##### 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 March 31, 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
(State of incorporation)
    
    95-4333817
(I.R.S. Employer Identification No.)130 Baytech Drive 
San Jose, CA
    
    95134(Address of principal executive offices)
    
    (Zip code)
 (408) 522-3100
 þ o
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



ENDWAVE CORPORATION
 INDEX
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2009
(unaudited) and December 31, 2008
    
    
    3Unaudited Condensed Consolidated Statements of Operations for
the Three Months Ended March 31, 2009 and 2008
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    14Item 3.
    
    Qualitative and Quantitative Disclosure about Market Risk
    
    
    20Item 4.
    
    Controls and Procedures
    
    
    21PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    21Item 6.
    
    Exhibits
    
    
    32SIGNATURES
    
    
    35EXHIBITS
    
    
    36EX-10.13EX-10.22EX-10.23EX-31.1EX-31.2EX-32.1
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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)
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    28,389
    
    
    $
    33,998Short-term investments
    
    
    12,219
    
    
    
    11,350Accounts receivable, net
    
    
    7,634
    
    
    
    4,762Inventories
    
    
    11,459
    
    
    
    14,454Other current assets
    
    
    783
    
    
    
    738Total current assets
    
    
    60,484
    
    
    
    65,302Property and equipment, net
    
    
    4,816
    
    
    
    4,220Other assets
    
    
    263
    
    
    
    218Restricted cash
    
    
    600
    
    
    
    600$
    66,163
    
    
    $
    70,340LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,190
    
    
    $
    2,263Accrued warranty
    
    
    2,085
    
    
    
    2,439Accrued compensation
    
    
    1,690
    
    
    
    2,811Other current liabilities
    
    
    958
    
    
    
    713Total current liabilities
    
    
    6,923
    
    
    
    8,226Other long-term liabilities
    
    
    86
    
    
    
    73Total liabilities
    
    
    7,009
    
    
    
    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 March 31, 2009 and December 31,
2008
    
    
    
    
    
    
    Common stock, $0.001 par value; 50,000,000 shares
authorized; 9,348,422 and 9,345,442 shares issued
and outstanding at March 31, 2009 and December 31,
2008, respectively
    
    
    9
    
    
    
    9Additional paid-in capital
    
    
    350,653
    
    
    
    349,855Accumulated other comprehensive income
    
    
    17
    
    
    
    42Accumulated deficit
    
    
    (291,525
    )
    
    
    (287,865
    )Total stockholders equity
    
    
    59,154
    
    
    
    62,041$
    66,163
    
    
    $
    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.
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ENDWAVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)
 Three months endedMarch 31,2009
    
    
    2008Revenues:Product revenues
    
    $
    11,795
    
    
    $
    13,840Development fees
    
    
    244
    
    
    
    341Total revenues
    
    
    12,039
    
    
    
    14,181Costs and expenses:Cost of product revenues*
    
    
    8,890
    
    
    
    10,043Cost of product revenues, amortization of intangible assets
    
    
    
    
    
    
    149Research and development*
    
    
    2,840
    
    
    
    2,842Selling, general and administrative*
    
    
    2,821
    
    
    
    3,361Amortization of intangible asses
    
    
    
    
    
    
    179Restructuring expense
    
    
    1,249
    
    
    
    Total costs and expenses
    
    
    15,800
    
    
    
    16,574Loss from operations
    
    
    (3,761
    )
    
    
    (2,393
    )Interest and other income, net
    
    
    93
    
    
    
    457Loss before provision for income tax benefit
    
    
    (3,668
    )
    
    
    (1,936
    )Income tax benefit
    
    
    8
    
    
    
    Net loss
    
    $
    (3,660
    )
    
    $
    (1,936
    )Basic and diluted net loss per share
    
    $
    (0.39
    )
    
    $
    (0.21
    )Shares used in computing basic and diluted net loss per share
    
    
    9,346,568
    
    
    
    9,142,180*Includes the following amounts related to stock-based compensation:Cost of product revenues
    
    $
    175
    
    
    $
    174Research and development
    
    
    187
    
    
    
    226Selling, general and administrative
    
    
    445
    
    
    
    605
 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)
 Three months endedMarch 31,2009
    
    
    2008Operating activities:Net loss
    
    $
    (3,660
    )
    
