SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                              --------------------

                                  FORM 10-KSB/A
                                 Amendment No.1

  (Mark One)
   [ X ]           ANNUAL REPORT PURSUANT TO SECTION OR 15(D) OF
                   THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended September 30, 1997

   [   ]           TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

                           Commission file No. 0-5351

                               EIP MICROWAVE, INC.
        (Exact name of small business issuer as specified in its charter)

                 Delaware                                    95-2148645
     (State or other jurisdiction                          (IRS Employer
    of incorporation or organization)                    Identification No.)

    6950 SW Hampton Street, Suite 200
            Portland, Oregon                                    97223
(Address of principal executive offices)                      (Zip Code)

                                 (503) 598-2605
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:         None
Securities registered under Section 12(g) of the Exchange Act:    Common Stock, 
                                                                  $.01 Par Value
                                                                (Title of Class)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. YES [ X ] NO [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ X ]

The  issuer's  revenues  for the fiscal  year ended  September  30,  1997,  were
$4,739,000.   The   aggregate   market   value  of  the  voting  stock  held  by
non-affiliates of the issuer, computed by reference to the average bid and asked
prices as of December 23, 1997, was approximately $405,000. For purposes of this
determination only, directors and officers of the issuer have been assumed to be
affiliates.  There were a total of 424,907  shares of the issuer's  common stock
outstanding as of December 23, 1997.

                                       1
<PAGE>
                       DOCUMENTS INCORPORATED BY REFERENCE


(1)      Portions of the Definitive  Proxy  Statement  filed with Securities and
         Exchange  Commission  relating to the Company's  1998 Annual Meeting of
         Stockholders - Part III.

                  Transitional Small Business Disclosure Format
                           (check one): Yes [ ] No [X]





































                                       2
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS

         Reference is made to the Consolidated  Financial  Statements,  together
with the notes thereto and the reports thereon of Meredith, Cardozo, Lanz & Chiu
LLP and Price  Waterhouse  LLP  appearing  on the pages of this report set forth
below:

                                                                         Page(s)
   Consolidated Balance Sheets as of September 30, 1997 and 1996           4
   Consolidated Statements of Operations for the Years Ended
        September 30, 1997, 1996 and 1995                                  5
   Consolidated Statements of Stockholders' Equity (Deficiency) for the
        Years Ended September 30, 1997, 1996 and 1995                      5
   Consolidated Statements of Cash Flows for the Years Ended
        September 30, 1997, 1996 and 1995                                  6
   Notes to Consolidated Financial Statements                              7-16
   Report of Independent Auditors                                         17
   Report of Independent Accountants                                      18























                                       3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)                September 30,            September 30,
                                                             1997                      1996
<S>                                                      <C>                       <C>
ASSETS

Current assets:
   Cash and cash equivalents                             $    250                  $    216
   Short-term investments                                      30                       324
                                                         ----------------------------------
                                                              280                       540

   Accounts receivable, net                                   405                       686
   Inventories                                              1,023                     1,067
   Prepaid expenses                                            62                        59
                                                         ----------------------------------
     Total current assets                                   1,770                     2,352

Property and equipment, net                                   590                       631
                                                         ----------------------------------
                                                         $  2,360                  $  2,983
                                                         ==================================


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
   Accounts payable                                      $    401                  $    706
   Accrued liabilities                                        629                       546
   Advanced payments from customers                             -                       190
   Bank borrowings                                            296                       185
   Notes payable to affiliates                                400                         -
   Current portion of obligations under capital leases         34                        34
                                                         ----------------------------------
     Total current liabilities                              1,760                     1,661
                                                         ----------------------------------

Long term notes payable to affiliates                         600                         -
Long term obligations under capital leases                     63                        95
                                                         ----------------------------------
     Total liabilities                                      2,423                     1,756
                                                         ----------------------------------

Commitments and contingencies (Note 5)

Stockholders' equity (deficiency):
   Common stock, $.01 par value;
     authorized -10,000,000 shares;
     424,907 issued and outstanding                             5                         5
   Additional paid-in capital                                 848                       848
   Retained earnings (accumulated deficit)                   (916)                      374
                                                         ----------------------------------
     Total stockholders' equity (deficiency)                  (63)                    1,227
                                                         ----------------------------------
                                                         $  2,360                  $  2,983
                                                         ==================================


The  accompanying  notes are an integral  part of these  consolidated  financial statements.
</TABLE>






                                       4
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND
STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended September 30,                                       1997               1996                1995
(In thousands except per share data)

<S>                                                                  <C>               <C>                 <C>     
Net sales                                                            $ 4,739           $  6,492            $  6,721
                                                                     ----------------------------------------------
Cost and expenses:
   Cost of sales                                                       2,955              4,064               3,646
   Research, development and engineering                                 996                978                 742
   Selling, general and administrative                                 2,005              2,084               2,289
   Interest and other, net                                                73               (141)                (81)
                                                                     -----------------------------------------------
       Total costs and expenses                                        6,029              6,985               6,596
                                                                     ----------------------------------------------

