<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 September 30, 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
                   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
   -----     -----


<PAGE>


                               POWER DESIGNS, INC.
          FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                      INDEX

<TABLE>
<CAPTION>

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

Item 1.  FINANCIAL STATEMENTS

         Condensed Consolidated Balance Sheet as of
         September 30, 1998 and 1997......................................4

         Condensed Consolidated Statement of Operations for
         the three months ended September 30, 1998 and 1997...............6

         Condensed Consolidated Statement of Changes
         in Stockholders' Deficit for the three months ended
         September 30, 1998 and 1997......................................7

         Condensed Consolidated Statement of Cash Flows for
         the three months ended September 30, 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>


<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements
<PAGE>


                               POWER DESIGNS, INC.

                      Condensed Consolidated Balance Sheet
                                   (Unaudited)

                           September 30, 1998 and 1997


<TABLE>
<CAPTION>

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

Current Assets:
 Cash                                                            $    126,175    $    (31,140)
 Accounts receivable, less allowance for doubtful accounts            417,646         542,086
 of $21,625 in 1998; $156,967 in 1997
 Inventories                                                          818,033       2,028,036
 Prepaid expenses                                                      36,344          38,888
                                                                 ------------    ------------
    TOTAL CURRENT ASSETS                                            1,398,198       2,577,871
                                                                 ------------    ------------

Equipment and Leasehold Improvements, net                             502,508         805,225
                                                                 ------------    ------------

Other Assets:
 Goodwill                                                                  --       2,839,742
 Deferred financing costs                                                  --         148,795
 Other assets                                                         164,913          26,228
                                                                 ------------    ------------
                                                                      164,913       3,014,765
                                                                 ------------    ------------

    TOTAL ASSETS                                                 $  2,065,619    $  6,397,861
                                                                 ------------    ------------
                                                                 ------------    ------------

<PAGE>

LIABILITIES AND STOCKHOLDERS'
    DEFICIT

Current Liabilities
 Notes payable
   Debtor in possession facility                                 $    245,000    $         --
   Affiliated companies                                                    --       6,780,278
   Preferred shareholders                                                  --       1,087,415
   Seller of assets acquired                                               --       1,000,000
   Others                                                                  --       1,664,500
 Current portion of capital lease obligations                              --          57,190
 Advances under factoring agreement                                   271,101              --
 Accounts payable                                                     124,937       1,810,844
 Accrued expenses                                                     179,974         266,051
 Accrued interest                                                       4,029         220,949
 Accrued warranty expense                                                  --         275,000
 Payables related to reorganization including accrued interest             --         103,330
                                                                 ------------    ------------
    TOTAL CURRENT LIABILITIES                                         825,041      13,265,557
                                                                 ------------    ------------

Long-Term Liabilities
 Capital lease obligation - less current portion                           --          98,734
 Liabilities subject to compromise                                 15,673,865              --
                                                                 ------------    ------------
                                                                   15,673,865          98,734
                                                                 ------------    ------------

    TOTAL LIABILITIES                                              16,498,906      13,364,291
                                                                 ------------    ------------

Stockholders' Deficit
 Common stock , $.0001 par value. 10,000,000 shares authorized            240             240
 2,391,493 shares issued and outstanding at September 30, 1998
 and 1997
 Preferred stock, $.01 par value, 1,000,000 shares authorized;          3,167           3,167
 316,743 shares issued and outstanding at September 30, 1998
 and 1997
 Additional paid-in capital                                         1,382,807       1,382,807
 Accumulated deficit                                              (15,819,500)     (8,352,644)
                                                                 ------------    ------------

    TOTAL STOCKHOLDERS' DEFICIT                                   (14,433,286)     (6,966,430)
                                                                 ------------    ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                  $  2,065,619    $  6,397,861
                                                                 ------------    ------------
                                                                 ------------    ------------

</TABLE>

<PAGE>


                               POWER DESIGNS, INC.