    $
    (1,936
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation
    
    
    374
    
    
    
    264Amortization of intangible assets
    
    
    
    
    
    
    328Stock compensation expense
    
    
    807
    
    
    
    1,005Amortization of investments
    
    
    (16
    )
    
    
    (2
    )Loss on sale of equipment
    
    
    6
    
    
    
    Gain on sale of investments
    
    
    
    
    
    
    (8
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,872
    )
    
    
    (1,796
    )Inventories
    
    
    2,982
    
    
    
    (31
    )Other assets
    
    
    (90
    )
    
    
    323Accounts payable
    
    
    (73
    )
    
    
    646Accrued warranty
    
    
    (354
    )
    
    
    82Accrued compensation, other current liabilities and other
long-term liabilities
    
    
    (858
    )
    
    
    (15
    )Net cash used in operating activities
    
    
    (3,754
    )
    
    
    (1,140
    )Investing activities:Purchases of leasehold improvements and equipment
    
    
    (976
    )
    
    
    (436
    )Proceeds on sales and maturities of investments
    
    
    4,515
    
    
    
    3,528Purchases of investments
    
    
    (5,393
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (1,854
    )
    
    
    3,092Financing activities:Proceeds from exercises of stock options, net
    
    
    4
    
    
    
    1Payments on capital leases
    
    
    (5
    )
    
    
    (6
    )Net cash used in financing activities
    
    
    (1
    )
    
    
    (5
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (7
    )Net change in cash and cash equivalents
    
    
    (5,609
    )
    
    
    1,940Cash and cash equivalents at beginning of period
    
    
    33,998
    
    
    
    38,992Cash and cash equivalents at end of period
    
    $
    28,389
    
    
    $
    40,932
 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
  March 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Investments:United States government agency
    
    $
    11,094
    
    
    $
    14
    
    
    $
    
    
    
    $
    11,108Corporate securities
    
    
    1,108
    
    
    
    4
    
    
    
    (1
    )
    
    
    1,111Total
    
    $
    12,202
    
    
    $
    18
    
    
    $
    (1
    )
    
    $
    12,219
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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 inActive Markets of
    
    
    Significant OtherBalance as of
    
    
    Identical Assets
    
    
    Observable InputsMarch 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)Assets:Cash equivalents:Money market funds
    
    $
    26,466
    
    
    $
    26,466
    
    
    $
    Commercial paper
    
    
    749
    
    
    
    
    
    
    
    749Short-term investments:United States government agencies
    
    
    11,108
    
    
    
    
    
    
    
    11,108Corporate securities
    
    
    1,111
    
    
    
    
    
    
    
    1,111Total
    
    $
    39,434
    
    
    $
    26,466
    
    
    $
    12,968Liabilities:
    
    $
    
    
    
    $
    
    
    
    $
    
  -7-




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4. Inventories
  March 31,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    8,205
    
    
    $
    8,452Work in process
    
    
    1,141
    
    
    
    1,574Finished goods
    
    
    2,113
    
    
    
    4,428$
    11,459
    
    
    $
    14,454
 5. Note Receivable
    6. Warranty
   Three months ended March 31,2009
    
    
    2008Balance at January 1
    
    $
    2,439
    
    
    $
    2,712Warranties accrued
    
    
    108
    
    
    
    201Warranties settled or reversed
    
    
    (462
    )
    
    
    (119
    )Balance at March 31
    
    $
    2,085
    
    
    $
    2,794
 -8-




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7. Restructuring
  SeveranceBenefits(in thousands)First quarter 2009 restructuring charge
    
    $
    1,249Cash payments
    
    
    (910
    )Accrual at March 31, 2009
    
    $
    339
  8. Commitments and Contingencies
  9. Stockholders Equity
   Three months ended March 31,2009
    
    
    2008Stock-based compensation expense by type of award:Employee stock options
    
    $
    650
    
    
    $
    891Employee stock purchase plan
    
    
    144
    
    
    
    122Amounts capitalized as inventory during the year
    
    
    (6
    )
    
    
    (22
    )Amounts capitalized as inventory and expensed
    
    
    19
    
    
    
    14Total stock-based compensation
    
    
    807
    
    
    
    1,005Tax effect on stock-based compensation
    
    
    
    
    
    
    Total stock-based compensation expense
    
    $
    807
    
    
    $
    1,005Impact on net loss per share  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.11
    )
 -9-




