<PAGE>

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


(MARK ONE)
 /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
                   For the quarterly period ended July 3, 1999

                                       OR

 /_/  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

      For the transition period from                 to
                                     ---------------    ---------------

                       COMMISSION FILE NUMBER 1-333-55797

                                ---------------

                              ELGAR HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                    51-0373329
    (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                   Identification No.)

          9250 BROWN DEER ROAD
          SAN DIEGO, CALIFORNIA                              92121
(Address of Principal Executive Offices)                  (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (858) 450-0085

                                ---------------

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 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
                                                      ---     ---

         As of August 11, 1999, the number of shares outstanding of the
Registrant's Common Stock was 2,300,000.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                              ELGAR HOLDINGS, INC.

                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                       PAGE
PART I       FINANCIAL INFORMATION                                                                    NUMBER
------       ---------------------                                                                    ------
<S>          <C>                                                                                      <C>
Item 1       Consolidated Financial Statements

               Consolidated Statements of Operations for the three months and six months
                ended June 27, 1998 (unaudited) and the three months and six months ended
                July 3, 1999 (unaudited).....................................................           3

               Consolidated Balance Sheets as of January 2, 1999 and July 3, 1999
                (unaudited)..................................................................           4

               Consolidated Statements of Cash Flows for the six months ended June 27, 1998
                (unaudited) and July 3, 1999 (unaudited).....................................           5

               Notes to Consolidated Financial Statements (unaudited)........................           6

Item 2       Management's Discussion and Analysis of Financial Condition and
              Results of Operations..........................................................          12

Item 3       Quantitative and Qualitative Disclosures About Market Risks.....................          16

PART II      OTHER INFORMATION

Item 6       Exhibits and Reports on Form 8-K................................................          18
</TABLE>

                                       2

<PAGE>

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS



                      ELGAR HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                              (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                    FOR THE THREE MONTHS ENDED          FOR THE SIX MONTHS ENDED
                                                  ------------------------------     ------------------------------
                                                  JUNE 27, 1998     JULY 3, 1999     JUNE 27, 1998     JULY 3, 1999
                                                  -------------     ------------     -------------     ------------
<S>                                               <C>               <C>              <C>               <C>
Net sales.....................................       $17,176           $13,237          $33,057           $28,230
Cost of sales.................................         8,907             7,604           17,526            16,193
                                                     -------           -------          -------            ------
    Gross profit..............................         8,269             5,633           15,531            12,037

Selling, general and administrative expense...         2,821             2,643            5,473             5,287
Research and development and engineering
   expenses...................................         1,673             1,523            3,468             3,020
Amortization expense..........................           421               608              749             1,214
                                                     -------           -------          -------            ------
    Operating income..........................         3,354               859            5,841             2,516
Interest expense, net.........................         2,442             2,598            4,687             5,287
                                                     -------           -------          -------            ------
Income (loss) before income tax provision
   (benefit)..................................           912            (1,739)           1,154            (2,771)
Income tax provision (benefit)................           531              (450)             570             (625)
                                                     -------           -------          -------            ------
    Net income (loss).........................       $   381          $ (1,289)          $  584          $(2,146)
                                                     =======          ========           ======          ========
</TABLE>

        THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       3
<PAGE>

                      ELGAR HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                          JULY 3, 1999
                                                                                    JANUARY 2, 1999        (UNAUDITED)
                                                                                    ---------------       ------------
<S>                                                                                 <C>                   <C>
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                             $   6,507            $   5,701
  Accounts receivable, net of allowance for doubtful accounts of
     $171 and $234, respectively..............................................              5,168                6,083
  Inventories.................................................................              9,095                8,456
  Deferred tax assets.........................................................                796                  796
  Prepaids and other..........................................................              1,356                1,022
                                                                                        ---------            ---------
      Total current assets....................................................             22,922               22,058
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation and
   amortization of $2,337 and $2,687, respectively............................              2,599                2,427
INTANGIBLE ASSETS, net of accumulated amortization of $4,910 and $6,492,
   respectively...............................................................             37,580               35,999
DEFERRED TAX ASSETS, net of current portion...................................                653                  653
                                                                                        ---------            ---------
                                                                                         $ 63,754             $ 61,137
                                                                                        =========            =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable............................................................          $   3,164            $   2,289
  Accrued liabilities.........................................................              6,750                7,397
  Current portion of long-term debt...........................................              4,000                   --
  Current portion of capital lease obligations................................                 15                   --
                                                                                        ---------            ---------
      Total current liabilities...............................................             13,929                9,686
CAPITAL LEASE OBLIGATIONS, net of current portion.............................                  8                   --
                                                                                        ---------            ---------
LONG-TERM DEBT, net of current portion........................................            100,000              100,000
                                                                                        ---------            ---------
         Total liabilities....................................................            113,937              109,686
                                                                                        ---------            ---------
SERIES A 10% CUMULATIVE REDEEMABLE PREFERRED STOCK,                                         9,406               10,042
   no par value, 20,000 shares authorized; 10,000 shares issued and outstanding         ---------            ---------

