<PAGE>
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                                   UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                       
                                       
                                   FORM 10-Q


(MARK ONE)
  X         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 ---              SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
                For the quarterly period ended October 3, 1998
                                       
                                      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                       (Zip Code)
             Offices)
                                       
      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 November 12, 1998, the number of shares outstanding of the
Registrant's Common Stock was 2,300,000.

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<PAGE>
                                       
                             ELGAR HOLDINGS, INC.
                                       
                         QUARTERLY REPORT ON FORM 10-Q
                                       
                                     INDEX

<TABLE>
<CAPTION>
                                                                    PAGE
PART I   FINANCIAL INFORMATION                                     NUMBER
------   ---------------------                                     ------
<S>      <C>                                                       <C>
Item 1   Consolidated Financial Statements                            
                                       
           Consolidated Statements of Operations for the              
            three months and six months ended September 27,           
            1997 (unaudited) and the three months and six             
            months ended October 3, 1998 (unaudited)                  3
                                       
           Consolidated Balance Sheets as of March 28, 1998           
            and October 3, 1998 (unaudited)                           4
                                       
           Consolidated Statements of Cash Flows for the six          
            months ended September 27, 1997 (unaudited) and           
            the  six months ended October 3, 1998                     
            (unaudited)                                               5
                                       
         Notes to Consolidated Financial Statements                   6
          (unaudited)
                                       
Item 2    Management's Discussion and Analysis of Financial           
          Condition and Results of Operations                        14
                                       
                                       
                                                                      
