<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 January 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: (619) 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 February 16, 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
                                                                        NUMBER
<S>      <C>                                                            <C>
PART I   FINANCIAL INFORMATION
Item 1   Consolidated Financial Statements

           Consolidated Statements of Operations for the three
             months and nine months ended December 27, 1997
             (unaudited) and the three months and nine months
             ended January 2, 1999
             (unaudited)............................................       3

           Consolidated Balance Sheets as of March 28, 1998
             and January 2, 1999 (unaudited)........................       4

           Consolidated Statements of Cash Flows for the nine
             months ended December 27, 1997 (unaudited) and nine
             months ended January 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

PART II    OTHER INFORMATION
Item 6       Exhibits and Reports on Form 8-K.......................      16
</TABLE>

                                        2
<PAGE>

                      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
                                                           DEC. 27, 1997     JAN. 2, 1999    DEC. 27, 1997      JAN. 2, 1999
                                                           ------------      ------------    -------------      ------------
<S>                                                        <C>               <C>             <C>                <C>
Net sales.............................................       $17,533           $14,188          $46,615             $47,136
Cost of sales.........................................         8,758             7,865           24,325              25,939
                                                             -------            ------          -------            --------
    Gross profit......................................         8,775             6,323           22,290              21,197
Selling, general and administrative expense...........         2,482             2,352            6,781               8,094
Research and development and engineering expenses.....         1,661             1,424            4,448               4,882
Amortization expense..................................           328               612              985               1,663
                                                             -------            ------          -------            --------
    Operating income..................................         4,304             1,935           10,076               6,558
Interest expense, net.................................           336             2,631            1,096               8,008
                                                             -------            ------          -------            --------
Income (loss) before income tax provision (benefit)...         3,968              (696)           8,980              (1,450)
Income tax provision (benefit)........................         2,139              (361)           4,410                (243)
                                                             -------            ------          -------            --------
    Net income (loss).................................       $ 1,829            $ (335)         $ 4,570            $ (1,207)
                                                             -------            ------          -------            --------
                                                             -------            ------          -------            --------
</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>
                                                                                                   MARCH 28,       JAN. 2, 1999
                                                                                                    1998(1)         (UNAUDITED)
<S>                                                                                                <C>             <C>
                                                                                                   ---------       ------------
                                                        ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                                       $   2,666         $   6,507
  Accounts receivable, net of allowance for doubtful accounts of
    $197 and $171, respectively...........................................................            6,453             5,168
  Inventories.............................................................................            8,305             9,095
  Deferred tax assets.....................................................................            1,098               879
  Prepaids and other......................................................................              373             1,324
                                                                                                   --------          --------
      Total current assets................................................................           18,895            22,973
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation and
  amortization of $1,643 and $2,779, respectively.........................................            2,952             2,599
INTANGIBLE ASSETS, net of accumulated amortization of
  $2,711 and $4,910, respectively.........................................................           22,412            37,580
DEFERRED TAX ASSETS, net of current portion...............................................              653               653
                                                                                                   --------          --------
                                                                                                   $ 44,912          $ 63,805
                                                                                                   --------          --------
                                                                                                   --------          --------

                                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable........................................................................        $   3,068         $   3,164
  Accrued liabilities.....................................................................            4,801             6,449
  Current portion of long-term debt.......................................................               --             2,250
  Current portion of capital lease obligations............................................               17                15
                                                                                                   --------          --------
      Total current liabilities...........................................................            7,886            11,878
CAPITAL LEASE OBLIGATIONS, net of current portion.........................................               19                 8
LONG-TERM DEBT, net of current portion....................................................           90,000           101,750
                                                                                                   --------          --------
      Total liabilities...................................................................           97,905           113,636
                                                                                                   --------          --------
SERIES A 10% CUMULATIVE REDEEMABLE PREFERRED STOCK,
  no par value, 20,000 shares authorized; 10,000 shares issued and outstanding on March
  28, 1998 and January 2, 1999, respectively..............................................            8,478             9,406
                                                                                                   --------          --------
STOCKHOLDERS' EQUITY (DEFICIT):
  Series B 6% Cumulative Convertible Preferred Stock, no par value,
    20,000 and 5,000 shares authorized, issued and outstanding on March 28, 1998
    and January 2, 1999, respectively.....................................................             --               5,000
  Common Stock, $.01 par value, 5,000,000 shares authorized; 2,300,000 shares issued and
    outstanding...........................................................................               23                23
  Additional paid-in capital..............................................................          (67,926)          (68,558)
  Retained earnings.......................................................................            6,432             4,298
                                                                                                   --------          --------
                                                                                                    (61,471)          (59,237)
                                                                                                   --------          --------
                                                                                                   $ 44,912          $ 63,805
                                                                                                   --------          --------
                                                                                                   --------          --------
</TABLE>
-------------
(1) The balance sheet at March 28, 1998 has been derived from the audited
    financial statements at that date, but does not include all of the
    information and footnotes required by generally accepted accounting
    principles for complete financial statements.

