##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, 2008

OR



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

For the transition period from  to

Commission
File Number: 000-30241

DDi CORP.

(Exact name of registrant as specified in its charter)



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

1220 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  þ    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  þ    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  þ

Indicate by check mark whether
the registrant has filed all documents and reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes  þ    No   ̈

As of July 29, 2008, DDi Corp. had 21,349,094 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 June 30, 2008

TABLE OF CONTENTS



|                               |  |                                                                                                           |  |   
|------------------------------ |  | --------------------------------------------------------------------------------------------------------- |  | --
|                               |  | PageNo.                                                                                                  
|PART I  FINANCIAL INFORMATION |  |                                                                                                          
|                               |  |                                                                                                          
|Item 1.                        |  | Financial Statements (Unaudited):                                                                         |  |   
|                               |  |                                                                                                          
|                               |  | Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007                           |  | 1 
|                               |  |                                                                                                          
|                               |  | Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 |  | 2 
|                               |  |                                                                                                          
|                               |  | Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007           |  | 3 
|                               |  |                                                                                                          
|                               |  | Notes to Condensed Consolidated Financial Statements                                                      |  | 4 
|                               |  |                                                                                                          
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 11
|                               |  |                                                                                                          
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                |  | 19
|                               |  |                                                                                                          
|Item 4.                        |  | Controls and Procedures                                                                                   |  | 19
|                               |  |                                                                                                          
|Item 4T.                       |  | Controls and Procedures                                                                                   |  | 20
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                          
|                               |  |                                                                                                          
|Item 1.                        |  | Legal Proceedings                                                                                         |  | 21
|                               |  |                                                                                                          
|Item 1A.                       |  | Risk Factors                                                                                              |  | 21
|                               |  |                                                                                                          
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                               |  | 21
|                               |  |                                                                                                          
|Item 3.                        |  | Defaults Upon Senior Securities                                                                           |  | 21
|                               |  |                                                                                                          
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                       |  | 21
|                               |  |                                                                                                          
|Item 5.                        |  | Other Information                                                                                         |  | 22
|                               |  |                                                                                                          
|Item 6.                        |  | Exhibits                                                                                                  |  | 22
|                               | 
|Signatures                     |  | 24                                                                                                       



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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 data)

(Unaudited)



|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                                                          |  | June 30,2008 |          |   | December 31,2007 |  
|ASSETS                                                                                                                                                                                                    |  |              |          |   |                  |   |          |  
|Current assets:                                                                                                                                                                                           |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                                                                 |  | $            | 17,788   |   |                  | $ | 20,445   |  
|Accounts receivable, net                                                                                                                                                                                  |  |              | 31,366   |   |                  |   | 26,411   |  
|Inventories                                                                                                                                                                                               |  |              | 14,582   |   |                  |   | 13,696   |  
|Prepaid expenses and other current assets                                                                                                                                                                 |  |              | 707      |   |                  |   | 657      |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Total current assets                                                                                                                                                                                      |  |              | 64,443   |   |                  |   | 61,209   |  
|Property, plant and equipment, net                                                                                                                                                                        |  |              | 27,825   |   |                  |   | 28,503   |  
|Goodwill                                                                                                                                                                                                  |  |              | 38,458   |   |                  |   | 39,006   |  
|Intangible assets, net                                                                                                                                                                                    |  |              | 4,430    |   |                  |   | 7,109    |  
|Other assets                                                                                                                                                                                              |  |              | 800      |   |                  |   | 950      |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Total assets                                                                                                                                                                                              |  | $            | 135,956  |   |                  | $ | 136,777  |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                      |  |              |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                                                                      |  |              |          |   |                  |   |          |  
|Current maturities of long-term debt                                                                                                                                                                      |  | $            | 244      |   |                  | $ | 244      |  
|Accounts payable                                                                                                                                                                                          |  |              | 12,147   |   |                  |   | 11,024   |  
|Accrued expenses and other current liabilities                                                                                                                                                            |  |              | 9,667    |   |                  |   | 8,594    |  
|Income taxes payable                                                                                                                                                                                      |  |              | 938      |   |                  |   | 1,301    |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                                                                 |  |              | 22,996   |   |                  |   | 21,163   |  
|Long-term debt                                                                                                                                                                                            |  |              | 1,394    |   |                  |   | 1,516    |  
|Other long-term liabilities                                                                                                                                                                               |  |              | 2,706    |   |                  |   | 2,933    |  
|Series A Preferred Stock                                                                                                                                                                                  |  |              |         |   |                  |   |         |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Total liabilities                                                                                                                                                                                         |  |              | 27,096   |   |                  |   | 25,612   |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Commitments and contingencies (Note 13)                                                                                                                                                                   |  |              |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                                                                     |  |              |          |   |                  |   |          |  
|Common stock$0.001 par value, 190,000 shares authorized, 22,746 shares issued and 21,349 shares outstanding at June 30, 2008 and
22,746 shares issued and 22,442 shares outstanding at December 31, 2007 |  |              | 23       |   |                  |   | 23       |  
|Additional paid-in-capital                                                                                                                                                                                |  |              | 244,239  |   |                  |   | 242,938  |  
|Treasury stock, at cost  1,397 and 304 shares held in treasury at June 30, 2008 and December 31, 2007,
respectively                                                                                      |  |              | (7,664   | ) |                  |   | (1,875   | )
|Accumulated other comprehensive income                                                                                                                                                                    |  |              | 429      |   |                  |   | 471      |  
|Accumulated deficit                                                                                                                                                                                       |  |              | (128,167 | ) |                  |   | (130,392 | )
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                                                |  |              | 108,860  |   |                  |   | 111,165  |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                                                |  | $            | 135,956  |   |                  | $ | 136,777  |  
|                                                                                                                                                                                                          |  |              |          |   |                  |   |          |  

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



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DDi Corp.

Condensed Consolidated Statements of Operations

(In thousands, except per
share data)

(Unaudited)



|                                                        |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                                        |  | Three Months Ended |        |   | Six Months Ended |  
|                                                        |  | June 30,2008       |        |   | June 30,2007     |   |        | June 30,2008 |  |   | June 30,2007 |  
|Net sales                                               |  | $                  | 51,188 |   |                  | $ | 49,133 |              |  | $ | 98,540       |   |  | $ | 92,580 |  
|Cost of goods sold                                      |  |                    | 40,815 |   |                  |   | 37,867 |              |  |   | 78,424       |   |  |   | 73,324 |  
|                                                        |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Gross profit                                            |  |                    | 10,373 |   |                  |   | 11,266 |              |  |   | 20,116       |   |  |   | 19,256 |  
|Operating expenses:                                     |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Sales and marketing                                     |  |                    | 3,192  |   |                  |   | 3,328  |              |  |   | 6,468        |   |  |   | 6,452  |  
|General and administrative                              |  |                    | 3,332  |   |                  |   | 3,892  |              |  |   | 7,170        |   |  |   | 7,703  |  
|Amortization of intangible assets                       |  |                    | 1,340  |   |                  |   | 1,339  |              |  |   | 2,679        |   |  |   | 2,679  |  
|Restructuring and other related charges                 |  |                    | 82     |   |                  |   | 132    |              |  |   | 267          |   |  |   | 209    |  
|                                                        |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Operating income                                        |  |                    | 2,427  |   |                  |   | 2,575  |              |  |   | 3,532        |   |  |   | 2,213  |  
|Interest expense                                        |  |                    | 191    |   |                  |   | 263    |              |  |   | 386          |   |  |   | 700    |  
|Interest income                                         |  |                    | (76    | ) |                  |   | (143   | )            |  |   | (232         | ) |  |   | (249   | )
|Other expense (income), net                             |  |                    | (26    | ) |                  |   | 113    |              |  |   | (113         | ) |  |   | 115    |  
|                                                        |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Income before income tax expense                        |  |                    | 2,338  |   |                  |   | 2,342  |              |  |   | 3,491        |   |  |   | 1,647  |  
|Income tax expense                                      |  |                    | 831    |   |                  |   | 384    |              |  |   | 1,266        |   |  |   | 680    |  
|                                                        |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Net income                                              |  | $                  | 1,507  |   |                  | $ | 1,958  |              |  | $ | 2,225        |   |  | $ | 967    |  
|                                                        |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Net income per share:                                   |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Basic                                                   |  | $                  | 0.07   |   |                  | $ | 0.09   |              |  | $ | 0.10         |   |  | $ | 0.04   |  
|Diluted                                                 |  | $                  | 0.07   |   |                  | $ | 0.09   |              |  | $ | 0.10         |   |  | $ | 0.04   |  
|Weighted-average shares used in per share computations: |  |                    |        |   |                  |   |        |              |  |   |              |   |  |   |        |  
|Basic                                                   |  |                    | 21,303 |   |                  |   | 22,613 |              |  |   | 21,646       |   |  |   | 22,604 |  
|Diluted                                                 |  |                    | 21,326 |   |                  |   | 22,655 |              |  |   | 21,659       |   |  |   | 22,650 |  

