SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark one)

| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996       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 No.  0-1921
                   ----------

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

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

14 Commerce Drive, Danbury, Connecticut                          11717
---------------------------------------                          -----
(Address of principal executive offices)                       (Zip Code)

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

                 250 Executive Drive, Edgewood, New York, 11717
--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer 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:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 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 13, 1996

Transitional Small Business Disclosure Format (check one)  Yes |_|  No |X|


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<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


                                    Page -2-
<PAGE>

                               POWER DESIGNS, INC.

                                    --------

                        Consolidated Financial Statements

                           September 30, 1996 and 1995

                                   (Unaudited)

                                      -----


<PAGE>

                               POWER DESIGNS, INC.

                                    --------

                      Condensed Consolidated Balance Sheet
                                   (Unaudited)

                           September 30, 1996 and 1995

                                      -----

   ASSETS
                                                       1996          1995
                                                       ----          ----
Current assets:
  Accounts receivable                              $    71,162   $    35,074
  Inventories                                          207,297       201,507
  Prepaid expenses                                       4,452         4,079
                                                   -----------   -----------
     Total current assets                              282,911       240,660
                                                   -----------   -----------
Property and equipment, less
  accumulated depreciation                               4,246         6,132
                                                   -----------   -----------
Other  assets:
  Acquisition deposit                                  440,000          --
  Investment in partnership                             21,221        21,294
  Security deposits                                      3,855         3,855
                                                   -----------   -----------
                                                       465,076        25,149
                                                   -----------   -----------
                                                   $   752,233   $   271,941
                                                   ===========   ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Liabilities:
  Cash overdraft                                   $     4,153   $     5,387
  Accounts payable and accrued expenses                201,673       166,241
  Current portion of long-term debt                  1,619,775       574,107
  Payables related to reorganization
    including accrued interest                         261,531       237,804
                                                   -----------   -----------
     Total liabilities                               2,087,132       983,539
                                                   -----------   -----------

Stockholders' deficit:
  Common stock; $.0001 par value, 10,000,000
    shares authorized, 2,391,493 shares
    issued and outstanding at September 30, 1996;
    2,176,259 shares, issued and outstanding
    at September 30, 1995                                  240           218
  Preferred stock; $.01 par value; 1,000,000
    shares authorized; shares issued and
    outstanding - none                                    --            --
  Additional paid in capital                           820,732       784,754
  Deficit                                           (2,155,871)   (1,496,570)
                                                   -----------   -----------
     Total stockholders' deficit                    (1,334,899)     (711,598)
                                                   -----------   -----------
                                                   $   752,233   $   271,941
                                                   ===========   ===========

         The accompanying notes are an integral part of these condensed
                             financial statements.


<PAGE>

                               POWER DESIGNS, INC.

                                    ---------

                 Condensed Consolidated Statement of Operations
                                   (Unaudited)

             For The Three Months ended September 30, 1996 and 1995

                                      -----

                                                       1996          1995
                                                       ----          ----
Net sales                                          $    90,502   $    42,331

Cost of sales                                           79,642        08,431
                                                   -----------   -----------
Gross profit                                            10,860        33,900

Selling, general and administrative expense            108,320        70,294
                                                   -----------   -----------
Net loss before other income (expense)                 (97,460)      (36,394)
                                                   -----------   -----------

Other income (expense):
  Investment income                                      1,000         8,231
  Interest expense                                     (33,947)      (16,475)
                                                   -----------   -----------
                                                       (32,947)       (8,244)
                                                   -----------   -----------
Net loss                                           $  (130,407)  $   (44,638)
                                                   ===========   ===========
Net loss per share                                 $      (.05)  $      (.02)
                                                   ===========   ===========

         The accompanying notes are an integral part of these condensed
                             financial statements.


<PAGE>

                              POWER DESIGNS, INC.

