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

(Mark One)

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

For the quarterly period ended September 30, 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.)

                                             13057
      6635 Kirkville Road                    -----
      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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

      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 November
4, 2005 was 17,107,033.

<PAGE>

                                  ANAREN, INC.

                                      INDEX

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

   Item 1.  Financial Statements

            Consolidated Condensed Balance Sheets as of                     3
            September 30, 2005 and June 30, 2005 (unaudited)

            Consolidated Condensed Statements of Earnings                   4
            for the Three Months Ended September 30,
            2005 and 2004 (unaudited)

            Consolidated Condensed Statements of Cash Flows                 5
            for the Three Months Ended September 30,
            2005 and 2004 (unaudited)

            Notes to Consolidated Condensed Financial                       6
            Statements (unaudited)

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

   Item 3.  Quantitative and Qualitative Disclosures                       25
            About Market Risk

   Item 4.  Controls & Procedures                                          25

PART II - OTHER INFORMATION

   Item 2.  Unregistered Sales of Equity Securities                        26
            and Use of Proceeds

   Item 4.  Submission of Matters to a Vote of Security Holders            26

   Item 6.  Exhibits                                                       26

   Officer Certifications                                                28 - 31


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                          ANAREN, INC. AND SUBSIDIARIES
                      Consolidated Condensed Balance Sheets
                      September 30, 2005 and June 30, 2005
                                   (Unaudited)

<TABLE>
<CAPTION>
                   Assets                                                                  September 30, 2005         June 30, 2005
                   ------                                                                  ------------------         -------------
<S>                                                                                          <C>                      <C>
Current assets:
     Cash and cash equivalents                                                               $   7,045,574            $   5,900,841
     Securities available for sale (note 3)                                                     16,100,000               16,200,000
     Securities held to maturity (note 3)                                                       36,219,295               36,307,880
     Receivables, less allowance of $213,099
       at September 30, 2005 and June 30, 2005                                                  14,766,106               14,780,146
     Inventories (note 4)                                                                       20,788,603               19,403,348
     Other receivables                                                                           1,251,142                1,144,680
     Deferred income taxes                                                                         657,611                  686,411
     Prepaid expenses                                                                              879,437                  662,247
     Other current assets                                                                          461,167                  423,000
                                                                                             -------------            -------------
                   Total current assets                                                         98,168,935               95,508,553

Securities available for sales (note 3)                                                                 --                3,500,000
Securities held to maturity (note 3)                                                            20,256,725               20,100,547
Property, plant and equipment, net (note 5)                                                     24,629,636               24,983,653
Goodwill                                                                                        30,715,861               30,715,861
Other intangible assets, net of accumulated amortization
    of $2,434,943 at September 30, 2005
    and $2,351,725 at June 30, 2005 (note 1)                                                       590,023                  673,241
                                                                                             -------------            -------------
                   Total assets                                                              $ 174,361,180            $ 175,481,855
                                                                                             =============            =============

      Liabilities and Stockholders' Equity
      ------------------------------------
Current liabilities:
     Accounts payable                                                                        $   6,548,257            $   6,077,313
     Accrued expenses (note 6)                                                                   1,766,330                2,331,885
     Income taxes payable                                                                        1,773,213                1,501,088
     Other current liabilities (note 8)                                                          1,051,791                1,044,759
                                                                                             -------------            -------------
                   Total current liabilities                                                    11,139,591               10,955,045
Deferred income taxes                                                                            1,670,504                1,627,304
Pension and postretirement benefit obligation                                                    3,418,176                3,253,188
Other liabilities (note 8)                                                                         621,033                  567,755
                                                                                             -------------            -------------
                   Total liabilities                                                            16,849,304               16,403,292
                                                                                             -------------            -------------

Stockholders' equity:
     Common stock of $.01 par value.  Authorized
        200,000,000 shares; issued 26,097,004 shares
        at September 30, 2005 and 26,070,804 at June 30, 2005                                      260,970                  260,708
     Additional paid-in capital                                                                172,351,838              171,333,975
     Unearned compensation                                                                        (256,945)                (248,578)
     Retained earnings                                                                          60,913,824               58,659,807
     Accumulated other comprehensive income                                                       (683,850)                (747,539)
                                                                                             -------------            -------------
                                                                                               232,585,837              229,258,373
     Less cost of 8,905,332 and 8,553,058 treasury shares
       at September 30, 2005 and June 30, 2005, respectively                                    75,073,961               70,179,810
                                                                                             -------------            -------------
                   Total stockholders' equity                                                  157,511,876              159,078,563
                                                                                             -------------            -------------
                   Total liabilities and stockholders' equity                                $ 174,361,180            $ 175,481,855
                                                                                             =============            =============
</TABLE>

See accompanying notes to consolidated condensed financial statements.


