UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

|X|   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

|_|   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 0-6620

                                  ANAREN, INC.
             (Exact name of registrant as specified in its Charter)

        New York                                          16-0928561
        --------                                          ----------
(State of incorporation)                     (I.R.S Employer Identification No.)

6635 Kirkville Road                          13057
East Syracuse, New York                      -----
-----------------------                      (Zip Code)
(Address of principal
executive offices)

Registrant's telephone number, including area code: 315-432-8909

________________________________________________________________________________
(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 by checkmark  whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be  submitted  and posted  pursuant to Rule 405 of  regulation  S-T  (Section
232.405 of this  chapter)  during the  preceding  12 months (or for such shorter
period that the registrant was required to submit and post such files. Yes|_| No
|_|

Indicate by check mark whether the Registrant is a large  accelerated  filer, an
accelerated  filer, a  non-accelerated  filer, or smaller  reporting company (as
defined in Rule 12b-2 of the Exchange Act).
Check One: Large accelerated filer |_|              Accelerated filer |X|

             Non-accelerated filer |_|      Smaller reporting company |_|

      Indicate  by check mark  whether  the  Registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

      The number of shares of Registrant's Common Stock outstanding on April 26,
2010 was 14,697,265.

                                       1
<PAGE>

                                  ANAREN, INC.
                                    FORM 10-Q
                                      INDEX

PART I - FINANCIAL INFORMATION                                          Page No.
------------------------------                                          --------

   Item 1.  Condensed Consolidated Financial Statements

            Condensed Consolidated Balance Sheets as of                  3
            March 31, 2010 and June 30, 2009 (unaudited)

            Condensed Consolidated Statements of Income                  4
            for the Three Months Ended March 31,
            2010 and 2009 (unaudited)

            Condensed Consolidated Statements of Income                  5
            for the Nine Months Ended March 31,
            2010 and 2009 (unaudited)

            Condensed Consolidated Statements of Cash Flows              6
            for the Nine Months Ended March 31,
            2010 and 2009 (unaudited)

            Notes to Condensed Consolidated Financial                    7 - 15
            Statements (unaudited)

   Item 2.  Management's Discussion and Analysis                         16 - 22
            of Financial Condition and Results of Operations

   Item 3.  Quantitative and Qualitative Disclosures About Market Risk   23

   Item 4.  Controls & Procedures                                        23

PART II - OTHER INFORMATION
---------------------------

   Item 1A. Risk Factors                                                 24

   Item 6.  Exhibits                                                     24

   Officer Certifications                                                25 - 29


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

                                  ANAREN, INC.
                      Condensed Consolidated Balance Sheets
                        March 31, 2010 and June 30, 2009
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                March 31, 2010         June 30, 2009
                                                                                                --------------         -------------
<S>                                                                                                <C>                   <C>
Assets:
      Cash and cash equivalents                                                                    $  44,445             $  49,893
      Securities held to maturity                                                                      1,516                11,810

      Receivables, less an allowance of $0.4 million at
         March 31, 2010 and June 30, 2009                                                             28,103                24,466
      Inventories                                                                                     33,392                35,282
      Prepaid expenses and other current assets                                                        4,318                 4,033
      Deferred income taxes                                                                            1,588                 1,547
                                                                                                   ---------             ---------
         Total current assets                                                                        113,362               127,031
      Securities available-for-sale                                                                    1,050                 1,050
      Securities held to maturity                                                                     18,430                 2,079
      Property, plant, and equipment, net                                                             49,789                52,889
      Deferred income taxes                                                                               28                    27
      Goodwill                                                                                        42,481                42,635
      Other intangible assets, net                                                                    10,450                11,344
                                                                                                   ---------             ---------
      Total assets                                                                                 $ 235,590             $ 237,055
                                                                                                   =========             =========

Liabilities and Shareholders' Equity:
       Current installments of long-term debt obligation                                           $  10,000             $   9,800
       Accounts payable                                                                                8,117                 6,991
       Accrued expenses                                                                                4,819                 5,208
       Deferred income taxes                                                                              --                   177
       Customer advance payments                                                                       1,071                   118
       Other current liabilities                                                                       2,237                 2,525
                                                                                                   ---------             ---------
         Total current liabilities                                                                    26,244                24,819
      Deferred income taxes                                                                            2,465                 2,103
      Pension and postretirement benefit obligation                                                    6,340                 6,496
      Long-term debt obligation                                                                       30,000                40,000
      Other liabilities                                                                                1,898                 2,692
                                                                                                   ---------             ---------
      Total liabilities                                                                               66,947                76,110
                                                                                                   ---------             ---------
Stockholders' Equity:
       Common stock, $0.01 par value.  Authorized 200,000
       shares; issued 28,505 and 28,007 at March 31, 2010 and
       June 30, 2009, respectively                                                                       285                   280
       Additional paid-in capital                                                                    205,199               199,597
       Retained earnings                                                                             114,339               104,399
       Accumulated other comprehensive loss                                                           (2,380)               (2,397)
                                                                                                   ---------             ---------
                                                                                                     317,443               301,879
         Less 13,808 and 13,251 treasury shares at March 31,
            2010 and June 30, 2009, respectively, at cost                                            148,800               140,934
                                                                                                   ---------             ---------
         Total stockholders' equity                                                                  168,643               160,945
                                                                                                   ---------             ---------
       Total liabilities and stockholders' equity                                                  $ 235,590             $ 237,055
                                                                                                   =========             =========
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                       3
<PAGE>

                                  ANAREN, INC.
                   Condensed Consolidated Statements of Income
                   Three Months Ended March 31, 2010 and 2009
                    (in thousands, except per share amounts)
                                   (unaudited)

                                                         2010            2009

Net sales                                              $42,181         $43,507
Cost of sales                                           25,356          28,423
                                                       -------         -------
         Gross profit                                   16,825          15,084
Operating Expenses:
   Marketing                                             2,407           2,360
   Research and development                              3,999           3,392
   General and administrative                            5,096           4,601
                                                       -------         -------
         Total operating expenses                       11,502          10,353
                                                       -------         -------
         Operating income                                5,323           4,731
Other income (expense):
   Interest expense                                       (129)           (312)
   Other, primarily interest income                         75             257
                                                       -------         -------
         Total other income (expense), net                 (54)            (55)
                                                       -------         -------
         Income before income tax expense                5,269           4,676
Income tax expense                                         708           1,200
                                                       -------         -------
         Net income                                    $ 4,561         $ 3,476
                                                       =======         =======

Earnings per share:
   Basic                                               $  0.33         $  0.25
                                                       =======         =======
   Diluted                                             $  0.32         $  0.25
                                                       =======         =======

Weighted average common shares Outstanding:
   Basic                                                13,919          13,812
                                                       =======         =======
   Diluted                                              14,328          14,062
                                                       =======         =======

      See accompanying notes to condensed consolidated financial statements


                                       4
<PAGE>

                                  ANAREN, INC.
                   Condensed Consolidated Statements of Income
                    Nine Months Ended March 31, 2010 and 2009
                    (in thousands, except per share amounts)
                                   (unaudited)

                                                        2010            2009

Net sales                                             $123,537        $123,074
Cost of sales                                           77,743          84,168
                                                      --------        --------
         Gross profit                                   45,794          38,906
Operating Expenses:
   Marketing                                             7,006           6,505
   Research and development                             11,140           9,500
   General and administrative                           14,218          13,993
                                                      --------        --------
         Total operating expenses                       32,364          29,998
                                                      --------        --------
         Operating income                               13,430           8,908
Other income (expense):
   Interest expense                                       (451)         (1,200)
   Other, primarily interest income                        288             968
                                                      --------        --------
         Total other income (expense), net                (163)           (232)
                                                      --------        --------
         Income before income tax expense               13,267           8,676
Income tax expense                                       3,328           2,274
                                                      --------        --------
         Net income                                   $  9,939        $  6,402
                                                      ========        ========

Earnings per share:
   Basic                                              $   0.71        $   0.46
                                                      ========        ========
   Diluted                                            $   0.68        $   0.45
                                                      ========        ========

Weighted average common shares Outstanding:
   Basic                                                14,083          13,916
                                                      ========        ========
   Diluted                                              14,595          14,102
                                                      ========        ========

      See accompanying notes to condensed consolidated financial statements


                                       5
<PAGE>

                                  ANAREN, INC.
                 Condensed Consolidated Statements of Cash Flows
                    Nine Months Ended March 31, 2010 and 2009
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                         2010                2009
                                                                                                       --------            --------
<S>                                                                                                    <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                                      $  9,939            $  6,402
       Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation                                                                                       6,700               6,083
       Loss on disposal of fixed assets                                                                     214                  (4)
       Amortization                                                                                         996               1,058
       Deferred income taxes                                                                               (245)               (468)
       Equity based compensation                                                                          2,703               3,048

       Changes in operating assets and liabilities:
           Receivables                                                                                   (3,638)              3,310
           Inventories                                                                                    1,874                (624)
           Prepaid expenses and other current assets                                                       (722)               (458)
           Accounts payable                                                                               1,126                (486)
           Accrued expenses                                                                                (389)                714
           Customer advance payments                                                                        953              (1,051)
           Other liabilities                                                                               (702)             (1,586)
           Pension and postretirement benefit obligation                                                   (156)                216
                                                                                                       --------            --------
             Net cash provided by operating activities                                                   18,653              16,154
                                                                                                       --------            --------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                                                              (3,862)             (5,475)
       Escrow claim received (payments made) related to the M. S.
             Kennedy and Unicircuit acquisitions, net of cash acquired                                      154             (48,166)
       Proceeds from sale of property, plant, and equipment                                                  50                  --
       Maturities of held to maturity and available-for-sale securities                                  11,760              17,109
       Purchases of held to maturity securities                                                         (17,918)             (3,130)
                                                                                                       --------            --------
             Net cash used in investing activities                                                       (9,816)            (39,662)
                                                                                                       --------            --------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Payments on mortgage payable                                                                          --              (1,210)
       Payment on note payable                                                                           (9,800)                 --
       Proceeds from note payable                                                                            --              49,800
       Stock options exercised                                                                            3,149                 230
       Excess tax benefit from exercise of stock options                                                    214                  28
       Purchase of treasury stock                                                                        (7,865)             (5,014)
                                                                                                       --------            --------

