SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
                               (Amendment No. 1)

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]

Check the appropriate box:

[ ]  Preliminary Proxy Statement
[ ]  Confidential,  for  Use  of the  Commission  Only  (as  permitted  by  Rule
     14a-6(e)(2)
[x]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

                            DIGITAL POWER CORPORATION
                            -------------------------
                (Name of Registrant as Specified In Its Charter)


    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]  No fee required
[ ]  125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
     22(a)(2) of Schedule 14A.
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
     1)   Title of each class of securities to which transaction applies:
     2)   Aggregate number of securities to which transaction applies:
     3)   Per unit  price  or other  underlying  value of  transaction  computed
          pursuant to Exchange  Act Rule 0-11 (set forth the amount on which the
          filing fee is calculated and state how it was determined):
     4)   Proposed maximum aggregate value of transaction:
     5)   Total fee paid:
[ ]  Fee paid previously with preliminary materials.
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2)  and identify the filing for which the  offsetting  fee was paid
     previously.  Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.

     1)   Amount Previously Paid: ______________________________________________
     2)   Form, Schedule or Registration Statement No.: ________________________
     3)   Filing Party: ________________________________________________________
     4)   Date Filed: __________________________________________________________





                            DIGITAL POWER CORPORATION
                              41920 Christy Street
                                Fremont, CA 94538
                                 (510) 657-2635


To Our Shareholders:

     You are cordially  invited to attend the annual meeting of the shareholders
of Digital Power Corporation to be held at 10:00 a.m. PST, on November 17, 2005,
at our corporate  offices located at 41920 Christy Street,  Fremont,  California
94538.

     At the  meeting,  you will be asked to (i) elect five (5)  directors to the
board,  (ii) approve an amendment to increase the authorized number of shares of
common stock from 10,000,000 to 30,000,000, and (iii) approve other matters that
properly come before the meeting, including adjournment of the meeting.

     We hope you will attend the shareholders'  meeting.  However, in order that
we may be assured of a quorum, we urge you to sign and return the enclosed proxy
in the postage-paid  envelope  provided as promptly as possible,  whether or not
you plan to attend the meeting in person.

                                        /s/ Jonathan Wax                 
                                        -------------------------------------
                                        Jonathan Wax                        
                                        Chief Executive Officer

October 31, 2005





                            DIGITAL POWER CORPORATION
                              41920 Christy Street
                                Fremont, CA 94538
                                 (510) 657-2635

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                         TO BE HELD ON NOVEMBER 17, 2005
                                                                         

     NOTICE IS HEREBY GIVEN that the annual meeting of  shareholders  of Digital
Power Corporation (the "Company"), a California corporation, will be held at our
corporate  headquarters,  located at 41920 Christy Street,  Fremont,  California
94538, on Thursday,  November 17, 2005, at 10:00 a.m. (PST),  for the purpose of
considering and acting on the following:

     1.   To elect five (5) directors to the board to hold office until the next
          annual meeting of shareholders  or until their  successors are elected
          and qualified;

     2.   To approve an amendment to increase  the  authorized  number of shares
          from 10,000,000 to 30,000,000 shares; and

     3.   To  transact  such other  business  as may  properly  come  before the
          meeting or any adjournment thereof.

     Only  shareholders  of record at the close of business on October 28, 2005,
are entitled to receive notice of and to vote at the meeting.  Shareholders  are
invited to attend the meeting in person.

     Please sign and date the accompanying  proxy card and return it promptly in
the enclosed postage-paid envelope whether or not you plan to attend the meeting
in person.  If you attend the meeting,  you may vote in person if you wish, even
if you previously have returned your proxy card. The proxy may be revoked at any
time prior to its exercise.

                                        By Order of the Board of Directors


                                        /s/ Leo Yen
                                        -------------------------------------
                                        Leo Yen
                                        Secretary
October 31,  2005


                             YOUR VOTE IS IMPORTANT
                             ----------------------

IN ORDER TO ASSURE YOUR  REPRESENTATION  AT THE  MEETING,  YOU ARE  REQUESTED TO
COMPLETE,  SIGN AND DATE THE  ENCLOSED  PROXY CARD AS PROMPTLY  AS POSSIBLE  AND
RETURN IT IN THE ENCLOSED ENVELOPE.





                            DIGITAL POWER CORPORATION
                              41920 Christy Street
                                Fremont, CA 94538
                                 (510) 657-2635

                                 ---------------                    
                                 PROXY STATEMENT
                                 ---------------

     We are furnishing this proxy statement to you in connection with our annual
meeting to be held on  Thursday,  November  17, 2005 at 10:00 a.m.  (PST) at our
corporate  headquarters,  located at 41920 Christy Street,  Fremont,  California
94538 and at any  adjournment  thereof.  The matters to be considered  and acted
upon are (i) the  election  of five (5)  directors  to the board to hold  office
until the next annual  meeting of  shareholders  or until their  successors  are
elected  and  qualified;  (ii)  to  approve  an  amendment  to our  articles  of
incorporation to increase in the number of authorized  shares from 10,000,000 to
30,000,000;  and (iii) such  other  business  as may  properly  come  before the
meeting.

     The enclosed  proxy is solicited on behalf of our board of directors and is
revocable  by you at any time prior to the voting of such  proxy.  All  properly
executed proxies  delivered  pursuant to this  solicitation will be voted at the
meeting and in accordance with your instructions, if any.

     Our annual report for the fiscal year 2004, including financial statements,
is included in this mailing. Such report and financial statements are not a part
of this proxy statement.

     This proxy statement was first mailed to shareholders on October 31, 2005.


                                ABOUT THE MEETING

What is the purpose of the Annual Meeting?

     The  purpose of the annual  meeting is to allow you to vote on the  matters
outlined in the accompanying Notice of Annual Meeting of Shareholders, including
the election of the directors and an amendment to our articles of incorporation.

