UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-Q/A
                                (Amendment No. 1)

(Mark One)

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

For the quarterly period ended December 31, 2005

|_|   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 check mark whether the Registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.

Check One: Large accelerated filer |_|  Accelerated filer |X|
           Non-accelerated filer |_|

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

      The number of shares of Registrant's Common Stock outstanding on February
3, 2006 was 16,963,425.

<PAGE>

Explanatory Note

      The  purpose of this  amended  Quarterly  Report on Form 10-Q/A of Anaren,
Inc.  (the  "Company")  is  to  restate  the  Company's  consolidated  condensed
financial  statements for the three and six months ended December 31, 2005 ("the
financial statements") and to modify the related disclosures.  See Note 1 to the
financial statements included in this amended Quarterly Report.

      The restatement arose from the Company's  determination  that an error had
occurred in the computer  program  used by the Company to value  work-in-process
inventory  resulting in a misstatement of inventory.  As a result of this error,
the Company has  determined  that its inventory at December 31, 2005 and its net
income for the three  months and six months  ended  December  31, 2005 were both
overstated. Additionally, the Company has corrected certain errors in accounting
for  income  taxes  related  to the  expiration  of  the  federal  research  and
experimentation tax credit at the end of calendar 2005.

      This amended Quarterly Report does not update or discuss any other Company
developments after the date of the original filing. All information contained in
this amended  Quarterly  Report and the original  Quarterly Report is subject to
updating and  supplementing as provided in the periodic reports that the Company
has filed and will file after the original  filing date with the  Securities and
Exchange Commission.


                                       2
<PAGE>

                                      INDEX

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

  Item 1. Financial Statements

          Consolidated Condensed Balance Sheets as of                       4
          December 31, 2005 (restated) and June 30, 2005

          Consolidated Condensed Statement of Earnings                      5
          for the Three Months Ended December 31, 2005 (restated)
          and 2004 (unaudited).

          Consolidated Condensed Statements of Earnings                     6
          for the Six Months Ended December 31,
          2005 (restated) and 2004 (unaudited)

          Consolidated Condensed Statements of Cash Flows                   7
          for the Six Months Ended December 31,
          2005 (restated) and 2004 (unaudited)

          Notes to Consolidated Condensed Financial                         8
          Statements (unaudited)

  Item 2. Management's Discussion and Analysis                             19
          of Financial Condition and Results of Operations

  Item 3. Quantitative and Qualitative Disclosures About Market Risk       31

  Item 4. Controls & Procedures                                            31

PART II - OTHER INFORMATION

  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds      33

  Item 4. Submission of Matters to a Vote of Security Holders              33

  Item 6. Exhibits                                                         33

Officer Certifications                                                   35 - 38


                                       3
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                          ANAREN, INC. AND SUBSIDIARIES
                      Consolidated Condensed Balance Sheets
                       December 31, 2005 and June 30, 2005

                   Assets                       December 31, 2005  June 30, 2005
                                                -----------------  -------------
                                                   (Restated -     (Revised)
                                                   See note 1)
                                                  (Unaudited)
Current assets:
    Cash and cash equivalents                    $   4,629,014    $   5,900,841
    Securities available for
      sale (note 4)                                 19,600,000       16,200,000
    Securities held to maturity
      (note 4)                                      40,499,172       36,307,880
    Receivables, less allowance
      of $210,807 at December 31, 2005
      and $213,099 at June 30, 2005                 13,907,521       14,780,146
    Inventories (note 5)                            22,089,634       19,403,348
    Other receivables                                1,142,200        1,144,680
    Deferred income taxes                              664,792          686,411
    Prepaid expenses                                   721,028          662,247
    Other current assets                               632,333          423,000
                                                 -------------    -------------
        Total current assets                       103,885,694       95,508,553

Securities available for
  sale (note 4)                                           --          3,500,000
Securities held to maturity
  (note 4)                                          12,499,018       20,100,547
Property, plant and equipment,
  net (note 6)                                      25,564,872       24,983,653
Goodwill                                            30,715,861       30,715,861
Other intangible assets, net of
  accumulated amortization
  of $2,518,160 at December 31, 2005
  and $2,351,725 at June 30, 2005 (note 2)             506,806          673,241
                                                 -------------    -------------
        Total assets                             $ 173,172,251    $ 175,481,855
                                                 =============    =============
  Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                               $   5,525,706    $   6,077,313
  Accrued expenses (note 7)                          2,473,539        2,331,885
  Income taxes payable                               1,395,430        1,501,088
  Customer deposits                                    483,722               --
  Other current liabilities (note 9)                   981,807        1,044,759
                                                 -------------    -------------
        Total current liabilities                   10,860,204       10,955,045
Deferred income taxes                                1,762,090        1,627,304
Pension and postretirement
  benefit obligation                                 3,594,613        3,253,188
Other liabilities (note 9)                             657,004          567,755
                                                 -------------    -------------
        Total liabilities                           16,873,911       16,403,292
                                                 -------------    -------------

Stockholders' equity:
    Common stock of $.01 par
      value.  Authorized 200,000,000
      shares; issued 26,168,204 shares
      at December 31, 2005 and 26,070,804
      at June 30, 2005                                 261,682          260,708
    Additional paid-in capital                     174,062,105      171,333,975
    Unearned compensation                             (227,312)        (248,578)
    Retained earnings                               62,895,906       59,395,271
    Accumulated other comprehensive
      income                                          (721,756)      (1,483,003)
                                                 -------------    -------------
                                                   236,270,625      229,258,373
    Less cost of 9,248,943 and 8,553,058
      treasury shares at December 31, 2005
      and June 30, 2005, respectively               79,972,285       70,179,810
                                                 -------------    -------------
        Total stockholders' equity                 156,298,340      159,078,563
                                                 -------------    -------------
        Total liabilities and
          stockholders' equity                   $ 173,172,251    $ 175,481,855
                                                 =============    =============

See accompanying notes to consolidated condensed financial statements.


                                       4
<PAGE>

                          ANAREN, INC. AND SUBSIDIARIES
                  Consolidated Condensed Statements of Earnings
                               Three Months Ended
                           December 31, 2005 and 2004
                                   (Unaudited)

                                       December 31, 2005     December 31, 2004
                                       -----------------     -----------------
                                    (Restated - See note 1)
Net sales                                 $25,019,013          $23,650,022

Cost of sales                              16,273,387           16,888,850
                                          -----------          -----------
  Gross profit                              8,745,626            6,761,172
                                          -----------          -----------
Operating expenses:
  Marketing                                 1,715,660            1,860,973
  Research and development                  2,268,438            1,387,105
  General and administrative                2,523,124            2,141,752
  Restructuring (note 7)                           --              458,335
                                          -----------          -----------
    Total operating expenses                6,507,222            5,848,165
                                          -----------          -----------

Operating income                            2,238,404              913,007

Other income, primarily interest              536,821              179,714
Interest expense                               (6,143)              (9,837)
                                          -----------          -----------
    Total other income                    $   530,678          $   169,877
                                          -----------          -----------

Income before income taxes                  2,769,082            1,082,884

Income tax expense                            759,000              102,000
                                          -----------          -----------

Net income                                $ 2,010,082          $   980,884
                                          ===========          ===========
  Basic earnings per share                      $0.12                $0.05
                                                =====                =====

  Diluted earnings per share:                   $0.11                $0.05
                                                =====                =====

Shares used in computing net
  earnings per share:
  Basic                                    17,020,360           19,580,182
                                          ===========          ===========
  Diluted                                  17,595,314           20,167,087
                                          ===========          ===========

See accompanying notes to consolidated condensed financial statements.


                                       5
<PAGE>

                          ANAREN, INC. AND SUBSIDIARIES
                  Consolidated Condensed Statements of Earnings
                                Six Months Ended
                           December 31, 2005 and 2004
                                   (Unaudited)

                                      December 31, 2005       December 31, 2004
                                      -----------------       -----------------
                                   (Restated - See note 1)
Net sales                                $49,633,371            $48,557,379

Cost of sales                             32,233,299             33,905,389
                                         -----------            -----------
  Gross profit                            17,400,072             14,651,990
                                         -----------            -----------
Operating expenses:
  Marketing                                3,483,739              3,637,618
  Research and development                 4,303,079              3,032,182
  General and administrative               5,015,434              4,243,936
  Restructuring (note 7)                          --                458,335
                                         -----------            -----------
    Total operating expenses              12,802,252             11,372,071
                                         -----------            -----------

Operating income                           4,597,820              3,279,919
Other income, primarily interest           1,124,565                532,771
Interest expense                             (12,286)               (15,642)
                                         -----------            -----------
    Total other income                     1,112,279                517,129
                                         -----------            -----------

Income before income taxes                 5,710,099              3,797,048

Income tax expense                         1,474,000                835,000
                                         -----------            -----------

Net income                               $ 4,236,099            $ 2,962,048
                                         ===========            ===========

  Basic earnings per share                     $0.25                  $0.15
                                               =====                  =====
  Diluted earnings per share:                  $0.24                  $0.15
                                               =====                  =====
Shares used in computing
  net earnings per share:
  Basic                                   17,211,315             19,862,314
                                         ===========            ===========
  Diluted                                 17,765,683             20,422,625
                                         ===========            ===========

See accompanying notes to consolidated condensed financial statements.


