##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


FOR ANNUAL AND TRANSITION REPORTS


PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the Fiscal Year Ended: October 1, 2005                                                  
|  
|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 1-4817


WHITE ELECTRONIC DESIGNS CORPORATION


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Indiana                                                            |  | 35-0905052                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

|                                              |  |                
|--------------------------------------------- |  | ---------------
|3601 E. University Drive
    Phoenix, Arizona |  | 85034(Zip Code)
|(Address of principal executive offices)      |  |                

Registrants telephone number, including area code:


602/437-1520


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


None


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


|                                          |  |                                          
|----------------------------------------- |  | -----------------------------------------
|Title of Each Class                       |  | Name of Each Exchange on Which Registered
|                                          |  |                                          
|Common Stock, stated value $.10 per share |  | NASDAQ National Market                   

o þ


o þ


þ o


o


þ o


o þ




DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS


|                                                                   |  |                                                                                                                                |    |                        |    |  |    | 
|------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------ | -- | ---------------------- | -- |  | -- | 
|NOTE REGARDING FORWARD LOOKING STATEMENTS
    AND ASSOCIATED RISKS |  |                                                                                                                                | 3  |                       
|PART I                                                             |  |                                                                                                                                | 5  |                       
|ITEM 1                                                             |  | BUSINESS                                                                                                                       |    |                        | 5  | 
|ITEM 1A                                                            |  | RISK FACTORS                                                                                                                   |    |                        | 12 | 
|ITEM 1B                                                            |  | UNRESOLVED STAFF COMMENTS                                                                                                      |    |                        | 22 | 
|ITEM 2                                                             |  | PROPERTIES                                                                                                                     |    |                        | 22 | 
|ITEM 3                                                             |  | LEGAL PROCEEDINGS                                                                                                              |    |                        | 22 | 
|ITEM 4                                                             |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                                        |    |                        | 23 | 
|                                                                   |  |                                                                                                                                |    | OUR EXECUTIVE OFFICERS |    |  | 23 | 
|PART II                                                            |  |                                                                                                                                | 24 |                       
|ITEM 5                                                             |  | MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED SHAREHOLDER MATTERS AND PURCHASES OF EQUITY
    SECURITIES                  |    |                        | 24 | 
|ITEM 6                                                             |  | SELECTED CONSOLIDATED FINANCIAL DATA                                                                                           |    |                        | 25 | 
|ITEM 7                                                             |  | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                      |    |                        | 25 | 
|ITEM 7A                                                            |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK                                                                 |    |                        | 42 | 
|ITEM 8                                                             |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA                                                                                |    |                        | 42 | 
|ITEM 9                                                             |  | CHANGES IN AND DISAGREEMENTS WITH
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON ACCOUNTING AND
    FINANCIAL DISCLOSURE |    |                        | 42 | 
|ITEM 9A                                                            |  | CONTROLS AND PROCEDURES                                                                                                        |    |                        | 43 | 
|ITEM 9B                                                            |  | OTHER INFORMATION                                                                                                              |    |                        | 43 | 
|PART III                                                           |  |                                                                                                                                | 44 |                       
|ITEM 10                                                            |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT                                                                         |    |                        | 44 | 
|ITEM 11                                                            |  | EXECUTIVE COMPENSATION                                                                                                         |    |                        | 44 | 
|ITEM 12                                                            |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                             |    |                        | 44 | 
|ITEM 13                                                            |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                                                             |    |                        | 45 | 
|ITEM 14                                                            |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                         |    |                        | 45 | 
|PART IV                                                            |  |                                                                                                                                | 45 |                       
|ITEM 15                                                            |  | EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES                                                                                 |    |                        | 45 | 
|SIGNATURES                                                         |  |                                                                                                                                | 48 |                       
|Report of Independent Registered Public Accounting Firm            |  |                                                                                                                                | 50 |                       
|Exhibit 21.1                                                      
|Exhibit 23.1                                                      
|Exhibi 31.1                                                       
|Exhibit 31.2                                                      
|Exhibit 32.1                                                      
|Exhibit 32.2                                                      



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NOTE REGARDING FORWARD LOOKING STATEMENTS AND ASSOCIATED
RISKS






| |   |                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our belief that we will complete the consolidation of our
    Phoenix locations in the second quarter of fiscal 2006 and that
    related moving and rearrangement costs will be immaterial; our
    estimates of the amount of capital expenditures that our
    leasehold improvements will require and proceeds from the sale
    of the land and building;                       
|
| |  | our expectations regarding our overall future sales, profits and
    gross margins, as well as bookings, for our display and
    microelectronic segments;                                                                                                                                                                                                                           
|
| |  | our expectations of an increase in raw material lead times for
    ceramic packages, memory components, and display glass
    materials, which may impact net sales and gross margins, and of
    short supplies for liquid crystal displays and memory components
    and future purchases of components including possible
    allocations of display and semiconductor components;
|
| |  | our expectations of increases or decreases in raw material
    prices;                                                                                                                                                                                                                                                                                                               
|
| |  | our expectations for the future demands for our products and
    future product sales mix, including our expectations for
    continued growth for our anti-tamper products and that foreign
    sales will continue to account for a significant portion of our
    sales, as well as our expectations regarding changes in sales to
    certain industries;                        
|
| |  | our expectations regarding future demand for our products, our
    ability to continue to meet our customers requirements and
    with regard to market acceptance and profitability of our new
    products;                                                                                                                                                                       
|
| |  | our belief regarding a trend of reduced weapons procurement by
    the military;                                                                                                                                                                                                                                                                                                     
|
| |  | our expectations regarding the sale of a range of military
    microelectronic products and fluctuations in product mix;                                                                                                                                                                                                                                                             
|
| |  | our expectations regarding our product production times, future
    shipments of backlog, and the impact of changes in raw material
    lead times on pricing, sales and inventory levels and the number
    of days of inventory on hand ratio;                                                                                                                                     
|
| |  | our expectations regarding our effective tax rate in the future
    and the adequacy of our tax reserves, the impact of the adoption
    of new accounting pronouncements and changes in the law on our
    effective tax rate, and our anticipated use of foreign sales
    income exclusions and research and development tax credits;                                             
|
| |  | our estimates regarding future amortization expense or goodwill
    impairment from our Panelview and IDS reporting units;                                                                                                                                                                                                                                                           
|
| |  | our expectations regarding future research and development costs
    and risks associated with the costs of start-up product
    development, including the levels of future product development
    in fiscal 2006 and beyond for products related to our
    Max-Vutm
    process technology and plans to introduce new products and
    technologies;                             
|
| |  | our estimates regarding selling, general and administrative
    expenses, including with regard to future expected levels of
    sales and minimum funding requirements for our pension plan;                                                                                                                                                                                        
|
| |  | our expectations regarding future property, plant and equipment
    expenditures and capital expenditures;                                                                                                                                                                                                                                                                           

3



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our expectations regarding our existing sources of liquidity and
    their sufficiency to satisfy cash requirements over the next
    year, including our expectations that cash flow from operations
    should be sufficient to fund cash needs in the short and long
    term and our belief that we are able to fund sales growth
    inventory increases and other operating expenses from available
    cash balances and operating cash flows;
|
| |  | our expectations regarding the need to draw on our line of
    credit and any related effect of interest rate changes; and                                                                                                                                                                                                                                                                                                                           
|
| |  | our belief that we will not pay cash dividends in the future.                                                                                                                                                                                                                                                                                                                                                                                        





| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the loss of one or more principal customers or delays or
    cancellations of orders due to the impact of adverse weather
    conditions on one or more principal customers;                                 
|
| |  | the failure of customers to accept our anti-tamper packaging or
    the development of improved anti-tamper packaging by competitors;                                                                        
|
| |  | the inability to procure required components and raw materials;                                                                                                                                              
|
| |  | any downturn in the semiconductor and telecommunications markets
    which could cause a decline in selling unit prices;                                                                                     
|
| |  | reductions in military spending or changes in the acquisition
    requirements for military products;                                                                                                        
|
| |  | the ability to locate appropriate acquisition candidates,
    negotiate an appropriate purchase price, and integrate into our
    business the people, operations, and products from acquired
    businesses;
|
| |  | the inability to develop, introduce and sell new products or the
    inability to develop new manufacturing technologies;                                                                                    
|
| |  | changes or restrictions in the practices, rules and regulations
    relating to sales in international markets; and                                                                                          
|
| |  | a negative outcome in our current litigation or additional
    litigation complaints.                                                                                                                        



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PART I







|       |         
|------ | --------
|ITEM 1 | BUSINESS

GENERAL






www.wedc.com


BUSINESS SEGMENTS




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MICROELECTRONIC SEGMENT








| |   |                                               
| | - | ----------------------------------------------
| |  | significant space savings and size advantages;
|
| |  | improved power and electrical performance; and
|
| |  | improved component compatibility.             



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|                                |  |                                                                                                                         
|------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------
|Product                         |  | Sample Application                                                                                                      
|                                |  |                                                                                                                         
|Military:                       |  |                                                                                                                         
|                               
| System on a substrate         |  |  Counter-measure suite of the F-16 Fighting
    Falcon 16 Fighting Falcon                                              
|                               
| Microprocessor modules        |  |  Air-to-air missiles, such as the Sidewinder
    AIM-9X and AIM-120 AMRAAM                                             
|                                |  |  Embedded computers used in the Apache
    Helicopter, Advanced Amphibious Assault Vehicle and the Abrams
    M1A2 Tank
|                               
| Memory modules                |  |  Air-to-air missiles, such as the Sidewinder
    AIM-9X and AIM-120 AMRAAM                                             
|                                |  |  Embedded computers used in the Comanche
    Helicopter, F-22 Raptor, Patriot PAC-3 Missile System                     
|                                |  |  Radar used in the F/A-18 Hornet                                                                                       
|                               
| Anti-tamper technology        |  |  Various military programs                                                                                             
|                               
|Commercial:                     |  |                                                                                                                         
|                               
| Multi-chip package            |  |  Telephone, data, and video communications                                                                             
|                               
| SDRAM/ DDR II memory modules  |  |  High-end servers for networking and ERP systems                                                                       
|                                |  |  Wireless CDMA base stations                                                                                           
|                               
| Flash memory PC card          |  |  Linear Flash PCMCIA Cards                                                                                             
|                               
| Microelectronic system boards |  |  Home entertainment consoles                                                                                           
|                                |  |  Hotel entertainment systems                                                                                           



| |        
| | -------
| | Backlog





| |            
| | -----------
| | Competition





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DISPLAY SEGMENT








| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Increased viewability (anywhere viewable); increased visibility
    in bright light conditions
    (Max-Vutm);
|
| |  | Increased visibility in bright light conditions; super bright
    low reflectance
    (SBLRtm);               
|
| |  | Ability to withstand heavy vibration and extreme
    temperatures; and                                        
|
| |  | Wider viewing angles                                                                                          





|                                                 |  |                                                                                                                                      
|------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------
|Product                                          |  | Sample Application                                                                                                                   
|                                                 |  |                                                                                                                                      
|Military:                                        |  |                                                                                                                                      
|                                                
| Mechanical components                          |  |  Impulse counters, altitude counters, rounds
    counters, logicator F-16 trim panel                                                
|                                                
| Super bright low reflectance technology (SBLR) |  |  Ground based vehicles, such as the Abrams M1A2
    Tank                                                                            
|                                                 |  |  Aircraft displays, such as the Apache
    Helicopter and the F-16 Fighting Falcon                                                  
|                                                
|Commercial:                                      |  |                                                                                                                                      
|                                                
| Max-Vutmprocess technology                     |  |  Mobile Personal Computers (PC),
    Tablet PC                                                                                    
|                                                
| Display module assembly                        |  |  Patient monitors                                                                                                                   
|                                                
| Optically enhanced displays                    |  |  Drive-thru kiosks; medical instruments; marine
    navigation; notebook PCs; cockpit instrumentation; automotive
    test equipment
|                                                
| Membrane keypads                               |  |  Home appliances                                                                                                                    
|                                                
| Keypad modules                                 |  |  Hand-held barcode applications                                                                                                     

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| |        
| | -------
| | Backlog





| |            
| | -----------
| | Competition





SALES, MARKETING AND DISTRIBUTION






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PRINCIPAL CUSTOMERS








RESEARCH, ENGINEERING AND PRODUCT DEVELOPMENT






| |   |                                                       
| | - | ------------------------------------------------------
| |  | developing new products;                              
|
| |  | improving existing products;                          
|
| |  | adapting existing products to new applications; and   
|
| |  | developing prototype components for specific programs.



REGULATORY MATTERS




| |                                   
| | ----------------------------------
| | Government Contracting Regulations





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| |                         
| | ------------------------
| | Environmental Protection





| |                                
| | -------------------------------
| | International Trade Regulations



RAW MATERIALS




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INTELLECTUAL PROPERTY








EMPLOYEES




FINANCIAL INFORMATION BY GEOGRAPHIC SEGMENT









|        |             
|------- | ------------
|ITEM 1A | RISK FACTORS



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on sales to defense-related companies for
    a large portion of our net sales and profits, and changes in
    military spending levels and patterns could negatively affect
    us.



12



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| |                                                                 
| | ----------------------------------------------------------------
| | Our goodwill has been and may become impaired in the
    future.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | We have made and we may make other acquisitions, and we
    cannot assure you that any potential acquisition will be
    successful.





| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | exposure to unanticipated liabilities of an acquired company;                                                                                                                                                           
|
| |  | the potential loss of key customers or key personnel of an
    acquired company;                                                                                                                                        
|
| |  | the recording of goodwill and non amortizable intangible assets
    that will be subject to impairment testing on a regular basis
    and potential periodic impairment charges;                                        
|
| |  | the diversion of the attention of our management team from other
    business concerns;                                                                                                                                 
|
| |  | the risk of entering into markets or producing products where we
    have limited or no experience, including the integration of the
    purchased technologies and products with our technologies and
    products; and
|
| |  | our ability to assess, integrate and implement internal controls
    of an acquired company in accordance with Section 404 of
    the Sarbanes-Oxley Act of 2002.                                                       





| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our customers may cancel their orders, change production
    quantities or delay production at any time, which could
    materially reduce our net sales and operating results.



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| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | We have a highly concentrated customer base and, as a
    result, our net sales could decline significantly if we lose a
    major customer.





| |                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on military prime contractors and commercial OEM
    customers for the sale of our products and the failure of these
    customers to achieve significant sales of products incorporating
    our components would reduce our net sales and operating
    results.





| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | We depend on the continuing trend of outsourcing by
    commercial OEMs and prime military contractors.





| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Our failure to comply with United States government laws
    and regulations would reduce our ability to be awarded future
    military business.



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| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | We may have an adverse resolution of litigation which may
    harm our operating results or financial condition.





| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | We may fail to meet expectations because our net sales,
    gross profits and net income are very likely to fluctuate from
    period to period.





| |   |                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our inability to adjust expenses for any particular quarter in
    response to net sales shortfalls because a substantial component
    of our operating expenses are fixed costs;                                                                                 
|
| |  | the cyclical nature of the markets in which we serve;                                                                                                                                                                                                              
|
| |  | any adverse changes in the mix of products and types of
    manufacturing services that we provide (e.g., high volume and
    low complexity commercial keypads have lower gross margins than
    high complexity microelectronic devices for defense contractors);
|
| |  | the complexity of our manufacturing processes and the
    sensitivity of our production costs to declines in manufacturing
    yields, which make yield problems both possible and costly when
    they occur;                                                     
|
| |  | expenses associated with acquisitions; and                                                                                                                                                                                                                         
|
| |  | general economic conditions.                                                                                                                                                                                                                                       





| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Changes in stock compensation accounting rules will affect
    our future results of operations.





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a lengthy sales cycle, which increases the
    likelihood that our quarterly net sales will fluctuate and which
    may, in turn, adversely affect the market price of our common
    stock.



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| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | Our failure to detect unknown defects in our products
    could materially harm our relationship with customers, our
    reputation and our business.





| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Our operating results could be seriously harmed if the
    markets in which we sell our products do not grow.





| |   |                                               
| | - | ----------------------------------------------
| |  | defense and aerospace equipment;              
|
| |  | computers and computer related peripherals;   
|
| |  | medical electronics and equipment;            
|
| |  | home appliances and consumer electronics;     
|
| |  | industrial controls; and                      
|
| |  | telecommunication/datacommunication equipment.





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Further downturns in the industries in which we operate
    could reduce the value of our inventories and cause a reduction
    in our profits.



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| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | We utilize manufacturing resources in Asia and Mexico,
    which limits our control of the manufacturing process.





| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the outsourcing contractors ability to manufacture
    products that meet our technical specifications and that have
    minimal defects;                                         
|
| |  | the outsourcing contractors ability to honor their product
    warranties;                                                                                                        
|
| |  | the financial solvency, labor concerns and general business
    condition of our outsourcing contractors;                                                                          
|
| |  | unexpected changes in and the burdens and costs of compliance
    with a variety of foreign laws and regulatory requirements;                                                      
|
| |  | increased chances of our intellectual property being infringed
    as a result of the failure of foreign governments to enforce the
    protection of intellectual property rights;
|
| |  | political and economic instability in overseas locations; and                                                                                                                      
|
| |  | global health related matters, such as another SARS scare, Avian
    Flu and other factors.                                                                                        



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | We are dependent on international markets for a large
    portion of our purchases and sales.







| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuations in foreign currencies, which may adversely affect
    the prices of our products and the prices of raw materials used
    in our products;                                                      
|
| |  | trade disputes;                                                                                                                                                                                              
|
| |  | changes in regulatory requirements, license requirements,
    tariffs and other trade barriers;                                                                                                              
|
| |  | the possibility of quotas, duties, taxes or other changes or
    restrictions upon the importation or exportation of our products
    implemented by the United States government or foreign
    governments;
|
| |  | the timing and availability of export or other licenses;                                                                                                                                                     
|
| |  | general political and economic conditions in the countries in
    which we sell our products;                                                                                                                
|
| |  | language and other cultural differences which may inhibit our
    sales and marketing efforts;                                                                                                               
|
| |  | costs of complying with a variety of foreign laws;                                                                                                                                                           
|
| |  | difficulty of accounts receivable collections;                                                                                                                                                               
|
| |  | increased chances of our intellectual property being infringed
    as a result of the failure of foreign governments to enforce the
    protection of intellectual property rights; and                      
|
| |  | public health issues that could disrupt local economies.                                                                                                                                                     

17



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| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to retain employees with key technical
    expertise or we are otherwise unable to protect our intellectual
    property, or if we are found to have infringed third party
    intellectual property rights, our financial condition and future
    prospects could be materially harmed.









| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Our business is dependent upon retaining key personnel and
    attracting new employees.





