<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 September 30, 2000

                                       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                       92121-2294
       (Address of Principal Executive Offices)             (Zip Code)

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

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

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X  No
                                                     ---   ---

         As of November 13, 2000, the number of shares outstanding of the
Registrant's Common Stock was 4,600,000.

================================================================================

<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 and nine months ended
                         October 2, 1999 (unaudited) and September 30, 2000 (unaudited).............          3

                       Consolidated Balance Sheets as of January 1, 2000 and September 30, 2000
                         (unaudited)................................................................          4

                       Consolidated Statements of Cash Flows for the nine months ended October 2,
                         1999 (unaudited) and September 30, 2000 (unaudited)........................          5

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

Item 2             Management's Discussion and Analysis of Financial Condition and
                     Results of Operations..........................................................          10

Item 3             Quantitative and Qualitative Disclosures About Market Risks......................          13

PART II            OTHER INFORMATION

Item 6             Exhibits and Reports on Form 8-K.................................................          14
</TABLE>


                                       2
<PAGE>

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


                      ELGAR HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           (UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                    FOR THE THREE MONTHS ENDED    FOR THE NINE MONTHS ENDED
                                                    --------------------------    -------------------------
                                                    OCTOBER 2,   SEPTEMBER 30,    OCTOBER 2,  SEPTEMBER 30,
                                                      1999           2000           1999          2000
                                                    ----------   -------------    ----------  -------------
<S>                                                 <C>          <C>              <C>         <C>
Net sales .......................................   $ 14,125       $ 16,980       $ 42,355       $ 47,147
                                                                                                 --------
Cost of sales ...................................      8,419         10,086         24,612         27,214
                                                    --------       --------       --------       --------
Gross profit ....................................      5,706          6,894         17,743         19,933

Selling, general and administrative expense .....      2,467          2,828          7,754          8,268

Research and development and engineering
  expense........................................      1,430          1,678          4,450          5,092

Amortization expense ............................        609            608          1,823          1,826
                                                    ----------   -------------    ----------  -------------
Operating income ................................      1,200          1,780          3,716          4,747

Interest expense, net ...........................      2,594          2,650          7,881          7,899
                                                    ----------   -------------    ----------  -------------

Loss before income tax benefit ..................     (1,394)          (870)        (4,165)        (3,152)

Income tax benefit ..............................       (312)            --           (937)           (21)
                                                    ----------   -------------    ----------  -------------

Net loss ........................................   $ (1,082)      $   (870)      $ (3,228)      $ (3,131)
                                                    ==========   =============    ==========  =============
</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
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                               JANUARY 1, 2000  SEPTEMBER 30, 2000
                                                                               ---------------  ------------------
                                                                                                    (UNAUDITED)
<S>                                                                            <C>              <C>
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ...................................................   $   4,479          $     405
  Accounts receivable, net of allowance for doubtful accounts of $152 and
     $155, respectively........................................................       7,253              8,682
  Inventories .................................................................       7,623             10,599
  Deferred income taxes .......................................................         796                796
  Prepaids and other ..........................................................         984                385
                                                                               ---------------  ------------------
      Total current assets ....................................................      21,135             20,867
                                                                               ---------------  ------------------
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation and
   amortization of $3,093 and $3,773, respectively ............................       2,343              2,830
INTANGIBLE ASSETS, net of accumulated amortization of $8,076 and $10,452,
   respectively ...............................................................      34,414             32,038
DEFERRED INCOME TAXES, net of current portion .................................         653                653
                                                                               ---------------  ------------------
                                                                                  $  58,545          $  56,388
                                                                               ===============  ==================
                      LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
  Accounts payable ............................................................   $   1,748          $   3,072
  Accrued expenses ............................................................       7,665              5,653
  Current portion of long-term debt ...........................................       1,250              4,000
  Line of credit ..............................................................          --              2,100
                                                                               ---------------  ------------------
      Total current liabilities ...............................................      10,663             14,825
LONG-TERM DEBT, net of current portion ........................................      98,750             96,000
                                                                               ---------------  ------------------
         Total liabilities ....................................................     109,413            110,825
                                                                               ---------------  ------------------
SERIES A 10% CUMULATIVE REDEEMABLE PREFERRED STOCK,
   no par value, 20,000 shares authorized; 10,000 shares issued and
   outstanding.................................................................      10,707             11,762
                                                                               ---------------  ------------------

