  outcome or
amount of loss, if any.

    On June 28,  2002,  Jeffrey  N.  Moeller,  the  former  Director  of Quality
Assurance  and  Regulatory  Affairs of Del  Medical,  commenced an action in the
Circuit  Court of Cook County,  Illinois,  against the Company,  Del Medical and
Walter  Schneider,  the former  President  of Del  Medical.  In the most current
iteration of this pleading,  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.  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,  addressed to alleged
interference  with his  relationship  with  prospective  employers.  The parties
appeared for  mediation in January  2007 but the  mediation  did not result in a
disposition of the action.  Accordingly, it appears that the action will proceed
to trial.  A status  conference  before the Court was held  March 8,  2007,  and
subsequently,  a trial date had been  scheduled  for October 1, 2007.  The trial
date  has  been  postponed  due to  the  unavailability  of a  witness  for  the
plaintiff.  A trial date has been scheduled of January 28, 2008. The Company and
Del Medical  intend to defend  vigorously  against  Mr.  Moeller's  claims.  Mr.
Moeller is seeking $2.37 million in damages  consisting of alleged  income loss,
including salary and benefits,  and the present value of his alleged lost income
and  benefits  in the future  after lump sum tax  adjustments.  The  Company has
recorded an accrual of $0.1  million  relating  to  potential  liability  in the
settlement of these claims.

   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,  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.  The
Company's RFI  subsidiary is continuing to ship products to the U.S.  Government
as well as to its commercial customers.

   The Company is a defendant in several  other legal  actions in various US 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.

   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.  These
shares were  valued at $3.26 a share,  or $3.0  million,  and are subject to SEC
Rule 144  limitations  as to holding  periods  and trading  volume  limitations.
Goodwill in the amount of $4.5 million was recorded and $0.9 million of minority
interest was reversed after recognition of a $0.4 million  dividend.  Due to the
previous  80%  ownership   interest   existing  at  the  time  of  the  original
acquisition,  the  assets and  liabilities  of the Villa  subsidiary  were fully
consolidated  before the  transaction  and considered to be at fair market value
with no additional adjustments necessary.

   The Company did not have 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 10K.

   The Company  anticipates  that cash generated from the Rights  Offering noted
above,   operations  and  amounts  available  from  credit  facilities  will  be
sufficient to satisfy currently  projected operating cash needs for at least the
next twelve months.


                                       28


EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS

   In June 2006, the Financial  Accounting  Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"),  "Accounting for Uncertainty in Income Taxes -
an  interpretation  of FASB  Statement  No. 109,  "Accounting  for Income Taxes"
("SFAS  109")",  to clarify  the  accounting  for  uncertainty  in income  taxes
recognized in an enterprise's  financial statements in accordance with SFAS 109.
This Interpretation prescribes a recognition threshold and measurement attribute
for the financial statement  recognition and measurement of a tax position taken
or  expected  to be taken in a tax  return.  FIN 48 also  provides  guidance  on
derecognition,  classification,  interest and  penalties,  accounting in interim
periods,  disclosure, and transition. The provisions of FIN 48 are effective for
fiscal years  beginning  after  December 15, 2006. The adoption of FIN 48 is not
expected to have a material impact on the Company's results of operations or its
financial position.

   In  September  2006,  the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin  ("SAB")  No. 108,  "Considering  the Effects of Prior Year
Misstatements  when Quantifying  Current Year  Misstatements."  SAB 108 requires
analysis of misstatements using both an income statement (rollover) approach and
a balance sheet (iron curtain) approach in assessing  materiality and allows for
a one-time  cumulative effect transition  adjustment.  SAB 108 was effective for
our fiscal year 2007 annual financial statements, and did not have any impact on
our results of operations or our financial position.

   In September  2006, the FASB issued SFAS No 157,  "Fair Value  Measurements,"
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.  This
statement is effective for the Company  beginning  July 1, 2008. The Company has
not  evaluated  the impact  that the  adoption  of SFAS No. 157 will have on its
financial statements at this time.

   In February  2007,  the FASB  released  SFAS No. 159,  "Fair Value Option for
Financial Assets and Financial  Liabilities." This statement permits entities to
choose to measure many  financial  instruments  and certain  other items at fair
value.  This Statement is effective for financial  statements  issued for fiscal
years beginning after November 15, 2007, and interim periods within those years.
The Company has not  evaluated the impact that the adoption of SFAS No. 159 will
have on its financial statements at this time.

ITEM 7A QUANTITATIVE 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 US  revolving  credit  and  Italian  subsidiary's  long-term  debt  incur
interest  charges that fluctuate with changes in market interest rates. See Note
8 of Notes to Consolidated  Financial  Statements included in Part II, Item 8 of
this Annual  Report.  Based on the balances as of July 28, 2007,  an increase of
1/2 of 1% in interest rates would  increase  interest  expense by  approximately
$32,000  annually.  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.

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 61% 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 US
dollars. In addition,  over the last three years, Villa has contributed positive
operating  income, as compared to our consolidated  operating  losses.  Having a
portion of our future income denominated in Euros exposes us to market risk with
respect to  fluctuations  in the US dollar value of future Euro  earnings.  A 5%
decline in the value of the Euro in fiscal 2007, for example, would have reduced
sales by approximately  $3.1 million,  and would have decreased our consolidated
income  from  continuing  operations  by  approximately  $440,000  (due  to  the
reduction in the US dollar value of Villa's operating income.)

ITEM 8  FINANCIAL 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.


                                       29


ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

   NONE

ITEM 9A CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

   The  Company,  under  the  supervision  and  with  the  participation  of the
Company's  management,  including James A. Risher,  Chief Executive Officer, and
Mark A. Zorko, Chief Financial  Officer,  has evaluated the effectiveness of the
design and operation of the Company's  "disclosure controls and procedures",  as
such  term is  defined  in Rules  13a-15e  and  15d-15e  promulgated  under  the
Securities Exchange Act of 1934, as amended, 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
Securities  Act of 1934,  as amended,  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.

INTERNAL CONTROL OVER FINANCIAL REPORTING

   In the  ordinary  course of  business,  the Company  routinely  enhances  its
information  systems by either upgrading its current systems or implementing new
systems.  There were no changes in the Company's  internal  controls or in other
factors that could  significantly  affect these  controls,  during the Company's
fourth  quarter  ended July 28,  2007,  that have  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

ITEM 9B OTHER INFORMATION

Not applicable.

PART III

ITEM 10 DIRECTORS, 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 Since
-----------------------------    -----    ---------------------------------- --------------
Gerald M.  Czarnecki               67     Director                                2003

James R.  Henderson                49     Chairman of the Board and Director      2003

General Merrill A.  McPeak         71     Director                                2005

James A.  Risher                   65     Director,   President   and  Chief      2005
                                          Executive Officer

                                                                              Officer Since
                                                                              -------------
Mark A. Zorko                      55     Chief Financial Officer                 2006

Mark A. Koch                       48     Former   Treasurer  and  Principal      2004
                                          Accounting Officer                 Resigned 2006


                                       30


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. 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 has been a member of the Company's  Board of Directors  since
      November  20,  2003 and  Chairman  of the Board  since May 12,  2005.  Mr.
      Henderson  has  served as a Vice  President  of Steel  Partners,  Ltd.,  a
      management and advisory company, since March 2002. Mr. Henderson served as
      a Vice President of Steel Partners Services, Ltd. from August 1999 through
      March 2002.  Mr.  Henderson  has served as President  and Chief  Operating
      Officer of WebFinancial Corporation  ("WebFinancial"),  which, through its
      operating subsidiaries,  operates in niche banking markets, since November
      2003 and as Chief  Operating  Officer and  Director  since June 2005.  Mr.
      Henderson has served as a director of Angelica Corporation,  an outsourced
      linen  management  services  provider to the  healthcare  industry,  since
      September  2006.  He has also served as President  of Gateway  Industries,
      Inc.,  a  provider  of  database   development   and  website  design  and
      development  services,  since December 2001. Mr. Henderson has served as a
      director of SL Industries,  Inc.  ("SLI"),  a manufacturer and marketer of
      power and data quality  systems and  equipment  for  industrial,  medical,
      aerospace and consumer  applications since January 2002. Mr. Henderson has
      served as a director of BNS  Corporation  since June 2004.  Mr.  Henderson
      served as a  director  of ECC  International  Corp.,  a  manufacturer  and
      marketer of computer  controlled  simulators  for  training  personnel  to
      perform  maintenance and operation  procedures on military  weapons,  from
      December 1999 until September 2003, and as acting Chief Executive  Officer
      from July 2002 until March 2003.  From January  2001 to August  2001,  Mr.
      Henderson served as President of MDM Technologies, Inc., a direct mail and
      marketing  company.  From 1996 to July 1999, Mr. Henderson was employed in
      various   positions  with  Aydin  Corporation  which  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.
      Mr. Henderson earned a B.S. in Accounting from the University of Scranton.

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, International,  a Florida-based  simulation
      and training company.  He has served as a director of several other public
      companies,  including  Tektronix  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, including: Gigabeam (NASDAQ: GGBM), a supplier of
      high performance,  high availability  fiber-speed wireless communications;
      MathStar  (NasdaqGM:   MATH),  a  designer  and  marketer  of  specialized
      semiconductor  integrated  circuits;  and Quintessence  Photonics (OTC BB:
      QPCI.OB),  a designer and manufacturer of high  performance  semiconductor
      laser  diodes.  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 July 22, 2006, Mr. Risher became the Interim  President
      and CEO of Del Global.  On August 31, 2006 Mr. Risher became the President
      and CEO 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 SLI since May 2003 and a director of New Century Equity
      Holdings Corp., a holding company seeking to acquire a new business, since
      October 2004.


                                       31


ADDITIONAL EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS.

MARK A. ZORKO,  55, has 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 has served as a director of Guardian  Technologies  International,  Inc.  Mr.
Zorko  is on the  audit  committee  for  Opportunity  Int'l,  a  microenterprise
development organization,  and on the Board of Directors for St. Alexius Medical
Center.  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.

MARK A KOCH, 48, served as our Treasurer and Principal  Accounting  Officer from
August 24, 2004 and our Secretary from September 17, 2004, until his resignation
from all  positions  held with the  Company on October  30,  2006.  Prior to his
appointment as Treasurer and Principal  Accounting  Officer,  Mr. Koch served as
our Corporate Controller and Assistant Secretary since February 2003.

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 and General Merrill  McPeak.  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,  both Mr. Czarnecki and Gen. McPeak are considered to be
an "independent  director" as defined in Rule 4200 of the  Marketplace  Rules of
the National Association of Securities Dealers, Inc.

CODE OF BUSINESS CONDUCT AND ETHICS.

   The Company has adopted a Code of Business Conduct and Ethics that applies to
the Company's  Chief Executive  Officer and Principal  Accounting  Officer.  The
Company's  Code of  Business  Conduct  and  Ethics is  posted  on the  Company's
website, HTTP://WWW.DELGLOBAL.COM.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

   Section 16(a) of the  Securities  Exchange Act of 1934 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  July 28,  2007,  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 July 28, 2007.

ITEM 11 EXECUTIVE 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 July 28,  2007.  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
oversees the design and administration of our executive compensation program.


                                       32


THE ROLE OF THE COMPENSATION COMMITTEE

      The Compensation  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 Compensation  Committee reviews and approves
the executive compensation and benefits programs for all the Company's executive
officers  annually,  usually in first  quarter of each fiscal year.  Any options
that  are  granted  as  a  result  of  the  Compensation  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.

      With respect to the Chief  Executive  Officer  ("CEO"),  the  Compensation
Committee  reviews and approves  corporate goals and  objectives,  evaluates the
CEO's performance  against these objectives,  and makes  recommendations  to the
Board regarding the CEO's compensation level based on that evaluation.

The CEO participates, together with the Compensation Committee, in the executive
compensation process by:

          o approving  perquisites  valued  at less than  $10,000  per year (all
            perquisites valued at greater than this amount are still approved by
            the Compensation Committee);

          o participating   in  informal   discussions   with  the  Compensation
            Committee   regarding   satisfaction  of  performance   criteria  by
            executive officers, other than the CEO;

          o 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

          o assigning  annual budget goals and other  objectives  that determine
            bonus awards for the CFO.