                 Condensed Consolidated Statement of Operations
                                   (Unaudited)

             For The Three Months Ended September 30, 1998 and 1997


<TABLE>
<CAPTION>

                                                      3 months ended           3 months ended
                                                    September 30, 1998        September 30, 1997

<S>                                                   <C>                        <C>
Net Sales                                             $   745,706                $   754,665

Cost of Sales                                             487,225                    770,045
                                                      -----------                -----------

     GROSS PROFIT (LOSS)                                  258,481                    (15,379)

Operating Expenses
  Selling, general and admin. expense                     181,167                    534,823
  Research and development                                 39,768                    117,400
  Depreciation and amortization                             8,861                    118,156
                                                      -----------                -----------
                                                          229,796                    770,379

     NET PROFIT (LOSS) BEFORE OTHER INCOME
     (EXPENSE) AND REORGANIZATION ITEMS                    28,685                   (785,758)
                                                      -----------                -----------

Other income (expense):
  Investment income                                         3,628                        300
  Interest expense                                        (46,652)                  (415,092)
                                                      -----------                -----------
     OTHER EXPENSE                                        (43,024)                  (414,792)
                                                      -----------                -----------

     NET LOSS BEFORE REORGANIZATION ITEMS                 (14,339)                (1,200,550)

Reorganization Items                                        4,000                       --
                                                      -----------                -----------

     NET LOSS                                         $   (18,339)               $(1,200,550)
                                                      -----------                -----------
                                                      -----------                -----------

Weighted average number of common
shares outstanding                                      2,391,493                  2,391,493
                                                      -----------                -----------
                                                      -----------                -----------

Net loss per share                                    $     (0.01)               $     (0.50)
                                                      -----------                -----------
                                                      -----------                -----------

</TABLE>



<PAGE>


                               POWER DESIGNS, INC.

      Condensed Consolidated Statement of Changes in Stockholders' Deficit

                                   (Unaudited)

             For The Three Months Ended September 30, 1998 and 1997

<TABLE>
<CAPTION>

                                   Common Stock        Preferred Stock
                                 ------------------   ------------------
                                                                             Additional
                                  Shares      Par     Shares       Par        Paid In      Accumulated
                                  Issued     Value    Issued      Value       Capital        Deficit
                                 -----------------------------------------------------------------------
<S>                              <C>         <C>      <C>       <C>        <C>            <C>
Balance, June 30, 1997           2,391,493   $  240   316,743   $  3,167   $  1,382,807   $ (7,152,094)

Net loss                                --       --        --         --             --     (1,200,550)
                                 ---------   ------   -------   --------   ------------   ------------
Balance, September 30, 1997      2,391,493      240   316,743      3,167      1,382,807     (8,352,644)
                                 ---------   ------   -------   --------   ------------   ------------
                                 ---------   ------   -------   --------   ------------   ------------

Balance, June 30, 1998           2,391,493      240   316,743      3,167      1,382,807    (15,801,161)

Net loss                                --       --        --         --             --        (18,339)
                                 ---------   ------   -------   --------   ------------   ------------

BALANCE, SEPTEMBER 30, 1998      2,391,493   $  240   316,743   $  3,167   $  1,382,807   $(15,819,500)
                                 ---------   ------   -------   --------   ------------   ------------
                                 ---------   ------   -------   --------   ------------   ------------

</TABLE>


<PAGE>


                               POWER DESIGNS, INC.

                 Condensed Consolidated Statement of Cash Flows
                                   (Unaudited)

             For The Three Months Ended September 30, 1998 and 1997


<TABLE>
<CAPTION>

                                                                  3 months ended        3 months ended
                                                                September 30, 1998    September 30, 1997

<S>                                                               <C>                    <C>
Cash Flows From Operating Activities
  Net loss                                                        $   (18,339)           $(1,200,550)
  Adjustments to reconcile net loss to net cash used in
   operating activities
    Depreciation and amortization                                      37,812                151,839
    Reorganization items                                                4,000
    Changes in operating assets and liabilities, net of assets
     acquired in business combination:
       Decrease (increase) in accounts receivable                      75,949                187,055
       Decrease (increase) in inventories                             (51,595)              (135,789)
       Increase in prepaid expenses                                    (1,854)               (37,365)
       Decrease (increase) in other assets                                 --                 49,384
       Increase in accounts payable and accrued expenses               23,289                118,438
       Increase )decrease in payables related to reorganization            --                  1,204
                                                                  -----------            -----------
        NET CASH USED IN OPERATING ACTIVITIES BEFORE
               REORGANIZATION ITEMS                                    69,262               (865,784)
                                                                  -----------            -----------

Cash Flows From Investing Activities:
 Purchase of property and equipment                                    (2,223)              (112,161)
 Payments related to assets acquired                                     --                  (15,093)
                                                                  -----------            -----------
       NET CASH USED IN INVESTING ACTIVITIES                           (2,223)              (127,254)

