U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _______ to _______
COMMISSION FILE NUMBER 1-12711
DIGITAL POWER CORPORATION
(Exact name of small business issuer as specified in its charter)
California 94-1721931
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
41920 Christy Street, Fremont, CA 94538-3158
(Address of principal executive offices)
(510) 657-2635
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
Number of shares of common stock outstanding as of September 30, 1999: 2,771,435
<PAGE>2
ITEM 1. Financial Statements
DIGITAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 527,977
Accounts receivable - trade, net of allowance for
doubtful accuonts of $320,000 3,500,187
Income tax refund receivable 175,457
Other receivables 78,118
Inventory, net 4,249,410
Prepaid expenses and deposits 91,100
Deferred income taxes 385,605
------------
Total current assets 9,007,854
PROPERTY AND EQUIPMENT, net 1,267,354
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
net amortization of $243,924 1,219,464
DEPOSITS 14,472
------------
TOTAL ASSETS $ 11,509,144
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 940,000
Current portion of long-term debt 67,805
Current portion of capital lease obligations 47,725
Accounts payable 1,527,675
Accrued liabilities 1,150,176
-----------
Total current liabilities 3,733,381
CAPITAL LEASE OBLIGATIONS, less current position 97,096
OTHER LONG-TERM LIABILITIES 25,000
DEFERRED INCOME TAXES 26,000
-----------
Total liabilities 3,881,477
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' EQUITY:
Preferred stock issuable in series, no par value, 2,000,000 shares
authorized; no shares issued and outstanding -
Common Stock, no par value, 10,000,000 shares authorized;
2,771,435 shares issued and outstanding 9,012,679
Warrants 60,776
Additional paid-in capital 218,334
Accumulated deficit (1,857,240)
Unearned employee stock ownership plan shares (67,805)
Accumulated other comprehensive income 260,923
-----------
Total stockholders' equity 7,627,667
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,509,144
===========
See accompanying notes to these condensed consolidated financial statements.
<PAGE>3
DIGITAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 4,424,676 $ 4,677,219 $ 11,974,087 $ 14,307,580
COST OF GOODS SOLD 3,246,669 3,389,856 9,009,935 10,460,360
----------- ----------- ------------ ------------
Gross Margin 1,178,007 1,287,363 2,964,152 3,847,220
----------- ----------- ------------ ------------
OPERATING EXPENSES
Engineering and product development 329,189 249,898 760,471 791,017
Marketing and selling 296,269 417,780 894,253 1,131,895
General and administrative 355,826 417,119 1,071,300 1,111,946
----------- ----------- ------------ ------------
Total operating expenses 981,284 1,084,797 2,726,024 3,034,858
----------- ----------- ------------ ------------
INCOME FROM OPERATIONS 196,723 202,566 238,128 812,362
----------- ----------- ------------ ------------
OTHER INCOME (EXPENSES):
Interest income 5,132 11,677 12,640 13,666
Interest expense (41,474) (60,511) (140,362) (175,586)
Translation loss (2,958) (17,096) (9,218) (32,056)
----------- ----------- ------------ ------------
Other income (expense) (39,300) (65,930) (136,940) (193,976)
----------- ----------- ------------ ------------
INCOME BEFORE INCOME TAXES 157,423 136,636 101,188 618,386
PROVISION FOR INCOME TAXES 60,100 53,100 98,900 236,000
----------- ----------- ------------ ------------
NET INCOME 97,323 83,536 2,288 382,386
----------- ----------- ------------ ------------
Other comprehensive income (loss):
Foreign currency translation adjustment 159,172 53,843 (10,505) 123,937
Income tax benefit from exercise of
stock options - 19,000 - 19,000
----------- ----------- ------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 256,495 $ 156,379 $ (8,217) $ 525,323
=========== =========== ============ ============
NET INCOME PER SHARE
BASIC $ 0.04 $ 0.03 $ * $ 0.14
=========== =========== ============ ============
DILUTED $ 0.03 $ 0.03 $ * $ 0.12
=========== =========== ============ ============
*Less than $0.01
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
<PAGE>4
DIGITAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,288 $ 382,386
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 358,381 266,672
