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 December 31, 2008

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

For the transition period from _____________________ to ________________________

                          Commission file number 0-6620

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

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

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

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


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

      Indicate by Check mark whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __

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

Check One:  Large accelerated filer __           Accelerated filer X

            Non-accelerated filer __             Smaller reporting company __

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

      The number of shares of Registrant's  Common Stock outstanding on February
2, 2009 was 14,526,817.


<PAGE>

                                  ANAREN, INC.
                                    FORM 10-Q
                                      INDEX

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

       Item 1.    Financial Statements

                  Consolidated Condensed Balance Sheets as of               3
                  December 31, 2008 and June 30, 2008 (unaudited)

                  Consolidated Condensed Statements of Earnings             4
                  for the Three Months Ended December 31,
                  2008 and 2007 (unaudited)

                  Consolidated Condensed Statements of Earnings             5
                  for the Six Months Ended December 31,
                  2008 and 2007 (unaudited)

                  Consolidated Condensed Statements of Cash Flows           6
                  for the Six Months Ended December 31,
                  2008 and 2007 (unaudited)

                  Notes to Consolidated Condensed Financial                 7
                  Statements (unaudited)

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

       Item 3.    Quantitative and Qualitative Disclosures About
                  Market Risk                                              26

       Item 4.    Controls & Procedures                                  26 - 27

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

       Item 1A.   Risk Factors                                             27

       Item 4.    Submission of Matters to a Vote of Security Holders      27

       Item 6.    Exhibits                                                 27

   Officer Certifications                                                28 - 32


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                                  ANAREN, INC.
                      Consolidated Condensed Balance Sheets
                       December 31, 2008 and June 30, 2008
                                   (Unaudited)

<TABLE>
<CAPTION>
                 Assets                                               December 31, 2008          June 30, 2008
<S>                                                                     <C>                      <C>
Current assets:
    Cash and cash equivalents                                           $  24,885,454            $  10,710,825
    Securities held to maturity                                            16,451,906               21,073,929
    Receivables, less allowances of $442,235 and $419,305
      at December 31, 2008 and June 30, 2008, respectively                 26,636,284               23,101,590
    Inventories                                                            38,610,295               26,981,367
    Other receivables                                                       1,358,628                1,505,162
    Prepaid expenses                                                          817,998                1,152,148
    Income tax receivable                                                     742,287                     --
    Deferred income taxes                                                   1,673,895                1,645,955
    Other current assets                                                      794,808                  610,981
                                                                        -------------            -------------
                Total current assets                                      111,971,555               86,781,957

Securities available for sale                                                 900,000                  314,200
Securities held to maturity                                                 3,136,195               11,993,768
Property, plant and equipment, net                                         55,259,370               42,266,431
Deferred income taxes                                                          30,068                   31,159
Goodwill                                                                   40,424,164               30,715,861
Other intangible assets, net                                               13,895,003                     --
                                                                        -------------            -------------
                Total assets                                            $ 225,616,355            $ 172,103,376
                                                                        =============            =============

      Liabilities and Stockholders' Equity
      ------------------------------------
Current liabilities:
    Current portion of long-term debt                                   $   9,800,000            $        --
    Accounts payable                                                        8,676,375                9,160,496
    Accrued expenses                                                        3,088,507                2,581,074
    Customer advance payments                                                 861,816                1,259,001
    Other current liabilities                                               3,912,685                2,618,422
                                                                        -------------            -------------
                Total current liabilities                                  26,339,383               15,618,993

Long-term debt                                                             40,000,000                     --
Deferred income taxes                                                       3,019,611                  813,720
Pension and postretirement benefit obligation                               3,546,639                3,314,739
Other liabilities                                                           1,506,650                1,492,268
                                                                        -------------            -------------
                Total liabilities                                          74,412,283               21,239,720
                                                                        -------------            -------------

Stockholders' equity:
    Common stock of $.01 par value.  Authorized
       200,000,000 shares; issued 27,777,740 shares
       at December 31, 2008 and 27,393,094 at June 30, 2008                   277,777                  273,930
    Additional paid-in capital                                            194,566,870              192,313,860
    Retained earnings                                                      97,465,640               94,540,282
    Accumulated other comprehensive loss                                     (171,812)                (343,990)
                                                                        -------------            -------------
                                                                          292,138,475              286,784,082
    Less cost of 13,251,423 treasury shares
      at December 31, 2008 and 12,780,181 at June 30, 2008                140,934,403              135,920,426
                                                                        -------------            -------------
                Total stockholders' equity                                151,204,072              150,863,656
                                                                        -------------            -------------
                Total liabilities and stockholders' equity              $ 225,616,355            $ 172,103,376
                                                                        =============            =============
</TABLE>

See accompanying notes to unaudited consolidated condensed financial statements.


                                       3
<PAGE>

                                  ANAREN, INC.
                  Consolidated Condensed Statements of Earnings
                               Three Months Ended
                           December 31, 2008 and 2007
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                December 31, 2008       December 31, 2007
                                                -----------------       -----------------
<S>                                                <C>                     <C>
Net sales                                          $ 41,442,845            $ 32,367,982

Cost of sales                                        29,144,274              21,967,487
                                                   ------------            ------------
        Gross profit                                 12,298,571              10,400,495
                                                   ------------            ------------

Operating expenses:
        Marketing                                     2,051,649               1,775,816
        Research and development                      3,023,410               2,286,673
        General and administrative                    4,972,357               3,363,262
                                                   ------------            ------------
              Total operating expenses               10,047,416               7,425,751
                                                   ------------            ------------

Operating income                                      2,251,155               2,974,744

Other income, primarily interest                        306,981                 598,366
Interest expense                                       (622,455)                 (9,796)
                                                   ------------            ------------
        Total other (expense) income               $   (315,474)           $    588,570
                                                   ------------            ------------

Income before income tax expense                      1,935,681               3,563,314

Income tax expense                                      352,000               1,012,000
                                                   ------------            ------------

Net income                                         $  1,583,681            $  2,551,314
                                                   ------------            ------------

Basic earnings per share                                  $0.11                   $0.17
                                                          -----                   -----

Diluted earnings per share                                $0.11                   $0.17
                                                          -----                   -----

Shares used in computing net earnings per share:

        Basic                                        13,803,554              14,714,479
                                                   ============            ============
        Diluted                                      13,974,313              14,993,433
                                                   ============            ============
</TABLE>

See accompanying notes to unaudited consolidated condensed financial statements.


                                       4
<PAGE>

                                  ANAREN, INC.
                  Consolidated Condensed Statements of Earnings
                                Six Months Ended
                           December 31, 2008 and 2007
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                December 31, 2008      December 31, 2007
                                                -----------------      -----------------
<S>                                                <C>                    <C>
Net sales                                          $ 79,567,313           $ 64,458,174

Cost of sales                                        55,744,607             43,538,693
                                                   ------------           ------------
        Gross profit                                 23,822,706             20,919,481
                                                   ------------           ------------

Operating expenses:
        Marketing                                     4,145,165              3,533,183
        Research and development                      6,107,977              4,889,991
        General and administrative                    9,392,295              6,725,506
                                                   ------------           ------------
              Total operating expenses               19,645,437             15,148,680
                                                   ------------           ------------

Operating income                                      4,177,269              5,770,801

Other income, primarily interest                        710,351              1,348,409
Interest expense                                       (888,262)               (46,432)
                                                   ------------           ------------
        Total other (expense) income               $   (177,911)          $  1,301,977
                                                   ------------           ------------

Income before income tax expense                      3,999,358              7,072,778

Income tax expense                                    1,074,000              1,816,000
                                                   ------------           ------------

Net income                                         $  2,925,358           $  5,256,778
                                                   ------------           ------------

Basic earnings per share                                  $0.21                  $0.34
                                                          -----                  -----

Diluted earnings per share                                $0.21                  $0.34
                                                          -----                  -----

Shares used in computing net earnings per share:

        Basic                                        13,967,191             15,378,406
                                                   ============           ============
        Diluted                                      14,121,072             15,679,369
                                                   ============           ============
</TABLE>

See accompanying notes to unaudited consolidated condensed financial statements.


                                       5
<PAGE>

                                  ANAREN, INC.
                 Consolidated Condensed Statements of Cash Flows
                                Six Months Ended
                           December 31, 2008 and 2007
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                December 31, 2008       December 31, 2007
Cash flows from operating activities:                                           -----------------       -----------------
<S>                                                                                <C>                     <C>
     Net income                                                                    $  2,925,358            $  5,256,778
     Adjustments to reconcile income from continuing operations
       to net cash provided by operating activities:
         Depreciation                                                                 3,923,765               3,378,113
         Amortization                                                                   915,884                 333,150
         Loss on disposal of fixed assets                                                (3,791)                     --
         Deferred income taxes                                                         (528,000)               (616,000)
         Stock-based compensation                                                     2,051,217               1,838,262
         Changes in operating assets and liabilities:
           Receivables                                                                2,885,890                (858,427)
           Inventories                                                                 (487,370)             (2,747,012)
           Other receivables                                                            162,052                (555,683)
           Prepaids and other current assets                                           (256,133)                284,153
           Accounts payable                                                          (1,997,511)               (534,062)
           Accrued expenses                                                            (473,339)             (1,596,675)
           Income taxes                                                                (742,287)               (306,369)
           Customer advance payments                                                   (637,343)              1,273,399
           Other liabilities                                                           (464,902)              2,015,715
           Pension and postretirement benefit obligation                                231,900                 190,000
                                                                                   ------------            ------------
     Net cash provided by operating activities                                        7,505,390               7,355,342
                                                                                   ------------            ------------
Cash flows from investing activities:
     Capital expenditures                                                            (3,635,771)             (7,108,022)
     Payment for purchase of M.S. Kennedy Corp. and
        Unicircuit, Inc.                                                            (47,295,874)                     --
     Maturities of held to maturity and available for sale securities                16,909,199              57,761,650
     Purchases of held to maturity and available for sale securities                 (3,130,490)            (32,324,160)
                                                                                   ------------            ------------
             Net cash (used in) provided by investing activities                    (37,152,936)             18,329,468
                                                                                   ------------            ------------
Cash flows from financing activities:
     Stock options exercised                                                            204,401                 538,941
     Proceeds from revolving credit note                                             49,800,000                      --
     Payment on mortgage payable                                                     (1,209,574)                     --
     Excess tax benefit from exercise of stock options                                   27,946                 106,110
     Purchase of treasury stock                                                      (5,013,977)            (27,491,278)
                                                                                   ------------            ------------
             Net cash provided by (used in) financing activities                     43,808,796             (26,846,227)
                                                                                   ------------            ------------
     Effect of exchange rates on cash                                                    13,379                  58,616
                                                                                   ------------            ------------
             Net increase (decrease) in cash and cash equivalents                    14,174,629              (1,102,801)
Cash and cash equivalents at beginning of period                                     10,710,825               7,912,276
                                                                                   ------------            ------------
Cash and cash equivalents at end of period                                         $ 24,885,454            $  6,809,475
                                                                                   ============            ============

Supplemental  disclosures of cash flow information:
     Cash paid during the period for:
       Interest                                                                    $    288,271            $     46,432
                                                                                   ============            ============
       Income taxes, net of refunds                                                $  2,075,500            $  1,296,252
                                                                                   ============            ============
Non-cash investing and financing activities:
       Fixed asset purchases included in accounts payable                          $    880,022            $    522,296
                                                                                   ============            ============
     Fair value of assets acquired, including cash acquired                        $ 58,837,184            $         --
     Liabilities assumed                                                             (7,805,662)                     --
     Net assets acquired                                                             51,031,522                      --
     Less -- direct acquisition costs                                                  (573,967)                     --
     Less -- cash acquired                                                           (2,556,681)                     --
     Less -- additional consideration accrued but not yet paid                         (605,000)                     --
     Net cash paid for purchases of businesses                                     $(47,295,874)           $         --
                                                                                   ============            ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.