        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
                                                                                           -------------------------------
                                                                                           DEC. 27, 1997      JAN. 2, 1999
                                                                                           -------------      ------------
<S>                                                                                        <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:\
  Net income (loss)...............................................................            $ 4,570          $ (1,207)
  Adjustments to reconcile net income (loss) to net cash provided by operating
    activities:
    Amortization of intangibles...................................................                985             1,663
    Amortization of deferred loan costs...........................................                132               536
    Depreciation and amortization on property, plant and equipment................                615               748
    (Increases) decreases in assets:
      Accounts receivable.........................................................             (1,205)            2,542
      Inventories.................................................................             (2,420)              375
      Prepaids and other..........................................................               (158)             (882)
      Deferred tax assets.........................................................                226               320
    Increases (decreases) in liabilities:
      Accounts payable............................................................                355              (510)
      Accrued liabilities.........................................................                553            (1,652)
      Income taxes payable........................................................                943                --
     Interest payable.............................................................                (61)            2,390
                                                                                              -------          --------
  Net cash provided by operating activities.......................................              4,535             4,323
                                                                                              -------          --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment......................................               (933)             (294)
  Acquisition of Power Ten, net of cash acquired..................................                 --           (17,266)
  Non-compete agreements..........................................................                 --              (240)
                                                                                              -------          --------
  Net cash (used in) investing activities.........................................               (933)          (17,800)
                                                                                              -------          --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from preferred stock issuance..........................................                 --             5,000
  Proceeds from bank borrowings...................................................                 --            15,000
  Deferred financing costs........................................................                 --            (1,037)
  Repayments on debt..............................................................             (4,007)           (1,000)
  Payments under capital leases...................................................                (28)              (13)
  Recapitalization consideration..................................................                 --              (632)
                                                                                              -------          --------
  Net cash provided by (used in) financing activities                                          (4,035)           17,318
                                                                                              -------          --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..............................               (433)            3,841
CASH AND CASH EQUIVALENTS, beginning of period....................................                691             2,666
                                                                                              -------          --------
CASH AND CASH EQUIVALENTS, end of period..........................................            $   258          $  6,507
                                                                                              -------          --------
                                                                                              -------          --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest..........................................................            $   851          $  5,147
  Cash paid for income taxes......................................................              3,225               427
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Preferred stock dividend-in-kind................................................            $    --          $    799
  Accretion of discount on preferred stock........................................                 --               129
</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.  INCORPORATION AND 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 the 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 DC power supplies. In connection with the acquisition, which 
was accounted for as a purchase, Elgar entered into non-compete agreements 
with the two former stockholders of Power Ten, one of whom is currently a 
member of Power Ten's management team. 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").

      Unaudited condensed pro forma net sales and net loss for the nine month 
periods ended December 27, 1997 and January 2, 1999, assuming the 
Recapitalization and the Power Ten acquisition occurred on March 30, 1997 and 
March 29, 1998, respectively, and also assuming a 40% statutory tax rate, are 
as follows (in thousands):

<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED
                                            ----------------------------
                                             DEC. 27, 1997   JAN. 2, 1999
                                             -------------   ------------
<S>                                          <C>             <C>
Net sales...............................     $54,027         $49,000
Net loss................................     $  (275)        $(1,562)
</TABLE>

                                        6
<PAGE>

                              ELGAR HOLDING, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION/BASIS OF PRESENTATION

    The accompanying consolidated financial statements as of and for the 
three months and nine months ended January 2, 1999 include the accounts of 
the Company and its wholly owned subsidiary, Elgar, and the accounts of 
Elgar's wholly owned subsidiary, Power Ten, from the date of Power Ten's 
acquisition on May 29, 1998. All significant intercompany accounts and 
transactions have been eliminated. The accompanying financial statements for 
the three months and nine months ended December 27, 1997 include only the 
accounts of Elgar. 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.

