##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO


SECTIONS 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1933    
|          
|           |  | For the fiscal year ended December 31, 2004                                                 
|          
|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.)
|                                                                            
|776 Palomar Avenue
    Sunnyvale, CA(Address of principal executive offices) |  | 94085(Zip code)                     

(408) 522-3100


(Registrants telephone number, including area code)


(Former name, former address and former fiscal year, if
changed since last report)





Securities registered pursuant to Section 12(b) of the
Act: None


Securities registered pursuant to Section 12(g) of the
Act: Common Stock, $0.001 par value


þ o


o þ


o














---










ENDWAVE CORPORATION


FORM 10-K


December 31, 2004


TABLE OF CONTENTS


|             |  |                                                                                                                      |    |          |    | 
|------------ |  | -------------------------------------------------------------------------------------------------------------------- | -- | -------- | -- | 
|             |  |                                                                                                                      |    | Page No. |   
|             |  |                                                                                                                      |    |          |   
|PART I      
|Item 1.      |  | Business                                                                                                             |    |          | 2  | 
|Item 2.      |  | Properties                                                                                                           |    |          | 32 | 
|Item 3.      |  | Legal Proceedings                                                                                                    |    |          | 32 | 
|Item 4.      |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |          | 32 | 
|PART II     
|Item 5.      |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |          | 33 | 
|Item 6.      |  | Selected Consolidated Financial Data                                                                                 |    |          | 34 | 
|Item 7.      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |          | 35 | 
|Item 7a.     |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |          | 49 | 
|Item 8.      |  | Financial Statements and Supplementary
    Data                                                                      |    |          | 50 | 
|Item 9.      |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |          | 78 | 
|Item 9A.     |  | Controls and Procedures                                                                                              |    |          | 78 | 
|Item 9B.     |  | Other Information                                                                                                    |    |          | 78 | 
|PART III    
|Item 10.     |  | Directors and Executive Officers of the
    Registrant                                                               |    |          | 79 | 
|Item 11.     |  | Executive Compensation                                                                                               |    |          | 83 | 
|Item 12.     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |          | 87 | 
|Item 13.     |  | Certain Relationships and Related
    Transactions                                                                   |    |          | 88 | 
|Item 14.     |  | Principal Accountant Fees and Services                                                                               |    |          | 90 | 
|PART IV     
|Item 15.     |  | Exhibits and Financial Statement
    Schedules                                                                       |    |          | 91 | 
|SIGNATURES   |  |                                                                                                                      | 94 |         
|EXHIBIT 10.9
|EXHIBIT 23.1
|EXHIBIT 23.2
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1



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##### Table of Contents



FORWARD-LOOKING INFORMATION







PART I







|        |         
|------- | --------
|Item 1. | Business

Introduction






2



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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. The communication link between the
    cellular base station site and a mobile telephone switching
    office, or MTSO, is referred to as cellular backhaul. This is
    currently the largest use of microwave radios. In most parts of
    the world, cellular backhaul is typically accomplished through
    the use of microwave radios either because of their ease of
    deployment and low overall cost relative to available wireline
    options or because adequate wireline facilities are not
    available. In the United States and Canada, cellular backhaul
    has been accomplished typically through the use of high-speed
    telephone lines because low-cost wireline facilities are readily
    available.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Carrier Class Trunking. Communications carriers
    require high capacity links between major voice and data
    switching centers, referred to as trunk circuits, to deploy
    their networks. While fiber optic cables are the most common
    type of trunk circuit facility, microwave radios are often used
    for portions of these circuits when the intervening terrain,
    such as mountains or bodies of water, is difficult to traverse
    or as redundant backup for the fiber optic network.                                                                                                                                   
|
| | Private Voice and Data Networks. When private users, such
    as companies and universities, deploy stand-alone campus area or
    metropolitan area voice and data networks, they often encounter
    situations where it is not possible to access a direct physical
    path between their facilities due to distance or intervening
    structures and roads. If third-party wireline facilities are not
    available or cost-effective, a microwave radio link is often
    used to provide the network connection. In addition, companies
    often implement microwave facilities as redundant backup for
    their wireline facilities.

Increased Demand for Microwave Radios in Telecommunication
Networks.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Growth of Wireless Telephony in Developing Nations.
    Developing nations, such as Russia, China, India and nations in
    Eastern Europe, have experienced a dramatic increase in wireless
    cellular telephony over the past few years. For example, in
    February 2005, Nokia publicly announced that its sales in China
    grew 44% from 2003 to 2004 and that China could become its
    largest market within three years. Nokia attributed its growth
    in China to both increased deployment in rural areas and a
    strong replacement market in urban areas. We believe this growth
    in cellular telephony will continue in China and other
    developing nations. We expect that this growth will result in
    increased demand for microwave backhaul radios because these
    countries lack well-established wireline infrastructures.                                                                                                                                                                                                                                                                                                      
|
| | Increase in Data-Intensive Cellular Traffic.
    Data-intensive 2.5G applications, such as sending
    email, transmitting digital images from camera-equipped cellular
    telephones and downloading music and ring tones, are gaining
    popularity. The increased use of these data-intensive
    applications is dramatically increasing the volume of backhaul
    traffic as compared to voice-only services, necessitating
    additional high-speed backhaul capacity. In locations where
    microwave radios currently fulfill the backhaul requirements,
    this increased demand will necessitate equipment upgrades or
    replacements. Where cellular backhaul is currently provided by
    wireline solutions, such as in the United States and Canada,
    these higher capacity requirements can make microwave radio
    backhaul solutions more cost-effective than wireline solutions
    because the incremental cost of added wireline capacity will, in
    some deployments, exceed the amortization cost of wireless
    solutions. In addition, adequate wireline solutions may not be
    available due to their technical limitations.
|
| | Deployment of Third-Generation Networks. Telecom OEMs and
    service providers are deploying new cellular systems known as
    third generation, or 3G, networks. We believe the
    deployment of these 3G networks will require a proportionately
    larger number of microwave radios. These networks support many
    data-intensive services, such as internet access via cellular
    phone or personal digital assistant, which require an even
    greater backhaul capacity than the current 2.5G applications
    noted above. We believe 3G networks will have a compounding
    effect on cellular backhaul needs because more base stations and
    more backhaul capacity per base station must be deployed in
    order to provide the required bandwidth and maintain quality of
    service. As the density of base stations increases, we expect
    there will be a shift to higher frequency backhaul to support
    more efficient re-use of the available wireless spectrum.                                                                                                                                                                  
|
| | Introduction of Other High Capacity Data-Only
    Telecommunication Networks. We believe the introduction of
    fixed wireless access data networks will also increase demand
    for microwave radios. Various approaches are being considered
    for the widespread implementation of fixed wireless access
    networks, including the IEEE 802.16 WiMAX standard. WiMAX is
    supported by a large industry consortium, which includes market
    leaders such as Cisco Systems, Inc., Ericsson and Intel
    Corporation. Such fixed wireless access networks will, like
    cellular telephone networks, face the technological and cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| |                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | issues associated with connecting individual access points to
    the wireline network infrastructure. This need for backhaul
    represents an opportunity for microwave radios, particularly
    because the anticipated high bandwidth requirements of fixed
    wireless access networks are served more cost-effectively by
    microwave radios than wireline alternatives.

Defense Electronics




Electronic Warfare Systems.


Radar Systems.


Intelligent Battlefield Systems.


High Capacity Communications.




Homeland Security Systems




Advanced Personnel Screening Portals.


Long Distance Personnel Detection.




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Our Opportunity










| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Low Cost. Telecom OEMs and defense and homeland security
    systems integrators are under increasing pricing pressure from
    their customers so they expect effective cost reduction programs
    from their merchant suppliers. These cost-reduction programs
    require merchant suppliers to make a comprehensive effort at
    multiple levels, including the integration of multiple
    functions, efficient manufacturing, effective supply chain
    management and use of low-cost sub-contractors, as appropriate.
|
| | Technical Depth. These OEMs and systems integrators seek
    merchant suppliers of RF modules that have significant
    experience in and understanding of the overall system design.
    This depth and breadth of understanding is crucial to
    determining appropriate overall system level tradeoffs and in
    providing advice to the OEM or system integrator, thereby
    enabling the OEM or system integrator to design and deploy its
    systems more cost-effectively.                                           
|
| | Flexible Production. Volatility of demand is common in
    the market for RF modules, especially in the telecommunications
    network market. Therefore, these OEMs and systems integrators
    need merchant suppliers that can accommodate fluctuations in the
    demand, whether in mix or quantity, in the normal course of
    business and can flexibly scale their manufacturing to match the
    fluctuating demands of the OEM or systems integrator.                                                                
|
| | Innovative Technology. New technology is the key to
    providing enhanced performance and continued cost reduction.
    These OEMs and systems integrators value this capability and
    therefore prefer partners that create new technologies offering
    additional functionality, higher reliability, lower cost and
    better performance.                                                                                                                                                                              



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Our Strengths






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cost-Effective Volume Manufacturing. Our high unit
    volumes enable us to achieve lower manufacturing costs than many
    of our competitors as we increase our materials purchasing
    power, amortize our overhead expenses over a larger number of
    units and gain labor efficiencies. The combination of our
    proprietary semiconductor components and technology, our ability
    to design highly-manufacturable products and our automated
    testing capability differentiate us from the labor-intensive
    methods often used in our industry. We contract with
    third-party, offshore manufacturers for added cost savings.                                                                                                                                                                                                                                                                                         
|
| | Depth and Breadth of Technical Expertise. We have
    extensive experience in the design and manufacture of
    high-frequency RF modules for a broad range of products. Our
    intellectual property and highly-skilled technical team are
    critical when dealing with the higher frequencies required by
    emerging applications. Our technical team has broad expertise in
    device physics, semiconductor device and circuit design, system
    engineering, test engineering and other critical disciplines. In
    addition, our large library of proprietary circuit designs
    enables us to introduce new products rapidly and
    cost-effectively. We believe the depth and breadth of our
    technical expertise differentiates us from many of our
    competitors, enabling us to optimize our products for critical
    performance factors and to assist our customers in developing an
    optimal overall design.
|
| | Scalable and Flexible Manufacturing. Our use of
    third-party contract manufacturing and innovative supply chain
    management techniques enables us to adjust rapidly, efficiently
    and flexibly to our customers varying quantity and product
    mix requirements, which are often created by unexpected needs
    and seasonal variations in demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Next-Generation Technology. We have invested in the
    development of next-generation circuit and packaging
    technologies that allow us to provide our customers with
    high-performance and low-cost solutions. Many of our competitors
    do not have the capability to produce proprietary circuit
    designs and therefore are limited to using standard,
    commercially-available semiconductor devices. We are able to
    develop new semiconductor devices on a custom basis to optimize
    the overall design. We have augmented our circuit design
    capabilities with advancements in circuit packaging that allow
    further enhancement of the design. This gives us the flexibility
    to optimize our product designs for our customers and their
    specific applications.                                                                                                                                   

Our Strategy




Accelerate Revenue Growth


Increase our Telecommunications Network Business.


7



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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.


Reduce Raw Materials and Component Costs.


Employ a Fabless Semiconductor Model.


8



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Leverage Technical Breadth and Strength


Broaden our Product Portfolio.


Develop New Circuit and Packaging Technologies.


Products and Technology


Products






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Single-Function Modules. Single-function modules are
    simple, standardized products that perform a single function,
    such as amplification, frequency multiplication or signal
    mixing. We employ these modules in the design of prototype or
    low production volume systems that do not warrant the
    development of a custom, fully-integrated module.                                                                                                   
|
| | Multi-Function Modules. Multi-function modules are
    customized, complex products that combine a number of individual
    functional elements into a single package. These modules are
    typically more cost-effective for higher-volume applications and
    provide greater reliability and performance than systems
    assembled by the customer using single-function RF modules.                                                                               
|
| | Integrated Subsystem Modules. Integrated subsystem
    modules combine several functional RF blocks, such as
    amplifiers, switches or oscillators, with various types of
    control and support circuitry, such as a microprocessor or a
    power supply, to form a stand-alone subsystem. These complex
    subsystem modules, such as those we supply to Nokia, combine RF
    capability with sophisticated analog and digital system
    interface capabilities.

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Circuit Technologies




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|                                    |  |                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                            |  |                                                                                                                                
|----------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|                                    |  |                                                                                                                                                                              
|                                    |  | Circuit Technologies                                                                                                                                                         
|                                    |  |                                                                                                                                                                              
|                                    |  |                                                                                                                                                                               |  | Endwave Next-Generation                                                                                                                                                                                                                                                   
|                                    |  | Current Technology                                                                                                                                                            |  | Technology                                                                                                                                                                                                                                                                
|                                   
|                                    |  | HMIC                                                                                                                                                                          |  | MMIC                                                                                                                                                                                                                                                                       |  | MLMS                                                                                                                           
|Circuit Type                        |  |                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                            |  |                                                                                                                                
|                                    |  | (Circuit Graphic)                                                                                                                                                             |  | (Circuit Graphic)                                                                                                                                                                                                                                                          |  | (Circuit Graphic)                                                                                                              
|                                   
|Description                         |  | 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 substrate              
|                                   
|                                   
|Module 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 block                                                   
|                                   
|                                   
|Substrate                           |  | Ceramic with single top layer metallization                                                                                                                                   |  | Semiconductor material, typically gallium arsenide                                                                                                                                                                                                                         |  | Next generation, multi- layer substrate containing metal,
    capacitive and resistive layers                                  
|                                   
|                                   
|Active 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 assembly                                                               
|                                   
|                                   
|Application                         |  | 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 assembly                                                                         
|                                   
|                                   
|Number of Bond                      |  | High  Often hundreds                                                                                                                                                         |  | Moderate  Often tens per                                                                                                                                                                                                                                                  |  | Low  Often fewer than                                                                                                         
|Wires (which require manual tuning) |  | per module                                                                                                                                                                    |  | module                                                                                                                                                                                                                                                                     |  | 10 per module                                                                                                                  
|                                   
|                                   
|Performance                         |  | 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 material                          
|                                   
|                                   
|Design 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 function              
|                                   
|                                   
|Relative 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
    HMICs
|                                   
|                                   
|Status                              |  | In production                                                                                                                                                                 |  | In production                                                                                                                                                                                                                                                              |  | In final testing and qualification                                                                                             
|                                   
|                                   

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| |                               
| | ------------------------------
| | Circuit Packaging Technologies





|                  |  |                                                                                                                                                      |  |                                                                                                                                                                 
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |  |                                                                                                                                                     
|                  |  | Circuit Packaging Technologies                                                                                                                      
|                  |  |                                                                                                                                                     
|                  |  | Current Technology                                                                                                                                   |  | Endwave Next-Generation Technology                                                                                                                              
|                 
|                  |  | Planar                                                                                                                                               |  | Epsilon                                                                                                                                                         
|Package Type      |  |                                                                                                                                                      |  |                                                                                                                                                                 
|                  |  | (PLANAR PACKAING DEVICE)                                                                                                                             |  | (EPSILON PACKAGING DEVICE)                                                                                                                                      
|                 
|Description       |  | 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 cover
|                 
|Size and Weight   |  | Metallic parts add significant thickness and weight                                                                                                  |  | Significantly thinner and lighter than planar packages                                                                                                          
|                 
|Performance       |  | Good  Good performance with adequate RF gasket seal                                                                                                 |  | Excellent  RF cavity sealed better than planar
    packages                                                                                                    
|                 
|Design 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 packages                                                               
|                 
|Manufacturability |  | Eight major assembly steps                                                                                                                           |  | Four major assembly steps                                                                                                                                       
|                 
|Relative Cost     |  | High  Material costs are significant                                                                                                                |  | Low  Metal carrier eliminated and plastic cover is
    more cost-effective                                                                                     
|                 
|Status            |  | In production                                                                                                                                        |  | In final testing and qualification                                                                                                                              
|                 

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Sales and Marketing






Customers




|                                                   |  |                                          
|-------------------------------------------------- |  | -----------------------------------------
|Telecommunications Network                         |  | Defense Electronics and Homeland Security
|                                                   |  |                                          
|Nokia                                              |  | The Boeing Company                       
|Nera ASA                                           |  | SafeView, Inc.                           
|Stratex Networks, Inc.                             |  | Lockheed Martin Corporation              
|Powerwave Technologies, Inc. (formerly LGP Allgon) |  | Suntron Corporation                      
|Siemens AG                                         |  |                                          



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Acquisitions




|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|------------------------------------------------------------------------------------------------------------------------------ |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|Acquisition                                                                                                                    |  |  | Structure                                                                                                                                                                                                            |  |  | Key Benefits                                                                                                                                                                                                                                                                                                                                                                                                             | 
|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|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,
    including Raytheon Company, Lockheed Martin Corporation and BAE
    Systems plc
     Added new customers, including Thales Group SA,
    L-3 Communications Corp. and Xicom Technology
     Formed core of Endwave Defense Systems division | 
|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|Verticom, 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 market                                                                                                                                                                                             | 
|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|Arcom 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 products                                                                                                                                                                                                                                                                                            | 
|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|Signal 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 production                                                                                                                                        | 
|                                                                                                                               |  |  |                                                                                                                                                                                                                      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|M/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




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| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | Product pricing and the ability to offer low-cost solutions;               
|
| |  | Technical leadership and product performance;                              
|
| |  | 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.




