================================================================================

                     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, 2005

[ ]   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
       incorporation or organization)                Identification No.)

                  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 November 8, 2005, 6,161,859

================================================================================



                            DIGITAL POWER CORPORATION

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                            AS OF SEPTEMBER 30, 2005

                                 IN U.S. DOLLARS

                                    UNAUDITED

                                      INDEX

                                                                        PAGE
                                                                       -------
Report of Independent Registered Public Accounting Firm                      2

Consolidated Balance Sheet                                               3 - 4

Consolidated Statements of Operations                                        5

Statements of Changes in Shareholders' Equity                                6

Consolidated Statements of Cash Flows                                        7

Notes to Consolidated Financial Statements                              8 - 13

                                        2


[LOGO OF ERNST & YOUNG]

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                          TO THE BOARD OF DIRECTORS OF

                            DIGITAL POWER CORPORATION

       We have reviewed the accompanying consolidated balance sheet of Digital
Power Corporation ("the Company") and its subsidiary as of September 30, 2005,
and the related consolidated statements of operations for the nine-month and
three-month periods ended September 30, 2005 and 2004, changes in shareholders'
equity for the nine-month period ended September 30, 2005, and the consolidated
statements of cash flows for the nine-month periods ended September 30, 2005 and
2004. These financial statements are the responsibility of the Company's
management.

       We conducted our review in accordance with the standards of the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.

       Based on our review, we are not aware of any material modifications that
should be made to the consolidated interim financial statements referred to
above for them to be in conformity with U.S. generally accepted accounting
principles.


Tel-Aviv, Israel                                  KOST FORER GABBAY & KASIERER
November 15, 2005                               A Member of Ernst & Young Global

                                        3


                                                       DIGITAL POWER CORPORATION

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------

U.S. DOLLARS IN THOUSANDS

                                                         SEPTEMBER 30,
                                                             2005
                                                         -------------
                                                           Unaudited
                                                         -------------
ASSETS

 CURRENT ASSETS:
   Cash and cash equivalents                             $       1,147
   Restricted cash                                                 281
   Trade receivables, net of allowance for doubtful
    accounts of $ 56 at September 30, 2005                       1,700
   Prepaid expenses and other current assets                       140
   Inventories                                                   2,227
                                                         -------------

 Total current assets                                            5,495
 -----                                                   -------------

 LEASE DEPOSITS                                                     18
                                                         -------------

 PROPERTY AND EQUIPMENT, NET                                       191
                                                         -------------

 Total assets                                            $       5,704
 -----                                                   =============

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

                                        4


                                                       DIGITAL POWER CORPORATION

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------

U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA

                                                         SEPTEMBER 30,
                                                             2005
                                                         -------------
                                                           Unaudited
                                                         -------------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                       $       1,777
  Related party - trade payables account                           476
  Deferred revenues                                                363
  Other current liabilities                                        377
  Convertible note (Note 4)                                        250
                                                         -------------

Total current liabilities                                        3,243
-----                                                    -------------

SHAREHOLDERS' EQUITY:
  Series A Redeemable, Convertible Preferred shares no
   par value: 500,000 shares authorized; 0 shares
   issued and outstanding at September 30, 2005                      -
  Preferred shares, no par value: 1,500,000 shares
   authorized; 0 shares issued and outstanding at
   September 30, 2005                                                -
  Common shares, no par value: 10,000,000 shares
   authorized; 6,161,859 shares issued and
   outstanding at September 30, 2005                            11,036
  Additional paid-in capital                                     2,227
  Deferred stock compensation                                       (8)
  Accumulated deficit                                          (10,780)
  Accumulated other comprehensive loss                             (14)
                                                         -------------

 Total shareholders' equity                                      2,461
 -----                                                   -------------

 Total liabilities and shareholders' equity              $       5,704
 -----                                                   =============

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

                                        5


                                                       DIGITAL POWER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA



                                                          NINE MONTHS ENDED           THREE MONTHS ENDED
                                                            SEPTEMBER 30,               SEPTEMBER 30,
                                                      -------------------------   -------------------------
                                                         2005          2004          2005          2004
                                                      -----------   -----------   -----------   -----------
                                                                            Unaudited
                                                      -----------------------------------------------------
                                                                                    
Revenues                                              $     7,187   $     6,158   $     2,969   $     2,190
Cost of revenues                                            5,090         4,673         2,120         1,669
                                                      -----------   -----------   -----------   -----------

