##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended March 31, 2010

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:
000-30241





DDi Corp.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 06-1576013                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

1220 N. Simon Circle

Anaheim, California 92806

(Address of principal executive offices) (Zip code)

(714) 688-7200

(Registrants telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act). (check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

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

As of May 7, 2010, DDi Corp. had 19,855,634 shares of common stock, par value $0.001 per share, outstanding.









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##### Table of Contents

DDi Corp.

Form 10-Q for the Quarterly Period Ended March 31, 2010

TABLE OF CONTENTS



|                               |  |                                                                                                    |  |        
|------------------------------ |  | -------------------------------------------------------------------------------------------------- |  | -------
|                               |  |                                                                                                    |  | PageNo.
|PART I  FINANCIAL INFORMATION |  |                                                                                                   
|                               |  |                                                                                                   
|Item 1.                        |  | Financial Statements (Unaudited):                                                                  |  |        
|                               |  |                                                                                                   
|                               |  | Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009                   |  | 3      
|                               |  |                                                                                                   
|                               |  | Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009     |  | 4      
|                               |  |                                                                                                   
|                               |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 |  | 5      
|                               |  |                                                                                                   
|                               |  | Notes to Condensed Consolidated Financial Statements                                               |  | 6      
|                               |  |                                                                                                   
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |  | 12     
|                               |  |                                                                                                   
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                         |  | 17     
|                               |  |                                                                                                   
|Item 4.                        |  | Controls and Procedures                                                                            |  | 17     
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                   
|                               |  |                                                                                                   
|Item 1.                        |  | Legal Proceedings                                                                                  |  | 18     
|                               |  |                                                                                                   
|Item 1A.                       |  | Risk Factors                                                                                       |  | 18     
|                               |  |                                                                                                   
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                        |  | 18     
|                               |  |                                                                                                   
|Item 3.                        |  | Defaults Upon Senior Securities                                                                    |  | 18     
|                               |  |                                                                                                   
|Item 4.                        |  | (Removed and Reserved)                                                                             |  | 18     
|                               |  |                                                                                                   
|Item 5.                        |  | Other Information                                                                                  |  | 18     
|                               |  |                                                                                                   
|Item 6.                        |  | Exhibits                                                                                           |  | 18     
|                               | 
|Signatures                     |  | 19                                                                                                



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

DDi Corp.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)



|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                       |  | March 31,2010 |          |   | December 31,2009 |  
|ASSETS                                                                                                                                                 |  |               |          |   |                  |   |          |  
|Current assets:                                                                                                                                        |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                              |  | $             | 12,171   |   |                  | $ | 19,392   |  
|Accounts receivable, net                                                                                                                               |  |               | 45,469   |   |                  |   | 35,280   |  
|Inventories                                                                                                                                            |  |               | 21,094   |   |                  |   | 19,342   |  
|Prepaid expenses and other current assets                                                                                                              |  |               | 1,104    |   |                  |   | 1,265    |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Total current assets                                                                                                                                   |  |               | 79,838   |   |                  |   | 75,279   |  
|Property, plant and equipment, net                                                                                                                     |  |               | 39,648   |   |                  |   | 40,175   |  
|Intangible assets, net                                                                                                                                 |  |               | 1,184    |   |                  |   | 1,374    |  
|Goodwill                                                                                                                                               |  |               | 3,485    |   |                  |   | 2,986    |  
|Other assets                                                                                                                                           |  |               | 723      |   |                  |   | 659      |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Total assets                                                                                                                                           |  | $             | 124,878  |   |                  | $ | 120,473  |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                   |  |               |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                   |  |               |          |   |                  |   |          |  
|Revolving credit facility                                                                                                                              |  | $             |         |   |                  | $ | 4,227    |  
|Current maturities of long-term debt                                                                                                                   |  |               | 1,729    |   |                  |   | 1,727    |  
|Accounts payable                                                                                                                                       |  |               | 22,782   |   |                  |   | 13,939   |  
|Accrued expenses and other current liabilities                                                                                                         |  |               | 13,317   |   |                  |   | 17,242   |  
|Income taxes payable                                                                                                                                   |  |               | 1,509    |   |                  |   | 1,974    |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Total current liabilities                                                                                                                              |  |               | 39,337   |   |                  |   | 39,109   |  
|Long-term debt                                                                                                                                         |  |               | 10,919   |   |                  |   | 11,246   |  
|Other long-term liabilities                                                                                                                            |  |               | 747      |   |                  |   | 810      |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Total liabilities                                                                                                                                      |  |               | 51,003   |   |                  |   | 51,165   |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Commitments and contingencies (Note 13)                                                                                                                |  |               |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                  |  |               |          |   |                  |   |          |  
|Common stock  $0.001 par value, 190,000 shares authorized, 22,803 shares issued and 19,856 shares outstanding at
March 31, 2010 and December 31, 2009 |  |               | 23       |   |                  |   | 23       |  
|Additional paid-in-capital                                                                                                                             |  |               | 247,369  |   |                  |   | 247,245  |  
|Treasury stock, at cost  2,947 shares held in treasury at March 31, 2010 and December 31, 2009                                                        |  |               | (16,323  | ) |                  |   | (16,323  | )
|Accumulated other comprehensive income                                                                                                                 |  |               | 1,054    |   |                  |   | 410      |  
|Accumulated deficit                                                                                                                                    |  |               | (158,248 | ) |                  |   | (162,047 | )
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                             |  |               | 73,875   |   |                  |   | 69,308   |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                             |  | $             | 124,878  |   |                  | $ | 120,473  |  
|                                                                                                                                                       |  |               |          |   |                  |   |          |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

DDi Corp.

Condensed Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)



|                                                        |  |                              |        |   |      |   |        |  
|------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                        |  | Three Months Ended March 31, |       
|                                                        |  | 2010                         |        |   | 2009 |  
|Net sales                                               |  | $                            | 64,665 |   |      | $ | 39,275 |  
|Cost of goods sold                                      |  |                              | 50,679 |   |      |   | 32,015 |  
|                                                        |  |                              |        |   |      |   |        |  
|Gross profit                                            |  |                              | 13,986 |   |      |   | 7,260  |  
|Operating expenses:                                     |  |                              |        |   |      |   |        |  
|Sales and marketing                                     |  |                              | 4,507  |   |      |   | 2,905  |  
|General and administrative                              |  |                              | 4,423  |   |      |   | 3,424  |  
|Amortization of intangible assets                       |  |                              | 190    |   |      |   | 190    |  
|                                                        |  |                              |        |   |      |   |        |  
|Operating income                                        |  |                              | 4,866  |   |      |   | 741    |  
|Interest expense                                        |  |                              | 459    |   |      |   | 198    |  
|Interest income                                         |  |                              | (17    | ) |      |   | (56    | )
|Other expense (income), net                             |  |                              | 216    |   |      |   | (45    | )
|                                                        |  |                              |        |   |      |   |        |  
|Income before income tax expense                        |  |                              | 4,208  |   |      |   | 644    |  
|Income tax expense                                      |  |                              | 409    |   |      |   | 131    |  
|                                                        |  |                              |        |   |      |   |        |  
|Net income                                              |  | $                            | 3,799  |   |      | $ | 513    |  
|                                                        |  |                              |        |   |      |   |        |  
|Net income per share:                                   |  |                              |        |   |      |   |        |  
|Basic                                                   |  | $                            | 0.19   |   |      | $ | 0.03   |  
|Diluted                                                 |  | $                            | 0.19   |   |      | $ | 0.03   |  
|Weighted-average shares used in per share computations: |  |                              |        |   |      |   |        |  
|Basic                                                   |  |                              | 19,824 |   |      |   | 19,715 |  
|Diluted                                                 |  |                              | 19,971 |   |      |   | 19,740 |  

The accompanying notes
are an integral part of these condensed consolidated financial statements.