                                       3
<PAGE>

                          ANAREN, INC. AND SUBSIDIARIES
                  Consolidated Condensed Statements of Earnings
                               Three Months Ended
                           September 30, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                 September 30, 2005         September 30, 2004
                                                                                 ------------------         ------------------
<S>                                                                                  <C>                        <C>
Net sales                                                                            $ 24,614,358               $ 24,907,357

Cost of sales                                                                          15,959,912                 17,016,539
                                                                                     ------------               ------------
         Gross profit                                                                   8,654,446                  7,890,818
                                                                                     ------------               ------------

Operating expenses:
         Marketing                                                                      1,768,079                  1,776,645
         Research and development                                                       2,034,641                  1,645,077
         General and administrative                                                     2,492,310                  2,102,185
                                                                                     ------------               ------------
                Total operating expenses                                                6,295,030                  5,523,907
                                                                                     ------------               ------------

Operating income                                                                        2,359,416                  2,366,911

Other income, primarily interest                                                          587,744                    353,058
Interest expense                                                                           (6,143)                    (5,805)
                                                                                     ------------               ------------
                Total other income                                                        581,601               $    347,253
                                                                                     ------------               ------------

Income before income taxes                                                              2,941,017                  2,714,164

Income tax expense                                                                        687,000                    733,000
                                                                                     ------------               ------------

Net income                                                                           $  2,254,017               $  1,981,164
                                                                                     ============               ============

      Basic earnings per share                                                              $0.13                      $0.10
                                                                                            =====                      =====

      Diluted earnings per share:                                                           $0.13                      $0.10
                                                                                            =====                      =====

Shares used in computing net earnings per share:
         Basic                                                                         17,402,270                 20,144,447
                                                                                       ==========                 ==========
         Diluted                                                                       17,936,051                 20,678,163
                                                                                       ==========                 ==========
</TABLE>

See accompanying notes to consolidated condensed financial statements.


                                       4
<PAGE>

                                  ANAREN, INC.
                 Consolidated Condensed Statements of Cash Flows
                               Three Months Ended
                           September 30, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                       September 30, 2005     September 30, 2004
                                                                                       ------------------     ------------------
<S>                                                                                      <C>                    <C>
Cash flows from operating activities:
      Net income                                                                         $  2,254,017           $  1,981,164
      Adjustments to reconcile net income
        to net cash provided by (used in) operating activities:
           Depreciation                                                                     1,201,919              1,252,667
           Amortization of intangibles                                                         83,218                320,992
           Loss on sale of equipment                                                               --                 67,397
           Loss on sale of securities available for sale                                           --                 21,347
           Deferred income taxes                                                               72,000                 73,300
           Equity based compensation                                                          861,921                 71,550
           Provision for doubtful accounts                                                         --                 (5,741)
           Changes in operating assets and liabilities:
             Receivables                                                                       14,040             (2,061,338)
             Inventories                                                                   (1,385,255)            (1,623,546)
             Other receivables                                                               (106,462)               439,192
             Other current assets                                                            (255,357)              (233,922)
             Accounts payable                                                                 470,944             (1,002,388)
             Accrued expenses                                                                (565,555)            (1,332,278)
             Income taxes payable                                                             272,125                745,830
             Customer advance payments                                                             --               (234,595)
             Other liabilities                                                                225,298                  8,254
                                                                                         ------------           ------------
               Net cash provided by (used in) operating activities                          3,142,853             (1,512,115)
                                                                                         ------------           ------------
Cash flows from investing activities:
      Capital expenditures                                                                   (847,902)            (5,606,303)
      Proceeds from sale of equity securities                                                      --                293,930
      Maturities of marketable debt and auction rate securities                            18,732,408             34,508,921
      Purchase of marketable debt and auction rate securities                             (15,200,000)           (32,005,000)
                                                                                         ------------           ------------
               Net cash provided by (used in) investing activities                          2,684,506             (2,808,452)
                                                                                         ------------           ------------
Cash flows from financing activities:
      Stock options exercised                                                                 147,836                 28,642
      Purchase of treasury stock                                                           (4,894,151)           (11,623,399)
                                                                                         ------------           ------------
               Net cash used in financing activities                                       (4,746,315)           (11,594,757)
                                                                                         ------------           ------------

      Effect of exchange rates                                                                 63,689                    962
                                                                                         ------------           ------------
               Net increase (decrease) in cash and cash equivalents                         1,144,733            (15,914,362)
Cash and cash equivalents at beginning of period                                            5,900,841             23,303,263
                                                                                         ------------           ------------
Cash and cash equivalents at end of period                                               $  7,045,574           $  7,388,901
                                                                                         ============           ============
Supplemental Disclosures of Cash Flow Information:
      Cash Paid During the Period For:
        Interest                                                                         $      6,143           $      6,554
                                                                                         ============           ============
        Income taxes, net of refunds                                                     $    342,875           $    (27,611)
                                                                                         ============           ============
</TABLE>

See accompanying notes to consolidated condensed financial statements.