Gross profit                                                2,097         1,485           849           521
                                                      -----------   -----------   -----------   -----------

Operating expenses:
  Engineering and product development                         374           449           151           157
  Selling and marketing                                       999           947           319           325
  General and administrative                                  797           811           268           256
                                                      -----------   -----------   -----------   -----------

Total operating expenses                                    2,170         2,207           738           738
-----                                                 -----------   -----------   -----------   -----------

Operating income (loss)                                       (73)         (722)          111          (217)
Financial income (expenses), net                              (87)           (5)            1            (7)
Other expenses                                                  -            (6)            -            (6)
                                                      -----------   -----------   -----------   -----------

Net income (loss)                                     $      (160)  $      (733)  $       112   $      (230)
                                                      ===========   ===========   ===========   ===========

Basic net earnings (loss) per share                   $     (0.03)  $     (0.13)  $      0.02   $     (0.04)
                                                      ===========   ===========   ===========   ===========

Diluted net earnings (loss) per share                 $     (0.03)  $     (0.13)  $      0.02   $     (0.04)
                                                      ===========   ===========   ===========   ===========

Weighted average number of shares used in
 computing basic net earnings (loss) per share          6,161,859     5,772,868     6,161,859     6,121,096
                                                      ===========   ===========   ===========   ===========

Weighted average number of shares used in
 computing diluted net earnings (loss) per share        6,161,859     5,772,868     6,183,665     6,121,096
                                                      ===========   ===========   ===========   ===========


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

                                        6


                                                       DIGITAL POWER CORPORATION

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------

U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA



                                                                                             ACCUMULATED     TOTAL        TOTAL
                               COMMON SHARES       ADDITIONAL     DEFERRED                     OTHER        COMPRE-      SHARE-
                           ---------------------    PAID-IN       STOCK       ACCUMULATED   COMPREHENSIVE   HENSIVE      HOLDERS'
                            NUMBER       AMOUNT     CAPITAL    COMPENSATION     DEFICIT     INCOME (LOSS)    LOSS        EQUITY
                           ---------  ----------  -----------  ------------   -----------   -------------   ---------   ---------
                                                                                                
Balance as of              6,161,859  $   11,036  $    2,227   $        (13)  $   (10,620)  $          75               $   2,705
 January 1, 2005

  Amortization of
   deferred stock
   compensation related
   to options granted to
   an employee                     -           -           -              5             -               -                       5
  Comprehensive loss:
    Net loss                       -           -           -              -          (160)              -   $    (160)       (160)
    Foreign currency
     translation
     adjustments                   -           -           -              -             -             (89)        (89)        (89)
                           ---------  ----------  ----------   ------------   -----------   -------------   ---------   ---------

  Total comprehensive
   loss                                                                                                     $    (249)
                                                                                                            =========
Balance as of
 September 30, 2005
   (unaudited)             6,161,859  $   11,036  $    2,227   $         (8)  $   (10,780)  $         (14)              $   2,461
                           =========  ==========  ===========  ============   ===========   =============               =========


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

                                        7


                                                       DIGITAL POWER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

U.S. DOLLARS IN THOUSANDS



                                                                                   NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,
                                                                                -----------------------
                                                                                   2005         2004
                                                                                ----------   ----------
                                                                                       Unaudited
                                                                                -----------------------
                                                                                       
Cash flows from operating activities:
-------------------------------------
  Net loss                                                                      $     (160)  $     (733)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation                                                                        64           79
    Loss on sale of property and equipment                                               -            6
    Compensation related to options granted to an employee                               5           10
    Increase in trade receivables                                                      (52)          (4)
    Decrease (increase) in prepaid expenses and other current assets                    25          (65)
    Decrease (increase) in inventories                                                (795)         168
    Increase in accounts payable                                                       538          224
    Increase (decrease) in  deferred revenues and other current liabilities             46         (286)
                                                                                ----------   ----------

Net cash used in operating activities                                                 (329)        (601)
                                                                                ----------   ----------
Cash flows from investing activities:
-------------------------------------
  Restricted cash                                                                      (50)          65
  Purchase of property and equipment                                                   (21)         (22)
  Proceeds from sale of property and equipment                                           -            3
                                                                                ----------   ----------