Who is entitled to vote?

     Only  shareholders  of record at the close of business on the record  date,
October  28,  2005 (the  "Record  Date"),  are  entitled  to vote at the  annual
meeting, or any postponements or adjournments of the meeting.

What are the Board's recommendations on the proposals?

     The Board  recommends a vote FOR each of the nominees and FOR the amendment
to increase the number of authorized common stock.

How do I vote?

     Sign  and  date  each  proxy  card  you   receive  and  return  it  in  the
postage-prepaid  envelope  enclosed  with  your  proxy  materials.  If you are a
registered  shareholder  and attend the meeting,  you may deliver your completed
proxy card(s) in person.
                                       1


     If your shares are held by your broker or bank, in "street  name," you will
receive a form from your  broker  or bank  seeking  instructions  as to how your
shares should be voted.  If you do not instruct your broker or bank how to vote,
your broker or bank will vote your shares if it has discretionary  power to vote
on a particular matter.

Can I change my vote after I return my proxy card?

     Yes. You have the right to revoke your proxy at any time before the meeting
by notifying the Company's Secretary at Digital Power Corporation, 41920 Christy
Street,  Fremont,  California 94538, in writing, voting in person or returning a
proxy card with a later date.

Who will count the vote?

     The  Secretary  will count the votes and act as the  inspector of election.
Our transfer agent, Computershare Transfer & Trust is the transfer agent for the
Company's  common stock.  Computershare  Transfer & Trust will tally the proxies
and provide this information at the time of the meeting.

What shares are included on the proxy card(s)?

     The shares on your proxy card(s) represent ALL of your shares.

What does it mean if I get more than one proxy card?

     If your shares are registered differently and are in more than one account,
you will  receive  more than one proxy card.  Sign and return all proxy cards to
ensure that all your shares are voted.  We  encourage  you to have all  accounts
registered in the same name and address  whenever  possible.  You can accomplish
this by contacting our transfer agent,  Computershare  Transfer & Trust, located
at 350 Indiana Street, Suite 800, Golden,  Colorado 80401, phone (303) 986-5400,
fax  (303)  986-2444,  or,  if your  shares  are held by your  broker or bank in
"street name," by contacting the broker or bank who holds your shares.

How many shares can vote?

     Only shares of common stock may vote.  As of the Record Date of October 28,
2005, 6,161,859 shares of common stock were issued and outstanding.

     Each share of common  stock is entitled to one vote at the annual  meeting,
except with respect to the  election of  directors.  In elections of  directors,
California  law provides that a shareholder,  or his or her proxy,  may cumulate
votes; that is, each shareholder has that number of votes equal to the number of
shares  owned,  multiplied  by the number of  directors  to be elected,  and the
shareholder may cumulate such votes for a single  candidate,  or distribute such
votes  among as many  candidates  as he or she  deems  appropriate.  However,  a
shareholder  may cumulate  votes only for a candidate or candidates  whose names
have been  properly  placed in nomination  prior to the voting,  and only if the
shareholder has given notice at the meeting,  prior to the voting, of his or her
intention to cumulate  votes for the  candidates  in  nomination.  The Company's
designated proxy holders (the "Proxy Holders") have  discretionary  authority to
cumulate votes represented by the proxies received in the election of directors.
The Proxy Holders intend to vote all proxies  received by them in such manner as
will assure the election of as many of the nominees described under "Election of
Directors" as possible.

                                       2


What is a "quorum"?

     A "quorum"  is a majority of the  outstanding  shares  entitled to vote.  A
quorum may be present in person or represented by proxy to transact  business at
the shareholders' meeting. For the purposes of determining a quorum, shares held
by brokers or  nominees  for which we receive a signed  proxy will be treated as
present even if the broker or nominee does not have discretionary  power to vote
on a  particular  matter  or  if  instructions  were  never  received  from  the
beneficial owner. These shares are called "broker  non-votes."  Abstentions will
be counted as present for quorum purposes.

What is required to approve each proposal?

     For the election of the directors, once a quorum has been established,  the
nominees  for  director  who receive  the most votes will become our  directors.
Holders owning a majority of the shares  outstanding  must approve the amendment
to our articles of incorporation.  

     If a broker  indicates  on its  proxy  that it does not have  discretionary
authority to vote on a particular matter, the affected shares will be treated as
not present and not entitled to vote with  respect to that  matter,  even though
the same  shares  may be  considered  present  for  quorum  purposes  and may be
entitled to vote on other matters.

What happens if I abstain?

     Proxies marked  "abstain" will be counted as shares present for the purpose
of determining  the presence of a quorum,  but for purposes of  determining  the
outcome of a proposal, shares represented by such proxies will not be treated as
affirmative votes.

How will we solicit proxies?

     We will  distribute  the proxy  materials  and solicit  votes.  The cost of
soliciting  proxies will be borne by us. These costs will include the expense of
preparing  and  mailing  proxy  solicitation   materials  for  the  meeting  and
reimbursements   paid  to  brokerage  firms  and  others  for  their  reasonable
out-of-pocket   expenses  for  forwarding   proxy   solicitation   materials  to
shareholders.  Proxies  may also be  solicited  in person,  by  telephone  or by
facsimile  by  our  directors,   officers  and  employees   without   additional
compensation.

                                       3


                                 STOCK OWNERSHIP

     The  following  table shows the amount of our shares of common  stock (AMEX
Symbol: DPW) beneficially owned (unless otherwise indicated) by each shareholder
known by us to be the beneficial  owner of more than 5% of our common stock,  by
each of our  directors and nominees and the  executive  officers,  directors and
nominees as a group.  As of September 28, there were 6,161,859  shares of common
stock outstanding. All information is as of September 28, 2005. Unless indicated
otherwise,  the address of all shareholders listed is Digital Power Corporation,
41920 Christy Street, Fremont, California 94538.

