<PAGE>

                   SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON D.C.  20549

                              FORM 10-QSB

(Mark One)

/X/  Quarterly report under Section 13 or 15(d) of the Securities Exchange 
     Act of 1934.

For the quarterly period ended March 31, 1998.

/ /  Transition report pursuant to Section 13 or 15(d) of the Securities 
     Exchange Act of 1934.

For the transition period from ______________ to ______________.

Commission File No.   0-1921
                    ----------

                           POWER DESIGNS INC.
------------------------------------------------------------------------
       (Name of Small Business Issuer as specified in its charter)

              Delaware                                11-1708714
     -------------------------------        -------------------------------
     (State or other jurisdiction of        (I.R.S. Employer Identification
      incorporation or organization)                    Number)

14 Commerce Drive, Danbury, Connecticut                 06810
---------------------------------------               ----------
(Address of principal executive offices)              (Zip Code)

                             (203) 748-7001
------------------------------------------------------------------------
             (Issuer's Telephone Number, Including Area Code)


------------------------------------------------------------------------
           (Former name, former address and former fiscal year, 
                       if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15 (d) of the Exchange Act during the past 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                        No   X
         -----                     -----

            APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


                                     1
<PAGE>

               PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be 
filed by Sections 12, 13 and 15(d) of the Securities Exchange Act of 1934 
subsequent to the distribution of securities under a plan confirmed by a 
court.

     Yes                        No   X
         -----                     -----

                APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practicable date.

     2,391,493 as of November 17, 1998

Transitional Small Business Issuer Format (check one):

     Yes                        No   X
         -----                     -----


                                      2
<PAGE>

                             POWER DESIGNS, INC.
         FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

                                   INDEX
<TABLE>
<CAPTION>
                                                                    PAGE NO.
                                                                    --------
<S>                                                                 <C>
PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

         Condensed Consolidated Balance Sheet as of 
         March 31, 1998 and 1997 ..................................      5

         Condensed Consolidated Statement of Operations for
         the three and nine months ended March 31, 1998 and 1997 ..      6

         Condensed Consolidated Statement of Changes in 
         Stockholders' Deficit for the three and nine months 
         ended March 31, 1998 and 1997 ............................      7

         Condensed Consolidated Statement of Cash Flows for the 
         three and nine months ended March 31, 1998 and 1997.......      8

         Notes to Condensed Consolidated Financial Statements .....      9

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
         CONDITIONS AND RESULTS OF OPERATIONS .....................     13

PART II - OTHER INFORMATION

Item 3.  DEFAULTS ON SENIOR SECURITIES ............................     16

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K .........................     17

Signatures ........................................................     18
</TABLE>


                                      3
<PAGE>

                       PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements


                                      4



<PAGE>

                              POWER DESIGNS, INC.

                    Condensed Consolidated Balance Sheet
                                 (Unaudited)

                            March 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                        1998            1997
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
ASSETS

Current assets:
  Cash                                                                   $18,616       ($121,295)
  Accounts receivable                                                    298,085         989,401
  Inventories                                                            860,367       1,949,898
  Prepaid expenses                                                        16,778          15,740
                                                                     -----------      ----------
    Total current assets                                               1,193,846       2,833,744
                                                                     -----------      ----------
Property and equipment, less accumulated depreciation                    721,089         644,276
                                                                     -----------      ----------
Other assets:
  Investment in partnership                                               22,041          22,041
  Security deposits                                                          -            86,366
  Goodwill                                                                   -         2,832,496
  Financing fees and organizational costs                                    -           320,081
                                                                     -----------      ----------
                                                                         $22,041       3,260,984
                                                                     -----------      ----------
                                                                      $1,936,976      $6,739,004
                                                                     -----------      ----------
                                                                     -----------      ----------

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable and accrued expenses                                  $99,351      $2,722,018
  Note payable - DIP                                                     245,000             -
  Seller financing                                                           -         2,550,000
  Payables related to 1994 reorganization,
    including accrued interest                                               -           134,124
                                                                     -----------      ----------
  Total current liabilities                                              344,351       5,406,142
                                                                     -----------      ----------
Long-term debt:
  Notes payable - affiliates                                                 -         5,294,351
  Liabilities subject to compromise                                   14,765,560             -
                                                                     -----------      ----------
    Total long term debt                                              14,765,560       5,294,351