                                    --------

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

             For The Three Months Ended September 30, 1996 and 1995

                                     -----

<TABLE>
<CAPTION>
                                Shares
                                Common                      Additional
                                Stock          Common        Paid In
                              Outstanding       Stock        Capital         Deficit          Total
                              -----------       -----        -------         -------          -----
<S>                            <C>          <C>            <C>            <C>             <C>         
Balance, June 30, 1995         2,176,259    $       218    $   784,745    $(1,451,932)    $  (666,960)
                                                                                          
Net loss                            --             --             --          (44,638)        (44,638)
                             -----------    -----------    -----------    -----------     -----------
                                                                                          
Balance, September 30, 1995    2,176,259    $       218    $   784,754    $(1,496,570)    $  (711,598)
                             ===========    ===========    ===========    ===========     ===========
                                                                                          
Balance, June 30, 1996         2,391,493    $       240    $   820,732    $(2,025,464)    $(1,204,492)
                                                                                          
Net loss                            --             --             --         (130,407)       (130,407)
                             -----------    -----------    -----------    -----------     -----------
                                                                                          
Balance, September 30, 1996    2,391,493    $       240    $   820,732    $(2,155,868)    $(1,334,899)
                             ===========    ===========    ===========    ===========     ===========
</TABLE>

         The accompanying notes are an integral part of these condensed
                             financial statements.


<PAGE>

                               POWER DESIGNS, INC.

                                    --------

                 Condensed Consolidated Statement of Cash Flows
                                   (Unaudited)

             For the Three Months Ended September 30, 1996 and 1995

                                     ------

                                                       1996          1995
                                                       ----          ----
Cash flows from operating activities:
  Net loss                                         $  (130,407)  $   (44,638)
  Adjustments to reconcile net loss to net cash
    used in operating activities
    Depreciation                                           251          --
      (Increase) decrease in:
        Accounts receivable                            (37,767)      (22,295)
        Inventories                                    (32,811)         --
        Prepaid expenses                                (4,452)         (356)
        Other assets                                  (250,000)         --
      Increase (decrease) in:
        Accounts payable and accrued expenses           33,170        (6,894)
        Payables related to reorganization                (124)       (7,161)
                                                   -----------   -----------

Cash flows used in operating activities               (422,140)      (81,344)
                                                   -----------   -----------

Cash flows from financing activities:
        Advances from affiliate                        (71,251)      (34,291)
        Cash received from long-term financing         495,178       117,395
                                                   -----------   -----------

Cash flows provided by financing activities            423,927        83,004
                                                   -----------   -----------

Net increase in cash                                     1,787         1,660

Cash overdraft, beginning of year                       (5,940)       (7,047)
                                                   -----------   -----------

Cash overdraft, end of year                        $    (4,153)  $    (5,387)
                                                   ===========   ===========

         The accompanying notes are an integral part of these condensed
                             financial statements.


<PAGE>

                               POWER DESIGNS, INC.

                                    --------

            Notes To The Condensed Consolidated Financial Statements

             For The Three Months Ended September 30, 1996 and 1995

                                      -----

Note 1 - Basis of Presentation:

The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim period.

The results of operations for the three month periods ended September 30, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full year.

Note 2 - Subsequent Events:

On October 11, 1996, a wholly owned subsidiary of Power Designs, Inc. (PDIXF
Acquisition Corporation) acquired for approximately $4,430,000, the net assets
of two divisions of Penril Datacomm Networks, Inc. These two divisions,
Technipower Power, Inc. and Constant Power, Inc., are manufacturers of power
supplies, auto transformers, power line conditioners and uninterruptable power
supplies. Additionally, the Company repaid loans, notes payable and obligations
to creditors totalling approximately $1,490,000 that existed as of October 11,
1996. The Company also incurred approximately $260,000 in costs (financing and
organizational) related to the transaction.