    INTERIM ACCOUNTING PERIODS

    The Company operates and reports financial results on a fiscal year of 52 
or 53 weeks ending the Saturday closest to March 31. Interim periods include 
13 or 14 weeks ending the last Saturday closest to the end of the quarter. 
Results from operations for the three months and nine months ended January 2, 
1999 are not necessarily indicative of the results to be expected for the 
fiscal year ending April 3, 1999.

CASH EQUIVALENTS

    Cash equivalents at March 28, 1998 and January 2, 1999 consist of cash 
held in a money market account.

                                        7
<PAGE>


                              ELGAR HOLDING, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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>
                                                    MARCH 28, 1998       JAN. 2, 1999
                                                    --------------       ------------
    <S>                                             <C>                  <C>
    Raw materials............................            $3,745             $4,151
    Work-in-process..........................             3,677              3,254
    Finished goods...........................               883              1,690
                                                         ------             ------
          Total..............................            $8,305             $9,095
                                                         ------             ------
                                                         ------             ------
</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 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

                                        8
<PAGE>

                              ELGAR HOLDING, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 January 2, 1999, sales to two customers accounted 
for approximately 20% and 19% of the Company's net sales. In the quarter 
ended December 27, 1997, sales to two customers accounted for approximately 
38% and 19% of the Company's net sales. In the nine months ended January 2, 
1999, sales to two customers accounted for approximately 20% and 12% of the 
Company's net sales. In the nine months ended December 27, 1997, sales to two 
customers accounted for approximately 30% and 17% of the Company's net sales. 
No other customers individually represented more than 10% of net sales in the 
third quarter of fiscal 1999 or fiscal 1998. The Company performs ongoing 
credit evaluation of its customers' financial condition. The Company 
maintains reserves for potential credit losses.

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1997, 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 months or nine months ended January 2, 1999. The Company plans to 
adopt SFAS No. 131 during its fiscal year ending April 3, 1999.

    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. SFAS No. 133 is effective 
for fiscal years beginning after June 15, 1999; however, a company may 
implement the provisions of SFAS No. 133 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 the Company's 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, with the 
first interest payment having been made on August 1, 1998.                    


                                     9 


<PAGE>
                              ELGAR HOLDING, 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 March 28, 1998 and January 2, 1999, respectively.

     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. As of January 2, 1999, Elgar was not in compliance with certain 
financial covenants contained in the Credit Agreement.

     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 above. The Company believes that it will be in compliance with 
the covenants contained in the Credit Agreement, as amended, for its fiscal 
quarter ended April 3, 1999.

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"). The Capital 
Call Agreement requires the majority shareholder to make a capital 
contribution to the Company upon the occurrence of certain events, including 
the failure to comply with certain financial covenants contained in the 
Credit Agreement.  Upon receipt of any such contribution, the Company would 
transfer the funds to Elgar for purposes of repaying outstanding indebtedness 
under the Credit 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.  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 failure to comply with certain financial 
covenants contained in the Credit Agreement, as amended.

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, for cash proceeds of $10 million. In connection 
with such issuance, the Company also issued to the purchasers 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 March 28, 1998.

    Dividends are payable to the holders of the redeemable preferred stock at 
the annual rate per share of 10% times the sum of $1,000 and accrued but 
unpaid dividends. Dividends shall be payable at the rate per share of 0.10 
shares of redeemable 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 shall be fully cumulative and shall accrue on a quarterly basis.