PART II  OTHER INFORMATION                                            
-------  -----------------
Item 6     Exhibits and Reports on Form 8-K                          19
</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 SIX MONTHS ENDED
                                                  ------------------------------     ------------------------------
                                                  SEPT. 27, 1997    OCT. 3, 1998     SEPT. 27, 1997    OCT. 3, 1998
                                                  --------------    ------------     --------------    ------------
<S>                                               <C>               <C>              <C>               <C>
Net sales..................................          $16,064           $15,772          $29,083           $32,948
Cost of sales..............................            8,511             9,167           15,567            18,074
                                                     -------           -------          -------           -------
   Gross profit............................            7,553             6,605           13,516            14,874
Selling, general and administrative
  expense..................................            2,101             2,920            4,300             5,741
Research and development and 
  engineering expenses.....................            1,584             1,785            2,787             3,458
Amortization expense.......................              328               630              656             1,051
                                                     -------           -------          -------           -------
  Operating income.........................            3,540             1,270            5,773             4,624
Interest expense, net......................              375             2,935              761             5,377
                                                     -------           -------          -------           -------
Income (loss) before income tax provision 
  (benefit)................................            3,165            (1,665)           5,012              (753)
Income tax provision (benefit).............            1,396              (412)           2,270               119
                                                     -------           -------          -------           -------
   Net income (loss).......................          $ 1,769           $(1,253)         $ 2,742           $  (872)
                                                     -------           -------          -------           -------
                                                     -------           -------          -------           -------
</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, 1998(1)           OCT. 3, 1998
                                                                                                      (UNAUDITED)
                                ASSETS
<S>                                                                         <C>                        <C>
CURRENT ASSETS:
 Cash and cash equivalents                                                  $  2,666                   $  2,430
 Accounts receivable, net of allowance for doubtful accounts of
   $197 and $188, respectively                                                 6,453                      7,534
 Inventories                                                                   8,305                      8,729
 Deferred tax assets                                                           1,098                      1,199
 Prepaids and other                                                              373                        697
                                                                            --------                   --------
    Total current assets                                                      18,895                     20,589
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated
  depreciation and amortization of $1,643 and $2,580, respectively             2,952                      2,780
INTANGIBLE ASSETS, net of accumulated amortization of
  $2,711 and $4,117, respectively                                             22,412                     38,391
DEFERRED TAX ASSETS, net of current portion                                      653                        653
                                                                            --------                   --------
                                                                            $ 44,912                   $ 62,413
                                                                            --------                   --------
                                                                            --------                   --------
                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
 Accounts payable                                                          $   3,068                  $   2,608
 Accrued liabilities                                                           4,801                      4,775
 Current portion of long-term debt                                               --                       2,125
 Current portion of capital lease obligations                                     17                         16
                                                                            --------                   --------
    Total current liabilities                                                  7,886                      9,523
CAPITAL LEASE OBLIGATIONS, net of current portion                                 19                         11
LONG-TERM DEBT, net of current portion                                        90,000                    102,375
                                                                            --------                   --------
      Total liabilities                                                       97,905                    111,909
                                                                            --------                   --------
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 October 3, 1998 respectively               8,478                      9,098
                                                                            --------                   --------
STOCKHOLDERS' EQUITY (DEFICIT):
 Series B 6% Cumulative Convertible Preferred Stock, no par value,
   0 and 5,000 shares authorized, issued and outstanding on March 28, 
   1998 and October 3, 1998, 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                      4,940
                                                                            --------                   --------
                                                                             (61,471)                   (58,595)
                                                                            --------                   --------
                                                                            $ 44,912                   $ 62,413
                                                                            --------                   --------
                                                                            --------                   --------
</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 SIX MONTHS ENDED
                                                                                  ---------------------------------
                                                                                   SEPT. 27, 1997     OCT. 3, 1998
                                                                                  ----------------   --------------
<S>                                                                               <C>                <C>           
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                                                                     $ 2,742           $ (872)
 Adjustments to reconcile net income (loss) to net cash provided (used in)
   by operating activities:
    Amortization of intangibles                                                            656            1,051
    Amortization of deferred loan costs                                                     88              354
    Depreciation and amortization on property, plant and equipment                         411              495
    (Increases) decreases in assets:
        Accounts receivable                                                             (2,529)             176
        Inventories                                                                     (1,486)             741
        Prepaids and other                                                                (178)            (254)
    Increases (decreases) in liabilities:
        Accounts payable                                                                   452           (1,066)
        Accrued liabilities                                                                409           (1,171)
        Income taxes payable                                                             1,387               --
        Interest payable                                                                    91              233
                                                                                       -------          -------
Net cash provided (used in) by operating activities                                      2,043             (313)
                                                                                       -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property, plant and equipment                                               (482)            (222)
 Acquisition of Power Ten, net of cash acquired                                             --          (17,266)
 Non-compete agreements                                                                     --             (240)
                                                                                       -------          -------
 Net cash used in investing activities                                                    (482)         (17,728)
                                                                                       -------          -------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from preferred stock issuance                                                     --            5,000
 Proceeds from bank borrowings                                                              --           15,000
 Deferred financing costs                                                                   --           (1,054)
 Repayments on debt                                                                     (1,940)            (500)
 Payments under capital leases                                                             (19)              (9)
 Recapitalization consideration                                                             --             (632)
                                                                                       -------          -------
 Net cash provided by (used in) financing activities                                    (1,959)          17,805
                                                                                       -------          -------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 (398)            (236)
CASH AND CASH EQUIVALENTS, beginning of period                                             691            2,666
                                                                                       -------          -------
CASH AND CASH EQUIVALENTS, end of period                                               $   293          $ 2,430
                                                                                       -------          -------
                                                                                       -------          -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid for interest                                                                 $  546          $ 4,839
 Cash paid for income taxes                                                                866              422
NON-CASH INVESTING AND FINANCING ACTIVITIES:
 Preferred stock dividend-in-kind                                                       $   --          $   534
 Accretion of discount on preferred stock                                                   --               87
</TABLE>

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

                                       5

<PAGE>
                                       
                     ELGAR HOLDINGS, INC. AND SUBSIDIARIES
                                       
                       NOTES TO CONSOLIDATED STATEMENTS

1. INCORPORATION AND COMPANY OPERATIONS
     
     Elgar Holdings, Inc., a Delaware corporation (the "Company") (formerly
known as Carlyle-EEC Holdings, Inc.), manufactures and sells programmable power
supply units through its wholly owned subsidiary, Elgar Electronics
Corporation, to commercial and defense entities as well as to governmental
agencies.  The Company's primary sales are within the United States and Europe.
     
