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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 For the quarterly period ended September 30, 1997.

                                       OR

[ ]  Transition  report  pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934

     For the transition period from ___________________ to ___________________.


                         Commission File Number: 0-8574

                          MICROWAVE POWER DEVICES, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                                   13-3622306     
   (State or other jurisdiction of                      (IRS Employer   
   incorporation or organization)                    Identification No.)

                              49 Wireless Boulevard
                         Hauppauge, New York 11788-3935
          (Address of principal executive offices, including zip code)

                                 (516) 231-1400
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                            Yes __X__.   No _____.


As of  November  1,  1997,  there  were  10,378,750  shares  outstanding  of the
registrant's Common Stock, $.01 par value.

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<PAGE>

                          MICROWAVE POWER DEVICES, INC.

                                      INDEX


PART I -- FINANCIAL INFORMATION                                         Page No.
-------------------------------                                         --------

ITEM 1.   Consolidated Financial Statements
          Consolidated Balance Sheets --
          September 30, 1997 and December 31, 1996 .....................    3

          Consolidated Statements of Operations --
          Three and nine months ended September 30, 1997 and 1996 ......    4

          Consolidated Statements of Cash Flows --
          Nine months ended September 30, 1997 and 1996 ................    5

          Notes to Consolidated Financial Statements....................    6


ITEM 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations.....................................    7


PART II -- OTHER INFORMATION

ITEM 6.   Exhibits and Reports on Form 8-K..............................   12


SIGNATURES..............................................................   13


                                     Page 2
<PAGE>

PART I -- FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.


                  MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                   September 30,  December 31,
                                                                                       1997           1996
                                                                                   -------------  ------------
                                                                                    (unaudited)     (audited)
                                     ASSETS
<S>                                                                                   <C>           <C>     
CURRENT ASSETS:
     Cash and cash equivalents ..................................................     $    629      $  1,149
     Accounts receivable, net of allowance for doubtful accounts of
        $60 and $76, respectively ...............................................        6,571         7,482
     Inventories, net ...........................................................       17,799        14,362
     Prepaid expenses and other current assets ..................................          814           657
     Deferred income taxes ......................................................        1,490           345
                                                                                      --------      --------
          Total current assets ..................................................       27,303        23,995
PROPERTY, PLANT AND EQUIPMENT, net ..............................................        8,142         8,057
INTANGIBLE ASSETS, net ..........................................................          413           369
INVESTMENT IN MARKETABLE SECURITIES AND OTHER
   LONG TERM ASSETS .............................................................          953         1,015
DEFERRED INCOME TAXES ...........................................................        4,256         5,454
                                                                                      --------      --------
                                                                                      $ 41,067      $ 38,890
                                                                                      ========      ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Current portion of long-term debt...........................................     $    650      $     45
     Accounts payable ...........................................................        5,915         5,103
     Accrued liabilities ........................................................        2,820         2,696
                                                                                      --------      --------
          Total current liabilities .............................................        9,385         7,844
                                                                                      --------      --------
LONG-TERM DEBT ..................................................................       13,029        12,744
                                                                                      --------      --------
SHAREHOLDERS' EQUITY:
     Preferred stock, $.01 par value; 5,000,000 shares authorized;
        no shares issued or outstanding .........................................           --            --
     Common stock, $.01 par value; 25,000,000 shares authorized;
        10,378,750 and 10,375,000 shares issued and outstanding, respectively ...          104           104
     Additional paid-in capital .................................................       23,306        23,276
     Notes receivable from shareholders .........................................         (187)         (225)
     Retained earnings (accumulated deficit) ....................................       (4,570)       (4,853)
                                                                                      --------      --------
          Total shareholders' equity ............................................       18,653        18,302
                                                                                      --------      --------
                                                                                      $ 41,067      $ 38,890
                                                                                      ========      ========
</TABLE>


              The accompanying notes are an integral part of these
                          consolidated balance sheets.


