<PAGE>   1

                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   ----------


(Mark One)
[ X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   March 31, 1997

                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 0-7428

                           CALIFORNIA MICROWAVE, INC.
             (Exact name of registrant as specified in its charter)


DELAWARE                                                94-1668412
--------                                                ----------
(State or other jurisdiction            (I.R.S. Employer Identification Number)
of Incorporation)

555 TWIN DOLPHIN DRIVE, REDWOOD CITY, CALIFORNIA           94065
------------------------------------------------           -----
(Address of principal executive offices)                   (Zip Code)


Registrant's telephone number, including area code       (415) 596-9000
                                                         --------------

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

       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                           YES   X    NO
                               -----     -----

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

          Classes                           Outstanding at April 30, 1997
---------------------------                 -----------------------------
Common Stock $.10 Par Value                           16,390,634



                                      -1-
<PAGE>   2




                          Part I. Financial Information

Item 1.  Financial Statements

                           CALIFORNIA MICROWAVE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended                Nine Months Ended
                                                          March 31                        March 31
                                                 -------------------------       -------------------------
                                                   1997            1996            1997           1996
                                                   ----            ----            ----           ----
<S>                                              <C>             <C>             <C>             <C>      
Sales                                            $  92,857       $ 100,073       $ 313,638       $ 332,125
Cost of products sold                               65,729          70,377         267,830         233,526
                                                 ---------       ---------       ---------       ---------
Gross margin                                        27,128          29,696          45,808          98,599
                                                 ---------       ---------       ---------       ---------
Expenses:
Research and development                             7,523           7,707          23,279          22,405
Marketing and administration                        18,713          18,438          61,189          55,731
Amortization of intangible assets                      645             547           1,725           1,641
Restructure charges                                  7,780              --           7,780              --
                                                 ---------       ---------       ---------       ---------
     Total expenses                                 34,661          26,692          93,973          79,777
                                                 ---------       ---------       ---------       ---------
Operating income (loss)                             (7,533)          3,004         (48,165)         18,822
Interest expense                                    (1,431)           (981)         (4,321)         (3,147)
Interest income                                          3              45              82              74
Gain on sale of subsidiary                              --              --           2,744              --
                                                 ---------       ---------       ---------       ---------
Income (loss) before income taxes                   (8,961)          2,068         (49,660)         15,749
Provision for (benefit from) income taxes           (2,957)            743         (16,388)          5,669
                                                 ---------       ---------       ---------       ---------
Net income (loss)                                $  (6,004)      $   1,325       $( 33,272)     $  10,080
                                                 =========       =========       =========       =========
Net income (loss) per share:
Primary                                          $    (.37)      $     .08       $   (2.06)      $     .62
                                                 =========       =========       =========       =========
Fully diluted                                           --       $     .08              --       $     .62
                                                                 =========                       =========

Average shares and equivalents outstanding:
Primary                                             16,273          16,148          16,184          16,203
Fully diluted                                           --          18,397              --          18,433
</TABLE>


See accompanying notes.





                                      -2-
<PAGE>   3




                           CALIFORNIA MICROWAVE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
                             (Unaudited, See Note A)

<TABLE>
<CAPTION>
                                                      March 31         June 30
                                                        1997            1996
                                                      ---------       ---------
<S>                                                   <C>             <C>      
Assets
Current assets:
       Cash and cash equivalents                      $   1,634       $   4,560
       Short-term investments                             1,795           1,504
       Accounts receivable                               85,797         108,278
       Inventories                                       93,667         103,456
       Deferred tax assets                               23,311          10,387
       Prepaid expenses                                   1,968           2,314
                                                      ---------       ---------
                Total current assets                    208,172         230,499
                                                      ---------       ---------
Net property, plant and equipment                        45,506          48,762
Deferred tax assets                                       3,361           1,973
Intangible and other assets                              51,929          57,106
                                                      ---------       ---------
                                                      $ 308,968       $ 338,340
                                                      =========       =========

Liabilities and Stockholders' Equity
Current liabilities:
       Notes payable                                  $  11,500       $      --
       Current portion of long-term debt                    331             525
       Accounts payable                                  31,385          46,566
       Accrued income taxes                                 723           3,406
       Other accrued liabilities                         50,758          38,750
                                                      ---------       ---------
                Total current liabilities                94,697          89,247
                                                      ---------       ---------
Long-term liabilities                                    74,174          79,233