                                                        Shares Beneficially
                                                                Owned(1)
     Name  & Address of Beneficial Owner               Number          Percent
     -----------------------------------               ------          -------
     Telkoor Power Ltd.                               2,661,261         43.2%
     5 Giborei Israel
     Netanya 42293
     Israel
     Ben-Zion Diamant                                 3,028,765(2)      47.6%
     David Amitai                                     2,861,261(3)      45.0%
     Yeheskel Manea                                      20,000(4)         *
     Youval Menipaz                                      20,000(4)         *
     Amos Kohn                                           20,000(4)         *
     Digital Power ESOP                                 167,504          2.7%
     Barry W. Blank                                     450,800          7.3%
     P.O. Box 32056
     Phoenix, AZ  85064

     All directors and executive officers as a group  3,363,765(5)      50.2%
     (6 persons)

     Footnotes to Table
     ------------------
      *   Less than one percent.
     (1)  Except as indicated in the footnotes to this table,  the persons named
          in the table have sole voting and investment power with respect to all
          shares of common stock shown as beneficially owned by them, subject to
          community property laws where applicable.
     (2)  Mr.  Diamant  serves as a  director  of Telkoor  Power  Ltd.  Includes
          options to purchase  200,000 shares owned by Mr. Diamant and 2,661,261
          shares  beneficially  owned by Telkoor  Power Ltd.,  which may also be
          deemed beneficially owned by Mr. Diamant.
     (3)  Mr. Amitai serves as a director of Telkoor Power Ltd. Includes options
          to purchase  200,000  shares owned by Mr. Amitai and 2,661,261  shares
          beneficially  owned by Telkoor  Power  Ltd.,  which may also be deemed
          beneficially owned by Mr. Amitai,.
     (4)  Includes options to purchase 20,000 shares exercisable within 60 days.
     (5)  Includes  2,661,261  shares owned by Telkoor Power Ltd.,  which may be
          deemed  beneficially  owned by Mr. Diamant and Mr. Amitai,  options to
          purchase 460,000 shares owned by directors, options to purchase 75,000
          shares owned by Mr. Wax and 167,504 shares owned by Digital Power ESOP
          of which  Mr.  Wax and Mr.  Diamant  are  trustees  and may be  deemed
          beneficial owners.

                                       4


                             SECTION 16 TRANSACTIONS

     Section  16(a) of the  Exchange Act  requires  our  executive  officers and
directors to file  reports of  ownership  and changes in ownership of our common
stock  with the SEC.  Executive  officers  and  directors  are  required  by SEC
regulations  to furnish us with  copies of all  Section  16(a)  forms they file.
Based solely upon a review of Forms 3, 4 and 5 delivered to the  Securities  and
Exchange  Commission   ("Commission")  during  fiscal  year  2004,  all  current
directors and officers of the Company timely filed all required reports pursuant
to Section 16(a) of the Securities Exchange Act of 1934.

                        PROPOSAL 1--ELECTION OF DIRECTORS

     Our bylaws presently provide that the authorized number of directors may be
fixed by resolution  of the Board from time to time,  with a minimum of five (5)
directors  and a  maximum  of nine  (9)  directors.  The  Board  has  fixed  the
authorized number of directors at five (5). The term of office for the directors
elected at this meeting will expire at the next annual  meeting of  shareholders
to be held in 2005 or until a director's earlier death,  resignation or removal.
Our  current  directors  consist  of Messrs.  Ben-Zion  Diamant,  David  Amitai,
Yeheskel Manea, Youval Menipaz, and Amos Kohn.

     Unless  otherwise  instructed,  the  proxyholders  will  vote  the  proxies
received by them for the five (5) nominees  named  below.  If any nominee of the
Company is unable or  declines  to serve as a director at the time of the annual
meeting,  the proxies  will be voted for any nominee  designated  by the present
Board of  Directors  to fill the  vacancy.  Each  nominee has agreed to serve as
director, if elected.

     The Board has formed a nominating committee and has nominated the following
nominees  for  directors:  Messrs.  Ben-Zion  Diamant,  Yeheskel  Manea,  Youval
Menipaz,  Amos Kohn and Jonathan Wax. The following indicates the age, principal
occupation or employment for at least the last five years and  affiliation  with
the Company, if any, for each nominee as director.

Ben-Zion Diamant                                           Director since 2001

     Mr.  Ben-Zion  Diamant,  age 55, has been the  Chairman of the Board of the
Company since  November  2001. He has also been Chairman of the Board of Telkoor
Power Ltd. since 1994.  From  1992-1994,  Mr. Diamant was a partner and business
development manager of Phascom. From 1989 to 1992, Mr. Diamant was a partner and
manager of Rotel  Communication.  He earned  his BA in  Political  Science  from
Bar-Ilan University.

Amos Kohn                                                  Director since 2003

     Mr. Amos Kohn,  age 45, became a Director of the Company in 2003.  Mr. Kohn
is the Vice  President  of Network  Modeling of ICTV Inc.,  a High Tech  company
located in Los Gatos,  California,  which is developing a  centralized  software
platform that enables cable operators to deliver revenue-generating new services
with full multimedia and real-time interactivity to any digital set-top. In year
2003, Mr. Kohn was Vice President of System  Engineering & Business  Development
of AVIVA  Communications,  Inc.,  a High  Tech  company  located  in  Cupertino,
California,  which is  developing  a  transport  solution  for  Video On  Demand
systems.  From  2000 to 2003,  Mr.  Kohn was the  Chief  Architect  of  Liberate
Technologies,  a software company specializing in telecommunications  located in
San Carlos,  California.  From 1997 to 2000,  Mr. Kohn was the Vice President of
Engineering & Technology for Golden Channel, the largest Cable Operator (MSO) in
Israel.  Mr.  Kohn  holds  a  Bachelors  of  Science  in  Electronics  from  ORT
Technological College, Israel.

