<PAGE>

  As filed with the Securities and Exchange Commission on September 27, 1999.
                                                              File No. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  -----------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                                  -----------

                             MILLITECH CORPORATION
             (Exact name of registrant as specified in its charter)
      Massachusetts                   3679                   04-2751645
     (State or other      (Primary Standard Industrial    (I.R.S. Employer
     jurisdiction of      Classification Code Number)   Identification No.)
     incorporation or
      organization)

                            20 Industrial Drive East
                         South Deerfield, MA 01373-0109
                                 (413) 665-8551
  (Address, including ZIP code, and telephone number, including area code, of
                   registrant's principal executive offices)
                               John L. Youngblood
                     President and Chief Executive Officer
                             MILLITECH CORPORATION
                            20 Industrial Drive East
                         South Deerfield, MA 01373-0109
                                 (413) 665-8551
 (Name, address, including ZIP code, and telephone number, including area code,
                             of agent for service)
                                   Copies to:
         DAVID L. LOUGEE, ESQ.                   WILLIAM R. KOLB, ESQ.
       JEFFREY L. DONALDSON, ESQ.                JOHN D. HANCOCK, ESQ.
 Mirick, O'Connell, DeMallie & Lougee,          Foley, Hoag & Eliot llp
                  llp                            One Post Office Square
            100 Front Street                        Boston, MA 02109
  Worcester, Massachusetts 01608-1477                (617) 832-1000
             (508) 791-8500
                                  -----------
   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
                                  -----------
   If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
   If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
   If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
                                  -----------
                        CALCULATION OF REGISTRATION FEE
<TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<CAPTION>
                                                         Proposed
                                                          maximum
                                                         aggregate   Amount of
                Title of each class of                   offering   registration
              securities to be registered                price(1)       fee
--------------------------------------------------------------------------------
<S>                                                     <C>         <C>
Common Stock, $.01 par value..........................  $72,450,000  $20,141.10
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for purposes of calculating the
    registration fee.

                                  -----------

   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 1999

                                       Shares

                 [Logo of Telaxis Communications Corporation]

                                 Common Stock

                                 ------------

   Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $     and $     per share. We will apply to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "TLXS."

   The underwriters have an option to purchase a maximum of    additional
shares to cover over-allotments of shares.

   Investing in our common stock involves risks. See "Risk Factors" on page 6.

<TABLE>
<CAPTION>
                                                            Underwriting
                                                            Discounts and Proceeds to
                                            Price to Public  Commissions    Telaxis
                                            --------------- ------------- -----------
<S>                                         <C>             <C>           <C>
Per share..................................     $              $            $
Total......................................     $              $            $
</TABLE>

   Delivery of the shares of common stock will be made on or about       ,
1999.

   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

Credit Suisse First Boston

                          Banc of America Securities LLC

                                                             CIBC World Markets

                  The date of this prospectus is       , 1999
<PAGE>

   The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

                                 ------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                      Page
                                      ----
<S>                                   <C>
Prospectus Summary..................    3
Risk Factors........................    6
Special Note Regarding Forward-
 Looking Statements.................   14
Use of Proceeds.....................   15
Dividend Policy.....................   15
Capitalization......................   16
Dilution............................   18
Selected Financial Data.............   19
Management's Discussion and Analysis
 of Financial Condition and Results
 of Operations......................   20
Business............................   29
</TABLE>
<TABLE>
<CAPTION>
                                   Page
                                   ----
<S>                                <C>
Management.......................   40
Material Relationships and
 Related-Party Transactions......   47
Principal Stockholders...........   49
Description of Capital Stock.....   51
Shares Eligible for Future Sale..   55
Underwriting.....................   57
Notice to Canadian Residents.....   58
Legal Matters....................   59
Experts..........................   59
Where You Can Find More
 Information.....................   60
Index to Financial Statements....  F-1
</TABLE>

                                 ------------

   You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.

                                 ------------

                     Dealer Prospectus Delivery Obligation

   Until      , 1999 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.

                                 ------------

   "Telaxis Communications," "Telaxis" and the Telaxis logo are our trademarks.
All other trademarks or service marks appearing in this prospectus are
trademarks or service marks of the respective companies that own them.

<PAGE>

                               PROSPECTUS SUMMARY

   This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully.

                       Telaxis Communications Corporation

   We develop and supply high-speed, or broadband, wireless access equipment
used by network service providers to deliver integrated voice, video and data
services to business and residential subscribers. Our products provide a high
performance alternative to other access technologies, such as traditional
copper wires, digital subscriber lines and cable modems, that connect the
network service provider and the subscriber. Our products enable high-speed
Internet access, electronic commerce, remote access, telecommuting and
extensions of corporate networks to branch offices. Using our products, network
service providers can enter markets quickly and economically, and then expand
their networks as the number of subscribers grows.

   Our product line consists of wireless transmitter and receiver equipment
that is installed outdoors in a cell-based arrangement. Each cell consists of a
hub that transmits and receives network traffic to and from customer premises
equipment, or CPE units, installed at multiple subscriber locations. This cell-
based arrangement is commonly referred to as point-to-multipoint architecture.

   We have developed two families of broadband point-to-multipoint wireless
access products. Our modular hubs and CPE units can be rapidly tailored for
competitive trials and initial commercial deployments. These modular products
address a network service provider's need for accelerated time-to-market. Our
planar hubs and CPE units, based on a printed circuit board design, can be
mass-produced using low-cost, highly automated manufacturing techniques. These
planar products address a network service provider's need for cost-effective
mass deployment.

   We sell our products primarily to network system integrators, such as
Newbridge Networks and Motorola, which include our products in broadband
wireless systems sold to network service providers. Our products have been
successfully demonstrated in more than 40 customer trials worldwide over the
last four years. We believe this experience is unmatched by any other supplier
of broadband point-to-multipoint wireless access equipment. As a result of
these trials, our products have been selected, either directly or by network
system integrators, for commercial deployment by network service providers,
including:

  . American Wireless                   . Korea Telecom


  . BellSouth Movicom                   . Maxlink Communications


  . Central Texas Communications        . Nexsatel


  . Convergence Communications          . South Central Telecom


  . Formus                              . Telenordia


  . Gateway Telecom                     . Tri-Corners Telecom

  . Home Telephone

   Our objective is to be the leading developer and supplier of broadband
point-to-multipoint wireless access equipment for use by network service
providers worldwide. Our strategy to accomplish this objective is to:

  .  Penetrate the global market with our two product families

  .  Capitalize upon our early customer acceptance

  .  Expand strategic relationships with network system integrators

  .  Reduce product costs while increasing performance and adding
     functionality

  .  Leverage technology partnerships

  .  Establish brand identity

                                       3
<PAGE>


   Our principal executive offices and manufacturing facilities are located at
20 Industrial Drive East, South Deerfield, Massachusetts 01373-0109. Our
telephone number is (413) 665-8551. Our Web site is located at
www.telaxiscomm.com. Information contained in our Web site is not incorporated
by reference into this prospectus, and you should not consider this information
as part of this prospectus. Our company was incorporated in Massachusetts in
1982.

                                  The Offering

Common stock offered..............      shares

Common stock outstanding after          shares
 this offering....................

Use of proceeds...................  For general corporate purposes, including
                                    working capital, and for potential
                                    acquisitions.

Proposed Nasdaq National Market     TLXS
 symbol...........................

   The number of shares to be outstanding after the offering is based on the
number of shares of common stock outstanding as of June 30, 1999 and gives
effect to the conversion of all outstanding shares of our preferred stock into
20,976,881 shares of common stock upon the closing of this offering. This
number excludes:

  .  2,850,651 shares issuable upon the exercise of options outstanding as of
     June 30, 1999 at an exercise price of $.50 per share

  .  5,786,383 shares available for issuance upon the exercise of options
     which have been or may be granted after June 30, 1999 under our active
     stock plans, including our 1999 stock plan adopted on September 13, 1999

  .  2,237,445 shares issuable upon the exercise of warrants outstanding as
     of June 30, 1999 at a weighted average exercise price of $.57 per share

                                       4
<PAGE>


                             Summary Financial Data
                     (in thousands, except per share data)

   The following tables summarize our financial data. The statement of
operations data reflect only our continuing operations. You should read our
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The pro forma balance sheet data reflect
our issuance of $1.0 million of subordinated promissory notes in July 1999, our
issuance of $14.9 million, net of estimated issuance costs, of redeemable
preferred stock on September 17, 1999 and our contemporaneous repayment of $2.0
million of subordinated promissory notes, and the conversion of our currently
outstanding redeemable preferred stock into common stock upon the closing of
this offering. The pro forma as adjusted balance sheet data reflect our sale of
     shares of common stock in this offering at an assumed initial public
offering price of $   per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us.

<TABLE>
<CAPTION>
                          Year Ended December 31,     Six Months Ended June 30,
                          --------------------------  ----------------------------
                           1996     1997      1998        1998            1999
                          -------  -------  --------  ------------    ------------
                                                      (unaudited)     (unaudited)
<S>                       <C>      <C>      <C>       <C>             <C>
Statement of Operations
 Data:
Sales...................  $   201  $ 1,733  $  2,386    $      1,037    $      2,762
Gross margin (loss).....       54     (595)   (4,814)           (751)            (17)
Operating loss..........   (1,829)  (6,726)  (13,172)         (5,331)         (3,716)
Loss from continuing
 operations.............  $(2,239) $(6,712) $(11,253)   $     (4,751)   $     (3,845)
Basic and diluted loss
 per share from
 continuing operations..  $ (2.07) $ (7.08) $ (11.44)   $      (4.83)   $      (3.87)
Shares used in computing
 basic and diluted
 loss per share.........    1,080      948       984             983             993
Pro forma basic and
 diluted loss per share
 from
 continuing
 operations(1)..........                    $  (0.89)                   $      (0.25)
Shares used in computing
 pro forma basic
 and diluted loss per
 share(1)...............                      12,638                          15,303
</TABLE>
--------------------
(1)  For an explanation of these computations, see Note 1 to our financial
     statements.

<TABLE>
<CAPTION>
                                                      June 30, 1999
                                           -----------------------------------
                                                                    Pro Forma
                                             Actual     Pro Forma  As Adjusted
                                           ----------- ----------- -----------
                                           (unaudited) (unaudited) (unaudited)
<S>                                        <C>         <C>         <C>
Balance Sheet Data:
Cash and cash equivalents.................  $    405     $14,305     $
Working capital (deficit).................      (421)     15,479
Total assets..............................    10,650      24,550
Long-term debt and capital lease
 obligations..............................     1,686       1,686
Redeemable preferred stock................    32,793         --
Total stockholders' (deficit) equity......   (29,875)     17,818
</TABLE>

   Except where we state otherwise, the information we present in this
prospectus:

  .  reflects the discontinuation of our millimeter-wave products business
     segment

  .  reflects the amendment of our charter to, among other things, increase
     the authorized number of shares of common stock to 100,000,000 shares
     and change our name to "Telaxis Communications Corporation" from
     "Millitech Corporation"

  .  assumes that the underwriters do not exercise their option to purchase
        additional shares after the closing of this offering

                                       5
<PAGE>

                                  RISK FACTORS

   You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. The risks and
uncertainties described below are not the only ones that we face. Additional
risks and uncertainties not presently known to us or that we currently believe
are immaterial also may impair our business operations. If any of the following
risks occurs, our business, operating results and financial condition could be
seriously harmed. In addition, the trading price of our common stock could
decline due to any of these risks, and you may lose all or part of your
investment.

                         Risks Related To Our Business

We have incurred substantial losses and may not be profitable in the future.

   Our continuing operations have not achieved profitability. We cannot predict
whether we will become profitable. Our failure to achieve profitability within
the time frame that investors expect may adversely affect the market price of
our common stock. We had losses from continuing operations of $3.8 million in
the six months ended June 30, 1999, $11.3 million in 1998 and $6.7 million in
1997. As a result of losses from continuing and discontinued operations, at
June 30, 1999, we had an accumulated deficit of $30.6 million. We have
generated relatively small amounts of product sales. We do not believe that our
sales growth rates are sustainable because those rates are calculated from a
small revenue base. In addition, we intend to increase expenditures in all
areas, including manufacturing and engineering, research and development, and
sales and marketing, in order to execute our business strategy.

Disappointing quarterly results could cause our stock price to fall.

   Our quarterly sales and operating results are difficult to predict and may
continue to fluctuate significantly from quarter to quarter. If our quarterly
sales or operating results fall below the expectations of investors, the price
of our common stock could fall substantially.

   Our quarterly results may fluctuate for several reasons, including the
following:

  .  the timing and size of orders for our products

  .  the mix of our product sales, which we expect will shift over time
     generally toward our less profitable CPE units

  .  the hiring and loss of personnel, particularly in manufacturing and
     sales and marketing, including significant recruiting bonuses or other
     hiring expenses

  .  our lengthy sales cycle, which typically ranges from six to 18 months,
     making it difficult for us to predict our future business operations and
     make plans for the future

  .  our manufacturing capacity constraints and our ability to fulfill orders

  .  the timing of our investments in additional manufacturing capacity

  .  unforeseen additional charges related to our discontinued operations

   We expect to increase our research and development, sales and marketing, and
general and administrative expenses. As a result, we expect to continue to
incur significant quarterly losses for at least the next several quarters.
Moreover, many of our expenses, such as employee compensation and rent, are
relatively fixed. We budget some of these expenses largely according to the
sales we expect to generate, and if our sales fall below our expectations, we
could incur significantly greater quarterly losses. Other factors could also
cause variations in our quarterly sales and operating results. Many of these
factors are outside our control.

                                       6
<PAGE>

Do not rely on our discontinued operations to predict our future operating
results.

   Historically, our operations focused on a business segment that we
discontinued in August 1999. We classify the results of that segment as a
discontinued operation in our financial statements. We shipped our first
prototype broadband point-to-multipoint wireless access equipment for trial in
1995. However, the commercial market for these products did not emerge until
recently. We received the first volume order for our broadband point-to-
multipoint wireless access products in June 1999. Accordingly, you have limited
financial data that you can use to evaluate our future prospects in the
broadband point-to-multipoint wireless access market. You should evaluate our
prospects in light of the risks, expenses and challenges we will encounter
because of our recent focus on this market.

We depend upon a small number of network system integrators for substantially
all of our sales.

   We depend on a small number of network system integrators to market, sell,
install, finance and support broadband point-to-multipoint wireless access
systems that include our products. Our network system integrators' failure to
accomplish these tasks successfully would adversely affect our sales and
operating results. One network system integrator accounted for 70% of our sales
in the six months ended June 30, 1999 and three network system integrators
accounted for 68% of our sales in 1998. These sales related primarily to
customer trials and initial commercial deployments. We have no long-term
purchase commitments or exclusive purchase agreements with these or any other
customers. Because there are a relatively small number of network system
integrators with the resources and technical expertise necessary to offer
broadband point-to-multipoint wireless access systems, and because these
network system integrators extensively test and evaluate products such as ours
before making a purchase decision, we may be unable to replace our network
system integrators quickly. Moreover, because we may be able to supply only a
few network system integrators, we may be unable to reduce our dependence on a
few customers. Our network system integrators could stop purchasing products
from us because our products do not meet their needs, because they cannot sell
broadband point-to-multipoint wireless access solutions profitably or for other
reasons, such as a corporate reorganization, acquisition or other transaction
that alters their strategic focus. We do not control our network system
integrators and have little, if any, influence over their strategic decisions.
Those decisions could limit our prospects in ways we cannot predict. If our
customers reduce orders for our products, we could lose sales and suffer damage
to our reputation in the industry.

The failure of our network system integrators to sell broadband point-to-
multipoint wireless access solutions that include our products would adversely
affect our sales and operating results.

   Even if our products meet all of our network system integrators' needs,
other factors may impede the success of their broadband point-to-multipoint
wireless access solutions. For example, installation costs may be high and
difficult to reduce. In addition, our network system integrators may not have
or use the financial, marketing and other resources necessary to ensure that
their solutions will succeed in the marketplace. For example, network service
providers may insist that network system integrators provide extensive
financing for the deployment of large broadband point-to-multipoint wireless
access networks, and our network system integrators may be unwilling or unable
to provide the necessary financial resources. Without providing financing, our
network system integrators may be unable to sell systems containing our
products, which would adversely affect our sales and operating results.

We may not be able to manufacture our products as quickly as our customers
require, which could cause us to lose sales.

   Currently, we are unable to manufacture products as quickly as our customers
require. This manufacturing constraint could cause us to lose sales, damage our
reputation, incur financial liabilities and jeopardize our long-term prospects.
If we receive any substantial order in the near future, we may be unable to
fulfill the order on a timely basis. We currently have a single line of
assembly, and equipment downtime at any stage of the assembly process would
halt production. We believe we will need to build additional manufacturing
capacity in the near future. Many factors may impair our ability to manufacture
our products in large quantities, including:

  .  our limited experience with volume manufacturing

                                       7
<PAGE>

  .  the complexity of our products

  .  our ability to obtain numerous sole-source components

  .  our ability to hire sufficient technical and engineering talent

  .  our ability to manage our supply chain and inventory levels

  .  our ability to maintain quality in a high volume production environment

  .  our limited financial resources

Any third-party manufacturer we engage may not perform to our satisfaction,
which could adversely affect our business.

   We believe we will need to engage third-party manufacturers to supplement
our manufacturing capacity. Few, if any, third-party manufacturers have the
technical capabilities to meet our quality standards and production goals.
Therefore, it may be difficult and time-consuming to identify and engage an
appropriate third-party manufacturer. Any third-party manufacturer we engage
may not perform to our expectations. We will have little, if any, control over
their performance. Their failure to meet our expectations in any respect could
cause us to lose sales, harm our reputation and otherwise adversely affect our
business. Moreover, we have limited experience dealing with third-party
manufacturers and may encounter unforeseen problems that are costly, time-
consuming and difficult to resolve. Any such problem could have a material
adverse effect on our business. If we are unable to engage a third-party
manufacturer, we will need to build additional manufacturing facilities of our
own.

Our products include single-source components, and our inability to obtain
these components would halt production and could have a material adverse effect
on our sales and operating results.

   We currently purchase a number of important components, such as electronic
filters, semiconductor devices, circuit boards, frequency references and
housings, from single-source suppliers for which alternative sources are not
readily available. Any delay or interruption in the supply of these components
could impair our ability to deliver our products and could reduce our sales.
Any of our single-source suppliers could enter into exclusive agreements with
or be acquired by our competitors, increase their prices, refuse to sell their
products, discontinue products or go out of business. Even if alternative
suppliers are available to us, identifying them is difficult and time-
consuming, and they may not meet our quality standards. We may not be able to
obtain sufficient quantities of these components on the same or substantially
the same terms. Consolidations among our suppliers could result in other sole-
source supply situations. An increase in the cost of these components could
make our products less competitive, lower our margins and have a material
adverse effect on our business, financial condition and results of operations.

As our customers enter new markets, we sometimes have to adapt our products
rapidly to the frequency and regulatory requirements that exist in those
markets, and we may incur significant costs making the necessary modifications.

   Each of our products is designed for a specific range of frequencies.
Because different governments license different portions of the frequency
spectrum for the broadband wireless access market, and because network service
providers license a multitude of specific frequencies, we sometimes have to
adapt our products rapidly to use different frequencies. This design process
can be difficult and time-consuming, and could therefore increase our costs and
cause delays in the delivery of products to our customers.

We may be unable to achieve the continuing cost reductions and technological
improvements required for our products to remain competitive.

   We expect that market conditions, particularly falling prices for competing
broadband access solutions, will force us to reduce our prices over time. If we
do not continue to reduce our product costs, we will continue to incur
operating losses. In order to reduce product costs, we must use low-cost,
automated manufacturing

                                       8
<PAGE>

techniques, increase manufacturing volume and improve yield. Low-cost automated
manufacturing of products such as ours has not been demonstrated to be feasible
in high volumes. We may not have and may not be able to acquire the experience,
technical know-how and other resources to achieve these goals.

   Our products have been purchased primarily by network system integrators for
customer trials and for sales to network service providers for early
deployment. Before our network system integrators commit to future orders for
our products, they may establish additional product specifications,
manufacturing parameters or other conditions of sale that we cannot meet. Our
failure or unwillingness to meet those specifications, parameters or conditions
could have a material adverse effect on our sales and operating results.

We expect to expand our operations significantly, and our failure to manage our
expansion could harm our business and adversely affect our financial condition
and results of operations.

   We are rapidly and significantly expanding our operations, including the
number of our employees, the geographic scope of our activities and our product
offerings. Our failure to manage growth effectively could harm our business and
adversely affect our financial condition and operating results. This expansion
has placed a significant strain on all of our resources. We are reassigning or
retraining approximately 20 employees from our discontinued operations to work
in our continuing operations and we are converting facilities from our
discontinued operations for use in our continuing operations. We expect that
this retraining and conversion process will be difficult and time-consuming. To
manage our growth, we must:

  .  hire, train and manage significant numbers of qualified employees,
     particularly manufacturing, engineering, sales and marketing personnel

  .  improve our core technologies

  .  expand our manufacturing capabilities

  .  manage our relationships with customers, suppliers and other business
     partners

  .  improve our existing and implement new operational, financial and
     management information controls, reporting systems and procedures

We expect to continue to derive a substantial portion of our sales from
international sources, and difficulties associated with international
operations could harm our business.

   We sell substantially all of our products to domestic and foreign network
system integrators, which offer systems including our products to network
service providers on a global basis. We believe our products are primarily used
by network service providers outside the United States. Sales outside the
United States frequently involve additional risks and difficulties, including:

  .  licenses, tariffs and other trade barriers imposed on products such as
     ours

  .  political and economic instability

  .  compliance with a wide variety of complex laws and treaties relating to
     telecommunications equipment

  .  delays or difficulties collecting accounts receivable

  .  the significant lack of legal protection for intellectual property

  .  fluctuations in currency exchange rates

If our network system integrators suffer losses as a result of any of these
factors in connection with foreign deployments, they could seek to renegotiate
terms or otherwise pass those losses on to us. Either outcome could have a
material adverse effect on our sales or operating results.

The loss of any of our executive officers or other key employees could
adversely affect our business.

   Our executive officers and key employees are crucial to our future success,
and the loss of their services could seriously impair our ability to implement
our business plan successfully. If we lost the services of any of

                                       9
<PAGE>

these individuals, we might lack needed leadership, experience, industry
expertise and technical expertise, and we would have to devote substantial
resources to finding a replacement. Until we found a suitable replacement, our
management team would be incomplete, which could have a material adverse effect
on our business. In addition, our highly technical business requires
significant numbers of qualified and experienced engineers, designers and other
technical employees, many of whom have attractive employment alternatives. The
strong demand for these employees raises our employee compensation expenses,
and our failure to retain these employees or hire qualified replacements for
reasonable compensation could have a material adverse effect on our business
and results of operations.

If we, our suppliers, network system integrators, or network service providers
fail to be year 2000 compliant, our business might be severely disrupted.

   Software and hardware that inaccurately process dates after December 31,
1999 present several areas of risk for our business. In particular, we are
subject to:

  .  costs and lost sales that we may incur if any of our products fail to be
     year 2000 compliant, including potential warranty or other claims from
     our customers;

  .  business shutdowns or slowdowns as a result of a failure of the internal
     systems we use to run our business, which could disrupt our business
     operations;

  .  interruption of product or component supplies, or a reduction in product
     quality, as a result of the failure of systems used by our suppliers,
     including any third-party manufacturer we may engage; and

  .  reductions or deferrals in sales as a result of year 2000 compliance
     issues of network system integrators or network service providers.

Our intellectual property rights may be inadequate to preserve or prevent
others from using our proprietary technology.

   Our success depends to a significant degree upon the preservation and
protection of our product and manufacturing process designs and other
proprietary technology. Our intellectual property rights, and our ability to
enforce those rights, may be inadequate to prevent others from using our
technology or substantially similar technology they may independently develop.
The use of that technology by others could eliminate any competitive advantage
we have, cause us to lose sales and otherwise harm our business. To protect our
proprietary technology, we generally limit access to our technology, treat
portions of our technology as trade secrets and obtain confidentiality or non-
disclosure agreements from persons with access to our technology. We have also
obtained and applied for patents in the United States and other countries, and
we rely on protections available under copyright and trademark law. These steps
may be inadequate to provide the protection we need. A significant portion of
our proprietary technology is know-how, and employees with know-how may depart
before transferring their know-how to other employees. Moreover, the laws of
other countries where we market our products may afford even less protection
for our intellectual property. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and costly,
even if we were to prevail.

Claims by others that we have violated their intellectual property rights could
prevent the sale of our products, cause us to pay damages and otherwise harm
our business.

   If we were to discover that any of our products violated the intellectual
property rights of a third party, we might be unable to redesign our product to
avoid violating their rights, and we might be unable to obtain a license on
commercially reasonable terms to use their intellectual property. In such a
case, we may be unable to continue selling that product, which could have a
material adverse effect on our revenues. For instance, we have received a
letter claiming that we may owe patent license fees for wafers we purchased for
research and development purposes not involving our continuing operations. We
do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes any patents, and any searching we do
conduct would not reveal technology covered by confidential patent
applications. Any claim that we infringe or otherwise violate the intellectual
property rights of others could cause us to incur substantial costs defending
against the claim, even if the claim

                                       10
<PAGE>

is invalid, and could distract our management from our business. Furthermore, a
party making such a claim could obtain a judgment that requires us to pay
substantial damages. A judgment could also include an injunction or other court
order that could prevent us from selling our products. Any of these events
could have a material adverse effect on our business, operating results and
financial condition.

                         RISKS RELATED TO OUR INDUSTRY

The broadband point-to-multipoint wireless access industry is new and its
future is uncertain. If significant demand for this technology does not
develop, our business, financial condition and results of operations will be
adversely affected.

   Broadband point-to-multipoint wireless access technology is new and unproven
in the marketplace. This technology may prove unsuitable for widespread
commercial deployment. Many factors will influence the success or failure of
broadband wireless access technology, including:

  .  its capacity to handle growing demands for faster transmission of
     increasing amounts of video, voice and data

  .  its cost-effectiveness and performance compared to other forms of
     broadband access, whose prices and performance continue to improve

  .  its reliability and security

  .  whether the products can be manufactured in sufficient volume

  .  its suitability for a sufficient number of geographic regions

  .  the availability of sufficient frequencies for network service providers
     to deploy products at commercially reasonable rates

  .  the availability of sufficient site locations for network service
     providers to install products at commercially reasonable rates

  .  safety and environmental concerns regarding broadband wireless
     transmissions

   Broadband point-to-multipoint wireless access solutions are also competing
with other high-speed solutions such as digital subscriber lines, cable, fiber,
other high-speed wire, satellite and point-to-point wireless technologies. Many
of these alternative technologies can take advantage of existing installed
infrastructure and have achieved significantly greater market acceptance and
penetration than broadband point-to-multipoint wireless access technologies.
Moreover, current broadband point-to-multipoint wireless access technology has
inherent technical limitations that may inhibit its widespread adoption in many
areas, including the need for line-of-sight installation and reduced
communication distance in bad weather. We expect broadband point-to-multipoint
access technologies to face increasing competitive pressures from both current
and future alternative technologies. In light of these factors, many network
service providers may be reluctant to invest heavily in broadband point-to-
multipoint wireless access solutions and, accordingly, the market for these
solutions may fail to develop or may develop more slowly than we expect. Either
outcome would have a material adverse effect on our business, financial
condition and results of operations.

The broadband point-to-multipoint wireless access industry is intensely
competitive, and our failure to compete effectively could adversely affect our
sales and operating results.

   The market for broadband point-to-multipoint wireless access equipment is
rapidly evolving and highly competitive. A number of large telecommunications
equipment suppliers, such as Alcatel, Ericsson and Nortel Networks, as well as
a number of smaller companies, have developed or are developing products that
compete with ours. Many of our competitors are substantially larger than we are
and have significantly greater financial, sales, marketing, distribution,
technical, manufacturing and other resources. These competitors may make
strategic acquisitions or establish cooperative relationships among themselves
or with third parties to increase their ability to gain market share rapidly.
We expect to face increasing competitive pressures from both current and future
competitors in the markets we serve.


                                       11
<PAGE>

Compliance with changing domestic and foreign laws, regulations and industry
standards may be difficult and may adversely affect our sales and results of
operations.

   Participants in the broadband industry, including ourselves and other
suppliers of broadband point-to-multipoint wireless access equipment, suppliers
of competing communications technologies, network system integrators and
network service providers, must comply with a significant number of evolving
communications laws, regulations and standards in the United States and abroad.
Industry participants may face additional costs, difficulties and challenges if
new laws, regulations or standards are adopted, or if existing laws,
regulations or standards are re-interpreted, or if they undertake activities
that require them to comply with additional laws, regulations and standards.
These costs, difficulties and challenges could have a material adverse effect
on the market for our products, which could cause us to lose sales, or could
otherwise render our business unprofitable.