Cash Flows From Financing Activities
 Net increase (decrease) in advances from affiliates                       --                900,707
 Capital lease obligations incurred on equipment net
  of principal repayments                                                  --                 77,292
 Payment of deferred financing costs                                       --                (25,000)
 Advances under factoring agreement                                    17,774                     --
                                                                  -----------            -----------
        NET CASH PROVIDED BY FINANCING ACTIVITIES                      17,774                952,999
                                                                  -----------            -----------

        NET INCREASE (DECREASE) IN CASH                                84,813                (40,039)

Cash (overdraft) and cash equivalents, beginning of period             41,362                  8,899
                                                                  -----------            -----------

Cash (overdraft) and cash equivalents, end of period              $   126,175            $   (31,140)
                                                                  -----------            -----------
                                                                  -----------            -----------

</TABLE>



<PAGE>


POWER DESIGNS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 three months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year.

The consolidated statements of operations for the periods ended September 30,
1998 and September 30, 1997 include the operations of PDIXF Acquisition
Corporation for these same periods 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


<PAGE>


between amounts shown by the Debtors and claims filed by creditors will be
investigated and reconciled. 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 - affiliated companies                   $ 7,015,553 (a)
Notes payable - preferred shareholders                   1,087,415 (a)
Notes payable - seller of assets acquired                  990,000 (a)
Notes payable - others                                   2,266,500
Accounts payable                                         2,388,677
Accrued expenses                                           375,135 (b)
Accrued interest                                         1,017,719
Accrued warranty expense                                   201,408
Capital lease obligation                                   142,872 (a)
Payables related to 1994 reorganization including
  accrued interest                                         188,586
                                                       -----------
Total                                                  $15,673,865

</TABLE>


(a) Notes payable to affiliated companies, preferred shareholders and seller of
    assets acquired, as well as capital lease obligation, include secured debt,
    which should be considered, due to various factors, subject to compromise.
    The Plan of Reorganization filed May 12, 1998, provides for allowed secured
    claims of $2,700,000 against outstanding secured notes of $9,092,968. As a
    result of this compromise, the Debtor has accrued interest on these, as well
    as other obligations through June 30, 1998. Additional interest in the
    amount of $394,780 on these secured obligations was incurred but not yet
    accrued for the quarter ended September 30, 1998. 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 $78,655 of these arrearages have been liquidated.


<PAGE>


NOTE 4.   OPERATING CASH RECEIPTS AND PAYMENTS

The following schedule depicts the operating cash receipts and payments for the
post-petition period of July 1, 1998 through September 30, 1998.

<TABLE>
<S>                                                                 <C>
Cash flows from operating activities:
  Cash received from customers                                      $  813,148
  Cash paid to suppliers and employees                                (695,968)
  Interest paid                                                        (52,508)
                                                                    ----------
    Net cash provided by operating activities before
      reorganization items                                              64,672
                                                                    ----------

  Operating cash flows from reorganization items:
  Professional fees paid for services in connection with
    the Chapter 11 proceeding                                                0
                                                                    ----------
     Net cash (used in) reorganization items                                 0
                                                                    ----------

     Net cash provided by (used in) operating activities                64,672
                                                                    ----------

Cash flows from investing activities:
    Distributions from limited partnership                               2,000
                                                                    ----------

     Net cash provided by investing activities                           2,000
                                                                    ----------

Cash flows from financing activities:
  Net borrowings under post-petition short-term credit facility         18,141
  Principal payments on pre-petition debt                                    0
                                                                    ----------
     Net cash provided by financing activities                          18,141

     Net increase in cash and cash equivalents                          84,813

Cash and cash equivalents
  Beginning                                                             41,362
                                                                    ----------
  Ending                                                             $ 126,175
                                                                    ----------

</TABLE>


NOTE 5.  SIGNIFICANT EVENTS

During the first quarter of fiscal 1999, the company's net profit before other
income and expense was $28,685. This improvement over the first quarter fiscal
1998 net loss of ($785,758) is primarily due to the suspension of the
uninterruptible power supply/power


<PAGE>


line conditioner ("UPS/PLC") product line, improved 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 first quarter.

An overall reduction in personnel and overhead expenditures resulted in
operating expenses of $229,796 for the three months ended September 30, 1998 as
compared to $770,379 for the same period in the prior year. Selling, general and
administrative expenses were $181,167 for the three months ended September 30,
1998 and $534,823 at September 30, 1997. The net profit (loss) for the three
months ended September 30, 1998 is ($18,339). Net profit (loss) for the
comparative period in the prior year is ($1,200,550).