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Our failure to comply with environmental regulations could
    subject us to costs and production delays.



18



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| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | If our selling prices decline and we fail to reduce our
    costs, our sales and operating results will decline.







| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to develop, introduce and sell new products or
    fail to develop and implement new manufacturing technologies,
    our operating results could be adversely affected.





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | we fail to complete and introduce new product designs in a
    timely manner;                       
|
| |  | we are unable to design and manufacture products according to
    the requirements of our customers;
|
| |  | our customers do not successfully introduce new systems or
    products incorporating our products; 
|
| |  | market demand for our new products does not develop as
    anticipated;                             
|
| |  | we are unable to obtain raw materials in a timely manner or at
    favorable prices; or             
|
| |  | we are unable to maintain pricing to sustain or grow our gross
    margins.                         



19



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| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on limited suppliers for certain critical raw
    materials. Our inability to obtain sufficient raw materials at
    favorable prices could increase our prices or otherwise harm our
    business.





| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | United States and global responses to terrorism, the
    Middle East situation and perceived nuclear threats increase
    uncertainties with respect to many of our businesses and may
    adversely affect our business and results of operations.







| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | While we believe our control systems are effective, there
    are inherent limitations in all control systems, and
    misstatements due to error or fraud may occur and not be
    detected.



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| |                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Board of Directors is authorized to issue shares of
    preferred stock that could have rights superior to our
    outstanding shares of common stock, and, if issued, could
    adversely impact the value of our common stock.





| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | voting rights, including the right to vote as a class on
    particular matters;
|
| |  | preferences as to dividends and liquidation rights;                             
|
| |  | conversion rights and anti-dilution protections; and                            
|
| |  | redemption rights.                                                              





| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Our shareholders rights plan may make it more
    difficult for others to obtain control of us.



Our stock price has been
volatile.






| |   |                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | future announcements concerning our company, our competitors or
    our principal customers, such as quarterly operating results,
    adjustments to previously reported results, changes in earnings
    estimates by analysts, technological innovations, new product
    introductions, governmental regulations, or litigation;
|
| |  | the liquidity within the market of our common stock;                                                                                                                                                                                                                                                                               
|
| |  | sales of common stock by our officers, directors and other
    insiders;                                                                                                                                                                                                                                                           
|
| |  | investor perceptions concerning the prospects of our business;                                                                                                                                                                                                                                                                     
|
| |  | market conditions and investor sentiment affecting market prices
    of equity securities of high technology companies in the
    microelectronic or display industries;                                                                                                                                                           
|
| |  | general economic, political and market conditions, such as
    recessions or international currency fluctuations;                                                                                                                                                                                                                  
|
| |  | market reaction to acquisitions, joint ventures or strategic
    investments announced by us or our competitors; and                                                                                                                                                                                                               
|
| |  | lawsuits filed against the Company.                                                                                                                                                                                                                                                                                                

21



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|        |                          
|------- | -------------------------
|ITEM 1B | UNRESOLVED STAFF COMMENTS








|       |           
|------ | ----------
|ITEM 2 | PROPERTIES



|                                |  |                |        |  |                 |  |                 |           |  |  |       | 
|------------------------------- |  | -------------- | ------ |  | --------------- |  | --------------- | --------- |  |  | ----- | 
|Location                        |  | Square Footage |        |  | Primary Segment |  |                 | Own/Lease | 
|                                |  |                |        |  |                 |  |                 |           | 
|Phoenix, Arizona (Headquarters) |  |                | 74,000 |  |                 |  | Microelectronic |           |  |  | Lease | 
|Phoenix, Arizona (Flower)       |  |                | 43,000 |  |                 |  | Microelectronic |           |  |  | Own   | 
|Hillsboro, Oregon               |  |                | 51,000 |  |                 |  | Display         |           |  |  | Lease | 
|Fort Wayne, Indiana             |  |                | 75,000 |  |                 |  | Display         |           |  |  | Own   | 
|Columbus, Ohio                  |  |                | 41,000 |  |                 |  | Display         |           |  |  | Own   | 










|       |                  
|------ | -----------------
|ITEM 3 | LEGAL PROCEEDINGS

McJimsey v. White Electronic Designs
Corporation, et al. Afework v. White Electronic Designs Corporation,
et al Anders v. White Electronic Designs Corporation,
et al. Sammarco v. White Electronic Designs Corporation,
et al.


22



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##### Table of Contents





Dodt v. Shokrgozar,
et al. Christ v. Shokrgozar, et al.









|       |                                                    
|------ | ---------------------------------------------------
|ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS






OUR EXECUTIVE OFFICERS






|                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Hamid R. Shokrgozar, 45 
     President, 
     Chief Executive Officer and 
     Chairman of the Board |  | Hamid R. Shokrgozarhas been our President and Chief
    Executive Officer since October 1998 and the Chairman of the
    Board since August 2000. Mr. Shokrgozar served as a
    director and as President and Chief Executive Officer of Bowmar
    from January 1998 until the merger of Bowmar and EDI in October
    1998. Mr. Shokrgozar served as President of White
    Microelectronics, the largest division of Bowmar, from June 1993
    to December 1997 and as its Vice President of Engineering and
    Technology from July 1988 to June 1993. Mr. Shokrgozar also
    served as Chairman of American Electronic Association (AEA),
    Arizona Council, during fiscal

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|                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                               |  | years 1999 and 2000. In addition, Mr. Shokrgozar holds a
    United States Patent for the invention of Stacked Die
    Carrier Assembly. Mr. Shokrgozar holds a Bachelors of
    Science in Electrical Engineering from California State
    University Fullerton.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                              
|Roger A. Derse, 55 
     Vice President, Chief Financial 
     Officer         |  | Roger A. Dersehas been our Vice President and Chief
    Financial Officer since March 2004. Mr. Derse has over
    25 years experience in finance and accounting. He
    previously served as Consultant/ Acting CFO for Vitron
    Manufacturing from 2002 through February 2004 and was Executive
    Vice President and Chief Operating and Financial Officer for
    Nanonics Corporation from 1998 to 2001. He was Chief Financial
    Officer for the White Microelectronics Division of Bowmar
    Instrument Corporation from 1993 to 1997. Mr. Derse holds a
    Bachelors of Science in Industrial Engineering from the
    University of Michigan, a Masters in Accounting from the
    University of Arizona, and is a Certified Public Accountant.
|                                                                              
|Dante V. Tarantine, 52 
     Executive Vice President, 
     Sales & Marketing |  | Dante V. Tarantinehas been our Corporate Executive Vice
    President, Sales and Marketing since January 2003.
    Mr. Tarantine served as our Senior Vice President of Sales
    from August 1998 to January 2003. He previously served as our
    Senior Vice President Sales and Marketing from September 1991 to
    August 1998 and as Vice President of Marketing for White
    Microelectronics from February 1987 to September 1991.
    Mr. Tarantine holds a Bachelors of Science in Electrical
    Engineering from California State University Northridge.                                                                                                                                                                                         




PART II







|       |                                                                                                           
|------ | ----------------------------------------------------------------------------------------------------------
|ITEM 5 | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    SHAREHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES.



|                          |      |      |   |      |    |  |   |      |  |  |    |      |  |  |   |      | 
|------------------------- | ---- | ---- | - | ---- | -- |  | - | ---- |  |  | -- | ---- |  |  | - | ---- | 
|                          |      | 2005 |  
|                          |      |      |  
|                          |      | Q1   |   |      | Q2 |  |   | Q3   |  |  | Q4 |     
|                          |      |      |   |      |    |  |   |      |  |  |    |     
|Common stock market price |      |      |   |      |    |  |   |      |  |  |    |      |  |  |   |     
|                          | High |      | $ | 6.80 |    |  | $ | 6.40 |  |  | $  | 5.65 |  |  | $ | 6.27 | 
|                          | Low  |      | $ | 5.38 |    |  | $ | 4.71 |  |  | $  | 4.40 |  |  | $ | 4.85 | 

|                          |      |      |   |       |    |  |   |      |  |  |    |      |  |  |   |      | 
|------------------------- | ---- | ---- | - | ----- | -- |  | - | ---- |  |  | -- | ---- |  |  | - | ---- | 
|                          |      | 2004 |  
|                          |      |      |  
|                          |      | Q1   |   |       | Q2 |  |   | Q3   |  |  | Q4 |     
|                          |      |      |   |       |    |  |   |      |  |  |    |     
|Common stock market price |      |      |   |       |    |  |   |      |  |  |    |      |  |  |   |     
|                          | High |      | $ | 12.70 |    |  | $ | 9.85 |  |  | $  | 8.27 |  |  | $ | 5.32 | 
|                          | Low  |      | $ | 7.53  |    |  | $ | 7.08 |  |  | $  | 4.70 |  |  | $ | 4.53 | 



24



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|       |                                     
|------ | ------------------------------------
|ITEM 6 | SELECTED CONSOLIDATED FINANCIAL DATA

|                                  |         |                                                  |         |       |      |   |         |      |  |   |         |      |  |      |        |      |  |   |        |      | 
|--------------------------------- | ------- | ------------------------------------------------ | ------- | ----- | ---- | - | ------- | ---- |  | - | ------- | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                  |         | 2005                                             |         |       | 2004 |   |         | 2003 |  |   | 2002    |      |  | 2001 |       
|                                  |         |                                                  |         |       |      |   |         |      |  |   |         |      |  |      |       
|                                  |         | (In thousands of dollars, except per share data) |        
|Statement of Income Data:         |         |                                                  |         |       |      |   |         |      |  |   |         |      |  |      |        |      |  |   |        |     
|Net sales (Notes 1 and 2)         |         | $                                                | 117,031 |       |      | $ | 108,962 |      |  | $ | 113,534 |      |  | $    | 90,458 |      |  | $ | 96,761 |     
|Net income (loss) (Notes 3 and 4) |         | $                                                | (3,535  | )     |      | $ | 4,807   |      |  | $ | 10,150  |      |  | $    | 8,740  |      |  | $ | 3,272  |     
|Earnings (loss) per share:        |         |                                                  |         |       |      |   |         |      |  |   |         |      |  |      |        |      |  |   |        |     
|                                  | Basic   |                                                  | $       | (0.14 | )    |   | $       | 0.20 |  |   | $       | 0.48 |  |      | $      | 0.44 |  |   | $      | 0.17 | 
|                                  | Diluted |                                                  | $       | (0.14 | )    |   | $       | 0.19 |  |   | $       | 0.44 |  |      | $      | 0.42 |  |   | $      | 0.16 | 
|Balance Sheet Data (at year end): |         |                                                  |         |       |      |   |         |      |  |   |         |      |  |      |        |      |  |   |        |     
|Total assets                      |         | $                                                | 121,268 |       |      | $ | 124,900 |      |  | $ | 119,806 |      |  | $    | 68,366 |      |  | $ | 57,228 |     
|Long-term obligations             |         | $                                                |        |       |      | $ |        |      |  | $ |        |      |  | $    |       |      |  | $ | 890    |     
|Shareholders equity              |         | $                                                | 104,220 |       |      | $ | 107,215 |      |  | $ | 101,028 |      |  | $    | 54,770 |      |  | $ | 43,780 |     
|Preferred stock                   |         | $                                                |        |       |      | $ |        |      |  | $ |        |      |  | $    |       |      |  | $ |       |     




This table should be read in conjunction with the
Consolidated Financial Statements provided elsewhere herein.






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In January 2003, the Company acquired IDS for a purchase price
    of approximately $18.6 million. The effect of this
    transaction increased our total assets by approximately
    $18.0 million and our shareholders equity by
    approximately $9.0 million. Net sales for IDS in fiscal
    2005, fiscal 2004 and fiscal 2003 totaled approximately
    $28.8 million, $23.4 million and $16.1 million,
    respectively.                                                                                
|   
|(2) | In January 2001, the Company acquired Panelview Inc. for a
    purchase price of approximately $9.1 million. The effect of
    the transaction increased our total assets by approximately
    $9.0 million as well as our shareholders equity by
    approximately $8.0 million. Net sales for Panelview in
    fiscal 2005, fiscal 2004, fiscal 2003, fiscal 2002 and fiscal
    2001 totaled approximately $30.2 million,
    $25.2 million, $34.4 million, $27.8 million and
    $7.7 million, respectively.
|   
|(3) | In fiscal 2003, the Company discontinued the amortization of its
    goodwill with the adoption of SFAS No. 142. Goodwill
    amortization expense, net of tax, was approximately
    $0.9 million and $0.8 million in fiscal 2002 and 2001,
    respectively.                                                                                                                                                                                                                                                   
|   
|(4) | In fiscal 2005, the Company recorded a non-cash goodwill
    impairment charge of approximately $11.4 million in
    connection with its annual review of goodwill for impairment and
    favorable income tax adjustments of approximately
    $1.0 million. The goodwill impairment had no corresponding
    income tax benefit.                                                                                                                                                                               






|       |                                                                                          
|------ | -----------------------------------------------------------------------------------------
|ITEM 7 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS



Overview




25



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Executive Summary








26



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TM


tm






27



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Segments




|                        |                             |      |         |        |      |   |         |        |   |   |         |        |  
|----------------------- | --------------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                        |                             | 2005 |         |        | 2004 |   |         | 2003   |  
|                        |                             |      |         |        |      |   |         |        |  
|Microelectronic Segment |                             |      |         |        |      |   |         |        |   |   |         |       
|                        | Military/ Industrial Market |      | $       | 37,765 |      |   | $       | 36,294 |   |   | $       | 42,426 |  
|                        | Commercial Market           |      |         | 26,318 |      |   |         | 24,397 |   |   |         | 19,007 |  
|                        |                             |      |         |        |      |   |         |        |  
|                        |                             |      | 64,083  |        |      |   | 60,691  |        |   |   | 61,433  |       
|                        |                             |      |         |        |      |   |         |        |  
|Display Segment         |                             |      |         |        |      |   |         |        |   |   |         |       
|                        | Military/ Industrial Market |      |         | 11,515 |      |   |         | 11,764 |   |   |         | 11,307 |  
|                        | Commercial Market           |      |         | 41,433 |      |   |         | 36,507 |   |   |         | 40,794 |  
|                        |                             |      |         |        |      |   |         |        |  
|                        |                             |      | 52,948  |        |      |   | 48,271  |        |   |   | 52,101  |       
|                        |                             |      |         |        |      |   |         |        |  
|Total                   |                             | $    | 117,031 |        |      | $ | 108,962 |        |   | $ | 113,534 |       
|                        |                             |      |         |        |      |   |         |        |  
|Microelectronic Segment |                             |      |         |        |      |   |         |        |   |   |         |       
|                        | Military/ Industrial Market |      |         | 33     | %    |   |         | 33     | % |   |         | 37     | %
|                        | Commercial Market           |      |         | 22     | %    |   |         | 23     | % |   |         | 17     | %
|                        |                             |      |         |        |      |   |         |        |  
|                        |                             |      | 55      | %      |      |   | 56      | %      |   |   | 54      | %     
|                        |                             |      |         |        |      |   |         |        |  
|Display Segment         |                             |      |         |        |      |   |         |        |   |   |         |       
|                        | Military/ Industrial Market |      |         | 10     | %    |   |         | 11     | % |   |         | 10     | %
|                        | Commercial Market           |      |         | 35     | %    |   |         | 33     | % |   |         | 36     | %
|                        |                             |      |         |        |      |   |         |        |  
|                        |                             |      | 45      | %      |      |   | 44      | %      |   |   | 46      | %     
|                        |                             |      |         |        |      |   |         |        |  
|Total                   |                             |      | 100     | %      |      |   | 100     | %      |   |   | 100     | %     
|                        |                             |      |         |        |      |   |         |        |  



Critical Accounting Policies and Estimates




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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We sell microelectronic and display products primarily to
    military prime contractors and commercial OEMs. A small portion
    of our products are also sold through distributors or resellers.
    We recognize revenue on product sales when persuasive evidence
    of an arrangement with the customer exists, title to the product
    has passed to the customer, which usually occurs at time of
    shipment, the sales price is fixed or determinable, and
    collectibility of the related billing is reasonably assured.
    Advance payments from customers are deferred and recognized when
    the related products are shipped. Revenue relating to products
    sold to distributors or resellers who either have return rights
    or where the Company has a history of accepting product returns
    are deferred and recognized when the distributor or reseller
    sells the product to the end customer. We also provide limited
    design services pursuant to related customer purchase orders and
    generally recognize the associated revenue as such services are
    performed. However, it may be deferred until certain elements
    are completed. We may from time to time enter into certain
    arrangements that contain multiple elements such as performing
    limited design services accompanied with follow-on manufacturing
    of related products. We allocate revenue to the elements based
    on relative fair value, and recognize revenue for each element
    when there is evidence of an arrangement, delivery has occurred
    or services have been rendered, the price is fixed or
    determinable and collectibility is reasonably assured.
    Arrangements with multiple elements that are not considered
    separate units of accounting require deferral of revenue until
    certain other elements have been delivered or the services have
    been performed. The amount of the revenue recognized is impacted
    by our judgment as to whether an arrangement includes multiple
    elements, and whether the elements are considered separate units
    of accounting.
|
| |  | Historically, we have experienced fluctuations in the demand for
    our products based on cyclical fluctuations in the
    microelectronic and display markets. These fluctuations may
    cause inventory on hand to lose value or become obsolete. In
    order to present the appropriate inventory value on our
    financial statements, we identify slow moving or obsolete
    inventories and record provisions to write down such inventories
    to net realizable value. These provisions are based on
    managements comparison of the value of inventory on hand
    against expected future sales. If future sales are less
    favorable than those projected by management, additional
    inventory provisions may be required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | We record trade accounts receivable at the invoiced amount and
    they do not bear interest. We maintain an allowance for doubtful
    accounts for estimated losses resulting from the inability of
    our customers to make required payments. We make these estimates
    based on an analysis of accounts receivable using available
    information on our customers financial status and payment
    histories. Historically, bad debt losses have not differed
    materially from our estimates. Write-offs against the allowance
    totaled approximately $274,000 in fiscal 2005, $170,000 in
    fiscal 2004 and $145,000 in fiscal 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | We maintain a pension plan for eligible union employees at our
    Fort Wayne, Indiana facility. To account for the cost of
    this plan, we make estimates concerning the expected long-term
    rate of return on plan assets, and discount rates to be used to
    calculate future benefit obligations. Changes in the expected
    long-term rate of return on plan assets affect the amount of
    investment income expected to be earned in the future. We base
    our related estimates using historical data on the rate of
    return from equities and fixed income investments, as well as
    projections for future returns on such investments. If the
    actual returns on plan assets do not equal the estimated
    amounts, we may have to fund future benefit obligations with
    additional contributions to the plan. Changes in the discount
    rate affect the value of the plans future benefit
    obligations. A lower discount rate increases the liabilities of
    the plan because it raises the value of future benefit
    obligations. This will also cause an increase in pension expense
    recognized. We use published bond yields to estimate the
    discount rate used for calculating the value of future benefit
    obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | We account for goodwill and intangible assets in accordance with
    SFAS No. 142, Goodwill and Other Intangible
    Assets, (SFAS 142) which requires
    goodwill to be tested for impairment on an annual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