                                       6
<PAGE>

                          ANAREN, INC. AND SUBSIDIARIES
                 Consolidated Condensed Statements of Cash Flows
                                Six Months Ended
                           December 31, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           December 31, 2005       December 31, 2004
                                                           -----------------       -----------------
                                                        (Restated - See note 1)
<S>                                                          <C>                      <C>
Cash flows from operating activities:
  Net income                                                 $  4,236,099             $  2,962,048
  Adjustments to reconcile net income
    to net cash provided by operating activities:
      Depreciation                                              2,391,077                2,502,172
      Amortization of intangibles                                 166,435                  404,210
      Loss on sale of equipment                                    15,875                   67,397
      Loss on sale of securities available for sale                    --                  342,711
      Deferred income taxes                                       156,405                  139,117
      Equity based compensation                                 1,725,844                  113,143
      Provision for doubtful accounts                              (2,292)                  25,508
      Tax benefit from exercise of stock options                  378,318                   13,536
      Changes in operating assets and liabilities:
        Receivables                                               874,917                  820,296
        Inventories                                            (2,686,286)              (2,350,455)
        Other receivables                                           2,480                  155,757
        Other current assets                                     (268,114)                  95,042
        Accounts payable                                         (551,607)              (2,216,230)
        Accrued expenses                                          141,654                 (853,914)
        Income taxes payable                                     (105,658)                 228,221
        Customer advance payments                                 483,722                 (137,416)
        Other liabilities                                          26,296                  108,485
        Postretirement benefit obligation                         341,425                  (49,472)
                                                             ------------             ------------
          Net cash provided by operating activities             7,326,590                2,370,156
                                                             ------------             ------------
Cash flows from investing activities:
  Capital expenditures                                         (2,989,171)              (7,329,399)
  Proceeds from sale of equity securities                              --                2,746,130
  Proceeds from sale of equipment                                   1,000                  160,000
  Maturities and sales of marketable debt securities           39,120,237               49,099,454
  Purchase of marketable debt securities                      (35,610,000)             (47,204,097)
                                                             ------------             ------------
          Net cash provided by (used in)
            investing activities                                  522,066               (2,527,912)
                                                             ------------             ------------
Cash flows from financing activities:
  Stock options exercised                                         646,209                   49,584
  Purchase of treasury stock                                   (9,792,475)             (11,623,399)
                                                             ------------             ------------
          Net cash used in financing activities                (9,146,266)             (11,573,815)
                                                             ------------             ------------

  Effect of exchange rates                                         25,783                     (658)
                                                             ------------             ------------
          Net decrease in cash and cash equivalents            (1,271,827)             (11,732,229)
Cash and cash equivalents at beginning of period                5,900,841               23,303,263
                                                             ------------             ------------
Cash and cash equivalents at end of period                   $  4,629,014             $ 11,571,034
                                                             ============             ============
Supplemental Disclosures of Cash Flow Information:
  Cash Paid During the Period For:
    Interest                                                 $     12,286             $     15,642
                                                             ============             ============
    Income taxes, net of refunds                             $  1,021,935             $    472,389
                                                             ============             ============
</TABLE>

See accompanying notes to consolidated condensed financial statements.


                                       7
<PAGE>

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

The consolidated  condensed  financial  statements are unaudited and reflect all
adjustments   (consisting  only  of  normal  recurring   adjustments  and  those
adjustments described in Note 1 herein) which are, in the opinion of management,
necessary  for a fair  presentation  of the  financial  position  and  operating
results for the interim periods. The consolidated condensed 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, 2005. The results of operations for
the six months ended  December 31, 2005 are not  necessarily  indicative  of the
results for the entire fiscal year ending June 30, 2006,  or any future  interim
period.

The income tax rates utilized for interim financial  statement  purposes for the
six months ended December 31, 2005 and 2004 are based on estimates of income and
utilization of tax credits for the entire year.

NOTE 1: Restatement of Financial Statements

The Company has  determined  that in the second  quarter of fiscal year 2006,  a
programming  error occurred in the computer program used by the Company to value
work-in-process  inventory resulting in a misstatement of inventory. As a result
of this error,  the Company has  determined  that its  inventory at December 31,
2005 and its net income for the three and six months  ended  December  31,  2005
were all overstated.  Additionally,  the Company has corrected certain errors in
accounting  for income  taxes  related to the  expiration  of the  Research  and
Experimentation  federal  tax  credit  at the end of  calendar  2005,  which had
previously considered immaterial.

The Company's  previously issued consolidated  condensed financial statements as
of and for the three and six months ended  December 31, 2005 have been  restated
to correct the accounting for the following items:

      o     Recording as of December 31, 2005 a $290,883  reduction in inventory
            to  correct  the  overstatement  of  work-in-process   inventory  at
            December  31,  2005 caused by the error in the  Company's  inventory
            valuation software.

      o     Recording  in the second  quarter and the first six months of fiscal
            2006 $290,883 of  additional  cost of sales to reflect the inventory
            overstatement  correction affecting the second quarter and first six
            months of fiscal 2006 results of operations.

      o     Recording in the second  quarter and first six months of fiscal 2006
            a  reduction   in  income  tax  expense  of  $71,000  and   $43,000,
            respectively,  due to the reduction in taxable  income caused by the
            inventory error correction and to properly reflect the expiration of
            the research and experimentation credit at the end of calendar 2005.
            The  reduction  in  income  tax  expense  for the six  months  ended
            December  31,  2005  incorporates  a $28,000  revision to income tax
            expense for the  quarter  ended  September  30,  2005,  deemed to be
            immaterial by the Company.

      o     Recording a reduction  in taxes  payable of $43,000 at December  31,
            2005 as a result of the  reduction in income tax expense for the six
            months ended December 31, 2005.


                                       8
<PAGE>

The following table summarizes the effect of the restatement  adjustments on the
financial  statements as of and for the three and six months ended  December 31,
2005.

                                              Three Months Ended December 31,
                                              -------------------------------
                                                     2005              2005
                                                     ----              ----
                                            (Previously Reported)   (Restated)
Cost of sales                                    $15,982,504      $16,273,387
Gross profit                                       9,036,509        8,745,626
Operating income                                   2,529,287        2,238,404
Income before income taxes                         3,059,965        2,769,082
Income tax expense                                   830,000          759,000
Net income                                       $ 2,229,965      $ 2,010,082
Basic net income per share                             $0.13            $0.12
Diluted net income per share                           $0.13            $0.11

                                               Six Months Ended December 31,
                                               -----------------------------
                                                    2005              2005
                                                    ----              ----
                                           (Previously Reported)   (Restated)
Cost of sales                                    $31,942,416      $32,233,299
Gross profit                                      17,690,955       17,400,072
Operating income                                   4,888,703        4,597,820
Income before income taxes                         6,000,982        5,710,099
Income tax expense                                 1,517,000        1,474,000
Net income                                       $ 4,483,982      $ 4,236,099
Basic net income per share                             $0.26            $0.25
Diluted net income per share                           $0.25            $0.24

                                                      As of December 31,
                                                      ------------------
                                                     2005            2005
                                                     ----            ----
                                            (Previously Reported) (Restated)
Inventories                                      $ 22,380,517    $ 22,089,634
Total current assets                              104,176,577     103,885,694
Total assets                                      173,463,134     173,172,251
Income taxes payable                                1,438,430       1,395,430
Total current liabilities                          10,903,204      10,860,204
Total liabilities                                  16,916,911      16,873,911
Retained earnings                                  63,143,789      62,895,906
Total stockholders' equity                        156,546,223     156,298,340
Total liabilities and                            $173,463,134    $173,172,251
stockholders' equity

The  adjustments to the balance sheet and income  statement at and for the three
and six months  ended  December  31, 2005 had no impact on total cash flows from
operating, investing and financing activities.

The restatement of the consolidated financial statements also affected footnotes
5, 10 and 13.

The  balance  sheet at June 30,  2005 has been  revised to reflect the effect of
recording the foreign currency  translation gain in the second quarter of fiscal
2004 instead of the third quarter fiscal 2006 as follows:


                                       9
<PAGE>

                                                         As of June 30,
                                                         --------------
                                                     2005            2005
                                                     ----            ----
                                            (Previously Reported)  (Revised)
Retained earnings                                $58,659,807      $59,395,271
Accumulated other comprehensive loss                (747,539)      (1,483,003)

NOTE 2: Intangible Assets

INTANGIBLE ASSETS:

Intangible assets as of December 31, 2005 and June 30, 2005 are as follows:

<TABLE>
<CAPTION>
                                               December 31                         June 30
                                    -------------------------------    -----------------------------
                                    Gross Carrying     Accumulated     Gross Carrying   Accumulated
                                       Amount          Amortization       Amount        Amortization
                                    -----------        ------------    --------------   ------------
<S>                                 <C>                 <C>              <C>             <C>
Patent                              $   574,966         $  467,160       $   574,966     $  431,225
Customer Relationships                1,350,000            975,000         1,350,000        862,500
Trade Name                              320,000            320,000           320,000        320,000
Non-Competition Agreements              180,000            156,000           180,000        138,000
Favorable Lease                         600,000            600,000           600,000        600,000
                                     ----------         ----------        ----------     ----------
  Total                              $3,024,966         $2,518,160        $3,024,966     $2,351,725
                                     ==========         ==========        ==========     ==========
</TABLE>

Intangible  asset  amortization  expense for six month period ended December 31,
2005 and 2004 aggregated $166,435 and $404,210,  respectively,  while intangible
asset amortization expense for the three months ended December 31, 2005 and 2004
aggregated $83,217 and $83,219,  respectively.  Amortization  expense related to
intangible assets for the next five years is as follows:

Year Ending June 30,
                  2006                           $332,869
                  2007                           $302,874
                  2008                           $ 37,498
                  2009                           $     --
                  2010                           $     --

NOTE 3: Equity-Based Compensation

Effective  July  1,  2005,  the  Company  adopted  the  fair  value  recognition
provisions of Statement of Financial  Accounting  Standards No. 123R (SFAS 123R)
on a prospective  basis.  This standard requires the Company to measure the cost
of employee  services  received in exchange for equity awards based on the grant
date fair value of the awards.  The cost is recognized as  compensation  expense
over the vesting period of the awards.

Total equity based  compensation  expense included in operating expenses for the
three months and six months ended December 31, 2005 is $863,923 and  $1,725,844,
respectively.  These amounts include $29,634 and $57,267, respectively,  related
to  the  Company's   restricted  stock  program  and  $834,289  and  $1,668,577,
respectively,  related to the Company's stock option program,  for the three and
six month periods.

As a result of the  adoption  of SFAS  123R,  both  operating  income and income
before taxes for the three  months and six months  ended  December 31, 2005 were
reduced by $834,289 and $1,668,577,  respectively,  while net income was reduced
by $777,289,  or $0.05 per basic and


                                       10
<PAGE>

$0.04 per diluted  share,  for the same three month  period and  $1,554,577,  or
$0.09 per basic and diluted share, for the same six month period.

As of December 31, 2005,  there were  3,015,151  stock options  outstanding.  At
December 31, 2005, the aggregate value of unvested options,  as determined using
a Black-  Scholes  option  valuation  model  was  $7,496,474  (net of  estimated
forfeitures). During the six months ended December 31, 2005, the Company granted
374,000  non-statutory  stock options,  with a fair value of $3,202,270  (net of
estimated  forfeitures),  and 46,770 options were forfeited and/or expired.  New
option  grants made after July 1, 2005, as well as option grants issued prior to
that date have been valued using a Black-Scholes option valuation model.

Prior to adopting SFAS 123R on July 1, 2005, the Company's equity based employee
compensation  expense was accounted for under the  recognition  and  measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees,  and
related interpretations.  For the three months and six months ended December 31,
2004,  no equity  option based  employee  compensation  cost is reflected in net
income,  as all options  granted under the  Company's  stock option plans had an
exercise price equal to the underlying  common stock price on the date of grant.
The following table  illustrates the effect on net income and earnings per share
if the Company had applied the fair value  recognition  provisions of SFAS 123R,
Accounting for Equity-Based Compensation,  to equity based employee compensation
for the three months and six months ended December 31, 2004.