Net income (loss) before income tax                                   (1,290)              (493)                125
Income tax provision                                                       -                  -                   -
                                                                     ----------------------------------------------
Net income (loss)                                                    $(1,290)          $   (493)           $    125
                                                                     ==============================================

Net income (loss) per share                                          $ (3.04)          $  (1.16)           $   0.30
                                                                     ==============================================

Weighted average common shares outstanding                               425                423                 423
                                                                     ==============================================
</TABLE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

                                                                                              Retained
                                                                                Additional    Earnings
                                                            Common Stock          Paid-in   (Accumulated
(Dollars in thousands)                                    Shares       Amount     Capital       Deficit)      Total

<S>                                                        <C>           <C>      <C>          <C>         <C>     
Balance at September 30, 1994                              423,307       $ 5      $ 844        $  742      $  1,591
   Net income                                                    -        -           -           125           125
                                                          ----------------- ---------------------------------------

Balance at September 30, 1995                              423,307         5        844           867         1,716
   Stock issues                                              1,600        -           4             -             4
   Net income                                                    -        -           -          (493)         (493)
                                                          ----------------- ----------------------------------------

Balance at September 30, 1996                              424,907         5        848           374         1,227
   Net income                                                    -         -          -        (1,290)       (1,290)
                                                        ------------------------------------------------------------

Balance at September 30, 1997                              424,907       $ 5      $ 848        $ (916)     $   (63)
                                                         ===========================================================


The  accompanying  notes are an integral  part of these  consolidated  financial statements.
</TABLE>




                                       5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash

For the years ended September 30,                                         1997              1996            1995
(Dollars in thousands)

<S>                                                                    <C>              <C>                <C>
Cash flows from operating activities:
   Net income (loss)                                                   $ (1,290)        $   (493)          $   125
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and amortization                                        167              147               220
       (Gain) loss on the sale of capital equipment                        (118)             (50)             (146)
   Change in assets and liabilities:
         Accounts receivable, net                                           281              378              (350)
         Inventories                                                         44               66              (149)
         Prepaid expenses and other assets                                   (3)              45               (36)
         Accounts payable                                                  (305)              96                83
         Accrued liabilities                                                 83             (130)               65
         Advanced payments from customers                                  (190)             190                 -
                                                                       -------------------------------------------
Cash provided by  (used in) operating activities                         (1,331)             249              (188)
                                                                       --------------------------------------------

Cash flows from investing activities:
     Purchase of short-term investments                                      -              (213)              (11)
     Sale of short-term investments                                         294              208                 -
     Capital expenditures                                                  (168)            (394)              (41)
     Proceeds from the sale of capital equipment                            160               61               155
                                                                       -------------------------------------------
Cash (used in) provided by investing activities                             286             (338)              103
                                                                       -------------------------------------------

Cash flows from financing activities:
   Proceeds from bank borrowings                                            111              185                 -
   Proceeds from notes payable to affiliates                              1,000                -                 -
   Proceeds from sales of common stock to employees                          -                 4                 -
   Repayment of obligations under capital leases                            (32)             (10)                -
                                                                       -------------------------------------------
Cash provided by financing activities                                     1,079              179                 -
                                                                       -------------------------------------------

Increase (decrease) in cash and equivalents                                  34               90               (85)
Cash and equivalents at beginning of period                                 216              126               211
                                                                        ------------------------------------------
Cash and equivalents at end of period                                   $   250          $   216           $   126
                                                                        ==========================================

Supplemental information:

   Interest paid                                                          $  31            $  13             $   1
   Equipment acquired pursuant to capital leases                              -            $ 124                 -




The  accompanying  notes are an integral  part of these  consolidated  financial statements.
</TABLE>



                                       6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              September 30, 1997

NOTE 1.  The Company And A Summary Of Significant Accounting Policies

The Company

         The Company is engaged in a single industry  segment  constituting  the
development,  manufacture,  and  sale  of high  frequency  microwave  and  radio
frequency  (RF)  test and  measurement  instruments.  The  Company's  standalone
microwave  frequency  counters  represented 53% of net sales in 1997, 50% of net
sales in 1996, and 64% of net sales in 1995. Substantially all of its activities
are conducted in the United States, and the Company has no foreign manufacturing
operations nor material amounts of foreign assets. Export sales,  principally to
customers in Western Europe and Pacific Rim countries, as a percent of net sales
were approximately 30% in 1997, 36% in 1996, and 43% in 1995. Profit margins are
similar  on foreign  and  domestic  sales.  Direct  sales to the  United  States
government and its contractors as a percent of net sales were  approximately 43%
in  1997  (20%  to one  government  subcontractor),  33%  in  1996  (22%  to one
government   subcontractor),   and   36%  in  1995   (11%   to  one   government
subcontractor).