   If our products do not comply with all of the legal and regulatory
requirements and standards that apply in a jurisdiction, we may face liability
for any violation and may be unable to offer our products in that jurisdiction.
These requirements and standards vary widely among jurisdictions, and we may be
unable to obtain necessary approvals for the marketing and sale of our
products. In the United States, the Telecommunications Act of 1996
significantly altered the regulatory environment for the communications
industry, and both the United States Congress and the Federal Communications
Commission continue to monitor and respond to the effects of that legislation.
For example, the FCC is considering changes to its regulations relating to
access to telephone lines, the ability of third parties to install equipment at
a network service provider's central location and the compatibility
requirements for equipment that runs on telephone lines. Large, well-financed
companies may successfully lobby for new laws or regulations that operate to
our disadvantage. In addition, a reversal of the general trend toward
deregulation in the telecommunications industry could materially and adversely
affect network service providers, and thereby materially and adversely affect
our business, financial condition and results of operations.

        RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK

The market price of our common stock is likely to be volatile.

   The market price of our common stock could fluctuate significantly for many
reasons, including the following:

  .  our financial performance or the performance of our competitors

  .  technological innovations or other trends in our industry

  .  successes or failures at significant product evaluations or field trials

  .  the introduction of new products by us or our competitors

  .  the arrival or departure of key personnel

  .  acquisitions, strategic alliances or joint ventures involving us or our
     competitors

  .  changes in estimates of our performance or recommendations by securities
     analysts

  .  decisions by major participants in the communications industry

  .  decisions by investors to de-emphasize investment categories, groups or
     strategies that include our company or industry

  .  market conditions in the industry, the financial markets and the economy
     as a whole

   In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations are often unrelated to the operating
performance of particular companies. These broad market

                                       12
<PAGE>

fluctuations may adversely affect the market price of our common stock. When
the market price of a company's stock drops significantly, stockholders often
institute securities class action lawsuits against the company. A lawsuit
against us could cause us to incur substantial costs and could divert the time
and attention of our management and other resources. Any of these events could
have a material adverse effect on our business, financial condition and results
of operations.

Future sales of common stock by our existing stockholders could cause our stock
price to fall.

   If our stockholders sell substantial amounts of common stock in the public
market, including shares issuable upon the exercise of outstanding options and
warrants, the market price of our common stock could fall. The perception among
investors that these sales will occur could produce the same effect. After this
offering, we will have    shares of common stock outstanding. The shares we are
selling in this offering will be freely tradeable in the public market. Giving
effect to lock-up agreements executed by our existing stockholders, the
remaining shares of common stock outstanding after this offering will be
available for sale in the public market as follows:

<TABLE>
<CAPTION>
                  Percent of Total
                       Shares
 Number of Shares   Outstanding             Date of Availability for Sale
 ---------------- ----------------          -----------------------------
 <C>              <C>              <S>
                           %            , 1999 (date of this prospectus) to
                                        , 2000 (90 days after the date of this
                                   prospectus)
                                        , 2000 (90 days after the date of this
                                   prospectus) to
                                        , 2000 (180 days after the date of this
                                   prospectus), in some cases subject to Rule 144
                                        , 2000 (180 days after the date of this
                                   prospectus), in some cases
                                   subject to Rule 144
                                   At various times after      , 2000
</TABLE>

   Our underwriters could waive the selling restrictions imposed by the lock-up
agreements at any time, which could accelerate the resale of outstanding shares
of common stock. In addition, at      , 1999, there were outstanding warrants
to purchase     shares and options to purchase    shares not subject to lock-up
agreements. The shares issuable upon exercise of the warrants will become
available for sale in the public market in accordance with Rule 144 and the
shares issuable upon exercise of the options will become available for sale in
the public market upon vesting and after we file a registration statement
covering those shares. We intend to file such a registration statement as
promptly as practicable after this offering. In addition, some of our
securityholders have rights to require us to register their shares for resale
in the public market. For a more detailed description, see "Description of
Capital Stock--Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."

Our securities have no prior public market, and our stock price may decline
after the offering.

   Before this offering, there has been no public market for our common stock,
and an active public market for our common stock may not develop or be
sustained after this offering. If an active public market for our common stock
does not develop, the liquidity of your investment may be limited, and our
stock price may decline below our initial public offering price. The initial
public offering price will be determined by negotiations between us and the
representatives of the underwriters and may bear no relationship to the price
that will prevail in the public market.

We have anti-takeover defenses that could delay or prevent an acquisition of
our company.

   Our articles of organization and by-laws and Massachusetts law contain
provisions that might enable our management to resist a takeover of our
company. These provisions could discourage, delay or prevent a change in
control of our company or an acquisition of our company at a price that many
stockholders may find attractive. These provisions may also discourage proxy
contests and make it more difficult for our stockholders to elect directors and
take other corporate actions. The existence of these provisions could limit the
price that

                                       13
<PAGE>

investors might be willing to pay in the future for shares of our common stock.
For a description of these provisions, see "Description of Capital Stock--Anti-
takeover Provisions of Massachusetts Law and Our Articles of Organization and
By-Laws."

We will have broad discretion in how we use the proceeds of this offering, and
our use of those proceeds may not yield a favorable return.

   We intend to use all of our proceeds from this offering for general
corporate purposes, including working capital, and for potential acquisitions.
Accordingly, we will have broad discretion in using our proceeds. You will not
have the opportunity to evaluate the economic, financial or other information
that we will use to determine how to use our proceeds.

If we cannot raise additional capital we may need on acceptable terms, we may
not achieve our business goals.

   If we do not have sufficient capital to fund our operations, we may be
forced to discontinue product development, reduce our sales and marketing
efforts, forego attractive business opportunities and lose the ability to
respond to competitive pressures. Any of these outcomes could have a material
adverse effect on our business, financial condition and results of operations.
We expect that the net proceeds from this offering, cash on hand and borrowings
under our credit facility will be sufficient to meet our working capital and
capital expenditure needs for at least the next 12 months. After that, we may
need to raise additional funds, and additional financing may not be available
on favorable terms, if at all. We may also require additional capital to
acquire or invest in complementary businesses or products or obtain the right
to use complementary technologies. If we issue additional equity securities to
raise funds, the ownership percentage of our existing stockholders would be
reduced. New investors may demand rights, preferences or privileges senior to
those of existing holders of our common stock.

You will suffer immediate and substantial dilution.

   The initial public offering price will significantly exceed the net tangible
book value per share of our common stock. Accordingly, if you purchase common
stock in this offering, you will incur immediate and substantial dilution of
your investment. To the extent that outstanding options or warrants are
exercised, you will incur additional dilution.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," contains forward-looking statements.
These statements relate to future events or our future financial performance,
and involve known and unknown risks, uncertainties, and other factors that may
cause our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance
or achievements expressed or implied by these forward-looking statements. These
risks and other factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider the risks outlined under "Risk Factors." These factors
may cause our actual results to differ materially from any forward-looking
statement.

   Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of
the forward-looking statements after the date of this prospectus to conform
these statements to actual results.

                                       14
<PAGE>

                                USE OF PROCEEDS

   We expect to receive net proceeds of approximately $   from the sale of
shares of common stock, or approximately $   from the sale of    shares if the
underwriters exercise their over-allotment option in full, assuming an initial
public offering price of $   per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us.

   We intend to use the net proceeds of this offering primarily for general
corporate purposes, including working capital. We may also use a portion of the
net proceeds to acquire complementary businesses, products and technologies or
to establish joint ventures that we believe will complement our current or
future business. However, we have no specific plans, agreements or commitments
to do so and are not currently engaged in any negotiations for any acquisition
or joint venture. Pending our use of these proceeds, we will invest the net
proceeds in short-term, interest-bearing, investment-grade securities. The
amounts that we actually expend for general corporate purposes will vary
significantly depending on a number of factors, including future sales growth
and the amount of cash we generate from operations, if any.

                                DIVIDEND POLICY

   We have never declared or paid any cash dividends. We currently intend to
retain any future earnings to fund the development and growth of our business.
In addition, under our credit facilities, we cannot pay dividends without our
creditors' consent, with limited exceptions. Therefore, we currently do not
anticipate paying cash dividends in the foreseeable future.

                                       15
<PAGE>

                                 CAPITALIZATION

   The following table sets forth:

  . our actual capitalization as of June 30, 1999

  . our pro forma capitalization as of June 30, 1999, after giving effect to:

    (a) our issuance of $1.0 million of subordinated promissory notes in
        July 1999

    (b) our issuance of $14.9 million, net of estimated issuance costs, of
        redeemable preferred stock on September 17, 1999 and our
        contemporaneous repayment of $2.0 million in outstanding
        subordinated promissory notes

    (c) the conversion of our currently outstanding redeemable preferred
        stock into 20,976,881 shares of common stock upon the closing of
        this offering

    (d) the amendments of our charter

  . our pro forma as adjusted capitalization as of June 30, 1999, which gives
    effect to our sale of    shares of common stock at an assumed initial
    public offering price of $  per share, after deducting estimated
    underwriting discounts and commissions and estimated offering expenses
    payable by us

You should read the following table in conjunction with our financial
statements and accompanying notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                      As of June 30, 1999
                                              -----------------------------------
                                                                       Pro Forma
                                                Actual     Pro Forma  As Adjusted
                                              ----------- ----------- -----------
                                              (unaudited) (unaudited) (unaudited)
<S>                                           <C>         <C>         <C>
Notes payable and current maturities of
 long-term debt.............................   $  1,675     $   675     $   675
                                               ========     =======     =======
Current maturities of capital lease
 obligations................................   $    795     $   795     $   795
                                               ========     =======     =======
Long-term debt:
  Long-term debt, net of current portion....   $  1,246     $ 1,246     $ 1,246
  Capital lease obligations, net of current
   portion..................................        440         440         440
                                               --------     -------     -------
    Total long-term debt, net of current
     portion................................      1,686       1,686       1,686
                                               --------     -------     -------
Redeemable preferred stock, $.01 par value;
 issued in classes A, B, D and E; 19,080,000
 total shares authorized and 14,310,214
 total shares issued and outstanding,
 actual; no shares authorized, issued or
 outstanding, pro forma and pro forma as
 adjusted...................................     32,793         --          --
Stockholders' (deficit) equity:
 Preferred stock, $.01 par value; 7,500,000
  shares authorized and no shares issued or
  outstanding, actual; 4,500,000 shares
  authorized and no shares issued or
  outstanding, pro forma and pro forma as
  adjusted..................................        --          --          --
 Common stock, $.01 par value; 36,000,000
  shares authorized and 1,000,360 shares
  issued and outstanding, actual;
  100,000,000 authorized, pro forma and pro
  forma as adjusted; 21,977,241 shares
  issued and outstanding, pro forma;
  shares issued and outstanding, pro forma
  as adjusted...............................         10         219
 Additional paid-in capital.................        763      48,247
 Accumulated deficit........................    (30,648)    (30,648)    (30,648)
                                               --------     -------     -------
  Total stockholders' (deficit) equity......    (29,875)     17,818
                                               --------     -------     -------
  Total capitalization......................   $  4,604     $19,504        $
                                               ========     =======     =======
</TABLE>

                                       16
<PAGE>

   The foregoing information excludes the following shares as of June 30, 1999:

  . 2,850,651 shares issuable upon the exercise of options outstanding as of
    June 30, 1999 at an exercise price of $.50 per share

  . 5,786,383 shares available for issuance upon the exercise of options
    which have been or may be granted after June 30, 1999 under our active
    stock plans, including our 1999 stock plan adopted on September 13, 1999

  . 2,237,445 shares issuable upon the exercise of warrants outstanding as of
    June 30, 1999 at a weighted average exercise price of $.57 per share

                                       17
<PAGE>

                                    DILUTION

   If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock immediately after this offering. Our pro forma net tangible
book value at June 30, 1999 was approximately $17.8 million, or $0.81 per share
of common stock. Pro forma net tangible book value per share represents total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock outstanding at June 30, 1999, after giving effect to our
issuance of redeemable preferred stock on September 17, 1999 for $14.9 million,
net of estimated issuance costs, our issuance and repayment of subordinated
promissory notes, and the conversion of our currently outstanding shares of
redeemable preferred stock into 20,976,881 shares of common stock upon the
closing of this offering. After giving effect to our sale of    shares of
common stock at an assumed initial public offering price of $   per share and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, our pro forma as adjusted net tangible book
value at June 30, 1999 would have been $  , or $   per share. This represents
an immediate increase in pro forma net tangible book value of $   per share to
existing stockholders and an immediate dilution of $   per share to new
investors, or approximately  % of the assumed initial public offering price of
$   per share. The following table illustrates this per share dilution:

<TABLE>
<S>                                                                 <C>   <C>
Assumed initial public offering price per share....................       $
  Pro forma net tangible book value per share at June 30, 1999..... $0.81
  Increase per share attributable to new investors.................
                                                                    -----
Pro forma as adjusted net tangible book value per share after the
 offering..........................................................
                                                                          ----
Dilution per share to new investors................................       $
                                                                          ====
</TABLE>

   The following table shows, on a pro forma as adjusted basis at June 30,
1999, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price paid per share by existing
stockholders and by new investors purchasing common stock in this offering,
after giving effect to:

  .  our issuance of shares of redeemable preferred stock on September 17,
     1999 for $14.9 million, net of estimated issuance costs

  .  the conversion of our currently outstanding shares of redeemable
     preferred stock into common stock

  .  our sale of    shares of common stock at an assumed initial public
     offering price of $  per share, before deducting estimated underwriting
     discounts and commissions and estimated offering expenses payable by us

<TABLE>
<CAPTION>
                                                                         Average
                                   Shares Purchased  Total Consideration  Price
                                  ------------------ -------------------   Per
                                    Number   Percent   Amount    Percent  Share
                                  ---------- ------- ----------- ------- -------
<S>                               <C>        <C>     <C>         <C>     <C>
Existing stockholders............ 21,977,241       % $48,466,000       %  $2.21
New investors....................                  %                   %  $
                                  ----------  -----  -----------  -----
  Total..........................             100.0% $            100.0%
                                  ==========  =====  ===========  =====
</TABLE>

   This discussion assumes no exercise of any stock options or warrants
outstanding as of June 30, 1999. At that date, there were 2,850,651 shares
issuable upon the exercise of outstanding options at an exercise price of $.50
per share and 2,237,445 shares issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $0.57. Additionally, there
were 5,786,383 shares available for issuance upon the exercise of options which
have been or may be granted under our active stock plans after June 30, 1999.
To the extent holders exercise these outstanding options or warrants, or any
options we have granted or may grant after June 30, 1999, there will be further
dilution to new investors.

                                       18
<PAGE>

                            SELECTED FINANCIAL DATA

   You should read the following selected financial data with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and notes appearing elsewhere in this prospectus. The
following statement of operations data reflect only our continuing operations,
which had minimal operating activity during the years ended December 31, 1994
and 1995. The statement of operations data for the years ended December 31,
1996, 1997 and 1998 and the balance sheet data at December 31, 1997 and 1998
are derived from the financial statements and notes audited by
PricewaterhouseCoopers LLP appearing elsewhere in this prospectus. The
statement of operations data for the years ended December 31, 1994 and 1995 and
the balance sheet data as of December 31, 1994, 1995 and 1996 are derived from
financial statements not appearing in this prospectus. The statement of
operations data for the six months ended June 30, 1998 and June 30, 1999 and
balance sheet data as of June 30, 1999 are unaudited. In our opinion, all
necessary adjustments, which consist only of normal recurring adjustments, have
been included to present fairly the unaudited six-month results, which should
be read with our financial statements and notes appearing elsewhere in this
prospectus. Historical results are not necessarily indicative of results that
may be expected for any future period. We have never declared or paid any cash
dividends.

<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                Year Ended December 31,                  June 30,
                          --------------------------------------  -----------------------
                          1994  1995   1996     1997      1998       1998        1999
                          ----- ----- -------  -------  --------  ----------- -----------
                                                                  (unaudited) (unaudited)
                                     (in thousands, except per share data)
<S>                       <C>   <C>   <C>      <C>      <C>       <C>         <C>
Statement of Operations
 Data:
Sales...................  $ --  $ --  $   201  $ 1,733  $  2,386    $ 1,037     $ 2,762
Cost of sales...........    --    --      147    2,328     7,200      1,788       2,779
                          ----- ----- -------  -------  --------    -------     -------
Gross margin (loss).....    --    --       54     (595)   (4,814)      (751)        (17)
Operating expenses
  Research and
   development, net.....    --    --      433    3,724     4,630      2,717       1,801
  Selling and
   marketing............    --    --      353      667     1,006        470         482
  General and
   administrative.......    --    --    1,097    1,740     2,722      1,393       1,416
                          ----- ----- -------  -------  --------    -------     -------
   Total operating
    expenses............    --    --    1,883    6,131     8,358      4,580       3,699
                          ----- ----- -------  -------  --------    -------     -------
Operating loss..........    --    --   (1,829)  (6,726)  (13,172)    (5,331)     (3,716)
Other income (expense)..    --    --     (410)    (626)      757        (75)       (129)
                          ----- ----- -------  -------  --------    -------     -------
Loss from continuing
 operations before
 income taxes...........    --    --   (2,239)  (7,352)  (12,415)    (5,406)     (3,845)
Income tax benefit......    --    --      --      (640)   (1,162)      (655)        --
                          ----- ----- -------  -------  --------    -------     -------
Loss from continuing
 operations.............    --    --  $(2,239) $(6,712) $(11,253)   $(4,751)    $(3,845)
Basic and diluted loss
 per share from
 continuing operations..    --    --  $ (2.07) $ (7.08) $ (11.44)   $ (4.83)    $ (3.87)
Shares used in computing
 basic and diluted
 loss per share.........    --    --    1,080      948       984        983         993
Pro forma basic and
 diluted loss per share
 from continuing
 operations(1)..........                                $  (0.89)               $ (0.25)
Shares used in computing
 pro forma basic
 and diluted loss per
 share(1)...............                                  12,638                 15,303
</TABLE>
---------------------
(1)  For an explanation of these computations, see Note 1 to our financial
     statements.

<TABLE>
<CAPTION>
                                       December 31,
                         ---------------------------------------------   June 30,
                          1994     1995     1996      1997      1998       1999
                         -------  -------  -------  --------  --------  -----------
                                                                        (unaudited)
                                            (in thousands)
<S>                      <C>      <C>      <C>      <C>       <C>       <C>
Balance Sheet Data:
Cash and cash
 equivalents............ $ 1,078  $ 1,071  $ 1,213  $ 10,294  $  2,635   $    405
Working capital
 (deficit)..............   3,694    3,962    3,266     8,439     3,271       (421)
Total assets............  11,597   12,016   10,728    20,059    14,955     10,650
Long-term debt and
 capital lease
 obligations,
 net of current
 portion................   2,385    1,929    3,257     1,690     1,047      1,686
Redeemable preferred
 stock..................  12,467   12,467   12,465    25,425    32,793     32,793
Total stockholders'
 deficit................  (7,258)  (6,693)  (9,560)  (14,998)  (24,591)   (29,875)
</TABLE>


                                       19
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   You should read the following discussion in conjunction with our financial
statements and the accompanying notes.

Overview

   We develop and supply broadband point-to-multipoint wireless access
equipment used by network service providers to deliver integrated voice, video
and data services to business and residential subscribers. We sell our products
primarily to network system integrators, which include our products in
broadband wireless systems sold to network service providers. We have developed
two families of broadband point-to-multipoint wireless access products. Our
modular hubs and CPE units can be rapidly tailored for competitive trials and
initial commercial deployments. These modular products address a network
service provider's need for accelerated time-to-market. Our planar hubs and CPE
units, based on a printed circuit board design, can be mass-produced using low-
cost, highly automated manufacturing techniques. These planar products address
a network service provider's need for cost-effective mass deployment.

   We commenced operations in 1982 and have derived the significant majority of
our sales from our millimeter-wave products business segment. In August 1999,
we adopted a plan to focus all of our resources on our broadband point-to-
multipoint wireless access business segment and to dispose of the millimeter-
wave products segment. As a result, we have presented the operations of the
millimeter-wave products segment as a discontinued operation in our financial
statements. The following management's discussion and analysis focuses on our
ongoing broadband point-to-multipoint wireless access business.

   Our first prototype broadband point-to-multipoint wireless access equipment
was evaluated in a trial in 1995. Before receiving our first volume order for
equipment in June 1999, virtually all of our shipments of products were for
customer trials and initial commercial deployments. To date, we have assembled
all of our products in-house, and only in limited volume. In the future, we may
engage third-party manufacturers to supplement our manufacturing capacity.

   A substantial portion of our sales are comprised of shipments to customers
located outside of the United States, and we expect this trend to continue. To
date, international sales have been denominated solely in U.S. dollars and,
accordingly, we have not been exposed to fluctuations in non-U.S. currency
exchange rates.

Results of Operations

   The following table provides continuing operations data as a percentage of
sales for the periods presented. The percentages may not add due to rounding.

<TABLE>
<CAPTION>
                                                               Six Months
                                       Year Ended                 Ended
                                      December 31,              June 30,
                                 --------------------------   ---------------
                                   1996      1997     1998     1998     1999
                                 --------   ------   ------   ------   ------
<S>                              <C>        <C>      <C>      <C>      <C>
Sales..........................     100.0%   100.0%   100.0%   100.0%   100.0%
Cost of sales..................      73.1    134.3    301.8    172.4    100.6
                                 --------   ------   ------   ------   ------
Gross margin (loss)............      26.9    (34.3)  (201.8)   (72.4)    (0.6)
Operating expenses
  Research and development,
   net.........................     215.4    214.9    194.0    262.0     65.2
  Selling and marketing........     175.6     38.5     42.2     45.3     17.5
  General and administrative...     545.8    100.4    114.1    134.3     51.3
                                 --------   ------   ------   ------   ------
    Total operating expenses...     936.8    353.8    350.3    441.7    133.9
                                 --------   ------   ------   ------   ------
Operating loss.................    (910.0)  (388.1)  (552.1)  (514.1)  (134.5)
Other income (expense).........    (204.0)   (36.1)    31.7     (7.2)    (4.7)
                                 --------   ------   ------   ------   ------
Loss from continuing operations
 before income taxes...........  (1,113.9)  (424.2)  (520.3)  (521.3)  (139.2)
Income tax benefit.............       --     (36.9)   (48.7)   (63.2)     --
                                 --------   ------   ------   ------   ------
Loss from continuing
 operations....................  (1,113.9)% (387.3)% (471.6)% (458.1)% (139.2)%
</TABLE>

                                       20
<PAGE>

 Six Months Ended June 30, 1998 and 1999

 Sales

   Sales increased 166% from $1.0 million for the six months ended June 30,
1998 to $2.8 million for the six months ended June 30, 1999. This increase
primarily reflects the increase in sales of our planar products.

 Cost of Sales

   Cost of sales consists of component and material costs, direct labor costs,
warranty costs, overhead related to manufacturing our products and customer
support costs. Cost of sales increased 55% from $1.8 million for the six months
ended June 30, 1998 to $2.8 million for the six months ended June 30, 1999.
This increase was attributable primarily to increased shipments of our planar
products. Gross margins were negative 72% for the six months ended June 30,
1998 and were negative 0.6% for the six months ended June 30, 1999. This
improvement was attributable primarily to increased shipments of our higher
margin planar products and a significant shipment of modular products at
favorable pricing terms.

 Research and Development Expenses

   Research and development expenses consist primarily of personnel and related
costs associated with our product development efforts. These include costs for
development of products and components, test equipment and related facilities.
Our gross research and development expenses decreased 22% from $2.7 million for
the six months ended June 30, 1998 to $2.1 million for the six months ended
June 30, 1999. This decrease reflects the reassignment of a group of engineers
to a customer support function and the elimination of a senior management
position. Some of our customers have provided funding to offset our development
costs for specific products. Net of these reimbursements, our research and
development expenses decreased 34% from $2.7 million for the six months ended
June 30, 1998 to $1.8 million for the six months ended June 30, 1999.

 Selling and Marketing Expenses

   Selling and marketing expenses consist of employee salaries and benefits,
consultant fees, and expenses for advertising, travel, technical assistance,
trade shows, and promotional and demonstration materials. Sales and marketing
expenses increased 3% from $470,000 for the six months ended June 30, 1998 to
$482,000 for the six months ended June 30, 1999. We added personnel to our
customer support group as noted above, and increased marketing efforts in
targeting key accounts. Partially offsetting the cost of these efforts was the
reduction of senior management and staff as we relocated our sales function
from Texas to Massachusetts.

 General and Administrative Expenses

   General and administrative expenses consist primarily of executive,
administrative, human resources, quality assurance, management information
systems and finance related costs. General and administrative expenses were
$1.4 million for both periods. In the six months ended June 30, 1999, we
incurred significant expenditures for recruiting and relocation, and we also
continued spending on our new management information system. However, these
costs were offset by the reassignment of personnel to selling and marketing.

 Other Income (Expense)

   Other income (expense) consists of interest earned on cash and cash
equivalents offset by interest expense and miscellaneous non-operating
expenses. Total other expense increased 72% from $75,000 for the six months
ended June 30, 1998 to $129,000 for the six months ended June 30, 1999.
Interest income decreased by $159,000 in 1999 as a result of lower invested
cash balances. This decrease in interest income was partially offset by a
decrease in interest expense of $105,000 due to repayment of the outstanding
balance under a bank line of credit.

                                       21
<PAGE>

 Income Tax Benefit

   In the six months ended June 30, 1998, we have recorded an income tax
benefit in continuing operations to the extent that the loss from continuing
operations offsets income from discontinued operations. No tax benefit has been
recorded in the six months ended June 30, 1999 due to the uncertainty in
deducting current losses against future taxable income.

 Years Ended December 31, 1996, 1997 and 1998

 Sales

   Sales increased $1.5 million from $201,000 in 1996 to $1.7 million in 1997.
Sales increased 38% from 1997 to $2.4 million in 1998. The increase in sales
from 1996 to 1997 was attributable to increased sales of modular products as
well as sales of individual modules. The increase in sales from 1997 to 1998
reflects increased sales of modular products as well as sales from our newly-
introduced planar products.

 Cost of Sales

   Cost of sales increased by $2.2 million from $147,000 in 1996 to $2.3
million in 1997. Cost of sales increased $4.9 million from 1997 to $7.2 million
in 1998. The increase in cost of sales from 1996 to 1997 was attributable to
increased shipments of modular products as well as shipments of individual
modules. The increase in cost of sales from 1997 to 1998 was attributable to
increased shipments of modular products as well as shipments of our newly-
introduced planar products. Gross margins were 27% in 1996, negative 34% in
1997, and negative 202% in 1998. These negative gross margins resulted from our
strategy of providing substantial discounts to encourage customer trials of our
products and demonstrate the viability of broadband point-to-multipoint
wireless technology. We also developed automated manufacturing processes and
added capacity and personnel in anticipation of future volume orders for our
products. In 1998, we incurred a charge of $1.1 million to write off obsolete
inventory.

 Research and Development Expenses

   Our gross research and development expenses increased $3.4 million from
$433,000 in 1996 to $3.8 million in 1997. Gross research and development
expenses increased 48% from 1997 to $5.6 million in 1998. The increase from
1996 to 1997 reflected significant investments to develop our modular products
and adapt them for different frequency ranges. The increase from 1997 to 1998
reflected significant investments to develop our planar products and adapt our
modular products for additional frequency ranges. These activities required us
to substantially increase the size of our research and development staff by
52%, from 29 personnel at the end of 1997 to 44 at the end of 1998. Net of
customer reimbursements, our research and development expenses increased $3.3
million from $433,000 in 1996 to $3.7 million in 1997. Net research and
development increased 24% from 1997 to $4.6 million in 1998.

 Selling and Marketing Expenses

   Selling and marketing expenses increased 89% from $353,000 in 1996 to
$667,000 in 1997. Selling and marketing expenses increased 51% from 1997 to
$1.0 million in 1998. The increase in selling and marketing expenses from 1996
to 1997 was attributable to our increased efforts to expand our presence in the
broadband wireless access marketplace and initiate contacts with various
network system integrators and network service providers. The increase in
selling and marketing expenses from 1997 to 1998 was attributable to our hiring
of additional key personnel to enhance our relationships with major customers
and prospects. From 1996 through 1998, we invested significantly in
installation and demonstration of our equipment at various locations worldwide.

                                       22
<PAGE>

 General and Administrative Expenses

   General and administrative expenses increased 59% from $1.1 million in 1996
to $1.7 million in 1997. General and administrative expenses increased 56% from
1997 to $2.7 million in 1998. The increase from 1996 to 1997 resulted from our
intensified recruiting efforts. Also, travel costs increased, as our executives
worked to promote the company and increase our recognition in the
telecommunications industry. The increase in general and administrative
expenses from 1997 to 1998 was attributable to the reconfiguration of
facilities to expand our manufacturing and engineering operations. In addition,
we began to implement a new integrated financial and management information
system.