                                       5


Yeheskel Manea                                             Director since 2002

     Mr. Yeheskel  Manea,  age 61, has served as a Director of the Company since
2002.  Since 1996,  he has been a Branch  Manager of Bank  Hapoalim,  one of the
leading banks in Israel.  Mr. Manea has been  employed with Bank Hapoalim  since
1972.  He holds a Bachelors  of Science in Economy and  Business  Administration
from Ferris College, University of Michigan.

Youval Menipaz                                             Director since 2002

     Mr. Youval  Menipaz,  age 55, has served as a Director of the Company since
2002. Mr. Menipaz has been the Managing  Director of Foriland  Investments since
2000, a privately owned company that invests in and manages  several  companies.
Since 1977, he has held several executive  positions in leading companies within
the Israeli  market.  Among others,  he served as the Operation  Manager of Osem
Industries Ltd, Vice President of Elite  Industries Ltd,  President of Supershuk
Greenberg   Ltd.  Mr.  Menipaz  holds  a  Bachelors  of  Science  in  Industrial
Engineering from the Technion, the Israeli Institute of Technology.

Jonathan Wax                                               Officer since 2004

     Mr. Jonathan Wax, age 48, became our CEO and President in January 2004. Mr.
Wax held Vice  President  positions  with  Artesyn  Technologies,  Inc.  and was
stationed both  domestically  and in the Far East, in addition to holding a wide
variety of sales positions,  including global account responsibilities with some
of Artesyn  Technologies,  Inc.'s largest accounts.  From 1994 to 1998, prior to
the merger with Zytec and Computer Products,  which formed Artesyn Technologies,
Inc.,  Mr. Wax was Vice  President of Customer  Support and Quality for Computer
Products.  Mr. Wax holds a Bachelor's  degree in Business from the University of
Nebraska.

RECOMMENDATION OF THE BOARD

     THE BOARD OF  DIRECTORS  RECOMMENDS  SHAREHOLDERS  VOTE "FOR" THE  NOMINEES
LISTED ABOVE.

How are directors compensated?

     Prior to January 1,  2005,  all  directors  who were not  employees  of the
Company were paid $10,000 per annum paid quarterly.  Effective  January 1, 2005,
each dependent director will receive $10,000 per annum paid quarterly.  However,
the director who is designated as the Audit Committee  financial  expert is paid
$15,000 per annum paid quarterly.  Upon joining the Board, all directors who are
not related  parties,  are granted  options to purchase  10,000 shares of common
stock vesting upon  completion of one year of service.  On February 28, 2005 all
directors who are not related  parties were granted  options to purchase  10,000
shares of common stock.

How often did the Board meet during fiscal 2004?

     The Board of Directors  met 11 times  during  fiscal  2004.  Each  director
attended  at  least  75% of the  total  number  of  meetings  of the  Board  and
Committees on which he served.

                                       6


Family Relationships

     Mr.  Manea's two children are married to Mr.  Diamont's two  children.  Mr.
Menipaz  is  the  son  of  Mr.  Amitai's  cousin.  There  are  no  other  family
relationships between any of the officers or directors.

Committees of the Board of Directors

Audit Committee

     The Board of Directors of the Company has an Audit  Committee.  The members
of the Audit Committee in 2004 were Messrs. Mark Thum, Amos Kohn, Yeheskel Manea
and Youval Menipaz.  Mr. Thum resigned in 2004. The current members of the Audit
Committee are Messrs.  Kohn, Manea and Menipaz.  All Audit Committee members are
independent directors.

     The  Audit  Committee  of the  Board  of  Directors  makes  recommendations
regarding the retention of independent auditors, reviews the scope of the annual
audit  undertaken  by our  independent  auditors and the progress and results of
their work,  and reviews  our  financial  statements,  internal  accounting  and
auditing  procedures and corporate programs to ensure compliance with applicable
laws.  The Audit  Committee  reviews the services  performed by the  independent
auditors  and  determines  whether  they are  compatible  with  maintaining  the
independent auditor's independence.  The Audit Committee has a Charter, which is
reviewed  annually and as may be required due to changes in industry  accounting
practices or the promulgation of new rules or guidance documents. The members of
the Audit Committee in 2004 were Messrs.  Mark Thum,  Amos Kohn,  Yeheskel Manea
and Youval  Menipaz.  The current  members of the Audit  Committee are:  Messrs.
Kohn, Manea and Menipaz. All Audit Committee members are independent  directors.
The Audit Committee met four times during fiscal 2004.

     The Board of Directors  determined  that Mr. Manea is qualified as an Audit
Committee  Financial Expert.  Mr. Manea is independent as determined by the AMEX
listing standards.

Compensation Committee

     The Compensation  Committee of the Board of Directors  reviews and approves
executive compensation policies and practices,  reviews salaries and bonuses for
our  officers,  administers  the  Company's  Stock Option Plan and other benefit
plans,  and  considers  other  matters as may, from time to time, be referred to
them by the Board of  Directors.  The members of the  Compensation  Committee in
2004 were Messrs.  Thum,  Kohn,  Manea and Menipaz.  The current  members of the
Compensation  Committee are Messrs.  Kohn,  Manea and Menipaz.  All Compensation
Committee members are independent directors.

Compensation Committee Interlocks and Insider Participation

     Messrs. Kohn, Manea and Menipaz serve on the Compensation Committee.  There
are  no  compensation  committee  interlocks  or  insider  participation  on our
compensation committee.

Nominating Committee

     Our directors  take a critical role in guiding our strategic  direction and
oversee the management of the Company.  Board  candidates  are considered  based
upon various  criteria,  such as their  broad-based  business  and  professional
skills and experiences,  a global business and social  perspective,  concern for
the long-term interests of the shareholders and personal integrity and judgment.
In addition,  directors must have time  available to devote to Board  activities

                                       7


and to enhance their  knowledge of the power supply  industry.  Accordingly,  we
seek to attract and retain highly  qualified  directors who have sufficient time
to attend to their substantial duties and responsibilities to the Company.