Allowance for doubtful accounts - (35,000)
Gain on disposal of asset - (16,648)
Deferred income taxes - (37,234)
Compensation recognized upon issuance of stock
or stock options - 48,032
Contribution to ESOP 117,113 118,164
Foreign currency translation adjustment 9,218 32,056
Changes in operating assets and liabilities:
Accounts receivable 24,851 683,057
Other receivables 24,924 67,059
Income Tax Refund Receivable 217,189 -
Inventory 650,110 (882,891)
Prepaid expenses (35,836) (194,589)
Deposits 26,319 (7,167)
Accounts payable 280,820 (1,543,150)
Accrued liabilities (444,922) 1,021,537
Other long-term liabilities (10,043) -
----------- ----------
Net adjustments 1,218,124 (480,102)
----------- ----------
Net cash provided by (used in) operating activities 1,220,412 (97,716)
----------- ----------
Cash Flows from Investing Activities:
Acquisition of Gresham Power Electronics - (3,370,293)
Purchases of property and equipment (123,893) (88,752)
Proceeds from sale of asset - 19,673
----------- ----------
Net cash used in investing activities (123,893) (3,439,372)
----------- ----------
Cash Flows from Financing Activities:
Proceeds from exercise of stock options including related
tax benefits - 156,506
Payments on long-term debt (117,114) (118,164)
Payments on capital lease obligations (32,466) (9,212)
Proceeds from line of credit - 1,750,000
Principal payments on notes payable (1,266,846) -
----------- ----------
Net cash provided by (used in) financing activities (1,416,426) 1,779,130
----------- ----------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (19,723) 91,881
----------- ----------
Net decrease in cash and cash equivalents (339,630) (1,666,077)
Cash and cash equivalents, beginning of period 867,607 2,205,282
----------- ----------
Cash and cash equivalents, end of period $ 527,977 $ 539,205
=========== ==========
</TABLE>
(Continued)
<PAGE>5
DIGITAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1999 1998
---- ----
<S> <C> <C>
Supplemental non-cash investing and refinancing activities:
Acquisition of fixed assets with debt $ - $ 147,857
=========== ===========
Supplemental Cash Flow Information:
Cash payments for:
Interest $ 142,052 $ 168,633
=========== ===========
Income taxes $ 41,957 $ 290,812
=========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
<PAGE>6
DIGITAL POWER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the fiscal year ended December 31, 1998.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments, consisting only of normal recurring
accruals, considered necessary to present fairly the Company's financial
position at September 30, 1999, the results of operations for the three month
and nine month periods ended September 30, 1999 and 1998, and cash flows for the
nine months ended September 30, 1999 and 1998. The results for the period ended
September 30, 1999, are not necessarily indicative of the results to be expected
for the entire fiscal year ending December 31, 1999.
<PAGE>7
NOTE 2 - EARNINGS PER SHARE
The following represents the calculation of earnings per share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
BASIC
-----
<S> <C> <C> <C> <C>
Net Income $ 97,323 $ 83,536 $ 2,288 $ 382,386
Weighted average number of common shares 2,771,435 2,734,837 2,771,435 2,712,778
------------ ----------- ----------- -----------
Basic earnings per share $ 0.04 $ 0.03 $ * $ 0.14
============ =========== =========== ===========
DILUTED
-------
Net income $ 97,323 $ 83,536 $ 2,288 $ 382,386
------------ ----------- ----------- -----------
Weighted average number of common shares 2,771,435 2,734,837 2,771,435 2,712,778
Common stock equivalent shares representing
Shares issuable upon exercise of stock options 64,981 252,763 65,226 350,730
Common stock equivalent shares representing
Shares issuable upon exercise of warrants -- -- -- 3,161
------------ ----------- ----------- -----------
Weighted average number of shares used in
Calculation of diluted earnings per share 2,836,416 2,987,600 2,836,661 3,066,669
------------ ----------- ----------- -----------
Diluted earnings per share $ 0.03 $ 0.03 $ * $ 0.12
============ =========== =========== ===========
* Less than
$0.01
</TABLE>
<PAGE>8
NOTE 3 - SEGMENT REPORTING
The company has identified its segments based upon its geographic operations.