Liquidity

         As shown in the accompanying  consolidated  financial  statements,  the
Company incurred a loss from operations for the year ended September 30, 1997 of
$1,290,000 and has experienced significant  fluctuations in operating results in
the past. The fiscal 1998 operating plan includes the release of a new frequency
measurement  product  and  other  new  products.  To  the  extent  that  product
development  is  delayed  or  the  new  product  introductions  do  not  achieve
sufficient market  acceptance,  the Company's  financial position and results of
operations will be adversely impacted.  The Company's fiscal 1998 operating plan
also assumes additional  financing will be necessary to fund its 1998 operations
(see notes 6 and 7).

         The Company has incurred  significant recent losses from operations and
additional  financing will be required for the Company to meet its business plan
for fiscal 1998 and beyond.  There can be no assurance that the Company will not
incur  additional  losses until its recently  introduced  and existing  products
generate  significant   revenues.   The  accompanying   consolidated   financial
statements  have been  prepared  assuming the Company  will  continue as a going
concern.  The  Company's  business  plan for  fiscal  1998  involves  three  key
operating  objectives:  (1) increasing the manufacture and shipment of microwave
frequency  counters to  Hewlett-Packard  Company for  distribution  on a private
label basis worldwide through an OEM relationship;  (2) completing field testing
of the Company's RF synthesized  signal  generators and RF down converters under
its five-year indefinite quantity,  fixed price subcontract with ManTech Systems
Engineering Corporation,  and preparing for shipment of production quantities of
these products in the fourth fiscal quarter of 1998; and (3) completing  current
development  efforts and introducing new test  instrumentation  for the wireless
telecommunications   market.   Management  believes  that  it  can  successfully
implement  these key operating  objectives.  The  Company's  ability to generate
sufficient cash to support its business plan during the 1998 fiscal year depends
on the ability of management  to obtain  additional  debt and equity  financing,
through the Rights Offering and other capital  sources.  Management is currently
pursuing  additional  debt  financing.  If the  Company is unable to obtain such
financing,  it will be  required  to reduce  discretionary  spending in order to
maintain its operations at a reduced level.  Management believes that it will be
able to reduce discretionary  spending if required.  The accompanying  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.





                                       7
<PAGE>
Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
Company  and  its   wholly-owned   subsidiary.   All  significant   intercompany
transactions and accounts have been eliminated.

Cash Equivalents

         The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.

Short-Term Investments

         Short-term investments,  consisting of publicly traded preferred stocks
and  government  bonds,  are  stated at fair  value.  The  Company  has  adopted
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments  in Debt and Equity  Securities"  ("SFAS  115").  SFAS 115  requires
companies to classify  investments  in debt and equity  securities  with readily
determinable  fair  values  as  "held-to-maturity",  "available  for  sale",  or
"trading"  and  establishes  accounting  and  reporting  requirements  for  each
classification.  The Company  classifies  all  securities  held as available for
sale.  Securities  classified  as available  for sale are reported at their fair
market value with unrealized  gains and losses reported as a separate  component
of stockholders'  equity. Such unrealized gains and losses were immaterial as of
September 30, 1997 and 1996. The Company's  government  bonds have a maturity of
one year or less.  Publicly traded preferred stocks are considered highly liquid
and are classified as short-term investments.

Concentration of Credit Risk

         Financial   instruments  that   potentially   subject  the  Company  to
significant  concentrations  of credit risk consist  principally  of cash,  cash
equivalents  and  short-term  investments  and trade  accounts  receivable.  The
Company  places its cash,  cash  equivalents  and  short-term  investments  in a
variety of financial  instruments such as certificates of deposit and marketable
equity securities.

         The Company  performs  ongoing  credit  evaluations  of its  customers'
financial condition and,  generally,  requires no collateral from its customers.
The Company maintains an allowance for uncollectible  accounts  receivable based
upon  the  expected  collectibility  of all  accounts  receivable  balances.  At
September  30,  1997,  the accounts  receivable  balances  from three  customers
represented 14%, 12%, and 8% of net trade receivables.

Inventories

         Inventories   are  stated  at  the  lower  of  standard   cost,   which
approximates actual cost (determined on a first-in, first-out basis), or market.
Property and Equipment

         Purchased property and equipment are stated at cost and are depreciated
using the  straight-line  method over lives  ranging  from three to eight years.
Self-constructed   demonstrator   products   are   stated   at  their   standard
manufacturing cost.





                                       8
<PAGE>
Revenue Recognition and Warranty

         Sales are  recognized at the time of shipment  provided no  significant
obligations remain and collectibility is probable.  The Company provides for the
estimated  costs of fulfilling  its warranty  obligation at the time the related
sale is recorded.

Income Taxes

         The Company utilizes an asset and liability  approach that requires the
recognition of deferred tax assets and  liabilities  for the expected future tax
consequence  of events  that have been  recognized  in the  Company's  financial
statements or tax returns.

