##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 000-31635
 (Commission file number)
 ENDWAVE CORPORATION
  Delaware
    
    95-4333817(State of incorporation)
    
    (I.R.S. Employer Identification No.)130 Baytech DriveSan Jose, CA
    
    95134(Address of principal executive offices)
    
    (Zip code)
 (408) 522-3100
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ENDWAVE CORPORATION
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    3Condensed Consolidated Balance Sheets as of September 30, 2009
(unaudited) and December 31, 2008
    
    3Unaudited Condensed Consolidated Statements of Operations for
the Three and Nine Months Ended September 30, 2009 and 2008
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2009 and 2008
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    18Item 3. Quantitative and Qualitative Disclosure about Market Risk
    
    25Item 4. Controls and Procedures
    
    25PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    26Item 1A. Risk Factors
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    36Item 6. Exhibits
    
    37SIGNATURES
    
    40EXHIBITS
    
    41EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ENDWAVE
CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 September,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    46,507
    
    
    $
    33,998Short-term investments
    
    
    21,731
    
    
    
    11,350Accounts receivable, net
    
    
    2,069
    
    
    
    4,762Inventories
    
    
    6,155
    
    
    
    14,454Other current assets
    
    
    1,025
    
    
    
    738Total current assets
    
    
    77,487
    
    
    
    65,302Property and equipment, net
    
    
    1,891
    
    
    
    4,220Other assets, net
    
    
    190
    
    
    
    218Restricted cash
    
    
    
    
    
    
    600$
    79,568
    
    
    $
    70,340LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,589
    
    
    $
    2,263Accrued warranty
    
    
    1,162
    
    
    
    2,439Accrued compensation
    
    
    712
    
    
    
    2,811Other current liabilities
    
    
    718
    
    
    
    713Total current liabilities
    
    
    4,181
    
    
    
    8,226Other long-term liabilities
    
    
    111
    
    
    
    73Total liabilities
    
    
    4,292
    
    
    
    8,299Commitments and contingencies (Note 8)Stockholders equity:Convertible preferred stock, $0.001 par
value; 5,000,000 shares authorized;
300,000 shares issued and outstanding
at September 30, 2009 and December 31,
2008, respectively
    
    
    43,092
    
    
    
    43,092Common stock, $0.001 par value;
50,000,000 shares authorized; 9,646,596
and 9,345,442 shares issued and
outstanding at September 30, 2009 and
December 31, 2008, respectively
    
    
    10
    
    
    
    9Additional paid-in capital, common stock
    
    
    309,647
    
    
    
    306,763Accumulated other comprehensive income
    
    
    5
    
    
    
    42Accumulated deficit
    
    
    (277,478
    )
    
    
    (287,865
    )Total stockholders equity
    
    
    75,276
    
    
    
    62,041$
    79,568
    
    
    $
    70,340
 
 (1)
    
    Derived from the Companys audited consolidated financial statements as of December 31, 2008. The accompanying notes are an integral part of these condensed consolidated financial statements.
 3




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ENDWAVE
CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
 (unaudited)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Product revenues
    
    $
    3,126
    
    
    $
    10,871
    
    
    $
    15,948
    
    
    $
    33,364Development fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Total revenues
    
    
    3,126
    
    
    
    10,871
    
    
    
    15,948
    
    
    
    33,424Costs and expenses:Cost of product revenues*
    
    
    2,369
    
    
    
    7,005
    
    
    
    11,425
    
    
    
    22,100Research and development*
    
    
    1,452
    
    
    
    1,736
    
    
    
    4,463
    
    
    
    4,577Selling, general and administrative*
    
    
    1,968
    
    
    
    2,595
    
    
    
    6,261
    
    
    
    8,131Restructuring
    
    
    (21
    )
    
    
    
    
    
    
    1,212
    
    
    
    Total costs and expenses
    
    
    5,768
    
    
    
    11,336
    
    
    
    23,361
    
    
    
    34,808Loss from continuing operations
    
    
    (2,642
    )
    
    
    (465
    )
    
    
    (7,413
    )
    
    
    (1,384
    )Interest and other income (expense), net
    
    
    (3
    )
    
    
    292
    
    
    
    197
    
    
    
    1,025Loss from continuing operations before
provision (benefit) for income taxes
    
    
    (2,645
    )
    
    
    (173
    )
    
    
    (7,216
    )
    
    
    (359
    )Provision (benefit) for income taxes
    
    
    (11
    )
    
    
    
    
    
    
    (32
    )
    
    
    22Loss from continuing operations
    
    
    (2,634
    )
    
    
    (173
    )
    
    
    (7,184
    )
    
    
    (381
    )Income (loss) from discontinued operations,
net of tax* (Note 10)
    
    
    41
    
    
    
    (826
    )
    
    
    17,571
    
    
    
    (3,314
    )Net income (loss)
    
    $
    (2,593
    )
    
    $
    (999
    )
    
    $
    10,387
    
    
    $
    (3,695
    )Basic and diluted net loss per share from
continuing operations
    
    $
    (0.27
    )
    
    $
    (0.02
    )
    