Net cash provided by (used in) investing activities                                    (71)          46
                                                                                ----------   ----------
Cash flows from financing activities:
-------------------------------------
  Proceeds from issuance of Common shares                                                -          743
  Proceeds from a convertible note                                                     250            -
  Exercise of options granted to an employee                                             -            7
                                                                                ----------   ----------

Net cash provided by financing activities                                              250          750
                                                                                ----------   ----------

Effect of exchange rate changes on cash and cash equivalents                           (26)           4
                                                                                ----------   ----------

Increase (decrease) in cash and cash equivalents                                      (176)         199
Cash and cash equivalents at the beginning of the period                             1,323        1,050
                                                                                ----------   ----------

Cash and cash equivalents at the end of the period                              $    1,147   $    1,249
                                                                                ==========   ==========


The accompanying notes are an integral part of the consolidated financial
statements

                                        8


NOTE 1:-      GENERAL

              Digital Power Corporation ("the Company" or "DPC") was
              incorporated in 1969, under the General Corporation Law of the
              State of California. The Company has a wholly-owned subsidiary,
              Digital Power Limited ("DPL"), located in the United Kingdom. The
              Company and its subsidiary are currently engaged in the design,
              manufacture and sale of switching power supplies and converters.
              The Company has two reportable geographic segments - North America
              (sales through DPC) and Europe (sales through DPL).

NOTE 2:-      SIGNIFICANT ACCOUNTING POLICIES

              a.     The significant accounting policies applied in the annual
                     financial statements of the Company as of December 31,
                     2004, are applied consistently in these financial
                     statements. In addition, the following accounting policy is
                     applied:

                     The accompanying unaudited consolidated financial
                     statements as of September 30, 2005 and for the nine-month
                     periods ended September 30, 2005 and 2004 are unaudited and
                     reflect all adjustments (consisting only of normal
                     recurring adjustments) which are, in the opinion of
                     management, necessary for a fair presentation of the
                     financial position and operating results for the interim
                     periods. The consolidated financial statements should be
                     read in conjunction with the consolidated financial
                     statements and notes thereto, together with management's
                     discussion and analysis of the financial condition and
                     results of operations, contained in the Company Annual
                     Report on Form 10-KSB for the fiscal year ended December
                     31, 2004. The results of operations for the nine-month
                     period ended September 30, 2005 are not necessarily
                     indicative of the results for the entire fiscal year ending
                     December 31, 2005.

              b.     Accounting for stock-based compensation:

                     The Company and its subsidiary have elected to follow
                     Accounting Principles Board Opinion No. 25, "Accounting for
                     Stock Issued to Employees" ("APB No. 25") in accounting for
                     its employee stock option plans. Under APB No. 25, when the
                     exercise price of the Company's share options is less than
                     the market price of the underlying shares on the date of
                     grant, compensation expense is recognized.

                     The Company and its subsidiary apply SFAS No. 123 and
                     Emerging Issues Task Force No. 96-18, "Accounting for
                     Equity Instruments That are Issued to Other Than Employees
                     for Acquiring, or in Conjunction with Selling, Goods or
                     Services" ("EITF 96-18"), with respect to options issued to
                     non-employees. SFAS No. 123 requires use of an option
                     valuation model to measure the fair value of the options at
                     the grant date.

                     Under Statement of Financial Accounting Standard No. 123,
                     "Accounting for Stock Based Compensation" ("SFAS No. 123")
                     pro forma information regarding net earnings (loss) and net
                     earnings (loss) per share is required and has been
                     determined as if the Company had accounted for its employee
                     options under the fair value method of that statement.

                                        9


                                                       DIGITAL POWER CORPORATION

NOTE 2:-      SIGNIFICANT ACCOUNTING POLICIES (Cont.)

                     The fair value for options granted in the nine months ended
                     September 30, 2005 and 2004 is amortized over their vesting
                     period and estimated at the date of grant using a
                     Black-Scholes options pricing model with the following
                     assumptions:



                                                          NINE MONTHS ENDED        THREE MONTHS ENDED
                                                            SEPTEMBER 30,             SEPTEMBER 30,
                                                       -----------------------   -----------------------
                                                          2005         2004         2005         2004
                                                       ----------   ----------   ----------   ----------
                                                                           Unaudited
                                                       -------------------------------------------------
                                                                                           
                     Dividend yield                             0%           0%           -            -
                     Expected volatility                      103%    107%-111%           -            -
                     Risk-free interest                         4%      3%-3.5%           -            -
                     Expected life of up to               7 years    5-7 years            -            -