COMPENSATION PHILOSOPHY AND OBJECTIVES

      The Compensation  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  Compensation  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 Compensation  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 Compensation 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 2007 fiscal year, the  Compensation
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 Compensation  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  Compensation
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.


                                       33


1. BASE SALARY

      Our base  salary  levels  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.  We review
salary levels annually to recognize these factors.  We do not target base salary
at any particular percent of total compensation. The base salary for our CEO and
CFO is set forth in their  employment  agreements,  which are  described in more
detail below.

      Our executive salary levels are intended to be consistent with competitive
salary  levels and job  responsibilities  of each  executive.  Salary  increases
reflect  competitive and economic trends, our overall financial  performance and
the performance of the individual executive.

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 the  achieving  the  Company's  annual  budget  and  attaining
specific  objectives  assigned by the Board of  Directors  of the  Company.  For
fiscal year 2007,  our CEO and CFO were eligible to receive an annual bonus with
a target of 60% and 45% of their annual base salary respectively.

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 Compensation Committee administers the DGTC Plan.
Among other things, the Compensation  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 chief executive officer;  (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 Compensation 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 their fair market value 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 July 28, 2007, under the terms of the DGTC Plan,
the Company granted (a) James A. Risher an option to purchase  120,000 shares of
the Company's  common stock and (b) Mark A. Zorko,  through two separate  option
grants,  the first being  options to  purchase  60,000  shares of the  Company's
common  stock and the second  being  options to  purchase  20,000  shares of the
Company's common stock.

      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.


                                       34


      The 2007 Plan is administered  by the  Compensation  Committee,  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
Compensation Committee also has the authority to designate which options granted
under the 2007 Plan will be  incentive  options and which shall be  nonqualified
options.

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  Compensation  Committee has delegated
authority to the CEO to approve such  perquisites for other executive  officers,
but the  Compensation  Committee must separately  approve any  perquisites  that
exceed $10,000 per year.

IMPACT OF TAX AND ACCOUNTING

      As a general  matter,  the  Compensation  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 Compensation  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  Compensation  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 Compensation 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.

SUMMARY COMPENSATION TABLE

      The  following  table sets forth all  compensation  awarded to, paid to or
earned by the  following  type of  executive  officers for the fiscal year ended
July 28, 2007: (i)  individuals  who served as, or acted in the capacity of, the
Company's  principal  executive officer for the fiscal year ended July 28, 2007;
(ii)  individuals  who served  as, or acted in the  capacity  of, the  Company's
principal  financial  officer for the fiscal year ended July 28, 2007; (iii) the
Company's  most  highly  compensated  executive  officers,  other than the chief
executive and chief financial officer, who were serving as executive officers at
the end of the fiscal  year ended July 28,  2007 (of which  there were none) 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 July 28,  2007 (of
which there was one). We refer to these  individuals  collectively as our "named
executive officers."


                                       35


                           SUMMARY COMPENSATION TABLE

                                                  Annual Compensation
                              ----------------------------------------------------
                                                      Bonus     Stock    Option        All Other
Name and Principal Position   Year   Salary ($)(1)   ($)(1)     Awards   Awards(5)   Compensation(2)    Total
---------------------------   ----   -------------   --------   ------   ---------   ---------------   --------

James A. Risher, Chief
Executive Officer             2007     $274,615      $224,324     $--     $ 51,171       $167,686      $717,796

Mark A. Zorko, Chief
Financial Officer             2007     $214,300      $131,291     $--     $ 23,526       $  6,844      $375,961

Mark A. Koch(3)
Treasurer and Principal
Accounting Officer            2007     $ 52,990      $   --       $--     $   --         $120,577(4)   $173,567

(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 year 2007:

         -------------------------------------------------------------------
                  Benefit              James A.      Mark A.        Mark A.
                                        Risher        Zorko          Koch
         -------------------------------------------------------------------
         (a)   Living allowance       $ 67,357           --             --
         -------------------------------------------------------------------
         (b)   Car Allowance              --         $  5,750           --
         -------------------------------------------------------------------
         (c)   401(k) Match               --           $1,094 (2(c))    --
         -------------------------------------------------------------------
         (d)   Tax Gross-Ups          $ 41,162           --             --
         -------------------------------------------------------------------
         (e)   Other                   $59,167(2(e))      --        $120,577 (4)
         -------------------------------------------------------------------
         (f)   Annual Total           $167,686       $  6,844       $120,577
         -------------------------------------------------------------------

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)   Mr.  Koch  served as the  Company's  Treasurer  and  Principal  Accounting
      Officer until October 30, 2006.

(4)   Mr. Koch received  separation  payments  totaling  $120,577 in fiscal year
      2007.

(5)   Refer to Footnote 11  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.


                                       36


Grants Of Plan-Based Awards:

--------------------------------------------------------------------------------
(a)                        (b)         (i)         (j)        (k)        (l)
--------------------------------------------------------------------------------
                                     All Other   All Other
                                      Stock       Option
                                      Awards:    Awards:
                                                            Exercise
                                      Number     Number of  or Base
                                     of Shares  Securities  Price of  Grant Date
                                     of Stock   Underlying   Option   Fair Value
                                     or Units    Options     Awards    of Stock
                          Grant                                       and Option
Name                       Date        (#)         (#)       ($/sh)   Awards ($)
--------------------------------------------------------------------------------
James A. Risher, Chief   8/31/2006      --      120,000(1)    1.50     118,800
Executive Officer
--------------------------------------------------------------------------------
Mark A. Zorko, Chief     8/31/2006      --       60,000(2)    1.50      59,400
Financial Officer        -------------------------------------------------------
                         11/17/2006     --       20,000(2)    2.00      26,200
--------------------------------------------------------------------------------
Mark A. Koch                  --        --         --         --          --
Treasurer and Principal
Accounting Officer
--------------------------------------------------------------------------------

      (1) Granted pursuant to the Company's DGTC Plan.

      These 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.

      (2) 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.

   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.


                                       37


   The Risher  Employment  Agreement  has been  superseded  by Letter  Agreement
between the Company and Mr. Risher,  dated September 19, 2007, setting forth the
terms  of Mr.  Risher's  continued  employment  by the  Company  as its  CEO and
President.  For fiscal year 2008, Mr. Risher shall receive 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 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.

   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  achieving  these  specific
objectives in fiscal year 2007, Mr. Zorko received a bonus of $ 131,291.

   OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END:

                                      Option Awards                                                             Stock Awards
------------------------------------------------------------------------------------------------------------------------------------
(a)                   (b)          (c)            (d)         (e)          (f)        (g)        (h)          (i)           (j)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                           Equity
                                                                                                                         Incentive
                                                                                                                            Plan
                                                                                                                           Awards:
                                                                                                             Equity      Market or
                                                Equity                                                      Incentive      Payout
                                               Incentive                            Number of    Market    Plan Awards:   Value of
                                              Plan Awards:                           Shares     Value of    Number of     Unearned
                   Number of     Number of     Number of                               or      Shares or    Unearned       Shares,
                  Securities    Securities    Securities                            Units of    Units of  Shares, Units   Units or
                  Underlying    Underlying    Underlying                           Stock That    Stock      or Other        Other
                  Unexercised   Unexercised   Unexercised    Option                   Have        That     Rights That      Rights
                   Options       Options       Unearned     Exercise     Option        Not      Have Not     Have Not     That Have
                     (#)           (#)         Options       Price     Expiration    Vested     Vested        Vested     Not Vested
Name              Exercisable  Unexercisable      (#)        ($)(1)       Date         (#)        ($)          (#)           ($)
------------------------------------------------------------------------------------------------------------------------------------
James A.
Risher, Chief      18,750(2)      6,250(2)        --         2.70       4/26/15
Executive           5,000(2)      5,000(2)        --         2.26       6/16/16          --        --           --           --
Officer            30,000(2)     90,000(2)        --         1.50       8/31/16
------------------------------------------------------------------------------------------------------------------------------------
Mark A. Zorko,
Chief Financial
Officer            15,000(2)     45,000(2)        --         1.50       8/31/16
                    5,000(2)     15,000(2)        --         2.00      11/17/16          --        --           --           --
------------------------------------------------------------------------------------------------------------------------------------
Mark A Koch,
former
Treasurer and
Principal
Accounting
Officer            10,000(2)       --             --          --          --             --        --           --           --
------------------------------------------------------------------------------------------------------------------------------------


                                                                 38


(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.

POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL

SEPARATION AGREEMENTS WITH CURRENT AND CERTAIN FORMER NAMED EXECUTIVE
OFFICERS.

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.

MARK A. KOCH

MR. KOCH SERVED AS THE  COMPANY'S  TREASURER AND  PRINCIPAL  ACCOUNTING  OFFICER
UNTIL OCTOBER 30, 2006.

   The Company entered into a Separation  Agreement and General Release dated as
of September 7, 2006, (the "Koch  Separation  Agreement") with Mark A. Koch, the
Company's former Principal Accounting Officer. The Koch Separation Agreement was
filed as  Exhibit  99.01 to the  Company's  Current  Report on Form 8-K filed on
September 7, 2006. The Koch Separation  Agreement  provided that Mr. Koch's last
day of employment  with the Company will be the first business day following the
filing by the  Company  with the SEC of its  Annual  Report on Form 10-K for the
fiscal year ending July 29, 2006,  but in no event later than November 30, 2006,
unless mutually agreed in writing by the parties (the "Termination  Date").  The
Separation  Agreement  also provided for a payment of one (1) year's base salary
payable  pro-rata over 12 months by the Company to Mr. Koch  commencing with the
first pay-day following the Termination  Date;  provided,  however,  that in the
event  the  Company  sells any of its  assets  or the  assets of any of its U.S.
Subsidiaries  for cash and such sale results in net cash proceeds to the Company
of at least $5.0  million,  then the  Company  shall pay to Mr. Koch any balance
outstanding  of the severance  payment within ten (10) days after receipt by the
Company of such net cash  proceeds  from such asset  sale.  Mr.  Koch  agreed to
release  and  discharges  the  Company,  as more  fully  described  in the  Koch
Separation Agreement. Pursuant to the Koch Separation Agreement, Mr. Koch's last
day of employment  with the Company was October 30, 2006. The total amount to be
paid to Mr.  Koch in  connection  with  the  termination  of his  employment  is
$165,000,  $120,577 of which was paid in fiscal 2007 and the  remainder of which
will be paid by October 30, 2007.

   The Koch Separation  Agreement supersedes a certain former Severance Benefits
Agreement, dated May 23, 2005, between the Company and Mr. Koch, except that the
terms and conditions of Article IV of the former  Severance  Benefits  Agreement
which concern obligations with respect to Company  confidential  information and
trade secrets, survive and remain in full force and effect.

DIRECTOR COMPENSATION

      The  Company  seeks  highly  qualified  individuals  to serve  as  outside
directors and compensates them with a combination of cash fees and stock options
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.