                                     Page 3
<PAGE>

                  MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                 For the Three Months Ended   For the Nine Months Ended
                                                ---------------------------  ---------------------------
                                                September 30, September 30,  September 30, September 30,
                                                    1997          1996           1997          1996
                                                ------------- -------------  ------------- -------------
<S>                                               <C>           <C>            <C>           <C>     
NET SALES ..................................      $ 13,970      $ 11,449       $ 36,204      $ 33,727
COST OF SALES ..............................        10,200        13,882         26,620        31,251
                                                  --------      --------       --------      --------
          Gross profit (deficit) ...........         3,770        (2,433)         9,584         2,476
                                                  --------      --------       --------      --------
OPERATING EXPENSES:
     General and administrative ............           902           720          2,664         2,488
     Selling ...............................         1,187           885          2,760         2,923
     Research and development ..............         1,170         1,832          2,847         5,795
                                                  --------      --------       --------      --------
                                                     3,259         3,437          8,271        11,206
                                                  --------      --------       --------      --------
          Income (loss) from operations ....           511        (5,870)         1,313        (8,730)
INTEREST EXPENSE, net ......................           317           291            931           670
OTHER EXPENSE (INCOME), net ................             1             4             (2)            3
                                                  --------      --------       --------      --------
          Income (loss) before income taxes            193        (6,165)           384        (9,403)
PROVISION (BENEFIT) FOR INCOME TAXES .......            25        (2,466)           101        (3,761)
                                                  --------      --------       --------      --------
          Net income (loss) ................      $    168      $ (3,699)      $    283      $ (5,642)
                                                  ========      ========       ========      ========

PER SHARE INFORMATION:
     Net income (loss) per common share ....      $   0.02      $  (0.36)      $   0.03      $  (0.54)
                                                  ========      ========       ========      ========
     Weighted average common shares and
        common share equivalents outstanding        10,496        10,375         10,454        10,375
                                                  ========      ========       ========      ========
</TABLE>


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


                                     Page 4
<PAGE>

                  MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                         For the Nine Months Ended
                                                                       ----------------------------
                                                                       September 30,  September 30,
                                                                           1997           1996
                                                                       -------------  -------------
<S>                                                                       <C>           <C>     
OPERATING ACTIVITIES:
     Net income (loss) .............................................      $   283       $(5,642)
     Adjustments to reconcile net income (loss) to net cash
        used in operating activities:
          Depreciation and amortization ............................          893           893
          Deferred income taxes ....................................           53        (3,788)
          Loss (gain) on sale of property, plant and equipment .....           (1)            3
     Changes in operating assets and liabilities:
          Accounts receivable ......................................          911         2,849
          Inventories ..............................................       (3,437)        1,439
          Prepaid expenses and other assets ........................          (61)         (271)
          Accounts payable and accrued liabilities .................          936         2,110
                                                                          -------       -------
               Net cash used in operating activities ...............         (423)       (2,407)
                                                                          -------       -------
INVESTING ACTIVITIES:
          Purchases of property, plant and equipment ...............         (913)         (702)
          Proceeds from sale of property, plant and equipment ......            6            15
          Investment in marketable securities ......................            4             5
                                                                          -------       -------
               Net cash used in investing activities ...............         (903)         (682)
                                                                          -------       -------
FINANCING ACTIVITIES:
          Proceeds from long-term debt .............................        2,700             0
          Principal payments of long-term debt .....................         (345)          (40)
          Net proceeds from (repayments on) revolving line of credit       (1,465)        3,126
          Proceeds from exercise of stock options ..................           30             0
          Deferred financing costs .................................         (114)            0
                                                                          -------       -------
               Net cash provided by financing activities ...........          806         3,086
                                                                          -------       -------
DECREASE IN CASH AND CASH EQUIVALENTS ..............................         (520)           (3)
CASH AND CASH EQUIVALENTS, beginning of year .......................        1,149           388
                                                                          -------       -------
CASH AND CASH EQUIVALENTS, end of period ...........................      $   629       $   385
                                                                          =======       =======

SUPPLEMENTAL DATA:
     Cash paid for interest ........................................      $   982       $   748
                                                                          =======       =======
     Cash paid for income taxes ....................................      $    96       $    17
                                                                          =======       =======
</TABLE>


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


                                     Page 5
<PAGE>

                  MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 1997
                 (in thousands, except share and per share data)
                                   (unaudited)


     1.  Reference  is made to the Notes to  Consolidated  Financial  Statements
contained in the  Company's  December 31, 1996  audited  consolidated  financial
statements  included in the Company's  1996 Annual Report and the Company's 1996
Annual  Report on Form 10-K filed with the SEC on March 28, 1997. In the opinion
of  Management,  the interim  unaudited  financial  statements  included  herein
reflect all adjustments  necessary,  consisting of normal recurring adjustments,
for a fair  presentation  of such  data on a basis  consistent  with that of the
audited data  presented  therein.  The  consolidated  results of operations  for
interim periods are not necessarily indicative of the results to be expected for
a full year.