                                       5
<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) 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 three months ended September
30, 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
three months ended September 30, 2005 and 2004 are based on estimates of income
and utilization of tax credits for the entire year.

NOTE 1: Intangible Assets

INTANGIBLE ASSETS:

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

<TABLE>
<CAPTION>
                                                             September 30                                 June 30
                                                   ----------------------------------        ---------------------------------
                                                   Gross Carrying         Accumulated        Gross Carrying        Accumulated
                                                   --------------         -----------        --------------        -----------
                                                       Amount            Amortization            Amount            Amortization
                                                       ------            ------------            ------            ------------
<S>                                                  <C>                  <C>                  <C>                  <C>
Patent                                               $  574,966           $  449,193           $  574,966           $  431,225
Customer Base                                         1,350,000              918,750            1,350,000              862,500
Trade Name                                              320,000              320,000              320,000              320,000
Non-Competition Agreements                              180,000              147,000              180,000              138,000
Favorable Lease                                         600,000              600,000              600,000              600,000
                                                     ----------           ----------           ----------           ----------
  Total                                              $3,024,966           $2,434,943           $3,024,966           $2,351,725
                                                     ==========           ==========           ==========           ==========
</TABLE>

Intangible asset amortization expense for the three month period ended September
30, 2005 and 2004 aggregated $83,218 and $320,992, respectively. Included in the
amortization expense for the three months ended September 30, 2004 is $205,000
for acceleration of the favorable lease intangible caused by the move of the
Company's Amitron facility. 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                               $       0
                2010                               $       0


                                       6
<PAGE>

NOTE 2: Equity-Based Compensation

Effective July 1, 2005, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standard 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. Included in operating expenses for the three
months ended September 30, 2005 is $861,921 of total equity based compensation
expense. Contained in the total equity based compensation expense is $27,633 of
expense related to the Company's restricted stock program and $834,288 ($777,441
net of tax) related to the Company's stock option program. Upon adoption of SFAS
123R, both operating income and income before taxes were reduced by $834,288 for
the quarter, while net income was reduced by $777,441, or $0.04 per basic and
diluted share.

As of September 30, 2005, there were 3,114,480 stock options outstanding. At
September 30, 2005, the aggregate value of unvested options, as determined using
a capital Black- Scholes option valuation model was $8,322,357 (net of estimated
forfeitures). During the quarter ended September 30, 2005, the Company granted
373,000 non-statutory stock options, with a fair value of $3,139,766 (net of
estimated forfeitures), and 17,640 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 plan 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 ended September 30, 2004, no
equity option based employee compensation cost is reflected in net income, as
all options granted under those 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 FASB Statement No. 123R,
Accounting for Equity-Based Compensation, to equity based employee compensation
for the three months ended September 30, 2004.

                                                             Three months ended
                                                             September 30, 2004
                                                             ------------------
Net income, as reported                                           $1,981,164

Deduct total equity based employee
  compensation expense determined under fair
  value based method for all awards, net
  of related tax effects                                           1,712,587
                                                                  ----------
Pro forma net income                                              $  268,577
                                                                  ==========
Earnings (loss) per share:
      Basic - as reported                                              $0.10
      Basic - pro forma                                                $0.01

      Diluted - as reported                                            $0.10
      Diluted - pro forma                                              $0.01


                                       7
<PAGE>

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 shares 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. At September 30, 2005, the Company
had 1,296,958 shares available for grant under the restated plan.

Information with respect to these plans are as follows:

<TABLE>
<CAPTION>
                                                                                                          Weighted
                                                                 Total                                     average
                                                                Shares           Option Price          exercise price
                                                                ------           ------------          --------------
<S>                                                            <C>               <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            $12.05
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                                                           373,000        $11.97 to 14.05            $14.01
Exercised                                                        (23,660)         $2.27 to 9.51            $ 6.22
Expired                                                           (1,400)        $9.51 to 53.00            $21.03
Canceled                                                         (16,240)       $15.00 to 53.00            $16.22
                                                               ---------

Outstanding at September 30, 2005                              3,114,480        $2.27 to $57.59            $12.78
                                                               =========

Shares exercisable at September 30, 2005                       1,697,744        $2.27 to $54.00            $14.47
                                                               =========
</TABLE>