                                          Three months ended   Six Months Ended
                                          December 31, 2004    December 31, 2004
                                          -----------------    -----------------

Net income, as reported                       $  980,884         $2,962,048

Deduct total equity based employee
  compensation expense determined
  under fair value based method for
  all awards, net of related tax effects       1,858,491          3,562,741
                                              ----------         ----------

Pro forma net loss                            $ (877,607)        $ (600,693)
                                              ==========         ==========

Earnings (loss) per share:
     Basic - as reported                         $0.05              $0.15
     Basic - pro forma                          $(0.05)            $(0.03)

     Diluted - as reported                       $0.05              $0.15
     Diluted - pro forma                        $(0.04)            $(0.03)

Stock Option Plans

In November 2004, the shareholders approved the amendment and restatement of the
Company's  three existing  stock option plans,  which combined these plans under
one single consolidated equity compensation plan, the Anaren, Inc. Comprehensive
Long-Term  Incentive  Plan. The effect of the amendment and  restatement  was to
combine the separate  share pools  available for grant under the three  existing
plans  into a single  grant  pool,  expand the type of  equity-based  awards the
Company may grant and extend the term of the combined  plan to October 31, 2014.
Under the  restated  plan,  the  Company  may  issue  incentive  stock  options,
non-statutory  stock  options,  stock  appreciation  rights,  restricted  stock,
performance shares, and performance units. On December 31, 2005, the Company had
1,325,088 shares available for grant under the restated plan.


                                       11
<PAGE>

Information with respect to these plans are as follows:

<TABLE>
<CAPTION>
                                                                             Weighted
                                            Total                            average
                                           Shares          Option Price   exercise price
                                           ------          ------------   --------------
<S>                                       <C>             <C>                 <C>
Outstanding at June 30, 2004              2,796,662       $1.38 to 62.44      $15.53

Issued                                      389,600      $12.05 to 13.43      $12.06
Exercised                                   (98,460)       $1.38 to 9.51      $ 1.26
Expired                                    (220,692)      $8.57 to 62.44      $26.90
Canceled                                    (84,330)      $9.51 to 62.44      $11.28
                                          ---------

Outstanding at June 30, 2005              2,782,780      $2.27 to $57.59      $14.73

Issued                                      374,000      $11.97 to 14.35      $14.01
Exercised                                   (94,859)      $2.27 to 15.00      $ 7.04
Expired                                     (30,530)      $9.51 to 53.00      $52.32
Canceled                                    (16,240)     $15.00 to 53.00      $16.22
                                          ---------

Outstanding at December 31, 2005          3,015,151      $2.27 to $57.59      $12.94
                                          =========
Shares exercisable at
  December 31, 2005                       1,897,999      $2.27 to $54.00      $14.97
                                          =========
</TABLE>

The following table summarizes significant ranges of outstanding and exercisable
options at December 31, 2005:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                             Options outstanding                                         Options exercisable
----------------------------------------------------------------------------------------------------------------------
 Range of exercise             Shares         Weighted average    Weighted average      Shares        Weighted average
       prices                                remaining life in     exercise price                      exercise price
                                                   years
----------------------------------------------------------------------------------------------------------------------
<S>                           <C>                    <C>               <C>               <C>                   <C>
$1.00 - $5.00                   146,200                0.88              $2.28             146,200               2.28
----------------------------------------------------------------------------------------------------------------------
$5.01 - $15.00                2,480,891                5.83             $11.04           1,408,611              11.04
----------------------------------------------------------------------------------------------------------------------
$15.01 - $40.00                 213,460                4.88             $20.37             168,588              20.37
----------------------------------------------------------------------------------------------------------------------
$40.01 - $65.00                 174,600                4.82             $53.12             174,600              53.12
----------------------------------------------------------------------------------------------------------------------
                              3,015,151                                                  1,897,999
----------------------------------------------------------------------------------------------------------------------
</TABLE>

During the six months ended December 31, 2005,  the per share  weighted  average
fair value of the non-statutory  stock options granted was $8.13. The fair value
of options at the date of the grant was estimated using the Black-Scholes  model
with the following assumptions for the respective period ending December 31:

                                                          2005             2004
                                                          ----             ----
Expected option life - key employee plan                  6.5              5
Expected option life - company-wide plan                  6.5              3
Weighted average risk-free interest rate                  4.34%            3.22%
Weighted average expected volatility                     62.00%           87.57%
Rate of dividends                                         0.0%             0.0%

For the six  month  period  ended  December  31,  2005,  the  Company  used  the
Simplified  Method to estimate the expected  term of the expected  life of stock
option grants as defined by SEC Staff  Accounting  Bulletin No. 107  Share-Based
Payment for each award  granted.  Expected  volatility  for the six month period
ended  December  31,  2005,  is based on  historical  volatility  levels  of the
Company's  common stock.  The  risk-free  interest rate for the six month period
ended  December 31, 2005 is based on the implied  yield  currently  available on
U.S.  Treasury  zero coupon  issues with a remaining  term equal to the expected
life.


                                       12
<PAGE>

Restricted Stock Program

On  November  17,  2004,  the  Company  issued a new grant of  23,500  shares of
restricted  stock.  The per-share  value of the grant was $13.60.  The shares of
restricted stock vest after a 36-month period.

On  September  1,  2005,  the  Company  issued a new  grant of 2,605  shares  of
restricted  stock.  The per-share  value of the grant was $13.82.  The shares of
stock vest after a 36 month period.

As of December  31, 2005 and 2004,  the  Company has issued  shares  aggregating
26,105 and 21,600,  respectively,  under its Restricted  Stock  Program.  During
fiscal  year 2005,  there were 1,900  shares  forfeited  and 19,700  shares that
matured. The shares of restricted stock vest after a period of 36 and 48 months.
Included in the  $1,725,844  and  $113,143,  of total equity based  compensation
expense,  for the six months  ended  December  31,  2005 and 2004,  the  Company
recognized  compensation  expense  associated  with the  lapse  of  restrictions
aggregating $57,267 and $113,143, respectively.

NOTE 4: Securities

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

<TABLE>
<CAPTION>
                                                                                       December 31, 2005
                                                                                       -----------------
                                                                                     Gross              Gross
                                                                  Amortized        Unrealized         Unrealized
                                                                     Cost             Gains             Losses          Fair Value
                                                                  -----------      ----------         ----------         -----------
<S>                                                               <C>               <C>               <C>                <C>
Securities available for sale:
     Auction rate securities                                      $19,600,000       $        --       $        --        $19,600,000
                                                                  -----------       -----------       -----------        -----------
         Total securities
         available-for-sale                                       $19,600,000       $        --       $        --        $19,600,000
                                                                  ===========       ===========       ===========        ===========
Securities held to maturity:
     Municipal bonds                                              $37,884,044       $        --       $  (234,029)       $37,650,015
     Commercial paper                                               2,237,281                --                --          2,237,281
     Corporate bonds                                                7,381,608                --           (21,872)         7,359,736
     Zero coupon bonds                                              1,995,557                --            (3,797)         1,991,760
     Federal agency bonds                                           3,499,700                --           (42,400)         3,457,300
                                                                  -----------       -----------       -----------        -----------
         Total securities held to maturity                        $52,998,190       $        --       $  (302,098)       $52,696,092
                                                                  ===========       ===========       ===========        ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                           June 30, 2005
                                                                                           -------------
                                                                                     Gross              Gross
                                                                  Amortized        Unrealized         Unrealized
                                                                     Cost             Gains             Losses          Fair Value
                                                                  -----------      ----------         ----------         -----------
<S>                                                               <C>               <C>               <C>                <C>
Securities available for sale:
     Auction rate securities                                      $19,700,000       $        --       $        --        $19,700,000
                                                                  -----------       -----------       -----------        -----------
         Total securities
           Available-for-sale                                     $19,700,000       $        --       $        --        $19,700,000
                                                                  ===========       ===========       ===========        ===========

Securities held to maturity:
     Municipal bonds                                              $37,746,195       $     1,702       $  (198,447)       $37,549,450
     Commercial paper                                               2,141,851                --                --          2,141,851
     Corporate bonds                                               10,792,879               185           (50,276)        10,742,788
     Zero coupon bonds                                              1,977,785                --           (11,205)         1,966,580
     Federal agency bonds                                           3,749,717                --           (21,627)         3,728,090
                                                                  -----------       -----------       -----------        -----------
         Total securities held to maturity                        $56,408,427       $     1,887       $  (281,555)       $56,128,759
                                                                  ===========       ===========       ===========        ===========
</TABLE>

The  unrealized  losses  on the  Company's  held  to  maturity  marketable  debt
securities were caused by interest rate  increases.  Because the Company has the
ability and intent to hold these  investments until they recover their amortized
cost,    the   Company   does   not   consider    these    investments   to   be
other-than-temporarily impaired at December 31, 2005.


                                       13
<PAGE>

Contractual maturities of marketable debt securities held to maturity at
December 31, 2005 are summarized as follows:


                            December 31, 2005            June 30, 2005
                            -----------------            -------------
                                         Fair                          Fair
                                         Market                       Market
                             Cost        Value          Cost          Value
                         -----------   -----------   -----------   -----------
Within one year          $40,499,172   $40,357,486   $36,307,880   $36,176,998
One year to five years    12,499,018    12,338,606    20,100,547    19,951,761
                         -----------   -----------   -----------   -----------
  Total                  $52,998,190   $52,696,092   $56,408,427   $56,128,759
                         ===========   ===========   ===========   ===========

Contractual maturities of auction rate securities available for sale at December
31, 2005 are summarized as follows:

                            December 31, 2005            June 30, 2005
                            -----------------            -------------
                                         Fair                          Fair
                                         Market                       Market
                             Cost        Value          Cost          Value
                         -----------   -----------   -----------   -----------
Within one year          $19,600,000   $19,600,000   $16,200,000   $16,200,000
One year to five years            --            --     3,500,000     3,500,000
                         -----------   -----------   -----------   -----------
  Total                  $19,600,000   $19,600,000   $19,700,000   $19,700,000
                         ===========   ===========   ===========   ===========

The Company  invests in auction rate  securities.  Auction rate  securities have
long-term  underlying  maturities;  however, the market is highly liquid and the
interest  rates  reset  every 7, 28 or 35  days.  In prior  years,  the  Company
classified  a  portion  of its  auction  rate  securities  as cash  equivalents;
however,  such amounts have been reclassified as  available-for-sale  securities
for all periods presented in this report.

During the three months and six months ended December 31, 2004, the Company sold
securities  available for sale and  recognized  losses of $325,364 and $342,711,
respectively  that are  included in other income in the  Company's  Statement of
Operations for those periods.