     2.  Earnings  per share for the three and nine months ended  September  30,
1997  includes  the  dilutive  effect of  119,685  and 78,782  weighted  average
outstanding  options,  respectively;  they do not  include  the  impact of other
outstanding options as the effect of their inclusion would be anti-dilutive.

     Earnings per share for the three and nine months ended  September  30, 1996
do not  include  the  impact  of  outstanding  options  as the  effect  of their
inclusion would be anti-dilutive.

     3. The following stock options were granted,  cancelled or exercised during
the third quarter of 1997 under either the 1995 or 1996 Stock Option Plans:

     Granted                   Cancelled                Exercised
     -------                   ---------                ---------
     16,500   @   $  9.50        2,715 @ $ 2.875          3,750 @ $ 8.00
                                 4,125 @ $ 8.00
                                 5,000 @ $ 9.50
                                   375 @ $10.75


     4. Recently Issued Accounting Standards

     In March 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share".  This
statement  establishes standards for computing and presenting earnings per share
("EPS"),  replacing the  presentation of currently  required  primary EPS with a
presentation  of Basic EPS. For entities with complex  capital  structures,  the
statement  requires the dual  presentation  of both Basic EPS and Diluted EPS on
the face of the statement of operations.  Under this new standard,  Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution;   Diluted  EPS  reflects  potential  dilution  from  the  exercise  or
conversion  of  securities  into common  stock or from other  contracts to issue
common stock and is similar to the  currently  required  fully diluted EPS. SFAS
No. 128 is effective for financial  statements  issued for periods  ending after
December 15, 1997,  including  interim periods,  and earlier  application is not
permitted.  When  adopted,  the Company will be required to restate its EPS data
for all prior periods  presented.  The Company does not expect the impact of the
adoption of this statement to be material to previously reported EPS amounts.


                                     Page 6
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS.


Overview

     Microwave Power Devices,  Inc. ("Microwave Power Devices" or the "Company")
commenced  operations  in  1967.  During  the past 30  years,  the  Company  has
designed,  manufactured  and marketed high power,  solid-state,  radio frequency
("RF") and  microwave  power  amplifiers  and related  subsystems  for military,
medical, satellite and, most recently, wireless telecommunications applications.

     The Company historically has been dependent upon the military market as its
principal source of revenue. In 1992, as the military market was declining,  the
Company  increased  the scope of its  business and entered  commercial  markets,
thereby  broadening its product  offerings.  The Company now develops  precision
high-power amplifiers for a variety of commercial uses.


Forward-Looking Statements

     Certain  information  contained  in this  Quarterly  Report  on Form  10-Q,
including,  without  limitation,  information  appearing  under  Part I, Item 2,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," are  forward-looking  statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities  Exchange Act of
1934).  Factors set forth in the  Company's  Annual  Report on Form 10-K,  filed
March 28, 1997,  under Item 1,  "Business - Risk  Factors,"  together with other
factors that appear with the  forward-looking  statements,  or in the  Company's
other  Securities and Exchange  Commission  filings,  including its Registration
Statement  on Form S-1 dated  September  29, 1995,  could  affect the  Company's
actual results and could cause the Company's actual results to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company in this Quarterly Report on Form 10-Q.