The following table summarizes significant ranges of outstanding and exercisable
options at September 30, 2005:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                           Options outstanding                                Options exercisable
-----------------------------------------------------------------------------------------------------------------------
                                                   Weighted average
Range of exercise                                 remaining life in    Weighted average                Weighted average
     prices                            Shares           years           exercise price     Shares       exercise price
-----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>                 <C>             <C>               <C>
$1.00 - $5.00                          176,000          1.24                $2.45           176,000           2.45
-----------------------------------------------------------------------------------------------------------------------
$5.01 - $15.00                       2,525,690          5.92               $11.57         1,218,530          10.73
-----------------------------------------------------------------------------------------------------------------------
$15.01 - $40.00                        214,690          5.11               $20.52           138,854          20.68
-----------------------------------------------------------------------------------------------------------------------
$40.01 - $65.00                        198,100          4.58               $53.11           164,360          53.13
-----------------------------------------------------------------------------------------------------------------------
                                     3,114,480                                            1,697,744
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       8
<PAGE>

During the three months ended September 30, 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 September 30:

                                                            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%

Restricted Stock Program

On November 17, 2004, the Company issued a new grant of 23,500 shares of
restricted stock. The per-share price 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 10,000 shares of
restricted stock. The per-share price of the grant was $13.82. The shares of
stock vest after a 36 month period.

As of September 30, 2005 and 2004, the Company has issued shares aggregating
33,500 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 $861,921 and $71,550, of total equity based compensation
expense, for the three months ended September 30, 2005 and 2004, the Company
recognized compensation expense associated with the lapse of restrictions
aggregating $27,633 and $71,550, respectively.


                                       9
<PAGE>

NOTE 3: Securities

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

<TABLE>
<CAPTION>
                                                                                    September 30, 2005
                                                                                    ------------------
                                                                                  Gross           Gross
                                                                Amortized       Unrealized     Unrealized
                                                                  Cost            Gains          Losses          Fair Value
                                                                  ----            -----          ------          ----------
<S>                                                            <C>               <C>          <C>                <C>
Securities available for sale:
      Auction rate securities                                  $16,100,000       $   --       $        --        $16,100,000
                                                               -----------       ------       -----------        -----------
           Total securities
           available-for-sale                                  $16,100,000       $   --       $        --        $16,100,000
                                                               ===========       ======       ===========        ===========
Securities held to maturity:
      Municipal bonds                                          $39,898,341       $   --       $  (202,351)       $39,695,990
      Commercial paper                                           1,342,618           --                --          1,342,618
      Corporate bonds                                            9,648,779           --           (42,545)         9,606,234
      Zero coupon bonds                                          1,986,577           --            (7,357)         1,979,220
      Federal agency bonds                                       3,599,705           --           (37,576)         3,562,129
                                                               -----------       ------       -----------        -----------
           Total securities held to maturity                   $56,476,020       $   --       $  (289,829)       $56,186,191
                                                               ===========       ======       ===========        ===========
</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>

Contractual maturities of marketable debt securities held to maturity at
September 30, 2005 are summarized as follows:

<TABLE>
<CAPTION>
                                                                    September 30, 2005                     June 30, 2005
                                                                    ------------------                     -------------
                                                                                    Fair                                  Fair
                                                                                    Market                               Market
                                                                  Cost              Value              Cost              Value
                                                                  ----              -----              ----              -----
<S>                                                            <C>               <C>               <C>                <C>
Within one year                                                $36,219,295       $36,105,112       $36,307,880        $36,176,998
One year to five years                                          20,256,725        20,081,078        20,100,547         19,951,761
                                                               -----------       -----------       -----------        -----------
      Total                                                    $56,476,020       $56,186,190       $56,408,427        $56,128,759
                                                               ===========       ===========       ===========        ===========
</TABLE>

Contractual maturities of auction rate securities available for sale at
September 30, 2005 are summarized as follows:

<TABLE>
<CAPTION>
                                                                    September 30, 2005                     June 30, 2005
                                                                    ------------------                     -------------
                                                                                    Fair                                  Fair
                                                                                    Market                               Market
                                                                  Cost              Value              Cost              Value
                                                                  ----              -----              ----              -----
<S>                                                            <C>               <C>               <C>                <C>
Within one year                                                $16,100,000       $16,100,000       $16,200,000        $16,200,000
One year to five years                                                  --                --         3,500,000          3,500,000
                                                               -----------       -----------       -----------        -----------
      Total                                                    $16,100,000       $16,100,000       $19,700,000        $19,700,000
                                                               ===========       ===========       ===========        ===========
</TABLE>


                                       10
<PAGE>

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 quarter ended September 30, 2004, the Company sold securities
available for sale and recognized a loss of $17,347 that is included in other
income in the Company's Statement of Operations for that period.