Stockholders' equity:
       Common stock                                       1,630           1,603
       Capital in excess of par value                    92,010          88,788
       Retained earnings                                 47,071          80,343
       Unamortized restricted stock plan expense           (482)           (722)
       Cumulative translation adjustment                   (132)           (152)
                                                      ---------       ---------
                Total stockholders' equity              140,097         169,860
                                                      ---------       ---------
                                                      $ 308,968       $ 338,340
                                                      =========       =========
</TABLE>

A-  The balance sheet at June 30, 1996 has been derived from the audited
    financial statements at that date, but does not include all of the
    information and footnotes required by generally accepted accounting
    principles for complete financial statements.

See accompanying notes.



                                      -3-
<PAGE>   4




                           CALIFORNIA MICROWAVE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                Nine Months Ended
                                                                     March 31
                                                             -----------------------
                                                               1997           1996
                                                               ----           ----
<S>                                                          <C>            <C>     
Operating activities:
Net income (loss)                                            $(33,272)      $ 10,080
Adjustments to reconcile net income (loss) to net
       cash provided by (used in) operating activities:
       Depreciation and amortization                           11,300          9,396
       Amortization of intangible assets                        1,725          1,641
       Non-cash portion of restructuring charges                1,160             --
       Amortization of debt issuance costs                        200            157
       Deferred tax assets                                    (16,388)            --
Net effect of changes in:
       Accounts receivable                                     24,758          4,940
       Inventories                                              9,789         (4,789)
       Prepaid expenses                                           346           (499)
       Accounts payable                                       (15,181)         3,351
       Accrued income taxes                                      (607)         3,593
       Other accrued liabilities                               17,364        (17,495)
                                                             --------       --------
Net cash provided by (used in) operating activities             1,194         10,375
                                                             --------       --------

Investing activities:
       Capital expenditures                                    (9,309)       (14,776)
       Other                                                    1,049           (722)
                                                             --------       --------
Net cash provided by (used in) investing activities            (8,260)       (15,498)
                                                             --------       --------

Financing activities:
       Proceeds from (payments on) long-term debt                (109)           (17)
       Proceeds from issuance of common stock                   3,249          3,459
       Proceeds from bank credit facilities                     1,000          1,200
                                                             --------       --------
Net cash provided by (used in) financing activities             4,140          4,642
                                                             --------       --------
Net increase (decrease) in cash and cash equivalents           (2,926)          (481)
Cash and cash equivalents at beginning of year                  4,560          1,983
                                                             --------       --------
Cash and cash equivalents at end of period                   $  1,634       $  1,502
                                                             ========       ========

Cash paid during the period for:
       Interest                                              $  3,654       $  2,059
       Income taxes                                               593          1,865
</TABLE>


See accompanying notes.





                                      -4-
<PAGE>   5


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 1 -          Basis of Presentation
                  ---------------------
                  The financial information at March 31, 1997, and for the
                  three and nine-month periods ended March 31, 1997 and 1996,
                  is unaudited, but includes all adjustments (consisting only of
                  normal recurring adjustments) which the management of
                  California Microwave, Inc. believes are necessary for a fair
                  presentation of the results for the periods presented. Interim
                  results are not necessarily indicative of results for a full
                  year. The consolidated interim financial statements should be
                  read in conjunction with the audited consolidated financial
                  statements for the year ended June 30, 1996 included in the
                  California Microwave, Inc. 1996 Annual Report to Stockholders.

                  In February 1997, The Financial Accounting Standards Board
                  issued Statement No.128, Earnings per Share, which is required
                  to be adopted on December 31, 1997. At that time, the Company
                  will be required to change the method currently used to
                  compute earnings per share and to restate all prior periods.
                  Under the new requirements for calculating primary earnings
                  per share, the dilutive effect of stock options will be
                  excluded. The impact is expected to result in an increase in
                  primary earnings per share in those periods in which the
                  Company has net income. The impact on primary earnings per
                  share for the quarter ended March 31, 1996 was not
                  significant. The impact of Statement 128 on fully diluted
                  earnings per share is also not significant.