These segments are represented by each of the Company's individual legal
entities: Digital Power Corporation (DPC), Poder Digital, S.A. de C.V. (PD) and
Digital Power Limited (DPL). Segment information is as follows:
For the Three Months Ended September 30, 1999
<TABLE>
<CAPTION>
DPC PD DPL Eliminations Totals
----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,570,215 $ 9,888 $ 1,844,573 $ -- $ 4,424,676
=========== ========= =========== =========== ===========
Intersegment Revenues $ 68,109 $ 544,757 $ -- $ (612,866) $ --
=========== ========= =========== =========== ===========
Interest Income $ 32,892 $ 953 $ -- $ (28,713) $ 5,132
========== ========= =========== =========== ===========
Interest Expense $ 32,662 $ 2,277 $ 35,248 $ (28,713) $ 41,474
=========== ========= =========== =========== ===========
Income Tax Expense $ -- $ -- $ 60,100 $ -- $ 60,100
=========== ========= =========== =========== ===========
Income (loss) $ 14,324 $ (18,155) $ 101,154 $ -- $ 97,323
=========== ========= =========== =========== ===========
</TABLE>
For the Three Months Ended September 30, 1998
<TABLE>
<CAPTION>
DPC PD DPL Eliminations Totals
----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,985,623 $ 11,894 $ 1,679,702 $ -- $ 4,677,219
=========== ========= =========== ============ ===========
Intersegment Revenues $ 55,873 $ 386,092 $ -- $ (441,965) $ --
=========== ========= =========== ============ ===========
Interest Income $ 11,677 $ -- $ -- $ -- $ 11,677
=========== ========= =========== ============ ===========
Interest Expense $ 45,099 $ 531 $ 14,881 $ -- $ 60,511
=========== ========= =========== ============ ===========
Income Tax Expense $ 16,650 $ -- $ 36,450 $ -- $ 53,100
=========== ========= =========== ============ ===========
Income (loss) $ 289,193 $(233,915) $ 28,258 $ -- $ 83,536
=========== ========= =========== ============ ===========
</TABLE>
<PAGE>9
For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
DPC PD DPL Eliminations Totals
----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 7,003,497 $ 19,540 $ 4,951,050 $ -- $11,974,087
=========== ========== =========== ============ ===========
Intersegment Revenues $ 169,019 $1,585,206 $ -- $ (1,754,225) $ --
=========== ========== =========== ============ ===========
Interest Income $ 95,289 $ 2,552 $ -- $ (85,201) $ 12,640
=========== ========== =========== ============ ===========
Interest Expense $ 100,841 $ 5,466 $ 119,256 $ (85,201) $ 140,362
=========== ========== =========== ============ ===========
Income Tax Expense $ -- $ -- $ 98,900 $ -- $ 98,900
=========== ========== =========== ============ ===========
Income (loss) $ (80,845) $ (34,379) $ 117,512 $ -- $ 2,288
=========== ========== =========== ============ ===========
</TABLE>
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
DPC PD DPL Eliminations Totals
----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 9,091,338 $ 31,090 $ 5,185,152 $ -- $14,307,580
=========== ========== =========== ============ ===========
Intersegment Revenues $ 55,873 $1,266,388 $ -- $ (1,322,261) $ --
=========== ========== =========== ============ ===========
Interest Income $ 13,666 $ -- $ -- $ -- $ 13,666
=========== ========== =========== ============ ===========
Interest Expense $ 122,486 $ 1,910 $ 51,190 $ -- $ 175,586
=========== ========== =========== ============ ===========
Income Tax Expense $ 143,450 $ -- $ 92,550 $ -- $ 236,000
=========== ========== =========== ============ ===========
Income (loss) $ 861,602 $ (674,283) $ 195,067 $ -- $ 382,386
=========== ========== =========== ============ ===========
</TABLE>
NOTE 4 - INCOME TAXES
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
For the Three Months Ending For the Three Months Ending
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Federal - 33,650 - 129,450
State - (17,000) - 14,000
Foreign 60,100 36,450 98,900 92,550
------ ------ ------ -------
Income tax expense 60,100 53,100 98,900 236,000
====== ====== ====== =======
</TABLE>
<PAGE>10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
With the exception of historical facts stated herein, the matters discussed in
this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
revenues and earnings from operations of the Company. Factors that could cause
actual results to differ materially include, in addition to other factors
identified in this report, a high degree of customer concentration, dependence
on the computer and other electronic equipment industry, competition in the
power supply industry, dependence on the Guadalajara, Mexico facility, and other
risks factors detailed in the Company's Securities and Exchange Commission
("SEC") filings including the risk factors set forth in Company's Registration
Statement on Form SB-2, SEC File No. 333-14199, and "Certain Considerations"
section in the Company's Form 10-KSB for the year ended December 31, 1998.
Readers of this report are cautioned not to put undue reliance on "forward
looking" statements which are, by their nature, uncertain as reliable indicators
of future performance. The Company disclaims any intent or obligation to
publicly update these "forward looking" statements, whether as a result of new
information, future events, or otherwise.
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999, COMPARED TO SEPTEMBER 30,
1998
REVENUES
Revenues decreased by 5.4% to $4,424,676 for the three months ended September
30, 1999, from $4,677,219 for the three months ended September 30, 1998.