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DDi Corp.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                            |  |                              |        |   |      |   |        |  
|------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                            |  | Three Months Ended March 31, |       
|                                                                                            |  | 2010                         |        |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |  |                              |        |   |      |   |        |  
|Net income                                                                                  |  | $                            | 3,799  |   |      | $ | 513    |  
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |                              |        |   |      |   |        |  
|Depreciation                                                                                |  |                              | 2,200  |   |      |   | 2,066  |  
|Amortization of intangible assets                                                           |  |                              | 190    |   |      |   | 190    |  
|Amortization of debt issuance costs and discount                                            |  |                              |       |   |      |   | 26     |  
|Amortization of deferred lease liability                                                    |  |                              | (115   | ) |      |   |       |  
|Non-cash stock-based compensation                                                           |  |                              | 348    |   |      |   | 620    |  
|Other                                                                                       |  |                              | 23     |   |      |   | 19     |  
|Changes in operating assets and liabilities:                                                |  |                              |        |   |      |   |        |  
|Accounts receivable                                                                         |  |                              | (9,903 | ) |      |   | (125   | )
|Inventories                                                                                 |  |                              | (2,080 | ) |      |   | (26    | )
|Prepaid expenses and other assets                                                           |  |                              | 163    |   |      |   | (7     | )
|Accounts payable                                                                            |  |                              | 8,383  |   |      |   | (832   | )
|Accrued expenses and other liabilities                                                      |  |                              | (4,496 | ) |      |   | (1,072 | )
|Income taxes payable                                                                        |  |                              | 724    |   |      |   | (1,210 | )
|                                                                                            |  |                              |        |   |      |   |        |  
|Net cash (used in) provided by operating activities                                         |  |                              | (764   | ) |      |   | 162    |  
|                                                                                            |  |                              |        |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |  |                              |        |   |      |   |        |  
|Purchases of property and equipment                                                         |  |                              | (1,286 | ) |      |   | (1,284 | )
|                                                                                            |  |                              |        |   |      |   |        |  
|Net cash used in investing activities                                                       |  |                              | (1,286 | ) |      |   | (1,284 | )
|                                                                                            |  |                              |        |   |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |  |                              |        |   |      |   |        |  
|Principal payments on long-term debt                                                        |  |                              | (515   | ) |      |   | (61    | )
|Payments of debt issuance costs                                                             |  |                              | (78    | ) |      |   |       |  
|Repayment of revolving credit facility                                                      |  |                              | (4,290 | ) |      |   |       |  
|                                                                                            |  |                              |        |   |      |   |        |  
|Net cash used in financing activities                                                       |  |                              | (4,883 | ) |      |   | (61    | )
|                                                                                            |  |                              |        |   |      |   |        |  
|Effect of exchange rate changes on cash and cash equivalents                                |  |                              | (288   | ) |      |   | 37     |  
|                                                                                            |  |                              |        |   |      |   |        |  
|Net decrease in cash and cash equivalents                                                   |  |                              | (7,221 | ) |      |   | (1,146 | )
|Cash and cash equivalents, beginning of period                                              |  |                              | 19,392 |   |      |   | 20,081 |  
|                                                                                            |  |                              |        |   |      |   |        |  
|Cash and cash equivalents, end of period                                                    |  | $                            | 12,171 |   |      | $ | 18,935 |  
|                                                                                            |  |                              |        |   |      |   |        |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1.
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of DDi Corp. and its wholly-owned subsidiaries. DDi Corp.
and its subsidiaries are referred to as the Company or DDi. The accompanying unaudited condensed financial statements include the accounts of Coretec Inc., a PCB manufacturer that was acquired by the Company on
December 31, 2009, except for the Condensed Consolidated Statements of Income and Cash Flows for the three months ended March 31, 2009. All intercompany transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes thereto contain all
adjustments necessary for a fair presentation of the financial position of the Company as of March 31, 2010 and the results of its operations and cash flows for the three months ended March 31, 2010 and 2009, and such adjustments are of a
normal recurring nature. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of results of operations to be expected for the full year.

The Company has prepared these financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such regulations, although the Company believes the
disclosures provided are adequate to prevent the information presented from being misleading. The condensed consolidated balance sheet data as of December 31, 2009 was derived from audited financial statements, but does not include all
disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP). This report on Form 10-Q for the quarter ended March 31, 2010 should be read in conjunction with the audited financial
statements presented in DDis Annual Report on Form 10-K for the year ended December 31, 2009.

Description of
Business

DDi is a leading provider of time-critical, technologically-advanced printed circuit board (PCB)
engineering and manufacturing services. The Company specializes in engineering and fabricating complex multi-layer PCBs on a quick-turn basis, with lead times as short as 24 hours. DDi has approximately 1,100 customers in various market segments
including communications and computing, military and aerospace, industrial electronics, instrumentation, medical and high-durability commercial markets. The Companys engineering capabilities and manufacturing facilities located in the United
States and Canada, together with its suppliers in Asia, enable it to respond to time-critical orders and technology challenges for its customers. DDi operates primarily in one geographical area, North America.

On December 31, 2009, the Company completed the acquisition of Coretec Inc. (Coretec), a PCB manufacturer headquartered
in Toronto, Ontario, which was previously a publicly-traded company listed on the Toronto Stock Exchange. See Note 2  Acquisition of Coretec Inc.

Recent Accounting Pronouncements

In January 2010, the FASB issued amended standards related to ASC Topic 820, Fair Value Measurements and Disclosures,that require
additional fair value disclosures. These amended standards require disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers, beginning in the first quarter of 2010. Additionally,
these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), beginning in the first quarter of 2011. The Company does not expect these
new standards to materially impact its consolidated financial statements.

NOTE 2. ACQUISITION OF CORETEC INC.