29



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | basis (and more frequently in certain circumstances) and written
    down when impaired. We completed our transitional testing for
    goodwill impairment upon adoption of SFAS 142, and our
    annual testing for fiscal 2004 and 2003 determined that our
    recorded goodwill was not impaired. However, in fiscal 2005 it
    was determined that our commercial microelectronics businesses
    in Phoenix and our display business in Oregon were impaired.
    Accordingly, we wrote down the related goodwill by approximately
    $11.4 million. Goodwill recorded was $5.7 million and
    $17.1 million at October 1, 2005 and October 2,
    2004, respectively. See Notes 2 and 6 of the Notes to the
    Consolidated Financial Statements for information relating to
    the goodwill impairment. Furthermore, SFAS 142 requires
    purchased intangible assets other than goodwill to be amortized
    over their useful lives unless these lives are determined to be
    indefinite. Purchased intangible assets are carried at cost less
    accumulated amortization. Amortization is computed over the
    estimated useful lives of the respective assets, generally two
    to fifteen years.                                                                                                                                                                                                                                                                                                                   
|
| |  | We account for income taxes in accordance with
    SFAS No. 109, Accounting for Income Taxes
    (SFAS 109) which requires the recognition of
    deferred tax assets and liabilities for the expected future tax
    consequences of temporary differences between the financial
    statement carrying amounts and the tax bases of assets and
    liabilities. Deferred tax assets are recognized, net of any
    valuation allowance, for deductible temporary differences and
    net operating loss and tax credit carry forwards. We regularly
    review our deferred tax assets for recoverability and, if
    necessary, establish a valuation allowance. During the ordinary
    course of business, there are transaction and calculations for
    which the ultimate tax determination is uncertain. We establish
    reserves for tax related uncertainties based on estimates of
    whether, and the extent to which, additional taxes and interest
    will be due. These reserves are established when, despite our
    belief that our tax return positions are fully supportable, we
    believe that certain positions are likely to be challenged and
    may not be sustained on review by tax authorities. We adjust
    these reserves in light of changing facts and circumstances,
    such as the closing of a tax audit. The provision for income
    taxes includes the impact of reserve provisions and changes to
    reserves that are considered appropriate, as well as the related
    net interest.

30



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Results of Operations




|                                  |                                     |            |       |      |      |  |       |      |   |  |       |      |   |  |       |      |  
|--------------------------------- | ----------------------------------- | ---------- | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | - |  | ----- | ---- | -
|                                  |                                     | Adjusted   |       |      |      |  |       |      |  
|                                  |                                     | 2005(1)(2) |       |      | 2005 |  |       | 2004 |   |  | 2003  |     
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Net sales                         |                                     |            | 100.0 | %    |      |  | 100.0 | %    |   |  | 100.0 | %    |   |  | 100.0 | %   
|Cost of sales                     |                                     |            | 70.3  | %    |      |  | 70.3  | %    |   |  | 70.9  | %    |   |  | 65.9  | %   
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Gross profit                      |                                     |            | 29.7  | %    |      |  | 29.7  | %    |   |  | 29.1  | %    |   |  | 34.1  | %   
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Operating expenses:               |                                     |            |       |      |      |  |       |      |   |  |       |      |   |  |       |     
|                                  | Selling, general and administrative |            |       | 16.8 | %    |  |       | 16.8 | % |  |       | 17.0 | % |  |       | 14.6 | %
|                                  | Research and development            |            |       | 4.8  | %    |  |       | 4.8  | % |  |       | 5.5  | % |  |       | 5.3  | %
|                                  | Amortization of intangible assets   |            |       | 0.5  | %    |  |       | 0.5  | % |  |       | 0.6  | % |  |       | 1.0  | %
|                                  | Goodwill impairment                 |            |       | 0.0  | %    |  |       | 9.8  | % |  |       | 0.0  | % |  |       | 0.0  | %
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Total operating expenses          |                                     |            | 22.1  | %    |      |  | 31.9  | %    |   |  | 23.1  | %    |   |  | 20.9  | %   
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Operating income (loss)           |                                     |            | 7.6   | %    |      |  | (2.2  | )%   |   |  | 6.0   | %    |   |  | 13.2  | %   
|Interest expense                  |                                     |            | 0.0   | %    |      |  | 0.0   | %    |   |  | 0.0   | %    |   |  | 0.1   | %   
|Interest (income)                 |                                     |            | (0.9  | )%   |      |  | (0.9  | )%   |   |  | (0.4  | )%   |   |  | (0.2  | )%  
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Income (loss) before income taxes |                                     |            | 8.5   | %    |      |  | (1.3  | )%   |   |  | 5.6   | %    |   |  | 12.9  | %   
|Provision for income taxes        |                                     |            | 2.6   | %    |      |  | 1.7   | %    |   |  | 2.0   | %    |   |  | 4.4   | %   
|                                  |                                     |            |       |      |      |  |       |      |   |  |       |     
|Net income (loss)                 |                                     |            | 5.9   | %    |      |  | (3.0  | )%   |   |  | 3.6   | %    |   |  | 8.5   | %   






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes $11.4 million non-cash impairment of goodwill,
    offset by the fourth quarter income tax adjustment of
    $0.8 million, and the third quarter provision to return
    adjustment of $0.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(2) | These are considered non-GAAP financial measures as
    defined in Item 10(e) of Regulation S-K of the
    Securities and Exchange Act. The presentation of this financial
    information is not intended to be considered in isolation or as
    a substitute for the financial information prepared and
    presented with GAAP. We use this adjusted financial information
    to evaluate our operating performance and believe the
    presentation of this information provides investors with a
    useful indicator of our results that is comparable among periods
    because it excludes the effects of material and unusual items
    that may occur on an irregular basis.

31



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|                                                          |                                     |                     |         |            |            |   |         |            |  |   |         |            | 
|--------------------------------------------------------- | ----------------------------------- | ------------------- | ------- | ---------- | ---------- | - | ------- | ---------- |  | - | ------- | ---------- | 
|                                                          |                                     | Twelve Months Ended |        
|                                                          |                                     |                     |        
|                                                          |                                     | GAAP                |         |            | Adjusted   |   |         |           
|                                                          |                                     | October 1,          |         |            | October 1, |   |         | October 2, | 
|                                                          |                                     | 2005                |         |            | 2005(1)(2) |   |         | 2004       | 
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Net sales                                                 |                                     | $                   | 117,031 |            |            | $ | 117,031 |            |  | $ | 108,962 |           
|Cost of sales                                             |                                     |                     | 82,298  |            |            |   | 82,298  |            |  |   | 77,297  |           
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Gross profit                                              |                                     |                     | 34,733  |            |            |   | 34,733  |            |  |   | 31,665  |           
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Operating expenses:                                       |                                     |                     |         |            |            |   |         |            |  |   |         |           
|                                                          | Selling, general and administrative |                     |         | 19,704     |            |   |         | 19,704     |  |   |         | 18,498     | 
|                                                          | Research and development            |                     |         | 5,634      |            |   |         | 5,634      |  |   |         | 6,036      | 
|                                                          | Amortization of intangible assets   |                     |         | 606        |            |   |         | 606        |  |   |         | 641        | 
|                                                          | Goodwill impairment                 |                     |         | 11,435     |            |   |         |           |  |   |         |           | 
|                                                          |                                     |                     |         |            |            |   |         |            | 
|                                                          | Total operating expenses            |                     |         | 37,379     |            |   |         | 25,944     |  |   |         | 25,175     | 
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Operating income (loss)                                   |                                     |                     | (2,646  | )          |            |   | 8,789   |            |  |   | 6,490   |           
|Interest expense                                          |                                     |                     |        |            |            |   |        |            |  |   | 2       |           
|Interest (income)                                         |                                     |                     | (1,138  | )          |            |   | (1,138  | )          |  |   | (454    | )         
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Income (loss) before income taxes                         |                                     |                     | (1,508  | )          |            |   | 9,927   |            |  |   | 6,942   |           
|Provision for income taxes                                |                                     |                     | 2,027   |            |            |   | 3,022   |            |  |   | 2,135   |           
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Net income (loss)                                         |                                     | $                   | (3,535  | )          |            | $ | 6,905   |            |  | $ | 4,807   |           
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Earnings (loss) per share  basic                         |                                     | $                   | (0.14   | )          |            | $ | 0.28    |            |  | $ | 0.20    |           
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Earnings per share  diluted                              |                                     | $                   | (0.14   | )          |            | $ | 0.28    |            |  | $ | 0.19    |           
|                                                          |                                     |                     |         |            |            |   |         |            | 
|Weighted average number of common shares and equivalents: |                                     |                     |         |            |            |   |         |            |  |   |         |           
|                                                          | Basic                               |                     |         | 24,437,672 |            |   |         | 24,437,672 |  |   |         | 24,201,436 | 
|                                                          |                                     |                     |         |            |            |   |         |            | 
|                                                          | Diluted                             |                     |         | 24,437,672 |            |   |         | 24,975,852 |  |   |         | 25,001,906 | 
|                                                          |                                     |                     |         |            |            |   |         |            | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes $11.4 million non-cash impairment of goodwill,
    offset by the fourth quarter income tax adjustment of
    $0.8 million and the third quarter provision to return
    adjustment of $0.2 million.                                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) | These are considered non-GAAP financial measures as
    defined in Item 10(e) of Regulation S-K of the Securities
    and Exchange Act. The presentation of this financial information
    is not intended to be considered in isolation or as a substitute
    for the financial information prepared and presented with GAAP.
    We believe the presentation of this information provides
    investors with a useful indicator of our results that is
    comparable among periods because it excludes the effects of
    unusual items that may occur on an irregular basis.

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|                                |                        |                     |        |        |            |   |       |      | 
|------------------------------- | ---------------------- | ------------------- | ------ | ------ | ---------- | - | ----- | ---- | 
|                                |                        | Twelve Months Ended |       
|                                |                        |                     |       
|                                |                        | October 1,          |        |        | October 2, |  
|                                |                        | 2005                |        |        | 2004       |  
|                                |                        |                     |        |        |            |  
|GAAP net income (loss)          |                        | $                   | (3,535 | )      |            | $ | 4,807 |     
|Adjustments:                    |                        |                     |        |        |            |   |       |     
|                                | Goodwill impairment    |                     |        | 11,435 |            |   |       |     | 
|                                | Tax adjustments        |                     |        | (995   | )          |   |       |     | 
|                                |                        |                     |        |        |            |  
|Adjusted net income             |                        | $                   | 6,905  |        |            | $ | 4,807 |     
|                                |                        |                     |        |        |            |  
|Income (loss) per common share: |                        |                     |        |        |            |   |       |     
|                                | Basic                  |                     |        |        |            |   |       |      | 
|                                | GAAP net income (loss) |                     | $      | (0.14  | )          |   | $     | 0.20 | 
|                                | Adjustments            |                     |        | 0.42   |            |   |       |     | 
|                                |                        |                     |        |        |            |  
|                                | Adjusted net income    |                     | $      | 0.28   |            |   | $     | 0.20 | 
|                                |                        |                     |        |        |            |  
|                                | Diluted                |                     |        |        |            |   |       |      | 
|                                | GAAP net income (loss) |                     | $      | (0.14  | )          |   | $     | 0.19 | 
|                                | Adjustments            |                     |        | 0.42   |            |   |       |     | 
|                                |                        |                     |        |        |            |  
|                                | Adjusted net income    |                     | $      | 0.28   |            |   | $     | 0.19 | 
|                                |                        |                     |        |        |            |  

Fiscal Year ended October 1, 2005 compared to Fiscal
Year ended October 2, 2004




| |          
| | ---------
| | Net Sales





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Military/industrial sales in the microelectronic segment were
    $37.8 million for the year ended October 1, 2005, an
    increase of $1.5 million, or approximately 4%, from
    $36.3 million for the year ended October 2, 2004. We
    expect sales to military/industrial customers to remain
    consistent in fiscal 2006 as compared to fiscal 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Commercial sales in the microelectronic segment were
    $26.3 million for the year ended October 1, 2005, an
    increase of $1.9 million, or approximately 8%, from
    $24.4 million for the year ended October 2, 2004. The
    growth was primarily attributable to products used in the
    high-end server applications and product sold to a hotel
    industry supplier for their entertainment video systems.
    However, we began to see in the second quarter of fiscal 2005
    and expect to continue to see reduced sales to Unisys, who
    previously accounted for more than 10% of microelectronic sales,
    for their memory modules used in a high-end server application
    which are expected to transition to a new generation of memory
    modules at lower volumes. However, we anticipate commercial
    sales in the microelectronic segment to grow slightly in fiscal
    2006.
|
| |  | Military/industrial sales in the display segment were
    $11.5 million for the year ended October 1, 2005, a
    decrease of $0.2 million, or approximately 2%, from
    $11.8 million for the year ended October 2, 2004. The
    slight decrease was due to decreased requirements for products
    used in the commercial aviation industry. We expect
    military/industrial sales in the display segment in fiscal 2006
    to be consistent with sales in fiscal 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Commercial sales in the display segment were $41.4 million
    for the year ended October 1, 2005, an increase of
    $4.9 million, or approximately 13%, from $36.5 million
    for the year ended October 2, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

33



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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The increase from prior year is attributable to increased sales
    to NCR of $9.3 million and $2.7 million of our tablet
    personal computer products over the prior year, partially offset
    by decreased sales to other customers during the period. Due to
    our strategic decision not to pursue future business in low
    margin products and the resulting completion of the NCR contract
    in the fourth quarter of fiscal 2005, we expect commercial sales
    in the display segment to be flat in fiscal 2006.









| |             
| | ------------
| | Gross Profit







34



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##### Table of Contents





| |                                             
| | --------------------------------------------
| | Selling, General and Administrative Expenses



s




| |                                  
| | ---------------------------------
| | Research and Development Expenses



TM




| |                    
| | -------------------
| | Goodwill Impairment





| |                 
| | ----------------
| | Interest Expense



35



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##### Table of Contents





| |                
| | ---------------
| | Interest Income





| |                                  
| | ---------------------------------
| | Amortization of Intangible Assets





| |             
| | ------------
| | Income Taxes







Fiscal Year ended October 2, 2004 compared to Fiscal
Year ended September 27, 2003




| |          
| | ---------
| | Net Sales





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Military/industrial sales in the microelectronic segment were
    $36.3 million for the year ended October 2, 2004, a
    decrease of $6.1 million, or approximately 14%, from
    $42.4 million for the year ended September 27, 2003.
    The decrease in sales was primarily due to a significant one
    time order of approximately $6.2 million in fiscal 2003 to
    a military prime contractor related to the Falcon Edge program
    and as a result of the shift in military spending priorities
    which lowered the volume of sales.
|
| |  | Commercial sales in the microelectronic segment were
    $24.4 million for the year ended October 2, 2004, an
    increase of $5.4 million, or approximately 28% from
    $19.0 million for the year ended September 27, 2003.
    The growth was primarily attributable to products used in the
    high-end server applications and product sold to a hotel
    industry supplier for their entertainment video systems.                                                                                                                        

36



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Military/industrial sales in the display segment were
    $11.8 million for the year ended October 2, 2004, an
    increase of $0.5 million, or approximately 4%, from
    $11.3 million for the year ended September 27, 2003.
    The increase was due to increased requirements for products used
    in the commercial aviation industry, which resulted in more
    product being sold.                                                                                                                                                             
|
| |  | Commercial sales in the display segment were $36.5 million
    for the year ended October 2, 2004, a decrease of
    $4.3 million, or approximately 11%, from $40.8 million
    for the year ended September 27, 2003. The decrease
    primarily comes from the loss of orders from GE Medical and
    Garmin, both of whom changed their manufacturing strategies in
    the fourth quarter of 2003. This was offset by increases in
    sales of displays for portable patient monitors, tablet personal
    computers and point of service terminals.







| |             
| | ------------
| | Gross Profit









| |                                             
| | --------------------------------------------
| | Selling, General and Administrative Expenses



37



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##### Table of Contents







| |                                  
| | ---------------------------------
| | Research and Development Expenses





| |                 
| | ----------------
| | Interest Expense





| |                
| | ---------------
| | Interest Income





| |                                  
| | ---------------------------------
| | Amortization of Intangible Assets





| |             
| | ------------
| | Income Taxes



Liquidity and Capital Resources






38



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##### Table of Contents























39



---



##### Table of Contents







Contractual Obligations




|                                   |  |                                              |        |           |        |   |       |             |       |   |             |  |  |         |       |  |  |   |       | 
|---------------------------------- |  | -------------------------------------------- | ------ | --------- | ------ | - | ----- | ----------- | ----- | - | ----------- |  |  | ------- | ----- |  |  | - | ----- | 
|                                   |  | Payments Due by Period as of October 1, 2005 |       
|                                   |  |                                              |       
|                                   |  |                                              |        | Less Than |        |   |       |             | After |  
|                                   |  | Total                                        |        |           | 1 Year |   |       | 1 - 3 Years |       |   | 4 - 5 Years |  |  | 5 Years |      
|                                   |  |                                              |        |           |        |   |       |             |       |   |             |  |  |         |      
|                                   |  | (In thousands)                               |       
|Operating leases                   |  | $                                            | 11,366 |           |        | $ | 1,507 |             |       | $ | 2,962       |  |  | $       | 2,498 |  |  | $ | 4,399 | 
|Pension funding(1)                 |  |                                              |       |           |        |   |      |             |       |   |            |  |  |         |      |  |  |   |      | 
|                                   |  |                                              |        |           |        |   |       |             |       |   |             |  |  |         |      
|Total Contractual Cash Obligations |  | $                                            | 11,366 |           |        | $ | 1,507 |             |       | $ | 2,962       |  |  | $       | 2,498 |  |  | $ | 4,399 | 
|                                   |  |                                              |        |           |        |   |       |             |       |   |             |  |  |         |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We are committed to meeting the annual minimum funding
    requirements relating to our pension plan, which covers
    approximately 37 employees at our Ft. Wayne facility. The
    Company cannot estimate expected minimum funding requirements at
    this time. The Company may also make contributions to the
    pension fund in excess of the minimum funding requirements
    during any year. See Note 12 to the Consolidated Financial
    Statements for additional information regarding the pension fund.