    $
    (0.76
    )
    
    $
    (0.04
    )Basic and diluted net income (loss) per
share from discontinued operations
    
    $
    (0.00
    )
    
    $
    (0.09
    )
    
    $
    1.86
    
    
    $
    (0.36
    )Basic and diluted net income (loss) per share
    
    $
    (0.27
    )
    
    $
    (0.11
    )
    
    $
    1.10
    
    
    $
    (0.40
    )Shares used in computing basic and diluted
net loss per share
    
    
    9,625,583
    
    
    
    9,216,760
    
    
    
    9,477,516
    
    
    
    9,182,041
 
 *
    
    Includes the following amounts related to stock-based compensation: Cost of product revenues
    
    $
    80
    
    
    $
    104
    
    
    $
    190
    
    
    $
    290Research and development
    
    
    186
    
    
    
    151
    
    
    
    374
    
    
    
    470Selling, general and administrative
    
    
    673
    
    
    
    517
    
    
    
    1,389
    
    
    
    1,613Income (loss) from discontinued
operations, net of tax
    
    
    
    
    
    
    233
    
    
    
    355
    
    
    
    717
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENDWAVE
CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Nine months endedSeptember 30,2009
    
    
    2008Operating activities:Net income (loss)
    
    $
    10,387
    
    
    $
    (3,695
    )Income (loss) from discontinued operations
    
    
    17,571
    
    
    
    (3,314
    )Loss from continuing operations, net of tax
    
    
    (7,184
    )
    
    
    (381
    )Adjustments to reconcile net loss to net cash provided by (used in)
continuing operating activities:Depreciation
    
    
    576
    
    
    
    427Stock compensation expense
    
    
    1,953
    
    
    
    2,373Amortization of investments, net
    
    
    198
    
    
    
    (25
    )Loss on sale of fixed assets
    
    
    
    
    
    
    3Gain on sale of investments
    
    
    
    
    
    
    (45
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    478
    
    
    
    961Inventories
    
    
    3,448
    
    
    
    (2,076
    )Other assets
    
    
    (1,015
    )
    
    
    (428
    )Accounts payable
    
    
    528
    
    
    
    568Accrued warranty
    
    
    (631
    )
    
    
    (243
    )Accrued compensation, other current liabilities and other
long-term liabilities
    
    
    (831
    )
    
    
    83Net cash (used in) provided by continuing operating activities
    
    
    (2,480
    )
    
    
    1,217Investing activities:Proceeds from sale of discontinued operations
    
    
    28,000
    
    
    
    Purchase of ALC Microwave, Inc., net of cash acquired
    
    
    
    
    
    
    (1,027
    )Change in restricted cash
    
    
    600
    
    
    
    (600
    )Purchases of property and equipment
    
    
    (289
    )
    
    
    (1,026
    )Proceeds on sale of property
    
    
    
    
    
    
    1Proceeds on sales and maturities of investments
    
    
    19,715
    
    
    
    11,102Purchases of investments
    
    
    (30,331
    )
    
    
    (16,058
    )Net cash provided by (used in) continuing investing activities
    
    
    17,695
    
    
    
    (7,608
    )Financing activities:Payments on capital leases
    
    
    (13
    )
    
    
    (17
    )Proceeds from common stock issuance
    
    
    242
    
    
    
    434Proceeds from exercises of stock options, net of issuance costs
    
    
    331
    
    
    
    2Net cash provided by financing activities
    
    
    560
    
    
    
    419Effects of foreign exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    12Cash flows from discontinued operations:Operating activities
    
    
    (2,472
    )
    
    
    (3,346
    )Investing activities
    
    
    (794
    )
    
    
    (601
    )Financing activities
    
    
    
    
    
    
    Net cash used in discontinued operations
    
    
    (3,266
    )
    
    
    (3,947
    )Net change in cash and cash equivalents
    
    
    12,509
    
    
    
    (9,907
    )Cash and cash equivalents at beginning of period
    
    
    33,998
    
    
    
    38,992Cash and cash equivalents at end of period
    
    $
    46,507
    
    
    $
    29,085
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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ENDWAVE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. Business and Basis of Presentation
    2. Restricted Cash
   3. Investments
  September 30,      2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Investments:Commercial paper
    
    $
    797
    
    
    $
    
    
    
    $
    
    
    
    $
    797United States government agency
    
    
    19,176
    
    
    
    7
    
    
    
    
    
    
    
    19,183Corporate securities
    
    
    1,753
    
    
    
    2
    
    
    
    (4
    )
    
    
    1,751Total
    
    $
    21,726
    
    
    $
    9
    
    
    $
    (4
    )
    
    $
    21,731
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##### Table of Contents



December 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Investments:Commercial paper
    
    $
    1,791
    
    
    $
    2
    
    
    $
    (3
    )
    
    $
    1,790United States government agency
    
    
    6,690
    
    
    
    35
    
    
    
    
    
    
    
    6,725Corporate securities
    
    
    2,827
    
    
    
    10
    
    
    
    (2
    )
    