STOCKHOLDERS' EQUITY (DEFICIT):
  Series B 6% Cumulative Convertible Preferred Stock, no par value,
     5,000 shares authorized, issued and outstanding..........................              5,000                5,000
  Series C 6% Cumulative Convertible Preferred Stock, no par value, 0 and 4,000
     shares authorized, issued and outstanding on January 2, 1999 and July 3,
     1999, respectively.........................................................               --                4,000
  Common Stock, $.01 par value, 5,000,000 shares authorized; 2,300,000 shares
     issued and outstanding...................................................                 23                   23
  Additional paid-in capital..................................................            (68,558)             (68,558)
  Retained earnings...........................................................              3,946                  944
                                                                                        ---------            ---------
                                                                                          (59,589)             (58,591)
                                                                                        ---------            ---------
                                                                                         $ 63,754             $ 61,137
                                                                                        =========            =========
</TABLE>

        THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       4

<PAGE>

                      ELGAR HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                FOR THE SIX MONTHS ENDED
                                                                                            -------------------------------
                                                                                            JUNE 27, 1998      JULY 3, 1999
                                                                                            -------------      ------------
<S>                                                                                         <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)....................................................................           $ 584        $ (2,146)
  Adjustments to reconcile net income (loss) to net cash provided by (used in)
     operating activities:
      Amortization of intangibles......................................................             750           1,215
      Amortization of deferred loan costs..............................................             235             367
      Write-off of deferred loan costs.................................................             665              --
      Depreciation and amortization on property, plant and equipment...................             511             476
      (Gain) loss on sale of property, plant and equipment.............................             (12)             25
      (Increases) decreases in assets:
         Accounts receivable...........................................................           1,742            (915)
         Inventories...................................................................             900             639
         Prepaids and other............................................................               2             334
         Deferred tax assets...........................................................            (119)             --
      Increases (decreases) in liabilities:
         Accounts payable..............................................................            (547)           (875)
         Accrued liabilities...........................................................            (671)            414
         Income taxes payable..........................................................            (430)             --
         Interest payable..............................................................           3,599              13
                                                                                               ---------        -------
  Net cash provided by (used in) operating activities..................................           7,209            (453)
                                                                                               ---------        -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment...........................................            (415)           (348)
  Acquisition of Power Ten, net of cash acquired.......................................         (17,266)             --
  Non-compete agreements...............................................................            (240)             --
  Proceeds from sale of property, plant and equipment..................................             10               --
                                                                                               ---------        -------
  Net cash used in investing activities................................................         (17,911)           (348)
                                                                                               ---------        -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from stock issuance.........................................................          19,014              --
  Proceeds from preferred stock issuance...............................................          15,000           4,000
  Issuance of Senior Notes.............................................................          90,000              --
  Proceeds from bank borrowings........................................................          15,580              --
  Repayments on debt...................................................................         (11,789)         (4,000)
  Payments under capital leases........................................................             (15)             (5)
  Deferred financing costs.............................................................          (6,388)             --
  Recapitalization consideration.......................................................        (103,249)             --
                                                                                               ---------        -------
  Net cash provided by (used in) financing activities..................................          18,153              (5)
                                                                                               ---------        -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................................           7,451            (806)
CASH AND CASH EQUIVALENTS, beginning of period.........................................             258           6,507
                                                                                               ---------        -------
CASH AND CASH EQUIVALENTS, end of period...............................................        $  7,709         $ 5,701
                                                                                               ========         =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest...............................................................        $    299         $ 4,948
  Cash paid for income taxes...........................................................           1,250           (589)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Series A preferred stock dividend-in-kind............................................        $    403         $   553
  Series B and Series C preferred stock dividend accrual...............................              --             220
  Accretion of discount on Series A preferred stock....................................              70              83
</TABLE>

        THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

                                       5
<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. COMPANY OPERATIONS

         Elgar Holdings, Inc., a Delaware corporation (the "Company"),
manufactures and sells programmable power supply units through its wholly owned
subsidiary, Elgar Electronics Corporation ("Elgar"), to commercial and defense
entities as well as to governmental agencies. The Company's primary sales are
within the United States and Europe.

         On February 3, 1998, the Company consummated a recapitalization (the
"Recapitalization") in which all shares of the Company's common stock, other
than those retained by certain members of management and certain other
shareholders (the "Continuing Shareholders"), were converted into the right to
receive cash based upon a formula. The Continuing Shareholders retained
approximately 15% of the common equity of the Company while new investors
acquired the balance of the equity interests in the Company.

         On May 29, 1998, Elgar acquired all of the issued and outstanding
shares of common stock of Power Ten, which specializes in developing and
manufacturing high-quality, high-power DC power supplies. The acquisition was
financed by the issuance of 5,000 shares of Series B Convertible Preferred Stock
and borrowings under the Company's credit facility (the "Credit Facility") with
Bankers Trust Company, as agent ("Bankers Trust").

