Digital Power Reports Financial Results for the Second Quarter

August 19, 2007 by Jeff Shepard

Digital Power Corp. ("Digital Power") announced its financial results for the second quarter ended June 30, 2007.

Digital Power reported revenue of $2,536,000 for the second quarter, a decrease of 24% from $3,333,000 for the same quarter last year. The company also reported an operating loss of $200,000 for the second quarter of 2007, compared to an operating profit of $28,000 for the same quarter last year. Digital Power reported a net loss of $196,000 for the three months ended June 30, 2007, compared to a net profit of $17,000 for the three months ended June 30, 2006.

Revenue for the six months ended June 30, 2007, was $5,278,000, a 13% decrease from revenue of $6,041,000 for the six months ended June 30, 2006. Net loss for the six months ended June 30, 2007, was $155,000, compared to a net income of $54,000 for the same period in 2006.

Commenting on the results, President and CEO, Jonathan Wax, stated, "While the second quarter was below our expectations and was dominated by a necessary $140,000 provision for obsolete inventory and sluggish sales in our commercial sector, we are clearly seeing significant activity in both our military and commercial sectors which included a $860,000 commercial purchase order with one customer in the industrial market which represents demand starting in the late third quarter of 2007 and continuing over the next twelve calendar months. In particular, we are quite pleased with customer receptivity with the new High Density 2x4 product lines and activity remains very high with the our Military, CPCI, and High Density EF series products. We are however, starting to see significant degradation in the older legacy designs that have now been available in the market place for over five years."

Wax further stated, "We have also recently completed a new agreement with Telkoor Telecom that we believe will allow us to achieve lower per unit costs on selected high volume products. In addition to the expected cost benefit associated with the agreement, we will now assume direct supply chain responsibility over Telkoor’s partners who support the manufacture of digital power purchase orders on the Telkoor product line out of the Asia. We feel this change will ultimately enhance our overall customer support, lead-time, and gross margin expectations particularly as we enter the late fourth quarter of 2007 when these higher volume product cost reductions are effectively implemented given the relevant lead-time of the products impacted by this agreement."