Contingencies


McJimsey v. White Electronic Designs
Corporation, et al. Afework v. White Electronic Designs Corporation,
et al Anders v. White Electronic Designs Corporation,
et al. Sammarco v. White Electronic Designs Corporation,
et al.


Dodt v. Shokrgozar,
et al. Christ v. Shokrgozar, et al.


40



---



##### Table of Contents







Recent Accounting Pronouncements










41



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##### Table of Contents












|        |                                                               
|------- | --------------------------------------------------------------
|ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK












|       |                                            
|------ | -------------------------------------------
|ITEM 8 | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA








|       |                                                                                                                               
|------ | ------------------------------------------------------------------------------------------------------------------------------
|ITEM 9 | CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM ON ACCOUNTING AND FINANCIAL
    DISCLOSURE



42



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##### Table of Contents








|        |                        
|------- | -----------------------
|ITEM 9A | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.


Changes in Internal Control over Financial Reporting.


Managements Report on Internal Control Over Financial
Reporting.


Internal Control-Integrated Framework









|        |                  
|------- | -----------------
|ITEM 9B | OTHER INFORMATION



|                   |  |                                                               |  |        |         | 
|------------------ |  | ------------------------------------------------------------- |  | ------ | ------- | 
|Name               |  | Title                                                         |  | Salary |        
|                   |  |                                                               |  |        |        
|Roger A. Derse     |  | Vice President, Chief Financial Officer, Secretary, Treasurer |  | $      | 210,000 | 
|Dante V. Tarantine |  | Vice President, Sales & Marketing                             |  | $      | 236,000 | 



|                    |  |                                                               |  |       |         | 
|------------------- |  | ------------------------------------------------------------- |  | ----- | ------- | 
|Name                |  | Title                                                         |  | Bonus |        
|                    |  |                                                               |  |       |        
|Hamid R. Shokrgozar |  | President, Chief Executive Officer, Chairman of the Board     |  | $     | 150,000 | 
|Roger A. Derse      |  | Vice President, Chief Financial Officer, Secretary, Treasurer |  | $     | 45,000  | 
|Dante V. Tarantine  |  | Vice President, Sales & Marketing                             |  | $     | 50,000  | 



43



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##### Table of Contents






PART III







|        |                                                   
|------- | --------------------------------------------------
|ITEM 10 | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





www.wedc.com







|        |                       
|------- | ----------------------
|ITEM 11 | EXECUTIVE COMPENSATION








|        |                                                                                                   
|------- | --------------------------------------------------------------------------------------------------
|ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS





| |                                     
| | ------------------------------------
| | Equity Compensation Plan Information



|                                                              |  |                      |           |  |                      |   |      |                      |  |  |           | 
|------------------------------------------------------------- |  | -------------------- | --------- |  | -------------------- | - | ---- | -------------------- |  |  | --------- | 
|                                                              |  | Number of Securities |           |  |                      |   |     
|                                                              |  | to be Issued         |           |  | Weighted Average     |   |      |                     
|                                                              |  | Upon Exercise of     |           |  | Exercise Price of    |   |      | Number of Securities | 
|                                                              |  | Outstanding Options, |           |  | Outstanding Options, |   |      | Remaining Available  | 
|Plan Category                                                 |  | Warrants and Rights  |           |  | Warrants, and Rights |   |      | for Future Issuance  | 
|                                                              |  |                      |           |  |                      |   |      |                      | 
|Equity compensation plans approved by security holders(1)     |  |                      | 1,382,709 |  |                      | $ | 4.34 |                      |  |  | 1,054,162 | 
|                                                              |  |                      |           |  |                      |   |      |                      | 
|Equity compensation plans not approved by security holders(2) |  |                      | 994,328   |  |                      | $ | 4.90 |                      |  |  | 112,577   | 
|                                                              |  |                      |           |  |                      |   |      |                      | 
|Total                                                         |  |                      | 2,377,037 |  |                      | $ | 4.57 |                      |  |  | 1,166,739 | 
|                                                              |  |                      |           |  |                      |   |      |                      | 






|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Equity compensation plans approved by security holders include
    the 1994 Flexible Stock Plan, as amended, the 2001 Director
    Stock Plan, and the Amendment to Companys Stock Option
    Plan for Non-Employee Directors.
|   
|(2) | Equity Compensation Plans not approved by security holders
    include the following plans:                                                                                                                                    

44



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##### Table of Contents





| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Shokrgozar Plan  During fiscal 2000,
    the Companys Board of Directors approved an independent
    grant to Mr. Shokrgozar for a nonqualified stock option to
    purchase up to 125,000 shares of common stock at an
    exercise price of $2.75 per share, vesting over four years.
    At October 1, 2005, 125,000 shares from this
    independent option right were still under option.                                                         
|
| |  | 2000 Broad Based Non-qualified Stock
    Plan  During fiscal 2001, the Companys
    Board of Directors approved the 2000 Broad Based Non-qualified
    Stock Plan, which provides for the issuance of options to
    purchase shares of Common Stock at an exercise price equal to
    the fair market value at the date of grant. As of
    October 1, 2005, 112,577 shares were available for
    grant and 650,132 granted options were unexercised.
|
| |  | IDS Plan  The Company assumed the IDS
    Stock Option Plan and 169,000 warrants with the acquisition of
    IDS in January, 2003. As of October 1, 2005, 50,346 granted
    options were unexercised and no shares were available for grant,
    and all of the warrants were unexercised.                                                                                                                                                             






|        |                                               
|------- | ----------------------------------------------
|ITEM 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|        |                                       
|------- | --------------------------------------
|ITEM 14 | PRINCIPAL ACCOUNTING FEES AND SERVICES






PART IV







|        |                                           
|------- | ------------------------------------------
|ITEM 15 | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                                   |  |      |    | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Financial Statements                                                                                                               |  | Page |   
|                                                                                                                                   |  |      |   
|Report of Independent Registered Public Accounting Firm                                                                            |  |      | 50 | 
|Consolidated Balance Sheet as of October 1, 2005 and
    October 2, 2004                                                           |  |      | 52 | 
|Consolidated Statement of Operations for the years ended
    October 1, 2005, October 2, 2004 and
    September 27, 2003           |  |      | 53 | 
|Consolidated Statement of Shareholders Equity for the
    years ended October 1, 2005, October 2, 2004 and
    September 27, 2003 |  |      | 54 | 
|Consolidated Statement of Cash Flows for the years ended
    October 1, 2005, October 2, 2004 and
    September 27, 2003           |  |      | 55 | 
|Notes To Consolidated Financial Statements                                                                                         |  |      | 56 | 

(a)(2) Financial Statement Schedules


INDEX TO FINANCIAL STATEMENT SCHEDULES


|                                                           |  |      |    | 
|---------------------------------------------------------- |  | ---- | -- | 
|Financial Schedule                                         |  | Page |   
|                                                           |  |      |   
|Schedule II Valuation and Qualifying Accounts and Reserves |  |      | 79 | 

45



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##### Table of Contents



(a)(3) Exhibits


| |      |    |  |                                                                                                                                                                                                                                                                                                                                                        
| | ---- | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2    | .1 |  | Agreement and Plan of Merger dated May 3, 1998 by and among
    Bowmar Instrument Corporation and Electronic Designs, Inc. and
    Bravo Acquisition Subsidiary, Inc. (incorporated herein by
    reference to Exhibit 2 to the current Report on
    Form 8-K filed on May 6, 1998.)                                                                  
|
| | 2    | .2 |  | Amendment to Agreement and Plan of Merger dated June 9,
    1998 (incorporated herein by reference to Exhibit 2.1A to
    the Registration Statement on Form S-4 filed on
    June 11, 1998, Registration No. 333-56565).                                                                                                                              
|
| | 2    | .3 |  | Amendment to Agreement and Plan of Merger dated August 24,
    1998 (incorporated herein by reference to Exhibit 2.1B to
    the Registration Statement on Form S-4, filed on
    September 2, 1998, Registration No. 333-56565).                                                                                                                      
|
| | 2    | .4 |  | Agreement and Plan of Reorganization dated as of
    January 22, 2003 by and among White Electronic Designs
    Corporation, IDS Reorganization Corp., and Interface Data
    Systems, Inc. (incorporated herein by reference to
    Exhibit 2.1 to the Current Report on Form 8-K filed
    January 24, 2003.                                         
|
| | 2    | .5 |  | Agreement and Plan of Reorganization dated January 29,
    2001, by and among White Electronic Designs Corporation, PV
    Acquisition Corporation, Panelview, Inc. and Panelview Partners
    L.P. (incorporated herein by reference to Exhibit 10.29 to
    the Companys Quarterly Report on Form 10-Q, filed on
    February 13, 2001).            
|
| | 3    | .1 |  | Amended and Restated Articles of Incorporation of White
    Electronic Designs Corporation (incorporated herein by reference
    to Exhibit 3.1 on Form 10-K filed December 24,
    1998).                                                                                                                                                             
|
| | 3    | .2 |  | Amended and Restated Code of By-Laws of White Electronic Designs
    Corporation (incorporated herein by reference to
    Exhibit 3.1 on Form S-3 filed June 2, 2003).                                                                                                                                                                                 
|
| | 4    | .1 |  | Shareholder Rights Agreement, effective December 6, 1996,
    (incorporated herein by reference to Exhibit 5 on
    Form 8-K, filed on December 19, 1996).                                                                                                                                                                                             
|
| | 4    | .2 |  | Amendment No. 1 to Rights Agreement, effective as of
    May 3, 1998 (incorporated herein by reference to
    Exhibit 4.3 to the Registration Statement on Form S-4,
    filed on June 11, 1998, Registration No. 333-56565).                                                                                                                          
|
| | 10   | .1 |  | Agreement to be Bound by Registration Rights Agreements, dated
    as of May 3, 1998, by and between Bowmar Instrument
    Corporation and Electronic Designs, Inc. (incorporated herein by
    reference to Exhibit 10.1 to the Registration Statement on
    Form S-4, filed on Jun 11, 1998, Registration No.
    333-56565).                       
|
| | **10 | .2 |  | Agreement to be Bound by Severance Agreements and Employment
    Agreement, dated as of May 3, 1998, by and between Bowmar
    Instrument Corporation and Electronic Designs, Inc.
    (incorporated herein by reference to Exhibit 10.2 to the
    Registration Statement on Form S-4, filed on June 11,
    1998, Registration No. 333-56565).       
|
| | **10 | .3 |  | 1994 Flexible Stock Plan (incorporated herein by reference to
    Exhibit A to the Companys definitive Proxy Statement
    prepared in connection with the 1994 Annual Meeting of
    Shareholders).                                                                                                                                                  
|
| | **10 | .4 |  | Amendment to Companys 1994 Flexible Stock Plan, effective
    May 7, 2001 (incorporated herein by reference to
    Exhibit 99 to the Registration Statement on Form S-8,
    filed on May 9, 2001, Registration No. 333-60544).                                                                                                                       
|
| | 10   | .5 |  | Revolving Credit and Term Loan Agreement by and between Bank
    One, Texas and White Electronic Designs Corporation, an Indiana
    Corporation, dated January 7, 2000. (Incorporated herein by
    reference to Exhibit 10.27 to the Companys 10-Q
    for the quarter ended January 1, 2000).                                                      
|
| | 10   | .6 |  | First Amendment to Revolving Credit Agreement by and between
    Bank One effective as of June 3, 2000; Promissory Note
    effective June 3, 2000, Notice of Final Agreement effective
    June 3, 2000 (incorporated herein by reference to
    Exhibit 10.28 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended July 1, 2000).
|
| | 10   | .7 |  | Third Modification agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective March 28, 2002
    (incorporated herein by reference to Exhibit 10.38 to the
    Companys Quarterly Report on Form 10-Q filed on
    May 13, 2002).                                                                                        
|
| | 10   | .8 |  | Fourth Modification agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective January 13, 2003
    (incorporated herein by reference to Exhibit 10.41 to the
    Companys Quarterly Report on Form 10-Q filed on
    February 11, 2003).                                                                                

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| |      |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ---- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10   | .9  |  | Fifth Modification agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective March 13, 2003
    (incorporated herein by reference to Exhibit 10.42 to the
    Companys Quarterly Report on Form 10-Q filed on
    May 13, 2003).                                                                                                                                                                                                               
|
| | **10 | .10 |  | White Electronic Designs Corporation 2001 Director Stock
    Plan (incorporated herein by reference to Exhibit 99 to the
    Registration Statement on Form S-8, filed on May 9,
    2001, Registration No. 333-60536).                                                                                                                                                                                                                                                       
|
| | **10 | .11 |  | Amendment to Companys Stock Option Plan for Non-Employee
    Directors (incorporated herein by reference to Exhibit 99
    to the Registration Statement on Form S-8, filed on
    May 9, 2001, Registration No. 333-60548).                                                                                                                                                                                                                                                 
|
| | **10 | .12 |  | White Electronic Designs Corporation 2000 Broad Based Employee
    Stock Option Plan (incorporated herein by reference to
    Exhibit 99 to the Registration Statement on Form S-8,
    filed on May 9, 2001, Registration No. 333-60542).                                                                                                                                                                                                                                    
|
| | **10 | .13 |  | Executive Employment Agreement made as of December 14, 2004
    between White Electronic Designs Corporation and Hamid R.
    Shokrgozar (incorporated by reference to Exhibit 10.16 to
    the Companys Annual Report on Form 10-K filed on
    December 16, 2004).                                                                                                                                                                                                         
|
| | **10 | .14 |  | Non-Qualified Stock Option Agreement between White Electronic
    Designs Corporation and Hamid Shokrgozar dated November 10,
    1999 (incorporated herein by reference to Exhibit 10.42 to
    the Companys Annual Report on Form 10-K filed on
    December 23, 2002).                                                                                                                                                                                                    
|
| | 10   | .15 |  | Industrial Real Estate Lease dated February 4, 1997 between
    Bowmar Instrument Corp., as tenant, and Allred Phoenix
    Properties, L.L.C., as landlord (incorporated herein by
    reference to Exhibit 10.5 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    September 27, 1997).                                                                                                                                                           
|
| | 10   | .16 |  | Sixth Modification Agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective March 19, 2004
    (incorporated here in by reference to Exhibit 10.1 on
    Form 10-Q, filed on May 14, 2004).                                                                                                                                                                                                                                                    
|
| | 10   | .17 |  | First Amendment to certain Industrial Real Estate Lease dated
    February 4, 1997 between White Electronic Designs
    Corporation (as successor  in  interest of
    Bowmar Instrument Corp.) and Gus Enterprises  XII,
    L.L.C. (as successor  in  interest of
    Allred Phoenix Properties, L.L.C.) dated November 5, 2004
    (incorporated herein by reference to Exhibit 10.21 to the
    Companys Annual Report on Form 10-K filed on
    December 16, 2004).
|
| | *21  | .1  |  | Subsidiaries of White Electronic Designs Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | *23  | .1  |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | *31  | .1  |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | *31  | .2  |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | *32  | .1  |  | Certification Pursuant to 18 U.S. C. Section 1350, As
    Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                                                                                                              
|
| | *32  | .2  |  | Certification Pursuant to 18 U.S. C. Section 1350, As
    Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                                                                                                              






| |   |                
| | - | ---------------
| | * | Filed herewith.



|   |                                                       
|-- | ------------------------------------------------------
|** | Management compensatory contract, plan or arrangement.

47



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##### Table of Contents






SIGNATURES






| |                                                 
| | ------------------------------------------------
| | WHITE ELECTRONIC DESIGNS CORPORATION            
|
| | /s/ Roger A. Derse                              
| |                                                 
| | Roger A. Derse                                  
| | Chief Financial Officer, Secretary and Treasurer







| |                                   
| | ----------------------------------
| | /s/ Hamid R. Shokrgozar           
| |                                   
| | Hamid R. Shokrgozar               
| | President, Chief Executive Officer
| | and Chairman of the Board         





| |                      
| | ---------------------
| | /s/ Thomas M. Reahard
| |                      
| | Thomas M. Reahard    
| | Lead Director        





| |                  
| | -----------------
| | /s/ Jack A. Henry
| |                  
| | Jack A. Henry    
| | Director         





| |                    
| | -------------------
| | /s/ Paul D. Quadros
| |                    
| | Paul D. Quadros    
| | Director           



48



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##### Table of Contents





| |                                        
| | ---------------------------------------
| | /s/ Edward A. White                    
| |                                        
| | Edward A. White                        
| | Vice Chairman of the Board of Directors





| |                  
| | -----------------
| | /s/ Thomas J. Toy
| |                  
| | Thomas J. Toy    
| | Director         





| |                                                 
| | ------------------------------------------------
| | /s/ Roger A. Derse                              
| |                                                 
| | Roger A. Derse                                  
| | Chief Financial Officer, Secretary and Treasurer



49



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Report of Independent Registered Public Accounting Firm