     The Board of Directors  has formed a  nominating  committee  consisting  of
Messrs.  Kohn,  Manea and  Menipaz  who are  independent  as defined in the AMEX
listing standards.  The nominating committee recommends a slate of directors for
election at the annual  meeting.  In  accordance  with AMEX rules,  the slate of
nominees is approved by a majority of the independent directors.  The nominating
committee does not have a charter.

     In  carrying  out  its  responsibilities,  the  nominating  committee  will
consider  candidates  suggested  by  shareholders.  If a  shareholder  wishes to
formally place a candidate's name in nomination,  however,  he or she must do so
in  accordance  with the  provisions of the Company's  Bylaws.  Suggestions  for
candidates  to be  evaluated  by the  Board  must be sent to Leo Yen,  Corporate
Secretary, Digital Power Corporation,  41920 Christy Street, Fremont, California
94538.

     In  accordance  with  Securities  Exchange  Commission   regulations,   the
following is the Audit Committee  Report.  Such report is not deemed to be filed
with the Securities Exchange Commission.

REPORT OF THE AUDIT COMMITTEE

     The Audit  Committee  oversees  the  financial  reporting  process  for the
Company  on  behalf of the  Board of  Directors.  In  fulfilling  its  oversight
responsibilities,  the Audit Committee reviews the Company's internal accounting
procedures,  consults  with and reviews the services  provided by the  Company's
independent  auditors  and  makes  recommendations  to the  Board  of  Directors
regarding the selection of independent  auditors.  Management is responsible for
the  financial  statements  and the reporting  process,  including the system of
internal  controls.  The independent  auditors are responsible for expressing an
opinion on the conformity of those audited  financial  statements with generally
accepted accounting principles.

     In  accordance  with  Statements  on  Accounting  Standards  (SAS) No.  61,
discussions were held with management and the independent auditors regarding the
acceptability and the quality of the accounting  principles used in the reports.
These  discussions  included the clarity of the  disclosures  made therein,  the
underlying  estimates and assumptions used in the financial  reporting,  and the
reasonableness  of the  significant  judgments and management  decisions made in
developing  the  financial  statements.  In addition,  the Audit  Committee  has
discussed with the independent  auditors their independence from the Company and
its management and the independent auditors provided the written disclosures and
the letter required by Independence Standards Board Standard No. 1.

     The  Audit  Committee  has  also  met  and  discussed  with  the  Company's
management,  and its independent  auditors,  issues related to the overall scope
and  objectives  of the audits  conducted,  the  internal  controls  used by the
Company and the selection of the Company's  independent  auditors.  In addition,
the Audit Committee  discussed with the independent  auditors,  with and without
management   present,   the  specific  results  of  audit   investigations   and
examinations  and the  auditor's  judgments  regarding  any and all of the above
issues.
  
                                       8


     Pursuant  to  the  reviews  and  discussions  described  above,  the  Audit
Committee  recommended  to the Board of  Directors  that the  audited  financial
statements  be included in the Annual  Report on Form 10-KSB for the fiscal year
ended December 31, 2004, for filing with the Securities and Exchange Commission.

                                        Respectfully submitted,
                
                                        DIGITAL POWER CORPORATION
                                        AUDIT COMMITTEE

                                        Amos Kohn
                                        Yeheskel Manea
                                        Youval Menipaz

                                        Executive Officers

The following is a description of the business background of the Company's
officers:

Ben-Zion Diamant

See Description of Directors above.

Jonathan Wax

See Description of Directors above.

Leo Yen

     Mr. Leo Yen became our Chief Financial  Officer in January 2005. Mr. Yen is
the President of Sagent Management,  a financial,  accounting and tax consulting
firm. From 2002 to 2004, Mr. Yen founded and managed Crystal Compass,  which was
acquired  by  Sagent  Management  in 2004.  From  1999 to 2002,  he was a Senior
Associate with Pricewaterhousecoopers LLP and from 1997 to 1999, he was a Senior
Tax  Consultant  with Ernst & Young LLP.  Mr.  Yen holds a BS in  Finance,  Real
Estate  and  Law  and a BS  in  Accounting  from  California  State  Polytechnic
University Pomona.

Code of Ethics

     We have  adopted a code of ethics that applies to our  principal  executive
officer, principal financial officer,  principal accounting officer,  controller
and other persons performing similar functions. A copy of our code of ethics can
be found on our website at http://www.digipwr.com/CodeofEthics.doc.  The Company
will report any amendment or wavier to the code of ethics on our website  within
five (5) days.

                                       9


                  EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS

     This table lists the  aggregate  compensation  paid in the past three years
for all services of the Chief  Executive  Officer.  No other persons earned over
$100,000 during the last fiscal year.



                                  

                                                           SUMMARY COMPENSATION TABLE

                                                                              Long Term Compensation
                                                                 ---------------------------------------------
                                       Annual Compensation                         Awards             Payouts
                                                                 ---------------------------------   ---------
                                                                  Restricted      Securities
                                                Other Annual        Stock         Underlying            LTIP
Name and                           Salary       Compensation       Award(s)         Options           Payouts        All Other
Principal Position      Year         ($)             ($)             ($)              (#)                ($)      Compensation
------------------      ----     ------------ ----------------  --------------  ---------------     -----------   ------------

Jonathan Wax, Chief     2004     $153,066         $12,541             $0            $150,000              $0             $0
Executive Officer




Options Granted in Last Fiscal Year

                                Individual Grants

                     Number of      Percent of Total
                     Securities     Options Granted 
                     Underlying     to Employees in    Exercise Base  Expiration
          Name     Options Granted    Fiscal Year     Price ($/share)     Date
     ------------  ---------------  ----------------  --------------- ----------
     Jonathan Wax      150,000            39.6%            $0.99        1/2014

Aggregated  Option  Exercises  in Last  Fiscal Year and Fiscal  Year-End  Option
Values

     The following  table sets forth  executive  officer  options  exercised and
option  values for fiscal  year  ended  December  31,  2004,  for all  executive
officers at the end of the year.