             Net cash provided by (used in) financing activities                                        (14,302)             43,834
                                                                                                       --------            --------
Effect of exchange rates on cash                                                                             17                   5
                                                                                                       --------            --------
             Net (decrease) increase in cash and cash equivalents                                        (5,448)             20,331
Cash and cash equivalents, beginning of year                                                             49,893              10,711
                                                                                                       --------            --------
Cash and cash equivalents, end of period                                                               $ 44,445            $ 31,042
                                                                                                       ========            ========


Supplemental disclosures of cash flow information:
       Cash paid during the period for:
         Interest                                                                                      $    586            $    888
                                                                                                       ========            ========
         Income taxes, net of refunds                                                                  $  4,424            $  2,756
                                                                                                       ========            ========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.


                                       6
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

The condensed  consolidated  financial  statements are unaudited and reflect all
adjustments  (consisting of normal recurring  adjustments)  and accruals,  which
are, in the opinion of  management,  necessary  for a fair  presentation  of the
financial position and operating results for the interim periods.  The condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
consolidated financial statements and notes thereto,  together with management's
discussion  and  analysis of  financial  condition  and  results of  operations,
contained in the Company's  Annual Report on Form 10-K for the fiscal year ended
June 30,  2009.  The results of  operations  for the three and nine months ended
March 31,  2010 are not  necessarily  indicative  of the  results for the entire
fiscal year ending June 30, 2010, or any future interim period.

The income tax rates utilized for interim financial  statement  purposes for the
three and nine months  ended March 31, 2010 and 2009 are based on  estimates  of
income and utilization of tax credits for the entire fiscal year ending June 30,
2010.

The Company  evaluated all events or transactions  that occurred after March 31,
2010 up through the date the Company issued these financial  statements.  During
this period, the Company did not have any recognizable subsequent events.

Certain reclassifications on the condensed consolidated statements of cash flows
for the nine months ended March 31, 2009 have been made ($0.3  million of income
tax liability increase was consolidated with other liabilities).

(1) New Accounting Pronouncements

In October 2009,  new  accounting  guidance was issued related to the accounting
for revenue  recognition  from  arrangement  with  multiple  deliverables.  This
guidance  removes  the  objective-and-reliable-evidence-of-fair-value  criterion
from the separation criteria used to determine whether an arrangement  involving
multiple  deliverables  contains  more  than  one unit of  accounting,  replaces
references to "fair value" with  "selling  price" to  distinguish  from the fair
value measurements  required under the "Fair Value Measurements and Disclosures"
guidance,  provides a hierarchy  that  entities must use to estimate the selling
price, eliminates the use of the residual method for allocation, and expands the
ongoing  disclosure  requirements.  This  update is  effective  for the  company
beginning  July 1, 2011 and can be  applied  prospectively  or  retrospectively.
Management is currently  evaluating the effect that adoption of this update will
have, if any, on the Company's condensed  consolidated financial statements when
it becomes effective in 2012.

In  January  2009,  new   accounting   guidance  which  requires  more  detailed
disclosures  about  employers'  plan  assets,  including  employers'  investment
strategies, major categories of plan assets,  concentrations of risk within plan
assets, and valuation  techniques used to measure the fair value of plan assets.
Other than for some  additional  disclosures  in the Annual Report on Form 10-K,
adoption of this  guidance  will not have an effect on the  Company's  condensed
consolidated financial statements.

(2) Equity Based Compensation

The  components  of  equity-based  compensation  expense  in the  statements  of
earnings are as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended                    Nine Months Ended
                                                ------------------                    -----------------
                                                      March 31                             March 31
                                                      --------                             --------
(amounts in thousands)                         2010              2009              2010               2009
                                              ------             ----             ------             ------
<S>                                           <C>                <C>              <C>                <C>
Stock option                                  $  216             $389             $  640             $1,346
Restricted stock                                 865              608              2,063              1,702
                                              ------             ----             ------             ------
       Stock-based compensation               $1,081             $997             $2,703             $3,048
                                              ======             ====             ======             ======
</TABLE>

In the nine months ended March 31, 2010, 282,000 shares of restricted stock with
aggregate  grant date fair value of $4.0 million were issued.  The issued shares
have a vesting period ranging between 1 to 4 years.  There were no shares issued
in the three months ended March 31, 2010.


                                       7
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

(3) Securities

The amortized cost and fair value of securities are as follows:

<TABLE>
<CAPTION>
                                                                                               March 31, 2010
                                                                        ------------------------------------------------------------
(amounts in thousands)                                                                     Gross           Gross
                                                                        Amortized       unrealized      unrealized
                                                                          Cost             gains          losses          Fair value
                                                                        ---------       ----------      ----------        ----------
<S>                                                                      <C>               <C>            <C>              <C>
Securities available-for-sale:
   Auction rate securities                                               $ 1,440           $ --           $(390)           $ 1,050

Securities held to maturity:
    Municipal bonds                                                      $17,800           $176           $  --            $17,976
    Corporate bonds                                                        1,147              6              --              1,153
    Federal agency bonds                                                     999             --              (1)               998
                                                                         -------           ----           -----            -------
           Total securities held to maturity                              19,946            182              (1)            20,127
                                                                         =======           ====           =====            =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                                June 30, 2009
                                                                        ------------------------------------------------------------
(amounts in thousands)                                                                     Gross           Gross
                                                                        Amortized       unrealized      unrealized
                                                                          Cost             gains          losses          Fair value
                                                                        ---------       ----------      ----------        ----------
<S>                                                                      <C>               <C>            <C>              <C>
Securities available-for-sale:
   Auction rate securities                                               $ 1,440           $ --           $(390)           $ 1,050

Securities held to maturity:
    Municipal bonds                                                      $13,889           $310           $  --            $14,199
    Corporate bonds                                                           --             --              --                 --
    Federal agency bonds                                                      --             --              --                 --
                                                                         -------           ----           -----            -------
           Total securities held to maturity                              13,889            310              --             14,199
                                                                         =======           ====           =====            =======
</TABLE>

Contractual  maturities  of  marketable  debt  securities  held to maturity  are
summarized as follows:

<TABLE>
<CAPTION>
                                                                   March 31, 2010                            June 30, 2009
                                                                                     Fair                                      Fair
                                                             Amortized              market             Amortized              market
                                                               Cost                 value                 cost                value
                                                             ---------             -------             ---------             -------
<S>                                                           <C>                  <C>                  <C>                  <C>
(amounts in thousands)
Within one year                                               $ 1,516              $ 1,553              $11,810              $12,075
One year to four years                                         18,430               18,574                2,079                2,124
                                                              -------              -------              -------              -------
    Total                                                     $19,946              $20,127              $13,889              $14,199
                                                              =======              =======              =======              =======
</TABLE>

Contractual maturities of auction rate securities available for sale are
summarized as follows:

<TABLE>
<CAPTION>
                                                                   March 31, 2010                            June 30, 2009
                                                                                     Fair                                      Fair
                                                                                    market                                    market
                                                               Cost                 value                 Cost                value
                                                             ---------             -------             ---------             -------
<S>                                                           <C>                   <C>                  <C>                  <C>
(amounts in thousands)
One year to five years                                        $1,440                $1,050               $1,440               $1,050
</TABLE>

The Company  owns one auction  rate  security.  The security has gone to auction
once  every 365 days,  and  since  September  2008,  the  security  has not been
purchased.  Therefore,  based on the outlook of the auction process, the Company
has recorded the security as long term. The available-for-sale  security that is
in an unrealized  loss position is  considered a temporary  impairment,  and the
unrealized  loss  has  been  recorded  as  a  component  of  accumulated   other
comprehensive  income. This temporary  impairment is generally due to changes in
the overall level of interest rates since the security was acquired. The Company
has a policy which  considers  historic  interest rate volatility and the target
actual  duration of its  investments  in debt  securities to initially  identify
potential other than-temporary  impairments. If a debt security is identified as
a potential other-than-temporarily impaired security,


                                       8
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

the  Company  has the  option to assert  its  ability  and  intent to hold it to
maturity and thereby would not recognize any loss, if necessary. The Company has
not  recognized  impairment  losses in the three and nine months ended March 31,
2010  and  2009.  The  Company  also has an  escrow  agreement  in  place  which
institutes  a deemed sale of the  investment  at the second  anniversary  of the
purchase date of M. S. Kennedy Corp (August 2010). The Company believes there is
no other than temporary impairment of this asset as of March 31, 2010.

(4) Fair Value Measurements

The carrying amount of financial instruments,  including cash, trade receivables
and accounts payable, approximated their fair value as of March 31, 2010 because
of the short maturity of these  instruments.  Also, the Company's  carrying cost
for its revolving credit note approximates fair value.

The carrying value of cash equivalents and the available-for-sale  security were
based on fair market value and a discounted cash flow analysis, respectively.