Revenues from the Company's United Kingdom's operations of Digital Power Ltd.
increased 9.8% to $1,844,573 for the third quarter ended September 30, 1999,
from $1,679,702 for the third quarter ended September 30, 1998. Revenues
attributed to the United States operations decreased by 13.9% from the same
quarter during the prior year. The decrease in revenues can be attributed
primarily from decreased purchases from one large customer who began buying a
lower priced product from a competitor during the fourth quarter of 1998. This
customer resumed placing orders with the Company during the first quarter of
1999, although at a lower volume. During the third quarter of 1999, this
customer placed no significant orders with the Company.
For the nine months ended September 30, 1999, revenues decreased by 16.3% to
$11,974,087 from $14,307,580 for the nine months ended September 30, 1998. The
decrease in revenues during the nine months ended September 30, 1999, can be
attributed primarily to the reduction in purchases from the one large customer
as stated in the quarterly review discussion above. For the nine months ended
September 30, 1999, Digital Power Ltd. contributed $4,951,050 to the Company's
revenues compared to $5,185,152 for the nine months ended September 30, 1998.
GROSS MARGINS
Gross margins were 26.6% for the three months ended September 30, 1999, compared
to 27.5% for the three months ended September 30, 1998. The decrease in gross
margins can primarily be attributed to a product mix with lower gross margins.
<PAGE>11
Gross margins were 24.8% for the nine months ended September 30, 1999, compared
to 26.9% for the nine months ended September 30, 1998. The decrease in gross
margins can primarily be attributed to reduced shipment level of higher margin
products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were 14.7% of revenues for the
three months ended September 30, 1999, compared to 17.9% for the three months
ended September 30, 1998. Selling, general and administrative expenses were
16.4% of revenues for the nine months ended September 30, 1999, compared to
15.7% for the nine months ended September 30, 1998. The continued cost
containments implemented by the Company resulted in actual dollar reductions in
these expenses of $182,804 for the quarter and $278,288 for the nine months
ended September 30, 1999.
ENGINEERING AND PRODUCT DEVELOPMENT
Engineering and product development expenses were 7.4% of revenues for the three
months ended September 30, 1999, and 5.3% for the three months ended September
30, 1998. Engineering and product development expenses were 6.4% of revenues for
the nine months ended September 30, 1999, compared to 5.5% for the nine months
ended September 30, 1998. Actual dollar expenditures increased $79,291 for the
quarter reflecting the Company's commitment to invest in new product
developments, in spite of current softness in revenues.
INTEREST EXPENSE
Interest expense, net of interest income, was $36,342 for the three months ended
September 30, 1999, compared to $48,834 for the three months ended September 30,
1998. Interest expense, net of interest income, was $127,722 for the nine months
ended September 30, 1999, compared to $161,920 for the nine months ended
September 30, 1998. The decrease in interest expense is related primarily to
payments made to reduce notes payable.
INCOME BEFORE INCOME TAXES
For the three months ended September 30, 1999, the Company had an income before
income taxes of $157,423 compared to income before income taxes of $136,636 for
the three months ended September 30, 1998. For the nine months ended September
30, 1999, the Company had income before income taxes of $101,188 compared to
income of $618,386 for the nine months ended September 30, 1998.
INCOME TAX
The provision for income tax increased from $53,100 for the three months ended
September 30, 1998, to $60,100 for the three months ended June 30, 1999, and
decreased from $236,000 for the nine months ended September 30, 1998, to $98,900
for the nine months ended September 30, 1999. The increase in the effective tax
rate for the nine months ended September 30, 1999, reflects increased taxable
income from the UK operations without a corresponding benefit from losses
generated in the US operations.
<PAGE>12
NET INCOME
Net income for the three months ended September 30, 1999, was $97,323 compared
to $83,536 for the three months ended September 30, 1998. Net income for the
nine months ended September 30, 1999, was $2,288, compared to $382,386 for the
nine months ended September 30, 1998. The increase in net income for the three
month period was due to the reduction in operating and other expenses
implemented to bring costs in line with revenue levels, while the decrease in
net income for the nine month period is related to decreased revenues for the
nine month period, primarily related to the Company's United States operations.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1999, the Company had cash of $527,977 and working capital of
$5,274,473. This compares with cash of $539,205 and working capital of
$5,724,124 at September 30, 1998. The decrease in working capital was due to an
increase prepaid expenses and decrease of notes payable and accrued liabilities,
offset by a decrease in accounts receivable and inventory and increase in
accounts payable, resulting in a decrease in cash and cash equivalents. Cash
provided by (used in) operating activities for the Company totaled $1,220,412
and ($97,716) for the nine months ended September 30, 1999 and 1998.