                     The following table illustrates the effect on net loss and
                     loss per share as if the fair value method had been applied
                     to all outstanding and unvested awards in each period:



                                                          NINE MONTHS ENDED        THREE MONTHS ENDED
                                                            SEPTEMBER 30,             SEPTEMBER 30,
                                                       -----------------------   -----------------------
                                                          2005         2004         2005         2004
                                                       ----------   ----------   ----------   ----------
                                                                           Unaudited
                                                       -------------------------------------------------
                                                                                  
                     Net income (loss) available to
                        Ordinary shares - as
                        reported                       $     (160)  $     (733)  $      112   $     (230)
                     Add - stock-based employee
                        compensation - intrinsic
                        value                                   5           10            2            1
                     Deduct - stock-based employee
                        compensation -fair value              (99)        (143)         (33)         (28)
                                                       ----------   ----------   ----------   ----------

                     Pro forma net income (loss)       $     (254)  $     (866)  $       81   $     (257)
                                                       ==========   ==========   ==========   ==========

                     Basic net earnings (loss) per
                        share, as reported             $    (0.03)  $    (0.13)  $     0.02   $    (0.04)
                                                       ==========   ==========   ==========   ==========
                     Proforma basic net earnings
                        (loss) per share               $    (0.04)  $    (0.15)  $     0.01   $    (0.04)
                                                       ==========   ==========   ==========   ==========
                     Diluted net earnings (loss)
                        per share, as reported         $    (0.03)  $    (0.13)  $     0.02   $    (0.04)
                                                       ==========   ==========   ==========   ==========
                     Proforma diluted net earnings
                        (loss) per share               $    (0.04)  $    (0.15)  $     0.01   $    (0.04)
                                                       ==========   ==========   ==========   ==========


                                       10


                                                       DIGITAL POWER CORPORATION

NOTE 3:-      INVENTORIES

                                                       SEPTEMBER 30,
                                                           2005
                                                       -------------
                                                         Unaudited
                                                       -------------
              Raw materials, parts and supplies        $         472
              Work in progress                                   422
              Finished products                                1,333
                                                       -------------
                                                       $       2,227
                                                       =============

NOTE 4:-      CONVERTIBLE LOAN

              In February 2005, the Company entered into a convertible loan
              agreement with Telkoor, according to which Telkoor loaned a $ 250
              interest free convertible note to be paid on the tenth business
              day after the Company announced its financial results for 2005.
              The note may be converted into Common shares at a rate of $ 1.06
              per share, which is equal to the quoted market price of the
              Company's Common stock on the date the Note was approved and
              signed. Automatic conversion shall occur if the Company meets its
              set budget for 2005. In accordance with the guidelines of APB No.
              14, "Accounting for Convertible Debt and Debt Issued with Stock
              Purchase Warrants", EITF Issue No. 98-5, "Accounting for
              Convertible Securities with Beneficial Conversion Features or
              Contingently Adjustable Conversion Instruments", and EITF Issue
              No. 00-27, "Application of issue No. 98-5 to Certain Convertible
              Instruments", the Company has determined the Note had no
              beneficial conversion feature since the conversion price was equal
              to the quoted market price of the Company's Common stock at the
              date the note was approved and signed.

NOTE 5:-      COMMITMENTS AND CONTINGENT LIABILITIES

              a. Pending litigation:

                     On April 2, 2003, a claim was filed against the Company by
                     Tek-Tron Enterprises Inc. ("Tek-Tron"). In April 2004, the
                     Company signed a settlement agreement with Tek-Tron
                     according to which the Company paid $ 90 and returned
                     certain disputed inventory for a full release. The
                     settlement agreement allowed Tek-Tron to seek arbitration
                     limited to the sum of $ 50 in case the parties do not agree
                     on a resolution regarding the returned inventory. Tek-Tron
                     initiated arbitration against the Company for $ 50 plus
                     legal fees. The arbitration hearing was held on May 2,
                     2005, and Tek-Tron was awarded $ 5 in damages and no legal
                     fees. Tek-Tron filed an appeal of the arbitration, and in
                     response, the Company filed a petition to enforce the
                     settlement agreed. On October 31, 2005, the Company has
                     been notified that Tek-Tron would be withdrawing its
                     arbitration appeal, and dismissing this matter formally and
                     finally. We are waiting receipt of the official dismissal
                     paper.

              b.     On May 3, 2005, the Company received a written notice from
                     the American Stock Exchange ("the AMEX"), advising that the
                     Company was not in compliance with the AMEX's listing
                     requirements. In order to maintain its AMEX listing, the
                     Company submitted on June 3, 2005, a recovery plan which
                     was accepted by AMEX, and the Company will be able to
                     continue its listing during the plan period, subject to
                     AMEX's periodic reviews. If the Company is not in
                     compliance with the listing standards at the end of such 18
                     months period or fails the periodic reviews, the AMEX will
                     initiate delisting proceedings.