Valuations on certain  instruments  are  prioritized  into three broad levels as
follows.  Level 1 inputs are quoted prices  (unadjusted)  in active  markets for
identical  assets or  liabilities.  Level 2 inputs are quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar
assets in markets that are not active,  inputs other than quoted prices that are
observable for the asset or liability,  including  interest rates,  yield curves
and credit risks, or inputs that are derived principally from or corroborated by
observable  market data  through  correlation.  Level 3 inputs are  unobservable
inputs based on our own  assumptions  used to measure assets and  liabilities at
fair value. A financial asset or liability's  classification is determined based
on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value as
measured on a recurring basis as of March 31, 2010:

(amounts in thousands)
<TABLE>
<CAPTION>
                                                                         Significant other    Significant
                                     Total Carrying   Quoted prices in       observable      unobservable
                                        Value at       active markets          inputs           inputs
                                     March 31, 2010      (Level 1)           (Level 2)         (Level 3)
                                     --------------   ----------------   -----------------   ------------
<S>                                      <C>              <C>                 <C>               <C>
Asset Category

Cash and cash equivalents                $15,619          $15,619             $   --            $   --

Available-for-sale
    securities                             1,050               --                 --             1,050
</TABLE>

Valuation Techniques.

In the first quarter ended September 30, 2008, the Company acquired this Level 3
security,  noted  in the  table  above,  with an  estimated  fair  value of $1.4
million.  As of March 31, 2010 and June 30,  2009,  this  security was valued at
$1.1 million. The Company's  available-for-sale security is a debt security that
is traded in an inactive  market.  After  analyzing  the  underlying  assets and
structure of the student loan auction rate security,  the Company has determined
that the most appropriate method of deriving a value indication was a discounted
cash  flow  analysis.   The  Company  found  that  collateral   characteristics,
redemption probability, credit rating, and discount rates are the most important
value drivers to determine an estimated fair value of the  underlying  security,
and is classified within Level 3 of the valuation hierarchy.


                                       9
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

(5) Intangible Assets

The major components of intangible assets are as follows:



<TABLE>
<CAPTION>
                                                         March 31, 2010                       June 30, 2009
(amounts in thousands)                              Gross               Net               Gross              Net
                                                   Carrying           Carrying          Carrying          Carrying
                                                    Amount             Amount            Amount            Amount
                                                    ------             ------            ------            ------
<S>                                                 <C>               <C>                <C>               <C>
Amortizable intangible assets:
    Customer relationships                          $7,530            $ 6,287            $7,530            $ 6,852
    Developed technology                               780                520               780                637
    Non-competition agreements                       1,130                663             1,130                875
                                                    ------            -------            ------            -------
       Total                                        $9,440            $ 7,470            $9,440            $ 8,364
                                                    ======            =======            ======            =======
Non-amortizable intangible assets:
    Trade names                                                         2,980                                2,980
                                                                      -------                              -------
Total intangible assets                                               $10,450                              $11,344
                                                                      =======                              =======
</TABLE>

Intangible asset amortization  expense for the three months ended March 31, 2010
and 2009  aggregated  $0.3 million and $0.1 million,  respectively,  and for the
nine  months  ended  March 31, 2010 and 2009  aggregated  $0.9  million and $0.8
million,  respectively.  Amortization expense related to developed technology is
recorded in cost of sales, and amortization  expense for non-compete  agreements
and customer relationships is recorded in general and administrative expense.

The  changes in the  carrying  amount of  goodwill  for the year ended March 31,
2010, are as follows:

(amounts in thousands)

Balance, July 1, 2009                                                  $ 42,635
Escrow claim received                                                      (154)
                                                                       --------
Balance, March 31, 2010                                                $ 42,481
                                                                       ========

(6) Inventories

Inventories are summarized as follows:

(amounts in thousands)                        March 31, 2010       June 30, 2009
                                              --------------       -------------
Raw Materials                                     $16,744             $18,533
Work in process                                    13,163              12,664
Finished goods                                      3,485               4,085
                                                  -------             -------
                                                  $33,392             $35,282
                                                  =======             =======

(7) Property, Plant, and Equipment

Components of property, plant, and equipment consists of the following:

(amounts in thousands)                          March 31, 2010     June 30, 2009
                                                --------------     -------------
Land and land improvements                        $  5,168            $  5,260
Construction in process                              1,295                 964
Buildings, furniture, and fixtures                  34,035              33,872
Machinery and equipment                             61,443              58,865
                                                  --------            --------
                                                   101,941              98,961
Less accumulated depreciation                      (52,152)            (46,072)
                                                  --------            --------
                                                  $ 49,789            $ 52,889
                                                  ========            ========


                                       10
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

(8) Accrued Expenses

Accrued expenses consists of the following:

(amounts in thousands)                           March 31, 2010    June 30, 2009
                                                 --------------    -------------
Compensation                                          $3,469           $3,638
Health insurance                                         812              685
Commissions and other                                    538              885
                                                      ------           ------
                                                      $4,819           $5,208
                                                      ======           ======

(9) Other Liabilities

Other liabilities consist of the following:

(amounts in thousands)                           March 31, 2010    June 30, 2009
                                                 --------------    -------------
Deferred compensation                               $   435           $   243
Supplemental retirement plan                            649               584
Accrued lease                                         1,085             1,184
Warranty accrual                                        394               434
Income tax liability                                    799             1,747
Deferred grant income                                   375               375
Interest                                                123               350
Other                                                   275               300
                                                    -------           -------
                                                      4,135             5,217
Less current portion                                 (2,237)           (2,525)
                                                    -------           -------
                                                    $ 1,898           $ 2,692
                                                    =======           =======

The Company provides warranty policies on its products. In addition, the Company
incurs  costs to service  our  products  in  connection  with  specific  product
performance  issues.  Liability for product  warranties  are based upon expected
future product  performance and durability,  and is estimated largely based upon
historical  experience.  Adjustments  are made to  accruals  as  claim  data and
historical  experience  warrant.  The changes in the carrying  amount of product
warranty reserves for the Nine months ended March 31, 2010, is as follows:

                (amounts in thousands)
                Balance as of July 1, 2009               $ 434
                Additions                                  313
                Costs incurred                            (282)
                Adjustments                                (71)
                                                         -----
                Balance as of March 31, 2010             $ 394
                                                         =====

(10) Income taxes

Income  taxes  for  the  third  quarter  of  fiscal  2010  were  $  0.7  million
representing an effective tax rate of 13.4%. This lower rate was a result of the
inclusion  of the  effects  of the  settlement  of the  IRS  examination  of the
Company's fiscal 2007 and 2008 returns, as well as, adjustments to uncertain tax
positions related to the results of the examination  amounting to a reduction in
tax expense of approximately  $1.0 million.  This compares to income tax expense
of $1.2 million for the third quarter of fiscal 2009,  representing an effective
tax rate of 25.7%.  The  effective  tax rate for fiscal  2010 is  expected to be
approximately 32.0%.


                                       11
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

In the nine months ended March 31, 2010, the Company  recognized a net reduction
in unrecognized tax benefits as follows, of which $1.0 million was recognized as
a tax benefit in the three months ended March 31, 2010:

(amounts in thousands)
Balance at July 1, 2009                                                 $ 1,660
Lapse of statute of limitations                                            (545)
Audit settlements ($0.2 million in cash payments)                          (488)
Other increases (decreases), net                                             (8)
                                                                        -------
Balance at March 31, 2010                                               $   619
                                                                        =======

Benefit recognized related to the interest on the uncertain
      tax positions                                                         (79)
                                                                        =======

The Company's  unrecognized tax benefits  including  interest and penalties were
$0.7 million at March 31, 2010,  and if recognized,  future  effective tax rates
may be impacted.  It is reasonably  possible that the liability  associated with
the Company's  unrecognized  tax benefits  will increase or decrease  within the
next twelve months; however, at this time an estimate of the range of reasonably
possible outcomes cannot be made. The Company settled a Federal income tax audit
for fiscal  years 2007 and 2008 and a New York State audit for fiscal years 2002
through 2006 during the third quarter of fiscal year 2010.  The Company  remains
subject to income tax  examinations  for its U.S.  federal  income taxes for the
fiscal year 2009,  and for  foreign,  state and local taxes for the fiscal years
2007 through 2009.

(11) Debt

Borrowings  under a  revolving  credit  note  (Note),  with  Key  Bank  National
Association, the Company's choice, bear interest at LIBOR, plus 100 to 425 basis
points,  or at the Lender's  prime rate,  minus (100) to plus 225 basis  points,
depending  upon the Company's  EBITDA  performance at the end of each quarter as
measured by the formula: EBITDA divided by the Current Portion of Long-term Debt
plus interest  expense.  For the nine months ended March 31, 2010,  the weighted
average interest rate on the outstanding borrowings was approximately 1.25%.

In the nine months  ending March 31, 2010,  the Company paid $9.8 million on the
Note.

(12) Earning Per Share

Basic  earnings  per  share is based on the  weighted  average  number of common
shares outstanding.  Diluted earnings per share is based on the weighted average
number of common shares outstanding, as well as dilutive potential common shares
which,  in the Company's  case,  comprise  shares  issuable  under the Company's
Comprehensive  Long-Term  Incentive Plan. The weighted  average number of common
shares  utilized in the  calculation of the diluted  earnings per share does not
include  anti-dilutive  shares aggregating  1,393,000 and 2,106,000 for the nine
months ended March 31, 2010 and 2009, respectively. The treasury stock method is
used to calculate  dilutive  shares,  which reduces the gross number of dilutive
shares by the number of shares  purchasable  from the  proceeds  of the  options
assumed to be exercised.


