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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to
 Commission file number: 000-31635
 
 Endwave Corporation
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    95-4333817(State of incorporation)
    
    (I.R.S. Employer Identification No.)130 Baytech DriveSan Jose, CA
    
    95134(Address of principal executive offices)
    
    (Zip code)
 (408) 522-3100  (Registrants telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value per share
    
    The NASDAQ Global Market
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 þ o
 o
  Large accelerated filer  o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ENDWAVE CORPORATION
FORM 10-K
Year Ended December 31, 2007
TABLE OF CONTENTS
  
 Page No.PART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    16Item 1B.
    
    Unresolved Staff Comments
    
    
    26Item 2.
    
    Properties
    
    
    26Item 3.
    
    Legal Proceedings
    
    
    26Item 4.
    
    Submission of Matter to Vote of Security Holders
    
    
    26PART IIItem 5.
    
    Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    27Item 6.
    
    Selected Consolidated Financial Data
    
    
    28Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    29Item 7A.
    
    Quantitative and Qualitative Disclosures About Market
Risk
    
    
    42Item 8.
    
    Financial Statements and Supplementary Data
    
    
    43Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    71Item 9A.
    
    Controls and Procedures
    
    
    71Item 9B.
    
    Other Information
    
    
    73PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    73Item 11.
    
    Executive Compensation
    
    
    78Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    89Item 13.
    
    Certain Relationships and Related Transactions and
Director Independence
    
    
    91Item 14.
    
    Principal Accountant Fees and Services
    
    
    93PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    93SIGNATURES
    
    
    98EXHIBIT 10.15EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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FORWARD-LOOKING INFORMATION
  
 PART I
 
 Item 1. Business
 Introduction
    3




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Industry Background and Markets
 High-Frequency RF Technology
   Telecommunication Networks
 Applications of High-Frequency RF Technologies in Telecommunication Networks.
 Cellular Backhaul.
 Carrier Class Trunking.
 Private Voice and Data Networks.
 4




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Increased Demand for Microwave Radios in Telecommunication Networks.
 Growth of Wireless Telephony in Developing Nations.
 Increase in Data-Intensive Cellular Traffic.
 Deployment of Third-Generation Networks.
 Introduction of Other High Capacity Data-Only Telecommunication Networks.
 Defense Electronics
  Electronic Warfare Systems.
 Radar Systems.
 5




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Signal Intelligence Systems.
 Intelligent Battlefield Systems.
 High Capacity Communications.
  Homeland Security Systems
  Advanced Personnel Screening Portals.
 Long Distance Personnel Detection.
  Our Opportunity
  Low Cost.
 6




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Technical Depth.
 Flexible Production.
 Innovative Technology.
  Our Strengths
  Cost-Effective Volume Manufacturing.
 Depth and Breadth of Technical Expertise.
 Scalable and Flexible Manufacturing.
 Next-Generation Technology.
 7




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Our Strategy
  Revenue Growth
 Increase our Telecommunication Network Business.
 Expand into New Growth Markets.
 Grow through Acquisitions.
 Offer the Highest Level of Manufacturing Efficiency and Flexibility
 Continually Improve Manufacturing Efficiency.
 Outsource to Low-Cost, Contract Manufacturers.
 8




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Reduce Raw Materials and Component Costs.
 Employ a Fabless Semiconductor Model.
 Leverage Technical Breadth and Strength
 Broaden our Product Portfolio.
 Develop New Circuit and Packaging Technologies.
 Products and Technology
 Products
  Single-Function Modules.
 Multi-Function Modules.
 Integrated Subsystem Modules.
 Circuit Technologies
  9




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##### Table of Contents



Circuit TechnologiesHMIC
    
    MMIC
    
    MLMSDescription
    
    Individual devices
bonded to a
substrate and then
interconnected with
bond wires
    
    Monolithic
semiconductor
substrate with
patterned devices
and
interconnections
    
    Individual devices
flip chip attached
using our patented
flip chip assembly
technology to a
complex substrateModule Design
    
    Multiple circuits
cascaded to form a
functional block
    
    Multiple circuits
cascaded to form a
functional block
    
    Single substrate
can form a complete
system on a chip
functional blockSubstrate
    
    Ceramic with single
top layer
metallization
    
    Semiconductor
material, typically
gallium arsenide
    
    Next generation,
multi- layer
substrate
containing metal,
capacitive and
resistive layersActive Devices
    
    Individual RF
devices attached to
substrate
    
    Devices patterned
into various areas
of the substrate;
active device area
is a small fraction
of total substrate
area
    
    Individual RF
devices especially
designed for flip
chip assemblyApplication
    
    Used for rapid
prototyping and low
volume production
    
    Used for high
volume automated or
third-party
assembly
    
    Used for high
volume automated or
third-party
assemblyNumber of Bond
Wires (which
require manual
tuning)
    
    High  Often
hundreds per module
    
    Moderate  Often
tens per module
    
    Low  Often fewer
than 10 per modulePerformance
    
    Variable  Units
must be hand-tuned
to required
specifications and
performance may be
variable
    
    Good  MMIC circuit
designed for
consistent
performance,
limited by
substrate
characteristics
    
    Excellent  Very
consistent
performance due to
lack of bond wires
and improved
substrate materialDesign Difficulty
    
    Moderate  The most
flexible circuit
technology for
customizing RF
performance; can be
designed very
quickly by us
because of our
large library of
HMIC core elements
    
    Difficult  Complete
circuit and all
interactions must
be concurrently
analyzed;
complicated by sub-
optimal substrate
properties of
semiconductor
materials for
interconnection and
filter elements;
single-substrate
process must be
used for all
devices
    
    Moderate  Multi-layer properties of
substrate
facilitate ease of
design; layers
optimized for their
functionRelative Cost
    
    High  Material
costs are modest,
but high assembly,
test and rework
labor costs
    
    High  Material
cost of large
semiconductors is
expensive
    
    Moderate  Device
and substrate costs
are lower than
MMICs; assembly
process automated
for lower labor
costs than HMICsStatus
    
    In production
    
    In production
    
    In early stages of
commercial
production
 10




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Circuit Packaging Technologies
   Circuit Packaging TechnologiesPlanar
    
    EpsilonDescription
    
    Circuit substrates mounted to metal
carrier and then enclosed with metal
cover; entire assembly mounted to
conventional printed wiring board
    
    Circuit substrates mounted directly to
composite printed wiring board using
chip on board approach and then
enclosed with non-metallized plastic
coverSize and Weight
    
    Metallic parts add significant thickness
and weight
    
    Significantly thinner and lighter than
planar packagesPerformance
    
    Good  Good performance when used with
an adequate RF gasket seal
    
    Excellent  RF cavity sealed better
than planar packagesDesign Difficulty
    
    Moderate  Requires separate design
effort for carrier and cover with
interfaces to printed wiring board
    
    Low  Fewer elements to design and
fewer mechanical interfaces to manage
than planar packagesManufacturability
    
    Eight major assembly steps
    
    Four major assembly stepsRelative Cost
    
    Moderate  Material costs are significant
    
    Low  Metal carrier eliminated and
plastic cover is more cost-effectiveStatus
    
    In production
    
    In early stages of commercial production
 Sales and Marketing
   Customers
  11




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Acquisitions
  Acquisition
    
    Structure
    
    Key BenefitsALC Microwave, Inc.  April 2007
    
    Purchased all of
the outstanding
capital stock of privately-held ALC
Microwave, Inc.
whose primary
product line was
logarithmic
amplifiers and
subsystems sold to
defense markets.
    
         Provided a significant market
position in specialized logarithmic
amplifiers.     Expanded relationships with
existing customers and added new
customers.JCA Technology, Inc., a
wholly-owned subsidiary of New
Focus, Inc., a subsidiary of
Bookham Technology plc  July 2004
    
    Purchased all of
the outstanding
capital stock of
JCA, whose primary product line was
microwave
amplifiers serving the defense
electronics
industry
    
         Provided significant market
position in RF amplifiers and
modules for defense and related
applications     Expanded relationships with
existing
customers and add new customers     Formed core of Endwave Defense
Systems divisionVerticom, Inc.  May 2003
    
    Purchased assets
including customer contracts,
equipment, inventory, product
designs and other
intellectual
property required
to manufacture and
supply YIG-based
frequency
synthesizers
    
         Enhanced high-performance
oscillator technology     Added new customer relationship
in the defense electronics market     Added new product application in
the defense communication satellite
terminal marketArcom Wireless Incorporated, a
subsidiary of Dover Corporation  February 2003
    
    Purchased assets
including customer contracts,
equipment,
inventory, product
designs and other
intellectual
property required
to manufacture and
supply a 58 GHz
integrated
transceiver
    
         Expanded relationship with an
existing customer     Enhanced market position as a
leading supplier of 58 GHz productsSignal Technology Corp. Fixed
Wireless Division  September
2002
    
    Purchased assets
including customer
contracts, equipment,
inventory, product
designs and other intellectual
property required to manufacture and
supply several
transceiver
products
    
         Expanded relationships with
existing customers including
Stratex Networks, Inc. and Nera ASA     Added new customers including
Siemens AG and Ceragon Networks
Ltd.     Significantly increased our
product portfolio     Facilitated move to offshore
productionM/A-Com Tech, Inc., a
subsidiary of Tyco Electronics formerly known as Stellex
Microwave Systems  April 2001
    
    Purchased assets
including customer contracts,
equipment, inventory, product
designs and other
intellectual
property required
to manufacture and
supply yttrium iron
garnet-based
frequency
synthesizers
    
         Added new product capabilities in
high performance oscillators     Added new customer relationship
with Stratex Networks, Inc.     Added new application in high
capacity microwave radios
 Competition
  12




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
    
    Product pricing and the ability to offer low-cost solutions;
    
    Technical leadership and product performance;
    
    Strong customer relationships;
    
    Product breadth;
    
    Time-to-market in the design and manufacturing of products; and
    
    Logistical flexibility, manufacturing capability and scalable capacity.
 Research and Development
  Custom Semiconductor Design Capabilities.
 Breadth of Expertise.
 Computer Modeling Capabilities.
 Extensive Library of Circuit Designs.
 Automated Testing Processes.
  13




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Patents and Intellectual Property Rights
    Operations
   14




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Backlog
   Governmental Regulation
   Seasonality
  15




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Employees
  Available Information
 www.endwave.com
 http://www.sec.gov
 
 Item 1A. Risk Factors
 You should consider carefully the following risk factors as well as other information in this
report before investing in any of our securities. If any of the following risks actually occur, our
business, operating results and financial condition could be adversely affected. This could cause
the market price of our common stock to decline, and you may lose all or part of your investment.
 Risks Relating to Our Business
 We have had a history of losses and may not be profitable in the future.
  We depend on a small number of key customers in the telecommunications industry for a large portion
of our revenues. If we lose any of our major customers, particularly Nera or Nokia Siemens
Networks, or there is any material reduction in orders for our products from any of these
customers, our business, financial condition and results of operations would be adversely affected.
  16




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We depend on the telecommunications industry for most of our revenues. If this industry suffers
another downturn or fails to grow as anticipated, our revenues could decrease and our profitability
could suffer. In addition, consolidation in this industry could result in delays or cancellations
of orders for our products, adversely impacting our results of operations.
    Implementing our acquisition strategy could result in dilution to our stockholders and operating
difficulties leading to a decline in revenues and operating profit.
  
    
    diversion of our management from the operation of our core business;
    
    assimilating the acquired operations and personnel;
    
    integrating information technology and reporting systems;
    
    retention of key personnel;
    
    retention of acquired customers; and
    
    implementation of controls, procedures and policies in the acquired business.
 17




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Our future success depends in part on our ability to further penetrate into new markets, such as
defense electronics and homeland security, and we may be unable to do so.
  Our operating results may be adversely affected by substantial quarterly and annual fluctuations
and market downturns.
  Because of the shortages of some components and our dependence on single source suppliers and
custom components, we may be unable to obtain an adequate supply of components of sufficient
quality in a timely fashion, or we may be required to pay higher prices or to purchase components
of lesser quality.
   
    
    semiconductor devices;
    
    application-specific monolithic microwave integrated circuits;
    
    voltage-controlled oscillators;
    
    voltage regulators;
    
    unusual or low usage components;
    
    surface mount components compliant with the EUs Restriction of Hazardous
Substances, or RoHS, Directive;
    
    high-frequency circuit boards;
 18




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
    
    custom connectors; and
    
    yttrium iron garnet components.
  Our cash requirements will be impacted by our need to increase inventories.
  We are exposed to fluctuations in the market values of our investment portfolio.
  We rely heavily on a Thailand facility of HANA Microelectronics Co., Ltd., a contract manufacturer,
to produce our RF modules. If HANA is unable to produce these modules in sufficient quantities or
with adequate quality, or it chooses to terminate our manufacturing arrangement, we will be forced
to find an alternative manufacturer and may not be able to fulfill our production commitments to
our customers, which could cause sales to be delayed or lost and could harm our reputation.
  19