NOTE 5: Inventories (restated)

Inventories are summarized as follows:

                                          December 31, 2005       June 30, 2005
                                          -----------------       -------------
                                       (Restated - See note 1)
        Component parts                       $10,587,283          $10,369,049
        Work in process                         9,067,997            7,709,465
        Finished goods                          3,715,750            2,766,157
                                              -----------          -----------
                                              $23,371,030          $20,844,671
        Reserve for obsolescence               (1,281,396)          (1,441,323)
                                              -----------          -----------
        Net inventory                         $22,089,634          $19,403,348
                                              ===========          ===========


                                       14
<PAGE>

NOTE 6: Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

                                           December 31, 2005      June 30, 2005
                                           -----------------      -------------
        Land and land improvements            $ 2,207,823          $ 2,207,823
        Buildings, furniture and fixtures      16,973,890           16,654,351
        Machinery and equipment                54,314,515           51,680,883
                                              -----------          -----------
                                              $73,496,228          $70,543,057
        Less accumulated depreciation
         and amortization                     (47,931,356)         (45,559,404)
                                              -----------          -----------
                                              $25,564,872          $24,983,653
                                              ===========          ===========

NOTE 7: Accrued Expenses

Accrued expenses consist of the following:

                                           December 31, 2005      June 30, 2005
                                           -----------------      -------------
        Compensation                           $1,066,199           $1,222,891
        Commissions                               692,685              620,990
        Health insurance                          432,401              271,561
        Restructuring (note 7)                         --               19,863
        Other                                     282,254              196,580
                                               ----------           ----------
                                               $2,473,539           $2,331,885
                                               ==========           ==========

The Company maintains an accrual for incurred, but not reported,  claims arising
from  self-insured  health benefits  provided to the Company's  employees in the
United States, which is included in accrued expenses in the consolidated balance
sheets.  The Company  determines  the adequacy of this accrual by evaluating its
historical  experience  and trends related to both health  insurance  claims and
payments,  information  provided  by its third party  administrator,  as well as
industry experience and trends.

NOTE 8: Restructuring

RF Power Components, Inc.

On October  26, 2004 the Company  announced  its  decision to merge its RF Power
Components,  Inc.  operations  into  Anaren  Ceramics.  In doing so, the Company
closed RF Power's Long Island facility and relocated the operation to the Anaren
Ceramics  New  Hampshire  location.  All of RF  Power's  employees  were  either
terminated  or  transferred  to the  New  Hampshire  facility.  Remaining  costs
associated with terminating 79 employees included in the restructuring liability
were paid-in-full in the six months ended December 31, 2005:

                        Balance   Six months ended December 31, 2005  Balance
                        June 30,     Costs          Cash            December 31,
                          2005      Incurred     Expenditures           2005
                        --------    --------     ------------       ------------

Severance payments        $19,863     $ --         $19,863              $ --
                          -------     ----         -------              ----
                          $19,863     $ --         $19,863              $ --
                          =======     ====         =======              ====


                                       15
<PAGE>

NOTE 9: Other Liabilities

        Other liabilities consist of the following:

                                        December 31, 2005        June 30, 2005
                                        -----------------        -------------
        Deferred compensation               $  722,004            $  650,064
        Pension liability                      559,988               675,000
        Other                                  356,819               287,450
                                            ----------            ----------
                                             1,638,811             1,612,514
        Less current portion                   981,807             1,044,759
                                            ----------            ----------
                                            $  657,004            $  567,755
                                            ==========            ==========

NOTE 10: Net Income (Loss) Per Share

Basic income per share is based on the weighted  average number of common shares
outstanding. Diluted income 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  2004
comprehensive  long-term  incentive plan. The weighted  average number of common
shares  utilized in the  calculation  of the  diluted  income per share does not
include antidilutive shares aggregating  1,065,952 and 1,301,562 at December 31,
2005 and 2004,  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.

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

<TABLE>
<CAPTION>
                                                                      Three Months Ended                   Six Months Ended
                                                                      ------------------                   ----------------
                                                                          December 31                          December 31
Numerator:                                                          2005               2004              2005               2004
----------                                                          ----               ----              ----               ----
                                                                 (Restated)                           (Restated)
<S>                                                             <C>                <C>                <C>                <C>
Net income from continuing operations                           $ 2,010,082        $   980,884        $ 4,236,099        $ 2,962,048
                                                                ===========        ===========        ===========        ===========
Denominator:

Denominator for basic earnings
  per share:
  Weighted average shares outstanding                            17,020,360         19,580,182         17,211,315         19,862,314
                                                                ===========        ===========        ===========        ===========
Denominator for diluted earnings
  per share:
  Weighted average shares outstanding                            17,020,360         19,580,182         17,211,315         19,862,314
  Common stock options
    and restricted stock                                            574,954            586,905            554,368            560,311
                                                                -----------        -----------        -----------        -----------
Weighted average shares and conversions                          17,595,314         20,167,087         17,765,683         20,422,625
                                                                ===========        ===========        ===========        ===========
</TABLE>

NOTE 11: Components of Net Periodic Pension Benefit Costs

<TABLE>
<CAPTION>
                                                                    Three Months Ended                Six Months Ended
                                                                    ------------------                ----------------
                                                                        December 31                      December 31
                                                                   2005             2004            2005             2004
                                                                   ----             ----            ----             ----
<S>                                                             <C>              <C>              <C>              <C>
Service cost                                                    $  85,587        $  65,712        $ 171,174        $ 131,424
Interest cost                                                     151,795          135,206          303,590          270,412
Expected return on plan assets                                   (173,365)        (134,113)        (346,730)        (268,226)
Amortization of prior service cost                                   (808)           4,560           (1,616)           9,120
Amortization of the net (gain) loss                                47,436           27,066           94,872           54,132
                                                                ---------        ---------        ---------        ---------
Net periodic benefit cost                                       $ 110,645        $  98,431        $ 221,290        $ 196,862
                                                                =========        =========        =========        =========
</TABLE>


                                       16
<PAGE>

Expected Pension Contributions

Expected contributions for fiscal 2006 are $675,000.

Estimated Future Pension Benefit Payments

The following  estimated  benefit  payments,  which reflect future  service,  as
appropriate, are expected to be paid:

July 1, 2005 - June 30, 2006 .............................            $  402,899
July 1, 2006 - June 30, 2007 .............................               405,260
July 1, 2007 - June 30, 2008 .............................               472,452
July 1, 2008 - June 30, 2009 .............................               483,474
July 1, 2009 - June 30, 2010 .............................               521,588
Years 2010 - 2014 ........................................             2,981,761

NOTE 12: Components of Net Periodic Postretirement Health Benefit Costs

<TABLE>
                                                                Three Months Ended               Six Months Ended
                                                                ------------------               ----------------
                                                                      December 31                   December 31
                                                                 2005            2004           2005           2004
                                                                 ----            ----           ----           ----
<S>                                                             <C>            <C>            <C>             <C>
Service cost                                                    $14,285        $15,286        $ 28,570        $30,572
Interest cost                                                    46,327         27,802          92,654         55,604
Amortization of the net (gain) loss                              18,788          4,617          37,576          9,234
                                                                -------        -------        --------        -------
Postretirement Health                                           $79,400        $47,705        $158,800        $95,410
                                                                =======        =======        ========        =======
</TABLE>

Expected Postretirement Health Contributions

Expected  contributions  for fiscal 2006 are $175,835,  net of $17,501  expected
subsidy receipts.

NOTE 13: Segment Information (restated)

The Company  operates  predominately in the wireless  communications,  satellite
communications  and defense  electronics  markets.  The Company's two reportable
segments are the wireless group and the space and 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 segment designs,  manufactures and markets commercial products used
mainly by the wireless  communications  market. The space and defense segment of
the business  designs,  manufactures  and markets  specialized  products for the
defense   electronics  and  satellite   communications   markets.   The  revenue
disclosures  for the  Company's  reportable  segments  depict  products that are
similar in nature.


                                       17
<PAGE>

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 &         Corporate and
                                                                 Wireless           Defense           Unallocated       Consolidated
                                                                 --------           -------         -------------       ------------
<S>                                                             <C>                  <C>            <C>                  <C>
Net sales:
Three months ended:
    December 31, 2005                                           $15,494,100          9,524,913                 --        $25,019,013
    December 31, 2004                                           $16,006,066          7,643,956                 --        $23,650,022
Six months ended:
    December 31, 2005                                           $31,904,835         17,728,536                 --        $49,633,371
    December 31, 2004                                           $33,774,359         14,783,020                 --        $48,557,379

Operating income (loss):
  Three months ended:
    December 31, 2005 (restated)                                  1,233,695          1,004,709                 --          2,238,404
    December 31, 2004                                              (741,875)         1,654,882                 --            913,007
  Six months ended:
    December 31, 2005 (restated)                                  3,278,886          1,318,934                 --          4,597,820
    December 31, 2004                                               (87,950)         3,367,869                 --          3,279,919

Goodwill and intangible assets:
    December 31, 2005                                            31,222,667                 --                 --         31,222,667
    June 30, 2005                                                31,389,102                 --                 --         31,389,102

Identifiable assets:*
    December 31, 2005 (restated)                                 19,171,068         16,591,076        106,187,440        141,949,584
    June 30, 2005                                                21,497,591         12,685,903        109,909,259        144,092,753

Depreciation:**
  Three months ended:
    December 31, 2005 (restated)                                    607,047            582,111                 --          1,189,158
    December 31, 2004                                               605,786            643,719                 --          1,249,505
  Six months ended:
    December 31, 2005 (restated)                                  1,245,959          1,145,118                 --          2,391,077
    December 31, 2004                                             1,450,027          1,052,145                 --          2,502,172

Intangibles amortization: ***
  Three months ended:
    December 31, 2005                                                83,217                 --                 --             83,217
    December 31, 2004                                                83,219                 --                 --             83,219
  Six months ended:
    December 31, 2005                                               166,435                 --                 --            166,435
    December 31, 2004                                               404,210                 --                 --            404,210
</TABLE>

      *     Segment assets primarily  include  receivables and inventories.  The
            Company does not  segregate  other assets on a products and services
            basis  for  internal  management  reporting  and,  therefore,   such
            information  is not  presented.  Assets  included in  corporate  and
            unallocated  principally are cash and cash  equivalents,  marketable
            securities,  other  receivables,  prepaid expenses,  deferred income
            taxes,  and  property,  plant and equipment not specific to business
            acquisitions.


                                       18
<PAGE>

      **    Depreciation  expense  related to  acquisition - specific  property,
            plant and equipment is included in the segment classification of the
            acquired  business.  Depreciation  expense  related to  non-business
            combination assets is allocated  departmentally based on an estimate
            of  capital  equipment  employed  by each  department.  Depreciation
            expense  is then  further  allocated  within  the  department  as it
            relates to the specific business segment impacted by the consumption
            of the capital  resources  utilized.  Due to the  similarity  of the
            property,  plant  and  equipment  utilized,  the  Company  does  not
            specifically  identify these assets by individual  business  segment
            for internal reporting purposes.