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Patents and Intellectual Property Rights








Operations






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Backlog






Governmental Regulation






Employees




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Available Information


http://www.sec.gov


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RISK FACTORS


You should consider carefully the following risk factors as
well as other information in this report and the documents
incorporated by reference herein or therein, before investing
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 Nokia, 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.




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.








19



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##### Table of Contents





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 have fluctuated significantly in the
past and are likely to continue to do so in future periods.






| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | variations in the timing and size of, or cancellations or
    reductions of, customer orders and shipments;                                                                 
|
| |  | variations in the availability, cost and quality of components
    from our suppliers, particularly from our single source
    suppliers and suppliers of scarce components;
|
| |  | competitive factors, including pricing, availability and demand
    for competing products;                                                                                 
|
| |  | constraints on our manufacturing capacity;                                                                                                                                  
|
| |  | variability of the product development and sales cycle with our
    customers;                                                                                              
|
| |  | variations in our manufacturing yields and other factors
    affecting our manufacturing costs;                                                                             
|
| |  | changes in our sales prices;                                                                                                                                                
|
| |  | changes in the mix of products with different gross margins;                                                                                                                
|
| |  | progress under significant development contracts;                                                                                                                           
|
| |  | obsolescence of our component inventories;                                                                                                                                  
|
| |  | hiring and loss of personnel, particularly in manufacturing,
    research and development and sales and marketing; and                                                      
|
| |  | product defect claims and associated warranty expenses.                                                                                                                     

Our operating results fluctuate significantly based on
seasonal factors in the telecommunications network market.




20



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Because of the scarcity of some components and our dependence
on single source suppliers for some other components, we may be
unable to obtain an adequate supply of components, 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;                                           
|
| |  | lead-free surface mount components;                           
|
| |  | high-frequency circuit boards;                                
|
| |  | custom connectors;                                            
|
| |  | electromagnetic housings;                                     
|
| |  | yttrium iron garnet components; and                           
|
| |  | magnetic components.                                          



We rely heavily on a Thailand facility of HANA
Microelectronics Co., Ltd., a third-party 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.




21



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We rely on 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 Velocium, without adequate notice would
adversely impact our ability to fill customer orders and could
damage our customer relationships.






We are subject to risks associated with acquisitions.






| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | 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.



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.




22



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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.






Competitive conditions may require us to reduce prices in the
future and, as a result, we may need to reduce our costs in
order to be profitable.




23



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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.








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;                                                                            

24



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| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | 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.                                                              





Because we do not have long-term commitments from many of our
customers, we must estimate customer demand, and errors in our
estimates could have negative effects on our inventory levels
and revenues.




Some of our customer contracts require us to manufacture
products designed by our customers. While we intend to convert
these products to products of our own design, such transitions
may be difficult to implement and delays or difficulties in
doing so could harm our operating results.




25



---



##### Table of Contents





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








26



---



##### Table of Contents







Our ability to maintain or increase our sales in
international markets may be limited by risks related to
international trade and marketing.






| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | changing regulations of various countries or regulating agencies
    effecting radio deployments and spectrum use;            
|
| |  | difficulties in complying with foreign laws and regulations and
    obtaining foreign governmental approvals and permits;     
|
| |  | delays in or prohibitions against exporting products resulting
    from export restrictions for our products and technologies;
|
| |  | international trade disagreements or embargoes;                                                                               
|
| |  | fluctuations in foreign currencies, especially the Euro, against
    the United States dollar;                                
|
| |  | political and economic instability;                                                                                           
|
| |  | unforeseen effects of terrorism and terrorist activities;                                                                     
|
| |  | adverse tax consequences; and                                                                                                 
|
| |  | seasonal reductions in business activity.                                                                                     

Starting in the third quarter of 2005, we are required to
expense employee stock options, which could significantly
increase our net loss or reduce our net income in future
periods.




27



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We currently transact business only in United States dollars.
In the future, economic or competitive situations may require us
to conduct business in other currencies. If this were to happen,
we could become subject to currency exchange rate volatility,
which could have an adverse impact on our operating results and
financial condition.




Risks Relating to Our Industry


We are required in many cases to obtain government approvals
and licenses prior to shipping our products and rejections or
delays in getting approvals could delay or reduce revenues.




Our acquisition of JCA Technology and our own marketing and
sales efforts have increased the volume of our products used by
the United States government. Our revenues in this market
largely depend upon the funding and implementation decisions of
Congress and United States government agencies. These decisions
could change abruptly and without notice, unexpectedly reducing
our current or future revenues in this market.




Many of our customers operate in Euro-based economies. The
current rise in the value of the Euro could make those
customers products uncompetitive in world markets, thereby
reducing their revenues and causing us to reduce our prices to
maintain those customer relationships.




Our failure to compete effectively could reduce our revenues
and margins.




28



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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.




Risks Relating to Ownership of Our Stock


The market price of our common stock has historically
fluctuated and is likely to fluctuate in the future.






| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our financial performance or the performance of our competitors;                                                                                 
|
| |  | technological innovations or other trends or changes in the
    telecommunications 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                                                     
|
| |  | low trading volume of our common stock.                                                                                                          



29



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##### Table of Contents





Our ability to achieve our business goals is substantially
dependent on our access to sufficient capital.




Northrop Grumman Corporation controls a large percentage of
our common stock and is able to control the outcome of matters
requiring stockholder approval.




If securities analysts do not publish research or reports
about our business or if they downgrade our stock, the price of
our common stock could decline.




Our certificate of incorporation, bylaws and arrangements
with executive officers contain provisions that could delay or
prevent a change in control.




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2 3


31



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|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

Legal Proceedings









|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                                    |                |      |   |       |     |  |   |       | 
|----------------------------------- | -------------- | ---- | - | ----- | --- |  | - | ----- | 
|                                    |                | High |   |       | Low | 
|                                    |                |      |   |       |     | 
|Fiscal Year Ended December 31, 2003 |                |      |   |       |     |  |   |      
|                                    | First Quarter  |      | $ | 1.95  |     |  | $ | 0.82  | 
|                                    | Second Quarter |      |   | 3.24  |     |  |   | 1.00  | 
|                                    | Third Quarter  |      |   | 6.91  |     |  |   | 2.64  | 
|                                    | Fourth Quarter |      |   | 10.60 |     |  |   | 5.39  | 
|Fiscal Year Ended December 31, 2004 |                |      |   |       |     |  |   |      
|                                    | First Quarter  |      |   | 12.96 |     |  |   | 7.10  | 
|                                    | Second Quarter |      |   | 10.20 |     |  |   | 5.50  | 
|                                    | Third Quarter  |      |   | 14.60 |     |  |   | 6.83  | 
|                                    | Fourth Quarter |      |   | 19.20 |     |  |   | 12.70 | 





33



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##### Table of Contents






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, 2002, 2003 and 2004 and the selected
consolidated balance sheet data as of December 31, 2003 and
2004 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, 2000 and 2001 and the
selected consolidated balance sheet data as of December 31,
2000, 2001 and 2002 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. All per-share
amounts for all periods presented have been restated to reflect
the 1-for-4 reverse stock split that became effective after the
close of business on June 28, 2002.


|                                                                                                      |  |                                       |         |   |      |   |          |      |  |   |         |   |  |      |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | -------- | ---- |  | - | ------- | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                                                      |  | Fiscal Year Ended December 31,        |        
|                                                                                                      |  |                                       |        
|                                                                                                      |  | 2000                                  |         |   | 2001 |   |          | 2002 |  |   | 2003    |   |  | 2004 |       
|                                                                                                      |  |                                       |         |   |      |   |          |      |  |   |         |   |  |      |       
|                                                                                                      |  | (in thousands, except per share data) |        
|Consolidated Statements of Operations Data:                                                           |  |                                       |         |   |      |   |          |      |  |   |         |   |  |      |        |   |  |   |        |  
|Revenues                                                                                              |  | $                                     | 41,232  |   |      | $ | 34,125   |      |  | $ | 22,572  |   |  | $    | 33,847 |   |  | $ | 33,162 |  
|Cost of product revenues                                                                              |  |                                       | 52,538  |   |      |   | 57,233   |      |  |   | 29,777  |   |  |      | 24,830 |   |  |   | 22,576 |  
|Other operating expenses                                                                              |  |                                       | 50,437  |   |      |   | 136,463  |      |  |   | 27,995  |   |  |      | 17,568 |   |  |   | 16,115 |  
|Loss from operations                                                                                  |  |                                       | (61,743 | ) |      |   | (159,571 | )    |  |   | (35,200 | ) |  |      | (8,551 | ) |  |   | (5,529 | )
|Net loss                                                                                              |  | $                                     | (59,541 | ) |      | $ | (156,746 | )    |  | $ | (31,002 | ) |  | $    | (7,910 | ) |  | $ | (4,404 | )
|Net loss applicable to common stockholders subsequent to the
    merger of TRW Milliwave into Endwave |  | $                                     | (57,536 | ) |      | $ | (156,746 | )    |  | $ | (31,002 | ) |  | $    | (7,910 | ) |  | $ | (4,404 | )
|Basic and diluted net loss per share                                                                  |  | $                                     | (23.76  | ) |      | $ | (17.90   | )    |  | $ | (3.47   | ) |  | $    | (0.87  | ) |  | $ | (0.45  | )

|                                            |  |                |         |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|------------------------------------------- |  | -------------- | ------- |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                                            |  | December 31,   |        
|                                            |  |                |        
|                                            |  | 2000           |         |  | 2001 |   |        | 2002 |  |   | 2003   |  |  | 2004 |       
|                                            |  |                |         |  |      |   |        |      |  |   |        |  |  |      |       
|                                            |  | (in thousands) |        
|Consolidated Balance Sheet Data:            |  |                |         |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|Cash and cash equivalents                   |  | $              | 74,061  |  |      | $ | 21,303 |      |  | $ | 9,224  |  |  | $    | 13,408 |  |  | $ | 14,158 | 
|Short-term investments                      |  |                | 26,559  |  |      |   | 35,860 |      |  |   | 19,801 |  |  |      | 15,890 |  |  |   | 10,979 | 
|Total assets                                |  |                | 250,665 |  |      |   | 99,037 |      |  |   | 60,049 |  |  |      | 53,074 |  |  |   | 50,094 | 
|Long-term obligations, less current portion |  |                | 5,015   |  |      |   | 3,841  |      |  |   | 1,075  |  |  |      | 363    |  |  |   | 559    | 
|Total stockholders equity                  |  |                | 224,630 |  |      |   | 77,129 |      |  |   | 47,506 |  |  |      | 41,043 |  |  |   | 39,064 | 

34



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|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|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






| |                          
| | -------------------------
| | Evolution of our Business



Dramatic Cost Reductions.






35



---



##### Table of Contents











Growth by Acquisition.


Customer Diversification.




36



---



##### Table of Contents







| |                       
| | ----------------------
| | Trends in our Business

Customer and Market Concentration.


Growth in Outsourcing.


Telecommunications Industry Consolidation.


Costs and Risks Associated with Acquisitions.


Costs and Risks Associated with Market Diversification.


37



---



##### Table of Contents





Cost Efficiencies and Risks Associated with Limited Number of
Semiconductor Foundries.




Seasonality.


Critical Accounting Policies




| |        
| | -------
| | General





| |                    
| | -------------------
| | Revenue Recognition



38



---



##### Table of Contents







| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |                  
| | -----------------
| | Warranty Reserves







39



---



##### Table of Contents







| |                    
| | -------------------
| | Inventory Valuation





| |                  
| | -----------------
| | Long-Lived Assets





| |                      
| | ---------------------
| | Restructuring Charges





| |               
| | --------------
| | Deferred Taxes





| |                      
| | ---------------------
| | Business Combinations



40



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##### Table of Contents







Results of Operations




|                               |                                                             |                          |         |        |        |   |        |        |        |   |        |        |        | 
|------------------------------ | ----------------------------------------------------------- | ------------------------ | ------- | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                               |                                                             | Fiscal Year Ended        |        
|                               |                                                             | December 31,             |        
|                               |                                                             |                          |        
|                               |                                                             | 2002                     |         |        | 2003   |   |        | 2004   |       
|                               |                                                             |                          |         |        |        |   |        |        |       
|                               |                                                             | (In thousands)           |        
|Revenues:                      |                                                             |                          |         |        |        |   |        |        |        |   |        |       
|                               | Product revenues                                            |                          | $       | 22,149 |        |   | $      | 32,135 |        |   | $      | 32,330 |       
|                               | Development fees                                            |                          |         | 423    |        |   |        | 1,712  |        |   |        | 832    |       
|                               |                                                             |                          |         |        |        |   |        |        |       
|                               |                                                             | Total revenues           |         |        | 22,572 |   |        |        | 33,847 |   |        |        | 33,162 | 
|                               |                                                             |                          |         |        |        |   |        |        |       
|Costs and expenses:            |                                                             |                          |         |        |        |   |        |        |        |   |        |       
|                               | Cost of product revenues                                    |                          |         | 29,777 |        |   |        | 24,830 |        |   |        | 22,389 |       
|                               | Cost of product revenues, amortization of intangible assets |                          |         |       |        |   |        |       |        |   |        | 187    |       
|                               | Research and development                                    |                          |         | 9,205  |        |   |        | 4,462  |        |   |        | 4,957  |       
|                               | Selling, general and administrative                         |                          |         | 9,223  |        |   |        | 8,755  |        |   |        | 7,527  |       
|                               | In-process research and development                         |                          |         |       |        |   |        |       |        |   |        | 320    |       
|                               | Amortization of intangible assets                           |                          |         |       |        |   |        |       |        |   |        | 182    |       
|                               | Restructuring charges, net                                  |                          |         | 8,210  |        |   |        | 304    |        |   |        | 2,895  |       
|                               | Impairment of long-lived assets                             |                          |         |       |        |   |        | 2,589  |        |   |        | 389    |       
|                               | Loss (recovery) on building sublease                        |                          |         |       |        |   |        | 662    |        |   |        | (359   | )     
|                               | Amortization of deferred stock compensation                 |                          |         | 1,357  |        |   |        | 796    |        |   |        | 204    |       
|                               |                                                             |                          |         |        |        |   |        |        |       
|                               |                                                             | Total costs and expenses |         |        | 57,772 |   |        |        | 42,398 |   |        |        | 38,691 | 
|                               |                                                             |                          |         |        |        |   |        |        |       
|Loss from operations           |                                                             |                          | (35,200 | )      |        |   | (8,551 | )      |        |   | (5,529 | )     
|Interest and other income, net |                                                             |                          | 4,198   |        |        |   | 641    |        |        |   | 1,125  |       
|                               |                                                             |                          |         |        |        |   |        |        |       
|Net loss                       |                                                             | $                        | (31,002 | )      |        | $ | (7,910 | )      |        | $ | (4,404 | )     
|                               |                                                             |                          |         |        |        |   |        |        |       