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We rely on the semiconductor foundry operations of Northrop Grumman Space Technology, Inc.
(formerly known as Velocium) and other third-party semiconductor foundries to manufacture the
semiconductors contained in our products. The loss of our relationship with any of these foundries,
particularly Northrop Grumman Space Technology, Inc., without adequate notice would adversely
impact our ability to fill customer orders and could damage our customer relationships.
   Our products may contain component, manufacturing or design defects or may not meet our customers
performance criteria, which could cause us to incur significant repair expenses, harm our customer
relationships and industry reputation, and reduce our revenues and profitability.
  We depend on our key personnel. Skilled personnel in our industry can be in short supply. If we are
unable to retain our current personnel or hire additional qualified personnel, our ability to
develop and successfully market our products would be harmed.
   20




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Competitive conditions often require us to reduce prices and, as a result, we need to reduce our
costs in order to be profitable.
  The length of our sales cycle requires us to invest substantial financial and technical resources
in a potential sale before we know whether the sale will occur. There is no guarantee that the sale
will ever occur and if we are unsuccessful in designing a high-frequency RF module for a particular
generation of a customers products, we may need to wait until the next generation of that product
to sell our products to that particular customer.
  We may not be able to design our products as quickly as our customers require, which could cause us
to lose sales and may harm our reputation.
    21




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We may not be able to manufacture and deliver our products as quickly as our customers require,
which could cause us to lose sales and would harm our reputation.
  
    
    the failure of a supplier to deliver needed components on a timely basis or with
acceptable quality;
    
    lack of sufficient capacity;
    
    poor manufacturing yields;
    
    equipment failures;
    
    manufacturing personnel shortages;
    
    labor disputes;
    
    transportation disruptions;
    
    changes in import/export regulations;
    
    infrastructure failures at the facilities of our offshore contract manufacturer;
    
    natural disasters;
    
    acts of terrorism; and
    
    political instability.
   Though we do have long-term commitments from many of our customers, they are not for fixed
quantities of product. As a result, we must estimate customer demand, and errors in our estimates
could have negative effects on our cash, inventory levels, revenues and results of operations.
  22




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Any failure to protect our intellectual property appropriately could reduce or eliminate any
competitive advantage we have.
     23




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Risks Relating to Our Industry
 Our revenues in the defense electronics and homeland security markets largely depend upon the
funding and implementation decisions of Congress and government agencies. These decisions could
change abruptly and without notice, unexpectedly reducing our revenues from these markets.
  Our failure to compete effectively could reduce our revenues and margins.
   Our failure to comply with any applicable environmental regulations could result in a range of
consequences, including fines, suspension of production, excess inventory, sales limitations and
criminal and civil liabilities.
  Government regulation of the communications industry could limit the growth of the markets that we
serve or could require costly alterations of our current or future products.
  24




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Risks Relating to Ownership of Our Stock
 The market price of our common stock has fluctuated historically and is likely to fluctuate in the
future.
  
    
    our financial performance or the performance of our competitors;
    
    the purchase or sale of common stock, short-selling or transactions by large
stockholders;
    
    technological innovations or other trends or changes in the telecommunication
network, defense electronics or homeland security markets;
    
    successes or failures at significant product evaluations or site
demonstrations;
    
    the introduction of new products by us or our competitors;
    
    acquisitions, strategic alliances or joint ventures involving us or our
competitors;
    
    decisions by major participants in the communications industry not to
purchase products from us or to pursue alternative technologies;
    
    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; and
    
    the low trading volume of our common stock.
  We have a few shareholders that each own a large percentage of our outstanding capital stock and,
as a result of their significant ownership, are able to significantly affect the outcome of matters
requiring stockholder approval.
  25




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Our certificate of incorporation, bylaws and arrangements with executive officers contain
provisions that could delay or prevent a change in control.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  26




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Information Relating to our Common Stock
  High
    
    LowFiscal Year Ended December 31, 2006First Quarter
    
    $
    15.50
    
    
    $
    8.98Second Quarter
    
    $
    17.15
    
    
    $
    10.11Third Quarter
    
    $
    13.90
    
    
    $
    11.36Fourth Quarter
    
    $
    13.75
    
    
    $
    10.38Fiscal Year Ended December 31, 2007First Quarter
    
    $
    13.75
    
    
    $
    10.50Second Quarter
    
    $
    12.86
    
    
    $
    9.50Third Quarter
    
    $
    12.09
    
    
    $
    8.25Fourth Quarter
    
    $
    10.49
    
    
    $
    5.40
  Dividend Policy
  Equity Compensation Plan Information
  Number of SecuritiesNumber of
    
    
    Weighted-
    
    
    Remaining AvailableSecurities to be
    
    
    Average Exercise
    
    
    for IssuanceIssued Upon
    
    
    Price of
    
    
    Under EquityExercise of
    
    
    Outstanding
    
    
    Compensation PlansOutstanding Options,
    
    
    Options,
    
    
    (Excluding SecuritiesWarrants and
    
    
    Warrants and
    
    
    Reflected inPlan Category
    
    Rights(a)
    
    
    Rights(b)
    
    
    Column (a)(c)(1)Equity compensation
plans approved by
security holders
    
    
    2,465,436
    
    
    $
    13.19
    
    
    
    2,128,220
    (2)Equity compensation
plans not approved
By security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    2,465,436
    
    
    $
    13.19
    
    
    
    2,128,220
 
 (1)
    
    Each year on October 17, starting in 2001 and continuing through 2007, the
aggregate number of shares of common stock that may be issued pursuant to
stock awards under the 2000 Employee Stock Purchase Plan was automatically
increased by the lesser of 350,000 shares or 1.5% of the total number of
shares of common stock outstanding on that date or such lesser amount as may
be determined by the Board of Directors(2)
    
    Includes 429,340 shares issuable under the 2000 Employee Stock Purchase Plan. Stock Repurchases
 Maximum DollarTotal Number of Securities
    
    Value of SecuritiesPurchased as Part of
    
    that May Yet BeTotal Number of Securities
    
    Average Price Paid per
    
    Publicly Announced Plans
    
    Purchased UnderPeriod
    
    Purchased
    
    Security
    
    or Programs
    
    the Program12/1/07 - 12/31/07 (1)
    
    
    2,502,247
    
    
    $
    6.83
    
    
    
    
    
    
    
    Total
    
    
    2,502,247
    
    
    $
    6.83
    
    
    
    
    
    
    
    
 
 (1)
    
    On December 24, 2007, we repurchased 2,502,247 shares of our common
stock held by Wood River Partners, L.P. and Wood River Partners
Offshore, Ltd. for $6.83 per share in cash. 27




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Performance Measurement Comparison
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 12/02
    


12/03
    


12/04
    


12/05
    


12/06
    


12/07Endwave
Corporation

    100.00
    


770.68




1,827.23
    


1,233.51
    


1,134.03
    


761.26NASDAQ
Composite


100.00
    

    149.75
    

    164.64
    

    168.60
    

    187.83
    


205.22NASDAQ
Telecommunications
    
    100.00
    

    188.21
    
    
    199.04
    
    
    192.18
    
    
    244.38
    
    
    253.12
 
 *
    
    $100 invested on 12/31/02 in stock or index-including reinvestment of dividends.Fiscal year ending December 31. 
 Item 6. Selected Consolidated Financial Data
 The following selected consolidated financial data should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements and the notes thereto included elsewhere in this report. The
selected consolidated statements of operations data for the fiscal years ended December 31 2007,
2006 and 2005 and the selected consolidated balance sheet data as of December 31, 2007 and 2006 are
derived from the audited consolidated financial statements that are included elsewhere in this
report. The selected consolidated statements of operations data for the fiscal years ended
December 31, 2004 and 2003 and the selected consolidated balance sheet data as of December 31,
2005, 2004 and 2003 are derived from our audited consolidated financial statements not included in
this report. The historical results are not necessarily indicative of the results of operations to
be expected in any future periods.
 Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(In thousands, except per share data)Consolidated Statements of
Operations Data:Revenues
    
    $
    56,476
    
    
    $
    62,226
    
    
    $
    48,735
    
    
    $
    33,162
    
    
    $
    33,847Cost of product revenues
    
    
    41,764
    
    
    
    44,220
    
    
    
    33,586
    
    
    
    22,576
    
    
    
    24,830Other operating expenses
    
    
    23,701
    
    
    
    21,901
    
    
    
    16,799
    
    
    
    16,115
    
    
    
    17,568Loss from operations
    
    
    (8,989
    )
    
    
    (3,895
    )
    
    
    (1,650
    )
    
    
    (5,529
    )
    
    
    (8,551
    )Net loss
    
    $
    (5,401
    )
    
    $
    (1,344
    )
    
    $
    (874
    )
    
    $
    (4,404
    )
    
    $
    (7,910
    )Basic and diluted net loss per share
    
    $
    (0.47
    )
    
    $
    (0.12
    )
    
    $
    (0.08
    )
    
    $
    (0.45
    )
    
    $
    (0.87
    )
 December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(In thousands)Consolidated Balance Sheet Data:Cash, cash equivalents and short-term and
long-term investments
    
    $
    48,957
    
    
    $
    67,587
    
    
    $
    22,415
    
    
    $
    25,137
    
    
    $
    29,298Total assets
    
    
    82,589
    
    
    
    100,653
    
    
    
    53,149
    
    
    
    50,094
    
    
    
    53,074Long-term obligations, less current portion
    
    
    116
    
    
    
    231
    
    
    
    385
    
    
    
    559
    
    
    
    363Total stockholders equity
    
    
    71,848
    
    
    
    89,398
    
    
    
    43,083
    
    
    
    39,064
    
    
    
    41,043
 28




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this report, as well as the
information set forth in the Risk Factors section of this report. In addition to historical
consolidated financial information, this discussion contains forward-looking statements that
involve known and unknown risks and uncertainties, including statements regarding our expectations,
beliefs, intentions or strategies regarding the future. All forward-looking statements included in
this report are based on information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements. Our actual results could differ
materially from those discussed in the forward-looking statements. You are cautioned not to place
undue reliance on these forward-looking statements. In the past, our operating results have
fluctuated and are likely to continue to fluctuate in the future.
 Overview
  Markets and Growth Strategy
 Telecommunications market.
  Defense electronics and homeland security system markets.
   29




---



##### Table of Contents



Growth through acquisitions.
 Seasonality
  Critical Accounting Policies and Estimates
 General
  Revenue Recognition
  30




---



##### Table of Contents



Allowance for Doubtful Accounts
  Warranty Reserves
  Inventory Valuation
  Stock-Based Compensation
    31




---



##### Table of Contents



Deferred Taxes
  Long-Lived Assets
  Business Combinations
   32




---



##### Table of Contents



Results of Operations
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Revenues:Product revenues
    
    $
    55,611
    
    
    $
    60,956
    
    
    $
    47,119Development fees
    
    
    865
    
    
    
    1,270
    
    
    
    1,616Total revenues
    
    
    56,476
    
    
    
    62,226
    
    
    
    48,735Costs and expenses:Cost of product revenues
    
    
    41,216
    
    
    
    43,771
    
    
    
    33,134Cost of product revenues,
amortization of intangible assets
    
    
    548
    
    
    
    449
    
    
    
    452Research and development
    
    
    10,707
    
    
    
    8,856
    
    
    
    6,488Selling, general and administrative
    
    
    12,463
    
    
    
    12,689
    
    
    
    9,327Transaction costs
    
    
    
    
    
    
    200
    
    
    
    851Amortization of intangible assets
    
    
    531
    
    
    
    156
    
    
    
    179Restructuring charges, net
    
    
    
    
    
    
    
    
    
    
    (46
    )Total costs and expenses
    
    
    65,465
    
    
    
    66,121
    
    
    
    50,385Loss from operations
    
    
    (8,989
    )
    
    
    (3,895
    )
    
    
    (1,650
    )Interest and other income, net
    
    
    3,590
    
    
    
    2,648
    
    
    
    776Loss before provision for income taxes
    
    
    (5,399
    )
    
    
    (1,247
    )
    
    
    (874
    )Provision for income taxes
    
    
    2
    
    
    
    97
    
    
    
    Net loss
    
    $
    (5,401
    )
    
    $
    (1,344
    )
    
    $
    (874
    )
 Year Ended December 31,2007
    
    2006
    
    2005(As a percentage of total revenues)Revenues:Product revenues
    
    
    98.5
    %
    
    
    98.0
    %
    
    
    96.7
    %Development fees
    
    
    1.5
    
    
    
    2.0
    
    
    
    3.3Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Costs and expenses:Cost of product revenues
    
    
    73.0
    
    
    
    70.3
    
    
    
    68.0Cost of product revenues,
amortization of intangible assets
    
    
    1.0
    
    
    
    0.7
    
    
    
    0.9Research and development
    
    
    19.0
    
    
    
    14.2
    
    
    
    13.3Selling, general and administrative
    
    
    22.1
    
    
    
    20.4
    
    
    
    19.1Transaction costs
    
    
    
    
    
    
    0.3
    
    
    
    1.7Amortization of intangible assets
    
    
    0.9
    
    
    
    0.3
    
    
    
    0.5Restructuring charges, net
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Total costs and expenses
    
    
    116.0
    
    
    
    106.3
    
    
    