NOTE 4: Inventories

Inventories are summarized as follows:

                                            September 30, 2005     June 30, 2005
                                            ------------------     -------------
Component parts                               $ 10,672,188         $ 10,369,049
Work in process                                  8,668,927            7,709,465
Finished goods                                   2,881,098            2,766,157
                                              ------------         ------------
                                              $ 22,222,213         $ 20,844,671
Reserve for obsolescence                        (1,433,610)          (1,441,323)
                                              ------------         ------------
Net inventory                                 $ 20,788,603         $ 19,403,348
                                              ============         ============

NOTE 5: Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

                                            September 30, 2005     June 30, 2005
                                            ------------------     -------------
Land and land improvements                    $  2,207,823         $  2,207,823
Buildings, furniture and fixtures               16,740,689           16,654,351
Machinery and equipment                         52,442,447           51,680,883
                                              ------------         ------------
                                              $ 71,390,959         $ 70,543,057
Less accumulated depreciation
 and amortization                              (46,761,323)         (45,559,404)
                                              ------------         ------------
                                              $ 24,629,636         $ 24,983,653
                                              ============         ============

NOTE 6: Accrued Expenses

Accrued expenses consist of the following:

                                            September 30, 2005     June 30, 2005
                                            ------------------     -------------
Compensation                                  $    501,106         $  1,222,891
Commissions                                        716,991              620,990
Health insurance                                   376,955              271,561
Restructuring (note 7)                                  --               19,863
Other                                              171,278              196,580
                                              ------------         ------------
                                              $  1,766,330         $  2,331,885
                                              ============         ============


                                       11
<PAGE>

NOTE 7: 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 quarter ended September 30, 2005:

                                           Three months ended
                              Balance      September 30, 2005         Balance
                             June 30,     Costs          Cash      September 30,
                               2005     Incurred     Expenditures      2005
                               ----     --------     ------------      ----
Severance payments           $19,863      $ --         $19,863         $ --
                             -------      ----         -------         ----
                             $19,863      $ --         $19,863         $ --
                             =======      ====         =======         ====

NOTE 8: Other Liabilities

        Other liabilities consist of the following:

                                              September 30, 2005   June 30, 2005
                                              ------------------   -------------
        Deferred compensation                     $  686,034        $  650,064
        Pension liability                            656,000           675,000
        Other                                        330,790           287,450
                                                  ----------        ----------
                                                   1,672,824         1,612,514
        Less current portion                       1,051,791         1,044,759
                                                  ----------        ----------
                                                  $  621,033        $  567,755
                                                  ==========        ==========

NOTE 9: 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 1,481,103 and 1,314,662 at September 30,
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.


                                       12
<PAGE>

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

                                                        Three Months Ended
                                                           September 30
                                                       ----------------------
                                                       2005              2004
                                                       ----              ----
Numerator:
Net income                                          $2,254,017        $1,981,164
                                                    ==========        ==========
Denominator:
Denominator for basic earnings
  per share:
    Weighted average shares
      outstanding                                   17,402,270        20,144,447
                                                    ==========        ==========
Denominator for diluted earnings
  per share:
  Weighted average shares
      outstanding                                   17,402,270        20,144,447
  Common stock options
    and restricted stock                               533,781           533,716
                                                    ----------        ----------
Weighted average shares
  and conversions                                   17,936,051        20,678,163
                                                    ==========        ==========

NOTE 10: Components of Net Periodic Pension Benefit Costs

                                                          Three Months Ended
                                                             September 30
                                                          ------------------
                                                           2005         2004
                                                           ----         ----

Service cost                                           $  61,825      $  65,712
Interest cost                                            141,090        135,206
Expected return on plan assets                          (156,687)      (134,113)
Amortization of prior service cost                         2,623          4,560
Amortization of the net (gain) loss                       12,414         27,066
                                                       ---------      ---------
Net periodic benefit cost                              $  61,265      $  98,431
                                                       =========      =========

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


                                       13
<PAGE>

NOTE 11: Components of Net Periodic Postretirement Health Benefit Costs

                                                            Three Months Ended
                                                              September 30
                                                            ------------------
                                                            2005         2004
                                                            ----         ----
Service cost                                             $ 14,285      $ 15,286
Interest cost                                              46,327        27,802
Amortization of the net (gain) loss                        18,788         4,617
                                                         --------      --------
Postretirement Health                                    $ 79,400      $ 47,705
                                                         ========      ========

Expected Postretirement Health Contributions

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

NOTE 12: Segment Information

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.


                                       14
<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:
  September 30, 2005                             16,410,735            8,203,623                   --           24,614,358
  September 30, 2004                             17,768,293            7,139,064                   --           24,907,357

Operating income (loss):
  Three months ended:
    September 30, 2005                            2,045,191              314,225                   --            2,359,416
    September 30, 2004                              653,925            1,712,986                   --            2,366,911

Goodwill and intangible assets:
    September 30, 2005                           31,305,884                   --                   --           31,305,884
    June 30, 2005                                31,389,102                   --                   --           31,389,102

Identifiable assets:*
    September 30, 2005                           19,356,668           15,682,544          108,016,084          143,055,296
    June 30, 2005                                21,497,591           12,685,903          109,909,259          144,092,753

Depreciation:**
  Three months ended:
    September 30, 2005                              638,912              563,007                   --            1,201,919
    September 30, 2004                              844,242              408,425                   --            1,252,667

Intangibles amortization: ***
  Three months ended:
    September 30, 2005                               83,218                   --                   --               83,218
    September 30, 2004                              320,992                   --                   --              320,992
</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.