 Other Income (Expense)

   Total other expense increased 53% from $410,000 in 1996 to $626,000 in 1997.
Total other expense changed from $626,000 in expense in 1997 to $757,000 in
income in 1998. The increase in other expense from 1996 to 1997 was
attributable to additional interest incurred on $3 million of subordinated
notes and additional borrowings under our bank line of credit. The change in
other expense from 1997 to other income in 1998 was primarily due to the
recognition of $997,000 in income related to the termination of a development
contract with a customer. Interest expense in 1998 was $210,000 lower than in
1997 due to repayment of the subordinated notes and bank line of credit.
Interest income increased by $193,000 due to proceeds invested from a private
placement completed in October 1997.

 Income Tax Benefit

   We have recorded an income tax benefit in continuing operations to the
extent that the loss from continuing operations offsets income from
discontinued operations. For 1997, the income tax benefit from continuing
operations is net of additional tax expense of $264,000, due to an increase in
the valuation allowance recorded against deferred tax assets.

                                       23
<PAGE>

 Quarterly Results of Operations

   The following table provides, for the periods presented, continuing
operations data derived from our statement of operations in dollars and as a
percentage of sales. The statement of operations data have been derived from
our unaudited financial statements. In management's opinion, these statements
have been prepared on substantially the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods presented. This information should be read with our financial
statements and notes appearing elsewhere in this prospectus. The operating
results in any quarter are not necessarily indicative of the results that may
be expected for any future period.

<TABLE>
<CAPTION>
                                              Quarter Ended
                         ---------------------------------------------------------------
                         March 31,  June 30,   Sept. 30,  Dec. 31,   March 31,  June 30,
                           1998       1998       1998       1998       1999       1999
                         ---------  --------   ---------  --------   ---------  --------
                                              (in thousands)
<S>                      <C>        <C>        <C>        <C>        <C>        <C>
Statement of Operations
 Data:
Sales ..................  $   414   $   623     $   410   $   939     $ 1,177   $ 1,585
Cost of sales ..........    1,047       741       1,261     4,151       1,581     1,198
                          -------   -------     -------   -------     -------   -------
Gross margin (loss) ....     (633)     (118)       (851)   (3,212)       (404)      387
Operating expenses
 Research and
  development
  expenditures .........    1,332     1,385       1,443     1,456         917     1,198
 Research and
  development
  reimbursement ........      --        --         (508)     (478)       (120)     (194)
                          -------   -------     -------   -------     -------   -------
  Research and
   development, net ....    1,332     1,385         935       978         797     1,004
 Selling and marketing
  ......................      182       288         149       387         318       164
 General and
  administrative .......      685       708         666       663         578       838
                          -------   -------     -------   -------     -------   -------
  Total operating
   expenses ............    2,199     2,381       1,750     2,028       1,693     2,006
                          -------   -------     -------   -------     -------   -------
Operating loss .........   (2,832)   (2,499)     (2,601)   (5,240)     (2,097)   (1,619)
Other income (expense)
 Interest expense ......     (127)     (132)       (112)     (102)        (68)      (86)
 Income from contract
  cancellation..........      --        --          --        997         --        --
 Interest income .......      118        66          16        33          17         8
                          -------   -------     -------   -------     -------   -------
  Total other income
   (expense) ...........       (9)      (66)        (96)      928         (51)      (78)
                          -------   -------     -------   -------     -------   -------
Loss from continuing
 operations before
 income taxes ..........   (2,841)   (2,565)     (2,697)   (4,312)     (2,148)   (1,697)
Income tax benefit .....      191       464         372       135         --        --
                          -------   -------     -------   -------     -------   -------
Loss from continuing
 operations ............  $(2,650)  $(2,101)    $(2,325)  $(4,177)    $(2,148)  $(1,697)
As a Percentage of
 Sales(1):
Sales ..................    100.0%    100.0%      100.0%    100.0%      100.0%    100.0%
Cost of sales ..........    252.9     118.9       307.6     442.1       134.3      75.6
                          -------   -------     -------   -------     -------   -------
Gross margin (loss) ....   (152.9)    (18.9)     (207.6)   (342.1)      (34.3)     24.4
Operating expenses
 Research and
  development
  expenditures .........    321.7     222.3       352.0     155.1        77.9      75.6
 Research and
  development
  reimbursement ........      --        --       (123.9)    (50.9)      (10.2)    (12.2)
                          -------   -------     -------   -------     -------   -------
  Research and
   development, net ....    321.7     222.3       228.0     104.2        67.7      63.3
 Selling and marketing
  ......................     44.0      46.2        36.3      41.2        27.0      10.3
 General and
  administrative .......    165.5     113.6       162.4      70.6        49.1      52.9
                          -------   -------     -------   -------     -------   -------
  Total operating
   expenses ............    531.2     382.1       426.8     216.0       143.8     126.6
                          -------   -------     -------   -------     -------   -------
Operating loss .........   (684.1)   (401.1)     (634.4)   (558.0)     (178.2)   (102.1)
Other income (expense)
 Interest expense ......    (30.7)    (21.2)      (27.3)    (10.9)       (5.8)     (5.4)
 Income from contract
  cancellation .........      --        --          --      106.2         --        --
 Interest income .......     28.5      10.6         3.9       3.5         1.4       0.5
                          -------   -------     -------   -------     -------   -------
  Total other income
   (expense) ...........     (2.2)    (10.6)      (23.4)     98.8        (4.3)     (4.9)
                          -------   -------     -------   -------     -------   -------
Loss from continuing
 operations before
 income taxes ..........   (686.2)   (411.7)     (657.8)   (459.2)     (182.5)   (107.1)
Income tax benefit .....     46.1      74.5        90.7      14.4         --        --
                          -------   -------     -------   -------     -------   -------
Loss from continuing
 operations ............   (640.1)%  (337.2)%    (567.1)%  (444.8)%    (182.5)%  (107.1)%
</TABLE>
---------------------
(1) Percentages may not add due to rounding.

                                       24
<PAGE>

   Our past sales and results of operations have fluctuated significantly from
quarter to quarter, and we expect these fluctuations to continue in the future.
The following discussion highlights significant events that have impacted our
sales and financial results for the six quarters in the period ended June 30,
1999.

   Our sales have increased each quarter beginning in the quarter ended
September 30, 1998. This increase was attributable primarily to increased
shipments of our planar products. Cost of sales has generally increased
primarily as a result of the increase in units shipped. We also incurred a
charge of $1.1 million in the quarter ended December 31, 1998 to write off
obsolete inventory. Before the quarter ended June 30, 1999, we generally had
negative gross margins. These negative gross margins reflect substantial
discounts provided to encourage customer trials of our products and demonstrate
the viability of broadband point-to-multipoint wireless access technology. Our
gross margins improved significantly in each quarter beginning in the quarter
ended March 31, 1999. This improvement was attributable primarily to the
increased shipments of our higher-margin planar products. We had a positive
gross margin of 24% in the quarter ended June 30, 1999. Our total operating
expenses decreased as a percentage of sales in each quarter beginning in the
quarter ended December 31, 1998. This decrease reflects the reduction of senior
management positions as we reorganized our sales, research and development, and
administrative functions in the quarter ended December 31, 1998. In addition,
some of our customers have provided funding to offset our development costs for
specific products. Our operating loss decreased as a percentage of sales in
each quarter beginning in the quarter ended December 31, 1998. The change from
other expense to other income in the quarter ended December 31, 1998 was the
result of the recognition of $1.0 million of other income related to the
termination of a development contract with a customer.

Liquidity and Capital Resources

   Since 1997, we have financed our operations primarily through the sale of
redeemable preferred stock and, to a much lesser extent, from cash generated by
our discontinued operations. We have also issued subordinated notes and used
equipment lease financing and bank lines of credit to provide cash. At June 30,
1999, we had $1.0 million of subordinated notes outstanding. We raised net
proceeds of $12.8 million in 1997 and $7.3 million in 1998 from the issuance of
redeemable preferred stock.

   At June 30, 1999, we had cash and cash equivalents of $405,000. At June 30,
1999, we had no bank borrowings and did not have a line of credit facility.

   Cash used in operating activities for the six months ended June 30, 1999 was
$3.3 million compared to $4.7 million for the six months ended June 30, 1998.
Cash used in operating activities was $8.5 million in 1998, $426,000 in 1997
and $1.8 million in 1996. Cash used in operating activities has primarily
represented funding of our net losses.

   Cash used in investing activities for the six months ended June 30, 1999 was
$747,000 compared to $2.6 million for the six months ended June 30, 1998. Cash
used in investing activities was $3.7 million in 1998, and $817,000 in 1997. In
each period, these amounts related primarily to the purchase of equipment used
in our manufacturing and research and development activities. Cash provided by
investing activities was $28,000 in 1996 and resulted from the sale of certain
property and equipment, net of additional equipment purchases.

   Cash provided by financing activities for the six months ended June 30, 1999
was $1.8 million compared to cash used by financing activities of $948,000 in
the six months ended June 30, 1998. The financing activities for the six months
ended June 30, 1999 consisted of the issuance of subordinated notes and term
notes collateralized by equipment. Cash provided by financing activities was
$4.5 million in 1998, and $10.3 million in 1997. In each of these years,
financing activities consisted primarily of the issuance of redeemable
preferred stock. Cash provided by financing activities was $1.9 million in 1996
and resulted from borrowings under a bank line of credit and proceeds from the
issuance of term notes.

   Our future cash requirements will depend upon a number of factors, including
the timing and level of research and development activities and sales and
marketing campaigns, and our ability to significantly increase

                                       25
<PAGE>

our manufacturing volumes. We believe that our cash and cash equivalent
balances and the proceeds from this offering will provide sufficient capital to
fund our operations for at least 12 months. Thereafter, we may require
additional capital to fund our operations. In addition, from time to time we
evaluate opportunities to acquire complementary technologies or companies.
Should we identify any such opportunities, we may need to raise additional
capital to fund the acquisitions and our operations. There can be no assurance
that financing will be available to us on favorable terms or at all.

Year 2000 Issues

   Many currently installed computer systems, software products and other
devices do not properly recognize dates after December 31, 1999. This "year
2000" problem could result in product failures, system failures or
miscalculations causing disruptions of operations. If the computer systems,
software products and devices upon which we rely do not correctly process dates
after December 31, 1999, our business could be adversely affected.

   State of Readiness--Products. We have reviewed all of our products and their
components to determine whether they are date-sensitive. Based on our review,
we do not believe there are any date-sensitive features in any of our products
or their components. Accordingly, we believe our products, as well as our
inventories of product components, are year 2000 compliant.

   State of Readiness--Third Parties. Because we depend on third parties, such
as single source suppliers, network system integrators and contract
manufacturers, we are assessing their year 2000 compliance. We have circulated
written surveys to our material component suppliers regarding their internal
year 2000 compliance. We have received and reviewed completed surveys from a
majority of our component suppliers. We are pursuing the suppliers that have
not responded to our survey for more information regarding their year 2000
compliance. The suppliers who responded to our survey stated that they believe
they are year 2000 compliant or will be year 2000 compliant by December 31,
1999. We have also had discussions regarding year 2000 compliance with our
network system integrator customers and selected third-party manufacturers we
may engage, but have not received definite assurances that year 2000 problems
will not materially affect their ability to do business with us. We do not
believe we will know by December 31, 1999 the year 2000 readiness of all third
parties with which we do business.

   State of Readiness--Internal Systems. We have completed our evaluation of
all of our internal systems for year 2000 compliance. These systems include our
information technology systems, such as our financial systems, enterprise
resource planning systems, network hardware, server and PC operating systems,
and core software applications, including our design software. These systems
also include our non-information technology systems, such as our telephone
switches, security systems, and office and facilities equipment. In most cases,
we obtained these systems from third parties, and our evaluation consisted of
inquiries made to vendors to determine whether their products were year 2000
compliant. As a result of our evaluation, we replaced desktop computers and
upgraded and tested our network software and several software applications. We
believe that our critical internal systems are now year 2000 compliant.

   Costs of Remediation. We estimate that the total costs that we incurred in
order to comply with year 2000 requirements was approximately $30,000. This
amount represents only our costs of upgrading or replacing software and
hardware ahead of schedule in order to obtain year 2000 compliant versions. We
do not separately track the internal costs of our year 2000 remediation
efforts. These costs consist primarily of payroll expenses for our information
systems personnel and selected research and development personnel.

   Risks and Contingency Plans--Products. Despite our review, our products may
contain year 2000 defects or use components with year 2000 defects. Our
contingency plan is to re-design our products to be year 2000 compliant or to
use year 2000 compliant components. This redesign process could be difficult
and time-consuming, and the associated costs may be material. If components are
not year 2000 compliant, we would have to replace our inventories of those
components, and compliant alternatives may not be readily available.

                                       26
<PAGE>

Moreover, we have represented to our customers that our products are year 2000
compliant. If our products are not year 2000 compliant, we could be liable for
the damages caused by our erroneous representation, and we could also lose
sales. These liabilities or lost sales could be significant, which could have a
material adverse effect on our business.

   Risks and Contingency Plans--Third Parties. We do not know the year 2000
readiness of our material suppliers that have not completed our survey.
Moreover, the suppliers who returned our surveys may have been mistaken or
untruthful in responding to the survey. If year 2000 problems disrupt the
operations of our suppliers, we may be unable to obtain necessary components
for our products. Because we lack alternative suppliers for many components, we
are unable to develop contingency plans. Similarly, year 2000 problems that
affect our network system integrators, or their network service provider
customers, could cause them to reduce or defer purchases or deployments of our
products. Because we depend on and have little or no control over our network
system integrators, we are unable to develop contingency plans. We cannot
predict the impact that year 2000 problems will have on our business
relationships with other third parties, and do not have specific contingency
plans with respect to those third parties. These problems could have a material
adverse effect on our business.

   Risks and Contingency Plans--Internal Systems. Because we believe our
internal systems are year 2000 compliant, we have not developed and do not
intend to develop any specific contingency plans for year 2000 problems that
may arise with these systems. If we encounter a year 2000 problem with a
critical system, the problem could severely disrupt our operations, damage our
reputation, distract us from planned business activities and cause us to incur
significant expenses to remedy the problem. These or other consequences of any
year 2000 problem could have a material adverse effect on our business.

Recent Accounting Pronouncements

   In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"), which establishes
standards for reporting information about operating segments in interim and
annual financial reporting. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997.
SFAS No. 131 did not have a material effect on our financial statements.

   In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1 is effective for
fiscal years beginning after December 15, 1998 and provides guidance over
accounting for computer software developed or obtained for internal use
including the requirement to capitalize specified costs and amortization of
such costs. We have adopted the provisions of SOP 98-1 for our six month period
ended June 30, 1999.

   In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities (SFAS No.
133), which establishes accounting and reporting standards for derivative
instruments and hedging activities. The statement requires recognition of all
derivatives at fair value in the financial statements. FASB Statement No. 137,
Accounting for Derivative Instruments and Hedging Activities Deferral of the
Effective Date of FASB Statement No. 133, an amendment of FASB Statement No.
133, defers implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. We have reviewed SFAS No. 133 and believe that, upon
implementation, the standard will not have a significant effect on our
financial statements.

                                       27
<PAGE>

Disclosures About Market Risk

   The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors, including those set forth in "Risk Factors."

   As of June 30, 1999, we had cash and cash equivalents of $405,000.
Substantially all of these amounts consisted of highly liquid investments with
remaining maturities at the date of purchase of less than 90 days. These
investments are subject to interest rate risk and will decrease in value if
market interest rates increase. A hypothetical increase or decrease in market
interest rates by 10 percent from the June 30, 1999 rates would cause the fair
value of these short-term investments to decline by an insignificant amount.
Due to the short duration of these investments, an immediate increase in
interest rates would not have a material effect on our financial condition or
results of operations. Declines in interest rates over time will, however,
reduce our interest income.

   We do not own any material equity investments. Therefore, we do not
currently have any direct equity price risk.

   Currently, all sales to international customers are denominated in United
States dollars and, accordingly, we are not currently exposed to foreign
currency exchange rate risks.

                                       28
<PAGE>

                                    BUSINESS

Overview

   We develop and supply broadband wireless access equipment used by network
service providers to deliver integrated voice, video and data services to
business and residential customers. Our products provide a high performance
alternative to other technologies, such as traditional copper wires, digital
subscriber lines and cable modems, that connect the network service provider
and the subscriber. Our products enable high-speed Internet access, electronic
commerce, remote access, telecommuting and extensions of corporate networks to
branch offices. Using our products, network service providers can enter markets
quickly and economically, and then expand their networks as the number of
subscribers grows.

   Our product line consists of wireless transmitter and receiver equipment
that is installed outdoors in a cell-based arrangement. Each cell consists of a
hub that transmits and receives network traffic to and from CPE units installed
at multiple subscriber locations. This cell-based arrangement is commonly
referred to as point-to-multipoint architecture.

   We sell our products primarily to network system integrators, such as
Newbridge Networks and Motorola, which include our products in broadband
wireless systems sold to network service providers. Our products have been
successfully demonstrated in more than 40 customer trials worldwide over the
last four years. We believe this experience is unmatched by any other supplier
of broadband point-to-multipoint wireless access equipment. As a result of
these trials, our products have been selected, either directly or by network
system integrators, for commercial deployment by network service providers,
including:

<TABLE>
<S>  <C>
  .  American Wireless               .  Korea Telecom


  .  BellSouth Movicom               .  Maxlink Communications


  .  Central Texas Communications    .  Nexsatel


  .  Convergence Communications      .  South Central Telecom


  .  Formus                          .  Telenordia


  .  Gateway Telecom                 .  Tri-Corners Telecom

  .  Home Telephone
</TABLE>

Industry Background

 The Growing Demand for Broadband Communications

   The amount of data being transmitted over the Internet and private
communications networks is increasing rapidly due to the growing number of
users accessing these networks and the increasing range of data-intensive
activities for which they use these networks. Businesses increasingly use the
Internet to enhance their reach to customers and suppliers with applications
such as electronic commerce, supply chain management, Web hosting, global
marketing and customer support. Businesses are also using the Internet to
create data networks among corporate sites, remote offices and telecommuters in
order to facilitate employee communications, e-mail, file sharing, and research
and analysis. Consumers use the Internet to communicate, collect and publish
information, conduct retail purchases and access online entertainment. These
network-based business and consumer activities require the transmission of
increasingly large amounts of data quickly and reliably. As a result, broadband
access is becoming increasingly important.

 Deregulation and Competition are Driving Deployment of Broadband Access
 Technologies

   Global telecommunications deregulation is creating significant competition
among providers of advanced communications services, thereby accelerating the
deployment of broadband access technologies. In the United States, incumbent
telephone companies such as Ameritech, Bell Atlantic, BellSouth, GTE, Pacific
Bell, SBC

                                       29
<PAGE>

Communications and US West were, until recently, the exclusive providers of the
copper wire connections between their network backbones and subscribers,
commonly known as the "last mile." The federal Telecommunications Act of 1996
intensified the competitive environment in the United States by requiring
telephone companies to lease portions of their networks, including the last
mile, to competing carriers. Additionally, telephone companies and cable
operators are seeking to expand their service offerings by entering each
others' markets. Similar deregulation and competition are occurring in many
regions of the world. To compete in this environment, many network service
providers seek to differentiate themselves and maximize revenue per subscriber
by offering integrated voice, video and data services, which require broadband
access.

 Developing Nations are Installing Communications Infrastructure

   In many parts of the world, communication services are either inadequate or
non-existent due to the lack of existing infrastructure. A number of developing
nations have privatized their state-owned telecommunications monopolies and
opened their markets to new network service providers. In constructing new
networks, many network service providers deploy broadband access technologies
to expand the services they offer and maximize revenue.

 Traditional Network Access Solutions Have Limitations

   To meet the growing demand for high-speed data transmission, many network
service providers have installed high-speed fiber optic transmission equipment,
switches and routers in the Internet backbone and in interoffice networks.
While the network backbone is capable of delivering data at very high speeds, a
bottleneck exists in the last mile, which was originally built to provide
traditional analog telephone service. Along the fiber optic network backbone,
data moves at speeds up to 10 billion bits per second, or 10 Gbps. Subscribers
have traditionally connected to the backbone using dial-up analog modems, which
transmit data at rates up to 56.6 thousand bits per second, or 56.6 Kbps, or
using integrated service digital network, or ISDN, modems, which transmit data
at rates up to 128 Kbps. At these modem speeds, several minutes are often
required to access a media-rich Web site, and several hours may be required to
transfer or download large files. This bottleneck frustrates subscribers and
limits the capability of network service providers to satisfy the demand for
high-speed Internet access, multimedia entertainment, real-time telecommuting
and branch office inter-networking. Additionally, the continued growth in both
the number of analog modem users and their time spent connected to the Internet
compounds the congestion experienced on many networks.

   Where subscribers require higher-speed connections, network service
providers have traditionally deployed copper-based T1 services in the United
States and E1 services internationally. A T1 line is a high-capacity, dedicated
telecommunications line which can support data transmission rates of up to 1.5
million bits per second, or 1.5 Mbps, which is 26.5 times the speed of analog
modems. An E1 line can support data transmission rates of up to 2.0 Mbps, or 35
times the speed of analog modems. Although T1 and E1 services have met the
broadband access needs of many large businesses, these services are either
unavailable to or prohibitively expensive for many small businesses, remote
offices, telecommuters and consumers.

 Alternative Access Solutions are Emerging

   Because analog and ISDN modem technologies do not satisfy the high-speed
access needs of many subscribers, and T1 or E1 access is often unavailable or
prohibitively expensive, alternative access solutions have been developed such
as:

   DSL. Digital subscriber line, or DSL, technology improves the data
transmission rate of a telephone company's existing copper wire network.
However, most deployments offer either high-speed asymmetrical services or
slower symmetrical services. Asymmetrical data rates provide higher
transmission speeds from the network to the subscriber and lower speeds from
the subcriber to the network. Symmetrical data rates provide equal transmission
speeds to and from the subscriber. DSL transmission rates are limited by the
length and quality of available copper wires.

                                       30
<PAGE>

   Cable. Two-way cable modems enable asymmetrical data services to be
delivered over a network originally designed to provide television service to
residential subscribers. Cable networks connect to the home using coaxial
cable, which has greater transmission capacity than the copper wires used by
telephone companies. However, these networks often are costly to upgrade for
two-way data services.

   Fiber. Fiber offers the highest data transmission rate of any access
solution, but is the most costly to deploy. Corporations and institutions use
fiber connections where critical operations require such data rates.

   Satellite. Broadband satellite solutions enable asymmetrical, two-way access
services. These solutions use broadcast satellite technology for high-speed
transmissions from the network service provider to the subscriber, but use
slower wire-based connections to transmit data from the subscriber to the
network service provider. The data rate available to each subscriber in a
service area decreases as usage increases.

   Point-to-Point Wireless. Point-to-point wireless technology enables
symmetrical data services using a dedicated link between a subscriber and a
network. However, the network service provider must install dedicated equipment
at each end of a link for each new subscriber. Therefore, economies of scale
are limited.

   Broadband Point-to-Multipoint Wireless. Broadband point-to-multipoint
wireless technology provides higher-speed symmetrical access than all other
alternative broadband solutions except high-cost dedicated links using fiber or
point-to-point wireless. Broadband point-to-multipoint wireless access
technology also offers the following advantages:

  .  Rapid Deployment. Network service providers can initiate service quickly
     because they are not required to install copper wire, cable or fiber.

  .  Low-cost Market Entry. Network service providers can initiate service
     economically with one hub and a small number of CPE units.

  .  Economies of Scale. Network service providers can add subscribers
     rapidly and cost-effectively, as each installed hub can support many CPE
     units.





                  [CHART SHOWING BROADBAND ACCESS DATA RATES]

 Mass Deployment of Broadband Point-to-Multipoint Solutions Presents Challenges

   Broadband point-to-multipoint wireless access equipment typically must be
tailored for frequency requirements that vary from country to country and
within each country. A further complication by the lack of

                                       31
<PAGE>

universal standards for equipment specifications and protocols. As a result,
suppliers of broadband point-to-multipoint wireless access equipment face
challenges in achieving economies of scale and developing cost-effective
products suitable for mass deployment.

   Conventional industry practice is to build broadband point-to-multipoint
wireless access equipment using multiple modules connected by small metal pipes
and wires. This approach requires considerable hand assembly and tuning and is
not suited to automated manufacturing. Therefore, assembly is often outsourced
to low-cost labor environments, which greatly reduces the ability to deliver
tailored products in a timely fashion.

   An opportunity exists to substantially reduce the cost of broadband point-
to-multipoint wireless access equipment by integrating the functionality of
multiple conventional modules onto printed circuit boards, thereby enabling the
use of low-cost manufacturing processes. However, major technical difficulties
have plagued the development and production of printed circuit boards that
operate at high frequencies and at high data rates because they typically
generate distorted or unwanted signals.

The Telaxis Solution

   Our solution consists of two product families that enable both the adoption
and growth of broadband wireless access for a diverse range of markets and
applications worldwide. Our modular products address a network service
provider's need for rapid time-to-market. Our planar products address a network
service provider's need for cost-effective mass deployment.

 Modular products for rapid time-to-market

   Our modular products feature a flexible architecture that enables us to
deliver a tailored solution in as little as four to six weeks for network
service provider trials and initial stages of deployment. This allows network
service providers using our modular products to be among the first to offer
broadband wireless services in new markets. We are able to achieve rapid
turnaround for the following reasons:

  .  Extensive Design Expertise and Database. Our 17 years of experience in
     millimeter-wave design and manufacturing provides us with an extensive
     database of circuit designs that we can readily simulate and modify.

  .  Flexible Platform. We have developed a flexible multiple module
     architecture that enables us to modify our products rapidly to address
     different frequencies, customer interfaces and performance requirements.

  .  Proven Modules. Through successful demonstrations in more than 40
     customer trials over the past four years, we have developed a large
     number of transmitters, receivers and other modules that we can quickly
     reproduce in our automated manufacturing facility.

  .  Integrated Facilities. Our integrated design and manufacturing
     facilities allow us to produce a custom circuit from concept to
     completion in a matter of days.

 Planar products for cost-effective mass deployment

   Large-scale commercial buildouts by network service providers require cost-
effective products. Our planar products integrate the functionality of multiple
conventional modules onto printed circuit boards, thereby enabling the use of
low-cost automated manufacturing processes. We believe we are the only provider
of broadband point-to-multipoint wireless access equipment that has
successfully implemented these manufacturing techniques. As a result, we are
able to offer products suitable for mass deployment with the following
benefits:

  .  Lower cost

  .  Higher performance

  .  Greater reliability

  .  Smaller size

                                       32
<PAGE>

Strategy

   Our objective is to be the leading worldwide provider of broadband point-to-
multipoint wireless access equipment. Our strategy to accomplish this objective
is to:

   Penetrate the global market with our two product families. Our strategy is
to secure new customer relationships by delivering tailored products to network
system integrators and network service providers more rapidly than our
competitors. Once network service providers and network system integrators use
our modular products in successful trials and initial deployments, we are
strategically positioned to sell them our cost-effective planar products for
mass deployment.

   Capitalize upon our early customer acceptance. We shipped our first
broadband point-to-multipoint access prototype in 1995. Our equipment has been
successfully demonstrated in more than 40 customer trials worldwide. We believe
this experience is unmatched by any other supplier. As a result of these
trials, our products have been selected, either directly or by network system
integrators, for initial commercial deployment by many network service
providers. We intend to build upon this acceptance of our products to become
the primary provider of broadband point-to-multipoint wireless access equipment
to these and other network service providers as they deploy commercial
buildouts.

   Expand strategic relationships with network system integrators. We believe
successful deployment of broadband wireless access equipment requires close
working relationships with network system integrators. We have established
relationships with Newbridge Networks, Motorola and Hughes Network Systems
Europe, that include joint marketing, sales development and supply agreements.
Our relationships with key industry leaders offer us insight into market
requirements and deployment trends, which shapes development of our long-term
product strategy. We intend to build upon our existing relationships and
establish new relationships with network system integrators to increase
distribution of our products and build brand awareness.

   Reduce product costs while increasing performance and adding
functionality. We continue to reduce the cost and improve the reliability of
our planar products by integrating various components directly into the circuit
board design. We are also developing a CPE unit with an antenna integrated into
its die-cast housing, which will significantly reduce product cost and size. In
order to reduce our customers' installation costs, we are developing products
with simple cabling and mounting hardware.

   Leverage technology partnerships. We have established a relationship with
the University of Massachusetts to design proprietary millimeter-wave
integrated circuits to achieve higher levels of integration and reduce costs.
We have a joint design and manufacturing relationship with California Amplifier
to combine our complementary expertise in designing and manufacturing low-cost
wireless products. We intend to continue to partner with other technology
developers to maintain and enhance our technology leadership position.

   Establish brand identity. We intend to establish brand awareness with
network service providers and to build upon our position in the broadband
point-to-multipoint wireless access equipment market. Historically, our
products have been sold primarily under private label by prominent network
system integrators. In the future, we will increasingly brand or co-brand our
products to build name recognition. In addition, we plan to invest in a broad
range of marketing programs, including participation in trade shows,
advertising in print publications, direct marketing to major customers and Web-
based marketing.