    Total liabilities                                                 15,109,911      10,700,493
                                                                     -----------      ----------
Stockholders' deficit
  Preferred stock, $.01 par value, 1,000,000 shares authorized;            3,167           3,167
  316,743 shares issued and outstanding at March 31, 1998 and 1997
  Common stock, $.0001 par value, 10,000,000 shares authorized               240             240
  2,391,493 shares issued and outstanding at March 31, 1998
  and 1997
  Additional paid-in capital                                           1,382,807       1,079,229
  Accumulated deficit                                                (14,559,149)     (5,044,125)
                                                                     -----------      ----------
    Total stockholders' deficit                                      (13,172,935)     (3,961,489)
                                                                     -----------      ----------
                                                                      $1,936,976      $6,739,004
                                                                     -----------      ----------
                                                                     -----------      ----------
</TABLE>

                                       5


<PAGE>

                            POWER DESIGNS, INC.

               Condensed Consolidated Statement of Operations
                                (Unaudited)

         For The Three and Nine Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
                                                   3 months ended   3 months ended   9 months ended   9 months ended
                                                   March 31, 1998   March 31, 1997   March 31, 1998   March 31, 1997
                                                   --------------   --------------   --------------   --------------
<S>                                                <C>              <C>              <C>              <C>
Net Sales                                             $523,907        $1,090,086       $1,760,746       $2,419,820
Cost of Sales                                          434,830         1,080,010        3,035,123        2,157,208
                                                     ---------       -----------      -----------      -----------
Gross profit                                            89,077            10,076       (1,274,377)         262,612

Selling, general and admin. expense                    422,729         1,335,805        5,047,791        2,775,117
                                                     ---------       -----------      -----------      -----------
Net income (loss) before other income (expense)       (333,652)       (1,325,729)      (6,322,168)      (2,512,505)
                                                     ---------       -----------      -----------      -----------
Other income (expense):
  Non-Operating income                                   8,260             1,820           11,931            3,320
  Interest expense                                    (115,889)         (259,042)      (1,067,818)        (509,476)
                                                     ---------       -----------      -----------      -----------
                                                      (107,629)         (257,222)      (1,055,887)        (506,156)
                                                     ---------       -----------      -----------      -----------
Net income (loss) before reorganization items         (441,281)       (1,582,951)      (7,378,055)      (3,018,661)
                                                     ---------       -----------      -----------      -----------

Reorganization items:
  Professional fees                                     25,000               -             25,000              -
  U.S. Trustee Fees                                      4,000               -              4,000              -
                                                     ---------       -----------      -----------      -----------
                                                        29,000               -             29,000              -
Net income (loss)                                    ($470,281)      ($1,582,951)     ($7,407,055)     ($3,018,661)
                                                     ---------       -----------      -----------      -----------
                                                     ---------       -----------      -----------      -----------
Net loss per share                                      ($0.20)           ($0.66)          ($3.10)          ($1.26)
                                                     ---------       -----------      -----------      -----------
                                                     ---------       -----------      -----------      -----------
</TABLE>


                                       6

<PAGE>

                             POWER DESIGNS, INC.

                     Condensed Consolidated Statement of 
                      Changes in Stockholders' Deficit
                                 (Unaudited)