41



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|                               |                                                             |                          |        |       |       |   |       |      |       |   |       |      |       |  
|------------------------------ | ----------------------------------------------------------- | ------------------------ | ------ | ----- | ----- | - | ----- | ---- | ----- | - | ----- | ---- | ----- | -
|                               |                                                             | Fiscal Year Ended        |       
|                               |                                                             | December 31,             |       
|                               |                                                             |                          |       
|                               |                                                             | 2002                     |        |       | 2003  |   |       | 2004 |      
|                               |                                                             |                          |        |       |       |   |       |      |      
|                               |                                                             | (As a percentage         |       
|                               |                                                             | of total revenues)       |       
|Revenues:                      |                                                             |                          |        |       |       |   |       |      |       |   |       |     
|                               | Product revenues                                            |                          |        | 98.1  | %     |   |       | 94.9 | %     |   |       | 97.5 | %    
|                               | Development fees                                            |                          |        | 1.9   |       |   |       | 5.1  |       |   |       | 2.5  |      
|                               |                                                             |                          |        |       |       |   |       |      |      
|                               |                                                             | Total revenues           |        |       | 100.0 | % |       |      | 100.0 | % |       |      | 100.0 | %
|                               |                                                             |                          |        |       |       |   |       |      |      
|Costs and expenses:            |                                                             |                          |        |       |       |   |       |      |       |   |       |     
|                               | Cost of product revenues                                    |                          |        | 131.9 |       |   |       | 73.4 |       |   |       | 67.5 |      
|                               | Cost of product revenues, amortization of intangible assets |                          |        |      |       |   |       |     |       |   |       | 0.6  |      
|                               | Research and development                                    |                          |        | 40.8  |       |   |       | 13.2 |       |   |       | 14.9 |      
|                               | Selling, general and administrative                         |                          |        | 40.9  |       |   |       | 25.9 |       |   |       | 22.7 |      
|                               | In-process research and development                         |                          |        |      |       |   |       |     |       |   |       | 1.0  |      
|                               | Amortization of intangible assets                           |                          |        |      |       |   |       |     |       |   |       | 0.5  |      
|                               | Restructuring charges, net                                  |                          |        | 36.4  |       |   |       | 0.9  |       |   |       | 8.7  |      
|                               | Impairment of long-lived assets                             |                          |        |      |       |   |       | 7.6  |       |   |       | 1.2  |      
|                               | Loss (recovery) on building sublease                        |                          |        |      |       |   |       | 2.0  |       |   |       | (1.1 | )    
|                               | Amortization of deferred stock compensation                 |                          |        | 5.9   |       |   |       | 2.3  |       |   |       | 0.7  |      
|                               |                                                             |                          |        |       |       |   |       |      |      
|                               |                                                             | Total costs and expenses |        |       | 255.9 |   |       |      | 125.3 |   |       |      | 116.7 |  
|                               |                                                             |                          |        |       |       |   |       |      |      
|Loss from operations           |                                                             |                          | (155.9 | )     |       |   | (25.3 | )    |       |   | (16.7 | )   
|Interest and other income, net |                                                             |                          | 18.6   |       |       |   | 1.9   |      |       |   | 3.4   |     
|                               |                                                             |                          |        |       |       |   |       |      |      
|Net loss                       |                                                             |                          | (137.3 | )%    |       |   | (23.4 | )%   |       |   | (13.3 | )%  
|                               |                                                             |                          |        |       |       |   |       |      |      

Results of Operations




| |                                                                          
| | -------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to year ended
    December 31, 2003

Revenues.




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Cost of product revenues.




Research and development expenses.


Selling, general and administrative expenses.


In-process research and development.


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Amortization of intangible assets.




Restructuring charges, net.






Impairment of long-lived assets.






Amortization of deferred stock compensation.


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Loss (recovery) on building sublease.


Interest income, expense and other, net.






Year ended December 31,
2003 compared to year ended December 31, 2002


Revenues.


Cost of product revenues.


Research and development expenses.


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Selling, general and administrative expenses.


Restructuring charges, net, and loss on sublease.




Impairment of long-lived assets.




Amortization of deferred stock compensation.


Interest income, expense and other, net.






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Liquidity and Capital Resources




|                                                                                        |  |                                |         |   |      |   |        |      |  |   |        |  
|--------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                        |  | Fiscal Year Ended December 31, |        
|                                                                                        |  |                                |        
|                                                                                        |  | 2002                           |         |   | 2003 |   |        | 2004 | 
|                                                                                        |  |                                |         |   |      |   |        |      | 
|                                                                                        |  | (In thousands)                 |        
|Net cash provided by (used in) operating activities                                     |  | $                              | (19,889 | ) |      | $ | 221    |      |  | $ | (4,970 | )
|Net cash provided by investing activities                                               |  |                                | 10,781  |   |      |   | 5,132  |      |  |   | 4,249  |  
|Net cash provided by (used in) financing activities                                     |  |                                | (2,971  | ) |      |   | (1,169 | )    |  |   | 1,471  |  
|Cash, cash equivalents, restricted cash and short-term
    investments at end of period |  | $                              | 30,585  |   |      | $ | 30,076 |      |  | $ | 25,137 |  











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|                                |  |                  |       | 
|------------------------------- |  | ---------------- | ----- | 
|Years Ending December 31,       |  | Operating Leases |      
|                                |  |                  |      
|                                |  | (In thousands)   |      
|2005                            |  | $                | 529   | 
|2006                            |  |                  | 345   | 
|2007                            |  |                  | 200   | 
|2008                            |  |                  | 206   | 
|2009                            |  |                  | 105   | 
|                                |  |                  |      
|Total minimum payments required |  | $                | 1,385 | 
|                                |  |                  |      

Recent Accounting Pronouncements




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|          |                                                               
|--------- | --------------------------------------------------------------
|Item. 7A. | Qualitative and Quantitative Disclosures about Market
    Risk

Qualitative and Quantitative Disclosures about Market Risk








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|         |                                            
|-------- | -------------------------------------------
|Item. 8. | Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                               |  |        |    | 
|-------------------------------------------------------------- |  | ------ | -- | 
|                                                               |  | Page   |   
|                                                               |  | Number |   
|                                                               |  |        |   
|Reports of Independent Registered Public
    Accounting Firms  |  |        | 51 | 
|Consolidated Balance Sheets                                    |  |        | 53 | 
|Consolidated Statements of Operations                          |  |        | 54 | 
|Consolidated Statements of Changes in
    Stockholders Equity |  |        | 55 | 
|Consolidated Statements of Cash Flows                          |  |        | 56 | 
|Notes to Consolidated Financial
    Statements                 |  |        | 57 | 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                                 
| | --------------------------------
| | /s/ Burr, Pilger &
    Mayer LLP









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REPORT OF ERNST & YOUNG LLP, INDEPENDENT


REGISTERED PUBLIC ACCOUNTING FIRM














| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





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ENDWAVE CORPORATION





CONSOLIDATED BALANCE SHEETS


|                                        |                                                                                                                                                              |                                            |        |          |        |   |        |          |        | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------ | -------- | ------ | - | ------ | -------- | ------ | 
|                                        |                                                                                                                                                              | December 31,                               |       
|                                        |                                                                                                                                                              |                                            |       
|                                        |                                                                                                                                                              | 2004                                       |        |          | 2003   |  
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                        |                                                                                                                                                              | (In thousands, except                      |       
|                                        |                                                                                                                                                              | share and per share data)                  |       
|ASSETS                                 
|Current assets:                         |                                                                                                                                                              |                                            |        |          |        |   |        |         
|                                        | Cash and cash equivalents                                                                                                                                    |                                            | $      | 14,158   |        |   | $      | 13,408   |       
|                                        | Restricted cash                                                                                                                                              |                                            |        |         |        |   |        | 778      |       
|                                        | Short-term investments                                                                                                                                       |                                            |        | 10,979   |        |   |        | 15,890   |       
|                                        | Accounts receivable, net of allowance for doubtful accounts of
    $243 in 2004 and $284 in 2003                                                             |                                            |        | 8,673    |        |   |        | 6,476    |       
|                                        | Accounts receivable, from affiliate                                                                                                                          |                                            |        | 15       |        |   |        | 105      |       
|                                        | Inventories                                                                                                                                                  |                                            |        | 7,866    |        |   |        | 8,119    |       
|                                        | Equipment held-for-sale                                                                                                                                      |                                            |        |         |        |   |        | 306      |       
|                                        | Other current assets                                                                                                                                         |                                            |        | 477      |        |   |        | 592      |       
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                        |                                                                                                                                                              | Total current assets                       |        |          | 42,168 |   |        |          | 45,674 | 
|                                        | Property, plant and equipment, net                                                                                                                           |                                            |        | 2,394    |        |   |        | 7,260    |       
|                                        | Other assets                                                                                                                                                 |                                            |        | 125      |        |   |        | 140      |       
|                                        | Goodwill and intangible assets                                                                                                                               |                                            |        | 5,407    |        |   |        |         |       
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|Total assets                            |                                                                                                                                                              | $                                          | 50,094 |          |        | $ | 53,074 |         
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                       
|LIABILITIES AND STOCKHOLDERS EQUITY   
|Current liabilities:                    |                                                                                                                                                              |                                            |        |          |        |   |        |         
|                                        | Accounts payable                                                                                                                                             |                                            | $      | 2,308    |        |   | $      | 1,733    |       
|                                        | Accounts payable to affiliate                                                                                                                                |                                            |        | 1,279    |        |   |        | 1,355    |       
|                                        | Accrued warranty                                                                                                                                             |                                            |        | 4,488    |        |   |        | 5,835    |       
|                                        | Accrued compensation                                                                                                                                         |                                            |        | 1,370    |        |   |        | 1,139    |       
|                                        | Note payable, current                                                                                                                                        |                                            |        |         |        |   |        | 516      |       
|                                        | Restructuring liabilities, current                                                                                                                           |                                            |        | 274      |        |   |        | 98       |       
|                                        | Other current liabilities                                                                                                                                    |                                            |        | 752      |        |   |        | 992      |       
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                        |                                                                                                                                                              | Total current liabilities                  |        |          | 10,471 |   |        |          | 11,668 | 
|                                        | Note payable, less current portion                                                                                                                           |                                            |        |         |        |   |        | 262      |       
|                                        | Other long-term liabilities                                                                                                                                  |                                            |        | 559      |        |   |        | 101      |       
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                        |                                                                                                                                                              | Total liabilities                          |        |          | 11,030 |   |        |          | 12,031 | 
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|Commitments and contingencies (Note 10) |                                                                                                                                                              |                                            |        |          |        |   |        |         
|Stockholders equity:                   |                                                                                                                                                              |                                            |        |          |        |   |        |         
|                                        | Convertible preferred stock $0.001 par value;
    5,000,000 shares authorized and none issued and outstanding                                                |                                            |        |         |        |   |        |         |       
|                                        | Common stock, $0.001 par value; 100,000,000 shares
    authorized, 10,499,944 and 9,347,585 shares issued and
    outstanding in 2004 and 2003, respectively |                                            |        | 10       |        |   |        | 9        |       
|                                        | Additional paid-in capital                                                                                                                                   |                                            |        | 304,658  |        |   |        | 302,427  |       
|                                        | Treasury stock, at cost (39,150 shares in 2004 and 2003)                                                                                                     |                                            |        | (79      | )      |   |        | (79      | )     
|                                        | Deferred stock compensation                                                                                                                                  |                                            |        |         |        |   |        | (221     | )     
|                                        | Accumulated other comprehensive loss                                                                                                                         |                                            |        | (30      | )      |   |        | (2       | )     
|                                        | Accumulated deficit                                                                                                                                          |                                            |        | (265,495 | )      |   |        | (261,091 | )     
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                        |                                                                                                                                                              | Total stockholders equity                 |        |          | 39,064 |   |        |          | 41,043 | 
|                                        |                                                                                                                                                              |                                            |        |          |        |  
|                                        |                                                                                                                                                              | Total liabilities and stockholders equity |        | $        | 50,094 |   |        | $        | 53,074 | 
|                                        |                                                                                                                                                              |                                            |        |          |        |  



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ENDWAVE CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


|                               |                                                                                                     |                             |        |           |        |   |        |           |        |   |         |           |        | 
|------------------------------ | --------------------------------------------------------------------------------------------------- | --------------------------- | ------ | --------- | ------ | - | ------ | --------- | ------ | - | ------- | --------- | ------ | 
|                               |                                                                                                     | Year Ended December 31,     |       
|                               |                                                                                                     |                             |       
|                               |                                                                                                     | 2004                        |        |           | 2003   |   |        | 2002      |       
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|                               |                                                                                                     | (In thousands, except share |       
|                               |                                                                                                     | and per share data)         |       
|Revenues:                      |                                                                                                     |                             |        |           |        |   |        |           |        |   |         |          
|                               | Product revenues ($86, $345, and $837 from affiliate,
    respectively)                             |                             | $      | 32,330    |        |   | $      | 32,135    |        |   | $       | 22,149    |       
|                               | Development fees                                                                                    |                             |        | 832       |        |   |        | 1,712     |        |   |         | 423       |       
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|                               |                                                                                                     | Total revenues              |        |           | 33,162 |   |        |           | 33,847 |   |         |           | 22,572 | 
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|Costs and expenses:            |                                                                                                     |                             |        |           |        |   |        |           |        |   |         |          
|                               | Cost of product revenues ($51, $124, and $235 related to
    revenues from affiliate, respectively) |                             |        | 22,389    |        |   |        | 24,830    |        |   |         | 29,777    |       
|                               | Cost of product revenues, amortization of intangible assets                                         |                             |        | 187       |        |   |        |          |        |   |         |          |       
|                               | Research and development                                                                            |                             |        | 4,957     |        |   |        | 4,462     |        |   |         | 9,205     |       
|                               | Selling, general and administrative                                                                 |                             |        | 7,527     |        |   |        | 8,755     |        |   |         | 9,223     |       
|                               | In-process research and development                                                                 |                             |        | 320       |        |   |        |          |        |   |         |          |       
|                               | Amortization of intangible assets                                                                   |                             |        | 182       |        |   |        |          |        |   |         |          |       
|                               | Restructuring charges, net                                                                          |                             |        | 2,895     |        |   |        | 304       |        |   |         | 8,210     |       
|                               | Impairment of long-lived assets                                                                     |                             |        | 389       |        |   |        | 2,589     |        |   |         |          |       
|                               | Loss (recovery) on building sublease                                                                |                             |        | (359      | )      |   |        | 662       |        |   |         |          |       
|                               | Amortization of deferred stock compensation*                                                        |                             |        | 204       |        |   |        | 796       |        |   |         | 1,357     |       
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|                               |                                                                                                     | Total costs and expenses    |        |           | 38,691 |   |        |           | 42,398 |   |         |           | 57,772 | 
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|Loss from operations           |                                                                                                     |                             | (5,529 | )         |        |   | (8,551 | )         |        |   | (35,200 | )        
|Interest and other income, net |                                                                                                     |                             | 1,144  |           |        |   | 753    |           |        |   | 4,597   |          
|Interest expense               |                                                                                                     |                             | (19    | )         |        |   | (112   | )         |        |   | (399    | )        
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|Net loss                       |                                                                                                     | $                           | (4,404 | )         |        | $ | (7,910 | )         |        | $ | (31,002 | )        
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|                               | Basic and diluted net loss per share                                                                |                             | $      | (0.45     | )      |   | $      | (0.87     | )      |   | $       | (3.47     | )     
|                               |                                                                                                     |                             |        |           |        |   |        |           |       
|                               | Shares used in computing basic and diluted net loss per share                                       |                             |        | 9,824,633 |        |   |        | 9,134,626 |        |   |         | 8,937,417 |       
|                               |                                                                                                     |                             |        |           |        |   |        |           |       






|  |                                             
|- | --------------------------------------------
|* | Amortization of deferred stock compensation:

|                                    |  |   |     |  |  |   |     |  |  |   |       |  
|----------------------------------- |  | - | --- |  |  | - | --- |  |  | - | ----- | -
|Cost of product revenues            |  | $ | 109 |  |  | $ | 193 |  |  | $ | (358  | )
|Research and development            |  |   | 44  |  |  |   | 225 |  |  |   | 724   |  
|Selling, general and administrative |  |   | 51  |  |  |   | 378 |  |  |   | 991   |  
|                                    |  |   |     |  |  |   |     |  | 
|                                    |  | $ | 204 |  |  | $ | 796 |  |  | $ | 1,357 |  
|                                    |  |   |     |  |  |   |     |  | 