Consolidated financial statements and financial statement
schedule




Internal control over financial reporting


Internal Control  Integrated Framework Internal
Control  Integrated Framework




50



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET


|                                     |                                                                                                             |                                            |        |        |            |  |        |        |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------ | ---------- |  | ------ | ------ | ------- | 
|                                     |                                                                                                             | October 1,                                 |        |        | October 2, | 
|                                     |                                                                                                             | 2005                                       |        |        | 2004       | 
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | (In thousands of dollars,                  |       
|                                     |                                                                                                             | except share data)                         |       
|ASSETS                              
|Current Assets                       |                                                                                                             |                                            |        |        |            |  |        |       
|                                     | Cash and cash equivalents                                                                                   |                                            | $      | 51,008 |            |  | $      | 38,030 |        
|                                     | Accounts receivable, less allowance for doubtful accounts of
    $250 and $560                              |                                            |        | 19,457 |            |  |        | 19,039 |        
|                                     | Inventories, net                                                                                            |                                            |        | 19,609 |            |  |        | 24,744 |        
|                                     | Prepaid expenses and other current assets                                                                   |                                            |        | 825    |            |  |        | 1,584  |        
|                                     | Deferred income taxes                                                                                       |                                            |        | 4,508  |            |  |        | 4,652  |        
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | Total Current Assets                       |        |        | 95,407     |  |        |        | 88,049  | 
|Property, plant and equipment, net   |                                                                                                             |                                            | 14,952 |        |            |  | 13,975 |       
|Goodwill                             |                                                                                                             |                                            | 5,670  |        |            |  | 17,105 |       
|Intangible assets, net               |                                                                                                             |                                            | 5,121  |        |            |  | 5,643  |       
|Other assets, net                    |                                                                                                             |                                            | 118    |        |            |  | 128    |       
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | Total Assets                               |        | $      | 121,268    |  |        | $      | 124,900 | 
|                                     |                                                                                                             |                                            |        |        |            | 
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY
|Current Liabilities                  |                                                                                                             |                                            |        |        |            |  |        |       
|                                     | Accounts payable                                                                                            |                                            | $      | 5,712  |            |  | $      | 9,070  |        
|                                     | Accrued salaries and benefits                                                                               |                                            |        | 2,356  |            |  |        | 1,396  |        
|                                     | Other accrued expenses                                                                                      |                                            |        | 3,701  |            |  |        | 2,258  |        
|                                     | Deferred revenue                                                                                            |                                            |        | 1,797  |            |  |        | 1,646  |        
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | Total Current Liabilities                  |        |        | 13,566     |  |        |        | 14,370  | 
|Accrued long-term pension liability  |                                                                                                             |                                            | 547    |        |            |  | 522    |       
|Deferred income taxes                |                                                                                                             |                                            | 1,725  |        |            |  | 1,175  |       
|Other long-term liabilities          |                                                                                                             |                                            | 1,210  |        |            |  | 1,618  |       
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | Total Liabilities                          |        |        | 17,048     |  |        |        | 17,685  | 
|                                     |                                                                                                             |                                            |        |        |            | 
|Commitments and Contingencies        |                                                                                                             |                                            |        |        |            |  |        |       
|Shareholders Equity                 |                                                                                                             |                                            |        |        |            |  |        |       
|                                     | Preferred stock, 1,000,000 shares authorized, no shares
    issued                                          |                                            |        |       |            |  |        |       |        
|                                     | Common stock, $0.10 stated value, 60,000,000 shares
    authorized, 24,479,276 and 24,335,310 shares issued |                                            |        | 2,448  |            |  |        | 2,433  |        
|                                     | Treasury stock, 44,442 and 44,442 shares, at cost                                                           |                                            |        | (4     | )          |  |        | (4     | )      
|                                     | Additional paid-in capital                                                                                  |                                            |        | 90,829 |            |  |        | 90,347 |        
|                                     | Unearned compensation                                                                                       |                                            |        |       |            |  |        | (8     | )      
|                                     | Retained earnings                                                                                           |                                            |        | 11,129 |            |  |        | 14,664 |        
|                                     | Accumulated other comprehensive loss                                                                        |                                            |        | (182   | )          |  |        | (217   | )      
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | Total Shareholders Equity                 |        |        | 104,220    |  |        |        | 107,215 | 
|                                     |                                                                                                             |                                            |        |        |            | 
|                                     |                                                                                                             | Total Liabilities and Shareholders Equity |        | $      | 121,268    |  |        | $      | 124,900 | 
|                                     |                                                                                                             |                                            |        |        |            | 



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF OPERATIONS


|                                                          |                                     |                                                     |         |            |            |   |         |               |  |   |         |            | 
|--------------------------------------------------------- | ----------------------------------- | --------------------------------------------------- | ------- | ---------- | ---------- | - | ------- | ------------- |  | - | ------- | ---------- | 
|                                                          |                                     | Year Ended                                          |        
|                                                          |                                     |                                                     |        
|                                                          |                                     | October 1,                                          |         |            | October 2, |   |         | September 27, | 
|                                                          |                                     | 2005                                                |         |            | 2004       |   |         | 2003          | 
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|                                                          |                                     | (In thousands of dollars, except share data and per |        
|                                                          |                                     | share data)                                         |        
|Net sales                                                 |                                     | $                                                   | 117,031 |            |            | $ | 108,962 |               |  | $ | 113,534 |           
|Cost of sales                                             |                                     |                                                     | 82,298  |            |            |   | 77,297  |               |  |   | 74,847  |           
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Gross profit                                              |                                     |                                                     | 34,733  |            |            |   | 31,665  |               |  |   | 38,687  |           
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Operating expenses:                                       |                                     |                                                     |         |            |            |   |         |               |  |   |         |           
|                                                          | Selling, general and administrative |                                                     |         | 19,704     |            |   |         | 18,498        |  |   |         | 16,607     | 
|                                                          | Research and development            |                                                     |         | 5,634      |            |   |         | 6,036         |  |   |         | 6,015      | 
|                                                          | Amortization of intangible assets   |                                                     |         | 606        |            |   |         | 641           |  |   |         | 1,106      | 
|                                                          | Goodwill impairment                 |                                                     |         | 11,435     |            |   |         |              |  |   |         |           | 
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|                                                          | Total operating expenses            |                                                     |         | 37,379     |            |   |         | 25,175        |  |   |         | 23,728     | 
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Operating income (loss)                                   |                                     |                                                     | (2,646  | )          |            |   | 6,490   |               |  |   | 14,959  |           
|Interest expense                                          |                                     |                                                     |        |            |            |   | 2       |               |  |   | 88      |           
|Interest (income)                                         |                                     |                                                     | (1,138  | )          |            |   | (454    | )             |  |   | (250    | )         
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Income (loss) before income taxes                         |                                     |                                                     | (1,508  | )          |            |   | 6,942   |               |  |   | 15,121  |           
|Provision for income taxes                                |                                     |                                                     | 2,027   |            |            |   | 2,135   |               |  |   | 4,971   |           
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Net income (loss)                                         |                                     | $                                                   | (3,535  | )          |            | $ | 4,807   |               |  | $ | 10,150  |           
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Earnings (loss) per share  basic                         |                                     | $                                                   | (0.14   | )          |            | $ | 0.20    |               |  | $ | 0.48    |           
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Earnings (loss) per share  diluted                       |                                     | $                                                   | (0.14   | )          |            | $ | 0.19    |               |  | $ | 0.44    |           
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|Weighted average number of common shares and equivalents: |                                     |                                                     |         |            |            |   |         |               |  |   |         |           
|                                                          | Basic                               |                                                     |         | 24,437,672 |            |   |         | 24,201,436    |  |   |         | 21,320,307 | 
|                                                          |                                     |                                                     |         |            |            |   |         |               | 
|                                                          | Diluted                             |                                                     |         | 24,437,672 |            |   |         | 25,001,906    |  |   |         | 22,920,209 | 
|                                                          |                                     |                                                     |         |            |            |   |         |               | 



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY


|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   |         |        |  
|-------------------------------------------------------- | -------------------- | -------------------------------------------- | ---------- |  | ------ | - | ----- | ---------- |  | - | ------- | -------- | -------- | ------------ | ----------- | ----- | ------------ | - | ----- | ------------- |  | - | ------------- | - |  | - | ---- | - |  | - | ------- | ------ | -
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         | Retained |          |              | Accumulated |       |              |  
|                                                         |                      |                                              |            |  |        |   |       | Additional |  |   |         |          | Earnings |              |             | Other |              |   | Total |              
|                                                         |                      | Common                                       |            |  | Common |   |       | Treasury   |  |   | Paid-in |          |          | Unearned     |             |       | (Accumulated |   |       | Comprehensive |  |   | Shareholders |  
|                                                         |                      | Shares                                       |            |  | Stock  |   |       | Stock      |  |   | Capital |          |          | Compensation |             |       | Deficit)     |   |       | Loss          |  |   | Equity        |  
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|                                                         |                      | (In thousands of dollars, except share data) |           
|Balance, September 28, 2002                              |                      |                                              | 20,091,542 |  |        | $ | 2,009 |            |  | $ | (4      | )        |          | $            | 53,313      |       |              | $ |      |               |  | $ | (293          | ) |  | $ | (255 | ) |  | $ | 54,770  |       
|Net income                                               |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   | 10,150        |   |  |   |      |   |  |   | 10,150  |       
|Minimum pension liability                                |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   | (71  | ) |  |   | (71     | )     
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|                                                         | Comprehensive income |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   |         | 10,079 |  
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|Stock options exercised                                  |                      |                                              | 964,963    |  |        |   | 96    |            |  |   |         |          |          |              | 2,127       |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 2,223   |       
|Common stock issued in public offering                   |                      |                                              | 2,402,874  |  |        |   | 240   |            |  |   |         |          |          |              | 21,718      |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 21,958  |       
|Common stock issued through employee stock purchase plan |                      |                                              | 30,210     |  |        |   | 3     |            |  |   |         |          |          |              | 193         |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 196     |       
|Common stock issued for IDS acquisition                  |                      |                                              | 577,595    |  |        |   | 58    |            |  |   |         |          |          |              | 4,557       |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 4,615   |       
|Options and warrants issued for IDS acquisition          |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              | 4,457       |       |              |   | (51   | )             |  |   |               |   |  |   |      |   |  |   | 4,406   |       
|Stock compensation earned during the year                |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   | 17    |               |  |   |               |   |  |   |      |   |  |   | 17      |       
|Tax benefits related to exercise of stock options        |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              | 2,764       |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 2,764   |       
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|Balance, September 27, 2003                              |                      |                                              | 24,067,184 |  |        |   | 2,406 |            |  |   | (4      | )        |          |              | 89,129      |       |              |   | (34   | )             |  |   | 9,857         |   |  |   | (326 | ) |  |   | 101,028 |       
|Net income                                               |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   | 4,807         |   |  |   |      |   |  |   | 4,807   |       
|Minimum pension liability                                |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   | 109  |   |  |   | 109     |       
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|                                                         | Comprehensive income |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   |         | 4,916  |  
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|Stock options exercised                                  |                      |                                              | 220,956    |  |        |   | 22    |            |  |   |         |          |          |              | 575         |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 597     |       
|Common stock issued through employee stock purchase plan |                      |                                              | 47,170     |  |        |   | 5     |            |  |   |         |          |          |              | 264         |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 269     |       
|Stock compensation earned during the year                |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   | 26    |               |  |   |               |   |  |   |      |   |  |   | 26      |       
|Tax benefits related to exercise of stock options        |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              | 379         |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 379     |       
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|Balance, October 2, 2004                                 |                      |                                              | 24,335,310 |  |        |   | 2,433 |            |  |   | (4      | )        |          |              | 90,347      |       |              |   | (8    | )             |  |   | 14,664        |   |  |   | (217 | ) |  |   | 107,215 |       
|Net loss                                                 |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   | (3,535        | ) |  |   |      |   |  |   | (3,535  | )     
|Minimum pension liability                                |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   | 35   |   |  |   | 35      |       
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|                                                         | Comprehensive loss   |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   |         | (3,500 | )
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|Stock options exercised                                  |                      |                                              | 119,752    |  |        |   | 12    |            |  |   |         |          |          |              | 288         |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 300     |       
|Common stock issued through employee stock purchase plan |                      |                                              | 24,214     |  |        |   | 3     |            |  |   |         |          |          |              | 104         |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 107     |       
|Stock compensation earned during the year                |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   | 8     |               |  |   |               |   |  |   |      |   |  |   | 8       |       
|Tax benefits related to exercise of stock options        |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              | 90          |       |              |   |       |               |  |   |               |   |  |   |      |   |  |   | 90      |       
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  
|Balance, October 1, 2005                                 |                      |                                              | 24,479,276 |  |        | $ | 2,448 |            |  | $ | (4      | )        |          | $            | 90,829      |       |              | $ |      |               |  | $ | 11,129        |   |  | $ | (182 | ) |  | $ | 104,220 |       
|                                                         |                      |                                              |            |  |        |   |       |            |  |   |         |          |          |              |             |       |              |   |       |               |  |   |               |  



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CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                                                             |                                                       |                             |        |        |            |   |        |               |        |   |         |       |        |  
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------- | ------ | ------ | ---------- | - | ------ | ------------- | ------ | - | ------- | ----- | ------ | -
|                                                                                             |                                                       | Year Ended                  |       
|                                                                                             |                                                       |                             |       
|                                                                                             |                                                       | October 1,                  |        |        | October 2, |   |        | September 27, |       
|                                                                                             |                                                       | 2005                        |        |        | 2004       |   |        | 2003          |       
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|                                                                                             |                                                       | (In thousands of dollars)   |       
|OPERATING ACTIVITIES:                                                                        |                                                       |                             |        |        |            |   |        |               |        |   |         |      
|Net income (loss)                                                                            |                                                       | $                           | (3,535 | )      |            | $ | 4,807  |               |        | $ | 10,150  |      
|Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                       |                             |        |        |            |   |        |               |        |   |         |      
|                                                                                             | Depreciation and amortization                         |                             |        | 4,067  |            |   |        | 4,416         |        |   |         | 4,846 |       
|                                                                                             | Amortization of premium on marketable securities      |                             |        |       |            |   |        | 80            |        |   |         |      |       
|                                                                                             | Goodwill impairment                                   |                             |        | 11,435 |            |   |        |              |        |   |         |      |       
|                                                                                             | Premium on marketable securities                      |                             |        |       |            |   |        | (120          | )      |   |         |      |       
|                                                                                             | Deferred income tax expense                           |                             |        | 670    |            |   |        | 1,188         |        |   |         | 32    |       
|                                                                                             | Tax benefits related to exercise of stock options     |                             |        | 90     |            |   |        | 379           |        |   |         | 2,764 |       
|                                                                                             | (Gain) loss on sale of property, plant, and equipment |                             |        | (41    | )          |   |        | 264           |        |   |         | 52    |       
|                                                                                             | Net changes in balance sheet accounts:                |                             |        |        |            |   |        |               |        |   |         |       |       
|                                                                                             |                                                       | Accounts receivable, net    |        |        | (418       | ) |        |               | 650    |   |         |       | (1,607 | )
|                                                                                             |                                                       | Inventories                 |        |        | 5,135      |   |        |               | (6,026 | ) |         |       | (43    | )
|                                                                                             |                                                       | Prepaid expenses            |        |        | 759        |   |        |               | 143    |   |         |       | (1,073 | )
|                                                                                             |                                                       | Other assets                |        |        | 10         |   |        |               | (40    | ) |         |       | 794    |  
|                                                                                             |                                                       | Accounts payable            |        |        | (4,239     | ) |        |               | 996    |   |         |       | 1,026  |  
|                                                                                             |                                                       | Other accrued expenses      |        |        | 2,554      |   |        |               | (3,494 | ) |         |       | 1,042  |  
|                                                                                             |                                                       | Other long-term liabilities |        |        | (407       | ) |        |               | 924    |   |         |       | (8     | )
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|Net cash provided by operating activities                                                    |                                                       |                             | 16,080 |        |            |   | 4,167  |               |        |   | 17,975  |      
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|INVESTING ACTIVITIES:                                                                        |                                                       |                             |        |        |            |   |        |               |        |   |         |      
|Acquisition of property, plant and equipment                                                 |                                                       |                             | (3,509 | )      |            |   | (2,299 | )             |        |   | (3,862  | )    
|Purchase of marketable securities                                                            |                                                       |                             |       |        |            |   |       |               |        |   | (5,080  | )    
|Proceeds from maturity of marketable security                                                |                                                       |                             |       |        |            |   | 5,120  |               |        |   |        |      
|Cash payments for acquisition, net of cash acquired                                          |                                                       |                             |       |        |            |   |       |               |        |   | (8,391  | )    
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|Net cash provided by (used for) investing activities                                         |                                                       |                             | (3,509 | )      |            |   | 2,821  |               |        |   | (17,333 | )    
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|FINANCING ACTIVITIES:                                                                        |                                                       |                             |        |        |            |   |        |               |        |   |         |      
|Borrowings on line of credit                                                                 |                                                       |                             |       |        |            |   |       |               |        |   | 6,128   |      
|Repayments on line of credit                                                                 |                                                       |                             |       |        |            |   |       |               |        |   | (6,128  | )    
|Borrowings of long-term debt                                                                 |                                                       |                             |       |        |            |   |       |               |        |   | 6,000   |      
|Repayments of long-term debt                                                                 |                                                       |                             |       |        |            |   |       |               |        |   | (12,940 | )    
|Common stock issued for exercise of options                                                  |                                                       |                             | 300    |        |            |   | 598    |               |        |   | 2,223   |      
|Common stock issued in public offering                                                       |                                                       |                             |       |        |            |   |       |               |        |   | 21,958  |      
|Common stock issued through employee purchase plan                                           |                                                       |                             | 107    |        |            |   | 268    |               |        |   | 196     |      
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|Net cash provided by financing activities                                                    |                                                       |                             | 407    |        |            |   | 866    |               |        |   | 17,437  |      
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|Net change in cash                                                                           |                                                       |                             | 12,978 |        |            |   | 7,854  |               |        |   | 18,079  |      
|Cash at beginning of year                                                                    |                                                       |                             | 38,030 |        |            |   | 30,176 |               |        |   | 12,097  |      
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|Cash at end of year                                                                          |                                                       | $                           | 51,008 |        |            | $ | 38,030 |               |        | $ | 30,176  |      
|                                                                                             |                                                       |                             |        |        |            |   |        |               |       
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                          |                                                       |                             |        |        |            |   |        |               |        |   |         |      
|Cash paid for interest                                                                       |                                                       | $                           |       |        |            | $ | 2      |               |        | $ | 88      |      
|Cash paid for income taxes                                                                   |                                                       | $                           | 1,653  |        |            | $ | 167    |               |        | $ | 3,911   |      
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
    ACTIVITIES:                     |                                                       |                             |        |        |            |   |        |               |        |   |         |      
|Acquisition of property, plant and equipment in accounts payable                             |                                                       | $                           | 881    |        |            | $ |       |               |        | $ |        |      
|Common stock issued for acquisition                                                          |                                                       | $                           |       |        |            | $ |       |               |        | $ | 4,615   |      
|Options and warrants issued for acquisition                                                  |                                                       | $                           |       |        |            | $ |       |               |        | $ | 4,457   |      



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                     
|-- | --------------------
|1. | NATURE OF OPERATIONS





|   |                                           
|-- | ------------------------------------------
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

























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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






















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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






