Note 2 -          Restructuring and other charges
                  -------------------------------
                  As a result of continued disappointing operating performance
                  by the Microwave Network Systems (MNS) division and the
                  Satellite Transmission Systems (STS) division, the Company
                  performed a comprehensive review of these and certain other of
                  the Company's operations during December 1996 and January
                  1997, including a review of inventory levels, product
                  development and migration plans, and facility and personnel
                  needs. It was determined that MNS will focus on products that
                  have potentially higher margins and STS will focus on selected
                  strategic customers and network opportunities that utilize the
                  Company's products. This resulted in the write-off of certain
                  inventories, the restructuring of MNS and STS operations, and
                  the recording of charges relating to warranty and contract
                  issues that arose at MNS and STS during the second quarter.
                  Inventory, warranty and contract, and other charges of
                  approximately $39 million were reflected in the results of
                  operations for the second quarter. Restructuring charges of
                  approximately $8 million are reflected in the results of
                  operations in the third quarter. See Management's Discussion
                  and Analysis of Financial Condition and Results of Operations
                  for further information.

Note 3 -          Contingent Liabilities
                  ----------------------
                  On November 9, 1995, and December 12, 1995, two putative class
                  action lawsuits were filed in the United States District Court
                  for the Northern District of California. The plaintiffs in
                  these two cases, which have been consolidated, purport to
                  represent a class of all persons who purchased common stock of
                  the Company between September 6, 1994, and June 29, 1995 (the
                  class period). Named as defendants are the Company and certain
                  of its former executive officers. The Complaints allege that
                  defendants violated various federal securities laws through
                  material misrepresentations and omissions during the class
                  period. Defendants filed motions to dismiss the complaints,
                  which the court granted on April 19, 1996, with leave to
                  amend. Plaintiffs filed an amended consolidated complaint and
                  in August 1996 defendants filed a motion to dismiss that
                  complaint. On November 1, 1996, the motion to dismiss was
                  denied. Although the ultimate outcome of these proceedings
                  cannot be determined, the Company believes that it has
                  meritorious defenses to the claims alleged in these lawsuits
                  and intends to defend the actions vigorously.





                                      -5-
<PAGE>   6

                  The Company is subject to other legal proceedings and claims
                  that arise in the normal course of its business. The Company
                  believes these proceedings will not have a material adverse
                  effect on the financial position or results of operations of
                  the Company.

Note 4 -          Inventories
                  -----------
<TABLE>
<CAPTION>
                                            (in thousands)
                                        March 31       June 30
                                          1997          1996
                                        --------      ---------
<S>                                     <C>           <C>     
Projects in process                     $ 28,829      $ 23,948
Less progress billings                     4,874        11,750
                                        --------      --------
                                          23,955        12,198
Work-in-process and finished goods        36,161        43,161
Raw materials and parts                   33,551        48,097
                                        --------      --------
                                        $ 93,667      $103,456
                                        ========      ========
</TABLE>

Note 5 -          Unbilled Accounts Receivable
                  ----------------------------
                  Included in accounts receivable at March 31, 1997 and June 30,
                  1996 are approximately $4.7 million and $7.5 million,
                  respectively, of unbilled receivables resulting from
                  provisions contained in certain export contracts.

                  The remaining unbilled receivables at March 31, 1997 are
                  expected to be billed and collected within one year.

Note 6 -          Stockholders' Equity 
                  --------------------
                  The change in capital in excess of par value for the nine
                  months ended March 31, 1997 consists principally of common
                  stock issuances and tax benefit of options exercised.

Note 7-           Reclassifications
                  -----------------
                  Certain fiscal year 1996 amounts have been reclassified to
                  conform to the fiscal 1997 presentation.

Note 8 -          Income Taxes
                  ------------
                  At March 31, 1997, the Company had a cumulative net deferred
                  tax asset of $26.6 million that will be available to reduce
                  payments on future tax liabilities. Management of the Company
                  believes it is more likely than not that the asset will be
                  realized through refunds of previously paid income taxes,
                  future profitable operations, and tax planning strategies.

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

Statements made below and elsewhere in this Form 10-Q that are not historical
facts, including any statements about expectations for fiscal year 1997 and
beyond, involve certain risks and uncertainties. Factors that could cause the
Company's actual results to differ materially from management's projections,
estimates and expectations include, but are not limited to, delays in the
receipt of orders or in the shipment of products, delays in implementing the
Company's restructuring plan, delays in transitioning from older to newer
products, and other factors referred to under "Information Regarding Forward
Looking Statements" in the Company's Form 10-K Annual Report for its fiscal year
ended June 30, 1996, and in the Company's Consolidated Financial Statements and
Notes to Financial Statements contained in its 1996 Annual Report to
Stockholders. The Condensed Consolidated Financial Statements and Notes to
Condensed Consolidated Financial Statements should be read in conjunction with
this Management's Discussion and Analysis of Financial Condition and Results of
Operations.




