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            1:-&lt;/b&gt;&lt;/font&gt;

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            &lt;font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"&gt;&amp;#160;&lt;/font&gt;

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            &lt;font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"&gt;a.&lt;/font&gt;

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            &lt;font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"&gt;Digital

            Power Corporation (the "Company" or "DPC") was

            incorporated in 1969, under the General Corporation Law

            of the State of California. The Company and Digital

            Power Limited ("DPL"), a wholly owned subsidiary

            located in the United Kingdom, 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).&lt;/font&gt;

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            &lt;font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"&gt;The

            Company depends on Telkoor Telecom Ltd. ("Telkoor"), a

            major shareholder of the Company and one of DPC's third

            party subcontractors, for manufacturing capabilities in

            production of the products which DPC sells. If these

            manufacturers are unable or unwilling to continue

            manufacturing the Company's products in required

            volumes on a timely basis, that could lead to loss of

            sales, and adversely affect the Company's operating

            results and cash position. The Company also depends on

            Telkoor's intellectual property and ability to transfer

            production to third party manufacturers. Failure to

            obtain new products in a timely manner or delay in

            delivery of product to customers will have an adverse

            effect on the Company's ability to meet its customers'

            expectations.&lt;/font&gt;

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