STOCKHOLDERS' DEFICIT:
  Series B 6% Cumulative Convertible Preferred Stock, no par value,
     5,000 shares authorized, issued and outstanding ..........................       5,000              5,000
  Series C 6% Cumulative Convertible Preferred Stock, no par value,
     4,000 shares authorized, issued and outstanding ..........................       4,000              4,000
  Common Stock, $.01 par value, 15,000,000 shares authorized; 4,600,000 shares
     issued and outstanding ...................................................          46                 46
  Additional paid-in capital ..................................................     (68,581)           (68,581)
  Accumulated deficit .........................................................      (2,040)            (6,664)
                                                                               ---------------  ------------------
                                                                                    (61,575)           (66,199)
                                                                               ---------------  ------------------
                                                                                  $  58,545          $  56,388
                                                                               ===============  ==================
</TABLE>


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


                                       4
<PAGE>

                      ELGAR HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                     FOR THE NINE MONTHS ENDED
                                                                                   -----------------------------
                                                                                   OCTOBER 2,      SEPTEMBER 30,
                                                                                     1999             2000
                                                                                   ---------       -------------
<S>                                                                                <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ..................................................................       $(3,228)         $(3,131)
  Adjustments to reconcile net loss to net cash used in operating activities:
      Amortization of intangibles ...........................................         2,374            2,376
      Depreciation and amortization on property, plant and equipment ........           670              655
      Loss (Gain)  on sale of property, plant and equipment .................            25              (16)
      (Increases) decreases in assets:
         Accounts receivable ................................................        (1,929)          (1,429)
         Inventories ........................................................         1,407           (2,976)
         Prepaids and other .................................................          (100)             599
      Increases (decreases) in liabilities:
         Accounts payable ...................................................          (848)           1,324
         Accrued liabilities ................................................           308             (224)
         Interest Payable ...................................................        (2,224)          (2,226)
                                                                                   ---------       -------------
  Net cash used in operating activities .....................................        (3,545)          (5,048)
                                                                                   ---------       -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment ................................          (501)          (1,126)
                                                                                   ---------       -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from preferred stock issuance ....................................         4,000               --
  (Repayments) borrowing on debt ............................................        (4,000)           2,100
  Payments under capital leases .............................................            (5)              --
                                                                                   ---------       -------------
  Net cash (used in) provided by financing activities .......................            (5)           2,100
                                                                                   ---------       -------------

NET DECREASE IN CASH AND CASH EQUIVALENTS ...................................        (4,051)          (4,074)
CASH AND CASH EQUIVALENTS, beginning of period ..............................         6,507            4,479
                                                                                   ---------       -------------
CASH AND CASH EQUIVALENTS, end of period ....................................       $ 2,456          $   405
                                                                                   =========       =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest ....................................................       $ 9,612          $ 9,567
  Cash received from income taxes ...........................................          (585)            (784)

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Series A preferred stock dividend-in-kind .................................       $   842          $   930
  Series B and Series C preferred stock dividend accrual ....................           358              438
  Accretion of discount on Series A preferred stock .........................           125              125
</TABLE>


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


                                       5
<PAGE>

1. COMPANY OPERATIONS

         Elgar Holdings, Inc., a Delaware corporation (the "Company"),
manufactures and sells programmable power and high power supply units through
its direct and indirect wholly owned subsidiaries, Elgar Electronics Corporation
("Elgar") and Power Ten, for semiconductors, telecommunications, measurement and
control and defense applications. The Company's primary sales are within the
United States and Europe.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   PRINCIPLES OF CONSOLIDATION/BASIS OF PRESENTATION

         The accompanying consolidated financial statements as of and for the
three and nine months ended September 30, 2000 include the accounts of the
Company, its wholly owned subsidiary, Elgar, and Elgar's wholly owned
subsidiary, Power Ten. All significant intercompany accounts and transactions
have been eliminated. These financial statements have been prepared in
accordance with generally accepted accounting principles and with the
instructions to Form 10-Q. The Company suggests that these financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-K for the fiscal year ended January 1, 2000. These
financial statements 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 December 31. Interim periods
include 13 or 14 weeks ending the last Saturday closest to the end of the
quarter. Results of operations for the three and nine months ended September 30,
2000 are not necessarily indicative of the results to be expected for the
Company's fiscal year ending December 30, 2000.