      ***   Amortization of identifiable intangible assets arising from business
            combinations  and patent  amortization  is allocated to the segments
            based on the segment  classification  of the acquired or  applicable
            operation.

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/A.  The  following  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/A.

Overview

The consolidated  financial  statements  present the financial  condition of the
Company as of December 31, 2005 and June 30, 2005, and the consolidated  results
of  operations  and cash flows of the Company for the three and six months ended
December 31, 2005 and 2004.

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  for  wireless  communications  systems,  in
satellites and in defense  electronics  systems.  Beginning in 2004, the Company
has introduced new components  addressing consumer wireless applications such as
wireless  local  area  networks,  Bluetooth,  cellular  handsets  and  satellite
telecommunications.   The  Company  sells  its  products  to  leading   wireless
communications equipment manufacturers such as Ericsson, Motorola, Nokia, Nortel
Networks,  and Andrew, and to satellite  communications and defense  electronics
companies such as Boeing Satellite,  ITT, Lockheed Martin,  Northrup Grumman and
Raytheon.

The  Company  generally  recognizes  sales at the time  products  are shipped to
customers, provided that persuasive evidence of an arrangement exists, the sales
price is fixed or easily determinable,  collectibility is reasonably assured and
title  and risk of loss has  passed  to the  customer.  Title  and the risks and
rewards of  ownership  of  products  are  generally  transferred  at the time of
shipment.  Payments received from customers in advance of products delivered are
recorded as customer advance payments until earned. Annually, a small percentage
of sales are derived  from  fixed-price  contracts  for the sale of  engineering
design and development efforts for space and defense


                                       19
<PAGE>

electronics products.  Sales and estimated profits under long-term contracts are
recognized according to customer  contractual  milestones on a units-of-delivery
basis.  Profit  estimates are revised  periodically  based upon changes in sales
value and costs at completion.  Any losses on these  contracts are recognized in
the period in which such losses are determined.

On August 3, 2004, the Company  acquired a 65,000 square foot building  situated
on  approximately  12 acres in Salem, New Hampshire for a purchase price of $4.8
million.  The Company commenced the move of its Amitron,  Inc. subsidiary to the
new facility in September  2004 and is operating the business  under the name of
Anaren  Ceramics,  Inc.,  a wholly  owned  subsidiary  of the  Company.  The New
Hampshire  facility will provide adequate space for anticipated future growth of
that business.  In  conjunction  with the decision to move to this new facility,
the Company  negotiated a buy out of the remaining lease of the Amitron facility
for a  one-time  charge  in  fiscal  2004  of  $350,000  and  the  Company  also
accelerated  amortization of the Amitron,  Inc. leasehold  improvement and lease
related  intangibles  amounting to $250,000  recognized in the fourth quarter of
fiscal 2004, and $250,000 recognized in the first quarter of fiscal 2005.

In  October,  2004 the Company  announced  that in order to  accelerate  ceramic
product growth initiatives and improve operating  efficiency,  it had decided to
consolidate its RF Power, Inc.  subsidiary with the Company's Amitron subsidiary
and close RF Power's facility in Bohemia,  New York. The  consolidated  company,
Anaren Ceramics,  Inc., operates at the Company's Salem, New Hampshire facility,
which will fully  accommodate the current  capacity needs of the combined entity
as well as significant  future growth. The relocation of RF Power's operation to
the Salem,  New Hampshire  facility was completed  during the second  quarter of
fiscal 2005. As a result of this consolidation,  the Company recognized costs of
$458,335 for severance and outplacement expenses, $91,000 for lease cancellation
and $300,000 for additional  inventory  write-downs during the second quarter of
fiscal 2005.  Additionally,  the Company  incurred further  consolidation  costs
totaling approximately $397,000, including equipment write-downs of $272,000, in
the third quarter of fiscal 2005,  related to integrating  RF Power's  operation
into Anaren Ceramics.

Effective July 1, 2005, the Company  adopted  Statement of Financial  Accounting
Standards No. 123R (SFAS 123R).  This  standard  requires the company to measure
the cost of employee  services  received in exchange for equity  awards based on
the grant date fair value of the  awards.  These costs are to be  recognized  as
compensation  expense over the vesting period of the awards.  SFAS 123R provides
for a prospective  application for adoption which the Company chose.  Under this
method,  the  Company  began  recognizing  compensation  costs for equity  based
compensation  for all new or  modified  grants  after June 30,  2005 and for the
unvested  portion  of the  grant  date  fair  value of  awards  issued  prior to
adoption,  based on the fair value previously calculated for footnote disclosure
purposes.  Equity based  compensation cost for employee stock options recognized
in the second  quarter and six months  ended  December 31, 2005 was $834,289 and
$1,668,577, respectively.

Third Quarter of Fiscal 2006 Outlook

Given the  current  volatile  wireless  market  demand and our Space and Defense
order  backlog,  we expect net sales to be in the range of $23.0 - $25.0 million
for  the  third  quarter  of  fiscal  2006.  With  an  anticipated  tax  rate of
approximately  25.3%  and an  expected  equity  based  compensation  expense  of
approximately  $0.04 per diluted share, we expect net earnings per diluted share
to be in the range of $0.09 - $0.12 for the third quarter.


                                       20
<PAGE>

Results of Operations

Net sales from  operations  for the three  months  ended  December 31, 2005 were
$25.0  million,  up $1.4  million from $23.6  million for the second  quarter of
fiscal 2005.  Net income for the second  quarter of fiscal 2006 was $2.0 million
(restated), or 8.0% (restated) of net sales, up $1.0 million (restated), or 105%
(restated) from net income of $981,000 in the second quarter of fiscal 2005.

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

<TABLE>
<CAPTION>
                                                                 Three Months Ended                     Six Months Ended
                                                         Dec. 31, 2005      Dec. 31, 2004     Dec. 31, 2005        Dec. 31, 2004
                                                         -------------      -------------     -------------        -------------
                                                           (Restated)                            (Restated)
<S>                                                           <C>                <C>                <C>                <C>
Net Sales                                                     100.0%             100.0%             100.0%             100.0%

Cost of sales                                                  65.0%              71.4%              64.9%              69.8%
                                                              -----              -----              -----              -----
Gross profit                                                   35.0%              28.6%              35.1%              30.2%
                                                              -----              -----              -----              -----

Operating expenses:
   Marketing                                                    6.9%               7.9%               7.0%               7.5%
   Research and development                                     9.1%               5.9%               8.7%               6.3%
   General and administrative                                  10.1%               9.0%              10.1%               8.7%
   Restructuring                                                0.0%               1.9%               0.0%               0.9%
                                                              -----              -----              -----              -----
     Total operating expenses                                  26.1%              24.7%              25.8%              23.4%
                                                              -----              -----              -----              -----

Operating income                                                8.9%               3.9%               9.3%               6.8%

Other income (expense):

     Other, primarily interest income                           2.1%               0.7%               2.2%               1.0%
     Interest expense                                           0.0%               0.0%               0.0%               0.0%
                                                              -----              -----              -----              -----
     Total other income (expense), net                          2.1%               0.7%               2.2%               1.0%
                                                              -----              -----              -----              -----

Income before income taxes                                     11.0%               4.6%              11.5%               7.8%
Income taxes                                                    3.0%               0.4%               3.0%               1.7%
                                                              -----              -----              -----              -----
   Net income                                                   8.0%               4.2%               8.5%               6.1%
                                                              =====              =====              =====              =====
</TABLE>

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

                          Three Months Ended             Six Months Ended
                              December 31                   December 31
                          -------------------           --------------------
                          2005           2004           2005            2004
                          ----           ----           ----            ----
Wireless                 $15,495        $16,006        $31,905        $33,774
Space and Defense          9,524          7,644         17,728         14,783
                         -------        -------        -------        -------
     Total               $25,019        $23,650        $49,633        $48,557
                         =======        =======        =======        =======


                                       21
<PAGE>

Three Months Ended December 31, 2005 Compared to Three Months Ended December 31,
2004

Net sales. Net sales rose $1.4 million,  or 5.5% to $25.0 million for the second
quarter  ended  December  31,  2005,  compared  to $23.6  million for the second
quarter of fiscal  2005.  This  increase  resulted  from a $1.9  million rise in
shipments of Space and Defense  products in the current second quarter which was
partially off-set by a $511,000 decline in sales of wireless products

The  decrease  in  sales  of  Wireless  products,   which  consist  of  standard
components,  ferrite  components  and custom  subassemblies  for use in building
Wireless  basestation  and  consumer  equipment,  was a result of a  decline  in
customer  demand  during  the second  quarter  for  custom  Wireless  components
compared to the second quarter of last year.

Wireless  product  sales fell  $511,000 or 3.2% in the second  quarter of fiscal
2006  compared  to the second  quarter  of fiscal  2005,  due to a $1.2  million
decline in  shipments of wireless  custom  subassemblies  in the current  second
quarter compared to the second quarter of fiscal 2005 due to a temporary decline
in demand  for Nokia  custom  products.  This drop was  partially  off-set  by a
$714,000,  or 200% increase in shipments of new consumer products in the current
second quarter compared to the same period last year.

Space and Defense  products  consist of custom  components  and  assemblies  for
communication satellites and defense radar and countermeasure subsystems for the
military.  Sales of Space and Defense  products rose $1.9 million,  or 24.6%, to
$9.5 million in the second quarter of fiscal 2006 compared to the second quarter
of the previous  fiscal year. This increase is attributed to a $1.9 million rise
in Defense product  shipments  during the current second quarter compared to the
same quarter in fiscal 2005.  Defense  product sales are  increasing  due to the
higher  level of new  business  booked by the  Company in fiscal  2004 and 2005,
which is now in  production.  Space and  Defense  product  bookings  were  $37.7
million in fiscal 2004,  $40.9  million in fiscal 2005 and have  exceeded  $19.0
million in the first half of fiscal 2006. Sales of Space and Defense products in
the  remainder  of fiscal  2006 are  expected  to range  between  $9.0 and $10.0
million,  quarterly,  as a result of the rise in new order  levels over the last
two fiscal years.

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 second quarter of fiscal 2006 was
$8.7  million  (restated),  (35.0% of net  sales  (restated)),  up $1.9  million
(restated)  from $6.8  million  (28.6% of net sales) for the same quarter of the
prior year. Gross profit on sales increased in the second quarter of fiscal 2006
over  the  second  quarter  of last  year due to the  higher  sales  volume  and
favorable  manufacturing  efficiencies  in the  current  second  quarter.  These
efficiencies  resulted  from higher  production  volumes at our lower cost China
facility and from yield  improvements  and  manufacturing  overhead cost savings
realized by  combining  the RF Power and Amitron  production  facilities  in one
building  as  Anaren  Ceramics.   Additionally,   cost  of  sales  included  the
recognition  of $197,000 of equity  based  compensation  expense,  while cost of
sales in the second  quarter of last year included  $300,000 of cost  associated
with the write-down of RF Power inventory due to the consolidation.