Funding for the above transaction (approximately $6,180,000) was provided by the
following:

  316,743 shares of preferred stock convertible to
     common stock at a conversion rate to be determined
     at a future date                                       $   265,000
  Warrants convertible into 416,749 shares of
     common stock at 87.5 cents per share                         7,000
  Subordinate debt from six individuals and
     a limited partnership                                    1,087,000
  Note payable to Inverness Corporation
     (Due April 1, 1998)                                      2,290,000
  Seller financing (Due 12/31/96)                             2,750,000

     Total sources                                            6,399,000

  Less:  cash deposited into PDIXF Corp.
     for working capital                                       (219,000)
                                                            -----------
                                                            $ 6,180,000

The Company expects to do a secondary stock offering prior to December 31, 1996,
which would provide the funds to repay the seller financing provided by Penril.
Should a secondary offering not occur by this date, bridge financing will need
to be secured. The Company is simultaneously working to arrange that financing.

The following proforma condensed balance sheet gives effect to the above event
as if it had occurred on September 30, 1996 without giving effect to operating
results through this period:


<PAGE>

                               POWER DESIGNS, INC.

                                    --------

            Notes To The Condensed Consolidated Financial Statements

             For The Three Months Ended September 30, 1996 and 1995

                                      -----

Note 2 - Subsequent Events: (Continued)

                        Proforma Condensed Balance Sheet
                              At September 30, 1996

<TABLE>
<CAPTION>
                                                   As Reported               Proforma
                                                 In Accompanying          Adjustments for          Proforma
                                              Financial Statements       Subsequent Funds        Balance Sheet
                                              --------------------       ----------------        -------------
               ASSETS
<S>                                               <C>                     <C>                    <C>          
Current assets:
   Cash                                           $       --              $    219,000           $     219,000
   Accounts receivable                                  71,162                 582,000                 653,162
   Inventories                                         207,297               1,900,000               2,107,297
   Prepaid expenses                                      4,452                    --                     4,452
                                                  ------------            ------------           -------------
     Total current assets                              282,911               2,701,000               2,983,911
                                                  ------------            ------------           -------------

Property and equipment, less accumulated
   depreciation                                          4,246                 525,000                 529,246
                                                  ------------            ------------           -------------

Other assets:
   Acquisition deposit                                 440,000                (190,000)                250,000
   Investment in partnership                            21,221                    --                    21,221
   Security deposits                                     3,855                    --                     3,855
   Goodwill                                               --                 1,973,000               1,973,000
   Financing fees and organizational costs                --                   260,000                 260,000
                                                  ------------            ------------           -------------
                                                       465,076               2,043,000               2,508,076
                                                  ------------            ------------           -------------
                                                  $    752,233            $  5,269,000           $   6,021,233
                                                  ============            ============           =============
    LIABILITIES AND STOCKHOLDERS'
               DEFICIT

Current liabilities:
   Seller financing                               $       --              $  2,750,000           $   2,750,000
   Cash overdraft                                        4,153                    --                     4,153
   Accounts payable and accrued expenses               201,673                 493,442                 695,115
   Current portion of long-term debt                 1,619,775              (1,130,346)                489,429
   Payables related to reorganization,
     including accrued interest                        261,531                (120,256)                141,275
                                                  ------------            -------------          -------------
     Total liabilities                               2,087,132               1,992,840               4,079,972
                                                  ------------            ------------           -------------
Long-term debt:
   Notes payable - affiliates                             --                 3,004,306               3,004,306
                                                  ------------            ------------           -------------

Stockholders' deficit:
   Preferred stock                                        --                   264,854                 264,854
   Common stock                                            240                    --                       240
   Additional paid in capital                          820,732                   7,000                 827,732
   Deficit                                          (2,155,871)                   --                (2,155,871)
                                                  ------------            ------------           -------------
     Total stockholders' deficit                    (1,334,899)                271,854              (1,063,045)
                                                  ------------            ------------           -------------
                                                  $    752,233            $  5,269,000           $   6,021,233
                                                  ============            ============           =============
</TABLE>


<PAGE>

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

      Current Developments

      During the first quarter of fiscal year 1997, the issuer focused primarily
on its search for suitable acquisition candidates. On October 11, 1996, after
the end of the reporting period, the issuer purchased the assets of two
subsidiaries of Penril Datacomm Networks, Inc. That acquisition was reported on
a Form 8-K dated October 28, 1996. After the transaction was completed, the
issuer also began taking steps to wind down operations at its Long Island
headquarters, so that it could consolidate its managerial and manufacturing
operations at the former Penril sites in Connecticut. This move was completed on
November 5, 1996.