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)



|                                                                              |  |                  |        |   |              |   |        |  
|----------------------------------------------------------------------------- |  | ---------------- | ------ | - | ------------ | - | ------ | -
|                                                                              |  | Six Months Ended |       
|                                                                              |  | June 30,2008     |        |   | June 30,2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |  |                  |        |   |              |   |        |  
|Net income                                                                    |  | $                | 2,225  |   |              | $ | 967    |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                  |        |   |              |   |        |  
|Depreciation                                                                  |  |                  | 5,629  |   |              |   | 4,777  |  
|Amortization of intangible assets                                             |  |                  | 2,679  |   |              |   | 2,679  |  
|Amortization of debt issuance costs and discount                              |  |                  | 51     |   |              |   | 204    |  
|Non-cash compensation                                                         |  |                  | 1,301  |   |              |   | 1,150  |  
|Other                                                                         |  |                  | 342    |   |              |   | 44     |  
|Changes in operating assets and liabilities:                                  |  |                  |        |   |              |   |        |  
|Accounts receivable                                                           |  |                  | (5,132 | ) |              |   | (973   | )
|Inventories                                                                   |  |                  | (961   | ) |              |   | 289    |  
|Prepaid expenses and other assets                                             |  |                  | 37     |   |              |   | (164   | )
|Accounts payable                                                              |  |                  | 1,200  |   |              |   | (1,740 | )
|Accrued expenses and other liabilities                                        |  |                  | 634    |   |              |   | (777   | )
|Income tax payable                                                            |  |                  | 278    |   |              |   | (45    | )
|                                                                              |  |                  |        |   |              |   |        |  
|Net cash provided by operating activities                                     |  |                  | 8,283  |   |              |   | 6,411  |  
|                                                                              |  |                  |        |   |              |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                         |  |                  |        |   |              |   |        |  
|Purchases of property and equipment                                           |  |                  | (5,209 | ) |              |   | (3,700 | )
|                                                                              |  |                  |        |   |              |   |        |  
|Net cash used in investing activities                                         |  |                  | (5,209 | ) |              |   | (3,700 | )
|                                                                              |  |                  |        |   |              |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                         |  |                  |        |   |              |   |        |  
|Principal payments on long-term debt                                          |  |                  | (122   | ) |              |   | (162   | )
|Payment of debt issuance costs                                                |  |                  |       |   |              |   | (287   | )
|Repurchases of common stock including commissions                             |  |                  | (5,789 | ) |              |   |       |  
|Proceeds from exercise of stock options                                       |  |                  |       |   |              |   | 236    |  
|                                                                              |  |                  |        |   |              |   |        |  
|Net cash used in financing activities                                         |  |                  | (5,911 | ) |              |   | (213   | )
|                                                                              |  |                  |        |   |              |   |        |  
|Effect of exchange rate changes on cash and cash equivalents                  |  |                  | 180    |   |              |   | (440   | )
|                                                                              |  |                  |        |   |              |   |        |  
|Net increase (decrease) in cash and cash equivalents                          |  |                  | (2,657 | ) |              |   | 2,058  |  
|Cash and cash equivalents, beginning of period                                |  |                  | 20,445 |   |              |   | 15,920 |  
|                                                                              |  |                  |        |   |              |   |        |  
|Cash and cash equivalents, end of period                                      |  | $                | 17,788 |   |              | $ | 17,978 |  
|                                                                              |  |                  |        |   |              |   |        |  

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. 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
statement of the financial position of the Company as of June 30, 2008 and the results of its operations for the three and six months ended June 30, 2008 and 2007 and its cash flows for the six months ended June 30, 2008 and 2007, and
such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2008 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 year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted
in the United States of America. This report on Form 10-Q for the quarter ended June 30, 2008 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, 2007.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets (SFAS 142), goodwill and other intangible assets with indefinite lives are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be
impaired. During the first quarter of 2008 and continuing into April 2008, the Companys stock price declined along with that of its competitors in the PCB industry as well as in the general stock market. This resulted in the Companys
market capitalization periodically falling below its book value. However, beginning in late April 2008 and continuing to date, the Companys stock price has increased to, and remains at, levels that result in the Companys market value
being higher than its book value. As such, no goodwill impairment is required at this time.

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 printed circuit boards on a quick-turn basis, with lead times as short as 24 hours. DDi has approximately 1,000 customers in various market segments including communications and
networking, military and aerospace, medical, test and industrial instruments, high-end computing, and high-durability commercial markets. The Company operates primarily in one geographical area, North America.

Recent Accounting Pronouncements

In September 2006, the
Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS 157), which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those
years. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements.
The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the
most advantageous market for the asset or liability. SFAS 157 defines fair value based upon an exit price model. Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1, 157-2, and proposed 157-c. FSP 157-1 amends SFAS 157
to exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays for one year the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP



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DDi CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



157-c clarifies the principles in SFAS 157 on the fair value measurement of liabilities. The adoption of the provisions of SFAS 157 for financial assets and
financial liabilities as of January 1, 2008 did not have any impact on the Companys consolidated financial statements. The Company is still assessing the impact of SFAS 157 for nonfinancial assets and nonfinancial liabilities on its
consolidated financial position, results of operations and cash flows. See Note 12 for additional fair value disclosures.

In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115 (SFAS 159), which is effective for fiscal years beginning after
November 15, 2007. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Unrealized gains and losses on items for which the fair value option is elected would be reported in earnings. The Company adopted
the provisions of SFAS 159 as of January 1, 2008 and did not elect the fair value option to measure certain financial instruments.

In December 2007,
the FASB issued SFAS No. 141 (revised 2007),Business Combinations (SFAS 141R). SFAS 141R establishes the requirements for how an acquirer recognizes and measures the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements for business combinations. SFAS 141R is effective for annual periods beginning after
December 31, 2008 and should be applied prospectively for all business combinations entered into after the date of adoption. SFAS 141R will have an impact on the Companys accounting for business combinations completed after
January 1, 2009.

In December 2007, the FASB approved the issuance of SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51 (SFAS 160). SFAS 160 will change the accounting and reporting for minority interests, which will now be termed noncontrolling interests. SFAS 160
requires noncontrolling interests to be presented as a separate component of equity and requires the amount of net income attributable to the parent and to the noncontrolling interest to be separately identified on the consolidated statement of
operations. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company currently does not expect adoption of SFAS 160 to have a material impact on its consolidated financial position, results of operations
or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities(SFAS
161), which requires certain disclosures related to derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating
the requirements of SFAS 161 and the impact, if any, that the adoption of this statement will have on the Companys consolidated financial position, results of operations and cash flows.

In April 2008, the FASB issued FSP 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for fiscal years
beginning after December 15, 2008. The Company is currently assessing the impact of FSP 142-3 on its consolidated financial position, results of operations and cash flows.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles(SFAS 162). This standard is intended to improve financial reporting by identifying a
consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities.
SFAS 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission of the Public Company Accounting Oversight Boards amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. The Company does not expect SFAS 162 to have a material impact on the preparation of its consolidated financial statements.