          For The Three and Nine Months Ended March 31, 1998 and 1997

<TABLE>
<CAPTION>
                                Shares        Shares
                               Preferred      Common                             Additional
                                 Stock         Stock      Preferred    Common      Paid In
                              Outstanding   Outstanding     Stock       Stock      Capital       Deficit         Total
                              -----------   -----------   ---------    ------    ----------    ------------   ------------
<S>                           <C>           <C>           <C>          <C>       <C>            <C>            <C>
Balance, June 30, 1996                0      2,391,493         $0       $240       $820,732     ($2,025,464)   ($1,204,492)
Dividends accrued                     -              -          -          -         (4,826)              -         (4,826)
Stock issuance                  316,743              -      3,167          -        268,687               -        271,854
Net loss                              -              -          -          -              -      (1,435,710)    (1,435,710)
Balance, December 31, 1996      316,743      2,391,493      3,167        240      1,084,593      (3,461,174)    (2,373,174)
Divedends accrued                     -              -          -          -         (5,364)              -         (5,364)
Net loss                              -              -          -          -              -      (1,582,951)    (1,582,951)
                                -------      ---------     ------       ----     ----------    ------------   ------------
Balance, March 31, 1997         316,743      2,391,493     $3,167       $240     $1,079,229     ($5,044,125)   ($3,961,489)
                                -------      ---------     ------       ----     ----------    ------------   ------------
                                -------      ---------     ------       ----     ----------    ------------   ------------

Balance, June 30, 1997          316,743      2,391,493     $3,167       $240     $1,382,807     ($7,152,094)   ($5,765,880)
Net loss                              -              -          -          -              -      (6,936,774)    (6,936,774)
Balance, December 31, 1997      316,743      2,391,493      3,167        240      1,382,807     (14,088,868)   (12,702,654)
Net loss                              -              -          -          -               -       (470,281)      (470,281)
                                -------      ---------     ------       ----     ----------    ------------   ------------
Balance, March 31, 1998         316,743      2,391,493     $3,167       $240     $1,382,807    ($14,559,149)  ($13,172,935)
                                -------      ---------     ------       ----     ----------    ------------   ------------
                                -------      ---------     ------       ----     ----------    ------------   ------------
</TABLE>


                                       7

<PAGE>

                          POWER DESIGNS, INC.

             Condensed Consolidated Statement of Cash Flows
                              (Unaudited)

        For The Three and Nine Months Ended March 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                   3 months ended   3 months ended   9 months ended   9 months ended
                                                   March 31, 1998   March 31, 1997   March 31, 1998   March 31, 1997
                                                   --------------   --------------   --------------   --------------
<S>                                                <C>              <C>              <C>              <C>
Cash flows from operating activities:
  Net loss                                           ($470,282)      ($1,582,951)     ($7,407,055)     ($3,018,661)
  Adjustments to reconcile net loss to net cash 
    used in operating activities
      Depreciation and amortization                     43,496           148,956        3,070,072          223,209
      (Increase) decrease in:
      Accounts receivable                              (27,738)          110,914          431,056         (374,005)
      Inventories                                       20,312          (680,340)       1,031,881         (824,183)
      Prepaid Expenses                                 (11,495)          (10,169)         152,148          (15,740)
      Other assets                                       1,754          (186,106)          91,953         (281,270)
    Increase (decrease) in:
      Accounts payable and accrued expenses            357,699         1,267,331          983,715        2,060,074
      Payables related to reorganization                     -            (9,485)          86,460         (127,531)
                                                     ---------       -----------      -----------      -----------
Cash flows used in operating activities                (86,254)         (941,850)      (1,559,770)      (2,358,107)
                                                     ---------       -----------      -----------      -----------
Cash flows used in investing activities:
      Purchase of property and equipment                     -          (144,066)        (203,599)        (180,853)
                                                     ---------       -----------      -----------      -----------
Cash flows from (used in) financing activities:
      Advances from (repayments to) affiliates        (140,117)        1,181,365        1,448,983        3,603,325
      Proceeds from note payable                       245,000                 -          245,000                -
      Acquisition of Penril net assets                       -          (200,000)         (10,000)      (1,936,558)
      Principal payments on capital leases                   -                 -           89,103                -
      Cash received from long term financing                 -                 -                -          495,178
      Cash received from stock issuance net of
        declared dividends                                   -            (5,366)               -          261,660
                                                     ---------       -----------      -----------      -----------
Cash flows provided by financing activities            104,883           975,999        1,773,086        2,423,605
                                                     ---------       -----------      -----------      -----------
Net increase (decrease) in cash                         18,629          (109,917)           9,717         (115,355)

