<PAGE>

================================================================================
                                  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 October 2, 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 November 1, 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 nine months
                         ended October 3, 1998 (unaudited) and the three months and nine months
                         ended October 2, 1999 (unaudited)..........................................          3

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

                       Consolidated Statements of Cash Flows for the nine months ended October 3,
                         1998 (unaudited) and October 2, 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 NINE MONTHS ENDED
                                                 ---------------------------------   --------------------------------
                                                   OCTOBER 3,          OCTOBER 2,     OCTOBER 3,         OCTOBER 2,
                                                     1998                1999           1999                1999
                                                 --------------     --------------   -------------     --------------
<S>                                               <C>               <C>              <C>               <C>
Net sales.....................................       $15,772           $14,125          $48,829           $42,355
Cost of sales.................................         9,167             8,419           26,693            24,612
                                                  ----------          --------          -------         ---------
    Gross profit..............................         6,605             5,706           22,136            17,743
Selling, general and administrative expense...         2,920             2,467            8,393             7,754
Research and development and engineering
   expenses...................................         1,785             1,430            5,253             4,450
Amortization expense..........................           630               609            1,379             1,823
                                                  ----------          --------          -------         ---------
    Operating income..........................         1,270             1,200            7,111             3,716
Interest expense, net.........................         2,935             2,594            7,622             7,881
                                                  ----------          --------          -------         ---------
Loss before income tax provision (benefit)....        (1,665)           (1,394)            (511)           (4,165)
Income tax provision (benefit)................          (412)             (312)             158              (937)
                                                  ----------          --------          -------         ---------
    Net loss..................................    $   (1,253)         $ (1,082)         $  (669)        $  (3,228)
                                                  ----------          --------          -------         ---------
                                                  ----------          --------          -------         ---------
</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>
                                                                                    JANUARY 2, 1999      OCTOBER 2, 1999
                                                                                   ----------------      ----------------
<S>                                                                                <C>                  <C>
                                     ASSETS                                                                (UNAUDITED)
CURRENT ASSETS:
  Cash and cash equivalents.................................................            $   6,507            $   2,456
  Accounts receivable, net of allowance for doubtful accounts of
     $171 and $234, respectively............................................                5,168                7,097
  Inventories...............................................................                9,095                7,688
  Deferred tax assets.......................................................                  796                  796
  Prepaids and other........................................................                1,356                1,456
                                                                                        ---------             --------
      Total current assets..................................................               22,922               19,493
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation and
   amortization of $2,337 and $2,875, respectively..........................                2,599                2,386
INTANGIBLE ASSETS, net of accumulated amortization of $4,910 and $7,284,
   respectively.............................................................               37,580               35,207
DEFERRED TAX ASSETS, net of current portion.................................                  653                  653
                                                                                        ---------             --------
                                                                                         $ 63,754             $ 57,739
                                                                                        ---------             --------
                                                                                        ---------             --------

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable..........................................................            $   3,164            $   2,316
  Accrued liabilities.......................................................                6,750                5,192
  Current portion of long-term debt.........................................                4,000                  375
  Current portion of capital lease obligations..............................                   15                   --
                                                                                        ---------             --------
      Total current liabilities.............................................               13,929                7,883
CAPITAL LEASE OBLIGATIONS, net of current portion...........................                    8                   --
LONG-TERM DEBT, net of current portion......................................              100,000               99,625
                                                                                        ---------             --------
         Total liabilities..................................................              113,937              107,508
                                                                                        ---------             --------
SERIES A 10% CUMULATIVE REDEEMABLE PREFERRED STOCK,
   no par value, 20,000 shares authorized; 10,000 shares issued and outstanding
                                                                                            9,406               10,373
                                                                                        ---------             --------