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ENDWAVE CORPORATION





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |     |   |   |          |         |   |   |        |         |  
|------------------------------- | ---------------------------------------------------------------- | --------------------------------- | ---------- | ------- | ------ | ---------- | -- | ------- |  | - | -------- | ----------- | - | ------------ | --- | --- | ------------- | - | ------ | ----------- |  | - | ----- | --- | - | - | -------- | ------- | - | - | ------ | ------- | -
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          | Accumulated |   |              |     |     |              
|                                |                                                                  |                                   |            |         |        | Additional |    |         |  |   | Deferred |             |   | Other        |     |     |               |   |       
|                                |                                                                  | Shares of                         |            |         | Common |            |    | Paid-In |  |   | Treasury |             |   | Stock        |     |     | Comprehensive |   |        | Accumulated |  |   |      
|                                |                                                                  | Common Stock                      |            |         | Stock  |            |    | Capital |  |   | Stock    |             |   | Compensation |     |     | Income (Loss) |   |        | Deficit     |  |   | Total |    
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|                                |                                                                  | (In thousands, except share data) |           
|Balance as of December 31, 2001 |                                                                  |                                   | 8,904,377  |         |        | $          | 9  |         |  | $ | 304,815  |             |   | $            |    |     |               | $ | (5,516 | )           |  | $ |      |     |   | $ | (222,179 | )       |   | $ | 77,129 |        
|                                | Unrealized loss on short-term investments                        |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       | (67 | ) |   |          |        |   |   |        | (67     | )
|                                | Net loss                                                         |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          | (31,002 | ) |   |        | (31,002 | )
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|                                | Comprehensive loss                                               |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |     |   |   |          |         |   |   |        | (31,069 | )
|                                | Exercise of stock options                                        |                                   |            | 1,000   |        |            |    |        |  |   |          | 5           |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 5       |  
|                                | Amortization of deferred stock compensation                      |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        | 1,357       |  |   |       |    |   |   |          |        |   |   |        | 1,357   |  
|                                | Reversal of deferred stock compensation due to forfeited options |                                   |            |         |        |            |    |        |  |   |          | (2,867      | ) |              |     |    |               |   |        | 2,867       |  |   |       |    |   |   |          |        |   |   |        |        |  
|                                | Issuance of common stock under employee stock purchase plan      |                                   |            | 109,354 |        |            |    |         |  |   |          | 163         |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 163     |  
|                                | Fractional shares relating to stock split                        |                                   |            | (70     | )      |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        |        |  
|                                | Purchase of treasury stock                                       |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     | (79 | )             |   |        |            |  |   |       |    |   |   |          |        |   |   |        | (79     | )
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|Balance as of December 31, 2002 |                                                                  |                                   | 9,014,661  |         |        |            | 9  |         |  |   | 302,116  |             |   |              | (79 | )   |               |   | (1,292 | )           |  |   | (67   | )   |   |   | (253,181 | )       |   |   | 47,506 |        
|                                | Unrealized gain on short-term investments                        |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       | 65  |   |   |          |        |   |   |        | 65      |  
|                                | Net loss                                                         |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          | (7,910  | ) |   |        | (7,910  | )
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|                                | Comprehensive loss                                               |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |     |   |   |          |         |   |   |        | (7,845  | )
|                                | Exercise of stock options                                        |                                   |            | 211,776 |        |            |    |        |  |   |          | 493         |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 493     |  
|                                | Compensation recognized under employee stock plans               |                                   |            |        |        |            |    |        |  |   |          | 124         |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 124     |  
|                                | Amortization of deferred stock compensation                      |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        | 672         |  |   |       |    |   |   |          |        |   |   |        | 672     |  
|                                | Reversal of deferred stock compensation due to forfeited options |                                   |            |        |        |            |    |        |  |   |          | (399        | ) |              |     |    |               |   |        | 399         |  |   |       |    |   |   |          |        |   |   |        |        |  
|                                | Issuance of common stock under employee stock purchase plan      |                                   |            | 121,148 |        |            |    |        |  |   |          | 93          |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 93      |  
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|Balance as of December 31, 2003 |                                                                  |                                   | 9,347,585  |         |        |            | 9  |         |  |   | 302,427  |             |   |              | (79 | )   |               |   | (221   | )           |  |   | (2    | )   |   |   | (261,091 | )       |   |   | 41,043 |        
|                                | Unrealized loss on short-term investments                        |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       | (28 | ) |   |          |        |   |   |        | (28     | )
|                                | Net loss                                                         |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          | (4,404  | ) |   |        | (4,404  | )
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|                                | Comprehensive loss                                               |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |     |   |   |          |         |   |   |        | (4,432  | )
|                                | Exercise of stock options                                        |                                   |            | 936,991 |        |            |    | 1       |  |   |          | 2,047       |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 2,048   |  
|                                | Amortization of deferred stock compensation                      |                                   |            |        |        |            |    |        |  |   |          |            |   |              |     |    |               |   |        | 204         |  |   |       |    |   |   |          |        |   |   |        | 204     |  
|                                | Reversal of deferred stock compensation due to forfeited options |                                   |            |        |        |            |    |        |  |   |          | (17         | ) |              |     |    |               |   |        | 17          |  |   |       |    |   |   |          |        |   |   |        |        |  
|                                | Issuance of common stock under employee stock purchase plan      |                                   |            | 215,368 |        |            |    |        |  |   |          | 201         |   |              |     |    |               |   |        |            |  |   |       |    |   |   |          |        |   |   |        | 201     |  
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    
|Balance as of December 31, 2004 |                                                                  |                                   | 10,499,944 |         |        | $          | 10 |         |  | $ | 304,658  |             |   | $            | (79 | )   |               | $ |       |             |  | $ | (30   | )   |   | $ | (265,495 | )       |   | $ | 39,064 |        
|                                |                                                                  |                                   |            |         |        |            |    |         |  |   |          |             |   |              |     |     |               |   |        |             |  |   |       |    



55



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ENDWAVE CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |        |        |   |         |        |        |  
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------------------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | -
|                                                  |                                                                                               | Year Ended December 31,                            |                                                                 
|                                                  |                                                                                               |                                                    |                                                                 
|                                                  |                                                                                               | 2004                                               |                                                                  |         | 2003   |        |   | 2002    |       
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|                                                  |                                                                                               | (In thousands)                                     |                                                                 
|Operating activities:                             |                                                                                               |                                                    |                                                                  |         |        |        |   |         |        |        |   |        
|                                                  | Net loss                                                                                      |                                                    | $                                                                | (4,404  | )      |        | $ | (7,910  | )      |        | $ | (31,002 | )     
|                                                  | Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities: |                                                    |                                                                  |         |        |        |   |         |        |        |   |         |       
|                                                  |                                                                                               | In-process research and development                |                                                                  |         | 320    |        |   |         |       |        |   |         |       |       
|                                                  |                                                                                               | Depreciation                                       |                                                                  |         | 1,619  |        |   |         | 2,444  |        |   |         | 4,357  |       
|                                                  |                                                                                               | Restructuring charge, net  non-cash portion       |                                                                  |         | (4     | )      |   |         | 304    |        |   |         | 7,891  |       
|                                                  |                                                                                               | Loss (recovery) on building sublease               |                                                                  |         | (359   | )      |   |         | 662    |        |   |         |       |       
|                                                  |                                                                                               | Impairment of long-lived assets                    |                                                                  |         | 389    |        |   |         | 2,589  |        |   |         |       |       
|                                                  |                                                                                               | Amortization of intangible assets                  |                                                                  |         | 369    |        |   |         |       |        |   |         |       |       
|                                                  |                                                                                               | Compensation recognized under employee stock plans |                                                                  |         |       |        |   |         | 124    |        |   |         |       |       
|                                                  |                                                                                               | Amortization of deferred stock compensation        |                                                                  |         | 204    |        |   |         | 672    |        |   |         | 1,357  |       
|                                                  |                                                                                               | Loss (gain) on disposal of fixed assets, net       |                                                                  |         | (535   | )      |   |         | (260   | )      |   |         | 13     |       
|                                                  |                                                                                               | Changes in operating assets and liabilities:       |                                                                  |         |        |        |   |         |        |        |   |         |        |       
|                                                  |                                                                                               |                                                    | Accounts receivable                                              |         |        | (1,493 | ) |         |        | (2,480 | ) |         |        | (1,307 | )
|                                                  |                                                                                               |                                                    | Inventories                                                      |         |        | 610    |   |         |        | 3,665  |   |         |        | 7,538  |  
|                                                  |                                                                                               |                                                    | Other assets                                                     |         |        | 160    |   |         |        | 134    |   |         |        | 381    |  
|                                                  |                                                                                               |                                                    | Accounts payable                                                 |         |        | 400    |   |         |        | 1,050  |   |         |        | (3,861 | )
|                                                  |                                                                                               |                                                    | Accrued compensation and other current and long term liabilities |         |        | (790   | ) |         |        | (1,025 | ) |         |        | (5,224 | )
|                                                  |                                                                                               |                                                    | Accrued warranty                                                 |         |        | (1,456 | ) |         |        | 252    |   |         |        | (32    | )
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|                                                  | Net cash provided by (used in) operating activities                                           |                                                    |                                                                  | (4,970  | )      |        |   | 221     |        |        |   | (19,889 | )     
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|Investing activities:                             |                                                                                               |                                                    |                                                                  |         |        |        |   |         |        |        |   |        
|                                                  | Purchases of property, plant and equipment                                                    |                                                    |                                                                  | (460    | )      |        |   | (8      | )      |        |   | (614    | )     
|                                                  | Cash paid for the acquisition of businesses                                                   |                                                    |                                                                  | (6,067  | )      |        |   |        |        |        |   | (3,421  | )     
|                                                  | Proceeds on sale of property and equipment                                                    |                                                    |                                                                  | 5,115   |        |        |   | 382     |        |        |   | 384     |       
|                                                  | Restricted cash                                                                               |                                                    |                                                                  | 778     |        |        |   | 782     |        |        |   | (1,560  | )     
|                                                  | Purchases of short term investments                                                           |                                                    |                                                                  | (13,037 | )      |        |   | (27,280 | )      |        |   | (61,142 | )     
|                                                  | Proceeds on maturities of short-term investments                                              |                                                    |                                                                  | 17,920  |        |        |   | 31,256  |        |        |   | 77,134  |       
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|                                                  | Net cash provided by investing activities                                                     |                                                    |                                                                  | 4,249   |        |        |   | 5,132   |        |        |   | 10,781  |       
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|Financing activities:                             |                                                                                               |                                                    |                                                                  |         |        |        |   |         |        |        |   |        
|                                                  | Payments on capital lease obligations                                                         |                                                    |                                                                  |        |        |        |   | (1,259  | )      |        |   | (4,334  | )     
|                                                  | Payments on notes payable                                                                     |                                                    |                                                                  | (778    | )      |        |   | (496    | )      |        |   |        |       
|                                                  | Issuance of notes payable                                                                     |                                                    |                                                                  |        |        |        |   |        |        |        |   | 1,274   |       
|                                                  | Proceeds from exercises of stock options                                                      |                                                    |                                                                  | 2,048   |        |        |   | 493     |        |        |   | 168     |       
|                                                  | Proceeds from issuance of stock                                                               |                                                    |                                                                  | 201     |        |        |   | 93      |        |        |   |        |       
|                                                  | Purchase of treasury shares                                                                   |                                                    |                                                                  |        |        |        |   |        |        |        |   | (79     | )     
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|                                                  | Net cash provided by (used in) financing activities                                           |                                                    |                                                                  | 1,471   |        |        |   | (1,169  | )      |        |   | (2,971  | )     
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|                                                  | Net increase (decrease) in cash and cash equivalents                                          |                                                    |                                                                  | 750     |        |        |   | 4,184   |        |        |   | (12,079 | )     
|                                                  |                                                                                               | Cash and cash equivalents at beginning of year     |                                                                  |         | 13,408 |        |   |         | 9,224  |        |   |         | 21,303 |       
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|                                                  |                                                                                               | Cash and cash equivalents at end of year           |                                                                  | $       | 14,158 |        |   | $       | 13,408 |        |   | $       | 9,224  |       
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       
|Supplemental disclosure of cash flow information: |                                                                                               |                                                    |                                                                  |         |        |        |   |         |        |        |   |        
|                                                  | Cash paid for interest                                                                        |                                                    | $                                                                | 19      |        |        | $ | 112     |        |        | $ | 399     |       
|                                                  |                                                                                               |                                                    |                                                                  |         |        |        |   |         |       



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.     The Company








2.     Summary of Significant
Accounting Policies


Basis of Consolidation




Reclassification




Use of Estimates




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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Revenue Recognition




Warranty






|                                        |  |                |        |  
|--------------------------------------- |  | -------------- | ------ | -
|                                        |  | (In thousands) |       
|                                        |  |                |       
|Balance at December 31, 2002            |  | $              | 5,583  |  
|Warranties accrued                      |  |                | 582    |  
|Warranties settled or reversed          |  |                | (330   | )
|                                        |  |                |       
|Balance at December 31, 2003            |  |                | 5,835  |  
|Assumed warranty due to JCA acquisition |  |                | 109    |  
|Warranties accrued                      |  |                | 598    |  
|Warranties settled or reversed          |  |                | (2,054 | )
|                                        |  |                |       
|Balance at December 31, 2004            |  | $              | 4,488  |  
|                                        |  |                |       

Allowance for Doubtful Accounts




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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Cash Equivalents and Short-Term Investments






Restricted Cash




Inventory Valuation




Property, Plant and Equipment




|                        |  |             |               | 
|----------------------- |  | ----------- | ------------- | 
|                        |  | Depreciable |              
|                        |  | Life        |              
|                        |  |             |              
|Buildings               |  |             | 30 years      | 
|Software                |  |             | 3 years       | 
|Leasehold improvements  |  |             | 3 years       | 
|Machinery and equipment |  |             | 5 to 7  years | 

Goodwill and Intangible Assets




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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Impairment of Long-Lived Assets












Income Taxes




Restructuring Charges




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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Stock-Based Compensation








|                                  |  |                         |          |   |      |  |          |      |  |  |          |  
|--------------------------------- |  | ----------------------- | -------- | - | ---- |  | -------- | ---- |  |  | -------- | -
|                                  |  | Year Ended December 31, |         
|                                  |  |                         |         
|                                  |  | 2004                    |          |   | 2003 |  |          | 2002 | 
|                                  |  |                         |          |   |      |  |          |      | 
|Stock Option Plans                |  |                         |          |   |      |  |          |      |  |  |          |  
|Expected dividend yield           |  |                         | 0.0      | % |      |  | 0.0      | %    |  |  | 0.0      | %
|Expected stock price volatility   |  |                         | 82       | % |      |  | 116      | %    |  |  | 140      | %
|Risk free interest rate           |  |                         | 3.36     | % |      |  | 4.02     | %    |  |  | 3.60     | %
|Expected life of options in years |  |                         | 5  years |   |      |  | 7  years |      |  |  | 7  years |  