Cash (overdraft), beginning of period                      (13)          (11,378)           8,899           (5,940)
                                                     ---------       -----------      -----------      -----------
Cash (overdraft), end of period                        $18,616         ($121,295)         $18,616        ($121,295)
                                                     ---------       -----------      -----------      -----------
                                                     ---------       -----------      -----------      -----------
</TABLE>

                                       8


<PAGE>


POWER DESIGNS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 and 1997
----------------------------------------------------------------------------

NOTE 1.  BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have been 
prepared by Power Designs, Inc. (the "Company"), without audit, pursuant to 
the rules and regulations of the Securities and Exchange Commission 
applicable to a going concern. These rules assume that assets will be 
realized and liabilities will be discharged in the normal course of business. 
The Company and its wholly-owned subsidiary filed petitions for relief under 
Chapter 11 of the United States Bankruptcy Code ("Chapter 11") on January 22, 
1998 (the "Filing"). The Debtors are presently operating their business as 
debtors-in-possession subject to the jurisdiction of the United States 
Bankruptcy Court for the Bridgeport District of Connecticut (the "Bankruptcy 
Court").

Certain information and footnote disclosure normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles have been condensed or omitted pursuant to such rules and 
regulations, although management of the Company believes that the disclosures 
are adequate to make the information presented not misleading. These 
condensed consolidated financial statements should be read in conjunction 
with the notes thereto. In the opinion of the management of the Company, the 
condensed consolidated financial statements include all adjustments, 
consisting of only normal recurring adjustments, necessary to fairly present 
the results for the interim periods to which these financial statements 
relate.

The results of operations for the nine months ended March 31, 1998 are not 
necessarily indicative of the results to be expected for the full year.

The consolidated statements of operations for the periods ended March 31, 
1998 and March 31, 1997 include the operations of PDIXF Acquisition 
Corporation for the periods July 1, 1997 through March 31, 1998 and October 
11, 1996 through March 31, 1997 respectively.

Certain reclassifications have been made to the prior period's financial 
statements to conform with classifications used in the current period.

NOTE 2. - PETITION FOR RELIEF UNDER CHAPTER 11

In the Chapter 11 case, substantially all liabilities as of the date of the 
Filing are subject to resolution under a plan of reorganization to be voted 
upon by the Debtors' creditors and stockholders and confirmed by the 
Bankruptcy Court. Schedules have been filed by the Debtors with the 
Bankruptcy Court setting forth the assets and liabilities of the Debtors as 
of the Filing as shown by the Debtors' accounting records. Differences 
between amounts shown by the Debtors and claims filed by creditors will be 
investigated and reconciled.


                                      9


<PAGE>

The amount and settlement terms for such disputed liabilities are subject to 
allowance by the Bankruptcy Court. Ultimately the adjustment of the total 
liabilities of the Debtors remains subject to a Bankruptcy Court approved 
plan of reorganization, and, accordingly, the amount of such liabilities is 
not presently determinable.

Under the Bankruptcy Code, the Debtors may elect to assume or reject real 
estate leases, employment contracts, personal property leases, service 
contracts and other executory pre-petition contracts, subject to Bankruptcy 
Court approval. The Debtors continue to review leases and contracts, as well 
as other operational changes, and cannot presently determine or reasonably 
estimate the ultimate outcome of, or liability resulting from, this review. 
Claims secured against the Debtors' assets ("secured claims") also are 
stayed, although the holders of such claims have the right to move the Court 
for relief from the stay. Secured claims are secured primarily by liens on 
the Debtor's machinery, equipment and accounts receivable.

NOTE 3.  LIABILITIES SUBJECT TO COMPROMISE

Liabilities subject to compromise are as follows:

<TABLE>
<S>                                                           <C>
Notes payable - affiliates                                    $10,219,195 (a)
Accounts payable and accrued expenses                           3,367,779 (b)
Seller financing                                                  990,000 (a)
Payables related to 1994 reorganization including
  accrued interest                                                188,586
                                                              -----------
Total                                                         $14,765,560
</TABLE>

(a)  Notes payable and seller financing include secured debt, which should be 
     considered, due to various factors, subject to compromise. The Plan of 
     Reorganization filed May 12, 1998, (copy attached) provides for allowed 
     secured claims of $2,400,000 against outstanding secured notes of 
     $9,092,969. As a result of this compromise, the Debtor has discontinued 
     accruing interest on these, as well as other obligations. Contractual 
     interest on those secured obligations amounts to $320,938 in excess of 
     reported expenses. Refer to Note 5, for a discussion of the credit 
     arrangements entered into subsequent to the Chapter 11 filings.