Net Income (Loss) Per Share

         The  calculation  of net  income  (loss)  per  share is based  upon the
weighted  average  number of common and  common  equivalent  shares  outstanding
during the year. As a result of the losses incurred in fiscal 1997 and 1996, the
common equivalent shares were antidilutive and, accordingly,  were excluded from
the computation of loss per share for those years. Common stock equivalents were
not materially dilutive for the year ended September 30, 1995.

Use of Estimates

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

Adoption of New Accounting Pronouncements.

         In 1995, the Financial  Accounting  Standards Board issued Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation." Only the disclosure requirements of this standard were adopted by
EIP for the year ending September 30, 1997, and therefore there was no impact on
EIP's consolidated financial position or results of operations.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128").  SFAS  128  which is  effective  for the  Company's  fiscal  year  ending
September  30,  1998,  redefines  earnings  per share under  generally  accepted
accounting  principles.  Under the new standard,  primary  earnings per share is
replaced by basic  earnings per share,  and fully diluted  earnings per share is
replaced by diluted earnings per share. The adoption of SFAS 128 is not expected
to have a material impact on the Company since earnings per share reported under
Accounting  Principles  Board Opinion No. 15 approximates  diluted  earnings per
share, which will be reported under SFAS 128.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement  of  Financial   Standards  No.  129  ("SFAS  129"),   "Disclosure  of
Information  about Capital  Structure." SFAS 129 requires  disclosure of certain
information related to the Company's capital structure and is not anticipated to
have a  material  impact on the  Company's  financial  position  or  results  of
operations.



                                       9
<PAGE>
         In June  1997,  the FASB  issued  SFAS  130,  "Reporting  Comprehensive
Income." SFAS 130 establishes  standards for reporting  comprehensive income and
its  components  in a  financial  statement  that is  displayed  with  the  same
prominence  as other  financial  statements.  Comprehensive  income  as  defined
includes  all  changes in equity  (net  assets)  during a period  from  nonowner
sources.  Examples of items to be included in  comprehensive  income,  which are
excluded from net income,  include foreign currency translation  adjustments and
unrealized gain/loss on available-for-sale securities. The disclosure prescribed
by SFAS must be made beginning with the first quarter of 1998.

         In June 1997, the FASB issued SFAS 131,  "Disclosures about Segments of
an Enterprise and Related Information". This statement establishes standards for
the  way  companies  report  information  about  operating  segments  in  annual
financial  statements.  It also  establishes  standards for related  disclosures
about products and services,  geographic areas, and major customers. The Company
has not yet  determined the impact,  if any, of adopting this new standard.  The
disclosures prescribed by SFAS 131 are effective in 1998.

NOTE 2.  Consolidated Balance Sheet Detail

(Dollars in thousands)                              September 30,
                                                    1997             1996
Accounts receivable:
   Trade                                        $    455          $   736
   Less - allowance for doubtful accounts            (50)             (50)
                                                --------------------------
                                                $    405          $   686
                                                =========================
Inventories:
   Raw materials                                $    531          $   719
   Work-in-process                                   452              320
   Finished goods                                     40               28
                                                -------------------------
                                                $  1,023          $ 1,067
                                                =========================

Property plant and equipment:
   Machinery and equipment                      $  3,093          $ 3,121
   Computer equipment and software                 1,047            1,054
   Demonstrator equipment                            306              337
   Furniture, fixtures and other fixed assets        865              807
                                                -------------------------
                                                   5,311            5,319
   Less: accumulated depreciation                 (4,721)          (4,688)
                                                --------------------------
                                                $    590          $   631
                                                =========================

Accrued liabilities:
   Salaries, wages and benefits                 $    297          $   215
   Board of Directors fees and expenses              116               77
   Legal and accounting                               89               14
   Accrued interest - affiliates                      49                -
   Commissions                                        25               83
   Warranty                                           21               53
   Other                                              32              104
                                                -------------------------
                                                $    629          $   546
                                                =========================




                                       10
<PAGE>
NOTE 3.  Employee Benefit Plans

Retirement Plan

         The Company has a  Retirement/Savings  Plan which qualifies as a thrift
plan under Section  401(k) of the Internal  Revenue Code. All employees who have
completed  three months of service on or before the semiannual  entry period are
eligible to  participate in the  Retirement  Plan.  The  Retirement  Plan allows
participants  to contribute up to 12% of their earnings to the  Retirement  Plan
and deduct this amount from their  wages for federal  income tax  purposes.  The
Company will contribute 50 cents for each dollar  contributed by the employee up
to 3% of total wages.  Company  contributions  in fiscal years 1997,  1996,  and
1995, totaled $39,000, $49,000, and $38,000, respectively.