      **    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.


                                       15
<PAGE>

      ***   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. 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.

Overview

The consolidated financial statements present the financial condition of the
Company as of September 30, 2005 and June 30, 2005, and the consolidated results
of operations and cash flows of the Company for the three months ended September
30, 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 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 operation 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


                                       16
<PAGE>

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 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 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 newly acquired 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 the 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 calcaulated for footnote disclosure
purposes. Equity based compensation cost for employee stock options recognized
in the first quarter ended September 30, 2005 was $834,288.

Second 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 $23.5 - $25.0 million
for the second quarter of fiscal 2006. With an anticipated tax rate of
approximately 23% 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 second quarter.

Results of Operations

Net sales from continuing operations for the three months ended September 30,
2005 were $24.6 million, down $293,000 from $24.9 million for the first quarter
of fiscal 2005. Net income for the first three months of fiscal 2006 was $2.3
million, or 9.2% of net sales, up $273,000, or 13.8% from net income of $2.0
million in the first three months of fiscal 2005.


                                       17
<PAGE>

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.

                                                       Three Months Ended
                                                Sept. 30, 2005    Sept. 30, 2004
                                                --------------    --------------

Net Sales                                            100.0%           100.0%

Cost of sales                                         64.8%            68.3%
                                                     -----            -----
Gross profit                                          35.2%            31.7%
                                                     -----            -----

Operating expenses:
   Marketing                                           7.2%             7.1%
   Research and development                            8.3%             6.6%
   General and administrative                         10.1%             8.5%
                                                     -----            -----
      Total operating expenses                        25.6%            22.2%
                                                     -----            -----

Operating income                                       9.6%             9.5%
                                                     -----            -----

Other income (expense):

      Other, primarily interest income                 2.4%             1.4%
      Interest expense                                 0.0%             0.0%
                                                     -----            -----
      Total other income (expense), net                2.4%             1.4%
                                                     -----            -----

Income before income taxes                            12.0%            10.9%
Income taxes                                           2.8%             2.9%
                                                     -----            -----
   Net income                                          9.2%             8.0%
                                                     =====            =====

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

                                                          Three Months Ended
                                                              September 30
                                                          ------------------
                                                           2005        2004
                                                           ----        ----
Wireless                                                 $16,410      $17,768
Space and Defense                                          8,204        7,139
                                                         -------      -------
     Total                                               $24,614      $24,907
                                                         =======      =======

Three Months Ended September 30, 2005 Compared to Three Months Ended September
30, 2004

Net sales. Net sales decreased $293,000, or 1.0% to $24.6 million for the first
quarter ended September 30, 2005 compared to $24.9 million for the first quarter
of fiscal 2005. This decline resulted from a $1.4 million drop in shipments of
Wireless infrastructure products in the current first quarter, which was
partially off-set by a $1.1 million increase in sales of Space and Defense
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 first quarter for standard Wireless components
compared to the first quarter of last year.


                                       18
<PAGE>

Wireless product sales fell $1.4 million, or 7.6% in the first quarter of fiscal
2006 compared to the first quarter last year, due to a $3.2 million decline in
circulator and older standard component product sales resulting from lower
customer demand. This decline was partially off-set by a $1.0 million increase
in shipments of custom products related to new Motorola and Nokia custom
business, and an $800,000 increase to $1.3 million in sales of new consumer
components. Wireless sales are expected to remain at current levels through the
second quarter of fiscal 2006.

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 $1.1 million, or 15% in the
first quarter of fiscal 2006 compared to the first quarter of the previous
fiscal year. This increase consisted of a $1.7 million rise in sales of Space
products, which was partially off-set by a $600,000 decline in defense product
shipments during the current quarter compared to the same quarter in fiscal
2005. Space and 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. Defense product bookings were $37.7 million in fiscal 2004 and $40.9
million in fiscal 2005. Sales of Space and Defense products in the remainder of
fiscal 2006 are expected to range between $8.5 million and $9.0 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 first quarter of fiscal 2006 was
$8.7 million, (35.2% of net sales), up $764,000 from $7.9 million (31.7% of net
sales) for the same quarter of the prior year. Gross profit on sales increased
in the first quarter of fiscal 2006 over the first quarter of last year due to
favorable manufacturing efficiencies in the current first quarter. 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 in one building as Anaren Ceramics in
Salem, New Hampshire. Additionally, cost of sales was increased by the
recognition of $325,000 of equity based compensation expense due to the adoption
of SFAS 123R in the current first quarter.

