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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

(Mark One)

|ý                                         | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|----------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended March 31, 2002.
|or                                       
|o                                         | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to
.

Commission file number: 0-24360

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SPECTRIAN CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 77-0023003                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification Number)
|350 West Java Drive,
Sunnyvale, California                     |  | 94089                                  
|(Address of principal executive office)                        |  | (Zip Code)                             

Registrant's telephone number, including area code:(408) 745-5400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange
on which registeredNone

None


Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
Series A Participating Preferred Stock, $.001 par value

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

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ý

The
aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Common Stock on May 31, 2002 as
reported on the Nasdaq National Market, was approximately $149,000,000. Shares of Common Stock held by each executive officer and director and by each person who owns 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As
of May 31, 2002, registrant had outstanding 11,475,451 shares of Common Stock exclusive of 1,293,700 shares of treasury stock.

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SPECTRIAN CORPORATION        INDEX TO  ANNUAL REPORT ON FORM 10-K        FOR YEAR ENDED MARCH 31, 2002

|           |  |                                                                                       |  | Page
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I    
|Item 1.    |  | Business                                                                              |  | 3   
|Item 2.    |  | Properties                                                                            |  | 14  
|Item 3.    |  | Legal Proceedings                                                                     |  | 15  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 15  
|PART II   
|Item 5.    |  | Market for the Registrant's Common Equity and Related Stockholder Matters             |  | 16  
|Item 6.    |  | Selected Consolidated Financial Data                                                  |  | 17  
|Item 7.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 18  
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 45  
|Item 8.    |  | Financial Statements and Supplementary Data                                           |  | 47  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 48  
|PART III  
|Item 10.   |  | Directors and Executive Officers of the Registrant                                    |  | 49  
|Item 11.   |  | Executive Compensation                                                                |  | 53  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 61  
|Item 13.   |  | Certain Relationships and Related Transactions                                        |  | 69  
|PART IV   
|Item 14.   |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 70  
|Signatures |  | 74                                                                                   

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PART I

ITEM 1. BUSINESS

This Annual Report on Form 10-K, including the information incorporated by reference herein, includes "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). These statements include, among other things, statements concerning Spectrian Corporation's ("Spectrian's" or "the Company's") expectations, beliefs, plans, intentions, future
operations, financial condition and prospects, and business strategies. The words "may," "will," "continue," "estimate," "project," "intend," "believe," "expect," "anticipate" and other similar
expressions generally identify forward-looking statements. Forward-looking statements in this Item 1 include, but are not limited to, those statements regarding the merger with REMEC, Inc., the
terms of the Agreement and Plan of Merger and Reorganization by and among REMEC, Inc., Reef Acquisition Corp. and the Company dated as of May 19, 2002, and the expected close of the
proposed merger; the expansion of the market for wireless communications due to the installation of wireless telephone networks in several developing countries and due to emerging
bi-directional wireless data applications; the new opportunities created by the attempt of traditional mobile communications systems providers to provide high Internet access speeds and
the adoption of limited Internet capability by PCS and cellular systems; the growing demand for wireless data equipment in Japan; the increasing demand for amplifier hardware and the price pressures
in the power amplifier market; the emergence in the United States and other developed countries of a wireless data service market; the increased use by wireless systems of multicarrier product
amplifiers due to lower cost and more compact size of such amplifiers; the effect of the loss or a significant decline in the product orders of a major customer of the Company; the occurrence of
future pricing pressures from its customers; the importance of sales outside of the United States; the expected completion date of the transfer of the Company's power amplifier repair and product
integration operations to a contract manufacturer; the Company's pricing commitments to OEM customers to achieve manufacturing cost reductions; customers' demanding specifications for the Company's
products; the Company's devotion of resources to research and development programs and the Company's success being dependent, in part, upon its ability to retain, attract and motivate highly qualified
personnel. There can be no assurance that these expectations will prove to have been correct. Certain important factors that could cause actual results to differ materially from the Company's
expectations are disclosed in this Annual Report on Form 10-K, including, without limitation, in the section entitled "Factors Affecting Future Operating Results" in Item
7Management's Discussion and Analysis of Financial Condition and Results of Operation and this section. All subsequent written and oral forward looking statements by or attributable to
the Company or persons acting on its behalf are expressly qualified in their entirety by such factors.

All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Investors are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. These forward-looking statements are made in
reliance upon the safe harbor provision of The Private Securities Litigation Reform Act of 1995.

General

The Company designs, manufactures and markets high-power radio frequency ("RF") amplifiers for the global wireless communications industry. The
Company's power amplifiers support a broad range of transmission standards, including Advanced Mobile Phone Services ("AMPS"), Time Division Multiple Access ("TDMA"), Code Division Multiple Access
("CDMA" and "CDMA2000"), Personal Communications System ("PCS"), Global System for Mobil Communications ("GSM"), Wireless Local Loop ("WLL"), Universal Mobile Telephone Service ("UMTS"), and
IMT-2000. Spectrian's power

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amplifiers are utilized as part of the infrastructure for both wireless voice and data networks. The Company's power amplifiers boost the power of a signal so that it can reach a wireless phone or
other device within a designated geography.

Spectrian
sells amplifiers to wireless base station manufacturing companies ("OEMs") and network operators of wireless communications systems. The Company focuses its product offering on
high-performance multicarrier amplifiers for the mobile wireless communications market.

Proposed Merger

On May 19, 2002, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and among REMEC, Inc., a California
corporation ("REMEC"), Reef Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of REMEC ("Merger Sub") and the Company pursuant to which REMEC will acquire the Company by a merger
of Merger Sub with the Company ("the merger"). Upon consummation of the merger, the Company's stockholders will receive approximately $14.00 of REMEC common stock, subject to a collar, or if REMEC
chooses, a combination of REMEC common stock and cash. If REMEC elects to pay in cash, it may pay up to $4.00 per share in cash. The remaining payment will be in REMEC common stock, which will be
determined based on the average trading price of REMEC common stock for the ten day period ending on the second trading day before the Company's special meeting of stockholders to approve the merger
and the Merger Agreement. Spectrian stockholders will also receive cash for any fractional shares of REMEC common stock that they are entitled to receive in the merger.

The
parties intend for the merger to be considered a tax-free reorganization under the Internal Revenue Code with respect to the REMEC common stock issued to the Company's
stockholders. The Merger Agreement has been approved unanimously by the board of directors of both companies. The merger is expected to close in the quarter ending September 30, 2002 but is
subject to a number of conditions including, among other things, approval of the Company's stockholders, approval of REMEC's shareholders and various regulatory approvals and clearances, including
those under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and the Securities Act of 1933, as amended.

Industry Background

The market for cellular, PCS, WLL, UMTS, and other communications services (collectively known as "wireless" services) has grown significantly during the past
decade, due to decreasing prices for wireless handsets, increasing competition among network operators and a greater availability of high quality services and RF spectrum. In addition, several
developing countries are installing wireless telephone networks as an alternative to installing, expanding or upgrading traditional wireline networks. Emerging bi-directional wireless data
applications have the potential to further expand the market for wireless communications by allowing network operators to increase revenue-generating traffic on their networks.

A
typical wireless communications system comprises a geographic region containing a number of cells, each of which contains a cell site (or "base station"), which are networked to
form a service provider's coverage area. Each base station houses the equipment that sends telephone calls to/from the switching office of the local wireline telephone company and transmits and
receives calls to the wireless users within the cell. A base station contains a fixed number of RF channels. In a single carrier system, each separate channel requires a separate transceiver, single
channel power amplifier and a tunable cavity filter, feeding an antenna to transmit the outgoing signal to the wireless telephone user. Wireless carriers are actively working to increase system
capacity by implementing additional radio carriers to existing base stations, and by adding new radio interface standards such as GSM, GPRS, EDGE, CDMA 1XRTT, and UMTS. In adding new radio traffic,
the network operator must increase

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the radio frequency power available in the transmission equipment in order to cover the same geographical area. Therefore, the need to increase system capacity has led many wireless base station
manufacturers and network operators to procure high power amplifiers which are designed to handle advanced digital communications signal formats.

Wireless
carriers' ability to more effectively manage the scarce spectrum resources and accommodate a larger number of subscribers is dependent on their ability to broadcast signals with
high "linearity." Linearity is the degree to which amplified signals remain within their prescribed band of the spectrum with low distortion or interference from adjacent channels. In the base station
network, RF power amplification is generally the greatest source of signal distortion. Consequently, obtaining RF power amplifiers with high linearity is critical to a service provider's ability to
reduce interference levels and thereby increase system capacity. One traditional technique to attain high linearity involves the use of feedforward linearization technology. Feedforward amplifiers are
typically highly complex and consume
more electrical power than other portions of the base station. In addition, due to the high voltages and temperatures involved, amplifiers are generally less reliable than the other circuits in a
wireless base station. Therefore, differentiation in the amplifier marketplace is often based on the cost, efficiency, and reliability of the amplifier products. Substantial investment and technical
expertise are required to design and manufacture single and multicarrier RF power amplifiers with high linearity, low cost, high efficiency and high reliability; all of which are critical to the
network and the service.

An
emerging trend in the wireless communications industry is the convergence of Internet high speed access with mobile and fixed wireless systems. Cellular and PCS systems are currently
adopting limited Internet capability, and many traditional mobile communications systems providers are attempting to provide high Internet access speeds which, Spectrian anticipates, will create
opportunities for new systems to gain market acceptance. Spectrian has been involved in initial deployments of early wireless Internet systems such as CDMA2000 or 1xRTT systems in Korea and the United
States, wireless local loop systems, and field trials of HDR systems. Initial consumer acceptance of wireless Internet services in Japan has indicated a growing demand for wireless data equipment.

The
growth of infrastructure equipment purchases is, however, impacted by the industry's focus on price reductions. Cellular Telecommunications Industry Association ("CTIA") indicates
that minutes of use are increasing by more than 30% per year; however, the average revenue per wireless user has been flat or declined. Competition between network operators for subscribers is
significant and influenced by subscriber plans that include a single rate, free long distance, no roaming charges and free minutes of use. This pricing pressure extends to the equipment manufacturers,
including suppliers of amplifiers and components. Therefore the demand for amplifier hardware is growing rapidly but the power amplifier market experiences severe price pressures.

The Spectrian Solution

Spectrian designs, manufactures and markets highly linear RF power amplifiers that seek to address the needs of wireless infrastructure "OEMs" and network
operators. The Company's amplifiers provide significant advantages to its customers, including:

High Linearity and Efficiency.The Company has developed the multiple technological competencies and disciplines required to
achieve high linearity and efficiency in its amplifiers. These competencies and disciplines include thermal and mechanical packaging design, advanced circuit design, linear correction technologies,
advanced signal processing techniques, control systems and computer aided design and modeling. Spectrian believes that the high degree of linearity of the Company's power amplifiers enables its
customers to furnish wireless services with high capacity base station equipment at low capital cost per subscriber. In addition, Spectrian believes that the high efficiency of the Company's power
amplifiers reduce its customers' operating costs by reducing requirements for air conditioning

5

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and other heat removal equipment, as well as reducing the network operator's recurring electricity costs.

Time to Market and Volume Manufacturing.The Company's design processes aid it in addressing wireless infrastructure
equipment suppliers' quantity and time to market requirements for power amplification products. The Company designs its amplifiers to be manufactured in high volumes at low cost. Power amplifiers have
historically been difficult to manufacture in high volumes due to the labor intensive nature of the manufacturing process and the complexities of RF power technology. The Company believes that its
experience with automated testing, which is faster than manual testing with replicable results, enables the Company to transfer manufacturing to outsource partners in lower cost areas of the world and
to achieve high volume at low cost.

Standards Independence.The Company's technologies support the major wireless modulation standards, and its multicarrier
power amplifiers support several standards simultaneously, including 3G modulation standards. The Company believes that this breadth of product functionality is important to wireless network operators
as they upgrade their cellular infrastructure equipment and implement digital systems in an environment characterized by evolving industry standards and new spectrum allocation.

Quality and Reliability.The Company strives to design its power amplifiers to be reliable in the field. The Company's
integrated design and manufacturing processes are important factors contributing to its ability to develop and produce reliable power amplifiers. In order to further address customer requirements for
power amplifier quality and reliability and to ensure process quality control, the Company has implemented a continuous process improvement program throughout its operations and the Company is ISO
9001 certified.

Multicarrier Functionality.The Company develops and supplies multicarrier amplifiers that integrate the functions of
multiple single carrier power amplifiers into a single unit, while simultaneously eliminating the need for certain filters and/or combiners. The Company believes the ability of its multicarrier
products to combine multiple digital and analog channel schemes enables carriers to maintain backward compatibility as they add digital transmission and implement dynamic channel allocation solutions.
In addition, high efficiency multicarrier units can reduce network operators' equipment and maintenance costs and space requirements, thereby lowering the total costs of ownership.

Markets

Wireless systems have historically employed analog transmission formats, certain of which have been adopted as industry standards. The need to accommodate a
growing wireless customer base within a finite amount of spectrum has, however, encouraged a worldwide transition from analog standards to various digital technologies which are significantly more
efficient. Current analog standards include AMPS, Total Access Communications System ("TACS") and Nordic Mobile Telephone ("NMT"). Current digital standards include TDMA, GSM and EDGE, CDMA
(IS-95A and B), CDMA 2000 (1xRTT), HDR (1xEV-DO) UMTS, IMT-2000, and Personal Digital Cellular ("PDC").

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The
following chart illustrates these existing and developing standards for wireless communications, and the shaded areas represent markets and/or regions served and standards supported
by the Company's current product offerings.

|                    |  | Major Wireless Standards by Region (frequencies in MHZ)      
|------------------- |  | -------------------------------------------------------------
|
|
|Analog Cellular     |  | AMPS (800)                                                   
|Digital Cellular    |  | CDMA (800)
TDMA (800)
GSM (800)
EDGE                         
|PCS                 |  | CDMA (1900)
CDMA 2000 (800, 1900)
TDMA (1900)
GSM (1900)
EDGE
|Wideband 3G & WCDMA |  | CDMA (800)
CDMA (1900)
WCS (2.3 GHz)                         

The Company believes that the potential for wireless communications in countries without reliable or extensive wireline systems may be
significant. The cost of building and maintaining a wireless network is generally less than the cost of building and maintaining a comparable wireline network. Thus, in many less developed countries,
wireless service may be the primary service platform for both mobile and fixed telecommunications. In addition, if technological advances and price decreases continue to occur, a market in the United
States and other developed countries for wireless data service may emerge.

Products

The Company designs highly linear power amplifiers that address the specific requirements of its customers and the market. The Company's product strategy is to
support multiple wireless systems and standards.

Most
existing installed wireless systems use lower cost single carrier power amplifiers. The following table provides a list of the standards for single carrier amplifiers offered by the
Company:

Spectrian Single Carrier Amplifier ConfigurationsStandard

Frequency
(MHZ)

Power
(Watts)Analog Cellular:AMPS, CDPD

869-894

45Digital Cellular:TDMA

869-894

50GSM

925-960

30PCS:GSM 1800

1805-1880

30CDMA

1930-1990

17GSM 1900

1930-1990

30


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While
many existing wireless systems use single carrier power amplifiers, the Company believes that more wireless systems will use multicarrier power amplifiers in the
future due to the lower cost and more capacity of multicarrier amplifier products. To meet this potential market trend, the Company has focused its development efforts on multicarrier amplification
products. The following table provides a list of the standards for multicarrier amplifiers offered by the Company:

Spectrian Multicarrier Amplifier ConfigurationsStandard

Frequency
(MHZ)

Power
(Watts)

Typical
Linearity
(dBc)*AMPS
TDMA
CDPD
CDMA/1xRTT/1xEV-DO
GSM/GPRS/EDGE UMTS

840-894

30-500

-65CDMA
CDMA/1xRTT/1xEV-DO
UMTS

1805-1990

30-75

-58TDMA
CDMA/1xRTT/1xEV-DO
GSM/GPRS/EDGE
UMTS

1930-1990

30-80

-65CDMA/1xRTT/1xEV-DO
IMT-2000/UMTS

2110-2170

30-60

-60


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*Carrier
to Intermodulation Distortion Ratio.

The
Company's amplifiers can be configured as either separate plug-in amplifier units or integrated subsystems and range in price from approximately $400 to $130,000. A basic
amplifier unit consists of a set of semiconductor power transistors, which boost the power of radio-frequency signals, circuitry to bias and adapt the transistors to interface with other electronics,
and a metal heat sink. A power amplifier subsystem consists of multiple electronic subassemblies and adds signal processing to enhance
linearity. The Company offers subsystem products and often integrates multiple subsystems into cabinets and sub-racks which provide amplification for a multi-sector base station. The
Company's products are integrated into base station systems designed and/or manufactured by OEM base station suppliers, and therefore must be engineered to be compatible with industry standards, as
well as customer specifications including frequency, power and linearity.

OEM and Network Operator Customers, Sales and Marketing

Network operators obtain their equipment from a concentrated group of large wireless infrastructure OEMs. According to Allied Business Intelligence,
Lucent Technologies, Inc. ("Lucent"), Ericsson Wireless Communications, Inc. ("Ericsson"), Hitachi, Ltd. ("Hitachi") Japan Radio Co. Ltd., Matsushita Electric Industrial
Co., Ltd. (doing business as "Panasonic"), Motorola Corporation ("Motorola"), LG Information and Communications Limited ("LGIC"), Siemens AG ("Siemens"), Samsung Electronics Co., Ltd.
("Samsung"), Nortel, and Nokia OY ("Nokia") supplied over 80% of the wireless infrastructure equipment installed worldwide in 2001. Many of these OEMs manufacture most of their base station
components, including the power amplifier, internally. In response to competition and as the performance requirements of certain components increase, many of these OEMs have begun to outsource
some of their power amplifier manufacturing to companies like Spectrian. To succeed in capturing orders from these OEMs, independent power amplifier suppliers must rapidly bring to market products
that are highly linear, can be produced in volume cost-effectively, support multiple standards and are reliable in the field.

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The Company sells power amplifiers to a limited number of OEMs in North America, Europe and Asia principally through its direct sales organization. Other current customers include
wireless network operators such as Cingular and Verizon. As network operators upgrade their wireless base stations, they often work directly with independent power amplifier manufacturers to ensure
new products are compatible with their existing network, support increased coverage areas, and provide high linearity. During fiscal 2002, Nortel, Samsung and Verizon accounted for approximately 47%,
24% and 12% of net revenues, respectively. Also during the second half of fiscal 2002, Cingular accounted for 16% of net revenues. During fiscal 2001, Nortel, Verizon and Samsung accounted for
approximately 59%, 18%, and 13% of net revenues, respectively. During fiscal 2000, Nortel accounted for approximately 72% of net revenues. Revenue with Nortel includes both Nortel Networks Corporation
and Guangdong Nortel Telecommunications Equipment Ltd., ("GDNT"), a joint venture between Nortel and Chinese local companies.

Furthermore,
a substantial portion of revenues from Nortel in the past has resulted from sales of a limited number of the Company's single carrier products. The Company's business,
financial condition and results of operations have been materially adversely affected in the past by anticipated orders failing to materialize and by deferrals or cancellations of orders as a result
of changes in customer requirements. The Company and Nortel have a supply agreement, renegotiated annually, pursuant to which Nortel commits to purchase a certain volume of its annual power amplifier
requirements for specified prices from the Company. This agreement allows Nortel to change the product mix requirements, which can significantly affect the Company's gross margins, and to change
requested delivery dates without significant financial consequences to Nortel. In addition, the Company's sales to Verizon, Samsung and Cingular are generally made on the basis of purchase orders
rather than long-term purchase commitments and any of these customers may cancel or defer their purchase orders without advanced notice to the Company. The Company's contractual
relationships with its major customers may adversely affect the Company's ability to efficiently manage production schedules and inventory levels and to accurately forecast product sales. There can be
no assurance that the Company will not experience such fluctuations in the future.

The
wireless communications market is characterized by volatile swings in production run rates based on the capital spending of wireless network operators in the deployment and upgrade
of their systems. The supply agreements and purchase orders from network operators do not generally commit the network operators to purchase quantities and allow them to change requested delivery
dates without significant financial consequences. Wide fluctuations in production volumes and delivery dates have impacted Spectrian's inventory levels and revenue levels during the past five years.
There can be no assurance that the Company will not experience such fluctuations in the future. If the Company is unable to find customers to generate demand for its new products, the Company's
revenues may be materially adversely affected. If the Company were to lose Nortel, Verizon, Samsung, Cingular or any other major customer, or if orders by Nortel, Verizon, Samsung, Cingular or any
other major customer
were to otherwise materially decrease either in unit quantity or in price, the Company's business, financial condition and results of operations would be materially adversely affected.

The
merchant market for the Company's products is becoming increasingly competitive. The Company sells its power amplifier products in several countries where its competitors are already
well established as suppliers. The Company competes with several merchant amplifier manufacturers for business from Nortel, Verizon, Samsung and Cingular. Major manufacturers of wireless
communications equipment have elected to enter the merchant amplifier business and compete directly with the Company. In 2001, Lucent formed and spun out Celiant, which entered the merchant amplifier
market. In June 2002, Andrew acquired Celiant. This competition has resulted in, and will continue to result in reduced average selling prices for the Company's products, which accordingly will
negatively impact gross margins. See "Management's Discussion and Analysis of Financial Condition and Results of

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Operations ("MD&A")Factors Affecting Future Operating ResultsRisks Related to Ongoing OperationsCustomer Concentration; Dependence on
Nortel, Verizon, Samsung and Cingular."

Sales and Marketing

The Company employs a customer focused, team based direct sales approach to satisfy the power amplification needs of its customers. Sales to large OEM customers
require close account management by Company personnel and relationships at multiple levels of its customers' organizations, including management, engineering and purchasing personnel. In addition, the
Company's application specific amplification products require experienced sales personnel to match the customer's amplification requirements to the Company's product capabilities. The Company believes
that close technical collaboration with the customer during the design phase of new wireless infrastructure equipment is critical to the integration of its amplification products into the new
equipment. This allows the Company's engineering personnel to work closely with their counterparts at the OEM customer to assure compliance of the Spectrian product to the customer's specification.

As
part of the effort to diversify its product base, the Company began to sell multicarrier amplifier systems (including filters and combiners) directly to network operators in fiscal
1997. The Company recognizes that these sales may be in conflict with potential or current OEM sales and is willing to work with its OEM equipment suppliers so that the service provider receives a
Spectrian power amplifier system directly or through the OEM. There can be no assurance that the Company's direct sales to network operators will not cause its OEM equipment suppliers to reduce orders
or terminate their relationship with the Company. Any such reduction or termination could have a material adverse effect on the Company's business, financial condition and results of operations.

The
Company has located sales and support personnel throughout the United States and in South Korea and China. The Company has sales personnel in Brazil and Europe. The Company also
markets its products with the assistance of independent sales representatives in various parts of the world. The Company has entered into contracts with independent sales representatives to market the
Company's
products in the United States, Canada, Austria, Finland, France, Germany, Italy, Sweden, Switzerland, Argentina, Brazil, Colombia, Chile, Venezuela and Japan. The Company continuously evaluates
whether to establish direct sales forces or to utilize independent representatives in a particular region or for a given potential customer depending upon the scope of potential sales opportunities.
Sales outside of the United States represented 66%, 78% and 87% of net revenues in fiscal 2002, fiscal 2001 and fiscal 2000, respectively. Sales outside of the United States are primarily denominated
in U.S. dollars in order to reduce the risks associated with the fluctuations of foreign currency exchange rates. The Company expects that sales outside of the United States will continue to account
for a significant portion of its revenues.

Manufacturing

In September 2000, the Company completed the transfer of its power amplifier production to a contract manufacturer located in Thailand on a turnkey basis.
In the first quarter of fiscal 2002, the Company began transferring its power amplifier repair and product integration operations to the same contract manufacturer and anticipates that the transfer
will be completed in June 2002. In calendar 2001, the financial strength of this contract manufacturer may have become impaired due to the declaration of bankruptcy by its U.S. parent
corporation. Also during fiscal 2002, the Company transferred the production of a lower volume single carrier GSM product to a second contract manufacturer in Taiwan and Wuxi, China. In the future,
the Company intends to subcontract MCPA products to this second contract manufacturer. The Company utilizes contract manufacturing to decrease the Company's manufacturing overhead and costs of its
products, to increase flexibility to respond to fluctuations in product demand and to leverage the strengths of the contract manufacturer's focus on high volume, high quality manufacturing. In
addition, the Company has introduced multiple

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products based on a common set of parts, in order to reduce the risk of future excess and obsolete inventory. At all manufacturing locations, all of the Company's products receive extensive
in-process and final quality inspections and tests. The Company maintains responsibility for qualification of components, assembly processes and test procedures.

Demands
from its customers drive the Company to frequently introduce and rapidly expand manufacturing volumes of its new products. This has caused the Company to experience high
materials and manufacturing costs, including high scrap and material waste, significant material obsolescence, labor inefficiencies and overtime expenses, inefficient material procurement and an
inability to realize economies of scale. These high manufacturing costs and production interruptions have had an adverse effect on the Company's results of operations. In addition, the Company has
made and expects to continue to make pricing commitments to OEM customers in anticipation of achieving manufacturing cost reductions from both product redesign and manufacturing improvements obtained
from its contract manufacturers. There can be no guarantee that the Company's common platform or other manufacturing strategies will eliminate excess and obsolete inventory and improve production
costs.

The
Company expects that its customers will continue to establish demanding specifications for quality, performance and reliability that must be met by the Company's products. Products
as complex as those offered by the Company often encounter development delays and may contain undetected defects or
failures when first introduced or after commencement of commercial shipments. The Company has from time to time in the past experienced product quality, performance or reliability problems. In
addition, multicarrier power amplifiers have a higher statistical probability of malfunction than single carrier power amplifiers because of their greater complexity. See "MD&AFactors
Affecting Future Operating ResultsRisk Related to Ongoing OperationsProduct Quality, Performance and Reliability."

The
Company attempts to utilize standard parts and components that are available from multiple vendors. However, certain components used in the Company's products are currently available
only from single sources, and other components are available from only a limited number of sources. Despite the risks associated with purchasing components from single sources or from a limited number
of sources, the Company has made the strategic decision to select single source or limited source suppliers in order to obtain lower pricing, receive more timely delivery and maintain quality control.
After the sale of UltraRF to Cree, Inc. ("Cree") in December 2000, the Company no longer manufactures LDMOS RF semiconductors, which are one critical component in the Company's power
amplifier products. Concurrent with the sale of UltraRF, the Company and Cree entered into a Purchase and Supply agreement, under which the Company was obligated as of December 29, 2000 to
purchase from Cree an aggregate of $58 million of semiconductors, with quarterly purchase commitments through December 2002. In October 2001 and April 2002, the Purchase and
Supply Agreement was amended to reduce the aggregate purchase commitment to $54.8 million and to extend the quarterly purchase commitments through June 2003. As of March 31, 2002,
the remaining purchase commitment is $21.3 million. Consequently, Cree is the Company's sole source vendor of certain bipolar and LDMOS RF power semiconductors. If the Company were unable to
obtain sufficient quantities of components, or if the Company were to experience an unusually high amount of defects in the Cree semiconductors, delays or reductions in product shipments could occur
which would have a material adverse effect on the Company's business, financial condition and results of operations. See "MD&AFactors Affecting Future OperationsRisk Related
to Future OperationsSole or Limited Sources of Materials and Services."

Research and Development

The Company's research and development organization designs high performance, low cost, highly manufacturable power amplifiers. The Company's research and
development organization focuses on rapid development of new power amplifiers that are manufacturable in large volumes at low cost. The

11

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research and development organization creates new product platforms and leverages existing ones, reuses existing circuit topologies and introduces into production new correction, control and
amplification concepts created by the research and development organization. The Company uses an automated design environment to model amplifiers. This design environment, together with the Company's
modular product architecture and configurable core technologies, allow the Company to define, develop and deliver on a timely basis the new and enhanced products demanded by its OEM customers.

The
Company usually develops and refines new technologies internally. However, if an opportunity exists to purchase or license technology that will provide a competitive or cost
advantage to its products
or shorten the design time of such products, the Company will license or purchase that technology. The Company historically has devoted a significant portion of its resources to research and
development programs and expects to continue to do so. The Company's research and development expenses were $23.8 million, $20.8 million, and $22.5 million for fiscal 2002, fiscal
2001 and fiscal 2000, respectively. See "MD&AFactors Affecting Future Operating ResultsRisk Related to Ongoing OperationsRisks of Licensed or Acquired
Technologies."

Competition

The Company's principal competitors in the market for wireless amplification products provided by merchant suppliers currently include Andrew, Celiant, Fujitsu
Limited ("Fujitsu"), Japan Radio Co. Ltd., Mitsubishi Corporation ("Mitsubishi"), REMEC, Inc. ("REMEC"), Panasonic, Paradigm Communications, Inc., and Powerwave. Certain of these
competitors have, and potential future competitors could have, substantially greater technical, financial, marketing, distribution and other resources than the Company and have, or could have, greater
name recognition and market acceptance of their products and technologies. No assurance can be given that the Company's competitors will not develop new technologies or enhancements to existing
products or introduce new products that will offer superior price or performance features compared to the Company's products. To the extent that OEMs increase their reliance on external sources
for their power amplification needs, more competitors could be attracted to the market. The Company expects its competitors to offer new and existing products at prices necessary to gain or retain
market share. The Company has experienced significant price competition, which has in the past affected gross margins. Certain of the Company's competitors have substantial financial resources which
may enable them to withstand sustained price competition or downturns in the power amplification market. There can be no assurance that the Company will not be subject to increased price competition
or that the Company will be able to compete successfully in the future. See "MD&AFactors Affecting Future Operating ResultsRisk Related to Ongoing
OperationsInternal Amplifier Design and Production Capabilities of OEMs" and "Market for the Company's Products is
Highly Competitive."

The
Company believes that a majority of the present worldwide production of power amplifiers is captive within the manufacturing operations of wireless equipment OEMs, many of which have
chosen not to purchase amplifiers from outside suppliers. Wireless equipment OEMs that purchase a portion of their power amplifier requirements from merchant suppliers may discontinue or reduce
purchases from outside suppliers. In addition, these manufacturers could decide to sell amplifiers to other wireless equipment OEMs and network operators in direct competition with merchant
suppliers. If this should occur, the competition for power amplifiers would significantly increase and could have a material adverse effect on the Company's business, financial condition and results
of operations.

The
markets in which the Company and its OEM customers compete are characterized by rapidly changing technology, evolving industry standards and continuous improvements in products and
services. In particular, because the Company's strategy of rapidly bringing to market products customized for numerous and evolving modulation standards requires developing and achieving volume
production of a large number of distinct products, the Company's ability to rapidly design and produce

12

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individual products for which there is significant OEM customer demand will be a critical determinant of the Company's future success. A softening of demand in the markets served by the Company or a
failure of a modulation standard in which the Company has invested substantial development resources may have a material adverse effect on the Company's business, financial condition and results of
operations. No assurance can be given that the Company's product development efforts will be successful, that its new products will meet customer requirements and be accepted or that its OEM
customers' product offerings will achieve customer acceptance with significant volumes to provide an adequate return of the Company's research and development investment. If a significant number of
development projects, including the Company's new multicarrier products, do not result in substantial volume production or if technologies or standards supported by the Company's or its customers'
products become obsolete or fail to gain widespread commercial acceptance, the Company's business may be materially adversely affected. See "MD&AFactors Affecting Future Operating
ResultsRisk Related to Ongoing OperationsInternal Amplifier Design and Production Capabilities of OEMs" and
"Market for the Company's Products is Highly Competitive."