                                       6
<PAGE>

Notes to Consolidated Condensed Financial Statements (Unaudited)

The consolidated  condensed  financial  statements are unaudited and reflect all
adjustments  (consisting  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, 2008.  The results of operations  for the six months ended December 31,
2008 are not  necessarily  indicative  of the results for the entire fiscal year
ending June 30, 2009, or any future interim period.

The income tax rates utilized for interim financial  statement  purposes for the
six months ended December 31, 2008 and 2007 are based on estimates of income and
utilization of tax credits for the entire fiscal year ending June 30, 2009.

During the second  quarter  ended  December  31,  2008,  the Company  recorded a
correction of an over accrued amount in its commission accrual for the amount of
$275,000. This correction was recorded to the Marketing line on the Consolidated
Condensed  Statements of Earnings (unaudited) for the three and six months ended
December  31, 2008.  The company  assessed the error on prior years and quarters
for over recording an accrual for commissions, and based on SEC Staff Accounting
Bulleting  (SAB) 99 and SAB 108, the error was determined to be immaterial for a
restatement of any prior filing, and was corrected in this filing.

(1) Acquisitions

Acquisition of MSK

On August 1, 2008, the Company completed the acquisition of M.S. Kennedy,  Corp.
("MSK"),  located in Syracuse, New York. The transaction was accounted for under
the purchase method of accounting, and the results of MSK's operations have been
included in the Company's consolidated financial statements since that date. MSK
is a leading provider of high performance analog microelectronics to the Defense
and Space  markets  and is a leading  designer  and  producer  of custom  analog
hybrids,  power hybrids,  and multi-chip  modules.  MSK offers broad  electronic
component design, packaging, and integration capability. MSK was integrated into
Anaren's existing Space & Defense Group.

The  Company  acquired  MSK for a  purchase  price  of  $28.6  million,  with an
additional  $0.3  million  in  transaction  costs.  The  Company  financed  this
transaction  through a five year,  $50.0 million  revolving  debt facility (note
11). In  accordance  with the purchase  method of  accounting,  the acquired net
assets are recorded at fair value at the date of acquisition. The purchase price
was based primarily on the estimated future operating results of MSK.

The following table summarizes the Company's estimated fair values of the assets
acquired  and  liabilities  assumed  in  the  MSK  acquisition  at the  date  of
acquisition.  The allocation of the purchase price is preliminary and subject to
change. Estimated fair values at August 1, 2008, are as follows:

  Current assets                                                   $13,605,381
  Property, plant and equipment                                      4,016,000
  Goodwill                                                           1,595,316
  Intangible assets                                                 10,630,000
  Other assets                                                         975,000
                                                                   -----------
        Total assets acquired                                       30,821,697

  Current liabilities                                                1,952,437
  Long-term liabilities                                                     --
                                                                   -----------
     Total liabilities assumed                                       1,952,437
                                                                   -----------

  Net assets acquired                                              $28,869,260
                                                                   ===========


                                       7
<PAGE>

The tradename  included in the intangible assets is not subject to amortization.
The goodwill and intangible assets related to this transaction, exclusive of the
tradename, are deductible for tax purposes.

Acquisition of Unicircuit

On August 29, 2008, the Company  completed the  acquisition  of Unicircuit  Inc.
located in  Littleton,  Colorado.  The  transaction  was accounted for under the
purchase method of accounting,  and the results of Unicircuit's  operations have
been  included in the Company's  consolidated  financial  statements  since that
date.  Unicircuit  is a  manufacturer  of printed  circuit  boards (PCB) used in
various  military and  aerospace  applications.  Unicircuit  is a leader in high
frequency  PCB  technology  and will  enhance the  Company's  ability to capture
integrated  microwave  assembly  opportunities  in the  defense,  satellite  and
aerospace  markets.  Unicircuit  was integrated  into Anaren's  existing Space &
Defense Group.

The Company  acquired  Unicircuit,  Inc. for a purchase  price of $21.9 million,
with an additional $0.3 million in transaction  costs. The Company financed this
transaction  by utilizing its existing five year,  $50.0 million  revolving debt
facility (note 11). In accordance  with the purchase  method of accounting,  the
acquired net assets are recorded at fair value at the date of  acquisition.  The
purchase price was based primarily on the estimated future operating  results of
Unicircuit.

The following table summarizes the Company's estimated fair values of the assets
acquired and  liabilities  assumed in the Unicircuit  transaction at the date of
acquisition.  The allocation of the purchase price is preliminary and subject to
change. Estimated fair values at August 29, 2008, are as follows:

  Current assets                                                   $ 6,723,180
  Property, plant and equipment                                      8,914,288
  Goodwill                                                           8,089,652
  Intangible assets                                                  3,980,000
  Other assets                                                         285,033
                                                                   -----------
        Total assets acquired                                       27,992,153

  Current liabilities                                                1,895,057
  Long-term liabilities                                              3,958,169
                                                                   -----------
     Total liabilities assumed                                       5,853,226

  Net assets acquired                                              $22,138,927
                                                                   ===========

The  goodwill  and  intangible  assets  related  to  this  transaction  are  not
deductible for tax purposes.

Intangible  Assets - The  purchase  price for the M.S.  Kennedy  and  Unicircuit
acquisitions was allocated to specific  intangible assets on a preliminary basis
as follows:

                                                                Weighted
                                                 Fair            average
                                                 value         amortization
                                                assigned       period (years)
     Amortizing intangible assets:
        Customer relationships               $   5,980,000               10
        Developed technology                     4,210,000                5
        Non-competition agreements               1,330,000                4
                                             -------------
           Total                             $  11,520,000

     Non-amortizing intangible assets:
        Tradenames                               3,090,000               --
                                             -------------
           Total                                 3,090,000
                                             -------------
     Total intangible assets                 $  14,610,000
                                             =============

Customer  relationships are expected to produce meaningful economic benefits for
at least 15 years,  with the vast  majority of the  benefits on a present  value
basis (approximately 95%) expected to be received in the first 10 years.


                                       8
<PAGE>

The developed technology is expected to produce meaningful economic benefits for
as much as 10 years.  The vast  majority  of the  benefits  are  expected  to be
realized in 5 years.

The  tradename  is  considered  indefinite  and  will not be  amortized  until a
decision  is made in the future to abandon it or if  information  indicates  the
life of the asset becomes definite.

The  noncompetition  agreements are amortized over their  contractual  life of 4
years.

The following  table sets forth the unaudited pro forma results of operations of
the Company for the three and six months ended December 31, 2008 and 2007, as if
the M.S.  Kennedy and the Unicircuit  acquisition  transactions  occurred at the
beginning of each fiscal year.

                                                      For the Three Months
                                                       Ended December 31,
                                                     2008              2007
                                                ---------------   --------------
Net sales                                       $    41,442,845   $   43,897,310
Income before income tax expense                $     4,221,854   $    6,133,927
Net income                                      $     3,869,854   $    4,222,213
Earnings per share:
   Basic                                        $          0.28   $         0.29
   Diluted                                      $          0.28   $         0.28
Weighted average common shares outstanding:
   Basic                                             13,803,554       14,714,479
   Diluted                                           13,974,313       14,993,433

                                                       For the Six Months
                                                       Ended December 31,
                                                     2008              2007
                                                ---------------   --------------
Net sales                                       $    84,020,682   $   85,209,334
Income before income tax expense                $     8,160,670   $   10,100,676
Net income                                      $     6,231,386   $    7,067,412
Earnings per share:
   Basic                                        $          0.45   $         0.46
   Diluted                                      $          0.44   $         0.45
Weighted average common shares outstanding:
   Basic                                             13,967,191       15,378,406
   Diluted                                           14,121,072       15,679,369

The pro forma results are presented  for  illustrative  purposes only and do not
include  expenses that  resulted from purchase  accounting or from the revolving
credit  note   (inventory   and  fixed  asset   step-up   expenses,   intangible
amortization,  or interest  expense) for the three and six months ended December
31, 2008.  Certain cost savings have resulted or may result from the acquisition
transactions,  although there can be no assurance that  additional  cost savings
will be achieved. These pro forma results do not purport to be indicative of the
results that would have actually been obtained if the  acquisition  transactions
have occurred as of the dates indicated,  nor do the pro forma results intend to
be a projection of results that may be obtained in the future.


                                       9
<PAGE>

(2) Equity-based Compensation

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

<TABLE>
<CAPTION>
                                         Three Months Ended        Six Months Ended
                                             December 31             December 31
                                           2008       2007         2008        2007
<S>                                      <C>        <C>        <C>          <C>
Stock option                             $408,222   $573,254   $  956,777   $1,167,676
Restricted stock                          577,278    368,870    1,094,440      670,586
                                         --------   --------   ----------   ----------
     Stock-based compensation expense    $985,500   $942,124   $2,051,217   $1,838,262
                                         ========   ========   ==========   ==========
</TABLE>

In the three and six months  ending  December 31, 2008, 0 and 345,391  shares of
restricted  stock with an  aggregate  value of $0 and  $3,145,949  were  issued,
respectively, with a vesting period of 1 to 4 years.