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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                      |  |             |            |   |               |  |            |           |  |   |       |  
|------------------------------------- |  | ----------- | ---------- | - | ------------- |  | ---------- | --------- |  | - | ----- | -
|                                      |  | 2005        |           
|                                      |  |             |           
|                                      |  | Loss        |            |   | Shares        |  |            | Per Share | 
|                                      |  | (Numerator) |            |   | (Denominator) |  |            | Amount    | 
|                                      |  |             |            |   |               |  |            |           | 
|Loss per share-basic                  |  |             |            |   |               |  |            |           |  |   |       |  
|Net Loss                              |  | $           | (3,535,000 | ) |               |  | 24,437,672 |           |  | $ | (0.14 | )
|                                      |  |             |            |   |               |  |            |           | 
|Loss available to common stockholders |  |             | (3,535,000 | ) |               |  | 24,437,672 |           |  |   | (0.14 | )
|Effects of Dilutive Securities        |  |             |            |   |               |  |            |           |  |   |       |  
|Stock options                         |  |             |            |   |               |  |           |           |  |   |      |  
|                                      |  |             |            |   |               |  |            |           | 
|Loss per share-diluted                |  |             |            |   |               |  |            |           |  |   |       |  
|Loss available to common stockholders |  | $           | (3,535,000 | ) |               |  | 24,437,672 |           |  | $ | (0.14 | )
|                                      |  |             |            |   |               |  |            |           | 



|                                          |  |             |           |  |               |  |            |           |  |   |       |  
|----------------------------------------- |  | ----------- | --------- |  | ------------- |  | ---------- | --------- |  | - | ----- | -
|                                          |  | 2004        |          
|                                          |  |             |          
|                                          |  | Income      |           |  | Shares        |  |            | Per Share | 
|                                          |  | (Numerator) |           |  | (Denominator) |  |            | Amount    | 
|                                          |  |             |           |  |               |  |            |           | 
|Earnings per share-basic                  |  |             |           |  |               |  |            |           |  |   |       |  
|Net Income                                |  | $           | 4,807,000 |  |               |  | 24,201,436 |           |  | $ | 0.20  |  
|                                          |  |             |           |  |               |  |            |           | 
|Earnings available to common stockholders |  |             | 4,807,000 |  |               |  | 24,201,436 |           |  |   | 0.20  |  
|Effects of Dilutive Securities            |  |             |           |  |               |  |            |           |  |   |       |  
|Stock options                             |  |             |           |  |               |  | 800,470    |           |  |   | (0.01 | )
|                                          |  |             |           |  |               |  |            |           | 
|Earnings per share-diluted                |  |             |           |  |               |  |            |           |  |   |       |  
|Earnings available to common stockholders |  | $           | 4,807,000 |  |               |  | 25,001,906 |           |  | $ | 0.19  |  
|                                          |  |             |           |  |               |  |            |           | 



|                                          |  |             |            |  |               |  |            |           |  |   |       |  
|----------------------------------------- |  | ----------- | ---------- |  | ------------- |  | ---------- | --------- |  | - | ----- | -
|                                          |  | 2003        |           
|                                          |  |             |           
|                                          |  | Income      |            |  | Shares        |  |            | Per Share | 
|                                          |  | (Numerator) |            |  | (Denominator) |  |            | Amount    | 
|                                          |  |             |            |  |               |  |            |           | 
|Earnings per share-basic                  |  |             |            |  |               |  |            |           |  |   |       |  
|Net Income                                |  | $           | 10,150,000 |  |               |  | 21,320,307 |           |  | $ | 0.48  |  
|                                          |  |             |            |  |               |  |            |           | 
|Earnings available to common stockholders |  |             | 10,150,000 |  |               |  | 21,320,307 |           |  |   | 0.48  |  
|Effects of Dilutive Securities            |  |             |            |  |               |  |            |           |  |   |       |  
|Stock options                             |  |             |            |  |               |  | 1,599,902  |           |  |   | (0.04 | )
|                                          |  |             |            |  |               |  |            |           | 
|Earnings per share-diluted                |  |             |            |  |               |  |            |           |  |   |       |  
|Earnings available to common stockholders |  | $           | 10,150,000 |  |               |  | 22,920,209 |           |  | $ | 0.44  |  
|                                          |  |             |            |  |               |  |            |           | 

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|                                                                                                                                                      |  |      |        |   |      |   |       |      |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                                                                                                      |  | 2005 |        |   | 2004 |   |       | 2003 | 
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 
|Net income (loss)  as reported                                                                                                                       |  | $    | (3,535 | ) |      | $ | 4,807 |      |  | $ | 10,150 |  
|Less: Total stock-based employee compensation expense determined
    under the fair value based method for all awards, net of related
    tax effects |  |      | (1,525 | ) |      |   | (730  | )    |  |   | (988   | )
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 
|Net income (loss)  pro forma                                                                                                                         |  | $    | (5,060 | ) |      | $ | 4,077 |      |  | $ | 9,162  |  
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 
|Earnings (loss) per share-basic as reported                                                                                                           |  | $    | (0.14  | ) |      | $ | 0.20  |      |  | $ | 0.48   |  
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 
|Earnings (loss) per share-basic pro forma                                                                                                             |  | $    | (0.20  | ) |      | $ | 0.17  |      |  | $ | 0.43   |  
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 
|Earnings (loss) per share-diluted as reported                                                                                                         |  | $    | (0.14  | ) |      | $ | 0.19  |      |  | $ | 0.44   |  
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 
|Earnings (loss) per share-diluted pro forma                                                                                                           |  | $    | (0.20  | ) |      | $ | 0.16  |      |  | $ | 0.40   |  
|                                                                                                                                                      |  |      |        |   |      |   |       |      | 



|                              |  |      |      |   |      |  |      |      |  |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                              |  | 2005 |      |   | 2004 |  |      | 2003 | 
|                              |  |      |      |   |      |  |      |      | 
|Employee Stock Options        |  |      |      |   |      |  |      |      |  |  |      |  
|Expected options term (years) |  |      | 5.2  |   |      |  | 4.7  |      |  |  | 5.0  |  
|Risk free interest rate       |  |      | 4.13 | % |      |  | 3.35 | %    |  |  | 2.98 | %
|Volatility                    |  |      | 68   | % |      |  | 81   | %    |  |  | 92   | %

|                              |  |      |      |   |      |  |      |      |  |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                              |  | 2005 |      |   | 2004 |  |      | 2003 | 
|                              |  |      |      |   |      |  |      |      | 
|Employee Stock Purchase Plan  |  |      |      |   |      |  |      |      |  |  |      |  
|Expected options term (years) |  |      | 0.5  |   |      |  | 0.5  |      |  |  | 0.5  |  
|Risk free interest rate       |  |      | 3.79 | % |      |  | 1.79 | %    |  |  | 0.94 | %
|Volatility                    |  |      | 39   | % |      |  | 58   | %    |  |  | 50   | %







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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |             
|-- | ------------
|3. | ACQUISITIONS









|                              |                           |                     |        |        |        | 
|----------------------------- | ------------------------- | ------------------- | ------ | ------ | ------ | 
|Current assets                |                           | $                   | 7,909  |       
|Property, plant and equipment |                           |                     | 5,121  |       
|Intangible assets             |                           |                     | 7,100  |       
|Goodwill                      |                           |                     | 10,507 |       
|Other                         |                           |                     | 764    |       
|                              |                           |                     |       
|                              | Total assets acquired     |                     |        | 31,401 |       
|                              |                           |                     |       
|Current liabilities           |                           |                     | 4,012  |       
|Long-term debt                |                           |                     | 5,980  |       
|Deferred income taxes         |                           |                     | 3,387  |       
|                              |                           |                     |       
|                              | Total liabilities assumed |                     |        | 13,379 |       
|                              |                           |                     |       
|                              |                           | Net assets acquired |        | $      | 18,022 | 
|                              |                           |                     |       

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                   |                        |              |  |      |         |   |        |             |  |   |       |       |  |   |        |       | 
|------------------ | ---------------------- | ------------ |  | ---- | ------- | - | ------ | ----------- |  | - | ----- | ----- |  | - | ------ | ----- | 
|                   |                        | Amortization |  |      |         |   | Micro- |             |  |  
|Asset              |                        | Period       |  |      | Display |   |        | Electronics |  |   | Total |      
|                   |                        |              |  |      |         |   |        |             |  |   |       |      
|                   |                        | (In years)   |  |      |         |   |        |             | 
|Goodwill           |                        |              |  |      |         | $ | 1,953  |             |  | $ | 8,554 |       |  | $ | 10,507 |      
|                   |                        |              |  |      |         |   |        |             |  |   |       |      
|Intangible assets: |                        |              |  |      |         |   |        |             |  |   |       |       |  |   |        |      
|                   | Non-compete agreements |              |  | 2.5  |         |   |        | 200         |  |   |       | 200   |  |   |        | 400   | 
|                   | Contracted backlog     |              |  | 0.67 |         |   |        | 194         |  |   |       | 406   |  |   |        | 600   | 
|                   | Existing technology    |              |  | 10   |         |   |        | 1,319       |  |   |       | 681   |  |   |        | 2,000 | 
|                   | Customer relationships |              |  | 15   |         |   |        | 2,704       |  |   |       | 1,396 |  |   |        | 4,100 | 
|                   |                        |              |  |      |         |   |        |             |  |   |       |      
|                   |                        |              |  |      |         | $ | 4,417  |             |  | $ | 2,683 |       |  | $ | 7,100  |      
|                   |                        |              |  |      |         |   |        |             |  |   |       |      



|                           |  |                    |         | 
|-------------------------- |  | ------------------ | ------- | 
|                           |  | Year Ended         |        
|                           |  | September 27, 2003 |        
|                           |  |                    |        
|                           |  | (In thousands of   |        
|                           |  | dollars except     |        
|                           |  | share data)        |        
|Net sales                  |  | $                  | 120,767 | 
|Net income                 |  | $                  | 9,722   | 
|Earnings per share-basic   |  | $                  | 0.45    | 
|Earnings per share-diluted |  | $                  | 0.42    | 







|   |                   
|-- | ------------------
|4. | FACILITIES CLOSURE



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |            
|-- | -----------
|5. | INVENTORIES



|                                                 |  |            |        |   |            |   |        |  
|------------------------------------------------ |  | ---------- | ------ | - | ---------- | - | ------ | -
|                                                 |  | October 1, |        |   | October 2, |  
|                                                 |  | 2005       |        |   | 2004       |  
|                                                 |  |            |        |   |            |  
|Gross inventories:                               |  |            |        |   |            |   |        |  
|Raw materials                                    |  | $          | 12,933 |   |            | $ | 17,059 |  
|Work-in-process                                  |  |            | 6,603  |   |            |   | 7,583  |  
|Finished goods                                   |  |            | 3,354  |   |            |   | 4,451  |  
|                                                 |  |            |        |   |            |  
|Total gross inventories                          |  |            | 22,890 |   |            |   | 29,093 |  
|Less reserve for excess and obsolete inventories |  |            | (3,281 | ) |            |   | (4,349 | )
|                                                 |  |            |        |   |            |  
|Total net inventories                            |  | $          | 19,609 |   |            | $ | 24,744 |  
|                                                 |  |            |        |   |            |  





|   |                               
|-- | ------------------------------
|6. | GOODWILL AND INTANGIBLE ASSETS



|                                 |  |                 |        |   |         |   |        |       |  |   |         |  
|-------------------------------- |  | --------------- | ------ | - | ------- | - | ------ | ----- |  | - | ------- | -
|                                 |  | Microelectronic |        |   | Display |   |        |      
|                                 |  | Segment         |        |   | Segment |   |        | Total | 
|                                 |  |                 |        |   |         |   |        |       | 
|Balance as of September 27, 2003 |  | $               | 8,571  |   |         | $ | 8,469  |       |  | $ | 17,040  |  
|Purchase price adjustment        |  |                 | 65     |   |         |   |       |       |  |   | 65      |  
|                                 |  |                 |        |   |         |   |        |       | 
|Balance as of October 2, 2004    |  |                 | 8,636  |   |         |   | 8,469  |       |  |   | 17,105  |  
|Goodwill impairment              |  |                 | (7,144 | ) |         |   | (4,291 | )     |  |   | (11,435 | )
|                                 |  |                 |        |   |         |   |        |       | 
|Balance as of October 1, 2005    |  | $               | 1,492  |   |         | $ | 4,178  |       |  | $ | 5,670   |  
|                                 |  |                 |        |   |         |   |        |       | 



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


tm






|                        |                        |        |       |       |              |   |        |        |   |   |       |       | 
|----------------------- | ---------------------- | ------ | ----- | ----- | ------------ | - | ------ | ------ | - | - | ----- | ----- | 
|                        |                        | Gross  |       |       | Accumulated  |   |        | Net    |  
|Intangible Assets       |                        | Amount |       |       | Amortization |   |        | Amount |  
|                        |                        |        |       |       |              |   |        |        |  
|October 1, 2005         |                        |        |       |       |              |   |        |        |   |   |       |      
|                        | Customer relationships |        | $     | 4,100 |              |   | $      | (729   | ) |   | $     | 3,371 | 
|                        | Existing technology    |        |       | 2,427 |              |   |        | (960   | ) |   |       | 1,467 | 
|                        | Other                  |        |       | 1,283 |              |   |        | (1,000 | ) |   |       | 283   | 
|                        |                        |        |       |       |              |   |        |        |  
|Total intangible assets |                        | $      | 7,810 |       |              | $ | (2,689 | )      |   | $ | 5,121 |      
|                        |                        |        |       |       |              |   |        |        |  
|October 2, 2004         |                        |        |       |       |              |   |        |        |   |   |       |      
|                        | Customer relationships |        | $     | 4,100 |              |   | $      | (456   | ) |   | $     | 3,644 | 
|                        | Existing technology    |        |       | 2,427 |              |   |        | (760   | ) |   |       | 1,667 | 
|                        | Other                  |        |       | 1,199 |              |   |        | (867   | ) |   |       | 332   | 
|                        |                        |        |       |       |              |   |        |        |  
|Total intangible assets |                        | $      | 7,726 |       |              | $ | (2,083 | )      |   | $ | 5,643 |      
|                        |                        |        |       |       |              |   |        |        |  

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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |  |            |       |   |            |   |       |  
|---------------------------------- |  | ---------- | ----- | - | ---------- | - | ----- | -
|                                   |  | October 1, |       |   | October 2, |  
|                                   |  | 2005       |       |   | 2004       |  
|                                   |  |            |       |   |            |  
|Balance at beginning of year       |  | $          | 5,643 |   |            | $ | 6,310 |  
|Change in intangible pension asset |  |            | 84    |   |            |   | (26   | )
|Amortization                       |  |            | (606  | ) |            |   | (641  | )
|                                   |  |            |       |   |            |  
|Balance at end of year             |  | $          | 5,121 |   |            | $ | 5,643 |  
|                                   |  |            |       |   |            |  

Estimated Aggregate Amortization Expense


for the Next Five Fiscal Years (in thousands):


|           |  |   |       | 
|---------- |  | - | ----- | 
|2006       |  | $ | 473   | 
|2007       |  |   | 473   | 
|2008       |  |   | 473   | 
|2009       |  |   | 473   | 
|2010       |  |   | 473   | 
|Thereafter |  |   | 2,473 | 
|           |  |   |      
|           |  | $ | 4,838 | 
|           |  |   |      



|   |                              
|-- | -----------------------------
|7. | PROPERTY, PLANT AND EQUIPMENT



|                                               |  |            |         |   |            |   |         |  
|---------------------------------------------- |  | ---------- | ------- | - | ---------- | - | ------- | -
|                                               |  | October 1, |         |   | October 2, |  
|                                               |  | 2005       |         |   | 2004       |  
|                                               |  |            |         |   |            |  
|Land                                           |  | $          | 697     |   |            | $ | 697     |  
|Buildings and improvements                     |  |            | 3,738   |   |            |   | 3,922   |  
|Machinery and equipment                        |  |            | 16,129  |   |            |   | 15,774  |  
|Furniture and fixtures                         |  |            | 3,432   |   |            |   | 3,227   |  
|Leasehold improvements                         |  |            | 2,225   |   |            |   | 2,224   |  
|Construction in progress                       |  |            | 3,020   |   |            |   | 60      |  
|                                               |  |            |         |   |            |  
|Total, at cost                                 |  |            | 29,241  |   |            |   | 25,904  |  
|Less accumulated depreciation and amortization |  |            | (14,289 | ) |            |   | (11,929 | )
|                                               |  |            |         |   |            |  
|Net property, plant and equipment              |  | $          | 14,952  |   |            | $ | 13,975  |  
|                                               |  |            |         |   |            |  



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|8. | OTHER ACCRUED EXPENSES



|                       |  |            |       |  |            |   |       | 
|---------------------- |  | ---------- | ----- |  | ---------- | - | ----- | 
|                       |  | October 1, |       |  | October 2, |  
|                       |  | 2005       |       |  | 2004       |  
|                       |  |            |       |  |            |  
|Sales commissions      |  | $          | 914   |  |            | $ | 895   | 
|Income taxes           |  |            | 1,308 |  |            |   |      | 
|Warranty               |  |            | 622   |  |            |   | 640   | 
|Other accruals         |  |            | 857   |  |            |   | 723   | 
|                       |  |            |       |  |            |  
|Total accrued expenses |  | $          | 3,701 |  |            | $ | 2,258 | 
|                       |  |            |       |  |            |  



|                                            |  |   |      |  
|------------------------------------------- |  | - | ---- | -
|Warranty reserve, September 27, 2003        |  | $ | 783  |  
|Reduction of provision for warranty claims  |  |   | (126 | )
|Warranty claims charged against the reserve |  |   | (17  | )
|                                            |  |   |     
|Warranty reserve, October 2, 2004           |  |   | 640  |  
|Provision for warranty claims               |  |   | 914  |  
|Warranty claims charged against the reserve |  |   | (932 | )
|                                            |  |   |     
|Warranty reserve, October 1, 2005           |  | $ | 622  |  
|                                            |  |   |     



|   |               
|-- | --------------
|9. | LINE OF CREDIT







|    |                                
|--- | -------------------------------
|10. | PUBLIC OFFERING OF COMMON STOCK



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|11. | INCOME TAXES



|                     |         |      |       |       |      |   |       |       |   |   |       |       |  
|-------------------- | ------- | ---- | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                     |         | 2005 |       |       | 2004 |   |       | 2003  |  
|                     |         |      |       |       |      |   |       |       |  
|Current              |         |      |       |       |      |   |       |       |   |   |       |      
|                     | Federal |      | $     | 1,066 |      |   | $     | 803   |   |   | $     | 4,252 |  
|                     | State   |      |       | 291   |      |   |       | 144   |   |   |       | 845   |  
|                     |         |      |       |       |      |   |       |       |  
|Total current        |         |      | 1,357 |       |      |   | 947   |       |   |   | 5,097 |      
|                     |         |      |       |       |      |   |       |       |  
|Deferred             |         |      |       |       |      |   |       |       |   |   |       |      
|                     | Federal |      |       | 818   |      |   |       | 1,190 |   |   |       | (62   | )
|                     | State   |      |       | (148  | )    |   |       | (2    | ) |   |       | (64   | )
|                     |         |      |       |       |      |   |       |       |  
|Total deferred       |         |      | 670   |       |      |   | 1,188 |       |   |   | (126  | )    
|                     |         |      |       |       |      |   |       |       |  
|Income tax provision |         | $    | 2,027 |       |      | $ | 2,135 |       |   | $ | 4,971 |      
|                     |         |      |       |       |      |   |       |       |  



|                                                         |  |      |       |   |      |   |       |      |  |   |       |  
|-------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                         |  | 2005 |       |   | 2004 |   |       | 2003 | 
|                                                         |  |      |       |   |      |   |       |      | 
|Income tax expense (benefit) provision at statutory rate |  | $    | (513  | ) |      | $ | 2,361 |      |  | $ | 5,141 |  
|State taxes, net of federal benefit                      |  |      | (56   | ) |      |   | 257   |      |  |   | 559   |  
|Federal and state credits                                |  |      | (816  | ) |      |   | (415  | )    |  |   | (376  | )
|Extraterritorial income exclusion                        |  |      | (139  | ) |      |   | (30   | )    |  |   | (377  | )
|Non-deductible goodwill impairment                       |  |      | 4,311 |   |      |   |      |      |  |   |      |  
|Adjustments related to prior year accruals               |  |      | (786  | ) |      |   |      |      |  |   |      |  
|Other                                                    |  |      | 26    |   |      |   | (38   | )    |  |   | 24    |  
|                                                         |  |      |       |   |      |   |       |      | 
|Income tax provision                                     |  | $    | 2,027 |   |      | $ | 2,135 |      |  | $ | 4,971 |  
|                                                         |  |      |       |   |      |   |       |      | 