Patents and Proprietary Technology

The Company's ability to compete successfully and achieve future revenue growth will depend, in part, on its ability to protect its proprietary technology and
operate without infringing the rights of others. The Company has a policy of seeking patents on inventions resulting from its ongoing research and development activities. There can be no assurance
that the Company's pending patent applications will be allowed or that the issued or pending patents will not be challenged or circumvented by competitors. Notwithstanding the Company's active pursuit
of patent protection, the Company believes that the success of its business depends more on the collective value of its patents, specifications, computer aided design and modeling tools, technical
processes and employee expertise. The Company has been awarded 25 United States patents and 2 foreign patents, has 4 United States patents and 1 foreign patent that have been allowed and has 6 United
States patent and 22 foreign patent applications pending. The data presented excludes 20 United States patents and 4 foreign patents that were awarded to the Company and assigned to Cree at the time
of the sale of UltraRF, to which the Company has been granted a royalty-free license. The Company generally enters into confidentiality and nondisclosure agreements with its employees,
suppliers, OEM customers, and potential customers and limits access to and distribution of its proprietary technology. However, there can be no assurance that such measures will provide adequate
protection for the Company's trade secrets or other proprietary information, or that the Company's trade secrets or proprietary technology will not otherwise become known or be independently developed
by competitors. The failure of the Company to protect its proprietary technology could have a material adverse effect on its business, financial condition and results of operations. See
"MD&AFactors Affecting Future Operating ResultsUncertain Protection of Intellectual Property."

The
communications equipment industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in significant and often
protracted and expensive litigation. Although there is currently no pending intellectual property litigation against the Company, the Company or its suppliers may from time to time be notified of
claims that the Company may be infringing patents or other intellectual property rights owned by third parties. If it is necessary or desirable, the Company may seek licenses under such patents or
other intellectual property rights. However, there can be no assurance that licenses will be offered or that the terms of any offered licenses will be acceptable to the Company. The failure to obtain
a license from a third party for technology used by the Company or otherwise secure rights to use such technology could cause the
Company to incur substantial liabilities, to suspend the manufacture of products or expend significant resources to develop noninfringing technology. There can be no assurance that the Company would
be successful in such development or that such licenses would be available on reasonable terms, if at all. In the event that any third party makes a successful claim against the Company or its
customers and

13

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either a license is not made available to the Company on commercially reasonable terms or a "design around" is not practicable, the Company could be required to pay substantial damages, to indemnify
its customers, to cease the manufacture, use and sale of infringing products, to expend significant resources to develop noninfringing technology, to discontinue the use of certain processes or to
obtain licenses to the infringing technology. See "MD&AFactors Affecting Future Operating ResultsRisk Related to Ongoing OperationsRisk
of Third Party Claims of Infringement."

Furthermore,
the Company may initiate claims or litigation against third parties for infringement of the Company's proprietary rights or to establish the validity of the Company's
proprietary rights. Litigation by or against the Company could result in significant expense to the Company and divert the efforts of the Company's technical and management personnel, whether or not
such litigation results in a favorable determination for the Company. In the event of an adverse result in any such litigation, the Company's business, financial condition and results of operations
would be materially adversely affected. See "MD&AFactors Affecting Future Operating ResultsRisk Related to Ongoing OperationsRisk of
Third Party Claims of Infringement."

Backlog

The Company does not believe that its backlog as of any particular date is representative of actual sales for any succeeding period. As part of the Company's
close working relationships with its major customers, such customers expect the Company to respond quickly to changes in the volume and delivery schedule of their power amplifiers, and if necessary,
to inventory products at the Company's facilities for just-in-time delivery. Therefore, although contracts with such customers typically specify aggregate dollar volumes of
products to be purchased over an extended time period, such contracts also provide that scheduled shipment dates of particular volumes are generally released to the Company only a few days or weeks
prior to the actual required delivery dates. In addition, these delivery schedules are shorter than the Company's manufacturing cycle time, which have required the Company to commit working capital to
build and hold inventory and to take significant excess and obsolete inventory risks. The Company's customers may also cancel or defer orders without significant penalty.

Employees

As of March 31, 2002, the Company had a total of 257 employees. The Company's future success will depend, in part, on its ability to continue to attract,
retain and motivate highly qualified technical and management personnel. None of the Company's employees is represented by a collective bargaining agreement, nor has the Company experienced any work
stoppage. The Company considers its relations with its employees to be good.

ITEM 2. PROPERTIES

The Company's principal administrative and engineering facilities are located in one building of approximately 91,400 square feet in Sunnyvale, California. In
connection with the sale of UltraRF in December 2000, the Company subleased another building of approximately 49,600 in Sunnyvale, California, to Cree for a term of 11 years (with three
options to extend the lease for up to an additional fifteen years) under substantially the same terms and conditions as the Company's lease. In November 1996, the Company entered into several
agreements in connection with a transaction with respect to these two properties. Pursuant to these agreements, the Company sold these properties to SPEC (CA) QRS 12-20, Inc.
("SPEC"), and pursuant to the terms of a lease agreement, SPEC agreed to lease these properties to the Company for a term of 15 years (with three options to extend the lease for up to an
additional fifteen years). This lease agreement also provides that the Company shall have the right of first refusal to purchase the properties from SPEC upon the occurrence of certain conditions.

14

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During
the third quarter of fiscal 2001, the Company signed an agreement to lease a facility of approximately 13,400 square feet in Folsom, California, commencing in the first quarter of
fiscal 2002 and terminating in April 2008. This facility is used for research and development functions.

In
the first quarter of fiscal 2001, the Company entered into an agreement to lease 12,000 square feet of development and manufacturing space for its engineering design center in Quincy,
Illinois. Pursuant to the terms of the lease agreement, the Company has agreed to lease this property for a term of two years (with two options to extend the lease for up to an additional four years)
from May 2000 and this lease expired in April 2002. In the first quarter of fiscal 2003, the Company extended this lease for one year.

In
1998, the Company entered into an operating lease for an ancillary 40,000 square foot manufacturing facility in Rocklin, California for a sixty month lease term expiring in
June 2003. During the second quarter of fiscal 2000, the Company subleased its Rocklin facility to The Gap, Inc. for the remainder of the Company's lease term.

In
the fourth quarter of fiscal 2002, the Company renewed for one year its lease of approximately 21,500 square feet of a facility in Seoul, South Korea for administrative, development,
manufacturing and repair functions for the Asia Pacific region which expires in February 2003.

ITEM 3. LEGAL PROCEEDINGS

A putative class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara on May 28, 2002, captioned Vogel v.
Shaner, et al., Case No. CV808140. The complaint names six of the Company's directors and its chief executive officer as defendants. In the complaint, the Plaintiff alleges that the defendants
violated their fiduciary duties owed to the Company's stockholders, including their duties of loyalty, good faith and independence, by engaging in self-dealing in the merger transaction
with REMEC. This violation allegedly stemmed from the defendants' failure to properly value the Company in the merger and due to conflicts of interest. The Plaintiff purportedly brought his action on
behalf of Company stockholders who are or would be harmed by the alleged conduct. The case seeks declaratory, injunctive and other forms of relief. The Company and the defendant directors and officer
believe the lawsuit is without merit and intends to defend the case vigorously.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS

(a)  Market Information

The Company's Common Stock has been traded on the Nasdaq National Market tier of the Nasdaq Stock Market under the trading symbol "SPCT" since August 4,
1994. The following table sets forth for
the period indicated the high and low sale prices for the Common Stock, as reported by the Nasdaq National Market.

High

LowFiscal Year Ended March 31, 2002Fourth Quarter

$
16.700

$
11.030Third Quarter

$
11.850

$
8.240Second Quarter

$
16.480

$
9.720First Quarter

$
19.300

$
9.810


High

LowFiscal Year Ended March 31, 2001Fourth Quarter

$
24.750

$
12.031Third Quarter

$
19.563

$
11.688Second Quarter

$
20.250

$
12.813First Quarter

$
22.500

$
13.438


The
reported last sale price of the Company's Common Stock on the Nasdaq National Market on May 31, 2002 was $12.97. The approximate number of holders of record of the shares of
the Company's Common Stock was 193 as of May 31, 2002. This number does not include stockholders whose shares are held in trust by other entities. The actual number of stockholders is greater
than this number of holders of record. Based on the number of annual reports requested by brokers, the Company estimates that it has approximately 6,000 beneficial owners of its Common Stock.

The
Company has never paid any cash dividends on its Common Stock and does not anticipate paying cash dividends in the foreseeable future. The Company has entered into a bank line of
credit and the Company's agreement with such lender prohibits the payment of cash dividends without the prior written consent of the lender.

(b)  Report of offering securities and use of proceeds therefrom

Not applicable.

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ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA

|                                                                         |                                                                                            | Fiscal Year Ended March 31, |        
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------ | --------------------------- | -------
|
|
|Statement of Operations Data:                                            |                                                                                            |                             |        
|NET REVENUES                                                             |                                                                                            | $                           | 103,782
|                                                                         |                                                                                            |                             |        
|COSTS AND EXPENSES:                                                      |                                                                                            |                             |        
|                                                                         | Cost of revenues                                                                           |                             |        
|                                                                         | Research and development                                                                   |                             |        
|                                                                         | Selling, general and administrative                                                        |                             |        
|                                                                         | Restructuring(1)                                                                           |                             |        
|                                                                         |                                                                                            |                             |        
|                                                                         |                                                                                            | Total costs and expenses    |        
|                                                                         |                                                                                            |                             |        
|OPERATING INCOME (LOSS)                                                  |                                                                                            |                             | (40,317
|INTEREST INCOME                                                          |                                                                                            |                             | 3,417  
|INTEREST EXPENSE                                                         |                                                                                            |                             | (13    
|OTHER INCOME, NET(2)                                                     |                                                                                            |                             | 16,347 
|                                                                         |                                                                                            |                             |        
|INCOME (LOSS) BEFORE INCOME TAXES                                        |                                                                                            |                             | (20,566
|INCOME TAXES                                                             |                                                                                            |                             | 301    
|                                                                         |                                                                                            |                             |        
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |                                                                                            |                             | (20,867
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLEADOPTION OF SFAS 133 |                                                                                            |                             | 494    
|                                                                         |                                                                                            |                             |        
|NET INCOME (LOSS)                                                        |                                                                                            | $                           | (20,373
|                                                                         |                                                                                            |                             |        
|NET INCOME (LOSS) PER SHARE(3):                                          |                                                                                            |                             |        
|                                                                         | Basic income (loss) per share before cumulative effect of change in accounting principle   |                             | $      
|                                                                         | Cumulative effect of change in accounting principle                                        |                             |        
|                                                                         |                                                                                            |                             |        
|                                                                         | Basic net income (loss) per share                                                          |                             | $      
|                                                                         |                                                                                            |                             |        
|                                                                         | Diluted income (loss) per share before cumulative effect of change in accounting principle |                             | $      
|                                                                         | Cumulative effect of change in accounting principle                                        |                             |        
|                                                                         |                                                                                            |                             |        
|                                                                         | Diluted net income (loss) per share                                                        |                             | $      
|                                                                         |                                                                                            |                             |        
|SHARES USED IN COMPUTING PER SHARE AMOUNTS:(3)                           |                                                                                            |                             |        
|                                                                         | Basic                                                                                      |                             |        
|                                                                         |                                                                                            |                             |        
|                                                                         | Diluted                                                                                    |                             |        
|                                                                         |                                                                                            |                             |        

|                                                           |  | March 31,
|---------------------------------------------------------- |  | ---------
|
|
|Balance Sheet Data:                                        |  |          
|Working capital                                            |  | $        
|Total assets                                               |  |          
|Debt and capital lease obligations, net of current portion |  |          
|Total stockholders' equity                                 |  | $        

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements include, among other things, statements concerning our expectations, beliefs, plans, intentions, future operations,
financial condition and prospects, and business strategies. The words "may," "will," "continue," "estimate," "project," "intend," "believe," "expect," "anticipate," and other similar expressions
generally identify forward-looking statements. Forward-looking statements in this Item 7 include, but are not limited to, statements regarding the following: the terms and expected timing of the
merger with REMEC; the impact on the Company of a loss of a major OEM customer; the Company's expectations of sales outside of the United States as a percentage of future revenues; the impact of
currency fluctuations on future revenues; the expected timing of completion of the transfer of all remaining repair and product integration operations; competition's affect on the Company's average
selling prices and gross margins; the effect on the Company's accounts receivable on account of a significant change in the liquidity or financial condition of a major customer; the consequences of
overvaluing or undervaluing the Company's inventory; the consequences of a significant increase in product returns or costs of repairs; gross margin as a percentage of net revenues in the future;
spending on new product initiatives in the future; the number of employee terminations due to restructuring; the expected timing of completion of the restructuring; the Company's continued evaluation
and recording of its net deferred tax asset; the anticipated spending for capital additions for the next twelve months; the sufficiency of the Company's available resources to meet cash requirements
and the factors which will determine the Company's future cash requirements. There can be no assurance that these expectations will prove to have been correct. Certain important factors that could
cause actual results to differ materially from the Company's expectations are disclosed in this Annual Report on Form 10-K, including, without limitation, in the section entitled
"Factors Affecting Future Operating Results" in this Item 7. All subsequent written and oral forward looking statements by or attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by such factors.

All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Investors are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. These forward-looking statements are made in
reliance upon the safe harbor provision of The Private Securities Litigation Reform Act of 1995.

Overview

Spectrian Corporation ("Spectrian" or the "Company") designs, manufacturers and markets high-power radio frequency ("RF") amplifiers, for the global
wireless communications industry. The Company's power amplifiers support a broad range of transmission standards, including Advanced Mobile Phone Services ("AMPS"), Time Division Multiple Access
("TDMA"), Code Division Multiple Access ("CDMA" and "CDMA2000"), Personal Communications System ("PCS"), Global System for Mobil Communications ("GSM"), Wireless Local Loop ("WLL"), Universal Mobile
Telephone Service ("UMTS") and IMT-2000. Spectrian's power amplifiers are utilized as part of the infrastructure for both wireless voice and data networks. The Company's power amplifiers
boost the power of a signal so that it can reach a wireless phone or other device within a designated geography.

On
May 19, 2002, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and among REMEC, Inc., a California corporation
("REMEC"), Reef Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of REMEC ("Merger Sub") and the Company pursuant to which REMEC will acquire the Company by a merger of Merger
Sub with the Company ("the merger"). Upon consummation of the merger, the

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Company's stockholders will receive approximately $14.00 of REMEC common stock, subject to a collar, or if REMEC chooses, a combination of REMEC common stock and cash. If REMEC elects to pay in cash,
it may pay up to $4.00 per share in cash. The remaining payment will be in REMEC common stock, which will be determined based on the average trading price of REMEC common stock for the ten day period
ending on the second trading day before the Company's special meeting of stockholders to approve the merger and the Merger Agreement. Spectrian stockholders will also receive cash for any fractional
shares of REMEC common stock that they are entitled to receive in the merger.

The
parties intend for the merger to be considered a tax-free reorganization under the Internal Revenue Code with respect to the REMEC common stock issued to the Company's
stockholders. The Merger Agreement has been approved unanimously by the board of directors of both companies. The merger is expected to close in the quarter ending September 30, 2002 but is
subject to a number of conditions including, among other things, approval of the Company's stockholders, approval of REMEC's shareholders and various regulatory approvals and clearances, including
those under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and the Securities Act of 1933, as amended.

On
December 29, 2000, the Company completed the sale of substantially all of the assets and external liabilities comprising its semiconductor division, UltraRF, to
Cree, Inc. ("Cree") pursuant to the Asset Purchase Agreement dated as of November 20, 2000 (the "Asset Purchase Agreement") among Cree, Zoltar Acquisition, Inc. ("Zoltar") and the
Company for 1,815,402 shares of common stock of Cree plus common stock with a guaranteed realizable value of $30 million, less $1,141,000 owed by the Company to Cree due to a change in the net
assets of UltraRF between October 1, 2000 and December 29, 2000. As part of the definitive agreement, the Company and Cree are entered into a supply agreement ("the Purchase and Supply
Agreement"), under which the Company was obligated as of December 29, 2000 to purchase from Cree an aggregate of $58 million of semiconductors, with quarterly purchase commitments
through December 2002. In October 2001 and April 2002, the Purchase and Supply Agreement was amended to reduce the aggregate purchase commitment to $54.8 million and to extend the
quarterly purchase commitments through June 2003. As of March 31, 2002, the remaining purchase commitment is $21.3 million. In the event Spectrian fails to make these purchases,
it is obligated either to purchase excess inventory that it may never utilize or to pay Cree the amount of the shortfall in cash. Accordingly, Spectrian deferred $58 million of the gain on sale
of UltraRF, which represented the amount of purchase commitment in the original Purchase and Supply Agreement, and is recognizing it in periods as the related purchase commitments to Cree are being
discharged. The Company recognized $30.0 million and $6.8 million of the deferred gain for the year ended March 31, 2002 ("fiscal 2002") and the year ended March 31, 2001
("fiscal 2001"), respectively. Spectrian and Cree also entered into a one-year joint development agreement to develop advanced technologies related to laterally diffused metal oxide
semiconductors ("LDMOS"), linear high gain LDMOS driver modules, high efficiency LDMOS power modules and SiC MESFET components. The joint development agreement expired on December 29, 2001.
Following the close of the sale of UltraRF, the Company no longer has revenues related to the sale of UltraRF products to third party customers. Additionally, as a result of the sale, the Company's
cost of semiconductors used in the manufacturing of amplifier products have increased because purchases from UltraRF are at fair market value rather than at manufacturing cost as was the case
historically.

For
fiscal 2002, Nortel Networks Corporation ("Nortel"), Samsung Electronics Co., Ltd. ("Samsung") and Verizon Communications ("Verizon"), accounted for 47%, 24% and 12% of net
revenues, respectively. Also during the second half of fiscal 2002, Cingular accounted for 16% of net revenues. For fiscal 2001, Nortel, Verizon and Samsung accounted for approximately 59%, 18% and
13% of net revenues, respectively. For the year ended March 31, 2000 ("fiscal 2000"), Nortel accounted for approximately 72% of net revenues.

19

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The
Company and Nortel have a supply agreement, renegotiated annually, pursuant to which Nortel commits to purchase a certain volume of its annual power amplifier requirements for
specified prices from the Company. This agreement allows Nortel to change the product mix requirements, which can significantly affect the Company's gross margins, and to change requested delivery
dates without significant financial consequences to Nortel. In addition, the Company's sales to Verizon, Samsung and Cingular are generally made on the basis of purchase orders rather than
long-term purchase commitments and any of these customers may cancel or defer their purchase orders without advanced notice to the Company. The Company's contractual relationships with its
major customers adversely affects the Company's ability to efficiently manage production schedules and inventory levels and to
accurately forecast product sales. The Company's business, financial condition and results of operations have been materially adversely affected in the past by anticipated orders failing to
materialize and by deferrals or cancellations of orders as a result of changes in customer requirements. In the past, product orders from Nortel have fluctuated sharply and the Company does not
currently sell any multicarrier power amplifiers ("MCPA") products to Nortel, which has adversely affected the Company's revenues and earnings. There can be no assurance that the Company will not
experience such fluctuations in the future or that the Company will receive any orders for MCPA products from Nortel or other parties in the future. If the Company is unable to find other customers to
generate demand for its new and existing products, the Company's revenues may be materially adversely affected. If the Company were to lose Nortel, Verizon, Samsung, Cingular or any other major
customer, or if orders by Nortel, Verizon, Samsung, Cingular or any other major customer were to otherwise materially decrease either in unit quantity or in price, the Company's business, financial
condition and results of operations would be materially adversely affected.

During
fiscal 2002, fiscal 2001 and fiscal 2000, net revenues from outside of the United States were 66%, 78% and 87%, respectively. The Company expects that sales outside of the United
States will continue to account for a significant percentage of the Company's net revenues for the foreseeable future. Financial market turmoil, economic downturn, consolidation or merger of
customers, and other changes in business conditions in any of the Company's current or future markets, such as Canada, South Korea, China, France and Brazil, may have a material adverse effect on the
Company's sales of its products. Furthermore, because the Company's products are predominantly priced in U.S. dollars, currency fluctuations and instability in the financial markets that are served by
the Company may have the effect of making the Company's products more expensive than those of other manufacturers whose products are priced in the local currency of the customer and may result in
reduced revenues for the Company. In addition, a portion of the Company's international product revenues (primarily in China) and repair revenues (primarily in South Korea) are denominated in foreign
currencies. Due to the passage of time between the pricing and sale of its products, the Company may be unable to competitively adjust its prices to reflect fluctuations in the exchange rate which may
result in reduced revenues. In the circumstances that the Company bills and receives local currencies, the Company may be restricted or impaired from exchanging the local currency into U.S. dollars
due to expatriation laws or regulations in foreign countries which would adversely affect the Company's operations and financial condition.

The
Company utilizes primarily one contract manufacturer to decrease the Company's manufacturing overhead and cost of its products, to increase flexibility to respond to fluctuations in
product demand and to leverage the strengths of the contract manufacturer's focus on high volume, high quality manufacturing. The financial strength of this contract manufacturer has recently become
impaired due to the declaration of bankruptcy by its U.S. parent corporation. The cost of transitioning manufacturing activities to the contract manufacturer were higher than the savings from costs of
products, which adversely affected the Company's gross margins from January 1999 to November 2000. Also during fiscal 2002, the Company transferred the production of a lower volume
single carrier GSM product to a second contract manufacturer in Taiwan and Wuxi, China. In the future, the Company intends to subcontract MCPA products to this second contract manufacturer. Although
the Company

20

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has transitioned substantially all of its manufacturing activities to an outside contract manufacturer, the Company still has significant fixed costs and is therefore dependent upon substantial
revenues to achieve and maintain profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of OperationsFactors Affecting Future Operating ResultsRisk Related to Ongoing OperationsSole or Limited Sources of Products, Materials and
Services."

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods. The Company believes
the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company's consolidated financial statements.

Revenue Recognition.The Company recognizes revenues when persuasive evidence of an arrangement exists, the price is fixed or
determinable, collection is reasonably assured, and delivery has occurred. Delivery occurs when the customer has taken title and assumed the risk of loss. Under this criteria, product revenues are
recognized either upon shipment of product to customers if shipping terms are FOBshipping point or upon receipt of product by customers if shipping terms are FOBdestination.
Revenues for products sold to distributors with rights of return are deferred and recognized upon resale of the products by the distributors. Revenues are also deferred if collection is not assured.
All revenues are recognized net of accruals for estimated sales returns and allowances.

Allowance for Doubtful Accounts.The Company performs ongoing credit evaluations of the Company's customers and adjusts
credit limits based upon payment history and the customer's current credit worthiness, as determined by the Company's review of their current credit information and generally does not require
collateral. The Company continuously monitors payments from the Company's customers and maintains an allowance for estimated credit losses based upon the Company's historical experience and any
specific customer collection issues that the Company has identified. Since the Company's accounts receivable are concentrated in a relatively few number of customers, a significant change in the
liquidity or financial condition of any one of these customers could have a material adverse impact on the realization of the Company's accounts receivable and the Company's results of operations.
Allowance for bad and doubtful accounts aggregated $400,000 and $460,000 at March 31, 2002 and 2001, respectively.

Allowance for excess and obsolete inventory, lower of cost or market and adverse purchase commitments.The Company values
inventory at standard cost, which is evaluated at least quarterly to determine that it approximates actual cost. The Company regularly reviews inventory quantities on hand and records an allowance for
excess and obsolete inventory based primarily on the Company's estimated forecast of product demand and production and repair requirements. The Company also regularly reviews the cost to produce
products against the estimated market value of the products and records a lower of cost or market provision for those products that have a cost in excess of the estimated market value.

21

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The Company outsources the production and repair of its products and certain components utilized in the production process that have long lead times. The Company regularly reviews its
outstanding purchase commitments and records an adverse purchase commitment liability based primarily on the Company's estimated forecast of product demand and production and repair requirements. The
Company also regularly reviews the cost to complete production of components on order against the estimated market value of the products and records an adverse purchase commitment liability if those
components that have a completed cost in excess of the estimated market value.

Demand
for the Company's products can fluctuate significantly from period to period. A significant decrease in demand could result in an increase in the amount of excess inventory
quantities on hand and adverse purchase commitments. In addition, the Company's industry is characterized by rapid technological change, frequent new product development, and rapid product
obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand and adverse purchase commitments. The Company has experienced price reductions on its products
because of competition and market conditions. A significant decrease in the market price of products could result in an increase in the required lower of cost or market provision and adverse purchase
commitments. Additionally, the Company's estimates of future product demand and market price may prove to be inaccurate, in which case the Company may have understated or overstated the provision
required for excess and obsolete inventory, lower of cost or market and adverse purchase commitments. In the future, if the Company's inventory is determined to be overvalued, the Company would be
required to recognize such costs in the Company's cost of goods sold at the time of such determination. Likewise, if the Company's inventory is determined to be undervalued, the Company may have
over-reported the Company's cost of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Therefore, although the Company
makes every effort to ensure the accuracy of the Company's forecasts of future product demand and market value, any significant unanticipated changes in demand or technological developments could have
a significant impact on the value of the Company's inventory, the amount of adverse purchase commitments and the Company's results of operations.

As
of March 31, 2002, several products from the older SCPA business line had cost of sales that exceeded the contractual selling price. Accordingly, the Company established lower
of cost or market inventory reserves for the associated inventory. The Company also recorded an allowance for certain SCPA and MCPA inventories on hand that exceeded the forecast product demand. The
total allowance for excess and obsolete inventory and lower of cost or market was $17.8 million at March 31, 2002. In addition, the Company recorded adverse purchase commitments of
$2.8 million at March 31, 2002.

Warranty Liability.The Company offers warranties of various lengths, ranging from one year to fifteen years, to the
Company's customers depending upon the specific product and terms of the customer
purchase agreement. The Company typically negotiates varying terms regarding warranty coverage and length of warranty dependant upon the product involved and the customer. The Company's standard
warranties require it to repair or replace defective product returned to it during such warranty period at no cost to the customer. The Company quantifies and records an estimate for warranty related
costs based on the Company's actual historical and projected return and failure rates, the current repair costs, and the length of the warranty period. In the past, the Company has experienced higher
than normal return rates on certain products, which required the Company to increase the required warranty provision and extend the warranty period. Should the Company experience actual return and
failure rates or repair costs that are higher than the estimated return and failure rates or repair costs used to calculate the provision, the Company's operating results for the period or periods in
which such returns or additional costs materialize will be adversely impacted. As at March 31, 2002 and 2001, the Company's estimates for warranty liabilities were $6.4 million and
$9.8 million, respectively.

Deferred Tax Assets.As part of the process of preparing the Company's consolidated financial statements the Company is
required to estimate the Company's income taxes in each of the

22

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jurisdictions in which the Company operates. This process involves estimating the Company's actual current tax exposure together with assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Company's consolidated
balance sheet. The Company must then assess the likelihood that the Company's deferred tax assets will be recovered from future taxable income and to the extent the Company believes that recovery is
not likely, the Company must establish a valuation allowance. To the extent the Company establishes a valuation allowance or increases this allowance in a period, the Company must include an expense
within the tax provision in its statement of operations.

Significant
management judgment is required in determining the Company's provision for income taxes, the Company's deferred tax assets and liabilities and any valuation allowance
recorded against the Company's net deferred tax assets. The Company has recorded a valuation allowance for the entire deferred tax assets as of March 31, 2002, due to uncertainties related to
the Company's ability to utilize the Company's deferred tax assets, primarily consisting of certain net operating losses carried forward and foreign tax credits, before they expire. The valuation
allowance is based on the Company's estimates of taxable income by jurisdiction in which the Company operates and the period over which the Company's deferred tax assets will be recoverable. In the
event that actual results differ from these estimates or the Company adjusts these estimates in future periods the Company may need to reduce the valuation allowance which could materially impact the
Company's financial position and results of operations. The net deferred tax asset as of March 31, 2002 was zero, net of a valuation allowance of $42.4 million.

Results of Operations

The following table sets forth for the periods indicated certain statement of operations data of the Company expressed as a percentage of total revenues and gross
margin on sales.

Fiscal Year Ended March 31,2002

2001

2000NET REVENUES

100.0
%
100.0
%
100.0
%COSTS AND EXPENSES:Cost of revenues

97.5

80.7

79.5Research and development

22.9

11.6

13.7Selling, general and administrative

17.8

12.0

11.8Restructuring

0.7

(0.1
)
0.6Total costs and expenses

138.9

104.2

105.6OPERATING LOSS

(38.9
)
(4.2
)
(5.6
)INTEREST INCOME

3.3

1.6

2.0INTEREST EXPENSE



(0.1
)
(0.3
)OTHER INCOME, NET

15.8

10.2

0.4INCOME (LOSS) BEFORE INCOME TAXES

(19.8
)
7.5

(3.5
)INCOME TAXES

0.3



INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

(20.1
)
7.5

(3.5
)CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLEADOPTION OF SFAS 133

0.5



NET INCOME (LOSS)

(19.6
)%
7.5
%
(3.5
)%GROSS MARGIN ON REVENUES

2.5
%
19.3
%
20.5
%


23

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Years Ended March 31, 2002 and 2001

Net Revenues.The Company's net revenues decreased 42% to $103.8 million for fiscal 2002 from $179.8 million
for fiscal 2001. The decrease in net revenues was primarily due to lower demand and reduced average selling prices for the Company's single carrier power amplifier ("SCPA") legacy products, lower
demand for the Company's Broadband, and to a lesser degree, lower demand and reduced average selling prices for some of the Company's multi-channel power amplifiers ("MCPA"). SCPA revenues decreased
56% to $45.0 million for fiscal 2002 from $102.8 million for fiscal 2001 primarily due to the replacement of SPCA products with MCPA products in certain of the Company's customers' new
product designs. Broadband revenues decreased 95% to $576,000 for fiscal 2002 from $11.1 million for fiscal 2001 primarily due to the bankruptcy of the network operator that deployed the
Company's broadband amplifiers. MCPA revenues decreased 11% to $52.6 million for fiscal 2002 from $58.7 million for fiscal 2001 primarily as a result of reductions in capital spending by
the Company's customers.

Cost of Revenues.Cost of revenues consists primarily of turnkey amplifier costs for the Company's products, internal
amplifier assembly and test costs, RF semiconductor fabrication, assembly and test costs, raw materials, manufacturing overhead and warranty costs. The Company's cost of revenues decreased by 30% to
$101.2 million for fiscal 2002 from $145.1 million for fiscal 2001. The decrease in cost of revenues on a dollar basis was due to lower sales and decreased warranty expense from
$4.9 million in fiscal 2001 to $2.9 million in fiscal 2002 as a result of lower quantity shipments and lower per unit repair cost due to the transfer of repair operations to a
subcontract manufacturer, partially offset by increased inventory obsolescence and lower of cost or market expense from $4.3 million in fiscal 2001 to $11.7 million in fiscal 2002 and
the higher costs of semiconductors on account of purchases from UltraRF after December 2000 being at fair market value rather than at manufacturing cost as had previously been the case.

Gross
margin on sales was 3% for fiscal 2002 as compared to 19% for fiscal 2001. The decrease in gross margin for fiscal 2002 was due to lower production volumes to absorb fixed overhead
costs, a decline in the average selling prices of SCPA products and some MCPA products and increased
inventory obsolescence and lower of cost or market expense from $4.3 million in fiscal 2001 to $11.7 million in fiscal 2002, partially offset by decreased warranty expense from
$4.9 million in fiscal 2001 to $2.9 million in fiscal 2002 as a result of lower quantity shipments and lower per unit repair cost due to the transfer of repair operations to a
subcontract manufacturer. The Company anticipates that gross margin as a percentage of net revenues will continue to be adversely effected by continued declining average selling prices, especially for
SCPA products, and higher semiconductor costs, as a result of the sale of the UltraRF division to Cree which means the Company must purchase the LDMOS RF semiconductor parts at market price rather
than recognizing the cost of revenues at the actual semiconductor cost of production.