    
    2,835Total
    
    $
    11,308
    
    
    $
    47
    
    
    $
    (5
    )
    
    $
    11,350
    Fair Value Measurements
  Quoted Prices in
    
    
    Significant OtherActive Markets of
    
    
    ObservableBalance as of
    
    
    Identical Assets
    
    
    InputsSeptember 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)Assets:Cash equivalents:Money market funds
    
    $
    43,602
    
    
    $
    43,602
    
    
    $
    Short-term investments:Commercial paper
    
    
    797
    
    
    
    
    
    
    
    797United States government agencies
    
    
    19,183
    
    
    
    
    
    
    
    19,183Corporate securities
    
    
    1,751
    
    
    
    
    
    
    
    1,751Total
    
    $
    65,333
    
    
    $
    43,602
    
    
    $
    21,731Liabilities:
    
    $
    
    
    
    $
    
    
    
    $
    
  7




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4. Inventories
  September 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    4,785
    
    
    $
    8,452Work in process
    
    
    21
    
    
    
    1,574Finished goods
    
    
    1,349
    
    
    
    4,428$
    6,155
    
    
    $
    14,454
  5. Note Receivable
    6. Warranty
  8




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Nine months ended September 30,2009
    
    
    2008Balance at January 1
    
    $
    2,439
    
    
    $
    2,712Warranties accrued
    
    
    641
    
    
    
    543Warranties settled or reversed
    
    
    (1,190
    )
    
    
    (583
    )Warranties transferred due to sale of the business
    
    
    (728
    )
    
    
    Balance at September 30
    
    $
    1,162
    
    
    $
    2,672
 7. Restructuring
   Restructuring(in thousands)First Quarter 2009 Restructuring Plan charge
    
    $
    1,249Second Quarter 2009 Restructuring Plan charge
    
    
    258Cash payments
    
    
    (1,351
    )First Quarter 2009 Restructuring Plan adjustment
    
    
    (61
    )Second Quarter 2009 Restructuring Plan adjustment
    
    
    (15
    )Accrual at September 30, 2009
    
    $
    80
  8. Commitments and Contingencies
   9




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##### Table of Contents



9. Stockholders Equity
 Common Stock
  Preferred Stock and Warrant Purchase Agreement
    Stock Option Exchange
   10




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##### Table of Contents



Stock Based Compensation
   Three months ended September 30,2009
    
    
    2008Stock-based compensation expense by type of award:Employee stock options
    
    $
    847
    
    
    $
    859Employee stock purchase plan
    
    
    109
    
    
    
    133Amounts capitalized into inventory during the three month period
    
    
    (17
    )
    
    
    (6
    )Amounts previously capitalized into inventory and expensed
    
    
    
    
    
    
    19Total stock-based compensation
    
    
    939
    
    
    
    1,005Tax effect on stock-based compensation
    
    
    
    
    
    
    Total stock-based compensation expense
    
    $
    939
    
    
    $
    1,005Impact on net income (loss) per share  basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.11
    )
  Nine months ended September 30,2009
    
    
    2008Stock-based compensation expense by type of award:Employee stock options
    
    $
    1,998
    
    
    $
    2,657Employee stock purchase plan
    
    
    314
    
    
    
    426Amounts capitalized into inventory during the nine month period
    
    
    (29
    )
    
    
    (47
    )Amounts previously capitalized into inventory and expensed
    
    
    25
    
    
    
    54Total stock-based compensation
    
    
    2,308
    
    
    
    3,090Tax effect on stock-based compensation
    
    
    
    
    
    
    Total stock-based compensation expense
    
    $
    2,308
    
    
    $
    3,090Impact on net income (loss) per share  basic and diluted
    
    $
    (0.24
    )
    
    $
    (0.34
    )
  11




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Valuation Assumptions
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Risk-free interest rate
    
    
    1.62% - 2.53
    %
    
    
    2.65% - 3.39
    %
    
    
    1.44% - 2.53
    %
    
    
    1.93% - 3.39
    %Expected life of options
    
    3.7 years
    
    

    3.5 years
    
    

    4.1 years
    
    

    3.5 yearsExpected dividends
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    70
    %
    
    
    70
    %
    
    
    70
    %
    
    
    70
    %
  Nine months endedSeptember 30,2009
    
    2008Risk-free interest rate
    
    
    0.35% - 0.93
    %
    
    
    2.05% - 4.74
    %Expected life of options
    
    1.2 years
    
    

    1.2 yearsExpected dividends
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    51
    %
    
    
    51
    %
   12




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Equity Incentive Program
   Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    ValueShares
    
    
    Price
    
    
    Term (Years)
    
    
    (In thousands)Outstanding at December 31, 2008
    
    
    3,008,917
    
    
    $
    9.23Options granted
    
    
    1,082,624
    
    
    
    2.21Options exercised
    
    
    (198,079
    )
    
    
    1.67Options cancelled
    
    
    (2,859,295
    )
    
    
    9.60Outstanding at September 30, 2009
    
    
    1,034,167
    
    
    $
    2.32
    
    
    
    8.93
    
    
    $
    743Options vested and exercisable and
expected to be exercisable at
September 30, 2009
    