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 issuer.

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. Advances
under this factoring agreement were $271,101 at September 30, 1998.

During the period from February 1998 through July 1999 the Company liquidated
$78,655 of its pre-petition labor and vacation 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
continue at this writing.

<PAGE>


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

         Current Developments

         During the first quarter of fiscal 1999, the issuer and its
wholly-owned subsidiary, continued manufacturing operations as
debtors-in-possession under Chapter 11 protection. The Vantage Partners LLC, a
management consulting firm retained pursuant to court order, together with
Melvin A. Becker, Vice President of Operations, continued in their roles as
senior management. Product offerings were confined to three historical families
of products ("core products"): military grade power supplies, variable
autotransformers, and linear switching power supply products. Employees and
contracted consultants of the issuer at September 30, 1998 number 26.

         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. Marketing efforts
have been initiated in the areas of product literature development, internet
advertisement, and sales representative solicitation. Open sales orders at
September 30, 1998 total $571,620.

         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 an alternative approach.
A local real estate brokerage firm has been retained to sublet the existing
facility. Although the facility continues to be presented to the marketplace, no
sublease transactions have as yet been consummated.

         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 has been attached as an exhibit to the Form 10QSB for
the


<PAGE>


period ended March 31, 1998. The Plan is currently the subject of ongoing
negotiation between the Debtors and various creditor committee constituencies.

         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
$14,434,000, meaning that amounts owed to its creditors exceed the issuer's
assets.

         The issuer is in the process of implementing and executing a Year 2000
compliance plan 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.
The issuer has assessed their internal processes and systems, and believes that
sales, administration, and general operations are substantially Year 2000
compliant. Prior to purchasing any new equipment or software, it is the issuer's
policy to ensure that the specifications include Year 2000 compliance.

         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 issuer
intends to complete this inquiry and assessment of the Year 2000 readiness of
the systems and products of these third parties by late 1999. However, due to
the need to devote management and financial resources to other operational
matters, the issuer has not as yet completed this inquiry and assessment.


<PAGE>


         To minimize potential disruptions, the issuer intends to adopt a
contingency plan, if deemed necessary, to address any issues raised during the
planned assessment in 1999. Because no specific instance of material Year 2000
non-compliance has been discovered to date, the issuer has not adopted a
contingency plan to deal with Year 2000 issues.

         Based upon the internal investigation to date, the issuer does not
expect the total costs of the Year 2000 review and compliance to have a material
adverse effect on the business or financial results. The issuer may have to
spend a material amount to develop and implement a contingency plan during 1999,
if the issuer finds that a material supplier or other third party upon whom the
issuer relies will face business interruptions as a result of Year 2000 issues.

         Based upon the review of the Year 2000 issues to date, the issuer does
not anticipate significant interruption of normal internal operations. 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 issuer's results of
operations, liquidity and financial condition. The issuer believes that, with
the completion of its Year 2000 assessment as scheduled, the possibility of
significant interruptions of normal operations should be minimized.

         Results of Operations

         Results for the first three months of fiscal 1999 reflect a significant
downsizing in operations which followed the issuer's Chapter 11 filing, and
therefore represent a substantial change from the pre-petition 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.

         First quarter of fiscal 1999 versus first quarter of fiscal 1998.

         Net sales decreased slightly to $745,706 for the quarter ended
September 30, 1998 as compared with $754,665 for the same period in 1997.

         However, gross profit (loss) increased from ($15,379) for the first
quarter in fiscal 1998 to $258,481 for the same quarter in fiscal 1999. The
resulting increase was primarily due to the shift to core product manufacturing
in the third quarter of fiscal 1998. Cost of sales decreased from $770,045 for
the first quarter of fiscal 1998 to $487,225 for the same period in fiscal 1999.
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 in 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 $414,792 as of
September 30, 1997 to $43,024


<PAGE>


as of September 30, 1998. The halting of the UPS/ PLC product line and
simultaneous impairment of Goodwill has eliminated the related amortization,
contributing to the reduction in operating expenses from $770,379 for the
quarter ending September 30, 1997 as compared to $229,796 for the quarter ending
September 30, 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.

         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.


<PAGE>

                           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.


<PAGE>


Item 6.   Exhibits and Reports on Form 8-K

          (a) Exhibits

              Exhibit      Financial Data Schedule.


<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:  October 18, 1999                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