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DDi CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



NOTE 2. 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):



|                |  |              |        |                  |   |       
|--------------- |  | ------------ | ------ | ---------------- | - | ------
|                |  | June 30,2008 |        | December 31,2007
|Raw materials   |  | $            | 6,501  |                  | $ | 7,063 
|Work-in-process |  |              | 4,481  |                  |   | 3,484 
|Finished goods  |  |              | 3,600  |                  |   | 3,149 
|                |  |              |        |                  |   |       
|Total           |  | $            | 14,582 |                  | $ | 13,696
|                |  |              |        |                  |   |       

NOTE 3. REVOLVING CREDIT FACILITY

On March 30, 2007, the Company amended its revolving credit facility (as amended, the Credit Facility) with General Electric Capital Corporation acting as agent, to extend the maturity date to
March 30, 2010 and change the maximum revolving credit line to $25 million. Availability under the Credit Facility is based on various liquidity and borrowing base tests including the Companys eligible accounts receivable and inventories.
The Companys wholly-owned operating subsidiaries are the borrowers under the Credit Facility. The Credit Facility is guaranteed by DDi Corp. and all of its subsidiaries that are not borrowers under the Credit Facility. The Credit Facility is
collateralized by the accounts receivable, inventories and other tangible and intangible personal property (other than property, plant and equipment) of the borrowers, and by a pledge of the stock of the Companys subsidiaries. Revolving credit
advances under the Credit Facility bear interest at the prime rate (5.0% at June 30, 2008). The Company can elect to have any new revolving credit advances, or convert any outstanding revolving credit advances, in excess of $1.0 million and in
increments of $500,000, made as a LIBOR-based loan with a term of one, two, or three months at a rate of LIBOR plus 1.5%. The Credit Facility contains customary covenants including financial covenants regarding the Companys fixed charge ratios
and capital expenditures if Liquidity, as defined in the agreement, falls below a certain threshold. During the quarter ended June 30, 2008, Liquidity was above the financial covenant measurement threshold. There are also negative covenants
regarding incurrence of additional debt, liquidation, merger or asset sales or changes in the Companys business. The Credit Facility restricts the Companys ability to pay cash dividends on its common stock and restricts its
subsidiaries ability to pay dividends to the Company without the lenders consent. As of June 30, 2008, the Company was in compliance with all required covenants.

As of June 30, 2008, the borrowing capacity under the credit facility was approximately $20.6 million; however, no amounts were outstanding.

NOTE 4. LONG-TERM DEBT

In April 2007, the Company consolidated two outstanding term loans assumed in the
acquisition of Sovereign Circuits, Inc. (Sovereign) with an aggregate outstanding balance totaling $1.9 million into one term loan collateralized by Sovereigns 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 Sovereign other than the real property. At June 30, 2008, the
effective interest rate of the term loan was 3.96% and the remaining outstanding balance was $1.6 million.



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DDi CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



NOTE 5. PRODUCT WARRANTY

The Company records warranty expense at the time revenue is recognized and maintains a warranty accrual for the estimated future warranty obligation 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 consistent with the Companys estimates. The changes in the Companys warranty accrual were as follows (in thousands):



|                                |  |                    |        |   |                  |   |      |              |  |   |              |   |  |   |        |  
|------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ---- | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                |  | Three Months Ended |        |   | Six Months Ended |  
|                                |  | June 30,2008       |        |   | June 30,2007     |   |      | June 30,2008 |  |   | June 30,2007 |  
|Beginning balance               |  | $                  | 746    |   |                  | $ | 593  |              |  | $ | 750          |   |  | $ | 592    |  
|Current period warranty charges |  |                    | 1,277  |   |                  |   | 838  |              |  |   | 2,059        |   |  |   | 1,766  |  
|Actual warranty costs incurred  |  |                    | (1,183 | ) |                  |   | (738 | )            |  |   | (1,969       | ) |  |   | (1,665 | )
|                                |  |                    |        |   |                  |   |      |              |  |   |              |   |  |   |        |  
|Ending balance                  |  | $                  | 840    |   |                  | $ | 693  |              |  | $ | 840          |   |  | $ | 693    |  
|                                |  |                    |        |   |                  |   |      |              |  |   |              |   |  |   |        |  

NOTE 6. INCOME TAXES

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109(FIN 48), on January 1, 2007.
As a result of the implementation, the Company had no increases or decreases to reserves for uncertain tax positions. There was no effect on the Companys consolidated financial condition, results of operations or cash flows as a result of
implementing FIN 48. The Company had approximately $1.2 million and $1.4 million of total gross unrecognized tax benefits at June 30, 2008 and December 31, 2007, respectively. If recognized in future periods there would be a reduction to
goodwill of $693,000 and a favorable affect to the tax rate for the remaining amounts. The Company anticipates a decrease in the tax contingency reserve during the remainder of 2008 of approximately $250,000 due to statute expirations.

The Company files income tax returns in the U.S. federal jurisdiction, various states and Canada. The Company has substantially concluded all U.S. federal income tax
matters for years through 2003. Canadian income tax matters have been examined through 2004. State jurisdictions that remain subject to examination range from 2002 to 2007.

NOTE 7. STOCK-BASED COMPENSATION

Stock Options

During the three months ended June 30, 2008, 13,000 stock options were granted to certain key employees and vest over three years in equal installments commencing
one year after the date of grant. At June 30, 2008, the total compensation cost related to non-vested stock options not yet recognized was $2.6 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis
over the remaining weighted-average period of approximately 1.4 years.

Restricted Stock

There were no grants of restricted stock during the three months ended June 30, 2008. At June 30, 2008, the total compensation cost related to non-vested
restricted stock awards not yet recognized was $575,000, 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.

Stock Compensation Expense

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



|                                    |  |                    |     |                  |   |              |  |              |       |  |   |      
|----------------------------------- |  | ------------------ | --- | ---------------- | - | ------------ |  | ------------ | ----- |  | - | -----
|                                    |  | Three Months Ended |     | Six Months Ended
|                                    |  | June 30,2008       |     | June 30,2007     |   | June 30,2008 |  | June 30,2007
|Non-cash compensation expense:      |  |                    |     |                  |   |              |  |              |       |  |   |      
|Cost of goods sold                  |  | $                  | 113 |                  | $ | 85           |  | $            | 242   |  | $ | 169  
|Sales and marketing expenses        |  |                    | 70  |                  |   | 43           |  |              | 140   |  |   | 6    
|General and administrative expenses |  |                    | 468 |                  |   | 470          |  |              | 919   |  |   | 975  
|                                    |  |                    |     |                  |   |              |  |              |       |  |   |      
|Total non-cash compensation expense |  | $                  | 651 |                  | $ | 598          |  | $            | 1,301 |  | $ | 1,150
|                                    |  |                    |     |                  |   |              |  |              |       |  |   |      



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DDi CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



NOTE 8. STOCK REPURCHASE PROGRAM

In August 2007, the Companys Board of Directors authorized the repurchase of up to 1,100,000 shares of the Companys common stock in the open market at prevailing market prices. In February 2008, the number
of shares authorized to be repurchased was increased by 400,000 shares to 1,500,000 shares. In May 2008, the number of shares authorized to be repurchased was increased by a further 500,000 shares, bringing the total number of shares authorized to
2,000,000 shares. The Company repurchased 122,481 shares during the quarter ended June 30, 2008 for a total cost of $757,000. All such shares and related costs are held as treasury stock and accounted for using the cost method. As of
June 30, 2008, the Company had repurchased a total of 1,396,986 shares, leaving 603,014 shares authorized to be repurchased under the program.