         On March 24, 1999, the Board of Directors of the Company elected to
change the Company's fiscal year end from the Saturday closest to March 31 to
the Saturday closest to December 31. Therefore, the accompanying consolidated
financial statements have been presented to show comparable periods for the
prior year.

         Unaudited condensed pro forma net sales and net income for the six
month period ended June 27, 1998, assuming the Recapitalization and the Power
Ten acquisition occurred on December 28, 1997 and also assuming a 40% statutory
tax rate, are as follows (in thousands):

<TABLE>
            <S>                                    <C>
            Net sales...........................   $37,585
            Net income..........................       696
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   PRINCIPLES OF CONSOLIDATION/BASIS OF PRESENTATION

         The accompanying consolidated financial statements as of and for the
three and six months ended July 3, 1999 include the accounts of the Company, its
wholly owned subsidiary, Elgar, and Elgar's wholly owned subsidiary, Power Ten,
which Elgar acquired on May 29, 1998. The accompanying financial statements for
the three and six months ended June 27, 1998 include the accounts of Elgar and
also of Power Ten from its date of acquisition. All significant intercompany
accounts and transactions have been eliminated. These financial statements have
been prepared in accordance with generally accepted accounting principles and
with the instructions to Form 10-Q. These financial statements have not been
examined by independent public accountants, but include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of financial condition, results of
operations and cash flows for such periods.

                                       6

<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   INTERIM ACCOUNTING PERIODS

         The Company operates and reports financial results on a fiscal year of
52 or 53 weeks ending the Saturday closest to December 31. Interim periods
include 13 or 14 weeks ending the last Saturday closest to the end of the
quarter. Results of operations for the three and six months ended July 3, 1999
are not necessarily indicative of the results to be expected for the Company's
fiscal year ending January 1, 2000.

   CASH EQUIVALENTS

         Cash equivalents at January 2, 1999 and July 3, 1999 consist of cash
held in a money market account.

   INVENTORIES

         Inventories, which include materials, direct labor and manufacturing
overhead, are stated at the lower of cost (first-in, first-out) or market and
are comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                JANUARY 2, 1999        JULY 3, 1999
                                                ---------------        ------------
                     <S>                        <C>                    <C>
                     Raw materials..........         $4,151                $3,683
                     Work-in-process........          3,254                 2,899
                     Finished goods.........          1,690                 1,874
                                                    --------               ------
                     Total..................          $9,095                $8,456
                                                      ======                ======
</TABLE>

   PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment are recorded at cost. Depreciation of
property, plant and equipment is provided using the straight-line method over
the estimated useful lives of the related assets.

   INTANGIBLE ASSETS

         Intangible assets represent (i) the excess of purchase price over net
book value of assets acquired in connection with acquisitions, (ii) deferred
financing costs incurred in connection with the Recapitalization and the Power
Ten acquisition and (iii) agreements not to compete relating to the Power Ten
acquisition. The components of intangible assets are being amortized on a
straight-line basis over their estimated useful lives, ranging from 5 to 15
years.

         The Company periodically re-evaluates the original assumptions and
rationale utilized in the establishment of the carrying value and estimated
useful lives of these assets. The criteria used for these evaluations include
management's estimate of the assets' continuing ability to generate income from
operations and positive cash flows in future periods as well as the strategic
significance of the intangible assets to the Company's business activity.

   INCOME TAXES

         The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires the use of the liability method in providing for income taxes.
Current income tax expense is the amount of income taxes expected to be

                                       7

<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

payable in the current year.

   REVENUE RECOGNITION

         The Company recognizes revenue when goods are shipped to the customer,
net of sales returns.

   USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

   CONCENTRATION OF CREDIT RISK

         In the quarter ended July 3, 1999, sales to one customer accounted for
approximately 19% of the Company's net sales. In the quarter ended June 27,
1998, sales to three customers accounted for approximately 18%, 15% and 15% of
the Company's net sales. In the six months ended July 3, 1999, sales to two
customers accounted for approximately 19% and 16% of the Company's net sales. In
the six months ended June 27, 1998, sales to three customers accounted for
approximately 20%, 17% and 13% of the Company's net sales. No other customers
individually represented more than 10% of net sales in the three or six months
ended June 27, 1998 and July 3, 1999. The Company performs ongoing credit
evaluation of its customers' financial condition and maintains reserves for
potential credit losses.

   RECENT ACCOUNTING PRONOUNCEMENTS

          In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 130
establishes standards for reporting of comprehensive income and its components
in a full set of general-purpose financial statements. SFAS No. 131 requires
reporting certain information about operating segments in annual and
interim-period financial statements. The Company adopted SFAS No. 130 on March
29, 1998. The Company had no elements of comprehensive income during the three
or six months ended July 3, 1999. The Company adopted SFAS No. 131 during its
fiscal year ended January 2, 1999. SFAS No. 131 requires reporting certain
information about operating segments in annual and interim-period financial
statements. The adoption of SFAS No. 131 did not have a material effect on the
Company as it operates in one business segment.