Research and Development.The Company's research and development expenses increased by 14% to $23.8 million in fiscal
2002 from $20.8 million in fiscal 2001. The increase in research and development expenses on a dollar basis for fiscal 2002 was due to new product development initiatives for the MCPA product
line which the Company believes are required to meet current and future market and customer requirements, the joint development agreement between the Company and Cree, partially offset by the
elimination of $3.3 million of UltraRF research and development expenses as a result of the sale of UltraRF in December 2000. The cost of the joint development agreement between the
Company and Cree, which started in January 2001 and ended in December 2001, was $600,000 in fiscal 2001 and $1.8 million in fiscal 2002. See Note 2 in the accompanying
notes to the Consolidated Financial Statements. As a percentage of net revenues, research and development expenses represented 23% of net revenues for fiscal 2002 as compared to 12% of net revenues
for fiscal 2001. The increase in research and development expenses as a percentage of net revenues was due to higher research and development expense on a dollar basis and lower revenues.

24

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Selling, General and Administrative.The Company's selling, general and administrative expenses decreased by 15% to
$18.5 million in fiscal 2002 from $21.6 million in fiscal 2001. As a percentage of net revenues, selling, general and administrative expenses represented 18% of net revenues for fiscal
2002 as compared to 12% of net revenues for fiscal 2001. The decrease in selling, general and administrative expenses on a dollar basis was primarily due to reduced general and administrative spending
from $11.9 million to $9.2 million as a result of cost reduction actions implemented by management and the elimination of certain selling, general and administrative expenses of UltraRF
as a result of the sale of UltraRF. The increase in selling, general and administrative expenses as a percentage of net revenues was due to lower revenues in fiscal 2002.

Restructuring Costs.In June 2001, the Company began to transfer its power amplifier repair and product integration
operations in Sunnyvale, California, to a contract manufacturer located in Thailand. In connection with this decision, the Company recognized in the three months ended July 1, 2001 a
restructuring charge of approximately $686,000 for estimated severance costs related to organizational changes and a planned reduction in work force and to write off property and equipment that had no
future value to the Company. Approximately 60 employees engaged in the repair and product integration operations were anticipated to be terminated as a result of the restructuring. As of
March 31, 2002, approximately 50 employees have been terminated. The Company anticipates that the restructuring will be completed no later than June 30, 2002.

During
fiscal 1999, the Company transitioned the assembly and test of its higher volume single carrier power amplifier products to a contract manufacturer located in Thailand on a
turnkey basis. During the fourth quarter of fiscal 2000, the Company decided to transfer the remaining power amplifier production in Sunnyvale, California, to the contract manufacturer to utilize
lower labor costs than available domestically and to reduce fixed overheads. In connection with the decision, the Company recognized in fiscal 2000 an approximately $1.0 million restructuring
charge for estimated severance costs related to organizational changes and a planned reduction in work force. In fiscal 2001, the Company reversed $100,000 of unused restructuring charge due to
changes in the restructuring plan. Approximately 60 employees engaged in manufacturing and production related functions were terminated as a result of the restructuring during fiscal 2001. The
transfer of production to Thailand was completed during the third quarter of fiscal 2001.

Interest Income.Interest income increased to $3.4 million in fiscal 2002 from $2.9 million in fiscal 2001. The
increase in interest income in fiscal 2002 resulted from higher interest-bearing investment balances associated with higher average cash and cash equivalent balances, partially offset by lower average
interest rates.

Interest Expense.Interest expense decreased to $13,000 in fiscal 2002 from $162,000 in fiscal 2001. The decrease in interest
expense in fiscal 2002 was the result of substantially reduced average borrowing levels due to repayments of debt and capital lease obligations made in association with the sale of UltraRF.

Other Income.Other income decreased to $16.3 million in fiscal 2002 from $18.4 million in fiscal 2001. Other
income for fiscal 2002 primarily represents a $30.0 million gain on the sale of UltraRF recognized as a result of fulfillment and reduction of the minimum purchase commitments to Cree per the
Purchase and Supply Agreement, as amended, partially offset by a $13.5 million realized loss on the sale of Cree common stock and options. Other income for fiscal 2001 represents an
$18.9 million gain on sale of UltraRF recognized in the third and fourth quarters of fiscal 2001 and a $481,000 realized loss on the sale of Cree common stock in the fourth quarter of fiscal
2001.

Income Taxes.Due to the losses incurred by the Company and the related net operating loss carryforwards available to the
Company, the Company did not record income tax expense except for foreign taxes and the minimum state income tax expense in fiscal 2002 and 2001. Income taxes increased to $301,000 in fiscal 2002 from
$12,000 in fiscal 2001. The increase in income taxes was due

25

---

to higher foreign taxes in fiscal 2002 as a result of the increased activities of foreign subsidiaries the Korean and Chinese markets. Due to the uncertainties surrounding the realization of the
deferred tax assets resulting from the Company's accumulated deficit and net losses, the Company has provided a valuation allowance against deferred tax assets where the realization was uncertain. The
Company will continue to evaluate positive and negative evidence on the recoverability of its net deferred tax asset each quarter and will record the net deferred tax asset when it is more likely than
not that it will be recovered.

Cumulative Effect of Change in Accounting PrincipleAdoption of SFAS133.On April 1, 2001, the Company
adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments and Hedging ActivitiesDeferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133,
and Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133 (referred to
hereafter as "SFAS 133"). In the three months ended March 31 and July 1, 2001, the Company entered into various option arrangements known as a cashless collar, to hedge its
investment in Cree common stock, which was acquired through the sale of UltraRF. The Company designated these option arrangements as fair value hedges under SFAS 133. In accordance with the
transition provisions of SFAS 133, the Company recorded an approximate $494,000 cumulative effect adjustment gain in earnings as of April 1, 2001.

Years Ended March 31, 2001 and 2000

Net Revenues.The Company's net revenues increased 10% to $179.8 million for fiscal 2001 from $163.6 million
for fiscal 2000. The growth in net revenue was primarily due to higher demand in the MCPA product line and Broadband product line, partially offset by a decline in the SCPA product line, sold
primarily to Nortel. MCPA revenues increased 81% to $58.7 million for fiscal 2001 from $32.2 million for fiscal 2000. Broadband revenues increased 221% to $11.1 million for fiscal
2001 from $3.5 million for fiscal 2000. Broadband revenues were recognized primarily in the first and second quarters of fiscal 2001. SCPA revenues decreased 19% to $102.8 million for
fiscal 2001 from $126.4 million for fiscal 2000 on lower average selling prices and volumes.

Cost of Revenues.The Company's cost of revenues increased by 12% to $145.1 million for fiscal 2001 from
$130.0 million for fiscal 2000. The increase on a dollar basis for fiscal year 2001 was due primarily to higher production volumes associated with the increased revenues, especially the
increase in MCPA production volumes, lower yields on semiconductor production and higher inventory obsolescence expense.

Gross
margin on sales was 19% for fiscal 2001 as compared to 21% for fiscal 2000. The decrease in gross margin reflected lower average selling prices, lower yields on semiconductor
production, higher inventory obsolescence expense, and higher semiconductor prices in the fourth quarter of fiscal 2001, partially offset by decreased manufacturing costs due to the increased use of
contract manufacturing and product mix.

Research and Development.Research and development expenses include the cost of designing, developing or reducing the
manufacturing cost of amplifiers and RF semiconductors. The Company's research and development expenses decreased by 8% to $20.8 million in fiscal 2001 from $22.5 million in
fiscal 2000. As a percentage of net revenues, research and development expenses represented 12% of net revenues for fiscal 2001 as compared to 14% of net revenues for fiscal 2000. The decrease in
research and development expenses on both a dollar and percentage of net revenues basis reflected higher revenue levels on a year-to-year basis, reduced expenses associated
with completion of the initial products in the new MCPA product line in early fiscal 2000, the sale of UltraRF, and the use of a product development methodology that allows for the reuse of designs in
several products.

26

---

Selling, General and Administrative.Selling, general and administrative expenses include
compensation and benefits for
sales, marketing, senior management and administrative personnel, commissions paid to independent sales representatives, professional fees and other expenses. The Company's selling, general and
administrative expenses increased by 12% to $21.6 million in fiscal 2001 from $19.3 million in fiscal 2000. As a percentage of net revenues, selling, general and administrative expenses
represented 12% of net revenues for fiscal 2001 as compared to 12% of net revenues for fiscal 2000. The increase in selling, general and administrative expenses on a dollar basis for fiscal 2001 was
principally due to increased commissions, marketing efforts to diversify the customer base, creation of the UltraRF sales force and network, increased sales and marketing activities in South Korea,
and costs incurred to evaluate strategic alternatives for UltraRF.

Restructuring Costs.In connection with the decision to transition power amplifier production to a contract manufacturer, the
Company recognized in fiscal 2000 an approximately $1.0 million restructuring charge for estimated severance costs related to organizational changes and a planned reduction in work force. In
fiscal 2001, the Company reversed $100,000 of unused restructuring charge due to changes in the restructuring plan.

Interest Income.Interest income decreased to $2.9 million in fiscal 2001 from $3.3 million in fiscal 2000. The
decrease in interest income for the year was a result of lower interest-bearing investment balances associated with the reduced average cash and cash equivalent balances.

Interest Expense.Interest expense decreased to $163,000 in fiscal 2001 from $500,000 in fiscal 2000. The decrease in
interest expense for the year was a result of substantially reduced average borrowing levels due to repayments made in association with the sale of property in December 1999 and the sale of
UltraRF in December 2000.

Other Income.Other income increased to $18.4 million in fiscal 2001 from $0.6 million in fiscal 2000. Other
income for fiscal 2001 represents an $18.9 million gain recognized on sale of UltraRF recognized in the third and fourth quarter of fiscal 2001 and a $481,000 realized loss on the sale of Cree
common stock in the fourth quarter of fiscal 2001. Other income for fiscal 2000, represents a $624,000 gain on the sale of a light industrial building in December 1999.

Income Taxes.Due to the losses incurred by the Company and the related net operating loss carryforwards available to the
Company, the Company did not record income tax expense except for foreign taxes in fiscal 2001 and foreign taxes and the minimum state income tax expense in fiscal 2000.

Segment Information

Under the management approach, the Company divided its business into two divisions based upon product type: Amplifier Division and Semiconductor Division, which
operated under the tradename of UltraRF. UltraRF derived virtually all of its net revenues from sales to the Amplifier Division. The Company allocated operating expenses to these segments but did not
allocate interest income and expense. Corporate expenses were allocated to the operating segments based on predetermined annual allocation methods. Appropriate intersegment eliminations were made in
the consolidation of the Company's consolidated financial statements. Following the sale of UltraRF on December 29, 2000, the

27

---

Company began operating as one vertical integrated unit. Segment information for fiscal 2001 and fiscal 2000 is as follows (in thousands):

Consolidated Statement of Operations DataFiscal 2001:

|                                  |  | Year Ended March 31, 2001
|--------------------------------- |  | -------------------------
|
|Net revenues, external            |  | $                        
|Net revenues, intersegment        |  |                          
|Amortization and depreciation     |  |                          
|Income (loss) before income taxes |  |                          

Consolidated Statement of Operations DataFiscal 2000:

|                                  |  | Year Ended March 31, 2000 |        
|--------------------------------- |  | ------------------------- | -------
|
|Net revenues, external            |  | $                         | 162,687
|Net revenues, intersegment        |  |                           |       
|Amortization and depreciation     |  |                           | 5,797  
|Income (loss) before income taxes |  |                           | (13,401

---

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company believes that the adoption of SFAS 141 has not had a significant impact on its financial statements to date.

In
July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective for fiscal
years beginning after December 15, 2001. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption
for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the testing for impairment of existing goodwill and other intangibles. The Company believes that the adoption of SFAS 142 will not have a significant impact on
its financial statements. The Company will adopt SFAS 142 in the quarter beginning April 1, 2002. The Company does not expect the adoption of SFAS 142 to have a material impact on
the Company's financial position and results of operations.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. This Statement supersedes FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and Accounting Principals Board Opinion No. 30 ("APB
30"), "Reporting Results of OperationsReporting the Effects of Disposal of a Division of a Business", however, this Statement retains the requirement of APB 30 to report discontinued
operations separately from continuing operations and extends that reporting to a component of an

28

---

entity that either has been disposed of (by sale, by abandonment, or in a distribution to owners) or is classified as held for sale. This Statement addresses financial accounting and reporting for
the impairment of certain long-lived assets and for long-lived assets to be disposed of. The Company does not expect the adoption of SFAS 144 to have a material impact
on the Company's financial position and results of operations.

Liquidity and Capital Resources

The Company has financed its growth through sales of Company assets or subsidiaries, sales of common stock, private sales of equity securities, capital equipment
leases, bank lines of credit and cash flows from operations. Principal sources of liquidity at March 31, 2002 consisted of cash and cash equivalents and short-term debt investments,
which total $90.7 million, and bank borrowing arrangements.

The
Company has a revolving line of credit of $10.0 million with a bank collateralized by the majority of the Company's assets. The line of credit expires on June 30, 2002.
On June 5, 2002, the Company renewed its line of credit extending the expiration date to June 4, 2003 at terms substantially similar to the existing line. Under the terms of the master
agreement governing this credit instrument, as amended, the Company is required to maintain certain minimum working capital and other specific financial ratios. The master agreement also has certain
restrictions on other indebtedness and the payment of dividends. At March 31, 2002, the Company was in compliance with the covenants of the master agreement. The amount available to borrow at
March 31, 2002 was $10.0 million. The Company can borrow at either (i) a variable rate equal to the prime rate or (ii) a fixed rate equal to 200 basis points above the
LIBOR rate, which at March 31, 2002 was 4.8% and 4.0%, respectively. The Company had no borrowings under the line of credit as of March 31, 2002.

The
Company's working capital decreased by $17.4 million to $87.6 million as of March 31, 2002 from $104.9 million as of March 31, 2001. The decrease
was primarily attributable to a $25.5 million decrease in cash and cash equivalents, restricted cash and short-term investments, a $9.4 million decrease in accounts
receivable, a $3.8 million decrease in deferred tax asset, a $709,000 decrease in prepaid expenses and a $251,000 increase in accrued liabilities, partially offset by a $5.4 million
increase in net inventories, a $1.3 million increase in income tax receivable, $4.9 million decrease in accounts payable, a $543,000 decrease in income tax payable and a
$10.3 million decrease in short-term deferred gain as a result of recognizing $30.0 million of the deferred gain on the sale of UltraRF from the fulfillment and reduction of
the minimum purchase commitments to Cree per the Purchase and Supply Agreement, as amended, partially offset by the reclassification of $19.7 million from long-term deferred gain to
short-term deferred gain. The Company's working capital increased by $25.5 million to $104.9 million as of March 31, 2001 from $79.4 million as of
March 31, 2000. The increase was primarily attributable to the $93.4 million in proceeds received for the sale of UltraRF, less the unrealized loss on the market value of Cree common
stock of $23.1 million and the short-term portion of the deferred gain on the sale of UltraRF of $31.6 million at March 31, 2001, a $3.8 million increase in
accounts receivable, and the recognition of a deferred tax asset of $3.8 million, which were partially offset by a decrease in inventories of $12.3 million due to the transfer of
manufacturing to a subcontract manufacturer in Thailand and the sale of UltraRF and an increase in accounts payable, accrued liabilities and income taxes payable of $8.1 million. The Company's
short-term investments were principally invested in investment grade, interest-bearing securities, Cree common stock and options, which were sold from January 2001 through
September 2001, and United States government bonds and notes.

Cash
used by operations was $28.3 million for fiscal 2002 compared to cash provided by operations of $10.2 million for fiscal 2001 and cash used by operations of
$14.9 million for fiscal 2000.

29

---

Cash
used by operations in fiscal 2002 was principally the result of a $20.4 million net loss, a $30.0 million non-cash recognized gain from the fulfillment and
reduction of the minimum purchase commitments to Cree per the Purchase and Supply Agreement, as amended, a $5.4 million increase in net inventories, a $4.9 million decrease in accounts
payable, a $1.3 million increase in income tax receivable and a $543,000 decrease in income taxes payable, partially offset by a $13.0 million realized loss from the sale of
short-term investments which resulted from the liquidation of all Cree common stock and options held as of March 31, 2001, a $9.2 million decrease in accounts receivable due
to reduced revenues in fiscal 2002, $5.3 million of depreciation and amortization expense, a $3.8 million decrease in deferred tax asset due to receipt of income tax refunds of about
$1.8 million, reclassification of $1.3 million to income tax receivable and reduction of income tax payable by $694,000, a $956,000 loss on disposal of property and equipment, a
$1.2 million decrease in prepaid expenses and other assets and a $498,000 increase in accrued liabilities.

Cash
provided by operations in fiscal 2001 was principally the result of $13.5 million in net income, depreciation and amortization of $10.4 million, a $7.1 million
decrease in net inventories due to the transfer of manufacturing to a subcontract manufacturer in Thailand and the write down of inventory due to obsolescence, a $7.7 million increase in
accounts payable due to the timing of purchases to support the higher revenue level, a $0.7 million increase in income taxes payable, which were partially offset by a recognized
$18.9 million non-cash gain on the sale of UltraRF net assets, a $3.8 million increase in deferred tax assets, a $3.8 million increase in accounts receivable due to
the higher revenue levels and the timing of shipments in the quarter, a $2.5 million decrease in accrued liabilities due to lower payroll and commission related accruals primarily due to the
decrease in headcount and the utilization of the restructuring reserve which was partially offset by the increase in the warranty reserve and a $1.1 million increase in prepaid expenses and
other current assets.

Cash
used by operations in fiscal 2000 was principally the result of a $5.8 million net loss, a $13.7 million net increase in inventory, which is partially a result of the
timing difference between Nortel's requested delivery dates and the Company's vendor purchase commitments to support the customer's delivery requirements, a $10.9 million increase in accounts
receivable, which increased proportionately with revenue growth and also reflects the longer standard payment terms in Europe, partially offset by $13.3 million of depreciation and amortization
expense, an $8.4 million increase in accounts payable, which increased proportionately with production levels. In addition, accrued liabilities decreased by $4.1 million due primarily to
the reduction of warranty reserves based upon repairing defective products previously accrued for and the timing of the payment of certain expenses, primarily payroll related.

The
Company's investing activities provided cash of approximately $35.0 million in fiscal 2002 as compared to providing cash of $8.5 million in fiscal 2001 and using cash
of $4.6 million in fiscal 2000.

Cash
provided by investing activities during fiscal 2002 resulted primarily from $117.9 million from the sale and maturity of short-term investments, which included
approximately $44.7 million generated from the sale of all Cree common stock and options held as of March 31, 2001, and $6.5 million from the release of restricted cash, which
represented the amount held in escrow to secure the Company's representations, warranties and covenants related to the sale of UltraRF to Cree, partially offset by $83.0 million in purchases of
short-term investments, $4.4 million in additions to property and equipment and a $2.0 million minority investment in Paragon Communications Ltd. ("Paragon").

Cash
provided by investment activities during fiscal 2001 resulted primarily from $45.4 million proceeds from sale and maturities of short-term investments which were
partially offset by $17.4 million in purchases of short-term investments, $9.6 million in additions to property and equipment and $9.8 million in payments for
transaction costs associated with the sale of UltraRF. Proceeds from sale of short-term investments in fiscal 2001 included the liquidation of Cree common stock with a

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guaranteed realizable value of $30 million, which was part of the consideration received for the sale of UltraRF to Cree.

Cash
used for investing activities during fiscal 2000 resulted primarily from $16.0 million in purchases of short-term investments and $7.7 million of additions
to property and equipment, partially offset by $15.6 million proceeds from sale and maturities of short-term investments and $3.5 million in proceeds from the sale of a light
industrial building by the Company.

Capital
additions during fiscal 2002 and 2001 included manufacturing test and production equipment required to support new products and test equipment to support various research and
development projects. Capital expenditures during fiscal 2000 included manufacturing test and production equipment required to support new products, test equipment to support various research and
development projects, and the ERP system.

The
Company's financing activities used cash of approximately $989,000 in fiscal 2002 as compared to providing cash of $6.1 million and $4.8 million during fiscal 2001 and
2000, respectively.

Cash
used by financing activities during fiscal 2002 was the result of $2.9 million in purchases of treasury stock and $103,000 in repayments of capital lease obligations, which
was partially offset by $2.0 million proceeds from the issuance of common stock, through the exercise of employee stock options and employee stock purchase plan activity.

Cash
provided by financing activities during fiscal 2001 was the result of $8.1 million proceeds from the issuance of common stock, through the exercise of employee stock options
and employee stock purchase plan activity, which was partially offset by $2.0 million in repayments of debt and capital lease obligations.

Cash
provided by financing activities during fiscal 2000 was the result of $9.2 million in proceeds from the issuance of common stock, through the exercise of employee stock
options and employee stock purchase plan activity, which was partially offset by $4.4 million in repayments of debt and capital lease obligations.

Contractual Obligations and Commercial Commitments

Capital Lease Obligations.The Company entered into capital leases for test equipment for a 24-month lease term
expiring from July to October 2002.

Operating Leases.During fiscal 1997, the Company sold its two principal facilities in Sunnyvale, California for
approximately $16.4 million, and leased the two facilities back under a lease that has been classified as an operating lease. The lease expires in November 2011 and the quarterly rent
payments are subject to Consumer Price Index adjustments on a tri-annual basis. The lease agreement provides that the Company would have the right of first refusal to purchase the
properties upon certain conditions. In connection with the sale of UltraRF to Cree in December 2000, the Company subleased one of the two facilities under the aforementioned operating lease to
Cree for the remaining term of the lease under substantially the same terms and conditions as the Company's lease.

In
1998, the Company entered into an operating lease for an ancillary 40,000 square foot manufacturing facility in Rocklin, California for a sixty month lease term expiring in
June 2003. During the second quarter of fiscal 2000, the Company subleased its Rocklin facility to The Gap, Inc. for the remainder of the Company's lease term.

The
Company also leases facilities in Folsom, California; Quincy, Illinois; Bellevue, Washington; Korea, China and Brazil to support its administrative, development, manufacturing,
repair, sales and marketing activities.

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Purchase Commitments with Cree.In December 2000, the Company and Cree entered into the Purchase and Supply Agreement,
under which the Company was obligated to purchase from Cree an aggregate of $58 million of semiconductors, with quarterly purchase commitments through December 2002. In
October 2001 and April 2002, the Purchase and Supply Agreement was amended to reduce the aggregate purchase commitment to $54.8 million and to extend the quarterly purchase
commitments through
June 2003. As of March 31, 2002, the remaining purchase commitment is $21.3 million, of which $20.0 million of purchases are required to be made in fiscal 2003 and
$1.3 million of purchases are required to be made in fiscal 2004.

Purchase Commitments with Subcontract Manufacturers.Monthly, the Company provides a six month rolling forecast of finished
goods requirements to its subcontract manufacturers for planning and long-lead time parts procurement purposes only. The Company issues purchase orders to the subcontract manufacturers
with delivery dates from four to twelve weeks from the purchase order date. Once a purchase order is accepted by the subcontract manufacturer, the Company is committed to accept delivery of the
amplifiers or reimburse the subcontract manufacturer for costs incurred to date. The subcontract manufacturers procures raw materials and schedules labor needed to manufacture the Company amplifiers
based on the aforementioned forecasts and standard purchase orders. In the past, the Company has reimbursed ACT for the cost of long-lead time parts and other raw material costs that had
been incurred by ACT because of the reduction of purchase order and forecasted quantities. The subcontract manufacturers also maintain inventory levels to repair the Company amplifiers. At
March 31, 2002, total accepted and unfulfilled purchase orders to procure completed amplifiers totaled $7.3 million. At March 31, 2002, the subcontract manufacturers had
$13.4 million of materials on hand and an additional $12.3 million of purchase commitments to buy raw materials to fulfill the accepted purchase orders, forecasted requirements and
repair requirements from the Company. At March 31, 2002, the Company estimated that $1.6 million of the purchase commitments made by the subcontract manufacturers are
non-cancelable.

Other Purchase Commitments.During its normal course of business, the Company also issues purchase orders to procure
components, materials and services from other vendors. As of March 31, 2002, the Company's outstanding purchase commitments with vendors other than Cree and its subcontract manufacturers
totaled approximately $4.9 million.

Royalty Commitments.On November 15, 2001, the Company entered into an agreement with Paragon to license certain
technology that can be used in the design of RF power amplifiers. Under the terms of the License Agreement, the Company may be required to pay a royalty to Paragon based upon revenues of products that
incorporate the licensed technology. If the Company elects to license the technology provided by Paragon, the Company must make quarterly advance royalty payments beginning July 1, 2002,
through December 31, 2004 in amounts ranging from $50,000 to $125,000 per quarter. These advance royalty payments are to be applied against earned royalties and are carried forward to
subsequent periods if not earned.

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Future
payments under all royalty commitments, purchase commitments, capital leases, non-cancelable operating leases and sublease income under these operating leases as of
March 31, 2002 are as follows (in thousands):

|                                                    |  | Amounts Due by Period
|--------------------------------------------------- |  | ---------------------
|
|Capital lease obligations                           |  | $                    
|Operating leases                                    |  |                      
|Minimum Royalty commitments with Paragon            |  |                      
|Minimum Purchase commitments with Cree              |  |                      
|Purchase commitments with subcontract manufacturers |  |                      
|Other purchase commitments                          |  |                      
|                                                    |  |                      
|Total commitments                                   |  | $                    
|                                                    |  |                      
|Sublease income                                     |  | $                    
|                                                    |  |                      

In
September 2001, the Board of Directors authorized the repurchase of up to $10 million of the Company's common stock. Any repurchase may be made in the open market at
times and prices considered appropriate by the Company's management. As of March 31, 2002, the Company had bought back 293,700 shares of its common stock at an average per share price of $9.80
for approximately $2.9 million. The Company did not repurchase any shares of its common stock in the three months ended March 31, 2002.

The
Company anticipates spending approximately $5.0 million over the next twelve months for capital additions primarily to support manufacturing production and test requirements
and development projects.

Based
on the Company's current working capital position and the available line of credit, the Company believes that sufficient resources will be available to meet the Company's cash
requirements for at least the next twelve months. However, there can be no assurance that future events will not require the Company to seek additional borrowings or capital and, if so required, that
such borrowing or capital will be available on acceptable terms. Factors that could affect cashflow from operations and as a result, the Company's need to seek additional borrowings or capital
include:



Related Party Transactions

Sales to Cingular Wireless LLC.During fiscal 2002, Cingular purchased approximately $8.6 million of MCPA products
from the Company (or 8.3% of fiscal 2002 net revenues), primarily in the second half of fiscal 2002. Robert W. Shaner, President of Wireless Operations for Cingular, has served as a director for the
Company since April 1999. The transactions between the two parties were performed at arms-length.

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Outsourced Stock Option Administration Services.In May of 2000, Spectrian entered into a non-binding
arrangement
with Montgomery Financial Services Corp. ("MFS"). MFS provides on-site stock option administration services to the Company. Henry C. Montgomery, Chairmen of the Board of MFS, has also
served as a director of the Company since November 2000. At the time the service was obtained, normal purchasing policies were followed which included several bids from other providers and
normal payment terms of 30 days. In fiscal 2002, the Company purchased $37,000 of services from MFS. Transactions between the two parties are performed at arms-length.

Investment in ArrayComm, Inc.In July of 1998, Spectrian purchased 222,222 shares of Series D preferred stock
(at $4.50 per share) in ArrayComm, Inc. ("ArrayComm"). The total investment in ArrayComm was $1.0 million. ArrayComm is a privately held company that develops antenna-based wireless
communications and broadband internet access technologies. Martin Cooper, Chief Executive Officer of ArrayComm, has also served as a director of the Company since January 1994. The investment
in ArrayComm was made at arms-length and there have been no other transactions between the companies.

Factors Affecting Future Operating Results

Risks Related to the Proposed Merger

Fluctuations in Merger Consideration.Upon completion of the merger, each share of the Company's common stock will be
converted into the right to receive $14 of REMEC common stock, provided that at REMEC's election, REMEC may offer a certain portion of the merger consideration in cash. REMEC may make this election at
any time prior to the fifth business day prior to the special meeting of the Company's stockholders. If REMEC elects not to pay any cash in the merger, the number of shares of REMEC common stock that
will be issued for each share of the Company's common stock shall be equal to $14.00 divided by the average closing price of REMEC common stock during the ten trading days ending on and including the
second trading day prior to the special meeting of the Company's stockholders. However, if the average closing price is greater than $10.50 then REMEC shall issue 1.33333 shares of its common stock
for each share of the Company's common stock, and if
the average closing price is less than $7.00 then REMEC shall issue 2.0 shares of its common stock for each share of the Company's common stock. Since the market price of REMEC's stock will fluctuate
and since REMEC may elect to pay cash as merger consideration, the Company's stockholders will not know the final exchange ratio until after the market closes on the second trading day prior to the
Company's special stockholder meeting. Accordingly, the specific number of shares of REMEC common stock that the Company's stockholders will receive in the merger will depend upon the market price of
REMEC's common stock at the time the closing of the merger. This price may fluctuate substantially. In addition, the Company is not permitted to withdraw from the merger or resolicit the vote of its
stockholders solely because of changes in the market price of REMEC's common stock or the Company's common stock. The share prices of REMEC and the Company's common stock are subject to the general
price fluctuations in the market for publicly traded equity securities, and the prices of both companies' common stock have experienced significant volatility in the past. The Company urges its
stockholders to obtain recent market quotations for its common stock and for REMEC's common stock. The Company cannot predict or give any assurances as to the respective market prices of the Company's
or REMEC's common stock at any time before or after the closing of the merger.

Customer delays, deferrals or cancellations of Product Orders.The public announcement of the merger could have a material
adverse effect on the Company's revenues and profitability in the short term. In particular, prospective customers could be reluctant to purchase the Company's products if they are uncertain about the
strategic direction of the combined company, the continuation of the Company's product offerings and the willingness of the combined company to support, service and repair existing products. Since the
merger, the Company has received questions from current and

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prospective customers about the status of the merger and the anticipated product development and integration plans. The merger was announced on May 19, 2002, in the second half of the
Company's first quarter of fiscal 2003. The Company tends to realize a substantial portion of its revenues during the last month of a quarter. Accordingly, the announcement of the merger could create
uncertainty among the Company's current and prospective customers. If one large customer, or a large number of smaller customers, were to delay their purchase decisions until the completion of the
merger, the Company's quarterly financial results could be significantly below the expectations of market analysts, which could cause a reduction in the market price of the Company's common stock.

Impairment of Existing Relationships.The public announcement of the merger could substantially impair the Company's
important business relationships. Customers and suppliers could decide to terminate or cancel their existing arrangements, or fail to renew those arrangements, as a result of the pending merger. In
addition, key employees may decide to terminate their employment due to the pending merger or other employees may experience uncertainty about their future role with the combined company which could
adversely affect the Company's ability to retain key management, marketing, sales and technical personnel.

Merger Related Costs.The Company estimates that it will incur direct transaction costs of approximately $3.7 million
in connection with the proposed merger, which will be expensed in the quarter in which they are incurred. The Company believes that the combined entity may incur charges to operations, which are not
currently reasonably estimable, in the quarter in which the merger is completed or the following quarters, to reflect costs associated with integrating the Company into REMEC. There can be
no assurance that the combined company will not incur additional material charges in subsequent quarters to reflect additional costs associated with the merger.

Risks Associated with REMEC's Common Stock.When the merger is completed, holders of the Company's common stock will become
holders of REMEC's common stock. REMEC's business differs greatly from the Company's and REMEC's results of operations, as well as the price of REMEC's common stock, may be affected by factors
different from those affecting the Company's results of operations and the price of the Company's common stock.