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Valuation Assumptions
  Three months endedMarch 31,2009
    
    2008Risk-free interest rate
    
    
    1.44%  1.97
    %
    
    
    1.93%  2.69
    %Expected life of options
    
    4.6 years
    
    
    3.6 yearsExpected dividends
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    70
    %
    
    
    70
    %
  Three months endedMarch 31,2009
    
    2008Risk-free interest rate
    
    
    1.61%  4.67
    %
    
    
    3.97%  4.67
    %Expected life of options
    
    1.2 years
    
    
    1.2 yearsExpected dividends
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    51
    %
    
    
    51
    %
   Equity Incentive Program
  -10-




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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
    
    
    469,700
    
    
    
    1.81Options exercised
    
    
    (2,980
    )
    
    
    1.17Options cancelled
    
    
    (250,324
    )
    
    
    8.58Outstanding at March 31, 2009
    
    
    3,225,313
    
    
    $
    8.21
    
    
    
    7.13
    
    
    $
    67Options vested and exercisable
and expected to be exercisable
at March 31, 2009
    
    
    2,924,259
    
    
    $
    8.50
    
    
    
    6.93
    
    
    $
    61Options vested and exercisable
at March 31, 2009
    
    
    1,727,062
    
    
    $
    9.72
    
    
    
    5.65
    
    
    $
    43
   Options Vested and ExercisableOptions Outstanding at March 31, 2009
    
    
    At March 31, 2009Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    
    
    
    
    Weighted-AverageRange of Exercise Price
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Shares
    
    
    Exercise Price$   0.76 - $   1.21
    
    
    54,896
    
    
    $
    1.07
    
    
    
    1.27
    
    
    
    54,896
    
    
    $
    1.07$   1.81 - $   1.81
    
    
    469,500
    
    
    $
    1.81
    
    
    
    9.84
    
    
    
    
    
    
    $
    0.00$   1.93 - $   6.37
    
    
    221,535
    
    
    $
    3.80
    
    
    
    6.17
    
    
    
    165,090
    
    
    $
    3.51$   6.59 - $   6.59
    
    
    764,030
    
    
    $
    6.59
    
    
    
    8.40
    
    
    
    221,188
    
    
    $
    6.59$   6.60 - $   9.77
    
    
    511,539
    
    
    $
    9.50
    
    
    
    6.33
    
    
    
    384,368
    
    
    $
    9.52$   9.90 - $ 10.22
    
    
    399,302
    
    
    $
    10.12
    
    
    
    5.09
    
    
    
    345,726
    
    
    $
    10.16$ 10.23 - $ 12.90
    
    
    222,296
    
    
    $
    11.96
    
    
    
    6.34
    
    
    
    185,637
    
    
    $
    11.91$ 13.23 - $ 13.23
    
    
    464,440
    
    
    $
    13.23
    
    
    
    7.13
    
    
    
    255,121
    
    
    $
    13.23$ 15.14 - $ 20.32
    
    
    113,746
    
    
    $
    16.65
    
    
    
    4.41
    
    
    
    111,007
    
    
    $
    16.68$ 21.47 - $ 21.47
    
    
    4,029
    
    
    $
    21.47
    
    
    
    5.84
    
    
    
    4,029
    
    
    $
    21.473,225,313
    
    
    $
    8.21
    
    
    
    7.13
    
    
    
    1,727,062
    
    
    $
    9.72
 Employee Stock Purchase Plan
  10. Net Loss Per Share
  -11-




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11. Comprehensive Income (Loss)
   Three months ended March 31,2009
    
    
    2008Net loss
    
    $
    (3,660
    )
    
    $
    (1,936
    )Foreign currency translation adjustments
    
    
    
    
    
    
    (7
    )Change in unrealized gain (loss) on investments
    
    
    (25
    )
    
    
    47Total comprehensive loss
    
    $
    (3,685
    )
    
    $
    (1,896
    )
 12. Segment Disclosures
  Three months ended March 31,2009
    
    
    2008United States
    
    $
    4,076
    
    
    
    33.9
    %
    
    $
    3,134
    
    
    
    22.1
    %Finland
    
    
    6,540
    
    
    
    54.3
    %
    
    
    7,604
    
    
    
