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Digital Power Corp Reports Operating Results (10-Q)

August 14, 2009 | About:

Digital Power Corp (DPW) filed Quarterly Report for the period ended 2009-06-30.

DIGITAL POWER is engaged in the design development manufacture and sales of 50 to750 watt switching power supplies and DC/DC converters to original equipment manufacturers of computers and other electronic equipment. Through their subsidiary Digital Power Limited they also design manufacture and sell uninterruptible power supplies power conversion and distribution equipment for naval and military applications and DC/AC inverters primarily for the telecommunications industry in Europe under the label Gresham Power Electronics. Digital Power Corp has a market cap of $11.3 million; its shares were traded at around $1.7 with a P/E ratio of 2.8 and P/S ratio of 0.9.

Highlight of Business Operations:

Our revenues decreased by 37.4 % to $2,095,000 for the three months ended June 30, 2009, from $3,347,000 for the three months ended June 30, 2008. The decrease in revenues is mainly due to a decline in sales of our standard commercial products as a result of the global economic recession. Revenues from our commercial products during this period decreased by 44.8% to $1,310,000 for the three months ended June 30, 2009, from $2,375,000 for the three months ended June 30, 2008. Revenue from sales of our military products decreased by 19.2% to $785,000 for the three months ended June 30, 2009, from $972,000 for the three months ended June 30, 2008.

For the six months ended June 30, 2009, our revenues decreased by 30.7% to $4,516,000, from $6,516,000 for the six months ended June 30, 2008. Revenues from our commercial products decreased by 39.5% to $2,947,000 for the six months ended June 30, 2009, from $4,868,000 for the six months ended June 30, 2008. Revenues from our military products decreased by 4.8% to $1,569,000 for the six months ended June 30, 2009, from $1,648,000 for the six months ended June 30, 2008. The overall decrease in revenues is mainly attributable to the decrease in sales of our commercial products, as discussed above.

Engineering and product development expenses were $133,000, or 6.4% of revenues, for the three months ended June 30, 2009, compared to $142,000, or 4.2% of revenues, for the three months ended June 30, 2008. Engineering and product development expenses were $269,000, or 6.0% of revenues, for the six months ended June 30, 2009, compared to $302,000, or 4.6% of revenues, for the six months ended June 30, 2008. This decrease was primarily due to the decrease in salary expenses.

General and administrative expenses were $331,000, or 15.8% of revenues, for the three months ended June 30, 2009, compared to $321,000, or 9.6% of revenues, for the three months ended June 30, 2008. The increase in the percentage of the expenditure of revenues is due mainly to the decrease in revenues in the three months ended June 30, 2009 compared to the revenues in the three months ended June 30, 2008. General and administrative expenses were $665,000, or 14.7% of revenues, for the six months ended June 30, 2009, compared to $880,000, or 13.5% of revenues, for the six months ended June 30, 2008. Expenditures decreased in 2009 by $215,000 mainly due to the accrual of liabilities in relation to the separation agreement with our former President and Chief Executive Officer in the six months ended June 30, 2008.

Financial expense was $99,000 for the three months ended June 30, 2009, compared to financial income of $9,000 for the three months ended June 30, 2008. Financial expense was $72,000 for the six months ended June 30, 2009, compared to financial income of $13,000 for the six months ended June 30, 2008. From time to time, we enter into forward contracts to hedge certain sales transactions which are denominated in foreign currencies. The change in financial results was due to foreign currency fluctuations during the respective periods and changes in the fair value of forward contracts.

For the six month period ended June 30, 2009, we had operating income of $123,000, compared to an operating income of $41,000 for the six month period ended June 30, 2008. For the year ended December 31, 2008, we had operating income of $391,000. Although we have actively taken steps to reduce our costs, we experienced a net loss of $118,000 for the three month period ended June 30, 2009 and, we might incur losses in the future until we increase revenues through the sale of current products and decreased manufacturing costs through a greater use of contract manufacturers in Asia and other strategic locations.

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