Regulatory Approvals of Merger.As a condition to the obligations of the Company and REMEC to complete the merger, the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 must have expired or been terminated and the Securities and Exchange Commission must have declared effective a
registration statement pursuant to which the Company's stockholders would be solicited to vote on the proposed merger. The Company and REMEC have made the required filings under the
Hart-Scott-Rodino Act with the Department of Justice and the Federal Trade Commission and REMEC expects to file its registration statement with the Securities and Exchange Commission
shortly after the date the Company files this Annual Report. There can be no assurance that the waiting period under the Hart-Scott-Rodino Act will be permitted to expire or be terminated
at all without materially adverse restrictions or conditions that would have an adverse effect on the Company or that the Securities and Exchange Commission will declare REMEC's registration statement
effective in a timely manner. The Company may be required to agree to various operating restrictions, before or after receipt of stockholder approval, in order to obtain the necessary authorizations
and approvals of the merger or to assure that governmental authorities do not seek to block the merger. The Company does not expect to seek any additional stockholder approval, after the special
meeting of its stockholders, to agree to any terms and conditions necessary to resolve any regulatory objections to the merger, and the Company will not seek stockholder approval unless such
stockholder approval is required to approve such terms and conditions under applicable law. Notwithstanding any agreements regarding operating restrictions that may be required under applicable law or
by governmental authorities, under the terms of the merger agreement, REMEC is not required to accept any material restrictions on its business or take any action which would materially and adversely
effect its business in

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order to complete the merger and may refuse to complete the merger if any such material restrictions or actions are required by governmental authorities as a condition to approving the merger. Even
if regulatory approvals are obtained, any federal, state or foreign governmental entity or any private person may challenge the merger at any time before or after its completion.

Failure to Complete the Proposed Merger.If the proposed merger is not completed, the Company may be subject to the following
material risks, among others:



Further,
if the merger agreement is terminated and the Company's board of directors determines to seek another merger or business combination, the Company may not be able to find a
partner willing to pay an equivalent or more attractive price than that which would be paid in the merger.

In
addition, while the merger agreement is in effect and subject to certain limited exceptions, the Company is generally prohibited from soliciting, initiating, knowingly encouraging or
knowingly inducing or participating in any discussions regarding a proposal to enter into any business combination with any party other than REMEC.

Risks Related to Ongoing Operations

Customer Concentration; Dependence on Nortel, Verizon, Samsung and Cingular.The wireless infrastructure equipment market is
dominated by a small number of large OEMs and wireless network operators, including Ericsson, Nokia, Lucent, Motorola, Samsung, Nortel, Verizon, Cingular and Siemens. The Company's revenues are
derived primarily from sales to a limited number of customers, in particular, Nortel, Verizon, Samsung and Cingular. Furthermore, a substantial portion of the Company's revenues from Nortel in the
past has resulted from sales of a limited number of the Company's products. The Company's business, financial condition and results of operations have been materially adversely affected in the past by
anticipated orders failing to materialize, by deferrals or cancellations of orders as a result of changes in customer requirements, and from the timing of the build out of new wireless networks. The
Company and Nortel have a supply agreement, renegotiated annually, pursuant to which Nortel commits to purchase a certain volume of its annual power amplifier requirements for specified prices from
the Company. This agreement allows Nortel to change the
product mix requirements, which can significantly affect the Company's gross margins, and to change requested delivery dates without significant financial consequences to Nortel. In addition, the
Company's sales to Verizon, Samsung and Cingular are generally made on the basis of purchase orders rather than long-term purchase commitments and any of these customers may cancel or
defer purchase orders without advanced notice to the Company. The Company's contractual relationships with its

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major customers may adversely affect the Company's ability to efficiently manage production schedules and inventory levels and to accurately forecast product sales. Any reduction in the level of
purchases of the Company's amplifiers by Nortel, Verizon, Samsung or Cingular or any material reduction in pricing without significant offsets, would have a material adverse effect on the Company's
business, financial condition and results of operations. For example, in the second and third quarters of fiscal 2002, product orders from Nortel fell substantially and the Company does not currently
sell any MCPA products to Nortel, which has adversely affected the Company's business. There can be no assurance that the Company will receive any product orders for MCPA products or any other
products from Nortel in the future. If the Company's current or new customers do not generate sufficient demand for the Company's new products replacing prior demand from Nortel, the Company's
business, financial condition and results of operations could be materially adversely affected. Further, if the Company were to lose Nortel, Verizon, Samsung, Cingular or any other major customer, the
Company's business, financial condition and results of operations would be materially adversely affected. In addition, the network operator market has been and is expected to continue experiencing an
industry consolidation, which has and will continue to have a negative impact on the Company's ability to diversify its customer base. Wireless infrastructure equipment OEMs have come under
increasing price pressure from wireless network operators, which in turn has resulted in downward pricing pressure on the Company's products. The Company expects to incur increasing pricing pressures
from Nortel, Verizon, Samsung, Cingular and other major customers in future periods, which could result in declining average sales prices and gross margins for the Company's products.

Fluctuations in Operating Results.The Company's quarterly and annual results have in the past been, and will continue to be,
subject to significant fluctuations due to a number of factors, any of which could have a material adverse effect on the Company's business, financial condition and results of operations. In
particular, the Company's results of operations are likely to vary due to: the timing, cancellation, delay or rescheduling of OEM and network operator customer orders and shipments; the timing of
announcements or introductions of new products by the Company, its competitors or their respective OEM and network operator customers; the acceptance of such products by wireless equipment
OEMs and network operators; relative variations in manufacturing efficiencies and costs; competitive factors such as the pricing, availability, and demand for competing amplification products;
changes in average sales prices and related gross margins which vary significantly based upon product mix; subcontractor performance; variations in operating expenses; changes in manufacturing
capacity and variations in the utilization of this capacity; shortages of key supplies; the long sales cycles associated with the Company's products; the timing and level of product and process
development costs; changes in inventory levels; the relative strength or weakness of international financial markets and the financial strength of domestic financial markets. Anticipated orders from
the Company's customers have in the past failed to materialize and delivery schedules have been deferred or canceled as a result of changes in customer requirements and the Company expects this
pattern to continue as customer requirements continue to change and industry standards continue to evolve. Reduced demand for wireless infrastructure equipment in the past has caused significant
fluctuations in the Company's product sales. For fiscal 2002 when compared to fiscal 2001, the Company experienced a significant sales decline as a result of delays and reductions in capital spending
by the Company's customers. There can be no assurance that the Company will not experience such fluctuations in the future or that the Company will experience in the future the same annual revenue
growth that it did in fiscal 2000 and 2001. The
Company establishes its expenditure levels for product development and other operating expenses based on its expected revenues, and expenses are relatively fixed in the short term. As a result,
variations in timing of revenues can cause significant variations in quarterly results of operations. At March 31, 2002, the Company had a relatively high level of inventory on hand.
Consequently, if customer demand falls below the Company's forecast, it may experience charges related to excess and obsolete inventory or be required to reduce the carrying value of inventory to the
lower of cost or market. The Company is not currently profitable and there can be no assurance that the Company will

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be profitable on a quarter-to-quarter or annual basis in the future. In fiscal 2002, the Company wrote down inventory by $11.7 million due to lower than expected
customer demand. The Company believes that period-to-period comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication
of future performance. Due to all the foregoing factors, it is likely that in some future quarter or quarters the Company's revenues or operating results will not meet the expectations of public stock
market analysts or investors. In such event, the market price of the Company's Common Stock would be materially adversely affected.

Economic Recession or other Economic Conditions.The Company's revenues are derived primarily from sales to wireless network
operators and OEMs in the wireless infrastructure equipment market. Any significant downturn in the wireless infrastructure equipment market, or domestic or international conditions, which
result in the reduction of capital expenditure budgets or the delay in product orders of the Company's customers would likely produce a decline in demand for the Company's power amplifier products.
Since early 2001, the wireless infrastructure equipment market has experienced a significant decline in revenue and product orders. If the Company's customers decide to delay their product orders or
reduce their capital expenditures, the Company's revenues, results of operations and financial condition would be adversely affected.

Declining Average Sales Prices.The Company has experienced, and expects to continue to experience, declining average sales
prices for all its products, especially its SCPAs, and in all geographical markets. Wireless infrastructure equipment manufacturers have come under increasing price pressure from wireless network
operators, which in turn has resulted in downward pricing pressure on the Company's products. In addition, competition among merchant amplifier suppliers has increased the downward pricing pressure on
the Company's products and certain customer contracts have pricing terms that allow these customers to purchase the Company's products at the lowest available market price. Since wireless
infrastructure equipment manufacturers frequently negotiate supply arrangements far in advance of delivery dates, the Company often must commit to price reductions for its products before it is aware
of how, or if, cost reductions can be obtained. To offset declining average sales prices, the Company believes that it must achieve manufacturing cost reductions. If the Company is unable to achieve
such cost reductions, the Company's gross margins will decline, and such decline will have a material adverse effect on the Company's business, financial condition and results of operations.

Product Quality, Performance and Reliability.The Company expects that its customers will continue to establish demanding
specifications for quality, performance and reliability that must be met by the Company's products. Power amplifiers as complex as those offered by the Company often encounter development delays and
may contain undetected defects or failures. The Company has from time to time in the past experienced product quality, performance and reliability problems. In addition, the
Company's MCPA products have a higher statistical probability of malfunction than its SCPA products due to their greater complexity. There can be no assurance that defects or failures relating to the
Company's product quality, performance and reliability will not occur in the future that may have a material adverse effect on the Company's business, financial condition and results of operations.

Internal Amplifier Design and Production Capabilities of OEMs.The Company believes that a majority of the present worldwide
production of power amplifiers is captive within the manufacturing operations of wireless equipment OEMs, many of which have chosen not to purchase a significant volume of amplifiers from outside
suppliers. In addition, these manufacturers could decide to sell amplifiers to other wireless equipment OEMs, either through direct sales or by spinning out their amplifier division as a separate
entity. If this should occur, the competition for power amplifiers would significantly increase and could have a material adverse effect on the Company's business, financial condition and results of
operations.

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The
Company also believes that those OEMs that purchase from third party amplifier vendors are reluctant to switch once committed to a particular merchant vendor. Consequently,
the Company has only limited opportunities to increase revenues by replacing internal OEM amplifier production or displacing other merchant amplifier suppliers. Moreover, given the limited
opportunities for merchant power amplifier suppliers, any decision by an OEM to employ a second source merchant supplier for a product currently purchased from a merchant supplier may reduce the
existing merchant supplier's ability to maintain a given level of product sales to such OEM or, possibly, to retain the OEM as a customer due to price competition from the second source merchant
supplier. There can be no assurance that the Company's major OEM customers will continue to rely, or increase their reliance, on the Company as an external source of supply for their power amplifiers,
or that other wireless equipment OEMs will become customers of the Company. If the major wireless infrastructure equipment suppliers do not purchase or do not continue to purchase their power
amplifiers from merchant suppliers, the Company's business, results of operations and financial condition will be materially adversely affected.

Rapid Technological Change; Evolving Industry Standards; Dependence on New Products.The markets in which the Company and its
OEM customers compete are characterized by rapidly changing technology, evolving industry standards and continuous improvements in products and services. In particular, because the Company's strategy
of rapidly bringing to market products customized for numerous and evolving modulation standards requires developing and achieving volume production of a large number of distinct products, the
Company's ability to rapidly design and produce individual products for which there is significant OEM customer demand will be a critical determinant of the Company's future success. A softening of
demand in the markets served by the Company or a failure of modulation standard in which the Company has invested substantial development resources may have a material adverse effect on the Company's
business, financial condition and results of operations. No assurance can be given that the Company's product development efforts will be successful, that its new products will meet customer
requirements and be accepted or that its OEM customers' product offerings will achieve customer acceptance. If a significant number of development projects, including the Company's new MCPA products,
do not result in substantial volume production or if technologies or standards
supported by the Company's or its customers' products become obsolete or fail to gain widespread commercial acceptance, the Company's business may be materially adversely affected.

Purchase and Supply Agreement with Cree.In connection with the Company's completion of the sale of UltraRF to Cree, the
Company entered into a Purchase and Supply Agreement with UltraRF, a subsidiary of Cree. Pursuant to the Purchase and Supply Agreement, as amended, the Company is committed to purchase and accept
delivery from UltraRF of $54.8 million of semiconductors over a 30-month period starting January 2001. As of March 31, 2002, the Company's remaining purchase
commitment was $21.3 million, with quarterly purchase commitments ranging from $1.3 million to $5.0 million. The Company's need for UltraRF components during a quarter may be
insufficient to satisfy its minimum commitments for such quarter. In such event, the Company would be obligated to purchase excess inventory that it may never utilize or to pay a shortfall surcharge
in cash, either of which could have a material adverse effect on the Company's business, financial condition and cash flow.

Arm's-Length Relationship.The Company relies on UltraRF for the supply of a substantial amount of components used in the
manufacture of its products. When the Company operated UltraRF as a separate division, it may have obtained more favorable terms for semiconductor products than through negotiations with unaffiliated
third parties. With the sale of UltraRF, the Company must now deal with UltraRF on an arm's-length basis. Accordingly, the prices and other terms for UltraRF semiconductor products are less favorable
to the Company than prior to the sale of UltraRF to Cree, which adversely affects the Company's gross margin.

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Sole or Limited Sources of Products, Materials and Services.The Company currently procures from single sources certain of
its power amplifier assemblies, specialized semiconductors, components and services for its products. The Company purchases these products, components and services on a purchase order basis, does not
carry significant inventories of these components and does not have any long-term supply contracts with its sole source vendors. In fiscal 2001, the Company completed the transfer of the
production of power amplifiers to a contract manufacturer in Thailand. As a result of this transfer, the Company no longer has significant manufacturing capacity. The Company issues
non-cancelable purchase orders to the contract manufacturer 60 days in advance of requested delivery, which is greater than the committed delivery schedule of some of its customers,
such as Nortel. In addition, the Company began the process of transferring its power amplifier repair and product integration operations to the same contract manufacturer in Thailand. As a result of
this transfer, the Company no longer has significant amplifier repair capacity as of March 31, 2002. On December 29, 2000, the Company completed the sale of substantially all of the
assets and liabilities comprising the Company's semiconductor division, UltraRF, to Cree. As a result, the Company no longer manufactures bipolar and LDMOS RF power semiconductors, which are critical
components in the Company's power amplifier products. Consequently, Cree is the Company's sole source vendor of certain bipolar and LDMOS RF power semiconductors. The Company's reliance on sole
sources for certain components and its migration to an outsourced, turnkey manufacturing and repair services strategy entail certain risks including reduced control over the price, timely delivery,
reliability and quality of the components and reliance on the financial strength and continued relationship with the contract manufacturer. In calendar 2001, the financial strength of the Company's
primary sole source contract manufacturer may
have become impaired due to the declaration of bankruptcy by its U.S. parent corporation. Although the Company has taken measures to protect itself in the event that this contract manufacturer
declares bankruptcy or is placed in receivership, the Company may suffer a loss of assets or disruption of its manufacturing processes and the Company's business, financial condition and results of
operations may be adversely affected. If the Company were to change any of its sole source vendors or contract manufacturer, the Company would be required to requalify its components with each new
vendor or contract manufacturer, respectively, as well as with each of its customers. Any inability of the Company to obtain timely deliveries of components, repair services, assembled amplifiers or
RF power semiconductors of acceptable quality in required quantities or a significant increase in the prices of components for which the Company does not have alternative sources could materially and
adversely affect the Company's business, financial condition and results of operations. The Company has occasionally experienced difficulties in obtaining some components, and no assurance can be
given that shortages will not occur in the future.

Risks of International Sales.The Company operates in an international market and expects that sales outside of the United
States will continue to account for a significant percentage of the Company's total revenues for the foreseeable future. These sales involve a number of inherent risks, including terrorist attacks on
U.S. companies, imposition of government controls, currency exchange fluctuations, potential insolvency of international distributors, representatives, vendors and customers, reduced protection of
intellectual property rights in some countries, the impact of recessionary environments in economies outside the United States, political instability and generally longer receivables collection
periods, as well as tariffs and other trade barriers. In addition, where the Company sells its products in U.S. dollars, increases in the value of the dollar relative to the local currency would
increase the price of the Company's products in foreign markets and make the Company's products relatively more expensive and less price competitive than competitors' products that are priced in local
currencies. Where the Company sells its products in foreign currencies, the Company may be unable to increase or decrease the prices for its products in a timely fashion to reflect fluctuations in the
exchange rate which would reduce the competitiveness of the Company's prices and result in lower revenues. Furthermore, foreign governments or regulatory bodies may in the future impose currency
restrictions or controls which would impair or prohibit the Company's ability to

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exchange its funds from foreign currencies into U.S. dollars thereby adversely affecting the Company's business, financial condition and results of operations. There can be no assurance that these
factors will not have a material adverse effect on the Company's future international sales and, consequently, on the Company's business, financial condition and results of operations, and the Company
has determined not to engage in hedging activities to mitigate any of these risks.

The
Company anticipates that turmoil in financial markets and the deterioration of the underlying economic conditions in certain countries where the Company has significant sales may
have an impact on its sales to customers located in or whose projects are based in those countries due to the impact of currency fluctuations on the relative price of the Company's products and
restrictions on government spending imposed by the International Monetary Fund (the "IMF") on those countries receiving the IMF's assistance. In addition, customers in those countries may face reduced
access to working capital to fund component purchases, such as the Company's products, due to higher interest rates, reduced funding of wireless infrastructure by domestic governments, reduced bank
lending due to contractions in the money supply or the deterioration in the customer's or its bank's financial condition or the inability to access equity financing. A substantial majority of the
Company's products are sold to OEMs who incorporate the Company's products into systems sold and installed to end-user customers.
These OEMs are not required by contract and do not typically provide the Company with information regarding the location and identity of their end-user customers, and, therefore,
the Company is not able to determine what portion of its product sales have been or future orders will be incorporated into OEM sales to end-users in countries experiencing financial
market turmoil and/or deterioration of economic conditions. Furthermore, a large portion of the Company's existing customers and potential new customers are servicing new markets in developing
countries that the Company's customers expect will deploy wireless communication networks as an alternative to the construction of a wireline infrastructure. If such countries decline to construct
wireless communication systems, or construction of such systems is delayed for any reason, including business and economic conditions and changes in economic stability due to factors such as increased
inflation and political turmoil, such delays could have a material adverse effect on the Company's business, financial condition and results of operations.

Reliance upon Growth of Wireless Services.Sales of power amplifiers to wireless infrastructure equipment suppliers and
network operators have in the past accounted, and are expected in the future to account, for substantially all of the Company's product sales. Demand for wireless infrastructure equipment is driven by
demand for wireless service. If demand for wireless services fails to increase or increases more slowly than the Company or its customers currently anticipate, the Company's business, financial
condition and results of operations would be materially and adversely affected.

Market for the Company's Products Is Highly Competitive.The wireless communications equipment industry is extremely
competitive and is characterized by rapid technological change, new product development and product obsolescence, evolving industry standards and significant price erosion over the life of a product.
The ability of the Company to compete successfully and achieve profitability depends in part upon the rates at which wireless equipment OEMs incorporate the Company's products into their
systems and the Company captures market share from other merchant suppliers. The Company's major OEM customers continuously evaluate whether to manufacture their own amplification products or purchase
them from outside sources. There can be no assurance that these OEM customers will incorporate the Company's products into their systems or that in general they will continue to rely, or expand their
reliance, on external sources of supply for their power amplifiers. These customers and other large manufacturers of wireless communications equipment could also elect to enter the merchant market and
compete directly with the Company, and at least two OEMs, NEC and Lucent, have already done so. Such increased competition could materially adversely affect the Company's business, financial condition
and results of operations.

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The Company's principal competitors in the market for wireless amplification products provided by merchant suppliers currently include, Andrew, Celiant, Fujitsu, Japan Radio
Co. Ltd., Mitsubishi, Panasonic, Paradigm, Powerwave and REMEC. No assurance can be given that the Company's competitors will not develop new technologies or enhancements to existing products
or introduce new products that will offer superior price or performance features compared to the Company's products.

Risk of Licensed or Acquired Technologies.The wireless communications equipment industry is very competitive, and as such,
the Company's growth is substantially dependent upon its ability to enhance its existing products and introduce new products on a timely basis. The Company has addressed in part its need to improve
existing products and develop new products through the licensing of externally developed technologies and through the acquisition of such technologies by investing in other companies. The licensing or
acquisition of externally developed technologies involves certain risks including difficulties in integrating the third party's technology into the Company's products, lack of control over the
reliability, timely delivery and quality of such technology and the failure of the Company to realize additional revenue associated with such technology which can offset the license payments or the
initial investment and related costs of such technology. If any of these risks materialize, the Company's license agreements or investments in externally developed technologies may not be financially
successful and may adversely affect the Company's business, operating results and financial condition.

Uncertain Protection of Intellectual Property.The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary technology and operate without infringing the rights of others. The Company has a policy of seeking patents on inventions
resulting from its ongoing research and development activities. There can be no assurance that the Company's pending patent applications will be allowed or that the issued or pending patents will not
be challenged or circumvented by competitors. Notwithstanding the Company's active pursuit of patent protection, the Company believes that the success of its business depends more on the collective
value of its patents, specifications, computer aided design and modeling tools, technical processes and employee expertise. In addition, the Company assigned 20 of its United States patents and 4 of
its foreign patents to Cree in connection with the sale of UltraRF. The Company has been granted by Cree a non-exclusive, royalty-free license to each of these patents,
however, there can be no assurance that Cree will adequately protect this proprietary information and any such failure could adversely affect the Company's business, financial condition and results of
operations. The Company generally enters into confidentiality and nondisclosure agreements with its employees, suppliers, customers, and potential customers and limits access to and distribution of
its proprietary technology. However, there can be no assurance that such measures will provide adequate protection for the Company's trade secrets or other proprietary information, or that the
Company's trade secrets or proprietary technology will not otherwise become known or be independently developed by competitors. The failure of the Company to protect its proprietary technology could
have a material adverse effect on its business, financial condition and results of operations.

Risk of Third Party Claims of Infringement.The communications equipment industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in significant and often protracted and expensive litigation. Although there is currently no pending intellectual property
litigation against the Company, the Company or its suppliers may from time to time be notified of claims that the Company may be infringing patents or other intellectual property rights owned by third
parties. If it is necessary or desirable, the Company may seek licenses under such patents or other intellectual property rights. However, there can be no assurance that licenses will be offered or
that the terms of any offered licenses will be acceptable to the Company. The failure to obtain a license from a third party for technology used by the Company or otherwise secure rights to use such
technology could cause the Company to incur substantial liabilities, to suspend the manufacture of products or expend significant resources to develop noninfringing technology. There

42

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can be no assurance that the Company would be successful in such development or that such licenses would be available on reasonable terms, if at all. In the event that any third party makes a
successful claim against the Company or its customers and either a license is not made available to the Company on commercially reasonable terms or a "design around" is not practicable, the Company's
business, financial condition and results of operations would be materially adversely affected. In addition, the Company remains liable for any potential claims, losses or expenses incurred by Cree as
a direct or indirect result of any inaccuracy or breach of the intellectual property, taxes or environmental representations and warranties made by the Company in connection with the sale of UltraRF.
The Company's liability for any such claim, loss or expense is unlimited, and, therefore, the filing of such a claim against Cree or the Company could materially adversely affect the Company's
financial condition.

Furthermore,
the Company may initiate claims or litigation against third parties for infringement of the Company's proprietary rights or to establish the validity of the Company's
proprietary rights. Litigation by or against the Company could result in significant expense to the Company and divert the efforts of the Company's technical and management personnel, whether or not
such litigation results in a favorable determination for the Company. In the event of an adverse result in any such litigation, the Company could be required to pay substantial damages, indemnify its
customers, cease the manufacture, use and sale of infringing products, expend significant resources to develop noninfringing technology, discontinue the use of certain processes or obtain licenses to
the infringing technology.

Government Regulation of Communications Industry.RF transmissions and emissions, and certain equipment used in connection
therewith are regulated in the United States, Canada and throughout the rest of the world. Regulatory approvals generally must be obtained by the Company in connection with the manufacture and sale of
its products, and by wireless network operators to operate the Company's products. The United States Federal Communications Commission (the "FCC") and regulatory authorities abroad constantly review
RF emission issues and promulgate standards based on such reviews. If more stringent RF emission regulations are adopted, the Company and its OEM customers may be required to alter the manner in which
radio signals are transmitted or otherwise alter the equipment transmitting such signals, which could materially adversely affect the Company's products and markets. The enactment by federal, state,
local or international governments of new laws or regulations or a change in the interpretation of existing regulations could also materially adversely affect the market for the Company's products.
For example, recently enacted laws and regulations which prohibit or restrict the use of hand held cellular telephones while operating a motor vehicle may have a material adverse affect on the market
for the Company's products. Although deregulation of
international communications industries along with radio frequency spectrum allocations made by the FCC have increased the potential demand for the Company's products by providing users of those
products with opportunities to establish new wireless personal communications services, there can be no assurance that the trend toward deregulation and current regulatory developments favorable to
the promotion of new and expanded personal communications services will continue or that other future regulatory changes will have a positive impact on the Company. Recently, the auction of new
frequency spectrums has been delayed by the FCC. The increasing demand for wireless communications has exerted pressure on regulatory bodies worldwide to adopt new standards for such products,
generally following extensive investigation of and deliberation over competing technologies. However, the delays inherent in this governmental approval process and the current uncertainty surrounding
the ownership and allocation of wireless spectrum licenses have in the past caused, and may in the future cause, the cancellation, postponement or rescheduling of the FCC auction of spectrum licenses
and the installation of communications systems by the Company's OEM customers. These delays have had in the past, and in the future may have, a material adverse effect on the sale of products by the
Company to such OEM customers.

Environmental Regulations.The Company is subject to a variety of local, state and federal governmental regulations relating
to the storage, discharge, handling, emission, generation, manufacture

43

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and disposal of toxic or other hazardous substances used to manufacture the Company's products. The Company believes that it is currently in compliance in all material respects with such regulations
and that it has obtained all necessary environmental permits to conduct its business. Nevertheless, the failure to comply with current or future regulations could result in the imposition of
substantial fines on the Company, suspension of production, alteration of its manufacturing processes or cessation of operations. Compliance with such regulations could require the Company to acquire
expensive remediation equipment or to incur substantial expenses. Any failure by the Company to control the use, disposal, removal or storage of, or to adequately restrict the discharge of, or assist
in the cleanup of, hazardous or toxic substances, could subject the Company to significant liabilities, including joint and several liabilities under certain statutes. The imposition of such
liabilities could materially adversely affect the Company's business, financial condition and results of operations. In addition, the Company is liable for any potential claim, loss or expense
incurred by Cree as a result of any inaccuracy or breach of the environmental representations and warranties made by the Company in connection with the sale of UltraRF.

Management of Growth; Dependence on Key Personnel.The Company's business and growth has placed, and is expected to continue
to place, a significant strain on the Company's personnel, management and other resources. The Company's ability to manage any future growth effectively will require it to attract, motivate, manage
and retain new employees successfully, especially in the highly competitive northern California job market, to integrate new employees into its overall operations and to retain the continued service
of its key technical, marketing and management personnel, and to continue to improve its operational, financial and management information systems. Although the Company has employment contracts with
several of its executive officers, these agreements do not obligate such individuals to remain in the employment of the Company. The Company does not maintain key person life insurance on any of its
key technical personnel. The competition for such personnel is intense. The Company has experienced loss of key employees in the past and could in the future. Such losses could have a material adverse
effect on the Company.

The
Company's ability to manage its growth will require it to continue to invest in its operational, financial and management information systems, procedures and controls. The Company
can give no assurance that it will be able to manage its growth effectively. Failure to manage growth effectively would have a material adverse effect on the Company's business, financial condition
and results of operations. The Company may, from time to time, pursue the acquisition of other companies, technology, assets or product lines that complement or expand its existing business. The
Company may also, from time to time, pursue divestitures of existing operations, technology or assets. Acquisitions and divestitures involve a number of risks that could adversely affect the Company's
operating results. These risks include the diversion of management's attention from day-to-day business, the fluctuation of operating results due to the timing of charges for
costs associated with acquisitions or divestitures, the difficulty of combining and assimilating the operations and personnel of the acquired companies, the difficulty of separating a divested
operation from the remaining operations, charges to the Company's earnings as a result of the purchase of intangible assets, and the potential loss of key employees as a result of an acquisition or
divestiture. Should any acquisition or divestiture take place, we can give no assurance that this transaction will not materially and adversely affect the Company or that any such transaction will
enhance the Company's business.

Risk of Business Interruption.The Company's operations are vulnerable to interruption by fire, earthquake, power loss,
telecommunications failure and other events beyond the Company's control. The Company does not have a detailed disaster recovery plan and its facilities in the State of California have been in the
past subject to electrical blackouts as a consequence of a shortage of available electrical power. In the event these blackouts occur in the future, they could disrupt the operations of the Company's
facilities in California and increase the Company's operating costs. In addition, the Company does not carry sufficient business interruption insurance to compensate it for losses that may

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occur and any losses or damages incurred could have a material adverse effect on the Company's business.

Volatility of Stock Price.The market price of the Company's stock has been and is likely to continue to be highly volatile,
and is affected significantly by factors such as fluctuations in the Company's quarterly and annual operating results, customer concentration, reliance on single source vendors, reliance on outsource
manufacturing, the timing difference between its customers' requested delivery dates and its vendor purchase commitments to support the customer's delivery requirements, reliance on international
markets, the absence of the economies of scale achieved by some of its competitors, announcements of technological innovations, new customer contracts or new products by the Company or its
competitors, announcements by the Company's customers regarding their business or prospects, changes in analysts' expectations, estimates and recommendations, news reports regarding the Company, its
competitors and its markets, governmental regulatory action, developments with respect to patents or proprietary rights, announcements of significant acquisitions or strategic partnerships by the
Company or its competitors, announcements of significant divestitures of existing businesses or product lines, concentration of stock ownership by a few entities resulting in a low float of the
Company's common stock in the public market, a significant short interest ownership position in the Company's common stock, general market conditions and other factors. The market price of the
Company's common stock has ranged from a low of $11.03 to a high of $16.70 during the period from December 31, 2001 to March 31, 2002. In addition, the stock market in general, and the
market prices for power amplifier manufacturers in particular, have experienced extreme volatility that is often unrelated to the operating performance of these companies. These broad market and
industry
fluctuations may adversely affect the price of the Company's common stock, regardless of actual operating performance. The market price of the Company's common stock has fluctuated significantly in
the past.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company develops products in the United States and markets its products in North America, South America, Europe and the Asia-Pacific region. Thus,
the financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. As the Company's sales are primarily denominated
in U.S. dollars, a strengthening of the dollar could make the Company's products less competitive in foreign markets. In addition, a portion of the Company's international product revenues (primarily
in China) and repair revenues (primarily in South Korea) are denominated in foreign currencies. In the circumstances that the Company bills and receives local currencies, the Company may be restricted
or impaired from exchanging the local currency into U.S. dollars due to expatriation laws or regulations in foreign countries which would adversely affect the Company's operations and financial
condition. As of March 31, 2002, the recorded values of cash and accounts receivable in Chinese Yuan and Korean Won were $1.5 million and $786,000, respectively, in the aggregate.

The
Company's exposure to market rate risk for changes in interest rates relate primarily to its investment portfolio. The Company does not hold derivative financial instruments in its
investment portfolio. The Company places its investments with high quality institutions and limits the amount of credit exposure to any one issuer. The Company is averse to principal loss and ensures
the safety and preservation of its invested funds by limiting default, market and reinvestment risk. The Company classifies its short-term investments as "fixed-rate" if the
rate of return on such instruments remains fixed over their term. These "fixed-rate" investments include fixed-rate U.S. government securities and corporate obligations with
contractual maturity dates ranging from less than one year up to five years.

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The table below presents the amounts and related weighted interest rates of the Company's short-term investments at March 31, 2002 and March 31, 2001 (dollars in thousands).