                                       11


                                                       DIGITAL POWER CORPORATION

NOTE 6:-      EVENTS DURING THE PERIOD

              In April 2005, the Company granted 70,000 options to Telkoor's
              employees. The Company had accounted for its options to Telkoors'
              employees under the fair value method of SFAS No. 123 and EITF
              96-18. The fair value for these options was estimated using a
              Black-Scholes option-pricing model with the following assumptions:
              risk-free interest rates of 4.4%, dividend yields of 0%,
              volatility of 103.5%, and the contractual life of the options of
              10 years. The fair value is amortized over the vesting period of
              the options of 4 years.

              During the quarter, no compensation expenses were recorded in the
              financial statements due to immateriality.

NOTE 7:-      SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHICAL INFORMATION

              The Company has two reportable geographic segments, see Note 1 for
              a brief description of the Company's business. The data is
              presented in accordance with Statement of Financial Accounting
              Standard No. 131, "Disclosure About Segments of an Enterprise and
              Related Information" ("SFAS No. 131").

              The following data presents the revenues, expenditures and other
              operating data of the Company's geographic operating segments:



                                                              NINE MONTHS ENDED SEPTEMBER 30, 2005
                                                                           (unaudited)
                                                       ---------------------------------------------------
                                                          DPC          DPL       ELIMINATIONS     TOTAL
                                                       ----------   ----------   ------------   ----------
                                                                                    
              Revenues                                 $    3,373   $    3,814   $          -   $    7,187
              Intersegment revenues                           629            -           (629)           -
                                                       ----------   ----------   ------------   ----------
              Total revenues                           $    4,002   $    3,814   $       (629)  $    7,187
                                                       ==========   ==========   ============   ==========

              Depreciation expenses                    $       16   $       48   $          -   $       64
                                                       ==========   ==========   ============   ==========

              Operating income (loss)                  $     (101)  $       28   $          -   $      (73)
                                                       ==========   ==========   ============   ==========

              Financial expenses, net                                                           $      (87)
                                                                                                ==========

              Net loss                                 $      (92)  $      (68)  $          -   $     (160)
                                                       ==========   ==========   ============   ==========

              Expenditures for segment assets at
                 September 30, 2004                    $       19   $        2   $          -   $       21
                                                       ==========   ==========   ============   ==========

              Identifiable assets at September 30,
                 2004                                  $    2,140   $    3,564   $          -   $    5,704
                                                       ==========   ==========   ============   ==========


                                       12


                                                       DIGITAL POWER CORPORATION

NOTE 7:-      SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHICAL INFORMATION (Cont.)



                                                              NINE MONTHS ENDED SEPTEMBER 30, 2004
                                                                           (unaudited)
                                                       ---------------------------------------------------
                                                          DPC          DPL       ELIMINATIONS     TOTAL
                                                       ----------   ----------   ------------   ----------
                                                                                    
              Revenues                                 $    2,874   $    3,284   $          -   $    6,158
              Intersegment revenues                           613            -           (613)           -
                                                       ----------   ----------   ------------   ----------

              Total revenues                           $    3,487   $    3,284   $       (613)  $    6,158
                                                       ==========   ==========   ============   ==========

              Depreciation expenses                    $       23   $       56   $          -   $       79
                                                       ==========   ==========   ============   ==========

              Operating loss                           $     (452)  $     (270)  $          -   $     (722)
                                                       ==========   ==========   ============   ==========

              Financial expenses, net                                                           $       (5)
                                                                                                ==========

              Other expenses                                                                    $       (6)
                                                                                                ==========

              Net loss                                 $     (450)  $     (283)  $          -   $     (733)
                                                       ==========   ==========   ============   ==========