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 October
     2, 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 (deficit)...............................................                3,946                 (607)
                                                                                        ---------             --------
                                                                                          (59,589)             (60,142)
                                                                                        ---------             --------
                                                                                         $ 63,754             $ 57,739
                                                                                        ---------             --------
                                                                                        ---------             --------
</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 NINE MONTHS ENDED
                                                                                           ----------------------------------
                                                                                                OCTOBER 3,     OCTOBER 2,
                                                                                                  1998           1999
                                                                                           -----------------   --------------
<S>                                                                                        <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.............................................................................          $(669)        $ (3,228)
  Adjustments to reconcile net loss to net cash provided by (used in) operating
     activities:
      Amortization of intangibles......................................................           1,380           1,824
      Amortization of deferred loan costs..............................................             437             550
      Write-off of deferred loan costs.................................................             665              --
      Depreciation and amortization on property, plant and equipment...................             771             670
      (Gain) loss on sale of property, plant and equipment                                          (12)             25
      (Increases) decreases in assets:
         Accounts receivable...........................................................           1,287          (1,929)
         Inventories...................................................................             685           1,407
         Prepaids and other............................................................           (414)            (100)
         Deferred tax assets...........................................................            (119)             --
      Increases (decreases) in liabilities:
         Accounts payable..............................................................            (965)           (848)
         Accrued liabilities...........................................................          (1,024)            308
         Income taxes payable..........................................................            (944)            --
         Interest payable..............................................................           1,536          (2,224)
                                                                                            -----------      ----------
  Net cash provided by (used in) operating activities..................................           2,614          (3,545)
                                                                                            -----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment...........................................            (517)           (501)
  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................................................         (18,013)           (501)
                                                                                            -----------      ----------
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...................................................................         (12,289)         (4,000)
  Payments under capital leases........................................................             (17)             (5)
  Deferred financing costs.............................................................          (6,468)             --
  Recapitalization consideration.......................................................        (103,249)             --
                                                                                            -----------      ----------
  Net cash provided by (used in) financing activities..................................          17,571              (5)
                                                                                            -----------      ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................................           2,172          (4,051)
CASH AND CASH EQUIVALENTS, beginning of period.........................................             258           6,507
                                                                                            -----------      ----------
CASH AND CASH EQUIVALENTS, end of period...............................................        $  2,430         $ 2,456
                                                                                            -----------      ----------
                                                                                            -----------      ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest...............................................................        $  5,128          $9,612
  Cash paid for income taxes...........................................................           1,647            (585)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Series A preferred stock dividend-in-kind............................................         $   684         $   842
  Series B and Series C preferred stock dividend accrual...............................             --              358
  Accretion of discount on Series A preferred stock....................................             115             125
</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 loss for the nine
month period ended October 3, 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...........................   $53,357
               Net loss............................      (557)
</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 nine months ended October 2, 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 nine months ended October 3, 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 nine months ended October 2,
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 October 2, 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      OCTOBER 2, 1999
                                                ---------------     ----------------
<S>                                                   <C>                   <C>
Raw materials...............................          $4,151                $3,389
Work-in-process.............................           3,254                 2,781
Finished goods..............................           1,690                 1,518
                                                     -------                ------
     Total..................................          $9,095                $7,688
                                                     -------                ------
                                                     -------                ------

</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

                                      7
<PAGE>
                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


in providing for income taxes.

   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 October 2, 1999, sales to one customer accounted
for approximately 21% of the Company's net sales. In the quarter ended October
3, 1998, sales to one customer accounted for approximately 29% of the
Company's net sales. In the nine months ended October 2, 1999, sales to two
customers accounted for approximately 20% and 13% of the Company's net sales.
In the nine months ended October 3, 1998, sales to two customers accounted for
approximately 21% and 14% of the Company's net sales. No other customers
individually represented more than 10% of net sales in the three or nine
months ended October 3, 1998 and October 2, 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 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.

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.


                                      8
<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   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 October 2, 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 October 2, 1999, Elgar was in
compliance with the covenants contained in the Credit Agreement.

   CAPITAL CALL AGREEMENT

         In connection with amending the Credit Agreement dated 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 contained in the Amended and Restated Capital Call
Agreement. The Company was in compliance with such covenants for the quarter
ended October 2, 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

                                      9
<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 October 2, 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 30, 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 nine months ended October 2, 1999, the Company
accrued $233,036 of dividends on the Series B Preferred Stock and $126,001 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.

5. COMMON STOCK

         At January 2, 1999 and October 2, 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

                                      10
<PAGE>

                              ELGAR HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


connection with the swap agreement, the Company has included $12,000 and
$39,000 in interest expense in its consolidated statements of operations for
the three and nine months ended October 2, 1999, respectively. Swap expense in
1998 did not have a material effect on the financial statements.