March 31,
2002

March 31,
2001Average fixed interest rate


3.6
%

5.5
%Amortized cost

$
48,374

$
38,655Fair value

$
48,585

$
38,919Contractual maturity dates:Less than 1 year

$
13,466

$
8,9311 to 5 years


35,119


29,988$
48,585

$
38,919


Pursuant
to the Asset Purchase Agreement, the Company received as partial consideration for the sale of UltraRF, 1,815,402 shares of common stock of Cree. In January 2001, the
Company sold 191,094 shares, which were held in escrow, for approximately $6.3 million and realized a loss of approximately $481,000 from the sale of these securities. Between January to
May 2001, the Company entered into various option arrangements, known as a cashless collar, expiring from July 2001 to May 2002, to hedge 1,100,000 shares of Cree common stock on
hand. Pursuant to the terms of the option arrangements, the Company was able to realize an average of $25.32 per share for the 1,100,000 hedged shares if the share price of Cree was lower than $25.32
when the options expired. If the Cree stock price exceeded an average of $41.14 when the options expired, the Company would sell its hedged shares at $41.14 or settle the options for a cash amount
equal to the difference between the Cree stock price and the option price. In fiscal 2002, the Company sold 1,139,308 shares of Cree common stock for $27.9 million and realized a loss of
$12.6 million. The Company also terminated 615,000 shares of Cree stock options prior to their expiration dates and realized a gain of $4.4 million, which represented the proceeds
realized upon termination of these options. In addition, the Company exercised put options in relation to 485,000 shares of Cree common stock for proceeds of $12.4 million and realized a loss
of $4.8 million. As of March 31, 2002, the Company did not have any Cree common stock on hand.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

QUARTERLY RESULTSUNAUDITED(in thousands, except per share data)

|                                                                                        |         | Three Months Ended
|--------------------------------------------------------------------------------------- | ------- | ------------------
|
|Net revenues                                                                            |         | $                 
|Cost of revenues                                                                        |         | $                 
|Gross profit                                                                            |         | $                 
|Net income (loss) before cumulative effect of change in accounting principle            |         | $                 
|Net income (loss)(1)                                                                    |         | $                 
|Net income (loss) before cumulative effect of change in accounting principle per share: |         |                   
|                                                                                        | Basic   |                   
|                                                                                        | Diluted |                   
|Net income (loss) per share:                                                            |         |                   
|                                                                                        | Basic   |                   
|                                                                                        | Diluted |                   
|Shares used in computing per share amounts:                                             |         |                   
|                                                                                        | Basic   |                   
|                                                                                        | Diluted |                   

|                                            |         | Three Months Ended
|------------------------------------------- | ------- | ------------------
|
|Net revenues                                |         | $                 
|Cost of revenues                            |         | $                 
|Gross profit                                |         | $                 
|Net income (loss)(2)                        |         | $                 
|Net income (loss) per share:                |         |                   
|                                            | Basic   |                   
|                                            | Diluted |                   
|Shares used in computing per share amounts: |         |                   
|                                            | Basic   |                   
|                                            | Diluted |                   

---

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See
Note 2 of Notes to Consolidated Financial Statements herein regarding the sale of UltraRF.

The
Company's consolidated financial statements and the independent accountants' reports appear on pages F-1 through F-33 of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The members of the board of directors and the executive officers of the Company are and certain information about them as of May 31, 2002 is as follows:

|Name                   |  | Age |  | Position                                                                                   
|---------------------- |  | --- |  | -------------------------------------------------------------------------------------------
|Garrett A. Garrettson  |  | 58  |  | Chairman of the Board                                                                      
|Thomas H. Waechter     |  | 49  |  | President, Chief Executive Officer and Director                                            
|Martin Cooper(1)       |  | 73  |  | Director                                                                                   
|Charles D. Kissner(2)  |  | 54  |  | Director                                                                                   
|Henry C. Montgomery(2) |  | 66  |  | Director                                                                                   
|Robert W. Shaner(1)    |  | 54  |  | Director                                                                                   
|Robert C. Wilson(2)    |  | 82  |  | Director                                                                                   
|Michael D. Angel       |  | 46  |  | Executive Vice President, Finance and Administration, Chief Financial Officer and Secretary
|Thomas A. Jones        |  | 47  |  | Vice President, Human Resources                                                            
|Robert D. Lyells       |  | 50  |  | Vice President, Operations                                                                 
|Joseph M. Madden       |  | 35  |  | Vice President, Marketing                                                                  
|Harry W. Oh            |  | 44  |  | Vice President and General Manager, Asia Pacific                                           
|David S. Piazza        |  | 38  |  | Vice President, Development                                                                
|Donald W. Sinnar       |  | 59  |  | Vice President, Sales & Service                                                            

---

Mr. Garrettsonjoined the Company in April 1996 and is currently its Chairman of the Board of Directors. Since November
2001, Mr. Garrettson has been the President, Chief Executive Officer and a Director of ClairVoyante Laboratories, Inc., a company that develops technology for flat panel and projector
products. Mr. Garrettson served as a technical strategist of the Company from March 2000 to March 2002. From April 1996 to March 2000, Mr. Garrettson served as President, Chief Executive
Officer and a Director of the Company. From March 1993 until he joined the Company, Mr. Garrettson was President and Chief Executive Officer of Censtor Corporation, a company that designs and
sells technology related to magnetic recording heads for the disk drive industry. Mr. Garrettson has also held various executive management positions with Control Data Corporation, a computer
system company, from November 1986 to October 1989, and Seagate Technology Inc., a company that designs and manufactures disk drives, from October 1989 to March 1993. From October 1973 to
November 1986, Mr. Garrettson also held various engineering management positions with Hewlett Packard Laboratories, a division of Hewlett Packard Company, a company providing computing and
imaging products. Mr. Garrettson is also a director of TCSI Corporation, a company that provides telecom network management software. Mr. Garrettson holds a B.S. and an M.S. in
Engineering Physics and a Ph.D. in Mechanical Engineering from Stanford University.

Mr. Waechterjoined the Company in March 2000 as its President and Chief Executive Officer, and as a Director. From
January 2000 until he joined the Company, Mr. Waechter was employed by Asyst Technologies, Inc., a company that provides mini-environment and manufacturing automation
systems, as its Senior Vice President of Global Business Operations. From September 1986 until January 2000, Mr. Waechter was employed by Schlumberger Ltd., a company
providing oilfield services, natural resource management, smart card-based technology and associated systems, and semiconductor test equipment, in various management positions, most
recently as its Vice President of Global Operations. Mr. Waechter holds a B.B.A. in Business Management from the College of William and Mary.

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Mr. Cooperhas been a director of the Company since January 1994. Mr. Cooper is a founder of ArrayComm, Inc.,
a wireless technology manufacturer, has served as Chairman since April 1992 and is presently its Chief Executive Officer. He has served as Chairman of Dyna, Incorporated, a consulting company,
since 1986. From 1985 to December 1992, he served as President of Cellular Pay Phone Incorporated, a cellular pay telephone company. From 1982 to 1986, he was a co-founder, Chairman
and Chief Executive Officer of Cellular Business Systems, Inc., a management information company. From 1954 to 1983, Mr. Cooper served in a variety of positions including Corporate Vice
President, Division Manager and Corporate Director of Research and Development of Motorola, Inc. He is a Fellow of the IEEE and of the Radio Club of America and a recipient of the IEEE
Centennial medal. He serves on the Advisory Board of the International National Electronics Consortium and on the Board of Trustees of the Illinois Institute of Technology. Mr. Cooper holds a
B.S. and an M.S. in Electrical Engineering from the Illinois Institute of Technology.

Mr. Kissnerhas served as a director of the Company since March 1998. Mr. Kissner currently serves as Chairman of the
Board and Chief Executive Officer of DMC Stratex Networks, Inc., ("DMC"), formerly known as Digital Microwave Corporation, a wireless telecommunications equipment company. Mr. Kissner
joined DMC in July 1995 as its President and Chief Executive Officer and was appointed Chairman of the Board in August 1996. Mr. Kissner served as Chief Executive Officer of DMC
until May 2000 and resumed this position in October 2001. Prior to joining DMC, Mr. Kissner served from July 1993 to July 1995 as Vice President and General Manager
of Microelectronics Division of M/A-COM, Inc., a manufacturer of radio and microwave communication products. From February 1990 to July 1993, Mr. Kissner served
as President, Chief Executive Officer and a Director of Aristacom International, Inc., a communications software company. From 1971 to 1990, Mr. Kissner was an executive with AT&T and
Fujitsu in a variety of positions. Mr. Kissner is also a director of SonicWALL, Inc., a supplier of Internet infrastructure security products. Mr. Kissner holds a B.S. in
Industrial Management and Electrical Engineering from California State Polytechnic University and an M.B.A. from the University of Santa Clara.

Mr. Montgomeryhas been a director of the Company since November 2000. From May to September 1999,
Mr. Montgomery also served as Interim Executive Vice President, Finance and Administration, Chief Financial Officer and Secretary of the Company. Since 1980, Mr. Montgomery has been the
Chairman of the Board of Montgomery Financial Services Corporation, a management consulting and financial services firm which has assisted companies in transition or that are financially
troubled from time to time. From January 2000 to March 2001, Mr. Montgomery served as Executive Vice President, Finance and Administration and Chief Financial Officer of Indus
International, Inc., a company engaged in enterprise asset management systems. From November 1996 through July 1997, Mr. Montgomery served as Executive Vice President of
SyQuest Technology, Inc. ("SyQuest"), a company that develops, manufactures and sells computer hard drives. On November 1998, SyQuest filed a petition under Chapter 11 of the U.S.
Bankruptcy Code. Mr. Montgomery also serves as a director of Catalyst Semiconductor, Inc., a semiconductor manufacturer, Consolidated Freightways Corporation, a trucking company, and
Swift Energy Company, an oil and gas company. Mr. Montgomery holds a B.A. in Economics from Miami University, Oxford, Ohio.

Mr. Shanerhas served as a director of the Company since April 1999. Since October 2000, Mr. Shaner has been
the President of Wireless Operations for Cingular, a joint venture between the wireless divisions of SBC Communications Inc. and BellSouth Corporation. From November 1999 to
October 2000, Mr. Shaner served as the President of SBC Wireless, Inc., a provider of wireless communication services to consumers and businesses. Mr. Shaner served as the
President and Chief Executive Officer of Pacific Bell Wireless from August 1998 to November 1999. Prior to assuming that position, Mr. Shaner served as President of SBCI Europe
and Middle East for SBC International, Inc. from March 1997 to July 1998. From 1995 to February 1997, Mr. Shaner held the position of President and Chief Executive
Officer for SBC International Wireless in France. From 1991 to 1995 Mr. Shaner

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served as Executive Vice President for Southwestern Bell Mobile System. Prior to 1991, Mr. Shaner held various other management positions at Southwestern Bell Telephone/Telecom and Cellular
One. Mr. Shaner also serves as a director of Central Methodist College. Mr. Shaner holds a B.A. from Central Methodist College.

Mr. Wilsonhas served as a director of the Company since October 1995. Mr. Wilson has been Chairman of
Wilson & Chambers, a venture capital and consulting firm, since December 1982. Mr. Wilson served as President, Chief Executive Officer and Chairman of the Board at Memorex
Corporation from 1974 until 1980. From 1971 to 1974, Mr. Wilson served as President and Chief Executive Officer of Collins Radio Company, a communications company. From 1969 to 1971,
Mr. Wilson was employed by Rockwell International, a diversified manufacturing company, first as President of Commercial Products and later as Executive Vice President. He is currently a member
of the boards of directors of Gigatronics Inc., a microwave instrument supplier. Mr. Wilson holds a B.S. in Engineering from the University of California at Berkeley.

Mr. Angeljoined the Company in September 1999 as its Executive Vice President, Finance and Administration, Chief Financial
Officer and Secretary. From April 1994 until he joined the Company, Mr. Angel was employed by National Semiconductor Corporation, a company that designs and manufactures semiconductor
products, in various management positions, most recently as its Director of Finance of Worldwide Manufacturing and Central Technology Operations. Mr. Angel has also held various positions with
Hitachi Data Systems, a manufacturer of mainframe computers, storage systems, open systems hardware and software, and PricewaterhouseCoopers LLP, an accounting and professional consulting firm.
Mr. Angel holds a B.S. degree in Business Administration with a concentration in Accounting from California State University, Chico.

Mr. Jonesjoined the Company in April 2001 as its Vice President, Human Resources. From December 1999 until he joined
Spectrian, Mr. Jones was employed by GN Resound, Inc., a manufacturer of high-technology hearing instruments, as its Senior Vice President of Global Human Resources. From
February 1999 to August 1999, Mr. Jones was employed by TriStrata Corporation, a company that develops internet security technology, in various positions, most recently as its
Vice President, Human Resources. From August 1997 to February 1999, Mr. Jones was employed by Forte Software/Sun Microsystems, Inc., a provider of computer systems, high
speed microprocessors and high performance software, in various positions, most recently as its Vice President, Human Resources. From August 1995 to August 1997, Mr. Jones was
employed by Pilot Software, Inc./Dun & Bradstreet Corporation, a company that develops business application software, as its Chief Human Resources Executive. Mr. Jones holds a
B.S. degree in Psychology from Baldwin-Wallace College and a M.S. degree from Iowa State University.

Mr. Lyellsjoined the Company in November 2001 as its Vice President, Operations. From September 2000 until he joined
Spectrian, Mr. Lyells was employed by Maxwell Technologies, Inc., a designer and manufacturer of electronic components and power and computing systems, as its Vice President and General
Manager, Sierra Division. From November 1999 to September 2000, Mr. Lyells was employed by MyTurn.Com, Inc., a developer and manufacturer of computer systems and an
internet service provider, as its Vice President, Manufacturing. From December 1997 to November 1999, Mr. Lyells was employed at 3D Systems, Inc., a developer and
manufacturer of solid imaging systems as its Senior Director, Product Assurance and Technology Center. From October 1994 to December 1997, Mr. Lyells was employed by Quality
Systems, Inc., a quality management consulting company, as a consultant. Mr. Lyells holds a B.S. degree in Physics from Illinois Institute of Technology.

Mr. Maddenjoined the Company in June 1997 and is currently its Vice President, Marketing. From May 1992 until he
joined Spectrian, Mr. Madden was employed by Superconductor Technologies, Inc., a manufacturer of high performance filters for the mobile wireless telecommunications industry, in

51

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various management positions, most recently as its Director of Product Management. Mr. Madden holds a B.S. degree in Physics from University of California, Los Angeles.

Mr. Ohjoined the Company in May 2000 as its Vice President and General Manager, Asia Pacific. From April 1996 to
May 2000, Mr. Oh was a consultant to the Company acting as a senior advisor for Far East Sales and Executive Managing Director in Asia Pacific. From February 1989 until he joined
Spectrian, Mr. Oh was self-employed as President of Capitalend Corporation. Mr. Oh holds a B.S. degree in Industrial & System Engineering from University of Southern
California.

Mr. Piazzajoined the Company in February 1990 and is currently its Vice President, Development. Mr. Piazza has held
various positions since joining the Company including General Manager, Semiconductor Division and Vice President, Semiconductor Research and Development. Mr. Piazza holds a B.S. degree in
Electrical Engineering from University of California, Davis.

Mr. Sinnarjoined the Company in September 2001 and as its Vice President, Sales and Service. From December 1995
until he joined Spectrian, Mr. Sinnar was employed by Odetics, Inc., a supplier of communications equipment for the television broadcast, video security, telecommunications and
intelligent transportation system markets, as its Senior Vice President and General Manager. Mr. Sinnar holds a B.S degree in Accounting from Benjamin Franklin University in Washington D.C.

Section 16 Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's executive officers, directors and persons who
own more than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("Commission") and
the National Association of Securities Dealers, Inc. Executive officers, directors and greater than ten percent stockholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company
believes that, during fiscal 2002, all executive officers, directors and greater than ten percent stockholders of the Company complied with all applicable filing requirements.

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following Summary Compensation Table sets forth certain information regarding the compensation of the Chief Executive Officer of the Company and the other
four most highly compensated executive officers of the Company and one former executive officer who would have been listed as one of the four most highly compensated executive officers but for the
fact that he was not employed by the Company as of March 31, 2002 (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company in fiscal 2002.

|                                                                                                                |  |                |  |   |                         |     |   | Long-Term
Compensation
Awards |        |                   | 
|--------------------------------------------------------------------------------------------------------------- |  | -------------- |  | - | ----------------------- | --- | - | ----------------------------- | ------ | ----------------- | 
|
|
|
|Thomas H. Waechter
President, Chief Executive Officer and Director(2)                                           |  | 2002
2001
2000 |  | $ | 350,001
345,617
       |     | $ | 73,376
110,906
100,000        | (3)    | 
110,000
250,000 | 
|Harry W. Oh
Vice President and General Manager, Asia Pacific(4)                                                 |  | 2002
2001
2000 |  |   | 209,327
152,795
       |     |   | 135,906
171,239
             | (5)(5) | 
60,000
        | 
|Michael D. Angel
Executive Vice President, Finance and Administration, Chief Financial Officer and Secretary(7) |  | 2002
2001
2000 |  |   | 249,519
224,519
99,234  |     |   | 47,001
58,613
               |        | 
90,000
110,000  | 
|Joseph M. Madden
Vice President, Marketing                                                                      |  | 2002
2001
2000 |  |   | 207,923
165,423
137,968 | (8) |   | 25,021
36,423
               |        | 
47,500
17,000   | 
|David S. Piazza
Vice President, Development                                                                     |  | 2002
2001
2000 |  |   | 194,519
169,654
156,333 |     |   | 35,534
36,507
               |        | 
47,500
        | 
|Garrett A. Garrettson
Chairman of the Board(9)                                                                  |  | 2002
2001
2000 |  |   | 158,469
294,122
303,357 |     |   | 80,933
95,753
               |        | 

50,000        | 

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Option Grants in Fiscal 2002

The following table provides information concerning each grant of options to purchase the Company's Common Stock made during fiscal 2002 to the Named Executive
Officers.

|                      |  | Number of
Securities
Underlying
Option
Granted |  | % of Total
Options
Granted to
Employees in
Fiscal Year |  |   |  |   |  | Potential Realizable Value
|--------------------- |  | ---------------------------------------------- |  | ------------------------------------------------------ |  | - |  | - |  | --------------------------
|
|
|Thomas H. Waechter    |  |                                               |  |                                                       |  |  |  |  |  |                          
|Harry W. Oh           |  |                                               |  |                                                       |  |  |  |  |  |                          
|Michael D. Angel      |  |                                               |  |                                                       |  |  |  |  |  |                          
|Joseph M. Madden      |  |                                               |  |                                                       |  |  |  |  |  |                          
|David S. Piazza       |  |                                               |  |                                                       |  |  |  |  |  |                          
|Garrett A. Garrettson |  |                                               |  |                                                       |  |  |  |  |  |                          

Aggregated Option Exercises in Fiscal 2002 and Fiscal Year-end Option Values

The following table sets forth certain information regarding the exercise of stock options during fiscal 2002 and the value of options held as of March 31,
2002 by the Named Executive Officers.

|                      |  |        |  |   |        | Number of Securities
Underlying Unexercised Options
at March 31, 2002 |         | Value of Unexercised In-the-
Money Options at March 31,
2002($)(2)
|--------------------- |  | ------ |  | - | ------ | --------------------------------------------------------------------- | ------- | ------------------------------------------------------------------
|
|
|Thomas H. Waechter    |  |       |  |   |       |                                                                       | 154,583 |                                                                   
|Harry W. Oh           |  |       |  |   |       |                                                                       | 49,693  |                                                                   
|Michael D. Angel      |  |       |  |   |       |                                                                       | 97,917  |                                                                   
|Joseph M. Madden      |  |       |  |   |       |                                                                       | 38,213  |                                                                   
|David S. Piazza       |  |       |  |   |       |                                                                       | 76,727  |                                                                   
|Garrett A. Garrettson |  | 30,000 |  | $ | 85,165 |                                                                       | 260,100 |                                                                   

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Employment Contracts and Change of Control Arrangements

On April 1, 2001, the Company and Garrett A. Garrettson, Chairman of the Board of Directors and a former officer, entered into an employment agreement
pursuant to which Mr. Garrettson agreed to act as a technical strategist for the Company until March 31, 2003. On September 30, 2001, the Company and Mr. Garrettson entered
into a Notice of Termination Agreement ("the Notice of Termination") pursuant to which Mr. Garrettson agreed to act as a technical strategist for the Company on a half time basis until
March 31, 2002. On March 31, 2002, Mr. Garrettson resigned as a technical strategist of the Company. Pursuant to the terms of the Notice of Termination, Mr. Garrettson
shall receive payment of his salary at a rate of $12,262 per month until March 31, 2003 and a fiscal 2003 bonus payment of approximately $40,500. Mr. Garrettson also received a lump sum
payment from the Company of $80,932 as his target bonus for fiscal year 2002. In addition, Mr. Garrettson's options to purchase common stock became fully vested and immediately exercisable as
of March 31, 2002 and Mr. Garretson has 12 months thereafter to exercise his options. The Notice of Termination Agreement also provides that the Company will continue to pay his
COBRA premiums and the premiums on his existing disability policy through March 31, 2003. Mr. Garrettson released the Company from any and all claims or any liability for compensation
except as set forth in his employment agreement or in the Notice of Termination.

On
April 6, 2001, the Company entered into a change of control and severance agreement with Thomas A. Jones. On July 19, 2001 and upon the initial employment for
those officers who joined the Company after such date, the Company entered into change of control and severance agreements with each of: Thomas H. Waechter, Michael D. Angel,
David S. Piazza, Joseph M. Madden, Harry W. Oh, Donald W. Sinnar and Robert Lyells. Under the terms of these change of control and severance agreements, in the event that
any of the above officers is subject to involuntary termination (as defined in the change of control and severance agreements) at any time after a change of control (as defined in the change of
control and severance agreements), his outstanding options will become fully vested and immediately exercisable. The change of control and severance agreements for Messrs. Waechter, Angel,
Jones, Piazza, Madden, Oh, Sinnar and Lyells provide in general that a termination is an involuntary termination if (A) the Company terminates the officer's employment without cause (as defined
in the
change of control and severance agreements) or (B) the officer terminates his employment for any of the following reasons:



In
addition to the requirements listed above, Mr. Waechter's change of control and severance agreement also provides that a termination may be deemed an involuntary termination if
Mr. Waechter were to terminate his employment with the Company after a change of control (as defined in the change of control and severance agreements) due to:



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In
connection with the negotiation of the Merger Agreement and the merger, Mr. Waechter has entered into an employment agreement with REMEC that will supersede
Mr. Waechter's change of control and severance agreement with the Company upon the closing of the merger. See "Employment Arrangements with REMEC" below.

In
addition to the requirements listed above, Mr. Angel's change of control and severance agreement provides that a termination may be deemed an involuntary termination if
Mr. Angel were to terminate his employment with the Company due to:



In
addition to the requirements listed above, the change of control and severance agreements for Messrs. Jones, Piazza, Madden, Oh, Sinnar and Lyells also provide that a
termination may be deemed an involuntary termination if the officer terminates his employment due to a significant reduction of the officer's duties, position or responsibilities or the removal of the
officer from such duties or position unless he is provided with comparable duties and position. Also, Mr. Jones' change of control and severance agreement provides that a termination may be
deemed an involuntary termination if Mr. Jones terminates his employment due to a reduction in his target bonus. In connection with the negotiation of the merger agreement and the merger,
Messrs. Jones and Piazza have entered into employment agreements with REMEC that will supersede their respective change of control and severance agreements with Spectrian. See "Employment
Arrangements with REMEC" below.

The
change of control and severance agreements provide that if an officer's status is involuntarily terminated at any time after a change of control (as defined in the change of control
and severance agreements) of the Company, the Company will be obligated to pay the officer his base salary as in effect at the time of his termination, 100% of his targeted bonus and employee benefits
for one year after his termination. For Mr. Waechter, the duration of base salary, targeted bonus payments and employee benefits is three years. For Mr. Angel, the duration of base
salary, targeted bonus payments and employee benefits is two years. In addition, upon an involuntary termination following a change of control (as defined in the change of control and severance
agreements), all of the officer's options to purchase common stock shall become fully vested and immediately exercisable. Mr. Waechter and Mr. Angel's change of control and severance
agreements also provide that the Company shall pay any excise taxes imposed upon either Mr. Waechter or Mr. Angel, whichever is applicable, pursuant to Section 280G of the
Internal Revenue Code, or any excise taxes imposed due to the Company's payment of the excise tax, due to their receipt of any severance payments or benefits from the Company.

The
change of control and severance agreements of each of Thomas H. Waechter, Michael D. Angel, Thomas A. Jones, David Piazza, Joseph M. Madden, Harry W. Oh, Donald W. Sinnar and Robert
Lyells define a Change of Control to mean the occurrence of any of the following events: (i) the approval of the Company's stockholders of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent more than 50% of the
total voting power of the surviving entity; (ii) the approval of the Company's stockholders of a plan of
liquidation or the sale or disposition of all or substantially all of the Company's assets; (iii) any person becoming the beneficial owner, directly or indirectly, of 50% or more of the
Company's outstanding

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voting securities or (iv) a change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors, where
"Incumbent Directors" means directors who either (A) are directors of the Company as of the date of the change of control and severance agreement or (B) are elected, or nominated for
election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination.

In
April 2001, in connection with his acceptance of employment, Thomas A. Jones, Vice President, Human Resources, entered into an employment letter with the Company pursuant to
which he receives an annual base salary of $175,000. The employment letter provides for additional variable compensation in the target amount of $43,750 per year. Mr. Jones received a sign on
bonus of $25,000. The Company also granted Mr. Jones shortly after he commenced his employment an option to purchase 50,000 shares of common stock subject to the Company's standard vesting
schedule.

In
September 2001, in connection with his acceptance of employment, Donald W. Sinnar, Vice President, Sales & Service, entered into an employment letter with the Company
pursuant to which he receives an annual base salary of $195,000. The employment letter provides for additional variable compensation in the target amount of $78,000 per year. Mr. Sinnar
received a sign on bonus of $5,000. The Company provided Mr. Sinnar with an interim living facility and has agreed to pay all of his relocation expenses. The Company also granted
Mr. Sinnar shortly after he commenced his employment an option to purchase 80,500 shares of common stock subject to the Company's standard vesting schedule.

In
November 2001, in connection with his acceptance of employment, Robert D. Lyells, Vice President, Operations, entered into an employment letter with the Company pursuant to
which he receives an annual base salary of $180,000. The employment letter provides for additional variable compensation in the target amount of $72,000 per year. Mr. Lyells received a sign on
bonus of $5,000. The Company also granted Mr. Lyells shortly after he commenced his employment an option to purchase 80,000 shares of common stock subject to the Company's standard vesting
schedule.

Christopher
A. Menicou, a former Vice President of the Company, resigned his employment from the Company effective January 17, 2002 pursuant to a separation agreement. According
to the terms of his separation agreement, Mr. Menicou received payment of his salary at a rate of $15,000 per month until May 17, 2002. In addition, the Company paid $7,500 for
outplacement services for Mr. Menicou and paid his COBRA and executive reimbursement policy premiums until May 17, 2002. Mr. Menicou released the Company from any and all claims
or any liability for compensation except as set forth in his separation agreement.

In
May 2002, the Company amended all of the outstanding options under the 1994 Director Option Plan to provide that effective only if the merger closes, each
non-employee director who has outstanding option grants under the 1994 Director Option Plan shall have nine months from the date of the closing of the merger to exercise his
options. Each of the following directors holds outstanding options under the 1994 Director Option Plan: Mr. Cooper, Mr. Montgomery, Mr. Shaner, Mr. Kissner and
Mr. Wilson. The outstanding options under the 1994 Director Option Plan previously provided for an exercisability period of 90 days following a change of control.

In
May 2002, the Company amended the change of control severance agreements of each of Mr. Waechter, Mr. Angel, Mr. Jones, Mr. Oh, Mr. Madden,
Mr. Piazza, Mr. Sinnar and Mr. Lyells to provide that effective only if the merger is closed, any of these individuals who is subject to Involuntary Termination (as defined is
such individual's change of control severance agreement) at any time after the closing of the merger shall have nine months from the date of his Involuntary Termination to exercise his stock
options. The change of control severance agreements previously provided for a period of 90 days following an Involuntary Termination to exercise stock options.

57

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Other
than the severance obligations of the Company under the various change of control severance agreements, the employees are employed at-will by the Company and are
eligible to participate in the Company's employee benefit plans and executive compensation programs.

Employment Contracts with REMEC

In connection with the execution of the Merger Agreement, Mr. Waechter, the Company's President and Chief Executive Officer, entered into an employment
agreement with REMEC, which will become effective upon the closing of the merger. Pursuant to his employment agreement, Mr. Waechter will become the President and Chief Operating Officer of
REMEC upon the closing of the merger. Upon the closing of the merger, Mr. Waechter has also agreed to waive his rights under his agreements with Spectrian and REMEC will pay Mr. Waechter
$1,000,000 in cash on a pre-tax basis as consideration for the waiver of approximately $1,600,000 in payments he would have been entitled to receive under his change of control and
severance agreement with the Company. REMEC will pay Mr. Waechter an annual base salary of $375,000 and an annual target bonus of 30% of his annual base salary provided Mr. Waechter
achieves certain objectives. Mr. Waechter will relocate to REMEC's Del Mar, California offices and REMEC will reimburse him for all actual relocation expenses, including closing costs on the
sale and purchase of his home. Mr. Waechter will receive a tax gross up payment to cover all federal, state and local income and employment taxes with respect to his relocation expenses as well
as on this gross up payment. Mr. Waechter will also be reimbursed for the reasonable cost of a country club membership and he will receive a $9,000 annual car allowance and six weeks of
vacation a year. REMEC will grant Mr. Waechter an option to purchase 100,000 shares of REMEC's common stock at the then current fair market value immediately after he becomes an employee of
REMEC.

Mr. Waechter's
employment agreement provides that if in the first three years of his employment with REMEC, he is terminated without cause (as defined in his employment agreement)
or resigns for good reason (as defined in his employment agreement), then he is entitled to receive:



Mr. Waechter's
employment agreement also provides that if he is still employed at REMEC on the date of a change of control of REMEC, he will receive:



In
the event Mr. Waechter is terminated without cause (as defined in his employment agreement) or resigns for good reason (as defined in his employment agreement) within two years
following a

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change of control (as defined in his employment agreement) of REMEC, then Mr. Waechter will also be entitled to receive:



The
definition of Change of Control in Mr. Waechter's employment agreement mirrors that set forth in his change of control and severance agreement with the Company.

The
definition of Good Reason in Mr. Waechter's employment agreement is substantially similar to the definition of Involuntary Termination set forth in his change of control and
severance agreement with the Company.

Mr. Waechter's
employment agreement also provides for the imposition of a "best-of" provision with respect to Section 280G of the Internal Revenue Code of 1986,
as amended, or the Internal Revenue Code or any similar tax, if Mr. Waechter's employment with REMEC is terminated without cause or for good reason within three years of the closing date of the
merger or within two years after a change of control of REMEC. Upon the occurrence of either of these events, the benefits received by Mr. Waechter under his employment agreement will be paid
at his election either in full or in such lesser amount such that the excise tax associated with Section 280G of the Internal Revenue Code will not apply with respect to the receipt of such
benefits.

In
order to receive his severance payments and benefits during the three year severance period following his termination, Mr. Waechter will not engage in any activity which is
deemed to be in competition with REMEC's business. Mr. Waechter has also agreed not to solicit, directly or indirectly, any employee to leave his or her employment with REMEC.
Mr. Waechter also released REMEC from any and all claims or any liability for severance benefits or stock acceleration except as set for in his employment agreement with REMEC.