   USE OF ESTIMATES

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


                                       6
<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>

                                                JANUARY 1, 2000     SEPTEMBER 30, 2000
                                                ---------------     ------------------
                                                                       (UNAUDITED)
<S>                                             <C>                 <C>
Raw materials...............................          $3,789                $5,403
Work-in-process.............................           2,482                 4,063
Finished goods..............................           1,352                 1,133
                                                ---------------     ------------------
     Total..................................          $7,623               $10,599
                                                ===============     ==================
</TABLE>

   RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and for Hedging Activities." SFAS No. 133 requires that all
derivatives be recorded on the balance sheet as an asset or liability measured
at its fair value with changes in fair value recognized currently in earnings
unless hedge accounting criteria are met. In June 1999, the FASB issued SFAS No.
137 which deferred the implementation of SFAS No. 133 to all fiscal quarters of
fiscal years beginning after June 15, 2000. SFAS No. 133, as further amended in
June 2000 by SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities," establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as
either an asset or liability measured at its fair value. The Company will adopt
these standards on December 31, 2000 and record its interest rate swap at fair
market value. The Company has not yet determined what impact, the adoption of
SFAS No. 133, as amended by SFAS No. 138, will have on its consolidated
financial statements, results of operations or related disclosures thereto.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB 101). This bulletin draws on existing accounting rules and provides
specific guidance on how those accounting rules should be applied to revenue
recognition. In June 2000, the SEC issued SAB 101B which deferred the
implementation of SAB 101 to the fourth quarter for fiscal years beginning after
December 15, 1999. The Company believes that its accounting policies conform to
the current provisions of SAB 101.

         In July 2000, the Emerging Issues Task Force ("EITF") reached a
consensus on EITF 00-10, "Accounting for Shipping and Handling Fees and Costs."
EITF 00-10 requires that all amounts billed to a customer in a sales transaction
related to shipping and handling, if any, represent revenue to the vendor and
should be classified as revenue. There has been no consensus at this time on the
treatment for the related costs. This EITF will be effective in the fourth
quarter of fiscal years beginning after December 15, 1999. The Company has not
yet determined what impact, if any, the adoption of EITF 00-10 will have on its
consolidated financial statements, results of operations or related disclosures
thereto.

3. CONCENTRATIONS OF CREDIT RISK

         In the quarter ended September 30, 2000, sales to one customer
accounted for approximately 10% of the Company's net sales. In the quarter ended
October 2, 1999, sales to one customer accounted for approximately 21% of the
Company's net sales, and in the nine months ended October 2, 1999, sales


                                       7
<PAGE>

to two customers accounted for approximately 20% and 13% of the Company's net
sales. No other customers individually represented more than 10% of net sales in
the three months ended October 2, 1999 and September 30, 2000 or the nine months
ended October 2, 1999 and September 30, 2000. The Company performs ongoing
credit evaluation of its customers' financial condition. The Company maintains
reserves for potential credit losses.

4. CREDIT FACILITY AND CAPITAL CALL AGREEMENT

         On March 10, 2000, in anticipation of Elgar's noncompliance with the
EBITDA and fixed charge covenants for the quarter ended April 1, 2000
contained in Elgar's credit facility, Elgar, the Company and the banks under
the credit facility entered into a third amendment to the credit agreement
governing the facility. In addition to receiving waivers for any covenant
violations both before and after giving effect to the third amendment, the
third amendment (i) resets the fixed charge coverage ratio for the quarter
ended April 1, 2000 and for following quarters of fiscal 2000 and (ii) resets
the minimum EBITDA levels for the quarter ended January 1, 2000 and for the
following quarters of fiscal 2000. Elgar was in compliance with the covenants
contained in the amended credit agreement as of September 30, 2000 and
expects to be in compliance through the end of fiscal 2000. If the Company
were to determine that it would not be able to meet those debt covenants for
the quarter ending March 31, 2001 or any successive periods, the Company
would then seek to enter into negotiations with Bankers Trust, the agent
under its credit facility, to renegotiate the applicable covenants, as it did
for 2000. If any such renegotiations were required, as they may be for the
period ending March 31, 2001, although the Company believes that it would be
successful in renegotiating the relevant covenants, no assurances can be
given that it would be able to do so.