         In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and for Hedging Activities." SFAS No. 133 requires that all
derivatives be recorded on the balance sheet as an asset or liability measured
at its fair value with changes in fair value recognized currently in earnings
unless hedge accounting criteria are met. In June 1999, the FASB issued SFAS No.
137 which deferred the implementation of SFAS No. 133 to fiscal years beginning
after June 15, 2000. A company may implement these provisions as of the
beginning of any fiscal quarter after June 16, 1998. The Company has not yet
determined what impact, if any, the adoption of SFAS No. 133 will have on its
consolidated financial statements, results of operations or related disclosures
thereto.

                                       8

<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. LONG-TERM DEBT, CREDIT FACILITY AND CAPITAL CALL AGREEMENT

   SENIOR NOTES

         In connection with the Recapitalization, all outstanding borrowings
under the then-existing revolving line of credit agreement and term loans
payable to a bank aggregating approximately $10.9 million were repaid and,
concurrently, the Company issued $90 million of 9.875% Senior Notes due February
1, 2008 and entered into the Credit Facility. Interest on the Senior Notes is
payable semi-annually on each February 1 and August 1.

   CREDIT FACILITY

         In connection with the Recapitalization, Elgar, as borrower, and the
Company, as guarantor, entered into a credit agreement (the "Credit Agreement")
with Bankers Trust, as agent, which provided for a $15 million revolving credit
facility (the "Revolving Facility") that matures on February 3, 2003. On May 29,
1998, in connection with the acquisition of Power Ten, the Credit Agreement was
amended and restated to, among other things, increase the available borrowings
to $30 million by adding a $15 million term facility (the "Term Facility") to
the existing $15 million Revolving Facility. Elgar used all of the proceeds from
the Term Facility to finance a portion of the purchase price for Power Ten.
Loans under the Credit Agreement are secured by substantially all of the
Company's assets (including a pledge of the capital stock of Elgar and Power
Ten) and guaranteed by the Company and Power Ten. No amounts were outstanding
under the Revolving Facility as of January 2, 1999 and July 3, 1999.

         The Credit Agreement contains restrictions on the incurrence of debt,
the sale of assets, mergers, acquisitions and other business combinations,
voluntary prepayment of other debt of the Company, transactions with affiliates,
repurchase or redemption of stock from stockholders, and various financial
covenants, including covenants requiring the maintenance of fixed charge
coverage, and maximum debt to earnings, before interest, taxes, depreciation and
amortization (EBITDA) ratios and minimum consolidated EBITDA.

         On February 12, 1999, the Company and Elgar entered into a First
Amendment and Waiver to the Credit Agreement pursuant to which, among other
things, available borrowings under the Revolving Facility were reduced from $15
million to $5 million, certain financial covenants were amended, and the Company
and Elgar received a waiver for past noncompliance with the covenants referred
to in the prior paragraph. As of July 3, 1999, Elgar was in compliance with the
covenants contained in the Credit Agreement.

   CAPITAL CALL AGREEMENT

         In connection with amending the Credit Agreement on May 29, 1998, the
Company, Elgar and the Company's majority shareholder entered into a capital
call agreement with Bankers Trust (the "Capital Call Agreement"). On February
12, 1999, in connection with entering into the First Amendment and Waiver to the
Credit Agreement, the majority shareholder agreed to make a capital contribution
to the Company by no later than March 31, 1999 in the amount of $4.0 million
(which contribution was made on March 30, 1999). In addition, on February 12,
1999, the majority shareholder entered into an Amended and Restated Capital Call
Agreement with Bankers Trust pursuant to which, among other things, the majority
shareholder agreed to contribute up to an additional $5.0 million of capital to
the Company upon the occurrence of certain events, including the Company's
failure to comply with certain financial covenants

                                       9

<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

contained in the Amended and Restated Capital Call Agreement. The Company was
in compliance with such covenants for the quarter ended July 3, 1999.

4. PREFERRED STOCK

   REDEEMABLE PREFERRED STOCK

         In connection with the Recapitalization, the Company issued 10,000
shares of redeemable preferred stock, designated as Series A 10% Cumulative
Redeemable Preferred Stock (the "Series A Preferred Stock"), for cash proceeds
of $10.0 million. In connection with such issuance, the Company also issued to
the purchasers of the Series A Preferred Stock warrants to purchase 353,744
shares of the Company's common stock. A value of $1.7 million has been
attributed to the warrants. The $1.7 million warrant value is included in
additional paid-in-capital as of January 2, 1999 and July 3, 1999.