     The Company was incorporated on March 27, 1996 and had no operations from
that date to April 3, 1996. On April 3, 1996, the Company acquired all of the
outstanding common stock of Elgar Electronics Corporation, a California
corporation (the "Predecessor" or "Elgar").
     
     On January 2, 1998, the Company entered into an Agreement and Plan of
Merger (the "Recapitalization Agreement") pursuant to which the Company was
recapitalized (the "Recapitalization"). Pursuant to the Recapitalization
Agreement, 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 agreed to retain approximately 15%
of the common equity of the Company. In order to finance the Recapitalization,
the Company (i) issued $90 million of senior notes in a debt offering, (ii)
received $19 million in cash from an investor group for common stock and (iii)
received $10 million in cash for the issuance of redeemable preferred stock. In
connection with the Recapitalization, the Company changed its name to Elgar
Holdings, Inc. Elgar, as borrower, and the Company, as guarantor, also entered
into a new $15 million revolving credit facility. Loans under the new facility
are secured by substantially all of the Company's assets and are guaranteed by
the Company and secured by a pledge of all the outstanding capital stock of
Elgar. The credit agreement governing the facility contains customary financial
covenants and defined events of default.
     
     On May 29, 1998, pursuant to a Stock Purchase Agreement dated as of May 5,
1998, Elgar acquired all of the issued and outstanding shares of common stock
of Power Ten for $17.8 million cash.  The acquisition has been accounted for as
a purchase.  In connection with the acquisition, Elgar entered into non-compete
agreements with the two former stockholders of Power Ten who are currently
members of Power Ten's management team.  At closing, Elgar paid each former
stockholder $120,000 as consideration for their agreement not to compete.  The
acquisition was financed by the issuance of 5,000 shares of Series B
Convertible Preferred Stock for $5 million in cash and borrowings of $15
million under the amended credit facility (see Note 3).  In connection with the
Power Ten acquisition and the financing thereof, Elgar recorded approximately
$16.1 million of goodwill (representing the excess of purchase price over the
net assets acquired) and approximately $0.9 million of deferred financing
costs, both of which are included in intangible assets as of October 3, 1998.

                                       6

<PAGE>

     Unaudited condensed pro-forma operating results for the six month period
ended September 27, 1997 and October 3, 1998, 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>
                                                                SIX MONTHS ENDED
                                                        ----------------------------------
                                                         SEPT. 27, 1997      OCT. 3, 1998
                                                        ----------------    --------------
<S>                                                     <C>                 <C>
Net sales...........................................        $34,215             $34,812
Cost of sales.......................................         18,209              19,053
                                                            -------             -------
   Gross profit.....................................         16,006              15,759
Selling, general and administrative expense.........          5,911               6,629
Research and development and engineering expense....          3,051               3,538
Amortization expense................................          1,216               1,223
                                                            -------             -------
   Operating income.................................          5,828               4,369
Interest expense, net...............................          5,559               5,597
                                                            -------             -------
   Income (loss) before income tax provision
    (benefit).......................................            269              (1,228)
Income tax provision (benefit)                                  602                  (2)
                                                            -------             -------
   Net income (loss)................................        $  (333)            $(1,226)
                                                            -------             -------
                                                            -------             -------
</TABLE>
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 six months ended October 3, 1998 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 six
months ended September 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 in the quarter.  Results from
operations for the three months and six months ended October 3, 1998 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 October 3, 1998 consist of cash
held in a money market account.
 