(3) Securities

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

<TABLE>
<CAPTION>
                                                            December 31, 2008 2006
                                           ---------------------------------------------------------
                                                             Gross         Gross
                                            Amortized      unrealized    unrealized
                                              cost           gains         losses         Fair value
                                           -----------      --------      --------       -----------
<S>                                        <C>              <C>           <C>            <C>
Securities available-for-sale:
   Auction rate securities                 $   975,000      $     --      $(75,000)      $   900,000
                                           -----------      --------      --------       -----------
     Total securities available-for-sale   $   975,000      $     --      $(75,000)      $   900,000
                                           ===========      ========      ========       ===========
Securities held to maturity:
   Municipal bonds                         $19,387,860      $240,926      $     --       $19,628,786
   Commercial paper                                 --            --            --                --
   Corporate bonds                             200,241           473            --           200,714
   Federal agency bonds                             --            --            --                --
                                           -----------      --------      --------       -----------
     Total securities held to maturity     $19,588,101      $241,399      $     --       $19,829,500
                                           ===========      ========      ========       ===========
</TABLE>

<TABLE>
<CAPTION>
                                                               June 30, 2008 2006
                                           ---------------------------------------------------------
                                                             Gross         Gross
                                            Amortized      unrealized    unrealized
                                              cost           gains         losses         Fair value
                                           -----------      --------      --------       -----------
<S>                                        <C>              <C>          <C>             <C>
Securities available-for-sale:
   Auction rate securities                 $   500,000      $     --     $(185,800)      $   314,200
                                           -----------      --------     ---------       -----------
     Total securities available-for-sale   $   500,000      $     --     $(185,800)      $   314,200
                                           ===========      ========     =========       ===========
Securities held to maturity:
   Municipal bonds                         $32,566,511      $246,941     $      --       $32,813,452
   Commercial paper                                 --            --            --                --
   Corporate bonds                             201,320         1,024            --           202,344
   Federal agency bonds                        299,866           323            --           300,189
                                           -----------      --------     ---------       -----------
     Total securities held to maturity     $33,067,697      $248,288     $      --       $33,315,985
                                           ===========      ========     =========       ===========
</TABLE>

Amortization  expense  relating to the net  discounts and premiums on securities
held to maturity for the three and six months ending  December 31, 2008 and 2007
amounted to $90,216 and $143,942, and $200,887 and $295,650.


                                       10
<PAGE>

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

<TABLE>
<CAPTION>
                                                           December 31, 2008                 June 30, 2008
                                                       -----------------------------------------------------------
                                                                          Fair                            Fair
                                                        Amortized        market         Amortized        market
                                                          Cost            value           Cost            value
                                                       -----------     -----------     -----------     -----------
<S>                                                    <C>             <C>             <C>             <C>
Within one year                                        $16,451,906     $16,649,400     $21,073,929     $21,147,444
One year to five years                                   3,136,195       3,180,100      11,993,768      12,168,541
                                                       -----------     -----------     -----------     -----------
   Total                                               $19,588,101     $19,829,500     $33,067,697     $33,315,985
                                                       ===========     ===========     ===========     ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                           December 31, 2008                 June 30, 2008
                                                       -----------------------------------------------------------
                                                                          Fair                            Fair
                                                        Amortized        market         Amortized        market
                                                          Cost            value           Cost            value
                                                       -----------     -----------     -----------     -----------
<S>                                                          <C>          <C>             <C>             <C>
Within one year                                              $     --     $     --        $     --        $     --
One year to five years                                        975,000      900,000         500,000         314,200
                                                             --------     --------        --------        --------
   Total                                                     $975,000     $900,000        $500,000        $314,200
                                                             ========     ========        ========        ========
</TABLE>

At  December  31,  2008,  the  Company  held an auction  rate  security  ("ARS")
amounting to $0.9 million.  The assets  underlying this investment are primarily
student  loans  which  are AAA rated and  substantially  guaranteed  by the U.S.
government under the Federal Family Education Loan Program.  Historically,  this
security has provided  liquidity through a Dutch auction process that resets the
applicable  interest rate at  pre-determined  intervals every 30 days.  However,
these auctions began to fail in the first quarter of 2008.  Since these auctions
have failed,  we have realized  higher interest rates for many of these ARS than
we would have otherwise.  Although we have been receiving  interest  payments at
these  rates,  the related  principal  amounts  will not be  accessible  until a
successful auction occurs, a buyer is found outside of the auction process,  the
issuer calls the  security,  or the security  matures  according to  contractual
terms. Maturity dates for this ARS investment is in 2038.

As a  result  of the  auction  failures,  this  ARS  does  not  have  a  readily
determinable  market value.  The Company  calculated a  preliminary  estimate at
December 31, 2008 and August 1, 2008  (purchase  date of M.S.  Kennedy) based on
broker and trader  data that was  available.  The Company is working on a formal
analysis to  determine  the  security's  value and will  adjust the  preliminary
estimate  that  was made  through  purchase  accounting  when  the  analysis  is
complete.

At December  31,  2008,  the  estimated  fair value of this ARS was $0.1 million
($0.1  million,  net of tax  effect)  less than its cost basis  recorded  at the
purchase  date.  Based  primarily  on the  period of time and the  extent of the
impairment,  as well as our ability to hold this security for an extended period
of time without  materially  affecting our liquidity  needs, we concluded it was
temporary  and  recorded it to  accumulated  other  comprehensive  income on the
accompanying Consolidated Condensed Balance Sheet at December 31, 2008.

To the extent we determine that any impairment is other-than-temporary, we would
record a charge to earnings.  In addition,  we have  concluded that the auctions
for these securities may continue to fail for at least the next 12 months and as
a result,  they have been classified as non-current  assets on our  Consolidated
Condensed Balance Sheet at December 31, 2008.

(4) Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157),  which is effective for fiscal years beginning after November 15, 2007 and
for interim  periods  within those  years.  This  statement  defines fair value,
establishes  a  framework  for  measuring  fair value and  expands  the  related
disclosure   requirements.   This  statement   applies  under  other  accounting
pronouncements  that require or permit fair value  measurements.  The  statement
indicates,  among other things,  that a fair value measurement  assumes that the
transaction  to sell an asset or  transfer a liability  occurs in the  principal
market for the asset or liability or, in the absence of a principal market,  the
most advantageous market for the asset or liability. SFAS 157 defines fair value
based upon an exit price model.


                                       11
<PAGE>

Relative to SFAS 157,  the FASB issued FASB Staff  Positions  ("FSP") FAS 157-1,
FAS 157-2,  and FAS 157-3. FSP FAS 157-1 amends SFAS 157 to exclude SFAS No. 13,
"Accounting  for  Leases"  (SFAS 13),  and its related  interpretive  accounting
pronouncements that address leasing transactions, while FSP FAS 157-2 delays the
effective date of the  application of SFAS 157 to fiscal years  beginning  after
November 15, 2008 for all nonfinancial assets and nonfinancial  liabilities that
are  recognized  or disclosed  at fair value in the  financial  statements  on a
non-recurring  basis.  FSP FAS 157-3 clarifies the application of SFAS 157 as it
relates to the valuation of financial  assets in a market that is not active for
those  financial  assets.  This FSP is effective  immediately and includes those
periods  for  which  financial  statements  have not been  issued.

The  Company  adopted  SFAS 157 as of July 1, 2008,  with the  exception  of the
application  of  the  statement  to   non-recurring   nonfinancial   assets  and
nonfinancial  liabilities.  Non-recurring  nonfinancial  assets and nonfinancial
liabilities  for which the Company has not  applied the  provisions  of SFAS 157
include those measured at fair value in goodwill impairment testing,  indefinite
lived  intangible  assets measured at fair value for impairment  testing,  asset
retirement obligations initially measured at fair value, and those non-recurring
nonfinancial  assets and  nonfinancial  liabilities  initially  measured at fair
value in a business combination.


Valuation  Hierarchy.  SFAS 157 establishes a valuation hierarchy for disclosure
of  the  inputs  to  valuation  used  to  measure  fair  value.  This  hierarchy
prioritizes  the inputs into three broad  levels as follows.  Level 1 inputs are
quoted  prices   (unadjusted)   in  active  markets  for  identical   assets  or
liabilities. Level 2 inputs are quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets in markets that
are not active,  inputs  other than quoted  prices that are  observable  for the
asset or liability,  including interest rates, yield curves and credit risks, or
inputs that are derived  principally  from or corroborated by observable  market
data through  correlation.  Level 3 inputs are unobservable  inputs based on our
own  assumptions  used to  measure  assets  and  liabilities  at fair  value.  A
financial asset or liability's classification within the hierarchy is determined
based  on  the  lowest  level  input  that  is  significant  to the  fair  value
measurement.

The following table provides the assets and liabilities carried at fair value as
measured on a recurring basis as of December 31, 2008:

<TABLE>
<CAPTION>
                                                                        Significant other   Significant
                                Total Carrying       Quoted prices in      observable       unobservable
                                   Value at          active markets          inputs            inputs
                               December 31, 2008       (Level 1)            (Level 2)         (Level 3)
                               -----------------       ---------            ---------         ---------

<S>                                <C>                  <C>                   <C>            <C>
Available for sale
   securities                      $ 900,000            $   --                $   --         $  900,000
</TABLE>

Valuation  Techniques.  The Company's available for sale securities include debt
securities that are traded in an inactive market. They are based on unobservable
inputs based on our own assumptions  used to measure  security at fair value and
are classified within Level 3 of the valuation hierarchy.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  - Including  an amendment of FASB
Statement  No. 115" (SFAS 159),  which is effective  for fiscal years  beginning
after November 15, 2007.  This statement  permits  entities to choose to measure
many financial instruments and certain other items at fair value. This statement
also establishes presentation and disclosure requirements designed to facilitate
comparisons  between entities that choose different  measurement  attributes for
similar types of assets and  liabilities.  Unrealized  gains and losses on items
for which the fair value option is elected  would be reported in  earnings.  The
Company  has adopted  SFAS 159 and has  elected  not to measure  any  additional
financial instruments and other items at fair value.

(5) Goodwill

The  changes in the  carrying  amount of  goodwill  for the three and six months
ended December 31, 2008, are as follows:


                                       12
<PAGE>

Balance, June 30, 2008                                               $30,715,861
Preliminary purchase accounting allocations                            9,706,106
                                                                     -----------
Balance, September 30, 2008                                          $40,421,967
                                                                     -----------
Adjustments to preliminary purchase accounting allocations                 2,197
                                                                     -----------
Balance, December 31, 2008                                           $40,424,164
                                                                     -----------

The Company's accounting  allocations totaling $9.7 million consist primarily of
preliminary  purchase  accounting  allocations  associated with the M.S. Kennedy
Corp. acquisition of $1.6 million and purchase accounting allocations associated
with the  acquisition of Unicircuit,  Inc. of $8.1 million.  All of the purchase
accounting allocations made in the three and six months ending December 31, 2008
relate to the Space and Defense Group.

No events during the three and six months ending December 31, 2008 have occurred
that would require an impairment test.