         Dividends are payable to the holders of the Series A Preferred Stock
at the annual rate per share of 10% times the sum of $1,000 and accrued but
unpaid dividends. Dividends are payable at the rate per share of 0.10 shares
of Series A Preferred Stock through January 31, 2001, and in cash on and
after April 30, 2001. Dividends are payable quarterly on January 31, April
30, July 31 and October 31 of each year, commencing April 30, 1998. Dividends
are fully cumulative and accrue on a quarterly basis.

   CONVERTIBLE PREFERRED STOCK

         In connection with the acquisition of Power Ten, the Company issued
5,000 shares of Series B 6% Cumulative Convertible Preferred Stock (the "Series
B Preferred Stock") for cash proceeds of $5.0 million. The offering, which was
made in compliance with the subscription rights contained in the Company's
Shareholders Agreement, was completed on May 29, 1998.

         In connection with entering into the First Amendment and Waiver to the
Credit Agreement, the Company's majority shareholder agreed to make a capital
contribution to the Company by no later than March 31, 1999 in the amount of
$4.0 million. In order to effectuate the contribution, the Company issued 4,000
shares of Series C 6% Cumulative Convertible Preferred Stock (the "Series C
Preferred Stock") for cash proceeds of $4.0 million. The offering, which was
made in compliance with the subscription rights contained in the Company's
Shareholders Agreement, was completed on March 31, 1999.

         Dividends are payable to the holders of the Series B Preferred Stock
and Series C Preferred Stock at the annual rate per share of 6% times the sum of
$1,000 and accrued but unpaid dividends. Such dividends are payable
semi-annually on April 30 and October 31 of each year, commencing October 31,
1998, when and if declared by the Board of Directors out of funds legally
available therefor. During the six months ended July 3, 1999, the Company
accrued $155,072 of dividends on the Series B Preferred Stock and $65,334 of
dividends on the Series C Preferred Stock.

         The Series B Preferred Stock and Series C Preferred Stock, which rank
on a parity with each other, rank junior to the Series A Preferred Stock.

                                       10

<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. COMMON STOCK

         At January 2, 1999 and July 3, 1999, a total of 353,744 shares of
common stock were reserved for issuance for the exercise of warrants at the
initial exercise price of $5.00 per share to the holders of the Series A
Preferred Stock. The exercise price and number of warrant shares are both
subject to adjustment in certain events.

6. INTEREST RATE SWAP

         On June 22, 1998, the Company entered into an interest rate swap
agreement with a bank with a notional amount of $7.5 million. Under the swap
agreement, the Company is required to make a payment based on a fixed rate of
5.83% on each March 24, June 24, September 24 and December 24, while on the same
dates receiving a payment based on a floating rate calculated with reference to
the three-month London Interbank Offering Rate (LIBOR). The swap agreement
terminates on June 25, 2001. In connection with the swap agreement, the Company
has included $15,908 and $26,783 in interest expense in its consolidated
statements of operations for the three and six months ended July 3, 1999,
respectively.

7. STOCK OPTION PLAN

         The Elgar Holdings, Inc. 1998 Stock Option Plan, as amended on March
24, 1999 (the "Option Plan"), provides for the issuance of up to 489,763 shares
of common stock pursuant to awards granted under the Option Plan (as of January
2, 1999, prior to the amendment, 265,374 shares of common stock were authorized
for issuance under the Option Plan). As of July 3, 1999, there were options
outstanding to purchase 437,600 shares of common stock. All options have been
granted at fair market value on the date of grant. In general, options vest
ratably over three or four years and expire on the tenth anniversary of the date
of grant.

                                       11

<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the
Unaudited Consolidated Financial Statements and Notes thereto of the Company
included elsewhere herein.

         This Report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. The words
"anticipates," "believes," "estimates," "expects," "plans," "intends" and
similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company, with respect to future events and are subject to
certain risks, uncertainties and assumptions, that could cause actual results to
differ materially from those expressed in any forward-looking statement,
including, without limitation: competition from other manufacturers in the
Company's industry, loss of key employees and/or general economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or expected. The
Company does not intend to update these forward-looking statements.

RESULTS OF OPERATIONS

         The following table sets forth certain income statement information for
the Company as a percentage of net sales for the three months and six months
ended June 27, 1998 and July 3, 1999, with the results of Power Ten included
from its date of acquisition on May 29, 1998:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED                  SIX MONTHS ENDED
                                            ------------------------------     ------------------------------
                                            JUNE 27, 1998     JULY 3, 1999     JUNE 27, 1998     JULY 3, 1999
                                            -------------     ------------     -------------     ------------
<S>                                         <C>               <C>              <C>               <C>
Net sales...............................       100.0%            100.0%            100.0%           100.0%
Cost of sales...........................        51.9              57.4              53.0             57.4
                                              ------            ------            ------            -----
    Gross profit........................        48.1              42.6              47.0             42.6
Selling, general and administrative
   expense..............................        16.4              20.0              16.5             18.7
Research and development and
   engineering expenses.................         9.7              11.5              10.5             10.7
Amortization expense....................         2.5               4.6               2.3              4.3
                                               -----             -----             -----            -----
    Operating income....................        19.5%              6.5%             17.7%             8.9%
                                               =====             =====             =====            =====
</TABLE>