Cash used in investing activities was $123,893 for the nine months ended
September 30, 1999, compared to $3,439,372 for the nine months ended September
30, 1998. For the nine months of 1998, $3,370,293 of the $3,439,372 cash used in
investing activities was for the acquisition of Gresham Power Electronics. Net
cash provided by (used in) financing activities was ($1,416,426) for the nine
months ended September 30, 1999, compared to $1,779,130. The cash provided by
financing activities in 1998 was primarily proceeds from a line of credit. Cash
used in financing activities in 1998 was primarily the payments on outstanding
borrowings.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's, or
its suppliers' and customers' computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company upgraded its software at a cost of less than $10,000 and has been
informed by its suppliers that such software is Year 2000 compliant. The
software from these suppliers is used in major areas of the Company's operations
such as for financial, sales, warehousing and administrative purposes. The
Company has no internally generated software. The Company believes that all of
its hardware is Year 2000 compliant. In connection with the acquisition of
Gresham Power, the Company has acquired new hardware and software to address the
Year 2000 Issue at a cost of approximately $150,000 to make Gresham Power Year
2000 compliant. Gresham Power has completed the installation of this new
hardware and software. After reasonable investigation, the Company has not yet
identified any other Year 2000 problem but will continue to monitor the issue.
However, there can be no assurances that the Year 2000 problem will not occur
with respect to the Company's computer systems.
<PAGE>13
The Company has initiated formal communications with significant suppliers and
large customers to determine the extent to which those third parties' failure to
remedy their own Year 2000 Issues would materially effect the Company and its
subsidiaries. In the event that the Company receives indications from its
suppliers and large customers that the Year 2000 Issue may materially effect
their ability to conduct business, the Company will seek contingency plans such
as finding other vendors that are Year 2000 compliant or increase its inventory
of supplies or parts in an attempt to ensure smooth operations until such vendor
can remedy the problem. The Company has not received any indication from its
suppliers and large customers that the Year 2000 Issue may materially effect
their ability to conduct business.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 14, 1999, the Company held its annual meeting of shareholders for the
election of directors and to approve amendments to amend the Articles of
Incorporation as follows:
Election of Directors For Votes Withheld
- --------------------- --- --------------
Robert O. Smith 2,066,038 363,889
Chris Schofield 2,111,115 318,812
Thomas W. O'Neil, Jr. 2,111,115 318,812
Scott C. McDonald 2,111,115 318,812
Robert J. Boschert 2,109,315 320,612
Proposal #1 - To amend the Articles of Incorporation of Digital to adopt a new
Article VI to eliminate cumulative voting;
For Against Abstain Not Voted
--- ------- ------- ---------
963,257 691,337 12,155 763,178
<PAGE>14
Proposal #2 - To amend the Articles of Incorporation of Digital to adopt a new
Article VII to eliminate shareholder action by written consent;
For Against Abstain Not Voted
--- ------- ------- ---------
942,474 710,617 13,658 763,178
Proposal #3 - To amend the Articles of Incorporation of Digital to adopt a new
Article VIII, which establishes higher voting requirements for shareholders in
certain circumstances (a) to approve certain business combinations involving
Digital and/or its subsidiaries, and (b) to amend Article VIII;
For Against Abstain Not Voted
--- ------- ------- ---------
947,235 699,769 11,160 771,763
Proposal #4 - If either Proposal Nos. 1 or 2 is approved, to amend the Articles
of Incorporation of Digital to adopt a new Article IX to require a higher voting
requirement to amend Articles VI or VII;
For Against Abstain Not Voted
--- ------- ------- ---------
955,376 701,469 9,904 763,178
Because approval of 66 2/3% of the outstanding shares of common stock was
necessary to approval Proposals 1, 2, 3 and 4, such proposals were not adopted.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27.1 Financial Data Schedule
<PAGE>15
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIGITAL POWER CORPORATION
(Registrant)
Date: November 12, 1999 /s/ Robert O. Smith
-----------------------------
Robert O. Smith
Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999 /s/ Philip G. Swany
-----------------------------
Philip G. Swany
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 10-QSB
for the period ended September 30, 1999, for Digital Power Corporation and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 527,977
<SECURITIES> 0
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0
0
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</TABLE>