    103.4Loss from operations
    
    
    (16.0
    )
    
    
    (6.3
    )
    
    
    (3.4
    )Interest and other income, net
    
    
    6.4
    
    
    
    4.3
    
    
    
    1.6Loss before provision for income taxes
    
    
    (9.6
    )
    
    
    (2.0
    )
    
    
    (1.8
    )Provision for income taxes
    
    
    
    
    
    
    0.2
    
    
    
    Net loss
    
    
    (9.6
    )%
    
    
    (2.2
    )%
    
    
    (1.8
    )%
 33




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##### Table of Contents



Results of Operations
 Year ended December 31, 2007 compared to year ended December 31, 2006
 Total revenues
 Year EndedDecember 31,2007
    
    2006
    
    % Change(In thousands)Total revenues
    
    $
    56,476
    
    
    $
    62,226
    
    
    
    (9.2
    )%Product revenues
    
    $
    55,611
    
    
    $
    60,956
    
    
    
    (8.8
    )%Development fees
    
    $
    865
    
    
    $
    1,270
    
    
    
    (31.9
    )%
    Cost of product revenues
 Year Ended December 31,2007
    
    2006
    
    % Change(In thousands)Cost of product revenues
    
    $
    41,216
    
    
    $
    43,771
    
    
    
    (5.8
    )%Percentage of revenues
    
    
    73.0
    %
    
    
    70.3
    %
    34




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Research and development expenses
 Year Ended December 31,2007
    
    2006
    
    % Change(In thousands)Research and development expenses
    
    $
    10,707
    
    
    $
    8,856
    
    
    
    20.9
    %Percentage of revenues
    
    
    19.0
    %
    
    
    14.2
    %
    Selling, general and administrative expenses
 Year Ended December 31,2007
    
    2006
    
    % Change(In thousands)Selling, general and
administrative
expenses
    
    $
    12,463
    
    
    $
    12,689
    
    
    
    (1.8
    )%Percentage of revenues
    
    
    22.1
    %
    
    
    20.4
    %
    Transaction costs
 Year EndedDecember 31,2007
    
    2006
    
    % Change(In thousands)Transaction costs
    
    $
    
    
    
    $
    200
    
    
    
    (100
    )%
  35




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Amortization of intangible assets
 Year EndedDecember 31,2007
    
    2006
    
    % Change(In thousands)Cost of product revenues,
amortization
of intangible assets
    
    $
    548
    
    
    $
    449
    
    
    
    22.0
    %Amortization of intangible assets
    
    $
    531
    
    
    $
    156
    
    
    
    240.4
    %
     Interest and other income, net
 Year EndedDecember 31,2007
    
    2006
    
    % Change(In thousands)Interest and other income, net
    
    $
    3,590
    
    
    $
    2,648
    
    
    
    35.6
    %
   36




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Year ended December 31, 2006 compared to year ended December 31, 2005
 Total revenues
 Year EndedDecember 31,2006
    
    2005
    
    % Change(In thousands)Total revenues
    
    $
    62,226
    
    
    $
    48,735
    
    
    
    27.7
    %Product revenues
    
    $
    60,956
    
    
    $
    47,119
    
    
    
    29.4
    %Development fees
    
    $
    1,270
    
    
    $
    1,616
    
    
    
    (21.4
    )%
    Cost of product revenues
 Year Ended December 31,2006
    
    2005
    
    % Change(In thousands)Cost of product revenues
    
    $
    43,771
    
    
    $
    33,134
    
    
    
    32.1
    %Percentage of revenues
    
    
    70.3
    %
    
    
    68.0
    %
  37




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##### Table of Contents



Research and development expenses
 Year Ended December 31,2006
    
    2005
    
    % Change(In thousands)Research and development expenses
    
    $
    8,856
    
    
    $
    6,488
    
    
    
    36.5
    %Percentage of revenues
    
    
    14.2
    %
    
    
    13.3
    %
  Selling, general and administrative expenses
 Year Ended December 31,2006
    
    2005
    
    % Change(In thousands)Selling, general and
administrative
expenses
    
    $
    12,689
    
    
    $
    9,327
    
    
    
    36.0
    %Percentage of revenues
    
    
    20.4
    %
    
    
    19.1
    %
  Transaction costs
 Year EndedDecember 31,2006
    
    2005
    
    % Change(In thousands)Transaction costs
    
    $
    200
    
    
    $
    851
    
    
    
    (76.5
    )%
   Amortization of intangible assets
 Year EndedDecember 31,2006
    
    2005
    
    % Change(In thousands)Cost of product revenues,
amortization
of intangible assets
    
    $
    449
    
    
    $
    452
    
    
    
    (0.7
    )%Amortization of intangible assets
    
    $
    156
    
    
    $
    179
    
    
    
    (12.8
    )%
  38




---



##### Table of Contents



Restructuring charges, net
 Year EndedDecember 31,2006
    
    2005
    
    % Change(In thousands)Restructuring charges, net
    
    $
    
    
    
    $
    (46
    )
    
    
    (100.0
    %)
  Interest and other income, net
 Year EndedDecember 31,2006
    
    2005
    
    % Change(In thousands)Interest and other income, net
    
    $
    2,648
    
    
    $
    776
    
    
    
    241.2
    %
  Liquidity and Capital Resources
  Year Ended December 31,2007
    
    2006
    
    2005(In thousands)Net cash provided by (used in) operating activities
    
    $
    3,921
    
    
    $
    2,776
    
    
    $
    (7,036
    )Net cash provided by (used in) investing activities
    
    
    24,860
    
    
    
    (29,343
    )
    
    
    5,758Net cash provided by financing activities
    
    
    (15,953
    )
    
    
    44,287
    
    
    
    4,926Cash, cash equivalents, restricted cash,
short-term and long-term investments at end of
period
    
    $
    48,982
    
    
    $
    67,848
    
    
    $
    22,440
 39




---



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40




---



##### Table of Contents



Payments Due by PeriodLess Than 1
    
    
    
    
    
    
    
    
    
    
    More Than 5Total
    
    
    Year
    
    
    1  3 Years
    
    
    3-5 Years
    
    
    Years(In thousands)Contractual Obligations:Capital lease obligations, including interest
    
    $
    67
    
    
    $
    24
    
    
    $
    43
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    2,094
    
    
    
    833
    
    
    
    1,261
    
    
    
    
    
    
    
    Purchase obligations
    
    
    5,536
    
    
    
    5,536
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    7,697
    
    
    $
    6,393
    
    
    $
    1,304
    
    
    $
    
    
    
    $
    
  Other Long-Term Liabilities
  Year Ending December 31,
    
    Deferred Gain(In thousands)2008
    
    $
    1542009
    
    
    77Total
    
    $
    231
 Recent Accounting Pronouncements
    41




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Item 7A. Quantitative
and Qualitative Disclosures about Market Risk
 Quantitative
and Qualitative Disclosures about Market Risk
    42




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    44Consolidated Balance Sheets
    
    
    45Consolidated Statements of Operations
    
    
    46Consolidated Statements of Stockholders Equity
    
    
    47Consolidated Statements of Cash Flows
    
    
    48Notes to Consolidated Financial Statements
    
    
    49
 43




---



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 44




---



##### Table of Contents



ENDWAVE CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2007
    
    
    2006(In thousands, exceptshare and per share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    38,992
    
    
    $
    26,176Short-term investments
    
    
    5,464
    
    
    
    41,411Accounts receivable, net of allowance for doubtful accounts of $67 in
2007 and $131 in 2006
    
    
    9,362
    
    
    
    8,713Inventories
    
    
    12,434
    
    
    
    17,127Other current assets
    
    
    1,168
    
    
    
    640Total current assets
    
    
    67,420
    
    
    
    94,067Long-term investments
    
    
    4,501
    
    
    
    Property and equipment, net
    
    
    2,999
    
    
    
    2,024Other assets
    
    
    212
    
    
    
    110Restricted cash
    
    
    25
    
    
    
    261Goodwill and intangible assets, net
    
    
    7,432
    
    
    
    4,191Total assets
    
    $
    82,589
    
    
    $
    100,653LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,422
    
    
    $
    4,280Accrued warranty
    
    
    2,712
    
    
    
    2,928Accrued compensation
    
    
    2,240
    
    
    
    2,652Other current liabilities
    
    
    2,251
    
    
    
    1,164Total current liabilities
    
    
    10,625
    
    
    
    11,024Other long-term liabilities
    
    
    116
    
    
    
    231Total liabilities
    
    
    10,741
    
    
    
    11,255Commitments and contingencies (Note 10)Stockholders equity:Convertible preferred stock, $0.001 par value; 5,000,000 shares
authorized; 300,000 shares issued and outstanding in 2007 and 2006,
respectively
    
    
    
    
    
    
    Common stock, $0.001 par value; 50,000,000 shares authorized;
9,174,622 and 11,556,946 shares issued and outstanding in 2007 and
2006, respectively
    
    
    9
    
    
    
    12Additional paid-in capital
    
    
    345,038
    
    
    
    357,203Treasury stock, at cost (39,150 shares in 2007 and 2006, respectively)
    
    
    (79
    )
    
    
    (79
    )Accumulated other comprehensive loss
    
    
    (6
    )
    
    
    (25
    )Accumulated deficit
    
    
    (273,114
    )
    
    
    (267,713
    )Total stockholders equity
    
    
    71,848
    
    
    
    89,398Total liabilities and stockholders equity
    
    $
    82,589
    
    
    $
    100,653
  45




---



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ENDWAVE CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands, except shareand per share data)Revenues:Product revenues ($0, $0, and $61 from affiliate, respectively)
    
    $
    55,611
    
    
    $
    60,956
    
    
    $
    47,119Development fees
    
    
    865
    
    
    
    1,270
    
    
    
    1,616Total revenues
    
    
    56,476
    
    
    
    62,226
    
    
    
    48,735Costs and expenses:Cost of product revenues ($0, $0 and $39 related to revenues
from affiliate, respectively)*
    
    
    41,216
    
    
    
    43,771
    
    
    
    33,134Cost of product revenues, amortization of intangible assets
    
    
    548
    
    
    
    449
    
    
    
    452Research and development*
    
    
    10,707
    
    
    
    8,856
    
    
    
    6,488Selling, general and administrative*
    
    
    12,463
    
    
    
    12,689
    
    
    
    9,327Transaction costs
    
    
    
    
    
    
    200
    
    
    
    851Amortization of intangible assets
    
    
    531
    
    
    
    156
    
    
    
    179Restructuring charges, net
    
    
    
    
    
    
    
    
    
    
    (46
    )Total costs and expenses
    
    
    65,465
    
    
    
    66,121
    
    
    
    50,385Loss from operations
    
    
    (8,989
    )
    
    
    (3,895
    )
    
    
    (1,650
    )Interest and other income, net
    
    
    3,590
    
    
    
    2,648
    
    
    
    776Interest expense
    
    
    
    
    
    
    
    
    
    
    Loss before provision for income taxes
    
    
    (5,399
    )
    
    
    (1,247
    )
    
    
    (874
    )Provision for income taxes
    
    
    2
    
    
    
    97
    
    
    
    Net loss
    
    $
    (5,401
    )
    
    $
    (1,344
    )
    
    $
    (874
    )Basic and diluted net loss per share
    
    $
    (0.47
    )
    
    $
    (0.12
    )
    
    $
    (0.08
    )Shares used in computing basic and diluted net loss per share
    
    
    11,563,716
    
    
    
    11,429,860
    
    
    
    10,891,431
 
 *
    
    Includes the following amounts related to stock-based compensation: Cost of product revenues
    
    $
    661
    
    
    $
    435
    
    
    $
    Research and development
    
    
    845
    
    
    
    540
    
    
    
    Selling, general and administrative
    
    
    2,608
    
    
    
    2,337
    
    
    
    
  46




---



##### Table of Contents



ENDWAVE CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands, except for share data)
 AccumulatedShares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    OtherShares of
    
    
    Preferred
    
    
    Common
    
    
    Common
    
    
    Paid-In
    
    
    Treasury
    
    
    Comprehensive
    
    
    AccumulatedPreferred Stock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalBalance as of December 31, 2004
    
    
    
    
    
    
    
    
    
    
    10,499,944
    
    
    $
    10
    
    
    $
    304,658
    
    
    $
    (79
    )
    
    $
    (30
    )
    
    $
    (265,495
    )
    
    $
    39,064Change in unrealized loss on
short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    (33
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (874
    )
    
    
    (874
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (907
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    793,444
    
    
    
    1
    
    
    
    4,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,340Issuance of common stock under
employee stock purchase plan
and other
    
    
    
    
    
    
    
    
    
    
    65,428
    
    
    
    
    
    
    
    586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    586Balance as of December 31, 2005
    
    
    
    
    
    
    
    
    
    
    11,358,816
    
    
    
    11
    
    
    
    309,583
    
    
    
    (79
    )
    
    
    (63
    )
    
    
    (266,369
    )
    
    
    43,083Change in unrealized gain on
short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    38Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,344
    )
    
    
    (1,344
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,306
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    120,395
    
    
    
    1
    
    
    