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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |                                        |            |        |        |            |   |        |        |  
|------------------------- | -------------------------------------- | ---------- | ------ | ------ | ---------- | - | ------ | ------ | -
|                          |                                        | October 1, |        |        | October 2, |  
|                          |                                        | 2005       |        |        | 2004       |  
|                          |                                        |            |        |        |            |  
|Deferred tax assets:      |                                        |            |        |        |            |   |        |       
|                          | Tax credits                            |            | $      | 200    |            |   | $      | 1,070  |  
|                          | Allowance for doubtful accounts        |            |        | 98     |            |   |        | 220    |  
|                          | Inventories                            |            |        | 2,902  |            |   |        | 3,146  |  
|                          | Deferred revenue                       |            |        | 703    |            |   |        | 566    |  
|                          | Accrued expenses and other liabilities |            |        | 550    |            |   |        | 305    |  
|                          | Pension                                |            |        | 82     |            |   |        | 107    |  
|                          | Net operating loss carry forwards      |            |        | 1,359  |            |   |        | 1,836  |  
|                          |                                        |            |        |        |            |  
|Deferred tax assets       |                                        |            | 5,894  |        |            |   | 7,250  |       
|                          |                                        |            |        |        |            |  
|Deferred tax liabilities: |                                        |            |        |        |            |   |        |       
|                          | Property, plant, and equipment         |            |        | (1,029 | )          |   |        | (1,510 | )
|                          | Intangible assets                      |            |        | (1,908 | )          |   |        | (2,146 | )
|                          | Other                                  |            |        | (174   | )          |   |        | (117   | )
|                          |                                        |            |        |        |            |  
|Deferred tax liabilities  |                                        |            | (3,111 | )      |            |   | (3,773 | )     
|                          |                                        |            |        |        |            |  
|Net deferred tax asset    |                                        | $          | 2,783  |        |            | $ | 3,477  |       
|                          |                                        |            |        |        |            |  











|    |              
|--- | -------------
|12. | BENEFIT PLANS



| |                     
| | --------------------
| | Defined Benefit Plan



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                     |                                                    |                |       |       |            |   |       |       |  
|---------------------------------------------------- | -------------------------------------------------- | -------------- | ----- | ----- | ---------- | - | ----- | ----- | -
|                                                     |                                                    | October 1,     |       |       | October 2, |  
|                                                     |                                                    | 2005           |       |       | 2004       |  
|                                                     |                                                    |                |       |       |            |  
|                                                     |                                                    | (In thousands) |      
|Defined Benefit Plan                                 |                                                    |                |       |       |            |   |       |      
|Reconciliation of Projected Benefit Obligation       |                                                    |                |       |       |            |   |       |      
|Benefit obligation beginning of year                 |                                                    | $              | 3,085 |       |            | $ | 3,087 |      
|                                                     | Service cost                                       |                |       | 61    |            |   |       | 56    |  
|                                                     | Interest cost                                      |                |       | 183   |            |   |       | 172   |  
|                                                     | Benefits paid                                      |                |       | (154  | )          |   |       | (142  | )
|                                                     | Actuarial (gain) loss                              |                |       | 188   |            |   |       | (88   | )
|                                                     |                                                    |                |       |       |            |  
|Benefit obligation end of year                       |                                                    | $              | 3,363 |       |            | $ | 3,085 |      
|                                                     |                                                    |                |       |       |            |  
|Reconciliation of Fair Value of Plan Assets          |                                                    |                |       |       |            |   |       |      
|                                                     | Plan assets at fair market value beginning of year |                | $     | 2,610 |            |   | $     | 2,542 |  
|                                                     | Actual return on plan assets                       |                |       | 288   |            |   |       | 222   |  
|                                                     | Employer contributions                             |                |       | 80    |            |   |       |      |  
|                                                     | Benefits paid                                      |                |       | (154  | )          |   |       | (142  | )
|                                                     | Expenses                                           |                |       | (13   | )          |   |       | (12   | )
|                                                     |                                                    |                |       |       |            |  
|Plan assets at fair market value end of year         |                                                    | $              | 2,811 |       |            | $ | 2,610 |      
|                                                     |                                                    |                |       |       |            |  
|Funded Status                                        |                                                    | $              | (552  | )     |            | $ | (475  | )    
|                                                     | Unrecognized prior service cost                    |                |       | 283   |            |   |       | 199   |  
|                                                     | Unrecognized actuarial loss                        |                |       | 264   |            |   |       | 323   |  
|                                                     |                                                    |                |       |       |            |  
|Net amount recognized                                |                                                    | $              | (5    | )     |            | $ | 47    |      
|                                                     |                                                    |                |       |       |            |  
|Amounts recognized in the consolidated balance sheet |                                                    |                |       |       |            |   |       |      
|                                                     | Accrued benefit liability                          |                | $     | (552  | )          |   | $     | (475  | )
|                                                     | Intangible assets                                  |                |       | 283   |            |   |       | 199   |  
|                                                     | Accumulated other comprehensive loss               |                |       | 264   |            |   |       | 323   |  
|                                                     |                                                    |                |       |       |            |  
|Net amount recognized                                |                                                    | $              | (5    | )     |            | $ | 47    |      
|                                                     |                                                    |                |       |       |            |  

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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                        |                                               |                |     |      |      |   |     |      |   |   |     |      |  
|--------------------------------------- | --------------------------------------------- | -------------- | --- | ---- | ---- | - | --- | ---- | - | - | --- | ---- | -
|                                        |                                               | 2005           |     |      | 2004 |   |     | 2003 |  
|                                        |                                               |                |     |      |      |   |     |      |  
|                                        |                                               | (In thousands) |    
|Components of Net Periodic Benefit Cost |                                               |                |     |      |      |   |     |      |   |   |     |     
|                                        | Service cost                                  |                | $   | 87   |      |   | $   | 83   |   |   | $   | 82   |  
|                                        | Interest cost                                 |                |     | 183  |      |   |     | 172  |   |   |     | 175  |  
|                                        | Expected return on market-related plan assets |                |     | (177 | )    |   |     | (172 | ) |   |     | (136 | )
|                                        | Amortization of prior service cost            |                |     | 39   |      |   |     | 27   |   |   |     | 35   |  
|                                        | Recognized actuarial loss                     |                |     |     |      |   |     | 11   |   |   |     | 14   |  
|                                        |                                               |                |     |      |      |   |     |      |  
|Net periodic benefit cost               |                                               | $              | 132 |      |      | $ | 121 |      |   | $ | 170 |     
|                                        |                                               |                |     |      |      |   |     |      |  

|                                                                                    |  |                |     |   |      |   |      |      |  |   |    | 
|----------------------------------------------------------------------------------- |  | -------------- | --- | - | ---- | - | ---- | ---- |  | - | -- | 
|                                                                                    |  | 2005           |     |   | 2004 |   |      | 2003 | 
|                                                                                    |  |                |     |   |      |   |      |      | 
|                                                                                    |  | (In thousands) |    
|Additional Information                                                              |  |                |     |   |      |   |      |      |  |   |    | 
|Increase (decrease) in minimum liability included in other
    comprehensive income |  | $              | (35 | ) |      | $ | (109 | )    |  | $ | 71 | 
|                                                                                    |  |                |     |   |      |   |      |      | 



|                               |  |            |      |   |            |  |      |  
|------------------------------ |  | ---------- | ---- | - | ---------- |  | ---- | -
|                               |  | October 1, |      |   | October 2, | 
|                               |  | 2005       |      |   | 2004       | 
|                               |  |            |      |   |            | 
|Weighted-Average Assumptions   |  |            |      |   |            |  |      |  
|Discount Rate                  |  |            | 5.65 | % |            |  | 5.92 | %
|Expected return on plan assets |  |            | 7.00 | % |            |  | 7.00 | %





|                          |  |      |       |  |      |   |       | 
|------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                          |  | 2005 |       |  | 2004 |  
|                          |  |      |       |  |      |  
|Asset Category            |  |      |       |  |      |   |       | 
|Cash and cash equivalents |  | $    | 102   |  |      | $ | 223   | 
|Fixed income mutual funds |  |      | 1,109 |  |      |   | 1,018 | 
|Equity mutual funds       |  |      | 1,594 |  |      |   | 1,364 | 
|Other                     |  |      | 6     |  |      |   | 5     | 
|                          |  |      |       |  |      |  
|Total                     |  | $    | 2,811 |  |      | $ | 2,610 | 
|                          |  |      |       |  |      |  

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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                |  |          |       | 
|--------------- |  | -------- | ----- | 
|                |  | Pension  |      
|                |  | Benefits |      
|                |  |          |      
|2006            |  | $        | 168   | 
|2007            |  |          | 182   | 
|2008            |  |          | 197   | 
|2009            |  |          | 195   | 
|2010            |  |          | 207   | 
|Years 2011-2015 |  |          | 1,275 | 



| |            
| | -----------
| | 401(k) Plan





|    |                                                  
|--- | -------------------------------------------------
|13. | STOCK OPTIONS, WARRANTS, AND STOCK PURCHASE PLANS



| |                    
| | -------------------
| | Stock Options Plans







72



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          |  |           |   |  |   |      | 
|---------------------------------------------------------------------- |  | ------ | --------- | -------- | -------- | - | ---- | ------ | -------- |  | --------- | - |  | -------- | ---- |  | -------- |  | --------- | - |  | - | ---- | 
|                                                                       |  | 2005   |           |          | 2004     |   |      | 2003   |         
|                                                                       |  |        |           |          |          |   |      |        |         
|                                                                       |  |        |           | Weighted |          |   |      |        | Weighted |  |           |   |  | Weighted |     
|                                                                       |  | Shares |           |          | Average  |   |      | Shares |          |  | Average   |   |  | Shares   |      |  | Average  | 
|                                                                       |  | Under  |           |          | Exercise |   |      | Under  |          |  | Exercise  |   |  | Under    |      |  | Exercise | 
|                                                                       |  | Option |           |          | Price    |   |      | Option |          |  | Price     |   |  | Option   |      |  | Price    | 
|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          | 
|Beginning balance outstanding                                          |  |        | 2,047,635 |          |          | $ | 4.43 |        |          |  | 2,215,382 |   |  | $        | 4.15 |  |          |  | 2,678,032 |   |  | $ | 3.67 | 
|Issued in IDS acquisition                                              |  |        |          |          |          |   |     |        |          |  |          |   |  |          |     |  |          |  | 469,277   |   |  | $ | 3.90 | 
|Granted                                                                |  |        | 325,000   |          |          |   | 6.11 |        |          |  | 179,000   |   |  |          | 7.33 |  |          |  | 155,132   |   |  |   | 9.11 | 
|Canceled                                                               |  |        | (56,362   | )        |          |   | 7.55 |        |          |  | (114,149  | ) |  |          | 7.05 |  |          |  | (123,050  | ) |  |   | 7.16 | 
|Exercised                                                              |  |        | (108,086  | )        |          |   | 2.36 |        |          |  | (232,598  | ) |  |          | 2.76 |  |          |  | (964,009  | ) |  |   | 2.31 | 
|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          | 
|Ending balance outstanding                                             |  |        | 2,208,187 |          |          | $ | 4.70 |        |          |  | 2,047,635 |   |  | $        | 4.43 |  |          |  | 2,215,382 |   |  | $ | 4.15 | 
|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          | 
|Options exercisable at year end                                        |  |        | 2,070,690 |          |          | $ | 4.58 |        |          |  | 1,690,859 |   |  | $        | 3.92 |  |          |  | 1,598,233 |   |  | $ | 3.45 | 
|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          | 
|Shares available for future grant                                      |  |        | 1,166,739 |          |          |   |      |        |          |  | 1,441,711 |   |  |          |      |  |          |  | 1,511,839 |   |  |   |      | 
|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          | 
|Weighted average fair value of all options granted during the
    year |  |        |           |          |          | $ | 6.11 |        |          |  |           |   |  | $        | 7.33 |  |          |  |           |   |  | $ | 6.55 | 
|                                                                       |  |        |           |          |          |   |      |        |          |  |           |   |  |          |      |  |          | 



|                         |  |                     |           |          |                     |   |          |                  |  |  |             |          |         |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | -------- | ------------------- | - | -------- | ---------------- |  |  | ----------- | -------- | ------- | -------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |          | Options Exercisable |  
|                         |  |                     |           |          |                     |  
|                         |  |                     |           | Weighted |                     |   | Weighted |                  |  |  |             | Weighted |        
|                         |  | Shares              |           |          | Average             |   |          | Average          |  |  |             |          | Average |         
|                         |  | Under               |           |          | Exercise            |   |          | Remaining        |  |  | Exercisable |          |         | Exercise |          
|                         |  | Option              |           |          | Price               |   |          | Contractual Life |  |  | Shares      |          |         | Price    |          
|                         |  |                     |           |          |                     |   |          |                  |  |  |             |          |         |          |          
|Range of exercise price: |  |                     |           |          |                     |   |          |                  |  |  |             |          |         |          |           |  |  |   |       | 
|$ 0.0000 - $ 1.6000      |  |                     | 263,982   |          |                     | $ | 1.13     |                  |  |  | 3.1         |          |         |          | 263,982   |  |  | $ | 1.13  | 
|$ 1.6001 - $ 3.2000      |  |                     | 485,852   |          |                     | $ | 2.51     |                  |  |  | 3.2         |          |         |          | 485,852   |  |  | $ | 2.51  | 
|$ 3.2001 - $ 4.8000      |  |                     | 517,394   |          |                     | $ | 3.83     |                  |  |  | 5.7         |          |         |          | 517,394   |  |  | $ | 3.83  | 
|$ 4.8001 - $ 6.4000      |  |                     | 217,952   |          |                     | $ | 5.82     |                  |  |  | 8.0         |          |         |          | 142,952   |  |  | $ | 6.17  | 
|$ 6.4001 - $ 8.0000      |  |                     | 517,750   |          |                     | $ | 6.98     |                  |  |  | 7.6         |          |         |          | 465,252   |  |  | $ | 6.89  | 
|$ 8.0001 - $ 9.6000      |  |                     | 102,132   |          |                     | $ | 8.67     |                  |  |  | 7.6         |          |         |          | 92,133    |  |  | $ | 8.67  | 
|$ 9.6001 - $11.2000      |  |                     | 91,125    |          |                     | $ | 10.60    |                  |  |  | 5.1         |          |         |          | 91,125    |  |  | $ | 10.60 | 
|$11.2001 - $12.8000      |  |                     | 12,000    |          |                     | $ | 12.19    |                  |  |  | 7.9         |          |         |          | 12,000    |  |  | $ | 12.19 | 
|                         |  |                     |           |          |                     |   |          |                  |  |  |             |          |         |          |          
|                         |  |                     | 2,208,187 |          |                     |   |          |                  |  |  |             |          |         |          | 2,070,690 |  |  |   |       | 
|                         |  |                     |           |          |                     |   |          |                  |  |  |             |          |         |          |          



| |                     
| | --------------------
| | Stock Purchase Plans



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|14. | COMMITMENTS AND CONTINGENCIES





McJimsey v. White Electronic Designs
Corporation, et al. Afework v. White Electronic Designs Corporation,
et al Anders v. White Electronic Designs Corporation,
et al. Sammarco v. White Electronic Designs Corporation,
et al.


Dodt v. Shokrgozar,
et al. Christ v. Shokrgozar, et al.