STOCK OPTION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      The Stock  Option  and  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 July 28, 2007 or at
any other time one of our officers or employees.  Other than Mr.  Risher,  the


                                       39


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)
------------------------------------------------------------------------------
                           Fees Earned
                          or  Paid  in    Option       All Other
                            Cash(1)      Awards(2)   Compensation   Total
Name                          ($)           ($)           ($)        ($)
------------------------------------------------------------------------------
Gerald M. Czarnecki (5)     33,500        12,114          --         45,614
------------------------------------------------------------------------------
James R.  Henderson         41,000(3)     32,877          --         73,877
(Chairman) (5)
------------------------------------------------------------------------------
General Merrill A.          33,500        21,890          --         55,390
McPeak (5)
------------------------------------------------------------------------------
James A. Risher (5)          4,167(4)         (4)       55,000(4)    59,167 (4)
------------------------------------------------------------------------------

(1) Fees consist of:

o     Each  non-employee  director  receives an annual  retainer of $20,000;
o     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);
o     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
o     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 2007,  Mr.  Czarnecki  received a grant to purchase  12,500
shares of the Company's common stock at an exercise price of $2.11 per share and
an aggregate fair value of $18,625;  Mr.  Henderson  received grants to purchase
50,000  shares of the Company's  common stock at an exercise  price of $1.65 per
share and 15,000  shares of the Company's  common stock at an exercise  price of
$2.11 per share and  aggregate  fair values of $54,500 and $22,350  respectively
and General McPeak  received a grant to purchase  11,500 shares of the Company's
common stock at an exercise price of $2.11 per share and an aggregate fair value
of $17,135.  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 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.  The
annual  grants of stock  options  to  directors  in  fiscal  year 2007 were made
pursuant to the DGTC Plan.  Directors  are also  eligible to receive  restricted
stock and option  awards under the terms of the  Company's  2007 Plan. No awards
were granted to directors under the 2007 Plan in Fiscal 2007.  Refer to Footnote
11 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)   As Mr.  Risher is the Company's  CEO, he is no longer  eligible to receive
any  compensation  for  his  service  as a  Director.  Mr.  Risher  did  receive
compensation  for  his  service  to  the  Company  as a  Director  prior  to his
appointment as CEO. Prior to Mr.  Risher's  appointment as CEO, he also provided
advisory work to the company as a consultant. The amounts set forth in the table
of Director  Compensation reflect compensation received by Mr. Risher's prior to
his appointment as CEO

(5)   At July 28, 2007,  Mr.  Czarnecki  held an aggregate of 50,000  options to
purchase the  Company's  Common  Stock,  of which 34,375 were  exercisable;  Mr.
Henderson held an aggregate of 106,000 options to purchase the Company's  Common
Stock,  of which  49,250  exercisable;  Mr.  McPeak held an  aggregate of 48,000


                                       40


options  to  purchase  the  Company's   Common  Stock,   of  which  27,375  were
exercisable;  Mr.  Risher held an aggregate  of 155,000  options to purchase the
Company's Common Stock, of which 53,750 exercisable.

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 Compensation  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. No awards were granted
to  directors  under the 2007 Plan in fiscal  2007.  The annual  grants of stock
options to directors in fiscal year 2007 were made pursuant to the DGTC Plan.

                          COMPENSATION COMMITTEE REPORT

      We  have  reviewed  and  discussed  with  management   certain   Executive
Compensation and Compensation  Discussion and Analysis provisions to be included
in the Company's  Annual Report filed on Form 10K, filed pursuant the Securities
Exchange Act of 1934, as amended (the "Annual Report"). 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 the Company's 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 2007:


                                       41


                                                                                                        Number of Securities
                                                 Number of Securities to be     Weighted-Average     Remaining Available for
                                                  Issued Upon Exercise of      Exercise Price of      Future Issuance Under
                                                    Outstanding Options,      Outstanding Options,     Equity Compensation
Plan Category                                       Warrants and Rights       Warrants and Rights            Plans(1)
----------------------------------------------   --------------------------   --------------------   -----------------------

Equity compensation plans approved by
security holders:
Stock Option Plan............................             1,913,993                $   3.51                   941,000

Equity compensation plans not approved by
security holders:                                           573,516                $   1.50                 Not applicable
Warrants issued in settlement of class action
lawsuit(2)...................................

(1)   Excludes  securities  to be issued upon exercise of  outstanding  options,
      warrants and rights.

(2)   Pursuant to our class action  settlement with our shareholders  concerning
      allegations  that the Company had violated  federal  Securities  laws,  we
      issued 2.5 million shares of our Common Stock and one million  warrants to
      purchase  our  Common  Stock at $2.00 per  share.  The  issuance  of these
      securities  was  pursuant to a court order issued in  connection  with the
      settlement of this class action lawsuit in January 2002, and therefore was
      exempt from the  registration  requirements  of the Securities Act of 1933
      pursuant to Section 3(a) (10) thereof.  These warrants were originally set
      to expire in March 2008.  In a motion filed in February  2004, a plaintiff
      class  claimed  damages due to Del Global's  failure to timely  complete a
      registration  statement  for the  shares of  Common  Stock  issuable  upon
      exercise of these  warrants.  The class  sought  damages of $1.25  million
      together  with interest and costs,  and a  declaration  that $2 million in
      subordinated notes issued as part of the 2002 class action settlement were
      immediately  due and payable.  In  settlement  of this matter,  Del Global
      modified the exercise,  or "strike,"  price of the 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.


                                       42


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

   The following table sets forth information concerning beneficial ownership of
common stock of the Company  outstanding  at September 7, 2007 by each person or
entity  (including  any "Group" as such term is used in Section 13(d) (3) of the
Securities Exchange Act of 1934, as amended (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
24,130,808  shares of common  stock  issued and  outstanding  as of September 7,
2007,  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                   Amount and Nature of
of Beneficial Owner              Beneficial Ownership(1)     Percent of Class
----------------------------     -----------------------     ----------------
Warren G. Lichtenstein                5,037,943(2)               20.88%
c/o Steel Partners II, L.P.
590 Madison Avenue
32nd Floor
New York, NY 10022

Wellington Management Co. LLP         2,737,021(3)               11.34%
75 State Street
Boston, MA 02109

(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. 11 to a Schedule 13D
      dated  March 16,  2007,  Steel  Partners  II,  L.P.,  a  Delaware  limited
      partnership  ("Steel  Partners"),   Warren  G.  Lichtenstein,   and  Steel
      Partners,  LLC, a Delaware limited liability corporation  ("Partners LLC")
      collectively  is the  beneficial  owner of 5,037,943  shares of our Common
      Stock.  Partners  LLC  is the  general  partner  of  Steel  Partners.  Mr.
      Lichtenstein is the sole executive officer and managing member of Partners
      LLC. By virtue of his positions  with Steel Partners and Partners LLC, Mr.
      Lichtenstein  has the  sole  power to vote and  dispose  of the  5,037,943
      shares of our Common Stock owned by Steel Partners and Partners LLC.

(3)   According to  information  contained in Amendment  No. 7 to a Schedule 13G
      dated March 12, 2007,  Wellington  Management Company, LLP ("Wellington"),
      an investment  advisor  registered under the Investment Act, may be deemed
      the beneficial  owner of 2,737,021  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 1,955,166 of our Common Stock and shared power
      to dispose of all 2,737,021 shares of our Common Stock owned by Wellington


SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT

      The following table sets forth information concerning beneficial ownership
of Common  Stock of the Company  outstanding  at  September  7, 2007 by (i) each
director;  (ii) each 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 24,130,808 shares of Common Stock issued and
outstanding  as of  September 7, 2007,  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


                                       43


                                        Amount and Nature of
Name and Address of Beneficial Owner   Beneficial Ownership(1)  Percent of Class
------------------------------------   -----------------------  ----------------
Mark A Koch (4)                                10,000(2)               *
Mark A. Zorko                                  35,000(2)               *
Gerald M. Czarnecki                            66,168(2)               *
James A. Risher                                53,750(2)               *
James R. Henderson (3)                         61,750(2)               *
Merrill A. McPeak                              68,491(2)               *
All Directors and Named Executive             295,159(2)              1.2%
Officers as a group (6 persons)

*     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 September 7, 2007, in the following amounts:
      Mark A. Koch -- 10,000,  Mark A. Zorko -- 35,000,  Gerald M.  Czarnecki --
      34,375,  James A.  Risher --  53,750,  James R.  Henderson  -- 61,750  and
      Merrill A. McPeak --27,375.

(3)   Mr.  Henderson is a Vice President of Steel  Partners,  Ltd., an entity of
      which Warren G. Lichtenstein is an affiliate by virtue of his ownership of
      Steel  Partners,  Ltd.  directly  and  through  Steel  Partners  II,  L.P.
      (collectively,  the "Group"). Mr. Henderson disclaims beneficial ownership
      of the  5,037,943  shares of our common  stock  collectively  owned by the
      Group.

(4)   Mr. Koch resigned as Treasurer and Principal Accounting Officer, effective
      October 30, 2006.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,  AND DIRECTOR
        INDEPENDENCE

REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS

      During  fiscal  2007,   the  Company  had  a  policy  for  the  review  of
transactions  in which  the  Company  was a  participant,  the  amount  involved
exceeded  $120,000  and 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 2007, 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.  There were no related person
transactions during fiscal 2007.

DIRECTOR INDEPENDENCE

      Although the Company is currently not listed on any exchange, the Board of
Directors  has  determined  that three of the members of the Board of Directors,
Mr. Czarnecki , Mr. Henderson and Gen. McPeak,  are  "independent" as defined in
Rule 4200 of the  Marketplace  Rules of the National  Association  of Securities
Dealers, Inc. Committee membership of the Company's directors is as follows:


                                       44


-------------------------------------------------------------------------
           Director            Audit      Compensation   Nominating and
                             Committee     and Stock       Governance
                                        Option Committee    Committee
-------------------------------------------------------------------------

 Gerald M. Czarnecki*          Chair           X                X

-------------------------------------------------------------------------

 James R. Henderson *                          X              Chair

-------------------------------------------------------------------------

 General Merrill A. Mcpeak*      X           Chair              X

-------------------------------------------------------------------------

 James A. Risher

-------------------------------------------------------------------------

*Independent

ITEM 14 PRINCIPAL 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 July 28, 2007 and July
29,  2006 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 $290,650, and $277,000, respectively.

AUDIT-RELATED  FEES  There  were  no  fees  billed  by  BDO  Seidman,   LLP  for
Audit-Related  services  for the fiscal  years  ended July 28, 2007 and July 29,
2006.

TAX FEES The aggregate fees billed by BDO Seidman,  LLP for tax services for the
fiscal  years ended July 28, 2007 and July 29, 2006 were  $71,665 and  $139,737,
respectively.  In both fiscal  years,  these fees  related to tax  planning  and
consulting work.

ALL OTHER  FEES  There  were no fees for other  professional  services  rendered
during the fiscal years ended July 28, 2007 or July 29, 2006.


                                       45


      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.

PART IV

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

                                                                                  PAGE NUMBER
(a) 1. FINANCIAL STATEMENTS
   CONSOLIDATED FINANCIAL STATEMENTS OF DEL GLOBAL TECHNOLOGIES CORP. AND
   SUBSIDIARIES:
   Report of Independent Registered Public Accounting Firm.....................        F-1
   Consolidated Balance Sheets as of July 28, 2007 and July 29, 2006...........        F-2
   Consolidated Statements of Operations for the Fiscal Years Ended July 28,
    2007, July 29, 2006 and July 30, 2005......................................        F-3
   Consolidated Statements of Cash Flows for the Fiscal Years Ended July 28,
    2007, July 29, 2006 and July 30, 2005......................................        F-4
   Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
    July 28, 2007, July 29, 2006 and July 30, 2005.............................        F-5
   Notes to Consolidated Financial Statements for the Fiscal Years Ended July
    28, 2007, July 29, 2006 and July 30, 2005..................................     F-6 - F-22

3. EXHIBITS

EXHIBIT
NUMBER                                  DESCRIPTION OF DOCUMENT
-------     --------------------------------------------------------------------

 2.1        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.


                                       46


 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.

 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.

 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.


                                       47


 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.

 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.

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.


                                       48


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.

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.


                                       49


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.

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.


                                       50


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.

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.


                                       51


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.

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
            the 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 6, 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.

21.1**      List of Subsidiaries

23.1**      Consent of BDO Seidman, LLP.

31.1**      Certification of Chief Executive Officer, James Risher,  pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**      Certification of Principal Financial Officer,  Mark Zorko,  pursuant
            to Section 302 of the Sarbanes-Oxley Act of 2002.

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.


                                       52


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


                                       53


                                   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.

October 11, 2007                          By: /s/ James A. Risher
                                              ----------------------------------
                                              James A. Risher
                                              President and Chief Executive Officer

October 11, 2007                          By: /s/ Mark A. Zorko
                                              ----------------------------------
                                              Mark A. Zorko
                                              Chief Financial 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.