    
    878,380
    
    
    $
    2.33
    
    
    
    8.79
    
    
    $
    629Options vested and exercisable at
September 30, 2009
    
    
    169,469
    
    
    $
    2.24
    
    
    
    4.83
    
    
    $
    171
   Options Vested and ExercisableOptions Outstanding at September 30, 2009
    
    
    At September 30, 2009Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    
    
    
    
    Weighted-AverageRange of Exercise Price
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Shares
    
    
    Exercise Price$  0.76 - $  1.21
    
    
    12,396
    
    
    $
    1.13
    
    
    
    3.25
    
    
    
    12,396
    
    
    $
    1.13$  1.81 - $  1.81
    
    
    339,587
    
    
    $
    1.81
    
    
    
    8.30
    
    
    
    77,248
    
    
    $
    1.81$  1.93 - $  2.40
    
    
    92,657
    
    
    $
    2.15
    
    
    
    6.52
    
    
    
    49,657
    
    
    $
    1.93$  2.53 - $  2.53
    
    
    519,624
    
    
    $
    2.53
    
    
    
    9.94
    
    
    
    0
    
    
    $
    0.00$  2.55 - $  6.10
    
    
    59,854
    
    
    $
    2.82
    
    
    
    8.88
    
    
    
    24,079
    
    
    $
    3.08$  6.59 - $  6.59
    
    
    4,462
    
    
    $
    6.59
    
    
    
    8.14
    
    
    
    1,740
    
    
    $
    6.59$  9.90 - $  9.90
    
    
    4,350
    
    
    $
    9.90
    
    
    
    6.29
    
    
    
    3,225
    
    
    $
    9.90$10.20 - $10.20
    
    
    875
    
    
    $
    10.20
    
    
    
    4.83
    
    
    
    875
    
    
    $
    10.20$13.23 - $13.23
    
    
    300
    
    
    $
    13.23
    
    
    
    7.36
    
    
    
    187
    
    
    $
    13.23$16.00 - $16.00
    
    
    62
    
    
    $
    16.00
    
    
    
    0.35
    
    
    
    62
    
    
    $
    16.001,034,167
    
    
    $
    2.32
    
    
    
    8.93
    
    
    
    169,469
    
    
    $
    2.24
 13




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##### Table of Contents



Employee Stock Purchase Plan
  10. Discontinued Operations
     Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue of discontinued operations
    
    $
    
    
    
    $
    6,108
    
    
    $
    5,313
    
    
    $
    15,015Loss from discontinued operations
    
    
    
    
    
    
    (826
    )
    
    
    (2,028
    )
    
    
    (3,314
    )Gain on sale of discontinued operation, net of tax
    
    
    41
    
    
    
    
    
    
    
    19,599
    
    
    
    Net income (loss) from discontinued operations, net of tax
    
    $
    41
    
    
    $
    (826
    )
    
    $
    17,571
    
    
    $
    (3,314
    )
 14




---



##### Table of Contents



11. Net Income (Loss) Per Share
    12. Comprehensive Income (Loss)
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    (2,593
    )
    
    $
    (999
    )
    
    $
    10,387
    
    
    $
    (3,695
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Change in unrealized gain (loss) on investments
    
    
    4
    
    
    
    (10
    )
    
    
    (37
    )
    
    
    (15
    )Total comprehensive income (loss)
    
    $
    (2,589
    )
    
    $
    (1,009
    )
    
    $
    10,350
    
    
    $
    (3,698
    )
 13. Segment Disclosures
  Three months ended September 30,2009
    
    
    2008United States
    
    $
    168
    
    
    
    5.4
    %
    
    $
    260
    
    
    
    2.4
    %Finland
    
    
    106
    
    
    
    3.4
    %
    
    
    9,434
    
    
    
    86.8
    %Germany
    
    
    1,205
    
    
    
    38.5
    %
    
    
    
    
    
    
    Slovakia
    
    
    1,081
    
    
    
    34.6
    %
    
    
    843
    
    
    
    7.7
    %Hungary
    
    
    448
    
    
    
    14.3
    %
    
    
    277
    
    
    
    2.6
    %Rest of the world
    
    
    118
    
    
    
    3.8
    %
    
    
    57
    
    
    
    0.5
    %Total
    
    $
    3,126
    
    
    
    100.0
    %
    
    $
    10,871
    
    
    
    100.0
    %
 15




---



##### Table of Contents



Nine months ended September 30,2009
    
    
    2008United States
    
    $
    213
    
    
    
    1.3
    %
    
    $
    687
    
    
    
    2.1
    %Finland
    
    
    9,997
    
    
    
    62.7
    %
    
    
    27,652
    
    
    
    82.7
    %Germany
    
    
    2,181
    
    
    
    13.7
    %
    
    
    
    
    
    
    Slovakia
    
    
    2,178
    
    
    
    13.7
    %
    
    
    2,499
    
    
    
    7.5
    %Hungary
    
    
    1,157
    
    
    
    7.3
    %
    
    
    760
    
    
    