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 $1.7 million (6.9%
of net sales) for the second  quarter of fiscal 2006,  down  $145,000  from $1.9
million (7.9% of net sales) for the second  quarter of fiscal 2005.  Included in
marketing  expense  for the second  quarter of fiscal  2006 is $69,000 of equity
based


                                       22
<PAGE>

compensation  expense.  Marketing  expense for the second quarter of fiscal 2005
does not include  expense for equity based  compensation  as the Company adopted
SFAS  123R  on a  prospective  basis.  Absent  the  inclusion  of  equity  based
compensation  expense,  marketing  costs in the second  quarter  of fiscal  2006
declined  approximately  11% year over year due to cost savings realized through
the consolidation of the RF Power and Amitron operations during fiscal 2005.

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 $2.3 million
(9.1% of net sales) in the second  quarter  of fiscal  2006,  up 63.5% from $1.4
million (5.9% of net sales) for the second quarter of fiscal 2005.  Research and
development   expenditures  are  supporting  further   development  of  Wireless
infrastructure  and consumer component  opportunities.  Research and Development
expenditures  have  increased  in the second  quarter of fiscal 2006 over second
quarter fiscal 2005 levels due to the higher level of Wireless  opportunities in
the  marketplace  and  due  to  the  inclusion  of  $128,000  for  equity  based
compensation expense.  These opportunities  resulted in the hiring of additional
product  development  personnel in fiscal 2005 and 2006, and additional  outside
spending  by the Company in the  current  first six months to  expedite  the new
product development  process.  The Company does not expect to reduce its current
research and  development  efforts and is  presently  working on a number of new
standard and custom Wireless products.

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  17.8% to $2.5  million  (10.1% of net sales) for the second
quarter  of fiscal  2006 from $2.1  million  (9.0% of net  sales) for the second
quarter of fiscal 2005.  The increase  resulted  primarily from the inclusion in
general and  administrative  expense of $441,000  of equity  based  compensation
expense in the second quarter of fiscal 2006. General and Administrative expense
for the second quarter of fiscal 2005 does not include  expense for equity based
compensation. Absent the inclusion of equity based compensation expense, general
and administrative  costs for the second quarter of fiscal 2006 declined $60,000
due to cost reductions  achieved  through the  consolidation of the RF Power and
Amitron operations during fiscal 2005.

Restructuring.  Restructuring  cost which consisted of wages,  health insurance,
payroll  taxes and  outplacement  costs were  $458,000 in the second  quarter of
fiscal  2005.  These  costs  were  related  to the  termination  of 79 people in
conjunction  with the closure of the RF Power Bohemia,  NY facility and the move
of that operation to Salem, NH in the second quarter of fiscal 2005.  There were
no restructuring expenses in the second quarter of fiscal 2006.

Operating Income.  Operating income increased $1.3 million  (restated),  or 145%
(restated) in the second quarter of fiscal 2006 to $2.2 million (restated) (8.9%
of net sales (restated)) compared to $913,000 (3.9% of net sales) for the second
quarter of last fiscal year.  In the second  quarter of fiscal  2006,  operating
income was reduced by $834,000 for equity  based  compensation  expense.  As the
Company  adopted  SFAS 123R on a  prospective  basis,  operating  income for the
second  quarter of fiscal 2005 (the prior year) does not include any expense for
equity based compensation.

On a  reporting  segment  basis,  Wireless  operating  income  was $1.2  million
(restated) for the second quarter of fiscal 2006  (including  $419,000 of equity
based compensation expense) up $2.0 million (restated) from a Wireless operating
loss of $742,000 for the second quarter of last year.  Wireless operating income
improved  significantly  in the  current  second  quarter  due to  cost


                                       23
<PAGE>

savings  achieved  through  the  consolidation  of  the  RF  Power  and  Amitron
operations  in fiscal  2005,  the  absence of  consolidation  and  restructuring
charges  ($850,000  in the second  quarter of fiscal  2005),  cost  efficiencies
resulting from higher manufacturing volumes in the Company's China operation and
a more favorable  wireless  custom  product mix in the current  second  quarter,
compared to the second quarter of last fiscal year.

Space and  Defense  operating  income  fell  $650,000  (restated)  in the second
quarter of fiscal 2006 to $1.0 million (restated)  (including $415,000 of equity
based  compensation  expense)  compared to $1.7  million  (with no equity  based
compensation  expense)  in the second  quarter of fiscal  2005.  This  decrease,
despite a rise in sales volume,  resulted from the large number of new Space and
Defense  programs  entering  production over the second half of last fiscal year
and the first half of fiscal  2006.  These  programs in their  early  production
phase require a higher level of engineering support, have higher scrap costs and
lower manufacturing efficiencies than more mature programs. Operating margins in
this group are expected to improve as the newer programs mature.

Other Income.  Other income is primarily  interest  income  received on invested
cash  balances  and  losses on the sale of stock and  capital  equipment.  Other
income  increased 198% to $537,000 (2.1% of net sales) for the second quarter of
fiscal 2006,  from $180,000  (0.7% of net sales) for the same quarter last year.
This  increase was caused mainly by the rise in market  interest  rates over the
past twelve months and the absence of losses on equipment and  investment  sales
in the current  second  quarter  compared to $388,000 of losses  recorded in the
second  quarter of last year.  Other income will  fluctuate  based on short-term
market interest rates and the level of investable cash balances.

Interest  Expense.  Interest  expense  represents  interest  paid on a  deferred
obligation.  Interest  expense for the second  quarter of fiscal 2006 was $6,000
compared to $10,000 for the second quarter of fiscal 2005.

Income Taxes.  Income taxes for the second  quarter of fiscal 2006 were $759,000
(restated) (3.0% of net sales (restated)), representing an effective tax rate of
27.4%  (restated).  This compares to income tax expense of $102,000 (0.4% of net
sales) for the second quarter of fiscal 2005, representing an effective tax rate
of 9.4%.  The Company's  effective tax rate is a direct result of the proportion
of  federally  exempt  state  municipal  bond income and federal tax credits and
benefits  in  relation to the levels of taxable  income or loss.  The  projected
effective  tax rate for fiscal 2006 is  approximately  25% compared to an actual
effective  tax  rate of 19% for  fiscal  2005.  The  increase  in the  projected
effective tax rate is a result of both the higher level of income and the amount
of  nondeductible  incentive  stock  option  equity based  compensation  expense
expected in fiscal 2006 compared to the level of deductible  non-statutory stock
option equity based  compensation  expenses  resulting from the adoption of SFAS
123R.  Stock  options  issued  prior to the  adoption of SFAS 123R,  were mainly
incentive  stock  options  and are  presently  generating  the  majority  of the
company's equity based employee stock option compensation expense.  Compensation
expense for these  options,  under SFAS 123R,  does not generate a tax deduction
and related deferred tax benefit. New options granted after the adoption of SFAS
123R are expected to be mainly non-statutory stock options,  which will generate
a tax deduction and related deferred tax benefit.


                                       24
<PAGE>

Six Months  Ended  December 31, 2005  Compared to Six Months Ended  December 31,
2004

Net Sales.  Net sales increased $1.1 million,  or 2.2%, to $49.6 million for the
first six months of fiscal  2006  compared  to $48.6  million  for the first six
months of fiscal 2004. This rise in sales resulted from a $2.9 million  increase
in sales of Space and Defense  products in the first half of fiscal 2006,  which
was  partially  off-set by a $1.9  million  decline  in  shipments  of  wireless
products.

The decrease in sales of Wireless  products in the first half of fiscal 2006 was
a result of a decline in customer demand for older standard resistive components
and circulator  products.  These products combined for a $3.4 million decline in
revenue. This decrease was partially off-set by a $1.4 million increase in sales
of new consumer components.

Space and  Defense  products  shipments  rose  $2.9  million,  or 20%,  to $17.7
million,  in the first  half of fiscal  2006  compared  to the first half of the
previous fiscal year. This increase consisted of a $2.9 million rise in sales of
Defense  products  during the current six months  compared to the same period in
fiscal 2005. Defense product sales are increasing due to the higher level of new
business  booked  by the  Company  in  fiscal  2004  and  2005,  which is now in
production.  Space and Defense  product  bookings  were $37.7  million in fiscal
2004, $40.9 million in fiscal 2005, and have exceeded $19.0 million in the first
half of fiscal  2006.  Sales of Space and Defense  products in the  remainder of
fiscal  2006 are  expected to range  between  $9.0  million  and $10.0  million,
quarterly,  as a result of the rise in new order levels over the last two fiscal
years.

Gross  Profit.  Gross profit for the first half of fiscal 2006 was $17.4 million
(restated),  (35.1% of net sales  (restated)),  up $2.7 million  (restated) from
$14.7 million (30.2% of net sales) for the same period of the prior year.  Gross
profit on sales  increased  in the first half of fiscal 2006 over the first half
of last year due to favorable  manufacturing  efficiencies  in the current year.
These  efficiencies  resulted from higher  production  volumes at our lower cost
China facility and manufacturing overhead cost savings realized by combining the
RF Power and Amitron production facilities into one building at Anaren Ceramics.
Additionally,  gross profit was lowered by the recognition of $522,000 of equity
based compensation expense in the first quarter of fiscal 2006.

Marketing.  Marketing  expenses  were $3.5  million  (7.0% of net sales) for the
first six months of fiscal 2006,  down  $154,000  from $3.6 million (7.5% of net
sales) for the first six months of fiscal 2005.  Included in  marketing  expense
for the first six months of fiscal 2006 is $138,000 of equity based compensation
expense.  Marketing  expenses  for the first half of fiscal  2005 do not include
expense for equity  based  compensation  as the Company  adopted  SFAS 123R on a
prospective basis.  Absent the inclusion of equity based  compensation  expense,
marketing costs in the first half of fiscal 2006 declined  approximately 8% year
over year due to cost savings realized through the consolidation of the RF Power
and Amitron  production  facilities during fiscal 2005, and the transfer of some
marketing personnel to other functions.

Research and  Development.  Research and development  expenses were $4.3 million
(8.7% of net sales) in the first half of fiscal 2006, up 41.9% from $3.0 million
(6.3% of net sales) for the first half of fiscal 2005.  Research and development
expenditures are supporting further  development of Wireless  infrastructure and
consumer  component  opportunities.  Research and development  expenditures have
increased in the first half of fiscal 2006 over first half of fiscal 2005 levels
due to the higher level of Wireless  opportunities in the marketplace and due to
the inclusion of $128,000 for equity based compensation expense.