    53.6
    %Italy
    
    
    10
    
    
    
    0.1
    %
    
    
    635
    
    
    
    4.5
    %Norway
    
    
    28
    
    
    
    0.2
    %
    
    
    34
    
    
    
    0.2
    %Slovakia
    
    
    191
    
    
    
    1.6
    %
    
    
    1,328
    
    
    
    9.4
    %Rest of the world
    
    
    1,194
    
    
    
    9.9
    %
    
    
    1,446
    
    
    
    10.2
    %Total
    
    $
    12,039
    
    
    
    100.0
    %
    
    $
    14,181
    
    
    
    100.0
    %
 -12-




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13. Recent Accounting Pronouncements
     14. Subsequent Events
  -13-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
    -14-




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Three months ended March 31, 2009 and 2008
  Three months endedMarch 31,2009
    
    2008Total revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of product revenues
    
    
    73.8
    
    
    
    70.8Cost of product revenues, amortization of intangible assets
    
    
    
    
    
    
    1.1Research and development
    
    
    23.6
    
    
    
    20.0Selling, general and administrative
    
    
    23.4
    
    
    
    23.7Amortization of intangible assets
    
    
    
    
    
    
    1.3Restructuring expense
    
    
    10.4
    
    
    
    Total costs and expenses
    
    
    131.2
    
    
    
    116.9Loss from operations
    
    
    (31.2
    )
    
    
    (16.9
    )Interest and other income, net
    
    
    0.8
    
    
    
    3.2Loss before provision for income tax benefit
    
    
    (30.5
    )
    
    
    (13.7
    )Income tax benefit
    
    
    0.1
    
    
    
    Net loss
    
    
    (30.4
    )%
    
    
    (13.7
    )%
 Total revenues
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Total revenues
    
    $
    12,039
    
    
    $
    14,181
    
    
    
    (15.1
    )%Product revenues
    
    $
    11,795
    
    
    $
    13,840
    
    
    
    (14.8
    )%Development fees
    
    $
    244
    
    
    $
    341
    
    
    
    (28.4
    )%
    Cost of product revenues
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Cost of product revenues
    
    $
    8,890
    
    
    $
    10,043
    
    
    
    (11.5
    )%Percentage of total revenues
    
    
    73.8
    %
    
    
    70.8
    %
  -15-




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Research and development expenses
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Research and development expenses
    
    $
    2,840
    
    
    $
    2,842
    
    
    
    (0.1
    )%Percentage of total revenues
    
    
    23.6
    %
    
    
    20.0
    %
    Selling, general and administrative expenses
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Selling, general and
administrative
expenses
    
    $
    2,821
    
    
    $
    3,361
    
    
    
    (16.1
    )%Percentage of total revenues
    
    
    23.4
    %
    
    
    23.7
    %
    -16-




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Amortization of intangible assets
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Cost of product revenues,
amortization
of intangible assets
    
    $
    
    
    
    $
    149
    
    
    
    (100
    )%Amortization of intangible assets
    
    $
    
    
    
    $
    179
    
    
    
    (100
    )%
     Restructuring expense
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Restructuring expense
    
    $
    1,249
    
    
    $
    
    
    
    
    
  Interest and other income, net
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Interest and other income, net
    
    $
    93
    
    
    $
    457
    
    
    
    (79.6
    )%
   -17-




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Income tax benefit
 Three months endedMarch 31,2009
    
    
    2008
    
    
    % Change(In thousands)Income tax benefit
    
    $
    8
    
    
    $
    
    
    
    
    
  Liquidity and Capital Resources
  Three months endedMarch 31,2009
    
    
    2008(in thousands)Net cash used in operating activities
    
    $
    (3,754
    )
    
    $
    (1,140
    )Net cash (used in) provided by investing activities
    
    
    (1,854
    )
    
    
    3,092Net cash used in financing activities
    
    
    (1
    )
    
    
    (5
    )Cash, cash equivalents, restricted cash, short-
term and long-term investments at end of period
    
    $
    41,208
    
    
    $
    47,451
   -18-




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Payments Due by PeriodLess Than 1
    
    
    
    
    
    
    
    
    
    
    More Than 5Total
    
    
    Year
    
    
    1 - 3 Years
    
    
    3-5 Years
    
    
    Years(In thousands)Contractual Obligations*:Capital lease obligations, including interest
    