              Expenditures for segment assets at
                 September 30, 2004                    $       15   $        7   $          -   $       22
                                                       ==========   ==========   ============   ==========

              Identifiable assets at September 30,
                 2004                                  $    2,040   $    3,073   $          -   $    5,113
                                                       ==========   ==========   ============   ==========




                                                              THREE MONTHS ENDED SEPTEMBER 30, 2005
                                                                          (unaudited)
                                                       ---------------------------------------------------
                                                          DPC          DPL       ELIMINATIONS     TOTAL
                                                       ----------   ----------   ------------   ----------
                                                                                    
              Revenues                                 $    1,272   $    1,697   $          -   $    2,969
              Intersegment revenues                           431            -           (431)           -
                                                       ----------   ----------   ------------   ----------

              Total revenues                           $    1,703   $    1,697   $       (431)  $    2,969
                                                       ==========   ==========   ============   ==========

              Depreciation expenses                    $        5   $       16   $          -   $       21
                                                       ==========   ==========   ============   ==========

              Operating income (loss)                  $      (10)  $      121   $          -   $      111
                                                       ==========   ==========   ============   ==========

              Financial income, net                                                             $        1
                                                                                                ==========

              Net income (loss)                        $       (6)  $      118   $          -   $      112
                                                       ==========   ==========   ============   ==========

              Expenditures for segment assets at
                 September 30, 2004                    $       11   $        -   $          -   $       11
                                                       ==========   ==========   ============   ==========

              Identifiable assets at September 30,
                 2004                                  $    2,140   $    3,564   $          -   $    5,704
                                                       ==========   ==========   ============   ==========


                                       13


                                                       DIGITAL POWER CORPORATION

NOTE 5:-      SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHICAL INFORMATION (Cont.)



                                                              THREE MONTHS ENDED SEPTEMBER 30, 2005
                                                                          (unaudited)
                                                       ---------------------------------------------------
                                                          DPC          DPL       ELIMINATIONS     TOTAL
                                                       ----------   ----------   ------------   ----------
                                                                                    
              Revenues                                 $    1,019   $    1,171   $          -   $    2,190
              Intersegment revenues                           196            -           (196)           -
                                                       ----------   ----------   ------------   ----------

              Total revenues                           $    1,215   $    1,171   $       (196)  $    2,190
                                                       ==========   ==========   ============   ==========

              Depreciation expenses                    $        8   $       21   $          -   $       29
                                                       ==========   ==========   ============   ==========

              Operating loss                           $      (93)  $     (124)  $          -   $     (217)
                                                       ==========   ==========   ============   ==========

              Financial expenses, net                                                           $       (7)
                                                                                                ==========

              Other expenses                                                                    $       (6)
                                                                                                ==========

              Net loss                                 $      (97)  $     (133)  $          -   $     (230)
                                                       ==========   ==========   ============   ==========

              Expenditures for segment assets at
                 September 30, 2004                    $        7   $        3   $          -   $       10
                                                       ==========   ==========   ============   ==========

              Identifiable assets at September 30,
                 2004                                  $    2,040   $    3,073   $          -   $    5,113
                                                       ==========   ==========   ============   ==========


                                       14


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, dependence on the electronic equipment industry,
competition in the power supply industry, dependence on manufacturers in China
and other risks factors detailed in the Company's Form 10-KSB for the year ended
December 31, 2004. 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.

GENERAL

We are engaged in the business of designing, developing, manufacturing,
marketing and selling switching power supplies to the industrial,
telecommunication, data communication, medical and military industries. Revenues
are generated from sales to distributors, system integrators, OEMs in North
America, Europe and the United Kingdom.

We have continued our efforts to increase sales to existing and new customers,
and continue our strategy to manufacture our products in the Far East. Until
revenues increase to a sufficient amount to offset our expenses, we anticipate
that we will continue to experience net losses for the near future. We believe
that our cash will be sufficient to fund those losses for the near future.

In February 2005, the Company signed on a $250,000 convertible note ("the Note")
agreement with Telkoor Telecom Ltd.("Telkoor"), a major stockholder in the
company. In accordance with the aforementioned agreement, the Company is
obligated to repay Telkoor the amount of $250,000 on the 10th business day after
the release of its financial results for the year ended December 31, 2005. The
conversion price of the Note is $1.06, which was the quoted market price of the
Company's Common stock on the date the Note was approved and signed. In
accordance with the guidelines of APB No. 14, "Accounting for Convertible Debt
and Debt Issued with Stock Purchase Warrants", EITF Issue No. 98-5, "Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios" and EITF Issue No. 00-27, "Application of issue
No. 98-5 to Certain Convertible Instruments", the Company has determined the
date of approving and signing the agreement as the commitment date and since the
conversion price was equal to the market price of the company's Common stock at
that date, the Note had no beneficial conversion feature.