    428
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    429Issuance of common stock under
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    77,735
    
    
    
    
    
    
    
    751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    751Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,321Tax benefit from employee
stock transactions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Issuance of preferred stock
and warrant, net of issuance
of $1,927
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,107Balance as of December 31, 2006
    
    
    300,000
    
    
    
    
    
    
    
    11,556,946
    
    
    
    12
    
    
    
    357,203
    
    
    
    (79
    )
    
    
    (25
    )
    
    
    (267,713
    )
    
    
    89,398Change in unrealized gain on
short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    31Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,401
    )
    
    
    (5,401
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,382
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    24,685
    
    
    
    
    
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Repurchase and retirement of
common stock
    
    
    
    
    
    
    
    
    
    
    . (2,504,847
    )
    
    
    (3
    )
    
    
    (17,202
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,205
    )Issuance of common stock under
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    97,838
    
    
    
    
    
    
    
    766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    766Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,141Issuance costs from the sale
of preferred stock and
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Balance as of December 31, 2007
    
    
    300,000
    
    
    $
    
    
    
    
    9,174,622
    
    
    $
    9
    
    
    $
    345,038
    
    
    $
    (79
    )
    
    $
    (6
    )
    
    $
    (273,114
    )
    
    $
    71,848
  47




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##### Table of Contents



ENDWAVE CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Operating activities:Net loss
    
    $
    (5,401
    )
    
    $
    (1,344
    )
    
    $
    (874
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation
    
    
    970
    
    
    
    858
    
    
    
    1,465Stock compensation expense
    
    
    4,114
    
    
    
    3,312
    
    
    
    Restructuring charge, net
    
    
    
    
    
    
    
    
    
    
    (46
    )Tax benefit from employee stock transactions
    
    
    
    
    
    
    13
    
    
    
    Amortization of intangible assets
    
    
    1,079
    
    
    
    605
    
    
    
    631Amortization of investments
    
    
    1
    
    
    
    55
    
    
    
    148Loss (gain) on the sale of land and equipment
    
    
    4
    
    
    
    77
    
    
    
    (159
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    67
    
    
    
    1,774
    
    
    
    (1,799
    )Inventories
    
    
    5,841
    
    
    
    (3,670
    )
    
    
    (5,582
    )Other assets
    
    
    (355
    )
    
    
    (93
    )
    
    
    (55
    )Accounts payable
    
    
    (939
    )
    
    
    1,326
    
    
    
    (633
    )Accrued warranty
    
    
    (374
    )
    
    
    (329
    )
    
    
    (1,231
    )Accrued compensation, restructuring and other current and long term liabilities
    
    
    (1,086
    )
    
    
    192
    
    
    
    1,099Net cash provided by (used in) operating activities
    
    
    3,921
    
    
    
    2,776
    
    
    
    (7,036
    )Investing activities:Cash paid in business combinations
    
    
    (5,771
    )
    
    
    
    
    
    
    (20
    )Purchases of property and equipment
    
    
    (1,092
    )
    
    
    (1,650
    )
    
    
    (416
    )Proceeds on sale of property and equipment
    
    
    11
    
    
    
    12
    
    
    
    30Change in restricted cash
    
    
    236
    
    
    
    (236
    )
    
    
    (25
    )Purchases of investments
    
    
    (57,756
    )
    
    
    (36,319
    )
    
    
    (14,528
    )Proceeds on maturities of short-term investments
    
    
    89,232
    
    
    
    8,850
    
    
    
    20,717Net cash provided by (used in) investing activities
    
    
    24,860
    
    
    
    (29,343
    )
    
    
    5,758Financing activities:Proceeds from the sale of Series B preferred stock and warrants, net of issuance costs
    
    
    (15
    )
    
    
    43,107
    
    
    
    Common stock repurchased
    
    
    (16,849
    )
    
    
    
    
    
    
    Proceeds from exercises of stock options
    
    
    145
    
    
    
    429
    
    
    
    4,340Proceeds from issuance of common stock
    
    
    766
    
    
    
    751
    
    
    
    586Net cash provided by (used in) financing activities
    
    
    (15,953
    )
    
    
    44,287
    
    
    
    4,926Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (12
    )
    
    
    
    
    
    
    Net increase in cash and cash equivalents
    
    
    12,816
    
    
    
    17,720
    
    
    
    3,648Cash and cash equivalents at beginning of year
    
    
    26,176
    
    
    
    8,456
    
    
    
    4,808Cash and cash equivalents at end of year
    
    $
    38,992
    
    
    $
    26,176
    
    
    $
    8,456Supplemental disclosure of cash flow information:Non-cash transactions:Fixed assets acquired under capital lease
    
    $
    66
    
    
    $
    
    
    
    $
    Change in unrealized gain (loss) on investments
    
    $
    31
    
    
    $
    38
    
    
    $
    (33
    )Capitalized stock-based compensation
    
    $
    27
    
    
    $
    9
    
    
    $
    
  48




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##### Table of Contents



ENDWAVE CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.  The Company
  
    
    integrated transceivers  combinations of electronic devices that combine both
the transmit and receive functions necessary for a bi-directional radio link;
    
    amplifiers  electronic devices used to increase the amplitude and power of an
electronic signal;
    
    synthesizers  electronic devices that can be used to generate several different
radio frequency signals from a single source;
    
    oscillators  electronic devices that generate radio frequency signals at a fixed
frequency;
    
    up and down converters  electronic devices that shift the center frequency of a
radio signal without altering the signals data modulation;
    
    frequency multipliers  electronic devices that increase the frequency of a radio
signal in integer multiples; and
    
    microwave switch arrays  electronic devices that can switch the routing of a
radio signal.
 2.  Summary of Significant Accounting Policies
 Basis of Consolidation
  Use of Estimates
  Revenue Recognition
  49




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##### Table of Contents



Warranty
    2007
    
    
    2006(In thousands)Balance at January 1
    
    $
    2,928
    
    
    $
    3,257Warranties accrued
    
    
    816
    
    
    
    2,150Warranties settled or reversed
    
    
    (1,032
    )
    
    
    (2,479
    )Balance at December 31
    
    $
    2,712
    
    
    $
    2,928
 Allowance for Doubtful Accounts
  Cash Equivalents and Short-Term Investments
   Restricted Cash
  50




---



##### Table of Contents



Inventory Valuation
  Property and Equipment
  DepreciableLifeSoftware
    
    3 yearsLeasehold improvements
    
    2 to 5 yearsMachinery and equipment
    
    5 to 7 years
 Goodwill and Intangible Assets
  Impairment of Long-Lived Assets
   51




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##### Table of Contents



Income Taxes
  Accounting for Uncertainty in
Income Taxesan interpretation of FASB Statement No. 109, Accounting for Income Taxes,
 Restructuring Charges
  Stock-Based Compensation
     Research and Development Expenses
  52




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##### Table of Contents



Concentration of Risk
         Fair Value of Financial Instruments
  53




---



##### Table of Contents



December 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Investments:United States government agency
    
    $
    1,496
    
    
    $
    4
    
    
    $
    
    
    
    $
    1,500Corporate securities
    
    
    8,463
    
    
    
    8
    
    
    
    (6
    )
    
    
    8,465Total
    
    $
    9,959
    
    
    $
    12
    
    
    $
    (6
    )
    
    $
    9,965Cash equivalents:Commercial paper
    
    $
    7,195
    
    
    $
    
    
    
    $
    
    
    
    $
    7,195
 December 31, 2006Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Short-term investments:United States government agencies
    
    $
    2,000
    
    
    $
    
    
    
    $
    (11
    )
    
    $
    1,989Corporate securities
    
    
    3,871
    
    
    
    
    
    
    
    (9
    )
    
    
    3,862Obligations of states and political subdivisions
    
    
    29,750
    
    
    
    
    
    
    
    
    
    
    
    29,750Commercial paper
    
    
    5,815
    
    
    
    
    
    
    
    (5
    )
    
    $
    5,810Total
    
    $
    41,436
    
    
    $
    
    
    
    $
    (25
    )
    
    $
    41,411Cash equivalents:Commercial paper
    
    $
    21,799
    
    
    $
    
    
    
    $
    
    
    
    $
    21,799
     Foreign Currency Transactions
  54




---



##### Table of Contents



Comprehensive Income (Loss)
   December 31,2007
    
    
    2006Accumulated other comprehensive lossForeign currency translation adjustments
    
    $
    (12
    )
    
    $
    Unrealized gain (loss) on investments
    
    
    6
    
    
    
    (25
    )Total
    
    $
    (6
    )
    
    $
    (25
    )
 Net Loss Per Share
     Advertising Costs
  55




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##### Table of Contents



Recent Accounting Pronouncements
      3.  Goodwill and Other Intangible Assets
 Goodwill
  56




---



##### Table of Contents



Intangible Assets
    December 31, 2007Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountDeveloped technology
    
    $
    3,130
    
    
    $
    (1,636
    )
    
    $
    1,494Tradename
    
    
    1,290
    
    
    
    (27
    )
    
    
    1,263Customer relationships
    
    
    1,680
    
    
    
    (633
    )
    
    
    1,047Customer backlog
    
    
    700
    
    
    
    (327
    )
    
    
    373Non-compete agreement
    
    
    370
    
    
    
    (61
    )
    
    
    309Total intangible assets
    
    $
    7,170
    
    
    $
    (2,684
    )
    
    $
    4,486
 December 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountDeveloped technology
    
    $
    2,250
    
    
    $
    (1,088
    )
    
    $
    1,162Tradename
    
    
    1,060
    
    
    
    
    
    
    
    1,060Customer relationships
    
    
    780
    
    
    
    (377
    )
    
    
    403Customer backlog
    
    
    140
    
    
    
    (140
    )
    
    
    Intangible assets
    
    $
    4,230
    
    
    $
    (1,605
    )
    
    $
    2,625
    Years Ending December 31,2008
    
    $
    1,3142009
    
    
    8742010
    
    
    4282011
    
    
    366Thereafter
    
    
    444Total
    
    $
    3,426
 57




---



##### Table of Contents



4. Inventories
  2007
    
    
    2006Raw materials
    
    $
    9,630
    
    
    $
    10,174Work in process
    
    
    1,365
    
    
    
    1,829Finished goods
    
    
    1,439
    
    
    
    5,124Total
    
    $
    12,434
    
    
    $
    17,127
 5. Property and Equipment
  2007
    
    
    2006Machinery and equipment
    
    $
    13,048
    
    
    $
    11,773Software
    
    
    941
    
    
    
    702Leasehold improvements
    
    
    522
    
    
    
    35014,511
    
    
    
    12,825Less accumulated depreciation
    
    
    (11,512
    )
    
    
    (10,801
    )Property and equipment, net
    
    $
    2,999
    
    
    $
    2,024
    6. Restructuring Charges, Net and Loss on Sublease
  Severance Benefits(In thousands)Accrual at December 31, 2004
    
    $
    193Cash payments
    
    
    (147
    )Restructuring charge adjustment
    
    
    (46
    )Accrual at December 31, 2005
    
    $
    
 58




---



##### Table of Contents



7. Segment Disclosures
  2007
    
    
    2006
    
    
    2005United States
    
    $
    10,387
    
    
    
    18.4
    %
    
    $
    9,812
    
    
    
    15.8
    %
    
    $
    8,917
    
    
    
    18.3
    %Finland
    
    
    29,573
    
    
    
    52.4
    %
    
    
    26,332
    
    
    
    42.3
    %
    
    
    23,717
    
    
    
    48.8
    %Italy
    
    
    4,091
    
    
    
    7.2
    %
    
    
    14,074
    
    
    
    22.6
    %
    
    
    7,754
    
    
    
    15.9
    %Norway
    
    
    3,793
    
    
    
    6.7
    %
    
    
    7,777
    
    
    
    12.5
    %
    
    
    3,762
    
    
    
    7.7
    %Rest of the world
    
    
    8,632
    
    
    
    15.3
    %
    
    
    4,231
    
    
    
    6.8
    %
    
    
    4,585
    
    
    
    9.3
    %Total
    
    $
    56,476
    
    
    
    100.0
    %
    
    $
    62,226
    
    
    
    100.0
    %
    
    $
    48,735
    
    
    
    100.0
    %
   8. Stock-Based Compensation
 Prior to the Adoption of SFAS No. 123(R)
   2005Net loss, as reported
    
    $
    (874
    )Add: Stock-based employee compensation
expense included in reported net
loss
    
    
    Deduct: Total stock-based employee
compensation expense determined under
fair value based method for stock
option awards and employee stock
purchase rights
    
    
    (7,969
    )Net loss, pro forma
    
    $
    (8,843
    )Basic and diluted net loss per share, as
reported
    
    $
    (0.08
    )Basic and diluted net loss per share,
pro forma
    
    $
    (0.81
    )
  59




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##### Table of Contents



Impact of the Adoption of SFAS No. 123(R)
  Year Ended
    
    Year EndedDecember 31, 2007
    
    December 31, 2006Stock-based compensation expense by type of award:Employee stock options
    
    $
    3,653
    
    
    $
    2,900Employee stock purchase plan
    
    
    488
    
    
    