Results of Operations --
Third Quarters Ended September 30, 1997 and September 30, 1996

     Net Sales. Net sales increased by 22% to $14.0 million in the third quarter
of 1997 from $11.4 million in the third quarter of 1996. This sales increase was
primarily due to higher shipments of the Company's commercial products partially
offset  by  lower  shipments  of  the  Company's  military  products.  Sales  of
commercial  products  increased by 41% to $11.3  million in the third quarter of
1997 from $8.0 million in the third quarter of 1996,  representing  81% and 70%,
respectively,  of net sales in such periods.  The commercial  sales increase was
predominantly due to higher shipments to a domestic wireless  telecommunications
OEM and a satellite communications OEM, partially offset by lower shipments to a
foreign wireless telecommunications OEM. Sales of military products decreased by
23% to $2.7 million in the third  quarter of 1997 from $3.4 million in the third
quarter of 1996,  representing 19% and 30%,  respectively,  of net sales in such
periods.  The  military  sales  decrease was  predominantly  due to lower market
demand for various Republic products.

     International  sales  decreased by 31% to $4.8 million in the third quarter
of 1997 from $6.9  million  in the third  quarter of 1996,  totaling  34% of net
sales in the third quarter of 1997 compared to 61% in the third quarter of 1996.
The  decrease in  international  sales was  predominantly  due to lower  foreign
wireless telecommunications OEM business and lower foreign shipments of Republic
products.  In the third quarter of 1997,  sales to two domestic  commercial OEMs
(Customer B and Customer D) and a foreign  commercial OEM (Customer A) accounted
for 32%, 15% and 26%,  respectively,  of the Company's  net sales.  In the third
quarter of 1996,  sales to a foreign  commercial OEM (Customer A) and a domestic
commercial  OEM  (Customer B) accounted  for 40% and 16%,  respectively,  of the
Company's net sales.


                                     Page 7
<PAGE>

     Gross  Profit.  Gross profit  improved by 255% to $3.8 million in the third
quarter of 1997 from $(2.4)  million in the third quarter of 1996. The Company's
gross profit margin (gross profit as a percentage of net sales) also improved to
27.0% in the third  quarter of 1997 from  (21.3)% in the third  quarter of 1996.
The increase in gross profit and gross profit  margin was  primarily  due to the
non-recurrence  of the third  quarter  1996 $4.9  million  write-off of wireless
multi-channel work-in-process inventory caused by the then diminished demand for
those particular  products and $0.7 million write-off of wireless single channel
work-in-process  inventory  caused by a domestic  commercial  OEM's  decision to
internally  manufacture  amplifiers for the production portion of their PCS-TDMA
program.  In addition,  the following factors  adversely  affected the Company's
gross  profit  margin for the third  quarter of 1997:  (i) the overall low gross
profit margin obtainable on the Company's  wireless  multi-channel  product line
(the  result  of  competitive   pricing   pressures),   (ii)   engineering   and
manufacturing  difficulties  experienced  on the  pre-production  phase of a new
wireless product and (iii) a lower than  anticipated  gross profit on a Republic
military program (due to technical difficulties encountered).

     Certain of the Company's  inventory costing techniques involve developing a
standard cost which estimates the average,  or standard,  cost per unit over the
extended life cycle of a product.  Such costs  include  labor,  material,  other
direct costs and related overheads. If the extended life cycle of a product does
not materialize or if there is no reasonable  certainty that product  maturation
will take place within the near future,  write-offs of work-in-process inventory
would be  required.  Such  write-offs  could  materially  adversely  affect  the
Company's gross profit and results of operations.

     Certain of the purchase orders or contracts comprising backlog at September
30, 1997 set forth product  specifications  not yet achieved by the Company that
would require the Company to complete additional product development. Failure to
develop products meeting such  specifications  could lead to the cancellation of
the related purchase orders or contracts.  The reduction,  delay or cancellation
of orders or contracts from one or more  significant  customers could materially
adversely  affect the  Company's  business,  financial  condition and results of
operations.

     There can be no assurances  that gross profit will continue to improve.  If
the  Company  is  not  able  to  reduce  its  production  costs  to  the  extent
anticipated,  or to introduce new products with higher  margins,  and if average
selling prices decline beyond current  expectations,  the Company's gross profit
and results of operations could be materially adversely affected.  The Company's
gross profit may also be affected by a variety of other  factors,  including the
mix of systems and equipment sold; production,  reliability or quality problems;
and price competition.