(6) Intangible Assets

The major components of intangible assets are as follows:

<TABLE>
<CAPTION>
                                                 December 31, 2008           June 30, 2008
                                              Gross           Net          Gross          Net
                                             Carrying       Carrying      Carrying     Carrying
                                              Amount         Amount        Amount       Amount
Amortizable intangible assets:
<S>                                       <C>             <C>            <C>         <C>
   Customer relationships (10 years)      $ 5,980,000     $ 5,750,418    $      --   $        --
   Developed technology (5 years)           4,210,000       3,859,167
   Non-competition agreements (4 years)     1,330,000       1,195,418
                                          -----------     -----------
      Total                               $11,520,000      10,805,003    $      --            --

Nonamortizable intangible assets:
   Tradenames                                               3,090,000                         --
                                                          -----------
      Total                                                 3,090,000                         --
                                                          -----------
Total intangible assets                                   $13,895,003                $        --
                                                          ===========                ===========
</TABLE>

Intangible asset  amortization  expense for the three and six month period ended
December 31, 2008 and 2007 aggregated $443,123 and $714,997, and $0 and $37,500,
respectively.  The June 30,  2008 table was updated to reflect  fully  amortized
intangibles  that  have no net  value at June  30,  2008.  Amortization  expense
related to developed  technology is recorded in cost of sales,  and amortization
expense for  non-compete  agreements and customer  relationships  is recorded in
general and administrative expense.

Estimated  amortization  expense for the remaining six months of fiscal 2009 and
for each of the five succeeding fiscal years and thereafter is as follows:

2009                                                                  $  886,246
2010                                                                  $1,772,492
2011                                                                  $1,772,492
2012                                                                  $1,772,492
2013                                                                  $1,471,678
2014                                                                  $  668,163
Thereafter                                                            $2,461,440

The  intangible  assets at  December  31,  2008 are  subject  to final  purchase
accounting adjustments, and estimates recorded during fiscal 2009 may need to be
adjusted.


                                       13
<PAGE>

(7) Inventory

Inventories are summarized as follows:

                                      December 31, 2008       June 30, 2008
                                      -----------------       -------------

            Component parts              $21,880,888           $14,277,256
            Work in process               12,268,189             9,077,429
            Finished goods                 4,461,218             3,626,682
                                         -----------           -----------
              Total                      $38,610,295           $26,981,367
                                         ===========           ===========

(8) Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

                                             December 31, 2008   June 30, 2008
                                             -----------------   -------------

            Land and land improvements          $ 5,260,067       $ 4,157,617
            Construction in process               5,153,892         3,022,085
            Buildings, furniture and fixtures    31,185,161        25,241,565
            Machinery and equipment              55,730,648        48,383,137
                                                -----------       -----------
                                                $97,329,768       $80,804,404
            Less accumulated depreciation        42,070,398        38,537,973
                                                -----------       -----------
                                                $55,259,370       $42,266,431
                                                ===========       ===========

(9) Accrued Expenses

Accrued expenses consist of the following:

                                         December 31, 2008      June 30, 2008
                                         -----------------      -------------
            Compensation                     $1,858,700           $1,400,574
            Commissions                         678,495              805,496
            Health insurance and other          551,312              375,004
                                             ----------           ----------
                                             $3,088,507           $2,581,074
                                             ==========           ==========

(10)  Other Liabilities

Other liabilities consist of the following:

                                      December 31, 2008        June 30, 2008
                                      -----------------        -------------

         Deferred compensation            $1,526,848            $1,504,676
         Accrued lease                       894,849               890,980
         Income taxes                      1,095,000               510,000
         Warranty                            629,535               854,536
         Interest                            599,991                    --
         Other                               673,113               350,498
                                          ----------            ----------
                                           5,419,336             4,110,690
         Less current portion              3,912,686             2,618,422
                                          ----------            ----------
                                          $1,506,650            $1,492,268
                                          ==========            ==========

In fiscal year 2004,  the Company  began  accruing  for a deferred  compensation
agreement  that the Company  entered  into with an  employee in March 2004,  and
extended the agreement in May 2007. During fiscal year 2008, the Company entered
into a final agreement with this employee. Under the terms of this contract, the
Company has


                                       14
<PAGE>

agreed to pay the present  valued amount of  approximately  $0.7 million to this
employee  beginning in January 2009. This agreement was amended in December 2008
and the employee was paid the $0.7 million during January 2009.

(11) Debt

The following table  summarizes the long-term debt of the Company as of December
31, 2008 and June 30, 2008:

                                                  December 31,       June 30,
                                                     2008              2008
                                                 ------------      -----------
      Revolving credit note                      $ 49,800,000      $        --

      Less current maturities                      (9,800,000)              --
                                                 ------------      -----------
       Long-term debt, less current maturities   $ 40,000,000      $        --
                                                 ============      ===========

The following table  summarizes the payments to be made on the long-term debt of
the Company for the remaining of 2009 and for the next five years:

2009                                                                 $        --
2010                                                                 $ 9,800,000
2011                                                                 $10,000,000
2012                                                                 $10,000,000
2013                                                                 $10,000,000
2014                                                                 $10,000,000

On July 31, 2008, the Company  entered into a loan  agreement (the  "Agreement")
with KeyBank  National  Association.  The  Agreement  consists of a  $50,000,000
revolving  credit  note (the  "Note"),  for which  principal  amounts are due on
August 1, 2009, and on each anniversary date thereafter through July 31, 2013 in
accordance  with the  above  schedule.  Availability  of  credit  under the Note
declines 20% annually on each  anniversary  date and any  outstanding  principal
balance  in excess of the new line limit is due and  payable  at that time.  The
Agreement  and the  Promissory  Note are  guaranteed  by three of the  Company's
domestic  subsidiaries,  as well as, an assignment of the Company's  interest in
its foreign subsidiary.

Borrowings under this Note, at the Company's choice, bear interest at the LIBOR,
plus 100 to 425 basis points, or at the Lender's Prime Rate, minus (100) to plus
225 basis points,  depending upon the Company's EBITDA performance at the end of
each quarter as measured by the formula:  EBITDA divided by the Current  Portion
of Long-term Debt plus interest  expense.  For the six months ended December 31,
2008,  the weighted  average  interest rate on the  outstanding  borrowings  was
4.16%.

Borrowings  under the Agreement  are subject to certain  financial and operating
covenants. The Company was in compliance with covenants as of December 31, 2008.

The Company is also  required to pay a  commitment  fee between 0.20 - 0.35% per
annum on the unused portion of the Note.  Available borrowing capacity under the
Note was $200,000 at December 31, 2008.

(12) Income Taxes

As discussed  in note 1, during the six months  ending  December  31, 2008,  the
Company completed the acquisition of two  subsidiaries.  As a result of acquired
unrecognized  tax benefits,  the Company  recognized an increase in unrecognized
tax benefits of $480,000. The acquired unrecognized tax benefits are recorded in
other  long-term  liabilities in the Company's  condensed  consolidated  balance
sheet,  as payment  of cash is not  anticipated  within one year of the  balance
sheet date.

Income taxes for the second quarter of fiscal 2009 were $352,000 representing an
effective  tax rate of 18.2%.  This compares to income tax expense of $1,012,000
for the second  quarter of fiscal 2008,  representing  an effective  tax rate of
28.4%.  This decrease  primarily  resulted from the reinstatement of the Federal
Research and Experimentation


                                       15
<PAGE>

credit  retroactive  to  January  1, 2008,  resulting  in a one-time  benefit of
$265,000.  The  effective  tax  rate  for  fiscal  2009  is now  expected  to be
approximately 31.0%.

As a result of the  reinstatement  of the Federal  Research and  Experimentation
credit,  the Company  recognized  an increase in  unrecognized  tax  benefits of
$95,000.  The Company is subject to income tax examinations for its U.S. federal
and foreign  income taxes for the fiscal years 2005 through 2008,  and for state
and local taxes for the fiscal years 2002 through 2008. Various state income tax
examinations  are  currently in progress.  It is  reasonably  possible  that the
liability associated with the Company's  unrecognized tax benefits will increase
or decrease  within the next twelve months as a result of these  examinations or
the expiration of the statutes of  limitations.  At this time an estimate of the
range of reasonably possible outcomes cannot be made.

(13) Earning Per Share

Basic  earnings per share is based on the weighted  average  number of shares of
common stock  outstanding.  Diluted  earnings per share is based on the weighted
average  number  of  shares of common  stock  outstanding,  as well as  dilutive
potential  shares of common stock which, in the Company's case,  comprise shares
issuable  under  the  Company's  Comprehensive  Long-Term  Incentive  Plan.  The
weighted  average  number of common shares  utilized in the  calculation  of the
diluted  earnings  per share does not include  antidilutive  shares  aggregating
2,128,836 and  1,183,120  for the three and six months ending  December 31, 2008
and 2007, respectively.  The treasury stock method is used to calculate dilutive
shares,  which  reduces  the gross  number of  dilutive  shares by the number of
shares of common  stock  that may be  purchased  from  proceeds  of  outstanding
options assumed to be exercised.

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

<TABLE>
<CAPTION>
                                                     Three Months Ended           Six Months Ended
                                                         December 31                December 31
                                                    -------------------          ------------------
                                                     2008          2007          2008          2007
                                                     ----          ----          ----          ----
<S>                                              <C>           <C>           <C>           <C>
Numerator:
Net income                                       $ 1,583,681   $ 2,551,314   $ 2,925,358   $ 5,256,778
                                                 ===========   ===========   ===========   ===========
Denominator:
Denominator for basic earnings per share:
           Weighted average shares outstanding    13,803,554    14,714,479    13,967,191    15,378,406
                                                 ===========   ===========   ===========   ===========
Denominator for diluted earnings per share:
         Weighted average shares outstanding      13,803,554    14,714,479    13,967,191    15,378,406
         Common stock options
           and restricted stock                      170,759       278,954       153,881       300,963
                                                 -----------   -----------   -----------   -----------
Weighted average shares and conversions           13,974,313    14,993,433    14,121,072    15,679,369
                                                 ===========   ===========   ===========   ===========
</TABLE>

(14) Employee Benefit Plans

Defined Benefit Plan

The following  table sets forth the components of net periodic  pension  benefit
costs:

<TABLE>
<CAPTION>
                                       Three Months Ended          Six Months Ended
                                          December 31                December 31
                                     ---------------------        -----------------
                                        2008          2007        2008         2007
                                        ----          ----        ----         ----
<S>                                  <C>          <C>          <C>          <C>
Service cost                         $  65,763    $  75,000    $ 131,536    $ 150,000
Interest cost                          187,077      175,000      374,154      350,000
Expected return on plan assets        (211,932)    (225,000)    (423,864)    (450,000)
Amortization of prior service cost          --           --           --           --
Amortization of the net loss            21,300           --       42,600           --
                                     ---------    ---------    ---------    ---------
Net periodic benefit cost            $  62,208    $  25,000    $ 124,416    $  50,000
                                     =========    =========    =========    =========
</TABLE>

Required Company contributions for fiscal 2009 are approximately $0.1 million.