                                       7

<PAGE>

 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      OCT. 3, 1998
                                         ----------------    --------------
<S>                                      <C>                 <C>
Raw materials......................           $3,745             $3,686
Work-in-process....................            3,677              3,315
Finished goods.....................              883              1,728
                                             -------            -------
    Total..........................           $8,305             $8,729
                                             -------            -------
                                             -------            -------
</TABLE>
 PROPERTY, PLANT AND EQUIPMENT
     
     Property, plant and equipment is 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
     
     As of March 28, 1998, intangible assets represent the excess of purchase
price over net book value of assets acquired in connection with the Company's
acquisition of Elgar (approximately $19.7 million) and certain financing costs
incurred in the Recapitalization.  As of October 3, 1998 intangible assets also
include agreements not to compete ($240,000), the excess of purchase price over
net assets acquired in connection with the acquisition of Power Ten
(approximately $16.1 million) and deferred financing costs (approximately $0.9
million).  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 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

                                       8

<PAGE>

could differ from those estimates.
 
 CONCENTRATION OF CREDIT RISK
     
     In the quarter ended October 3, 1998, sales to one customer accounted for
approximately 29% of the Company's net sales.  In the quarter ended September
27, 1997, sales to two customers accounted for approximately 27% and 19% of the
Company's net sales. In the six months ended October 3, 1998, sales to two
customers accounted for approximately 21% and 10% of the Company's net sales.
In the six months ended September 27, 1997, sales to two customers accounted
for approximately 25% and 18% of the Company's net sales. No other customers
individually represented more than 10% of net sales in the second 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 six
months ended October 3, 1998.  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 AND REVOLVING LINE OF CREDIT
 
 SENIOR NOTES
     
     In connection with the Recapitalization (see Note 1), 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 Senior Notes and entered
into a new credit facility with a bank.
     
     The Senior Notes bear interest at a rate of 9.875% per annum and mature on
February 1, 2008. Interest on the Senior Notes is payable semi-annually,
commencing on August 1, 1998.
     
     At any time on or before February 1, 2003, the Company may redeem up to
35% in aggregate principal amount of (i) the initial aggregate principal amount
of the Senior Notes and (ii) the initial principal amount of any additional
notes issued under the indenture after the issue date, on one or more
occasions, with the net cash proceeds of one or more public equity offerings at
a redemption price of 109.875% of the principal amount thereof, plus accrued
and unpaid interest thereon to the redemption date, 

                                       9

<PAGE>

provided that at least 65% of the sum of (i) the initial aggregate principal 
amount of the Senior Notes and (ii) the initial aggregate principal amount of 
additional notes remain outstanding immediately after redemption. The Senior 
Notes are redeemable by the Company at stated redemption prices beginning in 
February 2003.
     
     The Senior Notes are general unsecured obligations of the Company and rank
senior to all existing and future subordinated indebtedness of the Company. The
obligations of the Company as a guarantor of Elgar's obligations under the bank
credit facility are secured by substantially all of the assets of the Company.
Accordingly, such secured indebtedness effectively ranks senior to the Senior
Notes to the extent of such assets.
     
     The Senior Notes restrict, among other things, the Company's ability to
incur additional indebtedness, pay dividends or make certain other restricted
payments, incur liens, sell preferred stock of subsidiaries, apply net proceeds
from certain asset sales, merge or consolidate with any other person, sell,
assign, transfer, lease, convey or otherwise dispose of substantially all of
the assets of the Company or enter into certain transactions with affiliates.
The Senior Notes are fully and unconditionally guaranteed by Elgar and Power
Ten. The only direct or indirect subsidiary of the Company that is not a
guarantor of the Senior Notes is insignificant to the consolidated financial
statements. In management's opinion, separate financial statements of the
guarantors have not been presented as they would not be material to investors.
     
     The Senior Notes were issued on February 3, 1998. As such, the Company
believes the fair value of the Senior Notes approximates the carrying value of
such debt at March 28, 1998 and October 3, 1998.
 