(b)  The Debtor received approval from the bankruptcy Court to pay or 
     otherwise honor certain of its pre-petition obligations, including 
     employee wages.  To date, approximately $30,250 of these arrearages have 
     been liquidated.


                                     10
<PAGE>

NOTE 4.  OPERATING CASH RECEIPTS AND PAYMENTS

The following schedule depicts the operating cash receipts and payments for 
the post-petition period of January 22, 1998 through March 31, 1998.

<TABLE>
<S>                                                             <C>
Cash flows from operating activities:
  Cash received from customers                                  $ 162,441
  Cash paid to suppliers and employees                           (389,384)
  Interest paid                                                    (2,744)
                                                                ---------
    Net cash provided by operating activities before
      reorganization items                                       (229,687)
                                                                ---------
  Operating cash flows from reorganization items:
  Professional fees paid for services in connection with
    the Chapter 11 proceeding                                     (25,000)
                                                                ---------
    Net cash (used in) reorganization items                       (25,000)
                                                                ---------
    Net cash provided by (used in) operating activities          (254,687)
                                                                ---------
Cash flows from investing activities:
  Distributions from limited partnership                            1,000
                                                                ---------
  Net cash provided by investing activities                         1,000
                                                                ---------
Cash flows from financing activities:
  Net borrowings under post-petition short-term credit
    facility                                                      448,670
  Principal payments on pre-petition debt                        (174,390)

    Net cash provided by financing activities                     274,280

    Net increase in cash and cash equivalents                      20,593

Cash and cash equivalents
  Beginning                                                        (1,977)
                                                                ---------
  Ending                                                         $ 18,616
                                                                ---------
</TABLE>

NOTE 5.  SIGNIFICANT EVENTS

During the third quarter of fiscal 1998, the company's net loss before other 
income and expense was ($333,652). A significant portion of the loss related 
to carrying charges for the three-week period prior to the bankruptcy filing. 
This improvement over the third quarter fiscal 1997 net loss of ($1,325,729) 
is primarily due to the suspension of the uninterruptible power supply/power 
line conditioner ("UPS/PLC") product line, improved


                                     11
<PAGE>

manufacturing yields, and enhanced product margins. An impairment of 
long-lived assets recognized in the second quarter of fiscal 1998 resulted in 
a complete elimination of amortization expense for this third quarter.

Selling, general and administrative expenses were $422,729 for the three 
months ended March 31, 1998. The net profit (loss) for the three months ended 
March 31, 1998 is ($470,281).

In January of 1998 pursuant to a court order, the issuer, as 
debtor-in-possession, entered into a financing agreement with Venture 
Partners Ltd., as agent, to borrow working capital, up to a maximum of 
$400,000.  The terms of this agreement call for interest at 20% and a term of 
120 days. This debt is collateralized firstly by the machinery and equipment 
of the issuer, and secondarily by its accounts receivable.  A total of 
$245,000 is presently outstanding on this loan. As of this date the term of 
the note has expired placing the borrower in default. At this time, no demand 
for repayment has been received by the Company.

Similarly, in February of 1998 the issuer, pursuant to a court order, entered 
into a receivable factoring agreement with Porter Capital Corporation 
("Porter"), whereby trade receivables are sold to Porter at 94% of face 
value.  A 4% and 2% rebate is returned to the issuer if the receivable is 
collected within 60 and 90 days respectively.  Fees to Porter include a 
minimum of 2% of the face amount of the receivables factored, and an annual 
interest rate of prime on the outstanding amount advanced.  Collateral for 
this obligation comprises the factored receivables, with a secondary lien on 
the machinery and equipment of the issuer. In September of 1998 the before 
mentioned agreement was modified to a minimum fee of 2.5% for receivables 
collected within 60 days and an additional 1% for each additional 15 days 
outstanding to a maximum of 90 days.