74



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                              
|--- | -----------------------------
|15. | CONCENTRATIONS OF CREDIT RISK









|    |                         
|--- | ------------------------
|16. | SHAREHOLDERS RIGHTS PLAN





|    |                                   
|--- | ----------------------------------
|17. | FINANCIAL DATA BY BUSINESS SEGMENT





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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




















|                         |  |      |         |  |      |   |         |      |  |   |         | 
|------------------------ |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                         |  | 2005 |         |  | 2004 |   |         | 2003 | 
|                         |  |      |         |  |      |   |         |      | 
|United States of America |  | $    | 96,295  |  |      | $ | 90,529  |      |  | $ | 85,637  | 
|Europe and Middle East   |  |      | 10,412  |  |      |   | 11,360  |      |  |   | 11,931  | 
|Asia Pacific             |  |      | 8,076   |  |      |   | 4,765   |      |  |   | 15,760  | 
|Other                    |  |      | 2,250   |  |      |   | 2,308   |      |  |   | 206     | 
|                         |  |      |         |  |      |   |         |      | 
|Total Sales              |  | $    | 117,033 |  |      | $ | 108,962 |      |  | $ | 113,534 | 
|                         |  |      |         |  |      |   |         |      | 

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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


OPERATIONS BY BUSINESS SEGMENTS


|                                            |  |                           |         |   |      |   |         |      |  |   |         | 
|------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | 
|                                            |  | 2005                      |         |   | 2004 |   |         | 2003 | 
|                                            |  |                           |         |   |      |   |         |      | 
|                                            |  | (In thousands of dollars) |        
|Net sales                                   |  |                           |         |   |      |   |         |      |  |   |         | 
|Microelectronics                            |  | $                         | 64,083  |   |      | $ | 60,691  |      |  | $ | 61,433  | 
|Display                                     |  |                           | 52,948  |   |      |   | 48,271  |      |  |   | 52,101  | 
|                                            |  |                           |         |   |      |   |         |      | 
|Total net sales                             |  | $                         | 117,031 |   |      | $ | 108,962 |      |  | $ | 113,534 | 
|                                            |  |                           |         |   |      |   |         |      | 
|Income (loss) before tax(1)                 |  |                           |         |   |      |   |         |      |  |   |         | 
|Microelectronics                            |  | $                         | 3,133   |   |      | $ | 8,477   |      |  | $ | 12,568  | 
|Display                                     |  |                           | (4,641  | ) |      |   | (1,535  | )    |  |   | 2,553   | 
|                                            |  |                           |         |   |      |   |         |      | 
|Total income (loss) before tax              |  | $                         | (1,508  | ) |      | $ | 6,942   |      |  | $ | 15,121  | 
|                                            |  |                           |         |   |      |   |         |      | 
|Identifiable assets                         |  |                           |         |   |      |   |         |      |  |   |         | 
|Microelectronics                            |  | $                         | 38,780  |   |      | $ | 44,760  |      |  | $ | 43,902  | 
|Display                                     |  |                           | 26,853  |   |      |   | 37,330  |      |  |   | 35,271  | 
|General corporate                           |  |                           | 55,635  |   |      |   | 42,810  |      |  |   | 40,633  | 
|                                            |  |                           |         |   |      |   |         |      | 
|Total identifiable assets                   |  | $                         | 121,268 |   |      | $ | 124,900 |      |  | $ | 119,806 | 
|                                            |  |                           |         |   |      |   |         |      | 
|Capital expenditures                        |  |                           |         |   |      |   |         |      |  |   |         | 
|Microelectronics                            |  | $                         | 3,822   |   |      | $ | 1,125   |      |  | $ | 2,533   | 
|Display                                     |  |                           | 568     |   |      |   | 1,175   |      |  |   | 1,329   | 
|                                            |  |                           |         |   |      |   |         |      | 
|Total capital expenditures                  |  | $                         | 4,390   |   |      | $ | 2,300   |      |  | $ | 3,862   | 
|                                            |  |                           |         |   |      |   |         |      | 
|Depreciation and amortization expense       |  |                           |         |   |      |   |         |      |  |   |         | 
|Microelectronics                            |  | $                         | 2,304   |   |      | $ | 2,467   |      |  | $ | 2,992   | 
|Display                                     |  |                           | 1,763   |   |      |   | 1,949   |      |  |   | 1,854   | 
|                                            |  |                           |         |   |      |   |         |      | 
|Total depreciation and amortization expense |  | $                         | 4,067   |   |      | $ | 4,416   |      |  | $ | 4,846   | 
|                                            |  |                           |         |   |      |   |         |      | 






|    |                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Fiscal year 2005 reflects a non-cash goodwill impairment charge
    of approximately $7.1 million for the microelectronic
    segment and $4.3 million for the display segment in
    connection with the annual review of goodwill for impairment.



|    |                                              
|--- | ---------------------------------------------
|18. | SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

|                                  |  |                                                 |         |   |          |   |        |       |  |   |        |  |  |       |        |  |  |   |        | 
|--------------------------------- |  | ----------------------------------------------- | ------- | - | -------- | - | ------ | ----- |  | - | ------ |  |  | ----- | ------ |  |  | - | ------ | 
|                                  |  | Fiscal 2005                                     |        
|                                  |  |                                                 |        
|                                  |  | Year                                            |         |   | Oct 1(1) |   |        | Jul 2 |  |   | Apr 2  |  |  | Jan 1 |       
|                                  |  |                                                 |         |   |          |   |        |       |  |   |        |  |  |       |       
|                                  |  | (In thousand of dollars, except per share data) |        
|Net sales                         |  | $                                               | 117,031 |   |          | $ | 29,976 |       |  | $ | 30,329 |  |  | $     | 27,860 |  |  | $ | 28,866 | 
|Gross profit                      |  | $                                               | 34,733  |   |          | $ | 9,373  |       |  | $ | 9,170  |  |  | $     | 8,653  |  |  | $ | 7,537  | 
|Income (loss) before income taxes |  | $                                               | (1,508  | ) |          | $ | (8,164 | )     |  | $ | 2,747  |  |  | $     | 2,212  |  |  | $ | 1,697  | 
|Net income (loss)                 |  | $                                               | (3,535  | ) |          | $ | (8,321 | )     |  | $ | 2,070  |  |  | $     | 1,506  |  |  | $ | 1,210  | 
|Earnings (loss) per share-basic   |  | $                                               | (0.14   | ) |          | $ | (0.34  | )     |  | $ | 0.08   |  |  | $     | 0.06   |  |  | $ | 0.05   | 
|Earnings (loss) per share-diluted |  | $                                               | (0.14   | ) |          | $ | (0.34  | )     |  | $ | 0.08   |  |  | $     | 0.06   |  |  | $ | 0.05   | 

77



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WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                           |  |             |         |  |           |   |        |       |  |   |        |  |  |       |        |  |  |   |        | 
|-------------------------- |  | ----------- | ------- |  | --------- | - | ------ | ----- |  | - | ------ |  |  | ----- | ------ |  |  | - | ------ | 
|                           |  | Fiscal 2004 |        
|                           |  |             |        
|                           |  | Year        |         |  | Oct 2 (2) |   |        | Jul 3 |  |   | Apr 3  |  |  | Jan 3 |       
|                           |  |             |         |  |           |   |        |       |  |   |        |  |  |       |       
|Net sales                  |  | $           | 108,962 |  |           | $ | 28,773 |       |  | $ | 25,390 |  |  | $     | 28,944 |  |  | $ | 25,855 | 
|Gross profit               |  | $           | 31,665  |  |           | $ | 7,693  |       |  | $ | 6,933  |  |  | $     | 8,510  |  |  | $ | 8,529  | 
|Income before income taxes |  | $           | 6,941   |  |           | $ | 1,278  |       |  | $ | 893    |  |  | $     | 2,324  |  |  | $ | 2,446  | 
|Net income                 |  | $           | 4,807   |  |           | $ | 905    |       |  | $ | 565    |  |  | $     | 1,663  |  |  | $ | 1,674  | 
|Earnings per share-basic   |  | $           | 0.20    |  |           | $ | 0.04   |       |  | $ | 0.02   |  |  | $     | 0.07   |  |  | $ | 0.07   | 
|Earnings per share-diluted |  | $           | 0.19    |  |           | $ | 0.04   |       |  | $ | 0.02   |  |  | $     | 0.07   |  |  | $ | 0.07   | 






|    |                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During the quarter ended October 1, 2005, the Company
    recorded a non-cash goodwill impairment charge of
    $11.4 million and a $0.8 million income tax
    adjustment. The goodwill impairment did not have a corresponding
    income tax benefit.                                                        
|   
|(2) | During the quarter ended October 2, 2004, the Company
    incurred $0.3 million in legal fees related to the
    shareholder litigation, $0.2 million in fixed asset
    write-offs, and $0.3 million in the reserve of an accounts
    receivable pertaining to a display shipment to a commercial
    company.

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Schedule II


White Electronic Designs Corporation and Subsidiaries


Valuation and Qualifying Accounts and Reserves




|                    |                    |            |   |          |               |  |   |       |   |  |            |         |      |           |   |        |   |  |   |       | 
|------------------- | ------------------ | ---------- | - | -------- | ------------- |  | - | ----- | - |  | ---------- | ------- | ---- | --------- | - | ------ | - |  | - | ----- | 
|                    |                    |            |   | Charged/ |               |  |   |       |   |  |           
|                    |                    | Balance at |   |          | (Credited) to |  |   |       |   |  |            | Balance |     
|                    |                    | Beginning  |   |          | Costs and     |  |   |       |   |  |            | at End  |     
|Fiscal Year Ended   |                    | of Period  |   |          | Expenses      |  |   | Other |   |  | Deductions |         |      | of Period |  
|                    |                    |            |   |          |               |  |   |       |   |  |            |         |      |           |  
|Accounts Receivable |                    |            |   |          |               |  |   |       |   |  |            |         |      |           |   |        |   |  |   |      
|                    | October 1, 2005    |            | $ | 560      |               |  | $ | (36   | ) |  | $          |        |      |           | $ | (274   | ) |  | $ | 250   | 
|                    | October 2, 2004    |            | $ | 397      |               |  | $ | 333   |   |  | $          |        |      |           | $ | (170   | ) |  | $ | 560   | 
|                    | September 27, 2003 |            | $ | 626      |               |  | $ | (226  | ) |  | $          | 142     | (3)  |           | $ | (145   | ) |  | $ | 397   | 
|Inventories         |                    |            |   |          |               |  |   |       |   |  |            |         |      |           |   |        |   |  |   |      
|                    | October 1, 2005    |            | $ | 4,350    |               |  | $ | 1,455 |   |  | $          | (659    | )(1) |           | $ | (1,864 | ) |  | $ | 3,282 | 
|                    | October 2, 2004    |            | $ | 4,858    |               |  | $ | 1,011 |   |  | $          | (643    | )(2) |           | $ | (876   | ) |  | $ | 4,350 | 
|                    | September 27, 2003 |            | $ | 4,876    |               |  | $ | 537   |   |  | $          | 1,076   | (3)  |           | $ | (1,631 | ) |  | $ | 4,858 | 






|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Relates primarily to sales of parts previously reserved for.                                                         
|   
|(2) | Relates primarily to the closure of the Massachusetts facility
    and the related disposition/transfer of inventory.
|   
|(3) | Addition related to IDS acquisition.                                                                                 

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Exhibit Index


|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                        
|------- | ---- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 2    | .1          |  | Agreement and Plan of Merger dated May 3, 1998 by and among
    Bowmar Instrument Corporation and Electronic Designs, Inc. and
    Bravo Acquisition Subsidiary, Inc. (incorporated herein by
    reference to Exhibit 2 to the current Report on
    Form 8-K filed on May 6, 1998.)                                                                  
|        | 2    | .2          |  | Amendment to Agreement and Plan of Merger dated June 9,
    1998 (incorporated herein by reference to Exhibit 2.1A to
    the Registration Statement on Form S-4 filed on
    June 11, 1998, Registration No. 333-56565).                                                                                                                              
|       
|        | 2    | .3          |  | Amendment to Agreement and Plan of Merger dated August 24,
    1998 (incorporated herein by reference to Exhibit 2.1B to
    the Registration Statement on Form S-4, filed on
    September 2, 1998, Registration No. 333-56565).                                                                                                                      
|       
|        | 2    | .4          |  | Agreement and Plan of Reorganization dated as of
    January 22, 2003 by and among White Electronic Designs
    Corporation, IDS Reorganization Corp., and Interface Data
    Systems, Inc. (incorporated herein by reference to
    Exhibit 2.1 to the Current Report on Form 8-K filed
    January 24, 2003.                                         
|       
|        | 2    | .5          |  | Agreement and Plan of Reorganization dated January 29,
    2001, by and among White Electronic Designs Corporation, PV
    Acquisition Corporation, Panelview, Inc. and Panelview Partners
    L.P. (incorporated herein by reference to Exhibit 10.29 to
    the Companys Quarterly Report on Form 10-Q, filed on
    February 13, 2001).            
|       
|        | 3    | .1          |  | Amended and Restated Articles of Incorporation of White
    Electronic Designs Corporation (incorporated herein by reference
    to Exhibit 3.1 on Form 10-K filed December 24,
    1998).                                                                                                                                                             
|       
|        | 3    | .2          |  | Amended and Restated Code of By-Laws of White Electronic Designs
    Corporation (incorporated herein by reference to
    Exhibit 3.1 on Form S-3 filed June 2, 2003).                                                                                                                                                                                 
|       
|        | 4    | .1          |  | Shareholder Rights Agreement, effective December 6, 1996,
    (incorporated herein by reference to Exhibit 5 on
    Form 8-K, filed on December 19, 1996).                                                                                                                                                                                             
|       
|        | 4    | .2          |  | Amendment No. 1 to Rights Agreement, effective as of
    May 3, 1998 (incorporated herein by reference to
    Exhibit 4.3 to the Registration Statement on Form S-4,
    filed on June 11, 1998, Registration No. 333-56565).                                                                                                                          
|       
|        | 10   | .1          |  | Agreement to be Bound by Registration Rights Agreements, dated
    as of May 3, 1998, by and between Bowmar Instrument
    Corporation and Electronic Designs, Inc. (incorporated herein by
    reference to Exhibit 10.1 to the Registration Statement on
    Form S-4, filed on June 11, 1998, Registration
    No. 333-56565).                      
|       
|        | **10 | .2          |  | Agreement to be Bound by Severance Agreements and Employment
    Agreement, dated as of May 3, 1998, by and between Bowmar
    Instrument Corporation and Electronic Designs, Inc.
    (incorporated herein by reference to Exhibit 10.2 to the
    Registration Statement on Form S-4, filed on June 11,
    1998, Registration No. 333-56565).       
|       
|        | **10 | .3          |  | 1994 Flexible Stock Plan (incorporated herein by reference to
    Exhibit A to the Companys definitive Proxy Statement
    prepared in connection with the 1994 Annual Meeting of
    Shareholders).                                                                                                                                                  
|       
|        | **10 | .4          |  | Amendment to Companys 1994 Flexible Stock Plan, effective
    May 7, 2001 (incorporated herein by reference to
    Exhibit 99 to the Registration Statement on Form S-8,
    filed on May 9, 2001, Registration No. 333-60544).                                                                                                                       
|       
|        | 10   | .5          |  | Revolving Credit and Term Loan Agreement by and between Bank
    One, Texas and White Electronic Designs Corporation, an Indiana
    Corporation, dated January 7, 2000. (Incorporated herein by
    reference to Exhibit 10.27 to the Companys 10-Q for
    the quarter ended January 1, 2000).                                                      
|       
|        | 10   | .6          |  | First Amendment to Revolving Credit Agreement by and between
    Bank One effective as of June 3, 2000; Promissory Note
    effective June 3, 2000, Notice of Final Agreement effective
    June 3, 2000 (incorporated herein by reference to
    Exhibit 10.28 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended July 1, 2000).
|       
|        | 10   | .7          |  | Third Modification agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective March 28, 2002
    (incorporated herein by reference to Exhibit 10.38 to the
    Companys Quarterly Report on Form 10-Q filed on
    May 13, 2002).                                                                                        

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|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ---- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|       
|        | 10   | .8          |  | Fourth Modification agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective January 13, 2003
    (incorporated herein by reference to Exhibit 10.41 to the
    Companys Quarterly Report on Form 10-Q filed on
    February 11, 2003).                                                                                                                                                                                           
|       
|        | 10   | .9          |  | Fifth Modification agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective March 13, 2003
    (incorporated herein by reference to Exhibit 10.42 to the
    Companys Quarterly Report on Form 10-Q filed on
    May 13, 2003).                                                                                                                                                                                                   
|       
|        | **10 | .10         |  | White Electronic Designs Corporation 2001 Director Stock Plan
    (incorporated herein by reference to Exhibit 99 to the
    Registration Statement on Form S-8, filed on May 9,
    2001, Registration No. 333-60536).                                                                                                                                                                                                                                           
|       
|        | **10 | .11         |  | Amendment to Companys Stock Option Plan for Non-Employee
    Directors (incorporated herein by reference to Exhibit 99
    to the Registration Statement on Form S-8, filed on
    May 9, 2001, Registration No. 333-60548).                                                                                                                                                                                                                                     
|       
|        | **10 | .12         |  | White Electronic Designs Corporation 2000 Broad Based Employee
    Stock Option Plan (incorporated herein by reference to
    Exhibit 99 to the Registration Statement on Form S-8,
    filed on May 9, 2001, Registration No. 333-60542).                                                                                                                                                                                                                        
|       
|        | **10 | .13         |  | Executive Employment Agreement made as of December 14, 2004
    between White Electronic Designs Corporation and Hamid R.
    Shokrgozar (incorporated by reference to Exhibit 10.16 to
    the Companys Annual Report on Form 10-K filed on
    December 16, 2004).                                                                                                                                                                                             
|       
|        | **10 | .14         |  | Non-Qualified Stock Option Agreement between White Electronic
    Designs Corporation and Hamid Shokrgozar dated November 10,
    1999 (incorporated herein by reference to Exhibit 10.42 to
    the Companys Annual Report on Form 10-K filed on
    December 23, 2002).                                                                                                                                                                                        
|       
|        | 10   | .15         |  | Industrial Real Estate Lease dated February 4, 1997 between
    Bowmar Instrument Corp., as tenant, and Allred Phoenix
    Properties, L.L.C., as landlord (incorporated herein by
    reference to Exhibit 10.5 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    September 27, 1997).                                                                                                                                               
|       
|        | 10   | .16         |  | Sixth Modification Agreement between Bank One N.A. and White
    Electronic Designs Corporation, effective March 19, 2004
    (incorporated here in by reference to Exhibit 10.1 on
    Form 10-Q, filed on May 14 2004).                                                                                                                                                                                                                                         
|       
|        | 10   | .17         |  | First Amendment to certain Industrial Real Estate Lease dated
    February 4, 1997 between White Electronic Designs
    Corporation (as successor-in-interest of Bowmar Instrument
    Corp.) and Gus Enterprises - XII, L.L.C. (as
    successor-in-interest of Allred Phoenix Properties, L.L.C.)
    dated November 5, 2004 (incorporated herein by reference to
    Exhibit 10.21 to the Companys Annual Report on
    Form 10-K filed on December 16, 2004).
|       
|        | *21  | .1          |  | Subsidiaries of White Electronic Designs Corporation.                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | *23  | .1          |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | *31  | .1          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | *31  | .2          |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | *32  | .1          |  | Certification Pursuant to 18 U.S. C. Section 1350, As
    Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                                                                                                  
|       
|        | *32  | .2          |  | Certification Pursuant to 18 U.S. C. Section 1350, As
    Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                                                                                                  






|  |                
|- | ---------------
|* | Filed herewith.



|   |                                                       
|-- | ------------------------------------------------------
|** | Management compensatory contract, plan or arrangement.

81