                                       25
<PAGE>

General and Administrative.  General and administrative expenses increased 18.1%
to $5.0  million  (10.1% of net sales)  for the first six months of fiscal  2006
from $4.2  million  (8.7% of net sales) for the first six months of fiscal 2005.
The increase resulted primarily from the inclusion in general and administrative
expense of $882,000 of equity based compensation expense in the first six months
of fiscal 2006. General and  administrative  expense for the first six months of
fiscal 2005 does not include expense for equity based  compensation.  Absent the
inclusion of equity based compensation expense, general and administrative costs
for the first six months of fiscal 2006 declined $111,000 due to cost reductions
achieved through the consolidation of the RF Power and Amitron operations during
fiscal 2005.

Restructuring.  Restructuring  cost which consisted of wages,  health insurance,
payroll taxes and  outplacement  costs were $458,000 in the first half of fiscal
2005.  These costs were related to the  termination  of 79 people in conjunction
with the closure of RF Power's facility and the move of that operation to Salem,
New Hampshire in the second quarter of fiscal 2005.  There were no restructuring
charges in the first half of fiscal 2006.

Operating Income.  Operating income increased $1.3 million (restated),  or 40.2%
(restated) in the first half of fiscal 2006 to $4.6 million  (restated) (9.3% of
net sales (restated)) compared to $3.3 million (6.8% of net sales) for the first
half of last  fiscal  year.  In the first six months of fiscal  2006,  operating
income was reduced by $1.7  million for stock option  equity based  compensation
expense.  As the Company  adopted SFAS 123R on a  prospective  basis,  operating
income for the first six months of fiscal 2005 (the prior year) does not include
any expense for stock option equity based compensation.

On a  reporting  segment  basis,  Wireless  operating  income  was $3.3  million
(restated) for the first half of fiscal 2006 (including $838,000 of equity based
compensation  expense) up $3.4 million (restated) from a Wireless operating loss
of $88,000 for the first half of last year.  Wireless  operating income improved
significantly  in the  current  first six  months due to cost  savings  achieved
through the consolidation of the RF Power and Amitron operations in fiscal 2005,
the absence of  consolidation  charges  ($1.1 million in the first six months of
fiscal 2005), cost efficiencies resulting from high manufacturing volumes in the
Company's  China  operation  and a more  favorable  wireless  product mix in the
current first six months, compared to the first half of last fiscal year.

Space and Defense operating income fell $2.1 million (restated) in the first six
months of fiscal 2006 to $1.3 million  (restated)  (including  $831,000 of stock
option equity based compensation  expense) compared to $3.4 million in the first
six  months of  fiscal  2005.  This  decrease,  despite a rise in sales  volume,
resulted  from the  large  number of new Space  and  Defense  programs  entering
production  over the second half of last fiscal year and the current  first half
of fiscal 2006.  These programs in their early production phase require a higher
level of engineering  support,  have higher scrap costs and lower  manufacturing
efficiencies  than more  mature  programs.  Operating  margins in this group are
expected to improve as the newer programs mature.

Other Income.  Other income is primarily  interest  income  received on invested
cash  balances  and  losses on the sale of stock and  capital  equipment.  Other
income  increased  111% to $1.1  million  (2.2% of net sales) for the six months
ended  December 31,  2005,  from  $533,000  (1.0% of net sales) for the same six
months last year. This increase was caused mainly by the rise in market interest
rates over the past  twelve  months and the absence of losses on  equipment  and
investment  sales in the current first six months compared to $410,000 of losses
recorded in the first half of last year.  Other income will  fluctuate  based on
short-term market interest rates and the level of


                                       26
<PAGE>

investable cash balances.

Interest  Expense.  Interest  expense  represents  interest  paid on a  deferred
obligation.  Interest  expense  for the first  half of fiscal  2006 was  $12,000
compared to $16,000 for the first half of fiscal 2005.

Income  Taxes.  Income  taxes for the first half of fiscal 2006 were  $1,474,000
(restated) (3.0% of net sales (restated)), representing an effective tax rate of
25.8%  (restated).  This compares to income tax expense of $835,000 (1.7% of net
sales) for the first half of fiscal 2005,  representing an effective tax rate of
22%. The company's  effective  tax rate is a direct result of the  proportion of
federally  exempt  state  municipal  bond  income and  federal  tax  credits and
benefits  in  relation to the levels of taxable  income or loss.  The  projected
effective  tax rate for fiscal 2006 is  approximately  25% compared to an actual
effective  tax  rate of 19% for  fiscal  2005.  The  increase  in the  projected
effective tax rate is a result of both the higher level of income and the amount
of  nondeductible  incentive  stock  option  equity based  compensation  expense
expected in fiscal 2006 compared to the level of deductible  non-statutory stock
option equity based  compensation  expense  resulting  from the adoption of SFAS
123R.  Stock  options  issued  prior to the  adoption of SFAS 123R,  were mainly
incentive  stock  options  and are  presently  generating  the  majority  of the
company's equity based employee stock option compensation expense.  Compensation
expense for these  options,  under SFAS 123R,  does not generate a tax deduction
and related deferred tax benefit. New options granted after the adoption of SFAS
123R are expected to be mainly non-statutory stock options,  which will generate
a tax deduction and related deferred tax benefit.

Critical Accounting Policies

The methods,  estimates and judgments  management uses in applying the Company's
most  critical  accounting  policies  have a  significant  impact on the results
reported in the Company's financial statements. The U.S. Securities and Exchange
Commission  has defined the most critical  accounting  policies as the ones that
are most important to the portrayal of Anaren's financial condition and results,
and that require management to make the most difficult and subjective judgments,
often as a result of the need to make  estimates of matters that are  inherently
uncertain.  Based on this  definition,  the  Company's  most  critical  policies
include:   valuation  of  accounts   receivable,   which  impacts   general  and
administrative expense;  valuation of inventory, which impacts cost of sales and
gross margin;  the assessment of recoverability of goodwill and other intangible
and long-lived  assets,  which impacts  write-offs of goodwill,  intangibles and
long-lived  assets; and accounting for income taxes, which impacts the valuation
allowance  and  the  effective  tax  rate.  Management  reviews  the  estimates,
including,  but not limited  to,  allowance  for  doubtful  accounts,  inventory
reserves  and income tax  valuations  on a regular  basis and makes  adjustments
based on historical experiences, current conditions and future expectations. The
reviews are performed  regularly and adjustments are made as required by current
available information.  The Company believes these estimates are reasonable, but
actual results could and have differed at times from these estimates.

The Company's accounts receivable represent those amounts which have been billed
to its customers but not yet collected.  The Company  analyzes  various  factors
including  historical  experience,  credit  worthiness  of customers and current
market and economic  conditions in conjunction  with evaluating  customer credit
worthiness.  The allowance for doubtful accounts balance is established based on
the  portion of those  accounts  receivable  which are deemed to be  potentially
uncollectible.  Changes in judgments on these factors could impact the timing of
costs recognized.


                                       27
<PAGE>

The Company states inventories at the lower of cost or market,  using a standard
cost  methodology  to determine  the cost basis for the  inventory.  This method
approximates  actual cost on a  first-in-first-out  basis. The recoverability of
inventories  is based on the types  and  levels of  inventory  held,  forecasted
demand, pricing, competition and changes in technology.

The Company records  valuation  allowances to reduce deferred tax assets when it
is more likely than not that some portion of the amount may not be realized. The
Company  evaluates  the need for  valuation  allowances  on a regular  basis and
adjusts the allowance as needed.  These  adjustments,  when made,  would have an
impact  on the  Company's  financial  statements  in the  period  that they were
recorded.

Intangible  assets with  estimable  useful lives are amortized to their residual
values over those estimated  useful lives in proportion to the economic  benefit
consumed.

Long-lived  assets with estimated useful lives are depreciated to their residual
values over those useful lives in  proportion  to the economic  value  consumed.
Long-lived assets are tested for impairment at the group level, which is usually
an economic unit such as a  manufacturing  facility or  department,  which has a
measurable  economic  output  or  product.  Long-lived  assets  are  tested  for
impairment  when events or changes in  circumstances  indicate that the carrying
amount of a long-lived  asset may not be recoverable and exceeds its fair market
value. This circumstance exists if the carrying amount of the assets in question
exceeds the sum of the  undiscounted  cash flows expected to result from the use
of the  asset.  The  impairment  loss is  measured  as the  amount  by which the
carrying  amount of a long-lived  asset  exceeds its fair value as determined by
the  discounted  cash flow or in the case of negative cash flow, an  independent
market appraisal of the asset.

Goodwill  is tested  annually  during the fourth  fiscal  quarter,  or sooner if
indicators of impairment  exist,  for impairment by the Company at the reporting
unit level by comparing the fair value of the  reporting  unit with its carrying
value.  Valuation  methods for  determining the fair value of the reporting unit
include  reviewing  quoted  market  prices and  discounted  cash  flows.  If the
goodwill is indicated as being impaired (the fair value of the reporting unit is
less than the carrying  amount),  the fair value of the  reporting  unit is then
allocated to its assets and  liabilities in a manner similar to a purchase price
allocation in order to determine  the implied fair value of the  reporting  unit
goodwill.  This  implied  fair  value of the  reporting  unit  goodwill  is then
compared with the carrying  amount of the reporting  unit goodwill and, if it is
less, the Company would then recognize an impairment loss.

The  projection  of future  cash  flows  for the  goodwill  impairment  analysis
requires  significant  judgments and estimates  with respect to future  revenues
related to the assets and the future  cash  outlays  related to those  revenues.
Actual  revenues and related cash flows or changes in  anticipated  revenues and
related cash flows could result in changes in this  assessment  and result in an
impairment charge.  The use of different  assumptions could increase or decrease
the related impairment charge.

Liquidity and Capital Resources

Net cash provided by operations  for the six months ended  December 31, 2005 was
$7.3 million,  while net cash  provided by operations  for the first half of the
prior year was $2.4  million.  The  positive  cash flow from  operations  in the
current six months was due to the high level of net income  before  depreciation
and non cash  equity  compensation,  which more than  off-set  the $2.7


                                       28
<PAGE>

million  (restated) used to fund the current  inventory  increase.  The positive
cash flow from  operations in the first half of fiscal 2005 was due primarily to
income before  depreciation  and amortization for the period coupled with a $1.0
million  decline in trade and other  receivables  which  off-set a $2.4  million
increase in inventory and a $2.8 million pay down of current liabilities.

Net cash used in, or provided by, investing activities consists of funds used to
purchase capital equipment, proceeds from the sale of investments and funds used
or provided by the net purchase or maturity of marketable debt securities.

Net cash  provided by investing  activities in the first half of fiscal 2006 was
$522,000 and  consisted of $3.5 million  provided by the maturity of  marketable
debt securities, net of $3.0 million used to acquire capital equipment. Net cash
used in investing  activities  in the first half of fiscal 2005 was $2.5 million
and consisted of capital additions of $7.3 million, including approximately $5.0
million  for  the  purchase  and   renovation   of  the  Salem,   New  Hampshire
manufacturing facility,  which were offset by funds provided by the maturity and
sale of marketable securities totaling $4.8 million.