         The Company believes that funds available under its lines of credit and
anticipated funds from operations should be sufficient to satisfy its projected
working capital, debt service and capital expenditure needs in the normal course
of business. The Company is currently in compliance with its debt covenants.

         The Company has a $5.0 million working capital line of credit available
to it under the credit facility. At September 30, 2000, the Company had
outstanding $2,100,000 under the line of credit bearing interest at variable
rates. The line of credit expires on February 3, 2003.

         The Company, Elgar and the Company's majority shareholder are parties
to a capital call agreement with Bankers Trust Company, as agent (the "Capital
Call Agreement"). Pursuant to the terms of this agreement, the majority
shareholder agreed to contribute up to $5.0 million of capital to the Company
upon the occurrence of certain events, including the Company's failure to comply
with certain covenants contained in the capital call agreement. The Company was
in compliance with these covenants for the quarter ended September 30, 2000.

5. CONVERTIBLE PREFERRED STOCK

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

         In connection with entering into the first amendment to the credit
agreement, the Company's majority shareholder made a $4.0 million capital
contribution to the Company. In order to effectuate the contribution, the
Company issued 4,000 shares of Series C 6% Cumulative Convertible Preferred
Stock (the "Series C Preferred Stock") for cash proceeds of $4.0 million. This
offering, which was made in compliance with the subscription rights contained in
the Company's Shareholders Agreement, was completed on March 30, 1999.

         Dividends are payable to the holders of the Series B Preferred Stock
and Series C Preferred Stock at the annual rate per share of 6% times the sum of
(x) $1,000 and (y) accrued but unpaid dividends. For the series B Preferred
Stock, dividends are payable semi-annually on April 30 and


                                       8
<PAGE>

October 31. For the Series C Preferred Stock, dividends are payable
semi-annually on March 31 and September 30. These dividends are payable when and
if declared by the Board of Directors out of funds legally available therefor.
During the three months ended September 30, 2000, the Company accrued $84,210 of
dividends on the Series B Preferred Stock and $63,729 of dividends on the Series
C Preferred Stock.

6. SERIES A REDEEMABLE PREFERRED STOCK

     Dividends are payable quarterly to the holders of Series A cumulative
redeemable preferred stock at 10% per year. The dividends are payable in-kind
through January 31, 2001 and in cash thereafter except under certain
conditions as outlined in the indenture governing the Company's $90 million
of senior notes.

7. INTEREST RATE SWAP

         On June 22, 1998, the Company entered into an interest rate swap
agreement with a bank with a notional amount of $7.5 million. Under the swap
agreement, the Company is required to make a payment based on a fixed rate of
5.83% on each March 24, June 24, September 24 and December 24. This swap
agreement continues for the life of the related term loan agreement, with the
notional amounts of the swap decreasing as principal decreases on the related
loan agreement, terminating on June 25, 2001. The Company receives a floating
rate based on three-month LIBOR on the same dates as described above. In
connection with the swap agreement, the Company has included settlement income
of $18,000 and $33,000, respectively, in interest expense, net, in its
consolidated statements of operations for the three and nine months ended
September 30, 2000.

8. STOCK SPLIT

         In July 2000, the Board of Directors and the shareholders approved
(i) a two-for-one stock split of the Company's common stock, (ii) an increase
in the number of authorized shares of common stock from 5,000,000 to
15,000,000 and (iii) an amendment to the Company's stock option plan to
increase the number of shares of common stock reserved under the plan from
979,526 to 1,164,082. All references to shares included in the accompanying
financial statements and notes thereto have been restated to reflect the two
for one stock split.