 /s/ James R. Henderson                    Director - Chairman        October 11, 2007
 -----------------------------------
 James Henderson

 /s/ Merrill A. McPeak                     Director                   October 11, 2007
 -----------------------------------
 Merrill McPeak

 /s/ Gerald M. Czarnecki                   Director                   October 11, 2007
 -----------------------------------
 Gerald M. Czarnecki

 /s/ James A. Risher                       Director                   October 11, 2007
 -----------------------------------       Chief Executive Officer
 James A. Risher


                                       54


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Del Global Technologies Corp.
Franklin Park, Illinois

We have  audited  the  accompanying  consolidated  balance  sheets of Del Global
Technologies  Corp. and  subsidiaries as of July 28, 2007 and July 29, 2006, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the three  years in the  period  ended  July 28,  2007.  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 July 28, 2007 and July 29, 2006, and
the results of their operations and their cash flows for each of the three years
in the period ended July 28, 2007,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

/s/ BDO SEIDMAN, LLP

Chicago, Illinois
September 27, 2007


                                      F-1


DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE)

                                                                                    JULY 28,     JULY 29,
                                                                                     2007         2006
                                                                                   --------      --------
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ..................................................     $  7,860      $    333
  Trade receivables (net of allowance for doubtful accounts of $1,569
   and $1,095 for 2007 and 2006, respectively) ...............................       21,221        17,382
  Inventories ................................................................       21,930        16,436
  Prepaid expenses and other current assets ..................................        1,180           808
                                                                                   --------      --------
   Total current assets ......................................................       52,191        34,959
                                                                                   --------      --------
NON-CURRENT ASSETS:
  Property plant and equipment, net ..........................................        6,511         6,366
  Deferred income taxes ......................................................        1,011         1,159
  Goodwill ...................................................................        6,437         6,437
  Other assets ...............................................................          189           232
                                                                                   --------      --------
   Total non-current assets ..................................................       14,148        14,194
                                                                                   --------      --------
TOTAL ASSETS .................................................................     $ 66,339      $ 49,153
                                                                                   ========      ========


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term credit facilities ...............................................     $   --        $  5,959
  Current portion of long-term debt ..........................................        1,086         3,557
  Accounts payable - trade ...................................................       17,125        11,037
  Accrued expenses ...........................................................        7,432         7,444
  Income taxes payable .......................................................        1,570            27
                                                                                   --------      --------
   Total current liabilities .................................................       27,213        28,024
                                                                                   --------      --------
NON-CURRENT LIABILITIES:
  Long-term debt, less current portion .......................................        5,398         5,133
  Deferred income taxes ......................................................          292           302
  Other long-term liabilities ................................................        3,240         2,880
                                                                                   --------      --------
   Total non-current liabilities .............................................        8,930         8,315
                                                                                   --------      --------
       Total liabilities .....................................................       36,143        36,339
                                                                                   --------      --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
  Common stock -- $.10 par value; authorized - 50,000,000 and 20,000,000
   shares; issued - 24,753,526 and 12,258,294 shares at July 28, 2007 and
   July 29, 2006, respectively ...............................................        2,475         1,226
  Additional paid-in capital .................................................       79,726        67,679
  Treasury shares - 622,770 shares, at cost ..................................       (5,546)       (5,546)
  Accumulated other comprehensive income .....................................        1,880         1,610
  Accumulated deficit ........................................................      (48,339)      (52,155)
                                                                                   --------      --------
       Total shareholders' equity ............................................       30,196        12,814
                                                                                   --------      --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...................................     $ 66,339      $ 49,153
                                                                                   ========      ========

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 ENDED
                                                                                  JULY 28,     JULY 29,     JULY 30,
                                                                                      2007       2006         2005
                                                                                  ---------    --------     ---------
NET SALES .....................................................................   $ 104,167    $  83,014    $  84,872
COST OF SALES .................................................................      79,150       63,656       62,591
                                                                                  ---------    ---------    ---------
GROSS MARGIN ..................................................................      25,017       19,358       22,281
                                                                                  ---------    ---------    ---------
   Selling, general and administrative ........................................      14,590       13,619       16,452
   Research and development ...................................................       2,013        1,562        1,636
   Litigation settlement costs ................................................        --            697          300
                                                                                  ---------    ---------    ---------
    Total operating expenses ..................................................      16,603       15,878       18,388
                                                                                  ---------    ---------    ---------
OPERATING INCOME ..............................................................       8,414        3,480        3,893
   Interest expense (net of interest income of $91,$0 and $0 in 2007, 2006
     and 2005, respectively)...................................................        (991)      (1,311)      (1,350)
   Other income (loss) ........................................................         (54)         (34)          97
                                                                                  ---------    ---------    ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
  AND MINORITY INTEREST .......................................................       7,369        2,135        2,640
INCOME TAX PROVISION ..........................................................       3,553        1,758        2,054
                                                                                  ---------    ---------    ---------
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST ....................       3,816          377          586
MINORITY INTEREST .............................................................        --            108          393
                                                                                  ---------    ---------    ---------
INCOME FROM CONTINUING OPERATIONS .............................................       3,816          269          193
DISCONTINUED OPERATION ........................................................        --           (175)         199
                                                                                  ---------    ---------    ---------
NET INCOME ....................................................................   $   3,816    $      94    $     392
                                                                                  =========    =========    =========

NET INCOME PER BASIC SHARE
   Continuing operations ......................................................   $    0.24    $    0.02    $    0.02
   Discontinued operation .....................................................        --          (0.01)        0.02
                                                                                  ---------    ---------    ---------
   Net income per basic share .................................................   $    0.24    $    0.01    $    0.04
                                                                                  =========    =========    =========
   Weighted average shares outstanding ........................................      16,155       11,244       10,490
                                                                                  =========    =========    =========
NET INCOME PER DILUTED SHARE
   Continuing operations ......................................................   $    0.23    $    0.02    $    0.01
   Discontinued operation .....................................................        --          (0.01)        0.02
                                                                                  ---------    ---------    ---------
   Net income per diluted share ...............................................   $    0.23    $    0.01    $    0.03
                                                                                  =========    =========    =========
   Weighted average shares outstanding ........................................      16,455       12,076       11,465
                                                                                  =========    =========    =========

See notes to consolidated financial statements.


                                                                F-3


DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
                                                                                           FISCAL YEARS ENDED
                                                                                    JULY 28,    JULY 29,    JULY 30,
                                                                                      2007        2006        2005
                                                                                    --------    --------    --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................................   $  3,816    $     94    $    392
(Income) loss of discontinued operation .........................................       --           175        (199)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
  Depreciation and amortization .................................................        899       1,026       1,303
  Deferred income tax provision (benefit) .......................................        229        (277)        276
  Loss on sale of property plant and equipment ..................................         65         161         100
  Non cash litigation settlement costs ..........................................       --           455        --
  Non cash pension costs ........................................................       --          --           492
  Imputed interest - subordinated note ..........................................        185         257         196
  Minority interest .............................................................       --           108         393
  Stock based compensation expense ..............................................        219         141          39
Changes in operating assets and liabilities:
  Trade receivables .............................................................     (2,814)     (2,707)     (1,368)
  Inventories ...................................................................     (4,519)     (1,180)        345
  Prepaid expenses and other current assets .....................................       (328)        (68)        348
  Other assets ..................................................................         50          11         710
  Accounts payable - trade ......................................................      5,331       1,486      (1,764)
  Accrued expenses ..............................................................       (654)      1,038      (3,314)
  Payment of accrued litigation settlement costs ................................       (200)       (311)     (5,092)
  Income taxes payable ..........................................................      1,573        (177)       (586)
  Other long-term liabilities ...................................................        143          97         230
                                                                                    --------    --------    --------
Net cash provided by (used in) operating activities
  of continuing operations ......................................................      3,995         329      (7,499)
Net cash provided by (used in) operating activities of discontinued operation ...       --          (175)        377
                                                                                    --------    --------    --------
Net cash provided by (used in) all operating activities .........................      3,995         154      (7,122)
                                                                                    --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Property plant and equipment purchases ........................................       (779)       (765)       (891)
  Acquisition of minority interest ..............................................       --        (2,612)       --
                                                                                    --------    --------    --------
Net cash used in investing activities of continuing operations ..................       (779)     (3,377)       (891)
Net cash provided by investing activities of discontinued operation .............       --          --         3,086
                                                                                    --------    --------    --------
Net cash provided by investing activities of all operations .....................       (779)     (3,377)      2,195
                                                                                    --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowing under short-term credit facilities ..................................     37,193      39,112      39,838
  Repayment under short-term credit facilities ..................................    (43,247)    (38,303)    (38,256)
  Borrowings of long-term debt ..................................................      3,113       2,000        --
  Repayment of long-term debt ...................................................     (5,900)       (972)       --
  Proceeds from rights offering, net of related costs ...........................     12,354        --          --
  Proceeds from warrant exercises................................................        551           2          87
  Proceeds of stock option exercises ............................................        170         238         278
  Dividend paid to minority shareholders ........................................        (16)       --          (502)
                                                                                    --------    --------    --------
Net cash provided by financing activities of continuing operations ..............      4,218       2,077       1,445
                                                                                    --------    --------    --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .........................................         93          13         193
                                                                                    --------    --------    --------
CASH AND CASH EQUIVALENTS INCREASE (DECREASE) FOR THE YEAR ......................      7,527      (1,133)     (3,289)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR ................................        333       1,466       4,755
                                                                                    --------    --------    --------
CASH AND CASH EQUIVALENTS, END OF THE YEAR ......................................   $  7,860    $    333    $  1,466
                                                                                    ========    ========    ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for interest ......................................   $    744    $  1,054    $    654
  Cash paid during the period for income taxes ..................................        837       1,443       2,221
NON-CASH TRANSACTIONS
Financing Activities
   Acquisition of minority interest .............................................   $   --      $ (2,950)   $   --
Investing Activities
     Stock issued for purchase of minority interest .............................       --         2,950        --

See notes to consolidated financial statements.


                                                                F-4



DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)


                                                                   ACCUMULATED
                                                                      OTHER
                                    COMMON                           COMPRE-
                                  STOCK ISSUED         ADDITIONAL    HENSIVE                   TREASURY STOCK
                            -----------------------     PAID-IN       INCOME    ACCUMULATED   --------------------
                              SHARES       AMOUNT       CAPITAL                   DEFICIT     SHARES      AMOUNT         TOTAL
                            ----------   ----------   -----------   ----------  -----------   -------   ----------    ----------
BALANCE, JULY 31,
  2004 ..................   10,978,581   $    1,098   $   64,072    $      792   $  (52,641)  643,533   $   (5,546)   $    7,775
Stock option exercises ..      248,421           24          253          --           --        --           --             277

Stock warrant exercises .       25,956            3           84          --           --        --           --              87
Non-employee stock
compensation ............         --           --             39          --           --        --           --              39
Correction of treasury
  shares ................         --           --           --            --           --     (20,763)        --            --
Comprehensive income: ...         --           --           --            --           --        --           --            --
  Net income ............         --           --           --            --            392      --           --             392
  Pension obligation
   adjustments ..........         --           --           --             417         --        --           --             417
  Foreign currency
   adjustments ..........         --           --           --             241         --        --           --             241
                                                                                                                      ----------
  Total comprehensive
   income ...............         --           --           --            --           --        --           --           1,050
                            ----------   ----------   ----------    ----------   ----------   -------   ----------    ----------

BALANCE, JULY 30,
2005 ....................   11,252,958        1,125       64,448         1,450      (52,249)  622,770       (5,546)        9,228
Stock option exercises ..       99,000           10          228          --           --        --           --             238

Stock warrant exercises .        1,574            1            1          --           --        --           --               2
Stock compensation ......         --           --            142          --           --        --           --             142
Stock issued in
  minority interest
  acquisition ...........      904,762           90        2,860          --           --        --           --           2,950
Comprehensive income: ...         --           --           --            --           --        --           --            --
  Net income ............         --           --           --            --             94      --           --              94
  Foreign currency
   adjustments ..........         --           --           --             160         --        --           --             160
                                                                                                                      ----------
  Total comprehensive
   income ...............         --           --           --            --           --        --           --             254
                            ----------   ----------   ----------    ----------   ----------   -------   ----------    ----------

BALANCE, JULY 29,
  2006 ..................   12,258,294        1,226       67,679         1,610      (52,155)  622,770       (5,546)       12,814
Stock option exercises ..      101,000           10          161          --           --        --           --             171
Stock warrant
  exercises .............      366,854           37          514          --           --        --           --             551
Stock compensation ......         --           --            220          --           --        --           --             220
Issuance of stock for
  Rights Offering .......   12,027,378        1,202       11,152          --           --        --           --          12,354
Comprehensive income: ...         --           --           --            --           --        --           --
  Net income ............         --           --           --            --          3,816      --           --           3,816
  Foreign currency
   adjustments ..........         --           --           --             270         --        --           --             270
                                                                                                                      ----------
  Total comprehensive
   income ...............         --           --           --            --           --        --           --           4,086
                            ----------   ----------   ----------    ----------   ----------   -------   ----------    ----------
BALANCE, JULY 28,
  2007 ..................   24,753,526   $    2,475   $   79,726    $    1,880   $  (48,339)  622,770   $   (5,546)   $   30,196
                            ==========   ==========   ==========    ==========   ==========   =======   ==========    ==========

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.