     General and Administrative  Expenses.  General and administrative  expenses
increased by 25% to $0.9 million in the third  quarter of 1997 from $0.7 million
in the third quarter of 1996, representing 6.4% and 6.3%,  respectively,  of net
sales.  This increase was primarily due to the Company-wide  upgrade of computer
hardware and software and data processing equipment.

     Selling Expenses.  Selling expenses increased by 34% to $1.2 million in the
third  quarter  of  1997  from  $0.9  million  in the  third  quarter  of  1996,
representing 8.5% and 7.7%,  respectively,  of net sales. This increase resulted
primarily from higher bid and proposal  expenses  (incurred in connection with a
$12.0  million  foreign  military  order  awarded in the third quarter of 1997),
higher sales  representative  commissions  (the result of higher  overall  sales
volume),  higher  advertising,  trade  show and  travel  expenses  (incurred  in
connection with the first time attendance at a second major wireless trade show)
and a higher accrued warranty expense.

     Research  and  Development  Expenses.  Research  and  development  expenses
decreased by 36% to $1.2 million in the third  quarter of 1997 from $1.8 million
in the third quarter of 1996, representing 8.4% and 16.0%, respectively,  of net
sales. The decrease in research and development expenses resulted primarily from
reduced military product  development  efforts and, to a lesser extent,  reduced
wireless  telecommunications  product development efforts. Military research and
development expenses decreased predominantly as a result of the Company shipping
initial  hardware to a foreign  military OEM, late in 1996,  for a Republic MRES
2000 simulator product. In the military environment, customer funding of product
development  costs is typical.  The Republic MRES 2000 program was an exception,
however,  as the Company  funded a large  majority of this  product  development
effort throughout 1996. The Company believes that the continued  introduction of
new  products is


                                     Page 8
<PAGE>

essential to its competitiveness,  especially in the wireless telecommunications
market, and is committed to continued investment in research and development.

     Interest  Expense.  Interest  expense  remained  relatively  stable at $0.3
million in both the third quarters of 1997 and 1996.

     Provision for Income Taxes.  The Company's  effective tax rate decreased to
13.0% in the third quarter of 1997 from 40.0% in the third quarter of 1996.  The
1997  rate was  favorably  impacted  by the  partial  recovery  of a  previously
reserved deferred tax asset.  Without the benefit of this change in the reserve,
the effective tax rate for the third quarter of 1997 would have been 40.0%.  The
Company will continue to assess its reserved  deferred tax assets each reporting
quarter.  The 1996 rate was due to the then anticipated full year 1996 net loss,
the benefit of which the  Company  expects to utilize to offset  future  taxable
income, as prescribed by FAS 109. There can be no assurances,  however, that the
Company will continue to experience taxable income in the future.


Nine Months Ended September 30, 1997 and September 30, 1996

     Net Sales.  Net sales  increased  by 7% to $36.2  million in the first nine
months of 1997 from $33.7  million in the first nine months of 1996.  This sales
increase  was  primarily  due to higher  shipments of the  Company's  commercial
products.  Sales of commercial  products increased by 9% to $27.2 million in the
first nine  months of 1997 from $24.9  million in the first nine months of 1996,
representing  75% and  74%,  respectively,  of net  sales in such  periods.  The
commercial  sales  increase  was  predominantly  due to  higher  shipments  to a
domestic wireless  telecommunications  OEM and a satellite  communications  OEM,
partially  offset by lower  shipments to a foreign  wireless  telecommunications
OEM.  Sales of military  products  increased  by 2% to $9.0 million in the first
nine  months  of 1997  from  $8.8  million  in the  first  nine  months of 1996,
representing  25% and  26%,  respectively,  of net  sales in such  periods.  The
military  sales  increase was  predominantly  due to greater  market  demand for
various MPD amplifier products.

     International  sales  decreased  by 38% to $10.1  million in the first nine
months of 1997 from $16.2 million in the first nine months of 1996, totaling 28%
of net sales in the first nine months of 1997  compared to 48% in the first nine
months of 1996. The decrease in  international  sales was  predominantly  due to
lower foreign  wireless  telecommunications  OEM business,  partially  offset by
higher  Republic  foreign  military  business.  In the first six months of 1997,
sales to two domestic  commercial OEMs (Customer B and Customer D) and a foreign
commercial OEM (Customer A) accounted for 31%, 16% and 18%, respectively, of the
Company's  net  sales.  In the first  nine  months  of 1996,  sales to a foreign
commercial OEM (Customer A) and a domestic commercial OEM (Customer B) accounted
for 39% and 17%, respectively, of the Company's net sales.