 CREDIT FACILITY
     
     In connection with Recapitalization, Elgar, as borrower, and the Company,
as guarantor, entered into a Loan and Security Agreement with a bank to provide
Elgar with a $15 million revolving credit facility which matures on February 3,
2003. No amounts were outstanding under this credit facility as of March 28,
1998 and October 3, 1998, respectively.
     
     On May 29, 1998, in connection with the acquisition of Power Ten (see Note
1), the Company amended its credit agreement with the bank to, among other
things, increase the available borrowings thereunder to $30 million by
including a $15 million term facility and reconfirming the revolving facility
discussed above.  The proceeds of the term facility of $15 million were used to
finance a portion of the Power Ten acquisition.
     
     Elgar's indebtedness under the agreement is secured by a first priority
security interest in substantially all of the Company's assets, including the
assets of Elgar and Power Ten.
     
     Indebtedness under the agreement bears interest at a floating rate of
interest equal to, at Elgar's option, the Eurodollar rate for one, two, three
or six months, plus 2.75%, or the bank's prime rate plus a margin of 1.75%
     
     Advances under the agreement are limited to the lesser of (a) $15 million
and (b)(i) 85% of eligible accounts receivable plus (ii) 60% of eligible
inventory minus (iii) the aggregate amount of all undrawn letters of credit
issued under the Credit Facility plus the aggregate amount of any unreimbursed
drawings under any outstanding letters of credit.
     
     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, 

                                       10

<PAGE>

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 March 28, 1998 and October 3, 1998, the Company 
was in compliance with all required covenants under the credit facility.

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.
     
     If the cash dividends payable on the redeemable preferred stock shall have
been in arrears and unpaid for four or more successive dividend payment dates,
then until the date on which all such dividends in arrears are paid in full,
dividends shall accrue and be payable to the holders at the annual rate of 12%
times the sum of $1,000 per share and accrued but unpaid dividends thereon.
Upon payment in full of all dividends in arrears, cash dividends will
thereafter be payable at the 10% annual rate set forth above. There were no
dividends in arrears as of March 28, 1998 or October 3, 1998.
     
     Holders of shares of redeemable preferred stock shall be entitled to
receive the stated liquidation value of $1,000 per share, plus an amount per
share equal to any dividends accrued but unpaid, in the event of any
liquidation or dissolution of the Company. After payment of the full amount of
the liquidation preference, holders of shares of redeemable preferred stock
will not be entitled to any further participation in any distribution of assets
of the Company.
     
     The Company may, at its option, redeem at any time, all or any part of the
shares of the redeemable preferred stock at a redemption price per share equal
to 100% of the liquidation preference on the date of redemption. On August 3,
2008, the Company shall redeem any and all outstanding shares of redeemable
preferred stock at a redemption price per share equal to 100% of the
liquidation preference on the date of redemption.
     
     Upon the occurrence of a change in control (as defined), the redeemable
preferred stock shall be redeemable at the option of the holders, at a
redemption price per share equal to 100% of the liquidation preference.
     
     The holders of shares of redeemable preferred stock shall not be entitled
to any voting rights. However, without the consent of the holders of at least
85% of the outstanding shares of redeemable preferred stock, the Company may
not change the powers or preferences of the redeemable preferred stock, 

                                       11

<PAGE>

create, authorize or issue any shares of capital stock ranking senior to or on 
a parity with the redeemable preferred stock or create, authorize or issue any 
shares of capital stock constituting junior securities, unless such junior 
securities are subordinate in right of payment to the redeemable preferred 
stock.
     
     If any amount of cash dividends payable on the redeemable preferred stock
shall have been in arrears and unpaid for four or more successive dividend
payment dates, then the number of directors constituting the board of directors
shall increase, as defined, and the holders of the redeemable preferred stock
shall have the right to elect the newly-created directors.
     
     If the Company fails to redeem shares of redeemable preferred stock in
accordance with the mandatory redemption provisions described above, then the
number of directors constituting the Board of Directors shall increase, as
defined, and the holders of the redeemable preferred stock shall have the right
to elect directors to fill the newly-created directorships.
 