As of July 31, 2004, the Company's  Board  committed to a plan to dispose of its
Del High Voltage  Division ("DHV") and on October 1, 2004, the Company sold this
division for a purchase price of $3,100,  plus the  assumption of  approximately
$800 of liabilities.  Accordingly,  the results of operations for the year ended
July 30, 2005 have been  reclassified  to show this  division as a  discontinued
operation. See Note 3, Discontinued Operation.

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,  including the  reclassification in the fiscal
2005 cash flows statement of $3,086 of cash flows from  discontinued  operations
into investing activities from operating activities.

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 AND CASH  EQUIVALENTS - The Company  considers  highly  liquid  instruments
readily  convertible to known amounts of cash with original  maturities of three
months or less (measured from their acquisition date) to be cash equivalents.

FOREIGN  CURRENCY   TRANSLATION  -  The  financial  statements  of  our  foreign
subsidiary are recorded in "Euro" and translated into U.S. dollars.  The foreign
subsidiary'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 transporting 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 FIFO method.  Market value represents the estimated selling
price  less all  estimated  costs to  completion  and  costs to be  incurred  in
marketing, selling and distribution.


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

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

DEFERRED FINANCING COSTS, NET - Financing costs,  including fees, commission and
legal  expenses are  capitalized  and amortized on a straight line basis,  which
approximates the interest method, over the term 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 determined using a discounted cash flow method as well as a
review of valuation parameters for comparable publicly traded companies.

REVENUE  RECOGNITION - The Company  recognizes  revenue upon shipment,  provided
there is  persuasive  evidence  of an  arrangement,  there are no  uncertainties
concerning acceptance, the sales price is fixed, collection of the receivable is
probable and only perfunctory  obligations related to the arrangement need to be
completed. The Company maintains a sales return allowance, based upon historical
patterns,  to cover  estimated  normal  course of  business  returns,  including
defective or out of specification  product.  The Company's  products are covered
primarily  by one  year  warranty  plans  and in some  cases  optional  extended
warranties for up to five years are offered. The Company establishes  allowances
for warranties on an aggregate  basis for  specifically  identified,  as well as
anticipated,  warranty claims based on contractual terms, product conditions and
actual  warranty  experience by product  line.  The Company  recognizes  service
revenue when repairs or out of warranty repairs are completed. The Company has a
Food and Drug  Administration  ("FDA")  obligation to continue to provide repair
service for  certain  medical  systems  for up to seven years past the  warranty
period. These repairs are billed to the customers at market rates.

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,  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.

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.


                                      F-7


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 July 28, 2007.

The activity in allowances for doubtful accounts is as follows:

                                         BALANCE AT   CHARGED TO
                                        BEGINNING OF   COSTS AND                   BALANCE AT
                                            YEAR        EXPENSE    DEDUCTIONS (1)  END OF YEAR
                                        ------------  ----------   --------------  ------------
YEAR ENDED JULY 28, 2007 ...........
Allowance for doubtful accounts ....       $1,095       $  646         $  172         $1,569
YEAR ENDED JULY 29, 2006 ...........
Allowance for doubtful accounts ....       $1,028       $  338         $  271         $1,095
YEAR ENDED JULY 30, 2005 ...........
Allowance for doubtful accounts ....         $888       $  375         $  235         $1,028


(1) Write-off of accounts receivable previously charged to costs and expenses.


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) has been  adopted  for fiscal  years 2007 and 2006 and the  Company
recorded  related  expense of $235 and $141 in these  years,  respectively.  The
statement does not require  restatement of previously  issued  statements and is
being applied on a prospective basis. See Note 11, Shareholders' Equity.

Prior to the adoption of SFAS 123 (R),  the Company  accounted  for  stock-based
awards to employees using the intrinsic value method of accounting in accordance
with APB No. 25. The Company's practice in granting these awards to employees is
to set the excise  price of the stock  options  equal to the market price of our
underlying  stock on the date of grant.  Therefore,  under the  intrinsic  value
method,  no  compensation  expense is recognized  in the Company's  Consolidated
Statement of Operations.

Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant dates for awards  under  those  plans  consistent
with the methods  recommended  by SFAS 123 (R), the Company's net income and net
income  per share for fiscal  year 2005 would have been  stated at the pro forma
amounts indicated below:


                                                               FOR FISCAL YEAR ENDED
                                                                   JULY 30, 2005
                                                               ---------------------
Net income - as reported: ....................................     $        392
Total stock-based awards under fair value method .............             (292)
                                                                   ------------
Pro forma net income .........................................     $        100
                                                                   ============
Income per share - Basic
As reported ..................................................     $       0.04
Pro forma ....................................................     $       0.01
Income per share - Diluted
As reported ..................................................     $       0.03
Pro forma ....................................................     $       0.01
Weighted average number of shares outstanding - Basic ........       10,490,178
Weighted average number of shares outstanding - Diluted. .....       11,464,718

The fair  value of the  options  used for the above pro forma  disclosures  were
determined  on the date of grant using a  Black-Scholes  option  pricing  model.
These options were valued based on the following assumptions:  an estimated life
of seven  years,  volatility  of 63%,  risk free  interest  rate of 4.06% and no
dividend yield.


                                      F-8


EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS - In May 2005, the FASB issued SFAS No.
154, "Accounting Changes and Error Corrections, a replacement of APB Opinion No.
20 and SFAS No. 3." This Statement  provides  guidance on the accounting for and
reporting of accounting  changes and error corrections.  It establishes,  unless
impracticable,  retrospective application as the required method for reporting a
change  in  accounting   principle,   in  the  absence  of  explicit  transition
requirements specific to the newly adopted accounting principle.  This Statement
was  effective  for  accounting  changes  made in fiscal years  beginning  after
December 15, 2005.  The adoption of SFAS No. 154 had no impact on the  Company's
financial statements or results of operations.

In February 2006, the FASB issued SFAS No. 155,  "Accounting  for Certain Hybrid
Financial  Instruments - an amendment of FASB Statements No. 133 and 140," which
simplifies  accounting for certain hybrid  instruments by permitting  fair value
remeasurement  for any hybrid  instrument  that contains an embedded  derivative
that  otherwise  would  require  bifurcation.  SFAS No. 155 is effective for all
financial instruments acquired, issued or subject to a remeasurement (new basis)
event occurring after the beginning of an entity's first fiscal year that begins
after  September 15, 2006.  The adoption of SFAS No. 155 is not expected to have
any impact on the Company's results of operations or our financial position.

In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes - an  interpretation  of FASB Statement No. 109,
"Accounting  for Income  Taxes" ("SFAS  109")",  to clarify the  accounting  for
uncertainty in income taxes recognized in an enterprise's  financial  statements
in  accordance  with SFAS 109.  This  Interpretation  prescribes  a  recognition
threshold and measurement  attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48  also  provides  guidance  on  derecognition,  classification,  interest  and
penalties,  accounting  in interim  periods,  disclosure,  and  transition.  The
provisions of FIN 48 are effective for fiscal years beginning after December 15,
2006.  The Company  believes that FIN 48 will not have a material  impact on its
financial statements.

In  September  2006,  the  Securities  and  Exchange   Commission  issued  Staff
Accounting  Bulletin  ("SAB")  No. 108,  "Considering  the Effects of Prior Year
Misstatements  when Quantifying  Current Year  Misstatements."  SAB 108 requires
analysis of misstatements using both an income statement (rollover) approach and
a balance sheet (iron curtain) approach in assessing  materiality and allows for
a one-time  cumulative effect transition  adjustment.  SAB 108 was effective for
the Company's fiscal year 2007 annual financial  statements and did not have any
impact on its results of operations or financial position.

In  September  2006,  the FASB issues SFAS No. 157,  "Fair Value  Measurements,"
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.  This
statement is effective for the Company  beginning  July 1, 2008. The Company has
not  evaluated  the impact  that the  adoption  of SFAS No. 157 will have on its
financial statements at this time.

In  February  2007,  the FASB  released  SFAS No. 159,  "Fair  Value  Option for
Financial Assets and Financial  Liabilities." This statement permits entities to
choose to measure many  financial  instruments  and certain  other items at fair
value.  This Statement is effective for financial  statements  issued for fiscal
years beginning after November 15, 2007, and interim periods within those years.
The Company has not  evaluated the impact that the adoption of SFAS No. 159 will
have on its financial statements at this time.

2. ACQUISITION OF MINORITY INTEREST IN VILLA

On December 23, 2005, the Company acquired the remaining 20% of Villa for $2,612
plus 904,762 restricted shares of Company common stock. These shares were valued
at $3.26 a share,  or $2,950,  and are subject to SEC Rule 144 limitations as to
holding periods and trading volume limitations. Goodwill in the amount of $4,526
was recorded and $934 of minority  interest was reversed after  recognition of a
$388 dividend.  Due to the previous 80% ownership  interest existing at the time
of the original acquisition,  the assets and liabilities of the Villa subsidiary
were fully  consolidated  before the  transaction  and  considered to be at fair
market value with no additional adjustments necessary.

3. DISCONTINUED OPERATION

On October 1,  2004,  the  Company  completed  the sale of its Del High  Voltage
Division  ("DHV")  for a  purchase  price  of  $3,100,  plus the  assumption  of
approximately $800 of liabilities.  This division was formerly part of the Power
Conversion Group and designed,  manufactured and marketed proprietary  precision
power  conversion   subsystems  for  medical  as  well  as  critical  industrial
applications.  The  results  of  operations  of this  division  are  shown  as a
discontinued operation in the accompanying financial statements.


                                      F-9


Certain  information  with respect to the  discontinued  operation is summarized
below:

                                                            JULY 29,      JULY 30,
YEARS ENDED                                                   2006          2005
                                                            -------       -------
Revenues ..............................................      $ --         $1,899
Net income (loss) before income taxes .................        (175)         199
Income taxes ..........................................        --           --
Income (loss) from discontinued operation, net ........        (175)         199

Loss from  discontinued  operations  for fiscal 2006  reflects the accrual of an
estimated  liability  of $175 related to a New York State Sales tax audit of its
Valhalla  location,   including  the  DHV  business.  Income  from  discontinued
operation,  net for fiscal year 2005,  includes two months of operations through
the October 1, 2004 disposition date and a gain on the sale of the DHV assets of
$21.

4. INVENTORIES
Inventories consists of the following:

                                                         JULY 28, 2007   JULY 29, 2006
                                                         -------------   -------------
Raw materials and purchased parts ......................   $ 15,237        $ 13,660
Work-in-process ........................................      3,910           3,747
Finished goods .........................................      6,652           2,732
                                                           --------        --------
                                                             25,799          20,139
Less: allowance for obsolete and excess inventories ....     (3,869)         (3,703)
                                                           --------        --------
Total inventories net ..................................   $ 21,930        $ 16,436
                                                           ========        ========

The activity in the allowance for obsolete and excess inventories accounts is as
follows:

                                                      BALANCE AT   CHARGED TO
                                                     BEGINNING OF   COSTS AND                   BALANCE AT
                                                         YEAR        EXPENSE    DEDUCTIONS (1)  END OF YEAR
                                                     ------------  ----------   --------------  ------------                                                                                                                       YEAR
YEAR ENDED JULY 28, 2007
Allowance for obsolete and excess inventories ....      $3,703       $  651       $  485          $3,869
YEAR ENDED JULY 29, 2006
Allowance for obsolete and excess inventories ....       3,017        1,050          364           3,703
YEAR ENDED JULY 30, 2005
Allowance for obsolete and excess inventories ....       2,536          620          139           3,017


(1) Write-off of inventories previously charged to costs and expenses.