                                       9
<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 ended October 2,
1999 and September 30, 2000:
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED             NINE MONTHS ENDED
                                              --------------------------    --------------------------
                                              OCTOBER 2,   SEPTEMBER 30,    OCTOBER 2,   SEPTEMBER 30,
                                                1999           2000           1999           2000
                                              ----------   -------------    ----------   -------------
<S>                                           <C>          <C>              <C>          <C>
Net sales .................................     100.0%         100.0%         100.0%         100.0%
Cost of sales .............................      59.6           59.4           58.1           57.7
                                              ----------   -------------    ----------   -------------
    Gross profit ..........................      40.4           40.6           41.9           42.3
Selling, general and administrative
  expense..................................      17.5           16.6           18.3           17.5
                                                                                              17.5
Research and development and engineering
   expenses ...............................      10.1            9.9           10.5           10.8
Amortization expense ......................       4.3            3.6            4.3            3.9
                                              ----------   -------------    ----------   -------------
    Operating income ......................       8.5%          10.5%           8.8%          10.1%
                                              ==========   =============    ==========   =============
</TABLE>


COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE MONTHS
ENDED OCTOBER 2, 1999

         NET SALES. Net sales for the quarter ended September 30, 2000 were
$17.0 million, an increase of $2.9 million, or 20.6%, from net sales of $14.1
million for the quarter ended October 2, 1999. This increase was mainly due to
an increase in sales of programmable DC power products, including sales of
Sorensen and Power Ten products and sales to Racal, partially offset by a
decrease in sales of Space Systems and CASS program products.

         GROSS PROFIT. Gross profit for the quarter ended September 30, 2000 was
$6.9 million, an increase of $1.2 million, or 21.1%, from gross profit of $5.7
million for the quarter ended October 2, 1999. As a percentage of net sales,
gross profit increased from 40.4% for the quarter ended October 2, 1999 to 40.6%
for the quarter ended September 30, 2000.


                                       10
<PAGE>

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses were $2.8 million for the quarter ended
September 30, 2000, an increase of $0.3 million, or 12.0%, from SG&A expenses of
$2.5 million for the quarter ended October 2, 1999. SG&A expenses decreased as a
percentage of net sales from 17.5% for the quarter ended October 2, 1999 to
16.6% for the quarter ended September 30, 2000. The increase in SG&A dollars was
primarily due to higher commissions, increased compensation and higher
advertising expenses in the quarter ended September 30, 2000 compared to the
quarter ended October 2, 1999.

         RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and
development and engineering expenses were $1.7 million for the quarter ended
September 30, 2000, an increase of $0.3 million, or 21.4%, from research and
development and engineering expenses of $1.4 million for the quarter ended
October 2, 1999. As a percentage of net sales, research and development and
engineering expense decreased from 10.1% for the quarter ended October 2, 1999
to 9.9% for the quarter ended September 30, 2000. The increase in dollars was
mainly due to less customer-funded research and development expense and higher
compensation costs for the quarter ended September 30, 2000 as compared to the
quarter ended October 2, 1999.

         AMORTIZATION EXPENSE. Amortization expense was $0.6 million for each of
the quarters ended September 30, 2000 and October 2, 1999.

         OPERATING INCOME. Operating income was $1.8 million for the quarter
ended September 30, 2000, an increase of $0.6 million, or 50.0%, from operating
income of $1.2 million for the quarter ended October 2, 1999. Operating income
increased as a percentage of net sales from 8.5% for the quarter ended October
2, 1999 to 10.5% for the quarter ended September 30, 2000, due to the factors
discussed above.

         INCOME TAXES. Income taxes for the three months ended October 2, 1999
contained a tax benefit of $0.3 million, compared to zero tax benefit for the
three months ended September 30, 2000. For the quarter ended October 2, 1999,
the Company had generated losses that resulted in carryback benefits that were
reflected in income. Losses generated in the quarter ended September 30, 2000 do
not have a carryback benefit and thus the benefit has not been recognized in
income as its realization is uncertain.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE NINE MONTHS ENDED
OCTOBER 2, 1999.

         NET SALES. Net sales for the nine months ended September 30, 2000 were
$47.1 million, an increase of $4.7 million, or 11.1%, from net sales of $42.4
million for the nine months ended October 2, 1999. This increase was mainly due
to an increase in sales of programmable DC power products, including sales of
Sorensen and Power Ten products and sales to Racal, partially offset by a
decrease in sales of Space Systems and CASS program products.