Incentive Compensation

         The Company  has an  incentive  compensation  plan which  provides  for
awards of bonuses to officers and key employees  based  principally on achieving
stipulated   Company   financial   objectives.   In  making   specific   awards,
consideration  is given to the  individual's  contribution to the success of the
Company,  to the success and  performance of the unit or department of which the
individual is a member,  and to the achievement of individual  performance goals
established  at the  beginning  of the fiscal  year.  The formula for  computing
bonuses has been subject to annual  modification  and may in the future be again
modified at the  discretion of the Board of  Directors.  No bonuses were awarded
for fiscal years 1997 and 1996.  Bonuses of $61,000 were awarded for fiscal 1995
results.

Stock Appreciation Rights Plan

         On  November  11,  1992,  the  Board  of  Directors   adopted  a  Stock
Appreciation  Rights Plan ("SAR  Plan").  The SAR Plan provides for the award of
appreciation  rights  ("SARs") to officers and key  management  employees of the
Company  entitling  such  participants  to receive the increase,  if any, in the
value of one share of  Company  common  stock  from the date of the award to the
date(s) of valuation established at the time of the award.  Generally,  SARs are
deemed vested in five equal annual installments.  Each award vested will be paid
in cash on a scheduled payment date. During fiscal 1997, 1996, and 1995, no SARs
were awarded.  A total of 760,  2,760,  and 2,760 SARs were vested during fiscal
1997, 1996, and 1995, respectively.  A total of 4000, and 960 SARs were canceled
during  fiscal 1997 and 1995,  respectively,  leaving an  aggregate  of 760 SARs
outstanding at September 30, 1997. The Company accrues a compensation  liability
over the vesting  period based on the increase in the market value of the common
stock over the award price. The liability recorded in fiscal 1997, 1996 and 1995
was $2,000, $8,000 and $20,000, respectively.

Stock Option Plan

         FASB Statement 123, "Accounting for Stock-Based Compensation", requires
the Company to provide pro forma  information  regarding net income and earnings
per share as if compensation  cost for the Company's stock option plans had been
determined  in  accordance  with the fair value based method  prescribed in FASB
Statement  123.  The Company  estimates  the fair value of stock  options at the
grant date by using the Black-Scholes  option  pricing-model  with the following
weighted  average   assumptions  used  for  grants  in  1996,  1995,  and  1994,
respectively:  dividend yield of 0; expected volatility of 211%, 198%, and 139%;
risk-free interest rates of 5.79%,  5.73%, and 5.72%; and expected lives of four
years for the plan options.





                                       11
<PAGE>
         Under the  accounting  provisions of FASB  Statement 123, the Company's
net   (loss)   income   and   (loss)   earnings   per  share   would  have  been
increased/reduced  to the pro forma amounts  indicated  below. Pro forma results
for 1997 may not be indicative of pro forma  results in future  periods  because
the pro forma  amounts do not  include pro forma  compensation  cost for options
granted prior to October 1, 1996.
<TABLE>
<CAPTION>
                                                        September 30,
                                    -----------------------------------------------------
                                         1997                1996                 1995
                                    ------------        -------------        ------------
<S>                                 <C>                 <C>                  <C>
Net (loss) income:
     As reported                    $ (1,290,000)       $   (493,000)       $    125,000
                                     ===========         ===========         ===========
     Pro forma                      $ (1,311,000)       $   (493,000)       $    125,000
                                     ===========         ===========         ===========

Primary (loss) earnings per share:
     As reported                    $      (3.04)       $      (1.16)       $       0.30
                                     ===========         ===========         ===========
     Pro forma                      $      (3.08)       $      (1.16)       $       0.30
                                     ===========         ===========         ===========
</TABLE>

A summary of the status of the  Company's  stock option plan as of September 30,
1997,  1996,  and 1995,  and  changes  during the years  ended on those dates is
presented below:
<TABLE>
<CAPTION>
                                                               Options Outstanding
                             ---------------------------------------------------------------------------------------
                                  September 30, 1997            September 30, 1996            September 30, 1995
                             -------------------------      -------------------------      -------------------------
                                  Weighted-Average              Weighted-Average               Weighted-Average

                              Shares    Exercise Price       Shares    Exercise Price       Shares    Exercise Price
                             -------    --------------      -------    --------------      -------    --------------
<S>                          <C>          <C>               <C>          <C>               <C>          <C>
Outstanding at
  beginning of year           95,400      $   3.039          59,500      $   2.375              --      $      --
Granted                       50,000          4.750          37,500          4.030          59,500          2.375
Exercised                         --             --          (1,600)         2.375              --             --
Cancelled                    (13,000)         2.721              --             --              --             --
                             -------      ---------         -------      ---------         -------      ---------
Outstanding at
  end of year                132,400      $   3.727          95,400      $   3.039          59,500      $   2.375
                             =======      =========         =======      =========         =======      =========

Options exercisable
  at year-end                 49,765                         24,299                             --
                             =======                        =======                        =======

Weighted-average
  fair value of
  options granted
  during the year                         $   4.750                      $   4.030                      $   2.375
                                           ========                       ========                       ========
</TABLE>