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                  |  |                         |           |   |      |  |           |      |  |  |           |  
|--------------------------------- |  | ----------------------- | --------- | - | ---- |  | --------- | ---- |  |  | --------- | -
|                                  |  | Year Ended December 31, |          
|                                  |  |                         |          
|                                  |  | 2004                    |           |   | 2003 |  |           | 2002 | 
|                                  |  |                         |           |   |      |  |           |      | 
|Employee Stock Purchase Plan      |  |                         |           |   |      |  |           |      |  |  |           |  
|Expected dividend yield           |  |                         | 0.0       | % |      |  | 0.0       | %    |  |  | 0.0       | %
|Expected stock price volatility   |  |                         | 79        | % |      |  | 112       | %    |  |  | 105       | %
|Risk free interest rate           |  |                         | 1.57      | % |      |  | 1.16      | %    |  |  | 1.53      | %
|Expected life of options in years |  |                         | 0.5 years |   |      |  | 0.5 years |      |  |  | 0.5 years |  





|                                                  |                                                                                                                                                                     |                                |       |      |      |   |       |      |   |   |       |      |  
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ----- | ---- | ---- | - | ----- | ---- | - | - | ----- | ---- | -
|                                                  |                                                                                                                                                                     | Year Ended December 31,        |      
|                                                  |                                                                                                                                                                     |                                |      
|                                                  |                                                                                                                                                                     | 2004                           |       |      | 2003 |   |       | 2002 |  
|                                                  |                                                                                                                                                                     |                                |       |      |      |   |       |      |  
|                                                  |                                                                                                                                                                     | (In millions, except per share |      
|                                                  |                                                                                                                                                                     | data)                          |      
|Net loss, as reported                             |                                                                                                                                                                     | $                              | (4.4  | )    |      | $ | (7.9  | )    |   | $ | (31.0 | )   
|                                                  | Add: Stock-based employee compensation expense included in
    reported net loss                                                                                    |                                |       | 0.2  |      |   |       | 0.8  |   |   |       | 1.4  |  
|                                                  | Deduct: Total stock-based employee compensation expense
    determined under fair value based method for stock option awards
    and employee stock purchase rights |                                |       | (2.9 | )    |   |       | (3.9 | ) |   |       | (6.4 | )
|                                                  |                                                                                                                                                                     |                                |       |      |      |   |       |      |  
|Net loss, pro forma                               |                                                                                                                                                                     | $                              | (7.1  | )    |      | $ | (11.0 | )    |   | $ | (36.0 | )   
|                                                  |                                                                                                                                                                     |                                |       |      |      |   |       |      |  
|Basic and diluted net loss per share, as reported |                                                                                                                                                                     | $                              | (0.45 | )    |      | $ | (0.87 | )    |   | $ | (3.47 | )   
|Basic and diluted net loss per share, pro forma   |                                                                                                                                                                     | $                              | (0.72 | )    |      | $ | (1.20 | )    |   | $ | (4.03 | )   

Research and Development Expenses




Concentration of Risk








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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












Fair Value of Financial Instruments




63



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                              |       |                   |        |        |            |       |            |   |  |            |     |     |   |   |        |        | 
|----------------------------- | ----- | ----------------- | ------ | ------ | ---------- | ----- | ---------- | - |  | ---------- | --- | --- | - | - | ------ | ------ | 
|                              |       | December 31, 2004 |       
|                              |       |                   |       
|                              |       |                   |        | Gross  |            | Gross |            |   | 
|                              |       | Amortized         |        |        | Unrealized |       | Unrealized |   |  | Estimated  |    
|                              |       | Cost              |        |        | Gains      |       | Losses     |   |  | Fair Value |    
|                              |       |                   |        |        |            |       |            |   |  |            |    
|                              |       | (In thousands)    |       
|Short-term investments:       |       |                   |        |        |            |       |            |   |  |            |     |     |   |   |        |       
|Commercial paper              |       | $                 | 508    |        |            | $     |           |   |  | $          | (2  | )   |   | $ | 506    |       
|Government agency obligations |       |                   | 10,501 |        |            |       |           |   |  |            | (28 | )   |   |   | 10,473 |       
|                              |       |                   |        |        |            |       |            |   |  |            |     |    
|                              | Total |                   | $      | 11,009 |            |       | $          |  |  |            | $   | (30 | ) |   | $      | 10,979 | 
|                              |       |                   |        |        |            |       |            |   |  |            |     |    
|Cash equivalents:             |       |                   |        |        |            |       |            |   |  |            |     |     |   |   |        |       
|Commercial paper              |       | $                 | 1,550  |        |            | $     |           |   |  | $          |    |     |   | $ | 1,550  |       
|Government agency obligations |       |                   | 7,800  |        |            |       |           |   |  |            |    |     |   |   | 7,800  |       
|                              |       |                   |        |        |            |       |            |   |  |            |     |    
|                              | Total |                   | $      | 9,350  |            |       | $          |  |  |            | $   |    |   |   |        | 9,350  | 
|                              |       |                   |        |        |            |       |            |   |  |            |     |    

|                              |       |                   |       |        |            |   |       |            |  |   |            |    |   |   |       |        | 
|----------------------------- | ----- | ----------------- | ----- | ------ | ---------- | - | ----- | ---------- |  | - | ---------- | -- | - | - | ----- | ------ | 
|                              |       | December 31, 2003 |      
|                              |       |                   |      
|                              |       |                   |       | Gross  |            |   | Gross |            |  |  
|                              |       | Amortized         |       |        | Unrealized |   |       | Unrealized |  |   | Estimated  |   
|                              |       | Cost              |       |        | Gains      |   |       | Losses     |  |   | Fair Value |   
|                              |       |                   |       |        |            |   |       |            |  |   |            |   
|                              |       | (In thousands)    |      
|Short-term investments:       |       |                   |       |        |            |   |       |            |  |   |            |    |   |   |       |       
|Commercial paper              |       | $                 | 7,092 |        |            | $ |      |            |  | $ | (3         | )  |   | $ | 7,089 |       
|Government agency obligations |       |                   | 8,800 |        |            |   | 1     |            |  |   |           |    |   |   | 8,801 |       
|                              |       |                   |       |        |            |   |       |            |  |   |            |   
|                              | Total |                   | $     | 15,892 |            |   | $     | 1          |  |   | $          | (3 | ) |   | $     | 15,890 | 
|                              |       |                   |       |        |            |   |       |            |  |   |            |   
|Cash equivalents:             |       |                   |       |        |            |   |       |            |  |   |            |    |   |   |       |       
|Government agency obligations |       | $                 | 7,000 |        |            | $ |      |            |  | $ |           |    |   | $ | 7,000 |       
|                              |       |                   |       |        |            |   |       |            |  |   |            |   





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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Comprehensive Income (Loss)




Net Loss Per Share






Advertising Costs




Recent Accounting Pronouncements






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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                     
|-- | ------------------------------------
|3. | Goodwill and Other Intangible Assets

Goodwill




Intangible Assets




|                       |  |                |       |  |              |   |      |              |  |   |       | 
|---------------------- |  | -------------- | ----- |  | ------------ | - | ---- | ------------ |  | - | ----- | 
|                       |  | Gross Carrying |       |  | Accumulated  |   |      | Net Carrying | 
|                       |  | Amount         |       |  | Amortization |   |      | Amount       | 
|                       |  |                |       |  |              |   |      |              | 
|Developed technology   |  | $              | 2,250 |  |              | $ | (187 | )            |  | $ | 2,063 | 
|Tradename              |  |                | 1,060 |  |              |   |     |              |  |   | 1,060 | 
|Customer relationships |  |                | 780   |  |              |   | (65  | )            |  |   | 715   | 
|Customer backlog       |  |                | 140   |  |              |   | (117 | )            |  |   | 23    | 
|                       |  |                |       |  |              |   |      |              | 
|Intangible assets      |  | $              | 4,230 |  |              | $ | (369 | )            |  | $ | 3,861 | 
|                       |  |                |       |  |              |   |      |              | 







|                          |       |   |     |       | 
|------------------------- | ----- | - | --- | ----- | 
|Years Ending December 31, |       |  
|                          |       |  
|2005                      |       | $ | 629 |      
|2006                      |       |   | 606 |      
|2007                      |       |   | 606 |      
|2008                      |       |   | 606 |      
|2009                      |       |   | 354 |      
|                          |       |   |    
|                          | Total |   | $   | 2,801 | 
|                          |       |   |    



|   |            
|-- | -----------
|4. | Inventories



|                |       |      |       |       |      |   |       |       | 
|--------------- | ----- | ---- | ----- | ----- | ---- | - | ----- | ----- | 
|                |       | 2004 |       |       | 2003 |  
|                |       |      |       |       |      |  
|Raw materials   |       | $    | 7,139 |       |      | $ | 7,298 |      
|Work in process |       |      | 432   |       |      |   | 153   |      
|Finished goods  |       |      | 295   |       |      |   | 668   |      
|                |       |      |       |       |      |  
|                | Total |      | $     | 7,866 |      |   | $     | 8,119 | 
|                |       |      |       |       |      |  

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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


5.     Property, Plant and
Equipment




|                                   |  |      |        |   |      |   |        |  
|---------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                   |  | 2004 |        |   | 2003 |  
|                                   |  |      |        |   |      |  
|Land                               |  | $    |       |   |      | $ | 391    |  
|Buildings                          |  |      |       |   |      |   | 3,951  |  
|Software                           |  |      | 574    |   |      |   | 503    |  
|Leasehold improvements             |  |      | 79     |   |      |   | 170    |  
|Machinery and equipment            |  |      | 10,735 |   |      |   | 10,473 |  
|                                   |  |      |        |   |      |  
|                                   |  |      | 11,388 |   |      |   | 15,488 |  
|Less accumulated depreciation      |  |      | (8,994 | ) |      |   | (8,228 | )
|                                   |  |      |        |   |      |  
|Property, plant and equipment, net |  | $    | 2,394  |   |      | $ | 7,260  |  
|                                   |  |      |        |   |      |  





|   |             
|-- | ------------
|6. | Note Payable





|   |                                                
|-- | -----------------------------------------------
|7. | Restructuring Charges, Net and Loss on Sublease





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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                        |               |                    |     |      |  
|--------------------------------------- | ------------- | ------------------ | --- | ---- | -
|Third Quarter 2004 Plan                 |               | Severance Benefits |    
|                                        |               |                    |    
|                                        |               | (In thousands)     |    
|Third quarter 2004 restructuring charge |               | $                  | 431 |     
|                                        | Cash payments |                    |     | (238 | )
|                                        |               |                    |    
|Accrual at December 31, 2004            |               | $                  | 193 |     
|                                        |               |                    |    



|                                        |                                 |                    |     |      |  
|--------------------------------------- | ------------------------------- | ------------------ | --- | ---- | -
|Third Quarter 2003 Plan                 |                                 | Severance Benefits |    
|                                        |                                 |                    |    
|                                        |                                 | (In thousands)     |    
|Third quarter 2003 restructuring charge |                                 | $                  | 490 |     
|                                        | Cash payments                   |                    |     | (470 | )
|                                        |                                 |                    |    
|Accrual at December 31, 2003            |                                 |                    | 20  |     
|                                        | Cash payments                   |                    |     | (16  | )
|                                        | Restructuring charge adjustment |                    |     | (4   | )
|                                        |                                 |                    |    
|Accrual at December 31, 2004            |                                 | $                  |    |     
|                                        |                                 |                    |    







68



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Loss on Sublease






|   |                    
|-- | -------------------
|8. | Segment Disclosures



|                  |       |      |        |        |      |  |       |        |  |   |        |        |  |  |       |        |  |   |        |        |  |  |       |        | 
|----------------- | ----- | ---- | ------ | ------ | ---- |  | ----- | ------ |  | - | ------ | ------ |  |  | ----- | ------ |  | - | ------ | ------ |  |  | ----- | ------ | 
|                  |       | 2004 |        |        | 2003 |  |       | 2002   | 
|                  |       |      |        |        |      |  |       |        | 
|United States     |       | $    | 6,538  |        |      |  | 19.7% |        |  | $ | 8,375  |        |  |  | 24.8% |        |  | $ | 5,617  |        |  |  | 24.9% |       
|Finland           |       |      | 18,545 |        |      |  | 55.9% |        |  |   | 20,083 |        |  |  | 59.3% |        |  |   | 15,924 |        |  |  | 70.5% |       
|Singapore         |       |      | 3,274  |        |      |  | 9.9%  |        |  |   | 35     |        |  |  | 0.1%  |        |  |   |       |        |  |  |      |       
|Rest of the world |       |      | 4,805  |        |      |  | 14.5% |        |  |   | 5,354  |        |  |  | 15.8% |        |  |   | 1,031  |        |  |  | 4.6%  |       
|                  |       |      |        |        |      |  |       |        |  |   |        |        |  |  |       |        |  |  
|                  | Total |      | $      | 33,162 |      |  |       | 100.0% |  |   | $      | 33,847 |  |  |       | 100.0% |  |   | $      | 22,572 |  |  |       | 100.0% | 
|                  |       |      |        |        |      |  |       |        |  |   |        |        |  |  |       |        |  |  





|   |                     
|-- | --------------------
|9. | Stockholders Equity

Common Stock






Employee Stock Purchase Plan




69



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Stock Option Plans






Non-Employee Directors Stock Option Plan




70



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |                   |           |           |           |          |   |       |       | 
|-------------------------------- | ----------------- | --------- | --------- | --------- | -------- | - | ----- | ----- | 
|                                 |                   |           |           | Weighted- |         
|                                 |                   |           |           | Average   |         
|                                 |                   | Number of |           |           | Exercise |  
|                                 |                   | Shares    |           |           | Price    |  
|                                 |                   |           |           |           |          |  
|Outstanding at December 31, 2001 |                   |           | 1,068,844 |           |          | $ | 10.16 |      
|                                 | Options granted   |           |           | 1,740,057 |          |   |       | 1.76  | 
|                                 | Options exercised |           |           | (1,000    | )        |   |       | 4.80  | 
|                                 | Options cancelled |           |           | (482,150  | )        |   |       | 7.97  | 
|                                 |                   |           |           |           |          |  
|Outstanding at December 31, 2002 |                   |           | 2,325,751 |           |          |   | 3.82  |      
|                                 | Options granted   |           |           | 725,574   |          |   |       | 1.84  | 
|                                 | Options exercised |           |           | (211,776  | )        |   |       | 2.34  | 
|                                 | Options cancelled |           |           | (917,388  | )        |   |       | 3.86  | 
|                                 |                   |           |           |           |          |  
|Outstanding at December 31, 2003 |                   |           | 1,922,161 |           |          |   | 3.22  |      
|                                 | Options granted   |           |           | 705,025   |          |   |       | 10.51 | 
|                                 | Options exercised |           |           | (936,991  | )        |   |       | 2.18  | 
|                                 | Options cancelled |           |           | (101,835  | )        |   |       | 11.44 | 
|                                 |                   |           |           |           |          |  
|Outstanding at December 31, 2004 |                   |           | 1,588,360 |           |          | $ | 6.55  |      
|                                 |                   |           |           |           |          |  