CONVERTIBLE PREFERRED STOCK

                                        10
<PAGE>

                              ELGAR HOLDING, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    In connection with the acquisition of Power Ten, the Company issued 5,000 
shares Convertible Preferred Stock, designated as Series B Convertible 
Preferred Stock, for cash proceeds of $5 million.

    Dividends are payable to the holders of the convertible preferred stock 
at the annual rate per share of 6% times the sum of $1,000 and accrued but 
unpaid dividends. 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.

5.  COMMON STOCK

    On February 3, 1998, immediately prior to the Recapitalization, the 
Company effected (i) an increase in the number of shares authorized from 
1,000 to 9,340,000 shares and (ii) a 9,340 to 1 stock split of the common 
stock distributed in the form of a stock dividend. As a result of this 
action, 9,339,000 shares were issued to shareholders of record on February 3, 
1998. All references throughout the accompanying consolidated financial 
statements to the number of shares of the Company's common stock and earnings 
per share have been restated to reflect the effect of the stock split. In 
connection with the Recapitalization, the number of authorized shares of 
common stock was then reduced to 5,000,000 shares.

    At March 28, 1998 and January 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 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 pay a fixed rate of 5.83% on each March 
24, June 24, September 24 and December 24, commencing on September 24, 1998. 
The swap agreement terminates on June 25, 2001. The Company will receive a 
floating rate based on the three-month London Interbank Offering Rate (LIBOR) 
on the same dates as described above. In connection with the swap agreement, 
the Company has included $6,777 and $10,077 in interest expense in its 
consolidated statement of operations for the three and nine months ended 
January 2, 1999, respectively.

7.  STOCK OPTION PLAN

    On July 14, 1998, the Board of Directors adopted the Elgar Holdings, Inc. 
1998 Stock Option Plan (the "Option Plan"). The maximum number of shares of 
common stock that may be issued pursuant to awards granted under the Option 
Plan is 265,374. As of October 3, 1998 there were options outstanding to 
purchase 227,000 shares of common stock. During the quarter ended January 2, 
1999, the Company granted options to purchase 9,750 shares of common stock. 
All options have been granted at fair market value on the date of grant. 
Options vest ratably over four years and generally 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 December 27, 1997 and January 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
                                                   DEC. 27, 1997        JAN. 2, 1999      DEC. 27, 1997        JAN. 2, 1999
                                                   -------------        ------------      -------------        ------------
<S>                                                 <C>                 <C>               <C>                  <C>
Net sales......................................         100.0%               100.0%            100.0%              100.0%
Cost of sales..................................          50.0                 55.4              52.2                55.0
                                                        -----                -----             -----               -----
    Gross profit...............................          50.0                 44.6              47.8                45.0
Selling, general and administrative expense....          14.1                 16.6              14.6                17.2
Research and development and engineering
  expenses.....................................           9.5                 10.1               9.5                10.4
Amortization expense...........................           1.9                  4.3               2.1                 3.5
                                                        -----                -----             -----               -----
    Operating income...........................          24.5%                13.6%             21.6%               13.9%
                                                        -----                -----             -----               -----
                                                        -----                -----             -----               -----
</TABLE>

COMPARISON OF THE THREE MONTHS ENDED JANUARY 2, 1999 TO THE THREE MONTHS ENDED
DECEMBER 27, 1997

    NET SALES. Net sales for the quarter ended January 2, 1999 were $14.2 
million, a decrease of $3.3 million, or 18.9%, from net sales of $17.5 
million for the quarter ended December 27, 1997. 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), partially offset by an increase in sales of Space 
Systems products, AC products and the inclusion of the results of Power Ten.

    In the first quarter of fiscal year 1999, the Company was notified by 
Racal Instruments, Inc., 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
                                        12
<PAGE>

semiconductor manufacturer, that the leading semiconductor manufacturer 
referred to above has decided to cease orders for Elgar's current AT-8000 DC 
power supplies until anticipated "next generation" technology is available. 
Elgar's prototype ATE system for this next-generation technology was 
delivered to the end-user in August 1998 with production scheduled to 
commence in the latter part of calendar 1999. Racal accounted for 
approximately $17.7 million, or 28.3%, of the Company's total net sales in 
fiscal l998, the substantial majority of which was attributable to the 
semiconductor manufacturer. Revenues from Racal were less than $0.1 million 
for the quarter ended January 2, 1999 and $3.1 million for the nine months 
ended January 2, 1999. As result of the conversion to the next-generation 
product described above, the Company does not expect to book revenues from 
Racal for sales to the semiconductor manufacturer during the remainder of 
fiscal 1999.