During the months of April and May of 1998 the Company liquidated $30,250 of 
its pre-petition labor arrearages. As of this date the only remaining 
pre-petition labor arrearage is that of certain officers and accrued vacation 
pay for all former employees that did not return to work. During this time 
period the Company was in discussions with the U.S. Department of Labor 
regarding this matter. The Plan of Reorganization addresses the liquidation 
of the priority portion of these pre-petition liabilities over a period of 
eight months.

On May 12, 1998 a Plan of Reorganization was filed by the debtors with the 
Office of the U.S. Trustee. Negotiations pertaining to the specifics of the 
Plan of Reorganization among the creditors committee(s) and the debtor are 
progressing.


                                       12
<PAGE>

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

     Current Developments

     During the last two weeks of December 1997, the Company's employees were 
furloughed for the holidays. During this time the company was unable to 
obtain financing to continue operations at the expiration of the holiday 
furlough. The furlough was extended while the company arranged for the filing 
of its Chapter 11 proceedings. On January 22, 1998, the Company and its 
wholly-owned subsidiary, PDIXF Acquisition Corporation, filed voluntary 
petitions in bankruptcy court under Chapter 11 of the United States 
Bankruptcy Act. On January 26, 1998 the company reopened for business as 
Debtors in Possession under new management. Since January 26, 1998 the 
company has been in the sole business of manufacturing its three core product 
lines: military power supply products, variable autotransformers, and 
laboratory power supplies.

     During the third quarter of fiscal year 1998 the company experienced 
manufacturing and shipping delays due to material procurement issues 
primarily related to the lack of liquidity. Since the initial months 
following the Filing, the company has successfully resolved issues of 
material procurement with key suppliers and reinstated deteriorating 
relationships with distributors and customers. Liquidity has been improved by 
increased shipping levels and a concentrated effort on credit and collection 
issues with all customers.

     During the third quarter of fiscal year 1998 the company also initiated 
an effort to relocate from its thirty thousand square foot facility, to a 
facility one half the size. As of this date it has been determined that a 
down sizing and subletting of the current facility would be a more practical 
approach. A local real estate brokerage firm has been retained to sublet the 
existing facility.

     On May 12, 1998 the Company and its wholly-owned subsidiary, PDIXF 
Acquisition Corporation, filed a Plan of Reorganization with the Office of 
the U.S. Trustee.

     The Plan is a proposal of PDI and PDIXF to their Creditors and holders 
of Equity Interests. The Plan is the product of discussions with the Debtors' 
senior secured creditor, Inverness, which has agreed to support the Plan. The 
Plan undertakes to resolve all secured claims, administrative claims, 
priority claims, unsecured claims and equity interests. The Debtors believe 
that the distributions to be made, pursuant to the terms of this Plan, will 
produce for Creditors not less than they would receive if the Debtors' cases 
were converted to cases under Chapter 7 of the Code, the Debtors' assets 
liquidated and appropriate distributions therein were made as required by the 
Code.

     A copy of the Plan of Reorganization for Power Designs, Inc. and PDIXF 
Acquisition Corporation is attached. The Plan is currently the subject of 
negotiation between the Debtors and various creditor committee constituencies.


                                      13
<PAGE>

     Liquidity and Capital Resources

     Pursuant to a court order, the issuer, as debtor-in-possession, has 
entered into a financing agreement with Venture Partners Ltd., as agent, to 
borrow working capital, up to a maximum of $400,000.  The terms of this 
agreement call for interest at 20% and a term of 120 days.  This debt is 
collateralized firstly by the machinery and equipment of the issuer, and 
secondarily by its accounts receivable.  A total of $245,000 is presently 
outstanding on this loan.