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 October 2, 1999, there
were options outstanding to purchase 439,100 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 nine
months ended October 3, 1998 and October 2, 1999, with the results of Power
Ten included from its date of acquisition on May 29, 1998:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                  NINE MONTHS ENDED
                                           -----------------------------         -------------------------
                                           OCTOBER 3,         OCTOBER 2,         OCTOBER 3,     OCTOBER 2,
                                             1998                1999               1998           1999
                                           ------------      -----------         -----------    ----------
<S>                                        <C>                 <C>               <C>              <C>
Net sales...............................       100.0%            100.0%            100.0%           100.0%
Cost of sales...........................        58.1              59.6              54.7             58.1
                                              ------            ------            ------            -----
    Gross profit........................        41.9              40.4              45.3             41.9
Selling, general and administrative
   expense..............................        18.5              17.5              17.2             18.3
Research and development and
   engineering expenses.................        11.3              10.1              10.7             10.5
Amortization expense....................         4.0               4.3               2.8              4.3
                                              ------            ------            ------            -----
    Operating income....................         8.1%              8.5%             14.6%             8.8%
                                              ------            ------            ------            -----
                                              ------            ------            ------            -----
</TABLE>


COMPARISON OF THE THREE MONTHS ENDED OCTOBER 2, 1999 TO THE THREE
MONTHS ENDED OCTOBER 3, 1998

         NET SALES. Net sales for the quarter ended October 2, 1999 were $14.1
million, a decrease of $1.7 million, or 10.8%, from net sales of $15.8 million
for the quarter ended October 3, 1998. This decrease was mainly due to a
decrease in sales of both programmable AC power products and of products
related to the CASS Program for the U.S. Navy, partially offset by an increase
in sales of space systems products. The Company is currently negotiating with
Lockheed Martin, the prime contractor on the CASS Program, for supplying
products to the CASS Program during 2000 with options through 2003.

         GROSS PROFIT. Gross profit for the quarter ended October 2, 1999 was
$5.7 million, a decrease of $0.9 million, or 13.6%, from gross profit of $6.6
million for the quarter ended October 3, 1998. As a

                                      12

<PAGE>

percentage of net sales, gross profit decreased from 41.9% for the quarter
ended October 3, 1998 to 40.4% for the quarter ended October 2, 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 $2.5 million for the quarter ended
October 2, 1999, a decrease of $0.4 million, or 13.8%, from SG&A expenses of
$2.9 million for the quarter ended October 3, 1998. SG&A expenses decreased as
a percentage of net sales from 18.5% for the quarter ended October 3, 1998 to
17.5% for the quarter ended October 2, 1999. The decrease in SG&A expense was
primarily due to lower headcount and compensation expense in the quarter ended
October 2, 1999 compared to the quarter ended October 3, 1998.

         RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and
development and engineering expenses were $1.4 million for the quarter ended
October 2, 1999, a decrease of $0.4 million, or 22.2%, from research and
development and engineering expenses of $1.8 million for the quarter ended
October 3, 1998. As a percentage of net sales, research and development and
engineering expense decreased from 11.3% for the quarter ended October 3, 1998
to 10.1% for the quarter ended October 2, 1999. The decrease in both dollars
and as a percentage of net sales was due to an increase in customer-funded
research and development expense for the quarter ended October 2, 1999 as
compared to the quarter ended October 3, 1998.

         AMORTIZATION EXPENSE.  Amortization was $0.6 million for the quarters
ended October 2, 1999 and October 3, 1998.

         OPERATING INCOME. Operating income was $1.2 million for the quarter
ended October 2, 1999, a decrease of $0.1 million, or 7.7%, from operating
income of $1.3 million for the quarter ended October 3, 1998. Operating income
increased as a percentage of net sales from 8.1% for the quarter ended October
3, 1998 to 8.5% for the quarter ended October 2, 1999, due to the factors
discussed above.

         INCOME TAXES. Income taxes for the three months ended October 2, 1999
contained a tax benefit of $0.3 million, compared to a tax benefit of $0.4
million for the three months ended October 3, 1998. The Company's effective
tax rate was 22.4% for the three months ended October 2, 1999 and 24.7% for
the three months ended October 3, 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.

COMPARISON OF THE NINE MONTHS ENDED OCTOBER 2, 1999 TO THE NINE
MONTHS ENDED OCTOBER 3, 1998

         NET SALES. Net sales for the nine months ended October 2, 1999 were
$42.4 million, a decrease of $6.4 million, or 13.1%, from net sales of $48.8
million for the nine months ended October 3, 1998. The decrease was primarily
attributable to a $6.4 million decrease in sales of programmable DC products
to Racal Instruments, Inc. ("Racal") over the periods being compared, as
discussed below.