The Company has pledged all of its inventories in the U.S. having a net carrying
amount of  approximately  $6,608 and $5,009 at July 28, 2007 and July 29,  2006,
respectively, to secure its credit facility with its lender.

5. PROPERTY PLANT AND EQUIPMENT

Property plant and equipment consist of the following:

                                                       JULY 28, 2007   JULY 29, 2006
                                                       -------------   -------------
Land ...............................................     $    694        $    694
Buildings ..........................................        6,549           6,253
Machinery and equipment ............................        6,757           6,384
Furniture and fixtures .............................          817             721
Leasehold improvements .............................        1,754           1,585
Transportation equipment ...........................          109             119
Computers and other equipment ......................        2,552           4,187
                                                         --------        --------
                                                           19,232          19,943
Less: accumulated depreciation and amortization ....      (12,721)        (13,577)
                                                         --------        --------
Property plant and equipment, net ..................     $  6,511        $  6,366
                                                         ========        ========

The Company has pledged all of its  property,  plant and  equipment  in the U.S.
having a net carrying amount of approximately $1,985 and $1,854 at July 28, 2007
and July 29, 2006, respectively,  to secure its credit facility with its lender.


                                      F-10


Included in the table above are assets held under capital leases,  including the
Villa building, in the amount of $3,099 and $3,889 at July 28, 2007 and July 29,
2006, respectively. Accumulated amortization relating to capital leases was $845
and $729 at July 28, 2007 and July 29, 2006, respectfully.  Amortization expense
relating to capital  leases was $116,  $113 and $110 for fiscal  2007,  2006 and
2005, respectively.

Depreciation  expense for fiscal  years 2007,  2006 and 2005 was $872,  $998 and
$1,238, respectively.

6. GOODWILL

Goodwill consists of the following:

                                                        Medical Systems
                                                        ---------------
     Balance at July 30, 2005                              $  1,911
     Additions                                                4,526
                                                              -----
     Balance at July 29, 2006 and July 28, 2007            $  6,437
                                                           ========

As  described  in Note 2, during  fiscal year 2006,  the Company  completed  the
acquisition of the remaining 20% minority  interest in its Villa  subsidiary and
recorded additional goodwill of $4,526.

During fiscal 2007,  2006 and 2005,  the Company  conducted its annual  goodwill
impairment testing, and concluded that the remaining goodwill,  which relates to
its Medical Systems Segment,  was not impaired as each respective  balance sheet
date.

7. 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 is as follows:

                                                  JULY 28, 2007    JULY 29, 2006
                                                  -------------    -------------
Balance at beginning of year ..................      $   971          $ 1,040
 Provision for anticipated warranty claims ....          879              440
 Costs incurred related to warranty claims ....         (785)            (509)
                                                     -------          -------
Balance at end of year ........................      $ 1,065          $   971
                                                     =======          =======

8. SHORT-TERM CREDIT FACILITIES, LONG-TERM DEBT AND SUBORDINATED NOTE

Short-term credit facilities are summarized as follows:

                                       JULY 28, 2007    JULY 29, 2006
                                       -------------    -------------
Revolving lines of credit:
 Domestic .......................           $ --           $2,672
 Foreign ........................             --            3,287
                                            ----           ------

                                            $ --           $5,959
                                            ====           ======

Long-term debt was comprised of the following:

                                                   JULY 28, 2007   JULY 29, 2006    INTEREST RATE
                                                   -------------   -------------  ----------------
                                                                                  AT JULY 28, 2007
                                                                                  ----------------
Domestic term loan .............................     $  --           $ 1,817
Domestic subordinated note .....................        --             2,415
Foreign capital lease obligation ...............       2,650           2,800          5.0%
Foreign credit facilities ......................       2,699             324          Euribor + 1.3%
Foreign Italian Government loans ...............       1,135           1,334          3.4%
                                                     -------         -------
Total long term debt ...........................       6,484           8,690

Less current portion of long-term bank debt ....      (1,086)         (1,142)
Less current portion of subordinated note ......        --            (2,415)
                                                     -------         -------
Long-term debt, less current portion ...........     $ 5,398         $ 5,133
                                                     =======         =======



                                      F-11


On August 1, 2005, the Company  entered into a three-year  revolving  credit and
term loan facility with North Fork Business  Capital (the "North Fork Facility")
and repaid its prior  facility.  The North Fork  Facility  provided for a $6,000
formula based revolving credit facility based on the Company's eligible accounts
receivable and inventories as defined in the credit agreement.  In addition, the
Company  borrowed $2,000 under a term loan facility secured by the Company's Bay
Shore, New York building. Interest on the revolving credit borrowings is payable
at prime plus 0.5% or  alternatively  at a LIBOR rate plus 2.5%. The $2,000 term
loan was repayable in 36 monthly  installments  of $17 with a balloon payment of
the remaining balance due at the maturity in 2008. Interest on the term loan was
payable  monthly at prime plus 0.75% or a LIBOR rate plus 2.75%.  As of July 28,
2007, the Company had approximately  $9,000 of availability under the North Fork
Facility,  of which North Fork has reserved $1,000 against  possible  litigation
settlements. The term loan was extinguished and the revolver was paid down to $0
with a portion  of the  proceeds  received  from a March  2007  Rights  Offering
described  below.  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 US credit facility in
substantially all of its accounts  receivable,  inventories,  property plant and
equipment,  other assets and  intellectual  property in the US as well as 66% of
the outstanding stock of its Italian subsidiary, Villa (until a late fiscal 2007
amendment).

As  of  the  end  of  the  fourth  quarter  of  fiscal  2006,  the  Company  was
non-compliant with the following covenants:  the Adjusted US Earnings,  Adjusted
Earnings,  Senior US Debt Ratio and Fixed Charge  Coverage Ratio covenants under
the North Fork Facility,  due to the lower than anticipated  performance  during
fiscal 2006. On October 25, 2006, the Company and North Fork signed an amendment
to the facility  that waived the  non-compliance  with these  covenants  for the
fourth  quarter of fiscal 2006 and adjusted the  covenant  levels going  forward
through the maturity of the credit facility. In addition, the amendment reversed
$300 of a sinking fund reserved for the March 2007 maturity of the  subordinated
shareholder  notes and eliminated  additional  sinking fund reserves  provisions
related to the subordinated notes.

As of the end of the first quarter of fiscal 2007, the Company was non-compliant
with the tangible net worth covenant under the North Fork Facility.  On December
6, 2006, North Fork waived the  non-compliance  with this covenant for the first
quarter of fiscal 2007 and adjusted the covenant  levels going  forward  through
the maturity of the credit facility.

As of the end of fiscal 2007,  the Company was in compliance  with all covenants
under the North Fork Facility.

On June 1, 2007, the North Fork Facility was amended and restated. The amendment
increases  the  revolving  credit  facility  to a maximum  amount of $7,500  and
provides a capital expenditure loan facility up to $1,500.  Other changes to the
terms and conditions of the original loan agreement  include 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.

The Company  received a dividend  from its Villa  subsidiary  in October 2006 of
approximately  $1,560 which was used to pay down amounts  outstanding  under the
North Fork facility, in accordance with provisions of the facility.

The Company's Villa subsidiary  maintains short term credit facilities which are
renewed annually with Italian banks.  Currently,  these facilities are not being
utilized  and the balance due at July 28,  2007 is $0.  Interest  rates on these
facilities are variable and currently range from 3.7-13.75%.

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.  Interest  payable is at Euribor 3 months plus 1.3 points,
currently  5.475%.  The spread may be reduced to 1.04 points upon  completion of
the project if  objectives  are  achieved.  The note is repayable  over a 7 year
term,  with  reimbursement  starting  in  September  2008.  The note  contains a
financial covenant which provides that the net equity of Villa cannot fall below
5.0 million Euros. This covenant could limit Villa's ability to pay dividends to
the US parent company in the event of future losses,  future  dividends or other
events should cause Villa's equity to fall below the defined level.

In December  2006,  Villa  entered  into a 1.0 million  Euro loan with  interest
payable at Euribor 3 months  plus 0.95  points,  currently  5.125%.  The loan is
repayable in 4 years.

Villa was party to a 1.6 million Euro loan which was extinguished in March 2007.
Two final instalments for a total of 0.3 million Euro were repaid in fiscal year
2007.

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 2007, total principal due
is 2.3 million Euro. Villa manufacturing  facility is subject to a capital lease
obligation  which  matures  in 2011  with an  option  to  purchase.  Villa is in
compliance with all related financial  covenants under these short and long-term
financings.


                                      F-12


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 $2,000 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 $1,500. 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 obligations as follows:

                                                           CAPITAL
FISCAL YEARS                                     DEBT       LEASE         TOTAL
------------------------------------------     -------     -------      -------
2008 .....................................     $   698     $   555      $ 1,253
2009 .....................................         978         555        1,533
2010 .....................................         990         555        1,545
2011 .....................................         629         418        1,047
2012 .....................................         270        --            270
2013 and beyond ..........................         269        --            269
Purchase option ..........................        --         1,046        1,046
                                               -------     -------      -------
Total payments ...........................       3,834       3,129        6,963
Less: amount representing interest .......        --          (479)        (479)
                                               -------     -------      -------
Total ....................................     $ 3,834     $ 2,650      $ 6,484
                                               =======     =======      =======

9. 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 2007, 2006 or 2005.

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 2% of annual salary,  and recorded a related  expense of
$20, $106 and $118 for fiscal years 2007, 2006 and 2005, respectively.

The Company also had a defined benefit plan, which was frozen effective February
1,  1986.  As of  July  31,  2004,  the  Company  had a  minimum  liability  and
corresponding debit in accumulated other comprehensive income to account for the
unfunded  status of its defined  benefit plan,  in accordance  with SFAS No. 87,
Employers'  Accounting for Pensions.  During fiscal 2005, the Company applied to
the Pension Benefit Guaranty Corp and to the IRS for a determination  letter and
approval to  terminate  this plan.  In the fourth  quarter of fiscal  2005,  the
Company  recognized a related non-cash charge of approximately $500 to write off
the accumulated other  comprehensive  income on its balance sheet in recognition
of the formal  decision  to  terminate  the plan.  In  preparation  for the plan
termination,  during  fiscal 2005 the Company  fully  funded the  expected  cash
disbursement  of  $200.  The  Company  received  the  IRS  determination  letter
approving the final settlement  during the second quarter of fiscal 2006 and the
plan fully paid out all of the plan participants in March 2006.

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 $3,127 and $2,787 at July 28, 2007 and July
29, 2006,  respectively.  Provisions for employee  termination  indemnities were
$357, $401 and $412 for fiscal years 2007, 2006 and 2005, respectively.

10. 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 and litigation settlement 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.


                                      F-13


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.  The  Balance  Sheet  information
presented below and Income  Statement  related  disclosure below for all periods
presented  exclude  the  results  of the DHV  division  due to  this  division's
classification  as a discontinued  operation at July 31, 2004 and the subsequent
disposal on October 31, 2004.