|                                         |  |                                     |                  |  |                |           |       |                  |  |  |                  |  |  |                |           |  |  |   |       | 
|---------------------------------------- |  | ----------------------------------- | ---------------- |  | -------------- | --------- | ----- | ---------------- |  |  | ---------------- |  |  | -------------- | --------- |  |  | - | ----- | 
|                                         |  | Options Exercisable at December 31, |                 
|Options Outstanding at December 31, 2004 |  |                                     | 2004             | 
|                                         |  |                                     |                  | 
|                                         |  | Weighted-Average                    |                  |  |               
|Exercise Price                           |  |                                     | Weighted-Average |  |                | Remaining |       |                  |  |  | Weighted-Average | 
|Per Share                                |  | Shares                              |                  |  | Exercise Price |           |       | Contractual Life |  |  | Shares           |  |  | Exercise Price |          
|                                         |  |                                     |                  |  |                |           |       |                  |  |  |                  |  |  |                |          
|$ 0.76  $ 1.17                          |  |                                     | 165,697          |  |                | $         | 0.96  |                  |  |  | 7.91             |  |  |                | 132,749   |  |  | $ | 0.98  | 
|$ 1.18  $ 1.21                          |  |                                     | 134,966          |  |                | $         | 1.21  |                  |  |  | 7.57             |  |  |                | 127,414   |  |  | $ | 1.21  | 
|$ 1.93  $ 1.93                          |  |                                     | 318,927          |  |                | $         | 1.93  |                  |  |  | 8.43             |  |  |                | 208,191   |  |  | $ | 1.93  | 
|$ 2.68  $ 4.80                          |  |                                     | 181,828          |  |                | $         | 3.54  |                  |  |  | 6.80             |  |  |                | 165,784   |  |  | $ | 3.53  | 
|$ 5.00  $ 9.82                          |  |                                     | 81,989           |  |                | $         | 8.14  |                  |  |  | 7.91             |  |  |                | 27,950    |  |  | $ | 8.16  | 
|$10.20  $10.20                          |  |                                     | 237,850          |  |                | $         | 10.20 |                  |  |  | 9.59             |  |  |                | 130,000   |  |  | $ | 10.20 | 
|$10.22  $10.22                          |  |                                     | 292,688          |  |                | $         | 10.22 |                  |  |  | 9.09             |  |  |                | 244,750   |  |  | $ | 10.22 | 
|$10.60  $16.00                          |  |                                     | 158,891          |  |                | $         | 12.95 |                  |  |  | 7.70             |  |  |                | 124,385   |  |  | $ | 12.89 | 
|$16.13  $52.00                          |  |                                     | 5,524            |  |                | $         | 20.59 |                  |  |  | 8.20             |  |  |                | 2,124     |  |  | $ | 27.74 | 
|$56.00  $56.00                          |  |                                     | 10,000           |  |                | $         | 56.00 |                  |  |  | 5.57             |  |  |                | 10,000    |  |  | $ | 56.00 | 
|                                         |  |                                     |                  |  |                |           |       |                  |  |  |                  |  |  |                |          
|                                         |  |                                     | 1,588,360        |  |                | $         | 6.55  |                  |  |  | 8.29             |  |  |                | 1,173,347 |  |  | $ | 6.44  | 
|                                         |  |                                     |                  |  |                |           |       |                  |  |  |                  |  |  |                |          



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Deferred Stock Compensation






|    |                              
|--- | -----------------------------
|10. | Commitments and Contingencies

Commitments






|                          |       |   |     |       | 
|------------------------- | ----- | - | --- | ----- | 
|Years Ending December 31, |       |  
|                          |       |  
|2005                      |       | $ | 529 |      
|2006                      |       |   | 345 |      
|2007                      |       |   | 200 |      
|2008                      |       |   | 206 |      
|2009                      |       |   | 105 |      
|                          |       |   |    
|                          | Total |   | $   | 1,385 | 
|                          |       |   |    







|                          |       |   |    |    | 
|------------------------- | ----- | - | -- | -- | 
|Years Ending December 31, |       |  
|                          |       |  
|2005                      |       | $ | 57 |   
|2006                      |       |   | 14 |   
|                          |       |   |   
|                          | Total |   | $  | 71 | 
|                          |       |   |   

72



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Contingencies






|    |                           
|--- | --------------------------
|11. | Related Party Transactions











|    |             
|--- | ------------
|12. | Income Taxes







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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |                                      |      |         |        |      |   |         |        | 
|------------------------------------------- | ------------------------------------ | ---- | ------- | ------ | ---- | - | ------- | ------ | 
|                                            |                                      | 2004 |         |        | 2003 |  
|                                            |                                      |      |         |        |      |  
|Deferred tax assets:                        |                                      |      |         |        |      |   |         |       
|                                            | Net operating loss carryforwards     |      | $       | 64,300 |      |   | $       | 60,200 | 
|                                            | Research credit                      |      |         | 2,400  |      |   |         | 2,500  | 
|                                            | Capitalized research and development |      |         | 1,100  |      |   |         | 1,700  | 
|                                            | Other                                |      |         | 4,400  |      |   |         | 5,200  | 
|                                            |                                      |      |         |        |      |  
|Total deferred tax assets                   |                                      |      | 72,200  |        |      |   | 69,600  |       
|Valuation allowance for deferred tax assets |                                      |      | (70,700 | )      |      |   | (69,600 | )     
|                                            |                                      |      |         |        |      |  
|Deferred tax assets                         |                                      |      | 1,500   |        |      |   |        |       
|Deferred tax liabilities:                   |                                      |      |         |        |      |   |         |       
|                                            | Intangible assets                    |      |         | (1,500 | )    |   |         |       | 
|                                            |                                      |      |         |        |      |  
|Net deferred tax assets (liabilities)       |                                      | $    |        |        |      | $ |        |       
|                                            |                                      |      |         |        |      |  





|                                     |  |      |     |    |      |  |     |      |  |  |     |   
|------------------------------------ |  | ---- | --- | -- | ---- |  | --- | ---- |  |  | --- | --
|                                     |  | 2004 |     |    | 2003 |  |     | 2002 | 
|                                     |  |      |     |    |      |  |     |      | 
|Income tax benefit at statutory rate |  |      | (35 | )% |      |  | (35 | )%   |  |  | (35 | )%
|State, net of federal effect         |  |      | (6  | )  |      |  | (6  | )    |  |  | (6  | ) 
|Change in valuation allowance        |  |      | 36  |    |      |  | 37  |      |  |  | 39  |   
|Nondeductible deferred compensation  |  |      | 5   |    |      |  | 4   |      |  |  | 2   |   
|                                     |  |      |     |    |      |  |     |      | 
|Effective income tax rate            |  |      |    | %  |      |  |    | %    |  |  |    | % 
|                                     |  |      |     |    |      |  |     |      | 



|    |            
|--- | -----------
|13. | 401(k) Plan





|    |                      
|--- | ---------------------
|14. | Business Combinations



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














75



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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Tangible assets acquired            |  | $ | 1,057  |  
|Liabilities assumed                 |  |   | (655   | )
|In-process research and development |  |   | 320    |  
|Developed technology                |  |   | 2,250  |  
|Tradename                           |  |   | 1,060  |  
|Customer relationships and backlog  |  |   | 920    |  
|Other                               |  |   | 1,261  |  
|Goodwill                            |  |   | 1,546  |  
|Deferred tax liability              |  |   | (1,692 | )
|                                    |  |   |       
|Total purchase price                |  | $ | 6,067  |  
|                                    |  |   |       



Pro forma financial information




|                                       |  |                         |        |   |      |   |         |      |  |   |         |  
|-------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                       |  | Year Ended December 31, |       
|                                       |  |                         |       
|                                       |  | 2004                    |        |   | 2003 |   |         | 2002 | 
|                                       |  |                         |        |   |      |   |         |      | 
|Total revenues                         |  | $                       | 36,422 |   |      | $ | 40,420  |      |  | $ | 31,590  |  
|Net loss                               |  | $                       | (6,564 | ) |      | $ | (13,084 | )    |  | $ | (60,052 | )
|Net loss per share  basic and diluted |  | $                       | (0.67  | ) |      | $ | (1.43   | )    |  | $ | (6.72   | )









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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                  
|--- | -----------------
|15. | Subsequent Events









|    |                                            
|--- | -------------------------------------------
|16. | Quarterly Financial Information (unaudited)

|      |                                     |                                       |   |        |         |  |   |         |   |  |         |        |   |  |   |        | 
|----- | ----------------------------------- | ------------------------------------- | - | ------ | ------- |  | - | ------- | - |  | ------- | ------ | - |  | - | ------ | 
|      |                                     | First                                 |   |        | Second  |  |   | Third   |   |  | Fourth  |       
|      |                                     | Quarter                               |   |        | Quarter |  |   | Quarter |   |  | Quarter |       
|      |                                     |                                       |   |        |         |  |   |         |   |  |         |       
|      |                                     | (In thousands, except per share data) |  
|2004: |                                     |                                       |   |        |         |  |   |         |   |  |         |        |   |  |   |       
|      | Total revenues                      |                                       | $ | 6,617  |         |  | $ | 7,576   |   |  | $       | 7,594  |   |  | $ | 11,375 | 
|      | Cost of product revenues            |                                       |   | 3,971  |         |  |   | 5,257   |   |  |         | 5,482  |   |  |   | 7,866  | 
|      | Net income (loss)(1)                |                                       |   | (2,179 | )       |  |   | (429    | ) |  |         | (2,034 | ) |  |   | 238    | 
|      | Basic net income (loss) per share   |                                       | $ | (0.23  | )       |  | $ | (0.04   | ) |  | $       | (0.21  | ) |  | $ | 0.02   | 
|      | Diluted net income (loss) per share |                                       | $ | (0.23  | )       |  | $ | (0.04   | ) |  | $       | (0.21  | ) |  | $ | 0.02   | 
|2003: |                                     |                                       |   |        |         |  |   |         |   |  |         |        |   |  |   |       
|      | Total revenues                      |                                       | $ | 7,657  |         |  | $ | 8,470   |   |  | $       | 8,204  |   |  | $ | 9,516  | 
|      | Cost of product revenues            |                                       |   | 7,002  |         |  |   | 6,190   |   |  |         | 5,898  |   |  |   | 5,740  | 
|      | Net income (loss)(2)                |                                       |   | (6,473 | )       |  |   | (1,896  | ) |  |         | (735   | ) |  |   | 1,194  | 
|      | Basic net income (loss) per share   |                                       | $ | (0.72  | )       |  | $ | (0.21   | ) |  | $       | (0.08  | ) |  | $ | 0.13   | 
|      | Diluted net income (loss) per share |                                       | $ | (0.72  | )       |  | $ | (0.21   | ) |  | $       | (0.08  | ) |  | $ | 0.12   | 






|    |                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net income (loss) for the first quarter, third quarter and
    fourth quarter of 2004 includes charges of $2.5 million,
    $853,000 and $221,000, respectively, for restructuring
    activities, asset impairments, recovery on sublease agreements,
    amortization of intangible assets, and in-process research and
    development.
|   
|(2) | Net income (loss) for the first quarter, third quarter and
    fourth quarter of 2003 includes charges of $3.1 million,
    $629,000 and a benefit of $145,000, respectively, for
    restructuring activities, loss on sublease agreements and asset
    impairments.                                                                    

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ENDWAVE CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)







|         |                                                                                         
|-------- | ----------------------------------------------------------------------------------------
|Item. 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|          |                        
|--------- | -----------------------
|Item. 9A. | Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures






Changes in Internal Controls Over Financial Reporting.









|          |                  
|--------- | -----------------
|Item. 9B. | Other Information



78



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PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                           |  |     |    |  |          |                                                                                             
|-------------------------- |  | --- | -- |  | -------- | --------------------------------------------------------------------------------------------
|Name                       |  | Age |    |  | Position
|                           |  |     |    |  |         
|Edward A. Keible, Jr.      |  |     | 61 |  |          | Chief Executive Officer, President and Director                                             
|Julianne M. Biagini        |  |     | 42 |  |          | Chief Financial Officer, Senior Vice President, Finance and
    Administration and Secretary
|John J. Mikulsky           |  |     | 59 |  |          | Chief Marketing Officer and Senior Vice President, Marketing and
    Business Development   
|Edward C.V. Winn(1)(2)     |  |     | 66 |  |          | Chairman of the Board of Directors                                                          
|Joseph J. Lazzara(1)(2)(3) |  |     | 53 |  |          | Director                                                                                    
|John F. McGrath, Jr.(1)    |  |     | 40 |  |          | Director                                                                                    
|Wade Meyercord(2)(3)       |  |     | 64 |  |          | Director                                                                                    
|Carol Herod Sharer(2)(3)   |  |     | 53 |  |          | 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.


Julianne M. Biagini


John J. Mikulsky


Edward C.V. Winn


79



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##### Table of Contents





Joseph J. Lazzara


John F. McGrath, Jr.


Wade Meyercord


Carol Herod Sharer






80



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Section 16(a) Beneficial Ownership Reporting
Compliance








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | one report, covering one transaction for 500 shares of
    common stock, was filed late by Mr. Edward Keible; although
    not required by SEC rules, he has requested that the Company
    disclose the number of shares involved; a second report,
    covering one transaction but reporting an incorrect sale price
    in the report, was timely filed by Mr. Keible and was
    subsequently corrected on a Form 4 amending the previous
    Form 4 report;
|
| |  | one report, covering one transaction, was filed late by
    Mr. Edward Winn;                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | one report, covering one transaction, was filed late by
    Mr. Joseph Lazzara; a second report, covering two
    transactions but reporting incorrect exercise prices in the
    report, was filed late by Mr. Lazarra and was subsequently
    corrected on a Form 3 report amending a previous
    Form 3 report;                                                                                                                                             
|
| |  | two reports, covering an aggregate of four transactions, were
    filed late by Ms. Carol Herod Sharer; and                                                                                                                                                                                                                                                                                                                                                      
|
| |  | one report, covering one transaction, was filed late by
    Mr. Wade Meyercord; two additional reports, covering two
    transactions but reporting incorrect exercise prices in the
    reports, were timely filed by Mr. Meyercord and were
    subsequently corrected on two Form 4 reports amending two
    previous Form 4 reports.                                                                                                                         

Committees of the Board of Directors




Audit Committee




81



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Compensation Committee




Nominating and Governance Committee




Code of Business Conduct and Ethics




82



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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Compensation of Executive Officers




Summary Compensation Table


|                            |                                                    |                        |      |                        |        |  |         |          |            |  |            |        |  |                 |         |         |  |  |     |       | 
|--------------------------- | -------------------------------------------------- | ---------------------- | ---- | ---------------------- | ------ |  | ------- | -------- | ---------- |  | ---------- | ------ |  | --------------- | ------- | ------- |  |  | --- | ----- | 
|                            |                                                    |                        |      | Long-term Compensation |       
|                            |                                                    | Annual Compensation(1) |      |                        | Awards | 
|                            |                                                    |                        |      |                        |        | 
|                            |                                                    |                        |      | Securities             |        |  |        
|                            |                                                    |                        |      | Salary                 |        |  |         |          | Underlying |  |            |       
|                            |                                                    | Year                   |      |                        | ($)    |  |         | Bonus($) |            |  | Options(#) |        |  | All Other       |        
|Name and Principal Position |                                                    |                        |      |                        |        |  |         |          |            |  |            |        |  | Compensation($) |        
|                            |                                                    |                        |      |                        |        |  |         |          |            |  |           
|Edward A. Keible, Jr.(2)    |                                                    |                        | 2004 |                        |        |  | 327,231 |          |            |  | 40,000     |        |  |                 | 118,000 |         |  |  | 335 |      
|                            | President, Chief Executive Officer                 |                        |      | 2003                   |        |  |         | 318,000  |            |  |            | 95,400 |  |                 |         | 110,777 |  |  |     | 1,974 | 
|                            | and Director                                       |                        |      | 2002                   |        |  |         | 318,000  |            |  |            |       |  |                 |         | 317,174 |  |  |     | 2,586 | 
|Julianne M. Biagini(3)      |                                                    |                        | 2004 |                        |        |  | 204,231 |          |            |  | 20,000     |        |  |                 | 60,000  |         |  |  | 363 |      
|                            | Chief Financial Officer,                           |                        |      | 2003                   |        |  |         | 195,000  |            |  |            | 48,750 |  |                 |         | 46,659  |  |  |     | 963   | 
|                            | Senior Vice President,                             |                        |      | 2002                   |        |  |         | 195,000  |            |  |            |       |  |                 |         | 140,248 |  |  |     | 2,201 | 
|                            | Finance and Administration and Corporate Secretary |                        |      |                        |        |  |         |          |            |  |            |        |  |                 |         |         |  |  |     |       | 
|John J. Mikulsky(4)         |                                                    |                        | 2004 |                        |        |  | 231,462 |          |            |  | 20,000     |        |  |                 | 60,000  |         |  |  | 420 |      
|                            | Chief Marketing Officer                            |                        |      | 2003                   |        |  |         | 225,000  |            |  |            | 56,250 |  |                 |         | 55,799  |  |  |     | 1,573 | 
|                            | and Senior Vice President,                         |                        |      | 2002                   |        |  |         | 225,000  |            |  |            |       |  |                 |         | 143,750 |  |  |     | 2,279 | 
|                            | Market and Business Development                    |                        |      |                        |        |  |         |          |            |  |            |        |  |                 |         |         |  |  |     |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In accordance with rules promulgated by the Securities and
    Exchange Commission, other annual compensation in the form of
    perquisites and other personal benefits has been omitted where
    the aggregate amount of such perquisites and other personal
    benefits constitutes less than the lesser of $50,000 or 10% of
    the total annual salary and bonus for the Named Officer for the
    fiscal year.
|   
|(2) | All Other Compensation represents group life insurance payments
    made by Endwave in the amounts of $335, $1,974 and $874 for
    2004, 2003 and 2002, respectively, and a matching contribution
    paid by Endwave under our 401(k) plan of $1,712 in 2002.                                                                                                                                                        
|   
|(3) | All Other Compensation represents group life insurance payments
    made by Endwave in the amounts of $363, $963 and $401 for 2004,
    2003 and 2002, respectively, and a matching contribution paid by
    Endwave under our 401(k) plan of $1,800 in 2002.                                                                                                                                                          
|   
|(4) | All Other Compensation represents group life insurance payments
    made by Endwave in the amounts of $420, $1,573 and $583 for
    2004, 2003 and 2002, respectively, and a matching contribution
    paid by Endwave under our 401(k) plan of $1,696 in 2002.                                                                                                                                                        