                                       12
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

The  following  table  sets  forth the  computation  of basic and fully  diluted
earnings per share:

<TABLE>
<CAPTION>
                                                                             Three Months Ended                Nine Months Ended
                                                                                  March 31                          March 31
(amounts in thousands)                                                     2010              2009             2010             2009
                                                                           ----              ----             ----             ----
<S>                                                                       <C>              <C>              <C>              <C>
Numerator:
Net income                                                                $ 4,561          $ 3,476          $ 9,939          $ 6,402
                                                                          =======          =======          =======          =======

Denominator:
Denominator for basic earnings per share
outstanding                                                                13,919           13,812           14,083           13,916
                                                                          =======          =======          =======          =======

Denominator for diluted earnings per share:
   Weighted average shares outstanding                                     13,919           13,812           14,083           13,916
Common stock options and restricted stock                                     409              250              512              186
                                                                          -------          -------          -------          -------

Weighted average shares                                                    14,328           14,062           14,595           14,102
                                                                          =======          =======          =======          =======
</TABLE>

(13) Employee Benefit Plans

Defined Benefit Plan

Components  of net  periodic  pension  cost for the three and nine months  ended
March 31 are as follows:

<TABLE>
<CAPTION>
                                                                            Three Months Ended                  Nine Months Ended
                                                                                 March 31                           March 31
                                                                          ---------------------------------------------------------
                                                                          2010              2009              2010             2009
                                                                          -----             ----             -----             ----
<S>                                                                       <C>                 <C>            <C>                <C>
(amounts in thousands)
Service cost                                                              $  53               66             $ 209              197
Interest cost                                                               194              187               594              561
Expected return on plan assets                                             (198)            (212)             (572)            (635)
Amortization of the unrecognized loss                                        63               21               229               64
                                                                          -----             ----             -----             ----
Net periodic benefit cost                                                 $ 112               62             $ 460              187
                                                                          =====             ====             =====             ====
</TABLE>

Required  contributions  for fiscal 2010 are  approximately  $0.9 million,  $0.8
million has been paid in the nine months ending March 31, 2010.


                                       13
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

Postretirement Health Benefit Plan

Components  of net periodic  postretirement  benefit cost for the three and nine
months ended March 31 are as follows:

<TABLE>
<CAPTION>
                                                                              Three Months Ended               Nine Months Ended
                                                                                   March 31                         March 31
                                                                            -------------------------------------------------------
                                                                            2010             2009             2010             2009
                                                                            ----             ----             ----             ----
<S>                                                                         <C>               <C>            <C>                 <C>
(amounts in thousands)
Service cost                                                                $ 20              18             $  60               52
Interest cost                                                                 40              39               120              118
Amortization of the unrecognized loss                                          1               1                 3                3
Amortization of the prior service cost                                        (5)             (5)              (15)             (14)
                                                                            ----             ---             -----             ----
Net periodic benefit cost                                                   $ 56              53             $ 168              159
                                                                            ====             ===             =====             ====
</TABLE>

Expected  contributions  for fiscal 2010 are estimated to be approximately  $0.1
million.

(14) Other Comprehensive Income

Other Comprehensive Income

Comprehensive income consists of the following:

<TABLE>
<CAPTION>
                                                                            Three Months Ended                  Nine Months Ended
                                                                                 March 31                           March 31
                                                                          2010              2009              2010             2009
                                                                          ----              ----              ----             ----
<S>                                                                      <C>              <C>                <C>              <C>
(amounts in thousands)
Net income                                                               $4,561           $ 3,476            $9,939           $6,402

Other comprehensive income:
   Foreign currency translation gain                                          2               (38)               17                5
   Mark to market adjustment                                                 --                --                --              186
                                                                         ------           -------            ------           ------

Comprehensive income                                                     $4,563           $ 3,438            $9,956           $6,593
                                                                         ======           =======            ======           ======
</TABLE>

Accumulated Other Comprehensive Income (Loss)

The  cumulative  balance of each component of  accumulated  other  comprehensive
income (loss) is as follows:

<TABLE>
<CAPTION>
                                                               Foreign            Minimum             Mark to           Accumulated
                                                              currency            pension              market              other
                                                             translation         liability       available-for-sale    comprehensive
                                                             adjustment          adjustment          securities        income (loss)
                                                             -----------         ----------      ------------------    -------------
<S>                                                            <C>                <C>                  <C>                <C>
(amounts in thousands)
Balances at June 30, 2008                                      $1,370             $(1,529)             $(185)             $  (344)
Current period change                                              35              (1,883)              (205)              (2,053)
                                                               ------             -------              -----              -------
Balances at June 30, 2009                                      $1,405             $(3,412)             $(390)             $(2,397)
Current period change                                              17                  --                 --                   17
                                                               ------             -------              -----              -------
Balances at March 31, 2010                                     $1,422             $(3,412)             $(390)             $(2,380)
                                                               ======             =======              =====              =======
</TABLE>


                                       14
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

(15) Segment and Related Information

The Company  operates  predominately in the wireless  communications,  satellite
communications,  and space and defense  electronics  markets.  The Company's two
reportable  segments are the Wireless Group and the Space & Defense Group. These
segments have been determined based upon the nature of the products and services
offered, customer base, technology,  availability of discrete internal financial
information,  homogeneity of products,  and delivery channel, and are consistent
with  the  way  the  Company  organizes  and  evaluates  financial   information
internally for purposes of making operating decisions and assessing performance.

The Wireless Group designs,  manufactures,  and markets commercial products used
mainly by the wireless  communications  market. The Space & Defense Group of the
business designs,  manufactures,  and markets specialized products for the space
and defense electronics  markets. The Company's Space & Defense Group aggregates
certain  operating  segments  into  one  reportable  segment,  as the  operating
segments have similar products, customers, and margins on products.

The following  table reflects the operating  results of the segments  consistent
with the Company's internal financial  reporting process.  The following results
are used in part, by management,  both in evaluating the  performance of, and in
allocating resources to, each of the segments:

<TABLE>
<CAPTION>
                                                                                Space &
(amounts in thousands)                                        Wireless          Defense         Unallocated       Consolidated
                                                              --------          -------         -----------       ------------
<S>                                                           <C>               <C>               <C>               <C>
Net sales (Three Months Ended):
     March 31, 2010                                           $14,212           $27,969           $   --            $ 42,181
     March 31, 2009                                            17,255            26,252               --              43,507
Net sales (Nine Months Ended):
     March 31, 2010                                            41,006            82,531               --             123,537
     March 31, 2009                                            53,434            69,640               --             123,074
Operating income (Three Months Ended) (1)
     March 31, 2010                                             1,867             3,686             (230)              5,323
     March 31, 2009                                             2,035             3,046             (350)              4,731
Operating income (Nine Months Ended) (1)
     March 31, 2010                                             3,635            10,419             (624)             13,430
     March 31, 2009                                             5,044             4,539             (675)              8,908
Goodwill and intangible assets:
     March 31, 2010                                            30,716            22,215               --              52,931
     June 30, 2009                                             30,716            23,263               --              53,979
</TABLE>

(1)   Unallocated  amounts  relate  to  an  extension  of an  existing  deferred
      compensation  arrangement  ($0.2  million for the nine months ending March
      31, 2010) and the  remainder of the expense  relates to the lease  expense
      incurred on the England lease.


                                       15
<PAGE>

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

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

The following  Management's  Discussion and Analysis of Financial  Condition and
Results  of  Operations  should  be read in  conjunction  with the  consolidated
financial  statements  and the notes  thereto  appearing  elsewhere in this Form
10-Q. The following condensed discussion,  other than historical facts, contains
forward-looking statements that involve a number of risks and uncertainties. The
Company's  results  could  differ  materially  from those  anticipated  in these
forward-looking  statements as a result of various  factors,  including  factors
described  elsewhere in this Quarterly Report on Form 10-Q and factors described
in the  Company's  Annual Report on Form 10-K for the fiscal year ended June 30,
2009.

Overview

The consolidated  financial  statements  present the financial  condition of the
Company as of March 31, 2010 and June 30, 2009, and the consolidated  results of
operations  and cash flows of the Company  for the three  months and nine months
ended March 31, 2010 and 2009.

The Company designs,  develops and markets  microwave  components and assemblies
for  the  wireless   communications,   satellite   communications   and  defense
electronics  markets.  The  Company's  distinctive  manufacturing  and packaging
techniques enable it to cost-effectively produce compact,  lightweight microwave
products  for  use in  base  stations  and  subscriber  equipment  for  wireless
communications as well as, in satellites and in defense electronics systems. The
Company  sells  its  products  to  leading  wireless  communications   equipment
manufacturers such as Ericsson,  Motorola,  Nokia Siemens Networks,  and Huawei,
and to satellite communications and defense electronics companies such as Boeing
Satellite,  ITT, Lockheed Martin,  Northrop Grumman and Raytheon.  Net sales are
recognized when units are shipped.

Net sales under certain  long-term  contracts of the Space & Defense Group, many
of  which   provide   for   periodic   payments,   are   recognized   under  the
percentage-of-completion  method using the units of delivery  method.  Estimated
manufacturing  cost-at-completion  for these contracts are reviewed on a routine
periodic  basis,  and  adjustments  are  made   periodically  to  the  estimated
cost-at-completion based on actual costs incurred,  progress made, and estimates
of the  costs  required  to  complete  the  contractual  requirements.  When the
estimated  manufacturing  cost-at-completion  exceeds the  contract  value,  the
contract is written down to its net  realizable  value,  and the loss  resulting
from cost overruns is immediately  recognized.  To properly match net sales with
costs,  certain  contracts  may have  revenue  recognized  in excess of billings
(unbilled  revenues),  and other  contracts  may have  billings in excess of net
sales  recognized  (billings  in  excess of  contract  costs).  Under  long-term
contracts,  the  prerequisites  for billing the customer  for periodic  payments
generally involve the Company's achievement of contractually specific, objective
milestones (e.g.,  completion of design,  testing,  or other engineering  phase,
delivery of test data or other  documentation,  or  delivery  of an  engineering
model or flight hardware).