Mr. Piazza,
the Company's Vice President, Development, entered into an employment agreement with REMEC pursuant to which Mr. Piazza will become the General Manager,
Advanced Amplifier Products of REMEC upon the closing of the merger. REMEC will pay Mr. Piazza an annual base salary of $195,000 and an annual target bonus of 30% of his annual base salary
provided Mr. Piazza achieves certain objectives. REMEC will grant Mr. Piazza an option to purchase 30,000 shares of REMEC's common stock at the then current fair market value immediately
after he becomes an employee of REMEC. With respect to such option, 25% of the shares under this option shall vest upon each anniversary of the option's grant date for four years.

If
during the first three years of Mr. Piazza's employment with REMEC, he is terminated without cause (as defined in his employment agreement) or resigns for good reason (as
defined in his employment agreement), then Mr. Piazza will be entitled to receive:



The
definition of Good Reason in Mr. Piazza's agreement is substantially similar to the definition of Involuntary Termination set forth in his change of control and severance
agreement with the Company. In order to continue to receive his severance payments and benefits during the one year

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severance period, Mr. Piazza will not engage in any activity which is deemed to be in competition with REMEC's advanced RF amplifier business, Mr. Piazza also agreed not to
solicit, directly or indirectly, any employee to leave his or her employment with REMEC during that one year period. Mr. Piazza also released REMEC from any and all claims or any liability for
severance benefits or stock acceleration except as set for in his employment agreement with REMEC.

Mr. Jones,
the Company's Vice President, Human Resources, entered into an employment agreement with REMEC pursuant to which Mr. Jones will become the Vice President,
Worldwide Human Resources of REMEC upon the closing of the merger. REMEC will pay Mr. Jones an annual base salary of $175,000 and an annual target bonus of 20% of his annual base salary if
Mr. Jones achieves certain objectives. REMEC will grant Mr. Jones an option to purchase 5,000 shares of REMEC's common stock at the then current fair market value immediately after he
becomes an employee of REMEC. With respect to such option, 25% of the shares under this option shall vest upon each anniversary of the option's grant date for four years. Mr. Jones will
relocate to REMEC's headquarters in Del Mar, California and will also receive a relocation allowance of $85,000. If in the first three years of Mr. Jones's employment with REMEC, he is
terminated without cause (as defined in his employment agreement) or resigns for good reason (as defined in his employment agreement), then Mr. Jones will be entitled to receive:



The
definition of Good Reason in Mr. Jones' agreement is substantially similar to the definition of Involuntary Termination set forth in his change of control and severance
agreement with the Company. In order to continue to receive his severance payments and benefits during the one year severance period, Mr. Jones will not engage in any activity which is deemed
to be in competition with REMEC's business. For 12 months after the termination of his employment with REMEC for any reason, Mr. Jones shall not solicit, directly or indirectly, any
employee to leave his or her employment with REMEC. Mr. Jones released REMEC from any and all claims or any liability for severance benefits or stock acceleration except as set for in his
employment agreement with REMEC.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity Compensation Plan Information

The Company maintains the 1992 Stock Plan (the "Plan"), the 1994 Director Option Plan (the "Director Plan"), the 1998 Nonstatutory Stock Option Plan (the "NSO
Plan"), and the 1998 Employee Stock Purchase Plan (the "Employee Plan"), pursuant to which it may grant equity awards to eligible persons. Additionally, the Company has entered into individual
arrangements outside of its equity plans with Mr. Garrettson, Mr. Waechter and Mr. Angel providing for the award of its options to purchase common stock. The Plan, the Director
Plan, the NSO Plan, the Employee Plan and the terms of Mr. Garrettson, Mr. Waechter and Mr. Angel's equity awards are described more fully below.

The
following table gives information about equity awards under the Company's Plan, the Director Plan, the NSO Plan, the Employee Plan and Mr. Garrettson, Mr. Waechter and
Mr. Angel's equity arrangements:

|                                                              |  |           |     |   |       | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a)) |        
|------------------------------------------------------------- |  | --------- | --- | - | ----- | ------------------------------------------------------------------------------------------------------------------------------------------- | -------
|
|
|
|Equity compensation plans approved by security holders(1)     |  | 1,491,574 | (2) | $ | 16.46 | (2)                                                                                                                                         | 749,712
|Equity compensation plans not approved by security holders(4) |  | 1,344,604 |     |   | 17.28 |                                                                                                                                             | 213,134
|                                                              |  |           |     |   |       |                                                                                                                                             |        
|Total                                                         |  | 2,836,178 |     | $ | 16.84 |                                                                                                                                             | 962,846
|                                                              |  |           |     |   |       |                                                                                                                                             |        

---

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The Company's Board of Directors adopted the NSO Plan in June 1998. The Company's stockholders did not approve the NSO Plan. Following are the material
terms of the NSO Plan.



The purposes of the NSO Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive
to employees, directors and consultants, and to promote the success of the Company's business.



Options may be granted to employees and certain officers. Executive officers, defined to mean an individual who is named as an executive officer in the Company's
annual report on Form 10-K filed with the Securities and Exchange Commission, and members of the Company's Board of Directors are ineligible to receive awards granted pursuant to
the NSO Plan.



1,400,000 shares of our common stock have been reserved for issuance under the NSO Plan. The shares may be authorized, but unissued or reacquired common stock. If
an option granted pursuant to the NSO Plan expires or becomes unexercisable without having been exercised in full, the unpurchased share subject to such option will be available for future grant or
sale under the NSO Plan. However, in no event may any outstanding option subject to the NSO Plan be surrendered in exchange for an option subject to the NSO Plan with a lower exercise price.



The members of the Company's Board of Directors or a committee of the Board of Directors administers the NSO Plan. The Board of Directors or the committee
appointed by the Company's Board to administer the NSO Plan are referred to in this description as the "Administrator." The Administrator has the power and discretion to, among other things, determine
to whom options will be granted, the extent to which options will be granted, the number of shares subject to each option, determine the terms and conditions applicable to option grants, construe and
interpret the terms of the NSO Plan, prescribe, amend and rescind rules and regulations pertaining to the NSO Plan, modify or amend options, and determine how individuals granted options under the
plan may satisfy applicable withholding tax obligations. The Administrator's decisions, determinations and interpretations are final and binding. Members of the Board of Directors receive no
additional compensation for their services in connection with the administration of the Plan.



The Plan became effective when it was approved by the Company's Board of Directors, and it shall continue in effect for ten years, unless sooner terminated.



Nonstatutory stock options are awarded under the NSO Plan.

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(1)  Exercise
of an Option. Options are exercisable according to the terms of the NSO Plan and as such times and under such conditions as determined by the Administrator and
as set forth in the option agreement. Payment for shares issued upon exercise of an option may consist of cash, check, promissory note, delivery of shares already owned by the optionee (subject to
certain conditions), a cashless exercise program, a reduction in the amount of any Company liability owed by the optionee, such other consideration and method of payment to the extent permitted by law
or any combination of the foregoing methods.

(2)  Option
Price. The exercise price applicable to options granted pursuant to the NSO Plan is determined by the Administrator. However, in no event shall the exercise price
be less than 100% of the fair market value on the date of grant.

(3)  Termination
of an Optionee's Status as a Service Provider. The NSO Plan provides that if an optionee's employment is terminated or a consultant's service to the Company
is terminated an option (to the extent it was vested on such date) may be exercised for the period of time as permitted under the option agreement, and if none is so specified, the option may be
exercised for a period of three (3) months following such termination, but in no event may an option be exercised beyond the term of the option as specified in the option agreement. If the
option is not exercised within the time frames described above, the option terminates and the shares covered by such option revert to the NSO Plan.

(4)  Death
and Disability. The NSO Plan provides that if an optionee dies while an employee or consultant or an optionee's service with the Company terminates due to the
optionee's disability, the optionee shall fully vest in and have the right to exercise his or her option as to all of the optioned stock, including shares as to which it would not otherwise be vested
or exercisable, for such period of time as is specified in the optionee's option agreement. If no time is so specified in the option agreement, the NSO Plan provides that, the option may be exercised
for a period of (12) twelve months following the optionee's termination as an employee or consultant. If the option is not exercised within the time frames described above, the option
terminates and the shares covered by such option revert to the NSO Plan.

(5)  Termination
of Options. The term applicable to options granted under the NSO Plan are set forth in the optionee's option agreement.

(6)  Buyout
Provisions. The Administrator may at any time offer to buy out for payment in cash or shares of common stock an option previously granted based on such terms and
conditions as the Administrator shall establish and communicate to the optionee at the time that such offer is made.

(7)  Nontransferability
of Options. Unless determined otherwise by the Administrator, the NSO Plan provides that options may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised only by the optionee during his or her lifetime.



In the event any change, such as a stock split or dividend, is made in the Company's capitalization which results in an increase or decrease in the number of
outstanding shares of common stock without the receipt of consideration by the Company, an appropriate adjustment shall be made in the option price and in the number of shares subject to each option.

In
the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each optionee as soon as practicable prior to the effective date of such
dissolution or liquidation. The Administrator has the discretion to provide that an optionee shall have the right to exercise his or option until ten (10) days prior to a proposed dissolution
or liquidation as to all of the shares subject

63

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to such option, including unvested options. The NSO Plan also provides that in the event of a proposed liquidation or dissolution of the Company, the Administrator may provide that any Company
repurchase option applicable to any shares purchased upon exercise shall lapse.

In
the event of a merger of the Company with or into another corporation or the sale of substantially all of the assets of the Company, all outstanding options shall be assumed or an
equivalent option substituted by the successor corporation. The Administrator may, in its discretion, make provision for accelerating the exercisability of shares subject to options granted under the
NSO Plan in such event. If an option becomes fully vested and exercisable in lieu of assumption or substitution, the Administrator shall notify the optionee that the option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and the option shall terminate upon the expiration of such period.



The NSO Plan provides that the Company's Board of Directors may at any time amend, alter, suspend or terminate the NSO Plan. However, no such amendment,
alteration, suspension or termination may impair the rights of any optionee unless mutually agreed to in writing by the Company and the optionee.



An optionee generally will not recognize any taxable income at the time he or she is granted a nonqualified option. However, upon its exercise, the optionee will
recognize ordinary income generally measured as the excess of the then fair market value of the shares purchased over the purchase price. Any taxable income recognized in connection with an option
exercise by an optionee who is also an employee of the Company will be subject to tax withholding by the Company. Upon resale of such shares by the optionee, any difference between the sales price and
the optionee's purchase price, to the extent not recognized as taxable income as described above, will be treated as long-term or short-term capital gain or loss, depending on
the holding period.

Generally,
the Company will be entitled to a tax deduction in the same amount as the ordinary income realized by the optionee with respect to shares acquired upon exercise of a
nonqualified option.

The
foregoing is only a summary of the effect of federal income taxation upon the optionee and the Company with respect to the grant and exercise of options granted under the NSO Plan,
it does not purport to be complete, and does not discuss the tax consequences of the optionee's death or the income tax laws of any municipality, state or foreign country in which an optionee may
reside.



The Company has made a total of five (5) out of plan nonstatutory option grants to purchase the Company's common stock to the following individuals: Mssrs.
Angel, Garrettson (who has received a total of three out of plan grants) and Waechter.

Three
(3) of the five (5) out of plan option grants to purchase common stock, one of Mr. Garrettson's grants and the grants made to Mssrs. Angel and Waecther, were subject to the
terms and conditions of the NSO Plan, though such grants were not made pursuant to the NSO Plan. Accordingly, the material
terms of the NSO Plan described above apply to the aforementioned out of plan grants. The Company's Board of Directors approved the grants of the foregoing options to Mr. Garrettson in
November 1997, to Mr. Angel in September 1999 and to Mr. Waechter in March 2000. The Company's stockholders did not approve these options grants.

The
remaining two (2) out of plan grants to purchase common stock were made to Mr. Garrettson. These two (2) out of plan grants were subject to the terms and conditions of
the Plan.

64

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The material terms of the Plan as applicable to Mr. Garrettson are summarized below. The Company's Board of Directors approved the grants of the foregoing options in April 1996. The
Company's stockholders did not approve these options.



The purposes of the Plan are to attract, retain and motivate the best available personnel for positions of substantial responsibility, to provide additional
incentive to employees and consultants of the Company and to promote the success of the Company's business.



The Plan provides for administration by the Board of Directors of the Company or by a committee of the Board of Directors. The Plan is currently being
administered by the Compensation Committee of the Board of Directors, except that grants to executive officers are approved by the entire Board of Directors. The committee of the Board of Directors
appointed to administer the Plan is referred to in this description as the "Administrator." The Administrator determines the terms of options granted, including the exercise price, number of shares
subject to the option and the exercisability thereof. All questions of interpretation are determined by the Administrator and its decisions are final and binding upon all participants. Members of our
Board of Directors receive no additional compensation for their services in connection with the administration of the Plan.



The Plan provides that either incentive or nonqualified stock options may be granted to employees (including officers and employee directors) of the Company or
any of its designated subsidiaries. In addition, the Plan provides that nonqualified stock options may be granted to consultants of the Company or any of its designated subsidiaries. The Administrator
elects the optionees and determines the number of shares to be subject to each option. In making such determination, there are taken into account the duties and responsibilities of the optionee, the
value of the optionee's services, the optionee's present and potential contribution to the success of the Company and other relevant factors.



Each option is evidenced by a stock option agreement between the Company and the optionee to whom such option is granted and is subject to the following
additional terms and conditions:

(1)  Exercise
of the Option. The Administrator determines when options granted under the Plan may be exercised. An option is exercised by giving written notice of exercise to
the Company, specifying the number of shares of Common Stock to be purchased and tendering payment to the Company of the purchase price. Payment for shares issued upon exercise of an option may
consist of cash, check, promissory note, delivery of already-owned shares of the Company's common stock, subject to certain conditions. Payment may also be made by a cashless exercise procedure under
which the optionee provides irrevocable instructions to a brokerage firm to sell the purchased shares and to remit to the Company, out of the sale proceeds, an amount equal to the exercise price plus
all applicable withholding taxes or such other consideration as determined by the Administrator.

Options
may be exercised at any time on or following the date the options are first exercisable. An option may not be exercised for a fraction of a share.

(2)  Option
Price. The option price of all incentive stock options and nonqualified stock options under the Plan is determined by the Administrator, but in no event shall it
be less than the fair market value of the Common Stock on the date the option is granted. For purposes of the Plan, fair market

65

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value is defined as the closing price per share of the common stock on the date of grant as reported on the Nasdaq National Market.

(3)  Termination
Of Employment. The Plan provides that if the optionee's employment by the Company is terminated for any reason, other than death or disability, options may
be exercised within 30 days (or such other period of time, not exceeding three months in the case of incentive stock options, as is determined by the Administrator) after such termination and
may be exercised only to the extent the options were exercisable on the date of termination.

(4)  Death.
If an optionee should die while an employee or a consultant of the Company (or during such period of time not exceeding three months, as determined by the
Administrator), options may be exercised at any time within six months after the date of death but only to the extent that the options were exercisable on the date of death and in no event later than
the expiration of the term of such option as set forth in the Notice of Grant.

(5)  Disability.
If an optionee's employment is terminated due to a disability, options may be exercised at any time within twelve months from the date of such termination,
but only to the extent that the options were exercisable on the date of termination of employment and in no event later than the expiration of the term of such option as set forth in the notice of
grant.

(6)  Termination
of Options. Options granted under the Plan expire no later than ten years from the date of grant. However, incentive stock options granted to an optionee
who, immediately before the grant of such option, owned more than 10% of the total combined voting power of all classes of stock of the Company or a parent or subsidiary corporation, may not have a
term of more than five years. No option may be exercised by any person after such expiration.

(7)  Nontransferability
of Options. An option is nontransferable by the optionee, other than by will or the laws of descent and distribution or a qualified domestic relations
order, and is exercisable only by the optionee during his or her lifetime or, in the event of death, by a person who acquires the right to exercise the option by bequest or inheritance or by reason of
the death of the optionee.



The Plan provides that in the event any change, such as a stock split or dividend, is made in the Company's capitalization which results in an increase or
decrease in the number of outstanding shares of common stock without receipt of consideration by the Company, an appropriate adjustment shall be made in the option price and in the number of shares
subject to each option. In the event of the proposed dissolution or liquidation of the Company, all outstanding options automatically terminate. In the event of a merger of the Company with or into
another corporation or sale of substantially all of the assets of the Company, all outstanding options shall be assumed or an equivalent option substituted by the successor corporation. The
Administrator may in its discretion make provision for accelerating the exercisability of shares subject to options under the Plan in such event.



The Board of Directors may amend the Plan at any time or may terminate it without approval of the stockholders, provided, however, that stockholder approval is
required for any amendment which increases the number of shares which may be issued under the Plan, materially changes the standards of eligibility or materially increases the benefits which may
accrue to participants under the Plan. However, no action by the Board of Directors or stockholders may alter or impair any option previously granted under the Plan without the consent of the
optionee. In any event, the Plan will terminate in July 2002.

66

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Mr. Garrettson received a nonstatutory stock option to purchase the Company's common stock.

An
optionee will generally not recognize any taxable income at the time he or she is granted a nonqualified option. However, upon its exercise, the optionee will recognize ordinary
income generally measured as the excess of the then fair market value of the shares purchased over the purchase price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax withholding by the Company. Upon resale of such shares by the optionee, any difference between the sales price and the optionee's
purchase price, to the extent not recognized as taxable income as described above, will be treated as long-term or short-term capital gain or loss, depending on the holding
period.

Generally,
the Company will be entitled to a tax deduction in the same amount as the ordinary income realized by the optionee with respect to shares acquired upon exercise of a
nonqualified option.

The
foregoing is only a summary of the effect of federal income taxation upon the optionee and the Company, does not purport to be complete, and does not discuss the tax consequences of
the optionee's death or the income tax laws of any municipality, state or foreign country in which an optionee may reside.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of Common Stock of the Company as of May 31, 2002 as to
(i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each director, (iii) each of the executive officers
named in the Summary Compensation Table below and (iv) all directors and executive officers as a group.

|Five Percent Stockholders, Directors and Certain Executive Officers(1)                               |  | Common Stock
Beneficially Owned |  | Approximate
Percentage Owned(2) |  
|---------------------------------------------------------------------------------------------------- |  | ------------------------------- |  | ------------------------------- | -
|Kopp Investment Advisors, Inc.(3)
7701 France Avenue South
Suite 500
Edina, MN 55435                 |  | 3,448,259                       |  | 30.0                            | %
|State of Wisconsin Investment Board(4)
P.O. Box 7842
Madison, WI 53707                               |  | 2,269,300                       |  | 19.8                            |  
|REMEC, Inc.(5)
3790 Via de la Valle
Del Mar, CA 92014                                                |  | 861,349                         |  | 7.5                             |  
|Royce & Associates, Inc.(6)
1414 Avenue of the Americas
New York, NY 10019                           |  | 786,500                         |  | 6.9                             |  
|Dimensional Fund Advisors Inc.(7)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401               |  | 641,700                         |  | 5.6                             |  
|State Street Research & Management Company(8)
One Financial Center, 30th Floor
Boston, MA 02111-2690 |  | 617,600                         |  | 5.4                             |  
|Thomas H. Waechter(9)                                                                                |  | 181,356                         |  | 1.6                             |  
|                                                                                                     |  |                                 |  |                                 |  

67

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|Harry W. Oh(10)                                                  |  | 64,060  |  | *   | 
|---------------------------------------------------------------- |  | ------- |  | --- | 
|Michael D. Angel(11)                                             |  | 111,860 |  | *   | 
|Joseph M. Madden(12)                                             |  | 42,839  |  | *   | 
|David S. Piazza(13)                                              |  | 93,294  |  | *   | 
|Garrett A. Garrettson(14)                                        |  | 261,337 |  | 2.2 | 
|Martin Cooper(15)                                                |  | 38,126  |  | *   | 
|Charles D. Kissner(16)                                           |  | 16,876  |  | *   | 
|Henry C. Montgomery(17)                                          |  | 2,188   |  | *   | 
|Robert W. Shaner(18)                                             |  | 10,626  |  | *   | 
|Robert C. Wilson(19)                                             |  | 23,126  |  | *   | 
|All Directors and executive officers as a group (14 persons)(20) |  | 872,053 |  | 7.1 | 

---

68

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of OperationsRelated Party Transactions" of this Report.

Other
than compensation agreements and other agreements which are described under "Employment Contracts and Change of Control Agreements" above, the Company has no additional
transactions that were reportable under Item 404 Regulation S-K during fiscal 2002. All future transactions, including loans, between the Company and its officers, directors,
principal stockholders and their affiliates will be approved by a majority of the Board of Directors, including a majority of the independent and disinterested outside directors, and will continue to
be on terms no less favorable to the Company that could be obtained from unaffiliated third parties.

69

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

PageReport of Independent Accountants

F-2Consolidated Balance Sheets as of March 31, 2002 and 2001

F-3Consolidated Statements of Operations for the Years ended March 31, 2002, 2001 and 2000

F-4Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the Years ended March 31, 2002, 2001 and 2000

F-5Consolidated Statements of Cash Flows for the Years ended March 31, 2002, 2001, and 2000

F-6Notes to Consolidated Financial Statements

F-7




Exhibit
Number

Description2.1(16)

Agreement and Plan of Merger and Reorganization dated May 19, 2002 by and among the Registrant, REMEC, Inc. and Reef Acquisition Corp.3.5.1

Amended and Restated Certificate of Incorporation of Registrant.3.6(7)

Amended and Restated Bylaws of Spectrian Corporation (a Delaware Corporation) dated June 9, 20004.1.1(4)

Letter Agreement to amend Preferred Shares Rights Agreement dated as of January 15, 1997 between the Registrant and Kopp Investment Advisors, Inc.4.1.2(7)

Letter Agreement to amend Preferred Shares Rights Agreement dated as of February 16, 2000 between Kopp Investment Advisors, Inc. and Registrant.4.1.3(14)

Third Amended and Restated Preferred Shares Rights Agreement dated as of January 18, 2001 between the Registrant and Mellon Investor Services, L.L.C.4.1.4(15)

First Amendment to Rights Agreement dated May 17, 2002 between the Registrant and Mellon Investor Services, L.L.C.10.2(10)

1992 Stock Plan, as amended.10.4(6)

1994 Director Option Plan and form of agreement thereunder.


70

---

10.13(1)

Hardware Supply Agreement dated April 6, 1995 between Northern Telecom Limited and Registrant.10.16(2)

Purchase and Sale Agreement between Metropolitan Life Insurance Company and Registrant.10.22(3)

Lease Agreement dated November 19, 1996 between the Registrant and SPEC (CA) QRS 12-20, Inc.10.23(3)

Bill of Sale dated November 19, 1996 by the Registrant to SPEC (CA) QRS 12-20, Inc.10.26(5)

Stock Option Agreement dated November 26, 1997 between Registrant and Garrett A. Garrettson.10.27(5)

Stock Option Agreement dated November 26, 1997 between Registrant and Garrett A. Garrettson.10.28(17)

Stock Option Agreement dated November 26, 1997 between Registrant and Garrett A. Garrettson.10.39(7)

Amended and Restated Loan and Security Agreement between Silicon Valley Bank and Registrant.10.40.1(11)

Form of Change in Control Severance Agreement between the Registrant and Thomas A. Jones, Robert D. Lyells, Joseph M. Madden, Harry W. Oh, David S. Piazza and Donald W. Sinnar.10.40.2(11)

Change in Control Severance Agreement between the Registrant and Thomas H. Waechter.10.40.3(11)

Change in Control Severance Agreement between the Registrant and Michael D. Angel.10.41(7)

Master Lessor's Consent to Sublease between North American Resort Properties, Inc and Registrant.10.41.1(7)

Agreement and Assumption of Sublease between North American Resort Properties, Inc. and The Gap, Inc.10.42(7)

Closing documents regarding 165 Gibraltar Court, Sunnyvale, California.10.43(7)

Summary of Lease Contract between Ensung Building and Registrant.10.44(7)

Contract to Lease between Ellington Development Incorporated and Registrant.10.45(7)

Manufacturing Agreement between GSS/Array Technology and Registrant.10.46(8)

Sublease Agreement between American Microwave Technology and Registrant dated May 31, 2000.10.48(9)

Purchase and Supply Agreement dated as of December 29, 2000 by and between Spectrian Corporation, a Delaware corporation and Zoltar Acquisition, Inc., a North Carolina corporation.


71

---

10.48.1(12)

Amendment of Purchase and Supply Agreement, dated October 19, 2001, between Registrant and UltraRF Inc. (formerly known as Zoltar Acquisition, Inc.)10.48.2(13)

Amendment of Purchase and Supply Agreement, dated April 5, 2002, between Registrant and UltraRF Inc. (formerly known as Zoltar Acquisition, Inc.)10.49(9)

Sublease Agreement dated as of December 29, 2000 between Zoltar Acquisition, Inc., a North Carolina corporation, and Spectrian Corporation, a Delaware corporation.10.50(9)

Payment and Performance Guaranty of Sublease dated December 29, 2000, by Cree, Inc., a North Carolina corporation in favor of Spectrian Corporation, a California corporation.10.51(9)

Standard Industrial/Commercial Net Lease dated December 12, 2000 by and between CSS Properties II, LLC and Spectrian Corporation.10.55(12)

Amended Employment Agreement dated September 30, 2001 between Registrant and Garrett A. Garrettson.10.56

Master Supply Agreement dated as of August 14, 2001 by and between Registrant and Cingular Wireless L.L.C.10.57

Notice of Termination dated as of April 1, 2002 by and between the Registrant and Garrett A. Garrettson.10.58

Loan Modification Agreement between Registrant and Silicon Valley Bank dated June 5, 2002.10.59(17)

Stock Option Agreement dated April 10, 2000 by and between Registrant and Thomas H. Weachter.10.60(17)

Stock Option Agreement dated December 10, 1999 by and between Registrant and Michael D. Angel.23.1

Consent of PricewaterhouseCoopers LLP.24.1

Power of Attorney (included on page 74).99.1(16)

Form of Voting Agreement between Registrant and certain shareholders of REMEC, Inc.99.1(16)

Form of Voting Agreement between REMEC, Inc. and certain shareholders of Registrant.


---

72

---



73

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SIGNATURES

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

| |  |     |  | SPECTRIAN CORPORATION                                                        
| |  | --- |  | -----------------------------------------------------------------------------
| |  | By: |  | /s/THOMAS H. WAECHTERThomas H. Waechter President and Chief Executive Officer

Date:
June 14, 2002

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas H. Waechter and Michael D. Angel, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to sign any and all amendments (including post-effective
amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each of said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-facts
and agents, or his substitute or substitutes, or any of them, shall do or cause to be done by virtue hereof.

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

|Signature                                     |  | Title                                                                                                                                   |  | Date         
|--------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|                                              |  |                                                                                                                                         |  |              
|/s/THOMAS H. WAECHTERThomas H. Waechter       |  | President, Chief Executive Officer and Director(Principal Executive Officer)                                                            |  | June 14, 2002
|/s/MICHAEL D. ANGELMichael D. Angel           |  | Executive Vice President, Finance and Administration, Chief Financial Officer and Secretary(Principal Financial and Accounting Officer) |  | June 14, 2002
|/s/GARRETT A. GARRETTSONGarrett A. Garrettson |  | Director and Chairman                                                                                                                   |  | June 14, 2002
|/s/MARTIN COOPERMartin Cooper                 |  | Director                                                                                                                                |  | June 14, 2002
|/s/CHARLES D. KISSNERCharles D. Kissner       |  | Director                                                                                                                                |  | June 14, 2002
|/s/HENRY C. MONTGOMERYHenry C. Montgomery     |  | Director                                                                                                                                |  | June 14, 2002
|/s/ROBERT W. SHANERRobert W. Shaner           |  | Director                                                                                                                                |  | June 14, 2002
|/s/ROBERT C. WILSONRobert C. Wilson           |  | Director                                                                                                                                |  | June 14, 2002

74

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SPECTRIAN CORPORATION        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                |  | Page
|------------------------------------------------------------------------------- |  | ----
|Report of Independent Accountants                                               |  | F-2 
|Consolidated Balance Sheets                                                     |  | F-3 
|Consolidated Statements of Operations                                           |  | F-4 
|Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) |  | F-5 
|Consolidated Statements of Cash Flows                                           |  | F-6 
|Notes to Consolidated Financial Statements                                      |  | F-7 

F-1

---



REPORT OF INDEPENDENT ACCOUNTANTS

To
the Board of Directors and Stockholders of Spectrian Corporation:

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders' equity and comprehensive income (loss) and of cash
flows, present fairly, in all material respects, the financial position of Spectrian Corporation and its subsidiaries at March 31, 2002 and March 31, 2001, and the results of their
operations and their cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
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 auditing standards generally accepted in the United States of America, 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 our
opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers
LLP
San Jose, California
April 17, 2002, except for Note 16,
which is as of June 5, 2002

F-2

---



SPECTRIAN CORPORATION        CONSOLIDATED BALANCE SHEETS  (In thousands, except share data)

|                                       |                                                                                                                                                                                                              | March 31,                                  |      
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | -----
|
|ASSETS                                 |                                                                                                                                                                                                              |                                            |      
|CURRENT ASSETS:                        |                                                                                                                                                                                                              |                                            |      
|                                       | Cash and cash equivalents                                                                                                                                                                                    |                                            | $    
|                                       | Restricted cash                                                                                                                                                                                              |                                            |      
|                                       | Short-term investments                                                                                                                                                                                       |                                            |      
|                                       | Accounts receivable, less allowance for doubtful accounts of $400 and $460, respectively                                                                                                                     |                                            |      
|                                       | Inventories, net                                                                                                                                                                                             |                                            |      
|                                       | Income tax receivable                                                                                                                                                                                        |                                            |      
|                                       | Deferred tax asset                                                                                                                                                                                           |                                            |      
|                                       | Prepaid expenses and other current assets                                                                                                                                                                    |                                            |      
|                                       |                                                                                                                                                                                                              |                                            |      
|                                       |                                                                                                                                                                                                              | Total current assets                       |      
|Property and equipment, net            |                                                                                                                                                                                                              |                                            | 9,651
|Other assets                           |                                                                                                                                                                                                              |                                            | 3,127
|                                       |                                                                                                                                                                                                              |                                            |      
|                                       |                                                                                                                                                                                                              | Total assets                               |      
|                                       |                                                                                                                                                                                                              |                                            |      
|LIABILITIES AND STOCKHOLDERS' EQUITY   |                                                                                                                                                                                                              |                                            |      
|CURRENT LIABILITIES:                   |                                                                                                                                                                                                              |                                            |      
|                                       | Accounts payable                                                                                                                                                                                             |                                            | $    
|                                       | Accrued liabilities                                                                                                                                                                                          |                                            |      
|                                       | Income taxes payable                                                                                                                                                                                         |                                            |      
|                                       | Deferred gain, current portion                                                                                                                                                                               |                                            |      
|                                       | Current portion of debt and capital lease obligations                                                                                                                                                        |                                            |      
|                                       |                                                                                                                                                                                                              |                                            |      
|                                       |                                                                                                                                                                                                              | Total current liabilities                  |      
|Deferred gain, net of current portion  |                                                                                                                                                                                                              |                                            |     
|                                       |                                                                                                                                                                                                              |                                            |      
|                                       |                                                                                                                                                                                                              | Total liabilities                          |      
|                                       |                                                                                                                                                                                                              |                                            |      
|Commitments and Contingencies (Note 7) |                                                                                                                                                                                                              |                                            |      
|STOCKHOLDERS' EQUITY:                  |                                                                                                                                                                                                              |                                            |      
|                                       | Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued and outstanding                                                                                                                  |                                            |      
|                                       | Common stock, $0.001 par value, 25,000,000 and 20,000,000 shares authorized, respectively; 12,691,423 and 12,501,026 shares issued, respectively; 11,397,723 and 11,501,026 shares outstanding, respectively |                                            |      
|                                       | Additional paid-in capital                                                                                                                                                                                   |                                            |      
|                                       | Treasury stock, 1,293,700 and 1,000,000 shares of common stock held, respectively                                                                                                                            |                                            |      
|                                       | Deferred compensation expense                                                                                                                                                                                |                                            |      
|                                       | Accumulated other comprehensive income (loss)                                                                                                                                                                |                                            |      
|                                       | Accumulated deficit                                                                                                                                                                                          |                                            |      
|                                       |                                                                                                                                                                                                              |                                            |      
|                                       |                                                                                                                                                                                                              | Total stockholders' equity                 |      
|                                       |                                                                                                                                                                                                              |                                            |      
|                                       |                                                                                                                                                                                                              | Total liabilities and stockholders' equity |      
|                                       |                                                                                                                                                                                                              |                                            |      

See
accompanying notes to consolidated financial statements.