Postretirement Health Benefit Plan

The following  table sets forth the  components  of net periodic  postretirement
health benefit costs:


                                       16
<PAGE>

                                       Three Months Ended     Six Months Ended
                                           December 31          December 31
                                      -------------------  --------------------
                                        2008       2007       2008         2007
                                        ----       ----       ----         ----
Service cost                         $ 17,458    $20,000   $  34,916    $ 40,000
Interest cost                          39,259     42,500      78,518      85,000
Amortization of the net loss              931      7,500       1,862      15,000
Amortization of prior service cost     (4,527)        --      (9,054)         --
                                     --------    -------   ---------    --------
Postretirement health benefit cost   $ 53,121    $70,000   $ 106,242    $140,000
                                     ========    =======   =========    ========

Total expected contributions for fiscal 2009 are approximately $0.1 million.

(15) Other Comprehensive Income

Comprehensive income consists of the following:

<TABLE>
<CAPTION>
                                         Three Months Ended           Six Months Ended
                                            December 31                 December 31
                                       -----------------------     --------------------
                                           2008          2007         2008         2007
                                           ----          ----         ----         ----
<S>                                    <C>            <C>          <C>          <C>
Net income                             $ 1,583,681    $2,551,314   $2,925,358   $5,256,778
Other comprehensive income:
   Foreign currency translation gain        42,880       253,454       61,378      366,616
   Mark to market adjustment              (168,950)           --      110,800           --
                                       -----------    ----------   ----------   ----------

Comprehensive income                   $ 1,457,611    $2,804,768   $3,097,536   $5,623,394
                                       ===========    ==========   ==========   ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                         Pension and           Foreign           Mark to           Accumulated
                                        Postretirement         Currency           Market              Other
                                           Benefit           Translation       Available-for-     Comprehensive
                                          Liability           Adjustment      Sale Securities     Income (loss)
                                          ---------           ----------      ---------------     -------------
<S>                                      <C>                  <C>                <C>                <C>
Balance, June 30, 2008                   $(1,528,753)         $1,370,563         $(185,800)         $(343,990)

Other comprehensive income:
   Foreign currency translation gain              --              61,378                --             61,378
   Mark to market adjustment                      --                  --           110,800            110,800
                                         -----------          ----------         ---------          ---------

Balance, December 31, 2008               $(1,528,753)         $1,431,941         $ (75,000)         $(171,812)
                                         ===========          ==========         =========          =========
</TABLE>

(16) Segment Information

The Company  operates  predominately in the wireless  communications,  satellite
communications  and defense  electronics  markets.  The  Company's two operating
segments are Wireless and Space and Defense. 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  channels,  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


                                       17
<PAGE>

specialized  products for the defense  electronics and satellite  communications
markets.  The revenue  disclosures for the Company's  operating  segments depict
products that are similar in nature.

The following table reflects the operating results of the Company's two 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:

In thousands

<TABLE>
<CAPTION>
                                                         Space &     Corporate and
                                           Wireless      Defense      Unallocated    Consolidated
                                           --------      -------      -----------    ------------
<S>                                        <C>           <C>             <C>            <C>
Net sales:
Three months ended:
       December 31, 2008                   $16,687       $24,756         $  --          $41,443
       December 31, 2007                    17,858        14,510            --           32,368
Six months ended:
       December 31, 2008                    36,179        43,388            --           79,567
       December 31, 2007                    38,961        25,497            --           64,458

Operating income:
Three months ended:
       December 31, 2008                   $ 1,751       $   650         $(150)         $ 2,251
       December 31, 2007                       437         2,742          (204)           2,975
Six months ended:
       December 31, 2008                     3,009         1,493          (325)           4,177
       December 31, 2007                     2,180         3,795          (204)           5,771

Goodwill:
       December 31, 2008                    30,716         9,708            --           40,424
       June 30, 2008                        30,716            --            --           30,716
</TABLE>

(17) Summary of Significant Accounting Policies

Use of estimates

The  preparation  of the  financial  statements in  conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the dates of the financial  statements and the reported  amounts of revenues and
expenses during the reporting periods.

Revenue Recognition

Net  sales  are  derived  from  sales  of  the   Company's   products  to  other
manufacturers  or systems  integrators.  Net sales are recognized when units are
shipped.

Net sales under  certain  long-term  contracts  of the Space and  Defense  (S&D)
group,  many of which provide for periodic  payments,  are recognized  under the
percentage-of-completion  method using the units of delivery  method.  Estimated
manufacturing  cost-at-completion  for these contracts are reviewed on a routine
periodic  basis,  and  adjustments  are  made   periodically  to  the  estimated
cost-at-completion based on actual costs incurred,  progress made, and estimates
of the  costs  required  to  complete  the  contractual  requirements.  When the
estimated  manufacturing  cost-at-completion  exceeds the  contract  value,  the
contract is written down to its net  realizable  value,  and the loss  resulting
from cost overruns is immediately recognized.

To  properly  match net sales with costs,  certain  contracts  may have  revenue
recognized in excess of billings  (unbilled  revenues),  and other contracts may
have billings in excess of net sales recognized  (billings in excess of contract
costs).  Under long-term  contracts,  the prerequisites for billing the customer
for  periodic   payments   generally   involve  the  Company's   achievement  of
contractually  specific,  objective  milestones  (e.g.,  completion  of  design,
testing,   or  other  engineering   phase,   delivery  of  test  data  or  other
documentation,  or delivery of an  engineering  model or flight  hardware).  The
amount of unbilled accounts receivable at December 31, 2008 and June 30, 2008 is
$0.5 million and $0.2 million, respectively.

An award or incentive fee is usually  variable  based upon specific  performance
criteria stated in the contract.  Award or incentive fees are recognized at 100%
only upon achieving the contractual criteria and after the customer has approved
or granted the award or incentive.


                                       18
<PAGE>

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
condensed 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  those
factors  described  elsewhere  in this  Quarterly  Report  on Form  10-Q and the
factors  described in the  Company's  Annual  Report on Form 10-K for the fiscal
year ended June 30, 2008.

Overview

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

Net  sales  are  derived  from  sales  of  the   Company's   products  to  other
manufacturers or systems  integrators.  Net sales are generally  recognized when
units are shipped.

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

On July 31, 2008,  the Company  cancelled its previous $50.0 million demand note
loan agreement with no balance outstanding on the loan; and on the same day, the
Company  signed a loan agreement with KeyBank  National  Association  bank for a
$50.0  million  declining  revolving  line  of  credit  to be  used  to  finance
acquisitions  and working  capital  needs.  On July 31 and August 29, 2008,  the
Company  took  advances  totaling  $49.8  million  on this line to  finance  the
acquisitions  of M.S.  Kennedy Corp. and  Unicircuit,  Inc.  Advances under this
line, at the  Company's  choice,  bear interest at LIBOR,  plus 100 to 425 basis
points or at the Prime  Rate,  minus (100) to plus 225 basis  points,  depending
upon the Company's EBITDA  performance at the end of each quarter as measured by
the  formula:  EBITDA  divided by the  Current  Portion of  Long-term  debt plus
interest expense. Availability of credit under the line declines 20% annually on
the anniversary date of the note and any outstanding principal balance in excess
of the new line limit is due and payable at that time.

On August 1, 2008, the Company completed the acquisition of M.S. Kennedy,  Corp.
("MSK"),  located  in  Syracuse,  New York.  MSK is a leading  provider  of high
performance  analog  microelectronics  to the Defense and Space markets and is a
leading  designer and producer of custom  analog  hybrids,  power  hybrids,  and
multi-chip modules. MSK offers broad electronic component design, packaging, and
integration capability with net sales of $22.4 million in calendar 2007. MSK was
integrated into Anaren's existing Space & Defense Group. Anaren acquired MSK for
a purchase  price of $28.6  million,  and  earnings  from MSK are expected to be
accretive in fiscal year 2009. The Company financed this transaction through its
five year, $50.0 million revolving debt facility.

On August 29, 2008, the Company  completed the  acquisition  of Unicircuit  Inc.
located in Littleton,  Colorado. Unicircuit is a manufacturer of printed circuit
boards  ("PCB") used in various  military and  aerospace  applications  with net
sales of  $18.7  million  in  calendar  2007.  Unicircuit  is a  leader  in high
frequency PCB technology and will enhance Anaren's ability to capture integrated
microwave assembly opportunities in the defense, satellite and


                                       19
<PAGE>

aerospace  markets.  Unicircuit  was integrated  into Anaren's  existing Space &
Defense  Group.  Anaren  acquired  Unicircuit,  Inc.  for a  purchase  price  of
approximately  $21.9  million,  and earnings from  Unicircuit are expected to be
accretive  in fiscal  year  2009.  The  Company  financed  this  transaction  by
utilizing its existing five year, $50.0 million revolving debt facility.

Third Quarter of Fiscal 2009 Outlook

      For the third  quarter of fiscal 2009,  we anticipate an increase in sales
for the Space & Defense Group and  relatively  unchanged  sales for the Wireless
Group.  As a  result,  we  expect  net  sales  to be in the  range of $41 to $46
million.  We expect GAAP net  earnings  per diluted  share to be in the range of
$0.17 - $0.20 using an anticipated tax rate of approximately  31% and accounting
for approximately  $0.06 - $0.07 per share in charges related to expected equity
based compensation  expense and amortization of acquired  intangibles related to
the Company's two recent acquisitions.

Results of Operations

Net sales for the three months ended  December 31, 2008 were $41.4  million,  up
28.0% from sales of $32.4  million  for the  second  quarter of fiscal  2008 and
included $10.0 million in sales from M.S. Kennedy Corp. and Unicircuit, Inc. Net
income for the second  quarter of fiscal 2009 was $1.6  million,  or 3.8% of net
sales,  down $1.0 million from net income of $2.6 million in the second  quarter
of fiscal 2008.  Net income in the second  quarter of fiscal 2009  included $1.5
million of  acquisition  related  expense for inventory  step-up and  intangible
amortization  compared to no expense  for these  items in the second  quarter of
fiscal 2008.