The following table summarizes  information  about stock options  outstanding at
September 30, 1997:
<TABLE>
<CAPTION>
                                 Options Outstanding                         Options Exercisable
                  --------------------------------------------------   ------------------------------
                     Number      Weighted-Average                         Number
    Range of      Outstanding       Remaining       Weighted-Average   Exercisable   Weighted-Average
Exercise Prices    at 9/30/97    Contractual Life    Exercise Price     at 9/30/97    Exercise Price
---------------   -----------    ----------------   ----------------   -----------   ----------------
<S>               <C>            <C>                <C>                <C>           <C>
     $2.375           47,900         7.5 Years         $    2.375          29,532        $     2.375
     $3.875           19,500         8.3 Years         $    3.875          11,900        $     3.875
     $4.263           15,000         8.3 Years         $    4.263           5,000        $     4.263
     $4.750           50,000         9.1 Years         $    4.750           3,333        $     4.750
                  ----------                            ---------      ----------         ----------
                     132,400                           $    3.707          49,765        $     3.082
                  ==========                            =========      ==========         ==========

</TABLE>



                                       12
<PAGE>
NOTE 4.  Income Taxes

Deferred tax assets (liabilities) are summarized as follows:

(Dollars in thousands)                      1997           1996          1995

Net operating loss carryforwards        $  1,613       $  1,104      $  1,016
Tax credit carryforwards                     124            106           106
Inventory and other valuation reserves       229            221           190
                                        -------------------------------------
    Gross deferred tax asset               1,966          1,431         1,312
                                        -------------------------------------

Gross deferred tax liability                   -               -            -
                                        -------------------------------------
Deferred tax asset valuation allowance    (1,966)        (1,431)       (1,312)
                                        -------------------------------------
     Net deferred tax asset             $      -       $      -      $     -
                                        -------------------------------------

     The Company provides a valuation  allowance for deferred tax assets when it
is more likely than not that some  portion or all of the deferred tax asset will
not be realized.

         The U.S. net operating loss carryforward of approximately $4,400,000 at
September 30, 1997,  expires by fiscal year 2011 if not offset  against  taxable
income.  The amount of and the  benefit  from net  operating  losses that can be
carried forward may be impaired in certain circumstances. Events which may cause
changes in the  Company's  tax  carryovers  include,  but are not  limited to, a
cumulative ownership change of more than 50% over a three-year period.

NOTE 5.  Commitments And Contingencies

         The  Company  has signed a lease for 20,331  square  feet in a building
located in  Milpitas,  California,  for an initial  term of three  years  ending
October 31,  1998.  The lease  provides  for rentals of $226,000 and $19,000 for
fiscal years 1998 and 1999 plus  applicable  real property  taxes and insurance,
and contains one three year renewal  option.  Future lease  commitments  for the
next five fiscal  years for all other  leases as of  September  30, 1997 were as
follows (in thousands):

   Fiscal year ending September 30,         Capital Leases      Operating Leases
   --------------------------------         --------------      ----------------

     1998                                       $  40               $ 33
     1999                                          28                 24
     2000                                          26                 22
     Thereafter                                    21                 19
                                                 ----                 --
     Total minimum lease payments                 115               $ 98
                                                                     ===
     Less amount representing interest            (18)
                                                 -----
     Present value of minimum lease payments       97
     Less current portion                         (34)
                                                 ----
     Long-term lease obligation                 $  63
                                                 ====






                                       13
<PAGE>
         The Company also leases certain  equipment on a  month-to-month  basis.
Total rental  expense under all operating  leases was  $254,000,  $258,000,  and
$300,000, in fiscal years 1997, 1996, and 1995, respectively.

         On October 1, 1995,  the Company  entered into an Employment  Agreement
(the  "Agreement") with John F. Bishop,  Vice-Chairman of the Board,  Treasurer,
and Secretary of the Company, whereby Mr. Bishop will provide his services for a
monthly  salary of $6,500 for an initial term of two years.  On the first day of
each month, the initial term is automatically  extended for an additional month,
unless  either  party  notifies the other in writing of his or its desire not to
extend the term. In the event the Company elects not to extend the term or there
is a change in control of the Company  (the date of such event is referred to as
the  "Transition  Date"),  Mr. Bishop will continue to perform  services for the
Company for a three month  transition  period and the Company would maintain his
compensation  and other  benefits for the three month  transition  period and an
additional  twenty-one months.  Effective January 1, 1997, Mr. Bishop has agreed
to reduce his monthly salary to $3,250 until the Transition  Date. The Agreement
also allows Mr. Bishop the use of an  automobile  and the right to receive title
to the  automobile,  arising out of his  agreement to forgo $56,846 of salary in
prior years. Maintenance, insurance and gasoline costs for the automobile and an
office  location  are  also  part of the  Agreement.  The  corporate  office  is
currently  located in Newport  Beach,  California,  leased at a monthly  rate of
$1,320 on a month-to-month basis.