                         
                                                                              Value of Unexercised 
                                                                                     Options
                                                    Number of Options at          In-the-Money
                                                     December 31, 2004         at December 31, 2004
                Shares Acquired                       (Exercisable/              (Exercisable/
      Name       or Exercised     Value Realized      Unexercisable)           Unexercisable)(1)
     -------     --------------   --------------   ----------------------     ---------------------
  Jonathan Wax        0                 0                37,500/112,500           $9,750/$29,250



Footnotes to Table

(1)  Market price at December 31, 2004 for a share of common stock was $1.25.

Employment Agreements

     In January 2004, we entered into an employment  agreement with Mr. Jonathan
Wax, our President and Chief Executive Officer.  The agreement has a term of one
year with annual renewals  thereafter.  Annual compensation is $165,000.  In the
event of a change in  control or early  termination  without  cause,  we will be

                                       10


required  to pay Mr.  Wax one  year  compensation.  As a part of the  employment
contract,  Mr. Wax was granted options to purchase 150,000 shares, 37,500 shares
vested immediately and the remainder vests over three years.

                         Ten-Year Options/SAR Repricings

         There were no repricings during the year ended December 31, 2004

                      Equity Compensation Plan Information

     The following  table  provides  aggregate  information as of the end of the
fiscal year ended  December  31,  2004 with  respect to all  compensation  plans
(including individual  compensation  arrangements) under which equity securities
are authorized for issuance.



                  

=====================================================================================================================
        Plan category          Number of securities to be    Weighted-average exercise      Number of securities
                                issued upon exercise of        price of outstanding        remaining available for
                                  outstanding options,     options, warrants and rights     future issuance under
                                  warrants and rights                                     equity compensation plans
                                                                                            (excluding securities
                                                                                          reflected in column (a))
                                          (a)                         (b)                               (c)
=====================================================================================================================
  Equity compensation plans            1,550,425                       1.37                        522,480
approved by security holders
=====================================================================================================================
  Equity compensation plans                -                             -                            -
  not approved by security
           holders
=====================================================================================================================
            Total                      1,550,425                       1.37                        522,480
=====================================================================================================================


                                  Benefit Plans

Equity Compensation Plans Not Approved by Security Holders

     Subsequent to the year end, on January 17, 2004, the Board granted  150,000
options  that  are not  part of  compensation  plans  approved  by the  security
holders. There are options to purchase 150,000 shares of common stock granted in
the fiscal 2004 to the  Company's  Chief  Executive  Officer and President at an
exercise price of $0.99 vest 25% annual beginning January 17, 2004.

Employee Stock Ownership Plan

     We adopted an Employee  Stock  Ownership  Plan ("ESOP") in conformity  with
ERISA  requirements.  As of December 31, 2004,  the ESOP owns, in the aggregate,
167,504  shares of our common  stock.  All  eligible  employees  of the  Company
participate  in the ESOP on the  basis of level of  compensation  and  length of
service. Participation in the ESOP is subject to vesting over a six-year period.
The shares of our common stock owned by the ESOP are voted by the ESOP trustees.
Mr. Wax and Mr. Diamant are the two trustees of the ESOP.

                                       11


2002, 1998 and 1996 Stock Option Plans

     We have  established  the  2002,  1998 and 1996  Stock  Option  Plans  (the
"Plans").  The  purposes of the Plans are to  encourage  stock  ownership by our
employees,  officers,  and directors to give them a greater personal interest in
the success of the  business  and to provide an added  incentive  to continue to
advance in their employment or service to us. The Plans provide for the grant of
either incentive or non-statutory stock options. The exercise price of any stock
option  granted  under the  Plans  may not be less than 100% of the fair  market
value of our common stock on the date of grant.  The fair market value for which
an optionee may be granted  incentive stock options in any calendar year may not
exceed $100,000.  Generally,  the Company's stock option agreements  require all
stock to be purchase by cash or check.  Unless otherwise  provided by the Board,
an option  granted under the Plans is exercisable  for ten years.  The Plans are
administered by the  Compensation  Committee,  which has discretion to determine
optionees,  the  number of shares to be  covered by each  option,  the  exercise
schedule and other terms of the options. The Plans may be amended, suspended, or
terminated  by the Board but no such action may impair rights under a previously
granted option. Each incentive stock option is exercisable,  during the lifetime
of the  optionee,  only so long  as the  optionee  remains  employed  by us.  In
general,  no option is  transferable  by the optionee  other than by will or the
laws of descent and distribution.

     As of December 31, 2004, a total of 2,272,000  options are authorized to be
issued  under the 2002,  1998 and 1996 Plans and options to  purchase  1,140,425
shares of common stock were outstanding.