                                      -6-
<PAGE>   7

The following table sets forth for the periods indicated (i) certain income and
expense items expressed as a percentage of the Company's total sales and (ii)
the percentage change of such items for the three and nine months ended March
31, 1997 compared to the three and nine months ended March 31, 1996. See
Condensed Consolidated Statements of Operations.

<TABLE>
<CAPTION>
                                                                                            Period to Period
                                                     Percent of Sales                     Increase (Decrease)
                                                     ----------------                     -------------------

                                           Three Months           Nine Months       Three Months       Nine Months
                                               Ended                 Ended              Ended             Ended
                                             March 31              March 31           March 31          March 31
                                             --------              --------           --------          --------
                                           1997     1996        1997     1996       1997 vs 1996       1997 vs 1996
                                           ----     ----        ----     ----       ------------       ------------
<S>                                        <C>      <C>         <C>      <C>           <C>                <C>   
Sales                                      100.0%   100.0%      100.0%   100.0%        (7.2)%             (5.6)%
Gross margin                                29.2     29.7        14.6     29.7         (8.6)             (53.5)
Research and development expenses            8.1      7.7         7.4      6.7         (2.4)               3.9
Marketing and administration expenses       20.1     18.4        19.5     16.8          1.5                9.8
Amortization of intangible assets            0.7      0.6         0.6      0.5         17.9                5.1
Restructure charges                          8.4                  2.5                    NM                 NM
Operating income (loss)                     (8.1)     3.0       (15.4)     5.7           NM                 NM
Interest (expense) net                      (1.5)    (0.9)       (1.4)    (1.0)        52.6               37.9
Income (loss) before income taxes           (9.6)     2.1       (15.8)     4.7           NM                 NM
Net income (loss)                           (6.5)     1.3       (10.6)     3.0           NM                 NM
</TABLE>

The following table sets forth sales by product class and by market sector for
the three and nine months ended March 31, 1997 and 1996 (in thousands):

<TABLE>
<CAPTION>
                                                   Sales
                                                   -----

                                   Three Months                Nine Months
                                       Ended                      Ended
                                     March 31                   March 31
                                     --------                   --------
                                1997          1996          1997          1996
                                ----          ----          ----          ----
<S>                           <C>           <C>           <C>           <C>     
Satellite Communications      $ 26,395      $ 39,819      $103,510      $152,381
Wireless                        43,058        40,066       138,002       123,787
Intelligence and other          23,404        20,188        72,126        55,957
                              --------      --------      --------      --------
                              $ 92,857      $100,073      $313,638      $332,125
                              ========      ========      ========      ========

International                 $ 39,009      $ 44,624      $139,675      $167,284
U.S. Commercial                 28,405        28,910        93,244        90,781
U.S. Government                 25,443        26,539        80,719        74,060
                              --------      --------      --------      --------
                              $ 92,857      $100,073      $313,638      $332,125
                              ========      ========      ========      ========
</TABLE>

OVERVIEW

       As a result of continued disappointing operating performance by the
Microwave Network Systems (MNS) division and the Satellite Transmission Systems
(STS) division, management of the Company performed a comprehensive review of
these and certain other of the Company's operations during December 1996 and
January 1997. MNS represents the merged operations of TeleSciences Transmission
Systems (TTS), acquired in October 1993, Microwave Networks Incorporated,
acquired in May 1995, and certain operations of Microwave Radio Corporation,
acquired in April 1992. This comprehensive





                                      -7-
<PAGE>   8

review included a review of inventory levels, product development and migration
plans, facility and personnel needs, and other matters. As a result of this
review, it was determined that MNS will focus on a smaller number of potentially
higher-margin products, including several recently introduced products, and STS
will focus on selected strategic customers and networking opportunities that
utilize the Company's products. As a result of this product strategy, the
operations of MNS are in the process of being reorganized into two divisions,
one focused on the international cellular market and the other focused on the
domestic Personal Communications Services (PCS) relocation market. MNS will
immediately discontinue the sale of certain products and will phase-out other
products over the next 6 to 18 months. STS will also eliminate certain products
and will transfer others to the Company's EFData subsidiary (EFD). Accordingly,
management determined that certain quantities of inventory on-hand or subject to
firm purchase commitments at MNS and STS, and to a lesser extent at certain
other divisions, were in excess of reforecasted demand. As a result of such
review, including the decision to discontinue or phase-out certain products, the
Company recorded a provision of $31.2 million during the quarter ended December
31, 1996, to write-down certain inventories to their estimated net realizable
value.