On December 31, 2009, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of Coretec
by way of a plan of arrangement under the Business Corporations Act (Ontario) (the Arrangement). As a result of the Arrangement, Coretec and its subsidiaries became wholly-owned subsidiaries of the Company. Under the Arrangement,
(i) Coretecs shareholders received Canadian Dollar (CAD) $0.38 United States Dollar (USD) ( $0.36) per Coretec common share; and (ii) holders of outstanding Coretec stock options having an exercise price less
than CAD $0.38 (USD $0.36) per share received an amount per Coretec stock option equal to the difference between the CAD $0.38 (USD $0.36) and the exercise price in respect of such Coretec stock options. The aggregate cash purchase price paid by the
Company under the Arrangement was CAD $7.0 million (USD $6.7 million). In addition, as a result of the Arrangement, DDi effectively assumed approximately CAD $16.7 million (USD $15.9 million) of Coretec debt.



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DDi Corp.

Notes to Condensed Consolidated Financial Statements(Continued)

(Unaudited)



The purchase price allocation used in the preparation of the consolidated financial
statements at December 31, 2009 was preliminary due to the continuing analyses relating to the determination of the estimated fair values of the assets acquired and liabilities assumed in the Coretec acquisition. During the first quarter, with
the addition of new operating data, we were able to update certain analyses and determine that certain inventory balances as of December 31, 2009 required adjustment to decrease the net balance by $0.4 million which resulted in an increase to
goodwill of the same amount. Management does not expect any additional adjustments upon finalization of these matters to have a material effect on the allocation.

The acquisition of Coretec was recorded using the acquisition method of accounting in accordance with the revised authoritative guidance
for business combinations.

NOTE 3. INVENTORIES

Inventories are stated at the lower of cost (determined on a first-in, first-out or average cost basis) or market and consisted of the
following (in thousands):



|                |  |               |        |                  |   |       
|--------------- |  | ------------- | ------ | ---------------- | - | ------
|                |  | March 31,2010 |        | December 31,2009
|Raw materials   |  | $             | 8,455  |                  | $ | 8,173 
|Work-in-process |  |               | 7,980  |                  |   | 6,264 
|Finished goods  |  |               | 4,659  |                  |   | 4,905 
|                |  |               |        |                  |   |       
|Total           |  | $             | 21,094 |                  | $ | 19,342
|                |  |               |        |                  |   |       

NOTE 4. REVOLVING CREDIT FACILITY

Coretec Credit Facility

In connection with the acquisition of Coretec on December 31, 2009, the Company assumed the liability for the outstanding balance on
Coretecs revolving credit line with Wells Fargo Canada. The three year, CAD $10 million asset-based lending facility was entered into by Coretec on March 24, 2009 and was to be used for day-to-day working capital and other expenditures.
At December 31, 2009, the total outstanding principal and interest owed under the credit line was approximately USD $4.2 million. The Company terminated this credit line effective February 26, 2010 and paid the balance owed of
approximately USD $3.1 million on that date in full as well as an additional fee of approximately USD $0.1 million for early termination and legal fees. This fee has been reflected as interest expense in the Condensed Consolidated Statements of
Income for the three months ended March 31, 2010.

NOTE 5. LONG-TERM DEBT

Term Loan

On October 23, 2006, the Company completed the acquisition of Sovereign Circuits, Inc. a privately-held PCB manufacturer in North
Jackson, Ohio. In April 2007, the Company consolidated two outstanding term loans assumed in this acquisition with an aggregate outstanding balance totaling $1.9 million into one term loan collateralized by the real property. The note
matures in April 2015, bears interest at LIBOR plus 1.5%, and has monthly payments of approximately $20,000 plus accrued interest. In connection with this transaction, the lender released its liens on all assets of the acquired company other
than the real property. At March 31, 2010 and December 31, 2009, the effective interest rate of the term loan was 1.73% and 1.74%, respectively, and the principal balance was $1.2 million and $1.3 million, respectively.



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##### Table of Contents

DDi Corp.

Notes to Condensed Consolidated Financial Statements(Continued)

(Unaudited)



Coretec Long-Term Debt

On December 31, 2009, the Company assumed all of the long-term debt of Coretec in connection with the acquisition, consisting of six
asset-backed term loans as follows:

Business Development Bank of Canada

There are four existing loans with Business Development Bank of Canada (BDC)  a term loan, an infrastructure loan, an
equipment loan and a building loan. The BDC loans are secured by the land and building of the Companys Sheppard Avenue facility, located in Toronto, Ontario, and includes the requirement for the guarantee of 25% of the loan balance by the
Company. The BDC loans contain customary covenants including financial covenants regarding the Companys (a) debt-to-equity ratio, which must remain at or below .75:1, and (b) working capital ratio, which must remain at or above
1.2:1. As of March 31, 2010, the Company was in compliance with all required covenants.

The outstanding term loan had a
principal balance of approximately USD $0.9 million as of March 31, 2010. The loan requires monthly principal payments of approximately $44,000 over the loan term and bears interest, payable monthly, at BDCs floating base rate less 1.5%
(2.75% at March 31, 2010). The term loan matures in December 2011.

The infrastructure loan was provided to finance the
completion of the Companys Sheppard Avenue facility, located in Toronto, Ontario, for expanding infrastructure. The infrastructure loan had a principal balance of approximately USD $4.8 million as of March 31, 2010, accrues interest at
BDCs floating base rate (4.25% at March 31, 2010), has a 20 year term and requires monthly payments of approximately $21,000.

The equipment loan had a principal balance of approximately USD $2.4 million as of March 31, 2010. The equipment loan accrues
interest at the 1-month USD floating base rate plus 0.6%, (4.35% at March 31, 2010), has a 7 year term and requires monthly payments of approximately $36,000.

The building loan had a principal balance of approximately USD $0.4 million as of March 31, 2010. The building loan accrues interest
at BDCs floating base rate plus 0.25%, (4.5% at March 31, 2010), matures in March 2012 and requires monthly payments of approximately $16,000.

Zions Bank Mortgage

The mortgage loan with Zions Bank had a principal balance of approximately USD $1.5 million as of March 31, 2010, secured by the land
and building of the Companys Cuyahoga Falls, Ohio facility. The mortgage accrues interest at the Federal Home Loan Bank rate plus 2% (6.92% at March 31, 2010), has a term through November 2032, and requires monthly principal and interest
payments of approximately $12,000.

GE Real Estate Mortgage

The mortgage loan with GE Real Estate had a principal balance of approximately USD $1.3 million as of March 31, 2010, secured by the
land and building of the Companys Littleton, Colorado facility. The mortgage accrues interest at a fixed rate of 7.55% per annum, has a term through June 2032, and requires monthly interest and principal payments of approximately $11,000.