     Similarly, the issuer, pursuant to a court order, has entered into a 
receivable factoring agreement with Porter Capital Corporation ("Porter"), 
whereby trade receivables are sold to Porter at 94% of face value.  A 4% and 
2% rebate is returned to the issuer if the receivable is collected within 60 
and 90 days respectively.  Fees to Porter include a minimum of 2% of the face 
amount of the receivables factored, and an annual interest rate of prime on 
the outstanding amount advanced.  Collateral for this obligation comprises 
the factored receivables, with a secondary lien on the machinery and 
equipment of the issuer. In September of 1998 the initial six-month term had 
elapsed and the right to extend the agreement for a period of one year had 
been exercised. With this renewal the before mentioned agreement has been 
modified to a minimum fee of 2.5% for receivables collected within 60 days 
and an additional 1% for each additional 15 days outstanding to a maximum of 
90 days.

     The issuer currently has a net stockholders' deficit of approximately 
$13,170,000, meaning that amounts owed to its creditors, including without 
limitation Inverness Corporation, exceed the issuer's assets.

     The Company is in the process of implementing and executing a Year 2000 
assessment with the objective of having all of their significant business 
systems, including those that affect facilities and manufacturing activities, 
functioning properly with respect to the Year 2000 issue before January 1, 
2000.  As part of this assessment, significant service providers, vendors, 
suppliers, and customers that are believed to be critical to business 
operations after January 1, 2000, have been identified and steps are being 
undertaken in an attempt to reasonably ascertain their stage of Year 2000 
readiness.

     The Company has a Year 2000 compliant financial and manufacturing 
business system at his Connecticut facility. Costs to update other production 
equipment are not expected to be material to the Company.

     The failure to correct a material Year 2000 problem could result in an 
interruption in, or a failure of, certain normal business activities or 
operations.  Such failures could materially and adversely affect the 
Company's results of operations, liquidity and financial condition.  The 
Company believes that, with the completion of its Year 2000 assessment as 
scheduled, the possibility of significant interruptions of normal operations 
should be minimized.


                                      14
<PAGE>

     Results of Operations

     Results for the first nine months of fiscal 1997 reflect the 
Acquisition, and therefore represent a substantial change from the figures 
for the same period in fiscal 1998. Accordingly a period-to-period comparison 
of the historical results of operations and financial condition of the issuer 
is not meaningful.

     Third quarter of fiscal 1997 versus third quarter of fiscal 1998.

     Net sales decreased to $523,907 for the quarter ended March 31, 1998 as 
compared with $1,090,086 for the same period in 1997.

     However, gross profit increased from $10,076 for the third quarter in 
fiscal 1997 to $89,077 for the same quarter in fiscal 1998. The resulting 
increase was primarily due to the shift to core product in the third quarter 
of fiscal 1998. Cost of sales decreased from $1,080,010 for the third quarter 
of fiscal 1997 to $434,830 for the same period in fiscal 1998. A substantial 
portion of the increased performance is due to the shift to core product in 
the latter part of January 1998, resulting in a significant improvement to 
manufacturing yields and product margins. The bankruptcy filing in January 
has had a favorable impact on interest expense, allowing the company to 
service only that portion of the post filing debt attributable to post filing 
operating activity. Quarterly interest expense decreased from $259,042 as of 
March 31, 1997 to $115,889 as of March 31, 1998. The halting of the UPS/ PLC 
product line and simultaneous impairment of Goodwill has eliminated the 
related amortization, contributing to the reduction in administrative 
expenses from $1,335,805 for the quarter ending March 31, 1997 as compared to 
$422,729 for the quarter ending March 31, 1998.

     It is the intention of the present management of the issuer to 
concentrate its resources on the production of its existing three product 
lines, to reduce operating and occupancy costs where possible, to improve 
marketing strategies and further customer relationships, and to replace the 
debtor-in-possession financing with less costly conventional debt instruments 
upon confirmation of a plan of reorganization.  However, there can be no 
assurances that the issuer will be able to obtain such additional debt 
financing, or be successful at streamlining and improving operating results.

     First nine months of fiscal 1997 versus first nine months of fiscal 1998.