The Company operates in the wireless  communications,  satellite  communications
and defense  electronics  markets all of which have been affected by the current
economic  climate and  recession.  The defense budget has a direct impact on the
level of funding available for programs that the Company currently  participates
in or has targeted for future participation. We continue to assess the effect of
the 2010 defense budget proposal on these programs and, to date have seen little
negative  impact on our  anticipated  Space & Defense Group order rate in fiscal
2010.  The current  economic  down turn has  negatively  impacted the  worldwide
Wireless  infrastructure  market as the market has delayed or  downsized  system
expansions  and  upgrades.  The Company has seen this decline in demand over the
past twelve months  resulting in lower order volume for both custom and standard
component wireless  infrastructure products resulting in significant and ongoing
negative impact on Wireless Group sales levels in the current fiscal year. While
the Company has limited  short-term  visibility for customer demand,  we believe
that demand has stabilized at current levels and should improve in calendar 2010
as the economy begins to recover.

Fourth Quarter of Fiscal 2010 Outlook

For the fourth  quarter of fiscal 2010, we anticipate  comparable  sales for the
Wireless  Group and an increase in sales for the Space & Defense  Group from our
just  completed  third  quarter.  As a result,  we expect net sales to be in the
range of $41 to $45 million. We expect net income per diluted share to be in the
range of $0.22 - $0.26, using an anticipated tax rate of approximately 32.0% and
inclusive  of  approximately  $0.06 per share  related to expected  equity based
compensation   expense  and   acquisition   related   amortization  of  acquired
intangibles.


                                       16
<PAGE>

Results of Operations

Net sales for the three  months  ended March 31, 2010 were $42.2  million,  down
3.0% from  sales of $43.5  million  for the third  quarter of fiscal  2009.  Net
income for the third  quarter of fiscal 2010 was $4.6  million,  or 10.8% of net
sales,  up $1.1 million from net income of $3.5 million in the third  quarter of
fiscal  2009.  Net income in the third  quarter  of fiscal  2010  included  $0.3
million of acquisition related expense for intangible  amortization  compared to
$0.1 million of acquisition related intangible amortization in the third quarter
of fiscal 2009.

The following  table sets forth the  percentage  relationships  of certain items
from the Company's condensed consolidated statements of earnings as a percentage
of net sales.

<TABLE>
<CAPTION>
                                                                      Three Months Ended                   Nine Months Ended
                                                                      ------------------                   -----------------
                                                               Mar. 31, 2010     Mar. 31, 2009     Mar. 31, 2010     Mar. 31, 2009
                                                               -------------     -------------     -------------     -------------
<S>                                                                <C>               <C>               <C>               <C>
Net Sales                                                          100.0%            100.0%            100.0%            100.0%

Cost of sales                                                       60.1%             65.3%             62.9%             68.4%
                                                                    ----              ----              ----              ----
Gross profit                                                        39.9%             34.7%             37.1%             31.6%
                                                                    ----              ----              ----              ----

Operating expenses:
   Marketing                                                         5.7%              5.4%              5.7%              5.3%
   Research and development                                          9.5%              7.8%              9.0%              7.7%
   General and administrative                                       12.1%             10.6%             11.5%             11.4%
                                                                    ----              ----              ----              ----
      Total operating expenses                                      27.3%             23.8%             26.2%             24.4%
                                                                    ----              ----              ----              ----

Operating income                                                    12.6%             10.9%             10.9%              7.2%
                                                                    ----              ----              ----              ----

Other income (expense):

      Interest expense                                              (0.3)%            (0.7)%            (0.4)%            (1.0)%
      Other, primarily interest income                               0.2%              0.6%              0.2%              0.8%
                                                                    ----              ----              ----              ----
      Total other income (expense), net                             (0.1)%            (0.1)%            (0.2)%            (0.2)%
                                                                    ----              ----              ----              ----

Income before income taxes                                          12.5%             10.8%             10.7%              7.0%
Income taxes                                                         1.7%              2.8%              2.7%              1.8%
                                                                    ----              ----              ----              ----
   Net income                                                       10.8%              8.0%              8.0%              5.2%
                                                                    ====              ====              ====              ====
</TABLE>

The following table summarizes the Company's net sales by operating segments for
the periods indicated. Amounts are in thousands.

<TABLE>
<CAPTION>
                                                                Three Months Ended                        Nine Months Ended
                                                                ------------------                        -----------------
                                                      Mar. 31, 2010        Mar. 31, 2009        Mar. 31, 2010          Mar. 31, 2009
                                                      -------------        -------------        -------------          -------------
<S>                                                      <C>                  <C>                  <C>                   <C>
Wireless                                                 $14,212              $17,255              $ 41,006              $ 53,434
Space and Defense                                         27,969               26,252                82,531                69,640
                                                         -------              -------              --------              --------
     Total                                               $42,181              $43,507              $123,537              $123,074
                                                         =======              =======              ========              ========
</TABLE>

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Net sales.  Net sales were $42.2  million for the third  quarter ended March 31,
2010,  down 3.0% compared to $43.5 million for the third quarter of fiscal 2009.
Sales of Wireless Group products fell $3.0 million, or 17.6%, and sales of Space
& Defense  Group  products  rose $1.7  million,  or 6.5%,  in the current  third
quarter compared to the third quarter of fiscal 2009.

The  decline in sales of  Wireless  Group  products,  which  consist of standard
components,  ferrite  components  and custom  subassemblies  for use in building
wireless  base  station and consumer  equipment,  was the result of a decline in
demand for both custom  assemblies and standard  component  products  during the
first nine months of fiscal 2010 compared to the same period last year. Sales of
custom  products fell $2.5 million in the current third quarter  compared to the
third  quarter  last fiscal year,  due to a $1.7  million  decline in sales to a
major OEM as a result of a partial loss of customer  product  allocations to low
cost Asian  vendor  sources  and  decreased  demand for  second  generation  GSM
equipment.  Standard  component  demand in the  third  quarter  of  fiscal  2010
rebounded from depressed  second quarter levels,  rising 26%  sequentially,  but
sales  levels for these  products  still  declined  $0.5  million from the third
quarter of fiscal  2009  resulting  from the  general  decline in the  worldwide
economy  and


                                       17
<PAGE>

infrastructure  capital expenditure  levels. The continuing  challenging pricing
environment  for both  standard  component  and custom  assembly  products  also
negatively  impacted net sales for the current  third  quarter  compared to last
year. Demand for Wireless Group products,  in the fourth quarter of fiscal 2010,
is expected to be comparable to third quarter levels.

Space & Defense Group products  consist of custom  components and assemblies for
commercial  and  military   satellites,   as  well  as  radar,   receiver,   and
countermeasure  subsystems  for the  military.  Sales of Space &  Defense  Group
products rose $1.7 million, or 6.5% in the third quarter of fiscal 2010 compared
to the third quarter of the previous  fiscal year. The increase in current third
quarter sales was driven by $1.0 million and $1.6 million  increases in sales of
Hybrid modules products and Satellite and airborne radar products, respectively,
meanwhile   the  other   products  in  the  Space  &  Defense  Group  were  down
approximately  $1.0 in total,  compared  to the  third  quarter  of fiscal  2009
resulting  from to the higher level of order intake for these  products over the
last year.  Space & Defense  Group  product  sales  continue to benefit from the
higher level of business won by the Company over the past few fiscal years which
has resulted in the Group's backlog of $79.4 million as of March 31, 2010.

Gross Profit.  Cost of sales  consists  primarily of  engineering  design costs,
materials,  material  fabrication  costs,  assembly  costs,  direct and indirect
overhead,  and test costs. Gross profit for the third quarter of fiscal 2010 was
$16.8 million,  (39.9% of net sales), up from $15.1 million (34.7% of net sales)
for the same  quarter of the prior year.  Gross  profit,  as a percent of sales,
increased  in the third  quarter of fiscal  2010 from the third  quarter of last
year due to a more  favorable  product sales mix in both the Wireless  Group and
Space & Defense  Group.  Gross  margins were enhanced by the decline in sales of
lower margin,  high material  content custom Wireless Group  products.  Material
content in cost of sales across both  business  segments  fell,  as a percent of
sales,  an average of 4.5 percentage  points or over $1.0 million in the current
quarter  compared to the third  quarter  last year.  Additionally,  margins were
further  enhanced by reduced  production  overhead costs,  including  personnel,
freight, and production supplies, in excess of $0.6 million in the current third
quarter  compared to the same  period  last year  resulting  from  ongoing  cost
reduction efforts throughout the Company.

Marketing.  Marketing  expenses  consist  mainly of employee  related  expenses,
commissions  paid to sales  representatives,  trade show  expenses,  advertising
expenses and related travel expenses. Marketing expenses were $2.4 million (5.7%
of net sales) for the third quarter of fiscal 2010,  relatively flat compared to
$2.4 million (5.4% of net sales) for the third quarter of fiscal 2009. Marketing
expenses in the current  third  quarter rose  slightly from the third quarter of
last fiscal year due to changes in compensation costs which were largely off-set
by lower  travel and  advertising  expenditures  in the  current  third  quarter
compared to the third quarter of the last fiscal year.