    A major customer of Space Systems products recently requested that the 
Company upgrade one of its satellite testing systems.  Since this upgrade 
will require 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 anticipated sales in fiscal 2000.

    GROSS PROFIT. Gross profit for the quarter ended January 2, 1999 was $6.3 
million, a decrease of $2.5 million, or 28.4%, from gross profit of $8.8 
million for the quarter ended December 27, 1997. As a percentage of net 
sales, gross profit decreased from 50.0% for the quarter ended December 27, 
1997 to 44.6% for the quarter ended January 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 $2.4 million for the quarter ended 
January 2, 1999, a decrease of $0.1 million, or 4.0%, from SG&A expenses of 
$2.5 million for the quarter ended December 27, 1997. SG&A expenses increased 
as a percentage of net sales from 14.1% for the quarter ended December 27, 
1997 to 16.6% for the quarter ended January 2, 1999. The decrease in dollars 
in SG&A was primarily due to a reduction in advertising expense, lower 
commissions due to lower sales volume and lower levels of bonuses expected as 
compared to the prior year.

    RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and 
development and engineering expenses were $1.4 million for the quarter ended 
January 2, 1999, a decrease of $0.3 million, or 17.6%, from research and 
development and engineering expenses of $1.7 million for the quarter ended 
December 27, 1997. As a percentage of net sales, research and development and 
engineering expense increased from 9.5% for the quarter ended December 27, 
1997 to 10.1% for the quarter ended January 2, 1999. The decrease in dollars 
was due to lower labor, consulting and engineering material expense in the 
quarter ended January 2, 1999 versus the quarter ended December 27, 1997.

    AMORTIZATION EXPENSE. Amortization expense increased to $0.6 million for 
the quarter ended January 2, 1999 from $0.3 million for the quarter ended 
December 27, 1997. 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 $1.9 million for the quarter ended 
January 2, 1999, a decrease of $2.4 million, or 55.8%, from operating income 
of $4.3 million for the quarter ended December 27, 1997. Operating income 
decreased as a percentage of net sales from 24.5% for the quarter ended 
December 27, 1997 to 13.6% for the quarter ended January 2, 1999, due to the 
factors discussed above.

    INCOME TAXES. Income taxes for the three months ended January 2, 1999 
contained a tax benefit of $361,000, compared to a tax provision of $2.1 
million for the three months ended December 27, 1997. The Company's effective 
tax rate was 51.9% for the three months ended January 2, 1999 and 53.9% for 
the three months ended December 27, 1997. The effective tax rate differs from 
the statutory tax rate of 40.0%, primarily due to the non-deductibility of 
goodwill for tax purposes and realization of R & D tax credits utilized by 
the Company.

                                        13
<PAGE>

COMPARISON OF THE NINE MONTHS ENDED JANUARY 2, 1999 TO THE NINE MONTHS 
ENDED DECEMBER 27, 1997

    NET SALES. Net sales for the nine months ended January 2, 1999 were $47.1 
million, an increase of $0.5 million, or 1.1%, from net sales of $46.6 
million for the nine months ended December 27, 1997. During the nine months 
ended January 2, 1999, increases in (i) sales to the U.S. Navy's CASS 
Program, (ii) sales of Sorensen-brand products and (iii) sales of GUPS 
products and customer service revenues, along with the inclusion of the 
results of Power Ten, were offset by a decrease in sales of programmable DC 
products (primarily attributable to decreased sales to Racal).