83



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Stock Option Grants and Exercises




Option Grants in 2004


|                      |  |            |        |  |                 |  |      |              |  |                      |                  |                        |  |    |          |  |     |  |         |  |  |  |         | 
|--------------------- |  | ---------- | ------ |  | --------------- |  | ---- | ------------ |  | -------------------- | ---------------- | ---------------------- |  | -- | -------- |  | --- |  | ------- |  |  |  | ------- | 
|                      |  |            |        |  |                 |  |      |              |  | Potential Realizable |                 
|                      |  | Number of  |        |  |                 |  |      |              |  |                      | Value at Assumed |                       
|                      |  | Securities |        |  | % of Total      |  |      |              |  |                      |                  | Annual Rates of Stock  | 
|                      |  | Underlying |        |  | Options         |  |      |              |  |                      |                  | Price Appreciation for | 
|                      |  | Options    |        |  | Granted to      |  |      |              |  |                      |                  | Option Term ($)(2)     | 
|                      |  | Granted    |        |  | Employees in    |  |      | Exercise     |  |                      | Expiration       |                        |  |    |         
|Name                  |  | (#)(1)     |        |  | Fiscal Year (%) |  |      | Price ($/Sh) |  |                      | Date             |                        |  | 5% |          |  | 10% | 
|                      |  |            |        |  |                 |  |      |              |  |                      |                  |                        |  |    |          |  |     | 
|Edward A. Keible, Jr. |  |            | 58,216 |  |                 |  | 8.92 |              |  |                      | 10.22            |                        |  |    | 2/2/2014 |  |     |  | 374,172 |  |  |  | 948,225 | 
|                      |  |            | 9,784  |  |                 |  | 1.50 |              |  |                      | 10.22            |                        |  |    | 2/2/2014 |  |     |  | 62,884  |  |  |  | 159,362 | 
|                      |  |            | 50,000 |  |                 |  | 7.66 |              |  |                      | 10.20            |                        |  |    | 8/2/2014 |  |     |  | 320,736 |  |  |  | 812,809 | 
|Julianne M. Biagini   |  |            | 9,784  |  |                 |  | 1.50 |              |  |                      | 10.22            |                        |  |    | 2/2/2014 |  |     |  | 62,884  |  |  |  | 159,362 | 
|                      |  |            | 30,216 |  |                 |  | 4.63 |              |  |                      | 10.22            |                        |  |    | 2/2/2014 |  |     |  | 194,207 |  |  |  | 492,160 | 
|                      |  |            | 20,000 |  |                 |  | 3.07 |              |  |                      | 10.20            |                        |  |    | 8/2/2014 |  |     |  | 128,295 |  |  |  | 325,123 | 
|John J. Mikulsky      |  |            | 9,784  |  |                 |  | 1.50 |              |  |                      | 10.22            |                        |  |    | 2/2/2014 |  |     |  | 62,884  |  |  |  | 159,362 | 
|                      |  |            | 30,216 |  |                 |  | 4.63 |              |  |                      | 10.22            |                        |  |    | 2/2/2014 |  |     |  | 194,207 |  |  |  | 492,160 | 
|                      |  |            | 20,000 |  |                 |  | 3.07 |              |  |                      | 10.20            |                        |  |    | 8/2/2014 |  |     |  | 128,295 |  |  |  | 325,123 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Options granted under our 2000 Equity Incentive Plan and under
    our 1992 Stock Option Plan will vest in accordance with the
    terms of the applicable option grant and the terms of our
    Executive Officer Severance and Retention Plan, detailed in
    Employment, Severance and Change in Control
    Agreements below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | The potential realizable value is based on the term of the
    option at its time of grant. It is calculated by assuming that
    the stock price on the date of grant appreciates at the
    indicated rate, compounded annually for the entire term of the
    option and the option is exercised solely on the last day of its
    term for the appreciated price. These amounts represent certain
    assumed rates of appreciation less the exercise price, in
    accordance with the rules of the Securities and Exchange
    Commission, and do not reflect our estimate or projection of
    future stock price performance. Actual gains, if any, are
    dependent on the actual future performance of our common stock
    and no gain to the optionee is possible unless the stock price
    increases over the option term, which will benefit all
    stockholders.

Aggregated Option Exercises in Last Fiscal Year and Year-End
Option Values


|                      |  |                 |         |  |              |                        |           |                           |                          |  |                           |  |  |  |             | 
|--------------------- |  | --------------- | ------- |  | ------------ | ---------------------- | --------- | ------------------------- | ------------------------ |  | ------------------------- |  |  |  | ----------- | 
|                      |  |                 |         |  |              | Number of Securities   |           |                           | Value of Unexercised In- | 
|                      |  |                 |         |  |              | Underlying Unexercised |           |                           | the-Money Options at     | 
|                      |  | Shares Acquired |         |  | Value        |                        |           | Options at FY-End (#)     |                          |  | FY-End ($)                | 
|Name                  |  | on Exercise (#) |         |  | Realized ($) |                        |           | Exercisable/Unexercisable |                          |  | Exercisable/Unexercisable | 
|                      |  |                 |         |  |              |                        |           |                           |                          |  |                           | 
|Edward A. Keible, Jr. |  |                 | 397,638 |  |              |                        | 4,036,161 |                           |                          |  | 241,376/0                 |  |  |  | 2,361,309/0 | 
|Julianne M. Biagini   |  |                 | 90,000  |  |              |                        | 959,788   |                           |                          |  | 178,505/0                 |  |  |  | 2,128,800/0 | 
|John J. Mikulsky      |  |                 | 77,711  |  |              |                        | 1,036,318 |                           |                          |  | 224,905/0                 |  |  |  | 2,849,937/0 | 



84



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Compensation of Non-Employee Directors




|                                                          |  |   |        | 
|--------------------------------------------------------- |  | - | ------ | 
|Annual Retainer                                           |  | $ | 10,000 | 
|Board Chair Annual Retainer                               |  | $ | 10,000 | 
|Audit Committee Chair Annual Retainer                     |  | $ | 10,000 | 
|Compensation Committee Chair Annual Retainer              |  | $ | 5,000  | 
|Nominating and Governance Committee Chair Annual Retainer |  | $ | 3,000  | 
|Director Meeting Fee (in person)                          |  | $ | 1,000  | 
|Director Meeting Fee (telephonic)                         |  | $ | 500    | 
|Audit or Compensation Committee Meeting Fee (in person)   |  | $ | 1,000  | 
|Audit or Compensation Committee Meeting Fee (telephonic)  |  | $ | 500    | 

1 48 1 24




Employment, Severance and Change in Control Agreements




85



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Compensation Committee Interlocks and Insider
Participation




86



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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                                            |                        |                     |           |  |            |  |      |   | 
|----------------------------------------------------------- | ---------------------- | ------------------- | --------- |  | ---------- |  | ---- | - | 
|                                                            |                        | Shares Beneficially |          
|                                                            |                        | Owned(1)            |          
|                                                            |                        |                     |          
|Name and Address                                            |                        | Number              |           |  | Percent(2) | 
|                                                            |                        |                     |           |  |            | 
|Northrop Grumman Corporation(3)                             |                        |                     | 3,473,312 |  |            |  | 33.0 | %
|                                                            | 1840 Century Park East |                     |           |  |            |  |      |   | 
|                                                            | Los Angeles, CA 90067  |                     |           |  |            |  |      |   | 
|IXIS Derivatives Inc.                                       |                        |                     | 759,213   |  |            |  | 7.2  |  
|                                                            | 9 West 57th Street     |                     |           |  |            |  |      |   | 
|                                                            | New York, NY 10019     |                     |           |  |            |  |      |   | 
|Edward A. Keible, Jr.(4)                                    |                        |                     | 523,587   |  |            |  | 4.8  |  
|Julianne M. Biagini(5)                                      |                        |                     | 213,902   |  |            |  | 2.0  |  
|John J. Mikulsky(6)                                         |                        |                     | 303,082   |  |            |  | 2.8  |  
|Edward C.V. Winn(7)                                         |                        |                     | 14,033    |  |            |  | *    |  
|Joseph J. Lazzara(8)                                        |                        |                     | 6,190     |  |            |  | *    |  
|John F. McGrath, Jr.(9)                                     |                        |                     | 833       |  |            |  | *    |  
|Wade Meyercord(9)                                           |                        |                     | 2,308     |  |            |  | *    |  
|Carol Herod Sharer(10)                                      |                        |                     | 18,435    |  |            |  | *    |  
|All directors and Named Officers as a group (7 persons)(11) |                        |                     | 1,082,370 |  |            |  | 9.6  |  






|  |                       
|- | ----------------------
|* | 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.
|   
|(2) | Applicable percentages are based on 10,519,445 shares
    outstanding on February 9, 2005, adjusted as required by
    rules promulgated by the Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                              
|   
|(3) | The shares are held of record by Northrop Grumman
    Space & Mission Systems Corp. (formerly TRW Inc.), or
    Northrop Grumman S&MS, a wholly-owned subsidiary of Northrop
    Grumman Corporation. Northrop Grumman S&MS has the direct
    power to vote and direct the disposition of the shares. Northrop
    Grumman Corporation, as the sole parent of Northrop Grumman
    S&MS, has the indirect power to vote and dispose of the
    shares.                                          
|   
|(4) | Includes 316,376 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,
    234,821 shares would be subject to repurchase by us.                                                                                                                                                                                                                                                  



| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Also includes 195,315 shares held by the Keible Family
    Trust, of which Mr. Keible is co-trustee, and
    625 shares held by Mr. Keibles father-in-law.
    Mr. Keibles spouse shares voting and investment power
    over the shares held by Mr. Keibles father-in-law.



|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Includes 208,505 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,
    105,187 shares would be subject to repurchase by us. Also
    includes 1,234 shares held in a trust for the benefit of
    Ms. Biaginis daughter.

87



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|    |                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Includes 254,905 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,
    110,452 shares would be subject to repurchase by us. Also
    includes 600 shares owned by Mr. Mikulskys minor
    daughter.
|   
|(7) | Includes 12,783 shares issuable upon exercise of options
    exercisable within 60 days of the date of this table.                                                                                                                                                                                                      
|   
|(8) | Includes 6,040 shares issuable upon exercise of options
    exercisable within 60 days of the date of this table.                                                                                                                                                                                                       
|   
|(9) | Represents shares issuable upon exercise of options exercisable
    within 60 days of the date of this table.                                                                                                                                                                                                           



|     |                                                                                                                                                                                                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 13,435 shares issuable upon exercise of options
    exercisable within 60 days of the date of this table.                                                                                                                                                                                          
|    
|(11) | See footnotes 4 through 10 above, as applicable. Includes
    815,185 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,
    450,460 shares would be subject to a repurchase right by us.

Equity Compensation Plan Information




|                                                           |       |                      |           |           |                  |                      |      |                       |  |  |           |           | 
|---------------------------------------------------------- | ----- | -------------------- | --------- | --------- | ---------------- | -------------------- | ---- | --------------------- |  |  | --------- | --------- | 
|                                                           |       |                      |           |           |                  | Number of Securities |     
|                                                           |       | Number of            |           |           | Weighted-        |                      |      | Remaining Available   | 
|                                                           |       | Securities to be     |           |           | Average Exercise |                      |      | for Issuance          | 
|                                                           |       | Issued Upon          |           |           | Price of         |                      |      | Under Equity          | 
|                                                           |       | Exercise of          |           |           | Outstanding      |                      |      | Compensation Plans    | 
|                                                           |       | Outstanding Options, |           |           | Options,         |                      |      | (Excluding Securities | 
|                                                           |       | Warrants and         |           |           | Warrants and     |                      |      | Reflected in          | 
|Plan Category                                              |       | Rights(a)            |           |           | Rights(b)        |                      |      | Column (a))(c)(1)     | 
|                                                           |       |                      |           |           |                  |                      |      |                       | 
|Equity compensation plans approved by security holders     |       |                      | 1,588,360 |           |                  | $                    | 6.55 |                       |  |  | 1,741,514 | (2)      
|Equity compensation plans not approved by security holders |       |                      | 0         |           |                  |                      | 0    |                       |  |  | 0         |          
|                                                           |       |                      |           |           |                  |                      |      |                       | 
|                                                           | Total |                      |           | 1,588,360 |                  |                      | $    | 6.55                  |  |  |           | 1,741,514 | 
|                                                           |       |                      |           |           |                  |                      |      |                       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Each year on October 17, starting 2001 and continuing
    through 2005, the aggregate number of shares of common stock
    that may be issued pursuant to stock awards under the 2000
    Equity Incentive Plan is automatically increased by the lesser
    of 3,000,000 shares or 6% 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. In addition, each
    year on October 17, starting in 2001 and continuing through
    2005, the aggregate number of shares of common stock that may be
    issued pursuant to stock awards under the 2000 Employee Stock
    Purchase Plan is 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 151,954 shares issuable under the 2000 Employee
    Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

Indemnification




88



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Transactions with Northrop Grumman Corporation












89



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|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



|                      |  |      |     |  |      |   |     | 
|--------------------- |  | ---- | --- |  | ---- | - | --- | 
|                      |  | 2003 |     |  | 2004 |  
|                      |  |      |     |  |      |  
|Audit Fees(1)         |  | $    | 352 |  |      | $ | 227 | 
|Audit Related Fees(2) |  |      | 22  |  |      |   | 0   | 
|Tax Fees(3)           |  |      | 0   |  |      |   | 0   | 
|All Other Fees(4)     |  |      | 3   |  |      |   | 17  | 
|                      |  |      |     |  |      |  
|Total                 |  | $    | 377 |  |      |   | 244 | 
|                      |  |      |     |  |      |  






|    |                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees represent fees for professional services provided in
    connection with the audit of our annual consolidated financial
    statements and review of our quarterly condensed consolidated
    financial statements, and advice on accounting matters that
    arose during the audit.
|   
|(2) | Audit-related fees consisted principally of employee benefit
    plan audits.                                                                                                                                                                                                                   
|   
|(3) | Tax fees consisted primarily of income tax compliance and
    related services.                                                                                                                                                                                                                 
|   
|(4) | Represents fees for services provided in connection with other
    miscellaneous items not otherwise included in the categories
    above.                                                                                                                                                      