Research and Development.  Research and development expenses consist of material
and  salaries  and  related  overhead  costs of  employees  engaged  in  ongoing
research,  design and  development  activities  associated with new products and
technology  development.  Research and  development  expenses  were $4.0 million
(9.5% of net  sales)  in the third  quarter  of  fiscal  2010,  up 18% from $3.4
million (7.8% of net sales) for the third  quarter of fiscal 2009.  Research and
development  expenditures are supporting  further  development of Wireless Group
standard  products  for new  domestic  marketplace  opportunities  and  consumer
component  products  for  additional  commercial  applications,  as  well as new
technology  development in the Space & Defense Group.  Research and  Development
expenditures have increased in the third quarter of fiscal 2010 versus the third
quarter of last year due to the  higher  level of  opportunities  in the Space &
Defense  Group  marketplace  which  resulted in  approximately  $0.6  million in
additional  spending  compared to the third quarter of fiscal 2009.  The Company
expects to continue its current  research and  development  efforts and spending
levels through the remainder of the fiscal year.

General and  Administrative.  General  and  administrative  expenses  consist of
employee  related  expenses,  professional  services,  intangible  amortization,
travel related  expenses and other corporate costs.  General and  administrative
expenses increased to $5.1 million (12.1% of net sales) for the third quarter of
fiscal  2010,  from $4.6 million  (10.6% of net sales) for the third  quarter of
fiscal 2009.  The increase  resulted  from a rise of $0.2 million in  intangible
amortization  expense  from the  acquisitions  of M. S.  Kennedy and  Unicircuit
during the current third  quarter,  compared to the third quarter of fiscal 2009
due to an  adjustment  in the third  quarter  of fiscal  2009 in the  intangible
valuation of both companies,  a net $0.1 million  increase in  compensation  and
other  administrative  expenses  and a $0.2  million  increase  in expense for a
one-time charge related to the completion of a fixed asset physical inventory at
one of the Company's subsidiaries.

Operating Income.  Operating income increased 13% in the third quarter of fiscal
2010 to $5.3 million,  (12.6% of net sales),  compared to $4.7 million (10.9% of
net sales) for the third quarter of fiscal 2009.  This  improvement in the third
quarter of fiscal 2010 compared to the third quarter of last year was due to the
change in product  shipment  mix in the current  third  quarter  resulting  in a
decline in excess of $1.0 million in material costs in cost of sales


                                       18
<PAGE>

compared to the third quarter fiscal 2009. Operating income results were further
enhanced by the effect of ongoing cost  containment  and  reduction  initiatives
throughout  the Company over the last twelve months which have had a significant
positive effect on overall Company expense levels.

On an operating segment basis,  Wireless Group operating income was $1.9 million
(13.1% of group sales) for the third quarter of fiscal 2010,  down $0.1 million,
from the Group's  operating income of $2.0 million (12.8% of group sales) in the
third quarter of fiscal 2009.  The minor  decrease in Wireless  Group  operating
income despite the $3.1 million  decline in Wireless Group sales was a result of
the favorable  product mix in the current  third  quarter  compared to the third
quarter of fiscal 2009.  The $3.1 million  decline in Wireless  group sales year
over year  consisted  primarily  of a $2.6 million  decline in low margin,  high
material content custom products. Additionally, Wireless Group operating margins
were further enhanced by reduced manufacturing  operating costs due to the lower
sales volume and the Company's  overall cost reduction efforts which resulted in
lower non material production costs in the current third quarter compared to the
third quarter last year.

Space & Defense Group  operating  income was $3.7 million (13.2% of Group sales)
in the third quarter of fiscal 2010, up $0.7 million from $3.0 million (11.6% of
net group  sales) for the third  quarter of fiscal 2009.  Operating  margins for
this Group  improved 160 basis points in the current third  quarter  compared to
the third quarter of last year due to the $1.7 million  increase in sales and as
a result of the operating  expense savings achieved through the companywide cost
reduction efforts.

Other Income.  Other income  primarily  consists of interest  income received on
invested cash balances and rental income. Other income decreased to $0.1 million
in the third  quarter of fiscal  2010  compared  to $0.3  million  for the third
quarter of last year.  This  decrease was caused by the  substantial  decline in
short-term  interest  rates year over year and a  deliberate  shortening  of the
maturities  of the  Company's  investment  portfolio  due to the  turmoil in the
credit market.  Other income will fluctuate  based on short term market interest
rates,  the company's cash investment  strategy and the level of investable cash
balances.

Interest  Expense.  Interest  expense  consists  mainly of  interest  on Company
borrowings.  Interest  expense  in the third  quarter  of  fiscal  2010 was $0.1
million  compared to $0.3  million for the third  quarter of fiscal  2009.  This
decrease  was  due to the  substantial  decline  in  the  90 day  LIBOR  (London
Interbank  Offered  Rate)  interest  rate for the third  quarter of fiscal  2010
(approximately 1.25%) compared to the rate (approx.  2.5%) for the third quarter
of fiscal 2009.  The Company  borrowed a total of $49.8  million under its $50.0
million revolving credit facility in the first quarter of fiscal 2009 and repaid
$9.8 million in the first quarter of fiscal 2010. These borrowings bear interest
at the 90 day LIBOR  rate,  plus 100 to 425  basis  points,  depending  upon the
Company's rolling twelve month EBITDA  performance.  The rate is reset quarterly
and for the fourth quarter of fiscal 2010 is expected to be approximately 1.25%.

Income  Taxes.  Income  taxes for the  third  quarter  of fiscal  2010 were $0.7
million (1.7% of net sales),  representing an effective tax rate of 13.4%.  This
compares to income tax expense of $1.2 million (2.8% of net sales) for the third
quarter  of fiscal  2009,  representing  an  effective  tax rate of  25.7%.  The
effective  tax rate for the third  quarter  of  fiscal  2010 was a result of the
inclusion  of the  effects  of the  settlement  of the  IRS  examination  of the
Company's fiscal 2007 and 2008 returns,  as well as, adjustments to the balances
for uncertain tax positions related to the results of the examination  amounting
to a  reduction  in tax  expense of  approximately  $1.0  million,  or $0.07 per
diluted  share.  The  projected  effective  tax rate for fiscal  2010 absent IRS
settlements and reserve adjustments, is expected to be approximately 32.0%.

Nine Months Ended March 31, 2010 Compared to Nine Months Ended March 31, 2009

Net sales.  Net sales were $123.5  million  for the nine months  ended March 31,
2010,  up 0.4%  compared to $123.1  million  for the first nine of fiscal  2009.
Sales of Wireless Group products fell $12.4  million,  or 23.3%,  while sales of
Space & Defense Group  products  rose $12.9  million,  or 18.5%,  in the current
first nine months compared to the first nine months of fiscal 2009.

The drop in sales of  Wireless  Group  products,  was the result of a decline in
demand for both standard  components  and custom  assemblies  during the current
first  nine  months  compared  to the first nine  months of last year.  Sales of
custom  products  fell $7.4 million in the current  nine months  compared to the
first nine months of last fiscal year,  as the result of a $5.0 million  decline
in sales to a major OEM resulting  from partial loss of  allocations to low cost
Asian vendor sources and decreased  demand for second  generation GSM equipment.
Infrastructure  component  demand in the first nine  months of fiscal  2010 fell
$5.1 million from the first nine months of fiscal 2009 due to a general  decline
in shipments to both OEMs and distributors resulting from the general decline in
the  worldwide  economy  and  infrastructure  capital  expenditure  levels.  The
continuing challenging pricing environment for both


                                       19
<PAGE>

standard  component and custom assembly  products also  negatively  impacted net
sales for the first nine months of fiscal 2010 compared to last year. Demand for
Wireless  Group  products,  in the fourth quarter of fiscal 2010, is expected to
comparable to third quarter levels.

Sales of Space & Defense  Group  products  rose $12.9  million,  or 18.5% in the
first  nine  months of fiscal  2010  compared  to the first  nine  months of the
previous fiscal year.  Sales of Space & Defense Group products in the first nine
months of the  current  fiscal  year  included  nine  months of sales from M. S.
Kennedy Corp. and Unicircuit,  Inc., totaling $37.5 million,  while sales in the
first nine months of fiscal 2009 included  eight months and seven month of sales
from M. S. Kennedy and  Unicircuit,  respectively,  amounting to $25.5  million.
This increase is attributed to  approximately  $5.5 million from the  additional
three months sales not included in the first nine months of fiscal 2009 and $7.4
million  increase in sales of Hybrid  modules and RF printed wire boards at M.S.
Kennedy and Unicircuit, Inc., respectively,  above fiscal 2009 levels due to the
higher level of order intake for both  subsidiaries  over the last year. Space &
Defense  Group  product  sales  continue  to benefit  from the  higher  level of
business won by the Company over the past few fiscal years which has resulted in
the Group's backlog of $79.4 million as of March 31, 2010.

Gross  Profit.  Gross  profit for the first nine months of fiscal 2010 was $45.8
million,  (37.1% of net sales),  up from $38.9 million  (31.6% of net sales) for
the same period of the prior year.  Gross profit as a percent of sales increased
in the first nine  months of fiscal 2010 from the first nine months of last year
due to the increase in sales volume and due to the absence in the current  first
nine months of $2.2  million  (1.8% of net sales) of  amortization  of inventory
step-up costs related to the acquisition of M. S. Kennedy and Unicircuit,  which
were  included  in the first  nine of fiscal  2009 cost of sales.  Additionally,
gross  margins  were  enhanced by the $7.4  million  reduction in sales of lower
margin,  high material  content  custom  Wireless  Group products and by reduced
production overhead costs,  including personnel,  freight,  production supplies,
and scrap in excess of $2.0 million in the current first nine months compared to
the same  period  last  year as a  result  of  ongoing  cost  reduction  efforts
throughout the Company.