      As is discussed in more detail in "Liquidity and Capital Resources" below,
the issuer received additional financing of about $6.2 million and issued shares
of a new class of preferred stock, $.01 par value, in connection with the
acquisition.

      In early 1995, the issuer's shareholders approved a resolution calling for
the reincorporation of the issuer under Delaware law, by merging the issuer into
a Delaware corporation also named Power Designs Inc. The merger remains
unexecuted pending approval by the New York State Department of State, Division
of Corporations.

      At the end of fiscal year 1995, the issuer had entered into an acquisition
agreement with Cycle Transformer, Inc. ("Cycle") and the MarTek Group
("MarTek"), under which MarTek agreed to transfer its right to purchase Cycle to
the issuer for $60,000. Concurrently, the issuer received a capital infusion
from the MarTek's owners in the amount of $146,875. The acquisition of Cycle was
later abandoned, and litigation ensued. Subsequent to the end of the fiscal
year, the issuer agreed to pay MarTek, its owners and their representatives
$185,000 in an out-of-court settlement. The full amount was paid on September
27, 1996.

      Liquidity and capital resources.

      In addition to the issuer's efforts to find a suitable acquisition
candidate, during the quarter ended September 30, 1996 it pursued opportunities
for additional funding, in order to address its continuing shortage of working
capital. Lack of funds for marketing efforts, in combination with the technical
and custom production aspects of the issuer's non-standard products, have
hindered expansion of sales. Accordingly, additional working capital must be
obtained to finance current operations and debts, and to fund future investment.

      In particular, when the issuer emerged from bankruptcy in 1994 it entered
into a plan of reorganization which requires payments to pre-bankruptcy
creditors of


                                    Page -9-

<PAGE>

approximately $59,000 per year through fiscal 1997 and $49,000 from then through
fiscal 2000. It also received a loan of $130,500 from Venture Partners, Ltd.,
acting as agent, which requires monthly payments of principal of $1,900 from
June 30, 1995 through May 31, 1997, and a single balloon payment of $84,900 at
June 30, 1997. Finally, the issuer has capital investment requirements of
approximately $50,000 per year and deferrable capital investment requirements of
approximately $25,000 per year.

      Beginning in fiscal year 1995, Venture Partners arranged for the issuer to
obtain additional capital through a Revolving Loan Agreement with a Venture
Partners affiliate, Inverness Corporation ("Inverness"). The note under the Loan
Agreement provided for 15% annual interest and, as of July 1, 1995, a credit
line of $200,000. The maximum credit line was raised to $700,000 as of June 30,
1996, at which point the issuer in fact owed $834,097. Accordingly, the credit
line was again raised on July 31, 1996, to $1,200,000.

      During fiscal year 1995 the issuer issued a debenture to the MarTek Group
for $146,875, which was due on June 30, 1995 and carried interest of 10% per
annum. This debt remained outstanding until September 27, 1996, when the issuer
repaid it pursuant to an out-of-court arrangement with MarTek (see Part II, Item
1 below -- "Legal Proceedings").

      Subsequent to the end of the reporting period, on October 11, 1996, the
issuer obtained significant additional outside financing, totalling
approximately $6.2 million. The financing consisted of three primary components:
a private placement of debt and equity securities for $1,087,000 to six
individuals and a limited partnership; a note payable to Inverness in the amount
of $2,290,000, and short-term seller financing from Penril of $2.75 million, due
on December 31, 1996. As part of the acquisition and financing, the issuer
created a class of preferred stock, $.01 par value, which had been authorized by
vote of the shareholders in fiscal year 1995. Shares of such preferred stock
were included with the securities placed with the six individuals and limited
partnership.