    2.3
    %Rest of the world
    
    
    222
    
    
    
    1.3
    %
    
    
    1,826
    
    
    
    5.4
    %Total
    
    $
    15,948
    
    
    
    100.0
    %
    
    $
    33,424
    
    
    
    100.0
    %
    14. Recent Accounting Pronouncements
     16




---



##### Table of Contents



15. Subsequent Events
  17




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
   Overview
    Results of Operations
 Three and nine months ended September 30, 2009 and 2008
 18




---



##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of product revenues
    
    
    75.8
    
    
    
    64.4
    
    
    
    71.6
    
    
    
    66.1Research and development
    
    
    46.5
    
    
    
    16.0
    
    
    
    28.0
    
    
    
    13.7Selling, general and administrative
    
    
    63.0
    
    
    
    23.9
    
    
    
    39.3
    
    
    
    24.3Restructuring
    
    
    (0.7
    )
    
    
    
    
    
    
    7.6
    
    
    
    Total costs and expenses
    
    
    184.5
    
    
    
    104.3
    
    
    
    146.5
    
    
    
    104.1Loss from continuing operations
    
    
    (84.5
    )
    
    
    (4.3
    )
    
    
    (46.5
    )
    
    
    (4.1
    )Interest and other income (expense), net
    
    
    (0.1
    )
    
    
    2.7
    
    
    
    1.2
    
    
    
    3.1Loss from continuing operations before provision
(benefit) for income taxes
    
    
    (84.6
    )
    
    
    (1.6
    )
    
    
    (45.3
    )
    
    
    (1.1
    )Provision (benefit) for income taxes
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    0.1Loss from continuing operations
    
    
    (84.3
    )
    
    
    (1.6
    )
    
    
    (45.1
    )
    
    
    (1.1
    )Income (loss) from discontinued operations, net of tax
    
    
    1.3
    
    
    
    (7.6
    )
    
    
    110.2
    
    
    
    (9.9
    )Net income (loss)
    
    
    (83.0
    )%
    
    
    (9.2
    )%
    
    
    65.1
    %
    
    
    (11.0
    )%
 Total revenues
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    
    
    
    (In thousands)Total revenues
    
    $
    3,126
    
    
    $
    10,871
    
    
    
    (71.2
    )%
    
    $
    15,948
    
    
    $
    33,424
    
    
    
    (52.3
    )%Product revenues
    
    $
    3,126
    
    
    $
    10,871
    
    
    
    (71.2
    )%
    
    $
    15,948
    
    
    $
    33,364
    
    
    
    (52.2
    )%Development fees
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    60
    
    
    
    (100.0
    )%
    Cost of product revenues
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    

    
    
    (In thousands)Cost of product revenues
    
    $
    2,369
    
    
    $
    7,005
    
    
    
    (66.2
    )%
    
    $
    11,425
    
    
    $
    22,100
    
    
    
    (48.3
    )%Percentage
of total revenues
    
    
    75.8
    %
    
    
    64.4
    %
    
    
    
    
    
    
    71.6
    %
    
    
    66.1
    %
   19




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##### Table of Contents



Research and development expenses
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    
    

    
    (In thousands)Research and
development expenses
    
    $
    1,452
    
    
    $
    1,736
    
    
    
    (16.4
    )%
    
    $
    4,463
    
    
    $
    4,577
    
    
    
    (2.5
    )%Percentage of total revenues
    
    
    46.5
    %
    
    
    16.0
    %
    
    
    
    
    
    
    28.0
    %
    
    
    13.7
    %
     Selling, general and administrative expenses
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    

    
    
    (In thousands)Selling, general and
administrative expenses
    
    $
    1,968
    
    
    $
    2,595
    
    
    
    (24.2
    )%
    
    $
    6,261
    
    
    $
    8,131
    
    
    
    (23.0
    )%Percentage of total revenues
    
    
    63.0
    %
    
    
    23.9
    %
    
    
    
    
    
    
    39.3
    %
    
    
    24.3
    %
   20




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##### Table of Contents



Restructuring
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    

    
    
    (In thousands)Restructuring expenses
    
    $
    (21
    )
    
    $
    
    
    
    
    (100.0
    %)
    
    $
    1,212
    
    
    $
    
    
    
    
    100.0
    %
     Interest and other income, net
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    

    
    
    (In thousands)Interest and
other income
(expense), net
    
    $
    (3
    )
    
    $
    292
    
    
    
    (101.0
    %)
    
    $
    197
    
    
    $
    1,025
    
    
    
    (80.8
    %)
   21




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##### Table of Contents



Provision (benefit) for income taxes
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    

    
    
    (In thousands)Provision
(benefit) for
income taxes
    
    $
    (11
    )
    
    $
    
    
    
    
    (100.0
    %)
    
    $
    (32
    )
    
    $
    22
    
    
    
    (245.5
    )%
  Discontinued operations, net of tax
 Three months ended September 30,
    
    
    Nine months ended September 30,2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% Change(In thousands)
    
    
    
    

    
    
    (In thousands)Income (loss)
from discontinued
operations, net of
tax
    
    $
    41
    
    
    $
    (826
    )
    