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Audit Committee Pre-Approval Policy







Item 15.     Exhibits and
Financial Statement Schedules






| |                                                                                
| | -------------------------------------------------------------------------------
| | (1) The following consolidated financial statements are
    included in Item 8:















| |                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) The following financial statement schedule is included
    in Item 15(d): Schedule II  Valuation and
    Qualifying Accounts. All other schedules not listed above have
    been omitted because they are inapplicable or are not required.
|
| | (3) Listing of Exhibits:                                                                                                                                                                                                                        





|       |    |        |             |                                                                                                                                             
|------ | -- | ------ | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------
|Number |    |        | Description
|       |    |        |            
|       | 2  | .1(1) |             | Asset Purchase Agreement by and among M/A-COM Tech, Inc., Tyco
    Electronics Logistics AG and the Registrant dated April 24,
    2001.    
|       | 2  | .2(2) |             | Asset Purchase Agreement by and among Signal Technology
    Corporation and the Registrant dated September 24, 2002.                        
|       | 2  | .3(3) |             | Purchase and Sale Agreement by and Among New Focus, Inc.,
    Bookham Technology PLC and the Registrant dated July 21,
    2004.            
|       | 3  | .1(4)  |             | Amended and Restated Certificate of Incorporation effective
    October 20, 2000.                                                           
|       | 3  | .2(5)  |             | Certificate of Amendment of Amended and Restated Certificate of
    Incorporation effective June 28, 2002.                                  
|       | 3  | .3(4)  |             | Amended and Restated Bylaws effective October 20, 2000.                                                                                     
|       | 4  | .1(4)  |             | Form of specimen Common Stock Certificate.                                                                                                  
|       | 4  | .2(4)  |             | Investors Rights Agreement by and among the Registrant and
    certain investors named therein dated March 31, 2000.                       
|       | 4  | .3(6)  |             | Registration Rights Agreement by and between Northrop Grumman
    Space & Mission Systems Corp. and the Registrant dated
    March 23, 2005.
|       | 10 | .1(4)  |             | Form of Indemnity Agreement entered into by the Registrant with
    each of its directors and officers.                                     
|       | 10 | .2(4)* |             | 1992 Stock Option Plan.                                                                                                                     
|       | 10 | .3(4)* |             | Form of Incentive Stock Option under 1992 Stock Option Plan.                                                                                
|       | 10 | .4(4)* |             | Form of Nonstatutory Stock Option under 1992 Stock Option Plan.                                                                             
|       | 10 | .5(4)* |             | 2000 Equity Incentive Plan, as amended.                                                                                                     
|       | 10 | .6(4)* |             | Form of Stock Option Agreement under 2000 Equity Incentive Plan.                                                                            
|       | 10 | .7(4)* |             | 2000 Employee Stock Purchase Plan.                                                                                                          
|       | 10 | .8(4)* |             | Form of 2000 Employee Stock Purchase Plan Offering.                                                                                         
|       | 10 | .9*    |             | 2000 Non-Employee Directors Stock Option Plan, as amended.                                                                                 

91



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|       |    |          |             |                                                                                                                                                                                                                                  
|------ | -- | -------- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    |          | Description
|       |    |          |            
|       | 10 | .10(4)*  |             | Form of Nonstatutory Stock Option Agreement under the 2000
    Non-Employee Director Plan.                                                                                                                                       
|       | 10 | .11(7)*  |             | Description of Compensation Payable to Non-Employee Directors.                                                                                                                                                                   
|       | 10 | .12(7)*  |             | 2005 Base Salaries for Named Executive Officers.                                                                                                                                                                                 
|       | 10 | .13(7)*  |             | 2005 Executive Incentive Compensation Plan.                                                                                                                                                                                      
|       | 10 | .14(8)*  |             | Executive Officer Severance and Retention Plan.                                                                                                                                                                                  
|       | 10 | .15(8)*  |             | Transaction Incentive Plan.                                                                                                                                                                                                      
|       | 10 | .16(4)   |             | License Agreement by and between TRW Inc. and TRW Milliwave Inc.
    dated February 28, 2000.                                                                                                                                    
|       | 10 | .17(4)  |             | Production Agreement by and between TRW Inc. and the Registrant
    dated March 31, 2000 for the performance of the Development
    Agreement by and between TRW Inc. and Nokia Telecommunications
    OY dated January 28, 1999.
|       | 10 | .18(4)  |             | Services Agreement by and between TRW Inc. and the Registrant
    dated March 31, 2000.                                                                                                                                          
|       | 10 | .19(9)  |             | Development Agreement by and between Nokia and the Registrant
    dated August 14, 2003.                                                                                                                                         
|       | 10 | .20(10) |             | Purchase Agreement by and between Nokia Corporation and the
    Registrant dated December 31, 2003.                                                                                                                              
|       | 10 | .21(5)   |             | Industrial Lease by and between The Irvine Company and the
    Registrant dated January 28, 2004.                                                                                                                                
|       | 10 | .22(5)  |             | Amended and Restated Supply Agreement by and between Northrup
    Grumman Space and Mission Systems Corp. and the Registrant dated
    March 26, 2004.                                                                           
|       | 10 | .23(6)   |             | Settlement and Release Agreement by and between Northrop Grumman
    Space & Mission Systems Corp. and the Registrant dated
    March 23, 2005.                                                                                  
|       | 23 | .1       |             | Consent of Burr, Pilger & Mayer LLP, independent
    registered public accounting firm.                                                                                                                                          
|       | 23 | .2       |             | Consent of Ernst & Young 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 May 8, 2001.                                                       
|
| | (2) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on October 11, 2002.                                                  
|
| | (3) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on August 4, 2004.                                                    
|
| | (4) | Previously filed with the Registrants Registration
    Statement on Form S-1 (Registration No. 333-41302).                                                   
|
| | (5) | Previously filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004.                                                
|
| | (6) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on March 25, 2005.                                                    
|
| | (7) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on February 3, 2005.                                                  
|
| | (8) | Previously filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.                                            
|
| | (9) | Previously filed with an amendment to the Registrants
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2003 filed on August 4, 2004.



|     |                                                                                                                                                               
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Previously filed with an amendment to the Registrants
    Annual Report on Form 10-K for the fiscal year ended
    December 31, 2003 filed on August 4, 2004.



| |   |                                                                         
| | - | ------------------------------------------------------------------------
| | * | Indicates a management contract or compensatory plan or
    arrangement.





92



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##### Table of Contents



ENDWAVE CORPORATION


SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS




|                             |  |                |     |           |            |   |     |            |  |   |           |   |  |   |     | 
|---------------------------- |  | -------------- | --- | --------- | ---------- | - | --- | ---------- |  | - | --------- | - |  | - | --- | 
|                             |  |                |     | Additions |            |   |     |            | 
|                             |  | Balance at     |     |           | Charged to |   |     | Deductions |  |   | Balances  |  
|                             |  | Beginning      |     |           | Costs and  |   |     | and        |  |   | at End of |  
|                             |  | of Period      |     |           | Expense    |   |     | Write-offs |  |   | Period    |  
|                             |  |                |     |           |            |   |     |            |  |   |           |  
|                             |  | (In thousands) |    
|Year ended December 31, 2004 |  | $              | 284 |           |            | $ | 66  |            |  | $ | (107      | ) |  | $ | 243 | 
|                             |  |                |     |           |            |   |     |            |  |   |           |  
|Year ended December 31, 2003 |  | $              | 324 |           |            | $ | 126 |            |  | $ | (166      | ) |  | $ | 284 | 
|                             |  |                |     |           |            |   |     |            |  |   |           |  
|Year ended December 31, 2002 |  | $              | 678 |           |            | $ | 523 |            |  | $ | (877      | ) |  | $ | 324 | 
|                             |  |                |     |           |            |   |     |            |  |   |           |  

93



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##### Table of Contents






SIGNATURES






| |                    
| | -------------------
| | Endwave Corporation



| |     |                        
| | --- | -----------------------
| | By: | /s/ Julianne M. Biagini

| |                          
| | -------------------------
| |                          
| | Julianne M. Biagini      
| | Senior Vice President and
| | Chief Financial Officer  

POWER OF ATTORNEY


KNOW ALL PERSONS BY THESE PRESENTS,


|                                                       |  |                                                                                                    |  |                |  | 
|------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signatures                                             |  | Title                                                                                              |  | Date          
|                                                       |  |                                                                                                    |  |               
|                                                      
|/s/ Edward A. Keible,
    Jr.Edward
    A. Keible, Jr. |  | President, Chief Executive Officer and Director (Principal
    Executive Officer)                  |  | March 29, 2005
|                                                      
|/s/ Julianne M. BiaginiJulianne
    M. Biagini         |  | Senior Vice President and Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | March 29, 2005
|                                                      
|Edward
    C.V. Winn                                   |  | Chairman of the Board of Directors                                                                 |  | March 29, 2005
|                                                      
|/s/ Joseph J. LazzaraJoseph
    J. Lazzara             |  | Director                                                                                           |  | March 29, 2005
|                                                      
|/s/ John F. McGrath,
    Jr.John
    F. McGrath, Jr.   |  | Director                                                                                           |  | March 29, 2005
|                                                      
|/s/ Wade MeyercordWade
    Meyercord                   |  | Director                                                                                           |  | March 29, 2005
|                                                      
|/s/ Carol Herod SharerCarol
    Herod Sharer           |  | Director                                                                                           |  | March 29, 2005

94



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##### Table of Contents



INDEX TO EXHIBITS


|       |    |          |             |                                                                                                                                                                                                                                  
|------ | -- | -------- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    |          | Description
|       |    |          |            
|       | 2  | .1(1)   |             | Asset Purchase Agreement by and among M/A-COM Tech, Inc., Tyco
    Electronics Logistics AG and the Registrant dated April 24,
    2001.                                                                                         
|       | 2  | .2(2)   |             | Asset Purchase Agreement by and among Signal Technology
    Corporation and the Registrant dated September 24, 2002.                                                                                                             
|       | 2  | .3(3)   |             | Purchase and Sale Agreement by and Among New Focus, Inc.,
    Bookham Technology PLC and the Registrant dated July 21,
    2004.                                                                                                 
|       | 3  | .1(4)    |             | Amended and Restated Certificate of Incorporation effective
    October 20, 2000.                                                                                                                                                
|       | 3  | .2(5)    |             | Certificate of Amendment of Amended and Restated Certificate of
    Incorporation effective June 28, 2002.                                                                                                                       
|       | 3  | .3(4)    |             | Amended and Restated Bylaws effective October 20, 2000.                                                                                                                                                                          
|       | 4  | .1(4)    |             | Form of specimen Common Stock Certificate.                                                                                                                                                                                       
|       | 4  | .2(4)    |             | Investors Rights Agreement by and among the Registrant and
    certain investors named therein dated March 31, 2000.                                                                                                            
|       | 4  | .3(6)    |             | Registration Rights Agreement by and between Northrop Grumman
    Space & Mission Systems Corp. and the Registrant dated
    March 23, 2005.                                                                                     
|       | 10 | .1(4)    |             | Form of Indemnity Agreement entered into by the Registrant with
    each of its directors and officers.                                                                                                                          
|       | 10 | .2(4)*   |             | 1992 Stock Option Plan.                                                                                                                                                                                                          
|       | 10 | .3(4)*   |             | Form of Incentive Stock Option under 1992 Stock Option Plan.                                                                                                                                                                     
|       | 10 | .4(4)*   |             | Form of Nonstatutory Stock Option under 1992 Stock Option Plan.                                                                                                                                                                  
|       | 10 | .5(4)*   |             | 2000 Equity Incentive Plan, as amended.                                                                                                                                                                                          
|       | 10 | .6(4)*   |             | Form of Stock Option Agreement under 2000 Equity Incentive Plan.                                                                                                                                                                 
|       | 10 | .7(4)*   |             | 2000 Employee Stock Purchase Plan.                                                                                                                                                                                               
|       | 10 | .8(4)*   |             | Form of 2000 Employee Stock Purchase Plan Offering.                                                                                                                                                                              
|       | 10 | .9*      |             | 2000 Non-Employee Directors Stock Option Plan, as amended.                                                                                                                                                                      
|       | 10 | .10(4)*  |             | Form of Nonstatutory Stock Option Agreement under the 2000
    Non-Employee Director Plan.                                                                                                                                       
|       | 10 | .11(7)*  |             | Description of Compensation Payable to Non-Employee Directors.                                                                                                                                                                   
|       | 10 | .12(7)*  |             | 2005 Base Salaries for Named Executive Officers.                                                                                                                                                                                 
|       | 10 | .13(7)*  |             | 2005 Executive Incentive Compensation Plan.                                                                                                                                                                                      
|       | 10 | .14(8)*  |             | Executive Officer Severance and Retention Plan.                                                                                                                                                                                  
|       | 10 | .15(8)*  |             | Transaction Incentive Plan.                                                                                                                                                                                                      
|       | 10 | .16(4)   |             | License Agreement by and between TRW Inc. and TRW Milliwave Inc.
    dated February 28, 2000.                                                                                                                                    
|       | 10 | .17(4)  |             | Production Agreement by and between TRW Inc. and the Registrant
    dated March 31, 2000 for the performance of the Development
    Agreement by and between TRW Inc. and Nokia Telecommunications
    OY dated January 28, 1999.
|       | 10 | .18(4)  |             | Services Agreement by and between TRW Inc. and the Registrant
    dated March 31, 2000.                                                                                                                                          
|       | 10 | .19(9)  |             | Development Agreement by and between Nokia and the Registrant
    dated August 14, 2003.                                                                                                                                         
|       | 10 | .20(10) |             | Purchase Agreement by and between Nokia Corporation and the
    Registrant dated December 31, 2003.                                                                                                                              
|       | 10 | .21(5)   |             | Industrial Lease by and between The Irvine Company and the
    Registrant dated January 28, 2004.                                                                                                                                
|       | 10 | .22(5)  |             | Amended and Restated Supply Agreement by and between Northrup
    Grumman Space and Mission Systems Corp. and the Registrant dated
    March 26, 2004.                                                                           
|       | 10 | .23(6)   |             | Settlement and Release Agreement by and between Northrop Grumman
    Space & Mission Systems Corp. and the Registrant dated
    March 23, 2005.                                                                                  
|       | 23 | .1       |             | Consent of Burr, Pilger & Mayer LLP, independent
    registered public accounting firm.                                                                                                                                          



---



##### Table of Contents



|       |    |    |             |                                                                                                                                                                                        
|------ | -- | -- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    |    | Description
|       |    |    |            
|       | 23 | .2 |             | Consent of Ernst & Young 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 May 8, 2001.                                                       
|
| | (2) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on October 11, 2002.                                                  
|
| | (3) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on August 4, 2004.                                                    
|
| | (4) | Previously filed with the Registrants Registration
    Statement on Form S-1 (Registration No. 333-41302).                                                   
|
| | (5) | Previously filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004.                                                
|
| | (6) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on March 25, 2005.                                                    
|
| | (7) | Previously filed as an exhibit to the Registrants Current
    Report on Form 8-K filed on February 3, 2005.                                                  
|
| | (8) | Previously filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.                                            
|
| | (9) | Previously filed with an amendment to the Registrants
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2003 filed on August 4, 2004.



|     |                                                                                                                                                               
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Previously filed with an amendment to the Registrants
    Annual Report on Form 10-K for the fiscal year ended
    December 31, 2003 filed on August 4, 2004.



| |   |                                                                         
| | - | ------------------------------------------------------------------------
| | * | Indicates a management contract or compensatory plan or
    arrangement.



| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | Confidential treatment has been requested for a portion of this
    exhibit.