 CONVERTIBLE PREFERRED STOCK
     
     In connection with the acquisition of Power Ten (see Note 1), 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 shall be 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.
     
     Holders of shares of convertible preferred stock shall be entitled to
receive the stated liquidation value of $1,000 per share, plus an amount per
share equal to any dividends accrued but unpaid without interest, in the event
of any liquidation or dissolution of the Company. After payment of the full
amount of the liquidation preference, holders of shares of convertible
preferred stock will not be entitled to any further participation in any
distribution of assets of the Company.
     
     Holders of shares of convertible preferred stock will have the right, at
such holder's option, at any time following a Triggering Event (as defined), to
convert all or a portion of such shares into the Company's common stock,
excluding accrued dividends, at the conversion price of $10.00 per share,
subject to adjustments pursuant to certain anti-dilution provisions.
     
     The Company may, at its option, redeem at any time, all or any part of the
shares of the redeemable preferred stock at a redemption price per share equal
to 100% of the liquidation preference on the date of redemption.
     
     Upon the occurrence of a change in control (as defined), the convertible
preferred stock shall be redeemable at the option of the holders, at a
redemption price per share equal to 100% of the liquidation preference on the
date of redemption, including dividends accrued as defined.
     
     The holders of shares of convertible preferred stock shall not be entitled
to any voting rights. However, without the consent of the holders of at least
51% of the outstanding shares of convertible preferred stock, the Company may
not amend its Certificate of Incorporation in any way what would adversely
alter or change the powers, preferences or special rights of the convertible
preferred stock.

                                       12

<PAGE>

5. COMMON STOCK

     On February 3, 1998, immediately prior to the Recapitalization, the
Company effected a 9,340 to 1 stock split of the common stock to be distributed
in the form of a stock dividend and an increase in the number of shares
authorized from 1,000 to 9,340,000 shares. 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 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 reduced to 5,000,000 shares.
     
     At March 28, 1998 and October 3, 1998, 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 $3,300 in interest expense in its consolidated statement
of operations for the quarter ended October 3, 1998.

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.  All options were granted at fair market value on the date of
grant.  As of October 3, 1998, there were options outstanding to purchase
227,000 shares of common stock.  Options vest ratably over four years and
generally expire on the tenth anniversary of the date of grant.

                                       13

<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 for Elgar Holdings, Inc.
(the "Company") included elsewhere in this Quarterly Report on Form 10-Q.
     
     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, general economic conditions.  Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected.  The Company
does not intend to update these forward-looking statements.

RESULTS OF OPERATIONS
     
     The following table sets forth certain income statement information for
the Company as a percentage of net sales for the three months and six months
ended September 27, 1997 and October 3, 1998, with the results of Power Ten
included from its date of acquisition on May 29, 1998:
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                       ---------------------------------   ---------------------------------
                                                        SEPT. 27, 1997     OCT. 3, 1998     SEPT. 27, 1997     OCT. 3, 1998
                                                       ----------------   --------------   ----------------   --------------
<S>                                                    <C>               <C>               <C>                <C>
Net sales....................................               100.0%           100.0%             100.0%            100.0%
Cost of sales................................                53.0             58.1               53.5              54.9
   Gross profit..............................                47.0             41.9               46.5              45.1
Selling, general and administrative 
 expense.....................................                13.1             18.5               14.8              17.4
Research and development and 
 engineering expenses........................                 9.9             11.3                9.6              10.5
Amortization expense.........................                 2.0              4.0                2.3               3.2
                                                            -----            -----              -----             -----
Operating income.............................                22.0%             8.1%              19.8%             14.0%
                                                            -----            -----              -----             -----
                                                            -----            -----              -----             -----
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED OCTOBER 3, 1998 TO THE THREE MONTHS ENDED 
SEPTEMBER 27, 1997
     
     NET SALES.  Net sales for the quarter ended October 3, 1998 were
$15.8 million, a decrease of $0.3 million, or 1.9%, from net sales of $16.1
million for the quarter ended September 27, 1997. This decrease was primarily
due to a $3.6 million decrease in sales of programmable DC products, a $1.6
million decrease in sales of Space Systems products, offset by a $1.5 million
increase in sales to the U.S. Navy's CASS Program, a $1.4 million increase in
sales of other products as well as the inclusion of $2.0 million of Power Ten
sales for the three months ended October 3, 1998.
     