     Gross Profit.  Gross profit  increased by 287% to $9.6 million in the first
nine  months of 1997 from $2.5  million  in the first nine  months of 1996.  The
Company's  gross profit  margin (gross profit as a percentage of net sales) also
increased  to 26.5% in the first nine months of 1997 from 7.3% in the first nine
months of 1996.  The  increase  in gross  profit  and gross  profit  margin  was
primarily due to the  non-recurrence  of the first nine months 1996 $4.9 million
write-off of wireless  multi-channel  work-in-process  inventory  caused by then
diminished  demand for those  particular  products,  $1.0  million  write-off of
wireless multi-channel  work-in-process inventory related to the cancellation of
the  remainder of the AirNet  contract  and $0.7  million  write-off of wireless
single channel  work-in-process  inventory caused by a domestic commercial OEM's
decision to internally  manufacture  amplifiers  for the  production  portion of
their PCS-TDMA program.  In addition,  the following factors adversely  affected
the gross profit  margin for the first nine months of 1997:  (i) the overall low
gross profit margin obtainable on the Company's  multi-channel product line (the
result of competitive pricing pressures),  (ii) low gross profits the Company is
experiencing  on three military OEM contracts (the result of production  delays,
technical problems and software integration difficulties), (iii) engineering and
manufacturing  difficulties  experienced  on the  pre-production  phase of a new
wireless product,  (iv) a higher commercial  warranty expense  (specifically for
the  Company's  multi-channel,  Cellular-CDMA  product)  and  (v) a  lower  than
anticipated absorption of overhead


                                     Page 9
<PAGE>

expenses.  It should be noted,  however, that by the end of the first quarter of
1997,  the majority of the  technical  problems  encountered  with the Company's
multi-channel, Cellular-CDMA product had been addressed, product returns seem to
be diminishing,  product reliability  appears to be improving and,  accordingly,
commercial warranty expense seems to be leveling.

     Certain of the Company's  inventory costing techniques involve developing a
standard cost which estimates the average,  or standard,  cost per unit over the
extended life cycle of a product.  Such costs  include  labor,  material,  other
direct costs and related overheads. If the extended life cycle of a product does
not materialize or if there is no reasonable  certainty that product  maturation
will take place within the near future,  write-offs of work-in-process inventory
would be  required.  Such  write-offs  could  materially  adversely  affect  the
Company's gross profit and results of operations.

     Certain of the purchase orders or contracts comprising backlog at September
30, 1997 set forth product  specifications  not yet achieved by the Company that
would require the Company to complete additional product development. Failure to
develop products meeting such  specifications  could lead to the cancellation of
the related purchase orders or contracts.  The reduction,  delay or cancellation
of orders or contracts from one or more  significant  customers could materially
adversely  affect the  Company's  business,  financial  condition and results of
operations.

     There can be no assurances  that gross profit will continue to improve.  If
the  Company  is  not  able  to  reduce  its  production  costs  to  the  extent
anticipated,  or to introduce new products with greater margins,  and if average
selling prices decline beyond current  expectations,  the Company's gross profit
and results of operations could be materially adversely affected.  The Company's
gross profit may also be affected by a variety of other  factors,  including the
mix of systems and equipment sold; production,  reliability or quality problems;
and price competition.

     General and Administrative  Expenses.  General and administrative  expenses
increased  by 7% to $2.7  million  in the  first  nine  months of 1997 from $2.5
million in the first nine months of 1996, both  representing  7.4% of net sales.
This increase was primarily due to the Company-wide upgrade of computer hardware
and software and data processing equipment.

     Selling Expenses.  Selling expenses  decreased by 6% to $2.8 million in the
first nine  months of 1997 from $2.9  million in the first nine  months of 1996,
representing 7.6% and 8.6%,  respectively,  of net sales. This decrease resulted
primarily from lower sales  representative  commissions  (the result of domestic
versus  foreign sales mix  variations)  and, to a lesser  extent,  lower travel,
freight, advertising and trade show expenses, all of which were partially offset
by higher bid and proposal expenses (incurred in connection with a $12.0 million
foreign  military  order  awarded  in the third  quarter  of 1997,  as well as a
generally higher level of proposal activity across all product lines).