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

<TABLE>
<CAPTION>
                                                    Three Months Ended                Six Months Ended
                                            Dec. 31, 2008     Dec. 31, 2007    Dec. 31, 2008      Dec. 31, 2007
                                            -------------     -------------    -------------      -------------
<S>                                             <C>               <C>                <C>               <C>
Net Sales                                       100.0%            100.0%             100.0%            100.0%

Cost of sales                                    70.3%             67.9%              70.1%             67.5%
                                                -----             -----              -----             -----
Gross profit                                     29.7%             32.1%              29.9%             32.5%
                                                -----             -----              -----             -----

Operating expenses:
   Marketing                                      5.0%              5.5%               5.2%              5.5%
   Research and development                       7.3%              7.0%               7.7%              7.6%
   General and administrative                    12.0%             10.4%              11.8%             10.4%
                                                -----             -----              -----             -----
     Total operating expenses                    24.3%             22.9%              24.7%             23.5%
                                                -----             -----              -----             -----

Operating income                                  5.4%              9.2%               5.2%              9.0%
                                                -----             -----              -----             -----
Other (expense) income:

     Other, primarily interest income             0.7%              1.8%               0.9%              2.1%
     Interest expense                            (1.4)%             0.0%              (1.1)%            (0.1)%
                                                -----             -----              -----             -----
     Total other income (expense), net           (0.7)%             1.8%              (0.2)%             2.0%
                                                -----             -----              -----             -----

Income before income taxes                        4.7%             11.0%               5.0%             11.0%
Income taxes                                      0.9%              3.1%               1.3%              2.8%
                                                -----             -----              -----             -----
   Net income                                     3.8%              7.9%               3.7%              8.2%
                                                =====             =====              =====             =====
</TABLE>

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

                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                  Three Months Ended                Six months Ended
                                            Dec. 31, 2008     Dec. 31, 2007    Dec. 31, 2008     Dec. 31, 2007
                                            -------------     -------------    -------------     -------------
<S>                                            <C>               <C>               <C>              <C>
Wireless                                       $16,687           $17,858           $36,179          $38,961
Space and Defense                               24,756            14,510            43,388           25,497
                                               -------           -------           -------          -------
     Total                                     $41,443           $32,368           $79,567          $64,458
                                               =======           =======           =======          =======
</TABLE>

Three Months Ended December 31, 2008 Compared to Three Months Ended December 31,
2007

Net sales.  Net sales were $41.4 million for the second  quarter ended  December
31, 2008, up 28.0%  compared to $32.4  million for the second  quarter of fiscal
2008 and included $10.0 million from M S Kennedy Corp. and  Unicircuit,  Inc. in
the current second quarter. Shipments of Wireless products fell $1.2 million, or
6.6%, and sales of Space and Defense  products rose $10.2 million,  or 70.6%, in
the current second quarter compared to the second quarter of fiscal 2008.

Wireless products consist of standard components,  ferrite components and custom
subassemblies for use in building wireless  basestation and consumer  equipment.
Sales of Wireless  products  declined  in the second  quarter of fiscal 2009 due
primarily  to a fall-off  in demand for custom  Wireless  components  during the
current second quarter compared to the second quarter of last year, as well as a
general decline in overall Wireless  infrastructure  component demand during the
second half of the second  quarter.  Demand for  Wireless  products in the third
quarter of fiscal  2009 is  expected  to be  relatively  unchanged  from  second
quarter levels.

Space and Defense  products  consist of custom  components  and  assemblies  for
communication   satellites  and  defense  radar,  receiver,  and  countermeasure
subsystems  for the  military.  Sales of Space and Defense  products  rose $10.2
million,  or 70.6% in the second  quarter of fiscal  year 2009  compared  to the
second quarter of fiscal year 2008.  Sales of Space and Defense  products in the
second  quarter of the current  fiscal year included $10.0 million of sales from
M.S. Kennedy Corp. and Unicircuit, Inc. Space and Defense product sales continue
to benefit  from the higher  level of business  won by the Company over the past
few fiscal years,  with orders in the current  quarter  exceeding $33.0 million,
resulting in the current group backlog of $86.7 million.  Quarterly shipments of
Space and Defense  products for the third quarter of fiscal 2009 are expected to
range between $25.0 and $28.0 million.

Gross Profit.  Cost of sales  consists  primarily of  engineering  design costs,
materials,  material fabrication costs, assembly costs, intangible amortization,
direct  and  indirect  overhead,  and test  costs.  Gross  profit for the second
quarter of fiscal 2009 was $12.3  million  (29.7% of net  sales),  up from $10.4
million  (32.1% of net sales)  for the same  quarter  of the prior  year.  Gross
profit,  as a percent of sales,  decreased in the second  quarter of fiscal 2009
from the second  quarter of last year due to the  inclusion  of $1.1 million and
$211,000  of   amortization   of  inventory   step-up  costs  and   intangibles,
respectively,  related to the acquisition of M.S. Kennedy and Unicircuit.  Gross
profit  is  expected  to  improve  in the  second  half  of  fiscal  2009 as the
amortization of acquisitions inventory step-up costs was completed in the second
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 $2.1 million (5.0%
of net sales)  for the second  quarter of fiscal  2009,  up  $276,000  from $1.8
million (5.5% of net sales) for the second quarter of fiscal 2008. This increase
was  attributable  to the  inclusion  of $525,000  of  marketing  expenses  from
Unicircuit  and M.S.  Kennedy,  and reflects an  accounting  adjustment  for the
reduction of commission  expense of $275,000 to correct an over accrual that was
accumulated over a number of prior periods.

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 $3.0 million
(7.3% of net sales) in the second  quarter  of fiscal  2009,  up 32.2% from $2.3
million (7.0% of net sales) for the second quarter of fiscal 2008.  Research and
development   expenditures  are  supporting  further   development  of  Wireless
infrastructure  and  consumer  component  products,  as well  as new  technology
development   in  the  Space  and  Defense  Group.   Research  and   Development
expenditures  have  increased  in the second  quarter of fiscal  2009 versus the
second quarter of last year due to the higher level of opportunities in both the
Wireless and Space and Defense  marketplaces and the addition of M.S Kennedy and
Unicircuit,  which accounted for $442,000 of the increase.  The Company does not
expect to reduce its current  research and development  efforts through year-end
and is presently  working on a number of new  standard  and custom  Wireless and
Space and Defense opportunities.

General and Administrative.  General and administrative ("G&A") expenses consist
of employee related expenses,  professional services,  intangible  amortization,
travel related  expenses and other corporate costs.  General and  administrative
expenses  increased  $1.6 million,  to $5.0 million (12.0% of net sales) for the
second quarter of fiscal


                                       21
<PAGE>

2009,  from $3.4 million  (10.4% of net sales) for the second  quarter of fiscal
2008.  The  increase  in ("G&A")  expense in the second  quarter of fiscal  2009
compared to the second quarter last year resulted from  additional  personnel in
the  Finance,  Human  Resource and  Information  Technology  functions,  and the
inclusion  of $1.7  million  in  additional  G&A costs  including,  $233,000  of
intangible  amortization  from the  acquisitions of M.S.  Kennedy and Unicircuit
during the first quarter of fiscal 2009. This increase was partially  off-set by
a  $250,000  decline  in G&A  costs at the  Company's  Salem,  NH  operation  by
consolidation of shared services with our East Syracuse facility.

Operating  Income.  Operating  income fell 24.3% in the second quarter of fiscal
2009 to $2.3 million (5.4% of net sales),  compared to $3.0 million (9.2% of net
sales) for the second quarter of fiscal 2008. This decline was due mainly to the
inclusion of $1.1 and $443,000 of acquisition  related  inventory  step-up costs
and  intangible  amortization,  respectively,  in  the  current  second  quarter
compared to the second  quarter  last year.  Operating  margins are  expected to
improve in the second half of fiscal  2009 as the  amortization  of  acquisition
inventory step-up costs was completed in the second quarter.

On an operating  segment basis,  Wireless  operating income was $1.8 million for
the second  quarter of fiscal  2009,  up $1.4 million  from  Wireless  operating
income of $437,000 in the second quarter of fiscal 2008.  Despite the decline in
Wireless  sales,  operating  income  increased due to a more favorable  Wireless
sales mix year-over-year in the current second quarter.

Space and Defense  operating income was $650,000 in the second quarter of fiscal
2009, down $2.1 million from $2.7 million for the second quarter of fiscal 2008.
Operating  margins in this group  declined in the current  second quarter due to
the inclusion of $1.5 of acquisition  related  inventory  step-up and intangible
amortization  costs  attributable  to  the  acquisitions  of  M.S.  Kennedy  and
Unicircuit.  Space and Defense  operating margins are expected to improve in the
second half of fiscal 2009 as the amortization of acquisition  inventory step-up
costs was completed in the second quarter.

Other Income.  Other income  primarily  consists of interest  income received on
invested cash balances and rental income. Other income decreased 48% to $307,000
in the second quarter of fiscal 2009 compared to $598,000 for the second quarter
of last year.  This  decrease was caused by the decline in available  investable
cash due to the purchase of treasury  shares over the last twelve months and the
decline  in  interest  rates  during  the past six  months.  Other  income  will
fluctuate  based on short term market interest rates and the level of investable
cash balances.

Interest  Expense.  Interest  expense  consists  mainly of  interest  on Company
borrowings and deferred items.  Interest expense in the second quarter of fiscal
2009 was  $622,000  compared to $10,000 for the second  quarter of fiscal  2008.
This  increase  was  due to the  interest  expense  generated  by the  Company's
borrowings  in the first quarter of fiscal 2009 to finance the  acquisitions  of
M.S. Kennedy and Unicircuit. The Company borrowed a total of $49.8 million under
its $50.0 million revolving declining line of credit in the first quarter. These
borrowings  bear  interest  at the 90 day LIBOR,  plus 100 to 425 basis  points,
depending upon the Company's rolling twelve month EBITDA  performance.  The rate
is reset quarterly and was approximately 5% for the current second quarter.  The
interest rate on this  outstanding  loan balance for the third quarter of fiscal
2009 is expected to be  approximately  2.5% due to the decline in interest  rate
worldwide from October 1, 2008 to January 1, 2009.

Income Taxes.  Income taxes for the second  quarter of fiscal 2009 were $352,000
(0.8% of net sales),  representing an effective tax rate of 18.2%. This compares
to income tax expense of $1.0 million (3.1% of net sales) for the second quarter
of fiscal 2008,  representing  an  effective  tax rate of 28.4%.  This  decrease
primarily   resulted  from  the   reinstatement  of  the  federal  research  and
experimentation  credit retroactive to January 1, 2008,  resulting in a $265,000
tax  benefit in the second  quarter  ended  December  31,  2008.  The  projected
effective  tax rate for fiscal  year 2009 is now  expected  to be  approximately
31.0%. 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 United States and foreign  taxable  income
or loss.