Products

   We have two product families, consisting of modular products which can be
rapidly tailored for new markets and planar products for cost-effective mass
deployment. Our modular and planar product families consist of hub and CPE
equipment that is installed outdoors in a cell-based arrangement. Our products
provide capacity for data rates several times the rates supported by today's
modem technology. We believe that the highest symmetrical data rate available
with today's point-to-multipoint modem technology is 35 Mbps. Our products
operate at various frequencies ranging from 24 gigahertz, or GHz, to 44 GHz,
and are available with a range of interfaces, including hybrid fiber coax, or
HFC, and digital audio visual counsel, or DAVIC.

                                       33
<PAGE>

 CPE Products.

   We have concentrated our development efforts on the CPE unit. Because
multiple CPE units are supported by each hub, cost reduction of the CPE unit
has the most significant impact on the ability of a network service provider to
deploy broadband access services to its customers on a cost-effective basis.
Our modular CPE units address our customers' need for rapid time-to-market, and
our planar CPE units address their need for cost-effective mass deployment.

   Modular CPE. Our modular CPE unit can be quickly adapted to meet the
individual frequency, performance and interface requirements of a network
service provider. This product is currently available with DAVIC or HFC
interfaces. [Photograph of our modular CPE]

   Planar CPE. Our planar CPE unit is a highly integrated unit using single-
board, planar architecture that enables highly automated, cost-effective
manufacturing. These units enable network service providers to lower their
costs of deployment in commercial service buildouts. This product is currently
available with a DAVIC interface and we are developing an HFC interface.
[Photograph of our planar CPE]

   We are also developing a planar CPE unit that incorporates a proprietary
antenna and is designed to achieve significant size and cost reductions. This
CPE unit is designed to address the low-cost, high volume consumer market
segment to the extent it emerges.

 Hub Products

   Each hub provides two-way connectivity to multiple CPE units out to a range
of approximately two to three miles.

   Modular hub. Our modular hub can be quickly adapted to meet the performance
and interface requirements of a network service provider. This hub has the
flexibility to accommodate various combinations of transmitter or receiver
modules within a single housing. Antennas can be included within the housing or
attached externally. This hub is available with DAVIC or HFC interfaces.
[Photograph of our modular hub]

   Planar hub. Our planar hub consists of separate transmitter and receiver
units that are deployed together to provide two-way connectivity. The receiver
unit works in conjunction with one or more transmitter units to form a hub. The
planar hub unit enables network service providers to lower their costs of
deployment in commercial service buildouts. The planar hub is available with
DAVIC or HFC interfaces. [Photograph of our planar hub]

Technology

   Our 17 years of experience in millimeter-wave technology is the foundation
for our capability in the broadband point-to-multipoint wireless market. Our
products transmit and receive signals at various frequencies ranging from 24
GHz to 44 GHz and interface with modems that operate at frequencies below 2
GHz. A key element of our competitive advantage stems from our ability to
integrate millimeter-wave and microwave semiconductor devices and other
electronic components onto a single printed circuit board inside a die-cast
housing which is a functioning element of the overall product. The result is an
integrated outdoor unit using planar architecture that enables highly
automated, cost-effective manufacturing.

   Millimeter-wave technology uses frequencies that are ten times higher than
microwave technology, resulting in electronic components that are ten times
smaller. The higher frequency causes greater signal interference between
components, depending on their location and spacing on the circuit board. The
small size of the components and the need to place them precisely on the
circuit board present challenges for the design, development and manufacturing
of millimeter-wave products.

   Historically, hand tuning of each unit was required to prevent the products
from transmitting excessively distorted or unwanted signals that could
interfere with other radios or electronic equipment, which is prohibited

                                       34
<PAGE>

by governmental agencies worldwide. Our years of experience in developing
products that operate at high frequencies enable us to minimize excessively
distorted or unwanted signals and eliminate the need for hand tuning during
the manufacturing process. Furthermore, our automated processes are highly
repeatable, thereby minimizing mechanical misalignments in the placement of
components onto printed circuit boards. These misalignments contribute
directly to the creation of distorted and unwanted signals.

   In order to integrate millimeter-wave and microwave technologies into an
outdoor unit using planar architecture, we have developed additional expertise
in several areas, including:

  .  Micro-controller adaptation. We design interface circuits and software
     to incorporate micro-controllers into our products. These micro-
     controllers provide our products a high degree of functionality,
     including automatic adaptation to changing operating environments.

  .  Antennas. We design antennas and other sophisticated waveguide-based
     components to reduce the size, cost and complexity of the packaging of
     our products, while improving performance.

  .  Reference oscillators. We design and integrate reference oscillators
     onto our printed circuit boards to minimize signal distortion and to
     reduce cost.

  .  Microwave translation circuits. We design and integrate microwave
     translation circuits enabling our products to interface with various
     modems.

  .  Power supplies. We have a development program underway to integrate
     power supplies onto our printed circuit boards to reduce cost and
     increase reliability.

  . Material selection and mechanical assemblies. We select materials and
    design mechanical assemblies using the die-cast housing as a functional
    part of the product. This has enabled us to minimize unwanted signal
    interference while protecting our electronic components from damage.

   The accompanying photograph contrasts the physical architecture of our
planar and modular CPE units.

[Photograph contrasting our planar and modular CPE units]

Customers

   We sell our products primarily to network system integrators, including
Newbridge and Motorola Networks. The network system integrators in turn
develop complete broadband network solutions for their customers, the network
service providers. Occasionally, we sell our products directly to network
service providers. Our equipment has been successfully demonstrated in more
than 40 customer trials worldwide over the last four years. We believe this
experience is unmatched by any other supplier of broadband point-to-multipoint
wireless access equipment. As a result of these trials, we have been selected,
either directly or by network system integrators, to supply equipment for
commercial deployment by network service providers, including:

<TABLE>
<S>  <C>
  .  American Wireless               .  Korea Telecom


  .  BellSouth Movicom               .  Maxlink Communications


  .  Central Texas Communications    .  Nexsatel


  .  Convergence Communications      .  South Central Telecom


  .  Formus                          .  Telenordia


  .  Gateway Telecom                 .  Tri-Corners Telecom

  .  Home Telephone
</TABLE>

   For the six months ended June 30, 1999, sales to Newbridge Networks
represented 70% of sales and sales to Convergence Communications represented
22% of sales. For the year ended December 31, 1998, sales to Newbridge
Networks represented 30% of sales, sales to Convergence Communications
represented 26% of sales, and sales to Nexsatel, an affiliate of Formus,
represented 12% of sales.

                                      35
<PAGE>

Network System Integrator Relationships

   We have established relationships with three network system integrators to
facilitate the deployment of our products and to meet the requirements of
network service providers. In June 1999, all three of these network system
integrators introduced solutions that include our products at the Supercomm
trade show in Atlanta.

  .  Newbridge Networks. We have entered into product development and
     reseller agreements with Newbridge Networks. Through this relationship,
     our equipment has been evaluated in trials in North America, South
     America, Asia and Europe. As a result of these trials, Newbridge
     Networks has selected our equipment for commercial deployment in Canada,
     Argentina and the United States.

  .  Motorola. Motorola has deployed our equipment in trials in North America
     and Asia. We are currently developing equipment for commercial
     deployment in the United States.

  .  Hughes Network Systems (HNS) Europe. We have entered into a joint
     marketing and sales agreement with HNS Europe. Through this
     relationship, our equipment has undergone trials in North America and
     Europe.

Manufacturing

   Conventional industry practice is to build point-to-multipoint wireless
access equipment using multiple modules connected by small metal pipes and
wires. This approach has evolved from the more mature microwave industry, where
hand assembly and hand tuning is common due to low volume production. We have
developed extensive expertise in automated assembly and testing of printed
circuit board, planar products that operate at frequencies many times higher
than those used in the microwave industry. We have focused this experience on
the development of manufacturing strategies for high-volume production of cost-
effective broadband wireless access products for mass deployment.

   Concurrent process development. We develop our automated manufacturing
processes concurrently with the design and development of our millimeter-wave
products. These concurrent activities facilitate the design of products that
can be manufactured with very high tolerances, thereby minimizing unwanted and
distorted signals and eliminating the need for hand tuning.

   Automated component assembly. Our automated manufacturing technology enables
the repeated, high-precision placement and attachment of small chips, and the
bonding of wires between the chips and the printed circuit board. In the
production of millimeter-wave devices, this high precision is the critical
requirement to minimize distorted and unwanted signals and to achieve
acceptable performance.

   Final assembly and test. Our final assembly and automated test facility is
designed for pilot production runs ranging from several hundred to a few
thousand units. We use these pilot production runs to validate our
manufacturing processes in a carefully controlled environment at our
facilities. For high-volume production, we plan to supplement our manufacturing
capacity by establishing a relationship with a development and manufacturing
partner.

Marketing, Sales and Customer Service

 Marketing

   The global communications equipment industry is dominated by a limited
number of network system integrators. As a result, we focus our marketing
efforts on network system integrators and their customers, the network service
providers. Our marketing activities target technical experts and product
managers who heavily influence purchase decisions. Additionally, we coordinate
with our network system integrator partners to support their marketing
programs. We regularly provide them with design information, technical data and
promotional material to enable their sales forces to promote our products.

                                       36
<PAGE>

   We build brand awareness through several promotional programs, including the
following:

  .  Participation in trade shows

  .  Speaking at industry forums

  .  Web-based communication and promotion

  .  Publication of press releases

 Sales

   Our sales approach is to start by building a technical relationship with the
network system integrator. Typically, a senior executive from our technical
organization initiates discussions regarding a potential partnership. We then
assign an account manager to coordinate our efforts and focus our resources on
developing the relationship. This account manager aligns our engineering teams
and managers with their counterparts in the network system integrator's
organization to provide highly responsive technical and operational support
during trials of our equipment. After successful demonstration of our products,
we often adapt them for incorporation into the network system integrator's
broadband point-to-multipoint wireless systems. We support the network system
integrator in trials with network service providers. The objective of these
trials is the adoption of our equipment for mass deployment.

 Customer Service

   A key element of our sales approach is to be highly responsive to customers'
needs. We provide customer service in the following areas:

  .  System engineering. We provide engineering support for system trials,
     site surveys, specification development, integration of third-party
     equipment, installation and follow-on test support.

  .  Problem resolution. We provide prompt responses to customer problem
     reports, including telephone support, field service, and repair or
     replacement of equipment.

  .  Field support. Our customer service personnel are on call to provide
     global field support. We provide field support primarily for trials and
     initial deployments.

  .  Repairs. We maintain a repair center staffed with technicians who work
     directly with our quality assurance team to analyze failures and repair
     equipment.

   Currently, we conduct all customer support activities from our South
Deerfield, Massachusetts headquarters. As network buildouts progress, we intend
to establish support centers closer to our major customer deployments.

Research and Development

   The goal of our development activities is to reduce the cost and increase
the functionality of our products, while adapting them to the frequency and
interface specifications required for new markets. Our experience in
millimeter-wave and microwave technologies enables us to develop cost-effective
broadband point-to-multipoint wireless access products. We continue to advance
our core competencies and to extend these core competencies to meet rapidly
changing market needs. We are pursuing several development projects, including:

  .  Adapting our products to additional frequencies

  .  Developing additional modem interfaces

  .  Integrating microwave components into planar architectures

  .  Improving our products to reduce deployment costs

  .  Integrating the antenna into the die-cast housing

  .  Developing proprietary semiconductor devices

                                       37
<PAGE>

   Our multidisciplinary research and development team consists of engineers
and scientists whose specialities include microwave engineering, millimeter-
wave engineering, electrical engineering, mechanical engineering, chemistry,
physics, computer science and materials science. We also maintain close working
relationships with the University of Massachusetts and various technical
organizations.

Competition

   The market for broadband point-to-multipoint wireless access equipment is
rapidly evolving and highly competitive. A number of large telecommunications
equipment suppliers, such as Alcatel, Ericsson and Nortel Networks, as well as
a number of smaller companies, have developed or are developing products that
compete with ours. Many of our competitors are substantially larger than we are
and have significantly greater financial, sales, marketing, distribution,
technical, manufacturing and other resources. These competitors may make
strategic acquisitions or establish cooperative relationships among themselves
or with third parties to increase their ability to gain market share rapidly.
We expect to face increasing competitive pressures from both current and future
competitors in the markets we serve.

   The rapid technological developments within the network equipment industry
result in frequent changes to our group of competitors. The principal
competitive factors in our market include:

  .  Product availability

  .  Relationships with network system integrators and network service
     providers

  .  Product performance, features and inter-operability

  .  Product development speed

  .  Price

  .  Ability to manufacture and distribute products

  .  Technical support and customer service

  .  Brand recognition

   Broadband point-to-multipoint wireless access solutions are also competing
with other high-speed solutions such as digital subscriber lines, cable, fiber,
other high-speed wire, satellite and point-to-point wireless technologies. Many
of these alternative technologies can take advantage of existing installed
infrastructure and have achieved significantly greater market acceptance and
penetration than broadband point-to-multipoint wireless access technologies. We
expect to face increasing competitive pressures from both current and future
technologies in the broadband access market.

Intellectual Property

   Our success depends to a significant degree upon the preservation and
protection of our product and manufacturing process designs and other
proprietary technology. Although we employ a variety of intellectual property
in the development and manufacturing of our products, we believe that none of
our intellectual property is individually critical to our current operations.
However, taken as a whole, we believe our intellectual property rights are
significant. To protect our proprietary technology, we generally limit access
to our technology, treat portions of our technology as trade secrets and obtain
confidentiality or non-disclosure agreements from persons with access to our
technology. To date, we have been granted two United States patents, one of
which has been issued. In addition, we have two United States patent
applications pending. We have counterpart patents pending in three
international jurisdictions. We also rely on protections available under
copyright and trademark law.

   Our intellectual property rights, and our ability to enforce those rights,
may be inadequate to prevent others from using our technology or substantially
similar technology they may independently develop. The use of that technology
by others could eliminate any competitive advantage we have, cause us to lose
sales and otherwise harm our business. A significant portion of our proprietary
technology is know-how, and employees

                                       38
<PAGE>

with know-how may depart before transferring their know-how to other employees.
Moreover, the laws of other countries where we market our products may afford
even less protection for our intellectual property. If we resort to legal
proceedings to enforce our intellectual property rights, the proceedings could
be burdensome and costly, even if we were to prevail.

Facilities

   We lease approximately 78,000 square feet of facilities comprised of three
buildings in South Deerfield, Massachusetts. The term of the lease for our
primary facility expires in September 2000. We also lease approximately 4,200
square feet in Richardson, Texas. We believe that our existing facilities are
adequate to meet our current requirements and that suitable space will be
available as needed.

Employees

   On June 30, 1999, we had 130 employees in our continuing operations,
including approximately 56 in manufacturing, 42 in engineering, 9 in quality
assurance, 7 in sales, marketing and customer service and 16 in finance and
administration. We are not a party to any collective bargaining agreement. We
believe that relations with our employees are good.

Legal Proceedings

   We are not currently a party to any material legal proceedings.

                                       39
<PAGE>

                                   MANAGEMENT

Directors and Executive Officers

   Our directors, executive officers and key employees as of September 27, 1999
are as follows:

<TABLE>
<CAPTION>
Name                     Age Position
----                     --- --------
<S>                      <C> <C>
Albert E. Paladino,       67 Chairman of the Board of Directors
 Sc.D.(1)...............
John L. Youngblood,       58 President, Chief Executive Officer and Director
 Ph.D.(1)...............
Mervyn N. FitzGerald....  54 Senior Vice President, Operations
Ransom D. Reynolds......  56 Senior Vice President, Business Development
Dennis C. Stempel.......  36 Vice President, Chief Financial Officer and Treasurer
Kenneth R. Wood(2)......  45 Vice President, Engineering
Robert F. Browning(2)...  42 Vice President, Manufacturing
Allan M. Doyle,           69 Director
 Jr.(1)(3)..............
Robert C. Fleming(1)....  43 Director
James W. Fordyce(3).....  56 Director
David A. Norbury........  48 Director
Matthew S. Robison......  38 Director
</TABLE>
---------------------
(1)  Member of the compensation committee
(2)  Key employee
(3)  Member of the audit committee

   Dr. Albert E. Paladino has been our Chairman of the Board since January 1992
and a director since March 1984. Since December 1998, he has been a private
investor. He was a General Partner of Advanced Technology Ventures, a venture
capital firm, from 1981 through 1998. He is also a member of the board of
directors of TranSwitch Corporation, a publicly-traded developer of
semiconductor solutions for the communications markets, RF Micro Devices, a
publicly-traded manufacturer of radio frequency integrated circuit components,
and Helioss Corporation, a developer of high-capacity millimeter-wave
communications equipment. Dr. Paladino holds a B.S. and an M.S. in engineering
from Alfred University and an Sc.D. in materials science from the Massachusetts
Institute of Technology.

   Dr. John L. Youngblood has been our Chief Executive Officer and a director
since June 1992, and our President since March 1993. From August 1991 to June
1992, he was a management consultant. From May 1991 to August 1991, Dr.
Youngblood served as Executive Vice President of IMO Industries, a manufacturer
of analytical and optical instruments, electronic and mechanical controls, and
power transmission products. From January 1985 to May 1991, he held various
positions, including Chairman, Chief Executive Officer and President, at
Kollmorgen Corporation, a publicly-traded manufacturer of high-performance
electronic motion control products. He holds a B.S. in electrical engineering
from the University of Texas at Arlington, and both an M.S. and a Ph.D. in
electrical engineering from Oklahoma State University.

   Mervyn N. FitzGerald has been our Senior Vice President, Operations since
September 1999. From September 1996 to September 1999, Mr. FitzGerald served as
Vice President, Operations and Customer Service for the broadband wireless
access division of Nortel Networks, a provider of communications products and
services. From February 1995 to September 1996, he served as General Manager of
AlliedSignal Canada, a Canadian subsidiary of Allied Signal Inc., a diversified
aerospace manufacturer. From February 1992 to February 1995, he served as Vice
President, Operations for C-MAC Industries, a contract manufacturing company.
Mr. FitzGerald holds a B.S. in applied nuclear and solid state physics from
Polytechnic of the South Bank in London, England.

   Ransom D. Reynolds has been our Senior Vice President, Business Development
since February 1993. From May 1987 to February 1993, Mr. Reynolds served as
Director of the electro-optical division of Kollmorgen Corporation. He holds a
B.S. in physics from Southwest Texas State University and an M.B.A. from the
University of Houston.

                                       40
<PAGE>

   Dennis C. Stempel has been our Vice President, Chief Financial Officer and
Treasurer since April 1999. From November 1998 to April 1999, Mr. Stempel
served as our Director of Finance. From April 1996 to November 1998, he served
as a controller at Pratt & Whitney, a division of United Technologies
Corporation and a manufacturer of aircraft engines and space propulsion
systems. From March 1993 to April 1996, he served as the Director of Finance
for Anocoil Corporation, a manufacturer of lithographic printing plates. He
worked for Coopers & Lybrand from 1989 to 1993, including serving as a
certified public accountant from 1992 to 1993. Mr. Stempel holds a B.S. in
accounting from the University of Massachusetts.

   Kenneth R. Wood has been our Vice President, Engineering since December
1997. From April 1990 to December 1997, he was our Senior Microwave Engineer
and Program Manager. Mr. Wood holds a B.S. in electrical engineering from the
University of Pretoria and an M.S. in microwaves from the University of London.

   Robert F. Browning has been our Vice President, Manufacturing since July
1996. From December 1992 to July 1996, he served first as our manager and then
as our Director of Manufacturing. Mr. Browning holds a B.S. in electrical
engineering from Western New England College.

   Allan M. Doyle, Jr. has been a director since March 1984. From 1964 to May
1996, Mr. Doyle served as a member of the board of directors of Kollmorgen
Corporation. Before his retirement in 1990, he served as Vice Chairman of the
board of directors of Kollmorgen, and before that he served as Chief Financial
Officer. From 1990 to 1993, Mr. Doyle was an Associate Professor of Management
at Union College. Mr. Doyle holds a B.A. in industrial administration from
Union College and an M.B.A. from the Columbia University School of Business.

   Robert C. Fleming has been a director since November 1997. Since November
1995, he has been a General Partner of Prism Venture Partners, a venture
capital firm. From July 1993 to November 1995, he was a General Partner of
Norwest Venture Capital, also a venture capital firm. Mr. Fleming holds an A.B.
in engineering from Dartmouth College and an M.B.A. from the Wharton School.

   James W. Fordyce has been a director since June 1987. He has served as a
General Partner of Prince Ventures, a venture capital firm, since 1981. Mr.
Fordyce holds a B.A. in English literature from the University of Pennsylvania,
a Master's degree in philosophy, politics and economics from the University of
Oxford, and an M.B.A. from the Harvard Business School.

   David A. Norbury has been a director since September 1999. He has been
President, Chief Executive Officer and a director of RF Micro Devices since
September 1992. Mr. Norbury holds a B.S. in electrical engineering from the
University of Michigan, an M.S. in electrical engineering from Stanford
University and an M.B.A. from Santa Clara University.

   Matthew S. Robison has been a director since November 1997. Mr. Robison has
served as Vice President and Senior Technology Analyst for Ferris, Baker Watts,
an investment banking firm, since January 1999. From January 1997 to January
1999, Mr. Robison was a General Partner at Botti Brown Asset Management, an
asset management firm. From October 1994 to January 1997, Mr. Robison served as
Vice President and Research Analyst for Montgomery Securities. Mr. Robison
currently serves as a director of Anaren Microwave, a publicly-traded
manufacturer of wireless, satellite and electronics products. Mr. Robison holds
a B.S. from the University of Denver.

   Our board of directors is divided into three classes, with one class of
directors elected each year at the annual meeting of stockholders for a three-
year term of office. Messrs. Fleming and Doyle will serve in the class whose
terms expire in 2000. Messrs. Robison and Fordyce will serve in the class whose
terms expire in 2001. Drs. Youngblood and Paladino and Mr. Norbury will serve
in the class whose terms expire in 2002. Our executive officers are elected
annually by the directors and serve at the discretion of the directors. There
are no family relationships among our directors and executive officers.


                                       41
<PAGE>

Committees of the Board of Directors

   We have a compensation committee, consisting of Drs. Youngblood and
Paladino, and Messrs. Doyle and Fleming. The compensation committee:

  .  reviews the compensation and benefits of our executive officers and
     recommends stock option grants under our stock option plans

  .  makes recommendations to the board of directors regarding compensation
     matters

   We have an audit committee, consisting of Messrs. Doyle and Fordyce. The
audit committee:

  .  reviews and evaluates our audit and control functions

  .  reviews the results and scope of the audit and other services provided
     by our independent auditors

  .  makes recommendations to the board of directors regarding the selection
     of independent auditors

   We have a finance and executive committee consisting of Drs. Paladino and
Youngblood and Mr. Fleming. The finance and executive committee:

  .  maintains continuity between the board of directors and our executive
     officers

  .  acts on behalf of the board of directors between meetings but refers any
     major decisions to the full board of directors.

Director Compensation

   After this offering, we will pay all non-employee directors:

  .  a $10,000 annual retainer for serving on the board

  .  a $2,000 annual retainer for serving as chairman of a standing committee
     of the board

  .  $1,000 for each board meeting attended in person

  .  $500 for each committee meeting attended in person

   We will also reimburse our non-employee directors for reasonable expenses
incurred in attending meetings of the board of directors and its committees.

   In addition to cash compensation, we intend to grant:

  .  a non-qualified stock option to purchase 12,000 shares of our common
     stock that vests in three equal annual installments beginning on the
     date of grant to each new non-employee director elected or appointed to
     the board

  .  a fully vested, non-qualified stock option to purchase 9,000 shares of
     our common stock to each incumbent non-employee director immediately
     following each annual meeting of stockholders, as long as the director
     has served at least one year before the date of the annual meeting

   In January 1998, we granted (a) an option to purchase 9,000 shares of common
stock at $.50 per share to Dr. Paladino, Messrs. Doyle and Fordyce and a former
director, our four non-employee directors who had served for at least one year
before our 1997 annual stockholders meeting, (b) an option to purchase 12,000
shares of our common stock at $.50 per share to Messrs. Robison and Fleming,
the two newly appointed non-employee directors, and (c) an option to purchase
53,550 shares of our common stock at $.50 per share to Dr. Paladino in
recognition of his active role in the management and financing activities of
our company. The option granted to Mr. Fleming was issued to Prism Venture
Partners, the venture capital firm of which Mr. Fleming is a general partner.

   In May 1998, we granted an additional option to purchase 9,000 shares of our
common stock at $.50 per share to Dr. Paladino, Messrs. Doyle and Fordyce and a
former director, our four non-employee directors who had served for at least
one year before our 1998 annual stockholders meeting.

                                       42
<PAGE>

   In 1998, we paid Dr. Paladino $60,000 for his services as Chairman of the
Board. During 1998, we did not pay our directors any other cash compensation
for their services as directors except for reimbursement of the reasonable
expenses they incurred in attending meetings of the board of directors and its
committees.

   In May 1999, we granted an option to purchase 9,000 shares of our common
stock at $.50 per share to Dr. Paladino, Messrs. Doyle, Fordyce and Robison,
Prism Venture Partners and a former director. In August 1999, we granted Dr.
Paladino an option to purchase 80,000 shares of our common stock at $1.25 per
share and an additional option to purchase 20,198 shares of our common stock at
$2.25 per share, both in recognition of his active role in the management and
financing activities of our company. In September 1999, we granted an option to
purchase 12,000 shares of our common stock at $2.25 per share to Mr. Norbury as
a newly appointed director.

Compensation Committee Interlocks and Insider Participation

   The board of directors has a compensation committee consisting of four of
our directors. Dr. Youngblood, our President and Chief Executive Officer,
served as a member of our compensation committee during 1998. Dr. Youngblood
participated in discussions regarding the compensation of our executive
officers. None of our executive officers or members of our board of directors
serves as a member of the board of directors or compensation committee of any
other entity that has an executive officer serving as a member of our board of
directors or compensation committee, except that Dr. Paladino serves as a
member of the board of directors and of the compensation committee of RF Micro
Devices, of which Mr. Norbury, one of our directors, is President and Chief
Executive Officer.

Executive Compensation

   Summary Compensation. The following table summarizes the compensation earned
for services rendered to us in all capacities during 1998 by our Chief
Executive Officer and our only other executive officer who earned more than
$100,000 in salary and bonus during 1998. We refer to these executives as our
"named executive officers" elsewhere in this prospectus. The compensation
summarized in this table does not include medical, group life insurance, or
other plan benefits that are available generally to all of our salaried
employees or perquisites or other personal benefits that do not in the
aggregate exceed the lesser of $50,000 or 10% of the officer's salary and
bonus.

                           Summary Compensation Table
                                    For 1998

<TABLE>
<CAPTION>
                                                                Long-Term
                                                              Compensation
                                                          ---------------------
                                      Annual Compensation        Awards
                                      ------------------- ---------------------
                                                          Securities Underlying
Name and Principal Position               Salary ($)           Options (#)
---------------------------           ------------------- ---------------------
<S>                                   <C>                 <C>
John L. Youngblood...................      $216,825              200,000
 President and Chief Executive
 Officer
Ransom D. Reynolds...................       142,543              140,000
 Senior Vice President, Business
 Development
</TABLE>

   Option Grants in 1998. The following table provides information regarding
all options granted to our named executive officers in 1998. Amounts reported
in the last two columns of the table represent hypothetical values that the
holder could realize by exercising the options immediately before their
expiration, assuming the value of our common stock appreciates at the specified
compounded annual rates over the terms of the options. These numbers are
calculated based on the SEC's rules and do not represent our estimate of future
stock price growth. Actual gains, if any, on stock option exercises and common
stock holdings will depend on the timing of exercise and the future performance
of our common stock. We may not achieve the rates of appreciation

                                       43
<PAGE>

assumed in this table, and the named executive officers may not receive the
calculated amounts. This table does not take into account any appreciation in
the price of our common stock from the date of grant to the current date. The
values shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.

                             Option Grants in 1998

<TABLE>
<CAPTION>


                                                                          Potential Realizable
                                        Individual Grants                   Value at Assumed
                         ------------------------------------------------   Annual Rates of
                          Number of    Percent of                             Stock Price
                         Securities   Total Options                         Appreciation for
                         Underlying    Granted to    Exercise                 Option Term
                           Options    Employees in     Price   Expiration --------------------
Name                     Granted (#) Fiscal Year (%) ($/Share)    Date     5% ($)    10% ($)
----                     ----------- --------------- --------- ---------- --------- ----------
<S>                      <C>         <C>             <C>       <C>        <C>       <C>
John L. Youngblood......   150,000        10.1%        $0.50    01/05/08  $  47,167 $  119,530
                            50,000         3.4          0.50    02/25/08     15,722     39,843
Ransom D. Reynolds......   140,000         9.4          0.50    01/05/08     44,022    111,561
</TABLE>

   All options were granted at fair market value on the date of grant as
determined by our board of directors. The board of directors determined the
fair market value of our common stock based on various factors, including the
illiquid nature of an investment in our common stock, recent sales of
redeemable preferred stock, our limited operating history and our future
prospects.