    421Amounts capitalized as inventory
    
    
    (27
    )
    
    
    (9
    )Total stock-based compensation
    
    
    4,114
    
    
    
    3,312Tax effect on stock-based compensation
    
    
    
    
    
    
    Total stock-based compensation expense
    
    $
    4,114
    
    
    $
    3,312Impact on basic and diluted net loss per share
    
    $
    (0.36
    )
    
    $
    (0.29
    )
    Valuation Assumptions
   60




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##### Table of Contents



Year Ended December 31,2007
    
    2006
    
    2005Stock Option PlansExpected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected stock price volatility
    
    
    70
    %
    
    
    79
    %
    
    
    78
    %Risk free interest rate
    
    
    3.88% - 4.80
    %
    
    
    4.52% - 5.45
    %
    
    
    4.04
    %Expected life of options in years
    
    4 years
    
    5 years
    
    5 years
  Year Ended December 31,2007
    
    2006
    
    2005Employee Stock Purchase PlanExpected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected stock price volatility
    
    
    51
    %
    
    
    51
    %
    
    
    72
    %Risk free interest rate
    
    
    3.97% - 4.67
    %
    
    
    4.74% - 5.15
    %
    
    
    3.58
    %Expected life of options in years
    
    1.2 years
    
    1.3 years
    
    0.5 years
    9. Stockholders Equity
 Preferred Stock and Warrant Purchase Agreement
    61




---



##### Table of Contents



Common Stock
   62




---



##### Table of Contents



Shareholder Rights Plan
     Employee Stock Purchase Plan
  Stock Option Plans
    63




---



##### Table of Contents



WeightedWeighted
    
    Average
    
    AggregateAverage
    
    Remaining
    
    IntrinsicNumber of
    
    Exercise
    
    Contractual
    
    ValueShares
    
    Price
    
    Term (Years)
    
    (In thousands)Outstanding at December 31, 2004
    
    
    1,588,360
    
    
    $
    6.55Options granted
    
    
    561,650
    
    
    
    23.21Options exercised
    
    
    (793,444
    )
    
    
    5.47Options cancelled
    
    
    (63,689
    )
    
    
    12.18Outstanding at December 31, 2005
    
    
    1,292,877
    
    
    
    14.19Options granted
    
    
    608,300
    
    
    
    10.25Options exercised
    
    
    (120,395
    )
    
    
    3.55Options cancelled
    
    
    (48,113
    )
    
    
    12.63Outstanding at December 31, 2006
    
    
    1,732,669
    
    
    
    13.59Options granted
    
    
    796,150
    
    
    
    12.10Options exercised
    
    
    (24,685
    )
    
    
    5.88Options cancelled
    
    
    (38,698
    )
    
    
    13.46Outstanding at December 31, 2007
    
    
    2,465,436
    
    
    $
    13.19
    
    
    
    7.77
    
    
    $
    948,659Options vested and exercisable
and expected to be exercisable
at December 31, 2007
    
    
    2,262,266
    
    
    $
    13.33
    
    
    
    7.67
    
    
    $
    948,612Options vested and exercisable
at December 31, 2007
    
    
    1,368,825
    
    
    $
    14.53
    
    
    
    7.08
    
    
    $
    946,984
  64




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##### Table of Contents



Options Vested and ExercisableOptions Outstanding at December 31, 2007
    
    At December 31, 2007Weighted-AverageWeighted-Average
    
    Remaining
    
    
    
    
    
    Weighted-AverageRange of Exercise Price
    
    Shares
    
    Exercise Price
    
    Contractual Life
    
    Shares
    
    Exercise Price$0.76 - $9.32
    
    
    337,110
    
    
    $
    5.30
    
    
    
    6.68
    
    
    
    233,653
    
    
    $
    3.68$9.56 - $9.75
    
    
    34,332
    
    
    $
    9.64
    
    
    
    7.75
    
    
    
    18,773
    
    
    $
    9.69$9.77 - $9.77
    
    
    360,077
    
    
    $
    9.77
    
    
    
    8.10
    
    
    
    154,878
    
    
    $
    9.77$9.90 - $10.20
    
    
    321,627
    
    
    $
    10.04
    
    
    
    8.05
    
    
    
    136,109
    
    
    $
    10.14$10.22 - $11.58
    
    
    251,381
    
    
    $
    10.38
    
    
    
    6.65
    
    
    
    207,528
    
    
    $
    10.40$11.75 - $12.90
    
    
    161,937
    
    
    $
    12.45
    
    
    
    7.82
    
    
    
    74,995
    
    
    $
    12.47$13.23 - $13.23
    
    
    521,329
    
    
    $
    13.23
    
    
    
    9.12
    
    
    
    102,603
    
    
    $
    13.23$15.14 - $21.47
    
    
    308,293
    
    
    $
    19.65
    
    
    
    7.18
    
    
    
    270,936
    
    
    $
    20.06$24.00 - $45.80
    
    
    159,350
    
    
    $
    34.58
    
    
    
    7.56
    
    
    
    159,350
    
    
    $
    34.58$56.00 - $56.00
    
    
    10,000
    
    
    $
    56.00
    
    
    
    2.57
    
    
    
    10,000
    
    
    $
    56.002,465,436
    
    
    $
    13.19
    
    
    
    7.77
    
    
    
    1,368,825
    
    
    $
    14.53
  10. Commitments and Contingencies
 Commitments
    Years Ending December 31,2008
    
    $
    8332009
    
    
    5842010
    
    
    4092011
    
    
    268Total
    
    $
    2,094
 65




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##### Table of Contents



Years Ending December 31,2008
    
    $
    242009
    
    
    242010
    
    
    162011
    
    
    367Less amount representing interest
    
    
    8Present value of future minimum future lease payments
    
    
    59Less current portion
    
    
    19Long-term portion
    
    $
    40
  Purchase Obligations
  Contingencies
  11. Related Party Transactions
   66




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##### Table of Contents



12. Income Taxes
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Current tax expense:Federal
    
    $
    
    
    
    $
    90
    
    
    $
    State
    
    
    2
    
    
    
    7
    
    
    
    $
    2
    
    
    $
    97
    
    
    $
    Deferred tax benefit:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
      2007
    
    
    2006Deferred tax assets:Net operating loss carryforwards
    
    $
    70,800
    
    
    $
    69,600Net research credit
    
    
    1,800
    
    
    
    3,200Capitalized research and
development
    
    
    
    
    
    
    200Other
    
    
    6,800
    
    
    
    6,300Total deferred tax assets
    
    
    79,400
    
    
    
    79,300Valuation allowance for deferred tax
Assets
    
    
    (78,600
    )
    
    
    (78,200
    )Deferred tax assets
    
    
    800
    
    
    
    1,100Deferred tax liabilities:Intangible assets
    
    
    (800
    )
    
    
    (1,100
    )Net deferred tax assets
(liabilities)
    
    $
    
    
    
    $
    
  67




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Benefit from income taxes at statutory rate
    
    $
    (1,883
    )
    
    $
    (437
    )
    
    $
    (306
    )State taxes
    
    
    2
    
    
    
    7
    
    
    
    Losses for which no benefit is taken
    
    
    1,583
    
    
    
    70
    
    
    
    285Alternative minimum tax
    
    
    
    
    
    
    90
    
    
    
    Non-deductible stock compensation
    
    
    272
    
    
    
    337
    
    
    
    Other
    
    
    28
    
    
    
    30
    
    
    
    21Total
    
    $
    2
    
    
    $
    97
    
    
    $
    
     2007 Total(In thousands)Balance at January 1
    
    $
    2,544Increases related to current year tax positions
    
    
    73Expiration of the statute of limitations for the assessment of taxes
    
    
    Other
    
    
    Balance at December 31
    
    $
    2,617
 13. 401(k) Plan
  68




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##### Table of Contents



14. Business Combinations
       Tangible assets acquired
    
    $
    3,092Liabilities assumed
    
    
    (473
    )Core/developed technology
    
    
    880Tradename
    
    
    230Customer relationships
    
    
    900Customer backlog
    
    
    560Non-compete agreement
    
    
    370Goodwill
    
    
    1,380Total purchase price
    
    $
    6,939
  Pro forma financial information
  69




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Years Ended December 31,2007
    
    2006
    
    2005Total revenues
    
    $
    57,731
    
    
    $
    67,750
    
    
    $
    52,853Net loss
    
    
    (5,273
    )
    
    
    (1,269
    )
    
    
    (661
    )Net loss per share  basic and
diluted
    
    
    (0.46
    )
    
    
    (0.11
    )
    
    
    (0.06
    )
  15. Quarterly Financial Information (unaudited)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(In thousands, except per share data)2007:Total revenues
    
    $
    14,751
    
    
    $
    13,539
    
    
    $
    13,794
    
    
    $
    14,392Cost of product revenues
    
    
    10,733
    
    
    
    10,345
    
    
    
    10,089
    
    
    
    10,597Net loss
    
    
    (780
    )
    
    
    (1,907
    )
    
    
    (1,655
    )
    
    
    (1,059
    )Basic and diluted net loss per share
    
    $
    (0.07
    )
    
    $
    (0.16
    )
    
    $
    (0.14
    )
    
    $
    (0.09
    )2006:Total revenues
    
    $
    13,746
    
    
    $
    16,326
    
    
    $
    18,836
    
    
    $
    13,318Cost of product revenues
    
    
    10,109
    
    
    
    11,545
    
    
    
    12,928
    
    
    
    9,638Net income (loss)
    
    
    (1,178
    )
    
    
    (207
    )
    
    
    911
    
    
    
    (870
    )Basic net income (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.02
    )
    
    $
    0.08
    
    
    $
    (0.08
    )Diluted net income (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.02
    )
    
    $
    0.06
    
    
    $
    (0.08
    )
 16. Subsequent Events
  70




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control Over Financial Reporting
     Changes in Internal Controls Over Financial Reporting
  71




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        /s/  Burr, Pilger & Mayer LLP 
 72




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##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Name
    
    Age
    
    PositionEdward A. Keible, Jr.
    
    
    64
    
    
    Chief Executive Officer, President and DirectorJohn J. Mikulsky
    
    
    62
    
    
    Chief Operating Officer and Executive Vice PresidentBrett W. Wallace
    
    
    43
    
    
    Chief Financial Officer, Executive Vice President and SecretaryDavid M. Hall
    
    
    59
    
    
    Senior Vice President and General Manager, Defense and SecuritySteven F. Layton
    
    
    53
    
    
    Senior Vice President and General Manager, TelecomDaniel P. Teuthorn
    
    
    44
    
    
    Senior Vice President and General Manager, TechnologyEdward C.V. Winn(1)(2)(3)
    
    
    69
    
    
    Chairman of the Board of DirectorsJoseph J. Lazzara(1)(2)(3)
    
    
    56
    
    
    DirectorJohn F. McGrath, Jr.(1)
    
    
    43
    
    
    DirectorWade Meyercord(2)(3)
    
    
    67
    
    
    DirectorEric Stonestrom(2)(3)
    
    
    46
    
    
    Director
 
 (1)
    
    Member of the Audit Committee(2)
    
    Member of the Nominating and Governance Committee(3)
    
    Member of the Compensation Committee Edward A. Keible, Jr.
 John J. Mikulsky
 Brett W. Wallace
 73




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##### Table of Contents



David M. Hall
 Steven F. Layton
 Daniel P. Teuthorn
 Edward C.V. Winn
 Joseph J. Lazzara
 74




---



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John F. McGrath, Jr.
 Wade Meyercord
 Eric D. Stonestrom
   Section 16(a) Beneficial Ownership Reporting Compliance
   75




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##### Table of Contents



Committees of the Board of Directors
  Audit Committee
   Compensation Committee
   
    
    developing compensation policies that will attract and retain the highest quality executives, that will
clearly articulate the relationship of corporate performance to executive compensation and will reward executives
for Endwave's progress;
    
    proposing to the Board of Directors the adoption, amendment and termination of
stock option plans, stock appreciation rights plans, pension and profit sharing plan, stock
bonus plans, stock purchase
 76




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##### Table of Contents



plans, bonus plans, deferred compensation plans and other similar plans;
    
granting rights, participation and interests in such
plans to eligible participants, subject in certain cases to ratification by the Board;
    
reviewing and approving such other compensation matters as may be necessary or
appropriate in view of the Compensation Committee's overall responsibility; and
    
reviewing with management our Compensation Discussion and Analysis
and considering whether to recommend that it be included in proxy statements and other filings
  
    
    the amount of bonus to be awarded to each executive officer in
respect of the prior years performance;
    
whether to raise, lower or maintain the executive officers base salary for the current year;
    
the bonus targets to be set for the executive officers for the current year; and
    
option grants, if any, to be awarded to each executive officer.
 Nominating
and Governance Committee
  Code of Business Conduct and Ethics
  
 77




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Item 11. Executive Compensation
 COMPENSATION OF EXECUTIVE OFFICERS
 COMPENSATION DISCUSSION AND ANALYSIS
 Overview
  Role of Compensation Committee and Chief Executive Officer
   
    
    Developing compensation policies that will attract and retain the highest quality
executives, will clearly articulate the relationship of corporate performance to
executive compensation and will reward executives for Endwaves progress;
    
    Proposing to the Board of Directors the adoption, amendment and termination of stock
option plans, stock appreciation rights plans, pension and profit sharing plan, stock
bonus plans, stock purchase plans, bonus plans, deferred compensation plans and other
similar plans;
    
    Granting rights, participation and interests in such plans to eligible participants,
subject in certain cases to ratification by the Board of Directors; and
    
    Reviewing and approving such other compensation matters as may be necessary or
appropriate in view of the Compensation Committees overall responsibility.
  78




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##### Table of Contents




    
    The amount of bonus to be awarded to each executive officer in respect of the prior
years performance;
    
    Whether to raise, lower or maintain the executive officers base salary for the
current year;
    
    The bonus targets to be set for the executive officers for the current year; and
    
    Option grants, if any, to be awarded to each executive officer.
  Comparable Company Comparisons
   Elements of Executive Compensation
  Base Salary:
 79




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Annual Cash Incentive:
   Stock Options:
   80




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Other Benefits:
 Chief Executive Officer Compensation
  Employment, Severance and Change in Control Agreements
  Executive Officer Severance and Retention Plan Assuming No Change of Control:
 81




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Potential 2007 Severance and Retention Benefits assuming no Change of Control
  COBRA
    
    Option
    
    TotalName
    
    Salary(1)
    
    Benefits (2)
    
    Awards (3)
    
    BenefitEdward A. Keible, Jr.
    