NOTE 9. 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 printed circuit boards. 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 |        | Six Months Ended
|                  |  | June 30,2008       |        | June 30,2007     |   | June 30,2008 |  | June 30,2007
|Net sales:        |  |                    |        |                  |   |              |  |              |        |  |   |       
|North America (a) |  | $                  | 46,163 |                  | $ | 45,045       |  | $            | 89,869 |  | $ | 85,804
|Asia              |  |                    | 4,582  |                  |   | 3,741        |  |              | 7,838  |  |   | 6,029 
|Other             |  |                    | 443    |                  |   | 347          |  |              | 833    |  |   | 747   
|                  |  |                    |        |                  |   |              |  |              |        |  |   |       
|Total             |  | $                  | 51,188 |                  | $ | 49,133       |  | $            | 98,540 |  | $ | 92,580
|                  |  |                    |        |                  |   |              |  |              |        |  |   |       



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

NOTE 10. 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 required under
SFAS No. 123R, Share-Based Payment.

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



|                                                              |  |                    |        |                  |   |              |  |              |        |  |   |       
|------------------------------------------------------------- |  | ------------------ | ------ | ---------------- | - | ------------ |  | ------------ | ------ |  | - | ------
|                                                              |  | Three Months Ended |        | Six Months Ended
|                                                              |  | June 30,2008       |        | June 30,2007     |   | June 30,2008 |  | June 30,2007
|Weighted-average shares of common stock outstanding - basic   |  |                    | 21,303 |                  |   | 22,613       |  |              | 21,646 |  |   | 22,604
|Weighted common stock equivalents                             |  |                    | 23     |                  |   | 42           |  |              | 13     |  |   | 46    
|                                                              |  |                    |        |                  |   |              |  |              |        |  |   |       
|Weighted-average shares of common stock outstanding - diluted |  |                    | 21,326 |                  |   | 22,655       |  |              | 21,659 |  |   | 22,650
|                                                              |  |                    |        |                  |   |              |  |              |        |  |   |       
|Net income                                                    |  | $                  | 1,507  |                  | $ | 1,958        |  | $            | 2,225  |  | $ | 967   
|                                                              |  |                    |        |                  |   |              |  |              |        |  |   |       
|Net income per share - basic and diluted                      |  | $                  | 0.07   |                  | $ | 0.09         |  | $            | 0.10   |  | $ | 0.04  



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DDi CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



For the three and six months ended June 30, 2008, common shares issuable upon exercise of outstanding stock
options and the vesting of restricted stock of 2,263,510 and 2,271,954, respectively, were excluded from the diluted net income per common share calculation as their impact would have been anti-dilutive. For the three and six months ended
June 30, 2007, common shares issuable upon exercise of outstanding stock options of 2,022,320 and 2,018,343, respectively, were excluded from the diluted net income per common share calculation as their impact would have been anti-dilutive.

NOTE 11. COMPREHENSIVE INCOME

SFAS No. 130,
Reporting Comprehensive Income, establishes requirements for reporting and disclosure of comprehensive income and its components. Comprehensive income includes unrealized holding gains and losses and other items 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 |       | Six Months Ended
|                                         |  | June 30,2008       |       | June 30,2007     |   | June 30,2008 |  |   | June 30,2007
|Net income                               |  | $                  | 1,507 |                  | $ | 1,958        |  | $ | 2,225        |   |  | $ | 967  
|Other comprehensive income:              |  |                    |       |                  |   |              |  |   |              |   |  |   |      
|Foreign currency translation adjustments |  |                    | 29    |                  |   | 78           |  |   | (42          | ) |  |   | 89   
|                                         |  |                    |       |                  |   |              |  |   |              |   |  |   |      
|Comprehensive income                     |  | $                  | 1,536 |                  | $ | 2,036        |  | $ | 2,183        |   |  | $ | 1,056
|                                         |  |                    |       |                  |   |              |  |   |              |   |  |   |      

NOTE 12. FAIR VALUE MEASUREMENTS

The Company adopted SFAS 157 as of January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Non-recurring nonfinancial assets and
nonfinancial liabilities for which the Company has not applied the provisions of SFAS 157 include those measured at fair value in goodwill impairment testing, indefinite lived intangible assets measured at fair value for impairment testing, and
those initially measured at fair value in a business combination.

SFAS 157 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: Observable market-based inputs or
unobservable inputs that are corroborated by market data.

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. As of June 30, 2008, the Companys financial assets and financial liabilities that are measured at fair value on a recurring basis are comprised solely of money market fund investments. The Company invests
excess cash from its cash depository accounts in highly liquid money market funds and reflects these amounts within cash and cash equivalents on the consolidated balance sheet at a net value of 1:1 for each dollar invested.

The fair value of the Companys cash equivalents was $14.0 million as of June 30, 2008 and is based on quoted prices in active markets for identical assets.

NOTE 13. COMMITMENTS AND CONTINGENCIES

On May 2,
2006, SMDI Company filed a lawsuit against the Companys Laminate Technology Corp. subsidiary in Arizona Superior Court for Maricopa County (Case No. CV2006-006541). SMDI Company was the landlord for two buildings that constituted a
portion of the Companys now-closed Arizona facility. The complaint alleged that the Company breached the leases for the two buildings by failing to adequately maintain the buildings, failing to pay rent timely and failing to adequately repair
the buildings at the termination of the lease. The complaint sought an unspecified amount of damages. A bench trial was conducted from February 26, 2008 to March 12, 2008 regarding the plaintiffs breach of contract claims and the
Companys counter-claims asserting the landlord breached the lease and the implied covenant of good faith and fair dealing. On April 14, 2008, the parties submitted written closing arguments, and the Court took the case under advisement.
On July 1, 2008, the Court issued a ruling awarding the plaintiffs a total of $52,000 in damages. On July 9, 2008, the



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DDi CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)



Company filed a motion for reconsideration requesting that the Court award the Company attorneys fees. The Court has not entered a final judgment in the
case. The accompanying financial statements at June 30, 2008 include the accrual of the aforementioned award.

In addition to the above, the Company
is involved from time to time in other litigation concerning claims arising out of the Companys operations in the normal course of business.

The
Company does not believe any of the above noted legal claims or any other litigation will have a material adverse effect on the Companys financial condition, results of operations or cash flows and, except for the accrual of the award noted
above, the Company has not recorded any loss contingencies, as an unfavorable outcome in these matters is not probable at June 30, 2008.



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|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 and year to date period ended June 30, 2008. 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, 2007.

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 most recently filed 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 are a leading
provider of time-critical, technologically-advanced printed circuit board engineering and manufacturing services. We specialize in engineering and fabricating complex multi-layer printed circuit boards (PCBs or boards) on a
quick-turn basis, with lead times as short as 24 hours. We have approximately 1,000 customers in various market segments including communications and networking, military and aerospace, medical, test and industrial instruments, high-end computing,
and high-durability commercial markets. With such a broad customer base and approximately 50 new designs tooled per day, we have accumulated significant process and engineering expertise. Our 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. Our engineering capabilities and manufacturing facilities in the United States and Canada enable us to respond to time-critical orders and technology challenges for our customers.

Industry Overview

PCBs are a fundamental component of virtually all
electronic equipment. The level of board complexity is determined by several characteristics, including size, layer count, density, materials, functionality and design features. High-end commercial equipment manufacturers require complex PCBs
fabricated with higher layer counts, greater density, and advanced materials, and demand highly complex and sophisticated manufacturing capabilities. We see several significant trends within the industry, including:



| |  |  | Increasing customer demand for quick-turn production. Rapid advances in technology are significantly shortening product life-cycles and placing increased
pressure on original equipment manufacturers (OEMs) to develop new products in shorter periods of time. In response to these pressures, OEMs look to printed circuit board manufacturers that can offer design and engineering support and
quick-turn manufacturing to reduce time-to-market.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Increasing complexity of electronic equipment. OEMs are continually designing more complex and higher performance electronic equipment, which requires
sophisticated boards that accommodate higher speeds and frequencies and increased component densities and operating temperatures. In turn, OEMs rely on 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Results of Operations for the Three Months Ended June 30, 2008 Compared to the Three Months Ended
June 30, 2007

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



|                                          |  |                    |        |   |              |   |        |          |  |   |       |   |  |      |   
|----------------------------------------- |  | ------------------ | ------ | - | ------------ | - | ------ | -------- |  | - | ----- | - |  | ---- | --
|                                          |  | Three Months Ended |        |   | $ Change     |   |        | % Change | 
|                                          |  | June 30,2008       |        |   | June 30,2007 |   |        |         
|Net sales                                 |  | $                  | 51,188 |   |              | $ | 49,133 |          |  | $ | 2,055 |   |  | 4.2  | % 
|Cost of goods sold                        |  |                    | 40,815 |   |              |   | 37,867 |          |  |   | 2,948 |   |  | 7.8  | % 
|Gross profit                              |  |                    | 10,373 |   |              |   | 11,266 |          |  |   | (893  | ) |  | (8.0 | )%
|Gross profit as a percentage of net sales |  |                    | 20.3   | % |              |   | 22.9   | %        |  |   |       |   |  |      |   

Net Sales

Net
sales increased $2.1 million, or 4.2%, to $51.2 million for the second quarter of 2008, from $49.1 million for the same period in 2007. The increase in net sales was primarily due to an increase in volume of shipments with stable pricing as a result
of the growth in the military/aerospace market segment.