6. PRODUCT WARRANTY

The Company accrues warranty expense, which is included in cost of goods sold, at the time revenue is recognized for estimated future
warranty obligations related to defective PCBs at the time of shipment, based upon the relationship between historical sales volumes and anticipated costs. Factors that affect the warranty liability include the number of units sold, historical and
anticipated rates of warranty claims and the estimated cost of repair. The Company assesses the adequacy of the warranty accrual each quarter. To date, actual warranty claims and costs have been in line with the Companys estimates. The
warranty accrual is included in accrued expenses. The changes in the Companys warranty accrual were as follows (in thousands):



|                                    |  |                              |        |   |      |   |        |  
|----------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                    |  | Three Months Ended March 31, |       
|                                    |  | 2010                         |        |   | 2009 |  
|Beginning balance                   |  | $                            | 1,100  |   |      | $ | 805    |  
|Warranties issued during the period |  |                              | 1,412  |   |      |   | 1,127  |  
|Warranty expenditures               |  |                              | (1,339 | ) |      |   | (1,142 | )
|                                    |  |                              |        |   |      |   |        |  
|Ending balance                      |  | $                            | 1,173  |   |      | $ | 790    |  
|                                    |  |                              |        |   |      |   |        |  



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##### Table of Contents

DDi Corp.

Notes to Condensed Consolidated Financial Statements(Continued)

(Unaudited)



NOTE 7. INCOME TAXES

The Company applies the provisions of Income Taxes Topic of FASB ASC which established standards of financial accounting and reporting for
income taxes that result from an entitys activities during the current and preceding years. The Company had $0.4 million of total gross unrecognized tax benefits at March 31, 2010 and December 31, 2009. If recognized in future
periods there would be a favorable effect of $0.3 million to the effective tax rate. Management anticipates a decrease of approximately $0.1 million in the tax contingency reserve during the remainder of 2010 due to statute expirations. The Company
files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and Canada. The Company has substantially concluded all U.S. federal income tax matters for years through 2005. Canadian income tax matters have been examined
through 2008. State jurisdictions that remain subject to examination range from 2002 to 2009.

The Companys effective
income tax rate differs from the U.S. federal statutory tax rate of 35% primarily as a result of the mix of earnings between tax jurisdictions, research and development credits, state income taxes and its continuous evaluation of the realization of
its deferred tax assets and uncertain tax positions. The reduced income tax rate in 2010 was primarily the result of reserved net operating loss carryforwards and tax credits available to offset higher operating results in 2010.

Effective January 1, 2009, as required by the Business Combinations Topic of FASB ASC, any reduction of the U.S. valuation allowance
that was related to net deferred tax assets that were in existence as of applying fresh-start accounting and any adjustments to uncertain tax positions for years prior to the Companys emergence from bankruptcy in 2003 will now be recognized as
a U.S. tax benefit as opposed to a reduction of goodwill and additional-paid-in capital as was done in the past.

NOTE 8. STOCK-BASED
COMPENSATION

Stock Options

There were 462,000 grants of stock option awards during the three months ended March 31, 2010 and no grants of stock option awards
during the three months ended March 31, 2009. As of March 31, 2010, the total compensation cost related to non-vested stock options not yet recognized was $0.9 million, net of estimated forfeitures. This cost will be amortized on a
straight-line basis over the remaining weighted-average period of approximately 2.4 years.

Restricted Stock

There were 25,000 grants of restricted stock awards during the three months ended March 31, 2010 and no grants of
restricted stock awards during the three months ended March 31, 2009. As of March 31, 2010, the total compensation cost related to non-vested restricted stock awards not yet recognized was $0.9 million, net of estimated forfeitures. This
cost will be amortized on a straight-line basis over the remaining weighted-average period of approximately 1.6 years.

Stock Compensation Expense

The following table sets forth expense related to stock-based compensation (in thousands):



|                                    |  |                              |     |      |   |    
|----------------------------------- |  | ---------------------------- | --- | ---- | - | ---
|                                    |  | Three Months Ended March 31,
|                                    |  | 2010                         |     | 2009
|Non-cash compensation expense:      |  |                              |     |      |   |    
|Cost of goods sold                  |  | $                            | 125 |      | $ | 139
|Sales and marketing expenses        |  |                              | 84  |      |   | 88 
|General and administrative expenses |  |                              | 139 |      |   | 393
|                                    |  |                              |     |      |   |    
|Total non-cash compensation expense |  | $                            | 348 |      | $ | 620
|                                    |  |                              |     |      |   |    

NOTE 9. STOCK REPURCHASE PROGRAM

The Companys Board of Directors (the Board) previously authorized a common stock repurchase program of up to 3,000,000
shares of the Companys common stock in the open market at prevailing market prices or in privately-negotiated transactions. In February 2009, the Board amended the stock repurchase program to increase the amount of shares of



9



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##### Table of Contents

DDi Corp.

Notes to Condensed Consolidated Financial Statements(Continued)

(Unaudited)



common stock authorized to be repurchased by up to an additional $10 million worth of shares. The stock repurchase program is subject to applicable legal and regulatory requirements and the stock
repurchase program. The Company will continue to review the value in repurchasing shares after considering its cash levels and operating needs as well as other uses for its cash that could create greater shareholder value.

No shares were repurchased during the quarter ended March 31, 2010. As of March 31, 2010, the Company had repurchased a total
of 2,946,986 shares since the inception of the program. Shares repurchased are recorded as treasury stock (accounted for under the cost method) and are available for reissuance as determined by the Board.

NOTE 10. SEGMENT REPORTING

Based on evaluation of the Companys financial information, management believes that the Company operates in one reportable segment
related to the design, development, manufacture and test of complex PCBs. Since early 2005, the Company has operated primarily in one geographical area, North America. Revenues are attributed to the country in which the customer buying the product
is located.

The following table summarizes net sales by geographic area (in thousands):



|                  |  |                              |        |      |   |       
|----------------- |  | ---------------------------- | ------ | ---- | - | ------
|                  |  | Three Months Ended March 31,
|                  |  | 2010                         |        | 2009
|Net sales:        |  |                              |        |      |   |       
|North America (1) |  | $                            | 56,502 |      | $ | 36,400
|Asia              |  |                              | 6,666  |      |   | 2,074 
|Other             |  |                              | 1,497  |      |   | 801   
|                  |  |                              |        |      |   |       
|Total             |  | $                            | 64,665 |      | $ | 39,275
|                  |  |                              |        |      |   |       



|(1) | The majority of sales in North America are to customers located in the United States.
|--- | -------------------------------------------------------------------------------------

NOTE 11. NET INCOME PER SHARE

Basic net income per share is computed by dividing the net income for the period by the weighted-average number of common shares
outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted-average number of common and common equivalent shares outstanding during the period, if dilutive. The dilutive effect
of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of share-based compensation.