    $
    810,333
    
    
    $
    26,809
    
    
    $
    0
    
    
    $
    837,142John J. Mikulsky
    
    $
    368,500
    
    
    $
    24,392
    
    
    $
    0
    
    
    $
    392,892Brett W. Wallace
    
    $
    177,000
    
    
    $
    12,486
    
    
    $
    0
    
    
    $
    189,486
 
 (1)
    
    Reflects 2 months salary for each full year of employment for Mr. Keible (26 months total),
1.5 months salary for each full year of employment for Mr. Mikulsky (16.5 months total) and 9
months salary for Mr. Wallace.(2)
    
    Reflects 2 months coverage for each full year of employment for Mr. Keible (26 months total),
1.5 months coverage for each full year of employment for Mr. Mikulsky (16.5 months total) and
9 months coverage for Mr. Wallace.(3)
    
    Reflects value of options accelerated in the event of termination without cause without a
change of control. Since the closing price of Endwaves common stock on December 31, 2007,
was greater than the exercise price of the options that would have been accelerated under the
Severance and Retention Plan, the value of shares as to which vesting would have been
accelerated is assumed to be zero. Executive Officer Severance and Retention Plan Assuming Change of Control:
 82




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Potential 2007 Severance and Retention Benefits assuming a change of control
  COBRA
    
    Option
    
    TotalName
    
    Salary(1)
    
    Benefits (2)
    
    Awards (3)
    
    BenefitEdward A. Keible, Jr.
    
    $
    1,620,667
    
    
    $
    26,809
    
    
    $
    0
    
    
    $
    1,647,476John J. Mikulsky
    
    $
    737,000
    
    
    $
    24,392
    
    
    $
    0
    
    
    $
    761,392Brett W. Wallace
    
    $
    354,000
    
    
    $
    12,486
    
    
    $
    0
    
    
    $
    366,486David M. Hall
    
    $
    88,077
    
    
    $
    4,373
    
    
    $
    0
    
    
    $
    92,450Steven F. Layton
    
    $
    125,538
    
    
    $
    11,826
    
    
    $
    0
    
    
    $
    137,364Daniel P. Teuthorn
    
    $
    134,154
    
    
    $
    9,340
    
    
    $
    0
    
    
    $
    143,494
 
 (1)
    
    Reflects 4 months salary for each full year of employment for Mr. Keible (52 months total),
3.0 months salary for each full year of employment for Mr. Mikulsky (33 months total), 18
months salary for Mr. Wallace, 20 weeks salary for Mr. Hall, and 32 weeks salary for Messrs.
Layton and Teuthorn.(2)
    
    Reflects 2 months coverage for each full year of employment for Mr. Keible (26 months total),
1.5 months coverage for each full year of employment for Mr. Mikulsky (16.5 months total), 9
months coverage for Mr. Wallace, 20 weeks for Mr. Hall, and 32 weeks for Messrs. Layton and
Teuthorn.(3)
    
    Reflects value of options accelerated in the event of termination without cause in connection
with a change of control. Since the closing price of Endwaves common stock on December 31,
2007, was greater than the exercise price of the options that would have been accelerated
under the Severance and Retention Plan, the value of shares as to which vesting would have
been accelerated is assumed to be zero. Named Executive Officer Compensation
  83




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Summary Compensation Table
 Non-EquityOption
    
    Incentive Plan
    
    All Other
    
    TotalName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Awards
    
    Compensation
    
    Compensation
    
    Compensation(1)
    
    (2)
    
    (3)
    
    (4)
    
    (5)
    
    (6)
    
    (7)Edward A. Keible, Jr.
    
    
    2007
    
    
    $
    371,923
    
    
    $
    1,741
    
    
    $
    570,948
    
    
    $
    0
    
    
    $
    11,827
    
    
    $
    956,439President and Chief Executive Officer
    
    
    2006
    
    
    $
    325,631
    
    
    
    
    
    
    $
    431,546
    
    
    $
    178,000
    
    
    $
    10,089
    
    
    $
    945,266John J. Mikulsky
    
    
    2007
    
    
    $
    266,154
    
    
    
    
    
    
    $
    234,746
    
    
    $
    0
    
    
    $
    5,773
    
    
    $
    506,673Chief Operating Officer
    
    
    2006
    
    
    $
    250,846
    
    
    
    
    
    
    $
    190,347
    
    
    $
    94,500
    
    
    $
    7,267
    
    
    $
    542,960and Executive Vice PresidentBrett W. Wallace (8)
    
    
    2007
    
    
    $
    233,000
    
    
    
    
    
    
    $
    351,127
    
    
    $
    0
    
    
    $
    2,785
    
    
    $
    586,912Chief Financial Officer, Executive Vice
    
    
    2006
    
    
    $
    170,038
    
    
    
    
    
    
    $
    349,168
    
    
    $
    65,625
    
    
    $
    315
    
    
    $
    585,146President and Corporate SecretaryDavid M. Hall
    
    
    2007
    
    
    $
    227,961
    
    
    
    
    
    
    $
    272,262
    
    
    $
    0
    
    
    $
    4,971
    
    
    $
    505,194Senior Vice President
General Manager, Defense and SecuritySteven F. Layton
    
    
    2007
    
    
    $
    201,808
    
    
    
    
    
    
    $
    119,767
    
    
    $
    0
    
    
    $
    55,903
    
    
    $
    377,478Senior Vice President
General Manager, TelecomDaniel F. Teuthorn
    
    
    2007
    
    
    $
    216,039
    
    
    
    
    
    
    $
    119,715
    
    
    $
    0
    
    
    $
    57,172
    
    
    $
    392,926Senior Vice President
General Manager, Technology
 
 (1)
    
    Messrs. Hall, Layton and Teuthorn were promoted to executive officer positions in February
2007; therefore, data for 2006 is not reported.(2)
    
    The amounts in this column include any salary contributed by the named executive officer to
our 401(k) plan.(3)
    
    Reflects cash bonus paid to Mr. Keible for the award of a patent. Any bonus amounts paid
under our non-equity incentive plan are included in the Non-Equity Incentive Plan
Compensation column.(4)
    
    The amounts included in the Option Awards column represent the compensation cost recognized
by Endwave related to stock option awards to named executive officers, computed in accordance
with SFAS No. 123(R). For purposes of this table, the value excludes the impact of estimated
forfeitures. For a discussion of other valuation assumptions, see Note 8 to our consolidated
financial statements included elsewhere in this report.(5)
    
    The amounts in this column represent total performance-based bonuses earned for services
rendered.(6)
    
    All Other Compensation represents group life insurance payments, 401(k) employer matching
contributions and educational reimbursement payments made by Endwave.(7)
    
    The dollar value in this column for each named executive officer represents the sum of all
compensation reflected in the preceding columns.(8)
    
    Mr. Wallace joined Endwave on March 1, 2006, as Executive Vice President. He was promoted to
Chief Financial Officer on April 25, 2006. Mr. Wallaces annual salary for 2006 was $210,000. 84




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Grants of Plan-Based Awards in Fiscal 2007 (1)
 Grant DateAll Other Option
    
    Exercise
    
    Closing MarketEstimated Possible Payouts
    
    Awards: Number
    
    or Base
    
    Price of
    
    Grant DateUnder Non-Equity Incentive
    
    of Securities
    
    Price of
    
    Securities
    
    Fair Value ofPlan Awards
    
    Underlying
    
    Option
    
    Underlying
    
    Stock andGrant
    
    Threshold
    
    Target
    
    Maximum
    
    Options
    
    Awards
    
    Option
    
    Option AwardsName
    
    Date
    
    ($)
    
    ($)
    
    ($)
    
    (#)
    
    ($/Sh)
    
    ($/Sh) (1)
    
    ($) (2)Edward A. Keible,
Jr
    
    
    2/12/07
    
    
    $
    0
    
    
    $
    374,000
    
    
    $
    523,600
    
    
    
    101,000
    
    
    $
    13.23
    
    
    $
    13.02
    
    
    $
    707,542John J.
Mikulsky
    
    
    2/12/07
    
    
    $
    0
    
    
    $
    201,000
    
    
    $
    281,400
    
    
    
    40,000
    
    
    $
    13.23
    
    
    $
    13.02
    
    
    $
    280,214Brett W.
Wallace
    
    
    2/12/07
    
    
    $
    0
    
    
    $
    177,000
    
    
    $
    247,800
    
    
    
    40,000
    
    
    $
    13.23
    
    
    $
    13.02
    
    
    $
    280,214David M. Hall
    
    
    2/12/07
    
    
    $
    0
    
    
    $
    114,500
    
    
    $
    160,300
    
    
    
    20,000
    
    
    $
    13.23
    
    
    $
    13.02
    
    
    $
    140,107Steven F. Layton
    
    
    2/12/07
    
    
    $
    0
    
    
    $
    102,000
    
    
    $
    142,800
    
    
    
    20,000
    
    
    $
    13.23
    
    
    $
    13.02
    
    
    $
    140,107Daniel P. Teuthorn
    
    
    2/12/07
    
    
    $
    0
    
    
    $
    109,000
    
    
    $
    152,600
    
    
    
    20,000
    
    
    $
    13.23
    
    
    $
    13.02
    
    
    $
    140,107
 
 (1)
    
    The exercise price for option awards is determined as the closing price on the day prior to
grant. Therefore, the grant date closing price of the security underlying the option can
differ materially, positively or negatively, from the exercise price of the option award.(2)
    
    Each option vests as to 1/8 of the shares of common stock underlying it on the six month
anniversary of the grant date, with the remaining seven-eighths of the grant vesting in equal
quarterly installments over the remaining four-year vesting period. For a discussion of other
valuation assumptions, see Note 8 to our consolidated financial statements.  85




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Outstanding Equity Awards at December 31, 2007
 Number of Securities UnderlyingUnexercised
Options (1)(2)
    
    Option
    
    OptionName and Principal Position
    
    Exercisable
    
    Unexercisable
    
    Exercise Price
    
    Expiration DateEdward A. Keible, Jr.
    