   Each of these options vests over a four-year period, vesting as to 20% of
the shares subject to the option on the date of grant and as to an additional
20% on each anniversary of the date of grant until the option has fully vested.
These options become fully vested upon (a) a merger or consolidation of our
company with any other company, (b) the sale of substantially all of our assets
or (c) the sale of more than 50% of our outstanding stock to an unrelated
person or group.

   All options granted to the named executive officers in 1998 terminate on the
earliest of (a) three months after the date of termination of the executive's
employment if he ceases to be employed by us except as a result of his death or
disability, (b) one year after his death or disability, or (c) 10 years from
the date of grant.

   In August 1999, we granted an additional option to Dr. Youngblood to
purchase 180,000 shares at $1.25 per share and an additional option to Mr.
Reynolds to purchase 80,000 shares at $1.25 per share. These options otherwise
have the same terms as the options granted to these individuals in 1998.

   Fiscal Year-End Option Values. The following table provides information
regarding the value of all unexercised options held by the named executive
officers at the end of 1998. The value of unexercised in-the-money options
represents the difference between the fair market value of our common stock on
December 31, 1998 and the option exercise price, multiplied by the number of
shares underlying the option. There was no public trading market for our common
stock on December 31, 1998. Accordingly, solely for the purposes of this table,
we have assumed that the fair market value of our common stock on December 31,
1998 was $   , the assumed initial public offering price. Neither named
executive officer exercised any options in 1998.

                       1998 Fiscal Year-End Option Values

<TABLE>
<CAPTION>
                                 Number of Shares
                                  of Common Stock        Value of Unexercised
                              Underlying Unexercised         In-the-Money
                                 Options at Fiscal            Options at
                                   Year-End (#)           Fiscal Year-End ($)
                             ------------------------- -------------------------
Name                         Exercisable Unexercisable Exercisable Unexercisable
----                         ----------- ------------- ----------- -------------
<S>                          <C>         <C>           <C>         <C>
John L. Youngblood..........   415,000      210,000
Ransom D. Reynolds..........    96,000      134,000
</TABLE>

                                       44
<PAGE>

Employment Agreement and Change-of-Control Provisions

   In January 1994, we entered into an employment agreement with Dr.
Youngblood. Dr. Youngblood's employment agreement had an original term of 24
months and now renews automatically on a quarterly basis, provided that Dr.
Youngblood's employment has not terminated before the renewal date. Dr.
Youngblood's annual compensation was initially set at an annual base salary of
$190,000, and has since been increased to his current annual base salary of
$220,000. We currently furnish Dr. Youngblood with a company automobile at our
expense. Dr. Youngblood is entitled to receive severance payments for a minimum
of six months and a maximum of 24 months after termination of his employment
depending on the circumstances under which his employment terminates. The
maximum 24-month severance period will only apply if we terminate
Dr. Youngblood's employment without cause after we undergo a "change of
control" that was not approved by a majority of our board of directors. A
"change of control" is defined in Dr. Youngblood's agreement to include any
transaction that results in (a) a person or group holding 50% or more of the
combined voting power of our outstanding securities or (b) changes to our board
of directors such that the persons who were either directors on the date of Dr.
Youngblood's employment agreement or their nominated successors no longer
comprise a majority of the board. If we terminate Dr. Youngblood's employment
for cause, he will not be entitled to severance payments.

   Upon (a) our merger or consolidation with another company, (b) the sale of
substantially all of our assets to another company, or (c) the sale of more
than 50% of our outstanding capital stock to an unrelated person or group,
substantially all unvested options held by Dr. Youngblood and Mr. Reynolds will
vest and become immediately exercisable.

Stock Plans

   We currently maintain the three stock plans described below. We refer to
these stock plans as the "active stock plans" elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                               Shares or Options
                                            Outstanding Shares   Available for
                                   Shares   or Options Issued    Issuance Under
             Adoption Expiration  Reserved   Under Plan as of      Plan as of
 Plan Name     Date      Date    Under Plan September 17, 1999 September 17, 1999
 ---------   -------- ---------- ---------- ------------------ ------------------
 <S>         <C>      <C>        <C>        <C>                <C>
 1996 Stock
  Plan.....  01/26/96  01/26/06    600,000        279,000            321,000
 1997 Stock
  Plan.....  06/11/97  06/11/07  3,700,000      2,878,975            821,025
 1999 Stock
  Plan.....  09/13/99  09/13/09  3,500,000            --           3,500,000
</TABLE>

   In addition to the active stock plans, there are a total of approximately
537,900 shares subject to options issued under our 1986 Stock Option Plan, 1987
Stock Plan and 1988 Stock Plan. Although those three plans have expired and no
new options, stock or other stock rights may be issued under those plans, the
outstanding options under those plans will remain outstanding until their
expiration or exercise.

   The 1986 Plan provided for the grant of incentive stock options to
employees, including officers and directors who are employees. The other stock
plans provide for the grant of incentive stock options to employees and non-
qualified stock options and stock awards to employees, directors and
consultants. Additionally, the 1996, 1997 and 1999 Stock Plans provide for the
grant of stock appreciation rights to employees, directors and consultants.

   The compensation committee of the board of directors administers the stock
plans and recommends to the board of directors the terms of stock rights
granted, including (if applicable) the exercise price, the number of shares
subject to individual option awards and the vesting period of options. The
exercise price of incentive stock options cannot be lower than 100% of the fair
market value of the common stock on the date of grant and, in the case of
incentive stock options granted to holders of more than 10% of our voting
power, not less than 110% of the fair market value. The term of an incentive
stock option cannot exceed ten years, and the term of an incentive stock option
granted to a holder of more than 10% of our voting power cannot exceed five

                                       45
<PAGE>

years. Stock purchase rights may be issued either alone, in addition to, or in
tandem with other awards granted under the stock plans and/or cash awards made
outside of the stock plans. Incentive stock options granted under our stock
plans generally become exercisable over a four-year period, with 20% of the
shares subject to the option vesting on the date of grant and 20% vesting on
each anniversary of the date of grant until fully vested.

   The board of directors may amend, modify or terminate the stock plans at any
time as long as the amendment, modification or termination does not impair the
rights of plan participants with respect to outstanding options or other stock
rights.

   We intend to file, after the effective date of this offering, a Registration
Statement on Form S-8 to register up to approximately     shares of common
stock reserved for issuance under the stock plans described above. The
Registration Statement will become effective automatically upon filing. After
the Registration Statement has been filed, shares issued under the stock plans
may be sold in the open market, subject, in the case of certain holders, to the
Rule 144 limitations applicable to affiliates and the lock-up agreements.

Our 401(k) Plan

   In 1990, we adopted a 401(k) plan for our employees. The plan is subject to
the Employee Retirement Income Security Act of 1974. All of our employees who
are at least 18 years old may make salary reduction contributions under the
plan. Employees must have six months of qualified service to qualify for all
other contributions under the plan. In general, a participant may contribute up
to 15% of his or her annual compensation. We may elect to make both matching
contributions and discretionary contributions under the plan. In recent years,
we have made matching contributions equal to 50% of the participant's
contributions, subject to limits. Any discretionary profit-sharing
contributions we may make in a year would be allocated to plan participants
based on the proportion that the participant's compensation for the year bears
to the compensation of all participants for the year. We did not make any
discretionary contributions in 1998. Total employee and employer contributions
under the plan for any participant may not exceed the lesser of 25% of
compensation or $30,000. Participants are immediately vested in their voluntary
contributions under the plan and vest in all other contributions under the plan
based on their years of service. Participants are fully vested after four years
of qualified service. We may modify, amend or terminate the plan, subject to
the provisions of the Employee Retirement Income Security Act of 1974. If we
terminate the plan, participants will become fully vested in their account
balances under the plan.

Our Incentive Compensation Plan

   Each year, we adopt an incentive compensation plan for our employees. In
general, our full-time employees who have been employees for at least six
months are entitled to participate in the plan. The plan establishes an
incentive bonus pool, calculated according to a formula based on our
achievement of specified key operating objectives. We allocate approximately
75% of the pool for distribution to all eligible employees and 25% of the pool
for distribution to individuals who have made special contributions to our
company. We did not make any payments under our 1998 incentive compensation
plan.

                                       46
<PAGE>

             MATERIAL RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

   The following is a description of transactions since January 1, 1996 to
which we have been a party and in which the amount involved exceeded $60,000
and any director, executive officer or holder of more than five percent of our
capital stock had or will have a direct or indirect material interest.

   Since January 1, 1996, we have issued preferred stock, promissory notes,
and warrants as follows:

  .  On September 25, 1996 and July 31, 1997, we issued an aggregate of
     $3,000,000 in principal amount of 10% subordinated convertible notes due
     September 1998 and July 1999, respectively. As part of this transaction,
     we issued warrants to the participating investors to purchase an
     aggregate of 1,800,000 shares of our common stock at an exercise price
     of $.50 per share.

  .  On November 21, 1997 and December 18, 1997, we issued an aggregate of
     7,200,000 shares of our Class D redeemable preferred stock at a purchase
     price of $1.80 per share.

  .  On October 27, 1998, November 13, 1998, December 29, 1998, and September
     17, 1999, we issued an aggregate of 9,941,508 shares of our Class E
     redeemable preferred stock at a purchase price of $2.25 per share.

  .  On April 15, 1999 and July 16, 1999, we issued an aggregate of
     $2,000,000 in principal amount of 9.75% subordinated promissory notes
     due on the earlier of December 31, 1999 or the date we sell equity
     securities for at least $5,000,000. As part of this transaction, we
     issued warrants to the participating investors to purchase an aggregate
     of 400,000 shares of our common stock at an exercise price of $.50 per
     share.

   Our executive officers, directors and 5% stockholders participated in the
foregoing transactions as follows:

<TABLE>
<CAPTION>
                              10% Note                              9.75% Note
                             Financing                              Financing
                         ------------------                     ------------------
                                    Number  Number of Number of            Number
                         Principal    of     Class D   Class E  Principal    of
       Purchaser          Amount   Warrants  Shares    Shares    Amount   Warrants
       ---------         --------- -------- --------- --------- --------- --------
<S>                      <C>       <C>      <C>       <C>       <C>       <C>
Directors and executive
 officers:
Albert E. Paladino...... $  25,000  15,000     14,088    39,692  $ 8,250    1,650
John L. Youngblood......    30,000  18,000     16,906    13,949    4,000      800
Ransom D. Reynolds......    30,000  18,000     16,906     8,889      --       --
Allan M. Doyle, Jr. ....    25,000  15,000     14,088     6,595      --       --
James W. Fordyce........   102,485  61,491     57,755    25,154    3,000      600

Five percent
 stockholders:
SVE Star Ventures
 Group..................       --      --   1,497,689 3,744,015  400,000   80,000
Prism Venture Partners
 I, L.P. ...............       --      --   1,666,667   711,111  600,000  120,000
Alliance Technology
 Ventures Group.........       --      --         --  2,248,889  306,000   61,200
Techgains Group.........       --      --     555,556 1,006,754  210,000   42,000
Axiom Venture Partners
 II, L.P. ..............       --      --   1,111,112   412,916  240,000   48,000
Spring Point Group......       --      --     555,556   655,614      --       --
Prince Venture Partners
 II Limited
 Partnership............   375,000 225,000    211,333   409,594  200,000   40,000
United of Omaha Life
 Insurance Company...... 1,000,000 600,000    563,555       --       --       --
</TABLE>

   Mr. Fleming, a member of our board of directors, is affiliated with Prism
Venture Partners I, L.P. Mr. Fordyce, a member of our board of directors, is
affiliated with Prince Venture Partners II Limited Partnership.

   The SVE Star Ventures Group is comprised of five affiliated entities --
Star Growth Enterprise, SVE Star Ventures Enterprises No. V, SVM Star Ventures
Management GmbH No. 3, SVE Star Ventures Managementgesellschaft mbH Nr. 3 &
Co. Betelligungs KG Nr. 2, and SVE Star Ventures Enterprises No. VII.
Collectively, these entities beneficially own 5% or more of our capital stock.

                                      47
<PAGE>

   The Alliance Technology Venture Group is comprised of two affiliated
entities -- Alliance Technology Ventures II, L.P. and ATV II Affiliates Fund,
L.P. Collectively, these entities beneficially own 5% or more of our capital
stock.

   The Techgains Group is comprised of three affiliated entities - Technology
Associates Management Co., Ltd., Techgains International Corp., and Techgains
Corp. Collectively, these entities beneficially own 5% or more of our capital
stock.

   The Spring Point Group is comprised of two affiliated entities - Spring
Point Partners L.P. and Spring Point Offshore Fund. Collectively, these
entities beneficially own 5% or more of our capital stock.

   In September 1999, we agreed to issue 225,000 shares of common stock to
Mervyn N. FitzGerald, our Senior Vice President, Operations, for a purchase
price of $1.25 per share. In connection with this issuance of shares, we will
loan Mr. FitzGerald the $281,250 purchase price. The interest rate on the loan
will be the applicable federal rate, and the loan must be repaid upon Mr.
FitzGerald's sale of the shares. These shares will vest 20% on the date of
issuance and as to an additional 20% on the next four anniversaries of the date
of issuance. The unvested amount of these shares will be subject to repurchase
at a price of $1.25 per share upon Mr. FitzGerald's termination of employment.
Upon (a) our merger or consolidation with another company, (b) the sale of
substantially all of our assets to another company, or (c) the sale of more
than 50% of our outstanding capital stock to an unrelated person or group, all
unvested shares will immediately vest.

   Sale of Contraband Detection System Business. In June 1996, we sold the
assets, contracts and documentation relating to our contraband detection
systems business to Millimetrix LLC, a company controlled by Dr. G. Richard
Huguenin. At the time of the sale, Dr. Huguenin was one of our directors and
executive officers. We received the following as consideration for this
business:

  . $606,873 in cash

  . a $250,000 promissory note, payable over time

  . 19.9% of the ownership of Millimetrix

  . the right to receive royalty payments

   As part of the transaction, we granted Millimetrix a license to use
intellectual property related to the business and the right to acquire the
licensed intellectual property if agreed conditions were met. Millimetrix also
assumed operating leases related to the business, agreed to lease space from
us, and hired some of our employees.

   In connection with the sale, Dr. Huguenin resigned as one of our directors
and executive officers and surrendered all of his outstanding stock options. At
the same time, we repurchased 206,666 shares of our common stock from Dr.
Huguenin for $103,333 and granted him a non-qualified stock option to purchase
270,000 shares of common stock at an exercise price of $.50 per share.

   Millimetrix failed to perform its obligations in connection with this
transaction, and we have obtained a judgment against it.

Our Policy on Interested Transactions

   We have implemented a policy whereby contracts and business arrangements
with our officers, directors or stockholders, entities they own in whole or in
part, or entities for whom they serve as officers, directors, trustees or
members must be on an arm's-length basis and approved by the board of
directors. Our articles of organization and by-laws require approval of the
contract or transaction by a majority of the independent directors who have no
interest in the contract or transaction.

                                       48
<PAGE>

                             PRINCIPAL STOCKHOLDERS

   The following table provides information regarding the beneficial ownership
of our outstanding common stock as of September 17, 1999, and as adjusted to
reflect our sale of common stock in this offering, by:

  .  each person or group that we know owns more than 5% of the common stock,

  .  each of our directors,

  .  each of our executive officers, and

  .  all of our directors and executive officers as a group.

   Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days of September 17, 1999 are
deemed outstanding for computing the percentage ownership of the person holding
the options or warrants but are not deemed outstanding for computing the
percentage ownership of any other person. Except as we otherwise indicate, we
believe the beneficial owners of the common stock listed below, based on
information furnished by them, have sole voting and investment power with
respect to the number of shares listed opposite their names. Unless we
otherwise indicate, the address for each stockholder below is c/o Millitech
Corporation, 20 Industrial Drive East, South Deerfield, Massachusetts 01373-
0109.

<TABLE>
<CAPTION>
                                             Percentage of Shares Outstanding
                           Number of Shares  ---------------------------------------
Name of Beneficial Owner  Beneficially Owned Before Offering         After Offering
------------------------  ------------------ ----------------        ---------------
<S>                       <C>                <C>                     <C>
SVE Star Ventures             5,668,434                       25.2%
 Group(1)...............
 Possart Strasse No. 9
 81679 Munich, Germany
Prism Venture Partners        2,513,378                       11.1
 I, L.P(2)..............
 c/o Prism Venture
 Management, Inc.
 100 Lowder Brook Drive,
 Suite 2500
 Westwood, MA 02090
Robert C. Fleming(3)....      2,513,378                       11.1
Alliance Technology           2,310,089                       10.3
 Ventures Group(4)......
 8995 Westside Parkway,
 Suite 200
 Alpharetta, GA 30004
Techgains Group(5)......      1,604,310                        7.1
 2378 West 239th Street
 Torrance, CA 90501
Axiom Venture Partners        1,572,028                        7.0
 II, L.P(6).............
 City Place II--17th
 Floor
 185 Asylum Street
 Hartford, CT 06103
James W. Fordyce(7).....      1,346,023                        6.0
Spring Point Group(8)...      1,211,170                        5.4
 1 Montgomery Street,
 Suite 3300
 San Francisco, CA 94104
Prince Venture Partners       1,171,023                        5.2
 II Limited
 Partnership(9).........
 25 Ford Road
 Westport, CT 06880
United of Omaha Life          1,163,555                        5.0
 Insurance Company(10)..
 c/o Mutual of Omaha
 Insurance Company
 Mutual of Omaha Plaza
 Omaha, NE 68175
John L. Youngblood(11)..        565,655                        2.5
Albert E. Paladino(12)..        260,301                        1.2
Mervyn N.
 FitzGerald(13).........        225,000                        1.0
Ransom D. Reynolds(14)..        195,795                          *
</TABLE>

                                       49
<PAGE>

<TABLE>
<CAPTION>
                                             Percentage of Shares Outstanding
                           Number of Shares  --------------------------------------
Name of Beneficial Owner  Beneficially Owned Before Offering        After Offering
------------------------  ------------------ ----------------       ---------------
<S>                       <C>                <C>                    <C>
Allan M. Doyle,                  65,683                          *
 Jr.(15)................
Dennis C. Stempel(16)...         30,222                          *
David A. Norbury(17)....         25,222                          *
Matthew S. Robison(18)..         22,111                          *
All executive officers
 and directors as a
 group (10 persons).....      5,249,390                       22.3
</TABLE>
---------------------
 *  Less than 1%.
 (1)  Represents (a) 2,222,222 shares held by Star Growth Enterprise, (b)
      1,035,984 shares held by SVE Star Ventures Enterprises No. V, (c) 978,853
      shares held by SVM Star Ventures Management GmbH Nr. 3, (d) 183,927
      shares held by SVE Star Ventures Management GmbH Nr. 3 & Co. Betelligungs
      KG Nr. 2, (e) 1,167,448 shares held by SVE Star Ventures Enterprises No.
      VII and (f) warrants held by SVE Star Ventures Enterprises No. VII to
      purchase 80,000 shares of common stock.
 (2)  Includes 4,600 shares issuable upon the exercise of stock options within
      60 days of September 17, 1999 and warrants to purchase 120,000 shares of
      common stock.
 (3)  Mr. Fleming is a general partner and co-manager of Prism Venture Partners
      I, L.P. The shares listed represent the 2,513,378 shares beneficially
      held by Prism Venture Partners I, L.P. Mr. Fleming disclaims beneficial
      ownership of the shares beneficially held by Prism Venture Partners I,
      L.P., except to the extent of his pecuniary interest in those shares. Mr.
      Fleming's address is the same as the address of Prism Venture
      Partners I, L.P.
 (4)  Represents (a) 2,204,444 shares held by Alliance Technology Ventures II,
      L.P., (b) warrants held by Alliance Technology Ventures II, L.P. to
      purchase 60,000 shares of common stock, (c) 44,445 shares held by ATV II
      Affiliates Fund, L.P. and (d) a warrant held by ATV II Affiliates Fund,
      L.P. to purchase 1,200 shares of common stock.
 (5)  Represents (a) 56,754 shares held by Technology Associates Management
      Co., Ltd., (b) a warrant to purchase 2,000 shares held by Technology
      Associates Management Co., Ltd., (c) 600,000 shares held by Techgains
      International Corp., (d) a warrant held by Techgains International Corp.
      to purchase 20,000 shares of common stock, (e) 905,556 shares held by
      Techgains Corp. and (f) a warrant held by Techgains Corp. to purchase
      20,000 shares of common stock.
 (6)  Includes warrants to purchase 48,000 shares of common stock.
 (7)  Mr. Fordyce is a general partner of Prince Venture Partners II Limited
      Partnership. The shares listed represent (a) 1,171,023 shares
      beneficially held by Prince Venture Partners II Limited Partnership,
      (b) 109,909 shares held by Mr. Fordyce, (c) 3,000 shares issuable upon
      exercise of stock options held by Mr. Fordyce within 60 days of September
      17, 1999 and (d) warrants held by Mr. Fordyce to purchase 62,091 shares
      of common stock. Mr. Fordyce disclaims beneficial ownership of the shares
      beneficially held by Prince Venture Partners II Limited Partnership,
      except to the extent of his pecuniary interest in those shares.
 (8)  Represents 815,614 shares held by Spring Point Partners L.P. and 395,556
      shares held by Spring Point Offshore Fund.
 (9)  Includes warrants to purchase 265,000 shares of common stock.
(10)  Includes warrants to purchase 600,000 shares of common stock.
(11)  Includes 516,000 shares issuable upon exercise of stock options within 60
      days of September 17, 1999 and warrants to purchase 18,800 shares of
      common stock.
(12)  Includes 100,198 shares issuable upon exercise of stock options within 60
      days of September 17,1999.
(13)  Of the shares held by Mr. FitzGerald, 180,000 are subject to repurchase
      by us. See "Material Relationships and Related-Party Transactions."
(14)  Includes 152,000 shares issuable upon exercise of stock options within 60
      days of September 17, 1999 and a warrant to purchase 18,000 shares of
      common stock.
(15)  Includes 9,000 shares issuable upon the exercise of stock options within
      60 days of September 17, 1999 and a warrant to purchase 15,000 shares of
      common stock.
(16)  Includes 28,000 shares issuable upon exercise of stock options within 60
      days of September 17, 1999.
(17)  Includes 3,000 shares issuable upon exercise of stock options within 60
      days of September 17, 1999.
(18)  Includes 11,000 shares issuable upon exercise of stock options within 60
      days of September 17, 1999.

                                       50
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK

   Upon the closing of this offering, we will be authorized to issue up to
100,000,000 shares of common stock, $.01 par value, and 4,500,000 shares of
undesignated preferred stock, $.01 par value. As of September 17, 1999, there
were 1,476,860 shares of common stock outstanding held of record by 118
stockholders and 20,976,881 shares of redeemable preferred stock held by 85
stockholders. Upon the closing of this offering, these shares of redeemable
preferred stock will automatically convert into 20,976,881 shares of common
stock. Following this offering, there will be     shares of common stock
outstanding, or     shares if the underwriters exercise their over-allotment
option in full, assuming no exercise of outstanding options or warrants.

Common Stock

   The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders. When a quorum is present at a meeting,
the holders of a majority of the common stock present or represented and voting
on a matter will decide any matter to be voted on by the stockholders except
where a class vote is required by law or the articles of organization or where
a larger vote is required by law or the articles of organization. Elections are
determined by a plurality of the votes cast by stockholders entitled to vote at
the election. Subject to preferences of any outstanding shares of preferred
stock, the holders of common stock are entitled to receive ratably any
dividends the board of directors declares out of funds legally available for
the payment of dividends. Dividends are non-cumulative. If we are liquidated,
dissolved or wound up, the holders of common stock will be entitled to share
pro rata all assets remaining after payment of liabilities and liquidation
preferences of any outstanding shares of preferred stock. Holders of common
stock have no preemptive rights or rights to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and non-assessable, and the shares of common stock to be issued in
this offering will be fully paid and non-assessable. The rights, preferences
and privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of holders of preferred stock that the board of
directors may designate and issue in the future. As of September 17, 1999,
there were 8,380,674 shares of common stock reserved for issuance upon the
exercise of options and warrants. On that date, there were outstanding stock
options to purchase an aggregate of 3,518,509 shares of common stock and
warrants to purchase an aggregate of 2,481,890 shares of common stock.

Preferred Stock

   Upon the closing of this offering, our articles of organization will
authorize our board of directors, without any action by our stockholders, to
issue up to 4,500,000 shares of undesignated, or "blank check," preferred stock
in one or more classes or series. The board also has the authority to fix the
designations, powers, preferences, privileges and relative, participating,
optional or special rights and the qualifications, limitations or restrictions
of any preferred stock, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights of the common stock. The board of directors,
without stockholder approval, can issue preferred stock with voting, conversion
or other rights that could adversely affect the voting power and other rights
of the holders of common stock. Our board could quickly issue preferred stock
with terms that could delay or prevent a change in control of our company or
make removal of our management more difficult. Additionally, the issuance of
preferred stock may decrease the market price of the common stock. We have no
plans to issue any preferred stock.

Warrants

   As of September 17, 1999, there were warrants outstanding to purchase a
total of 2,481,890 shares at a weighted average exercise price of $1.68 per
share. These warrants expire on various dates from December 21, 2000 to July
30, 2007.

                                       51
<PAGE>

Registration Rights

   After this offering, the holders of     shares of common stock and warrants
to purchase     shares of common stock, or their permitted transferees, will be
entitled to certain rights with respect to the registration of those shares
under the Securities Act. These registration rights are contained in four
agreements, one with certain of our stockholders (currently covering
shares and warrants to purchase      shares) and three separate agreements with
three of our lenders (in the aggregate covering         shares and warrants to
purchase      shares). As described below, the agreement with our stockholders
provides for both demand registration rights and piggyback registration rights
while the agreements with our lenders only provide for piggyback registration
rights.

   Demand Registration Rights. At any time after six months following the
closing of this offering, the holders of at least 40% of the registrable
securities under the agreement with our stockholders may require, on two
occasions, that we use our diligent best efforts to register some or all of
those registrable securities under the Securities Act at our expense. In
addition, the holders of at least 20% of the registrable securities under the
agreement with our stockholders may require that we use our diligent best
efforts to register some or all of those registrable securities under the
Securities Act on Form S-2 or S-3 or similar short-form registration, as long
as we are eligible to use a short-form registration and the value of the
securities to be registered is reasonably anticipated to exceed $1,000,000.
Only the first two short-form registrations will be at our expense. Inclusion
of any holders' registrable securities in any registration is subject to
limitations and conditions.

   Piggyback Registration Rights. If we propose to register any of our
securities under the Securities Act for our own account or for the account of
any of our stockholders, holders of registrable securities under each of the
four agreements granting registration rights are entitled, subject to
limitations and conditions, to receive notice of that registration and to
include registrable securities in that registration at our expense. One of the
limitations is the ability of any underwriter of any of those offerings to
reduce the number of shares proposed to be registered in view of market
conditions.

   We intend to file, promptly after the effective date of this offering, a
registration statement on Form S-8 to register up to approximately     shares
of common stock reserved for issuance under our stock plans. The registration
statement will become effective automatically upon filing. After the
registration statement has been filed, shares issued under the stock plans may
be sold in the open market, subject, in some cases, to the Rule 144 limitations
applicable to our affiliates and the lock-up agreements. For more information,
see "Shares Eligible for Future Sale."

Anti-takeover Provisions of Massachusetts Law and Our Articles or Organization
and By-Laws

   Provisions of Massachusetts law and our articles or organization and by-laws
may discourage takeover attempts not previously approved by our board of
directors, including takeovers that some stockholders may deem to be in their
best interest. These provisions may inhibit temporary fluctuations in the
market price of our common stock that might otherwise result from actual or
rumored takeover attempts. These provisions could also delay or frustrate the
removal of incumbent directors or the assumption of control by stockholders,
even if it would be beneficial to our stockholders. These provisions could also
discourage or make more difficult a merger, tender offer or proxy contest, even
if it would be beneficial to stockholders, and could depress the market price
of our common stock. Our board of directors believes that these provisions are
appropriate to protect the interests of our stockholders. Our board of
directors has no present plans to adopt any other measures or devices which may
have an anti-takeover effect.

   Classified Board of Directors. Our articles of organization provide for a
board of directors that is divided into three classes. The first class of
directors will hold office until the first annual meeting of stockholders
following this offering, the second class of directors will hold office until
the second annual meeting of stockholders following this offering, and the
third class of directors will hold office until the third annual meeting of
stockholders following this offering. After each annual meeting, the directors
elected at that meeting will serve a three-year term. Stockholders may remove
our directors only for cause.

                                       52
<PAGE>

   Meetings of Stockholders. Our by-laws provide that annual meetings of
stockholders will be held at the date, time and place, either within or outside
the Commonwealth of Massachusetts, as the board of directors may determine. A
special meeting of the stockholders may be called only by our President, our
board of directors, or the holders of at least 30% of our outstanding voting
stock. The provision permitting only stockholders holding at least 30% of the
outstanding voting stock to call a special meeting may be amended only by
stockholders holding 75% of the outstanding voting stock.