401(k) Plan

     We  adopted a  tax-qualified  employee  savings  and  retirement  plan (the
"401(k) Plan"), which generally covers all of our full-time employees.  Pursuant
to the 401(k) Plan,  employees may make  voluntary  contributions  to the 401(k)
Plan up to a maximum of six  percent of eligible  compensation.  The 401(k) Plan
permits, but does not require,  additional matching and Company contributions on
behalf of Plan  participants.  We match  contributions  at the rate of $0.25 for
each  $1.00  contributed  up to  6%  of  the  base  salary.  We  can  also  make
discretionary  contributions.  The 401(k)  Plan is  intended  to  qualify  under
Sections  401(k) and 401(a) of the Internal  Revenue  Code of 1986,  as amended.
Contributions  to such a qualified  plan are deductible to the Company when made
and neither the  contributions  nor the income earned on those  contributions is
taxable to Plan participants until withdrawn.  All 401(k) Plan contributions are
credited to separate accounts maintained in trust.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     On March 31, 2003,  we entered into an agreement to sell 900,000  shares of
common stock to Telkoor Power Ltd. ("Telkoor") in consideration of $600,000.  As
a part of the  transaction,  Telkoor's  warrant to purchase  900,000  shares was
canceled.  The warrant to purchase  900,000 shares would have expired on May 23,
2003. Our Chairman,  Mr.  Diamant owns 42.45% and our Director,  Mr. Amitai owns
39.98% of the outstanding shares of Telkoor Power Ltd.

     On January 12, 2004, we entered into a securities  purchase  agreement with
Telkoor.  Under the securities  purchase  agreement,  Telkoor  acquired  290,023
shares  of  common  stock  for  the  aggregate   purchase   price  of  $250,000.
Additionally, under the agreement, Telkoor had the right to invest an additional
$250,000  on or  before  June 30,  2004.  The  purchase  price per share for the
additional  investment  was  agreed  to be  the  average  closing  price  of the
Company's  common  stock  twenty (20)  trading days prior to notice of intent to
invest.  On June 14, 2004,  Telkoor gave notice of its intent to invest $250,000
and the parties  entered into a definitive  agreement on June 16, 2004.  Telkoor
purchased 221,238 shares at $1.13 per share.

                                       12


     On  February  3,  2005,  Telkoor  loaned  the  Company  $250,000  through a
Convertible  Note.  Under  the terms of the  Convertible  Note,  Telkoor  loaned
$250,000  interest free until the tenth business day after the Company announces
its financial results for fiscal 2005. Telkoor has the right to convert the debt
to common stock at $1.06 per share. The loan will automatically convert at $1.06
per share if the Company meets its set budget for the fiscal year 2005.

     There is currently a dispute between certain  shareholders  and managers of
Telkoor,  which is subject to  litigation  in Israel.  Two of the members of our
Board of Directors  and the two members that  comprise the Board of Directors of
Digital Power Limited are involved in this dispute.  Although,  the Company does
not believe the dispute has seriously effected the day-to-day  operations of the
Company,  it has an impact on certain decision making on the Company or with one
of its suppliers (Telkoor).

                                 PROPOSAL NO. 2

        APPROVAL OF AMENDMENT TO THE ARTICLES OF INCORPORATION INCREASING
                 THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

     The Company's  authorized  capital stock  currently  consists of 10,000,000
shares of common stock and 1,500,000 shares of preferred stock. As of the record
date  of  October  28,  2005,  there  were  6,161,859  shares  of  common  stock
outstanding  and no preferred  stock  outstanding.  The Board of  Directors  has
proposed the Company increase its authorized common stock from 10,000,000 shares
and 30,000,000 shares.

     The amendment will allow the Company to issue  additional  shares of common
stock as may be  necessary in order to provide  potential  growth to the Company
through  financings,  additional  research and  development  activities,  and to
provide  equity  incentives  to  employees,   officers,  and  directors.  Future
issuances of additional shares of common stock would have the effect of diluting
the voting  rights and could have the effect of diluting  earnings per share and
book value per share of existing stockholders.  The availability for issuance of
additional  shares of  Common  Stock  could  discourage  or make more  difficult
efforts  to  obtain  control  of the  Company.  As of the  date  of  this  proxy
statement,  the Company has no  understandings or agreements to issue additional
shares of common stock.

     The amendment must be approved by the holders  representing the majority of
the outstanding shares of common stock. The effective date of the amendment will
occur  upon  filing  such  amendment  with the  California  Secretary  of State.
Assuming that the stockholders approve the amendment, management intends to file
the amendment as soon as practicable thereafter.

     If this proposal 2 is adopted by the  shareholders,  the first paragraph of
Section (a)(i) of Article III of the Articles of  Incorporation  will be amended
to read as follows:

     "III: (a) (i) This Corporation is authorized to issue two classes of shares
     to be designated respectively Preferred Stock, no par value,  ("Preferred")
     and Common Stock, no par value,  ("Common").  The total number of shares of
     Preferred this  corporation  shall have authority to issue is 2,000,000 and
     the total number of shares of Common the  Corporation  shall have authority
     to issue is 30,000,000."

                                       13


RECOMMENDATION OF THE BOARD

     THE  BOARD  OF  DIRECTORS  RECOMMENDS  THAT  SHAREHOLDERS  VOTE  "FOR"  THE
AMENDMENT  TO  INCREASE  THE NUMBER OF  AUTHORIZED  SHARES OF COMMON  STOCK FROM
10,000,000 SHARES TO 30,000,000 SHARES.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

     Kost Forer Gabbay & Kasierer,  a Member of Ernst & Young  Global  served as
our  independent  auditors for the annual audit for the year ended  December 31,
2004 and 2003.

Audit Fees

     The  aggregate  fees billed by Kost Forer  Gabbay &  Kasierer,  a Member of
Ernst & Young Global,  for professional  services  rendered for the audit of the
Company's  financial  statements for the fiscal year ended December 31, 2004 was
$98,000 and December 31, 2003 was $95,000.

Audit-Related Fees

     The  aggregate  fees  billed for  assurance  and  related  services  by the
principal accountant that are reasonably related to the performance of the audit
or review of the Company's financial statements for the years ended December 31,
2004 and 2003 was $0.

Tax Fees

     The aggregate fees billed for tax  compliance,  tax advice and tax planning
rendered by our independent auditors for the fiscal year ended December 31, 2004
was $24,000 and December 31, 2003 was $30,000.

All Other Fees

     The aggregate fees billed for all other  professional  services rendered by
the Company's  independent auditors for the fiscal years ended December 31, 2004
and 2003 was $0.