The following table sets forth the calculation of basic and diluted net income per share of common stock (in thousands, except per share
amounts):



|                                                              |  |                              |        |      |   |       
|------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|                                                              |  | Three Months Ended March 31,
|                                                              |  | 2010                         |        | 2009
|Weighted-average shares of common stock outstanding  basic   |  |                              | 19,824 |      |   | 19,715
|Weighted-average common stock equivalents                     |  |                              | 147    |      |   | 25    
|                                                              |  |                              |        |      |   |       
|Weighted-average shares of common stock outstanding  diluted |  |                              | 19,971 |      |   | 19,740
|                                                              |  |                              |        |      |   |       
|Net income                                                    |  | $                            | 3,799  |      | $ | 513   
|                                                              |  |                              |        |      |   |       
|Net income per share  basic and diluted                      |  | $                            | 0.19   |      | $ | 0.03  
|                                                              |  |                              |        |      |   |       

For the three months ended March 31, 2010 and
2009, common shares issuable upon exercise of outstanding stock options and vesting of restricted stock of 2,747,730 and 2,573,924, respectively, were excluded from the diluted net income per common share calculation as their impact would have been
anti-dilutive.



10



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##### Table of Contents

DDi Corp.

Notes to Condensed Consolidated Financial Statements(Continued)

(Unaudited)



NOTE 12. COMPREHENSIVE INCOME

Comprehensive income includes unrealized translation gains and losses that have previously been excluded from net income and reflected
instead in stockholders equity. The following table summarizes the Companys comprehensive income (in thousands):



|                                         |  |                              |       |      |   |      |  
|---------------------------------------- |  | ---------------------------- | ----- | ---- | - | ---- | -
|                                         |  | Three Months Ended March 31, |      
|                                         |  | 2010                         |       | 2009 |  
|Net income                               |  | $                            | 3,799 |      | $ | 513  |  
|Other comprehensive income:              |  |                              |       |      |   |      |  
|Foreign currency translation adjustments |  |                              | 644   |      |   | (100 | )
|                                         |  |                              |       |      |   |      |  
|Comprehensive income                     |  | $                            | 4,443 |      | $ | 413  |  
|                                         |  |                              |       |      |   |      |  

NOTE 13. FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Company began applying fair value measurements to assets and liabilities reported in its financial
statements at fair value on a recurring basis as required by the Fair Value Measurements and Disclosures Topic of FASB ASC. This topic establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This
hierarchy prioritizes the inputs into three broad levels as follows:



|         |  |                                                                                                                                                                                                                                                                                                                      
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Quoted market prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                          
|         | 
|Level 2: |  | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|         | 
|Level 3: |  | Unobservable inputs that are not corroborated by market data.                                                                                                                                                                                                                                                        

A financial assets or liabilitys classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement. The estimated fair values of the Companys financial instruments, which include cash and cash equivalents, accounts receivable, revolving credit facility, accounts payable, accrued liabilities and
income taxes payable, approximate their carrying values due to their short maturities. These items are classified as either Level 1 or Level 2 inputs.

Cash equivalents consist of the Companys excess cash invested in highly liquid money market accounts. These amounts are reflected
within cash and cash equivalents on the condensed consolidated balance sheet at a net value of 1:1 for each dollar invested. The cost and fair value of the Companys cash equivalents was $12.2 million as of March 31, 2010 and was based on
quoted market prices in active markets for identical assets, a Level 1 input.

To calculate the estimated fair value of the
Companys variable and fixed rate notes payable and mortgage debt as of March 31, 2010, the Company estimated that in the current market the Companys cost of borrowing on similar debt would, on average, be approximately 6.27% based
on its current debt rating and an analysis of current market rates. Using this estimated interest rate and a discount rate of 8.0% (Level 2 and 3 inputs), the Company estimated the fair value of its debt to be approximately $150,000 higher than its
carrying value of $12.6 million.

NOTE 14. COMMITMENTS AND CONTINGENCIES

Litigation

From time to time the Company is involved in litigation and government proceedings incidental to its business. These proceedings are
in various procedural stages. The Company believes as of the date of this report that provisions or accruals made for any potential losses, to the extent estimable, are adequate and that any liabilities or costs arising out of these proceedings
are not likely to have a materially adverse effect on its condensed consolidated financial statements. The outcome of any of these proceedings, however, is inherently uncertain, and if unfavorable outcomes were to occur, there is a possibility that
they would, individually or in the aggregate, have a materially adverse effect on the Companys condensed consolidated financial statements.



11



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

The following is a discussion of the financial condition and results of operations for our fiscal quarter ended March 31, 2010. As
used herein, the Company, we, us, or our means DDi Corp. and its wholly-owned subsidiaries. This discussion and analysis should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations set forth in DDi Corp.s Annual Report on Form 10-K for the year ended December 31, 2009 (the Form 10-K).

Some of the statements in this section contain forward-looking statements regarding our assumptions, projections, expectations,
targets, intentions or beliefs about future events, which involve risks and uncertainties. All statements other than statements of historical facts included in this section relating to expectation of future financial performance, continued growth,
changes in economic conditions or capital markets and changes in customer usage patterns and preferences, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as may, will, should, expect, plan,
intend, forecast, anticipate, believe, estimate, predict, potential, continue or the negative of these terms or other comparable terminology. The forward-looking statements contained in this section involve known and unknown risks, uncertainties and
situations that may cause our or our industrys actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these
statements. Factors that might cause actual events or results to differ materially from those indicated by these forward-looking statements may include the matters listed under Risk Factors in Item 1A in our Form 10-K including, but
not limited to, changes in general economic conditions in the markets in which we may compete and fluctuations in demand in the electronics industry; increased competition; increased costs; our ability to retain key members of management; our
ability to address changes to environmental laws and regulations; risks associated with acquisitions; adverse state, federal or foreign legislation or regulation or adverse determinations by regulators; and other factors identified from time to time
in our filings with the U. S. Securities and Exchange Commission (SEC).

Any forward-looking statement
speaks only as of the date on which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors.

Our Company

We provide time-critical, technologically-advanced printed circuit board (PCB) engineering and manufacturing services. We
specialize in engineering and fabricating complex multi-layer PCBs on a quick-turn basis, with lead times as short as 24 hours, and on manufacturing products with high levels of complexity and reliability with low-to-moderate production
volumes. We have approximately 1,100 customers in various market segments including communications, computing, military/aerospace, industrial electronics, instrumentation, medical and high-durability commercial markets. With such a broad customer
base and approximately 80 new PCB designs tooled per day, we have accumulated significant process and engineering expertise. Our core strength is developing innovative, high-performance solutions for customers during the engineering, test and launch
phases of their new electronic product development. Our entire organization is focused on rapidly and reliably filling complex customer orders and building long-term customer relationships.

On December 31, 2009, we completed the acquisition of Coretec Inc. (Coretec), a Canadian-based PCB manufacturer whose
shares previously were publicly traded on the Toronto Stock Exchange. We believe that this acquisition will allow us to increase our overall North American production capacity, extend our presence in the military/aerospace and medical markets and
strengthen our flex and rigid-flex product capabilities.

Industry Overview

Printed circuit boards are a fundamental component of virtually all electronic equipment. A PCB is comprised of layers of laminate and
copper and contains patterns of electrical circuitry to connect electronic components. The level of PCB complexity is determined by several characteristics, including density, size, layer count, materials and functionality. High-end commercial and
military/aerospace equipment manufacturers require complex PCBs fabricated with higher layer counts, greater density and advanced materials, and demand highly complex and sophisticated manufacturing capabilities. By contrast, other PCBs, such as
those used in non-wireless consumer electronic products, are generally less complex and have less sophisticated manufacturing requirements.