     Research  and  Development  Expenses.  Research  and  development  expenses
decreased  by 51% to $2.8  million  in the first  nine  months of 1997 from $5.8
million  in the  first  nine  months  of  1996,  representing  7.9%  and  17.2%,
respectively,  of net sales.  The decrease in research and development  expenses
resulted primarily from reduced military product  development  efforts and, to a
lesser extent, reduced wireless  telecommunications product development efforts.
Military research and development  expenses decreased  predominantly as a result
of the Company  shipping  initial  hardware to a foreign  military  OEM, late in
1996, for a Republic MRES 2000 simulator product.  In the military  environment,
customer funding of product development costs is typical. The Republic MRES 2000
program was an exception,  however,  as the Company  funded a large  majority of
this product  development  effort throughout 1996. The Company believes that the
continued  introduction  of new products is  essential  to its  competitiveness,
especially  in the  wireless  telecommunications  market,  and is  committed  to
continued investment in research and development. The Company views the decrease
in wireless  telecommunications  research and development expenses (the majority
of which occurred in the first quarter of 1997) as a short term solution used to
assist  in  reducing  costs to match  corresponding  reduced  wireless  revenue.
Fundamental to this effort was a temporary reallocation of some of the Company's
engineering   and   technology   resources  to  either   revenue   producing  or
customer-funded product development during the first quarter of 1997.


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<PAGE>

This action  enabled the Company to leverage its other  commercial  and military
product  lines  while  insuring a  continued  and  focused  emphasis on critical
wireless telecommunications development projects.

     Interest Expense.  Interest expense increased by 39% to $0.9 million in the
first nine  months of 1997 from $0.7  million in the first nine  months of 1996,
primarily  reflecting  increased  average  borrowings under the Company's credit
facility.

     Provision for Income Taxes.  The Company's  effective tax rate decreased to
26.3% for the first  nine  months of 1997 from 40% in the first  nine  months of
1996.  The  1997  rate was  favorably  impacted  by the  partial  recovery  of a
previously  reserved  deferred tax asset.  Without the benefit of this change in
the reserve,  the  effective  tax rate for the third  quarter of 1997 would have
been 40.0%. The Company will continue to assess its reserved deferred tax assets
each reporting quarter.  The 1996 rate was due to the then anticipated full year
1996 net loss,  the  benefit of which the  Company  expects to utilize to offset
future taxable income, as prescribed by SFAS No. 109. There can be no assurances
that the Company will continue to achieve taxable income in the future.


Liquidity and Capital Resources

     In the fourth  quarter of 1995,  the  Company  successfully  completed  its
initial  public  offering  ("IPO")  raising  net  proceeds  to  the  Company  of
approximately  $20.4  million from the  Company's  sale of  2,875,000  shares of
Common Stock, including the underwriters'  over-allotment option. Since the IPO,
the Company has financed its operations and met its capital requirements through
the  following  two sources:  (i) a credit  facility  and (ii) cash  provided by
operating activities.

     On February 13, 1997,  the Company and IBJ Schroder  Bank and Trust Company
("IBJ") entered into a $13.0 million credit  facility  consisting of a revolving
line of credit in the amount of $10.3  million  and a term loan in the amount of
$2.7 million. The revolving line of credit and term loan bear interest at annual
rates  equal  to the  prime  rate  plus  1.0% and the  prime  rate  plus  1.25%,
respectively.  The credit  facility  matures in February 2000 and  automatically
renews for one-year periods thereafter,  unless terminated by either the Company
or IBJ. Aggregate borrowings under the revolving line of credit are limited by a
borrowing  base,  which is  calculated  as the sum of 85% of  eligible  accounts
receivable  and 40% of eligible raw  materials and  work-in-process  inventories
(with borrowings based on aggregate eligible inventory limited to $6.0 million).
The term loan  requires  a  monthly  paydown  of $0.05  million.  Therefore,  at
September 30, 1997 the term loan balance was $2.4 million.  The credit  facility
is subject to customary covenants,  including,  among other things,  limitations
with  respect to incurring  indebtedness,  payment of  dividends  and  affiliate
advances, and a provision for maintaining a certain fixed charge coverage ratio.