Net cash used in  financing  activities  was $9.1  million  in the first half of
fiscal 2006 and $11.6  million in the first half of last fiscal year.  Cash used
in the first half of fiscal 2006 consisted of $9.8 million used for the purchase
of 343,611 treasury shares,  net of $646,000 received from the exercise of stock
options.  Cash used in the first half of fiscal  2005 was $11.6  million for the
purchase of 968,198 treasury  shares,  net of $50,000 received from the exercise
of stock options.

During the remainder of fiscal 2006, the Company  anticipates that its main cash
requirements  will be for  additions  to capital  equipment  and the purchase of
additional treasury shares.  Capital  expenditures are expected to total between
$4.0 and $5.0  million  for  fiscal  2006 and will be  funded by  existing  cash
balances.

The Company  expects to continue to purchase  shares of its common  stock in the
open market and/or through  private  negotiated  transactions  under the current
Board authorization,  depending on market conditions. At December 31, 2005 there
were   1,078,579   shares   remaining   under  the  current   Board   repurchase
authorization.

At December 31, 2005, the Company had approximately  $77.2 million in cash, cash
equivalents, and marketable securities. The Company has no debt, and on a fiscal
year  basis has had  positive  operating  cash flow for over  eight  years.  The
Company believes that its cash  requirements for the foreseeable  future will be
satisfied  by currently  invested  cash  balances  and expected  cash flows from
operations.


                                       29
<PAGE>

Disclosures About Contractual Obligations and Commercial Commitments

Accounting standards require disclosure concerning the Company's obligations and
commitments  to make  future  payments  under  contracts,  such as  debt,  lease
agreements,  and under  contingent  commitments,  such as debt  guarantees.  The
Company's obligations and commitments at December 31, 2005 are as follows:

<TABLE>
<CAPTION>
                                                              Payment Due by Period
                                                              ---------------------
                                                     Less
                                       Total        than 1 Yr.           2-3 Yrs         4-5 Yrs       Over 5 Yrs
                                       -----        ----------           -------         -------       ----------
<S>                                  <C>              <C>               <C>              <C>            <C>
Contractual obligations
Operating leases - facilities        $3,812,295       $496,676          $957,692         $898,258       $1,459,669
Deferred compensation                   359,537         65,000           130,000          130,000           34,537
</TABLE>

Recent Accounting Pronouncements

In November, 2004 the FASB published Statement of Financial Accounting Standards
No. 151,  Inventory  Costs, an amendment of ARB No. 43, Chapter 4. Statement 151
amends  the  guidance  in  Chapter  4,  "Inventory  Pricing"  of ARB No.  43 and
clarifies the accounting for abnormal amounts of idle facility expense, freight,
handling  costs,  and wasted  material  (spoilage).  Statement 151 requires that
those items be recognized as current-period charges. Statement 151 also requires
that  allocation  of fixed  production  overheads to the costs of  conversion be
based on the normal  capacity of the  production  facilities.  Statement  151 is
effective for inventory  costs incurred during fiscal years beginning after June
15, 2005.  Statement 151 was  effective  for the Company's  2006 fiscal year and
upon  adoption  did  not  have a  material  impact  on the  Company's  financial
statements.

In May 2005, the FASB published Statement of Financial  Accounting Standards No.
154,  Accounting Changes and Error  Corrections.  Statement 154 replaces APB No.
20, Accounting  Changes,  and FASB Statement No. 3, Reporting Changes in Interim
Financial  Statements.  The Statement  changes the accounting for, and reporting
of, a change in  accounting  principle.  Statement  154  requires  retrospective
application  to prior  periods'  financial  statements  of voluntary  changes in
accounting  principle and changes required by new accounting  standards when the
standard  does  not  include  specific  transition  provisions,   unless  it  is
impracticable  to do so.  Statement 154 is effective for accounting  changes and
corrections  of errors in fiscal years  beginning  after  December 15, 2005 (the
Company's fiscal 2007).  Early  application is permitted for accounting  changes
and  corrections of errors during fiscal years beginning after June 1, 2005 (the
Company's fiscal 2006).

Forward-Looking Cautionary Statement

The  statements   contained  in  this  Form  10-Q/A  which  are  not  historical
information are "forward-looking  statements".  These, and other forward-looking
statements,  are subject to business and economic risks and  uncertainties  that
could cause actual results to differ materially from those discussed.  The risks
and  uncertainties  described  below are not the only  risks  and  uncertainties
facing our Company. Additional risks and uncertainties not presently known to us
or that are currently deemed immaterial may also impair our business operations.
If any of the following  risks actually  occur,  our business could be adversely
affected,  and the trading price of our common stock could decline,  and you may
lose all or part of your  investment.  Such known factors  include,  but are not
limited to: the need for any follow-on  actions in connection with the Company's
accounting  practices,  and the  impact of the  Company's  restatements  and the
reaction to them from the Company's  stockholders  and the financial  markets in
general;  the Company's ability to timely ramp up to meet some of our customers'
increased  demands;  unanticipated


                                       30
<PAGE>

delays and/or difficulties associated with relocating the Company's Suzhou China
facility and successfully completing all requalification  procedures;  potential
unanticipated  liabilities and delays associated with the physical  expansion of
the Company's Syracuse, New York facility;  unanticipated delays in successfully
completing customer orders within contractually  required timeframes;  increased
pricing pressure from our customers;  decreased capital expenditures by wireless
service   providers;   the  possibility  that  the  Company  may  be  unable  to
successfully   execute  its  business   strategies   or  achieve  its  operating
objectives,  generate  revenue  growth or  achieve  profitability  expectations;
successfully  securing  new design  wins from our OEM  customers,  reliance on a
limited number of key component suppliers,  unpredictable difficulties or delays
in  the   development  of  new  products;   order   cancellations   or  extended
postponements;  the risks associated with any technological shifts away from the
Company's  technologies  and core  competencies;  unanticipated  impairments  of
assets including  investment values and goodwill;  diversion of defense spending
away from the Company's  products and or technologies  due to on-going  military
operations;   and  litigation   involving  antitrust,   intellectual   property,
environmental,  product warranty,  product liability,  and other issues. You are
encouraged  to  review  Anaren's  2006  Annual  Report,  Anaren's  Form 10-K (as
amended)  for the fiscal  year ended June 30,  2006 and  Anaren's  Form 10-Q (as
amended)  for the three months  ended  September  30, 2006 and exhibits to those
Reports filed with the  Securities  and Exchange  Commission to learn more about
the various risks and uncertainties facing Anaren's business and their potential
impact on Anaren's  revenue,  earnings and stock price.  Unless required by law,
Anaren  disclaims  any  obligation  to  update  or  revise  any  forward-looking
statement.

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 amended Quarterly Report on Form 10-Q/A.

As of December 31, 2005, the Company had cash,  cash  equivalents and marketable
securities of $77.2 million, all of which consisted of highly liquid investments
in  marketable  debt  securities.  The  marketable  debt  securities  at date of
purchase  normally  have  maturities  between one and 18 months,  are exposed to
interest rate risk and will decrease in value if market interest rates increase.
A hypothetical decrease in market interest rates of 10.0% from December 31, 2005
rates,  or 0.25%,  would have reduced net income and cash flow by  approximately
$50,000,  or $0.002  per  share for the  quarter.  Due to the  relatively  short
maturities  of the  securities  and its  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  rates will reduce the
Company's interest income.

Item 4. Controls and Procedures

A. Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive  Officer and its Chief Financial Officer evaluated
the Company's  disclosure  controls and  procedures  (as defined in Exchange Act
Rules  13a-15(e) and  15(d)-15(e))  as of the end of the period  covered by this
quarterly  report.  Management  has  concluded  that  the  Company's  disclosure
controls and procedures were not effective due to a


                                       31
<PAGE>

material  weakness  related to the Company's  internal  control  surrounding the
accounting for work-in-process inventory.  Specifically,  the control deficiency
related to an  undetected  error in the computer  program which  calculates  the
material  value of  work-in-process.  To address  this  material  weakness,  the
Company  performed  additional  analysis  in  order  to  prepare  the  unaudited
quarterly   consolidated  financial  statements  in  accordance  with  generally
accepted  accounting  principles  in the United  States,  which  resulted  in an
adjustment to the unaudited interim financial  statements for the second quarter
of fiscal 2006. Accordingly, management believes that the accompanying financial
statements for the second  quarter of fiscal 2006 are presented  fairly and that
the material weakness has been remediated as of November 30, 2006.

B. Changes in Internal Control Over Financial Reporting

Except  as noted  above,  there has been no  change  in the  Company's  internal
control over financial reporting that occurred during the fiscal quarter covered
by this  report  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the Company's internal controls over financial reporting.


                                       32
<PAGE>

PART II OTHER INFORMATION

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

Issuer Purchases of Equity Securities

On May 10,  2005,  the Board of Directors  increased by 2,000,000  the number of
shares that the Company was authorized to repurchase in open market or privately
negotiated  transactions  through  its  previously  announced  stock  repurchase
program  and  as of  September  30,  2005,  1,422,190  remained  authorized  for
purchase. The program, 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 December 31, 2005,  1,078,579 shares remained  authorized
for purchase.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
         Period              Total Number of       Average Price Paid       Total Number of      Maximum Number (or
                            Shares (or Units)     per Share (or Unit)      Shares (or Units)     Approximate Dollar
                                Purchased                                Purchased as Part of   Value) of Shares (or
                                                                          Publicly Announced     Units) that May Yet
                                                                           Plans or Programs     Be Purchased Under
                                                                                                the Plans or Programs
-----------------------------------------------------------------------------------------------------------------------
<S>                               <C>                      <C>                   <C>                 <C>
October 2005                      85,100                   13.96                 85,100              1,337,090
-----------------------------------------------------------------------------------------------------------------------
November 2005                    192,963                   14.01                192,963              1,144,127
-----------------------------------------------------------------------------------------------------------------------
December 2005                     65,548                   15.36                 65,548              1,078,579
-----------------------------------------------------------------------------------------------------------------------
Total                            343,611                      --                343,611                     --
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

        None.

Item 6. Exhibits

        31   RULE 13a-14(a) CERTIFICATIONS

        32   SECTION 1350 CERTIFICATIONS


                                       33
<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: January 31, 2007                  /s/ Lawrence A. Sala
                                        ----------------------------------------
                                        Lawrence A. Sala
                                        President & Chief Executive Officer

Date: January 31, 2007                  /s/ Joseph E. Porcello
                                        ----------------------------------------
                                        Joseph E. Porcello
                                        Sr. Vice President of Finance, Treasurer


                                       34