                                       15


THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005, COMPARED TO SEPTEMBER 30, 2004

REVENUES
Total revenues increased by 35.6% to $2,969,000 for the three months ended
September 30, 2005, from $2,190,000 for the three months ended September 30,
2004.

Revenues from the domestic operations of DPC increased 24.8% to $1,272,000 for
the third quarter ended September 30, 2005, from $1,019,000 for the third
quarter ended September 30, 2004. Revenues from the Company's European
operations of DPL increased 44.9% to $1,697,000 for the third quarter ended
September 30, 2005, from $1,171,000 for the third quarter ended September 30,
2004. The revenue increase in the third quarter of 2005 is mainly due to
increase in sales of military products and new products.

For the nine months ended September 30, 2005, revenues increased by 16.7% to
$7,187,000 from $6,158,000 from the nine months ended September 30, 2004.
Revenues attributed to the domestic operations of DPC for the nine months ended
September 30, 205, increased by 17.4% to $3,373,000 from $2,874,000 for the nine
months ended September 30, 2004. The increase in revenue from the domestic
operations of DPC is mainly due to higher sales of our new products and military
products. Revenues from the Company's European operations of DPL for the nine
months ended September 30, 2005 increased by 16.1% to $3,814,000 from $3,284,000
for the nine months ended September 30, 2004.

GROSS MARGINS
Gross margins were 28.6% for the three months ended September 30, 2005, compared
to 23.8% for the three months ended September 30, 2004. The increase in gross
margins can be primarily attributed to the increase use of lower cost contract
manufacturers in the Far East. Gross margins were 29.2% for the nine months
ended September 30, 2005 compared to 24.1% for the nine months ended September
30, 2004. The increase in gross margins can be primarily attributed to increase
use of lower cost contract manufacturers in the Far East.

ENGINEERING AND PRODUCT DEVELOPMENT
Engineering and product development expenses were 5.1% of revenues for the three
months ended September 30, 2005, and 7.2% for the three months ended September
30, 2004. In absolute dollars, the engineering expenses remained at
approximately the same level. Engineering and product development expenses were
5.2% of revenues for the nine months ended September 30, 2005, compared to 7.3%
of revenues for the nine months ended September 30, 2004.

                                       16


SELLING AND MARKETING
Selling and marketing expenses were 10.7% of revenues for the three months ended
September 30, 2005, compared to 14.8% for the three months ended September 30,
2004. In absolute dollars, the selling and marketing expenditures remained at
approximately the same level. Selling and marketing expenses were 13.9% of
revenues for the nine months ended September 30, 2005, compared to 15.4% for the
nine months ended September 30, 2004. In absolute dollars, the selling and
marketing expenditures increased by $52,000. The increase in selling and
marketing were primarily due to new hires, and travel expenses as part of our
efforts to increase sales.

GENERAL AND ADMINISTRATIVE
General and administrative expenses were 9.0% of revenues for the three months
ended September 30, 2005, compared to 11.7% for the three months ended September
30, 2004. General and administrative expenses were 11.1% of revenues for the
nine months ended September 30, 2005, compared to 13.2% for the nine months
ended September 30, 2004. In absolute dollars, the general and administrative
expenditures remained at approximately the same level.

FINANCIAL INCOME (EXPENSES), NET
Financial income net was $1,000 for the three months ended September 30, 2005,
compared to financial expense net of $7,000 for the three months ended September
30, 2004. Financial expense was $87,000 for the nine months ended September 30,
2005, compare to financial expense of $5,000 for the nine months ended September
30, 2004. Financial expense resulted mainly from the exchange rate fluctuation.

NET PROFIT (LOSS)
For the three months ended September 30, 2005, the Company had net profit of
$112,000 compared to a net loss of $230,000 for the three months ended September
2004. The net profit is mainly due to the increase in revenues and increase in
gross margin. Net loss for the nine months ended September 30, 2005 decrease to
$160,000 compared to $733,000 for the nine months ended September 30, 2004. The
net loss decrease is mainly due to increase in sales and increase in gross
margin.