     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 

                                       14

<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 in
early 1999.  Elgar's prototype ATE system for this next-generation technology
was delivered to Racal in August 1998 with initial production scheduled to
commence in early 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 only $0.1 million for the quarter ended
October 3, 1998 and $3.1 million for the six months ended October 3, 1998.  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 in the second half of fiscal 1999.
     
     GROSS PROFIT.  Gross profit for the quarter ended October 3, 1998 was
$6.6 million, a decrease of $1.0 million, or 13.2%, from gross profit of
$7.6 million for the quarter ended September 27, 1997. As a percentage of net
sales, gross profit decreased from 47.0% for the quarter ended September 27,
1997 to 41.9% for the quarter ended October 3, 1998.  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 $2.9 million for the quarter ended
October 3, 1998, an increase of $0.8 million, or 38.1%, from SG&A expenses of
$2.1 million for the quarter ended September 27, 1997.  SG&A expenses increased
as a percentage of net sales from 13.1% for the quarter ended September 27,
1997 to 18.5% for the quarter ended October 3, 1998. The increase in SG&A was
primarily due to the inclusion of $0.4 million of such expenses from Power Ten,
a $0.2 million increase in management fees and $0.2 million in merit increases.
     
     RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES.  Research and
development and engineering expenses were $1.8 million for the quarter ended
October 3, 1998, an increase of $0.2 million, or 12.5%, from research and
development and engineering expenses of $1.6 million for the quarter ended
September 27, 1997.  As a percentage of net sales, research and development and
engineering expense increased from 9.9% for the quarter ended September 27,
1997 to 11.3% for the quarter ended October 3, 1998.  The increase was due to
the inclusion of $0.2 million of such expense from Power Ten.
     
     AMORTIZATION EXPENSE.  Amortization expense increased to $0.6 million for
the quarter ended October 3, 1998 from $0.3 million for the quarter ended
September 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 $1.3 million for the quarter ended
October 3, 1998, a decrease of $2.2 million, or 62.9%, from operating income of
$3.5 million for the quarter ended September 27, 1997. Operating income
decreased as a percentage of net sales from 22.0% for the quarter ended
September 27, 1997 to 8.1% for the quarter ended October 3, 1998, due to the
factors discussed above.

                                       15

<PAGE>

COMPARISON OF THE SIX MONTHS ENDED OCTOBER 3, 1998 TO THE SIX MONTHS ENDED
SEPTEMBER 27, 1997
     
     NET SALES.  Net sales for the six months October 3, 1998 were
$32.9 million, an increase of $3.8 million, or 13.1%, from net sales of $29.1
million for the six months September 27, 1997. This increase was primarily due
to a $2.2 million increase in sales to the U.S. Navy's CASS Program, a $1.5
million increase in sales of Sorensen-brand products, a $0.7 million increase
in sales of other products and the inclusion of $2.8 million of Power Ten sales
from its date of acquisition on May 29, 1998, offset by a $3.4 million decrease
in sales of programmable DC products (mostly to Racal).
     
     GROSS PROFIT.  Gross profit for the six months October 3, 1998 was
$14.9 million, an increase of $1.4 million, or 10.4%, from gross profit of
$13.5 million for the six months September 27, 1997. As a percentage of net
sales, gross profit decreased from 46.5% for the six months September 27, 1997
to 45.1% for the six months October 3, 1998.  The decrease in gross profit was
primarily attributable to unfavorable product mix.
     