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##### Table of Contents

We see several significant trends within the PCB manufacturing industry, including:



| |  |  | Short product life cycles for electronics.Rapid advances in technology are significantly shortening product life-cycles and placing
increased pressure on OEMs to develop new products in shorter periods of time. In response to these pressures, OEMs look to PCB manufacturers to offer design and engineering support and quick-turn manufacturing services to reduce time to market.
Many OEMs, in an effort to increase electronic supply chain efficiency, work with a small number of technically qualified suppliers that have sophisticated manufacturing expertise and are able to offer a broad range of PCB products.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increasing complexity of electronic equipment.OEMs are continually designing more complex and higher performance electronic equipment,
which requires sophisticated PCBs that accommodate higher signal speeds and frequencies and increased component densities and operating temperatures. Further, the semiconductor industry continues to design and manufacture integrated circuits with
higher speeds or smaller sizes and require PCBs to meet the densities of the semiconductor industry. In turn, OEMs rely on PCB manufacturers that can provide advanced engineering and manufacturing services early in the new product development cycle.
OEMs are also requiring more lead-free materials and other green products which add to the complexity of the materials utilized in the manufacturing of PCBs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Military and aerospace products.The military/aerospace market is characterized by time-consuming and complex certification processes, long
product life cycles, and a unique combination of demand for leading-edge technology with extremely high reliability and durability. An increased focus on incorporating technology in products for reconnaissance and intelligence combined with
continued spending on military communications, aerospace, and weapons systems applications are anticipated to drive steady end-market growth. Success in the military/aerospace market is generally achieved only after manufacturers demonstrate the
long-term ability to pass extensive OEM and government certification processes, numerous product inspections, audits for quality and performance, and extensive administrative requirements associated with participation in government programs. Export
controls represent a barrier to entry for international competition as they restrict the overseas export of defense-related materials, services, and sensitive technologies that are associated with government programs. In addition, the complexity of
the end products serves as a barrier to entry to potential new suppliers.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increased demand volatility in commercial end-markets.As a result of the continued downturn in the global economy, demand for PCBs from the
commercial sector, including the communications, computing, industrial electronics, and instrumentation markets, continues to be volatile. Companies operating in these industries, including existing or potential DDi customers, are experiencing
deterioration in their businesses, which in turn may cause them to delay or cancel orders from PCB manufacturers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Shifting of high volume production to Asia.Asian-based PCB manufacturers have been able to capitalize on lower labor costs to increase
their market share of production of PCBs used in higher-volume consumer electronics applications, such as personal computers and cell phones. However, Asian-based manufacturers have generally been unable to meet the lead time requirements for the
production of complex PCBs on a quick-turn basis.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Results of Operations

During the last two quarters of 2009, we experienced a sequential increase in demand and sales following four sequential quarterly
declines starting in the third quarter of 2008. The sequential growth in the last six months of 2009 was driven primarily by the improving demand in the commercial markets, led by the communications, industrial, instrumentation, medical, and
consumer electronics segments. This increase in demand continued during the first quarter of 2010 as revenues grew 12.2% sequentially from the fourth quarter 2009 pro-forma sales, which includes the combined sales for DDi and Coretec. We also
experienced strong orders of $71.8 million during the first quarter representing a 1.11 book-to-bill ratio. If the current strength in demand continues throughout 2010, we expect net sales in 2010 to grow at least 15% over the combined DDi and
Coretec pro forma net sales of $220 million for 2009.

The following tables set forth select data from our Condensed
Consolidated Statements of Income (in thousands):



|                                          |  |                              |        |   |      |   |        |          |  |          |        |  |      |  
|----------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -------- |  | -------- | ------ |  | ---- | -
|                                          |  | Three Months Ended March 31, |        |   |      |   |        |         
|                                          |  | 2010                         |        |   | 2009 |   |        | $ Change |  | % Change |       
|Net sales                                 |  | $                            | 64,665 |   |      | $ | 39,275 |          |  | $        | 25,390 |  | 64.6 | %
|Cost of goods sold                        |  |                              | 50,679 |   |      |   | 32,015 |          |  |          | 18,664 |  | 58.3 | %
|                                          |  |                              |        |   |      |   |        |          |  |          |        |  |      |  
|Gross profit                              |  |                              | 13,986 |   |      |   | 7,260  |          |  |          | 6,726  |  | 92.6 | %
|Gross profit as a percentage of net sales |  |                              | 21.6   | % |      |   | 18.5   | %        |  |          |        |  |      |  



13



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##### Table of Contents

Net Sales

Net sales are derived from the engineering and manufacture of complex, technologically-advanced multi-layer PCBs.

Net sales increased $25.4 million, or 64.6%, to $64.7 million for the first quarter of 2010, from $39.3 million for the same period in
2009. The increase in net sales was primarily due to $17.8 million of revenues contributed by the operations of Coretec during the quarter as well as continued strong end market customer demand.

Gross Profit

Gross profit for the first quarter of 2010 was $14 million, or 21.6% of net sales, compared to $7.3 million, or 18.5% of net sales, for
the same period in 2009. Gross margin in the first quarter benefited from leveraging labor and fixed overhead costs over higher production levels partially offset by an increase in material costs and approximately $0.4 million of severance costs
associated with the Coretec acquisition.

Non-cash Compensation



|                                    |  |                              |     |      |   |    
|----------------------------------- |  | ---------------------------- | --- | ---- | - | ---
|                                    |  | Three Months Ended March 31,
|                                    |  | 2010                         |     | 2009
|Non-cash compensation:              |  |                              |     |      |   |    
|Cost of goods sold                  |  | $                            | 125 |      | $ | 139
|Sales and marketing expenses        |  |                              | 84  |      |   | 88 
|General and administrative expenses |  |                              | 139 |      |   | 393
|                                    |  |                              |     |      |   |    
|Total non-cash compensation         |  | $                            | 348 |      | $ | 620
|                                    |  |                              |     |      |   |    

Non-cash compensation expense related to stock options
and restricted stock awards was recorded based on estimated fair value as prescribed by the Compensation - Stock Compensation topic of FASB ASC.

Sales and Marketing Expenses



|                             |  |                              |       |   |      |   |       |          |  |          |       |  |      |  
|---------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -------- |  | -------- | ----- |  | ---- | -
|                             |  | Three Months Ended March 31, |       |   |      |   |       |         
|                             |  | 2010                         |       |   | 2009 |   |       | $ Change |  | % Change |      
|Sales and marketing expenses |  | $                            | 4,507 |   |      | $ | 2,905 |          |  | $        | 1,602 |  | 55.1 | %
|Percentage of net sales      |  |                              | 7.0   | % |      |   | 7.4   | %        |  |          |       |  |      |  

Sales and marketing expenses increased on an absolute dollar basis by $1.6 million, or 55.1%, to
$4.5 million, or 7% of net sales, for the first quarter of 2010, from $2.9 million, or 7.4% of net sales, for the first quarter of 2009. The dollar increase was primarily due to the inclusion of the sales and marketing expenses of Coretec during the
quarter. The decrease in sales and marketing expenses as a percentage of net sales was primarily due to the positive operating leverage that results from higher sales levels.