    
    75,000
    
    
    
    0
    
    
    $
    9.77
    
    
    
    2/6/201637,500
    
    
    
    0
    
    
    $
    10.20
    
    
    
    8/2/201442,500
    
    
    
    0
    
    
    $
    10.22
    
    
    
    2/2/201432,813
    (3)
    
    
    0
    
    
    $
    21.47
    
    
    
    2/3/201537,500
    (3)
    
    
    0
    
    
    $
    34.89
    
    
    
    7/31/2015100,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/20171,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/2017John J. Mikulsky
    
    
    5,860
    
    
    
    0
    
    
    $
    1.17
    
    
    
    1/30/201313,894
    
    
    
    0
    
    
    $
    1.93
    
    
    
    6/5/201330,000
    
    
    
    0
    
    
    $
    9.77
    
    
    
    2/6/201615,000
    
    
    
    0
    
    
    $
    10.20
    
    
    
    8/2/201425,000
    
    
    
    0
    
    
    $
    10.22
    
    
    
    2/2/20144,923
    
    
    
    0
    
    
    $
    11.75
    
    
    
    1/5/201115,000
    (3)
    
    
    0
    
    
    $
    21.47
    
    
    
    2/3/201530,000
    (3)
    
    
    0
    
    
    $
    34.89
    
    
    
    7/31/201540,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/2017Brett W. Wallace
    
    
    120,000
    
    
    
    0
    
    
    $
    9.32
    
    
    
    2/29/201640,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/2017David M. Hall
    
    
    80,000
    
    
    
    0
    
    
    $
    12.90
    
    
    
    10/19/201515,000
    
    
    
    0
    
    
    $
    9.77
    
    
    
    2/6/201620,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/2017Steven F. Layton
    
    
    1,351
    
    
    
    0
    
    
    $
    1.17
    
    
    
    1/30/201311,723
    
    
    
    0
    
    
    $
    1.93
    
    
    
    6/5/201315,000
    
    
    
    0
    
    
    $
    9.77
    
    
    
    2/6/201615,000
    (3)
    
    
    0
    
    
    $
    34.89
    
    
    
    7/31/20158,750
    
    
    
    0
    
    
    $
    10.20
    
    
    
    8/2/201418,000
    
    
    
    0
    
    
    $
    10.22
    
    
    
    2/2/20147,500
    (3)
    
    
    0
    
    
    $
    21.47
    
    
    
    2/3/201520,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/2017Daniel P.
Teuthorn
    
    
    938
    
    
    
    0
    
    
    $
    1.17
    
    
    
    1/30/201315,000
    
    
    
    0
    
    
    $
    9.77
    
    
    
    2/6/20167,500
    
    
    
    0
    
    
    $
    10.20
    
    
    
    8/2/201415,000
    
    
    
    0
    
    
    $
    10.22
    
    
    
    2/2/20146,563
    (3)
    
    
    0
    
    
    $
    21.47
    
    
    
    2/3/20157,500
    (3)
    
    
    0
    
    
    $
    34.89
    
    
    
    7/31/201520,000
    
    
    
    0
    
    
    $
    13.23
    
    
    
    2/11/2017
 
 (1)
    
    Each option vests as to 1/8 of the shares of common stock underlying it on the six month
anniversary of the grant date, with the remaining seven-eighths of the grant vesting in equal
quarterly installments over the remaining four-year vesting period. Each option expires ten years after the date of grant or, if earlier, three
months after termination of employment in most cases.(2)
    
    All options described in
the above table are reflected as exercisable because all options granted to our executive
officers have an early exercise feature that allows optionees to exercise unvested options,
subject to our right to repurchase the unvested shares at cost upon the optionees termination
of employment. Options unvested as of December 31, 2007 are as
follows: Keible, 137,877; Mikulsky, 55,626; Wallace, 100,000; Hall,
64,689; Layton, 28,064; and Teuthorn, 28,064.(3)
    
    This option was replaced in our 2008 option exchange program for an option exercisable for
the same number of shares but with an exercise price per share of $6.59.  As required by such
program, the new option vests over four years beginning in February 2008. 2007
Options Exercises
  86




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##### Table of Contents



Compensation of Non-Employee Directors
  Fees Paid
    
    Option
    
    TotalName
    
    In Cash
    
    Awards (1)
    
    CompensationEdward C.V. Winn, Chairman
    
    $
    44,000
    
    
    $
    47,092
    
    
    $
    91,092Joseph J. Lazzara
    
    $
    34,000
    
    
    $
    56,531
    
    
    $
    90,531John F. McGrath
    
    $
    41,000
    
    
    $
    78,704
    
    
    $
    119,704Wade Meyercord
    
    $
    33,000
    
    
    $
    56,155
    
    
    $
    89,155Eric D. Stonestrom
    
    $
    28,000
    
    
    $
    71,790
    
    
    $
    99,790
 
 (1)
    
    The amounts included in the Option Awards column represent the compensation cost recognized
by Endwave in 2007 related to stock option awards to each member of our Board of Directors,
computed in accordance with SFAS No. 123(R). For purposes of this table, the value excludes
the impact of estimated forfeitures. For a discussion of other valuation assumptions, see
Note 8 to our consolidated financial statements.  Board Membership Fees Payable to Non-Employee Directors
 Non-Employee Director Annual Retainer
    
    $
    25,000Board Chair Annual Retainer
    
    $
    10,000Audit Committee Chair Annual Retainer
    
    $
    16,000Audit Committee Member Annual Retainer
    
    $
    6,000Compensation Committee Chair Annual Retainer
    
    $
    8,000Compensation Committee Member Annual Retainer
    
    $
    3,000Nominating and Governance Committee Chair Annual Retainer
    
    $
    3,000Nominating and Governance Committee Member Annual Retainer
    
    $
    0Board Meeting Fee (in person)
    
    $
    0Board Meeting Fee (telephonic)
    
    $
    0Committee Meeting Fee (in person)
    
    $
    0Committee Meeting Fee (telephonic)
    
    $
    0
  87




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##### Table of Contents



Report of the Compensation Committee 1
  
 
  88




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Shares Beneficially Owned(1)Series B PreferredCommon Stock
    
    StockName and Address
    
    Number
    
    Percent(2)
    
    Number
    
    Percent(2)Entities affiliated with Oak Management Corporation,
XI, LLC (3) One
Gorham Island Westport,
CT 06880
    
    
    3,900,000
    
    
    
    29.92
    %
    
    
    390,000
    
    
    
    100.00
    %Entities affiliated with Potomac Capital Management
(4) 825
Third Avenue New
York, NY 10022
    
    
    1,665,386
    
    
    
    18.23Entities affiliated with EagleRock Capital
Management (5) 551
Fifth Avenue, 34th Floor New
York, NY 10176
    
    
    1,373,520
    
    
    
    15.04Pate Capital Partners, LP (6)
555 Montgomery Street, Ste. 603
San Francisco, CA 94111
    
    
    800,000
    
    
    
    8.76Entities affiliated with Dimensional
Fund
Advisors LP (7) 1299
Ocean Ave. Santa
Monica, CA 90401
    
    
    668,971
    
    
    
    7.32Edward A. Keible, Jr.(8)
    
    
    509,761
    
    
    
    5.58John J. Mikulsky (9)
    
    
    280,847
    
    
    
    3.07Brett W. Wallace (10)
    
    
    201,744
    
    
    
    2.21Daniel P. Teuthorn (11)
    
    
    111,384
    
    
    
    1.22Steven F. Layton (12)
    
    
    118,499
    
    
    
    1.30David M. Hall (13)
    
    
    140,496
    
    
    
    1.54Edward C.V. Winn (14)
    
    
    18,656
    
    
    
    *Joseph J. Lazzara (15)
    
    
    28,445
    
    
    
    *John F. McGrath, Jr. (14)
    
    
    24,633
    
    
    
    *Wade Meyercord(14)
    
    
    27,745
    
    
    
    *Eric Stonestrom(14)
    
    
    11,083
    
    
    
    *All directors and executive officers as
a group (11 persons)(16)
    
    
    1,473,293
    
    
    
    16.13
 
 *
    
    Less than one percent.(1)
    
    This table is based upon information supplied to us by our officers, directors and principal
stockholders and upon any Schedules 13D or 13G filed with the Securities and Exchange. Unless otherwise
indicated in the footnotes to this table, and subject to community property laws where applicable, we
believe that each of the stockholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned. 89




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##### Table of Contents



(2)
    
    Applicable percentages are based on 9,135,472 shares outstanding on February 8, 2008, adjusted as
required by rules promulgated by the Securities and Exchange Commission.(3)
    
    300,000 shares of Series B Stock are held of record by Oak Investment Partners XI, Limited Partnership,
a Delaware limited partnership (Oak Investment Partners XI,). Oak Associates XI LLC, a Delaware
limited liability company (Oak Associates XI), is the general partner of Oak Investment Partners XI
and as such may be deemed to beneficially own the shares held by Oak
Investment XI. Oak Management
Corporation, a Delaware corporation (Oak Management), is the investment advisor to Oak Investment
Partners XI and as such may be deemed to beneficially own the shares held by Oak Investment XI. Bandel
L. Carano, Gerald R. Gallagher, Edward F. Glassmeyer, Fredric W. Harman, Ann H. Lamont and David B.
Walrod are general partners, managing members, shareholders, directors and/or officers of Oak Investment
XI and as such may be deemed to beneficially own the shares held by Oak Investment XI.The number of shares of Series B Stock beneficially owned by Oak Investment XI includes 90,000 shares of
Series B Stock issuable within 60 days of the date of this table upon exercise of a warrant held by Oak
Investment XI. The number of shares of common stock beneficially owned by Oak Investment XI includes
3,900,000 shares of common issuable within 60 days of the date of this table upon conversion of 390,000
shares of Series B Stock beneficially owned by Oak Investment XI.(4)
    
    Potomac Capital Partners LP is a private investment partnership formed under the laws of the State of
Delaware. Potomac Capital Management LLC is the General Partner of Potomac Capital Parters LP. Mr.
Paul J. Solit is the Managing Member of Potomac Capital Management LLC.(5)
    
    The shares are held by EagleRock Master Fund, L.P. (ERMF) and EagleRock Institutional Partners LP
(ERIP). EagleRock Capital Management, LLC (EagleRock) is the investment manager of ERMF and ERIP and
has sole power to vote and dispose of the shares held by ERMF and ERIP and may be deemed to beneficially
own such shares. Nader Tavakoli is the Manager of EagleRock and may direct the voting and disposition of
the shares held by ERMF and ERIP and may be deemed to beneficially own such shares.(6)
    
    The shares are beneficially held by Pate Capital Partners, LP . Bruce A. Pate, General Partner has the
sole power to vote or direct the vote of said shares. In addition, Mr. Bruce A. Pate has the sole power
to dispose or to direct the disposition of said shares.(7)
    
    Dimensional Fund Advisors LP (formerly, Dimensional Fund Advisors, Inc.) (Dimensional), an investment
advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice
to four investment companies registered under the Investment Company Act of 1940, and serves as
investment manager to certain other commingled group trusts and separate accounts. These investment
companies, trusts and accounts are the Funds. In its role as investment advisor or manager,
Dimensional possesses investment and/or voting power over the securities of the Issuer described in this
schedule that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the
Issuer held by the Funds. However, all securities reported are owned by the Funds. Dimensional
disclaims beneficial ownership of such securities. Mr. Christopher Crossan, Global Chief Compliance
Officer, is a General Partner of Dimensional Holdings Inc.(8)
    
    Includes 426,313 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. If exercised in full within 60 days of the date of this table, 289,813 shares would be subject to
repurchase by us. Also includes 83,448 shares held by the Keible Family Trust, of which Mr. Keible is
co-trustee.(9)
    
    Includes 219,677 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. If exercised in full within 60 days of the date of this table, 132,500 shares would be subject to
repurchase by us. Also includes 600 shares owned by Mr. Mikulskys daughter.(10)
    
    Includes 200,000 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. If exercised in full within 60 days of the date of this table, 130,000 shares would be subject
to repurchase by us.(11)
    
    Includes 92,501 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. If exercised in 90




---



##### Table of Contents



full within 60 days of the date of this table, 57,813 shares would be subject to
repurchase by us.(12)
    
    Includes 117,324 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. If exercised in full within 60 days of the date of this table, 66,250 shares would be subject to
repurchase by us.(13)
    
    Includes 135,000 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. If exercised in full within 60 days of the date of this table, 77,501 shares would be subject to
repurchase by us.(14)
    
    Represents shares issuable upon exercise of options exercisable within 60 days of the date of this table.(15)
    
    Includes 27,445 shares issuable upon exercise of options exercisable within 60 days of the date of this
table. Also includes 1,000 shares held by the Joseph J. and Nancy B. Lazzara Family Trust, of which Mr.
Lazzara is co-trustee.(16)
    
    See footnotes 8 through 15 above, as applicable. Includes 1,300,377 shares issuable upon exercise of
options exercisable within 60 days of the date of this table. If exercised in full within 60 days of the
date of this table, 753,877 shares would be subject to a repurchase right by us. 
 Item 13. Certain Relationships and Related Transactions and Director Independence
 Indemnification
  Transactions with Wood River
    91




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Related-Person Transactions Policy and Procedures
   Independence
of the Board of Directors
   92




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  2007
    
    
    2006Audit Fees(1)
    
    $
    543
    
    
    $
    578Audit-related Fees(2)
    
    
    13
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    $
    556
    
    
    $
    578
 
 (1)
    
    Audit fees represent fees for professional services provided in
connection with the audit of our annual consolidated financial
statements, review of our quarterly condensed consolidated financial
statements and services that are normally provided by Burr, Pilger &
Mayer LLP in connection with statutory and regulatory filings or
engagements.(2)
    
    Audit-related fees consist of assurance and related services that are
reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported above under
audit fees. The services provided for the fees disclosed under this
category include due diligence and accounting consultations in
connection with acquisitions. Independence of Independent Registered Public Accounting Firm and Pre-Approval Policy
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
         93




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##### Table of Contents



INDEX TO EXHIBITS
 Number
    
    Description2.1(1)
    
    Stock Purchase Agreement among the Registrant and the stockholders and option holders of ALC Microwave,
Inc. dated April 19, 2007.3.1(2)
    
    Amended and Restated Certificate of Incorporation effective October 20, 2000.3.2(3)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation effective June 28, 2002.3.3(2)
    
    Amended and Restated Bylaws effective October 20, 2000.3.4(4)
    
    Certificate of Designation for Series A Junior Participating Preferred Stock.3.5(5)
    
    Certificate of Designation for Series B Preferred Stock.3.6(6)
    
    Amendment to Amended and Restated Bylaws.3.7(7)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation effective July 26, 2007.4.1(2)
    