       In addition, certain customers of MNS have experienced quality problems
with a specific product (now discontinued) which was sold in significant
quantities during 1993 to 1995. After determining the scope of the quality
problem, the Company recently offered to retrofit the affected products at no
cost to the customer. The Company has recorded a provision for the estimated
costs of this program. The Company also determined that warranty and other
provisions should be made for other discontinued products and for certain loss
contracts. Warranty and contract loss provisions recorded in the quarter ended
December 31, 1996 amounted to $6.5 million.

       Primarily as a result of the above, during the quarter ended December 31,
1996, the Company recorded $38.0 million to cost of products sold and $1.3
million to marketing and administration expense for the write-down of
inventories to amounts expected to be realized, the recognition of unusual
warranty and contract costs, and other expenses. Only approximately $7.0
million of the total of $39.3 million will result in future cash outlays. The
comprehensive review of operations also resulted in the decision to reduce
future operating expenses through the closure of certain facilities at MNS and
the termination of approximately 175 employees at MNS and STS. The Company
recognized approximately $7.8 million of restructuring charges, of which $6.9
million relates to facility closures and the remainder to severance charges. As
required by generally accepted accounting principles, these restructuring
charges were recorded in the quarter ended March 31, 1997. The Company also
expects aggregate costs of approximately $1 million for the fourth quarter of
fiscal 1997 and the first quarter of fiscal 1998 for retention and relocation
costs for certain employees and other expenses to be incurred in connection
with the restructuring. These costs will be included in marketing and
administration expense and research and development expense in those periods.
Relocation expenses incurred during the quarter ended March 31, 1997, were
approximately $800,000.

       As a part of the review process, and in accordance with its accounting
policies, the Company reviewed the $10 million carrying value of intangible
assets associated with the acquisition of TTS. The Company concluded that the
asset will be realized through the on-going domestic operations of MNS. However,
the remaining period over which this asset will be realized has been shortened
to 13 years from 26 years.

       In June 1995, the Company recorded restructuring charges of approximately
$20.9 million and other charges of approximately $15.5 million, for a total of
approximately $36.4 million in connection with a program to reduce costs and
improve operating efficiencies. Through March 31, 1997, asset writedowns and
payments in connection with the 1995 charges totaled approximately $33.5 million
leaving approximately $2.9 million to be paid.

RESULTS OF OPERATIONS

       Sales   Sales were $92.9 million and $100.1 million for the three months
ended March 31, 1997 and 1996, respectively, representing a decrease of 7%.
Wireless product sales and intelligence systems and other sales increased 8% and
16%, respectively, while satellite communication sales decreased 34%. 





                                      -8-
<PAGE>   9

The decrease in satellite communications sales was principally due to continued
delays in completing the financing of certain large satellite earth station
projects and the decrease in sales for a telecommunications project in Saudi
Arabia as this project was substantially completed in fiscal 1996 and has not
been replaced by similar projects in fiscal 1997. The Company expects that
satellite communication sales for the fourth quarter will be below satellite
communication sales recorded in the fourth quarter of fiscal 1996.

       U.S. commercial sales, sales to the U.S. government and international
sales for the three months ended March 31, 1997 decreased 2%, 4% and 13%,
respectively, when compared to the third quarter of fiscal 1996. Products
represented 69% of sales in the third quarter of 1997 compared to 63% in the
third quarter of 1996, with the balance represented by system sales.

       Sales were $313.6 million and $332.1 million for the nine months ended
March 31, 1997 and 1996, respectively, representing a decrease of 6%. Wireless
sales and intelligence systems and other sales increased 12% and 29%,
respectively, substantially offsetting a 32% decrease in satellite
communications sales. U.S. commercial sales and sales to the U.S. government
increased 3% and 9%, respectively, while international sales decreased 17%.
Satellite communications and international sales declined because the Saudi
Arabia project was not replaced.