COMPARISON OF THE THREE MONTHS ENDED JULY 3, 1999 TO THE THREE MONTHS ENDED
JUNE 27, 1998

         NET SALES. Net sales for the quarter ended July 3, 1999 were $13.2
million, a decrease of $4.0 million, or 23.3%, from net sales of $17.2 million
for the quarter ended June 27, 1998. This decrease was due to a decrease in
sales of programmable DC products (primarily attributable to decreased sales to
Racal Instruments, Inc. ("Racal"), as discussed in the following paragraph), and
a decrease in sales of Space Systems products, partially offset by the inclusion
of the results of Power Ten for a full quarter in the 1999 period.

         Racal is a systems integrator for test and measurement equipment which
provides certain automatic test equipment ("ATE") systems utilizing Elgar's
programmable power supplies to manufacturers, including a leading semiconductor
manufacturer. In May 1998, Racal notified the Company that the leading

                                      12

<PAGE>

semiconductor manufacturer had decided to cease orders for Elgar's current
AT-8000 DC power supplies until the "next generation" technology was available.
Elgar's prototype power supplies for this next-generation technology were
delivered to the end-user in August 1998. The Company commenced delivering
pre-production power supplies to the end-user in the second quarter of 1999, and
anticipates receiving production orders from the end-user in the latter part of
calendar 1999 or early 2000. Revenues from Racal were $0.1 million in the
quarter ended July 3, 1999 and $3.0 million in the quarter ended June 27, 1998.

         As previously disclosed, a major customer of Space Systems products
has requested that the Company upgrade one of its satellite testing systems.
Since this upgrade has required additional engineering efforts on the part of
the Company and testing on the part of the customer, deliveries of additional
systems to the customer are expected to be delayed. These delays are expected
to adversely affect the Company's net sales at the end of calendar 1999 and
the beginning of calendar 2000.

         GROSS PROFIT. Gross profit for the quarter ended July 3, 1999 was $5.6
million, a decrease of $2.7 million, or 32.5%, from gross profit of $8.3 million
for the quarter ended June 27, 1998. As a percentage of net sales, gross profit
decreased from 48.1% for the quarter ended June 27, 1998 to 42.6% for the
quarter ended July 3, 1999. The decrease in gross profit was primarily
attributable to unfavorable product mix and lower sales volume.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses were $2.6 million for the quarter ended July 3,
1999, a decrease of $0.2 million, or 7.1%, from SG&A expenses of $2.8 million
for the quarter ended June 27, 1998. SG&A expenses increased as a percentage of
net sales from 16.4% for the quarter ended June 27, 1998 to 20.0% for the
quarter ended July 3, 1999. The decrease in dollars in SG&A expense was
primarily due to lower commissions due to lower sales volume, partially offset
by the inclusion of Power Ten SG&A expenses for a full quarter in the 1999
period.

         RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and
development and engineering expenses were $1.5 million for the quarter ended
July 3, 1999, a decrease of $0.2 million, or 11.8%, from research and
development and engineering expenses of $1.7 million for the quarter ended June
27, 1998. As a percentage of net sales, research and development and engineering
expense increased from 9.7% for the quarter ended June 27, 1998 to 11.5% for the
quarter ended July 3, 1999. The decrease in dollars was due to an increase in
customer funded research and development expense in the quarter ended July 3,
1999 versus the quarter ended June 27, 1998.

         AMORTIZATION EXPENSE. Amortization expense increased to $0.6 million
for the quarter ended July 3, 1999 from $0.4 million for the quarter ended June
27, 1998. This increase was due to three months of amortization expense incurred
in connection with the Company's acquisition of Power Ten.

         OPERATING INCOME. Operating income was $0.9 million for the quarter
ended July 3, 1999, a decrease of $2.5 million, or 73.5%, from operating income
of $3.4 million for the quarter ended June 27, 1998. Operating income decreased
as a percentage of net sales from 19.5% for the quarter ended June 27, 1998 to
6.5% for the quarter ended July 3, 1999, due to the factors discussed above.

         INCOME TAXES. Income taxes for the three months ended July 3, 1999
contained a tax benefit of $0.5 million, compared to a tax provision of $0.5
million for the three months ended June 27, 1998. The Company's effective tax
rate was 25.9% for the three months ended July 3, 1999 and 58.2% for the three
months ended June 27, 1998. The effective tax rate differs from the statutory
tax rate of 40.0%, primarily

                                      13

<PAGE>

due to the non-deductibility of goodwill for tax purposes and realization of
research and development tax credits utilized by the Company.