   Amendment of By-Laws. Our articles of organization and by-laws provide that
the by-laws may be amended or repealed by the board of directors or by the
stockholders. An amendment by stockholders requires the affirmative vote of the
holders of at least 75% of the outstanding capital stock entitled to vote
generally at an election of directors.

   This system of electing directors, the ability of stockholders to remove
directors only for cause and the inability of stockholders holding less than
30% of the outstanding voting stock to call a special meeting may discourage
someone from making a tender offer or otherwise attempting to obtain control of
our company and may maintain the incumbency of the board of directors.

   Massachusetts Statutory Business Combination Provision. We will be subject
to the provisions of Chapter 110F of the Massachusetts General Laws, an anti-
takeover law, after this offering has been completed. In general, this statute
prohibits a Massachusetts corporation with more than 200 stockholders of record
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless:

  .  before that date, the board of directors approved either the business
     combination or the transaction that resulted in the stockholder's
     becoming an interested stockholder,

  .  the interested stockholder acquires 90% of the outstanding voting stock
     of the corporation (excluding shares held by affiliates of the
     corporation) at the time the stockholder becomes an interested
     stockholder, or

  .  the business combination is approved by both the board of directors and
     holders of two-thirds of the outstanding voting stock of the corporation
     (excluding shares held by the interested stockholder).

   A "business combination" includes a merger, consolidation, stock or asset
sales, and other specified transactions involving the corporation or any direct
or indirect majority-owned subsidiary of the corporation resulting in a
financial benefit to the interested stockholder. Generally, an "interested
stockholder" is:

  .  a person who, alone or together with affiliates and associates, owns
     five percent or more of the corporation's voting stock, or 15% or more
     in the case of persons eligible to file a Schedule 13G under the
     Securities Exchange Act,

  .  an affiliate or associate of the corporation who at any time within the
     three-year period preceding the date of the transaction owned five
     percent or more of the corporation's voting stock, or 15% or more in the
     case of persons eligible to file a Schedule 13G under the Securities
     Exchange Act, or

  .  the affiliates and associates of any such affiliate or associate of the
     corporation.

   A person is not an "interested stockholder" if its ownership of shares in
excess of the five percent or fifteen percent limitation is the result of
action taken solely by us, but the person will become an "interested
stockholder" if the person thereafter acquires additional shares of voting
stock, except as a result of further corporate action not caused, directly or
indirectly, by the person. We may at any time elect not to be governed by
Chapter 110F by amending our articles of organization or by-laws by a vote of a
majority of the stockholders entitled to vote. Such an amendment would not be
effective for 12 months and would not apply to a business combination with any
person who became an interested stockholder before the adoption of the
amendment.

   In addition, Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions," provides, in general, that any stockholder of a
Massachusetts corporation with more than 200 stockholders of record who
acquires voting stock of the corporation in a "control share acquisition" may
not vote the shares so acquired (or shares acquired within 90 days before or
after the "control share acquisition") unless a majority of the other
stockholders of the corporation entitled to vote so authorize. In general, a

                                       53
<PAGE>

"control share acquisition" includes the acquisition by any person of
beneficial ownership of shares which, when added to all other shares
beneficially owned by the person, would entitle the person to vote:

  .  between 20% and 33 1/3%,

  .  between 33 1/3% and 50%, or

  .  more than 50% of the outstanding voting stock of the corporation.

   A "control share acquisition" generally does not include, among other
transactions, the acquisition of shares directly from the issuing corporation.
In addition, Chapter 110D permits a corporation to provide in its articles of
organization or by-laws that the corporation may redeem, for fair value, all of
the shares acquired in a control share acquisition if the interested
stockholder does not deliver a control share acquisition statement or if the
interested stockholder delivers a control share acquisition statement but the
stockholders of the corporation do not authorize voting rights for those
shares.

   Massachusetts General Laws Chapter 156B, Section 50A, requires that
publicly-held Massachusetts corporations that have not "opted out" of Section
50A have a classified board of directors consisting of three classes as nearly
equal in size as possible. Section 50A also provides that directors who are
classified may be removed by the stockholders only for cause. Our articles of
organization reflect the requirements of Section 50A.

Limitations on Liability and Indemnification

   Our articles of organization limit the liability of our directors to the
extent permitted by Massachusetts law. No director will be personally liable to
us or our stockholders for monetary damages resulting from his or her conduct
as a director except liability for:

  .  breach of the director's duty of loyalty

  .  acts or omissions not in good faith or which involved intentional
     misconduct or knowing violations of law

  .  unlawful distributions and loans to insiders

  .  transactions from which the director personally received a benefit in
     money, property or services to which the director was not legally
     entitled

   Our by-laws provide that we will indemnify any person made a party to a
proceeding because he or she was or is a director, officer, employee or other
agent of ours and that we may advance or reimburse reasonable expenses incurred
by him or her before the final disposition of the proceeding if he or she
undertakes to repay those expenses if he or she is adjudicated to be not
entitled to indemnification. In addition, we have the right, before a final
adjudication, to compromise and settle a proceeding and pay expenses, if a
compromise and settlement of a proceeding is in our best interests. To the
extent our by-laws provide for indemnification of directors for liabilities
arising under the Securities Act, those provisions are, in the opinion of the
SEC, against public policy as expressed in the Securities Act and are therefore
unenforceable.

   We maintain a liability insurance policy, which may insure our directors and
officers against liability they may incur for serving in their capacities as
directors and officers.

   We believe that the limitation of liability provisions in our articles or
organization, the indemnification provisions in our by-laws and our liability
insurance policy will facilitate our ability to continue to attract and retain
qualified individuals to serve as directors and officers.

Transfer Agent and Registrar

   The transfer agent and registrar for the common stock is Registrar and
Transfer Company.

The Nasdaq Stock Market's National Market Listing

   We will apply for inclusion of our common stock on The Nasdaq Stock Market's
National Market under the symbol "TLXS."

                                       54
<PAGE>

                        SHARES ELIGIBLE FOR FUTURE SALE

   Before this offering, there has been no public market for our common stock.
The market price of our common stock could drop if our existing stockholders
sell large numbers of shares of our common stock in the public market or if
investors perceive that such sales could occur. These factors could also make
it more difficult to raise funds through future offerings of common stock.

   After this offering, there will be outstanding      shares of common stock,
or    shares if the underwriters exercise their over-allotment option in full,
assuming no exercise of outstanding options or warrants. Of these shares, the
   shares sold in this offering, or    shares if the underwriters exercise
their over-allotment option in full, will be freely tradable without
restriction under the Securities Act except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. The remaining
22,453,741 shares are "restricted securities" within the meaning of Rule 144.
The restricted securities may not be sold unless they are registered under the
Securities Act or are sold pursuant to an exemption from registration, such as
the exemption provided by Rule 144.

   Our executive officers, directors and certain other securityholders have
entered into lock-up agreements in which they have agreed that, for a period of
180 days after the date of this prospectus, they will not offer, sell, contract
to sell, pledge or otherwise dispose of any shares of our common stock, or any
securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose their intention to make any such offer,
sale, contract, pledge or disposal, without the prior written consent of Credit
Suisse First Boston Corporation. In addition, we have agreed in the
underwriting agreement that, for a period of 180 days after the date of this
prospectus and with limited exceptions, we will not offer, sell, contract to
sell, pledge or otherwise dispose of any shares of our common stock, or any
securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose our intention to make any such offer,
sale, contract, pledge or disposal, without the prior written consent of Credit
Suisse First Boston Corporation. We have similarly agreed that, with limited
exceptions, we will not file a registration statement with the SEC or publicly
disclose our intention to do so. Credit Suisse First Boston Corporation may, at
any time and without notice, waive any of the terms of these lock-up
agreements.

   Subject to these lock-up agreements, our outstanding shares of common stock
will be available for sale in the public market as follows:

<TABLE>
<CAPTION>
        Percent of
 Number    Total
   of     Shares
 Shares Outstanding                Date of Availability for Sale
 ------ ----------- ----------------------------------------------------------
 <C>    <C>         <S>
                         , 1999 (date of this prospectus) to      , 2000 (90
                    days after the date of this prospectus)
                         , 2000 (90 days after the date of this prospectus) to
                         , 2000 (180 days after the date of this prospectus),
                    in some cases subject to Rule 144
                         , 2000 (180 days after the date of this prospectus),
                    in some cases subject to Rule 144
                    At various times after      , 2000
</TABLE>

   In addition, as of June 30, 1999, there were outstanding options to purchase
2,850,651 shares of common stock and warrants to purchase 2,237,445 shares of
common stock. Of these options and warrants,     will be subject to lock-up
agreements. After the expiration of the lock-up agreements,     of these
options and warrants will be vested and exercisable, assuming no prior
exercise, cancellation or expiration.


                                       55
<PAGE>

   Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, any person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of:

  .  1% of the then-outstanding shares of common stock, which will equal
     approximately     shares immediately after this offering

  .  the average weekly trading volume in the common stock during the four
     calendar weeks immediately preceding the date on which the seller files
     a notice of the sale on Form 144 with the SEC

   Sales under Rule 144 are also subject to requirements relating to notice,
manner of sale and the availability of current public information about us.

   Rule 144(k). A person (or persons whose shares are aggregated) who has not
been our affiliate at any time during the three months immediately preceding a
sale, and who has beneficially owned the shares for at least two years, would
be entitled to sell the shares under Rule 144(k) without regard to the volume
limitations, notice requirements and other conditions of Rule 144.

   Rule 701. In general, under Rule 701 as currently in effect, each of our
directors, officers, employees, consultants or advisors who purchased shares
from us before the date of this prospectus in connection with a compensatory
stock plan or other written compensatory agreement will be eligible to sell
those shares in the public market 90 days after the date of this prospectus in
reliance on Rule 144, but without complying with all of the restrictions of
Rule 144, such as the holding period. In addition, Rule 701 will apply to
shares of common stock we issue upon exercise of the options we granted before
the effective date of this offering.

   As soon as practicable after this offering, we intend to file a registration
statement under the Securities Act to register approximately     shares of
common stock available for issuance pursuant to our stock plans. The
registration statement will become effective upon filing. Shares issued
pursuant to our stock plans after the effective date of the registration
statement will be available for sale in the open market subject in some cases
to the lock-up agreements and, for affiliates, subject to the conditions and
restrictions of Rule 144.

   For a description of the registration rights of our securityholders, see
"Description of Capital Stock--Registration Rights."

                                       56
<PAGE>

                                  UNDERWRITING

   Under the terms and subject to the conditions contained in an underwriting
agreement dated      , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC and CIBC World Markets Corp. are acting as representatives, the
following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
                                                                        Number
                               Underwriter                             of Shares
                               -----------                             ---------
   <S>                                                                 <C>
   Credit Suisse First Boston Corporation.............................
   Banc of America Securities LLC.....................................
   CIBC World Markets Corp............................................
                                                                          ---
     Total............................................................
                                                                          ===
</TABLE>

   The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

   We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to      additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

   The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $   per share. The
underwriters and selling group members may allow a discount of $   per share on
the sales to other broker/dealers. After the initial public offering, the
public offering price, concession and discount to broker/dealers may be changed
by the representatives.

   The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
                                    Per Share                       Total
                          ----------------------------- -----------------------------
                             Without          With         Without          With
                          Over-allotment Over-allotment Over-allotment Over-allotment
                          -------------- -------------- -------------- --------------
<S>                       <C>            <C>            <C>            <C>
Underwriting Discounts
 and Commissions
 paid by us.............       $              $              $              $
Expenses payable by us..       $              $              $              $
</TABLE>

   The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

   Certain employees of CIBC World Markets Corp., including the research
analyst that will cover us, own redeemable preferred stock that will convert
into shares of common stock upon completion of this offering.

   We and our executive officers, directors and certain other securityholders
have agreed not to offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, or, in our case, file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of common stock or securities convertible into or exchangeable
or exercisable for any common stock, or publicly disclose the intention to make
any such offer, sale, contract, pledge, disposition or filing, without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, with exceptions for outstanding
stock options and warrants.

   The underwriters have reserved for sale, at the initial public offering
price, up to     shares of common stock for business partners, employees,
directors and other persons associated with us who have expressed an interest
in purchasing common stock in this offering. The number of shares available for
sale to

                                       57
<PAGE>

the general public in this offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.

   We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in that respect.

   We will apply to list our common stock on The Nasdaq Stock Market's National
Market under the symbol "TLXS."

   Before this offering, there has been no public market for our common stock.
The initial public offering price was determined by negotiation between us and
the representatives. The principal factors considered in determining the public
offering price included:

  .  the information in this prospectus and otherwise available to the
     representatives

  .  the history of and the prospects for the industry in which we compete

  .  the ability of our management

  .  the prospects for our future earnings

  .  the present state of our development and our current financial condition

  .  the general condition of the securities markets at the time of this
     offering

  .  the recent market prices of, and the demand for, publicly-traded common
     stock of generally comparable companies

   The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act.

  .  Over-allotment involves syndicate sales in excess of the offering size,
     which creates a syndicate short position.

  .  Stabilizing transactions permit bids to purchase the underlying security
     so long as the stabilizing bids do not exceed a specified maximum.

  .  Syndicate covering transactions involve purchases of common stock in the
     open market after the distribution has been completed in order to cover
     syndicate short positions.

  .  Penalty bids permit the representatives to reclaim a selling concession
     from a syndicate member when the common stock originally sold by the
     syndicate member is purchased in a syndicate covering transaction to
     cover syndicate short positions.

   These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

                          NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

   The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

                                       58
<PAGE>

Representations of Purchasers

   Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (2) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (3) the purchaser has reviewed the text above under "Resale
Restrictions."

Rights of Action of Ontario Purchasers

   The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

   All of the issuer's directors and officers as well as the experts named
herein may be located outside Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside Canada and, as a result, it may
not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside Canada.

Notice to British Columbia Residents

   A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. This report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

Taxation and Eligibility for Investment

   Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                 LEGAL MATTERS

   Certain legal matters will be passed upon for us by Mirick, O'Connell,
DeMallie & Lougee, LLP, Worcester, Massachusetts. Partners and associates in
the firm own an aggregate of 38,500 shares of common stock and have options to
purchase an additional 27,250 shares of common stock. Certain legal matters
will be passed upon for the underwriters by Foley, Hoag & Eliot LLP, Boston,
Massachusetts.

                                    EXPERTS

   PricewaterhouseCoopers LLP, independent accountants, have audited the
financial statements of Millitech Corporation as of December 31, 1997 and 1998,
and for each of the three years in the period ended December 31, 1998 which are
included in this prospectus and registration statement. Our financial
statements are included in this prospectus in reliance on the report of
PricewaterhouseCoopers LLP, given on their authority as experts in auditing and
accounting.

                                       59
<PAGE>

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the SEC a registration statement on Form S-1. This
prospectus, which forms a part of the registration statement, does not contain
all of the information set forth in the registration statement and its
exhibits. References in this prospectus to any contract or other document are
not necessarily complete and, if we filed the contract or document as an
exhibit to the registration statement, you should refer to the exhibit for more
information. You may review a copy of the registration statement, including
exhibits and schedules filed with it, at the SEC's public reference facilities
in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the SEC located at 7 World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may also obtain copies of the
materials from the Public Reference Section of the SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
SEC maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as our
company, that file electronically with the SEC.

   We intend to furnish our stockholders with annual reports containing
financial statements audited by independent certified public accountants and
will make available quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal year.

                                       60
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations and Comprehensive Loss............................ F-4
Statements of Changes in Stockholders' Deficit............................. F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>

                                      F-1
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Millitech Corporation

   In our opinion, the accompanying balance sheets and the related statements
of operations and comprehensive loss, of changes in stockholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of Millitech Corporation (the "Company") at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Millitech Corporation's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Springfield, Massachusetts
March 5, 1999, except for Note 2
as to which the date is August 24, 1999

                                      F-2
<PAGE>

                             MILLITECH CORPORATION
                                 BALANCE SHEETS
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                      December 31,                   Pro Forma
                                    ------------------   June 30,    June 30,
                                      1997      1998       1999        1999
                                    --------  --------  ----------- -----------
                                                        (unaudited) (unaudited)
<S>                                 <C>       <C>       <C>         <C>
Assets
Current assets
  Cash and cash equivalents........ $ 10,294  $  2,635   $    405    $    405
  Accounts receivable, less
   allowance for doubtful accounts
   ($210 in 1997 and $368 in
   1998)...........................    2,744     3,013        955         955
  Contracts in process.............       85       139        --          --
  Inventories......................    3,162     3,093      2,613       2,613
  Net assets to be disposed of.....      --        --       1,399       1,399
  Other current assets.............       96        97        253         253
                                    --------  --------   --------    --------
    Total current assets...........   16,381     8,977      5,625       5,625
  Property, plant and equipment,
   net.............................    3,430     5,922      4,933       4,933
  Patents and intangible assets,
   net of accumulated
   amortization....................      121       --         --          --
  Other assets.....................      127        56         92          92
                                    --------  --------   --------    --------
    Total assets................... $ 20,059  $ 14,955   $ 10,650    $ 10,650
                                    ========  ========   ========    ========
Liabilities, Redeemable Preferred
 Stock and Stockholders' (Deficit)
 Equity
Current liabilities
  Notes payable.................... $  1,500  $    --    $  1,000    $  1,000
  Accounts payable.................    2,268     2,209      1,572       1,572
  Customer prepayments.............    1,028       204        186         186
  Accrued expenses.................    1,968     2,060      1,768       1,768
  Income taxes payable.............       53        41         50          50
  Current maturities of long-term
   debt............................      508       379        675         675
  Current maturities of capital
   lease obligations...............      617       813        795         795
                                    --------  --------   --------    --------
    Total current liabilities......    7,942     5,706      6,046       6,046
Long-term debt.....................      729       350      1,246       1,246
Capital lease obligations..........      961       697        440         440
                                    --------  --------   --------    --------
    Total liabilities..............    9,632     6,753      7,732       7,732
                                    --------  --------   --------    --------
Commitments and contingencies
Redeemable Preferred Stock
  Redeemable preferred stock, Class
   A, $.01 par value; $3.25
   redemption value; authorized
   3,090,323 shares (3,270,000 in
   1997); issued and outstanding
   3,045,696 shares................    9,899     9,899      9,899         --
  Redeemable preferred stock, Class
   B, $.01 par value; $3.25
   redemption value; authorized
   789,677 shares (1,250,000 in
   1997); issued and outstanding
   789,677 shares..................    2,566     2,566      2,566         --
  Redeemable preferred stock, Class
   C, $.01 par value; authorized 0
   shares (400,000 in 1997); none
   issued .........................      --        --         --          --
  Redeemable preferred stock, Class
   D, $.01 par value; $1.80
   redemption value; authorized
   7,200,000 shares; issued and
   outstanding 7,200,000 shares....   12,960    12,960     12,960         --
  Redeemable preferred stock, Class
   E, $.01 par value; $2.25
   redemption value; authorized
   8,000,000 shares in 1999 and
   4,000,000 shares in 1998; issued
   and outstanding 3,274,841
   shares..........................      --      7,368      7,368         --
                                    --------  --------   --------    --------
                                      25,425    32,793     32,793         --
Stockholders' (Deficit) Equity
  Preferred stock, $.01 par value;
   7,500,000 shares authorized in
   1999; none issued...............      --        --         --          --
  Common stock, $.01 par value;
   authorized 36,000,000 shares in
   1999, 25,000,000 shares in 1998
   and 20,000,000 shares in 1997;
   issued and outstanding 1,000,360
   shares in 1999, 987,920 shares
   in 1998 and 983,394 shares in
   1997............................       10        10         10         153
  Additional paid-in capital.......      733       669        763      33,413
  Accumulated deficit..............  (15,741)  (25,270)   (30,648)    (30,648)
                                    --------  --------   --------    --------
    Total stockholders' (deficit)
     equity........................  (14,998)  (24,591)   (29,875)      2,918
                                    --------  --------   --------    --------
    Total liabilities, redeemable
     preferred stock and
     stockholders' (deficit)
     equity........................ $ 20,059  $ 14,955   $ 10,650    $ 10,650
                                    ========  ========   ========    ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>

                             MILLITECH CORPORATION
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                         Six months ended June
                            Year ended December 31,               30,
                            --------------------------  -----------------------
                             1996     1997      1998       1998        1999
                            -------  -------  --------  ----------- -----------
                                                        (unaudited) (unaudited)
<S>                         <C>      <C>      <C>       <C>         <C>
Sales.....................  $   201  $ 1,733  $  2,386    $ 1,037     $ 2,762
Cost of sales.............      147    2,328     7,200      1,788       2,779
                            -------  -------  --------    -------     -------
Gross margin (loss).......       54     (595)   (4,814)      (751)        (17)
Operating expenses
 Research and development,
  net.....................      433    3,724     4,630      2,717       1,801
 Selling and marketing....      353      667     1,006        470         482
 General and
  administrative..........    1,097    1,740     2,722      1,393       1,416
                            -------  -------  --------    -------     -------
 Total operating
  expenses................    1,883    6,131     8,358      4,580       3,699
                            -------  -------  --------    -------     -------
Operating loss............   (1,829)  (6,726)  (13,172)    (5,331)     (3,716)
                            -------  -------  --------    -------     -------
Other income (expense)
 Interest expense.........     (423)    (683)     (473)      (259)       (154)
 Income from contract
  cancellation............      --       --        997        --          --
 Interest income..........       13       40       233        184          25
 Other....................      --        17       --         --          --
                            -------  -------  --------    -------     -------
 Total other income
  (expense)...............     (410)    (626)      757        (75)       (129)
                            -------  -------  --------    -------     -------
Loss from continuing
 operations before income
 taxes....................   (2,239)  (7,352)  (12,415)    (5,406)     (3,845)
Income tax benefit........      --      (640)   (1,162)      (655)        --
                            -------  -------  --------    -------     -------
Loss from continuing
 operations...............   (2,239)  (6,712)  (11,253)    (4,751)     (3,845)
                            -------  -------  --------    -------     -------
Discontinued operations:
 Income (loss) from
  operations of MMWP
  segment, net of taxes of
  $328, $904, $1,162, $655
  (unaudited) and $0
  (unaudited) for the
  years ended December 31,
  1996, 1997, and 1998 and
  for the six months ended
  June 30, 1998 and 1999,
  respectively............     (530)   1,342     1,724        971         367
 Loss on disposition of
  MMWP segment, including
  provision of $300
  (unaudited) for
  operating losses during
  the phase-out period,
  net of $0 (unaudited)
  for taxes...............      --       --        --         --       (1,900)
                            -------  -------  --------    -------     -------
Income (loss) from
 discontinued operations..     (530)   1,342     1,724        971      (1,533)
                            -------  -------  --------    -------     -------
Net loss and comprehensive
 loss.....................  $(2,769) $(5,370) $ (9,529)   $(3,780)    $(5,378)
                            =======  =======  ========    =======     =======
Basic and diluted earnings
 (loss) per share from:
 Continuing operations....  $ (2.07) $ (7.08) $ (11.44)   $ (4.83)    $ (3.87)
                            =======  =======  ========    =======     =======
 Discontinued operations..  $ (0.49) $  1.42  $   1.75    $   .99     $ (1.54)
                            =======  =======  ========    =======     =======
 Net loss.................  $ (2.56) $ (5.66) $  (9.68)   $ (3.85)    $ (5.42)
                            =======  =======  ========    =======     =======
Shares used in computing
 basic and diluted
 earnings (loss) per
 share....................    1,080      948       984        983         993
                            =======  =======  ========    =======     =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

                             MILLITECH CORPORATION
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                               Common Stock    Additional
                             -----------------  Paid-in   Accumulated
                              Shares    Amount  Capital     Deficit    Total
                             ---------  ------ ---------- ----------- --------
<S>                          <C>        <C>    <C>        <C>         <C>
Balances, December 31,
 1995......................  1,092,860   $ 11    $ 898     $ (7,602)  $ (6,693)
Exercise of common stock
 options...................     11,500    --         5                       5
Treasury stock acquired and
 retired...................   (206,666)    (2)    (101)                   (103)
Net loss...................                                  (2,769)    (2,769)
                             ---------   ----    -----     --------   --------
Balances, December 31,
 1996......................    897,694      9      802      (10,371)    (9,560)
Exercise of common stock
 options...................     85,700      1       42                      43
Other......................                       (111)                   (111)
Net loss...................                                  (5,370)    (5,370)
                             ---------   ----    -----     --------   --------
Balances, December 31,
 1997......................    983,394     10      733      (15,741)   (14,998)
Exercise of common stock
 options...................      4,526    --         2                       2
Other......................                        (66)                    (66)
Net loss...................                                  (9,529)    (9,529)
                             ---------   ----    -----     --------   --------
Balances, December 31,
 1998......................    987,920     10      669      (25,270)   (24,591)
Exercise of common stock
 options...................     12,440    --         6                       6
Other......................                         88                      88
Net loss...................                                  (5,378)    (5,378)
                             ---------   ----    -----     --------   --------
Balances, June 30, 1999
 (unaudited)...............  1,000,360   $ 10    $ 763     $(30,648)  $(29,875)
                             =========   ====    =====     ========   ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>

                             MILLITECH CORPORATION
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                          Six months ended June
                              Year ended December 31,              30,
                              -------------------------  -----------------------
                               1996     1997     1998       1998        1999
                              -------  -------  -------  ----------- -----------
                                                         (Unaudited) (Unaudited)
<S>                           <C>      <C>      <C>      <C>         <C>
Cash flows from operating
 activities
 Net loss...................  $(2,769) $(5,370) $(9,529)   $(3,780)    $(5,378)
 Adjustments to reconcile
  net loss to net cash
  utilized by operating
  activities:
 Depreciation and
  amortization..............    1,176    1,563    2,076        888       1,162
 Loss on disposition of MMWP
  segment...................      --       --       --         --        1,900
 Non-cash compensation
  expense...................      --       --       --         --           88
 Gain on sale of property
  and equipment.............     (241)     --       --         --          --
 Deferred income taxes......      322      277      --         --          --
 Changes in assets and
  liabilities
  Accounts receivable.......    1,240     (161)    (269)        93         625
  Contracts in process......      (68)     449      (54)      (159)        (11)
  Inventories...............     (866)     220       69     (1,922)     (1,273)
  Other current assets......       41       31       (1)      (214)       (156)
  Accounts payable and
   accrued expenses.........     (927)   1,911       32        333        (264)
  Customer prepayments......      427      601     (824)        57          17
  Income taxes payable......     (134)      53      (13)        (3)          9
                              -------  -------  -------    -------     -------
  Net cash utilized by
   operating activities.....   (1,799)    (426)  (8,513)    (4,707)     (3,281)
                              -------  -------  -------    -------     -------
Cash flows from investing
 activities
 Additions to property and
  equipment.................     (556)    (778)  (3,706)    (2,574)       (708)
 Proceeds from sale of
  property and equipment....      642      --       --         --          --
 Reduction (addition) to
  other assets..............      (58)     (39)      20          3         (39)
                              -------  -------  -------    -------     -------
  Net cash provided
   (utilized) by investing
   activities...............       28     (817)  (3,686)    (2,571)       (747)
                              -------  -------  -------    -------     -------
Cash flows from financing
 activities
 Proceeds from note
  payable...................    2,000    1,000      --         --        1,000
 Net (repayment) borrowing
  under line of credit......    1,500      500   (1,500)      (300)        --
 Proceeds from long-term
  debt......................      --       --       --         --        1,416
 Repayments of long-term
  debt and capital lease
  obligations...............   (1,415)    (994)  (1,264)      (648)       (624)
 Issuance of common stock
  upon exercise of options..        6       43        2        --            6
 Issuance of redeemable
  preferred stock...........      --     9,917    7,368        --          --
 Stock issuance costs.......      --      (111)     (66)       --          --
 Redemption of preferred
  stock.....................       (3)     --       --         --          --
 Treasury stock acquired and
  retired...................     (103)     --       --         --          --
 Addition to other assets...      (72)     (31)     --         --          --
                              -------  -------  -------    -------     -------
  Net cash provided
   (utilized) by financing
   activities...............    1,913   10,324    4,540       (948)      1,798
                              -------  -------  -------    -------     -------
Net increase (decrease) in
 cash and cash equivalents..      142    9,081   (7,659)    (8,226)     (2,230)
Cash and cash equivalents at
 beginning of period........    1,071    1,213   10,294     10,294       2,635
                              -------  -------  -------    -------     -------
Cash and cash equivalents at
 end of period..............  $ 1,213  $10,294  $ 2,635    $ 2,068     $   405
                              =======  =======  =======    =======     =======
Supplemental disclosure of
 cash flow information
 Cash paid (received) during
  the period for
 Income taxes paid (net of
  cash refunds received)....  $   167  $   (62) $   --     $   --      $   --
 Interest paid..............      423      615      240        121         149
 Non-cash investing and
  financing activities:
 Equipment acquired under
  capital lease agreements..      130    1,781      689        689         125
 Conversion of notes and
  accrued interest to
  preferred stock...........      --     3,043      --         --          --
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>

                             MILLITECH CORPORATION

                         NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

   We develop and supply broadband point-to-multipoint wireless access
equipment used by network service providers to deliver integrated voice, video
and data services to business and residential customers. We sell our products
primarily to network system integrators that include our products in broadband
wireless systems sold to network service providers.