       Gross Margin   Gross margin was $27.1 million and $29.7 million for the
three months ended March 31, 1997 and 1996, respectively. Gross margin as a
percentage of total sales was 29.2% and 29.7%, respectively, for such periods.
Continued competitive pricing, particularly at EFData, continues to limit
increases in gross margins on product sales.

       Gross margin was $45.8 million and $98.6 million for the nine months
ended March 31, 1997 and 1996, respectively, representing a decrease of 54%.
Gross margin as a percentage of sales was 26.7% (excluding the second quarter
charges discussed in the overview above) and 29.7% for such periods,
respectively.

       Research and Development   Research and development expenses were $7.5
million and $7.7 million for the three months ended March 31, 1997 and 1996,
respectively, representing a decrease of 2%. Research and development expenses
as a percentage of total sales were 8.1% and 7.7% for such periods,
respectively. The Company continues to focus its research and development
efforts primarily on the development of new satellite networking products and
networking software and wireless products.

       Research and development expenses were $23.3 million and $22.4 million
for the nine months ended March 31, 1997 and 1996, respectively, representing an
increase of 4%. Research and development expenses as a percentage of total sales
were 7.4% and 6.7% for such periods, respectively.

       Marketing and Administration   Marketing and administration expenses were
$18.7 million and $18.4 million for the three months ended March 31, 1997 and
1996, respectively, representing an increase of 2%. Marketing and administration
expenses as a percentage of total sales were 20.1% and 18.4% for such periods,
respectively.

       Marketing and administration expenses were $61.2 million and $55.7
million for the nine months ended March 31, 1997 and 1996 respectively,
representing an increase of 10%. Marketing and administration expenses as a
percentage of total sales were 19.5% and 16.8% for such periods, respectively.
Included in marketing and administration expenses for the quarter ended December
31, 1996, is approximately $1.3 million of severance charges for the Company's
former chief executive officer.

       Amortization of Intangible Assets   Amortization expenses associated with
intangible assets increased by approximately $100,000 during the three months
and nine months ended March 31, 1997. This increase is due to the change in the
remaining amortization period for the TTS intangible assets of approximately $10
million from 26 years to 13 years.






                                      -9-
<PAGE>   10

       Restructure Charges   The Company recorded $7.8 million of restructuring
charges in the third quarter of fiscal 1997. The amount consists of $800,000 for
employee severance, of which $334,000 was paid during the third quarter, and the
balance of $7.0 million relates to facility closures and is expected to be
incurred over the next 5 years.

       Interest Expense, Net   Net interest expense was $1.4 million and $0.9
million for the three months ended March 31, 1997 and 1996, respectively,
representing a increase of 53%. Net interest expense was $4.2 million and $3.1
million for the nine months ended March 31, 1997 and 1996, respectively,
representing a 38% increase. The increase in net interest expense reflects the
need for the Company to borrow against its credit lines to fund operations and
capital expenditures.

       Gain on Sale of Subsidiary   During the second quarter of fiscal 1996,
the Company recognized a $2.7 million gain from the sale of its Digital Radio
Technology subsidiary.

       Provision for (Benefit from) Income Taxes   The provision for (benefit
from) income taxes was ($3.0) million and $0.7 million for the three months
ended March 31, 1997 and 1996, respectively, and ($16.4) million and $5.7
million for the nine months ended March 31, 1997 and 1996 respectively. The
effective tax rate benefit of 33% for fiscal 1997 represents the federal
statutory rate of 35% reduced for the effect of non-deductible amortization of
goodwill (for tax purposes).

       At March 31, 1996, the Company had a cumulative net deferred tax asset of
$26.6 million that will be available to reduce payments on future tax
liabilities. Management of the Company believes it is more likely than not that
the asset will be realized through refunds of previously paid income taxes,
future profitable operations, and tax planning strategies.

LIQUIDITY AND CAPITAL RESOURCES

       At March 31, 1997, the Company had working capital of $113.5 million,
including $1.6 million of cash and cash equivalents, compared with working
capital of $141.3 million, including cash and cash equivalents of $4.6 million,
at June 30, 1996.