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 $1.8 million (7.2%
of net sales) for the first quarter of fiscal 2006, unchanged from $1.8 million
(7.1% of net sales) for the first quarter of fiscal 2005. Included in marketing
expense for the first quarter of fiscal 2006 is $69,000 of equity based
compensation expense resulting from the adoption of Statement of Financial
Accounting Standard 123R (SFAS 123R) by the Company on July 1, 2006. Marketing
expenses for the first 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 first quarter of fiscal 2006 declined approximately 4% 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 $2.0 million
(8.3% of net sales) in the first quarter of fiscal 2006, up 23.7% from $1.6
million (6.6% of net sales) for the first 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 first


                                       19
<PAGE>

quarter of fiscal 2006 over first quarter fiscal 2005 levels due to the higher
level of Wireless opportunities in the marketplace. These opportunities resulted
in the hiring of additional product development personnel in fiscal 2005 and
additional outside spending by the Company in the current first quarter 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 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 18.6% to $2.5 million (10.1% of net sales) for the first
quarter of fiscal 2006 from $2.1 million (8.5% of net sales) for the first
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 first quarter of fiscal 2006 resulting from the Company's
adoption of SFAS 123R. General and Administrative expense for the first 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 first quarter of fiscal 2006 declined $51,000 due to cost
reductions achieved through the consolidation of the RF Power and Amitron
operations during fiscal 2005.

Operating Income. Operating income was unchanged in the first quarter of fiscal
2006 at $2.4 million (9.6% of sales) compared to $2.4 million (9.5% of net
sales) for the first quarter of fiscal 2005. In the first quarter of fiscal
2006, operating income was reduced by $834,000 for equity based compensation
expense resulting from the Company's adoption of FAS 123R on July 1, 2005. As
the Company adopted SFAS 123R on a prospective basis, operating income for the
first 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 $2.0 million for the
first quarter of fiscal 2006 (including $419,000 of equity based compensation
expense) up $1.4 million from Wireless operating income of $654,000 for the
first quarter of last year. Wireless operating income improved significantly in
the current first quarter due to cost savings achieved through the consolidation
of the RF Power and Amitron operations in fiscal 2005, the absence of
consolidation charges, cost efficiencies resulting from high manufacturing
volumes in the Company's China operation and a more favorable wireless custom
product mix in the current first quarter, compared to the first quarter of last
fiscal year.

Space and Defense operating income fell $1.4 million in the first quarter of
fiscal 2006 to $314,000 (including $415,000 of equity based compensation
expense) compared to $1.7 million in the first 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 current first quarter. 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.

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

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 66% to $588,000


                                       20
<PAGE>

(2.4% of net sales) for the quarter ended September 30, 2005, from $353,000
(1.4% 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 first quarter
compared to $88,000 of losses recorded in the first quarter of last year. Other
income will fluctuate based on short-term market interest rates and the level of
investable cash balances.

Income Taxes. Income taxes for the first quarter of fiscal 2006 were $687,000
(2.8% of net sales), representing an effective tax rate of 23.3%. This compares
to income tax expense of $733,000 (2.9% of net sales) for the first quarter of
fiscal 2005, representing an effective tax rate of 27.0%. 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 23% compared to an actual effective tax rate of 19%
for fiscal 2005. The increase in the projected effective tax rate is a result of
the level of the 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.

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.


                                       21
<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 quarter ended September 30, 2005 was
$3.1 million, while net cash used in operations for the first quarter of the
prior year was $1.5 million. The positive cash flow from operations in the
current first quarter was due to the high level of net income before
depreciation and non cash equity compensation. The negative cash flow from


                                       22
<PAGE>

operations for the first quarter of the prior year was due to the $3.7 million
rise in receivables and inventory, coupled with a $2.3 million paydown of
current liabilities.

Net cash provided by investing activities in the first quarter of fiscal 2006
was $2.7 million and consisted of $3.5 million provided by the maturity of
marketable debt securities, net of $848,000 used to acquire capital equipment.
Net cash used in investing activities in the first quarter of fiscal 2005 was
$2.8 million and consisted of capital additions of $5.6 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 $2.8 million.

Net cash used in financing activities was $4.7 million in the first quarter of
fiscal 2006 and $11.6 million in the first quarter of last fiscal year. Cash
used in the first quarter of fiscal 2006 consisted of $4.9 million used for the
purchase of 352,274 treasury shares, net of $148,000 received from the exercise
of stock options. Cash used in the first quarter of fiscal 2005 was $11.6
million for the purchase of 968,198 treasury shares, net of $29,000 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 September 30, 2005 there
were 1,412,190 shares remaining under the current Board repurchase
authorization.