Selected financial data of these segments are as follows:

                                                        MEDICAL     POWER
                         FISCAL YEAR ENDED              SYSTEMS   CONVERSION
                           JULY 28, 2007                 GROUP       GROUP       OTHER       TOTAL
----------------------------------------------------   ---------   ---------   ---------    ---------
Net sales to external customers ....................   $  90,979   $  13,188   $    --      $ 104,167
Cost of sales ......................................      70,879       8,271        --         79,150
                                                       ---------   ---------   ---------    ---------
Gross margin .......................................      20,100       4,917        --         25,017
                                                       ---------   ---------   ---------    ---------
Selling, general and administrative ................      10,635       2,476       1,479       14,590
Research and development ...........................       2,013        --          --          2,013
Litigation settlement costs ........................        --          --          --           --
                                                       ---------   ---------   ---------    ---------
  Total operating expenses .........................      12,648       2,476       1,479       16,603
                                                       ---------   ---------   ---------    ---------
Operating income (loss) ............................   $   7,452   $   2,441   $  (1,479)       8,414
                                                       ---------   ---------   ---------
Interest expense ...................................                                             (991)
Other income (expense) .............................                                              (54)
                                                                                            ---------
Income from continuing operations, before income
  taxes and minority interest ......................                                        $   7,369
                                                                                            =========
Depreciation .......................................   $     704   $     165   $       3    $     872
Amortization .......................................          27        --          --             27
Segment assets .....................................      60,658       5,014         668       66,340
Capital 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.


                                                        MEDICAL     POWER
                         FISCAL YEAR ENDED              SYSTEMS   CONVERSION
                           JULY 29, 2006                 GROUP       GROUP       OTHER       TOTAL
----------------------------------------------------   ---------   ---------   ---------    ---------
Net sales to external customers ....................   $ 70,287    $12,727     $   --       $ 83,014
Cost of sales ......................................     55,453       8,203        --         63,656
                                                       --------    --------    --------     --------
Gross margin .......................................     14,834       4,524        --         19,358
                                                       --------    --------    --------     --------
Selling, general and administrative ................      9,467       2,148       2,004       13,619
Research and development ...........................      1,562        --          --          1,562
Litigation settlement costs ........................        252         (55)        500          697
                                                       --------    --------    --------     --------
 Total operating expenses ..........................     11,281       2,093       2,504       15,878
                                                       --------    --------    --------     --------
Operating income (loss) ............................   $  3,553    $  2,431    $ (2,504)       3,480
                                                       ========     ========   ========
Interest expense ...................................                                          (1,311)
Other expense ......................................                                             (34)
                                                                                            --------
Income from continuing operations, before income
  taxes  and minority interest .....................                                        $  2,135
                                                                                            ========
Depreciation .......................................   $    793    $    193    $      2     $    988
Amortization .......................................         38        --          --             38
Segment assets .....................................     43,630       5,055         468       49,153
Capital expenditures ...............................        695          66           4          765

Inter-segment  sales  were  $149  for the  fiscal  year  ended  July  29,  2006.
Approximately  $35,481 of Medical  Systems  Group  assets are  located in Italy,
including $10,249 of long-lived assets.


                                      F-14


                                                        MEDICAL     POWER
                         FISCAL YEAR ENDED              SYSTEMS   CONVERSION
                           JULY 30, 2005                 GROUP       GROUP       OTHER       TOTAL
----------------------------------------------------   ---------   ---------   ---------    ---------
Net sales to external customers ....................   $ 70,792    $ 14,080    $   --       $ 84,872
Cost of sales ......................................     54,288       8,303        --         62,591
                                                       --------    --------    --------     --------
Gross margin .......................................     16,504       5,777        --         22,281
                                                       --------    --------    --------     --------
Selling, general and administrative ................      9,261       2,630       4,561       16,452
Research and development ...........................      1,636        --          --          1,636
Litigation settlement costs ........................       --           300        --            300
                                                       --------    --------    --------     --------
  Total operating expenses .........................     10,897       2,930       4,561       18,388
                                                       --------    --------    --------     --------
Operating income (loss) ............................   $  5,607    $  2,847    $ (4,561)       3,893
                                                       ========    ========     ========
Interest expense ...................................                                          (1,350)
Other income .......................................                                              97
                                                                                            --------
Loss from continuing operations, before income
  taxes and minority interest ......................                                        $  2,640
                                                                                            ========
Depreciation .......................................   $    850    $    247    $    141     $  1,238
Amortization .......................................         65        --          --             65
Segment assets .....................................     32,731       6,008       2,037       40,776
Capital expenditures ...............................        736         151           4          891


Inter-segment  sales  were  $182  for the  fiscal  year  ended  July  30,  2005.
Approximately  $24,704 of Medical  Systems  Group  assets are  located in Italy,
including $5,455 of long-lived assets.


MAJOR  CUSTOMERS AND EXPORT SALES - 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 at July 28, 2007. For
fiscal  years  ended July 29, 2006 and July 30,  2005,  no  individual  customer
accounted for greater than 10% of total revenue or accounts receivable.

Foreign sales were 63%, 64% and 55% of the Company's  consolidated  net sales in
fiscal  years  ended  July  28,  2007,   July  29,  2006,  and  July  30,  2005,
respectively. Net sales by geographic areas were:

                                               JULY 28, 2007             JULY 29 2006           JULY 30, 2005
                                           ---------------------   ----------------------   ---------------------
United States ........................     $ 38,397         37%     $ 29,979         36%     $ 38,785         45%
Canada ...............................          869          1%          158         -%           497          1%
Europe ...............................       48,129         46%       37,078         45%       32,571         38%
Far East .............................        7,603          7%        6,298          8%        8,819         11%
Mexico, Central and South America ....        3,117          3%        6,750          8%        1,976          2%
Africa, Middle East and Australia ....        6,052          6%        2,751          3%        2,224          3%
                                           --------   --------      --------   --------      --------   --------
                                           $104,167        100%     $ 83,014        100%     $ 84,872        100%
                                           ========   ========      ========   ========      ========   ========


Revenues  are  attributable  to  geographic  areas based on the  location of the
customers.

11. 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.

In addition,  on January 22,  2007,  the Company  entered  into a  stockholders'
rights  plan (the  "Rights  Plan").  The  Rights  Plan  provides  for a dividend


                                      F-15


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 - In September 2000, the Board of Directors  approved an
additional repurchase of $3,000 of the Company's common stock bringing the total
authorized  to $7,500.  The  Company  has not  purchased  any shares  under this
program  since fiscal 2001,  when 11,500  shares were  purchased for $108. As of
July 28, 2007, 489,806 shares had been purchased by the Company for $4,502 under
this Stock Buy-Back Program. These shares are included in Treasury Shares on the
accompanying Balance Sheet.

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 2007 and
2006 are as follows:

                                                   2007            2006
                                               ---------------------------
Estimated life (in years) ....................        7              7
Volatility rate...............................   63%-74%           62%
Risk free interest rate.......................   4.44%-5.16%    4.74%-4.93%
Dividend rate.................................       0%             0%
Forfeiture rate...............................       2%             0%
Weighted average fair value...................      1.16           1.58
Recorded compensation expense.................   $   219        $  141

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.


                                      F-16


    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.

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.
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 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:

                                                       JULY 28, 2007             JULY 29, 2006               JULY 30, 2005
                                                 -----------------------   -------------------------   -------------------------
                                                                WEIGHTED                  WEIGHTED                    WEIGHTED
                                                                AVERAGE                   AVERAGE                     AVERAGE
                                                   SHARES       EXERCISE     SHARES       EXERCISE       SHARES       EXERCISE
                                                 OUTSTANDING      PRICE    OUTSTANDING      PRICE      OUTSTANDING     PRICE
                                                 -----------   ---------   -----------   -----------   -----------   -----------
Granted and outstanding, beginning of year ....   1,545,996    $   3.93     1,662,494    $   3.81       2,133,415     $   3.15
Granted .......................................     469,000        1.73       100,000        2.66         150,000         2.70
Exercised .....................................    (101,000)       1.69       (99,000)       2.09        (248,420)        1.12
Cancelled and forfeited .......................        --           --       (117,498)       2.56        (372,501)        1.41
                                                  ---------                 ---------                   ---------
Outstanding at end of year ....................   1,913,996        3.51     1,545,996        3.93       1,662,494         3.81
                                                  =========                 =========                   =========
Exercisable at end of year ....................   1,494,743        4.00     1,477,243        4.00       1,508,742         3.92


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 July 28,  2007 the  distribution  of stock  option  exercise  prices is as
follows:

                           OPTIONS OUTSTANDING          OPTIONS EXERCISABLE
                        --------------------------------------------------------
                                        WEIGHTED                      WEIGHTED
                                         AVERAGE                      AVERAGE
     EXERCISE             NUMBER OF     EXERCISE       SHARES        EXERCISE
    PRICE RANGE         OPTION SHARES     PRICE      EXERCISABLE       PRICE
---------------------   -------------   ----------   ------------   ------------
$1.00 - $3.34             1.223,288      $   1.76       804,835       $   1.75
$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              156,677          8.91       156,677           8.91
                          ---------      --------     ---------       --------
                          1,913,996      $   3.51     1,494,743       $   4.00
                          =========      ========     =========       ========


At July 28, 2007,  the  aggregate  intrinsic  value of options  outstanding  and
options exercisable was $786 and $538, 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-17


Future  compensation  expense related to the vesting of employee options granted
by July 28, 2007 is expected to be $230 in 2008, $198 in 2009 and $37 in 2010.

Cash proceeds and intrinsic  value related to total stock options  exercised are
provided in the following table:

YEAR ENDED                             JULY 28, 2007   JULY 29, 2006   JULY 30, 2005
                                       -------------   -------------   -------------
Proceeds from stock options exercised       $  170          $  238          $  278
Intrinsic Value                                 57             137             367

An expense was recognized for the fair value of options granted to non-employees
in the amount of $39 in fiscal year 2005.

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 2007, 2006 and 2005, 366,854,  1,574 and 58,006,  respectively,  of these
warrants  were  exercised  for cash proceeds to the Company of $551, $2 and $87,
respectively. As of July 28, 2007, 573,516 of these warrants were outstanding.

12. INCOME (LOSS) PER SHARE

                                                                                     FOR FISCAL YEARS ENDED
                                                                         -----------------------------------------------
                                                                         JULY 28, 2007    JULY 29, 2006    JULY 30, 2005
                                                                         -------------    -------------    -------------
Numerator:
  Net income..........................................................    $     3,816      $        94      $       392
Denominator:
   Weighted average shares outstanding for basic income per share.....     16,154,552       11,244,421       10,490,178
   Effect of dilutive securities......................................        300,673          832,075          974,540
                                                                          -----------      -----------      -----------
   Weighted average shares outstanding for diluted income per share...     16,455,225       12,076,496       11,464,718
                                                                          ===========      ===========      ===========
Income per basic common share.........................................    $      0.24      $      0.01      $      0.04
                                                                          ===========      ===========      ===========
Income per diluted common share.......................................    $      0.23      $      0.01      $      0.03
                                                                          ===========      ===========      ===========


Common  shares  outstanding  for the fiscal years ended July 28, 2007,  July 29,
2006 and July 30, 2005, were reduced by 622,770 shares of treasury stock.

The computation of diluted shares outstanding does not include the effect of the
assumed exercise of 1,414,978,  1,180,389 and 545,622 for employee stock options
outstanding as of July 28, 2007, July 29, 2006 and July 30, 2005,  respectively,
and 0, 474,113 and 428,919  warrants to purchase  Company common stock for those
years because the effect of their assumed exercise would be anti-dilutive.

13. INCOME TAXES

The Company's  consolidated income from continuing  operations before income tax
benefit and minority  interest  for fiscal years 2007,  2006 and 2005 of $7,369,
$2,135 and $2,640  reflects  foreign pre-tax net income of $8,180,  $3,620,  and
$3,842 for fiscal years 2007,  2006, and 2005,  respectively  and a U.S. pre-tax
loss of $811, $1,485 and $1,202, respectively.