   We commenced operations in 1982 and have derived the significant majority of
our sales from our millimeter-wave products business segment. In August 1999,
we adopted a plan to focus all of our resources on our broadband point-to-
multipoint wireless access business segment and to dispose of the millimeter-
wave products segment. As a result, we have presented the operations of the
millimeter-wave products segment as a discontinued operation in our financial
statements (see Note 2).

   The following is a summary of significant accounting policies:

 Unaudited Interim Financial Data

   The financial information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited. In the opinion of management, such interim
financial information includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. The results of operations for the six months ended June 30, 1999 are
not necessarily indicative of the results to be expected for any future period.

 Unaudited Pro Forma Balance Sheet

   The outstanding shares of the Company's preferred stock Series A, B, D and E
automatically convert to common stock upon a public offering resulting in gross
proceeds of at least $15,000,000 and with an offering price of $9.75, $9.75,
$9.75, and $4.50 per share, respectively. These conversions have been reflected
in the unaudited pro forma balance sheet as of June 30, 1999. The pro forma
balance sheet excludes the 6,666,667 shares of Series E stock issued in
September 1999 (see Note 19).

 Cash and Cash Equivalents

   The Company considers highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.

 Revenue Recognition

   Sales under short-term contracts and for stock items are recognized when
deliveries are made. Sales under cost-reimbursement contracts are recorded as
costs are incurred and include estimated earned fees in the proportion that
costs incurred to date bear to total estimated costs.

   Sales under certain fixed-price and fixed-price incentive contracts are
recorded utilizing the percentage of completion method, wherein costs and
estimated gross margin are recorded as the work is performed. Income is accrued
based upon the percentage that costs incurred to date bear to estimated total
costs after giving effect to the most recent estimates of costs and funding at
completion.

   Fees under certain contracts may be increased or decreased in accordance
with cost or performance incentive provisions which measure actual performance
against established targets or specific criteria. Incentive fee awards or
penalties are included in sales or cost of sales at the time the amounts can be
reasonably determined.

                                      F-7
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   As some contracts extend over one or more years, revisions in cost and
profit estimates during the course of the work are reflected in the accounting
period in which the facts which require the revision become known. At the time
a loss on a contract becomes known, the entire amount of the estimated ultimate
loss on such contract is accrued.

 Concentrations of Credit Risk

   Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash, cash equivalents and trade accounts
receivable. The Company places its cash investments with high-quality financial
institutions. The Company extends credit to its customers based on an
evaluation of the customer's financial condition and history and generally does
not require collateral. The Company has historically incurred minimal credit
losses. Approximately 24% and 27% of accounts receivable at December 31, 1997
and 1998 are due from customers who each comprise more than 10% of the total
outstanding accounts receivable. At June 30, 1999, all accounts receivable were
due from four customers, each comprising more than 10% of the total outstanding
accounts receivable relating to the Company's continuing operations.

 Use of Estimates

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

 Comprehensive Income

   Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income. For
the years ended December 31, 1996, 1997 and 1998 and for the six months ended
June 30, 1998 and 1999, comprehensive loss equaled net loss.

 Research and Development

   The Company incurs research and development costs in the exploration of
commercially viable applications of its millimeter-wave and microwave
technology.

   The Company also incurs research and development costs under customer-funded
contracts. Costs of approximately $1,640,000 and $1,727,000 are recorded net of
the associated customer funding of $67,000 and $986,000 in the years ended
December 31, 1997 and 1998, respectively. Costs of approximately $277,000
(unaudited) are shown net of the associated customer funding of $314,000
(unaudited) for the six months ended June 30, 1999. There were no such
contracts in the year ended December 31, 1996 or the six months ended June 30,
1998. Significant terms of customer-funded research and development
arrangements include granting the customer a non-exclusive, royalty-free right
and license to use and distribute the product and its related sales and
technical literature that is developed by the Company under the agreement.

 Inventories

   Inventories are stated at the lower of cost (average cost method) or market.
During 1998, the Company recorded a related reserve of approximately $1,068,000
to adjust such inventory to its net realizable value.

                                      F-8
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 Property, Plant and Equipment

   Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method based upon the estimated useful lives of the
assets as follows:

<TABLE>
<CAPTION>
   Asset                                                               Life
   -----                                                           -------------
   <S>                                                             <C>
   Machinery and equipment........................................  5 to 7 years
   Furniture and fixtures......................................... 7 to 10 years
   Leasehold improvements......................................... 5 to 10 years
   Equipment under capital leases.................................  5 to 7 years
</TABLE>

   Leasehold improvements and equipment under capital leases are amortized over
the lesser of the life of the lease or the useful lives of the improvements or
equipment.

   When assets are sold or retired, the related cost and accumulated
depreciation are removed from their respective accounts and any resulting gain
or loss is included in income.

 Patents and Intangible Assets

   Patents and intangible assets are recorded at cost and are amortized using
the straight-line method over 10 years.

   In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
reviews long-lived assets and certain identifiable intangibles for impairment
at each reporting date, and whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company recorded
charges of $125,000 and $76,664 for the years ended December 31, 1997 and 1998,
respectively, as a result of its decision to reduce the carrying value of
certain patents held by the Company. This charge is included as a component of
general and administrative expenses.

 Income Taxes

   Deferred tax assets and liabilities are computed annually for differences
between the financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.

   Income tax expense (benefit) is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities. An income tax benefit is recorded in the Company's continuing
operations to the extent that the loss from continuing operations offsets
income from discontinued operations.

                                      F-9
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


 Earnings Per Share

   Earnings per share has been computed by dividing the loss from continuing
operations, income (loss) from discontinued operations and net loss by the
weighted average common shares outstanding. No effect has been given to the
exercise of common stock options, stock warrants, convertible notes, and
redeemable preferred stock, since such effect would be antidilutive on
continuing operations for all reporting periods. Pro forma basic and diluted
loss per share have been computed assuming the conversion of all outstanding
shares of redeemable preferred stock into common shares, as if the shares had
converted immediately upon their issuance. The following table presents the
calculation of historical and pro forma per share amounts (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                           Six months ended
                            Year ended December 31,            June 30,
                            --------------------------  -----------------------
                             1996     1997      1998       1998        1999
                            -------  -------  --------  ----------- -----------
                                                        (unaudited) (unaudited)
<S>                         <C>      <C>      <C>       <C>         <C>
Historical:
  Loss from continuing
   operations.............. $(2,239) $(6,712) $(11,253)   $(4,751)    $(3,845)
                            =======  =======  ========    =======     =======
  Weighted average shares
   of common stock
   outstanding.............   1,080      948       984        983         993
                            =======  =======  ========    =======     =======
  Basic and diluted loss
   per share from
   continuing operations... $ (2.07) $ (7.08) $ (11.44)   $ (4.83)    $ (3.87)
                            =======  =======  ========    =======     =======
  Income (loss) from
   discontinued
   operations.............. $  (530) $ 1,342  $  1,724    $   971     $(1,533)
                            =======  =======  ========    =======     =======
  Weighted average shares
   of common stock
   outstanding.............   1,080      948       984        983         993
                            =======  =======  ========    =======     =======
  Basic and diluted income
   (loss) per share from
   discontinued
   operations.............. $ (0.49) $  1.42  $   1.75    $   .99     $ (1.54)
                            =======  =======  ========    =======     =======
  Net loss................. $(2,769) $(5,370) $ (9,529)   $(3,780)    $(5,378)
                            =======  =======  ========    =======     =======
  Weighted average shares
   of common stock
   outstanding.............   1,080      948       984        983         993
                            =======  =======  ========    =======     =======
  Basic and diluted net
   loss per share.......... $ (2.56) $ (5.66) $  (9.68)   $ (3.85)    $ (5.42)
                            =======  =======  ========    =======     =======
Pro Forma (Unaudited):
  Weighted average shares
   of common stock
   outstanding.............                        984                    993
  Pro forma adjustment to
   reflect weighted average
   effect of assumed
   conversion of
   outstanding redeemable
   preferred stock into
   common stock............                     11,654                 14,310
                                              --------                -------
  Weighted average shares
   used to compute pro
   forma basic and diluted
   loss per share..........                     12,638                 15,303
                                              ========                =======
  Pro forma basic and
   diluted loss per share
   from: Continuing
   operations..............                   $  (0.89)               $ (0.25)
                                              ========                =======
   Discontinued
    operations.............                   $   0.14                $ (0.10)
                                              ========                =======
   Net loss................                   $  (0.75)               $ (0.35)
                                              ========                =======
</TABLE>
 Derivative Instruments

   In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, which establishes accounting and reporting standards for derivative
instruments and hedging activities. The statement requires recognition of all
derivatives at fair value

                                      F-10
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

in the financial statements. FASB Statement No. 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB Statement No. 133, defers
implementation of Statement No. 133 until fiscal years beginning after June 15,
2000. The Company has reviewed Statement No. 133 and believes that, upon
implementation, the standard will not have a significant effect on its
financial statements.

 Reclassification

   Certain 1996 and 1997 amounts have been reclassified to conform to the
current year's presentation.

2. Discontinued Operations

   In August 1999, the Board of Directors voted and authorized management to
dispose of the Company's millimeter-wave products (MMWP) business segment. This
segment consists of the development and manufacture of millimeter-wave
components and assemblies, including antennas and quasi-optical products,
multiplexer products, and passive waveguide products.

   Accordingly, the Company has restated its historical financial statements to
present the MMWP segment's operating results as a discontinued operation. The
results of the MMWP operations, including provisions for termination costs,
employee benefits, losses during the phase-out period of $300,000 and an
estimated loss on disposal of $1,600,000 resulting from the write-down of
inventory and equipment, have been segregated from continuing operations and
reported as a separate line item in the statement of operations and
comprehensive loss.

   The assets and liabilities of the MMWP segment at June 30, 1999, consisting
primarily of accounts receivable, inventories, equipment, accounts payable and
accrued expenses, have been segregated as net assets to be disposed of in the
amount of $1,399,000 (unaudited) in the accompanying balance sheet.

   Sales for the MMWP segment were $13,467,000, $14,686,000, $12,211,000,
$6,357,000 (unaudited) and $4,689,000 (unaudited) for the years ended December
31, 1996, 1997 and 1998 and for the six months ended June 30, 1998 and 1999,
respectively.

3. Contracts in Process

   Contracts in process consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                December 31,
                                              ------------------   June 30,
                                                1997      1998       1999
                                              --------  --------  -----------
                                                                  (unaudited)
   <S>                                        <C>       <C>       <C>
   Costs and estimated profit or loss on
    uncompleted contracts.................... $ 10,618  $ 13,488     $--
   Less billings to date.....................  (10,533)  (13,349)     --
                                              --------  --------     ----
                                              $     85  $    139     $--
                                              ========  ========     ====
</TABLE>

   Unbilled amounts are recorded on a percentage of completion method and are
recoverable upon shipment of the product, presentation of billings, or
completion of the contract.

                                      F-11
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


4. Inventories

   Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                       December 31,
                                                       -------------  June 30,
                                                        1997   1998     1999
                                                       ------ ------ -----------
                                                                     (unaudited)
   <S>                                                 <C>    <C>    <C>
   Work in process.................................... $  997 $  918   $1,311
   Parts and subassemblies............................  2,165  2,175    1,302
                                                       ------ ------   ------
                                                       $3,162 $3,093   $2,613
                                                       ====== ======   ======
</TABLE>

5. Property, Plant and Equipment

   Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                  December 31,
                                                -----------------   June 30,
                                                 1997      1998       1999
                                                -------  --------  -----------
                                                                   (unaudited)
   <S>                                          <C>      <C>       <C>
   Machinery and equipment..................... $ 7,841  $ 10,962    $ 8,430
   Furniture and fixtures......................     622       740        675
   Leasehold improvements......................   1,508     1,980      1,711
   Equipment under capital leases..............   2,785     3,469      2,748
                                                -------  --------    -------
                                                 12,756    17,151     13,564
   Less accumulated depreciation and
    amortization...............................  (9,326)  (11,229)    (8,631)
                                                -------  --------    -------
                                                $ 3,430  $  5,922    $ 4,933
                                                =======  ========    =======
</TABLE>

   The net book value of all equipment under capital leases was approximately
$1,581, $1,487 and $1,134 (unaudited) at December 31, 1997 and 1998, and June
30, 1999, respectively.

   Depreciation expense for the years ended December 31, 1996, 1997 and 1998
was $1,101, $1,393 and $1,903, respectively. Depreciation expense for the six
months ended June 30, 1998 and 1999 was $838 (unaudited) and $1,159
(unaudited), respectively.

6. Accrued Expenses

   Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                    December 31,
                                                    -------------  June 30,
                                                     1997   1998     1999
                                                    ------ ------ -----------
                                                                  (unaudited)
   <S>                                              <C>    <C>    <C>
   Accrued payroll, commissions and related
    expenses....................................... $  909 $1,002   $  583
   Accrued warranty expense........................    342    492      555
   Accrued contract costs..........................    647    334      210
   Other accrued expenses..........................     70    232      120
   Accrued loss on disposition of MMWP segment.....    --     --       300
                                                    ------ ------   ------
                                                    $1,968 $2,060   $1,768
                                                    ====== ======   ======
</TABLE>

                                      F-12
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


7. Notes Payable

   Notes payable consisted of a collateralized line of credit of $1,500,000 at
December 31, 1997.

   Collateral for the line of credit consisted of all assets of the Company.
The maximum amount that could be borrowed under this agreement was limited to
80% of bank-approved domestic accounts receivable plus 75% of bank-approved
international accounts receivable. Interest accrued at the rate of prime plus
1%. (Prime was 8.5% at December 31, 1997.) The line of credit expired on
October 31, 1998 and was not renewed by the Company.

   In April 1999, the Company received $1,000,000 (unaudited) in proceeds from
subordinated promissory notes as bridge financing. The notes bear interest at 9
3/4% and are payable at the earlier of December 31, 1999 or the sale of equity
securities of the Company of at least $5,000,000. The note holders received
warrants for the purchase of 200,000 shares (unaudited) of the Company's common
stock at an exercise price of $.50 per share.

8. Long-Term Debt

   Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                        December
                                                           31,
                                                       ------------   June 30,
                                                        1997   1998     1999
                                                       ------  ----  -----------
                                                                     (unaudited)
   <S>                                                 <C>     <C>   <C>
   Uncollateralized subordinated note, due December
    2000, quarterly principal payments of $87,500
    with interest at 10% (see Note 13)...............  $1,138  $700    $  525
   Uncollateralized subordinated note, due June 2003,
    monthly principal payments of $8,333 with
    interest at 10% (see Note 13)....................      99    29       400
   Collateralized equipment notes, due April 2003,
    monthly principal and interest payments of
    $24,695, with interest at 7.8%...................     --    --        996
                                                       ------  ----    ------
                                                        1,237   729     1,921
   Less current portion..............................    (508) (379)     (675)
                                                       ------  ----    ------
                                                       $  729  $350    $1,246
                                                       ======  ====    ======
</TABLE>

   The maturities of long-term debt outstanding are as follows (in thousands):

<TABLE>
<CAPTION>
                                                        December 31,  June 30,
                                                            1998        1999
                                                        ------------ -----------
                                                                     (unaudited)
   <S>                                                  <C>          <C>
   1999................................................     $379       $  675
   2000................................................      350          520
   2001................................................      --           365
   2002................................................      --           361
                                                            ----       ------
                                                            $729       $1,921
                                                            ====       ======
</TABLE>

   During 1997, the Company issued subordinated convertible notes totaling
$1,000,000. In conjunction with these notes, the Company issued a total of
600,000 common stock warrants. In 1997, the $1,000,000 subordinated convertible
notes and $2,000,000 subordinated convertible notes issued previously, together
with accrued interest of $43,000, were converted into 1,690,656 shares of Class
D redeemable preferred stock (see Notes 12 and 13).

   The subordinated note due June 2003 and the line of credit (Note 7) contain
debt covenant requirements related to financial ratios, including a quick
ratio, debt-to-equity ratio and debt service coverage. The Company

                                      F-13
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

was in default of certain of these covenants as of and for the years ended
December 31, 1997 and 1998. The lenders of the line of credit have waived such
defaults as of and for the year ended December 31, 1997. The line of credit
expired and was not renewed in 1998. The lenders of the subordinated note have
waived such default as of and for the year ended December 31, 1998 and through
the year ending December 31, 1999.

   In May 1999, the Company entered into a senior loan and security agreement
which provides for the issuance of up to $2,000,000 in promissory notes. As of
June 30, 1999, $996,000 (unaudited) in notes were outstanding against this
agreement. The notes are collateralized by machinery, equipment, intangible and
other assets of the Company. The notes require an additional interest
compensation payment at the end of the term of the notes. The payment, at the
option of the Company, is either 12.5% of the original principal of the note,
or six months of payments in the amount of 2.43% of the original principal of
the note. In conjunction with these notes, the Company issued 44,445
(unaudited) Class E preferred stock warrants which expire in May 2006 (see Note
13).

   In June 1999, the Company paid the balance of its uncollateralized
subordinated note due June 1999 and issued a new uncollateralized subordinated
note due June 2003 to the same lender totaling $400,000 (unaudited). The
previous note due June 1999 required monthly payments of $5,833 with interest
at 10%. In conjunction with the new note due June 2003, the Company issued
40,000 (unaudited) common stock warrants that expire July 2007 (see Note 13).
The Company also extended the duration of the lender's outstanding Class A
preferred stock warrants to June 2003.

9. Leases

   The Company leases its operating facility and certain equipment under
operating and capital leases which extend through 2003. Certain leases include
renewal options.

   Future minimum annual lease payments under these lease agreements at
December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              Operating Capital
   Year ending                                                 Leases   Leases
   -----------                                                --------- -------
   <S>                                                        <C>       <C>
   1999......................................................  $  659   $  864
   2000......................................................     242      585
   2001......................................................     149      340
   2002......................................................      91      123
   2003......................................................      60      --
                                                               ------   ------
   Future minimum lease payments.............................  $1,201    1,912
                                                               ======
   Less amount representing interest.........................             (402)
                                                                        ------
   Present value of net minimum lease payments...............            1,510
   Less current portion......................................             (813)
                                                                        ------
   Long-term portion.........................................           $  697
                                                                        ======
</TABLE>

   The Company has a ten-year operating lease for its primary operating
facility. The building lease requires the Company to pay utilities, insurance,
maintenance costs and real estate taxes. The building is leased from a
preferred stockholder.

   In addition, the Company leases equipment under various leases for periods
ranging from one to five years. Some of these leases contain options to
purchase the equipment at the termination of the lease at a price equal to fair
market value.

                                      F-14
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   Total rental expense charged to operations under operating leases was
approximately $439,000, $521,000, $624,000, $317,000 (unaudited) and $270,000
(unaudited) for the years ended December 31, 1996, 1997 and 1998 and for the
six months ended June 30, 1998 and 1999, respectively.

10. Incentive Compensation Plan

   The Company maintains an incentive compensation plan. All payouts are at the
Board of Directors' discretion. No compensation expense was recognized under
this plan for the years ended December 31, 1996, 1997 and 1998 or for the six
months ended June 30, 1998 and 1999.

11. Income Taxes

   The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
                                  December 31,
                               -------------------
                               1996 1997    1998
                               ---- -----  -------
   <S>                         <C>  <C>    <C>
   Continuing operations:
   Current tax expense
    (benefit):
     Federal.................  $--  $   3  $   --
     State...................   --    (16)     --
                               ---- -----  -------
                                --    (13)     --
                               ---- -----  -------
   Deferred tax expense
    (benefit):
     Federal.................   --   (529)    (981)
     State...................   --    (98)    (181)
                               ---- -----  -------
                                --   (627)  (1,162)
                               ---- -----  -------
   Income tax benefit related
    to continuing
    operations...............   --   (640)  (1,162)
                               ---- -----  -------
   Discontinued operations:
   Current tax expense:
     Federal.................  $--  $ 763  $   981
     State...................     6   141      181
                               ---- -----  -------
                                  6   904    1,162
                               ---- -----  -------
   Deferred tax expense:
     Federal.................   304   --       --
     State...................    18   --       --
                               ---- -----  -------
                                322   --       --
                               ---- -----  -------
   Income tax expense related
    to discontinued
    operations...............   328   904    1,162
                               ---- -----  -------
     Total income tax
      expense................  $328 $ 264  $   --
                               ==== =====  =======
</TABLE>


                                      F-15
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The provision for income taxes differs from the amount computed utilizing
the federal statutory rate of 34% as follows:

<TABLE>
<CAPTION>
                                Year ended
                               December 31,
                             ---------------------
                             1996    1997    1998
                             -----   -----   -----
   <S>                       <C>     <C>     <C>
   Federal statutory rate..  (34.0)% (34.0)% (34.0)%
   State taxes, net of
    federal effect.........   (6.2)   (4.3)   (7.6)
   Other...................   (0.6)    7.6    (2.2)
   Change in valuation
    allowance..............   54.3    35.9    43.8
                             -----   -----   -----
                              13.5%    5.2%    0.0%
                             =====   =====   =====
</TABLE>

   The tax effects of temporary differences that give rise to deferred tax
assets (liabilities) at December 31, 1997 and 1998 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                1997               1998
                                         ------------------ -------------------
                                         Current Noncurrent Current  Noncurrent
                                         ------- ---------- -------  ----------
   <S>                                   <C>     <C>        <C>      <C>
   Inventory reserves...................  $ 263   $   --    $ 1,134   $   --
   Vacation liability...................    130       --        173       --
   Warranty.............................     75       --        198       --
   Allowance for reserve accounts.......     84       --        148       --
   Accrued contract costs...............    157       --        121       --
   Other................................    117       (38)      253       (85)
   Investment...........................    --        --        --       (173)
   Depreciation.........................    --        110       --        138
   Tax credit carryovers................    --        226       --        383
   Net operating loss carryforwards.....    --      4,223       --      7,231
                                          -----   -------   -------   -------
   Gross deferred tax benefit...........    826     4,521     2,027     7,494
   Valuation allowance..................   (826)   (4,521)   (2,027)   (7,494)
                                          -----   -------   -------   -------
                                          $ --    $   --    $   --    $   --
                                          =====   =======   =======   =======
</TABLE>

   At December 31, 1998, the Company has approximately $18,996 ($11,563 in
1997) of net operating loss carryforwards and $288 ($200 in 1997) of investment
and research and development tax credit carryforwards available for federal
income tax purposes. There are approximately $14,584 of net operating losses
($6,999 in 1997) and approximately $96 in investment and research and
development tax credit carryforwards available in 1998 ($12 in 1997) for state
tax purposes.

   Expiration of these carryforwards commenced in 1998 and will continue
through 2013. It is possible that the net operating loss carryforward amounts
that may be used in a single year may be limited.

12. Preferred Stock

   The Company has issued and outstanding Class A, B, D and E preferred stock.
Each of the classes has redemption rights, a liquidation preference, conversion
rights, and dividend rights:

  .  Each Class A, B, D and E share may be converted at the option of the
     holder into a share of common stock at a price of $3.25, $3.25, $1.80
     and $2.25, respectively. Conversion would occur automatically upon a
     public offering resulting in gross proceeds of at least $15,000,000 and
     with an offering price

                                      F-16
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

   of at least $9.75, $9.75, $9.75 and $4.50 per share for the Class A, B, D,
   and E shares, respectively. Each Class D and E share would automatically
   be converted into common stock upon the conversion of 90% or more of the
   authorized stock of the class.

  .  The Class A, B, D and E shares have a liquidation preference in the
     amount of $3.25, $3.25, $1.80 and $2.25, respectively, plus all declared
     and unpaid dividends.

  .  The holders of Class A, B, D and E shares are entitled to receive, when
     and as declared by the Board of Directors, non-cumulative annual cash
     dividends of $.26, $.26, $.144 and $.18 per share, respectively. No
     dividends have been declared by the Board of Directors.

  .  Certain of the classes of preferred stock have liquidation rights,
     voting rights and cash dividend rights in preference to the other
     preferred stock.

   During 1997, the stockholders authorized 400,000 shares of preferred stock
to be known as Class C preferred stock. The Class C shares are entitled to one
vote per share at any stockholders' meeting. During 1998, the stockholders
reduced the authorized shares of Class C to zero and at December 31, 1998,
there were no Class C preferred shares outstanding.

   During 1997, the Company issued 7,200,000 shares of Class D preferred stock
at $1.80 per share for an aggregate of $12,960,000. As part of the Class D
preferred stock issue, the holders of the Company's subordinated convertible
notes agreed to convert the principal amount of $3,000,000 and accrued interest
of $43,000 into 1,690,656 shares of Class D preferred stock (see Note 8). The
balance of the proceeds, equal to $9,917,000, was received in cash.

   During 1998, the Company issued 3,274,841 shares of Class E preferred stock
at $2.25 per share for an aggregate of $7,368,000.

   The Company shall offer to redeem the Class A and Class B preferred shares
at the rate of 20% per year at $3.25 per share, plus an amount equal to all
declared and unpaid dividends. All Class A and Class B redemptions can be
waived at the option of two-thirds of the respective Class A or Class B
preferred stockholders. As part of the agreement in 1998 to issue Class E
preferred stock, the Class A and Class B preferred stockholders elected to
postpone their redemption rights until 2003.

   On October 21, 2003 and on the first and second anniversaries thereof, the
Company shall offer to redeem from each Class D and Class E preferred holder, a
maximum of one-third, two-thirds and one hundred percent, respectively, of the
total number of shares held by each stockholder at a price equal to the greater
of $1.80 and $2.25, respectively, plus all declared and unpaid dividends, or
the fair market value as determined by the Board of Directors. The Class D
preferred stockholders agreed to postpone their redemption from 2002 to 2003,
as part of the 1998 Class E preferred stock issuance.

                                      F-17
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The aggregate amounts of potential required future redemptions as of
December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                          Class A       Class B       Class D        Class E
                       ------------- ------------- -------------- -------------
                       Shares Amount Shares Amount Shares Amount  Shares Amount
                       ------ ------ ------ ------ ------ ------- ------ ------
   <S>                 <C>    <C>    <C>    <C>    <C>    <C>     <C>    <C>
   1999...............   --   $  --   --    $  --    --   $   --    --   $  --
   2000...............   --      --   --       --    --       --    --      --
   2001...............   --      --   --       --    --       --    --      --
   2002...............   --      --   --       --    --       --    --      --
   2003...............   609   1,980  158      513 2,400    4,320 1,092   2,456
   Thereafter......... 2,437   7,919  632    2,053 4,800    8,640 2,183   4,912
                       -----  ------  ---   ------ -----  ------- -----  ------
                       3,046  $9,899  790   $2,566 7,200  $12,960 3,275  $7,368
                       =====  ======  ===   ====== =====  ======= =====  ======
</TABLE>

13. Stock Warrants

   The Company has issued stock warrants for its preferred and common stock as
follows:

<TABLE>
<CAPTION>
                                  Class A           Class E
                              Preferred Stock   Preferred Stock    Common Stock
                            ------------------- --------------- -------------------
                                                       Exercise
                                      Exercise  Number  Price             Exercise
                            Number of Price Per   of     Per    Number of Price Per
                             Shares     Share   Shares  Share    Shares     Share
                            --------- --------- ------ -------- --------- ---------
   <S>                      <C>       <C>       <C>    <C>      <C>       <C>
   Exercisable at December
    31, 1995...............  28,000     $3.25      --     --      125,000   $0.50
   Granted.................     --        --       --     --    1,200,000    0.50
                             ------     -----   ------  -----   ---------   -----
   Exercisable at December
    31, 1996...............  28,000      3.25      --     --    1,325,000    0.50
   Granted.................     --        --       --     --      600,000    0.50
                             ------     -----   ------  -----   ---------   -----
   Exercisable at December
    31, 1997...............  28,000      3.25      --     --    1,925,000    0.50
   Granted.................     --        --       --     --          --      --
                             ------     -----   ------  -----   ---------   -----
   Exercisable at December
    31, 1998...............  28,000      3.25      --     --    1,925,000    0.50
   Granted.................     --        --    44,445  $2.25     240,000    0.50
                             ------     -----   ------  -----   ---------   -----
   Exercisable at June 30,
    1999 (unaudited).......  28,000     $3.25   44,445  $2.25   2,165,000   $0.50
                             ======     =====   ======  =====   =========   =====
</TABLE>

                                      F-18
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The Company issued 1,200,000, 600,000, and 40,000 (unaudited) common stock
warrants during 1996, 1997 and the six months ended June 30, 1999 in
conjunction with subordinated convertible debt of $2,000,000 and $1,000,000 and
a subordinated note of $400,000, respectively (see Note 8). In addition,
200,000 common stock warrants were issued during the six months ended June 30,
1999 in conjunction with the bridge financing (see Note 7).