     Net sales decreased from $2,419,820 for the nine months ended March 31, 
1997 as compared to $1,760,746 for the nine months ended March 31, 1998.

     Likewise, gross profit decreased from a profit of $262,612 for the nine 
months ended March 31, 1997 to a profit (loss) of ($1,274,377) for the nine 
months ended March 31, 1998 the result of the low manufacturing yields and a 
substantial reduction in UPS/PLC inventory value. Cost of Sales increased 
from $2,157,208 for the period ended


                                      15
<PAGE>

March 31, 1997 to $3,035,123 for the same period in fiscal 1998. A 
substantial portion of the increase, $1,218,512 is due to the inventory 
adjustment noted. The issuer's growing reliance on debt financing of its 
deficits accounts for the increase in interest expense to $1,067,818 as of 
March 31,1998 from $509,475 as of March 31, 1997. As a result of these 
conditions, the halting of the primary product line's production and full 
impairment of Goodwill totaling $2,846,557, the net profit (loss) for the 
nine months ending March 31, 1998 is ($7,407,055), as compared to 
($3,018,661) for the same period in fiscal 1997.

     Certain statements contained in this Item 2 regarding matters that are 
not historical facts, including, among others, statements regarding the 
future adequacy of the issuer's working capital, its ability to raise capital 
through debt or equity offerings, its ability to maintain or improve its 
present cash flow, are "forward-looking statements".  Such forward-looking 
statements involve risks and uncertainties which may cause the actual 
results, performance or achievements of the issuer to be materially different 
from any future results, performance or achievements, express or implied by 
such forward-looking statements.

     These forward-looking statements are identified by their use of forms of 
such terms and phrases as "expects," "intends," "goals," "estimates," 
"projects," "plans," "anticipates," "should," "future," "believes," and 
"scheduled".  The variables which may cause differences include, but are not 
limited to, the following:  general economic and business conditions; 
competition; success of operating initiatives; operating costs; advertising 
and promotional efforts; the existence or absence of adverse publicity; 
changes in business strategy or development plans; the ability to retain 
management; availability, terms and deployment of capital; business abilities 
and judgement of personnel; availability of qualified personnel; labor and 
employee benefit costs; availability and costs of raw materials and supplies; 
and changes in, or failure to comply with, government regulations.  Although 
the issuer believes that the assumptions underlying the forward-looking 
statements contained herein are reasonable, any of the assumptions could be 
inaccurate, and therefore, there can be no assurance that the forward-looking 
statements included in this filing will prove to be accurate.  In light of 
the significant uncertainties inherent in the forward-looking statements 
included herein, the inclusion of such information should not be regarded as 
a representation by the issuer or any other person that the objectives and 
expectations of the issuer will be achieved.

                       PART II.  OTHER INFORMATION

Item 3.  Defaults Upon Senior Securities

     As of this date the principal amount of the Venture Partners Ltd., as 
agent indebtedness described at Part I, Item 2 above was not paid in full, 
thereby placing the issuer in default. As of this date no demand for 
repayment has been made and all interest payments are current. There are no 
renewal negotiations pending.


                                      16
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

    (a)  Exhibits

         Exhibit      Financial Data Schedule

         Exhibit      Plan of Reorganization for Power Designs, Inc. and 
                      PDIXF Acquisition Corporation

    (b)  The company filed a report on Form 8-K, dated February 9, 1998 
         reporting the resignation of Fred G. Basso as President, effective 
         January 15, 1998. The same 8-K filing also reports that on January 
         22, 1998, the issuer and its wholly owned subsidiary, PDIXF 
         Acquisition Corporation, filed voluntary petitions in bankruptcy 
         under Chapter 11 of the United States Bankruptcy Act.


                                      17
<PAGE>

                                  SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized.

Date:  December 11, 1998              POWER DESIGNS, INC.
       Danbury, Connecticut           (Registrant)


                                  By: /s/ Melvin A. Becker
                                      ------------------------------
                                          Melvin A. Becker
                                          Secretary

                                  By: /s/ Anthony F. Intino II
                                      ------------------------------
                                          Anthony F. Intino II
                                          Chief Financial Officer


                                      18