     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  SG&A expenses were
$5.7 million for the six months ended October 3, 1998, an increase of
$1.4 million, or 32.6%, from SG&A expenses of $4.3 million for the six months
September 27, 1997.  SG&A expenses increased as a percentage of net sales from
14.8% for the six months September 27, 1997 to 17.4% for the six months October
3, 1998. The increase in dollars was primarily due to the inclusion of $0.5
million of such expenses from Power Ten, $0.2 million of nonrecurring
expenditures incurred in connection with the acquisition of Power Ten, $0.3
million of increased management fees and $0.4 million in other increases.
     
     RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES.  Research and
development and engineering expenses were $3.5 million for the six months
October 3, 1998, an increase of $0.7 million, or 25.0%, from research and
development and engineering expenses of $2.8 million for the six months
September 27, 1997. The increase was primarily due to a $0.3 million increase
in labor costs (both headcount and merit increases), the inclusion of $0.2
million of such expense from Power Ten and a $0.2 million decrease in customer-
funded research and development relative to overall research and development
and engineering expenses.  As a percentage of net sales, research and
development and engineering expense increased from 9.6% for the six months
September 27, 1997 to 10.5% for the six months October 3, 1998.
     
     AMORTIZATION EXPENSE.  Amortization expense increased to $1.1 million for
the six months October 3, 1998 from $0.7 million for the six months September
27, 1997.  This increase was due to four months of amortization expense
incurred in connection with the Company's acquisition of Power Ten.
     
     OPERATING INCOME.  Operating income was $4.6 million for the six months
October 3, 1998, a decrease of $1.2 million, or 20.7%, from operating income of
$5.8 million for the six months September 27, 1997. Operating income decreased
as a percentage of net sales from 19.8% for the six months September 27, 1997
to 14.0% for the six months October 3, 1998, due to the factors discussed
above.

INCOME TAXES
     
     Income taxes for the three months and six months ended October 3, 1998
contained a tax benefit of $412,000 and a tax provision of $119,000,
respectively.  The reason for the income tax change between periods was due to
goodwill not being a deductible expense for tax purposes.

                                       16

<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 used in the Company's operating activities for the six months 
ended October 3, 1998 was $0.3 million, a decrease of $2.4 million from cash 
flow of $2.1 million provided by operating activities in the six months ended 
September 27, 1997.  This decrease was primarily attributable to a $3.6 
million decrease in net income, a $2.7 million increase in accounts 
receivable, a $2.2 million increase in inventory, offset by a $1.6 million 
increase in accruals, a $1.5 million increase in accounts payable, a $1.4 
million increase in income taxes payable and $0.8 million of other favorable 
items.   The $4.3 million increase in cash interest payments, from $0.5 
million in the first half of fiscal 1998 to $4.8 million in the first half of 
fiscal 1999, is attributable to interest paid on (i) the $90 million in 
aggregate principal amount of the 9 7/8% Senior Notes issued by the Company 
on February 3, 1998 ($4.4 million) and (ii) the Company's term credit 
facility ($0.4 million) which it obtained on the same date.
     
     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 $482,000
and $222,000 for the  six months ended September 27, 1997 and the six months
ended October 3, 1998, 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 updates have been installed and tested, the business software
update is expected to be installed and tested before the end of fiscal 1999,
and personal computer hardware and software upgrades/replacements are being
evaluated for conversion by the end of June 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 ($10,000 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 

                                       17

<PAGE>

completed by September 1999.  A contingency plan has not been developed as the 
risk of conversion 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, the Company does not expect that the
year 2000 issue will materially affect its operations due to problems
encountered by its suppliers, customers or end-users for its products, although
no assurances can be given as to this.

                                       18

<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 3, 1998.
                                       
                                       19
                                       

<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:  November 13, 1998           By:  /s/Christopher W. Kelford
                                    -------------------------------------------
                                    Christopher W. Kelford
                                    Vice President--Finance, Chief Financial
                                     Officer, Treasurer and Assistant Secretary

                                       20