       During the first nine months of fiscal 1997, cash and cash equivalents
were provided by operations (after adjusting the operating loss for depreciation
and amortization and charges discussed in the overview) and decreases in
accounts receivable, offset by reductions of accounts payable. Cash and cash
equivalents were used to pay year-end accrued liabilities, including payments
under incentive agreements and employee benefit plans and certain restructuring
payments. The net result was cash and cash equivalents provided by operations of
$1.2 million. During the first nine months of fiscal 1996, cash and cash
equivalents were provided by operating income (including depreciation and
amortization ) and decreases in inventories, and were used to fund an increase
in accounts receivable and to reduce accounts payable and to pay year-end
accrued liabilities. The net result was cash and cash equivalents provided by
operating activities of $10.4 million.

       The Company's investing activities during the first nine months of fiscal
1997 included capital expenditures of $9.3 million. Total cash used for
investing activities was $8.3 million. Net cash used for investing activities
during the first nine months of fiscal 1996 was $15.5 million, which included
$14.8 million of capital expenditures.

       During the first nine months of fiscal 1997, cash and cash equivalents of
$4.1 million were provided by financing activities, including borrowings of $1
million under the Company's credit lines and sales of $3.2 million of common
stock to employees under on-going stock option and purchase plans. During the
first nine months of 1996, the Company sold $3.5 million of common stock to its
employees.

       The above activity resulted in a net decrease in cash and cash
equivalents of $2.9 million for the first nine months of fiscal 1997 compared to
a net decrease in cash and cash equivalents of $0.5 million for the first nine
months of fiscal 1996.




                                      -10-
<PAGE>   11

     In December 1996, the Company amended its principal credit facility. The

facility was reduced to $30 million and is secured by the Company's current
assets. The amended facility expires March 1998. As of March 31, 1997, there
were $11.5 million of borrowings and $5.0 million of standby letters of credit
outstanding under this facility, leaving $13.5 million of available credit. At
March 31, 1997, the Company was not in compliance with certain covenants of its 
debt agreements. The lenders have waived such non-compliance and amended such
covenants as necessary to bring the Company into compliance at March 31, 1997.
In May, the Company expects to replace this credit facility with a new 3 year
credit facility with availability based upon an accounts receivable formula.
This new facility will be secured by current and intangible assets and will
require .25% annual commitment fees. Interest rates for borrowings will not
exceed the bank's reference rate plus 0.5%.

       The Company has sold certain qualified export receivables to a bank,
these receivables are insured for 95% of their value and the remaining uninsured
5% is with full recourse to CMI. At March 31, 1997, the outstanding balances of
sold and uncollected receivable balances approximated $12.0 million.

       The Company believes that its current cash position, funds generated from
operations and funds available from its credit facilities will be adequate to
meet the Company's requirements for working capital, capital expenditures and
debt service for at least the next 12 months.

OTHER FINANCIAL INFORMATION

       Bookings   Orders booked were $115.7 million and $90.4 million for the
three months ended March 31, 1997 and 1996, respectively, representing an
increase of 28%. Bookings increased in all product areas when compared to the
third quarter of fiscal 1996. Intelligence systems bookings increased by 157% to
$31.9 million and represent 27% of total bookings, wireless increased by 8% to
38% of total bookings and satellite communications by 7% to 35% of total
bookings.

       Backlog   Backlog was $181.8 million and $206.0 million at March 31, 1997
and 1996, respectively, representing a decrease of 12%. Substantially all of the
March 31, 1997 backlog is expected to be delivered within twelve months.




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<PAGE>   12


                           Part II - Other Information


Item 1.-5.    Inapplicable

Item 6.       Exhibits and Reports on Form 8-K

              (a)  Exhibit 10.25 - First amended and restated credit agreement,
                   dated December 31, 1996, between California Microwave, Inc.
                   and Bank of America National Trust Savings Association

              (b)  Exhibit 11 - Statement re computation of per share earnings.

              (c)  Reports on Form 8-K.
                   January 14, 1997 reporting under Item 5. - Other Events.
                   February 12, 1997 reporting under Item 5. - Other Events
                   March 19, 1997 reporting under Item 5. - Other Events





                                      -12-
<PAGE>   13




                                   SIGNATURES



       Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.



CALIFORNIA MICROWAVE, INC.




May 12, 1997                             BY     /s/   Gilbert F. Johnson
------------                                    ---------------------------
Date                                            Gilbert F. Johnson
                                                President



May 12, 1997                             BY     /s/   George L. Spillane
------------                                    ---------------------------
Date                                            George L. Spillane
                                                Vice President
                                                Chief Financial Officer








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