COMPARISON OF THE SIX MONTHS ENDED JULY 3, 1999 TO THE SIX MONTHS ENDED
JUNE 27, 1998

         NET SALES. Net sales for the six months ended July 3, 1999 were $28.2
million, a decrease of $4.9 million, or 14.8%, from net sales of $33.1 million
for the six months ended June 27, 1998. During the six months ended July 3,
1999, a decrease in sales of programmable DC products (primarily attributable to
decreased sales of $6.5 million to Racal) was partially offset by the inclusion
of the results of Power Ten for a full six months in the 1999 period.

         GROSS PROFIT. Gross profit for the six months ended July 3, 1999 was
$12.0 million, a decrease of $3.5 million, or 22.6%, from gross profit of $15.5
million for the six months ended June 27, 1998. As a percentage of net sales,
gross profit decreased from 47.0% for the six months ended June 27, 1998 to
42.6% for the six months ended July 3, 1999. The decrease in gross profit was
primarily attributable to unfavorable product mix and lower volume.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $5.3
million for the six months ended July 3, 1999, a decrease of $0.2 million, or
3.6%, from SG&A expenses of $5.5 million for the six months ended June 27, 1998.
SG&A expenses increased as a percentage of net sales from 16.5% for the six
months ended June 27, 1998 to 18.7% for the six months ended July 3, 1999. The
decrease in dollars in SG&A expense was primarily due to lower commissions due
to lower sales volume, partially offset by the inclusion of Power Ten SG&A
expenses for a full six months in the 1999 period.

         RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and
development and engineering expenses were $3.0 million for the six months
ended July 3, 1999, a decrease of $0.5 million, or 14.3%, from research and
development and engineering expenses of $3.5 million for the six months ended
June 27, 1998. As a percentage of net sales, research and development and
engineering expense increased from 10.5% for the six months ended June 27,
1998 to 10.7% for the six months ended July 3, 1999. The decrease in dollars
was due to an increase in customer funded research and development expense in
the six months ended July 3, 1999 versus the six months ended June 27, 1998,
offset in part by the inclusion of Power Ten research and development
expenses for a full six months in the 1999 period.

         AMORTIZATION EXPENSE. Amortization expense increased to $1.2 million
for the six months ended July 3, 1999 from $0.7 million for the six months ended
June 27, 1998. This increase was due to a full six months of amortization
expense in the 1999 period attributable to the Company's acquisition of Power
Ten.

         OPERATING INCOME. Operating income was $2.5 million for the six months
ended July 3, 1999, a decrease of $3.3 million, or 56.9%, from operating income
of $5.8 million for the six months ended June 27, 1998. Operating income
decreased as a percentage of net sales from 17.7% for the six months ended June
27, 1998 to 8.9% for the six months ended July 3, 1999, due to the factors
discussed above.

         INCOME TAXES. Income taxes for the six months ended July 3, 1999
contained a tax benefit of $0.6 million, compared to a tax provision of $0.6
million for the six months ended June 27, 1998. The Company's effective tax rate
was 22.6% for the six months ended July 3, 1999 and 49.4% for the six months
ended June 27, 1998. The effective tax rate differs from the statutory tax rate
of 40.0%, primarily due to the non-deductibility of goodwill for tax purposes
realization of research and development tax credits utilized by the Company.

                                      14

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         CASH FLOW. The Company's principal uses of cash are to finance working
capital, debt service and capital expenditures. Historically, the Company has
funded its activities principally from working capital and a line of credit.

         SOURCES OF CAPITAL. The Company anticipates that its principal uses of
cash will be working capital requirements, debt service requirements and capital
expenditures. Based upon current and anticipated levels of operations,
management believes that its cash flow from operations, together with amounts
available under the Company's credit facility, will be adequate to meet its
anticipated requirements for the foreseeable future for working capital,
interest payments, payments under the Company's term credit facility and capital
expenditures. The Company's future operating performance will be subject to
future economic conditions and to financial, business and other factors, many of
which may be beyond the Company's control.

         CAPITAL REQUIREMENTS. The Company's capital expenditures were $348,000
in the six months ended July 3, 1999 and $415,000 in the six months ended June
27, 1998.

YEAR 2000

         Many computer programs have been written using two digits rather than
four to define the applicable year. Computer programs with time-sensitive
software may recognize a date using "00" as the year 1900 rather the year 2000.
This "year 2000" issue could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.

         With a view to the year 2000 issue, the Company has undertaken a
detailed review of all of the significant operating systems, software
applications and hardware used in its operations. The Company has also made
contact with its major suppliers in order to determine their state of readiness.
The Company's operating systems and business software updates have been
installed and tested, and personal computer hardware and software
upgrades/replacements have been converted. Other items such as the phone switch,
bank capabilities, outside insurance carriers and the outside payroll system are
being evaluated for compliance. Management expects that the cost to become year
2000 compliant, including conversion of its business software and upgrades of
its personal computer hardware and software, will total approximately $80,000
($40,000 of which has been incurred to date). Compliance status from key
suppliers has been evaluated to determine whether the Company will need to
switch sources to ensure ongoing product/service availability. This evaluation
and any resulting conversions are expected to be completed by September 1999.
Additional safety stock of critical components has been identified and will be
purchased before year end. A contingency plan is being developed,
notwithstanding that the risk on remaining items is considered low.