      The financing permitted the issuer to pay in full several of the debts
mentioned above: the payments required under the plan of reorganization to
pre-bankruptcy creditors; the $130,500 debt outstanding to Venture Partners as
agent, and the full amount owed Inverness under the Revolving Loan Agreement.

      Because of the completed acquisition of the Penril subsidiaries, the
issuer hopes to be able to supply a greater percentage of its working capital
needs through operating cash flow during the 1997 fiscal year. Nevertheless, the
issuer expects that it will be in need of additional financings through
offerings of debt or equity. The remaining capital necessary for operating
purposes and capital investment is anticipated to be supplied by financings
secured by its receivables and additional loans. It is currently exploring the
possibility either of a public offering of stock or bridge financing, but has
made no definite decisions in this regard.


                                    Page -10-

<PAGE>

      The issuer currently has a deficit in shareholders' equity, meaning that
amounts owed to its creditors, including without limitation Inverness Corp.,
exceed the value of its assets. As of the end of the reporting period, the
issuer has no plans beyond the above to remedy the deficit in shareholders'
equity.

      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 (as such term is defined in the Securities
Act of 1933 and the Securities Exchange Act of 1934, as amended). Such forward
looking statements are not guarantees of future performance. There remain
substantial risks that the issuer will be unable to obtain adequate financing to
improve its performance and achieve its business goals.

      Results of operations

      The issuer's internal financial information for the period ended September
30, 1995 is limited because of personnel and procedural changes in the issuer's
auditing department. Nevertheless, the issuer has concluded that it can prepare
unaudited financial statements for those periods on a basis comparable to that
of the fiscal 1997 financial statements.

      First three months of fiscal 1997 versus first three months of fiscal 1996

      As the issuer continued to focus its attention on the acquisition of the
Penril assets, sales diminished by 35% during the reporting period as compared
with the first quarter of fiscal 1996. Professional and managerial services
required for the acquisition increased the issuer's selling, general and
administrative expenses. Furthermore, interest expenses doubled as the issuer
entered into the various loan agreements described above at "Liquidity and
Capital Resources." Accordingly, total net loss tripled on a comparative basis
between the two quarters. Management believes that the execution of the
acquisition agreement and the additional capital resulting from the related
transactions (described at "Liquidity and Capital Resources" above) will allow
the issuer to stabilize its financial position and increase cash flow. In
particular, the product lines acquired from Penril are hoped to provide
substantial new marketing opportunities and form a basis for expansion.

      Certain statements contained in this Item 6 regarding matters that are not
historical facts, including, among others, statements regarding future effects
of the October 11, 1996 acquisition, the future adequacy of the issuer's working
capital, its ability to raise capital through debt or equity offerings, and its
ability to maintain or improve its present cash flow, are forward looking
statements (as such term is defined in the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended). Such forward looking statements
are not guarantees of future performance. There


                                    Page -11-

<PAGE>

remain substantial risks that the issuer will be unable to obtain adequate
financing to improve its performance and achieve its business goals.

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      On July 31, 1996 the issuer agreed to pay $185,000 in an out-of-court
arrangement to settle a lawsuit brought by two former directors of the issuer.
The full amount was paid on September 27, 1996, and relieved a debt of $146,875
owed to a company the two former directors controlled, plus accrued interest
(see Item 6 -- "Management's Discussion and Analysis -- Liquidity and Capital
Resources").

Item 4. Submission of Matters to a Vote of Security Holders

      No matter was submitted during the reporting period covered by this report
to a vote of security holders, through the solicitation of proxies, or
otherwise.

Item 6. Exhibits and Reports on Form 8-K.

      (a) Exhibits:  None

      (b) No reports on Form 8-K have been filed during the quarter ended
September 30, 1996.

                                   SIGNATURES

      Pursuant to the requirements of the Act, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.


Date:  December 9, 1996            POWER DESIGNS INC.
                                   ------------------
                                     (Registrant)


                                   By: /s/ Rudolf Zeidler
                                       ---------------------------
                                        Rudolf Zeidler, President


                                    Page -12-