    Form of specimen Common Stock Certificate.4.2(4)
    
    Rights Agreement dated as of December 1, 2005 between the Registrant and Computershare Trust Company, Inc.4.3(4)
    
    Form of Rights Certificate4.4(5)
    
    Preferred Stock and Warrant Purchase Agreement by and between Oak Investment Partners XI, Limited
Partnership and the Registrant dated April 24, 2006.4.5(5)
    
    Warrant issued to Oak Investment Partners XI, Limited Partnership.4.6(8)
    
    Amendment No. 1 to Rights Agreement, dated as of December 21, 2007, between the Registrant and
ComputerShare Trust Company, Inc.10.1(2)
    
    Form of Indemnity Agreement entered into by the Registrant with each of its directors and officers.10.2(2)*
    
    1992 Stock Option Plan.10.3(2)*
    
    Form of Incentive Stock Option under 1992 Stock Option Plan.10.4(2)*
    
    Form of Nonstatutory Stock Option under 1992 Stock Option Plan.10.5(9)*
    
    2007 Equity Incentive Plan.10.6(10)*
    
    Form of Stock Option Agreement under 2007 Equity Incentive Plan.10.7(10)*
    
    Form of Stock Option Agreement for Non-Employee Directors under the 2007 Equity Incentive Plan.10.8(2)*
    
    2000 Employee Stock Purchase Plan.10.9(2)*
    
    Form of 2000 Employee Stock Purchase Plan Offering.10.10(11)*
    
    2000 Non-Employee Directors Stock Option Plan, as amended.10.11(2)*
    
    Form of Nonstatutory Stock Option Agreement under the 2000 Non-Employee Director Plan.10.12(12)*
    
    Description of Compensation Payable to Non-Employee Directors.10.13(12)*
    
    2007 Base Salaries for Named Executive Officers.10.14(12)*
    
    2007 Executive Incentive Compensation Plan.10.15*
    
    Executive Officer Severance and Retention Plan.10.16(2)
    
    License Agreement by and between TRW Inc. and TRW Milliwave Inc. dated February 28, 2000.10.17(13)
    
    Purchase Agreement between Nokia and the Registrant dated January 1, 2006.10.18(13)
    
    Frame Purchase Agreement by and between the Registrant and Siemens Mobile Communications Spa dated
January 16, 2006.10.19(14)
    
    Lease Agreement by and between Legacy Partners I San Jose, LLC and the Registrant dated May 24, 2006.10.20(14)
    
    Supply Agreement by and between Northrop Grumman Space and Mission Systems Corp. and the Registrant dated
July 25, 2006.10.21(15)
    
    Services Agreement by and between Hana Microelectronics Co., Ltd. and the Registrant dated October 15, 2006.10.22(16)
    
    Amended and Restated Settlement Agreement by and between the Registrant and Arthur Steinberg, as receiver
for Wood River Capital Management, L.L.C., Wood River Associates, L.L.C., Wood River Partners, L.P. and
Wood River Partners Offshore, Ltd., dated December 20, 2007.10.23(8)
    
    Stock Purchase Agreement, dated December 21, 2007, entered into between the Registrant, Wood River
Partners,
 94




---



##### Table of Contents



Number
    
    DescriptionL.P., Wood River Partners Offshore, Ltd. and, for the limited purpose set forth therein, Arthur
J. Steinberg, solely in his capacity as Receiver for Wood River Capital Management, L.L.C., Wood River
Associates, L.L.C., Wood River Partners, L.P. and Wood River Partners Offshore, Ltd. and not in his
individual capacity.21.1
    
    List of Subsidiaries.23.1
    
    Consent of Burr, Pilger & Mayer LLP, independent registered public accounting firm.31.1
    
    Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on April 24, 2007 and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to the Registrants Registration
Statement on Form S-1 (Registration No. 333-41302) and incorporated
herein by reference.(3)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended March 31, 2004 and incorporated herein
by reference.(4)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on December 5, 2005 and incorporated herein by
reference.(5)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on April 26, 2006 and incorporated herein by reference.(6)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on February 5, 2007 and incorporated herein by
reference.(7)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended September 30, 2007 and incorporated
herein by reference.(8)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on December 21, 2007 and incorporated herein by
reference.(9)
    
    Previously filed as an appendix to the Registrants Definitive Proxy
Statement on Schedule 14A filed on June 13, 2007 and incorporated
herein by reference.(10)
    
    Previously filed as an exhibit to the Registrants Registration
Statement on Form S-8 (Registration No.333-144851) and incorporated
herein by reference.(11)
    
    Previously filed as an exhibit to the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 and incorporated
herein by reference.(12)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on February 7, 2007 and incorporated herein by
reference.(13)
    
    Previously filed as an exhibit to the Registrants Registration
Statement on Form S-3 (Registration No.333-144054) and incorporated
herein by reference. 95




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##### Table of Contents



(14)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2006 and incorporated herein
by reference.(15)
    
    Previously filed as an exhibit to the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2006 and incorporated
herein by reference.(16)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on December 20, 2007 and incorporated herein by
reference.*
    
    Indicates a management contract or compensatory plan or arrangement.
    
    Confidential treatment has been requested for a portion of this exhibit.  96




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##### Table of Contents



ENDWAVE CORPORATION
 SCHEDULE II
 VALUATION AND QUALIFYING ACCOUNTS
  Additions(Reductions)Balance at
    
    
    Charged to
    
    
    Deductions
    
    
    BalancesBeginning
    
    
    Costs and
    
    
    and
    
    
    at End ofof Period
    
    
    Expense
    
    
    Write-offs
    
    
    Period(In thousands)Year ended December 31, 2007
    
    $
    131
    
    
    $
    (5
    )
    
    $
    (59
    )
    
    $
    67Year ended December 31, 2006
    
    $
    296
    
    
    $
    (124
    )
    
    $
    (41
    )
    
    $
    131Year ended December 31, 2005
    
    $
    243
    
    
    $
    59
    
    
    $
    (6
    )
    
    $
    296
 97




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##### Table of Contents



SIGNATURES
  ENDWAVE CORPORATIONBy:
    /s/  BRETT W. WALLACEBrett W. WallaceExecutive Vice President and Chief Financial Officer POWER OF ATTORNEY
 KNOW ALL PERSONS BY THESE PRESENTS,
 Signatures
    
    Title
    
    Date/s/  EDWARD A. KEIBLE, JR.
    
    President, Chief Executive Officer and
    
    March 11, 2008Edward A. Keible, Jr.
    
    Director
(Principal Executive Officer)/s/  BRETT W. WALLACE
    
    Executive Vice President and Chief
    
    March 11, 2008Brett W. Wallace
    
    Financial
Officer (Principal Financialand Accounting Officer/s/  EDWARDC.V. WINN
    
    Chairman of the Board of Directors
    
    March 11, 2008Edward C.V. Winn/s/  JOSEPHJ. LAZZARA
    
    Director
    
    March 11, 2008Joseph J. Lazzara/s/  JOHN F. MCGRATH, JR.
    
    Director
    
    March 11, 2008John F. McGrath, Jr./s/  WADEMEYERCORD
    
    Director
    
    March 11, 2008Wade Meyercord/s/  ERIC STONESTROM
    
    Director
    
    March 11, 2008Eric Stonestrom
 98




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##### Table of Contents



INDEX TO EXHIBITS
 Number
    
    Description2.1(1)
    
    Stock Purchase Agreement among the Registrant and the stockholders and option holders of ALC
Microwave, Inc. dated April 19, 2007.3.1(2)
    
    Amended and Restated Certificate of Incorporation effective October 20, 2000.3.2(3)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation effective June 28, 2002.3.3(2)
    
    Amended and Restated Bylaws effective October 20, 2000.3.4(4)
    
    Certificate of Designation for Series A Junior Participating Preferred Stock.3.5(5)
    
    Certificate of Designation for Series B Preferred Stock.3.6(6)
    
    Amendment to Amended and Restated Bylaws.3.7(7)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation effective July 26, 2007.4.1(2)
    
    Form of specimen Common Stock Certificate.4.2(4)
    
    Rights Agreement dated as of December 1, 2005 between the Registrant and Computershare Trust Company,
Inc.4.3(4)
    
    Form of Rights Certificate4.4(5)
    
    Preferred Stock and Warrant Purchase Agreement by and between Oak Investment Partners XI, Limited
Partnership and the Registrant dated April 24, 2006.4.5(5)
    
    Warrant issued to Oak Investment Partners XI, Limited Partnership.4.6(8)
    
    Amendment No. 1 to Rights Agreement, dated as of December 21, 2007, between the Registrant and
ComputerShare Trust Company, Inc.10.1(2)
    
    Form of Indemnity Agreement entered into by the Registrant with each of its directors and officers.10.2(2)*
    
    1992 Stock Option Plan.10.3(2)*
    
    Form of Incentive Stock Option under 1992 Stock Option Plan.10.4(2)*
    
    Form of Nonstatutory Stock Option under 1992 Stock Option Plan.10.5(9)*
    
    2007 Equity Incentive Plan.10.6(10)*
    
    Form of Stock Option Agreement under 2007 Equity Incentive Plan.10.7(10)*
    
    Form of Stock Option Agreement for Non-Employee Directors under the 2007 Equity Incentive Plan.10.8(2)*
    
    2000 Employee Stock Purchase Plan.10.9(2)*
    
    Form of 2000 Employee Stock Purchase Plan Offering.10.10(11)*
    
    2000 Non-Employee Directors Stock Option Plan, as amended.10.11(2)*
    
    Form of Nonstatutory Stock Option Agreement under the 2000 Non-Employee Director Plan.10.12(12)*
    
    Description of Compensation Payable to Non-Employee Directors.10.13(12)*
    
    2007 Base Salaries for Named Executive Officers.10.14(12)*
    
    2007 Executive Incentive Compensation Plan.10.15*
    
    Executive Officer Severance and Retention Plan.10.16(2)
    
    License Agreement by and between TRW Inc. and TRW Milliwave Inc. dated February 28, 2000.10.17(13)
    
    Purchase Agreement between Nokia and the Registrant dated January 1, 2006.10.18(13)
    
    Frame Purchase Agreement by and between the Registrant and Siemens Mobile Communications Spa dated
January 16, 2006.10.19(14)
    
    Lease Agreement by and between Legacy Partners I San Jose, LLC and the Registrant dated May 24, 2006.10.20(14)
    
    Supply Agreement by and between Northrop Grumman Space and Mission Systems Corp. and the Registrant
dated July 25, 2006.10.21(15)
    
    Services Agreement by and between Hana Microelectronics Co., Ltd. and the Registrant dated October
15, 2006.10.22(16)
    
    Amended and Restated Settlement Agreement by and between the Registrant and Arthur Steinberg, as
receiver for Wood River Capital Management, L.L.C., Wood River Associates, L.L.C., Wood River
Partners, L.P. and Wood River Partners Offshore, Ltd., dated December 20, 2007.10.23(8)
    
    Stock Purchase Agreement, dated December 21, 2007, entered into between the Registrant, Wood River
Partners, L.P., Wood River Partners Offshore, Ltd. and, for the limited purpose set forth therein,
Arthur J. Steinberg, solely in his capacity as Receiver for Wood River Capital Management, L.L.C.,
Wood River Associates, L.L.C., Wood River Partners, L.P. and Wood River Partners Offshore, Ltd. and
not in his individual capacity.21.1
    
    List of Subsidiaries.23.1
    
    Consent of Burr, Pilger & Mayer LLP, independent registered public accounting firm.31.1
    
    Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 99




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##### Table of Contents



(1)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on April 24, 2007 and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to the Registrants Registration
Statement on Form S-1 (Registration No. 333-41302) and incorporated
herein by reference.(3)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended March 31, 2004 and incorporated herein
by reference.(4)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on December 5, 2005 and incorporated herein by
reference.(5)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on April 26, 2006 and incorporated herein by reference.(6)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on February 5, 2007 and incorporated herein by
reference.(7)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended September 30, 2007 and incorporated
herein by reference.(8)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on December 21, 2007 and incorporated herein by
reference.(9)
    
    Previously filed as an appendix to the Registrants Definitive Proxy
Statement on Schedule 14A filed on June 13, 2007 and incorporated
herein by reference.(10)
    
    Previously filed as an exhibit to the Registrants Registration
Statement on Form S-8 (Registration No.333-144851) and incorporated
herein by reference.(11)
    
    Previously filed as an exhibit to the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 and incorporated
herein by reference.(12)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on February 7, 2007 and incorporated herein by
reference.(13)
    
    Previously filed as an exhibit to the Registrants Registration
Statement on Form S-3 (Registration No.333-144054) and incorporated
herein by reference.(14)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2006 and incorporated herein
by reference.(15)
    
    Previously filed as an exhibit to the Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2006 and incorporated
herein by reference. 100




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##### Table of Contents



(16)
    
    Previously filed as an exhibit to the Registrants Current Report on
Form 8-K filed on December 20, 2007 and incorporated herein by
reference.*
    
    Indicates a management contract or compensatory plan or arrangement.
    
    Confidential treatment has been requested for a portion of this exhibit. 101