General and Administrative Expenses



|                                    |  |                              |       |   |      |   |       |          |  |          |     |  |      |  
|----------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -------- |  | -------- | --- |  | ---- | -
|                                    |  | Three Months Ended March 31, |       |   |      |   |       |         
|                                    |  | 2010                         |       |   | 2009 |   |       | $ Change |  | % Change |    
|General and administrative expenses |  | $                            | 4,423 |   |      | $ | 3,424 |          |  | $        | 999 |  | 29.2 | %
|Percentage of net sales             |  |                              | 6.8   | % |      |   | 8.7   | %        |  |          |     |  |      |  

General and administrative expenses increased on an absolute dollar basis by $1.0 million, or
29.2%, to $4.4 million, or 6.8% of net sales, for the first quarter of 2010, from $3.4 million, or 8.7% of net sales, for the first quarter of 2009. The absolute dollar increase was primarily due to the inclusion of the general and administrative
expenses of Coretec during the quarter. The decrease in general and administrative expenses as a percentage of net sales was primarily due to the positive operating leverage that results from higher sales levels, despite incurring approximately $0.4
million of incremental professional fees in connection with the Coretec acquisition during the first quarter of 2010.



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##### Table of Contents

Amortization of Intangibles

Amortization of intangible assets relates to customer relationships identified in connection with the purchase of Sovereign Circuits in
the fourth quarter of 2006. These intangible assets are being amortized using the straight-line method over an estimated useful life of five years resulting in $0.2 million of amortization expense per quarter for the remaining
acquisition-related customer relationships through October 2011.

Interest Expense

Interest expense consists of amortization of debt issuance costs, interest expense associated with long-term deferred leases, fees related
to the termination of the Coretec revolving credit line, and interest on our note payable and newly acquired Coretec long-term debt consisting of six asset-backed term loans. Interest expense increased to $0.5 million for the first quarter of 2010
compared to $0.2 million for the same period in 2009.

Other Income, Net

Net other income consists of foreign exchange transaction gains or losses related to our Canadian operations and other miscellaneous
non-operating items. For the first quarter of 2010, net other expense was $0.2 million compared to net other income of $45,000 in the first quarter of 2009.

Income Tax Expense

The Company recorded income tax expense for the first quarter of 2010 of $0.4 million or 9.7% of pre-tax income, compared to income tax
expense of $0.1 million, or 20.3% of pre-tax income, for the same period in 2009. The increase in income tax expense was primarily due to an increase in Canadian income tax expense in the first quarter of 2010. Our effective income tax rate differs
from the U.S. federal statutory tax rate of 35% primarily as a result of the mix of earnings between tax jurisdictions, research and development credits, state income taxes and our continuous evaluation of the realization of our deferred tax assets
and uncertain tax positions, and the impact of the recognition of the tax benefit of net operating loss carryforwards to the extent of current earnings.

According to the Business Combinations Topic of the Accounting Standards Codification (ASC) established by the Financial
Accounting Standards Board (FASB), any reduction of the U.S. valuation allowance that was related to net deferred tax assets that were in existence as of applying fresh-start accounting and any adjustments to uncertain tax positions for
years prior to our emergence from bankruptcy in 2003 will now be recognized as a U.S. tax benefit as opposed to a reduction of goodwill and additional-paid-in capital as was done in the past.

Liquidity and Capital Resources



|                                                      |  |                        |           |                  |   |          
|----------------------------------------------------- |  | ---------------------- | --------- | ---------------- | - | ---------
|                                                      |  | March 31,2010          |           | December 31,2009
|                                                      |  | (Dollars in thousands)
|Working capital                                       |  | $                      | 40,501    |                  | $ | 36,170   
|Current ratio (current assets to current liabilities) |  |                        | 2.0 : 1.0 |                  |   | 1.9 : 1.0
|Cash and cash equivalents                             |  | $                      | 12,171    |                  | $ | 19,392   
|Long-term debt, including current portion             |  | $                      | 12,648    |                  | $ | 17,200   

As of March 31,
2010, we had total cash and cash equivalents of $12.2 million. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. We maintain cash and cash equivalents at certain
financial institutions in excess of amounts insured by federal agencies. However, management does not believe this concentration subjects the Company to any unusual financial risk beyond the normal risk associated with commercial banking
relationships. We frequently monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on those funds.

The increase in our working capital and related improvement to our current ratio from December 31, 2009 was primarily due to an
increase in our current assets primarily due to higher accounts receivable and to a lesser extent higher inventory offset by a decrease in cash and cash equivalents. The increase in accounts receivable was primarily due to increased sales levels
during the quarter as well as an increase in our days sales outstanding as the integration of the Coretec credit and collection function required resources that normally were dedicated to collection efforts.



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##### Table of Contents

The decrease in our cash and cash equivalents of $7.2 million from December 31, 2009
was primarily due to the payment of the Coretec revolving credit line and other debt of $4.8 million and our investments in capital equipment of $1.3 million during the first quarter of 2010.

Our principal sources of liquidity to fund ongoing operations have been existing cash on hand and cash generated from operations. We
believe that our current cash balance, in combination with net cash expected to be generated from operations, will fund ongoing operations for at least the next twelve months. In the event that we require additional funding during the next twelve
months, we will attempt to raise capital through either debt or equity arrangements. We cannot provide assurance that the required capital would be available on acceptable terms, if at all, or that any financing activity would not be dilutive to our
current stockholders.

Consolidated Cash Flows

The following table summarizes our statements of cash flows for the three months ended March 31, 2010 and 2009 (in thousands):



|                                          |  |                              |        |   |      |   |        |  
|----------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                          |  | Three Months Ended March 31, |       
|                                          |  | 2010                         |        |   | 2009 |  
|Net cash provided by (used in):           |  |                              |        |   |      |   |        |  
|Operating activities                      |  | $                            | (764   | ) |      | $ | 162    |  
|Investing activities                      |  |                              | (1,286 | ) |      |   | (1,284 | )
|Financing activities                      |  |                              | (4,883 | ) |      |   | (61    | )
|Effect of exchange rates on cash          |  |                              | (288   | ) |      |   | 37     |  
|                                          |  |                              |        |   |      |   |        |  
|Net decrease in cash and cash equivalents |  | $                            | (7,221 | ) |      | $ | (1,146 | )
|                                          |  |                              |        |   |      |   |        |  

Net cash (used in) provided by operating activities represents net income adjusted for non-cash charges and
working capital changes. The $1 million increase in net cash used by operating activities for the three months ended March 31, 2010 compared to the same period in 2009 was primarily due to increases in accounts receivable, inventories, and
accounts payable, reflecting our expanded revenue and production levels in the first quarter of 2010, as well as decreases in accrued expenses as a result of the timing of payments made.