Gross Profit

Gross profit for the second quarter of 2008 was $10.4 million, or 20.3% of net sales, compared to $11.3 million, or 22.9% of net sales, for the same period in 2007. The decrease from prior year was primarily due to
higher labor costs including overtime. As we experienced an increase in demand in the latter half of the first quarter and into the second quarter, we ramped up quickly by adding extra headcount and incurred more overtime to meet demand, which drove
labor costs higher and also resulted in labor inefficiencies as new employees were trained and became fully productive. To a lesser extent, material price increases and higher depreciation expense also added to the reduction in the gross profit
percentage.

Non-cash Compensation



|                                    |  |                    |     |              |   |    
|----------------------------------- |  | ------------------ | --- | ------------ | - | ---
|                                    |  | Three Months Ended
|                                    |  | June 30,2008       |     | June 30,2007
|Non-cash compensation:              |  |                    |     |              |   |    
|Cost of goods sold                  |  | $                  | 113 |              | $ | 85 
|Sales and marketing expenses        |  |                    | 70  |              |   | 43 
|General and administrative expenses |  |                    | 468 |              |   | 470
|                                    |  |                    |     |              |   |    
|Total non-cash compensation         |  | $                  | 651 |              | $ | 598
|                                    |  |                    |     |              |   |    

Non-cash compensation expense related to stock awards was recorded in accordance with the fair value recognition
provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment(SFAS 123R).



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Sales and Marketing Expenses



|                             |  |                    |       |   |              |   |       |          |  |   |      |   |  |      |   
|---------------------------- |  | ------------------ | ----- | - | ------------ | - | ----- | -------- |  | - | ---- | - |  | ---- | --
|                             |  | Three Months Ended |       |   | $ Change     |   |       | % Change | 
|                             |  | June 30,2008       |       |   | June 30,2007 |   |       |         
|Sales and marketing expenses |  | $                  | 3,192 |   |              | $ | 3,328 |          |  | $ | (136 | ) |  | (4.1 | %)
|Percentage of net sales      |  |                    | 6.2   | % |              |   | 6.8   | %        |  |   |      |   |  |      |   

Sales and marketing expenses decreased 4.1% in the second quarter of 2008 to $3.2 million, or 6.2% of net sales,
from $3.3 million, or 6.8% of net sales, for the same period in 2007. The decrease in expenses is primarily due to a more efficient sales strategy related to the mix of direct and indirect sales resources implemented during 2007 impacting commission
expense.

General and Administrative Expenses



|                                    |  |                    |       |   |              |   |       |          |  |   |      |   |  |       |   
|----------------------------------- |  | ------------------ | ----- | - | ------------ | - | ----- | -------- |  | - | ---- | - |  | ----- | --
|                                    |  | Three Months Ended |       |   | $ Change     |   |       | % Change | 
|                                    |  | June 30,2008       |       |   | June 30,2007 |   |       |         
|General and administrative expenses |  | $                  | 3,332 |   |              | $ | 3,892 |          |  | $ | (560 | ) |  | (14.4 | %)
|Percentage of net sales             |  |                    | 6.5   | % |              |   | 7.9   | %        |  |   |      |   |  |       |   

General and administrative expenses decreased 14.4% in the second quarter of 2008 to $3.3 million, or 6.5% of net
sales, from $3.9 million, or 7.9% of net sales, for the second quarter of 2007. The decrease relates to several cost categories including communications expense, Sarbanes-Oxley consulting fees, other consulting and outside services, and bad debt
expense and reflects managements continued efforts to control costs.

Amortization of Intangible Assets

Amortization of intangible assets relates to customer relationships identified during the allocation of the reorganized value of the Company subsequent to our emergence
from bankruptcy in 2003 and to customer relationships identified in connection with the Sovereign acquisition in October 2006. These intangible assets are being amortized using the straight-line method over an estimated useful life of five years
resulting in $1.3 million of amortization expense per quarter through November 2008, when the customer relationships identified in the bankruptcy become fully amortized, and thereafter $190,000 per quarter through October 2011.

Restructuring and Other Related Charges

The restructuring and other
related charges in the second quarter of 2008 and 2007 are a result of ongoing fees and expenses related to litigation with the landlord of two buildings in connection with the closing of our Arizona facility in 2005. We completed remediation of the
Arizona facility (encompassing three separate buildings) and exited the last building in the third quarter of 2006. A ruling was issued on July 1, 2008 awarding the landlord $52,000 and this amount is reflected in the $82,000 expense recorded
in the second quarter of 2008.

Interest Expense

Interest expense consists of amortization of debt issuance costs, fees related to our revolving credit facility, interest on our note payable on our Ohio facility, and interest expense associated with long-term leases. Interest expense
decreased by $72,000 to $191,000 for the second quarter of 2008 from $263,000 for the same period in 2007. The decrease is primarily related to a reduction in deferred lease expense resulting from an expired lease.

Interest Income

Interest income consists of interest earned on our
cash balances and decreased by $67,000 to $76,000 for the second quarter of 2008 from $143,000 for the second quarter of 2007. Although the Companys average cash balances during the second quarter of 2008 and during the same period in 2007
were relatively consistent, reduced interest rates resulted in an overall reduction in net income.



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##### Table of Contents

Other Expense (Income), Net

Net other expense (income) consists of foreign exchange transaction gains or losses related to our Canadian operations and other miscellaneous non-operating items. For the second quarter of 2008, net other income was $26,000 compared to net
other expense of $113,000 in the second quarter of 2007 and was primarily impacted by the change in currency exchange rates between the U.S. and Canadian dollar.

Income Tax Expense

For the second quarter of 2008, income tax expense was $831,000 compared to $384,000 in the prior year comparable
period. The increase in tax expense is primarily due to a change in the mix of income coming from Canada and the U.S. Our Canadian effective tax rate is considerably lower than our U.S. effective tax rate due to our R&D credits. In the
second quarter of 2007, the majority of income was attributable to Canada while in the second quarter of 2008, we had both U.S. and Canadian taxable income.

Under the fresh-start accounting rules related to our emergence from bankruptcy in 2003, any reduction of a U.S. valuation allowance that is related to net deferred tax assets that were in existence as of applying fresh-start accounting
will be recognized as a credit to goodwill. As a result, there is no U.S. tax benefit for book purposes even though the net operating loss carryfowards result in a reduction of cash taxes paid by us.