    GROSS PROFIT. Gross profit for the nine months ended January 2, 1999 was 
$21.2 million, a decrease of $1.1 million, or 4.9%, from gross profit of 
$22.3 million for the nine months ended December 27, 1997. As a percentage of 
net sales, gross profit decreased from 47.8% for the nine months ended 
December 27, 1997 to 45.0% for the nine months ended January 2, 1999. The 
decrease in gross profit was primarily attributable to unfavorable product 
mix.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $8.1 
million for the nine months ended January 2, 1999, an increase of $1.3 
million, or 19.1%, from SG&A expenses of $6.8 million for the nine months 
ended December 27, 1997. SG&A expenses increased as a percentage of net sales 
from 14.6% for the nine months ended December 27, 1997 to 17.2% for the nine 
months ended January 2, 1999. The increase in dollars was primarily due to 
the inclusion of $0.9 million of such expenses from Power Ten, $0.2 million 
of nonrecurring expenditures incurred in connection with the acquisition of 
Power Ten and merit increases.

    RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and 
development and engineering expenses were $4.9 million for the nine months 
ended January 2, 1999, an increase of $0.5 million, or 11.4%, from research 
and development and engineering expenses of $4.4 million for the nine months 
ended December 27, 1997. The increase was primarily due to the inclusion of 
$0.4 million of such expense from Power Ten and a $0.1 million increase in 
labor costs. As a percentage of net sales, research and development and 
engineering expense increased from 9.5% for the nine months ended December 
27, 1997 to 10.4% for the nine months ended January 2, 1999.

    AMORTIZATION EXPENSE. Amortization expense increased to $1.7 million for 
the nine months ended January 2, 1999 from $1.0 million for the nine months 
ended December 27, 1997. This increase was due to seven months of 
amortization expense incurred in connection with the Company's acquisition of 
Power Ten.

    OPERATING INCOME. Operating income was $6.6 million for the nine months 
ended January 2, 1999, a decrease of $3.5 million, or 34.7%, from operating 
income of $10.1 million for the nine months ended December 27, 1997. 
Operating income decreased as a percentage of net sales from 21.6% for the 
nine months ended December 27, 1997 to 13.9% for the nine months ended 
January 2, 1999, due to the factors discussed above.

    INCOME TAXES. Income taxes for the nine months ended January 2, 1999 
contained a tax benefit of $243,000, compared to a tax provision of $4.4 
million for the nine months ended December 27, 1997. The Company's effective 
tax rate was 16,8% for the three months ended January 2, 1999 and 49.1% for 
the three months ended December 27, 1997. 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 R & D 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.

    Cash flow provided by operating activities for the nine months ended 
January 2, 1999 was $4.3 million, a decrease of $0.2 million from cash flow 
of $4.5 million provided by operating activities for the nine months ended 
December 27, 1997. This decrease was attributable to a decrease in net income 
of $5.8 million, a decrease of $2.3 million in accruals, a decrease of $0.9 
million in accounts payable and a decrease of $0.9 million in income tax 
accrual, offset by a $3.7 million decrease in accounts receivable, a $2.8 
million decrease in inventory, a $2.5 million increase in interest payable on 
the Senior Notes and a $0.7 million decrease in intangibles.

    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, amortization of 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 $294,000 
and $933,000 for the nine months ended January 2, 1999 and December 27, 1997, 
respectively.

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 are 
being evaluated for conversion by the end of fiscal 1999. Other items such as 
the phone switch, bank capabilities, outside insurance carriers and the 
outside payroll system are being evaluated for conversion before the end of 
fiscal 1999. 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 ($15,000 of 
which has been incurred to date). Compliance status from key suppliers will 
be evaluated to determine whether the Company will need to switch sources to 
ensure ongoing product/service availability. This evaluation/conversion is 
expected to be completed by September 1999. A contingency plan has not been 
developed as the risk on remaining

                                        15
<PAGE>

items is considered low. Should any issues arise which cannot be adequately 
addressed and remedied, management will develop a contingency plan at that 
point.

    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 most 
suppliers and meeting with key suppliers to assess compliance status. Should 
any of the areas being addressed not provide adequate results, management 
will evaluate alternate suppliers for service or equipment or convert to 
alternate software as needed.

    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.

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 January 2, 1999.

                                        16
<PAGE>

                                    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:  February 16, 1999        By: /s/ CHRISTOPHER W. KELFORD
                                     ------------------------------
                                     Christopher W. Kelford
                                     Vice President--Finance, Chief Financial
                                     Officer, Treasurer and Assistant Secretary




                                        17