Six Months  Ended  December 31, 2008  Compared to Six Months Ended  December 31,
2007

Net sales.  Net sales were $79.6  million for the six months ended  December 31,
2008, up 23.4%  compared to $64.5 million for the second quarter of fiscal 2008.
Sales in the first six months of the current  fiscal year included $14.7 million
of sales from M.S.  Kennedy Corp.  and  Unicircuit,  Inc.  Shipments of Wireless
products fell $2.8  million,  or 7.1%,  and sales of Space and Defense  products
rose $17.9 million,  or 70.2%,  in the current six months  compared to the first
six months of fiscal 2008.

The decline in sales of Wireless  products was the result of a decline in demand
for  custom  Wireless  components  during  the first six  months of fiscal  2009
compared to the same period of last year. Additionally,  the Company experienced
a general decline in overall Wireless infrastructure component demand during the
latter part of the


                                       22
<PAGE>

second quarter which appeared to reflect the overall  slowing of the economy due
to the worldwide  economic slow down. Demand for Wireless products in the second
half of fiscal 2009 is expected to be relatively  unchanged  from second quarter
levels.

Sales of Space and Defense  products rose $17.9  million,  or 70.2% in the first
half of fiscal 2009  compared  to the first half of the  previous  fiscal  year.
Sales of Space and  Defense  products  in the first  six  months of the  current
fiscal  year  included  $14.7  million  of sales  from M.S.  Kennedy  Corp.  and
Unicircuit,  Inc.  Space and Defense  product sales continue to benefit from the
higher level of business won by the Company over the past few fiscal years, with
orders in the first six months exceeding $46.6 million.  Quarterly  shipments of
Space and Defense  products  for the second half of fiscal 2009 are  expected to
range between $50.0 and $56.0 million.

Gross  Profit.  Gross  profit for the first six months of fiscal  2009 was $23.8
million,  (29.9% of net sales),  up from $20.9 million  (32.5% of net sales) for
the same period of the prior year.  Gross profit as a percent of sales decreased
in the first  half of fiscal  2009 from the first six months of last year due to
the  inclusion of $2.5 million of  amortization  of inventory  step-up costs and
intangibles  related to the acquisition of M.S.  Kennedy and  Unicircuit.  Gross
profit  is  expected  to  improve  in the  second  half  of  fiscal  2009 as the
amortization of acquisition  inventory step-up costs was completed in the second
quarter.

Marketing.  Marketing  expenses  were $4.1  million  (5.2% of net sales) for the
first six months of fiscal  2009,  up $612,000  from $3.5  million  (5.5% of net
sales)  for the first  six  months of fiscal  2008.  Marketing  expenses  in the
current six month period included $807,000 of marketing expenses from Unicircuit
and M.S. Kennedy, which was partially offset by an accounting adjustment for the
reduction of commission  expense of $275,000 to correct an over accrual that was
accumulated over a number of prior periods.

Research and  Development.  Research and development  expenses were $6.1 million
(7.7% of net sales) in the first six months of fiscal  2009,  up 24.9% from $4.9
million  (7.6% of net sales) for the first six months of fiscal  2008.  Research
and  development  expenditures  are supporting  further  development of Wireless
infrastructure and consumer component  opportunities,  as well as new technology
development   in  the  Space  and  Defense  Group.   Research  and   Development
expenditures  have  increased  in the first six months of fiscal 2009 versus the
first six months of last year due to the higher level of  opportunities  in both
the Wireless and Space and Defense  marketplaces which resulted in approximately
$500,000 in additional spending at our Ceramic and Microwave  operations and the
addition  of M.S Kennedy  and  Unicircuit,  which  accounted  for the  remaining
$700,000  of the  increase.  The  Company  does not expect to reduce its current
research and development  efforts through year-end and is presently working on a
number of new standard and custom Wireless and Space and Defense opportunities.

General and Administrative.  General and administrative  expenses increased $2.7
million, to $9.4 million (11.8% of net sales) for the first half of fiscal 2009,
from $6.7 million  (10.4% of net sales) for the first half of fiscal  2008.  The
increase in general and administrative expense in the first six months of fiscal
2009  compared  to the first six months of last year  resulted  from  additional
personnel in the Finance,  Human Resource and Information  Technology functions,
and the inclusion of $2.8 million in additional G&A costs  including  intangible
amortization  of $364,000 from the  acquisition  of M.S.  Kennedy and Unicircuit
during the first half of the current  fiscal year.  This  increase was partially
off-set by a $376,000  decline in G&A costs at the Company's Salem, NH operation
by consolidation of shared services with our East Syracuse facility.

Operating Income.  Operating income fell 27.6% in the first six months of fiscal
2009 to $4.2 million, (5.2% of net sales), compared to $5.8 million (9.0% of net
sales) for the first six months of fiscal  2008.  This decline was due mainly to
the inclusion of $2.2 million of acquisition related inventory step-up costs and
intangible  amortization of $715,000 in the current first six months compared to
the first six months of last year.

On an operating  segment basis,  Wireless  operating income was $3.0 million for
the first half of fiscal 2009,  up $800,000 from  Wireless  operating  income of
$2.2  million in the first half of fiscal 2008.  The increase in Wireless  group
operating  income in the first half of fiscal 2009 compared to the first half of
fiscal 2008,  despite the decline in wireless sales, was due to a more favorable
Wireless sales mix year-over-year in the current first six months.

Space and Defense  operating income was $1.5 million in the first half of fiscal
2009,  down $2.3  million  from $ 3.8 million for the first half of fiscal 2008.
Operating  margins in this group declined in the current first six months due to
the inclusion of $2.2 of acquisition  related  inventory  step-up and intangible
amortization  costs of $715,000  caused by the  acquisition of M.S.  Kennedy and
Unicircuit.  Prior to these  costs,  operating  income for the Space and Defense
group rose  $577,000,  or 15%, from $3.8 million for the first half of last year
due mainly to the  increase  in sales  volume  which  offset  the lower  margins
experienced on some start-up programs. Space and Defense operating


                                       23
<PAGE>

margins  are  expected  to  improve  in the  second  half of fiscal  2009 as the
amortization of acquisition  inventory step-up costs was completed in the second
quarter.

Other Income. Other income decreased 47% to $710,000 in the first half of fiscal
2009 compared to $1.3 million for the first half of last year. This decrease was
caused by the  decline  in  available  investable  cash due to the  purchase  of
treasury  shares over the last twelve  months and the decline in interest  rates
during the past six  months.  Other  income will  fluctuate  based on short term
market interest rates and the level of investable cash balances.

Interest  Expense.  Interest  expense in the first six months of fiscal 2009 was
$888,000  compared  to  $46,000  for the first six months of fiscal  2008.  This
increase was due to the interest expense  generated by the Company's  borrowings
in the first quarter of fiscal 2009 to finance the  acquisitions of M.S. Kennedy
and  Unicircuit.  The Company  borrowed a total of $49.8 million under its $50.0
million  revolving  declining  line  of  credit  in  the  first  quarter.  These
borrowings bear interest at the 90 day LIBOR rate, plus 100 to 425 basis points,
depending upon the Company's rolling twelve month EBITDA  performance.  The rate
is reset quarterly and was 4.16% for the first six months.  The interest rate on
this outstanding loan balance is expected to be approximately 2.5% for the third
quarter of fiscal 2009.

Income  Taxes.  Income taxes for the first half of fiscal 2009 were $1.1 million
(1.3% of net sales),  representing an effective tax rate of 26.8%. This compares
to income tax expense of $1.8 million  (2.8% of net sales) for the first half of
fiscal  2008,  representing  an effective  tax rate of 25.7%.  During the second
quarter of fiscal  2009,  the Federal  Research and  Experimentation  credit was
reinstated  retroactive to January 1, 2008. The projected effective tax rate for
fiscal 2009 is  approximately  31.0% compared to an actual effective tax rate of
26.0% for fiscal 2008.  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 United  States and foreign
taxable income or loss.

Liquidity and Capital Resources

Net cash provided by operations for the first six months of fiscal 2009 was $7.5
million and  resulted  from net income  before  depreciation,  amortization  and
non-cash equity based compensation expense. The positive cash flow from earnings
for the six months was further  enhanced by a $2.9 million  decrease in accounts
receivable due to improved collections, which more than off-set a small increase
in  inventory  and a $4.2  million  pay down of  current  liabilities.  Net cash
provided by operations  for the first six months of fiscal 2008 was $7.4 million
and resulted from the high level of net income before  depreciation and non-cash
equity based compensation  expense. The positive cash flow from earnings for the
six months was  partially  off-set by  increases in  inventory  and  receivables
totaling  $3.6 million,  as well as a pay down of accrued  expenses and accounts
payable of $2.1 million.

Net cash used in investing activities in the first six months of fiscal 2009 was
$37.2  million  and  consisted  of $13.8  million  provided  by the  maturity of
marketable debt securities,  $3.6 million used to pay for capital  additions and
$47.3 used to pay for the  acquisitions of M.S. Kenney and Unicircuit.  Net cash
provided  by  investing  activities  in the first half of fiscal  2008 was $18.3
million and  consisted of $25.4  million  provided by the maturity of marketable
debt securities, net of $7.1 million used to pay for capital additions.

Net cash provided by financing activities in the first six months of fiscal 2009
was $43.8  million  and  consisted  of  borrowings  of $49.8  million  under the
Company's revolving declining line of credit to finance the acquisitions of M.S.
Kennedy and Unicircuit, net of $1.2 million used to pay off an acquired mortgage
and $5.0  million used to purchase  471,000  treasury  shares.  Net cash used in
financing  activities  in the first six months of fiscal 2008 was $26.8  million
and consisted of $27.5 million used to purchase 1.8 million  treasury shares net
of $645,000  generated by cash  receipts  and tax benefits  from the exercise of
stock options.

During the remainder of fiscal 2009, the Company  anticipates that its main cash
requirement will be for capital  expenditures,  possible continued repurchase of
the Company's common stock,  payment of a deferred  obligation and, in the first
quarter  of fiscal  2010,  the $9.8  million  principal  payment  on its line of
credit.  Capital  expenditures  for the remainder of fiscal 2009 are expected to
total  between  $4.5- $5.5  million  and will be funded from  existing  cash and
investments.

The Company may  continue to  repurchase  shares of its common stock in the open
market and or through privately  negotiated  transaction under the current Board
authorization,  depending on market conditions. At December 31, 2008, there were
approximately  1.1 million shares  remaining under the current Board  repurchase
authorization.

At December 31, 2008, as a result of the decline in the stock market, the assets
in the Company's  defined benefit plan had declined over  approximately 20% from
July 1, 2007 when the plan was considered to be fully funded. Due


                                       24
<PAGE>

to this  decline,  the Company is required to make a $130,000  deposit  into the
plan by March  15,  2009 to meet the 92%  funding  requirement  for July 1, 2008
measurement  date  and  further  expects  the  need  to make a  contribution  of
approximately $2.0 million by March 2010 to meet the 94% funding requirement for
the July 1, 2009  meansurement  date  valuation.  Additionally,  due to the plan
losses, it is expected that the net periodic pension benefit cost will double in
fiscal 2010.