Results of Operations for the Six Months Ended June 30, 2008 Compared to the Six months Ended June 30, 2007

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



|                                          |  |                  |        |   |              |   |          |   |  |   |       |  |     |  
|----------------------------------------- |  | ---------------- | ------ | - | ------------ | - | -------- | - |  | - | ----- |  | --- | -
|                                          |  | Six Months Ended |        |   | $ Change     |   | % Change |  
|                                          |  | June 30,2008     |        |   | June 30,2007 |   |          |  
|Net sales                                 |  | $                | 98,540 |   |              | $ | 92,580   |   |  | $ | 5,960 |  | 6.4 | %
|Cost of goods sold                        |  |                  | 78,424 |   |              |   | 73,324   |   |  |   | 5,100 |  | 7.0 | %
|Gross profit                              |  |                  | 20,116 |   |              |   | 19,256   |   |  |   | 860   |  | 4.5 | %
|Gross profit as a percentage of net sales |  |                  | 20.4   | % |              |   | 20.8     | % |  |   |       |  |     |  

Net Sales

Net
sales increased $6.0 million, or 6.4%, to $98.5 million for the six months ended June 30, 2008, compared to $92.6 million for the same period in 2007. The increase in net sales was primarily due to an increase in volume of shipments with stable
pricing as a result of the growth in the military/aerospace market segment.

Gross Profit

Gross profit for the six months ended June 30, 2008 was $20.1 million, or 20.4% of net sales, compared to $19.3 million, or 20.8% of net sales for the same period in
2007. The decrease in the gross profit percentage from the prior year was primarily due to higher labor costs including overtime. As we experienced an increase in demand in the latter part of the first quarter and into the second quarter, we ramped
up quickly by adding extra headcount and incurring more overtime to meet demand, which drove labor costs higher and resulted in labor inefficiencies as new employees were trained and became fully productive. To a lesser extent, increased utilities
and maintenance costs as well as higher depreciation expense also added to the reduction in the gross profit percentage.



14



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##### Table of Contents

Non-cash Compensation



|                                    |  |                  |       |              |   |      
|----------------------------------- |  | ---------------- | ----- | ------------ | - | -----
|                                    |  | Six Months Ended
|                                    |  | June 30,2008     |       | June 30,2007
|Non-cash compensation:              |  |                  |       |              |   |      
|Cost of goods sold                  |  | $                | 242   |              | $ | 169  
|Sales and marketing expenses        |  |                  | 140   |              |   | 6    
|General and administrative expenses |  |                  | 919   |              |   | 975  
|                                    |  |                  |       |              |   |      
|Total non-cash compensation         |  | $                | 1,301 |              | $ | 1,150
|                                    |  |                  |       |              |   |      

Non-cash compensation expense related to stock awards was recorded in accordance with the fair value recognition
provisions of SFAS 123R.

Sales and Marketing Expenses



|                             |  |                  |       |   |              |   |          |   |  |   |    |  |     |  
|---------------------------- |  | ---------------- | ----- | - | ------------ | - | -------- | - |  | - | -- |  | --- | -
|                             |  | Six Months Ended |       |   | $ Change     |   | % Change |  
|                             |  | June 30,2008     |       |   | June 30,2007 |   |          |  
|Sales and marketing expenses |  | $                | 6,468 |   |              | $ | 6,452    |   |  | $ | 16 |  | 0.2 | %
|Percentage of net sales      |  |                  | 6.6   | % |              |   | 7.0      | % |  |   |    |  |     |  

Total sales and marketing expenses were essentially flat at $6.5 million in the first six months of both 2008 and
2007. However, as a percentage of net sales, sales and marketing expenses decreased to 6.6% for the first six months of 2008 from 7.0% for the same period in 2007, primarily due to our more efficient sales distribution strategy implemented during
2007 resulting in lower overall commission expense.

General and Administrative Expenses



|                                    |  |                  |       |   |              |   |       |          |  |   |      |   |  |      |   
|----------------------------------- |  | ---------------- | ----- | - | ------------ | - | ----- | -------- |  | - | ---- | - |  | ---- | --
|                                    |  | Six Months Ended |       |   | $ Change     |   |       | % Change | 
|                                    |  | June 30,2008     |       |   | June 30,2007 |   |       |         
|General and administrative expenses |  | $                | 7,170 |   |              | $ | 7,703 |          |  | $ | (533 | ) |  | (6.9 | %)
|Percentage of net sales             |  |                  | 7.3   | % |              |   | 8.3   | %        |  |   |      |   |  |      |   

Total general and administrative expenses decreased 6.9% to $7.2 million, or 7.3% of net sales for the six months
ended June 30, 2008, from $7.7 million, or 8.3% of net sales for the six months ended June 30, 2007. The decrease in general and administrative expenses was primarily attributable to reductions in several cost categories including
Sarbanes-Oxley consulting fees, communications expense, corporate insurance, other consulting and outside services, and bad debt expense.

Amortization
of Intangible Assets

Amortization of intangible assets relates to customer relationships identified during the allocation of the reorganized value of
the Company subsequent to our emergence from bankruptcy in 2003 and to customer relationships identified in connection with the Sovereign acquisition in October 2006. These intangible assets are being amortized using the straight-line method over an
estimated useful life of five years resulting in $1.3 million of amortization expense per quarter through November 2008, when the customer relationships identified in the bankruptcy become fully amortized, and thereafter $190,000 per quarter through
October 2011.

Restructuring and Other Related Charges

The restructuring and other related charges in the first half of 2008 and 2007 are a result of the ongoing fees and expenses related to litigation with the landlord of two buildings in connection with the closing of our Arizona facility in
2005. We completed remediation of the Arizona facility (encompassing three separate buildings) and exited the last building in the third quarter of 2006. A ruling was issued on July 1, 2008 awarding the landlord $52,000 and this amount is
reflected in the $267,000 expense recorded in the first half of 2008.



15



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##### Table of Contents

Interest Expense

Interest expense consists of amortization of debt issuance costs, fees related to our Credit Facility, interest on the note payable on our Ohio facility, and interest expense associated with long-term leases. Interest expense decreased to
$386,000 for the six months ended June 30, 2008 from $700,000 for the same period in 2007. The decrease is primarily related to a reduction in debt issuance costs amortization related to the renewal of the revolving credit facility in March
2007 and a decrease in deferred lease expense resulting from an expired lease.

Interest Income

Interest income consists of interest earned on our cash balances and decreased to $232,000 during the first six months of 2008 from $249,000 during the same period in
2007. Although the Company maintained higher average cash balances during the first half of 2008 compared to the same period in 2007, reduced interest rates resulted in an overall reduction in interest income.

Other Expense (Income), Net

Net other expense (income) consists of
foreign exchange transaction gains or losses related to our Canadian operations and other miscellaneous non-operating items. For the six months ended June 30, 2008, net other income was $113,000 compared to net other expense of $115,000 for the
same period in 2007 and was primarily impacted by the change in currency exchange rates between the U.S. and Canadian dollar.

Income Tax Expense

For the six months ended June 30, 2008, income tax expense was $1.3 million compared to $680,000 in the prior year comparable period. This year to
date increase was primarily related to an increase in U.S. taxable income for the six months ended June 30, 2008 compared to the six months ended June 30, 2007.

Liquidity and Capital Resources



|                                                      |  |                        |           |                  |   |          
|----------------------------------------------------- |  | ---------------------- | --------- | ---------------- | - | ---------
|                                                      |  | June 30,2008           |           | December 31,2007
|                                                      |  | (Dollars in thousands)
|Working capital                                       |  | $                      | 41,447    |                  | $ | 40,046   
|Current ratio (current assets to current liabilities) |  |                        | 2.8 : 1.0 |                  |   | 2.9 : 1.0
|Cash and cash equivalents                             |  | $                      | 17,788    |                  | $ | 20,445   
|Short term borrowings                                 |  | $                      |          |                  | $ |         
|Long term debt, including current portion             |  | $                      | 1,638     |                  | $ | 1,760    

As of June 30, 2008, we had total cash and cash equivalents of $17.8 million and no amounts outstanding on
our revolving credit facility. The decrease in our current ratio and cash and cash equivalents from December 31, 2007 was primarily due to repurchases of our common stock totaling $5.8 million during the six months ended June 30, 2008.