     The  Audit  Committee  approved  100% of the  fees  paid  to the  principal
accountant  for  audit-related,  tax and other fees in the fiscal year 2004. The
Audit  Committee  pre-approves  all  non-audit  services to be  performed by the
auditor in accordance with the Audit Committee Charter.  The percentage of hours
expended  on the  principal  accountant's  engagement  to  audit  the  Company's
financial  statements  for the most recent  fiscal year that were  attributed to
work  performed  by persons  other than the  principal  accountant's  full-time,
permanent employees was 0%.

Proposals of Shareholders

     We must receive proposals  intended to be presented by shareholders at 2006
annual meeting of shareholders no later than June 29, 2006 for consideration for
possible  inclusion  in the  proxy  statement  relating  to  that  meeting.  All
proposals must meet the requirements of Rule 14a-8 of the Exchange Act.

     For any proposal  that is not  submitted for inclusion in next year's proxy
statement (as described in the preceding paragraph),  but is instead intended to
be presented directly at next year's annual meeting, Rule 14a-14 of the Exchange
Act permits  management  to vote  proxies in its  discretion  if the Company (a)
receives  notice of the  proposal  before the close of business on June 29, 2006

                                       14


and advises  shareholders in the next year's proxy statement about the nature of
the matter  and how  management  intends to vote on such  matter or (b) does not
receive notice of the proposal prior to the close of business on June 29, 2004.

     Notices of intention to present  proposal at the 2006 Annual Meeting should
be addressed to Digital Power  Corporation,  41920 Christy Street,  Fremont,  CA
94538, Attention:  Secretary. The Company reserves the right to reject, rule out
of order or take other appropriate action with respect to any proposal that does
not comply with these and other applicable requirements.

Annual Report to Shareholders

     The Annual  Report on Form  10-KSB for the fiscal year ended  December  31,
2004,  including  audited financial  statements,  was mailed to the shareholders
concurrently  with this proxy statement,  but such report is not incorporated in
this proxy  statement  and is not deemed to be a part of the proxy  solicitation
material.  The  Form  10-KSB  and all  other  periodic  filings  made  with  the
Securities  and Exchange  Commission  are available on the Company's  website at
www.digipwr.com.

                                 OTHER BUSINESS

     We do not know of any  business to be  presented  for action at the meeting
other than those  items  listed in the notice of the  meeting  and  referred  to
herein. If any other matters properly come before the meeting or any adjournment
thereof,  it is intended  that the proxies  will be voted in respect  thereof in
accordance with the recommendations of the Board of Directors.

                                        By Order of the Board of Directors


                                        /s/ Leo Yen                         
                                        --------------------------------
                                        Leo Yen,
                                        Secretary

October 31, 2005





PROXY


                            DIGITAL POWER CORPORATION
                              41920 Christy Street
                                Fremont, CA 94538
                                 (510) 657-2635

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

     The undersigned  hereby appoints Jonathan Wax and Leo Yen as proxies,  each
with full power to appoint substitutes,  and hereby authorizes them or either of
them to  represent  and to vote as  designated  below,  all the shares of common
stock of  Digital  Power  Corporation  held of record by the  undersigned  as of
October  28,  2005,  at the  Annual  Meeting of  Shareholders  to be held at the
Company's  headquarters  located at 41920 Christy Street,  Fremont, CA 94538, at
10:00 a.m.  (PST), on November 17, 2005, and any  adjournments or  postponements
thereof,  and hereby  ratifies  all that said  attorneys  and  proxies may do by
virtue hereof.

PLEASE MARK VOTE IN BRACKET IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]

Proposal 1:    To elect  directors to serve for the ensuing year and until their
               successors are elected.

Nominees

Ben-Zion Diamant                 [  ] FOR          [  ] WITHHOLD AUTHORITY
Jonathan Wax                     [  ] FOR          [  ] WITHHOLD AUTHORITY
Yehezkel Manea                   [  ] FOR          [  ] WITHHOLD AUTHORITY
Youval Menipaz                   [  ] FOR          [  ] WITHHOLD AUTHORITY
Amos Kohn                        [  ] FOR          [  ] WITHHOLD AUTHORITY

Proposal 2.    To  approve  an   amendment   to  the   Company's   Articles   of
               Incorporation  to  increase  the  authorized  number of shares of
               common stock from 10,000,000 to 30,000,000.

[  ]  FOR            [  ]  AGAINST             [  ]  WITHHOLD AUTHORITY


Proposal 3:    To transact  such other  business as may properly come before the
               meeting and any adjournments thereof.

                                       1


THIS PROXY, WHEN PROPERLY EXECUTED,  WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE  UNDERSIGNED  SHAREHOLDER.  IF NO DIRECTION  IS MADE,  THIS PROXY WILL BE
VOTED FOR PROPOSALS ONE AND TWO.

THIS PROXY ALSO DELEGATES  DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO OTHER
BUSINESS  WHICH  PROPERLY MAY COME BEFORE THE MEETING,  OR ANY  ADJOURNMENTS  OR
POSTPONEMENTS  THEREOF. IN THEIR DISCRETION,  THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

PLEASE  READ,  SIGN,  DATE AND RETURN  THIS PROXY  PROMPTLY  USING THE  ENCLOSED
ENVELOPE.

THE UNDERSIGNED HEREBY ACKNOWLEDGES  RECEIPT OF THE NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.


Dated: _____________, 2005                
                                    -------------------------------
                                    Signature



                                    -------------------------------
                                    Signature


                                  Common Stock


Please  sign  exactly  as name  appears at left.  When  shares are held by joint
tenants  or more than one  person,  all  owners  should  sign.  When  signing as
attorney,  as executor,  administrator,  trustee, or guardian,  please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer.  If a partnership,  please sign in partnership name
by authorized person.


                                       2