Net cash used in investing activities for the three months ended March 31, 2010 was essentially flat compared to the same period in
2009.

The $4.8 million increase in net cash used in financing activities for the three months ended March 31, 2010
compared to the same period in 2009 was primarily due to the complete pay off of the borrowings from the revolver credit facility that was assumed upon the acquisition of Coretec at the end of 2009, as well as required principal payments made on
Coretec term debt that was also assumed.

Critical Accounting Policies and Use of Estimates

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual
results could differ from those estimates. Information with respect to our critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is
contained on pages 25 to 27 in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, of the Companys Annual Report on Form 10-K. We believe that at March 31, 2010 there had been no
material changes to this information.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued amended standards related to Accounting Standards
Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, that require additional fair value disclosures. These amended standards require disclosures about inputs and valuation techniques used to measure fair value as
well as disclosures about significant transfers, beginning in the first quarter of 2010. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant
unobservable inputs (Level 3), beginning in the first quarter of 2011. We do not expect these new standards to materially impact its consolidated financial statements.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------

Interest Rate Risk

Variable Rate Debt

In connection with our acquisitions of Sovereign and Coretec, we assumed variable-rate debt including notes payable and mortgages
previously used to finance the purchase of certain real estate holdings, infrastructure or plant and equipment. The interest rates on our variable rate debt are tied to various floating base rates as defined or to LIBOR. These debt obligations,
therefore, expose us to variability in interest payments due to changes in these rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense decreases.

Our variable-rate notes payable and variable rate mortgages subject us to market risk exposure. At March 31, 2010, we had $12.6
million outstanding under such agreements at interest rates ranging from 1.73% to 7.55% per annum.

Fixed Rate Debt

The fair market value of our one long-term fixed interest rate mortgage assumed in connection with our acquisition of
Coretec is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall because we could refinance for a lower rate. Conversely, the fair value of fixed interest rate debt will
decrease as interest rates rise. The interest rate changes affect the fair market value but do not impact earnings or cash flows.

Foreign Currency Exchange Risk

A portion of the sales and expenses of our Canadian operations are transacted in Canadian dollars, which is deemed to be the functional
currency for our Canadian entities. Thus, assets and liabilities are translated to U.S. dollars at period end exchange rates in effect. Sales and expenses are translated to U.S. dollars using an average monthly exchange rate. Translation adjustments
are included in accumulated other comprehensive income (loss) in stockholders equity, except for translation adjustments related to an intercompany note denominated in Canadian dollars between our U.S. entity and our Canadian entities.
Settlement of the note is planned in the foreseeable future; therefore currency adjustments are included in determining net income (loss) for the period, and could have a material impact on results of operations and cash flows in the event of
significant currency fluctuations. Gains and losses on foreign currency transactions are included in operations. We have foreign currency translation risk equal to our net investment in those operations. We do not use forward exchange contracts to
hedge exposures to foreign currency denominated transactions and do not utilize any other derivative financial instruments for trading or speculative purposes.



|Item 4. | Controls and Procedures.
|------- | ------------------------

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by
this report, that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) are effective to ensure that all information required to be
disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission (the
SEC), and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial
Officer, as appropriate, and allow timely decisions regarding required disclosure.

Changes in Internal Controls

No change in our internal control over financial reporting occurred during the quarter ended March 31, 2010 that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

From
time to time we are involved in litigation and government proceedings incidental to our business. These proceedings are in various procedural stages. We believe as of the date of this report that provisions or accruals made for any potential losses,
to the extent estimable, are adequate and that any liabilities or costs arising out of these proceedings are not likely to have a materially adverse effect on our consolidated financial statements. The outcome of any of these proceedings, however,
is inherently uncertain, and if unfavorable outcomes were to occur, there is a possibility that they would, individually or in the aggregate, have a materially adverse effect on our consolidated financial statements.



|Item 1A. | Risk Factors
|-------- | ------------

There have
been no significant changes to the risk factors disclosed in our Form 10-K for the year ended December 31, 2009.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | (Removed and Reserved)
|------- | ----------------------



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------

The exhibits
listed below are hereby filed with the SEC as part of this Quarterly Report on Form 10-Q. Certain of the following exhibits have been previously filed with the SEC pursuant to the requirements of the Securities Act or the Exchange Act. Such exhibits
are identified in the chart to the right of the Exhibit and are incorporated herein by reference.



|        |  |                                                                                                                  |  |               |  |                           |  |              |  |         |  |           
|------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ------------- |  | ------------------------- |  | ------------ |  | ------- |  | ----------
|        |  |                                                                                                                  |  |               |  | Incorporated by Reference
|Exhibit |  | Description                                                                                                      |  | FiledHerewith |  | Form                      |  | PeriodEnding |  | Exhibit |  | FilingDate
|        |  |                                                                                                                  |  |               |  |                          
|3.1     |  | Amended and Restated Certificate of Incorporation of DDi Corp.                                                   |  |               |  | 8-K                       |  |              |  | 3.1     |  | 12/13/2003
|        |  |                                                                                                                  |  |               |  |                          
|3.2     |  | Amended and Restated Bylaws of DDi Corp.                                                                         |  |               |  | 10-Q                      |  | 6/30/2005    |  | 3.4     |  | 8/09/2005 
|        |  |                                                                                                                  |  |               |  |                          
|31.1    |  | Certification of Chief Executive Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act    |  | X             |  |                           |  |              |  |         |  |           
|        |  |                                                                                                                  |  |               |  |                          
|31.2    |  | Certification of Chief Financial Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act    |  | X             |  |                           |  |              |  |         |  |           
|        |  |                                                                                                                  |  |               |  |                          
|32.1    |  | Certification of Chief Executive Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X             |  |                           |  |              |  |         |  |           
|        |  |                                                                                                                  |  |               |  |                          
|32.2    |  | Certification of Chief Financial Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X             |  |                           |  |              |  |         |  |           



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##### Table of Contents

SIGNATURES

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



|                  |  |  |  |  |  |                                      
|----------------- |  |  |  |  |  | -------------------------------------
|                  |  |  |  |  |  | DDi CORP.                            
|                  |  |  | 
|Date: May 7, 2010 |  |  |  |  |  | /s/    MIKEL H.
WILLIAMS             
|                  |  |  |  |  |  | Mikel H. Williams                    
|                  |  |  |  |  |  | President and Chief Executive Officer



|                  |  |  |  |  |  |                         
|----------------- |  |  |  |  |  | ------------------------
|Date: May 7, 2010 |  |  |  |  |  | /s/    J. MICHAEL
DODSON
|                  |  |  |  |  |  | J. Michael Dodson       
|                  |  |  |  |  |  | Chief Financial Officer 



19