   The outstanding common stock warrants have an exercise price of $.50 and
expire as follows:

<TABLE>
<CAPTION>
                                                                    Expiration
   Number of Warrants                                                  Date
   ------------------                                             --------------
   <S>                                                            <C>
   125,000....................................................... December 2000
   1,200,000..................................................... September 2006
   840,000.......................................................   July 2007
</TABLE>

   The outstanding Class A preferred stock warrants have an exercise price of
$3.25 and expire in June 2003 (See Note 8). The outstanding Class E preferred
stock warrants have an exercise price of $2.25 and expire in May 2006 (see Note
8).

14. Stock Options

   The Company has stock option plans that provide for the granting of options
to certain employees, directors and consultants. The plans permit the granting
of options to purchase a maximum of 5,740,000 shares of common stock at prices
and require that the options be exercisable at such prices and at such times as
determined by the Board of Directors, not to exceed ten years from date of
issuance.

   As of December 31, 1998, 2,405,955 options are available for issuance under
these plans. However, the Class D preferred stockholders' agreement limits the
number of additional options that may be issued without the approval of the
Class D stockholders. As of December 31, 1998, under this agreement,
approximately 881,000 of the total 2,405,955 options available may be granted
by the Board of Directors without approval by the Class D stockholders. The
stock options for employees generally have a vesting requirement of four years
whereby 20% of the options granted vest at the time of issuance and the
remainder vest at a rate of 20% per year on the anniversary date of the
issuance.

                                      F-19
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   All outstanding options have an exercise price of $.50 per share. The
aggregate stock option transactions for these plans are as follows:

<TABLE>
<CAPTION>
                                                                      Number of
                                                                       Shares
                                                                      ---------
   <S>                                                                <C>
   Balance, December 31, 1995........................................   983,300
     Granted.........................................................   375,000
     Exercised.......................................................   (11,500)
     Canceled or expired.............................................  (366,900)
                                                                      ---------
   Balance, December 31, 1996........................................   979,900
     Granted.........................................................   410,000
     Exercised.......................................................   (85,700)
                                                                      ---------
   Balance, December 31, 1997 (745,700 exercisable).................. 1,304,200
     Granted......................................................... 1,880,773
     Exercised.......................................................    (4,526)
     Canceled or expired.............................................  (705,728)
                                                                      ---------
   Balance, December 31, 1998 (1,323,070 exercisable)................ 2,474,719
     Granted.........................................................   249,362
     Exercised.......................................................   (12,440)
     Canceled or expired.............................................  (130,990)
                                                                      ---------
   Balance, June 30, 1999 (1,571,991 exercisable)(unaudited)......... 2,580,651
                                                                      =========
</TABLE>

   The weighted average contractual life of options outstanding at December 31,
1998 is 6.8 years.

   Additionally, the Company has options outstanding at December 31, 1998 to a
former shareholder/employee to purchase 270,000 shares of the Company's common
stock for $.50 per share. This option was granted in 1996 under the terms of a
sales agreement (see Note 18).

   The Company granted options to non-employees during the six months ended
June 30, 1999 and accordingly recognized $88,000 (unaudited) in non-cash
compensation expense.

   The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its stock-based
compensation plans. Had compensation cost for the Company's stock option plans
been determined in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, the Company's pro forma net loss and net loss per share would
have been as follows:

<TABLE>
<CAPTION>
                                                      Year ended December 31,
                                                      -------------------------
                                                       1996     1997     1998
                                                      -------  -------  -------
                                                       (in thousands, except
                                                          per share data)
   <S>                                                <C>      <C>      <C>
   Net loss:
     As reported..................................... $(2,769) $(5,370) $(9,529)
     Pro forma.......................................  (2,795)  (5,412)  (9,662)
   Net loss per share:
     As reported.....................................   (2.56)   (5.66)   (9.68)
     Pro forma.......................................   (2.59)   (5.71)   (9.82)
</TABLE>

   The above pro forma effects may not be representative of the effects for
future years, as option grants typically vest over several years and additional
options are generally granted each year.

                                      F-20
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The fair value of each option grant has been estimated on the date of grant
using the minimum value pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
                                                       1996     1997     1998
                                                      -------  -------  -------
   <S>                                                <C>      <C>      <C>
   Risk-free interest rate...........................    6.84%    6.47%    5.58%
   Expected life..................................... 8 years  8 years  8 years
   Volatility........................................       0%       0%       0%
   Dividend yield....................................     --       --       --
</TABLE>

   The weighted average fair value of those options granted in 1996, 1997 and
1998 was $0.21, $0.20 and $0.18, respectively.

15. Common and Preferred Stock Reserved

   During 1998, the stockholders authorized an additional 5,000,000 shares of
common stock.

   As a result of the outstanding preferred stock, outstanding stock warrants,
stock option plans and restricted stock purchase agreement, the Company has
reserved 18,700,073 shares of common stock at December 31, 1997 and 22,263,841
shares at December 31, 1998, and 28,000 shares of Class A preferred stock at
December 31, 1997 and 1998.

   During the six months ended June 30, 1999, the stockholders voted to
authorize 7,500,000 (unaudited) shares of preferred stock, $.01 par value to
increase the authorized shares of the Series E preferred stock to 8,000,000
(unaudited) and to increase the authorized shares of common stock to 36,000,000
(unaudited).

16. Segment Information

   During 1998, the Company adopted the provisions of FASB Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information. FASB
Statement No. 131 establishes standards for disclosures about operating
segments, products and services, geographic areas and major customers.

   Prior to the Company's decision to discontinue its millimeter-wave products
(MMWP) business segment (see Note 2), the Company developed and manufactured
products in two business segments, the MMWP and broadband wireless access (BWA)
segments. As a result of this decision, the Company now operates in only the
BWA segment. Products of the BWA segment include hub and customer premises
equipment.

   The BWA segment's sales by country are (in thousands):

<TABLE>
<CAPTION>
                                          Year ended        Six months ended
                                         December 31,           June 30,
                                      ------------------ -----------------------
                                      1996  1997   1998     1998        1999
                                      ---- ------ ------ ----------- -----------
                                                         (unaudited) (unaudited)
   <S>                                <C>  <C>    <C>    <C>         <C>
   United States..................... $173 $  225 $1,153   $  209      $  823
   Canada............................    1    --     713      415       1,936
   Other countries...................   27  1,508    520      413           3
                                      ---- ------ ------   ------      ------
                                      $201 $1,733 $2,386   $1,037      $2,762
                                      ==== ====== ======   ======      ======
</TABLE>

   The Company's research and production facilities and accompanying long-lived
assets are located in the United States.

                                      F-21
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   Sales to individual customers in excess of 10% of total BWA segment revenues
are presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                       Year ended        Six months ended
                                      December 31,           June 30,
                                   ------------------ -----------------------
                                   1996  1997   1998     1998        1999
                                   ---- ------ ------ ----------- -----------
                                                      (unaudited) (unaudited)
   <S>                             <C>  <C>    <C>    <C>         <C>
   Individual customers in excess
    of 10% of revenues:
    Customer A.................... $ 20 $  --  $  --    $  --       $  --
    Customer B....................   95    --     --       --          --
    Customer C....................   59    --     --       --          --
    Customer D....................   27    674    --       --          --
    Customer E....................  --     584    --       --          --
    Customer F....................  --     --     296      296         --
    Customer G....................  --     --     614      --          604
    Customer H....................  --     --     713      415       1,935
                                   ---- ------ ------   ------      ------
                                    201  1,258  1,623      711       2,539
   Other customers................  --     475    763      326         223
                                   ---- ------ ------   ------      ------
   Total sales.................... $201 $1,733 $2,386   $1,037      $2,762
                                   ==== ====== ======   ======      ======
</TABLE>

17. Employee Savings and Profit-Sharing Plan

   The Company sponsors an employee savings and profit-sharing plan for all
employees. Full-time employees become eligible for participation after one-half
year of service. The Company provides a 50% matching of employee contributions,
up to a maximum of $2,000 ($1,750 in 1997). An additional contribution is
determined at the discretion of the Board of Directors.

   The Company's contributions to this plan amounted to approximately $132,000,
$147,000 and $191,000 for the years ended December 31, 1996, 1997 and 1998 and
$121,000 (unaudited) and $149,000 (unaudited) for the six months ended June 30,
1998 and 1999, respectively.

18. Related-Party Transactions

   The Company had sales to a preferred stockholder of approximately $728,000,
$1,028,000 and $953,000 during 1996, 1997 and 1998, and $555,000 (unaudited)
and $702,000 (unaudited) for the six months ended June 30, 1998 and 1999,
respectively. Included in accounts receivable at December 31, 1997 and 1998 are
approximately $378,000 and $160,000 due from these sales. These transactions
comprise subcontracts associated with the preferred stockholder's contracts
with the U.S. Government, and are contracted in accordance with federal
contracting guidelines. The sales and related accounts receivable from this
customer are included in discontinued operations.

   The Company holds a promissory note receivable of $250,000 as the result of
a 1996 license and sales agreement with a limited liability company established
and partly owned by a former stockholder/employee. The Company also owns a
19.9% interest in the company. At December 31, 1997 and 1998, the Company has
reserved for the entire amount due on the note receivable of approximately
$213,000 and $200,000, respectively, and has no value assigned to its 19.9%
interest in the limited liability company. The Company has instituted legal
action to collect the amounts due plus damages.

                                      F-22
<PAGE>

                             MILLITECH CORPORATION

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


19. Subsequent Events (unaudited)

 Bridge Financing

   In July 1999, the Company received an aggregate of $1,000,000 in proceeds
from subordinated promissory notes issued to certain preferred stockholders,
common stockholders, officers and directors. The notes bear interest at 9.75%
and are to be paid in full on the earlier of December 31, 1999 or the sale of
the Company's equity securities having an aggregate sales price of at least
$5,000,000. Holders of the subordinated promissory notes also received warrants
to purchase an aggregate of 200,000 shares of the Company's common stock at
$.50 per share. The warrants expire in July 2007.

 Revolving Line of Credit

   In August 1999, the Company entered into a revolving line of credit
agreement with a bank. The agreement provides for an initial borrowing of up to
$1,000,000, which is increased by $500,000 upon the Company's raising an
additional $3,000,000 in stockholders' equity and increased by $500,000 upon
receipt of a machinery and equipment appraisal, for a total amount available of
$2,000,000. Interest is payable on the outstanding balance of the line at prime
plus 1%. The line is collateralized by all assets of the Company and expires on
August 19, 2000. The agreement requires the Company to comply with certain
covenants, including net income and tangible net worth.

   In connection with the revolving line of credit agreement, the bank received
a warrant to purchase 44,445 shares of the Company's Series E preferred stock
at $2.25 per share. The warrant expires in August 2006.

 Series E Preferred Stock

   In September 1999, the Company sold 6,666,667 shares of its Series E
preferred stock for $15,000,000, prior to issuance expenses. Of the total
proceeds, approximately $2,000,000 will be used to retire the $2,000,000 in
subordinated promissory notes from the bridge financing and approximately
$13,000,000 will be used for general corporate purposes. The terms of the
additional Series E shares issued are the same as the Series E shares
previously issued (see Note 12).

                                      F-23
<PAGE>




                  [Logo of Telaxis Communications Corporation]
<PAGE>

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

   The following table sets forth the expenses (other than the underwriting
compensation expected to be incurred) in connection with the offering described
in this Registration Statement. All of the amounts (except the SEC Registration
Fee, the NASD Filing Fee and The Nasdaq Stock Market's National Market Listing
Fee) are estimates.

<TABLE>
<S>                                                                     <C>
SEC Registration Fee................................................... $20,141
NASD Filing Fee........................................................   7,745
The Nasdaq Stock Market's National Market Listing Fee..................       *
Blue Sky Fees and Expenses.............................................   7,500
Printing and Engraving Costs...........................................       *
Legal Fees and Expenses................................................       *
Accounting Fees and Expenses...........................................       *
Transfer Agent and Registrar Fees and Expenses.........................       *
Miscellaneous..........................................................       *
                                                                        -------
  Total................................................................ $     *
                                                                        =======
</TABLE>

Item 14. Indemnification of Directors and Officers.

   Section 67 of Chapter 156B of the Massachusetts General Laws, or the
Massachusetts Business Corporation Law (the "MBCL"), provides that the
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by
it to whatever extent shall be specified in or authorized by (i) the articles
of organization or (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote on
the election of directors. Except as the articles of organization or by-laws
otherwise require, indemnification of any such persons who are not directors of
the corporation may be provided by it to the extent authorized by the
directors. Such indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he shall be
adjudicated not to be entitled to indemnification, which undertaking may be
accepted without reference to the financial ability of such person to make
repayment. Any such indemnification may be provided although the person to be
indemnified is no longer an officer, director, employee or agent of the
corporation or of such other organization or no longer serves with respect to
any such employee benefit plan. Section 67 further provides that no
indemnification shall be provided for any person with respect to any matter as
to which he shall have been adjudicated in any proceeding not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the corporation or, to the extent that such matter relates to service with
respect to any employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan.

   The Company's by-laws provide that the Company shall indemnify each person
who is, or shall have been, a director, officer, employee or agent of the
Company, or who is serving or shall have served, at the request of the Company,
as a director or officer of another organization or in any capacity with
respect to any employee benefit plan of the Company, against all liabilities
and expenses (including judgments, fines, penalties, amounts paid or to be paid
in settlement and reasonable attorney's fees) imposed upon or incurred by any
such person in connection with or arising out of claims made, or any action,
suit or proceeding threatened or brought against him or in which he may be
involved by reason of any action taken omitted by him as a director, officer,
employee or agent, or as a result of any service with respect to any such
employee benefit plan.

                                      II-1
<PAGE>

   Section 13(b)(1 1/2) of Chapter 156B of the MBCL permits a corporation to
include in its articles of organization a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 61 or
62 of the MBCL (relating to unlawful payment of dividends, unlawful stock
purchase and redemption and loans to insiders) or (iv) for any transaction from
which the director derived an improper personal benefit. Article VI of the
Company's Articles of Organization provides that the Company's directors shall
not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, expect in the circumstances set forth
in the MBCL.

   Section 67 of the MBCL also affords a Massachusetts corporation the power to
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities. The Company currently maintains a
directors and officers liability insurance policy.

   The Underwriting Agreement filed as Exhibit 1.1 provides that the
Underwriters named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), and the Underwriting Agreement provides that
such Underwriters will contribute to certain liabilities of such persons under
the Securities Act.


Item 15. Recent Sales of Unregistered Securities.

   The Company has issued or sold the following unregistered securities within
the past three years:

  .  an aggregate of 6,666,667 shares of Class E preferred stock at $2.25 per
     share in September 1999 to 47 accredited investors;

  .  a warrant to purchase 44,445 shares of Class E preferred stock at $2.25
     per share in August 1999 to a commercial lender;

  .  warrants to purchase an aggregate of 200,000 shares of common stock at
     $.50 per share in July 1999 to 12 accredited investors;

  .  a warrant to purchase 40,000 shares of common stock at $.50 per share in
     June 1999 to one accredited investor;

  .  a warrant to acquire 44,445 shares of Class E preferred stock at $2.25
     per share in May 1999 to a lease financing company;

  .  warrants to purchase an aggregate of 200,000 shares of common stock at
     $.50 per share in April 1999 to 14 accredited investors;

  .  an aggregate of 3,274,841 shares of Class E preferred stock at $2.25 per
     share in October, November and December 1998 to 32 accredited investors;

  .  an aggregate of 7,200,000 shares of Class D preferred stock at $1.80 per
     share in November and December 1997 to 38 accredited investors;

  .  warrants to acquire an aggregate of 1,800,000 shares of common stock at
     $.50 per share in September 1996 and July 1997 to 23 accredited
     investors;

  .  stock options to purchase an aggregate of 2,504,635 shares of common
     stock at an exercise price of $.50 between October 1, 1996 and September
     2, 1999 to a total of 193 consultants, employees and directors under the
     Company's 1996 and 1997 stock plans;

  .  stock options to purchase an aggregate of 780,225 shares of common stock
     at an exercise price of $1.25 between July 14, 1999 and September 2,
     1999 to a total of 12 consultants, employees and directors under the
     Company's 1997 stock plan;

                                      II-2
<PAGE>

  .  stock options to purchase an aggregate of 354,629 shares of common stock
     at an exercise price of $2.25 between August 24, 1999 and September 13,
     1999 to a total of 191 consultants, employees and directors under the
     Company's 1997 stock plan;

  .  225,000 shares of restricted common stock at $1.25 per share under our
     1997 Stock Plan to one employee in September 1999; and

  .  an aggregate of 289,966 shares at prices ranging from $0.50 to $1.25 to
     our employees, directors and consultants upon the exercise of options
     held by those individuals and issued under one or more of our stock
     plans.

   Each of the sales described above were completed without registration under
the Securities Act in reliance upon one or more of the following exemptions:

  .  Section 4(2) of the Securities Act or Rule 506 of Regulation D
     promulgated under the Securities Act for transactions not involving a
     public offering; or

  .  Rule 701 promulgated under the Securities Act with respect to certain of
     the options and shares of common stock issued to the Company's
     employees, directors and consultants.

   None of the sales of the securities issued by the Company have involved the
use of an underwriter, and no commissions were paid in connection with the sale
of any of the securities issued by the Company.

Item 16. Exhibits and Financial Statement Schedules.

 (a) Exhibits

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
  1.1    Form of Underwriting Agreement.*

  3.1    Restated Articles of Organization of the Company.*

  3.2    By-laws of the Company, as amended.

  4.1    Form of certificate evidencing ownership of Common Stock of the
          Company.*

  5.1    Opinion of Mirick, O'Connell, DeMallie & Lougee, llp.*

 10.1    1986 Stock Plan of the Company.

 10.2    1987 Stock Plan of the Company.

 10.3    1988 Stock Plan of the Company.

 10.4    1996 Stock Plan of the Company.

 10.5    1997 Stock Plan of the Company.

 10.6    1999 Stock Plan of the Company.

 10.7    Employment Agreement by and between the Company and John L. Youngblood
          dated January 25, 1994.

 10.8    Reseller Agreement by and between the Company and Newbridge Networks
          Corporation dated August 7, 1998.*

 10.9    Professional Services Agreement by and between the Company and
          Newbridge Networks Corporation dated August 7, 1998.*

 10.10   Revised Purchase Order by and between the Company and Motorola dated
          September 20, 1999.*

 10.11   Memorandum of Understanding by and between the Company and Hughes
          Network Systems Limited dated August 12, 1998.*

</TABLE>

                                      II-3
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
 10.12   Memorandum of Understanding by and between the Company and California
          Amplifier, Inc. dated March 11, 1999.

 10.13   Lease by and between the Company and Edward J. O'Leary-Raymond M.
          Vincunas Partnership dated January 16, 1990.

 10.14   Lease by and between the Company and Lloyd C. Green and Mildred E.
          Green dated June 30, 1998.

 10.15   Revolving Line of Credit Agreement by and between the Company and
          Boston Federal Savings Bank dated August 20, 1999.

 10.16   Fourth Amended and Restated Registration Rights Agreement dated
          September 17, 1999.

 10.17   Registration Rights Agreement by and between the Company and Boston
          Federal Savings Bank dated August 20, 1999.

 10.18   Registration Rights Agreement by and between the Company and Phoenix
          Leasing Incorporated dated May 19, 1999.

 10.19   Purchase Agreement by and between the Company and Massachusetts
          Technology Development Corporation dated June 1988.*
 10.20   First Amendment to the Purchase Agreement by and between the Company
          and Massachusetts Technology Development Corporation dated December
          28, 1988.*
 10.21   Second Amendment to the Purchase Agreement by and between the Company
          and Massachusetts Technology Development Corporation dated June 17,
          1999.*
 10.22   Senior Loan and Security Agreement by and between the Company and
          Phoenix Leasing Corporation dated May 19, 1999.*
 10.23   Subordinated Note and Warrant Purchase Agreement by and between the
          Company and Massachusetts Capital Resource Company dated December 7,
          1992.*
 10.24   Subordinated Note Purchase Agreement by and between the Company and
          Massachusetts Capital Resource Company dated August 15, 1994.*

 23.1    Consent of PricewaterhouseCoopers llp.

 23.2    Consent of Mirick, O'Connell, DeMallie & Lougee, LLP (incorporated in
          the Opinion filed as Exhibit 5.1 above).*

 24.1    Power of Attorney (included on the signature page of this Registration
          Statement).

 27.1    Financial Data Schedule.
</TABLE>
---------------------
*  To be filed by amendment.

 (b) Financial Statement Schedules

   Schedule II - Valuation and Qualifying Accounts

   All other financial statement schedules have been omitted because they are
not required, not applicable, or the information to be included in the
financial statement schedules is included in the Financial Statements or the
notes thereto.

                                      II-4
<PAGE>

Item 17. Undertakings.

   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

   The undersigned registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of this
  registration statement in reliance on Rule 430A and contained in a form of
  prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Securities Act shall be deemed to be part of this
  registration statement as of the time it is declared effective.

     (2) For the purpose of determining any liability under the Securities
  Act, each post-effective amendment that contains a form of prospectus shall
  be deemed to be a new registration statement relating to the securities
  offered therein, and the offering of such securities at that time shall be
  deemed to be the initial bona fide offering thereof.

   The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

                                      II-5
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of
Massachusetts, on September 27, 1999.

                                          Millitech Corporation

                                          By: /s/ John L. Youngblood
                                             ----------------------------------
                                                     John L. Youngblood
                                               President and Chief Executive
                                                          Officer

                               POWER OF ATTORNEY

   KNOW ALL MEN BY THESE PRESENTS, that MILLITECH CORPORATION, a corporation
organized under the laws of the Commonwealth of Massachusetts (the
"Corporation"), and the undersigned officers and directors of the Corporation,
individually and in their respective capacities indicated below, hereby make,
constitute and appoint John L. Youngblood and Dennis C. Stempel its and their
true and lawful attorneys, their separate or joint signatures sufficient to
bind, with power of substitution, to execute, deliver and file in its or their
behalf, and in each person's respective capacity or capacities as shown below,
with the Securities and Exchange Commission (or any other governmental
authority) a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, any amendments to and any and all documents in support of or
supplemental to said registration statement by the Corporation, and any
additional registration statements filed pursuant to Rule 462(b); and the
Corporation and each said person hereby grant to said attorneys full power and
authority to do and perform each and every act and thing whatsoever as any one
of said attorneys may deem necessary or advisable to carry out the full intent
of this Power of Attorney to the same extent and with the same effect as the
Corporation or the undersigned officers and directors of the Corporation might
or could do personally in its or their capacity or capacities as aforesaid; and
the Corporation of each of said persons hereby ratify, confirm and approve all
acts and things that any one of said attorneys may do or cause to be done by
virtue of this Power of Attorney and its signature or their signatures as the
same may be signed by any one of said attorneys to said registration statement
and any and all documents in support of or supplemental to said Registration
Statement and any and all amendments thereto.

   Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
        /s/ John L. Youngblood         President, Chief Executive September 27, 1999
______________________________________    Officer and Director
          John L. Youngblood

        /s/ Dennis C. Stempel            Vice President, Chief    September 27, 1999
______________________________________     Financial Officer,
          Dennis C. Stempel             Treasurer, and Principal
                                           Accounting Officer

        /s/ Albert E. Paladino                  Director          September 27, 1999
______________________________________
          Albert E. Paladino
</TABLE>

                                      II-6
<PAGE>

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
       /s/ Allan M. Doyle, Jr.                  Director          September 27, 1999
______________________________________
         Allan M. Doyle, Jr.

        /s/ Robert C. Fleming                   Director          September 27, 1999
______________________________________
          Robert C. Fleming

         /s/ James W. Fordyce                   Director          September 27, 1999
______________________________________
           James W. Fordyce

         /s/ David A. Norbury                   Director          September 27, 1999
______________________________________
           David A. Norbury

        /s/ Matthew S. Robison                  Director          September 27, 1999
______________________________________
          Matthew S. Robison
</TABLE>

                                      II-7
<PAGE>

       REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of Millitech Corporation:

   In connection with our audits of the financial statements of Millitech
Corporation as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998 which financial statements are included
in the Prospectus, we have also audited the financial statement schedule listed
in Item 16(b) herein. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements.

/s/ PricewaterhouseCoopers LLP

Springfield, Massachusetts
March 5, 1999, except for Note 2
as to which the date is August 24, 1999

                                      S-1
<PAGE>

   Item 16(b)                                                        Schedule II

                             MILLITECH CORPORATION

                       VALUATION AND QUALIFYING ACCOUNTS
              For the years ended December 31, 1996, 1997 and 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                          Column C
        Column A          Column B        Additions        Column D   Column E
------------------------ ---------- --------------------- ---------- ----------
                         Balance at Charged to Charged to            Balance at
                         Beginning  Costs and    Other                 End of
      Description        of Period   Expenses   Accounts  Deductions   Period
      -----------        ---------- ---------- ---------- ---------- ----------
1996
<S>                      <C>        <C>        <C>        <C>        <C>
Inventory reserve.......   $1,858     $  (22)               $ (82)     $1,754
Allowance for doubtful
 accounts...............      100        162                   (1)        261
Warranty reserve........      342        191                 (191)        342
                           ------     ------      ---       -----      ------
                           $2,300     $  331                $(274)     $2,357
                           ======     ======      ===       =====      ======
<CAPTION>
1997
<S>                      <C>        <C>        <C>        <C>        <C>
Inventory reserve.......   $1,754     $  877                $(650)     $1,981
Allowance for doubtful
 accounts...............      261        (51)                 --          210
Warranty reserve........      342        229                 (229)        342
                           ------     ------      ---       -----      ------
                           $2,357     $1,055                $(879)     $2,533
                           ======     ======      ===       =====      ======
<CAPTION>
1998
<S>                      <C>        <C>        <C>        <C>        <C>
Inventory reserve.......   $1,981     $2,236                $ (45)     $4,172
Allowance for doubtful
 accounts...............      210        176                  (18)        368
Warranty reserve........      342        284                 (134)        492
                           ------     ------      ---       -----      ------
                           $2,533     $2,696                $(197)     $5,032
                           ======     ======      ===       =====      ======
</TABLE>



                                      S-2
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
  1.1    Form of Underwriting Agreement.*

  3.1    Restated Articles of Organization of the Company.*

  3.2    By-laws of the Company, as amended.

  4.1    Form of certificate evidencing ownership of Common Stock of the
          Company.*

  5.1    Opinion of Mirick, O'Connell, DeMallie & Lougee, LLP.*

 10.1    1986 Stock Plan of the Company.

 10.2    1987 Stock Plan of the Company.

 10.3    1988 Stock Plan of the Company.

 10.4    1996 Stock Plan of the Company.

 10.5    1997 Stock Plan of the Company.

 10.6    1999 Stock Plan of the Company.

 10.7    Employment Agreement by and between the Company and John L. Youngblood
          dated January 25, 1994.

 10.8    Reseller Agreement by and between the Company and Newbridge Networks
          Corporation dated August 7, 1998.*

 10.9    Professional Services Agreement by and between the Company and
          Newbridge Networks Corporation dated August 7, 1998.*

 10.10   Revised Purchase Order by and between the Company and Motorola dated
          September 20, 1999.*

 10.11   Memorandum of Understanding by and between the Company and Hughes
          Network Systems Limited dated August 12, 1998.*

 10.12   Memorandum of Understanding by and between the Company and California
          Amplifier, Inc. dated March 11, 1999.*

 10.13   Lease by and between the Company and Edward J. O'Leary-Raymond M.
          Vincunas Partnership dated January 16, 1990.

 10.14   Lease by and between the Company and Lloyd C. Green and Mildred E.
          Green dated June 30, 1998.

 10.15   Revolving Line of Credit Agreement by and between the Company and
          Boston Federal Savings Bank dated August 20, 1999.

 10.16   Fourth Amended and Restated Registration Rights Agreement dated
          September 17, 1999.

 10.17   Registration Rights Agreement by and between the Company and Boston
          Federal Savings Bank dated August 20, 1999.

 10.18   Registration Rights Agreement by and between the Company and Phoenix
          Leasing Incorporated dated May 19, 1999.

 10.19   Purchase Agreement by and between the Company and Massachusetts
          Technology Development Corporation dated June 1988.*.
 10.20   First Amendment to the Purchase Agreement by and between the Company
          and Massachusetts Technology Development Corporation dated December
          28, 1988.*
 10.21   Second Amendment to the Purchase Agreement by and between the Company
          and Massachusetts Technology Development Corporation dated June 17,
          1999.*
</TABLE>
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
 10.22   Senior Loan and Security Agreement by and between the Company and
          Phoenix Leasing Corporation dated May 19, 1999.*
 10.23   Subordinated Note and Warrant Purchase Agreement by and between the
          Company and Massachusetts Capital Resource Company dated December 7,
          1992.*
 10.24   Subordinated Note Purchase Agreement by and between the Company and
          Massachusetts Capital Resource Company dated August 15, 1994.*

 23.1    Consent of PricewaterhouseCoopers LLP.

 23.2    Consent of Mirick, O'Connell, DeMallie & Lougee, LLP (incorporated in
          the Opinion filed as Exhibit 5.1 above).*

 24.1    Power of Attorney (included on the signature page of this Registration
          Statement).

 27.1    Financial Data Schedule.
</TABLE>
---------------------
*  To be filed by amendment.