                                      F-18



Provision for income taxes consists of the following:

                                               FOR FISCAL YEARS ENDED
                                   ---------------------------------------------
                                   JULY 28, 2007   JULY 29, 2006   JULY 30, 2005
                                   -------------   -------------   -------------
CURRENT TAX EXPENSE:
 Foreign ........................      $ 3,410         $ 1,739         $ 1,640
 State and local ................            5              35              42
DEFERRED PROVISION (BENEFIT):
 Federal ........................         --              --               101
 State and local ................         --              --              --
 Foreign ........................          138             (16)            271
                                       -------         -------         -------
NET PROVISION ...................      $ 3,553         $ 1,758         $ 2,054
                                       =======         =======         =======


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

                                                                              FOR FISCAL YEARS ENDED
                                                                  -----------------------------------------------
                                                                  JULY 28, 2007    JULY 29, 2006    JULY 30, 2005
                                                                  -------------    -------------    -------------
Statutory Federal income tax rate .............................       34.0%             34.0%            34.0%
State Tax, less Federal tax effect ............................        0.1%              1.6%             6.2%
Foreign taxes .................................................        9.2%              8.2%            72.4%
Valuation allowance adjustment ................................       (1.9)%           (98.5)%          (34.8)%
Provision for undistributed earnings of foreign subsidiary ....        7.2%            138.8%             --
Other .........................................................       (0.4)%            (1.7)%            --
                                                                      ====              ====             -----
Effective tax rate ............................................       48.2%             82.4%            77.8%
                                                                      ====              ====             ====



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

                                                              JULY 28, 2007   JULY 29, 2006
                                                              -------------   -------------
Deferred income tax assets:
  Federal net operating loss carry forward ...............       $ 15,420        $ 15,603
  State tax credits and operating loss carry forwards ....          2,223             639
  Reserve for inventory obsolescence .....................          1,417           1,203
  Allowances and reserves not currently deductible .......            933           1,043
  Amortization ...........................................            197             439
  Stock based compensation ...............................            430             315
  Other ..................................................             55            --
                                                                 --------        --------
    Gross deferred income tax assets .....................         20,675          19,242
Deferred income tax liabilities:
    Undistributed earnings of foreign subsidiary .........         (2,278)         (2,359)
    Fixed assets .........................................           (383)           (239)
   Other .................................................           --               (85)
                                                                 --------        --------
   Gross deferred income tax liabilities .................         (2,661)         (2,683)
Less: valuation allowance ................................        (17,295)        (15,702)
                                                                 --------        --------
Net deferred income tax assets ...........................       $    719        $    857
                                                                 ========        ========

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

                                                    JULY 28, 2007  JULY 29, 2006
                                                    -------------  -------------

Deferred income tax assets - non-current .........       1,011         $ 1,159
Deferred income tax liabilities -- non-current ...        (292)           (302)
                                                       -------         -------
                                                       $   719         $   857
                                                       =======         =======


DEFERRED INCOME TAX ASSET

The Company  accounts for deferred income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," whereby it recognizes  deferred income tax assets


                                      F-19


and liabilities for temporary  differences between its financial reporting basis
and income tax  reporting  basis and for  income  tax net  operating  loss carry
forwards.

The Company periodically assesses the realization of its net deferred income tax
assets. This evaluation is primarily based upon current operating results in the
taxing  jurisdiction and expectations of future operating  results in the taxing
jurisdiction.  A valuation allowance is recorded if the Company believes its net
deferred  income tax assets will not be realized.  The  Company's  assessment is
based  on its  expectation  of the more  likely  than not  result.  Because  the
Company's U.S. legal entities  reported a loss in each of the fiscal years 2005,
2006 and 2007 and based on  expectations  of future  results from the U.S. legal
entities,  the Company continues to carry a 100% valuation  allowance on its net
U.S. deferred tax asset.

At July 28, 2007,  the Company has federal net operating  loss carry forwards of
$45,350 that expire at various times between July, 2020 and July, 2025.

The Company  recorded a tax provision  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 tax asset will be realized.

The Company has also concluded  that,  given its history of receiving  dividends
from its foreign  subsidiary,  Villa,  it cannot assume that the income of Villa
will be permanently reinvested.  As required by SFAS 109, the Company recorded a
deferred tax liability related to the undistributed  earnings of Villa. However,
it can make no assurances that Villa will generate profits in the future or that
future dividends will be received.

In 2006, the FASB issued  Interpretation  No. 48,  Accounting for Uncertainty in
Income Taxes.  FIN 48 requires  reporting of taxes based on tax positions  which
meet a more likely than not standard and which are measured at their more likely
than not  settlement.  Currently,  reporting  of  taxes  is based on tax  return
reporting  positions,  which do not  require a more  likely  than not  standard.
Differences  between  financial  and tax  reporting  which do not meet  this new
threshold are required to be recorded as unrecognized tax benefits.  FIN 48 also
provides  guidance  on the  presentation  of tax  obligations  in the  financial
statements and the  recognition of potential IRS interest and penalties.  FIN 48
is effective for the Company's 2008 fiscal year.  The Company  believes that FIN
48 will not have a material impact on its financial statements.

14. COMMITMENTS AND CONTINGENCIES

a.  EMPLOYMENT  MATTERS - The Company had an  employment  agreement  with Samuel
Park, the previous Chief Executive  Officer ("CEO"),  for the period May 1, 2001
to April 30, 2004. The employment agreement provided for certain payments in the
event of a change in the  control of the  Company.  On  October  10,  2003,  the
Company announced the appointment of Walter F. Schneider as President and CEO to
replace Mr. Park, effective as of such date. As a result, the Company recorded a
charge of $0.2  million  during the first  quarter of fiscal  2004 to accrue the
balance remaining under Mr. Park's employment agreement.

   The Company's  employment  agreement with Mr. Park provided for payments upon
certain  changes of control.  The  Company's  Board of Directors  elected at the
Company's Annual Meeting of Shareholders  held on May 29, 2003, had reviewed the
"change of control",  provisions regarding payments totaling up to approximately
$1.8 million under the employment agreement between the Company and Mr. Park. As
a result of this  review  and based  upon,  among  other  things,  the advice of
special  counsel,  the  Company's  Board of  Directors  has  determined  that no
obligation to pay these amounts has been triggered.  Prior to his departure from
the Company on October 10,  2003,  Mr. Park orally  informed  the Company  that,
after reviewing the matter with his counsel,  he believed that the obligation to
pay these amounts has been triggered.  On October 27, 2003, the Company received
a letter from Mr.  Park's  counsel  demanding  payment of certain sums and other
consideration  pursuant to the  Company's  employment  agreement  with Mr. Park,
including  these change of control  payments.  On November 17, 2003, the Company
filed a complaint in the United States District Court,  Southern District of New
York, against Mr. Park seeking a declaratory  judgment that no change in control
payment  was or is due to Mr.  Park,  and that an  amendment  to the  employment
contract with Mr. Park regarding  advancement and reimbursement of legal fees is
invalid  and  unenforceable.  Mr.  Park  answered  the  complaint  and  asserted
counterclaims  seeking  payment from the Company  based on his  position  that a
"change in  control"  occurred  in June 2003.  Mr.  Park is also  seeking  other
consideration he believes he is owed under his employment agreement. The Company
filed a reply to Mr. Park's counterclaims  denying that he is entitled to any of
these payments. Discovery in this matter was conducted and completed.  Following
discovery,  the Company and Mr. Park filed  motions for summary  judgment on the
issues  related  to  change  in  control  and the  amendment  to the  employment
agreement,   which   motions  have  been  fully   submitted  to  the  Court  for
consideration.  To date,  no  decision  has been  issued  by the  Court on these
motions.  If Mr.  Park  prevails  on his  claims and the  payments  he seeks are
required to be paid in a lump sum,  these  payments may have a material  adverse
effect on the Company's liquidity.  It is not possible to predict the outcome of
these claims.  However,  the Company's  Board of Directors does not believe that


                                      F-20


such a claim is  reasonably  likely  to  result in a  material  decrease  in the
Company's  liquidity in the foreseeable  future. The Company has not recorded an
accrual for any potential settlement of this claim as it has no basis upon which
to estimate either the outcome or amount of loss, if any.

   On June 28,  2002,  Jeffrey  N.  Moeller,  the  former  Director  of  Quality
Assurance  and  Regulatory  Affairs of Del  Medical,  commenced an action in the
Circuit  Court of Cook County,  Illinois,  against the Company,  Del Medical and
Walter  Schneider,  the former  President  of Del  Medical.  In the most current
iteration of this pleading,  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.  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,  addressed to alleged
interference  with his  relationship  with  prospective  employers.  The parties
appeared for  mediation in January  2007 but the  mediation  did not result in a
disposition of the action.  Accordingly, it appears that the action will proceed
to trial.  A status  conference  before the Court was held  March 8,  2007,  and
subsequently,  a trial date had been  scheduled  for October 1, 2007.  The trial
date  has  been  postponed  due to  the  unabailability  of a  witness  for  the
plaintiff. A trial date has been scheduled for January 28, 2008. The Company and
Del Medical  intend to defend  vigorously  against  Mr.  Moeller's  claims.  Mr.
Moeller is seeking $2.37 million in damages  consisting of alleged  income loss,
including salary and benefits,  and the present value of his alleged lost income
and  benefits  in the future  after lump sum tax  adjustments.  The  Company has
recorded an accrual of $0.1  million  relating  to  potential  liability  in the
settlement of these claims.

b. OTHER LITIGATION  MATTERS - 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,  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.  The Company's RFI  subsidiary is continuing to ship products
to the U.S. Government as well as to its commercial customers.

In  addition,  the Company is a  defendant  in several  other  legal  actions in
various US and foreign  jurisdictions  arising  from 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

c. LEASE  COMMITMENTS  - The Company  leases  facilities  for its  manufacturing
operations  with  expiration  dates ranging from 2007 through 2012. In addition,
the Company has  various  office  equipment  and auto  leases  accounted  for as
operating  leases.  The future minimum  annual lease  commitments as of July 28,
2007 are as follows:

    FISCAL YEARS                                                      AMOUNT
    2008 ....................................................          $329
    2009 ....................................................           260
    2010 ....................................................            95
    2011-2012 ...............................................            75
                                                                       ----
      Total .................................................          $759
                                                                       ====

    Rent expense for fiscal years 2007,  2006 and 2005 was $396,  $300 and $336,
respectively.

15. SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

   YEAR ENDED JULY 28, 2007:

                                                                       QUARTER
                                                    FIRST        SECOND          THIRD        FOURTH
                                                ------------   -----------   -----------   ------------
Net sales ...................................   $   19,286     $   26,771    $   27,122    $   30,988
Gross margin ................................   $    4,011     $    6,749    $    6,025    $    8,232
Income (loss) from continuing operations ....   $     (487)    $    1,082    $    1,056    $    2,165
Discontinued operation ......................   $       --     $      --     $      --     $     --


                                      F-21


Net income (loss) ...........................   $     (487)    $    1,082    $    1,056    $    2,165
Basic earnings per share:
Income (loss) from continuing operations ....   $    (0.04)    $     0.09    $     0.06    $     0.09
Discontinued operation ......................   $      --      $      --     $      --     $     --
Net income (loss) per share .................   $    (0.04)    $     0.09    $     0.06    $     0.09
Diluted earnings per share:
Income (loss) from continuing operations ....   $    (0.04)    $     0.09    $     0.06    $     0.09
Discontinued operation ......................   $      --      $      --     $      --     $     --
Net income (loss) per share .................   $    (0.04)    $     0.09    $     0.06    $     0.09



    YEAR ENDED JULY 29, 2006

                                                                       QUARTER
                                                    FIRST        SECOND          THIRD        FOURTH
                                                ------------   -----------   -----------   ------------
Net sales ...................................   $   16,239     $   21,994    $   20,804    $   23,977
Gross margin ................................   $    3,735     $    5,214    $    4,502    $    5,907
Income (loss) from continuing operations ....   $     (483)    $      (60)   $      (73)   $      885
Discontinued operation ......................   $      --      $      --     $      --     $     (175)
Net income (loss) ...........................   $     (483)    $      (60)   $      (73)   $      710
Basic earnings per share:
Income (loss) from continuing operations ....   $    (0.05)    $    (0.01)   $    (0.01)   $     0.08
Discontinued operation ......................   $      --      $      --     $      --     $    (0.01)
Net income (loss) per share .................   $    (0.05)    $    (0.01)   $    (0.01)   $     0.07
Diluted earnings per share:
Income (loss) from continuing operations ....   $    (0.05)    $    (0.01)   $    (0.01)   $     0.07
Discontinued operation ......................   $      --      $      --     $      --     $    (0.01)
Net income (loss) per share .................   $    (0.05)    $    (0.01)   $    (0.01)   $     0.06



                                                                F-22`