At December 31, 2008, the Company had approximately  $45.4 million in cash, cash
equivalents,  and marketable securities. On a fiscal year basis, the Company has
had positive  operating cash flow for over ten 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.

Off-Balance Sheet Arrangements

We have no off-balance sheet  arrangements  within meaning of Item 303(a) (4) of
Reg S-K.

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 and lease
agreements,  and under  contingent  commitments,  such as debt  guarantees.  The
Company's obligations and commitments at December 31, 2008 are as follows:

<TABLE>
<CAPTION>
                                                                    Less
Payment Due by Period                             Total           Than 1 Yr.        2 - 3 Yrs.        4 - 5 Yrs.     Over 5 Yrs.
                                                  -----           ----------        ----------        ----------     -----------
Contractual obligations
<S>                                            <C>               <C>               <C>               <C>               <C>
Debt and interest payments.. ...........       $52,922,500       $10,922,500       $21,500,000       $20,500,000       $    --
Operating leases -- facilities.. .......       $ 2,539,915       $   295,567       $ 1,157,740       $ 1,023,652       $62,956
Deferred Compensation.. ................       $   946,601       $   748,794       $   130,000       $    67,807       $    --
</TABLE>

The unrecognized  tax benefits that are recorded in other long-term  liabilities
in the Company's condensed  consolidated balance sheet are not anticipated to be
paid within one year of the balance  sheet date;  and the time period for when a
cash  payout  on these  unrecognized  tax  benefits  can not be  anticipated  or
estimated do to the uncertainty and as such are not included in the above table.

Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standard No.
141 (revised 2007), "Business Combinations" (SFAS 141(R)). The objective of this
Statement  is to  improve  the  relevance,  representational  faithfulness,  and
comparability  of  the  information  that a  reporting  entity  provides  in its
financial  reports about a business  combination.  Specifically,  it establishes
principles  and  requirements  over how the acquirer (1) recognizes and measures
the   identifiable   assets   acquired,   the  liabilities   assumed,   and  any
noncontrolling  interest in the acquiree;  (2) recognizes and measures  goodwill
acquired in the business combination or a gain from a bargain purchase, and; (3)
determines  what  information  to  disclose  to  enable  users of the  financial
statements  to  evaluate  the  nature  and  financial  effects  of the  business
combination.  This  Statement is  effective  for fiscal  years  beginning  after
December  15, 2008 (fiscal year 2010).  The Company is currently  assessing  the
impact of this Statement on the financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standard No.
160, "Noncontrolling Interests in Consolidated Financial Statements an amendment
of ARB No. 51" (SFAS 160).  The  objective  of this  Statement is to improve the
relevance,  comparability,  and transparency of the financial information that a
reporting   entity  provides  in  its  consolidated   financial   statements  by
establishing  accounting and reporting standards for the noncontrolling interest
in  a  subsidiary   (minority  interests)  and  for  the  deconsolidation  of  a
subsidiary.  This Statement is effective for fiscal years,  and interim  periods
within those fiscal years, beginning after December 15, 2008 (fiscal year 2010).
The Company is currently assessing the impact of this Statement on the financial
statements.

In April 2008, the FASB issued a FASB Staff Position No. 142-3 "Determination of
the Useful Life of Intangible  Assets" (FSP).  This Position  amends the factors
that should be considered  in the  developing  renewal or extension  assumptions
used to determine  the useful life of a recognized  intangible  asset under FASB
Statement No. 142, "Goodwill and Other Intangible Assets." The intent of the FSP
is to improve the consistency between the useful life of a recognized intangible
asset and the period of  expected  cash flows used to measure  the fair value of
the asset under FASB Statement No. 141 (revised 2007), "Business  Combinations,"
and other U.S.  generally  accepted  accounting  principles.  This  Statement is
effective for fiscal years, and interim periods within those fiscal years,


                                       25
<PAGE>

beginning  after December 15, 2008 (fiscal year 2010).  The Company is currently
assessing the impact of this Statement on the financial statements.

Item  3. Quantitative and Qualitative Disclosures About Market Risk

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

As of December 31, 2008, the Company had cash,  cash  equivalents and marketable
securities  of $45.4  million,  all of which with the  exception  of the company
auction rate security  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 December 31, 2008 rates, or 0.25%, would have
reduced net income and cash flow by approximately  $28,000, or $.002 per diluted
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 rate will reduce the Company's interest income.

As of December 31, 2008, the Company had $49.8 million in outstanding debt under
its  revolving  line of credit with a bank.  The line  consists of a $50,000,000
revolving credit note for which principal amounts are due on August 1, 2009, and
on each anniversary date thereafter through July 31, 2013. Borrowings under this
Note, at the  Company's  choice,  bear interest at LIBOR,  plus 100 to 425 basis
points or at the Prime  Rate,  minus (100) to plus 225 basis  points,  depending
upon the Company's EBITDA  performance at the end of each quarter as measured by
the  formula:  EBITDA  divided by the  Current  Portion of  Long-term  Debt plus
interest  expense.  For the three months ended  December 31, 2008,  the weighted
average interest rate on the outstanding  borrowings was 5.00%. Interest expense
for these  borrowings  is exposed to  interest  rate risk and will  increase  if
market  interest rates rise. A hypothetical  increase in market interest rate of
10.0% from December 31, 2008 rates,  or 0.5%,  would have reduced net income and
cash flow by approximately  $62,000, or $.004 per diluted share for the quarter.
Due to the Company's significant cash reserves and historical positive operating
cash flow,  the Company does not believe that an immediate  increase in interest
rates would have a significant  effect on its financial  condition or results of
operations. Over time, however, increases in market interest rates will increase
the Company's interest expense.

Forward-Looking Cautionary Statement

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
"forward-looking  statements"  made by or on behalf of the Company.  We may from
time  to time  make  written  or oral  statements  that  are  "forward-looking,"
including  statements  contained  in this  report  and  other  filings  with the
Securities  and  Exchange  Commission  and in reports to our  shareholders.  All
forward-looking  statements  are made on the  basis of  management's  views  and
assumptions  regarding future events and business performance as of the time the
statements  are made and the Company does not undertake any obligation to update
its disclosure  relating to forward looking  matters.  Actual results may differ
materially from those expressed or implied.  The  uncertainties and risk factors
that could affect our Company,  its  business and actual  results are  described
throughout this filing,  and particularly in the "Risk Factors" in Part II, Item
1A of this Form 10-Q,  and in our 2008 Annual Report on Form 10-K under the Item
1A, "Risk Factors."

Item  4. Controls and Procedures

A. Evaluation of Disclosure Controls and Procedures

An evaluation of the  effectiveness of the design and operation of the Company's
disclosure  controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the  Securities  Exchange Act of 1934,  as amended  ("Exchange  Act")) was
carried out under the  supervision and with the  participation  of the Company's
management,  including the President and Chief  Executive  Officer and the Chief
Financial Officer ("the Certifying  Officers") as of December 31, 2008. Based on
that evaluation, the Certifying Officers concluded that the Company's disclosure
controls and procedures are effective.

B. Changes in Internal Control Over Financial Reporting

There have been no changes in the  Company's  internal  control  over  financial
reporting (as such term is defined in Rules  13a-15(f)  and 15d-15(f)  under the
Exchange Act) during the quarter ended December 31, 2008 that have


                                       26
<PAGE>

materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.

PART II OTHER INFORMATION

Item 1A. Risk Factors

The  Company's  Annual  Report on Form 10-K for the  fiscal  year ended June 30,
2008, in Part 1, Item 1A. "Risk Factors",  describes  risks  associated with our
business. This item includes material changes to and supplements the description
of the  "Risk  Factors"  disclosed  in our  2008  Annual  Report  on Form  10-K.
Additional risk factors related to our business, financial condition and results
of  operations  include:  the current  world-wide  economic  downturn and credit
crises and their  potential  impact on our  business,  financial  condition  and
results of operations,  including  customers or potential  customers reducing or
delaying  their product  investments,  insolvency of key suppliers  resulting in
product  delays,  failures by vendors and other  third-parties  to perform their
contractual obligations,  the inability of customers to obtain credit to finance
purchases of our products, and customer insolvencies or delayed payments, any of
which could impact our ability to manage  inventory  levels and collect customer
receivables,  could lengthen our cash conversion cycle and increase our need for
cash, which could ultimately decrease our net income and profitability;  and our
Note with  KeyBank  National  Association  bears  interest  at a variable  rate.
Accordingly,  unanticipated  material  increases  in  LIBOR  or in the  rate may
adversely affect the Company's financial condition and results of operations.

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

      The Company's Annual  shareholders'  meeting was held on November 7, 2008,
at which time the election of  Directors  was  conducted.  The  following  named
individuals were nominated and re-elected as Directors. Votes Votes For Withheld

                                                    Votes                Votes
                                                     For                Against
                                                  ----------           ---------
            Lawrence A. Sala                      12,852,355             266,029
            Robert U. Roberts                     12,853,303             265,801
            David Wilemon                         12,827,658             289,619
            Patricia Civil                        12,099,341           1,019,043

      Messr.  Sala,  Wilemon and Roberts were elected to terms  expiring in 2011
      and Director  Civil was elected to a term  expiring in 2010.  The terms of
      Directors John Smucker, Mathew S. Robison, Dale F. Eck, Carl W. Gerst, Jr.
      and James G. Gould continued after the meeting.

Item 6. Exhibits

10.1  Amendment to Employment Agreement, dated December 30, 2008, by and between
      Lawrence A. Sala and Anaren,  Inc.  (incorporated  by reference to Exhibit
      10.1 of the  Company's  Current  Report  on Form  8-K,  as filed  with the
      Securities and Exchange Commission on January 5, 2009).

10.2  Amendment #3 to Carl W. Gerst, Jr.  Employment  Agreement,  dated December
      30, 2008, by and between Carl W. Gerst, Jr. and Anaren, Inc. (incorporated
      by reference to Exhibit 10.2 of the Company's  Current Report on Form 8-K,
      as filed with the Securities and Exchange Commission on January 5, 2009).

31    Rule 13a-14(a) Certifications

32    Section 1350 Certifications


                                       27
<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: February 9, 2009             /s/ Lawrence A. Sala
                                   ---------------------------------------------
                                   Lawrence A. Sala
                                   President & Chief Executive Officer

Date:  February 9, 2009            /s/ George A. Blanton
                                   ---------------------------------------------
                                   George A. Blanton
                                   Sr. Vice  President,  Chief Financial Officer
                                   and Treasurer


                                       28