NOTE 6.  Bank Borrowings

         At September 30, 1996,  the Company had a bank line of credit  ("line")
which  provided for  borrowings  up to  $500,000,  not to exceed 60% of eligible
accounts  receivable.  The balance  outstanding was $185,000 as of September 30,
1996.  The line  bears  interest  at the  bank's  prime  rate plus 3% per annum,
provided  that the interest rate in effect each month shall not be less than 10%
per annum,  and is payable monthly  (11.25% as of September 30, 1996).  The line
contains  various  restrictive  covenants  requiring,  among other matters,  the
maintenance  of  minimum  levels of  tangible  net worth and  profitability  and
certain financial ratios,  including minimum quick ratio and maximum debt to net
worth ratio.  The line also  precludes  or limits the Company in taking  certain
actions,  such  as  paying  dividends,  making  loans,  making  acquisitions  or
incurring  indebtedness,  without the bank's prior written consent.  The line is
secured by substantially  all of the Company's  assets. As of November 15, 1996,
the bank  extended the maturity date of the line to January 15, 1997 and amended
certain   restrictive   covenants,   but  limited  borrowings  to  the  $185,000
outstanding.

         On  January  15,  1997,  the  bank  line was  revised  to  provide  for
borrowings up to $500,000.  At September 30, 1997,  the  outstanding  borrowings
were $296,000.  As of October 23, 1997,  the Company was not in compliance  with
the  restrictive  covenants  of the line,  as so amended.  In the event that the
Company is unable to maintain compliance with financial  covenants,  J. Bradford
Bishop,  the Chairman and Chief  Executive  Officer of the Company,  and John F.
Bishop,  the  Vice  Chairman,  Treasurer  and  Secretary  of  the  Company  (the
"Bishops") have agreed to finance up to $500,000 of working capital (in addition
to funds  provided  under  the  subordinated  loan  facility  (note 7)) on terms
acceptable to the Bishops and the Company to replace the line of credit.

NOTE 7.  Subordinated Loan Agreement and Bridge Loans

         The  Company  entered  into  Subordinated  Loan  Agreement  dated as of
December 16, 1996 with J. Bradford Bishop,  Chairman and Chief Executive Officer
of the Company,  and John F. Bishop,  Vice Chairman,  Treasurer and Secretary of
the Company  (together,  the "Bishops").  The Bishops  advanced  $600,000 to the
Company under the  Subordinated  Loan Agreement.  Interest accrued thereon at 8%
per  annum,  payable  quarterly.   In  connection  with  the  Subordinated  Loan
Agreement,  the Company issued

                                       14
<PAGE>
warrants to the Bishops to purchase  90,000  shares of Common Stock at $3.00 per
share. The Subordinated  Loan Agreement  terminated on October 15, 1997, and all
obligations  thereunder  were repaid in full on such date with the proceeds from
the Loan Facility with the Bishop  Family Trust (Note 8). As  consideration  for
the early repayment of such obligations, the warrants issued to the Bishops were
canceled on October 15, 1997.

         The Company has received  several bridge loans from the Bishops payable
on demand (the "Bridge Loans"),  which amounted to $400,000,  plus interest,  on
September 30, 1997.  Interest accrued thereon at 10% per annum. The Bridge Loans
were  repaid  in full on  October  15,  1997,  with the  proceeds  from the Loan
Facility with the Bishop Family Trust.

NOTE 8.  Subsequent Event

         On October 15,  1997,  the  Company  entered  into a loan and  security
agreement (the "Loan Facility") with John F. Bishop and Ann R. Bishop,  trustees
of the Bishop  Family  Trust (the  "Bishop  Family  Trust").  The Loan  Facility
provides for a term loan of $1,000,000  and  revolving  advances up to $450,000.
Interest is charged at the prime rate plus 5% and is payable  monthly  (13.5% as
of October 15, 1997).  The Loan Facility  expires on October 15, 1998.  The Loan
Facility contains various restrictive covenants requiring,  among other matters,
the achievement of profitability on a rolling 3-month basis commencing in August
1998,  and the  maintenance  of  minimum  revenues  from  its  OEM  relationship
commencing in January 1998. The Bishop Family Trust also precludes or limits the
Company's  ability to take certain  actions,  such as paying  dividends,  making
loans, making acquisitions or incurring indebtedness,  without the Bishop Family
Trust's prior written consent. The Loan Facility is secured by substantially all
of the  Company's  assets.  The Bishop  Family Trust has  subordinated  the Loan
Facility to the Bank Line.  At October 15, 1997,  the Company was in  compliance
with the restrictive covenants of the Loan Facility.

         Under the terms of the Loan Facility,  the Company will be obligated to
pay  facility  fees of up to $282,000 to the Bishop  Family  Trust in the manner
described below.

         A. A facility  fee of $70,500 was fully  earned on October 22, 1997 and
will be payable by the Company on January 22, 1998.