Marketing.  Marketing  expenses  were $7.0  million  (5.7% of net sales) for the
first nine months of fiscal 2010, up $0.5 million from $6.5 million (5.3% of net
sales) for the first  nine  months of fiscal  2009.  Marketing  expenses  in the
current  first nine months rose $0.5  million from the first nine months of last
fiscal year due to the  inclusion  of $1.9 million of  marketing  expenses  from
Unicircuit and M. S. Kennedy in the current first nine months,  compared to $1.4
million for these two subsidiaries in the first nine months of last fiscal year,
which  included  only eight  months and seven month of expense for M. S. Kennedy
and Unicircuit,  respectively.  The first nine months of fiscal 2009 expense had
been adjusted down for a $0.3 million  reduction in commission  expense from the
correction  of an over  accrual  that was  accumulated  over a  number  of prior
periods.  There was no comparable  adjustment in the first nine months of fiscal
2010,  although  commission expense for the first nine months of fiscal 2010 was
comparable to the same period in the fiscal 2009 due to lower sales volumes from
standard Wireless component products.

Research and Development.  Research and development  expenses were $11.1 million
(9.0% of net sales) in the first nine  months of fiscal  2010,  up 17% from $9.5
million  (7.7% of net sales) for the first nine months of fiscal 2009.  Research
and  development  expenditures  are supporting  further  development of Wireless
Group  infrastructure  and  consumer  component  opportunities,  as  well as new
technology  development in the Space & Defense Group.  Research and  Development
expenditures  have  increased in the first nine months of fiscal 2010 versus the
first nine months of last year due to the higher level of  opportunities  in the
Space & Defense Group  marketplaces which resulted in approximately $1.6 million
in additional spending for that business group compared to the first nine months
of fiscal  2009.  The Company  expects to  continue  its  current  research  and
development efforts and spending levels through the remainder of the fiscal year
and is presently  working on a number of new standard and custom  Wireless Group
and Space & Defense Group opportunities.

General and  Administrative.  General  and  administrative  expenses  were $14.2
million  (11.5% of net sales) for the first nine months of fiscal 2010,  up 1.6%
from $14.0  million  (11.4% of net  sales)  for the first nine  months of fiscal
2009.  The  increase  in general  and  administrative  expense in the first nine
months of fiscal 2010  compared to the first nine months of last year was due to
the  inclusion  of $4.7  million of general  and  administrative  expenses  from
Unicircuit and M. S. Kennedy in the current first nine months,  compared to $4.1
million for these two subsidiaries in the first nine months of last fiscal year,
which  included  only eight  months and seven month of expense for M. S. Kennedy
and  Unicircuit,  respectively.  This increase was  partially  off-set by a $0.3
million decline in compensation and other administrative expenses due to a three
month delay in granting restricted stock, reduced professional service costs and
the consolidation of some administrative functions across all subsidiaries.


                                       20
<PAGE>

Operating  Income.  Operating income increased 50.8% in the first nine months of
fiscal 2010 to $13.4  million,  (10.9% of net sales),  compared to $8.9  million
(7.2% of net sales) for the first nine months of fiscal 2009.  This  increase in
the first nine months of fiscal 2010 from the first nine months of last year was
due to the absence of $2.2 million of  amortization  of inventory  step-up costs
related to the acquisition of M. S. Kennedy and Unicircuit,  which were included
in the first nine months of fiscal 2009 cost of sales.  Operating  margins  were
further  enhanced by a favorable  product mix which  resulted in lower  material
costs per sales dollar of 27.4% in fiscal 2010  compared to 32.0% in fiscal 2009
due mainly to a $7.4 million  reduction in sales of high material content custom
Wireless  Group  products  in the  current  first nine months and the effects of
ongoing  cost  reduction  initiatives  throughout  the Company  which have had a
significant positive effect on overall Company expense levels.

On an operating segment basis,  Wireless Group operating income was $3.6 million
(8.9% of group  sales)  for the first  nine  months of  fiscal  2010,  down $1.4
million, from the Group's operating income of $5.0 million (9.4% of group sales)
in the  first  nine  months of fiscal  2009.  The  decrease  in  Wireless  Group
operating  income in the first nine months of fiscal 2010  compared to the first
nine months of fiscal 2009 was a result of the $12.4 million decline in Wireless
group  sales year over year which  resulted in a $2.4  million  decline in gross
margins for this business  segment.  This decline in gross margin in dollars was
partially  off-set by an  improvement in gross margin as a percent of sales from
35.7% in fiscal 2009 to 40.7 % in fiscal 2010 resulting from $7.4 million of the
Wireless  Group sales  decrease  being low margin high material  content  custom
products and  reductions in  manufacturing  costs due to the lower sales volume.
Additionally,  operating  margins were further  enhanced by a $1.0 million (13%)
decline in marketing and Administrative expenses within the group in the current
first nine  months of fiscal  2010  compared to the same period last year due to
the decline in group sales volume.

Space & Defense Group operating  income was $10.4 million (12.6% of Group sales)
in the first nine months of fiscal 2010,  up $5.9 from $4.5 million (6.5% of net
group  sales) for the first nine months of fiscal  2009.  Operating  margins for
this Group improved  approximately six percentage points in the first nine month
of fiscal 2010 due to the $12.9  million  increase in sales and the inclusion of
only $0.9 million of acquisition  related  intangible  amortization costs and no
inventory  step-up  costs in the first nine months of fiscal  2010,  compared to
$2.9 million of combined  acquisition  related  inventory step-up and intangible
amortization  costs caused by the  acquisition  of M. S. Kennedy and  Unicircuit
during  the first nine  months of fiscal  2009.  Group  operating  margins  were
further  enhanced as a result of the cost savings achieved through the Company's
cost reduction efforts in the current fiscal year.

Other Income. Other income decreased to $0.3 million in the first nine months of
fiscal  2010  compared  to $1.0  million for the first nine months of last year.
This decrease was caused by the substantial decline in short-term interest rates
year over year and a deliberate  shortening  of the  maturities of the Company's
investment  portfolio due to the turmoil in the credit market. Other income will
fluctuate  based on  short  term  market  interest  rates,  the  company's  cash
investment strategy and the level of investable cash balances.

Interest  Expense.  Interest expense in the first nine months of fiscal 2010 was
$0.5 million  compared to $1.2 million for the first nine months of fiscal 2009.
This decrease was due to the substantial  decline (approx.  0.38%) in the 90 day
LIBOR  interest  rate for the first nine months of fiscal  2010  compared to the
rate  (approx.  2.2%) for the first  nine  months of fiscal  2009.  The  Company
borrowed  a total of $49.8  million  under its $50.0  million  revolving  credit
facility in the first  quarter 2009 and repaid $9.8 million in the first quarter
of fiscal 2010.  These  borrowings  bear interest at the 90 day LIBOR rate, plus
100 to 425 basis  points,  depending  upon the  Company's  rolling  twelve month
EBITDA  performance.  The rate is reset  quarterly and for the fourth quarter of
fiscal 2010 is expected to be approximately 1.25%.

Income  Taxes.  Income  taxes for the first nine months of fiscal 2010 were $3.3
million (2.7% of net sales),  representing an effective tax rate of 25.1%.  This
compares to income tax expense of $2.3 million (1.8% of net sales) for the first
nine months of fiscal 2009,  representing  an effective  tax rate of 26.2%.  The
effective  tax rate for the first nine months of fiscal 2010 was a result of the
inclusion  of the  effects  of the  settlement  of the  IRS  examination  of the
Company's fiscal 2007 and 2008 returns,  as well as, adjustments to reserves for
uncertain tax positions related to the results of the examination amounting to a
reduction in tax expense of  approximately  $1.0  million,  or $0.07 per diluted
share in the current third quarter.  The projected effective tax rate for fiscal
2010 absent adjustments described above, is expected to be approximately 32.0%.

Critical Accounting Policies

There  have  been no  material  changes  to the  Company's  critical  accounting
policies,  estimates,  or judgments  from those  discussed in the Company's 2009
Annual Report Form 10-K.


                                       21
<PAGE>

Liquidity and Capital Resources

Net cash  provided  by  operations  for the first nine months of fiscal 2010 was
$18.7 million and resulted from the net income before depreciation  amortization
and non-cash  equity based  compensation  expense plus a $1.9 million decline in
inventory.  The  positive  cash  flow  from  earnings  for the nine  months  was
partially  off-set by a $3.6  million  increase  in  receivables  due to heavier
shipments in the last half of the quarter.

Net cash  provided  by  operations  for the first nine months of fiscal 2009 was
$16.2 million and resulted from net income before depreciation, amortization and
non-cash equity based compensation  expense.  Additional cash provided by a $3.3
million decrease in accounts receivable due to improved  collections was off-set
by cash used to fund an increase  in  inventory  and a $3.1  million pay down of
current liabilities.

Net cash used in  investing  activities  in the first nine months of fiscal 2010
was $9.8 million and  consisted of $6.2 million from the purchase of  marketable
debt securities,  in addition to $3.9 million used to pay for capital additions.
Net cash used in  investing  activities  in the first nine months of fiscal 2009
was $39.7 million and consisted of $14.0 million  provided by the net maturities
of marketable debt  securities,  $5.5 million used to pay for capital  additions
and  $48.2  million  used  to pay  for  the  acquisitions  of  M.S.  Kenney  and
Unicircuit.