         GROSS PROFIT. Gross profit for the nine months ended September 30, 2000
was $19.9 million, an increase of $2.2 million, or 12.4%, from gross profit of
$17.7 million for the nine months ended October 2, 1999. As a percentage of net
sales, gross profit increased from 41.9% for the nine months ended October 2,
1999 to 42.3% for the nine months ended September 30, 2000 due to efficiencies
resulting from increasing sales volumes.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $8.3
million for the nine months ended September 30, 2000, an increase of $0.5
million, or 6.4%, from SG&A expenses of $7.8 million for the nine months ended
October 2, 1999. SG&A expenses decreased as a percentage of net sales from 18.3%
for the nine months ended October 2, 1999 to 17.5% for the nine months ended


                                       11
<PAGE>

September 30, 2000. The dollar increase was primarily due to higher
commissions, higher advertising expenses and higher sales and marketing
expenses in the nine months ended September 30, 2000 compared to the nine
months ended October 2, 1999.

         RESEARCH AND DEVELOPMENT AND ENGINEERING EXPENSES. Research and
development and engineering expenses were $5.1 million for the nine months ended
September 30, 2000, an increase of $0.6 million, or 13.3%, from research and
development and engineering expenses of $4.5 million for the nine months ended
October 2, 1999. As a percentage of net sales, research and development and
engineering expense increased from 10.5% for the nine months ended October 2,
1999 to 10.8% for the nine months ended September 30, 2000. The increase in both
dollars and as a percentage of net sales was mainly due to higher compensation
expense and an increase in the cost of engineering materials for the nine months
ended September 30, 2000 as compared to the nine months ended October 2, 1999.

         AMORTIZATION EXPENSE. Amortization expense was $1.8 million for each of
the nine months ended September 30, 2000 and October 2, 1999.

         OPERATING INCOME. Operating income was $4.7 million for the nine months
ended September 30, 2000, an increase of $1.0 million, or 27.0%, from operating
income of $3.7 million for the nine months ended October 2, 1999. Operating
income increased as a percentage of net sales from 8.8% for the nine months
ended October 2, 1999 to 10.1% for the nine months ended September 30, 2000, due
to the factors discussed above.

         INCOME TAXES. Income taxes for the nine months ended October 2, 1999
contained a tax benefit of $0.9 million, compared to a tax benefit of
approximately $21,000 for the nine months ended September 30, 2000. For the
nine months ended October 2, 1999, the Company generated losses that resulted
in carryback benefits that were reflected in income. Losses generated in the
nine months ended September 30, 2000 do not have a carryback benefit and thus
have not been recognized in income as its realization is uncertain.

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, a revolving line of
credit and the sale of convertible preferred stock to its stockholders.

         On each of December 31, 2000 and March 31, 2001, the Company is
required to make $875,000 principal payments on its outstanding term loan
under the credit facility. In addition, on February 1, 2001 an interest
payment of approximately $4.5 million is due to the holders of the Company's
senior notes.

         The Company believes that funds available under its line of credit
and anticipated funds from operations should be sufficient to satisfy the
Company's projected working capital, debt service and capital expenditure
needs in the normal course of business. The Company is currently in
compliance with the debt covenants contained in its credit facility and
expects to be in compliance through the end of 2000. If the Company were to
determine that it would not be able to meet those debt covenants for the
quarter ending March 31, 2001 or any successive periods, the Company would
then seek to enter into negotiations with Bankers Trust, the agent under its
credit facility, to renegotiate the applicable covenants, as it did for 2000.
If any such renegotiations were required, as they may be for the period
ending March 31, 2001, although the Company believes that it would be
successful in renegotiating the relevant covenants, no assurances can be
given that it would be able to do so.

         SOURCES OF CAPITAL. The Company anticipates that its principal
sources of cash will be cash flow from operations together with amounts
available under the Company's line of credit with Bankers Trust, which
provides for borrowings of up to $5,000,000. As of September 30, 2000, the
Company has utilized $2.1 million of the line of credit leaving $2.9 million
available for other cash flow needs.