F-3

---

SPECTRIAN CORPORATION        CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands, except per share data)

|                                                                                           |                                     | Year Ended March 31,     |        
|------------------------------------------------------------------------------------------ | ----------------------------------- | ------------------------ | -------
|
|NET REVENUES                                                                               |                                     | $                        | 103,782
|                                                                                           |                                     |                          |        
|COSTS AND EXPENSES:                                                                        |                                     |                          |        
|                                                                                           | Cost of revenues                    |                          |        
|                                                                                           | Research and development            |                          |        
|                                                                                           | Selling, general and administrative |                          |        
|                                                                                           | Restructuring                       |                          |        
|                                                                                           |                                     |                          |        
|                                                                                           |                                     | Total costs and expenses |        
|                                                                                           |                                     |                          |        
|OPERATING LOSS                                                                             |                                     |                          | (40,317
|INTEREST INCOME                                                                            |                                     |                          | 3,417  
|INTEREST EXPENSE                                                                           |                                     |                          | (13    
|OTHER INCOME, NET                                                                          |                                     |                          | 16,347 
|                                                                                           |                                     |                          |        
|INCOME (LOSS) BEFORE INCOME TAXES                                                          |                                     |                          | (20,566
|INCOME TAXES                                                                               |                                     |                          | 301    
|                                                                                           |                                     |                          |        
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                   |                                     |                          | (20,867
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLEADOPTION OF SFAS 133                   |                                     |                          | 494    
|                                                                                           |                                     |                          |        
|NET INCOME (LOSS)                                                                          |                                     | $                        | (20,373
|                                                                                           |                                     |                          |        
|NET INCOME (LOSS) PER SHARE:                                                               |                                     |                          |        
|Basic income (loss) per share before cumulative effect of change in accounting principle   |                                     | $                        | (1.80  
|Cumulative effect of change in accounting principle                                        |                                     |                          | 0.04   
|                                                                                           |                                     |                          |        
|Basic net income (loss) per share                                                          |                                     | $                        | (1.76  
|                                                                                           |                                     |                          |        
|Diluted income (loss) per share before cumulative effect of change in accounting principle |                                     | $                        | (1.80  
|Cumulative effect of change in accounting principle                                        |                                     |                          | 0.04   
|                                                                                           |                                     |                          |        
|Diluted net income (loss) per share                                                        |                                     | $                        | (1.76  
|                                                                                           |                                     |                          |        
|SHARES USED IN COMPUTING PER SHARE AMOUNTS:                                                |                                     |                          |        
|                                                                                           | Basic                               |                          |        
|                                                                                           |                                     |                          |        
|                                                                                           | Diluted                             |                          |        
|                                                                                           |                                     |                          |        

See
accompanying notes to consolidated financial statements.

F-4

---



SPECTRIAN CORPORATION        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)        (In thousands, except share data)

|                                                                    |  | Common Stock |  |   |    |  |   |         |   |   |         |   |   |        |  
|------------------------------------------------------------------- |  | ------------ |  | - | -- |  | - | ------- | - | - | ------- | - | - | ------ | -
|
|
|Balances as of March 31, 1999                                       |  | 11,102,333   |  | $ | 10 |  | $ | 149,588 |   | $ | (14,789 | ) | $ |       |  
|Exercise of stock options                                           |  | 565,941      |  |   | 1  |  |   | 7,420   |   |   |        |   |   |       |  
|Employee stock purchase plan                                        |  | 191,233      |  |   | 1  |  |   | 1,762   |   |   |        |   |   |       |  
|Deferred stock-based compensation                                   |  |              |  |   |    |  |   | 1,347   |   |   |        |   |   | (1,347 | )
|Stock-based compensation expense                                    |  |             |  |   |   |  |   |        |   |   |        |   |   | 410    |  
|Net loss                                                            |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Unrealized losses on investments                                    |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Comprehensive loss                                                  |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|                                                                    |  |              |  |   |    |  |   |         |   |   |         |   |   |        |  
|Balances as of March 31, 2000                                       |  | 11,859,507   |  |   | 12 |  |   | 160,117 |   |   | (14,789 | ) |   | (937   | )
|Exercise of stock options                                           |  | 510,806      |  |   | 1  |  |   | 6,458   |   |   |        |   |   |       |  
|Employee stock purchase plan                                        |  | 130,713      |  |   |   |  |   | 1,607   |   |   |        |   |   |       |  
|Deferred stock-based compensation                                   |  |             |  |   |   |  |   | (658    | ) |   |        |   |   | 658    |  
|Stock-based compensation expense                                    |  |             |  |   |   |  |   |        |   |   |        |   |   | 210    |  
|Net income                                                          |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Unrealized losses on investments                                    |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Comprehensive loss                                                  |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|                                                                    |  |              |  |   |    |  |   |         |   |   |         |   |   |        |  
|Balances as of March 31, 2001                                       |  | 12,501,026   |  |   | 13 |  |   | 167,524 |   |   | (14,789 | ) |   | (69    | )
|Exercise of stock options                                           |  | 85,607       |  |   |   |  |   | 1,070   |   |   |        |   |   |       |  
|Employee stock purchase plan                                        |  | 104,790      |  |   |   |  |   | 924     |   |   |        |   |   |       |  
|Purchase of treasury stock                                          |  |             |  |   |   |  |   |        |   |   | (2,880  | ) |   |       |  
|Stock-based compensation expense                                    |  |             |  |   |   |  |   |        |   |   |        |   |   | 29     |  
|Net loss                                                            |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Unrealized gain on investments                                      |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Realized loss on investments previously included in unrealized loss |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|Comprehensive income                                                |  |             |  |   |   |  |   |        |   |   |        |   |   |       |  
|                                                                    |  |              |  |   |    |  |   |         |   |   |         |   |   |        |  
|Balances as of March 31, 2002                                       |  | 12,691,423   |  | $ | 13 |  | $ | 169,518 |   | $ | (17,669 | ) | $ | (40    | )
|                                                                    |  |              |  |   |    |  |   |         |   |   |         |   |   |        |  

See accompanying notes to consolidated financial statements.

F-5

---

SPECTRIAN CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)

|                                                   |                                                                                                     | Year Ended March 31,                                                                                |                                  
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ---------------------------------
|
|Cash flows from operating activities:              |                                                                                                     |                                                                                                     |                                  
|                                                   | Net income (loss)                                                                                   |                                                                                                     | $                                
|                                                   | Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: |                                                                                                     |                                  
|                                                   |                                                                                                     | Gain on sale of UltraRF                                                                             |                                  
|                                                   |                                                                                                     | Net loss on sale of short-term investments                                                          |                                  
|                                                   |                                                                                                     | (Gain) loss on sale and disposal of property and equipment, net                                     |                                  
|                                                   |                                                                                                     | Depreciation and amortization                                                                       |                                  
|                                                   |                                                                                                     | Provision for doubtful accounts receivable                                                          |                                  
|                                                   |                                                                                                     | Stock option compensation expense                                                                   |                                  
|                                                   |                                                                                                     | Changes in deferred tax assets                                                                      |                                  
|                                                   |                                                                                                     | Changes in income tax payable                                                                       |                                  
|                                                   |                                                                                                     | Changes in income tax receivable                                                                    |                                  
|                                                   |                                                                                                     | Changes in operating assets and liabilities
(in fiscal 2001, net of the effect of sale of UltraRF): |                                  
|                                                   |                                                                                                     |                                                                                                     | Accounts receivable              
|                                                   |                                                                                                     |                                                                                                     | Inventories                      
|                                                   |                                                                                                     |                                                                                                     | Prepaid expenses and other assets
|                                                   |                                                                                                     |                                                                                                     | Accounts payable                 
|                                                   |                                                                                                     |                                                                                                     | Accrued liabilities              
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|Cash flows from investing activities:              |                                                                                                     |                                                                                                     |                                  
|                                                   | Purchases of short-term investments                                                                 |                                                                                                     |                                  
|                                                   | Proceeds from sale and maturities of short-term investments                                         |                                                                                                     |                                  
|                                                   | Purchase of minority investment                                                                     |                                                                                                     |                                  
|                                                   | Release of restricted cash                                                                          |                                                                                                     |                                  
|                                                   | Costs associated with sale of UltraRF                                                               |                                                                                                     |                                  
|                                                   | Purchase of property and equipment                                                                  |                                                                                                     |                                  
|                                                   | Proceeds from sale of property and equipment                                                        |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|Cash flows from financing activities:              |                                                                                                     |                                                                                                     |                                  
|                                                   | Repayments of debt and capital lease obligations                                                    |                                                                                                     |                                  
|                                                   | Purchase of treasury stock                                                                          |                                                                                                     |                                  
|                                                   | Proceeds from sales of common stock, net                                                            |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|Supplemental disclosures of cash flow information: |                                                                                                     |                                                                                                     |                                  
|                                                   | Cash paid during the year for interest                                                              |                                                                                                     | $                                
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   | Net cash paid (received) for income taxes                                                           |                                                                                                     | $                                
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   | Acquisition of equipment under capital lease obligation                                             |                                                                                                     | $                                
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   | Noncash investing and financing activities:                                                         |                                                                                                     |                                  
|                                                   |                                                                                                     | Exchange of short-term investments for restricted cash                                              |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     | Deferred stock option compensation                                                                  |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  
|                                                   |                                                                                                     | Cree stock received for sale of UltraRF                                                             |                                  
|                                                   |                                                                                                     |                                                                                                     |                                  

See accompanying notes to consolidated financial statements.

F-6

---



SPECTRIAN CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        YEARS ENDED MARCH 31, 2002, 2001 AND 2000

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Spectrian Corporation and subsidiaries ("the Company") was originally incorporated in California in 1984 under the name Microwave Modules &
Devices, Inc. ("MM&D") and engaged in the manufacture of power amplifiers for military applications. On April 2, 1992, MM&D changed its name to Spectrian Corporation. On
October 3, 1997, the Company reincorporated in Delaware. The Company is engaged in the design, manufacture and marketing of high-power radio frequency ("RF") amplifiers for the
global wireless communications industry. Prior to the sale of its semiconductor division, that operated under the trade name UltraRF, to Cree Inc. ("Cree") on December 29, 2000, the
Company also produced semiconductor devices for use in the design and manufacture of wireless infrastructure equipment. Spectrian's power amplifiers are utilized as part of the infrastructure for both
wireless voice and data networks. The Company's power amplifiers boost the power of a signal so that it can reach a wireless phone or other device within a designated geography.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Foreign Currency Transactions

Monetary accounts maintained in currencies other than the United States dollar are re-measured using the foreign exchange rate at the balance sheet
date. Operations accounts and non-monetary balance sheet accounts are measured and recorded at the rate reported in current operations. The effect of foreign currency
re-measurement was not significant in fiscal years 2002, 2001 or 2000.

Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured, and
delivery has occurred. Delivery occurs when the customer has taken title and assumed the risk of loss. Under this criteria, product revenues are recognized either upon shipment of product to customers
if shipping terms are FOBshipping point or upon receipt of product by customers if shipping terms are FOBdestination. Revenues for products sold to distributors with rights
of return are deferred and recognized upon resale of the products by the distributors. Revenues are also deferred if collection is not assured. All revenues are recognized net of accruals for
estimated sales returns and allowances.

Concentration of Credit Risk and Fair Value of Financial Instruments

The carrying value of the Company's financial instruments, including cash and cash equivalents, restricted cash, short-term investments, equity
options, accounts receivable and long-term debt approximates fair market value, since marketable equity securities have been valued at market, the discounted present value of investments
is approximately equal to carrying value, and receivables are subject to collection in less than three months. Financial instruments that subject the Company to concentrations of credit risk consist
primarily of cash and cash equivalents, restricted cash, short-term

F-7

---

investments, equity options and trade accounts receivable. The Company maintains its cash and cash equivalents, restricted cash and short-term investments with high quality financial
institutions. The Company evaluates the credit risk associated with its customers and provides an allowance for doubtful accounts.

Risks and Uncertainties

The Company's migration to an outsourced, turnkey manufacturing and repair services strategy entail certain risks including reduced control over the cost, timely
delivery, reliability and quality of the components and reliance on the financial strength and continued relationship with the contract manufacturer. In calendar 2001, the financial strength of the
Company's primary sole source contract manufacturer may have become impaired due to the declaration of bankruptcy by its U.S. parent corporation. Although the Company has taken measures to protect
itself in the event that this contract manufacturer declares bankruptcy or is placed in receivership, the Company may suffer a loss of assets or disruption of its manufacturing processes and the
Company's business, financial condition and results of operations may be adversely affected. If the Company were to change its contract manufacturer, the Company would be required to requalify its
components with each new contract manufacturer, respectively, as well as with each of its customers. Any inability of the Company to obtain timely deliveries of repair services or assembled amplifiers
of acceptable quality in required quantities could materially and adversely affect the Company's business, financial condition and results of operations.

Allowance for Doubtful Accounts

The Company performs ongoing credit evaluations of the Company's customers and adjusts credit limits based upon payment history and the customer's current credit
worthiness, as determined by the Company's review of current credit and financial information, and generally does not require collateral. The Company continuously monitors payments from the Company's
customers and maintains an allowance for estimated credit losses based upon the Company's historical experience and any specific customer collection issues that the Company has identified. Since the
Company's accounts receivable are concentrated in a relatively few number of customers, a significant change in the liquidity or financial condition of any one of these customers could have a material
adverse impact on the realization of the Company's accounts receivable and the Company's results of operations. Allowance for bad and doubtful accounts aggregated $400,000 and $460,000 at
March 31, 2002 and 2001, respectively. The Company recorded charges for allowance for bad and doubtful accounts of $250,000, $40,000 and $32,000 in fiscal 2002, 2001 and 2000, respectively.
Receivables written off against the allowance aggregated $310,000 in 2002 and none in fiscal 2001 and 2000.

Cash Equivalents and Short-Term Investments

The Company considers all liquid investments with an original maturity of three months or less to be cash equivalents. The cash equivalents consisted of
commercial paper and U.S. government securities as of March 31, 2002.

The
Company has classified its investments in certain debt securities, equity options and common stock investments in Cree as "available-for-sale," and records
such investments at fair market value, with unrealized gains and losses reported as a separate component of stockholders' equity. Realized

F-8

---

gains and losses are determined using the specific identification method. Interest income is recorded using an effective interest rate, with the associated premium or discount amortized to interest
income. At March 31, 2002, the unrealized gains on the Company's investments aggregated to $211,000.

Inventories and Adverse Purchase Commitments

The Company values inventory at standard cost, which is evaluated at least quarterly to determine that it approximates actual cost. The Company regularly reviews
inventory quantities on hand and records an allowance for excess and obsolete inventory based primarily on the Company's estimated forecast of product demand and production and repair requirements.
The Company also regularly reviews the cost to produce products against the estimated market value of the products and records a lower of cost or market provision for those products that have a cost
in excess of the estimated market value.

The
Company outsources the production and repair of its products and certain components utilized in the production process that have long lead times. The Company regularly reviews its
outstanding purchase commitments and records an adverse purchase commitment liability based primarily on the Company's estimated forecast of product demand and production and repair requirements. The
Company also regularly reviews the cost to complete production of components on order against the estimated market value of the products and records an adverse purchase commitment liability for those
components that have a completed cost in excess of the estimated market value.

Demand
for the Company's products can fluctuate significantly from period to period. A significant decrease in demand could result in an increase in the amount of excess inventory
quantities on hand and adverse purchase commitments. In addition, the Company's industry is characterized by rapid technological change, frequent new product development, and rapid product
obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand and adverse purchase commitments. The Company has experienced price reductions on its products
because of competition and market conditions. A significant decrease in the market price of products could result in an increase in the required lower of cost or market provision and adverse purchase
commitments. Additionally, the Company's estimates of future product demand and market price may prove to be inaccurate, in which case the Company may have understated or overstated the provision
required for excess and obsolete inventory, lower of cost or market and adverse purchase commitments. In the future, if the Company's inventory is determined to be overvalued, the Company would be
required to recognize such costs in the Company's cost of goods sold at the time of such determination. Likewise, if the Company's inventory is determined to be undervalued, the Company may have
over-reported the Company's cost of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Therefore, although the Company
makes every effort to ensure the accuracy of the Company's forecasts of future product demand and market value, any significant unanticipated changes in demand or technological developments could have
a significant impact on the
value of the Company's inventory, the amount of adverse purchase commitments and the Company's results of operations.

As
of March 31, 2002, several products from the older single carrier power amplifier ("SCPA") business line had cost of sales that exceeded the contractual selling price.
Accordingly, the Company established lower of cost or market inventory reserves for the associated inventory. The Company also

F-9

---

recorded an allowance for certain SCPA and multicarrier power amplifier ("MCPA") inventories on hand that exceeded the forecast product demand. Total allowance for excess and obsolete inventory and
lower of cost or market at March 31, 2002 was $17.8 million.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives
of the respective assets, generally three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease terms or the estimated useful lives of
the respective assets.

Income Taxes

Income taxes are recorded using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce deferred tax assets to an amount
whose expected realization is more likely than not.

Per Share Computations

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted net income (loss) per share is computed using the weighted average number of common and potentially dilutive common shares outstanding during the period using the
treasury stock method. Potentially dilutive common shares include the effect of stock options.

Use of Estimates in the Preparation of Financial Statements

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, the disclosure of contingent assets and liabilities, revenues and expenses during the reporting period. Actual results could differ from those
estimates.

Accounting for Stock-Based Compensation

The Company accounts for its employee stock compensation plans using the intrinsic value method. The Company calculates the fair value of stock-based compensation
and discloses the pro forma impact of the value on net loss and net loss per share in the notes to the financial statements.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be

F-10

---

recoverable based on an evaluation of the undiscounted cash flow generated by such assets. Although the Company currently has no significant impaired assets, if such assets were to be considered
impaired, the impairment to be recognized would be measured by the amount by which the carrying amount of the asset exceeds its fair value.

Comprehensive Income (Loss)

Comprehensive income, as defined, includes all changes in equity during a period from non-owner sources. The Company's comprehensive income (loss)
includes unrealized gains or losses on investments and is displayed in the Consolidated Statement of Stockholders Equity and Comprehensive Income (Loss). In fiscal 2002, comprehensive income included
$10.1 million of unrealized gain on short term investments and $13.0 million of realized loss on short term investments which were previously included in unrealized loss. In fiscal 2001,
comprehensive loss represented $22.2 million of unrealized loss on short term investments.

Warranty

The Company offers warranties of various lengths, ranging from one year to fifteen years, to the Company's customers depending upon the specific product and terms
of the customer purchase agreement. The Company typically negotiates varying terms regarding warranty coverage and length of warranty dependant upon the product involved and the customer. The
Company's standard warranties require it to repair or replace defective product returned to it during such warranty period at no cost to the customer. The Company quantifies and records an estimate
for warranty related costs based on the Company's actual historical and projected return and failure rates, the current repair costs, and the length of the warranty period. In the past, the Company
has experienced higher than normal return rates on certain products, which required the Company to increase the required warranty provision and extend the warranty period. Should the Company
experience actual return and failure rates or repair costs that are higher than the estimated return and failure rates or repair costs used to calculate the provision, the Company's operating results
for the period or periods in which such returns or additional costs materialize will be adversely impacted.

Reclassifications

Certain items have been reclassified to be consistent with current presentation. The reclassifications have no effect on previously disclosed net income (loss) or
stockholders' equity.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company believes that the adoption of SFAS 141 has not had a significant impact on its financial statements to date.

In
July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective for fiscal
years beginning after

F-11

---

December 15, 2001. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the
reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously
reported goodwill and the testing for impairment of existing goodwill and other intangibles. The Company believes that the adoption of SFAS 142 will not have a significant impact on its
financial statements. The Company will adopt SFAS 142 in the quarter beginning April 1, 2002. The Company does not expect the adoption of SFAS 142 to have a material impact on the
Company's financial position and results of operations.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. This Statement supersedes FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and Accounting Principals Board Opinion No. 30
("APB 30"), "Reporting Results of OperationsReporting the Effects of Disposal of a Division of a Business", however, this Statement retains the requirement of APB 30 to report
discontinued operations separately from continuing operations and extends that reporting to a component of an entity that either has been disposed of (by sale, by abandonment, or in a distribution to
owners) or is classified as held for sale. This Statement addresses financial accounting and reporting for the impairment of certain long-lived assets and for long-lived assets
to be disposed of. The Company does not expect the adoption of SFAS 144 to have a material impact on the Company's financial position and results of operations.

2. SALE OF ULTRARF

On December 29, 2000, the Company completed the sale of substantially all of the assets and liabilities comprising the Company's semiconductor division,
UltraRF, pursuant to the Asset Purchase Agreement dated as of November 20, 2000 (the "Asset Purchase Agreement") among Cree, Zoltar Acquisition, Inc. ("Zoltar") and the Company for
1,815,402 shares of Cree common stock then valued at $64.5 million, based upon the per share price at the date of closing, plus common stock of Cree with a guaranteed realizable value of
$30 million, less $1.1 million owed by the Company to Cree due to a change in the net assets of UltraRF between October 1, 2000 and December 29, 2000. Of the total
consideration received, 191,094 shares of Cree common stock were placed in escrow to secure the Company's representations, warranties and covenants under the Asset Purchase Agreement over a
12 month period. In January 2001, the Company sold all the shares held in escrow for approximately $6.3 million and recognized a loss of approximately $481,000 from the sale of
these securities. On June 29, 2001, one-half of the cash proceeds from the sale of escrow shares plus interest earned in the amount of $3.2 million was released from escrow.
On December 29, 2001, the remaining amount held in escrow plus interest earned totaling $3.3 million was released from escrow.

In
the year ended March 31, 2002 ("fiscal 2002"), the Company sold 1,139,308 shares of Cree common stock for $27.9 million and realized a loss of $12.6 million. In
addition, the Company exercised put options in relation to 485,000 shares of Cree common stock for proceeds of $12.4 million and realized a loss of $4.8 million. The total realized loss
on sale of Cree stock of $17.4 million was

F-12

---

included in other income (net) in fiscal 2002. As of September 30, 2001, the Company had disposed of all shares of Cree common stock received as consideration under the Asset Purchase
Agreement.

As
part of the definitive agreement, the Company and Cree entered into a two-year supply agreement, under which the Company is obligated to purchase from Cree an aggregate of
$58 million of semiconductors (the "Purchase and Supply Agreement"). The Purchase and Supply Agreement was amended in October 2001 and April 2002. Total purchase commitment under
the amended Purchase and
Supply Agreement was reduced by $3.2 million to $54.8 million and the agreement term was extended to June 30, 2003. As of March 31, 2002, the remaining purchase commitment
was $21.3 million with quarterly commitments ranging from $1.3 million to $5.0 million. In the event Spectrian fails to make these purchases, it is obligated to pay Cree the
amount of the shortfall. Accordingly, the Company deferred $58 million of the gain on sale of UltraRF, which was the amount of purchase commitment in the original Purchase and Supply Agreement,
and is recognizing it in periods as the related purchase commitments to Cree are being fulfilled. In addition, Spectrian and Cree entered into a one-year joint development agreement to
develop advanced technologies related to laterally diffused metal oxide semiconductors ("LDMOS"), linear high gain LDMOS driver modules, high efficiency LDMOS power modules and SiC MESFET components,
under which Spectrian paid to Cree a development fee of $2.4 million in four quarterly installments of $600,000 beginning in April 2001. The joint development agreement expired on
December 29, 2001 and the Company has paid Cree all fees due under the agreement. The Company also subleased one of the facilities in Sunnyvale, California to Cree for a term of 11 years
(with three options to extend the lease an additional five years) with similar terms as the lease agreement between the Company and its landlord. The Company's sublease income from Cree was $907,000
in fiscal 2002 and $227,000 in fiscal 2001. As of March 31, 2002, future sublease income from Cree totaled $8.8 million.

The
Company realized an aggregate gain of $69.7 million from the sale of UltraRF, of which $58.0 million was deferred as noted above, with the balance of
$11.7 million being recognized as other income during the three months ended December 31, 2000. During the three months ended March 31, 2001, Spectrian recognized a gain of
$7.2 million as other income. In fiscal 2002, Spectrian recognized a gain of $30.0 million from the sale of UltraRF as other income due to the fulfillment of the purchase commitment. As
a result, the deferred gain on sale of UltraRF was $21.3 million on March 31, 2002.

Summarized
below are the unaudited pro forma results of the Company as though UltraRF had been sold at April 1, 1999 (in thousands, except per share data):

Year Ended March 31,2001

2000Total revenues

$
178,671

$
162,687Net loss

$
(8,436
)
$
(13,914
)Net loss per share (basic and diluted)

$
(0.76
)
$
(1.33
)


The
pro forma financial information presented above is not necessarily indicative of either the results of operations that would have occurred had the disposal taken place at the
beginning of fiscal

F-13

---

2000 or of future results of operations of the Company. The gain on sale of UltraRF has not been included in the pro forma results above because it is non-recurring and directly related
to the sale.

3. ADOPTION OF SFAS 133

The Company adopted Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging
Activities, as amended by Statement of Financial Accounting Standards No. 137,Accounting for Derivative Instruments and Hedging
ActivitiesDeferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133, and Statement of Financial Accounting
Standards No. 138,Accounting for Certain Derivative Instruments and Certain Hedging Activities,an amendment of FASB
Statement No. 133(referred to hereafter as "SFAS 133"), on April 1, 2001. In accordance with the transition provisions of SFAS 133, the Company
recorded an approximate $494,000 gain cumulative effect adjustment in earnings as of April 1, 2001.

The
following are the pro forma amounts of the retroactive application of the adoption of SFAS 133:

Year Ended March 31,2002

2001

2000Net income (loss)

$
(20,867
)
$
13,974

$
(5,823
)Net income (loss) per share:Basic

$
(1.80
)
$
1.26

$
(0.56
)Diluted

$
(1.80
)
$
1.23

$
(0.56
)




All derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative contract, it designates the
derivative as (1) a hedge of the fair value of a recognized asset or liability or (2) an instrument that is held for trading or non-hedging purposes (a "trading" or
"non-hedging" instrument). Since April 1, 2001, the Company has designated all derivative contacts as a fair value hedge and has not entered into derivatives for the purposes of
trading. Changes in the fair value of a derivative that is highly effective asand that is designated and qualifies asa fair-value hedge, along with changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk, are recorded in current-period earnings.

By
using derivative financial instruments to hedge exposures to changes in share prices for its marketable equity securities, the Company exposes itself to credit risk and market risk.
Credit risk is the risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. When the fair value of a derivative contract is positive,
the counterparty owes the Company, which creates repayment risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, does not
assume repayment risk. The Company minimizes its credit (or repayment) risk in derivative instruments by (1) entering into transactions with high-quality counterparties,
(2) limiting the amount of its exposure to each counterparty, and (3) monitoring the financial condition of its counterparties. The Company also maintains a policy of requiring that all
derivative contracts be governed by an International Swaps and Derivatives Association Master Agreement.

F-14

---

The
Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various
hedge transactions. This process includes linking all derivatives that are designated as fair-value hedges to specific assets on the balance sheet. The Company also formally assesses (both
at the hedge's inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value of hedged items and
whether those derivatives may be expected to remain highly effective in future periods.

The
Company discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer effective in offsetting changes in the fair value of a hedged item;
(2) the derivative expires or is sold, terminated, or exercised; or (3) management determines that designating the derivative as a hedging instrument is no longer appropriate.



The Company had an investment in the common stock of Cree (see Note 2 above). The Company's investment exposed it to a risk related to the effects of
changes in price of Cree common stock. This financial exposure was monitored and managed by the Company. The Company's risk-management focuses on the unpredictability of financial markets
and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. The Company used cashless collars, which are combinations of option
contracts to hedge this risk. The Company generally hedged 60% to 100% of its investment in Cree common stock. The Company excludes from its assessment of hedge effectiveness the gain or loss
associated with the time value of the options.

F-15

---



The Company did not have any gain or loss from the sale of Cree stock options in fiscal 2001. In fiscal 2002, the Company terminated 615,000 shares of Cree stock
options prior to their expiration dates and realized a gain of $4.4 million, which represented the proceeds realized upon termination of these options. Of this gain, $494,000 was recognized as
a cumulative effect of change in accounting principle upon adoption of SFAS 133 and the balance of $3.9 million net gain was recorded in other income (net) in fiscal 2002. As of
March 31, 2002, the Company has no derivative financial instruments.

4. OTHER INCOME, NET

Other income, net included (in thousands):

Year Ended March 31,2002

2001

2000Gain on sale of UltraRF

$
29,950

$
18,852

$
Loss on sale of Cree, Inc. common stock


(17,429
)

(481
)

Net gain on Cree, Inc. common stock options


3,886





Gain on sale of building








624Other


(60
)




Other income, net

$
16,347

$
18,371

$
624


5. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Available-for-sale securities at March 31, 2002 and 2001 were as follows (in thousands):

As of March 31, 2002

Amortized Cost

Unrealized Gain (Loss)

Fair
ValueGovernment bonds and notes

$
15,539

$
158

$
15,697Corporate bonds and notes


50,749


53


50,80266,288


211


66,499Less amounts classified as cash equivalents


17,914





17,914Short-term investments

$
48,374

$
211

$
48,585Contractual maturity dates of bonds and notes:Less than 1 year







$
13,4661 to 5 years








35,119$
48,585


F-16

---

As of March 31, 2001

Amortized Cost

Unrealized Gain (Loss)

Fair
ValueGovernment bonds and notes

$
23,355

$
120

$
23,475Corporate bonds and notes


41,164


144


41,308Common stock investments in Cree, Inc.


57,713


(33,397
)

24,316Equity options in Cree, Inc.





10,277


10,277122,232


(22,856
)

99,376Less amounts classified as cash equivalents


25,864





25,864Short-term investments

$
96,368

$
(22,856
)

73,512Less common stock and equity options in Cree, Inc.








34,593Bonds and notes classified as short-term investments







$
38,919Contractual maturity dates of bonds and notes:Less than 1 year







$
8,9311 to 5 years








29,988$
38,919


6. BALANCE SHEET COMPONENTS

Balance sheet components at March 31, 2002 and 2001 are as follows (in thousands):

March 31,2002

2001Inventories:Raw materials

$
15,932

$
11,185Work in progress


3,539


5,699Finished goods


7,450


5,337Consigned inventory


672


$
27,593

$
22,221


F-17

---

March 31,2002

2001Property and equipment:Machinery and equipment

$
41,979

$
47,341Software


3,725


3,819Leasehold improvements


2,024


2,67347,728


53,833Less accumulated depreciation and amortization


38,077


42,201$
9,651

$
11,632


Depreciation
expense was $5.2 million, $10.4 million and $13.2 million for fiscal 2002, 2001 and 2000, respectively. Amortization expense was $171,000, $51,000 and
$101,000 for fiscal 2002, 2001 and 2000, respectively.