Net cash used in  financing  activities  in the first nine months of fiscal 2010
was $14.3 million and  consisted of $9.8 million used to pay long-term  debt and
$7.9 million used to purchase approximately 557,000 treasury shares, net of $3.4
million  generated by cash  receipts and tax benefits from the exercise of stock
options.  Net cash provided by financing  activities in the first nine months of
fiscal 2009 was $43.8 million and consisted of borrowings of $49.8 million under
the Company's  revolving declining line of credit to finance the acquisitions of
M.S.  Kennedy and  Unicircuit,  net of $1.2  million used to pay off an acquired
mortgage and $5.0 million used to purchase 471,000 treasury shares.

During the next twelve  months,  the Company  anticipates  that its primary cash
requirement will be for capital  expenditures,  possible continued repurchase of
the Company's common stock and the $10.0 million  principal  payment on its line
of credit due in July 2010. Capital  expenditures for the next twelve months are
expected to be between  $5.0 and $7.0  million and will be funded from  existing
cash and investments.

The Company may  continue to  repurchase  shares of its common stock in the open
market and/or through privately negotiated  transactions under the current Board
authorization,  depending on market  conditions.  At March 31, 2010,  there were
approximately  520,000  shares  remaining  under the  current  Board  repurchase
authorization.

At March 31, 2010,  the Company had  approximately  $65.4 million in cash,  cash
equivalents,  and marketable securities.  The Company has had positive operating
cash flow for over ten years,  and believes that its cash  requirements  for the
foreseeable  future will be satisfied by currently  invested  cash  balances and
expected cash flows from operations.

Recent Accounting Pronouncements

In October 2009,  new  accounting  guidance was issued related to the accounting
for revenue  recognition  from  arrangement  with  multiple  deliverables.  This
guidance removes the  "objective-and-reliable-evidence-of-fair-value"  criterion
from the separation criteria used to determine whether an arrangement  involving
multiple  deliverables  contains  more  than  one unit of  accounting,  replaces
references to "fair value" with  "selling  price" to  distinguish  from the fair
value measurements  required under the "Fair Value Measurements and Disclosures"
guidance,  provides a hierarchy  that  entities must use to estimate the selling
price, eliminates the use of the residual method for allocation, and expands the
ongoing  disclosure  requirements.  This  update is  effective  for the  Company
beginning  July 1, 2011 and can be  applied  prospectively  or  retrospectively.
Management is currently  evaluating the effect that adoption of this update will
have, if any, on the Company's condensed  consolidated financial statements when
it becomes effective in 2012.

In  January  2009,  new   accounting   guidance  which  requires  more  detailed
disclosures  about  employers'  plan  assets,  including  employers'  investment
strategies, major categories of plan assets,  concentrations of risk within plan
assets, and valuation  techniques used to measure the fair value of plan assets.
Other than for some  additional  disclosures  in the Annual Report on Form 10-K,
adoption of this  guidance  will not have an effect on the  Company's  condensed
consolidated financial statements.


                                       22
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following  discusses the Company's  possible exposure to market risk related
to changes in interest rates, equity prices and foreign currency exchange rates.
This discussion  contains  forward-looking  statements that are subject to risks
and  uncertainties.  Results could differ  materially from those  anticipated in
these  forward-looking  statements  as a result of  various  factors,  including
factors described elsewhere in this Quarterly Report.

As of March 31, 2010,  the Company had cash,  cash  equivalents  and  marketable
securities  of $65.4  million,  all of which with the exception of the Company's
auction rate security  consisted of highly liquid investments in marketable debt
securities.  The marketable  debt  securities at date of purchase  normally have
maturities  within 3 years,  are exposed to interest rate risk and will decrease
in value if market  interest rates increase.  A hypothetical  decrease in market
interest rate of 10.0% from March 31, 2010 rates, or 0.035%,  would have reduced
net income and cash flow by  approximately  $6,000,  or $.0004 per diluted share
for the quarter.  Due to the relatively  short  maturities of the securities and
the Company's  ability to hold those  investments to maturity,  the Company does
not  believe  that  an  immediate  decrease  in  interest  rates  would  have  a
significant  effect on its financial  condition or results of  operations.  Over
time,  however,  declines in interest  rate will reduce the  Company's  interest
income.

As of March 31, 2010,  the Company had $40.0 million in  outstanding  debt under
its  revolving  line of  credit  with Key Bank  National  Association.  The line
consists of a $40,000,000  revolving credit note for which principal amounts are
due on August 1, 2010, and on each anniversary date thereafter  through July 31,
2013.  Borrowings  under this Note,  at the Company's  choice,  bear interest at
LIBOR,  plus 100 to 425 basis points or at the Lender's prime rate,  minus (100)
to plus 225 basis points, depending upon the Company's EBITDA performance at the
end of each  quarter as measured by the formula:  EBITDA  divided by the Current
Portion of  Long-term  Debt plus  interest  expense.  For the three months ended
March 31, 2010, the weighted average interest rate on the outstanding borrowings
was 1.25%.  Interest  expense for these  borrowings  is exposed to interest rate
risk and will increase if market interest rates rise. A hypothetical increase in
market  interest rate of 10.0% from March 31, 2010 rates,  or 0.13%,  would have
reduced net income and cash flow by approximately $13,000, or $.0006 per diluted
share for the  quarter.  Due to the  Company's  significant  cash  reserves  and
historical  positive  operating  cash flow, the Company does not believe that an
immediate  increase in interest  rates  would have a  significant  effect on its
financial condition or results of operations.  Over time, however,  increases in
market interest rates will increase the Company's interest expense.

Forward-Looking Cautionary Statement

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
"forward-looking  statements"  made by or on behalf of the Company.  We may from
time  to time  make  written  or oral  statements  that  are  "forward-looking,"
including  statements  contained  in this  report  and  other  filings  with the
Securities  and  Exchange  Commission  and in reports to our  shareholders.  All
forward-looking  statements  are made on the  basis of  management's  views  and
assumptions  regarding future events and business performance as of the time the
statements  are made and the Company does not undertake any obligation to update
its disclosure  relating to forward looking  matters.  Actual results may differ
materially from those expressed or implied.  The  uncertainties and risk factors
that could affect our Company,  its  business and actual  results are  described
throughout this filing and in our 2009 Annual Report on Form 10-K under the Item
1A, "Risk Factors."

Item 4. Controls and Procedures

A. Disclosure Controls and Procedures

An evaluation of the  effectiveness of the design and operation of the Company's
disclosure  controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the  Securities  Exchange Act of 1934,  as amended  ("Exchange  Act")) was
carried out under the  supervision and with the  participation  of the Company's
management,  including the President and Chief  Executive  Officer and the Chief
Financial  Officer ("the  Certifying  Officers") as of March 31, 2010.  Based on
that evaluation, the Certifying Officers concluded that the Company's disclosure
controls and procedures were effective as of March 31, 2010.

B. Changes in Internal Control Over Financial Reporting

There  were no changes  in the  registrant's  internal  control  over  financial
reporting  during our fiscal quarter to which this Quarterly Report on Form 10-Q
relates that have materially  affected,  or are reasonably  likely to materially
affect, internal control over financial reporting.


                                       23
<PAGE>

PART II OTHER INFORMATION

Item 1A. Risk Factors

The Company is exposed to certain risk factors that may affect operations and/or
financial results. The significant factors known to the Company are described in
the Company's most recently filed Annual Report on Form 10-K. There have been no
material changes from the risk factors as previously  disclosed in the Company's
Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities

On November 5, 2007, the Board of Directors increased by an additional 2,000,000
the number of shares that the Company was  authorized  to repurchase in the open
market or by privately negotiated  transactions through its previously announced
stock repurchase program.  The program (originally  announced on March 5, 2001),
which may be suspended at any time without notice,  has no expiration  date. The
following  table  sets  forth  information   regarding  shares  repurchased  and
purchasable under the program during and as of the end of the periods indicated.
On  March  31,  2010,  approximately  520,000  shares  remained  authorized  for
purchase, depending on market conditions.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Maximum Number
                                                                                                             (or Approximate
                                                                                  Total Number of           Dollar Value) of
                                                                                 Shares (or Units)          Shares (or Units)
                           Total Number of                                     Purchased as Part of          that May Yet Be
                          Shares (or Units)          Average Price Paid         Publicly Announced         Purchased Under the
   Period                     Purchased             per Share (or Unit)          Plans or Programs          Plans or Programs
------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                       <C>                          <C>                       <C>
January 2010                    54,802                    15.00                        54,802                    708,710
------------------------------------------------------------------------------------------------------------------------------
February 2010                   65,475                    12.42                        65,475                    643,235
------------------------------------------------------------------------------------------------------------------------------
March 2010                     123,720                    12.73                       123,720                    519,515
------------------------------------------------------------------------------------------------------------------------------
Total                          243,997                    13.15                       243,997                    519,515
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Item 6.         Exhibits

                31         Rule 13a-14(a) Certifications

                32         Section 1350 Certifications


                                       24
<PAGE>

                                   SIGNATURES

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

                                     Anaren, Inc.
                                     ------------
                                     (Registrant)

Date: April 30, 2010                 /s/ Lawrence A. Sala
                                     -------------------------------------------
                                     Lawrence A.Sala
                                     President & Chief Executive Officer

Date: April 30, 2010                 /s/ George A. Blanton
                                     -------------------------------------------
                                     George A. Blanton
                                     Sr. Vice President, Chief Financial Officer
                                     and Treasurer


                                       25