At September 30, 2005, the Company had approximately $79.6 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.

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 September 30, 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                     $4,029,449        $507,562        $991,388        $920,181        $1,610,318
Deferred compensation                                375,787          65,000         130,000         130,000            50,787
</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


                                       23
<PAGE>

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

In an effort to provide investors a balanced view of the Company's current
condition and future growth opportunities, this Quarterly Report on Form 10-Q
includes comments by the Company's management about future performance. These
statements which are not historical information are "forward-looking statements"
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. 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 Company's
ability to timely ramp up to meet some of our customers' increased demands;
difficulties achieving acceptable operating performance at the Company's
recently consolidated Anaren Ceramics subsidiary in Salem, New Hampshire;
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 or have difficulties in
successfully executing its business strategies or achieving its operating
objectives, generate revenue growth or achieving profitability expectations;
difficulty in successfully securing new design wins from our original equipment
manufacturer 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; unanticipated delays and/or
difficulties increasing procurement of raw materials in Asia through the
Company's Suzhou, China facility; 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 2005 Annual Report, on Form 10-K for the
fiscal year ended June 30, 2005, and


                                       24
<PAGE>

the corresponding exhibits, 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 Quarterly Report on Form 10-Q.

As of September 30, 2005, the Company had cash, cash equivalents and marketable
securities of $79.6 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 rate of 10.0% from September 30, 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

      1.    Evaluation of disclosure controls and procedures. Based on their
            evaluation of the Company's disclosure controls and procedures (as
            defined in Rules 13a-15(e) and 15d-15(e) under the Securities
            Exchange Act of 1934) as of the end of the period covered by this
            Quarterly Report on Form 10-Q, the Company's chief executive officer
            and chief financial officer have concluded that the Company's
            disclosure controls and procedures are designed to ensure that
            information required to be disclosed by the Company in the reports
            that it files or submits under the Exchange Act is recorded,
            processed, summarized and reported within the time periods specified
            in the SEC's rules and forms and are operating in an effective
            manner.

      2.    Changes in internal controls. During the period covered by this
            Quarterly Report on Form 10-Q, there were no changes in the
            Company's internal control over financial reporting (as defined in
            Rule 13a-15(f)) that have materially affected, or are reasonably
            likely to materially affect, the Company's internal control over
            financial reporting.


                                       25
<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 by
privately negotiated transactions through its previously announced stock
repurchase program and as of June 30, 2005, 1,774,464 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 September 30, 2005, 1,412,190 shares remained authorized
for purchase.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                                   Maximum Number
                                                                                                  (or Approximate
                                                                            Total Number of      Dollar  Value) of
                                                                           Shares (or Units)     Shares (or Units)
                                Total Number of                          Purchased as Part of     that May Yet Be
                               Shares (or Units)   Average Price Paid     Publicly Announced    Purchased Under the
   Period                         Purchased        per Share (or Unit)     Plans or Programs     Plans or Programs
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>                     <C>              <C>
July 2005                               --                   --                      --               1,774,464
-------------------------------------------------------------------------------------------------------------------
August 2005                        164,414                13.89                 164,414               1,610,050
-------------------------------------------------------------------------------------------------------------------
September 2005                     187,860                13.89                 187,860               1,412,190
-------------------------------------------------------------------------------------------------------------------
Total                              352,274                   --                 352,274                      --
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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

      The Company's Annual Shareholders' meeting was held on November 3, 2005,
      at which time the election of Directors was conducted. The following named
      individuals were nominated and re-elected as Directors.

                                                    Votes         Votes
                                                     For        Withheld
                                                     ---        --------
      Lawrence A. Sala                           14,347,392      689,108
      Robert U. Roberts                          14,421,337      615,163
      Dr. David Wilemon                          14,421,082      615,418

      Messrs. Sala, Roberts and Wilemon were elected to terms expiring in 2008.
      The terms of Directors Matthew S. Robinson, Dale F. Eck, Carl W. Gerst,
      James G. Gould, and Herbert I. Corkin continued after the meeting.

      Additionally, the selection of KPMG LLP was approved as the Company's
      independent registered public accounting firm for fiscal 2006 was ratified
      by a vote of 14,713,676 for and 318,484 withheld.

Item 6. Exhibits

      31    RULE 13a-14(a) CERTIFICATIONS

      32    SECTION 1350 CERTIFICATIONS


                                       26
<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: November 7, 2005                   /s/ Lawrence A. Sala
                                         ---------------------------------------
                                         Lawrence A.Sala
                                         President & Chief Executive Officer

Date: November 7, 2005                   /s/ Joseph E. Porcello
                                         ---------------------------------------
                                         Joseph E. Porcello
                                         Vice President of Finance and Treasurer


                                       27