In August 2007, our Board of Directors authorized the repurchase of up to 1,100,000 shares of common stock in the open market at prevailing market prices.
In February 2008, the number of shares authorized to be repurchased was increased by 400,000 shares to 1,500,000 shares. In May 2008, the number of shares authorized to be repurchased was increased by a further 500,000 shares bringing the total
number of shares authorized to 2,000,000 shares. We repurchased 1,092,533 shares during the six months ended June 30, 2008 at an average price per share of $5.27 excluding commissions. As of June 30, 2008, we had repurchased a total of
1,396,986 shares, leaving 603,014 shares authorized to be repurchased under the program. We will continue to review the value in repurchasing shares after considering our cash levels and operating needs as well as other avenues for our cash that
could create greater shareholder value.

Our principal sources of liquidity to fund ongoing operations have been existing cash on hand, cash generated from
operations and, if needed, our asset-based revolving Credit Facility, along with proceeds from various equity offerings and asset sales. We believe that our current cash balance, in combination with net cash expected to be generated from operations
and the availability of our Credit Facility, 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.



16



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##### Table of Contents

Revolving Credit Facility

On March 30, 2007, we amended our revolving credit facility (as amended, the Credit Facility) with General Electric Capital Corporation acting as agent, to extend the maturity date to March 30, 2010 and change the
maximum revolving credit line to $25.0 million. Availability under the Credit Facility is based on various liquidity and borrowing base tests including our eligible accounts receivable and inventories. Our wholly-owned operating subsidiaries
are the borrowers under the Credit Facility. The Credit Facility is guaranteed by DDi Corp. and all of its subsidiaries that are not borrowers under the Credit Facility. The Credit Facility is secured by the accounts receivable, inventories and
other tangible and intangible personal property (other than property, plant and equipment) of the borrowers, and by a pledge of the stock of our subsidiaries. Revolving credit advances under the Credit Facility bear interest at the prime rate (5.0%
at June 30, 2008). We can elect to have any new revolving credit advances, or convert any outstanding revolving credit advances, in excess of $1.0 million and in increments of $500,000, made as a LIBOR-based loan with a term of one, two,
or three months at a rate of LIBOR plus 1.5%. The Credit Facility contains customary covenants including financial covenants regarding our fixed charge ratios and capital expenditures if Liquidity, as defined in the agreement, falls below a certain
threshold. During the quarter ended June 30, 2008, Liquidity was above the financial covenant measurement threshold. There are also negative covenants regarding incurrence of additional debt, liquidation, merger or asset sales or changes in our
business. The Credit Facility restricts our ability to pay cash dividends on our common stock and restricts our subsidiaries ability to pay dividends to us without the lenders consent. At June 30, 2008, we were in compliance with
all required covenants.

As of June 30, 2008, the borrowing capacity under the Credit Facility was approximately $20.6 million and there were no
amounts outstanding.

Consolidated Cash Flows

The
following table summarizes our statements of cash flows for the six months ended June 30, 2008 and 2007 (in thousands):



|                                                     |  |                  |        |   |              |   |        |  
|---------------------------------------------------- |  | ---------------- | ------ | - | ------------ | - | ------ | -
|                                                     |  | Six Months Ended |       
|                                                     |  | June 30,2008     |        |   | June 30,2007 |  
|Net cash provided by (used in):                      |  |                  |        |   |              |   |        |  
|Operating activities                                 |  | $                | 8,283  |   |              | $ | 6,411  |  
|Investing activities                                 |  |                  | (5,209 | ) |              |   | (3,700 | )
|Financing activities                                 |  |                  | (5,911 | ) |              |   | (213   | )
|Effect of exchange rates on cash                     |  |                  | 180    |   |              |   | (440   | )
|                                                     |  |                  |        |   |              |   |        |  
|Net increase (decrease) in cash and cash equivalents |  | $                | (2,657 | ) |              | $ | 2,058  |  
|                                                     |  |                  |        |   |              |   |        |  

Net cash provided by operating activities represents net income adjusted for non-cash charges and working capital
changes. The $1.9 million change in net cash provided by operating activities for the six months ended June 30, 2008 compared to the same period in 2007 was primarily due to an increase in operating income and an increase in accounts payable
and accrued expenses, offset partially by increases in accounts receivable and inventories.

The $1.5 million increase in net cash used in investing
activities for the six months ended June 30, 2008 compared to the same period in 2007 was primarily due to an increase in capital equipment investments to increase our technological compatibilities as well as expand capacity in certain
manufacturing process areas.

The $5.7 million change in net cash used in financing activities for the six months ended June 30, 2008 compared to the
same period in 2007 was primarily due to repurchases of our common stock totaling $5.8 million during the first half of 2008.



17



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##### Table of Contents

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 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 23 to 25 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 for the year ended December 31, 2007. We believe that at June 30, 2008 there had been no material changes to this information.

Recent Accounting Pronouncements

In September 2006, the Financial
Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS 157), which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years.
This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements. The
statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most
advantageous market for the asset or liability. SFAS 157 defines fair value based upon an exit price model. Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1, 157-2, and proposed 157-c. FSP 157-1 amends SFAS 157 to
exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays for one year the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP 157-c clarifies the principles in SFAS 157 on the fair value measurement of liabilities. The adoption of the
provisions of SFAS 157 for financial assets and financial liabilities as of January 1, 2008 did not have any impact on our consolidated financial statements. We are still assessing the impact of SFAS 157 for nonfinancial assets and nonfinancial
liabilities on our consolidated financial statements. See Note 12 in the Notes to Condensed Consolidated Financial Statements for additional fair value disclosures.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115 (SFAS 159),
which is effective for fiscal years beginning after November 15, 2007. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Unrealized gains and losses on items for which the fair value option is elected
would be reported in earnings. We adopted the provisions of SFAS 159 as of January 1, 2008 and did not elect the fair value option to measure certain financial instruments.

In December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations (SFAS 141R). SFAS 141R establishes the requirements for how an acquirer recognizes and
measures the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements for business combinations. SFAS 141R is effective
for annual periods beginning after December 31, 2008 and should be applied prospectively for all business combinations entered into after the date of adoption. SFAS 141R will have an impact on our accounting for business combinations completed
after January 1, 2009.

In December 2007, the FASB approved the issuance of SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51 (SFAS 160). SFAS 160 will change the accounting and reporting for minority interests, which will now be termed noncontrolling interests.
SFAS 160 requires noncontrolling interests to be presented as a separate component of equity and requires the amount of net income attributable to the parent and to the noncontrolling interest to be separately identified on the consolidated
statement of operations. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. We currently do not expect adoption of SFAS 160 to have a material impact on our consolidated financial position, results of
operations or cash flows.



18



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##### Table of Contents

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities(SFAS 161), which requires certain disclosures related to derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently
evaluating the requirements of SFAS 161 and the impact, if any, that the adoption of this statement will have on our consolidated financial position, results of operations and cash flows.

In April 2008, the FASB issued FSP 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for fiscal years
beginning after December 15, 2008. We are currently assessing the impact of FSP 142-3 on our consolidated financial position, results of operations and cash flows.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles(SFAS 162). This standard is intended to improve financial reporting by identifying a
consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities.
SFAS 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission of the Public Company Accounting Oversight Boards amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. We do not expect SFAS 162 to have a material impact on the preparation of our consolidated financial statements.



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

Interest Rate Risk

Advances under our Credit Facility bear interest at the prime rate (5.0% at June 30, 2008) or can be converted to
LIBOR-based loans at a rate of LIBOR plus 1.5%. If the prime rate, or LIBOR rate for LIBOR-based loans, increased, thereby increasing our effective borrowing rate by the same amount, cash interest expense related to the Credit Facility would
increase dependent on any outstanding borrowings. There were no borrowings on the Credit Facility during the quarter ended June 30, 2008.

Foreign
Currency Exchange Risk

A portion of the sales and expenses of our Canadian operations are denominated in Canadian dollars, which is deemed to be the
functional currency for our Canadian entity. 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 in stockholders equity, except for translation adjustments related to an intercompany note denominated in Canadian Dollars between our U.S. entity and our Canadian entity.
Settlement of the note is planned in the foreseeable future; therefore, currency adjustments are included in determining net income for the period in accordance with SFAS No. 52, Foreign Currency Translation, and could have a material
impact on results of operations and cash flows in the event of 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 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.