         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 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. As anticipated, in November

                                      13

<PAGE>

1999 the Company received an initial production order from Racal for the next
generation technology equipment. Revenues from Racal were $0.2 million in the
nine months ended October 2, 1999 and $6.6 million in the quarter ended
October 3, 1998.

         GROSS PROFIT. Gross profit for the nine months ended October 2, 1999
was $17.7 million, a decrease of $4.4 million, or 19.9%, from gross profit of
$22.1 million for the nine months ended October 3, 1998. As a percentage of
net sales, gross profit decreased from 45.3% for the nine months ended October
3, 1998 to 41.9% for the nine months ended October 2, 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 $7.8
million for the nine months ended October 2, 1999, a decrease of $0.6 million,
or 7.1%, from SG&A expenses of $8.4 million for the nine months ended October
3, 1998. SG&A expenses increased as a percentage of net sales from 17.2% for
the nine months ended October 3, 1998 to 18.3% for the nine months ended
October 2, 1999. The decrease in dollars in SG&A expense was primarily due to
a decrease in commissions due to lower sales volume and nonrecurring costs
associated with the Company's recapitalization in February 1998 that were not
present in the nine months ended October 2, 1999.

         RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and
development and engineering expenses were $4.5 million for the nine months
ended October 2, 1999, a decrease of $0.8 million, or 15.1%, from research and
development and engineering expenses of $5.3 million for the nine months ended
October 3, 1998. As a percentage of net sales, research and development and
engineering expense decreased from 10.7% for the nine months ended October 3,
1998 to 10.5% for the nine months ended October 2, 1999. The decrease in
dollars was due to an increase in customer funded research and development
expense in the nine months ended October 2, 1999 versus the nine months ended
October 3, 1998.

         AMORTIZATION EXPENSE. Amortization expense increased to $1.8 million
for the nine months ended October 2, 1999 from $1.4 million for the nine
months ended October 3, 1998. This increase was due to a full nine months of
amortization expense in the 1999 period attributable to the Company's
acquisition of Power Ten.

         OPERATING INCOME. Operating income was $3.7 million for the nine
months ended October 2, 1999, a decrease of $3.4 million, or 47.9%, from
operating income of $7.1 million for the nine months ended October 3, 1998.
Operating income decreased as a percentage of net sales from 14.6% for the
nine months ended October 3, 1998 to 8.8% for the nine months ended October 2,
1999, due to the factors discussed above.

         INCOME TAXES. Income taxes for the nine months ended October 2, 1999
contained a tax benefit of $0.9 million, compared to a tax provision of $0.2
million for the nine months ended October 3, 1998. The Company's effective tax
rate was 22.5% for the nine months ended October 2, 1999 and (30.9)% for the
nine months ended October 3, 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.

                                      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.

         CAPITAL REQUIREMENTS. The Company's capital expenditures were
$501,000 in the nine months ended October 2, 1999 and $517,000 in the nine
months ended October 3, 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 ($55,000 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
mid-November 1999. Additional safety stock of critical components has been
ordered for delivery before year end. A contingency plan for suppliers of
non-critical components is being developed, notwithstanding that the risk on
these 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.

         Substantially all of the tasks involved in evaluating supplier
readiness have been completed and 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.

                                      15

<PAGE>


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 October 2, 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 to 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 October 2, 1999 about the
Company's derivative instruments and other financial instruments that are
sensitive to changes in interest rates.

LONG TERM BANK DEBT (VARIABLE RATE)

<TABLE>

<S>                                        <C>
Principal amount                           $10,000,000(1)
Variable interest rate                     8.25%(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%.


                                      16




<PAGE>

INTEREST RATE SWAP ARRANGEMENT (FIXED RATE)

<TABLE>
<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                     5.515% for the current period (2)
Swap interest                              $39,000 (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 $39,000 of
      interest expense for the nine months ended October 2, 1999.


SENIOR NOTES (FIXED RATE)

<TABLE>
<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 October 2, 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:  November 15, 1999                  By: /s/ Christopher W. Kelford
                                               --------------------------------
                                               Christopher W. Kelford
                                               Vice President--Finance,
                                                 Chief Financial Officer,
                                                 Treasurer and Assistant
                                                 Secretary


                                      18