    
    (105.0
    )%
    
    $
    17,571
    
    
    $
    (3,314
    )
    
    
    (630.2
    )%
   22




---



##### Table of Contents



Liquidity and Capital Resources
  Nine months endedSeptember 30,2009
    
    
    2008(in thousands)Net cash provided by (used in) operating activities
    
    $
    (2,480
    )
    
    $
    1,217Net cash provided by (used in) investing activities
    
    
    17,695
    
    
    
    (7,608
    )Net cash provided by financing activities
    
    
    560
    
    
    
    419Cash, cash equivalents, restricted cash, short-term and long-term investments at end of period
    
    $
    68,238
    
    
    $
    44,686
       23




---



##### Table of Contents



Payments Due by PeriodTotal
    
    
    Less Than 1 Year
    
    

1-3 Years
    
    
    3-5 Years
    
    
    More Than 5 Years(In thousands)Contractual Obligations:Capital lease obligations, including interest
    
    $
    17
    
    
    $
    12
    
    
    $
    5
    
    
    
    
    
    
    $
    Operating lease obligations
    
    
    1,178
    
    
    
    526
    
    
    
    545
    
    
    
    107
    
    
    
    Total
    
    $
    1,195
    
    
    $
    538
    
    
    $
    550
    
    
    $
    107
    
    
    $
    
 Recent Accounting Pronouncements
      24




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4. Controls and Procedures
 (a) Evaluation of disclosure controls and procedures.
   (b) Changes in internal controls over financial reporting.
  25




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
 You should consider carefully the following risk factors as well as other information in this
report before investing in any of our securities. If any of the following risks actually occur, our
business, operating results and financial condition could be adversely affected. This could cause
the market price of our common stock to decline, and you may lose all or part of your investment.
 ** Indicates risk factor has been updated since our Annual Report on Form 10-K for the year
ended December 31, 2008.
 Risks Relating to Our Business
 We have had a history of losses and may not be profitable in the future.**
  Subsequent to the divesture of our defense and security business, we depend on the mobile
communication industry for substantially all of our revenues. As this industry is negatively
impacted by the global economic downturn, our revenues could decrease and our profitability could
suffer. In addition, consolidation in this industry could result in delays or cancellations of
orders for our products, adversely impacting our results of operations.**
   26




---



##### Table of Contents



The current turmoil in the global economy could adversely impact our operations and financial
results.**
  We depend on a small number of key customers in the mobile communication industry for a significant
portion of our revenues. If we lose any of our major customers, particularly Nokia Siemens
Networks, or there is any material reduction in orders for our products from any of these
customers, our business, financial condition and results of operations would be adversely
affected.**
  Our operating results may be adversely affected by substantial quarterly and annual fluctuations
and market downturns.
  Implementing our acquisition strategy could result in dilution to our stockholders and operating
difficulties leading to a decline in revenues and operating profit.
  27




---



##### Table of Contents




    
    diversion of our management from the operation of our core business;
    
    assimilating the acquired operations and personnel;
    
    integrating information technology and reporting systems;
    
    retention of key personnel;
    
    retention of acquired customers; and
    
    implementation of controls, procedures and policies in the acquired business.
  We rely on the semiconductor foundry operations of third-party semiconductor foundries to
manufacture the integrated circuits sold directly to our customers or contained in our products.
The loss of our relationship with any of these foundries without adequate notice would adversely
impact our ability to fill customer orders and could damage our customer relationships.**
   Because of the shortages of some components and our dependence on single source suppliers and
custom components, we may be unable to obtain an adequate supply of components of sufficient
quality in a timely fashion, or we may be required to pay higher prices or to purchase components
of lesser quality.**
   
    
    semiconductor devices;
    
    application-specific monolithic microwave integrated circuits;
    
    voltage-controlled oscillators;
 28




---



##### Table of Contents




    
    voltage regulators;
    
    unusual or low usage components;
    
    surface mount components compliant with the EUs Restriction of Hazardous
Substances, or RoHS, Directive;
    
    high-frequency circuit boards; and
    
    custom connectors.
  We are exposed to fluctuations in the market values of our investment portfolio.
  Competitive conditions often require us to reduce prices and, as a result, we need to reduce our
costs in order to be profitable.**
  We rely heavily on a Thailand facility of HANA Microelectronics Co., Ltd., a contract manufacturer,
to produce our RF modules and to package our microwave and millimeter wave integrated circuits. If
HANA is unable to produce these modules in sufficient quantities or with adequate quality, or it
chooses to terminate our manufacturing arrangement, we will be forced to find an alternative
manufacturer and may not be able to fulfill our production commitments to our customers, which
could cause sales to be delayed or lost and could harm our reputation.**
  29