     Operating  activities used net cash of $0.4 million and $2.4 million in the
first nine  months of 1997 and 1996,  respectively.  From  December  31, 1996 to
September  30,  1997,  accounts  receivable  decreased  by $0.9  million,  while
inventory and accounts payable and accrued liabilities increased by $3.4 million
and  $0.9  million,  respectively.  The  decrease  in  accounts  receivable  was
primarily  due to the  collection  during the first  nine  months of 1997 of two
foreign receivables which were outstanding at December 31, 1996 and had extended
payment  terms.  The increase in inventory  was  predominantly  due to a greater
work-in-process  inventory on two long-term military contracts.  The increase in
accounts payable and accrued  liabilities was primarily the result of the second
quarter 1997  implementation  of a new cash  management  system which  created a
favorable float  situation at September 30, 1997 (i.e.:  checks in vendors hands
but not  yet  cleared).  Investing  activities,  which  consisted  primarily  of
equipment  acquisitions,  used net cash of $0.9  million and $0.7 million in the
first nine months of 1997 and 1996,  respectively.  Financing activities,  which
consisted  primarily of proceeds from  long-term  debt and net proceeds from the
revolving line of credit,  provided net cash of $0.8 million and $3.1 million in
the first nine months of 1997 and 1996, respectively.

     Capital  expenditures  were $0.9 million and $0.7 million in the first nine
months of 1997 and 1996, respectively.  These expenditures were funded primarily
through  cash  provided  by  beginning  of year cash  on-hand  balances  and the
Company's credit facility.  Principal  expenditures for the first nine months of
1997 included


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<PAGE>

upgrades to the  Company's  business  systems'  hardware  and  software  and CAD
systems.  In addition,  1997 expenditures  included purchases of engineering and
manufacturing  test  equipment,   computer  equipment,   manufacturing  assembly
equipment and furniture and fixtures.  The Company anticipates making additional
capital  expenditures  of $0.6 million  during the remainder of 1997,  including
purchases  of  additional   engineering  and  manufacturing  assembly  and  test
equipment,  purchases of office  equipment as well as continued  upgrades to its
CAD systems and computer equipment.

     As of September 30, 1997, the Company had working capital of  approximately
$17.9 million,  compared to approximately $16.2 million as of December 31, 1996.
Working capital as of September 30, 1997 included approximately $6.6 million and
$17.8 million in accounts receivable and inventory,  respectively. The Company's
current ratio (ratio of current assets to current  liabilities)  as of September
30, 1997 was 2.9:1,  compared  with a current  ratio of 3.1:1 as of December 31,
1996. As of both September 30, 1997 and December 31, 1996, the Company's debt to
equity ratio was 0.7:1.

     The Company believes that cash generated from operations, amounts available
under its credit  facility,  and/or third party  financing will be sufficient to
fund necessary capital  expenditures and to provide adequate working capital for
at least  the next 12  months.  There  can be no  assurance,  however,  that the
Company  will not require  additional  financing  prior to such date to fund its
operations,  and,  if  required,  that  such  financing  will  be  available  on
commercially  reasonable terms. In addition,  the Company may require additional
financing after such date to fund its operations.



PART II -- OTHER INFORMATION


ITEM 6.   Exhibits and Reports on Form 8-K.

          (a)  Exhibit 27.1 Financial Data Schedule.

          (b)  No  reports on Form 8-K have been filed  during the  quarter  for
               which this report is filed.


                                    Page 12
<PAGE>

SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                        MICROWAVE POWER DEVICES, INC.
                                             (Registrant)


Dated: November 3, 1997                 /s/  Edward J. Shubel
       ----------------                 --------------------------
                                        By:  Edward J. Shubel
                                             President and CEO


Dated: November 3, 1997                 /s/  Paul E. Donofrio
       ----------------                 --------------------------
                                        By:  Paul E. Donofrio
                                             Vice President Finance/CFO
                                             (Principal Financial and 
                                             Accounting Officer)


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