         Management believes that its most significant exposure on the year 2000
issue is from suppliers that experience problems. Along those lines, management
is both obtaining year 2000 compliance certificates from significant suppliers
and talking with key suppliers to assess compliance status. Should any of the
areas being addressed not provide adequate results, management will evaluate
alternate suppliers for services or equipment or convert to alternate software
as needed.

                                      15

<PAGE>

         Based on the steps taken to date, management does not expect that the
year 2000 issue will materially affect the Company's operations due to problems
encountered by its suppliers, customers or end-users for its products, although
no assurances can be given as to this.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The Company has only limited involvement in derivative financial
instruments and does not hold or issue them for trading purposes. Certain
amounts borrowed under the Company's Credit Facility are at variable interest
rates and the Company is thus subject to market risk resulting from interest
rate fluctuations. The Company enters into interest rate swaps in part to alter
interest rate exposures. Interest rate swaps allow the Company to raise
long-term borrowings at floating rates and effectively swap them into fixed
rates that are lower than those available to the Company if fixed-rate
borrowings were made directly. Under interest rate swaps, the Company agrees
with another party to exchange, at specified intervals, the difference between
fixed-rate and floating-rate amounts calculated by reference to an agreed
notional principal amount. See Note 6 to the Company's Consolidated Financial
Statements included elsewhere in this report. As of July 3, 1999, all but
$2,500,000 of the Company's long-term bank debt was covered by this swap
arrangement. Thus, the Company's exposure with respect to upward movements in
interest rates is with respect this portion of its bank debt.

         In addition, the Company is exposed to market risks related to
fluctuations in interest rates on the Senior Notes. For fixed rate debt such as
the Senior Notes, changes in interest rates generally affect the fair value of
the debt instrument. The Company does not have an obligation to repay the Senior
Notes prior to maturity in February 2008 and, as a result, interest-rate risk
and changes in fair value should not have a significant impact on the Company.

         The tables below provide information as of July 3, 1999 about the
Company's derivative instruments and other financial instruments that are
sensitive to changes in interest rates.

                                      16

<PAGE>

<TABLE>
<CAPTION>

LONG TERM BANK DEBT (VARIABLE RATE)
<S>                                        <C>
Principal amount                           $10,000,000(1)
Variable interest rate                     8.125%(2)
Maturity--tranche                          September 30, 1999
Maturity--loan                             February 3, 2002
Remaining principal payments:
        1999                                            $0
        2000                                    $1,250,000
        2001                                    $3,750,000
        2002                                    $4,000,000
        2003                                    $1,000,000
</TABLE>

-----------
(1) $7,500,000 of this amount is covered by the interest-rate swap arrangement
described below.
(2) Renewals are based on the Eurodollar Rate plus 2.75%.

<TABLE>
<CAPTION>
INTEREST RATE SWAP ARRANGEMENT (FIXED RATE)
<S>                          <C>
Parties                      The Company (fixed rate payor) and Bankers Trust
                             Company (floating rate payor)
Notional amount              $7,500,000
Fixed interest rate          5.83% (1)
Floating interest rate       5.1888% for the current period (2)
Swap interest                $26,783 (3)
Commencement date            June 24, 1998
Maturity date                June 25, 2001
</TABLE>

-----------
(1)   As the fixed interest rate payor, the Company is required to pay a fixed
      rate of 5.83% per annum on the $7,500,000 notional amount, payable
      quarterly on each March 24, June 24, September 24 and December 24.
(2)   As the floating rate payor, Bankers Trust Company is required to pay a
      floating rate of interest on the $7,500,000 notional amount, based on the
      three-month London Interbank Offering Rate (LIBOR), payable quarterly on
      each March 24, June 24, September 24 and December 24.
(3)   In connection with the swap agreement, the Company recorded $26,783 of
      interest expense for the six months ended July 3, 1999.

<TABLE>
<CAPTION>
SENIOR NOTES (FIXED RATE)
<S>                                        <C>
Principal amount outstanding               $90,000,000
Fixed interest rate                        9.875%
Maturity date                              February 1, 2008
</TABLE>

                                      17
<PAGE>

PART II       OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

              (a)   EXHIBITS.

              EXHIBIT NO.        DESCRIPTION
                  27              Financial Data Schedule


              (b) No current reports on Form 8-K were filed during the quarter
ended July 3, 1999.


                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                        ELGAR HOLDINGS, INC.



Dated:  August 11, 1999                 By: /s/ CHRISTOPHER W. KELFORD
                                            ---------------------------------
                                            Christopher W. Kelford
                                            Vice President--Finance,
                                            Chief Financial Officer,
                                            Treasurer and Assistant Secretary


                                      18