---



##### Table of Contents



Our products may contain component, manufacturing or design defects or may not meet our customers
performance criteria, which could cause us to incur significant repair expenses, harm our customer
relationships and industry reputation, and reduce our revenues and profitability.
  We depend on our key personnel. Skilled personnel in our industry can be in short supply. If we are
unable to retain our current personnel or hire additional qualified personnel, our ability to
develop and successfully market our products would be harmed.
   The length of our sales cycle requires us to invest substantial financial and technical resources
in a potential sale before we know whether the sale will occur. There is no guarantee that the sale
will ever occur and if we are unsuccessful in designing integrated circuits and module products for
a particular generation of a customers products, we may need to wait until the next generation of
that product to sell our products to that particular customer.**
  30




---



##### Table of Contents



We may not be able to design our products as quickly as our customers require, which could cause us
to lose sales and may harm our reputation.**
    We may not be able to manufacture and deliver our products as quickly as our customers require,
which could cause us to lose sales and would harm our reputation.**
  
    
    the failure of a supplier to deliver needed components on a timely basis or with
acceptable quality;
    
    lack of sufficient capacity;
    
    poor manufacturing yields;
    
    equipment failures;
    
    manufacturing personnel shortages;
    
    labor disputes;
    
    transportation disruptions;
    
    changes in import/export regulations;
    
    infrastructure failures at the facilities of our offshore contract manufacturer;
    
    natural disasters;
    
    acts of terrorism; and
    
    political instability.
 31




---



##### Table of Contents



Although we do have long-term commitments from many of our customers, they are not for fixed
quantities of product. As a result, we must estimate customer demand, and errors in our estimates
could have negative effects on our cash, inventory levels, revenues and results of operations.
  Any failure to protect our intellectual property appropriately could reduce or eliminate any
competitive advantage we have.**
   32




---



##### Table of Contents



Risks Relating to Our Industry
 Our failure to compete effectively could reduce our revenues and margins.**
  Our failure to comply with any applicable environmental regulations could result in a range of
consequences, including fines, suspension of production, excess inventory, sales limitations and
criminal and civil liabilities.
  33




---



##### Table of Contents



Government regulation of the communications industry could limit the growth of the markets that we
serve or could require costly alterations of our current or future products.
  Risks Relating to Ownership of Our Stock
 The market price of our common stock has fluctuated historically and is likely to fluctuate in the
future.**
  
    
    our financial performance or the performance of our competitors;
    
    the purchase or sale of common stock, short-selling or transactions by
large stockholders;
    
    technological innovations or other trends or changes in mobile
communication networks;
    
    successes or failures at significant product evaluations or site
demonstrations;
    
    the introduction of new products by us or our competitors;
    
    acquisitions, strategic alliances or joint ventures involving us or our
competitors;
    
    decisions by major participants in the communications industry not to
purchase products from us or to pursue alternative technologies;
    
    decisions by investors to de-emphasize investment categories, groups or
strategies that include our company or industry;
    
    market conditions in the industry, the financial markets and the economy as
a whole;
    
    existence of preferred stock with rights differing from those of common
stock; and
    
    the low trading volume of our common stock.
  34




---



##### Table of Contents



We have a few shareholders that each own a large percentage of our outstanding capital stock and,
as a result of their significant ownership, are able to significantly affect the outcome of matters
requiring stockholder approval.**
   Our certificate of incorporation, bylaws, arrangements with executive officers and the rights of
our preferred shareholder contain provisions that could delay or prevent a change in control.
    35




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    To elect one director, Edward A. Keible, Jr., to hold office until the 2012
Annual Meeting of Stockholders.FOR:      5,254,883      WITHHOLD:      1,742,3592.
    
    To elect one director, Edward C.V. Winn to hold office until the 2012 Annual
Meeting of Stockholders.FOR:      4,787,419      WITHHOLD:      2,209,8233.
    
    To ratify the selection by the Audit Committee of the Board of Directors of
Burr, Pilger & Mayer LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2009.FOR:      6,696,280       AGAINST:      198,494       ABSTAIN:      102,468
 36




---



##### Table of Contents



Item 6. Exhibits.
 Number
    
    Description2.1(1)
    
    Stock Purchase Agreement among the Registrant and the stockholders and option holders of ALC Microwave, Inc.
dated April 19, 2007.2.2(18)
    
    Asset Purchase Agreement among the Registrant, Microsemi Corporation and SHR Corporation dated April 30,
2009.2.3(18)
    
    Indemnification Agreement between the Registrant and Microsemi Corporation dated April 30, 2009.3.1(2)
    
    Amended and Restated Certificate of Incorporation effective October 20, 2000.3.2(3)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation effective June 28, 2002.3.3(4)
    
    Certificate of Designation for Series A Junior Participating Preferred Stock.3.4(5)
    
    Certificate of Designation for Series B Preferred Stock.3.5(6)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation effective July 26, 2007.3.6(7)
    
    Amended and Restated Bylaws.4.1(2)
    
    Form of Specimen Common Stock Certificate.4.2(4)
    
    Rights Agreement dated as of December 1, 2005 between the Registrant and Computershare Trust Company, Inc.4.3(4)
    
    Form of Rights Certificate4.4(5)
    
    Preferred Stock and Warrant Purchase Agreement by and between Oak Investment Partners XI, Limited
Partnership and the Registrant dated April 24, 2006.4.5(5)
    