         B. If the principal  amount of the  obligations  outstanding  under the
Loan  Facility  on January  22,  1998  exceeds  $1,000,000,  then an  additional
facility fee of $70,500 will be fully earned on such date and will be payable by
the Company on January 22, 1998.

         C. If the principal  amount of the  obligations  outstanding  under the
Loan Facility on April 22, 1998 exceeds $1,000,000,  then an additional facility
fee of  $141,000  will be fully  earned on such date and will be  payable by the
Company on April 22, 1998.

The Company  will have the right to pay the  facility fee in cash or by issuance
of Common Stock.  The number of shares of Common Stock issuable as payment for a
facility fee will equal (a) the applicable  facility fee divided by (b) the Fair
Market Value (as defined in the Loan  Facility) per share of Common Stock on the
date such facility fee is payable to the Bishop Family Trust.

         Future performance and levels of capital  expenditures could reduce the
total amount of funds available under the Bank Line and the Loan Facility at any
given time.



                                       15
<PAGE>
NOTE 9.  Board of Directors' Fees

         During fiscal 1996, the Board of Directors  waived fees owed to them by
the Company  totaling  $112,000.  The  reversal of  previously  accrued fees was
included in  "Interest  and other,  net" cost and  expenses in the  statement of
operations,  and thereby  reduced the net loss for the year ended  September 30,
1996.










































                                       16
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS





To the Board of Directors and
Stockholders of EIP Microwave, Inc.

         We have  audited the  accompanying  consolidated  balance  sheet of EIP
Microwave,  Inc.  and  subsidiary  as of  September  30,  1997,  and the related
consolidated  statements of operations,  stockholders' equity (deficiency),  and
cash flows for the year then ended. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated  financial  statements based on our audits. The
consolidated  financial  statements of EIP Microwave,  Inc. and subsidiary as of
September  30,  1996 and for the years  ended  September  30, 1996 and 1995 were
audited by other  auditors  whose  report as of October  23,  1997  included  an
explanatory  paragraph that described  conditions that raise  substantial  doubt
about the Company's ability to continue as a going concern.

         We conducted our audit in accordance with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present  fairly,  in  all  material  respects,  the  financial  position  of EIP
Microwave,  Inc. and  subsidiary  as of September  30, 1997,  and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

         The accompanying  financial  statements have been prepared assuming the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has incurred  significant recent losses from
operations  and will need to obtain  additional  financing  to meet its business
plans for fiscal 1998 and beyond. These conditions raise substantial doubt about
its  ability to  continue as a going  concern.  Management's  plans in regard to
these  matters are also  described in Note 1. The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.


/s/  Meredith, Cardozo, Lanz & Chiu LLP

MEREDITH, CARDOZO, LANZ & CHIU LLP
San Jose, California
November 20, 1997






                                       17
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS





To the Board of Directors and
Stockholders of EIP Microwave, Inc.

         In our opinion,  the accompanying  consolidated  balance sheets and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows present fairly, in all material  respects,  the financial  position of EIP
Microwave,  Inc.  and its  subsidiary  at September  30, 1996 and 1995,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  September  30, 1996,  in conformity  with  generally  accepted
accounting principles.  These financial statements are the responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.

         The accompanying  financial  statements have been prepared assuming the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has incurred  significant recent losses from
operations  and may need to obtain  additional  financing  to meet its  business
plans for fiscal 1998 and beyond that raise  substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 1. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.


/s/  Price Waterhouse LLP

PRICE WATERHOUSE LLP
San Jose, California
December  23,  1996,  except  for the  third  paragraph  of Note 1,  the  second
paragraph of Note 6 and Note 9, which are as of October 23, 1997.









                                       18
<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    EIP MICROWAVE, INC.

September   , 1998                  By:
                                       ------------------------------------
                                       J. Bradford Bishop
                                       Chairman of the Board
                                       Chief Executive Officer and Director


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.



/s/ J. Bradford Bishop                      
--------------------------                                    September 21, 1998
J. Bradford Bishop            Chairman of the Board,
                              Chief Executive Officer and Director
                              (Principal Executive Officer)


/s/ William J. Stanners, Jr.
--------------------------
William J. Stanners, Jr.                                      September 21, 1998
                              Chief Financial Officer, Treasurer and
                              Assistant Secretary (Principal Financial 
                              Officer & Principal Accounting Officer)


/s/ John F. Bishop
--------------------------
John F. Bishop                 Director                       September 21, 1998


--------------------------
Robert D. Johnson              Director                       September   , 1998
              
  

--------------------------
J. Sidney Webb                 Director                       September   , 1998
                 


/s/ Michael E. Johnson
--------------------------
Michael E. Johnson             Director                       September 21, 1998


/s/ James N. Cutler, Jr.
--------------------------
James N. Cutler, Jr.           Director                       September 21, 1998





                                       19