March 31,2002

2001Accrued liabilities:Employee compensation and benefits

$
2,900

$
2,839Warranty


6,400


9,800Restructuring


161


Adverse purchase commitments


2,754


Other accrued liabilities


1,994


1,319$
14,209

$
13,958


7. COMMITMENTS AND CONTINGENIES

Lines of Credit

The Company has a revolving line of credit of $10.0 million with a bank collateralized by the majority of the Company's assets. The line of credit expires
on June 30, 2002. Under the terms of the master agreement governing this credit instrument, as amended, the Company is required to maintain certain minimum working capital and other specific
financial ratios. The master agreement also has certain restrictions on other indebtedness and the payment of dividends. At March 31, 2002, the Company was in compliance with the covenants of
the master agreement. The amount available to borrow at March 31, 2002, was $10.0 million. The Company can borrow at either (i) a variable rate equal to the prime rate or
(ii) a fixed rate equal to 200 basis points above the LIBOR rate, which at March 31, 2002 was 4.8% and 4.0%, respectively. The Company had no borrowings under the line of credit at
March 31, 2002. The line of credit was renewed on June 5, 2002 with an expiration date of June 4, 2003.

F-18

---

Purchase Commitments with Cree

In December 2000, the Company and Cree are entered into the Purchase and Supply Agreement, under which the Company was obligated to purchase from Cree an
aggregate of $58 million of semiconductors, with quarterly purchase commitments through December 2002. In October 2001 and April 2002, the Purchase and Supply Agreement was
amended to reduce the aggregate purchase commitment to $54.8 million and to extend the quarterly purchase commitments through June 2003. As of March 31, 2002, the remaining
purchase commitment is $21.3 million.

Purchase Commitments with Subcontract Manufacturers

Monthly, Spectrian provides a six-month rolling forecast of finished goods requirements to its subcontract manufacturers for planning and
long-lead time parts procurement purposes only. Spectrian issues purchase orders to the subcontract manufacturers with delivery dates from four to twelve weeks from the purchase order
date. Once a purchase order is accepted by the subcontract manufacturer, Spectrian is committed to accept delivery of the amplifiers or reimburse the subcontract manufacturer for costs incurred to
date. The subcontract manufacturers procures raw materials and schedules labor needed to manufacture Spectrian amplifiers based on the aforementioned forecasts and standard purchase orders. In the
past, Spectrian has reimbursed ACT for the cost of long-lead time parts and other raw material costs that had been incurred by ACT because of the reduction of purchase order and forecasted
quantities. The subcontract manufacturers also maintain inventory levels to repair Spectrian amplifiers. At March 31, 2002, total accepted and unfulfilled purchase orders to procure completed
amplifiers totaled $7.3 million. At March 31, 2002, the subcontract manufacturers had $13.4 million of materials on hand and an additional $12.3 million of purchase
commitments to buy raw materials to fulfill the accepted purchase orders, forecasted requirements and repair requirements from
Spectrian. At March 31, 2002, Spectrian estimated that $1.6 million of the purchase commitments made by the subcontract manufacturers are non-cancelable.

Other Purchase Commitments

During its normal course of business, the Company issues purchase orders to procure components, materials and services from vendors. As of March 31, 2002,
the Company's outstanding purchase commitments with vendors, other than Cree and its subcontract manufacturers, totaled approximately $4.9 million.

Royalty Commitments

On November 15, 2001, the Company entered into an agreement with Paragon Communications, Inc. ("Paragon") to license certain technology that can be
used in the design of RF power amplifiers. Under the terms of the License Agreement, the Company may be required to pay a royalty to Paragon based upon revenues of products that incorporate the
licensed technology. If the Company elects to license the technology provided by Paragon, the Company must make quarterly advance royalty payments beginning July 1, 2002, through
December 31, 2004 in amounts ranging from $50,000 to $125,000 per quarter. These advance royalty payments are to be applied against earned royalties and are carried forward to subsequent
periods if not earned.

F-19

---

Lease Commitments

The Company entered into capital leases for test equipment for a 24-month lease term expiring from July to October 2002. As of March 31,
2002, future minimum lease payments under these capital leases are $66,000 all of which are due in fiscal 2003.

During
fiscal 1997, the Company sold its principal facilities in Sunnyvale, California for approximately $16.4 million, and leased the facilities back under a lease that has been
classified as an operating lease. The lease expires in November 2011 and the quarterly rent payments are subject to Consumer Price Index adjustments on a tri-annual basis beginning
in November 1999. In connection with the sale of UltraRF to Cree in December 2000, the Company subleased one of the two facilities under the aforementioned operating lease to Cree for
the remaining term of the lease under substantially the same term and conditions as the Company's lease.

In
1998, the Company entered into an operating lease for an ancillary 40,000 square foot manufacturing facility in Rocklin, California for a sixty month lease term expiring in
June 2003. During the second quarter of fiscal 2000, the Company subleased its Rocklin facility to The Gap, Inc. for the reminder of the Company's lease term.

The
Company also leases facilities in Folsom, California; Quincy, Illinois; Brazil, Korea and China to support its administrative, development, manufacturing, repair, sales and marketing
activities.

Future
minimum lease payments under all noncancelable operating leases and sublease income under these operating leases as of March 31, 2002 are as follows (in thousands):

Lease Payments

Sublease Income2003

$
2,993

$
1,3492004


2,325


1,0202005


2,237


9072006


2,241


9072007


2,246


907Thereafter


9,660


4,233$
21,702

$
9,323


Rent
expense was $2.9 million, $2.9 million and $2.3 million for the years ended March 31, 2002, 2001 and 2000, respectively. Sublease rental income was
$1,341,000, $615,000 and $310,000 for fiscal 2002, 2001 and 2000, respectively.

Contingencies

From time to time, the Company is involved in legal actions arising in the ordinary course of business. Based on information currently available, the Company
believes no material loss would result from litigation. However, absolute assurance cannot be given that third party assertions will be resolved without costly litigation, in a manner that is not
adverse to the Company's financial position, results of operations or cash flows or without requiring royalty payments in the future which may adversely impact gross margins.

F-20

---

The
Company has change of control severance agreements with its Chief Executive Officer and seven other executives, which provide for payments of lump sum cash severance payments equal
to annual compensation including bonuses for periods ranging from one to three years, continuation of health insurance benefits for periods ranging from one to three years and acceleration of vesting
of stock options in the event of involuntary termination of employment of these executives.

The
Company continues to be impacted by the softness in the telecommunications sector as well as competitive pricing pressures which has resulted in lower sales. During the year ended
March 31, 2002 the Company used $28.2 million cash in operations and recorded a net loss of $20.4 million. In order for the Company to meet its business objectives, it will need
to either increase sales or reduce costs in order to achieve sustained profitability and generate cash flows from operations. Until such time, the Company will continue to depend upon its existing
cash, cash equivalents and short term investment balances and its current line of credit. Should the Company be unable to meet its profitability and cash flow goals it may be required to seek
alternative sources of capital. However, there can be no assurance that such alternative sources of capital will be available on reasonable terms, if at all.

8. STOCKHOLDERS' EQUITY

Preferred Stock

The Board of Directors has the authority to issue up to 5.0 million shares of undesignated preferred stock and to determine the powers, preferences and
rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock and to fix the number of shares constituting any series
and the designation of such series, without any
further vote or action by the Company's stockholders. The Board of Directors has designated 20,000 shares of preferred stock as Series A Participating Preferred Stock, although none of such
shares have been issued.

Shareholder Rights Plan

The Board of Directors of the Company adopted a Shareholder Rights Plan in October 1996 (the "Rights Plan"), as amended in January 1997,
August 2000, January 2001 and May 2002. Pursuant to the Rights Plan, the Board declared a dividend of one Preferred Stock Purchase Right per share of Common Stock (the "Rights") and each
such Right has an exercise price of $126.00. The Rights become exercisable upon the occurrence of certain events, including the announcement of a tender offer or exchange offer for the Company's
Common Stock or the acquisition of a specified percentage of the Company's Common Stock by a third party. The exercise of the Rights could have the effect of delaying, deferring or preventing a change
in control of the Company, including, without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of the Company's Common Stock. These provisions
could also limit the price that investors might be willing to pay in the future for shares of the Company's Common Stock.

Treasury Stock

In September 2001, the Board of Directors authorized the repurchase of up to $10 million of the Company's common stock. In fiscal 2002, the Company
repurchased 293,700 shares of the outstanding

F-21

---

common stock at an average per share price of $9.80 for approximately $2.9 million. Treasury stock is carried at cost in the consolidated balance sheets as "Treasury Stock" and results in a
reduction of Stockholders' Equity.

Stock Option Plans

The Company has adopted three stock option plans, (the "Plans"): the 1992 Stock Plan (the "1992 Plan"), the 1994 Director Option Plan (the "Directors' Plan"), and
the 1998 Nonstatutory Stock Options Plan (the "1998 Plan"). Pursuant to the terms of the plans, the Company's Board of Directors may grant stock options to selected employees, directors, officers and
consultants of the Company. Stock options are generally granted with an exercise price equal to the fair market value of the Company's stock at the date of grant.

1992 Plan

In 1997, the Company amended the 1992 Plan under which the Company's Board of Directors could issue options to purchase up to 3,300,886 shares of common stock to
employees and directors of and consultants to the Company. In July 1999, the Company amended the 1992 Plan to reserve an additional 450,000 shares of common stock for issuance under the 1992
Plan. In August 2000, an additional 400,000 shares were reserved under the 1992 Plan.

Under
the 1992 Plan, the Company's Board of Directors has the authority to determine to whom options will be granted, the number of shares under option, the option term and the exercise
price. The options generally have 10-year terms and vest 25% after one year from the grant date with the remaining options vesting pro rata over the following 36 months. The term of
any options issued under the plan may not exceed ten years from the date of grant.

Directors' Plan

The Directors' Plan provides for automatic grants to purchase 5,000 of the Company's common stock upon new non-employee directors being elected to the
Board of Directors. The Directors' Plan also provides for the grant of options to purchase up to an additional 5,000 shares annually thereafter. Options under the Directors' Plan vest over
48 months and the exercise price of options granted shall be 100% of the fair market value of the Company's common stock on the date of grant. The options expire ten years after the date of
grant. In July 1999, the Company amended the Directors' Plan to increase the aggregate number of shares authorized by 60,000 shares to 145,000 shares. Under the Director's Plan, 25,000 shares
were granted during fiscal 2002.

1998 Plan

In January 1998, the Company adopted the 1998 Plan under which the Company's Board of Directors could issue options to purchase up to 400,000 shares of
common stock to employees of and consultants to the Company. In the second quarter of fiscal 1999, an additional 500,000 shares were reserved under the 1998 Plan. In the first quarter of fiscal 2000,
an additional 250,000 shares were reserved under the 1998 Plan. In the second quarter of fiscal 2001, an additional 250,000 shares were reserved under the 1998 Plan.

F-22

---

Under
the 1998 Plan, the Company's Board of Directors has the authority to determine to whom options will be granted, the number of shares under option, the option term and the exercise
price. The
options generally have 10-year terms and vest 25% after one year from the grant date with the remaining options vesting pro rata over the following 36 months.

Other Stock Option Grant Activity

Outside of the 1992 Plan, the Director's Plan and the 1998 Plan, two officers and one employee of the Company were granted a combined total of options to purchase
390,000 shares of its common stock during fiscal 1997, at exercise prices ranging from $9.50 to $14.50, which are subject to the same vesting schedule as that of the Company's 1992 Stock Plan. In
fiscal 1998, one officer and two employees were granted a combined total of 90,000 options outside of the Plans at exercise prices ranging from $16.88 to $56.38, which are subject to the same vesting
schedule as that of the 1992 Stock Plan. During fiscal 1999, options to purchase 91,667 shares were cancelled. In fiscal 2000, two officers and one employee were granted a combined total of options to
purchase 410,000 shares of its common stock outside of the Plans at an exercise price ranging from $11.38 to $23.06, which are subject to the same vesting schedule as that of the 1992 Plan. During
fiscal 2001, options to purchase 22,917 shares were cancelled.

The
following table summarizes option activity under the Company's various plans:

|                                 |                            | Available for
Grant |            | Options
Outstanding |            | Weighted
Average
Exercise
Price
|-------------------------------- | -------------------------- | ------------------- | ---------- | ------------------- | ---------- | -------------------------------
|Outstanding as of March 31, 1999 |                            | 435,408             |            | 2,317,642           |            | $                              
|                                 | Additional shares reserved |                     | 1,170,000  |                     |           |                                
|                                 | Granted                    |                     | (1,944,794 | )                   | 1,944,794  |                                
|                                 | Exercised                  |                     |           |                     | (565,941   | )                              
|                                 | Canceled                   |                     | 424,959    |                     | (424,959   | )                              
|                                 |                            |                     |            |                     |            |                                
|Outstanding as of March 31, 2000 |                            | 85,573              |            | 3,271,536           |            |                                
|                                 | Additional shares reserved |                     | 650,000    |                     |           |                                
|                                 | Granted                    |                     | (1,221,950 | )                   | 1,221,950  |                                
|                                 | Exercised                  |                     |           |                     | (510,806   | )                              
|                                 | Canceled(1)                |                     | 1,089,096  |                     | (1,112,013 | )                              
|                                 |                            |                     |            |                     |            |                                
|Outstanding as of March 31, 2001 |                            | 602,719             |            | 2,870,667           |            |                                
|                                 | Granted                    |                     | (396,150   | )                   | 396,150    |                                
|                                 | Exercised                  |                     |           |                     | (85,607    | )                              
|                                 | Canceled                   |                     | 345,032    |                     | (345,032   | )                              
|                                 |                            |                     |            |                     |            |                                
|Outstanding as of March 31, 2002 |                            | 551,601             |            | 2,836,178           |            | $                              
|                                 |                            |                     |            |                     |            |                                

---

F-23

---



The following tables summarize information about stock options outstanding at March 31, 2002:

|                 |  | Options Outstanding |  | Options Exercisable
|---------------- |  | ------------------- |  | -------------------
|
|$  0.20 - $12.56 |  | 507,109             |  | 8.30               
|$12.75 - $13.19  |  | 330,190             |  | 7.85               
|$13.38 - $14.75  |  | 607,109             |  | 6.22               
|$14.88 - $18.75  |  | 474,402             |  | 8.24               
|$19.00 - $22.50  |  | 464,760             |  | 7.53               
|$22.56 - $24.13  |  | 289,208             |  | 7.96               
|$24.19 - $52.00  |  | 163,400             |  | 6.80               
|                 |  |                     |  |                    
|$  0.20 - $52.00 |  | 2,836,178           |  | 7.55               
|                 |  |                     |  |                    

Options
exercisable at March 31, 2001 and 2000 were 1,013,990 and 1,015,881, respectively.

Using
the Black-Scholes Option-Pricing Model, the per share weighted average fair market value of stock options granted during fiscal 2002, 2001 and 2000 were $9.60, $11.14 and $15.32,
respectively, on the date of grant. Assumptions used with the Black-Scholes Option-Pricing Model were as follows:

Fiscal Year2002

2001

2000Risk-free interest rate

4.5%

5.8%

5.8%Expected term of options

5.5 years

5.5 years

5.3 yearsExpected volatility

91.5%

89.7%

86.2%Expected dividend yield

0.0%

0.0%

0.0%


Stock-Based Compensation

The Company has granted certain consultants stock options under the 1992 Plan and the 1998 Plan. In fiscal 2001, the Company granted one consultant 7,500 shares
under the 1998 Plan at an exercise price of $15.50, which were fully vested at the date of grant. Stock-based compensation expense related to the grant of stock options to employees and
non-employees is recognized as earned. At each reporting date, the Company re-values the stock-based compensation related to unvested non-employee options using the
Black-Scholes option pricing model. Accordingly during fiscal 2001, due to a decline in the share price, the Company recorded a net reduction in deferred compensation expense of $658,000. In
connection with the grant of stock options to these employees and consultants, the Company recorded stock-based compensation expense of $29,000, $210,000 and $410,000 for fiscal 2002, 2001 and 2000,
respectively. As of March 31, 2002, the Company expects to amortize stock-based compensation expense of $29,000 in fiscal 2003 and $11,000 in fiscal 2004.

F-24

---

Employee Stock Purchase Plan

In June 1998, the Company's stockholders approved the 1998 Employee Stock Purchase Plan (the "Purchase Plan") which permitted eligible employees to
purchase the Company's Common Stock through payroll deductions. The Purchase Plan consisted of consecutive and overlapping 12-month offering periods, each divided into two
six-month purchase periods. The purchase price of the shares in the Purchase Plan is 85% of the lower of the fair market value of the Common Stock at the beginning of the offering period
or the end of each purchase period. The Company reserved a total of 250,000 shares of common stock for issuance under this plan. The Purchase Plan has a feature whereby the number of shares reserved
under the Purchase Plan are increased automatically on an annual basis by the lesser of 300,000 shares or 2% of outstanding shares of Common Stock. There were 411,245 shares of Common Stock available
for issuance as of March 31, 2002. During the fiscal years ended March 31, 2002 and 2001, shares totaling 104,790 and 130,713 were acquired under the Purchase Plan at an average per
share price of $8.82 and $12.30, respectively.

Under
SFAS No. 123,Accounting for Stock-Based Compensation, pro forma compensation cost is calculated for the fair market value of
the employees' purchase rights. The fair value of each stock purchase right granted under the Purchase Plan was estimated using the Black-Scholes Option-Pricing Model with the following weighted
average assumptions by fiscal year:

Fiscal Year2002

2001

2000Risk-free interest rate

3.9%

5.6%

5.0%Expected term of options

0.5 years

0.5 years

0.5 yearsExpected volatility

66.7%

110.3%

86.2%Expected dividend yield

0.0%

0.0%

0.0%


The
per share weighted average fair market value of those purchase rights granted in fiscal 2002, 2001 and 2000 was $2.94, $6.50 and $6.08, respectively, per share.

Pro Forma Fair Value Information

The Company accounts for its employee stock plans using the intrinsic value method. Had the Company determined compensation cost based on the fair value at the
grant date for its stock options

F-25

---

under SFAS No. 123, the Company's net income (loss) and related per share amounts would have been as indicated in the pro forma amounts indicated below (in thousands, except per share
amounts):

Year Ended March 31,2002

2001

2000Net income (loss):As reported

$
(20,373
)
$
13,480

$
(5,823
)Pro forma

$
(28,976
)
$
3,325

$
(15,099
)Earnings (loss) per share:Basic:As reported

$
(1.76
)
$
1.21

$
(0.56
)Pro forma

$
(2.51
)
$
0.30

$
(1.45
)Diluted:As reported

$
(1.76
)
$
1.19

$
(0.56
)Pro forma

$
(2.51
)
$
0.29

$
(1.45
)


9. EMPLOYEE BENEFIT PLAN

In January 1997, the Company adopted the Spectrian Corporation 401(k) Savings Plan (the "Benefit Plan") to provide retirement and incidental benefits for
eligible employees. The Benefit Plan provides for Company contributions as determined by the Company's Board of Directors that may not exceed 20% of the annual aggregate salaries of those employees
eligible for participation. As of March 31, 2002, the Benefit Plan offers a diverse selection of investment alternatives, representing all asset classes. Employees may not invest in the
Company's stock through the Benefit Plan. In fiscal years 2002, 2001 and 2000, the Company contributed $329,000, $514,000 and $148,000, respectively, in contributions to the Benefit Plan.

F-26

---

10. INCOME TAXES

The components of the provision for (benefit from) income taxes in the statement of operations are as follows (in thousands):

Year Ended March 31,2002

2001

2000Current:Federal

$
(3,713
)
$
3,713

$
State


(105
)

105


10Foreign


301


12


20Total current


(3,517
)

3,830


30Deferred:Federal


3,245


(3,245
)

State


573


(573
)

Foreign








Total deferred


3,818


(3,818
)

Total provision for income taxes

$
301

$
12

$
30


Income
tax expense for the years ended March 31, 2002, 2001 and 2000 differs from the amount computed by applying the statutory federal income tax rate to pretax income (loss) as
a result of the following (in thousands):

Year Ended March 31,2002

2001

2000Federal tax (benefit) at statutory rate

$
(6,992
)
$
4,587

$
(1,970
)State tax, net of Federal benefit


(3,384
)

283


10Alternative minimum tax


(2,103
)

295


Research Credit


(1,069
)




FSC tax expense


18


12


20Change in valuation allowance


13,947


(5,290
)

2,299Foreign rate difference


(250
)




Other


134


125


(329
)Income tax expense

$
301

$
12

$
30


F-27

---

The
components of significant portions of the deferred tax assets and liabilities are presented below (in thousands):

| |                                                  | March 31,                       |  
| | ------------------------------------------------ | ------------------------------- | -
|
|
| | Various accruals and reserves                    |                                 | $
| | Net operating loss carryforwards                 |                                 |  
| | Credit carryforwards                             |                                 |  
| | Property and equipment depreciation differences  |                                 |  
| | Unrealized loss on available for sale securities |                                 |  
| | Deferred gain                                    |                                 |  
| |                                                  |                                 |  
| |                                                  | Total gross deferred tax assets |  
| | Less valuation allowance                         |                                 |  
| |                                                  |                                 |  
| |                                                  | Total deferred tax assets       |  
| |                                                  |                                 |  

Due
to the uncertainties surrounding the realization of the deferred tax assets resulting from the Company's accumulated deficit and net tax losses in fiscal 2002 and 2000, the Company
has provided a valuation allowance against the deferred tax assets where realization is uncertain. The Company has evaluated both positive and negative evidence about the recoverability of its net
deferred tax assets and determined that it is more likely than not that they will not be realized.

As
of March 31, 2002, the Company has a net operating loss carryforward of $37 million and $18 million for Federal and California income tax purposes. The Federal
net operating losses will expire unless utilized in 2022 and the state losses will expire unless utilized in 2008. The Company has approximately $6.1 million of Federal and California research
credit carryforwards. If not utilized, the Federal research credit carryforwards will expire in various amounts beginning 2008 through March 2021. The California research credits will
carryforward indefinitely.

Included
in the deferred tax assets is approximately $6 million of assets relating to the stock option compensation which will be credited to equity when realized.

11. PER SHARE COMPUTATION

For fiscal 2001, options to purchase 1,451,242 common shares were outstanding, but were not included in the computation of diluted net income per share because
the exercise prices of the options were greater than the average market price of the common shares. For fiscal 2002 and fiscal 2000, 2,836,178 and 3,271,536 common equivalent shares with weighted
averages exercise prices of $16.84 and $18.46, respectively, were not included for the calculation of diluted net loss per share as they were considered antidilutive due to the net loss the Company
experienced in these fiscal years.

F-28

---

A
reconciliation of the basic and diluted per share calculation follows:

|                        |  | Year ended March 31, |        
|----------------------- |  | -------------------- | -------
|
|
|Basic                   |  | $                    | (20,373
|Effect of stock options |  |                      |       
|                        |  |                      |        
|Diluted                 |  | $                    | (20,373
|                        |  |                      |        

12. CUSTOMER CONCENTRATIONS

For fiscal 2002, three customers accounted for approximately 47%, 24% and 12% of net revenues. For fiscal 2001, three customers accounted for approximately 59%,
18% and 13% of net revenues. For fiscal 2000, one customer accounted for approximately 72% of net revenues. Four customers accounted for an aggregate of 94% of accounts receivable at March 31,
2002 and three customers accounted for an aggregated of 90% of accounts receivable at March 31, 2001.

13. SEGMENT INFORMATION

Under the management approach, prior to the sale of UltraRF, the Company divided its business into two divisions based upon product type: Amplifier Division and
Semiconductor Division. UltraRF derived virtually all of its net revenues from sales to the Amplifier Division. The Company allocated operating expenses to these segments but did not allocate interest
income and expense. Corporate expenses were allocated to the operating segments based on predetermined annual allocation methods. Appropriate intersegment eliminations were made in the consolidation
of the Company's consolidated financial statements. Following the sale of UltraRF on December 29, 2000, the Company began operating as one vertical integrated unit. (See Note 2). Segment
information for fiscal 2001 and fiscal 2000 is as follows:

Consolidated Statement of Operations DataFiscal 2001 (in thousands):

|                                  |  | Year Ended March 31, 2001
|--------------------------------- |  | -------------------------
|
|Net revenues, external            |  | $                        
|Net revenues, intersegment        |  |                          
|Amortization and depreciation     |  |                          
|Income (loss) before income taxes |  |                          

F-29

---



Consolidated Statement of Operations DataFiscal 2000 (in thousands):

|                                  |  | Year Ended March 31, 2000 |        
|--------------------------------- |  | ------------------------- | -------
|
|Net revenues, external            |  | $                         | 162,687
|Net revenues, intersegment        |  |                           |       
|Amortization and depreciation     |  |                           | 5,797  
|Income (loss) before income taxes |  |                           | (13,401

*Data
in the "Other" column represents the elimination of intersegment revenues, interest income and expense, other income, the provision for income taxes, certain unallocated corporate expenses and
corporate amortization and depreciation that is subsequently allocated to the operating segments.

Consolidated Balance Sheet Data (in thousands):

March 31, 2001Amplifier

UltraRF

Other

TotalSegment Assets

$
30,235

$


$
3,618

$
33,853Expenditures for additions to long-lived assets

$
5,228

$
3,478

$
936

$
9,642


Segment
assets represent inventories and property and equipment, which are allocated to these segments.

Net
revenues from major product categories were as follows (in thousands):

Year ended March 31,2002

2001

2000SCPA

$
45,547

$
113,886

$
126,486MCPA


52,555


58,739


32,537Other


5,680


7,127


4,544Total Revenue

$
103,782

$
179,752

$
163,567


F-30

---

Geographic Segment Data:

Net revenue from unaffiliated customers by geographic region were as follows (in thousands):

Year Ended March 31,2002

2001

2000United States

$
35,389

$
39,265

$
22,144South Korea


27,536


32,378


25,560Canada


22,979


75,712


68,971China


8,721


2,457


France


4,511


22,360


42,878Brazil


2,942


6,523


157Other


1,704


1,057


3,857Total Revenue

$
103,782

$
179,752

$
163,567


The
Company's long-lived assets are located in the following countries (in thousands):

March 31,2002

2001United States

$
4,871

$
7,966Thailand


3,307


2,707South Korea


1,033


959China


309


Malaysia


131


$
9,651

$
11,632


14. CLOSURE OF MANUFACTURING OPERATIONS AND RELATED RESTRUCTURING CHARGES

In June 2001, the Company decided to transfer its power amplifier repair and product integration operations in Sunnyvale, California, to a contract
manufacturer located in Thailand. In connection with the decision, the Company recognized in the three months ended July 1, 2001, an approximately $686,000 restructuring charge for estimated
severance costs related to organizational changes and a planned reduction in work force and to write off property and equipment that have no future value to the Company. Approximately 60 employees
engaged in the repair and product integration operations are anticipated to be terminated as a result of the restructuring. As of March 31, 2002, approximately 50 employees have been
terminated. The Company anticipates that the restructuring will be completed

F-31

---

no later than June 30, 2002. The following table represents the restructuring activity that took place up through March 31, 2002 (in thousands):

Asset
Write-offs
(Non Cash)

Reduction in
Workforce
(Cash)

Other
(Cash)

TotalAccrual for restructuring charges

$
161

$
485

$
40

$
686Cash payment of severance costs





(356
)




(356
)Cash payment of other restructuring costs








(8
)

(8
)Write-off of property and equipment


(161
)







(161
)Balance at March 31, 2002

$


$
129

$
32

$
161


The
balance of the restructuring accrual is included in accrued liabilities on the consolidated balance sheets.

During
fiscal 1999, the Company transitioned the assembly and test of its higher volume single carrier power amplifier products to a contract manufacturer located in Thailand on a
turnkey basis. During the fourth quarter of fiscal 2000, the Company decided to transfer the remaining power amplifier production in Sunnyvale, California, to the contract manufacturer to utilize
lower labor costs than available domestically and to reduce fixed overheads. In connection with the decision, the Company recognized in fiscal 2000 an approximately $1.0 million restructuring
charge for estimated severance costs related to organizational changes and a planned reduction in work force. In fiscal 2001, the Company reversed $100,000 of unused restructuring charge due to
changes in the restructuring plan. Approximately 60 employees engaged in manufacturing and production related functions were terminated as a result of the restructuring during fiscal 2001. The
transfer of production to Thailand was completed during the third quarter of fiscal 2001.

15. RELATED PARTY TRANSACTIONS

Sales to Cingular Wireless LLC.During fiscal 2002, Cingular purchased approximately $8.6 million of MCPA products
from the Company (or 8.3% of fiscal 2002 net revenues), primarily in the second half of fiscal 2002. Robert W. Shaner, President of Wireless Operations for Cingular, has served as a director for the
Company since April 1999.

Outsourced Stock Option Administration Services.In May of 2000, Spectrian entered into a non-binding arrangement
with Montgomery Financial Services Corp. ("MFS"). MFS provides on-site stock option administration services to the Company. Henry C. Montgomery, Chairmen of the Board of MFS, has also
served as a director for Spectrian since November 2000. In fiscal 2002, the Company purchased $37,000 of services from MFS.

Investment in ArrayComm, Inc.In July of 1998, Spectrian purchased 222,222 shares of Series D preferred stock
(at $4.50 per share) of ArrayComm, Inc. ("ArrayComm"). The total investment in Arraycomm was $1.0 million. ArrayComm is a privately held company that develops antenna-based wireless
communications and broadband internet access technologies. Martin Cooper, Chief Executive Officer of ArrayComm, has also served as a director for Spectrian since January 1994.

F-32

---

16. SUBSEQUENT EVENTS

Line of Credit

On June 5, 2002, the Company renewed its line of credit extending the expiration date to June 4, 2003 at terms substantially similar to the existing
line.

Merger with REMEC, Inc.

On May 19, 2002, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and among REMEC, Inc., a California
corporation ("REMEC"), Reef Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of REMEC ("Merger Sub") and the Company pursuant to which REMEC will acquire the Company by a merger
of Merger Sub with the Company ("the merger"). Upon consummation of the merger, the Company's stockholders will receive approximately $14.00 of REMEC common stock, subject to a collar, or if REMEC
chooses, a combination of REMEC common stock and cash. If REMEC elects to pay in cash, it may pay up to $4.00 per share in cash. The remaining payment will be in REMEC common stock, which will be
determined based on the average trading price of REMEC common stock for the ten day period ending on the second trading day before the Company's special meeting of stockholders to approve the merger
and the Merger Agreement. Spectrian stockholders will also receive cash for any fractional shares of REMEC common stock that they are entitled to receive in the merger.

The
parties intend for the merger to be considered a tax-free reorganization under the Internal Revenue Code with respect to the REMEC common stock issued to the Company's
stockholders. The Merger Agreement has been approved unanimously by the board of directors of both companies. On May 19, 2002, the Company amended the Rights Plan to facilitate the merger. The
merger is expected to close in the quarter ending September 30, 2002 but is subject to a number of conditions including, among other things, approval of the Company's stockholders, approval of
REMEC's shareholders and various regulatory approvals and clearances, including those under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended and the Securities Act of
1933, as amended. In the event the Company fails to close the proposed merger due to the occurrence of certain events, the Company shall be required to pay REMEC a termination fee of
$6 million.

Litigation

A putative class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara on May 28, 2002, captioned Vogel v.
Shaner, et al., Case No. CV808140. The complaint names six of the Company's directors and its chief executive officer as defendants. In the
complaint, the Plaintiff alleges that the defendants violated their fiduciary duties owed to the Company's stockholders, including their duties of loyalty, good faith and independence, by engaging in
self-dealing in the merger transaction with REMEC. This violation allegedly stemmed from the defendants' failure to properly value the Company in the merger and due to conflicts of
interest. The Plaintiff purportedly brought his action on behalf of Company stockholders who are or would be harmed by the alleged conduct. The case seeks declaratory, injunctive and other forms of
relief. The Company and the defendant directors and officer believe the lawsuit is without merit and intends to defend the case vigorously. However, given that the lawsuit has only recently been
filed, it is not possible to predict with certainty the ultimate resolution of this litigation.

F-33

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