    Warrant issued to Oak Investment Partners XI, Limited Partnership.4.6(8)
    
    Amendment No. 1 to Rights Agreement, dated as of December 21, 2007, between the Registrant and ComputerShare
Trust Company, Inc.10.1(2)
    
    Form of Indemnity Agreement entered into by the Registrant with each of its directors and officers.10.2(2)*
    
    1992 Stock Option Plan.10.3(2)*
    
    Form of Incentive Stock Option under 1992 Stock Option Plan.10.4(2)*
    
    Form of Nonstatutory Stock Option under 1992 Stock Option Plan.10.5(9)*
    
    2007 Equity Incentive Plan.10.6(10)*
    
    Form of Stock Option Agreement under 2007 Equity Incentive Plan.10.7(10)*
    
    Form of Stock Option Agreement for Non-Employee Directors under the 2007 Equity Incentive Plan.10.8(2)*
    
    2000 Employee Stock Purchase Plan.10.9(2)*
    
    Form of 2000 Employee Stock Purchase Plan Offering.10.10(11)*
    
    2000 Non-Employee Directors Stock Option Plan, as amended.10.11(2)*
    
    Form of Nonstatutory Stock Option Agreement under the 2000 Non-Employee Director Plan.10.12(12)*
    
    Description of Compensation Payable to Non-Employee Directors.10.13(13)*
    
    2009 Base Salaries for Named Executive Officers.10.14(2)
    
    License Agreement by and between TRW Inc. and TRW Milliwave Inc. dated February 28, 2000.10.15(14)
    
    Purchase Agreement between Nokia and the Registrant dated January 1, 2006.10.16(14)
    
    Frame Purchase Agreement by and between the Registrant and Siemens Mobile Communications Spa dated January
16, 2006.10.17(15)
    
    Lease Agreement by and between Legacy Partners I San Jose, LLC and the Registrant dated May 24, 2006.10.18(16)
    
    Services Agreement by and between Hana Microelectronics Co., Ltd. and the Registrant dated October 15, 2006.10.19(17)
    
    Lease Agreement by and between 8812, a California limited partnership, and the Registrant dated May 20, 2008.10.20(17)
    
    Amended and Restated Supply Agreement by and between Northrop Grumman Space and Mission Systems Corp. and
the Registrant dated May 12, 2008.10.21(13)
    
    First Amendment, dated as of December 1, 2008, to Amended and Restated Supply Agreement by and between
Northrop Grumman Space and Mission Systems Corp. and the Registrant dated May 12, 2008.
 37




---



##### Table of Contents



Number
    
    Description10.22(13)
    
    Amendment, dated as of February 13, 2009, to Amended and Restated Supply Agreement by and between
Northrop Grumman Space and Mission Systems Corp. and the Registrant dated May 12, 2008.10.23(19)*
    
    Executive Officer Severance Plan.10.24(19)*
    
    Senior Executive Officer Severance and Retention Plan.31.1
    
    Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
April 24, 2007 and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form S-1
(Registration No. 333-41302) and incorporated herein by reference.(3)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for
the quarter ended March 31, 2004 and incorporated herein by reference.(4)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
December 5, 2005 and incorporated herein by reference.(5)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
April 26, 2006 and incorporated herein by reference.(6)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference.(7)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
July 28, 2008 and incorporated herein by reference.(8)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
December 28, 2007 and incorporated herein by reference.(9)
    
    Previously filed as an appendix to the Registrants Definitive Proxy Statement on
Schedule 14A filed on June 13, 2007 and incorporated herein by reference.(10)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form S-8
(Registration No. 333-144851) and incorporated herein by reference.(11)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 and incorporated herein by reference.(12)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
February 1, 2008 and incorporated herein by reference.(13)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q filed
for the quarter year ended March 31, 2009 and incorporated herein by reference.(14)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form S-3
(Registration No. 333-144054) and incorporated herein by reference. 38




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##### Table of Contents



(15)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2006 and incorporated herein by reference.(16)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
fiscal year ended December 31, 2006 and incorporated herein by reference.(17)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for
the quarter year ended June 30, 2008 and incorporated herein by reference.(18)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for
the quarter year ended June 30, 2009 and incorporated herein by reference.(19)
    
    Previously filed as an exhibit to the Registrants Current Report on Form 8-K filed on
September 17, 20098 and incorporated herein by reference.*
    
    Indicates a management contract or compensatory plan or arrangement.
    
    Confidential treatment has been requested for a portion of this exhibit. 39




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##### Table of Contents



SIGNATURES
  ENDWAVE CORPORATIONDate: November 13, 2009By:
    /s/ Edward A. Keible, Jr.Edward A. Keible, Jr.Vice Chairman and Chief Executive Officer
(Duly Authorized Officer and Principal
Executive Officer)By:
    /s/ Curt P. SacksCurt P. SacksChief Financial Officer
and Senior Vice President
(Duly Authorized Officer and Principal 
Financial and Accounting Officer) 40




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##### Table of Contents



Index to Exhibits
 Number
    
    Description31.1
    
    
    Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    
    Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 41