                                       12
<PAGE>

         CAPITAL EXPENDITURES. The Company's capital expenditures were
$1,126,000 and $501,000 in the nine months ended September 30, 2000 and nine
months ending October 2, 1999, respectively. The Company's capital expenditures
were $310,000 and $153,000 in the three months ended September 30, 2000 and
three months ending October 2, 1999, respectively.

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         We have only limited involvement in derivative financial instruments.
We do not hold or issue derivative financial instruments for trading purposes.
As of September 30, 2000, $10,000,000 of outstanding borrowings under our credit
facility are at variable interest rates and we are thus subject to market risk
resulting from interest rate fluctuations. We enter into interest rate swaps in
part to alter interest rate exposures. Interest rate swaps allow us to raise
long-term borrowings at floating rates and effectively swap them into fixed
rates that are lower than those available to us if fixed-rate borrowings were
made directly. Under interest rate swaps, we agree with another party to
exchange, at specified intervals, the difference between fixed-rate and
floating-rate amounts calculated by reference to an agreed notional principal
amount. As of September 30, 2000, all but $2,500,000 of our long-term bank debt
was covered by this swap arrangement. Thus, our exposure with respect to upward
movements in interest rates is this portion of our bank debt.

         In addition, we are exposed to market risks related to fluctuations in
interest rates on our $90,000,000 of senior notes outstanding at September 30,
2000. For fixed rate debt such as the senior notes, changes in interest rates
generally affect the fair value of the debt instrument. We do not have an
obligation to repay the senior notes prior to maturity in February 2008 and, as
a result, interest-rate risk and changes in fair value should not have a
significant impact on us.

         The tables below provide information as of September 30, 2000 about our
derivative instruments and other financial instruments that are sensitive to
changes in interest rates.

<TABLE>
<CAPTION>
LONG TERM BANK DEBT (VARIABLE RATE)
<S>                                        <C>
Principal amount                           $10,000,000 (1)
Variable interest rate                     9.625% (2)
Maturity--loan                             February 3, 2003
Remaining principal payments:
        2000                                    $375,000
        2001                                  $3,625,000
        2002                                  $4,000,000
        2003                                  $2,000,000
</TABLE>
-------------------
(1) $7,500,000 of this amount is covered by the interest-rate swap arrangement
    described below.
(2) Renewals are based on the Eurodollar Rate plus 2.75%.

<TABLE>
<CAPTION>
REVOLVING BANK DEBT  (VARIABLE RATE)
<S>                                        <C>
Line of credit limit                       $5,000,000
Principal amount outstanding               $2,100,000
Variable interest rate                     (1)
</TABLE>
-------------------
(1) Renewals are based on the Eurodollar Rate plus 2.75% or current Base Rate.


                                       13
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE SWAP ARRANGEMENT (FIXED RATE)
<S>                                            <C>
Parties                                        The Company (fixed rate payor) and Bankers Trust Company
                                               (floating rate payor)
Notional amount                                $7,500,000
Fixed interest rate                            5.83% (1)
Floating interest rate                         6.66% for the current period (2)
Swap interest (credit)                         $(32,962) (3)
Commencement date                              June 24, 1998
Maturity date                                  June 25, 2001
</TABLE>
-------------------
(1)   As the fixed interest rate payor, the Company is required to pay a fixed
      rate of 5.83% per annum on the $7,500,000 notional amount, payable
      quarterly on each March 24, June 24, September 24 and December 24.
(2)   As the floating rate payor, Bankers Trust Company is required to pay a
      floating rate of interest on the $7,500,000 notional amount, based on the
      three-month London Interbank Offering Rate (LIBOR), payable quarterly on
      each March 24, June 24, September 24 and December 24.
(3)   In connection with the swap agreement, the Company recorded $33,000 as a
      credit to interest expense for the nine months ended September 30, 2000.

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

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 September 30, 2000.


                                       14
<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 14, 2000      By:   /s/ CHRISTOPHER W. KELFORD
                                     --------------------------
                                     Christopher W. Kelford
                                     Vice President--Finance, Chief Financial
                                     Officer, Treasurer and Assistant Secretary