LIQUIDITY AND CAPITAL RESOURCES
On September 30, 2005, the Company had cash, and cash equivalents $1,147,000 and
working capital of $2,252,000. This compares with cash and cash equivalents of
$1,249,000 and working capital of $2,785,000 at September 30, 2004. The decrease
in working capital is mainly due to operating losses.

Cash used in operating activities for the Company totaled $329,000 for the nine
months ended September 30, 2005, compared to cash used in operating activities
of $601,000 for the nine months ended September 30, 2004. Cash used in investing
activities was $71,000 for the nine months ended September 30, 2005, compared to
$46,000 cash provided for the nine months ended September 30, 2004.

                                       17


The Company has an available line of credit with Silicon Valley Bank ("SVB").
The Company can borrow up to $1,200,000 against eligible accounts receivable and
other financial covenants. The rate for this line of credit would be at Silicon
Valley Bank's prime rate plus 1.75%. In order to utilize the line of credit, the
Company is required to maintain certain ratios and be in compliance with other
covenants. As of September 30, 2005, the Company has not utilized its line of
credit.

The Company believes it has adequate resources at this time to continue its
promotional efforts to increase sales in the electronic industry market.
However, if the Company does not meet those goals, it may have to raise money
through debts or equity, which may dilute shareholder's equity.

AMEX LISTING
On May 3, 2005, the Company received a written notice from the American Stock
Exchange ("the AMEX"), advising that the Company was not in compliance with the
AMEX's listing requirements. In order to maintain its AMEX listing the Company
submitted on June 3, 2005 a recovery plan which was accepted by AMEX and the
Company will be able to continue its listing during the plan period, subject to
AMEX's periodic reviews. If the Company is not in compliance with the listing
standards at the end of such 18 months period or fails the periodic reviews, the
AMEX will initiate delisting proceedings.

ITEM 3. CONTROLS AND PROCEDURES

The Company's management with the participation of the Company's principal
executive and financial officers evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined Rule 13a-15(e) of the Exchange
Act) as of the end of the period covered by this report. The Company's
disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act are recorded, processed, summarized and reported on a timely
basis. Based upon their evaluation, the Company's principal executive and
financial officers concluded that the Company's disclosure controls and
procedures are effective to accumulate and communicate to the Company's
management as appropriate to allow timely decisions regarding disclosure.

                                       18


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On April 2, 2003, a claim was filed against the Company by Tek-Tron Enterprises
Inc. ("Tek-Tron"). In April 2004, the Company signed a settlement agreement with
Tek-Tron according to which the Company paid $90,000 returned certain disputed
inventory for a full release. The settlement agreement allowed Tek-Tron to seek
arbitration limited to the sum of $50,000 on case the parties do not agree on a
resolution regarding the returned inventory. Tek-Tron initiated arbitration
against the Company for $50,000 plus legal fees. The arbitration hearing was
held on May 2, 2005, and Tek-Tron was awarded $5,000 in damages and no legal
fees. Tek-Tron filed an appeal of the arbitration, and in response, the Company
filed a petition to enforce the settlement agreed. On October 31, 2005, the
Company have been notified that Tek-Tron would be withdrawing its arbitration
appeal, and dismissing this matter formally and finally. We are waiting receipt
of the official dismissal paper.

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         31.1     Certification of the CEO under the Sarbanes-Oxley Act
         31.2     Certification of the CFO under the Sarbanes-Oxley Act
         32       Certification of the CEO & CFO under the Sarbanes-Oxley Act

(b) Reports on Form 8-K

The Company filed the following reports

Date of Report    Date of Event     Item reported
---------------   ---------------   -------------------------------------------
August 16, 2005   August 16, 2005   Financial Results for Second Quarter
July 14, 2005     July 14, 2005
July 6, 2005      July 6, 2005      Amex approval Digital Power's recovery plan

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                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    DIGITAL POWER CORPORATION
                                    (Registrant)

                                    /s/ Jonathan Wax
Date:  11/15/2005                   -------------------------------------------
                                    Jonathan Wax
                                    Chief Executive Officer
                                    (Principal Executive Officer)


                                    /s/ Leo Yen
Date:  11/15/2005                   -------------------------------------------
                                    Leo Yen
                                    Chief Financial Officer
                                    (Principal Financial Officer)

                                       20