19



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##### Table of Contents

Changes in Internal Controls

No change in our internal control over financial reporting occurred during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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

None.



20



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##### Table of Contents

PART II  OTHER INFORMATION



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

Reference is made to our Annual Report on Form
10-K for the period ended December 31, 2007 and our Quarterly Report on Form 10-Q for the period ended March 31, 2008 (the Q1 10-Q) for a summary of our previously reported legal proceedings. Except as set forth below, since
the date of the filing of the Q1 10-Q, there have been no material developments in previously reported legal proceedings.

On July 1, 2008, the
Superior Court in SMDI v. Laminate Technologies Corp. (Case No. CV2006-006541) issued a ruling awarding the plaintiffs a total of $52,000 in damages. On July 9, 2008, the Company filed a motion for reconsideration requesting that the Court
award the Company attorneys fees. The Court has not entered a final judgment in the case.

Item 1A. Risk Factors

There have been no significant changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.



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

The
following table contains information for shares repurchased during the second quarter of 2008:



|                         |  |                                 |     |  |                                 |       |                                                                               |         |                                                                                 |         |  | 
|------------------------ |  | ------------------------------- | --- |  | ------------------------------- | ----- | ----------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------- | ------- |  | 
|Period                   |  | Total Number ofShares Purchased |     |  | Average PricePaid per Share (1) |       | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs |         | Maximum Number ofShares that May Yet BePurchased Under thePlans or Programs
(2)
|April 1  April 30, 2008 |  |                                |     |  | $                               |      |                                                                               |        |                                                                                 |       
|May 1  May 31, 2008     |  | 122,481                         | (3) |  |                                 | 6.153 |                                                                               | 122,481 |                                                                                 | 603,014
|June 1  June 30, 2008   |  |                                |     |  |                                 |      |                                                                               |        |                                                                                 |       
|                         |  |                                 |     |  |                                 |       |                                                                               |         |                                                                                 |         |  | 
|TOTAL                    |  | 122,481                         | (3) |  | $                               | 6.153 |                                                                               | 122,481 |                                                                                 | 603,014



|(1) | Average price per share excludes commissions.
|--- | ---------------------------------------------



|(2) | In August 2007, the Board of Directors authorized the repurchase of 1,100,000 shares of Company common stock in the open market at prevailing market prices or privately-negotiated
transactions. The Company announced the authorization of the repurchase program on August 9, 2007. This repurchase program does not have an expiration date. In February 2008, the Board of Directors approved an increase in the authorized number
of shares of the Companys common stock to be repurchased to 1,500,000 shares from 1,100,000 shares. In May 2008, the Board of Directors approved an increase in the authorized number of shares of the Companys common stock to be
repurchased to 2,000,000 shares from 1,500,000 shares.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | All 122,481 shares purchased during the second quarter of 2008 were purchased in open-market transactions pursuant to the Repurchase Program.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



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

None



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

The Annual
Meeting of the Stockholders of DDi Corp. was held on May 13, 2008 for the purpose of (i) electing seven directors to the Board of Directors; and (ii) voting on a proposal to ratify the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for the fiscal year ending December 31, 2008.

Proposal 1. Robert J. Amman, Jay B. Hunt,
Andrew E. Lietz, Bryant R. Riley, Steven C. Schlepp, Carl Vertuca, Jr. and Mikel H. Williams were elected by a plurality vote to serve as directors of the Company for a term of one year and until their respective successors are elected and
qualified.



21



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##### Table of Contents

The tabulation of votes cast for the election of Messrs. Amman, Hunt, Lietz, Riley, Schlepp, Vertuca and Williams was as
follows:



|                  |  |            |  |               
|----------------- |  | ---------- |  | --------------
|                  |  | Votes For  |  | Votes Withheld
|Robert J. Amman   |  | 14,315,094 |  | 29,555        
|Jay B. Hunt       |  | 14,310,119 |  | 34,530        
|Andrew E. Lietz   |  | 14,311,994 |  | 32,655        
|Bryant R. Riley   |  | 13,209,749 |  | 1,134,900     
|Steven C. Schlepp |  | 14,310,094 |  | 34,555        
|Carl Vertuca, Jr. |  | 14,257,694 |  | 86,955        
|Mikel H. Williams |  | 14,315,119 |  | 29,530        

Proposal 2. The proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm was approved. The affirmative vote of a majority of the votes cast by holders of the shares of common stock and series A preferred stock of the Company present in person or by proxy at the Annual Meeting and
entitled to vote on Proposal 2, voting together as a single class, was required for approval. The tabulation of votes was as follows:



|           |  |               |  |           
|---------- |  | ------------- |  | ----------
|Votes For  |  | Votes Against |  | Absentions
|14,336,067 |  | 8,155         |  | 427       



|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
|Index |  | Description                                                                                    |  | FiledHerewith |  | Form                      |  | PeriodEnding |  | Exhibit |  | Filing Date
|      |  |                                                                                                |  |               |  |                          
|3.1   |  | Amended and Restated Certificate of Incorporation of DDi Corp.                                 |  |               |  | 8-K                       |  |              |  | 3.1     |  | 12/13/2003 
|      |  |                                                                                                |  |               |  |                          
|3.2   |  | Certificate of Designation of DDi Corp.                                                        |  |               |  | 8-K                       |  |              |  | 3.2     |  | 12/13/2003 
|      |  |                                                                                                |  |               |  |                          
|3.3   |  | Certificate of Designation of Series B Preferred Stock of DDi Corp.                            |  |               |  | 8-K                       |  |              |  | 10.2    |  | 4/7/2004   
|      |  |                                                                                                |  |               |  |                          
|3.4   |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of DDi Corp. |  |               |  | 8-K                       |  |              |  | 3.1     |  | 8/10/2005  
|      |  |                                                                                                |  |               |  |                          
|3.5   |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of DDi Corp. |  |               |  | 8-K                       |  |              |  | 3.1     |  | 2/8/2006   
|      |  |                                                                                                |  |               |  |                          
|3.6   |  | Amended and Restated Bylaws of DDi Corp.                                                       |  |               |  | 10-Q                      |  | 6/30/2005    |  | 3.4     |  | 8/9/2005   



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##### Table of Contents

|      |  |                                                                                                                  |  |               |  |                           |  |              |  |         |  |            
|----- |  | ---------------------------------------------------------------------------------------------------------------- |  | ------------- |  | ------------------------- |  | ------------ |  | ------- |  | -----------
|      |  |                                                                                                                  |  |               |  | Incorporated by Reference
|Index |  | Description                                                                                                      |  | FiledHerewith |  | Form                      |  | PeriodEnding |  | Exhibit |  | Filing Date
|      |  |                                                                                                                  |  |               |  |                          
|10.3  |  | Employment Agreement dated April 7, 2008 between DDi Corp. and Mikel H. Williams                                 |  |               |  | 8-K                       |  |              |  | 99.1    |  | 4/11/2008  
|      |  |                                                                                                                  |  |               |  |                          
|10.4  |  | Employment Agreement dated April 7, 2008 between DDi Corp. and Michael R. Mathews                                |  |               |  | 8-K                       |  |              |  | 99.2    |  | 4/11/2008  
|      |  |                                                                                                                  |  |               |  |                          
|10.5  |  | Employment Agreement dated April 7, 2008 between DDi Corp. and Gerald Barnes                                     |  |               |  | 8-K                       |  |              |  | 99.3    |  | 4/11/2008  
|      |  |                                                                                                                  |  |               |  |                          
|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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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: July 31, 2008 |  |  |  | /s/ MIKEL H. WILLIAMS
|                    |  |  |  |                       |  | Mikel H. Williams                    
|                    |  |  |  |                       |  | President and Chief Executive Officer
|                    |  | 
|Date: July 31, 2008 |  |  |  | /s/ SALLY EDWARDS    
|                    |  |  |  |                       |  | Sally Edwards                        
|                    |  |  |  |                       |  | Chief Financial Officer              



24