    $
    38
    
    
    $
    24
    
    
    $
    14
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    4,132
    
    
    
    1,031
    
    
    
    1,763
    
    
    
    1,246
    
    
    
    92Total
    
    $
    4,170
    
    
    $
    1,055
    
    
    $
    1,777
    
    
    $
    1,246
    
    
    $
    92
 
 *

    Due to the sale of our defense and security business, some of our future cash obligations for
operating and capital leases will be assumed by Microsemi as of the transaction date. The
following table summarizes our future cash obligations for operating leases and capital leases,
excluding interest, that will be assumed by Microsemi: Payments Due by PeriodLess Than 1
    
    
    
    
    
    
    
    
    
    
    More Than 5Total
    
    
    Year
    
    
    1 - 3 Years
    
    
    3-5 Years
    
    
    Years(In thousands)Contractual Obligations:Capital lease obligations, including interest
    
    $
    14
    
    
    $
    12
    
    
    $
    2
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    2,692
    
    
    
    483
    
    
    
    1,023
    
    
    
    1,094
    
    
    
    92Total
    
    $
    2,706
    
    
    $
    495
    
    
    $
    1,025
    
    
    $
    1,094
    
    
    $
    92
 -19-




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Recent Accounting Pronouncements
     
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
    -20-




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Item 4. Controls and Procedures
 (a) Evaluation of disclosure controls and procedures.
   (b) Changes in internal controls over financial reporting.
  
 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 onForm 10-Kfor the year
ended December 31, 2008. -21-




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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.**
    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.**
 -22-




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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.
  
    
    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 semiconductors 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.
  -23-




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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;
    
    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;
    
    custom connectors; and
    
    yttrium iron garnet components.
  -24-




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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. 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.**
  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.
 -25-




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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 a high-frequency RF module 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.
  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.**
    -26-




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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.
  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.
  -27-




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Any failure to protect our intellectual property appropriately could reduce or eliminate any
competitive advantage we have.**
     -28-




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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.
  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.**
  -29-




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##### Table of Contents




    
    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.
  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.**
   -30-




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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.
    -31-




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##### 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, 2007.3.1(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*
    
    2009 Base Salaries for Named Executive Officers.10.14(13)*
    
    Executive Officer Severance and Retention Plan.10.15(2)
    
    License Agreement by and between TRW Inc. and TRW Milliwave Inc. dated February 28, 2000.10.16(14)
    
    Purchase Agreement between Nokia and the Registrant dated January 1, 2006.10.17(14)
    
    Frame Purchase Agreement by and between the Registrant and Siemens Mobile Communications Spa dated January
16, 2006.10.18(15)
    
    Lease Agreement by and between Legacy Partners I San Jose, LLC and the Registrant dated May 24, 2006.10.19(16)
    
    Services Agreement by and between Hana Microelectronics Co., Ltd. and the Registrant dated October 15, 2006.10.20(17)
    
    Lease Agreement by and between 8812, a California limited partnership, and the Registrant dated May 20, 2008.10.21(17)
    
    Amended and Restated Supply Agreement by and between Northrop Grumman Space and Mission Systems Corp. and
the Registrant dated May 12, 2008.10.22
    
    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.
 -32-




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##### Table of Contents



Number
    
    Description10.23
    
    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, 2008.31.1
    
    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 Annual Report on
Form 10-K filed for the fiscal year ended December 31, 2007 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.(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. -33-




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(17)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008 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. -34-




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##### Table of Contents



SIGNATURES
  ENDWAVE CORPORATION  By:
    /s/ Edward A. Keible, Jr.Edward A. Keible, Jr.President and Chief Executive Officer
(Duly Authorized Officer and Principal
Executive Officer)By:
    /s/ Brett W. WallaceBrett W. Wallace Executive Vice Presidentand Chief Financial Officer(Duly Authorized
Officer and PrincipalFinancial and
Accounting Officer) -35-




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##### Table of Contents



INDEX TO EXHIBITS
 Number
    
    Description10.13*
    
    2009 Base Salaries for Named Executive Officers.10.22
    
    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, 2008.10.23
    
    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, 2008.31.1
    
    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.
 
 *
    
    Indicates a management contract or compensatory plan or arrangement.
    
    Confidential treatment has been requested for a portion of this exhibit. -36-